RICKS CABARET INTERNATIONAL INC, S-3/A, 1997-07-23

RICKS CABARET INTERNATIONAL INC
S-3/A, 1997-07-23
EATING & DRINKING PLACES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 22, 1997

FILE NO. 333-24517

================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-3

AMENDMENT NO. 2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

RICK'S CABARET INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
TEXAS 76-0458229
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
ROBERT L. WATTERS,
3113 BERING DRIVE, 3113 BERING DRIVE,
HOUSTON, TEXAS 77057 HOUSTON, TEXAS 77057
(713) 785-0444 (713) 785-0444
(Address of principal executive offices, including (Name and address of agent for service and agent's
zip code and Registrant's telephone number, telephone number, including area code)
including area code)
</TABLE>

With copies to:

ROBERT D. AXELROD,
5300 MEMORIAL DRIVE, SUITE 700,
HOUSTON, TEXAS 77007
(713) 861-1996
(713) 552-0202-FAX

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.

If the only securities being registered on this form are being offered
pursuant to a dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If the Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [X] 33-88372
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING EXERCISE PRICE PROCEEDS TO AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(*) PRICE(*) PER SHARE THE COMPANY REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common Stock, par value
$0.01.................... 380,000 $2.8125 $1,068,750 -- -- $323.87
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock underlying
Redeemable Common Stock
Purchase Warrant........... 920,000** -- -- $3.00 $2,760,000 **
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock underlying
Representative Warrants.... 160,000** -- -- $4.35 696,000 **
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock underlying the
Underlying Warrants........ 80,000** -- -- $4.35 348,000 **
- ------------------------------------------------------------------------------------------------------------------------------
Total.............. 3,804,000 $323.87
==============================================================================================================================
</TABLE>

* Estimated solely for the purpose of calculating the registration fee.
Calculated pursuant to Rule 457(g) and based on the average bid and asked
price of the Company's Common Stock on March 31, 1997.

** These securities were previously registered on Form SB-2 effective October
12, 1995. The prospectus contained in this Form S-3 is also a post-effective
amendment to the Form SB-2, and serves as the current prospectus for these
securities. The amount of $323.62 was paid as a fee to the Securities and
Exchange Commission for these securities in connection with the original
registration statement filed on Form SB-2. The Form SB-2 registered other
securities as well which were fully distributed in 1995 and are not related
to this Form S-3.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVENESS DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2

RICK'S CABARET INTERNATIONAL, INC.

CROSS-REFERENCE SHEET
SHOWING LOCATION IN THE PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS OF FORM S-3

<TABLE>
<CAPTION>
FORM S-3 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
-------------------------------- ----------------------
<C> <S> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus................................. Outside Front Cover Page of Prospectus
2. Inside Front Cover and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover and Outside Back Cover
Pages of Prospectus
3. Summary Information and Risk Factors................ The Company; Risk Factors
4. Use of Proceeds..................................... Use of Proceeds
5. Determination of Offering Price..................... Outside Front Cover; Use of Proceeds
6. Dilution............................................ *
7. Selling Stockholders................................ Selling Stockholders
8. Plan of Distribution................................ Outside Front Cover Page; Risk Factors;
Plan of Distribution
9. Description of Securities to be Registered.......... Documents Incorporated by Reference
10. Interest of Named Experts and Counsel............... Legal Matters
11. Material Changes.................................... Recent Houston, Texas City Ordinance
12. Incorporation by Reference of Certain Information... Documents Incorporated by Reference
13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Limitation on Director's Liability;
Indemnification
</TABLE>

- ---------------

(*) None or Not Applicable
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JULY 22, 1997

RICK'S CABARET INTERNATIONAL, INC.

1,540,000 SHARES OF COMMON STOCK

This Prospectus relates to the resale of 380,000 shares of common stock,
par value $0.01 per share (the "Common Stock"), of Rick's Cabaret International,
Inc. (the "Company") which may be offered and sold from time to time (the
"Stockholder Shares") by certain security holders of the Company (the "Selling
Stockholders"); and relates to an offering by the Company of 1,160,000 shares of
Common Stock of the Company consisting of (i) 920,000 shares of Common Stock
underlying 920,000 Redeemable Common Stock Purchase Warrants (the "Warrants");
(ii) 160,000 shares of Common Stock underlying 160,000 Representative Warrants
("Representative's Warrants"); and (iii) 80,000 shares of Common Stock issuable
upon the exercise of the Underlying Warrants ("Underlying Warrants"),
(collectively, the "Exercisable Warrants"). The Selling Stockholders may from
time to time sell all or any portion of the Common Stock in the over-the-counter
market, on any regional or national securities exchange on which the Common
Stock is listed or traded, in negotiated transactions or otherwise, at prices
then prevailing or related to the then current market price or at negotiated
prices. A current Prospectus must be in effect at the time of the sale of the
shares of Common Stock to which this Prospectus relates. The Common Stock may be
sold directly or through broker dealers, or in a distribution by one or more
underwriters on a firm commitment or a best efforts basis. The Selling
Stockholders and any broker-dealer who participates in the distribution of the
Common Stock may be deemed to be Underwriters ("Underwriters") within the
meaning of the Securities Act of 1933, as amended (the "Act"). Any commission
received by any broker-dealer and any profit on resale of Common Stock purchased
by them may be deemed to be underwriting commission under the Act. Each Warrant
entitles the holder to purchase one share of Common Stock for $3.00 per share,
subject to adjustment under certain circumstances, until October 12, 1998. The
Warrants are not exercisable unless, at the time of exercise, the Company has a
current Prospectus covering the shares of Common Stock issuable upon exercise of
the Warrants. The Warrants may be redeemed by the Company at $.05 per Warrant,
at any time prior to their expiration, on not less than thirty (30) days written
notice, if the closing price of the Common Stock for a period of thirty (30)
consecutive trading days equals or exceeds $6.00 per share, subject to
adjustment, provided that such notice is mailed not later than ten (10) days
after the end of such period. The Company has agreed to use its best efforts to
have a current Registration Statement in effect with respect to the Common Stock
underlying the Warrants at any time when the holders thereof may exercise their
Warrants.
Each Representative's Warrant entitles the holder to purchase one share of
Common Stock for $4.35 per share. The Representative's Warrants are exercisable
until October 12, 2000. The Underlying Warrants entitle the holder to purchase
one share of Common Stock at an exercise price of $4.35 per share. The
Underlying Warrants are exercisable until October 12, 1998.
The outstanding Warrants were initially issued in connection with an
October 1995 public offering of the Company's securities (the "Public
Offering"), and the Representative's Warrants and Underlying Warrants were sold
to the Representative of the several underwriters of the Public Offering. The
Company will receive the proceeds from the exercise of the Warrants, the
Representative's Warrants and the Underlying Warrants. See, Use of Proceeds.

The Company's Common Stock and Warrants are quoted on the National
Association of Securities Dealer's NASDAQ Small Cap Market automated quotation
system under the symbol "RICK" and "RICKW", respectively. On July 18, 1997, the
last closing bid price of the Company's Common Stock as reported by the National
Association of Securities Dealer's NASDAQ Small Cap Market was $2.50 per share
bid.

FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK, SEE THE "RISK FACTORS"
SECTION OF THIS PROSPECTUS BEGINNING ON PAGE 4.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The Date of this Prospectus is July , 1997.

<PAGE> 4

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER
PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR ITS SUBSIDIARIES SINCE THE DATE HEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
ANY PERSON IN ANY STATE WHERE SUCH OFFER WOULD BE UNLAWFUL.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C>
Available Information....................................... 3
Documents Incorporated by Reference......................... 3
The Company................................................. 4
Risk Factors................................................ 4
Recent Houston, Texas City Ordinance........................ 10
Use of Proceeds............................................. 11
Plan of Distribution........................................ 11
Selling Stockholders........................................ 13
Limitation on Director's Liability; Indemnification......... 14
Legal Matters............................................... 14
Experts..................................................... 14
</TABLE>

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<PAGE> 5

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Company will provide without charge to each person who receives
a copy of this Prospectus, upon written or oral request, a copy of any
information that is incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless the
exhibits are themselves specifically incorporated by reference). Such request
should be directed to Rick's Cabaret International, Inc., Attention of Robert L.
Watters, 3113 Bering Drive, Houston, Texas 77057, tel. (713) 785-0444.

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Act with respect to the securities offered by this Prospectus.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and this offering, reference is made to the Registration
Statement, including the exhibits filed therewith, as well as such reports,
proxy statements and other information filed with the Commission, which may be
inspected without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.

The Commission maintains a Web site on the Internet that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the Commission. The address of the site is
http://www.sec.gov. Visitors to the site may access such information by
searching the EDGAR data base on the site.

DOCUMENTS INCORPORATED BY REFERENCE

The Company hereby incorporates by reference in this Prospectus (i) the
Company's Annual Report on Form 10-KSB for the fiscal year ended September 30,
1996; (ii) the Company's Quarterly Report on Form 10-QSB for the fiscal quarter
ended December 31, 1996; (iii) the Company's Report on Form 8-K dated October
22, 1996; (iv) the description of the Company's securities contained in the
Company's Form SB-2 dated October 12, 1995, including any amendments or reports
filed for the purpose of updating such description; and (v) the Company's Report
on Form 10-QSB for the fiscal quarter ended March 31, 1997. All other reports
filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act
since March 31, 1997, are hereby incorporated herein by reference.

All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14, or 15(d) of the Exchange Act, prior to the termination of this
offering, shall be deemed to be incorporated by reference into this Prospectus.
Any statement contained in a document incorporated or deemed to be incorporated
by reference in this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained in this
Prospectus or any other subsequently filed document which also is or is deemed
to be incorporated by reference modifies or replaces such statement.

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THE COMPANY

The Company was organized in 1994 by Robert L. Watters to acquire all of
the outstanding capital stock of Trumps, Inc. ("Trumps"), a Texas corporation
formed in 1982, from Robert L. Watters, its sole shareholder. Since 1983, Trumps
has operated Rick's Cabaret ("Rick's"), a premiere adult nightclub offering
topless entertainment in Houston, Texas. Rick's Cabaret, which caters primarily
to businessmen, has developed a clientele base which includes professionals,
business executives and other individuals who tend to entertain more frequently
than the average person and who tend to have greater disposable income. From its
inception, the Company's objective was to provide a first-class entertainment
environment for the business consumer. To achieve this goal and reach its target
market, Rick's created an attractive, yet discreet environment, complimented by
a first-class bar and restaurant operation conducive to attracting businessmen
and out-of-town convention clientele.

In February, 1996, the Company formed RCI Entertainment, Louisiana, Inc., a
Louisiana corporation, for the purpose of administering, operating, managing and
leasing its new location in New Orleans, Louisiana. The Company recently opened
its new facility in New Orleans which is located at 315 Bourbon Street. In
addition, the Company formed RCI Entertainment (Texas), Inc. in June, 1996, for
the purpose of acquiring 1.13 acres of land in Houston, Texas. The Company has
presently determined to place this property for sale. In December 1996, the
Company acquired the land and building at its primary Houston, Texas location in
connection with the settlement of certain litigation, thereby allowing the
Company to remain at the location.

RISK FACTORS

The Common Stock offered hereby is speculative and involves a high degree
of risk. In addition to the other information set forth in this Prospectus, each
prospective investor should carefully consider the following risk factors before
making an investment decision.

RECENT LOSSES AND ACCUMULATED DEFICIT

The Company incurred losses for the fiscal year ending September 30, 1996
and for the first quarter of fiscal 1997 (three months ended December 31, 1996)
of $(708,614) and $(715,939) for a cumulative loss since October 1, 1995 of
$(1,382,578) and an accumulated deficit of $(1,141,351) at March 31, 1997. For
the second quarter of fiscal 1997, the Company had net income of $41,975.
Revenues increased during the fiscal year ending September 30, 1996 to
$4,630,298 from $4,534,706 during the previous fiscal year. During the first
quarter of fiscal 1997, revenues declined to $1,082,615 from $1,168,126 from the
same quarter during the previous fiscal year. Losses have been largely
attributable to operations and the increase in costs associated with acquisition
activities and the opening of the New Orleans location on December 30, 1996. The
primary Houston location at 3113 Bering Drive experienced a revenue decline
during this time period which was offset by the opening of Tantra, the Company's
non-sexually oriented discotheque and billiard parlor. Management believes that
with the opening of the New Orleans location and recent cost reduction programs
put into place during the second and third quarters of fiscal 1997, that the
decline in revenues and the losses incurred during previous quarters will likely
be mitigated. The Company has typically experienced reduced revenues from May
through September with the strongest operating results occurring during October
through April. While management continues to believe that the overall trend
remains consistent, the Company has experienced decreased sales at the primary
Houston location during the October through April period. Management attributes
these decreases to the current level of competition and to the public perception
of a newly enacted city ordinance affecting sexually oriented businesses which
is pending judicial review.

NECESSARY PERMITS -- RECENT HOUSTON CITY ORDINANCE

The Company currently has a Business Permit (the "Permit") to operate a
sexually oriented business ("Sexually Oriented Business") in Houston, Texas.
However, in January, 1997 the City Council of the City of Houston passed a
comprehensive new ordinance regulating the location of and the conduct within
Sexually Oriented Businesses (the "Ordinance"). The new Ordinance, which is
pending judicial review establishes new distances that Sexually Oriented
Businesses may be located to schools, churches, playgrounds and other

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sexually oriented businesses. There are no provisions in the Ordinance exempting
previously permitted sexually oriented businesses from the effect of the new
Ordinance. Rick's Cabaret at its original location at 3113 Bering Drive and its
location on the Southwest Freeway have both applied for new permits under the
new ordinance as required by March 1, 1997. On March 19 and 20, 1997, the
Company was informed that each of its locations failed to meet the requirements
of the Ordinance and accordingly the renewal of the Company's Business License
had been denied.

The Ordinance provides that a business which is denied a renewal of its
operating permit due to changes in distance requirements under the Ordinance is
entitled to continue in operation for a period of time (the "Amortization
Period") if the owner is unable to recoup, by the effective date of the
Ordinance, its investment in the business that was incurred through the date of
the passage and approval of the Ordinance.

On April 14, 1997, the Company filed a written request with the City of
Houston requesting an extension of time during which the Company may continue
operations at its original location under the Amortization Period provisions of
the Ordinance since the Company was unable to recoup its investment prior to the
effective date of the Ordinance. An administrative hearing (the "Hearing") was
held on July 11, 1997 by the City of Houston to determine the appropriate
Amortization Period to be granted to the Company. At the Hearing, the Company
requested that it be granted an Amortization Period at its original location
equal to forty-five years from the effective date of the Ordinance. There has
been no determination of the Company's Amortization Period as yet by the City of
Houston. There can be no assurance given as to the length of time, if any, of
the Amortization Period that will be granted by the Hearing official. The
Company has the right to appeal any decision of the Hearing official to the
district court in the State of Texas.

On May 12, 1997, the City of Houston agreed to defer implementation of the
Ordinance until the constitutionality of the entire Ordinance is decided by
court trial.

The Company, along with numerous other sexually oriented businesses has
sought court relief to halt implementation of the new ordinance until such time
as the matter can be brought before a full and considered hearing. The court
hearing originally set for July 14, 1997 has been reset until a later date.
There are other provisions in the ordinance, such as provisions governing the
level of lighting in a sexually oriented business, the distance between a
customer and dancer while the dancer is performing in a state of undress and
provisions regarding the licensing of dancers which may be detrimental to the
conduct of business by the Company and all of these provisions also will be the
subject of the above mentioned litigation.

No assurance can be given as to the likelihood of the success of any
litigation filed against the City of Houston, but in the event that such
litigation is unsuccessful it is likely the Company will be able to take the
benefit of the Amortization Period contained in the new Ordinance designed to
allow recovery of a business's investment and which will allow the Company to
continue in business at its present location during the Amortization Period.

A dance hall permit is required for the operation of a discotheque in the
city of Houston. The dance hall permit is not a discretionary permit, but must
be granted by the city if the provisions of the applicable ordinance are
satisfied. A dance hall permit may be revoked or renewal may be refused if
certain criminal activities occur on the premises or if the person listed as the
applicant has committed certain named offenses. The loss of the dance hall
permit would have a material adverse effect on Rick's business, financial
condition and results of operations.

RISK OF ADULT NIGHTCLUB OPERATIONS AND DINNER THEATER CONCEPT

Historically, the adult entertainment, restaurant and bar industry has been
an extremely volatile industry. The industry tends to be extremely sensitive to
the general local economy, in that when economic conditions are prosperous,
entertainment industry revenues increase, and when economic conditions are
unfavorable, entertainment industry revenues decline. Coupled with this economic
sensitivity is the trendy personal preferences of the customers who frequent
adult cabarets. The Company continuously monitors trends in its customers'
tastes and entertainment preferences so that, if necessary, it can make
appropriate changes which will allow it to remain one of the premiere adult
cabarets. However, any significant decline in general

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corporate conditions or uncertainties regarding future economic prospects that
affect consumer spending could have a material adverse effect on the Company's
business. In addition, Rick's has historically catered to a clientele base from
the upper end of the market. Accordingly, further reductions in the amounts of
entertainment expenses allowed as deductions from income under the Internal
Revenue Code of 1954, as amended, could adversely affect sales to customers
dependent upon corporate expense accounts. The Company continues to plan for the
opening of a cabaret style dinner theater on the second floor of the New Orleans
location. Completion of the second floor facility is currently contingent upon
obtaining additional construction cost financing. Uncertainties relating to the
opening of the facility relate to the availability and suitability of financing,
the timing of the opening and availability of talent, and ultimately the overall
market acceptance of this concept.

FINANCIAL CONTROLS

A significant part of the revenues earned by the Company through its adult
nightclub operations will be collected in cash by full and part-time employees.
Comprehensive financial controls are required to minimize the potential loss of
revenue through theft or misappropriation of cash. To the extent that these
controls are not structured or executed properly, significant cash revenues
could be lost and profitability of the Company impaired. The Company believes
that it has implemented significant cash controls, including separating
management personnel from actually handling cash and utilizing a combination of
accounting and physical inventory control devices to deter theft and to ensure a
high level of security within its accounting practices and procedures.

COMPETITION

The adult topless club entertainment business is highly competitive with
respect to price, service and location, as well as the professionalism of the
entertainment. Rick's Cabaret in Houston competes with a number of locally-owned
adult cabarets, some of whose names may enjoy recognition that equals that of
Rick's. There are approximately 50 adult cabarets located in the Houston area of
which approximately 10 are in direct competition with the Company. In recent
years, Rick's has been among the highest adult nightclub in the Houston area in
alcoholic beverage sales, according to the information made available by the
Texas Alcoholic Beverage Commission. Although the Company believes that it is
well-positioned to compete successfully, there can be no assurance that Rick's
will be able to maintain its high level of name recognition and prestige within
the marketplace.

DEPENDENCE ON AND AVAILABILITY OF MANAGEMENT; MANAGEMENT OF GROWTH

The success of the Company is substantially dependent upon the time,
talent, and experience of Robert Watters, its President and Chief Executive
Officer. The Company has entered into a three-year employment agreement with Mr.
Watters which extends to December 31, 1997. Additionally, the Company has
obtained key-man life insurance on the life of Mr. Watters in the amount of
$3,000,000. The loss of the services of Mr. Watters would have a material
adverse impact on the Company and its business. In the event of Mr. Watters
unavailability or in the event that he should become temporarily disabled, the
Company believes that it presently has in place management systems and controls
which are sufficiently strong to enable it to run efficiently and effectively
until Mr. Watters' return or until a replacement could be found. No assurance
can be given, however, that a replacement for Mr. Watters could be located in
the event of his unavailability. Further, in order for the Company to expand its
business operations, it must continue to improve and expand the level of
expertise of its personnel and must attract, train and manage qualified managers
and employees to oversee and manage the expanded operations. The Company's
practice of training management without prior adult topless club experience
could result in a delay in the Company's anticipated growth plans due to the
time required to attract and train such qualified managers and employees.

KEY EMPLOYEES

The Company's success depends on maintaining a high quality of female
entertainers and waitresses. Competition for topless entertainers in the adult
entertainment business is intense. The lack of availability of

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quality, personable, attractive entertainers or the Company's inability to
attract and retain other key employees, such as kitchen personnel and
bartenders, could adversely impact the business of the Company.

ABILITY TO MANAGE GROWTH

It is the intention of the Company to expand its existing business
operations by opening additional topless nightclubs in other metropolitan areas
under the trade name "Rick's Cabaret." The opening of additional topless
nightclubs will subject the Company to a variety of risks associated with
rapidly growing companies. In particular, the Company's growth may place a
significant strain on its accounting systems and internal controls and personal
overview of its day-to-day operations. Although management intends to ensure
that its internal controls remain adequate to meet the demands of further
growth, there can be no assurance that its systems, controls or personnel will
be sufficient to meet these demands. Inadequacies in these areas could have a
material adverse effect on Rick's business, financial condition and results of
operations. The Company has recruited its management staff exclusively from
outside of the topless industry in the belief that management which has not been
exposed to operating practices which the Company believes prevalent elsewhere in
the topless industry and with diverse management backgrounds will produce a
management team that operates with a high level of integrity. This practice of
training management without adult nightclub experience may cause the Company to
experience a shortage of qualified management necessary to fulfill its
anticipated growth plans due to the additional time required to train such
personnel.

PERMITS RELATING TO THE SALE OF ALCOHOL

Rick's derives a significant portion of its revenues from the sale of
alcoholic beverages. In Texas, the authority to issue a permit to sell alcoholic
beverages is governed by the Texas Alcoholic Beverage Commission (the "TABC"),
which has the authority, in its discretion, to issue the appropriate permits.
Rick's presently holds a Mixed Beverage Permit and a Late Hours Permit (the
"Permits"). These Permits are subject to annual renewal, provided Rick's has
complied with all rules and regulations governing the permits. Renewal of a
permit is subject to protest, which may be made by a law enforcement agency or
by a member of the general public. In the event of a protest, the TABC may hold
a hearing at which time the views of interested parties are expressed. The TABC
has the authority after such hearing not to issue a renewal of the protested
alcoholic beverage permit. While Rick's has never been subject to a protest
hearing against the renewal of its Permits, there can be no assurance that such
a protest could not be made in the future, nor can there be any assurance that
the Permits would be granted in the event such a protest was made. Other states
may have similar laws which may limit the availability of a permit to sell
alcoholic beverages or which may provide for suspension or revocation of a
permit to sell alcoholic beverages in certain circumstances. The temporary or
permanent suspension or revocations of either of the Permits or the inability to
obtain permits in areas of expansion would have a material adverse effect on the
revenues, financial condition and results of operations of the Company.

STATUS OF ENTERTAINERS AS INDEPENDENT CONTRACTORS

The Company believes its entertainers to be independent contractors and not
employees for federal income tax purposes and that the entertainers should be
treated as self-employed independent contractors under the income tax
withholding provisions of the Internal Revenue Code and under the Federal
Insurance Contributions Act and the Federal Unemployment Tax Act. In addition,
the Company believes the entertainers are independent contractors for purposes
of regulations administered by the United States Department of Labor. However,
the status of the entertainers as independent contractors is not free from
doubt. The Company has sought neither a ruling from either the Internal Revenue
Service or the Department of Labor nor an opinion of counsel as to the status of
its entertainers as independent contractors. After consultation with counsel,
the Company does not believe that it could obtain an opinion on this issue at a
cost which the Company would find acceptable. Moreover, the Company believes
that any such opinion, if obtained, would be of very limited value, given the
inherently factual nature of the issue. To the extent that a determination were
made that the entertainers are not independent contractors, but rather are
employees for tax or labor purposes, and a similar determination were not made
as to other adult cabarets, the Company

7
<PAGE> 10

could be at a competitive disadvantage with other adult cabarets. Moreover, such
a determination could result in the imposition of penalties against the Company
for its prior treatment, the effect of which could be material. The Company is a
member of the Texas Entertainment Association, an organization composed of the
largest adult cabarets in Texas. One of the objectives of the Texas
Entertainment Association has been to keep the membership informed of changes in
the law relating to the status of entertainers as independent contractors and to
coordinate the policies of the major adult cabarets in an effort to ensure that
changes in the policies and procedures relating to the employment status of
entertainers are made uniformly by the entire adult industry in Texas. The
Company presently intends to change its treatment of its entertainers from
independent contractors to employees in the near future. The Company is working
cooperatively with the Texas Entertainment Association in an effort to achieve
an orderly transition within the entire industry.

EXISTING LITIGATION

The Company and Mr. Watters are presently involved in certain litigation.
In Dallas J. Fontenot v. Trumps, Inc. and Robert L. Watters, Cause No. 94-057144
in the 127th District Court of Harris County, Texas (the "Fontenot Lawsuit"),
Mr. Fontenot sued the Company and Mr. Watters for alleged breaches of an
Agreement entered into in April, 1993 among Mr. Fontenot, the Company and Mr.
Watters. Mr. Fontenot alleges that Mr. Watters and the Company have breached
this Agreement, but does not indicate the manner in which the breach has
occurred. The Company believes that it has fully complied with its obligations
under this Agreement. The litigation is presently in the discovery stage. The
Company believes, after consultation with counsel, that it has substantial
defenses to the claims being asserted against it and that the risk of material
financial exposure to the Company is unlikely.

In March 1997, Classic Affairs and Robert Sabes initiated litigation
against the Company in Minneapolis, Minnesota styled Robert W. Sabes and Classic
Affairs, Inc., d/b/a Shiek's Palace Royale v. Rick's Cabaret International,
Inc., a Texas corporation, RCI Entertainment (Minnesota), Inc. and Robert L.
Watters, in District Court, 4th Judicial District, Cause No. CT97-006457. The
suit alleges that the Company and Mr. Watters violated a Non-Competition
Agreement which was to have been executed upon the closing of the acquisition of
Shiek's Palace Royale which never took place.

Mr. Sabes ("Sabes") and Classic Affairs, Inc. ("Classic Affairs") are
seeking an order from the Court that the covenant not to compete is binding upon
the Company and Mr. Watters even though the acquisition of Shiek's Palace Royale
never took place, as well as an order for unspecified damages for the breach of
the agreement. The Company and Mr. Watters have answered the original complaint
and have denied all of the allegations contained therein. Further, the Company
has filed a Counterclaim against Sabes and Classic Affairs alleging that Sabes
and Classic Affairs are seeking to interfere with the Company's right to
purchase another adult entertainment facility in Minneapolis. The Company
believes, after consultation with counsel, that the claims asserted by Sabes and
Classic Affairs are without merit and are subject to defenses. The Company
intends to defend this suit against the claims asserted and to pursue its
counterclaim against Sabes and Classic Affairs.

UNINSURED RISKS

The Company maintains insurance in amounts it considers adequate for
personal injury and property damage to which the business of the Company may be
subject. As of September 1996, the Company maintains personal injury liquor
liability insurance, however, there can be no assurance that the Company may not
be exposed to potential liabilities in excess of the coverage provided by
insurance, which liabilities may be imposed pursuant to the Texas "Dram Shop"
statute or similar "Dram Shop" statutes or common law theories of liability in
other states where the Company may expand. The Texas "Dram Shop" statute
provides a person injured by an intoxicated person the right to recover damages
from an establishment that wrongfully served alcoholic beverages to such person
if it was apparent to the server that the individual being sold, served or
provided with an alcoholic beverage was obviously intoxicated to the extent that
he presented a clear danger to himself and others. An employer is not liable for
the actions of its employee who overserves if (i) the employer requires its
employees to attend a seller training program approved by the TABC; (ii) the
employee has actually attended such a training program; and (iii) the employer
has not directly or indirectly encouraged the

8
<PAGE> 11

employee to violate the law. It is the policy of Rick's to require that all
servers of alcohol working at Rick's be certified as servers under a training
program approved by the TABC, which certification gives statutory immunity to
the sellers of alcohol from damage caused to third parties by those who have
consumed alcoholic beverages at such establishment pursuant to the Texas
Alcoholic Beverage Code. There can be no assurance, however, that uninsured
liabilities may not arise which could have a material adverse effect on the
Company.

CONTROL BY MANAGEMENT

The Chief Executive Officer and Chairman of the Board of the Company owns
approximately 37% of the outstanding Common Stock of the Company. As a result,
management will be able to influence the election of directors and otherwise
influence the affairs of the Company for the foreseeable future.

LIMITATIONS ON PROTECTION OF SERVICE MARKS

Rights of the Company to the tradenames "Rick's" and "Rick's Cabaret", are
established under the common law, based upon the Company's substantial and
continuous use of these trademarks in interstate commerce since at least as
early as 1987. "RICK'S AND STARS DESIGN" and "RICK'S CABARET" logos are
registered through service mark registrations issued by the United States Patent
and Trademark Office ("PTO").

There can be no assurance that these steps taken by the Company to protect
its Service Marks will be adequate to deter misappropriation of its protected
intellectual property rights. Litigation may be necessary in the future to
protect the Company's rights from infringement, which may be costly and time
consuming. The loss of the intellectual property rights owned or claimed by the
Company could have a material adverse affect on the Company.

POSSIBLE VOLATILITY OF COMMON STOCK PRICE

The market price of the Common Stock of the Company may be highly volatile,
as has been the case with the securities of many other small capitalization
companies. Additionally, in recent years, the securities markets have
experienced a high level of price and volume volatility and the market prices of
securities for many companies, particularly small capitalization companies, have
experienced wide fluctuations which have not necessarily been related to the
operating performances or underlying asset values of such companies. Securities
of issuers having relatively limited capitalization or securities recently
issued in a public offering are particularly susceptible to change based on
short-term trading strategies of certain investors.

NO CASH DIVIDENDS

The Company has never paid cash dividends on its Common Stock and the Board
of Directors does not anticipate paying cash dividends in the foreseeable
future. It currently intends to retain future earnings to finance the growth of
its business.

ANTI-TAKEOVER EFFECTS OF ISSUANCE OF PREFERRED STOCK

The Board of Directors has the authority to issue up to 1,000,000 shares of
Preferred Stock, $.10 par value per share, in one or more series, to fix the
number of shares constituting any such series, and to fix the rights and
preferences of the shares constituting any series, without any further vote or
action by the stockholders. The issuance of Preferred Stock by the Board of
Directors could adversely affect the rights of the holders of Common Stock and
could prevent holders of common stock from receiving a potential premium for
their stock. For example, such issuance could result in a class of securities
outstanding that would have preferences with respect to voting rights and
dividends and in liquidation over the Common Stock, and could (upon conversion
or otherwise) enjoy all of the rights appurtenant to Common Stock. The Board's
authority to issue Preferred Stock could discourage potential takeover attempts
and could delay or prevent a change in control of the Company through merger,
tender offer, proxy contest or otherwise by making such attempts more difficult
to achieve or more costly. There are no issued and outstanding shares of
Preferred Stock; there

9
<PAGE> 12

are no agreements or understandings for the issuance of Preferred Stock, and the
Board of Directors has no present intention to issue Preferred Stock.

LIMITATION ON DIRECTOR LIABILITY

The Company's Articles of Incorporation provide, as permitted by governing
Texas law, that a director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director, with certain exceptions. These provisions may discourage
stockholders from bringing suit against a director for breach of fiduciary duty
and may reduce the likelihood of derivative litigation brought by stockholders
on behalf of the Company against a director. See, Limitation on Directors'
Liability; Indemnification.

RECENT HOUSTON, TEXAS CITY ORDINANCE

In January, 1997, the City Council of the City of Houston passed a
comprehensive new ordinance regulating the location of and the conduct within
Sexually Oriented Businesses. The new Ordinance, which is pending judicial
review establishes new distances that Sexually Oriented Businesses may be
located to schools, churches, playgrounds and other sexually oriented
businesses. There are no provisions in the Ordinance exempting previously
permitted sexually oriented businesses from the effect of the new Ordinance.
Rick's Cabaret at its original location at 3113 Bering Drive and its proposed
new location on the Southwest Freeway applied for new permits under the new
ordinance as required by March 1, 1997. On March 19 and 20, 1997, the Company
was informed that each of its locations failed to meet the requirements of the
Ordinance and accordingly the renewal of the Company's Business License had been
denied.

On May 12, 1997, the City of Houston agreed to defer implementation of the
Ordinance until the constitutionality of the entire Ordinance is decided by
court trial.

No assurance can be given as to the likelihood of the success of any
litigation filed against the City of Houston, but in the event that such
litigation is unsuccessful it is likely that the Company will be able to take
the benefit of the Amortization Period provision contained in the new Ordinance
designed to allow recovery of a business's investment and which will allow the
Company to continue in business at its present location during the Amortization
Period.

10
<PAGE> 13

USE OF PROCEEDS

The Company will not receive any proceeds upon the resale of the Common
Stock by the Selling Stockholders. Selling Stockholders will not pay any of the
costs of this Offering.

In the event that shares of Common Stock are issued upon exercise of all of
the Warrants, the Representative's Warrants and the Underlying Warrants
described herein, the Company will receive as net proceeds, a maximum of
$3,792,000, after deducting estimated offering expenses. The Company expects to
use the net proceeds, if and when available, for working capital and general
corporate purposes. As there are no commitments from the holders of the
Warrants, the Representative's Warrants or the Underlying Warrants to so
exercise such securities and purchase Common Stock, there can be no assurance
that any Warrants, Representative's Warrants or Underlying Warrants will be
exercised.

The Company reserves the right to change its use of proceeds when and if
market conditions or unexpected changes in operating conditions or results
occur. In addition, the Company may, when and if the opportunity arises, acquire
other businesses involved in activities which are compatible with the Company's
business. If such an opportunity arises, the Company may use a portion of the
proceeds of this offering for that purpose. The Company has no specific plans,
arrangements, agreements or understanding with respect to any acquisition in
which these funds would be used, and there is no assurance that any acquisitions
will be made.

PLAN OF DISTRIBUTION

The Selling Stockholders, and the holders of Common Stock issuable through
the Exercisable Warrants, (the "Exercisable Warrant Holders") may, from time to
time, sell all or a portion of their shares in transactions (which may include
block transactions) in the over-the-counter market, on any national or regional
securities exchange in which the Common Stock is listed or traded, in negotiated
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices. Resales by the purchasers of such
shares may be made in the same manner.

The Selling Stockholders and the Exercisable Warrant Holders may effect
such transactions by selling their securities directly to purchasers, through
broker-dealers acting as agents for the Selling Stockholders and the Exercisable
Warrant Holders or to broker-dealers who may purchase shares as principals and
thereafter sell the securities from time to time in the over-the-counter market,
in negotiated transactions or otherwise. Such broker-dealers, if any, may
receive compensation in the form of discounts, concessions or commissions from
both the Selling Stockholders and the Exercisable Warrant Holders and/or the
purchasers for whom such broker-dealers may act as agents or to whom they may
sell as principals (which compensation as to a particular broker-dealer may be
in excess of customary commissions).

If the Company is notified by a Selling Stockholder and the Exercisable
Warrant Holders that any material arrangement has been entered into with a
broker-dealer for the sale of the Common Stock, the Company would be required to
amend the Registration Statement of which this Prospectus is a part and file a
Prospectus Supplement to describe the agreements between the Selling Stockholder
and the Exercisable Warrant Holders and such broker-dealer relating to the
distribution.

The Selling Stockholders and the Exercisable Warrant Holders and any
broker-dealers participating in the distribution of the Common Stock covered by
this Prospectus may be deemed to be "underwriters" (within the meaning of
Section 2(11) of the Act). Any commissions received by them, as well as any
proceeds from any sales as a principal by them, may be deemed to be underwriting
discounts and commissions under the Act.

The Company will pay certain costs and expenses incurred in connection with
the registration of the Stockholder Shares under the Act. The Company will not,
however, pay any commissions or any other fees in connection with the sale of
the Common Stock.

There is no assurance that the Selling Stockholders and the Exercisable
Warrant Holders will sell any or all of the Common Stock.

11
<PAGE> 14

The 920,000 shares of Common Stock issuable upon exercise of the Warrants,
are being offered hereby by the Company and are distributable when and as such
Warrants are exercised by the Warrant holders. No underwriters are employed with
respect to the exercise of any of the Warrants, nor will the Company pay any
fees upon their exercise. The Company will receive the exercise price upon
exercise of the aforesaid Warrants as proceeds.

The Company has been informed that each of the holders of the
Representative's Warrants and Underlying Warrants (the "Holders") has a direct
or indirect business relationship with Barron Chase Securities, Inc., the
underwriter of the Company's IPO. To the best of the Company's knowledge, there
is no other material relationship between any of the Holders and the Company.

The 240,000 shares of Common Stock issuable upon the exercise of the
outstanding Representative Warrants and Underlying Warrants will be offered for
sale by the Holders from time to time in the public marketplace or otherwise.
The Holders are not restricted as to the prices at which they may sell their
shares and sales of such shares at less than the market price may depress the
market price of the Common Stock. It is anticipated that none of the securities
offered by the Holders are being offered through underwriters and no
arrangements have been made with any outside broker, dealer or underwriter for
the resale of such securities, all of which may be offered for sale from time to
time through the NASDAQ system or otherwise. The period for sale of such
securities by the Holders may occur over an extended period of time. The Company
will receive the exercise price upon exercise of the Representative's Warrants
and Underlying Warrants, but will not receive any proceeds from the sale of such
securities after exercise.

12
<PAGE> 15

SELLING STOCKHOLDERS

The following table sets forth the name of each Selling Stockholder, the
number of shares of Common Stock offered by each Selling Stockholder, the number
of shares of Common Stock to be owned by each Selling Stockholder if all shares
were to be sold in the Offering and the percentage of the Company's outstanding
Common Stock that will be owned by each Selling Stockholder if all shares are
sold in the offering. The shares of Common Stock being offered hereby are being
registered to permit public secondary trading and the Selling Stockholders may
offer all or a portion of the shares for resale from time to time.

<TABLE>
<CAPTION>
SHARES SHARES PERCENTAGE
OWNED SHARES OWNED AFTER OWNED AFTER
SELLING BEFORE OFFERED OFFERING IF ALL OFFERING IF ALL
STOCKHOLDER(1) OFFERING FOR SALE SHARES SOLD* SHARES SOLD
-------------- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Paul E. Bennet............................... 5,000 5,000 0 0%
Arthur L. Asch............................... 5,000 5,000 0 0%
Jack Gilbert................................. 10,000 10,000 0 0%
Harry Falterbauer............................ 20,000 20,000 0 0%
Austin A. Cooper............................. 10,000 10,000 0 0%
Sterling Capital LLC......................... 5,000 5,000 0 0%
Dan R. Balabon............................... 5,000 5,000 0 0%
Marc Granet.................................. 3,076 3,076 0 0%
Arnold S. Gale, IRA.......................... 5,000 5,000 0 0%
Barney R. Stephens........................... 20,000 20,000 0 0%
Larry J. Corneck............................. 10,000 10,000 0 0%
Irving J. Denmark............................ 5,000 5,000 0 0%
C.G. Chase Construction Co................... 10,000 10,000 0 0%
Stanley Snyder............................... 5,000 5,000 0 0%
Private Trust Corp. Ltd.
TTEE:New Amsterdam Investment Trust........ 5,000 5,000 0 0%
Nicholas Kratsios............................ 3,500 3,500 0 0%
Dan Signore.................................. 4,000 4,000 0 0%
Matt Tomaszewski............................. 15,000 15,000 0 0%
Thomas F. Polich............................. 5,000 5,000 0 0%
Julia A. Knight.............................. 3,500 3,500 0 0%
Jeffrey D. Gohd.............................. 2,000 2,000 0 0%
Lawrence C. Gibbs............................ 10,000 10,000 0 0%
Thad Thrash.................................. 1,000 1,000 0 0%
Nicholas B. Graziano 0
Revocable Family 0
Living Trust of 12-13-95................... 2,846 2,846 0 0%
Rock Fund(2)................................. 125,000 125,000 0 0%
Fidelity Holdings, LTD....................... 80,000 80,000 0 0%
Richard M. Hoffman........................... 5,000 5,000 0 0%
</TABLE>

- ---------------

(*) Assumes no sales are effected by the Selling Stockholders during the
offering period other than pursuant hereto.

(1) Except as set forth below, no Selling Stockholder has held any position or
office, or has had any material relationship with the Company or any of its
affiliates within the past three years.

(2) Affiliates of the Rock Fund own an additional 119,600 shares of Common Stock
for a total of 244,600 shares.

13
<PAGE> 16

LIMITATION ON DIRECTOR'S LIABILITY; INDEMNIFICATION

Texas law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. The Articles of the
Company limit the liability of directors of the Company (in their capacity as
directors but not in their capacity as officers) to the Company or its
stockholders to the fullest extent permitted by Texas law. Specifically,
directors of the Company will not be personally liable for monetary damages for
breach of a director's fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Article 2.41
under the Texas Business Corporation Act ("TBCA"), or (iv) for any transactions
from which the director derived an improper personal benefit, whether or not the
benefit resulted from an action taken in the person's official capacity. Section
2.41 of the TBCA relates to directors' liability for unlawful dividends and
stock issuances.

The inclusion of this provision in the Articles may have the effect of
reducing the likelihood of derivative litigation against directors, and may
discourage or deter stockholders or management from bringing a lawsuit against
directors for breach of their duty of care, even though such an action, if
successful, might otherwise have benefited the Company and its stockholders.

The Company's Articles provide for the indemnification of its executive
officers and directors, and the advancement to them of expenses in connection
with any proceedings and claims, to the fullest extent permitted by the TBCA
law. The Articles include related provisions meant to facilitate the
indemnitees' receipt of such benefits. These provisions cover, among other
things: (i) specification of the method of determining entitlement to
indemnification and the selection of independent counsel that will in some cases
make such determination, (ii) specification of certain time periods by which
certain payments or determinations must be made and actions must be taken, and
(iii) the establishment of certain presumptions in favor of an indemnitee.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers or controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a small
business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the small
business issuer will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed on for the
Company by Axelrod Smith & Kirshbaum of Houston, Texas. Mr. Robert D. Axelrod
presently owns 2,000 shares of Common Stock of the Company and 20,000 Common
Stock Purchase Warrants.

EXPERTS

The consolidated balance sheets at September 30, 1996 and 1995 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the years ended September 30, 1996 and 1995 of Rick's Cabaret
International, Inc. incorporated by reference into this Prospectus and
Registration Statement have been audited by Jackson & Rhodes P.C., independent
auditors, as set forth in their report, and are incorporated by reference in
reliance upon such report, given upon the authority of such firm as experts in
accounting and auditing.

14
<PAGE> 17

PART II

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated expenses to be incurred in
connection with the distribution of the securities being registered. The
expenses shall be paid by the Company.

<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 323.87
Printing and Engraving Expenses............................. 5,000.00
Legal Fees and Expenses..................................... 10,000.00
Accounting Fees and Expenses................................ 1,000.00
Blue Sky Fees and Expenses.................................. 0.00
Transfer Agent Fees and Miscellaneous....................... 1,000.00
----------
Total............................................. $17,323.87
</TABLE>

ITEM 15. LIMITATION ON DIRECTOR'S LIABILITY; INDEMNIFICATION

II-1
<PAGE> 18

ITEM 16. EXHIBITS

The following exhibits are filed as part of this Registration Statement:

<TABLE>
<CAPTION>
EXHIBIT
NO. IDENTIFICATION OF EXHIBIT
------- -------------------------
<C> <S>
4.1* -- Form of Registration Rights Agreement.
4.2* -- The Company's Articles of Incorporation, which are
incorporated by reference to the Company's Form SB-2
Exhibit 3.1 as effective with the Commission on October
12, 1995.
4.3* -- The Company's By-laws, which are incorporated by
reference to the Company's Form SB-2 Exhibit 3.2 as
effective with the Commission on October 12, 1995.
4.4* -- Specimen of the Company's common stock certificate, which
is incorporated by reference to the Company's Form SB-2
Exhibit 4.1 as effective with the Commission on October
12, 1995.
4.5* -- Instruments defining the rights of security holders,
which are incorporated by reference to the Company's Form
SB-2 Exhibit 4.2 as effective with the Commission on
October 12, 1995.
5.1** -- Opinion of Axelrod, Smith & Kirshbaum
23.1** -- Consent of Axelrod, Smith & Kirshbaum (Included in
Exhibit 5.1)
23.2** -- Consent of Jackson & Rhodes P.C.
27.1* -- Financial Data Schedule, which is incorporated by
reference to the Company's Quarterly Report on Form
10-QSB for the fiscal quarter ended March 31, 1997 filed
with the Commission on May 15, 1997.
</TABLE>

- ---------------

* Previously filed, or incorporated by reference.

** Filed herewith.

ITEM 17. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offer or sales are being made, a
post-effective amendment to this registration statement:

i. To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

ii. To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and

iii. To include any additional or changed material information with
respect to the plan of distribution.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(4) i. That, for the purpose of determining liability under the
Securities Act of 1933, the information omitted from the form
of prospectus filed as part of this registration statement

II-2
<PAGE> 19

in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4), or 497(h) under the Securities Act of 1933 shall be
deemed to be part of this registration statement as of the time
it was declared effective.

ii. That, for the purpose of determining liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

II-3
<PAGE> 20

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 Amendment No. 2 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
City of Houston, State of Texas on July 18, 1997.

RICK'S CABARET INTERNATIONAL, INC.

By: /s/ ROBERT L. WATTERS
----------------------------------
Robert L. Watters, Chairman of the
Board and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ ROBERT L. WATTERS Chairman of the Board, Chief July 18, 1997
- ----------------------------------------------------- Executive Officer, and Director
Robert L. Watters

/s/ ERICH NORTON WHITE Director and Executive Vice July 21, 1997
- ----------------------------------------------------- President
Erich Norton White

/s/ SCOTT C. MITCHELL Director July 16, 1997
- -----------------------------------------------------
Scott C. Mitchell

/s/ MARTIN SAGE Director July 14, 1997
- -----------------------------------------------------
Martin Sage

/s/ ROBERT GARY WHITE Chief Financial Officer and July 21, 1997
- ----------------------------------------------------- Principal Accounting Officer
Robert Gary White
</TABLE>

II-4
<PAGE> 21

INDEX TO EXHIBITS

- ---------------

* Previously filed, or incorporated by reference.

** Filed herewith.

<PAGE> 1

EXHIBIT 5.1

[LETTERHEAD]

July 21, 1997

Robert L. Watters, President
Rick's Cabaret International, Inc.
3113 Bering Drive
Houston, Texas 77057

Dear Mr. Watters:

As counsel for Rick's Cabaret International, Inc., a Texas corporation
("Company"), you have requested our firm to render this opinion in connection
with the Registration Statement of the Company on Form S-3 ("Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), filed with
the Securities and Exchange Commission relating to the resale of 380,000 shares
of common stock, par value $.01 per share (the "Common Stock") by certain
security holders of the Company. All of the 380,000 shares of Common Stock are
currently outstanding shares of the Company's Common Stock owned by a certain
security holders of the Company. The Registration Statement also relates to the
registration of the issuance of up to 1,160,000 shares of common stock, par
value $.01 per share (the "Common Stock"), consisting of (i) 920,000 shares of
Common Stock underlying 920,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") of the Company, (ii) 160,000 shares of Common Stock underlying
160,000 Representative's Warrants ("Representative's Warrants") and (iii) 80,000
shares of Common Stock issuable upon the exercise of the Underlying Warrants
("Underlying Warrants"). The Warrants, Representative's Warrants and the
Underlying Warrants are referred to collectively herein as "Warrants."

We are familiar with the Registration Statement and the registration
contemplated thereby. In giving this opinion, we have reviewed the Registration
Statement and such other documents and certificates of public officials and of
officers of the Company with respect to the accuracy of the factual matters
contained therein as we have felt necessary or appropriate in order to render
the opinions expressed herein. In making our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents presented to us
as originals, the conformity to original documents of all documents presented to
us as copies thereof, and the authenticity of the original documents from which
any such copies were made, which assumptions we have not independently verified.

Based upon the foregoing, we are of the opinion that:

1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas; and

2. The shares of Common Stock to be resold are validly authorized,
validly issued, fully paid and nonassessable.

3. The shares of Common Stock underlying the Warrants to be issued
upon exercise of such Warrants are validly authorized and, upon exercise of
the Warrants in accordance with their terms, will be validly issued, fully
paid and nonassessable.

We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference in the Registration Statement to Axelrod, Smith,
& Kirshbaum under the heading "Exhibits -- Opinion."

Very truly yours,

/s/ AXELROD, SMITH & KIRSHBAUM

<PAGE> 1

EXHIBIT 23.2

The Board of Directors
Rick's Cabaret International, Inc.

We consent to the use of our reports included herein and to the references
to our firm under the heading "Experts" in the Registration Statement on Form
S-3 Amendment No. 2.

/s/ JACKSON & RHODES P.C.
------------------------------------
Jackson & Rhodes P.C.

Dallas, Texas

July 18, 1997