SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549
                                   FORM 10-KSB

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT  OF  1934;  For  the  Fiscal  Year  Ended:      SEPTEMBER  30,  1998

                          OR

[ ]     TRANSITION  REPORT  PURSUANT  TO  SECTION 13 or 15(d) OF THE SECURITIES
        EXCHANGE  ACT  OF  1934

Commission  File  Number:  0-26958

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

             Texas                                         76-0458229
 (State or other jurisdiction of                         (IRS Employer
  incorporation or organization)                       identification No.)

                     3113 Bering Drive, Houston, Texas 77057
          (Address of principal executive offices, including zip code)

                                 (713) 785-0444
              (Registrant's telephone number, including area code)

Securities  registered  under  Section  12(b)  of  the  Exchange  Act:

     Title of Each Class     Name of Each Exchange on which Registered

     N/A                     N/A

Securities  registered  pursuant  to  12(g)  of  the  Exchange  Act:

     Title  of  Each  Class

     Common  Stock,  $.01  par  value


     Indicate  by  check  mark  whether the registrant (i) has filed all reports
required  to be filed by Section 13 or 15(d) of the Exchange Act during the past
12  months  (or for such shorter period that the registrant was required to file
such  reports),  and  (ii)  has been subject to such filing requirements for the
past  90  days.  Yes  [X]  No  [ ]

     Indicate  by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated  by  reference  in Part III of this Form 10-KSB or any amendment to
this  Form  10-KSB.  [X]

     Issuer's  revenues  for  the year ended September 30, 1998 were $7,831,531.
The  aggregate  market  value  of  Common  Stock  held  by non-affiliates of the
registrant  at  December  15, 1998, based upon the last reported sales prices on
NASDAQ, was $2,090,161.  As of December 15, 1998, there were 6,547,453 shares of
Common  Stock  outstanding.

<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS


PART I
<S>       <C>                                                    <C>
Item 1.   Business                                                1

Item 2.   Properties                                             10

Item 3.   Legal Proceedings                                      12

Item 4.   Submission of Matters to a Vote of Security Holders    13

PART II

Item 5.   Market for Registrant's Common Equity
          and Related Stockholder Matters                        14

Item 6..  Management's Discussion and Analysis
          of Financial Condition and Results of Operations       15

Item 7.   Financial Statements                                   19

Item 8.   Changes in and Disagreements With Accountants
          on Accounting and Financial Disclosure                 19

PART III

Item 9.   Directors, Executive Officers, Promoters and Control
          Persons; Compliance with Section 16(a)
          of The Exchange Act                                    20

Item 10.  Executive Compensation                                 22

Item 11.  Security Ownership of Certain Beneficial Owners
          And Management                                         26

Item 12.  Certain Relationships and Related Transactions         27

Item 13.  Exhibits and Reports on Form 8-K                       30
</TABLE>

<PAGE>
                                     PART I

ITEM  1.     BUSINESS

     Rick's  Cabaret  International,  Inc. ("Rick's" or the "Company") currently
owns  and  operates  premiere  adult nightclubs offering adult entertainment and
restaurant and bar operations. The Company has two adult nightclubs in operation
in  Houston,  Texas  as  well  as  a  non-sexually oriented discotheque, Tantra.
Additionally,  the  Company  has  adult  nightclubs in operation in New Orleans,
Louisiana and Minneapolis, Minnesota.  The Company owns the original location of
Rick's  Cabaret  on  Bering  Drive  in  Houston,  Texas,  the location of Tantra
discotheque,  in  Houston,  Texas  and  the  location in Minneapolis, Minnesota.
Rick's  leases  its  location  in  north Houston, Texas located near George Bush
Intercontinental  Airport,  which  opened  in December, 1998 from a consolidated
subsidiary.  The  Company  leases  its  New  Orleans  facility.

HISTORY  AND  INTRODUCTION

     The  Company was organized as a Texas corporation in 1994 to acquire all of
the  outstanding  capital  stock of Trumps, Inc., a Texas corporation ("Trumps")
from  Robert L. Watters, its sole stockholder.  As a result of this transaction,
Trumps  became  a  wholly  owned  subsidiary  of  the  Company.

     Trumps was incorporated in 1982 and has operated Rick's Cabaret since 1983.
Mr.  Watters  initially  became  a  10% stockholder of Trumps in November, 1987,
becoming  one  of three stockholders in Trumps.  Mr. Watters' ownership interest
in Trumps increased to 50% of the outstanding stock in 1989.  Mr. Watters became
the sole stockholder of Trumps in 1993 through a series of business transactions
with  the  only  other  then  remaining  stockholder.

     In  September,  1995,  the  Company  acquired  all  of the capital stock of
Tantric  Enterprises,  Inc.,  Tantra  Dance,  Inc.,  and  Tantra  Parking,  Inc.
(collectively  "Tantra") from Mr. Watters.  The Tantra companies own and operate
Tantra, a non-sexually oriented discotheque and billiard club in Houston, Texas.

     In February, 1996, the Company formed RCI Entertainment (Louisiana) Inc., a
Louisiana  corporation,  which  operates  the Company's location in New Orleans,
Louisiana.

     In  January 1997, the Company formed RCI Entertainment (Minnesota), Inc., a
Minnesota  corporation, for the purpose of administering, operating and managing
its  location  in  Minneapolis,  Minnesota,  which  began  operations  in  1998.

     The Company formed RCI Entertainment (Texas), Inc., a Texas corporation, in
June,  1996,  for the purpose of acquiring 1.13 acres of land in Houston, Texas.
The  Company  sold  the  property  in  November,  1997.

                                        1
<PAGE>
     In  August, 1998, the Company acquired approximately 93% of the outstanding
common  stock  of  Taurus  Entertainment Companies, Inc., a Colorado corporation
("Taurus")  in  a  private  stock  exchange  transaction  with certain principal
stockholders  of Taurus.  The Stock Exchange Agreement provided that the Company
exchange  one  share  of  its common stock for each three and one-half shares of
Taurus  common  stock  owned  by certain principal shareholders of Taurus.  As a
result of the Exchange, the Company exchanged a total of 1,143,426 shares of its
common  stock  for  approximately  4,002,006  shares  of common stock of Taurus,
giving  the Company control of Taurus.  The terms and conditions of the Exchange
were  determined  by  the parties through arms length negotiations.  However, no
appraisal  was conducted. The financial results of Taurus have been consolidated
into  the  Company's  financial  statements  since  the  date  of  acquisition.

     Taurus  is  a  publicly  owned  company in the adult entertainment business
trading  on  the  OTCBB  under  the symbol "TAUR".  Taurus owns and operates two
adult  entertainment  nightclubs in Austin and Houston, Texas under the name XTC
Cabaret.  Taurus  owns  one  other facility in Houston, Texas which is leased to
the Company.  This location, was remodeled and opened in December, 1998.  Taurus
also  leases  one  facility  in  New  Orleans,  Louisiana.

     In  a  transaction  simultaneous  to the acquisition of Taurus, the Company
acquired  certain  real  estate  in San Antonio, Texas from one of the principal
stockholders  of  Taurus.  The  Company  is  holding  this  property for sale or
development.  The  Company acquired the property from a principal stockholder of
Taurus  for the same price that the principal stockholder paid for the property.
The  Company financed the purchase of the property by the issuance of a six year
$366,000  Convertible  Debenture,  secured  by  the  real  estate  acquired.

     In a transaction simultaneous to the acquisition of Taurus, Taurus acquired
certain  real  estate  in  Houston, Texas from Mr. McElroy.  Taurus acquired the
property  from  Mr.  McElroy  for  the  same price that Mr. McElroy paid for the
property.  Taurus financed the purchase of the property by the issuance of a six
year  $286,744  Convertible Debenture, secured by the real estate acquired.  The
Company is a guarantor of this Convertible Debenture.  The Convertible Debenture
is  convertible  into shares of Common Stock of the Company at any time prior to
maturity  at  the  Conversion  Price  of  $2.75  per  share.

BUSINESS  STRATEGY

     Prior  to  Rick's  opening in 1983 in Houston, Texas, the topless nightclub
business  was  characterized  by small establishments generally managed by their
owner.  Such  establishments  were  often  dimly  lit  and  the  standards  for
performers'  personal  appearance  and  personality were not maintained.  It was
customary  for  performers  to  alternate  between dancing and waitressing.  The
quantity and quality of bar service was low and food was not frequently offered.
Music  was usually "hard" rock and roll, played at a loud level by a disc jockey
who  frequently  interrupted  the music to make general announcements.  Usually,
only

                                        2
<PAGE>
cash  was  accepted and businessmen  felt  uncomfortable in such an environment.
Recognizing  a  void  in the market for a first-class adult cabaret, the Company
designed  Rick's  and  targeted  the  businessmen's  segment  of  the  market by
providing  a  unique quality entertainment environment.  The following summarize
the  areas  of  operation of Rick's which management believe distinguish it from
its  competitors.

     FEMALE  ENTERTAINMENT.  Management  of the Company has followed a policy of
maintaining  high  standards  in  the  areas  of  both  personal  appearance and
personality  of  its  topless entertainers and waitresses.  Though a performer's
physical  appearance  is  very  important, of equal importance is her ability to
present  herself  attractively  and  to  converse  intelligently with customers.
Management  prefers  that  the  performers  it  hires  are  experienced dancers.
Prospective  performers  are  initially  interviewed by the Company's management
personnel.  Management  makes  a  determination  as  to  whether  a  particular
applicant  is  suitable  based  on  such factors of appearance, attitude, dress,
communication  skills  and  demeanor.

     MANAGEMENT.  The  Company has recruited its management staff primarily from
outside  the  topless industry, in the belief that management which has not been
exposed  to  operating  practices  prevalent  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.

     COMPLIANCE  POLICIES.  The  management  of  Rick's has a policy of ensuring
that  its  business  is  carried  on in conformity with local, state and federal
laws.  In particular, the Company's management has a "no tolerance" policy as to
illegal  drug  use  in  or  around  the premises.  Posters placed throughout the
nightclub  reinforce  this  policy  as  do  periodic unannounced searches of the
entertainer's  lockers.  Entertainers and waitresses who arrive for work are not
allowed  to  leave  the  premises without the permission of management.  Once an
entertainer  does leave the premises, she is not allowed to return to work until
the  next  day.  Management  continually  monitors the behavior of entertainers,
waitresses  and  customers  to  ensure  that  proper  standards  of behavior are
observed.

     Management  also reviews all credit card charges made by customers while at
Rick's.  Specifically,  management  has  in place a formal policy which provides
that  all credit card charges must be approved, in writing, by management before
any  charges  are accepted.  Management is particularly trained to review credit
card  charges  to  ensure that the only credit card charges approved for payment
are  for  food,  drink  and  entertainment  at  Rick's  Cabaret.

                                        3
<PAGE>
     FOOD  AND  DRINK.  The  Company believes a key to the success of a premiere
adult  nightclub  is  a  quality,  first-class  bar  and restaurant operation to
compliment  its  adult  entertainment.  The Company employs Service Managers who
are  in  charge  of  recruiting  and  training a professional waitress staff and
ensuring  that  each  customer  receives  prompt  and courteous service.  Rick's
employs  Chefs with restaurant experience and Bar Managers, who are in charge of
ordering  inventory  and scheduling of bar staff.  The Company believes that the
operation  of a first class restaurant is a necessary component to the operation
of  a  premiere  adult  cabaret, as is the provision of premium wine, liquor and
beer in order to ensure that the customer perceives and obtains good value.  The
Company's  restaurant operations in all of its topless cabarets are full service
operations  which  provides  business  lunch  buffets and a full-scale lunch and
dinner menu service offering hot and cold appetizers, salads, seafood, steak and
lobster.  An extensive selection of premiere wines are offered to compliment any
customer's  lunch  or  dinner  selection.

     CONTROLS.  Operational  and  accounting  controls  are  essential  to  the
successful  operation  of  a  cash  intensive  nightclub  and bar business.  The
Company  has implemented internal procedures and controls designed to ensure the
integrity  of  its  operational  and  accounting records.  The Company separates
management  personnel  from  all  cash  handling  to  ensure  that management is
isolated  from  and does not handle any cash.  The Company uses a combination of
accounting  and  physical inventory control mechanisms to ensure a high level of
integrity  in  its  accounting  practices.  Computers play a significant role in
capturing  and analyzing a variety of information to provide management with the
information necessary to efficiently manage and control the nightclub.  Deposits
of  cash  and  credit  card  receipts  are reconciled each day to a daily income
report.  In  addition,  management  reviews on a daily basis (i) cash and credit
card  summaries  which  tie  together  all  cash  and  credit  card transactions
occurring  at the front door, the bars in the club and the cashier station, (ii)
a  summary  of  the  daily bartenders' check-out reports, and (iii) a daily cash
requirements  analysis  which  reconciles the previous day=s cash on hand to the
requirements  for the next day's operations.  These daily computer reports alert
management  of any variances from expected financial results based on historical
norms.  Further,  the  Company  conducts,  on  a  monthly  basis, an independent
overview  of  its financial condition and has engaged independent accountants to
conduct  an  annual  audit  and to review and advise the Company relating to its
internal  controls.

ATMOSPHERE.  Rick's  maintains a high standard in its facility and in its decor.
The  furniture  and  furnishings  in  the  club  area are designed to create the
feeling  of  an  upscale  restaurant.  The  sound  system is designed to provide
quality  sound  at  levels  where  conversations  can  still  take  place.  This
environment  is  carefully  monitored, in terms of maintenance, music selection,
entertainer  and  waitress  appearance  and all aspects of customer service on a
continuous  basis.

                                        4
<PAGE>
     VIP  ROOM.  In keeping with Rick's emphasis on serving the upper-end of the
business  market,  Rick's  opened  its  first  VIP  room  in 1987, which is open
primarily  to individuals who purchase memberships. All of the Company's topless
clubs  have VIP rooms. A VIP room provides a higher level of luxury in its decor
and  services.  Membership  in Rick's VIP room requires a joining membership fee
which  ranges  from $250 for a non-resident individual membership to $550 for an
individual  resident  membership  and  $1,200  for  a  corporate  membership.
Additionally,  a  non-member may use the VIP room for a one-night admission fee.
Membership  in  any Rick's VIP room also entitles members to access to other VIP
rooms  at  all  other  locations  opened  by  the  Company.

     ADVERTISING AND PROMOTION.  Rick's marketing  philosophy  towards customers
is  to portray Rick's as a premiere cabaret providing topless entertainment in a
fun,  yet  discreet,  environment.  Hotel  publications,  local  radio,  cable
television,  newspapers, billboards, taxi-cab reader boards as well as a variety
of  promotional  campaigns  ensure  that  Rick's name is kept before the public.

     Rick's  has received a significant amount of media exposure over the years.
Mr.  Watters  has appeared twice on the talk show "Geraldo" talking about Rick's
and  was  featured in an episode of "Lifestyles of the Rich and Famous" focusing
on  the  topless industry.  In addition, Penthouse magazine produced a nine page
article  on  the  club  and  Playboy  magazine  covered  Rick's spring 1993 golf
tournament  in  a  recent  article.  In  the  past,  Rick's  has  sponsored golf
tournaments and outings which have generated significant interest and tradition.
Articles  covering  the  nightclub  have appeared in Glamour magazine as well as
Ladies  Home Journal.  The nightclub has been mentioned in an inside cover story
in  Time  magazine  as well as being mentioned on numerous occasions in both the
Houston  Chronicle and the Houston Post and in a 1995 article published in Texas
Monthly.  In  1993  Rick's  produced  the  Girls  of  Rick's,  a 90 minute video
feature,  which  was aired as a Pay-per-View feature on Warner cable.  The video
was  reviewed  in  several  local  newspapers  as  well as the Hollywood Variety
magazine.  In  December,  1994,  Rick's provided entertainers for a Pay-Per-View
feature  produced  by  a  local  radio  station.

     Rick's  received  extensive  national  coverage  of  its  IPO  and articles
appeared  in  The  Wall  Street  Journal,  Los  Angeles  Times, Houston Business
Journal, and numerous other regional newspapers.  The television program "Extra"
ran  a  short  feature  on  Rick's,  as did the program "Inside Edition." Rick's
Cabaret  in  New  Orleans  received  an  award  for  "Best  Topless Club" in the
Southwest  at  the 1998 Exotic Dancer Award Show held in Las Vegas in September,
1998.

RICK'S  CABARET  IN  NEW  ORLEANS,  LOUISIANA  AND  MINNEAPOLIS,  MINNESOTA.

                                        5
<PAGE>
     In  addition  to  the  Company's  original  operation  on  Bering  Drive in
Houston,  Texas,  the  Company  has opened a new location in December, 1998 near
George  Bush  Intercontinental  Airport  in Houston, Texas. The Company also has
locations  in  New  Orleans,  Louisiana and Minneapolis, Minnesota.  The Company
opened  its  location  in  New  Orleans,  Louisiana, in December, 1996, which is
located at 315 Bourbon Street in the New Orleans celebrated French Quarter.  The
Company's  lease for the New Orleans' location commenced on May 7, 1996, and has
a  term  of  39 2 years.  The lease is a triple net lease with the tenant paying
taxes,  maintenance  and  insurance.  The  club occupies 16,200 square feet in a
three  story  building.  The  club is comprised of two entertainment venues, the
first  being  a cabaret in the format of Rick's Cabaret in Houston, Texas, which
is  presently  open and occupies the bottom floor.  The second venue and format,
yet  to  be  opened,  will occupy the second floor of the building and will be a
theater  seating  250 patrons.  Live choreographed shows will take place twice a
night  with  a  cast  separate  from the cabaret facilities.  Rent is based on a
fixed minimum payment with a percentage supplement in the event that gross sales
exceed  certain  numbers.

A  facility  in  downtown Minneapolis, Minnesota was purchased in November 1997,
renovated,  and  opened  as  a  Rick's  Cabaret in March, 1998.  The Minneapolis
facility had previously been operated as an adult entertainment venue.  The club
occupies  9,000  square  feet  in  a one story building with a 6,400 square foot
lower  floor and is located at 300 South 3rd St. in Minneapolis, near the Target
Center,  home  to  the  Timberwolves NBA team and the Metrodome, home to the NFL
Vikings  team.

     The  Company  leased  a  10,000  square  foot building from a subsidiary of
Taurus  Entertainment Companies, Inc. in August 1998, located at 410 Sam Houston
Parkway  East,  in north Houston, near George Bush Intercontinental Airport. The
site  was  operated  under the name Broadstreets Cabaret by Taurus Entertainment
Companies, Inc. and was damaged by a fire in May, 1998. The property was rebuilt
largely  from  funds  provided  by  insurance monies and was opened as a topless
cabaret  in  December,  1998.

TANTRA

     The Company owns and operates Tantra,  a non-sexually  oriented discotheque
and  billiard  club in Houston, Texas.  Tantra is located in a 6,500 square foot
building  and  incorporates  separate areas for bar service, dancing and playing
billiards.  Tantra  is  designed  to appeal to an audience of people between the
ages  of  21  through  40 who wish to dance to music which may be categorized as
modern dance music.  Tantra is designed to appeal to both couples and single men
and  women.  Tantra  is seen as a separate, but complimentary, business activity
to  Rick's Cabaret and is part of the Company's business philosophy to diversify
into  a  broader  based  entertainment  Company.

FUTURE  EXPANSION

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<PAGE>
     It  is  the  Company's  intention to continue to open adult cabarets in the
format  and bearing the name "Rick's Cabaret" in other cities.  The Company also
will consider the acquisition of adult cabarets in other cities.  In determining
which cities will be prime locations for a "Rick's Cabaret" a variety of factors
will  be  considered.  The  current  regulatory  environment will be one of such
factors.  The  city  must  presently  permit alcoholic beverages to be sold in a
topless  cabaret  and  must  permit table dancing.  Another factor which will be
considered  is the availability of sites.  The city must have available a number
of  sites  suitable  for  conversion  to a Rick's style cabaret, located in high
traffic commercial areas.  The Company also will review potential competition in
the  area  and  will  attempt  to  analyze  the  current  market  conditions and
profitability  of other adult cabarets in the city.  The proximity to Houston of
a  particular city will also be considered.  In the early years of expansion the
city  must  be  within  easy  commuting  distance  by air of Houston.  This will
facilitate the training of management in Houston and enable the participation of
Houston-based  management in the construction and opening of the new enterprise.
The  existing  business  climate  will also be of critical importance.  The city
must  have  a  significant  population  of  indigenous  businessmen, should be a
recognized  tourist  destination  and  should  have  a well developed convention
business.

COMPETITION

     The  adult  topless  club entertainment business is highly competitive with
respect  to  price,  service and location, as well as the professionalism of its
entertainment.  For example, 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.  While  there  are  restrictions  on the location of a
so-called  "sexually  oriented business" there are no barriers to entry into the
adult  cabaret  entertainment  market  and  only  the  name "Rick's" and "Rick's
Cabaret"  are proprietary.  There are approximately 50 adult cabarets located in
the  Houston  area  of which approximately 10 are in direct competition with the
Company.  In  New  Orleans,  Rick's  is  ideally located on world famous Bourbon
Street.  There are approximately 10 cabarets in New Orleans only one of which is
considered  direct  competition.  In  Minneapolis,  Rick's  is favorably located
downtown  and  is a short walk from the Metrodome Stadium and the Target Center.
There is only one cabaret in Minneapolis in direct competition with the Company.
The  Company  believes that the combination of its existing name recognition and
the  entertainment  environment  that  it  has created, which is distinctive and
unique,  will  allow  the Company to effectively compete within the industry and
within  the cities in which the Company operates.  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.

GOVERNMENTAL  REGULATIONS

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<PAGE>
     The  Company  is subject to various federal, state and local laws affecting
its  business  activities.  In  particular,  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.  Rick's has never
been  the  subject  of  a  protest  hearing  against the renewal of its Permits.
Louisiana and Minnesota  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.
Prior  to  expanding  into  any  new  market,  the  Company  will take all steps
necessary  to  ensure  compliance with all licensing and regulatory requirements
for  the  sale  of  alcoholic  beverages  as  well  as  the  sale  of  food.

     In  addition  to  various  regulatory  requirements  affecting  the sale of
alcoholic beverages, in Houston, and in many other cities, location of a topless
cabaret  is  subject to restriction by city ordinance.  Rick's in Houston, Texas
is  subject  to  "The  Sexually  Oriented Business  Ordinance" (the "Ordinance")
which  contains  prohibitions  on  the  location  of  an  adult  cabaret.  The
prohibitions  deal  generally  with  distance  from schools, churches, and other
sexually oriented businesses and contain restrictions based on the percentage of
residences within the immediate vicinity of the sexually oriented business.  The
granting  of  a  Sexually  Oriented  Business  Permit ("Business Permit") is not
subject  to  discretion;  the  Business  Permit  must be granted if the proposed
operation  satisfies  the  requirements  of  the  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 established new distances that
Sexually  Oriented  Businesses  may be located to schools, churches, playgrounds
and  other  sexually  oriented  businesses.  There  were  no  provisions  in the
Ordinance  exempting  previously permitted sexually oriented businesses from the
effect  of  the  new  Ordinance.  In  1997, the Company was informed that Rick's
Cabaret  at its location at 3113 Bering Drive failed to meet the requirements of
the  Ordinance  and accordingly the renewal of the Company's Business License at
that  location  was  denied.

     The  Ordinance  provided  that a business which was denied a renewal of its
operating  permit  due  to  changes in distance requirements under the Ordinance
would  be  entitled  to  continue  in  operation  for  a  period  of  time  (the
"Amortization Period") if the owner were 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.

     The  Company filed a written request with the City of Houston requesting an
extension  of  time  during  which  the Company could 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 by
the  City  of  Houston  to  determine  the appropriate Amortization Period to be
granted to the Company.  At the Hearing, the Company was granted an amortization
period  through  July 1998.  The Company has the right to appeal any decision of
the  Hearing official to the district court in the State of Texas.  The location
in  north  Houston  opened  in  December,  1998  similarly  failed  to  meet the
requirements  of  the  Ordinance  as  passed,  but  the  Company  did receive an
Amortization  Period  through  June  30, 2000 for the location in north Houston.

                                        8
<PAGE>
     In  May,  1997,  the  City of Houston agreed to defer implementation of the
Ordinance  until  the  constitutionality  of the entire Ordinance was decided by
court  trial.  In  February  1998  the  U.S.  District  Court  for  the Southern
District  of  Texas,  Houston,  Division,  struck down certain provisions of the
Ordinance,  including  the  provision  mandating a 1,500 foot distance between a
club  and schools, churches and other sexually oriented business, leaving intact
the provision of the 750 foot distance as it existed in the prior Houston, Texas
Ordinance.

     There  are  other  provisions  in  the  Houston,  Texas  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 that were upheld
which  may  be  detrimental  to  the  business  by the Company.  The Company, in
concert  with  other sexually oriented businesses, is appealing these aspects of
the  Houston,  Texas  Ordinance.

     The  City  of  Houston,  and  the  Company  in  concert with other sexually
oriented  businesses,  have appealed the court's rulings.  In the event that the
City  of  Houston  is  successful  in an appeal, the Company's Houston locations
could be out of compliance.  Such an outcome could have an adverse impact on the
Company's  future.

     On  April  1, 1998, the City of Houston began enforcing certain portions of
the  Ordinance,  including  the  distance  requirement  between a customer and a
dancer while dancing, and the requirement that dancers be licensed.  The City of
Houston's  enforcement  of  the recently implemented provisions of the Ordinance
could  have  an  adverse  impact  on the Rick's location in Houston, Texas.  The
current  requirement  of  a  three foot distance between a dancer and a customer
could  reduce  customer  satisfaction and could result in fewer customers at the
Houston location.  The requirement that a dancer be licensed may result in fewer
dancers working, which could have an adverse impact on the Houston location.  It
is  unknown  what future impact the enforcement of the Ordinance may have on the
Company's  Houston  locations.

     The  Company is also required to have a dance hall permit for the operation
of  a  discotheque  in  the  city  of  Houston.  The  dancehall  permit is not a
discretionary  permit,  but must be granted by the city if the provisions of the
applicable  ordinance  are  satisfied.  A  dancehall  permit  may  be revoked or
renewal  may  be refused if certain criminal activities occur on the premises or
the  person  listed  as  the  applicant  has  committed  certain named offenses.
Tantra's  dancehall  permit  is  presently  held  by  Mr.  Watters.  The Company
believes  that  it  could  obtain  a new dance hall permit if for any reason Mr.
Watters  failed  to  renew  or was refused the renewal of the dance hall permit.
Prior  to  expanding  into  any  new  market,  the  Company  will take all steps
necessary to obtain any required dance hall permits and to comply with any other
related  regulatory  requirements  within  that  market.

                                        9
<PAGE>
     In  Minneapolis, the Company is required to be in compliance with state and
city liquor licensing laws. The cabaret is located in an area presently zoned to
enable  the  operation  of  a  topless  cabaret.

     In  New Orleans, the Company is required to be in compliance with state and
city liquor licensing laws. The cabaret is located in an area presently zoned to
enable  he  operation  of  a  topless  cabaret.

     In  San  Antonio,  the  Company  would be required to be in compliance with
state  liquor  licensing  law  and  the  sexually  oriented  business  ordinance
implemented  by  the  City  of  San  Antonio.

TRADEMARKS

     Rights  of  the Company to the trademarks "Rick's" and "Rick's Cabaret" are
established  under  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" logo was registered by the United States Patent
and  Trademark Office ("PTO") in 1989.  Due to an oversight, these registrations
were canceled by the PTO for failure of the Company to file a required affidavit
with  the  PTO setting forth that the service mark was still in use in commerce.
Applications  for service mark registrations for this mark were refiled, and the
PTO has issued new registrations for the service mark "RICK'S AND STARS DESIGN".

     The  Company  has also obtained service mark registrations from the PTO for
the  Company's  RICK'S  CABARET  service  mark.

     There  can  be  no assurance that the 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.

EMPLOYEES  AND  INDEPENDENT  CONTRACTORS

     As  of  September  30,  1998,  the  Company had approximately 350 full-time
employees,  of  which  30  are  in management positions, including corporate and
administrative  operations,  and  approximately  150  are  engaged  in  food and
beverage  service,  including  bartenders and waitresses.  None of the Company's
employees  are  represented  by  a  union and the Company considers its employee
relations  to  be  good.

     Additionally,  the  Company  has  independent contractor relationships with
over  1000  entertainers,  who  are self-employed and work with the Company on a
non-exclusive  basis  as  independent  contractors.  Performers  in Minneapolis,
Minnesota  act  as  commissioned  employees.

ITEM  2.     PROPERTIES

                                       10
<PAGE>
     The  Company  owns the premises where Rick's Cabaret is located in Houston,
Texas.  The  cabaret  contains an aggregate 12,300 square feet, divided into two
separate  club  areas  and  executive and administrative offices.  The main club
area  and  the  VIP  club  area  together  contain  10,500  square feet and seat
approximately  300  people.  The  executive  and administrative offices comprise
1,800  square  feet.  A woman's apparel boutique leases approximately 300 square
feet  at  the  same  location.

SRD  Vending  Company,  Inc.  ("SRD"),  a  Texas Corporation wholly-owned by the
Company  also  occupies  120 square feet at the same location.  SRD provides and
maintains  the  cigarette  vending  machines  located  at  Rick's  Cabaret.

The  Company  owns a 6,500 square foot building in which Tantra is located.  The
building  incorporates  separate  areas  for  bar  service,  dancing and playing
billiards.  The  building  is currently leased to Tantra, pursuant to a ten year
lease  agreement  which expires on August 1, 2004.  The lease agreement provides
for lease payments of the greater of (i) $1,500 per month or (ii) 5% of Tantra's
gross receipts per month until such time as the Company has received $250,000 of
rental  income.

The  Company leases the premises where Rick's Cabaret is located in New Orleans,
Louisiana.  The  Company's  lease for the New Orleans' location commenced on May
7,  1996,  and  has  a term of 39 2 years.  The lease is a triple net lease with
tenant paying taxes, maintenance and insurance.  The club occupies 16,200 square
feet  in  a  three  story  building.

     The  Company  purchased  a  facility  in downtown Minneapolis, Minnesota in
November,  1997  which  opened  as  a  Rick's  Cabaret in 1998.  The Minneapolis
facility  had  previously  been  operated as an adult entertainment venue.   The
club  occupies 15,400 square feet in a one story building with a fully developed
lower  floor.  The  mortgage on the property was executed in November, 1997 with
an  original  principal amount of $500,000 and bearing interest of 9% per annum,
amortized  over 20 years with monthly principal and interest payments of $4,498,
and  a  balloon  payment  due  in  July  2007.

                                       11
<PAGE>
     The Company purchased real estate in San Antonio, Texas from Ralph McElroy,
a  principal stockholder of the Company, consisting of 1.5 acres. The Company is
analyzing  its  options  regarding  development  of  this property.  The Company
acquired  the property from Mr. McElroy for the same price that Mr. McElroy paid
for  the  property.  The  Company  financed  the purchase of the property by the
issuance  of  a  six  year  $366,000  Convertible Debenture, secured by the real
estate  acquired.  The  principal balance of the Convertible Debenture is due in
July,  2004, in one lump sum payment.  Interest is due and payable monthly, with
the  first  interest  payment  beginning  in  September, 1998.   The Convertible
Debenture  is subject to redemption at the option of the Company, in whole or in
part, at 100% of the principal face amount of the Convertible Debenture redeemed
plus  any  accrued  and  unpaid interest on the redemption date, at any time and
from  time  to  time, upon not less than 30 nor more than 60 days notice, if the
Closing  Price of the common stock of the Company shall have equaled or exceeded
$8.50  per  share  of  common  stock  for ten (10) consecutive trading days. The
Convertible  Debenture  is  convertible  into shares of Common Stock at any time
prior to maturity (unless earlier redeemed) at the Conversion Price of $2.75 per
share.  See,  Certain  Relationships  and  Related  Transactions.

     Taurus  purchased  real  estate  in  Houston,  Texas  from Ralph McElroy, a
principal stockholder of the Company, where Taurus operates an XTC Cabaret.  The
Company  acquired  the  property  from  Mr.  McElroy for the same price that Mr.
McElroy  paid  for  the  property.  The  Company  financed  the  purchase of the
property  by  the issuance of a six year $286,744 Convertible Debenture, secured
by  the  real  estate  acquired.  The Company is a guarantor of this Convertible
Debenture.  The  principal  balance of the Convertible Debenture is due in July,
2004,  in  one  lump sum payment.  Interest is due and payable monthly, with the
first  interest payment beginning in September, 1998.  The Convertible Debenture
is  convertible  into shares of Common Stock of the Company at any time prior to
maturity at the Conversion Price of $2.75 per share.  See, Certain Relationships
and  Related  Transactions.

     The  Company  leases  premises  located on the north side of Houston, Texas
from  Taurus,  where  a topless cabaret opened in December, 1998.  The Company's
lease  for  this  location  continues  until  July 31, 2018 at a monthly rent of
$15,000.  The  lease is a triple net lease with tenant paying taxes, maintenance
and insurance.  The club will occupy 10,000 square feet in a one story building.

ITEM  3.     LEGAL  PROCEEDINGS

     In  November, 1998, LMTD, Inc. initiated litigation against a subsidiary of
one  of  the  Company's subsidiaries, Citation Land, LLC ("Citation"), in a case
styled  LMTD,  Inc. v. Texas Warehouse Company, Inc., et al. Cause No. 98-12570,
in  the  200th  Judicial District Court of Travis County, Texas.  The suit seeks
specific performance and damages against Texas Warehouse Company, Inc. regarding
a  Purchase  Option  Agreement.  Plaintiff  also alleges a tortious interference
claim against Citation in the amount of $540,000.   Counsel for Citation intends
to  file  a counterclaim and or cross action at the time that its answer is due.
Counsel  for  Citation  believes  that the exposure to Citation is minimal.  The
Company  intends  to  vigorously  defend  itself  in this matter and to deny all
allegations.

     On  October  15,  1998, All City Beverage and Entertainment, Inc. initiated
litigation  against  one of the Company's subsidiaries in a case styled All City
Beverage  and  Entertainment,  Inc.  v.  Taurus  Entertainment  Companies,
Inc.("Taurus"),  Cause  No.  98-49119,  in  the 61st  Judicial District Court of
Harris  County,  Texas.  The  suit  seeks  damages  in the amount of $25,000 and
175,000  shares  of  common stock of Taurus in connection with an Asset Purchase
Agreement  between All City Beverage and Entertainment, Inc. and Taurus.  Taurus
has  filed  a  counter-claim  asserting  that there were undisclosed obligations
which Taurus was required to pay.  The counter-claim seeks damages in an  amount
in  excess  of $25,000.  This matter is in the early stages of litigation and no
discovery  has  taken place.  Taurus intends to vigorously defend itself in this
matter.

                                       12
<PAGE>
SEXUALLY  ORIENTED  BUSINESS  ORDINANCE  OF  HOUSTON,  TEXAS

     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 established new distances that
Sexually  Oriented  Businesses  may be located to schools, churches, playgrounds
and  other  sexually  oriented  businesses.  There  were  no  provisions  in the
Ordinance  exempting  previously permitted sexually oriented businesses from the
effect  of  the  new  Ordinance.  In  1997, the Company was informed that Rick's
Cabaret  at its location at 3113 Bering Drive failed to meet the requirements of
the  Ordinance  and accordingly the renewal of the Company's Business License at
that  location  was  denied.

     The  Ordinance  provided  that a business which was denied a renewal of its
operating  permit  due  to  changes in distance requirements under the Ordinance
would  be  entitled  to  continue  in  operation  for  a  period  of  time  (the
"Amortization Period") if the owner were 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.

     The  Company filed a written request with the City of Houston requesting an
extension  of  time  during  which  the Company could 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 by
the  City  of  Houston  to  determine  the appropriate Amortization Period to be
granted to the Company.  At the Hearing, the Company was granted an amortization
period  through  July 1998.  The Company has the right to appeal any decision of
the  Hearing  official  to  the  district  court  in  the  State  of  Texas.

     In  May,  1997,  the  City of Houston agreed to defer implementation of the
Ordinance  until  the  constitutionality  of the entire Ordinance was decided by
court  trial.  In  February  1998  the  U.S.  District  Court  for  the Southern
District  of  Texas,  Houston,  Division,  struck down certain provisions of the
Ordinance,  including  the  provision  mandating a 1,500 foot distance between a
club  and schools, churches and other sexually oriented business, leaving intact
the provision of the 750 foot distance as it existed in the prior Houston, Texas
Ordinance.

     There  are  other  provisions  in  the  Houston,  Texas  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 that were upheld
which  may  be  detrimental  to  the  business  of the Company.  The Company, in
concert  with  other sexually oriented businesses, is appealing these aspects of
the  Houston,  Texas  Ordinance.

                                       13
<PAGE>
     The  City  of  Houston  and  the  Company,  in  concert with other sexually
oriented  businesses  has  appealed  the court's rulings.  In the event that the
City  of  Houston  is  successful  in an appeal, the Company's Houston locations
could be out of compliance.  Such an outcome could have an adverse impact on the
Company's  future.

     On  April  1, 1998, the City of Houston began enforcing certain portions of
the  Ordinance,  including  the  distance  requirement  between a customer and a
dancer while dancing, and the requirement that dancers be licensed.  The City of
Houston's  enforcement  of  the recently implemented provisions of the Ordinance
could  have  an  adverse  impact  on the Rick's location in Houston, Texas.  The
current  requirement  of  a  three foot distance between a dancer and a customer
could  reduce  customer  satisfaction and could result in fewer customers at the
Houston location.  The requirement that a dancer be licensed may result in fewer
dancers working, which could have an adverse impact on the Houston location.  It
is  unknown  what future impact the enforcement of the Ordinance may have on the
Company's  Houston  locations.

ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

     During  the  fourth  quarter  of 1998, there were no matters submitted to a
vote  of  the  Security  Holders,  through solicitation of proxies or otherwise.

                                     PART II

ITEM  5.     MARKET  FOR  REGISTRANT'S COMMON EQUITY AND RELATED     STOCKHOLDER
MATTERS

     The  Company's  Common  Stock is traded on The NASDAQ SmallCap Market under
the  symbol  "RICK."  The  following table sets forth the quarterly high and low
last  sales  prices  per  share  for  the  Common  Stock, as reported by NASDAQ.

<TABLE>
<CAPTION>
     COMMON  STOCK  PRICE  RANGE

                  HIGH     LOW
<S>             <C>      <C>
1997
First Quarter   $ 5 1/2  $  4.00
Second Quarter  $4 7/16  $ 2 3/4
Third Quarter   $  3.00  $ 2 1/4
Fourth Quarter  $ 2 5/8  $  2.00

1998
First Quarter   $3 3/16  $ 2 1/4
Second Quarter  $3 3/16  $2 1/16
Third Quarter   $ 4 3/8  $ 2 1/8
Fourth Quarter  $3 3/16  $   1/2
</TABLE>

                                       14
<PAGE>
     On December 15, 1998, the last sales price for the Common Stock as reported
by  The  NASDAQ SmallCap Market was $.50 per share.  On December 15, 1998, there
were  approximately  392  stockholders  of  record  of  the  Common  Stock.

TRANSFER  AGENT  AND  REGISTRAR

     The transfer agent and registrar for the Company's Common Stock is American
Stock  Transfer & Trust Company, 40 Wall Street, 46th Floor, NY, NY 10005, (718)
921-8275.

DIVIDEND  POLICY

     The  Company has not paid, and the Company does not currently intend to pay
cash  dividends  on  its  common  stock  in the foreseeable future.  The current
policy of the Company's Board of Directors is to retain all earnings, if any, to
provide  funds  for  operation  and  expansion  of  the Company's business.  The
declaration of dividends, if any, will be subject to the discretion of the Board
of  Directors,  which  may  consider  such  factors  as the Company's results of
operations,  financial  condition, capital needs and acquisition strategy, among
others.

RECENT  SALES  OF  UNREGISTERED  SECURITIES

     In  August, 1998, the Company acquired approximately 93% of the outstanding
common  stock  of  Taurus  Entertainment Companies, Inc., a Colorado corporation
("Taurus")  in  a  private  stock  exchange  transaction  with certain principal
stockholders  of Taurus.  The Stock Exchange Agreement provided that the Company
exchange  one  share  of  its common stock for each three and one-half shares of
Taurus  common  stock  owned  by certain principal shareholders of Taurus.  As a
result of the Exchange, the Company exchanged a total of 1,143,426 shares of its
common  stock for approximately 4,002,006 shares of common stock of Taurus.  The
Company  believes  that  each  of  the  persons  had knowledge and experience in
financial  and  business  matters  which allowed them to evaluate the merits and
risk of the receipt of these securities of the Company, and that each person was
knowledgeable  about  the  Company's operations and financial condition.   These
transactions  were  effected  by  the  Company  in reliance upon exemptions from
registration under the Securities Act of 1933 as amended (the "Act") as provided
in  Section  4(2)  thereof.  Each certificate issued for unregistered securities
contained  a  legend  stating that the securities have not been registered under
the  Act  and setting forth the restrictions on the transferability and the sale
of  the  securities. No underwriter participated in, nor did the Company pay any
commissions  or  fees  to  any  underwriter  in  connection  with  any  of these
transactions.  None  of  the  transactions  involved  a  public  offering.

ITEM  6.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL
             CONDITION  AND  RESULTS  OF  OPERATIONS

                                       15
<PAGE>
    The  following  discussion  should be read in conjunction with the financial
statements  and  notes thereto for the fiscal years ended September 30, 1998 and
1997.

FORWARD  LOOKING  STATEMENT  AND  INFORMATION

     This  Management  Discussion  and Analysis contains various forward looking
statements  which  represent  the  Company's  expectations or beliefs concerning
future  events  and  involve  a  number  of  risks and uncertainties.  Important
factors  that  could  cause  actual  results  to  differ  materially  from those
indicated  include  risks  and  uncertainties  relating  to  the  impact  and
implementation  of  the  sexually  oriented  business  ordinance  in the City of
Houston,  competitive  factors,  the  timing of the openings of other clubs, the
integration  of  operations  of  Taurus  Entertainment  Companies,  Inc with the
operations  and  management  of  the Company, and the availability of acceptable
financing to fund corporate expansion efforts.  The Company has no obligation to
update  or  revise these forward looking statements to reflect the occurrence of
future  events  or  circumstances.

GENERAL

     The  Company  was formed in December 1994 to acquire all of the outstanding
capital  stock  of  Trumps, Inc., a Texas corporation ("Trumps") formed in 1982.
Since  1983,  Trumps  has  operated  Rick's  Cabaret,  a premier adult nightclub
offering topless entertainment in Houston, Texas.  In 1995, the Company acquired
Tantra,  a  non-sexually  oriented discotheque and billiard club also located in
Houston, Texas from Robert L. Watters, the principal shareholder.  Tantra became
operational  during  the  second  quarter of fiscal 1995.  In February 1996, the
Company  formed  RCI Entertainment (Louisiana) Inc., a Louisiana corporation for
the  purpose  of  administering, operating, managing and leasing its location in
New Orleans, Louisiana.  The Company opened its facility in New Orleans in 1996.
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 sold
the  Land  in  November,  1997.  In  January,  1997  the  Company  formed  RCI
Entertainment  (Minnesota)  Inc.  for  the  purpose  of  acquiring,  renovating
operating  and  managing  its  facility  in Minneapolis, Minnesota.  The Company
opened  its facility in Minneapolis, Minnesota in March, 1998. In December, 1998
the  Company  opened  its  fourth topless location in leased premises located in
north Houston, Texas. The Company's fiscal year end is September 30.  In August,
1998,  the  Company  acquired  93%  of  the  outstanding  common stock of Taurus
Entertainment  Companies,  Inc.

     The  Company's revenues are derived from the sale of liquor, beer, wine and
food,  which  comprises  approximately 58% of total revenues, and charges to the
entertainers, cover charges and other income which comprise approximately 42% of
total  fiscal  1998  revenues.

                                       16
<PAGE>
RESULTS  OF  OPERATIONS

YEAR  ENDED  SEPTEMBER  30,  1998  COMPARED  TO  YEAR  ENDED SEPTEMBER 30, 1997.

     For  the  1998  fiscal year, the Company had consolidated total revenues of
$7,831,531,  an  increase  of  25%  or  $1,553,952 above fiscal 1997 revenues of
$6,277,579.   Revenues  in  New  Orleans  surpassed  revenues in Houston for the
first  time,  with  New  Orleans  contributing  51% of the gross revenues of the
Company,  Houston  28%,  Tantra  6%  and  Minneapolis  (which  was only open for
approximately  one-half  of  the  fiscal  year)  11%.  The  Taurus Entertainment
Companies,  Inc.  group  contributed,  for  the  period  from August 11, 1998 to
September  30,  1998  4%  of  the  gross  revenues  of  the  Company.

     Costs  of  goods  sold were 24% and 32% of sales of alcoholic beverages and
food  for  fiscal 1998 and 1997, respectively.  This decrease is due steps taken
by  management  to  achieve  continuing improvements in cost of goods sold.  The
Company  continues  a  program to improve margins from liquor and food sales and
food  service  efficiency.

     Salaries  and  wages  increased 25% or $530,427 from fiscal 1997 due to the
addition  of  management  personnel in Minneapolis, as a result of the policy of
the  Company  in  Minneapolis  of treating the entertainers as employees and the
acquisition  of  Taurus  Entertainment  Companies, Inc.  Management staffing was
increased  in  order  to  have  adequately  trained personnel to assist with the
planning  and  pre-opening  activities  of  other  locations.

     Other  general  and  administrative expenses increased  7% or $270,069 from
fiscal  1997  to fiscal 1998.  Charge card fees increased $38,150 largely due to
increased sales.  Legal and accounting fees increased $48,148 as a result of the
cost  of  the acquisition and opening of the store in Minneapolis, Minnesota and
the  acquisition  of  Taurus  Entertainment  Companies,  Inc.

     Advertising  and promotion decreased by $286,324 reflecting a change in the
Company's  policy  regarding advertising expenditures surrounding the opening of
new  stores.

     Other  costs increased $290,694 during fiscal 1998 as a result of increased
travel  and  lodging  costs  incurred by staff involved with the New Orleans and
Minneapolis locations and the review of the Taurus Entertainment Companies, Inc.
acquisition  and  of  other  potential  acquisitions.

                                       17
<PAGE>
     The  Company experienced a net loss of $604,864 for fiscal 1998 compared to
a  net  loss  of  $1,293,330  for  fiscal  1997.  Management  has taken steps as
discussed  in  greater detail below to ensure the Company will become profitable
in  fiscal  1999,  principally  as  a result of increased revenues and decreased
advertising expenditures and also as income from the opening of new locations is
realized.  See,  Liquidity  and  Capital  Resources.

     Interest  expense  increased  to $384,037 during fiscal 1998 as a result of
the acquisition of the land and building in Minneapolis, Minnesota and inclusion
of  the  debt  of  Taurus  Entertainment  Companies,  Inc.

YEAR  ENDED  SEPTEMBER  30,  1997  COMPARED  TO  YEAR  ENDED SEPTEMBER 30, 1996.

     For  the  1997  fiscal year, the Company had consolidated total revenues of
$6,277,579,  an  increase of $1,647,281 from fiscal 1996 revenues of $4,630,298.
Single  location  revenues for Rick's Cabaret - Houston declined 17% from fiscal
1996 to fiscal 1997 or approximately $594,000.  The decline at Rick's Cabaret in
Houston  was  offset by the opening of Rick's Cabaret New Orleans which provided
revenues of $2,296,779 during the nine months of this fiscal period for which it
was open.  The overall decline in single location revenues in Houston, Texas was
attributable  to the increased level of competition in the area and the chilling
effect  of  a  new ordinance passed in January, 1997 by the City of Houston City
Council.

      Costs  of  goods sold were 32% and 30% of sales of alcoholic beverages and
food for fiscal 1997 and 1996, respectively.  This slight increase is due to the
increase  in  food  sales  which carries a higher cost than beverage sales.  The
Company  continues  a  program to improve margins from liquor and food sales and
food  service  efficiency.

     Salaries  and  wages  increased 42% or $625,400 from fiscal 1996 due to the
addition  of personnel in all areas of the company due to the opening of the New
Orleans  location  and  in  preparation  for  the  opening  of  the  location in
Minneapolis,  Minnesota.

     Other  general  and  administrative expenses increased 23% or $749,579 from
fiscal  1996  to fiscal 1997.  Charge card fees increased $40,951 largely due to
opening the new location in New Orleans.  Legal and accounting decreased $25,099
as  a  result  of  the  final  settlement  of  two  cases involving the company.
Advertising  and  promotion  increased  by $241,130 reflecting the cost of media
expenditure  in  New  Orleans.  The  company's  current  media expenditures have
declined  reflecting the decrease in need for advertising in New Orleans.  Other
costs  increased  during  fiscal  1996 as a result of (i) additional expenses of
$52,000  to  recognize  refunds due to wait staff employees in Houston for shift
charges  and  tip  processing  fees, and (ii) increased travel and lodging costs
incurred  by  staff involved with the opening of the New Orleans and Minneapolis
locations  and  the  review  of  other  potential  acquisitions.

     The  Company  experienced a net loss of $1,293,330 for fiscal 1997 compared
to  a  net  loss  of  $708,614  for  fiscal  1996.

                                       18
<PAGE>
LIQUIDITY  AND  CAPITAL  RESOURCES

     At  September  30,  1998  the  Company  had  a  working  capital deficit of
$(887,833),  compared  to working capital of $107,342 at the end of fiscal 1997.
The  decrease  in  working capital is primarily due to the sale of land held for
sale in November, 1997 and the use of the proceeds in renovating and opening the
nightclub  in  Minneapolis,  Minnesota  in  March,  1998.
In  the  opinion  of  management, working capital is not a true indicator of the
status  of the Company due to the short cycle to liquidity, which results in the
realization of cash within no more than five (5) days after the culmination of a
transaction.

     Net  cash  provided  by  operating  activities  in fiscal 1998 was $427,172
compared  to  net  cash used by operating activities of $544,768 in fiscal 1997.
The  increase  in cash provided by operating activities was due primarily to the
net  loss of $570,864 being balanced by depreciation of $440,055, an increase in
accounts  payable  and  accrued  liabilities  of  $512,278.  Net  cash  used  in
investing  activities  was  $(307,465)  in 1998 and was due to investment in the
renovation  of  the  property  owned  by  the Company in Minneapolis, Minnesota.

     Cash  provided  by financing activities was $120,527 due to proceeds raised
from  selling  common stock for $775,000 less payments made on long-term debt in
the  amount  of  $654,473.

     Management  believes  it  has  implemented  plans that will ensure that the
Company  will  become  profitable  in  fiscal  1999.  The  acquisition of Taurus
Entertainment Companies, Inc. represented the first multi-unit expansion for the
Company,  and  included  locations  outside  of  its original market of Houston,
Texas.  Emphasis  will  continue to be placed on reduction of Cost of Goods Sold
by  setting  and  monitoring  management  goals  at  each  location.

     Although  the  Company  has  not established lines of credit other than the
existing debt, there can be no assurance that the Company will be able to obtain
additional  financing on reasonable terms, if at all.  The Company has, however,
developed  numerous  contacts  with  professionals who have expertise in raising
capital through private placement of securities and the Company will look to the
public  marketplace  to  find  the  resources  necessary to continue its planned
expansion.

                                       19
<PAGE>
     Because  of the large volume of cash handled by the Company, stringent cash
controls  have  been  implemented  by  the  Company.  These procedures have been
improved  over  the  life  of  the Company, to take advantage of improvements in
technology.  Management believes that it will be able to duplicate the financial
controls that exist at its current locations at future locations, and that these
controls  will  provide  sufficient  safeguards  to protect the interests of the
Company.  In  the  event  the topless club industry is required in all states to
convert  the  entertainers  who  perform from independent contractor to employee
status, the Company has prepared alternative plans that Management believes will
protect the profitability of the Company.  In addition, Management believes that
the  industry  standard  of treating the entertainers as independent contractors
provides  sufficient  safe  harbor protection to preclude any tax assessment for
prior  years  payroll  taxes.

     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 all of its location competes with a number of
locally-owned  adult cabarets, some of whose names enjoy recognition that equals
that  of  Rick's.  Although  the  Company believes that it is well-positioned to
compete  successfully  in the future, there can be no assurance that Rick's will
be  able  to maintain its high level of name recognition and prestige within the
marketplace.

SEASONALITY

     The  Company  is  significantly  affected  by seasonal factors.  Typically,
Rick's has experienced reduced revenues from May through September.  The Company
has  historically  experienced  its  strongest  operating results during October
through  April.

     YEAR  2000

     The  Company  currently  believes  that  it  does  not have any significant
exposure  to  uncertainties  nor material anticipated costs related to Year 2000
issues  including  Company,  vendor  and customer issues.  The Company's current
systems  and  any  anticipated  upgrades  are  Year  2000  compliant.

ITEM  7.     FINANCIAL  STATEMENTS

     The  information required hereunder is included in this report as set forth
in  the  "Index  to  Financial  Statements"  on  page  F-1.

ITEM  8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON     ACCOUNTING AND
             FINANCIAL  DISCLOSURE

     There  have  been  no  changes  in  accountants  since  the  Registrant's
incorporation in 1994, nor have there been any disagreements with accountants on
any  matter  of  accounting  principles  or  practices,  financial  statement
disclosure,  or  auditing  scope  or  procedure.

                                       20
<PAGE>
                                    PART III
ITEM  9.     DIRECTORS,  EXECUTIVE  OFFICERS, PROMOTERS AND CONTROL     PERSONS;
COMPLIANCE  WITH  SECTION  16(A)  OF  THE  EXCHANGE     ACT

DIRECTORS  AND  EXECUTIVE  OFFICERS.

     Directors  are  elected  annually  and  hold  office  until the next annual
meeting of the stockholders of the Company or until their successors are elected
and qualified.  Officers are elected annually and serve at the discretion of the
Board of Directors.  There is no family relationship between or among any of the
directors  and  executive  officers  of  the  Company.  The  Company's  Board of
Directors  consists  of  five  persons.

<TABLE>
<CAPTION>
Name                Age                       Position
------------------  ---  ---------------------------------------------------
<S>                 <C>  <C>
Robert L. Watters    47  Director, Chairman of the Board,
                         Chief Executive Officer and Chief Financial Officer

Erich Norton White   28  Director and Executive Vice President

Eric Langan          30  Director and Vice-President-Systems,
                         Marketing and Promotion

Scott C.  Mitchell   45  Director

Martin Sage          47  Director
</TABLE>

     Robert  L.  Watters, age 47, has been a director of the Company since 1986,
and  has been the sole stockholder of the Company since March 1993.  Mr. Watters
has  been  president  and  chief executive officer of the Company since 1991 and
presently  serves also as its chief financial officer.  He was also a founder in
1989  and  operator  until  1993  of  the Colorado Bar & Grill, an adult cabaret
located  in  Houston, Texas and in 1988 performed site selection, negotiated the
property  purchase  and  oversaw  the design and permitting for the cabaret that
became  the  Cabaret  Royale,  in Dallas, Texas.  Mr. Watters practiced law as a
solicitor in London, England and is qualified to practice law in New York state.
Mr.  Watters  worked  in  the  international tax group of the accounting firm of
Touche,  Ross  & Co.  (now succeeded by Deloitte & Touche) from 1979 to 1983 and
was  engaged in the private practice of law in Houston, Texas from 1983 to 1986,
when he became involved in the full-time management of the Company.  Mr. Watters
graduated  from the London School of Economics and Political Science, University
of  London,  in 1973 with a Bachelor of Laws (Honours) degree and in 1975 with a
Master  of  Laws  degree  from  Osgoode  Hall  Law  School,  York  University.

                                       21
<PAGE>
     Erich  Norton  White, age 28, vice president, secretary and general manager
has  served as a Director of the Company since July, 1995.  Mr. White joined the
Company  in  January, 1993 as a night manager and from May, 1995 until November,
1998  has  been  a  General  Manager,  first  in Houston and subsequently in New
Orleans.  Mr.  White  presently  oversees  General  Management  in all locations
controlled  by  the  Company.  From  October, 1989, until joining the Company in
1993, Mr. White worked in the hospitality industry for the Bennigan's restaurant
chain.  Mr.  White  completed  the  Bennigan's  Restaurant  Management  Training
Program  in  1992.

     Eric  Langan, age 30, has been involved in the adult entertainment business
since  1989.  He  has  served  as  the  President  and  Director of Taurus since
November, 1997.  From January 1997 through the present, he has held the position
of  President with XTC Cabaret, Inc., which was subsequently acquired by Taurus.
Since  1989, Mr. Langan has exercised managerial control over the grand openings
and  operations  of  numerous  adult  entertainment  businesses.  Through  these
activities,  Mr.  Langan  has  acquired  the  knowledge  and skills necessary to
successfully  operate  adult entertainment businesses.  Mr. Langan has also been
an officer of Citation Land Company which owned commercial income real estate in
Houston,  Texas, which also was subsequently acquired by Taurus. Mr. Langan has,
from  November,  1998  has been responsible for development of business systems,
marketing  and  promotion  at  all  of  the locations controlled by the Company.

     Scott  C.  Mitchell,  age 45, has served as a director of the Company since
December,  1994.  Mr. Mitchell has been a certified public accountant in private
practice  since  1976  and has been a principal of his own firm since 1981.  Mr.
Mitchell's  current  firm  Mitchell  &  Cavallo,  P.C.  serves  a  wide range of
business  and  individual clients.  Mr. Mitchell has been licensed since 1980 to
practice  law in the State of Texas and since 1986 has been admitted to practice
before  the  Tax  Court  of  the  United States.  Further, Mr. Mitchell has been
appointed  by  various  District  Courts  as  a  receiver  and special master of
business  entities  under  court  jurisdiction.  Mr.  Mitchell  was  appointed a
Receiver of the Company in September, 1989 with limited authority to oversee and
review  the  receipt and disbursement of revenues of the Company.  Mr. Mitchell,
however,  had no authority over the management of the Company.  The receivership
was  terminated  in  March, 1993.  Mr. Mitchell graduated from the University of
Texas  with  an  honors  degree  in  Business  Administration.

     Martin  Sage,  age  47, has served as a Director of the Company since July,
1995.  Mr.  Sage is the founder and director of Sage Productions, Inc., which is
involved  in  the  development of applying advanced learning theory to business.
The  Sage  Learning Method enables individuals to build innovative approaches to
management,  leadership  and  team  building.  The Sage Learning Method works to
create  dynamic  relationships  which  motivate  and  create  synergy  between
individuals and the businesses where they work.  For the past 16 years, Mr. Sage
has  served  as a consultant to businesses throughout the United States bringing
his  innovative  approach  to  business  to many organizations and corporations.

COMMITTEES  OF  THE  BOARD  OF  DIRECTORS

                                       22
<PAGE>
     The  Company  has  no  compensation  committee and no nominating committee.
Decisions  concerning  executive  officer compensation for 1998 were made by the
full  Board of Directors.  Robert L. Watters, Eric Langan and Erich Norton White
are  the  only  directors  of  the Company who are also officers of the Company.

     In  January, 1998 the Company established an Audit Committee of independent
directors whose members are Martin Sage and Scott Mitchell.  The primary purpose
of  the  Audit Committee is to oversee the Company's financial reporting process
on  behalf  of the Board of Directors.  The Audit Committee meets privately with
the Company's Chief Accounting Officer and with the Company's independent public
accountants  and evaluates the responses by the Chief Accounting Officer both to
the  facts  presented  and  to  the  judgments  made  by the outside independent
accountants.  The  Audit  Committee  will  reports  activities to the full Board
after  each  meeting.  In  addition,  the activities and responsibilities of the
Audit Committee include the nomination or selection of the independent auditors,
review  of the results of the audit and a detailed review of the overall Company
and  the  adequacy  of  the  Company's  internal  controls.

CERTAIN  SECURITIES  FILINGS

     The  Company  believes  that  all  persons  subject to Section 16(a) of the
Exchange  Act  in  connection  with the Company have complied on a timely basis.

ITEM  10.     EXECUTIVE  COMPENSATION

     The  following table reflects all forms of compensation for services to the
Company  for  the fiscal years ended September 30, 1998, 1997, 1996 of the chief
executive  officer  and  the  executive vice-president of the Company.  No other
executive  officer  of the Company received compensation which exceeded $100,000
during  1998.

<TABLE>
<CAPTION>
                                     SUMMARY COMPENSATION TABLE

                Annual  Compensation                      Long  Term  Compensation
                                                     Awards                        Payouts
                                         Other                 Securities                     All
Name and                                Annual     Restricted  Underlying                    Other
Principal                               Compen-      Stock      Options/             LTIP   Compens-
Position   Year   Salary     Bonus     sation (1)    Awards       SARs     Payouts  sation
---------  ----  --------  ----------  ----------  ----------  ----------  -------  ------  --------
<S>        <C>   <C>       <C>         <C>         <C>         <C>         <C>      <C>     <C>
Robert L   1998  $325,000         -0-         -0-         -0-      20,000              -0-       -0-
Watters    1997  $325,000         -0-         -0-         -0-         -0-              -0-       -0-
CEO        1996  $325,000         -0-         -0-         -0-         -0-              -0-       -0-

Erich      1998  $100,000         -0-         -0-         -0-      35,000              -0-       -0-
Norton     1997  $ 65,000         -0-         -0-         -0-         -0-              -0-       -0-
White      1996  $ 50,000         -0-         -0-         -0-         -0-              -0-       -0-
EVP
<FN>
(1)     The  Company  provides Messrs. Watters, and White with certain personal benefits.  Since the
value  of  such  benefits  does  not exceed the lesser of $50,000 or 10% of annual compensation, the
amounts  are  omitted.
</TABLE>

                                       23
<PAGE>
<TABLE>
<CAPTION>
                                     OPTION/SAR GRANTS IN LAST FISCAL YEAR
                                              (Individual Grants)


                                 Percent of                            Potential Realizable Value At
                   Number of        Total                                 Assumed Annual Rates of
                  Securities    Options/SARs                            Stock Price Appreciation For
                  Underlying     Granted To     Exercise                        Option Term
                 Options/SARs     Employees     Or Base
                    Granted       In Fiscal      Price     Expiration
Name                  (#)           Year         ($/Sh)       Date         5% ($)         10% ($)
---------------  -------------  -------------  ----------  ----------  -------------  --------------
<S>              <C>            <C>            <C>         <C>         <C>            <C>
Robert L.
Watters  (1)            20,000            30%  $     2.50     1-28-03            -0-             -0-

Erich Norton
White  (1,2)            35,000            50%  $     2.50     1-28-03            -0-             -0-
______________
<FN>
1     Messrs. Watters and White received  20,000 options in theirs capacity as Directors of the Company.
      See,Director  Compensation.
2     Mr.  White  also  received  15,000  options  as  employee  compensation.
</TABLE>

<TABLE>
<CAPTION>
             AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
                            FY-END OPTION/SAR VALUES


                                            Number Of
                                            Securities         Value Of
                                            Underlying       Unexercised
                                           Unexercised       In-The-Money
                                         Options/SARs At   Options/SARs At
                                         Fiscal Year-End   Fiscal Year-End
                  Shares        Value          (#)               ($)
                Acquired On   Realized     Exercisable/      Exercisable/
Name           Exercise  (#)     ($)      Unexercisable     Unexercisable
<S>            <C>            <C>        <C>               <C>
Robert L.
Watters  (1)   No exercises         -0-       -0- /20,000         -0- / -0-


Erich Norton
White   (1)    No exercises         -0-    43,750 /20,000         -0- / -0-
</TABLE>

DIRECTOR  COMPENSATION

     The  Company  does  not currently pay any cash directors' fees, but it pays
the  expenses of its directors in attending board meetings.  Scott C.  Mitchell,
Martin  Sage  and  Erich  N.  White, directors of the Company were granted stock
options  on  October  12, 1995 for services provided to the Company as directors
pursuant  to  which  Messrs.  Mitchell,  Sage  and White were each granted 5,000
stock options, all at an exercise price of $3.00 per share, expiring in January,
2005.  The  options are exercisable only as to one-fourth of the total number of
shares  covered  by each grant of options during each 12-month period commencing

                                       24
<PAGE>
12  months  after  the  grant date.  In January, 1998, the Company issued 20,000
options  on  the  Company's  common  stock  to  each  of Messrs. Watters, White,
Mitchell  and  Sage,  who were then Directors, all at an exercise price of $2.50
per  share,  expiring  in January, 2003.  The options are exercisable only as to
one-fourth of the total number of shares covered by each grant of options during
each  12-month  period  commencing  12  months  after  the  grant  date.

EMPLOYEE  STOCK  OPTION  PLAN

     While the Company has been successful in attracting and retaining qualified
personnel,  the  Company believes that its future success will depend in part on
its  continued  ability  to  attract and retain highly qualified personnel.  The
Company  pays wages and salaries which it believes are competitive.  The Company
also  believes  that  equity  ownership is an important factor in its ability to
attract  and  retain  skilled personnel, and in 1995 adopted a Stock Option Plan
(the  "Plan")  for  employees  and  directors.

     The  purpose  of  the  Plan  is to further the interest of the Company, its
subsidiaries  and  its stockholders by providing incentives in the form of stock
options  to key employees and directors who contribute materially to the success
and  profitability  of  the  Company.  The  grants  will  recognize  and  reward
outstanding individual performances and contributions and will give such persons
a proprietary interest in the Company, thus enhancing their personal interest in
the  Company's  continued  success and progress.  This Plan will also assist the
Company  and  its  subsidiaries  in  attracting  and retaining key employees and
directors.  The  options  granted  under this Plan may be either Incentive Stock
Options, as that term is defined in Section 422A of the Internal Revenue Code of
1986, as amended, or nonstatutory options taxed under Section 83 of the Internal
Revenue  Code  of  1986,  as  amended.  The Plan is administered by the Board of
Directors  or  by a Compensation Committee of the Board of Directors.  The Board
of  Directors has the exclusive power to select the participants in the Plan, to
establish  the  terms  of the options granted to each participant, provided that
all  options granted shall be granted at an exercise price equal to at least 85%
of  the fair market value of the Common Stock covered by the option on the grant
date  and  to  make all determinations necessary or advisable under the Plan.  A
total  of  300,000  shares  may  be  optioned and sold under the Company's Stock
Option  Plan.  As  of September 30, 1998, 300,000 stock options had been granted
under  the  Plan,  none  of  which  have  been  exercised.

EMPLOYMENT  AGREEMENT

                                       25
<PAGE>
     The  Company  has  a three year employment agreement with Robert L. Watters
(the  "Agreement")  to  serve as its President and Chief Executive Officer.  The
Agreement,  which extends through December 31, 2000, provides for an annual base
salary  of  $300,000.  The  Agreement  also  allows  for an annual bonus, in the
discretion  of  the  Board  of Directors (excluding Mr. Watters), based upon the
financial  performance,  including  evaluation of the income and earnings of the
Company  during  the year.  The Agreement also provides for participation in all
benefit  plans  maintained  by the Company for salaried employees.  Mr. Watters'
Agreement  contains  a confidentiality provision and an agreement by Mr. Watters
not  to  compete  with  the  Company  upon the expiration of the Agreement.  The
Company  has not established, nor does it provide for, long-term incentive plans
or  defined  benefit  or  actuarial  plans.

     The  Company  has  a  three year employment agreement with Eric Langan (the
"Langan  Agreement")  to  serve as its Vice-president of Operations.  The Langan
Agreement, which extends through August 11, 2001 and provides for an annual base
salary of $171,600.  The Langan Agreement also provides for participation in all
benefit  plans  maintained  by the Company for salaried employees.  Mr. Langan=s
Agreement  contains  a  confidentiality provision and an agreement by Mr. Langan
not  to  compete  with  the Company upon the expiration of the Langan Agreement.
The  Company has not established long-term incentive plans or defined benefit or
actuarial  plans.  Pursuant  to  the  Langan  Agreement, Mr. Langan will receive
options  to  purchase  250,000  of  the Company's shares at an exercise price of
$1.75  per  share,  vesting  in  August,  1999.

     The  Company  has a three year employment agreement with Erich Norton White
(the  "White  Agreement")  to  serve as its Executive Vice-president.  The White
Agreement, which extends through April, 2000, provides for an annual base salary
of $100,000.  The White Agreement also provides for participation in all benefit
plans  maintained  by the Company for salaried employees.  Mr. White=s Agreement
contains  a  confidentiality  provision  and  an  agreement  by Mr. White not to
compete  with  the  Company  upon  the  expiration  of  the  White  Agreement.

     The  Company  has  not  established  long-term  incentive  plans or defined
benefit  or  actuarial  plans.

                                       26
<PAGE>
ITEM  11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND     MANAGEMENT

     The  following  table  sets forth certain information at December 17, 1998,
with  respect  to the beneficial ownership of shares of Common Stock by (i) each
person  known  to  the  Company  who  owns  beneficially  more  than  5%  of the
outstanding  shares  of  Common  Stock, (ii) each director of the Company, (iii)
each  executive  officer  of  the  Company  and  (iv) all executive officers and
directors  of  the  Company  as  a  group.   As of December 17, 1998, there were
6,547,  453  shares  of  Common  Stock  outstanding.

<TABLE>
<CAPTION>
Name and                           Number of        Title of     Percent
Address                              Shares          Class       of Class
------------------------------  ----------------  ------------  ----------
<S>                             <C>               <C>           <C>
Robert L. Watters
3113 Bering
Houston, Texas 77057            1,769,500  (1,4)  Common Stock       27.1%

Erich Norton White
3113 Bering
Houston, Texas 77057             43,750  (1,2,4)  Common Stock        0.6%

Scott C.  Mitchell
820 Gessner ,Suite 1380
Houston, Texas 77024             13,750  (1,3,4)  Common Stock        0.2%

Martin Sage
1714-A Nantucket
Houston, Texas 77057              3,750  (1,3,4)  Common Stock        0.1%

Eric Langan
3113 Bering
Houston, Texas 77057                 402,811 (1)  Common Stock        6.2%

Ralph McElroy                     817,688  (1,5)  Common Stock       12.5%
1211 Choquette
Austin, Texas, 78757

All directors and officers as
a group (five (5) persons)            2,233,534   Common Stock       34.1%
<FN>
___________________
(1)     Messrs.  Watters,  White,  Langan,  Mitchell,  Sage  and  McElroy have sole
voting  and investment power with respect to the shares shown as beneficially owned
by  them.

                                       27
<PAGE>
(2)     Includes  options  to  purchase 28,750 shares at an exercise price of $3.00
per  share,  which are presently exercisable; includes an option to purchase 15,000
shares  at an exercise price of $2.50 per share which is presently exercisable; and
does  not  include  options  to  purchase an additional 1,250 shares at an exercise
price  of  $3.00  per  share,  which will not become exercisable within the next 60
days.

(3)     Includes options to purchase 3,750 shares at an exercise price of $3.00 per
share,  which  are  presently  exercisable; and does not include option to purchase
1,250  shares  at  an  exercise  price  of  $3.00  per  share which will not become
exercisable  within  the next 60 days.  Does not include options to purchase 20,000
shares  which  will  not  become  exercisable  within  the  next  60  days.

(4)     Does  not  include  options to purchase 20,000 shares which will not become
exercisable  within  the  next  60  days.

(5)     Includes  133,091  shares  of  common  stock  issuable upon conversion of a
convertible  debenture.  This  debenture  is  currently convertible at a conversion
price  of $2.75 per share and has a face amount of $366,000.  Also includes 104,270
shares  of  common stock issuable upon conversion of a convertible debenture Taurus
of  which the Company is a guarantor.  This debenture is currently convertible at a
conversion  price  of  $2.75  per  share  and  has  a  face  amount  of  $$286,744.
</TABLE>

ITEM  12.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     Prior  to  the  Company's  reorganization, the Company, as a privately-held
company  engaged  in  certain  business  transactions with Mr. Watters, its sole
stockholder.  These transactions are described below.  The Board of Directors of
the  Company  has adopted a policy that Company affairs will be conducted in all
respects  by  standards  applicable  to  publicly-held corporations and that the
Company  will  not  enter  into any future transactions and/or loans between the
Company  and its officers, directors and 5% shareholders unless the terms are no
less  favorable  than could be obtained from independent, third parties and will
be  approved  by  a  majority of the independent, disinterested directors of the
Company.  In  the  Company's  view,  all  of  the  transactions  described below
involving  the  Company  meet  this  standard.

     The  Company was organized in 1994 to acquire all of the outstanding common
stock  of  Trumps,  Inc.  ("Trumps"),  a  Texas corporation formed in 1982, from
Robert  L.  Watters,  its  sole  stockholder.  The Company issued to Mr. Watters
1,750,000 shares of its common stock in exchange for the common stock of Trumps.
This  exchange,  which  resulted in Trumps becoming a wholly owned subsidiary of
the  Company,  was consummated in February 1995.  The transaction was entered as
part  of  a  corporate  reorganization,  the  result  of which was to create the
Company  as  a  holding  company  for  Trumps.

                                       28
<PAGE>
     In  August,  1995,  the  Board  of  Directors of the Company authorized the
acquisition from Mr. Watters of all of the capital stock of Tantric Enterprises,
Inc., Tantra Dance, Inc., and Tantra Parking, Inc. (collectively "Tantra").  The
Company  issued to Mr. Watters 50,000 shares of its common stock in exchange for
the  stock  of  Tantra.  The  exchange  was consummated in September, 1995.  The
Tantra companies own and operate Tantra, a non-sexually oriented discotheque and
billiard  club  in  Houston,  Texas.  The Board of Directors determined that the
combination  of  the business operations of Tantra and the Company will create a
synergy  which will enhance the profitability of both businesses.  Moreover, the
diversification  of  the  Company's  operations  into  the business of Tantra is
anticipated  to enhance the public image of the Company.  The Board of Directors
has  received  an opinion of an independent third-party appraiser that the terms
of  the  transaction  are fair and reasonable to the Company and are at least as
favorable  to  the  Company as would be the case between unrelated parties.  Mr.
Watters  had  no  cost  basis  in  the  stock  of  Tantra.

     In  1998,  Mr.  Watters  loaned  $121,000  to  the  Company.  This  loan is
evidenced  by  a  demand  promissory note which bears interest at 12% per annum.

     During  the  Company's  fiscal years ending 1998 and 1997, the Company paid
$33,000  and  $20,090, respectively, for accounting services to accounting firms
in  which  Mr.  Mitchell,  a  director  of  the  Company,  was  a  principal.

     In  August, 1998, the Company acquired approximately 93% of the outstanding
common  stock  of  Taurus  Entertainment Companies, Inc. ("Taurus") in a private
stock  exchange  transaction  with the certain principal stockholders of Taurus,
among  whom  were  Eric  Langan and Ralph McElroy.  The Stock Exchange Agreement
provided  that the Company exchange one share of its common stock for each three
and  one-half  shares  of  Taurus  common  stock  owned  by  certain  principal
shareholders  of  Taurus.  As  a  result  of  the  Exchange, Mr. Langan received
402,146  shares of common stock of the Company, and Mr. McElroy received 393,389
shares  of  common  stock the Company.  The terms and conditions of the Exchange
were  determined  by  the  parties  through  arms  length  negotiations.

                                       29
<PAGE>
     In  a  transaction  simultaneous  to the acquisition of Taurus, the Company
acquired  certain  real  estate  in  San  Antonio,  Texas from Mr. McElroy.  The
Company  acquired  the  property  from  Mr.  McElroy for the same price that Mr.
McElroy  paid  for  the  property.  The  Company  financed  the  purchase of the
property  by  the issuance of a six year $366,000 Convertible Debenture, secured
by  the  real  estate acquired.  The Convertible Debenture bears interest at the
rate  of  12% per annum, with interest payable monthly.  Interest payments began
in  September,  1998.  The principal balance of the Convertible Debenture is due
in  one lump sum payment in July, 2004.  The Convertible Debenture is subject to
redemption  at  the  option  of the Company, in whole or in part, at 100% of the
principal face amount of the Convertible Debenture redeemed plus any accrued and
unpaid  interest on the redemption date, at any time and from time to time, upon
not  less  than  30  nor  more  than 60 days notice, if the Closing Price of the
common  stock  of  the Company shall have equaled or exceeded $8.50 per share of
common stock for ten (10) consecutive trading days. The Convertible Debenture is
convertible  into  shares  of Common Stock at any time prior to maturity (unless
earlier redeemed) at the Conversion Price of $2.75 per share.  In the event that
the  Company  files  a  Registration  Statement to register shares of its Common
Stock  with  the Securities and Exchange Commission (ASEC@) on Form S-3 or other
similar  form  (except for Form S-8 or Form S-4) than the Company will undertake
to  use  its  best  efforts  to  register  for  resale  all  of
Mr. McElroy=s shares into which the Convertible Debenture may be converted under
the  same  Registration  Statement.

     In a transaction simultaneous to the acquisition of Taurus, Taurus acquired
certain  real  estate  in  Houston, Texas from Mr. McElroy.  Taurus acquired the
property  from  Mr.  McElroy  for  the  same price that Mr. McElroy paid for the
property.  The  Company financed the purchase of the property by the issuance of
a  six year $286,744 Convertible Debenture, secured by the real estate acquired.
The  Company  is  a  guarantor  of  this Convertible Debenture.  The Convertible
Debenture  bears  interest  at  the rate of 12% per annum, with interest payable
monthly.  Interest  payments began in September, 1998.  The principal balance of
the  Convertible  Debenture  is due in one lump sum payment in July, 2004.   The
Convertible  Debenture is convertible into shares of Common Stock of the Company
at  any  time  prior to maturity at the Conversion Price of $2.75 per share.  In
the  event that the Company files a Registration Statement to register shares of
its Common Stock with the Securities and Exchange Commission (ASEC@) on Form S-3
or  other  similar  form (except for Form S-8 or Form S-4) than the Company will
undertake  to  use  its best efforts to register for resale all of Mr. McElroy=s
shares  into  which  the  Convertible  Debenture may be converted under the same
Registration  Statement.

ITEM  13.     EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)   Exhibits

                                       30
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.  Identification of Exhibit
<C>                     <S>
3.1   *      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.

3.2   *      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.

4.1   *      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.

4.2   *      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.

4.3   *      Form of Debenture, which is incorporated by reference to the Company's Form 8-K
             dated August 11, 1998 Exhibit 4.1.

10.1  *      Form of Stock Exchange Agreement With Certain Taurus Holders, which is
             incorporated by reference to the Company's Form 8-K dated August 11, 1998 Exhibit
             10.1.

10.2  **     Employment Agreement with Robert L. Watters

10.3  **     Employment Agreement with Erich Norton White.

21.1  **     Subsidiaries

27.1  **     Financial Data Schedule
<FN>
______________________
*     Incorporated  by  reference
**    Filed  herewith
</TABLE>

(b)  Reports  on  Form  8-K.

     The Company filed a report on Form 8-K dated August 11, 1998 which reported
the  acquisition  of  assets  and  other  events.

                                   SIGNATURES

                                       31
<PAGE>
     In  accordance with the requirements of Section 13 of 15(d) of the Exchange
Act,  the  Registrant  has  caused this report to be signed on its behalf by the
undersigned,  thereunto  duly  authorized,  on  the  23nd  day of December 1998.

                           RICK'S  CABARET  INTERNATIONAL,  INC.

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


Pursuant  to  the  requirements of the Exchange Act, this report has been signed
below  by  the  following  persons in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE                           TITLE                  DATE
-------------------------  ------------------------  -----------------
<S>                        <C>                       <C>
/s/ ROBERT L. WATTERS      Chairman of the Board,    December 23, 1998
-------------------------                                             
    Robert L. Watters      Chief Executive Officer,
                           Chief Accounting Officer,
                           and Director

/s/ ERICH NORTON WHITE     Director and Executive    December 23, 1998
-------------------------                                             
    Erich Norton White     Vice President

/s/ ERIC LANGAN            Director and              December 28, 1998
-------------------------                                             
    Eric Langan            Vice-President-Systems,
                           Marketing and Promotion

/s/ SCOTT C.  MITCHELL     Director                  December 23, 1998
-------------------------                                             
    Scott C.  Mitchell

/s/ MARTIN SAGE            Director                  December 23, 1998
-------------------------                                             
    Martin Sage
</TABLE>

                                       32
<PAGE>
<TABLE>
<CAPTION>
   RICK'S  CABARET  INTERNATIONAL,  INC.  AND  SUBSIDIARIES
              AUDITED  FINANCIAL  INFORMATION
        INDEX  TO  CONSOLIDATED  FINANCIAL  STATEMENTS

----------------------------------------------------------   
<S>                                                         <C>
Independent Auditor's Report . . . . . . . . . . . . . . .  F-2

Consolidated Balance Sheets for the years ended
September 30, 1998 and 1997. . . . . . . . . . . . . . . .  F-3

Consolidated Statements of Operations for the years ended
September 30, 1998 and 1997. . . . . . . . . . . . . . . .  F-4

Consolidated Statements of Changes in Stockholders' Equity
for the years ended September 30, 1998 and 1997. . . . . .  F-5

Consolidated Statements of Cash Flows for the years ended
September 30, 1998 and 1997. . . . . . . . . . . . . . . .  F-6

Notes to Consolidated Financial Statements . . . . . . . .  F-7
</TABLE>

                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

Board  of  Directors  and  Stockholders
Rick's  Cabaret  International,  Inc.


We  have  audited the accompanying consolidated balance sheets of Rick's Cabaret
International,  Inc. and subsidiaries as of September 30, 1998 and 1997, and the
related  consolidated  statements of operations, changes in stockholders' equity
and  cash  flows  for  the  years then ended. These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion  on  these  consolidated  financial  statements  based  on  our  audits.

We  conducted  our  audits  in  accordance  with  generally  accepted  auditing
standards.  Those  standards  require  that  we  plan  and perform the audits to
obtain  reasonable  assurance about whether the financial statements are free of
material  misstatement.  An  audit includes examining, on a test basis, evidence
supporting  the  amounts  and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant estimates
made  by  management,  as  well  as  evaluating  the overall financial statement
presentation.  We  believe  that  our  audits provide a reasonable basis for our
opinion.

In  our opinion, the consolidated financial statements referred to above present
fairly,  in all material respects, the consolidated financial position of Rick's
Cabaret  International, Inc. and subsidiaries as of September 30, 1998 and 1997,
and  the  results  of  their  operations and their cash flows for the years then
ended  in  conformity  with  generally  accepted  accounting  principles.


                                               Jackson  &  Rhodes  P.C.


Dallas,  Texas
November  13,  1998

                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                 RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                             SEPTEMBER 30, 1998 AND 1997


                                        ASSETS


                                                              1998          1997
                                                          ------------  ------------
<S>                                                       <C>           <C>
 Current assets:
   Cash                                                   $   597,644   $   357,410 
   Accounts receivable                                         58,023        29,695 
   Inventories                                                 94,633        61,953 
   Prepaid expenses                                            34,876        57,413 
   Land held for sale                                         569,069       815,652 
                                                          ------------              
     Total current assets                                   1,354,245     1,322,123 
                                                          ------------  ------------

 Property and equipment:
   Buildings, land and leasehold improvements               9,851,798     5,285,119 
   Furniture and equipment                                  1,609,031     1,188,800 
                                                          ------------  ------------
                                                           11,460,829     6,473,919 

   Less accumulated depreciation                           (1,213,557)     (813,853)
                                                          ------------  ------------

                                                           10,247,272     5,660,066 
                                                          ------------  ------------

 Other assets:
   Goodwill, less accumulated amortization of $91,924       3,154,804             - 
   Other                                                      112,025       165,504 
                                                          ------------  ------------
                                                            3,266,829       165,504 
                                                          ------------  ------------
                                                          $14,868,346   $ 7,147,693 
                                                          ============  ============



 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:

   Current portion of long-term debt (Note 4)             $   718,636   $   398,798 
   Accounts payable - trade                                 1,179,410       649,618 
   Accrued expenses                                           344,032       166,365 
                                                          ------------  ------------
     Total current liabilities                              2,242,078     1,214,781 

 Long-term debt, less current portion (Note 4)              6,015,903     1,754,175 
                                                          ------------  ------------

         Total liabilities                                  8,257,981     2,968,956 
                                                          ------------  ------------

 Commitments and contingencies (Note 7)                             -             - 

 Minority interests                                            11,896             - 

 Stockholders' equity (Notes 1 and 9):
   Preferred stock - $.10 par, authorized
     1,000,000 shares; none issued                                  -             - 
   Common stock - $.01 par, authorized
     15,000,000 shares;  issued 6,467,353 and 4,114,922        64,673        41,149 
   Additional paid-in capital                               8,941,378     5,940,306 
   Retained earnings (deficit)                             (2,407,582)   (1,802,718)
                                                          ------------  ------------
     Total stockholders' equity                             6,598,469     4,178,737 
                                                          ------------  ------------
                                                          $14,868,346   $ 7,147,693 
                                                          ============  ============
</TABLE>

           See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                  RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                         CONSOLIDATED STATEMENTS OF OPERATIONS
                    FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997


                                                                1998          1997
                                                            ------------  ------------
<S>                                                         <C>           <C>
 Revenues:
   Sales of alcoholic beverages                             $ 4,028,988   $ 3,192,356 
   Sales of food                                                515,821       563,281 
   Service revenues                                           3,010,999     2,184,002 
   Other                                                        275,723       337,940 
                                                            ------------  ------------

                                                              7,831,531     6,277,579 
                                                            ------------  ------------

 Operating expenses:
   Cost of goods sold                                         1,102,556     1,197,416 
   Salaries and wages                                         2,653,558     2,123,131 
   Other general and administrative:
     Taxes and permits                                          831,388       705,516 
     Charge card fees                                           160,474       122,324 
     Rent                                                       395,038       341,509 
     Legal and accounting                                       355,186       307,038 
     Advertising                                                488,224       774,548 
     Other                                                    2,065,934     1,775,240 
                                                            ------------  ------------

                                                              8,052,358     7,346,722 
                                                            ------------  ------------

 Loss from operations                                          (220,827)   (1,069,143)

   Interest expense                                            (384,037)     (160,784)
                                                            ------------  ------------

 Loss before income taxes and cumulative effect
   of accounting change                                        (604,864)   (1,229,927)

   Income taxes (benefit) (Note 5)                                    -       (87,735)
                                                            ------------  ------------

 Loss before cumulative effect of accounting change            (604,864)   (1,142,192)

 Cumulative effect of change in accounting for preopening
   costs - no income tax effect                                       -      (151,138)
                                                            ------------  ------------

 Net loss                                                   $  (604,864)  $(1,293,330)
                                                            ============  ============

 Loss per common share:
   Before cumulative effect of change in accounting               (0.14)        (0.30)
   Effect of accounting change                                        -         (0.03)
                                                            ------------  ------------

 Loss per common share                                      $     (0.14)  $     (0.33)
                                                            ============  ============

 Weighted average shares outstanding                          4,338,034     4,114,922 
                                                            ============  ============

 Proforma amounts assuming the new accounting method
   is applied retroactively:
       Net loss                                             $(1,217,809)
                                                            ============              

       Net loss per share                                   $     (0.30)
                                                            ============              
</TABLE>


           See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                        RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                          FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997


                                          Common Stock      Additional   Retained
                                       -------------------
                                       Number of             Paid-in     Earnings
                                        Shares     Amount    Capital     (Deficit)       Total
                                       ---------  --------  ----------  ------------  ------------
<S>                                    <C>        <C>       <C>         <C>           <C>
 Balance, September 30, 1996           4,068,077  $ 40,681  $5,788,528  $  (509,388)  $ 5,319,821 

 Sale of common stock for cash            46,845       468     151,778            -       152,246 

 Net income (loss)                             -         -           -   (1,293,330)   (1,293,330)
                                       ---------  --------  ----------  ------------  ------------

 Balance, September 30, 1997           4,114,922    41,149   5,940,306   (1,802,718)    4,178,737 

 Acquisition of Taurus Entertainment
      Companies, Inc.                  1,443,426    14,434   1,993,316            -     2,007,750 

 Acquisition of Minnesota property       147,632     1,476     180,667            -       182,143 

 Shares issued for accounts payable       44,000       440      59,263            -        59,703 

 Sales of common stock for cash          717,373     7,174     767,826            -       775,000 

 Net income (loss)                             -         -           -     (604,864)     (604,864)
                                       ---------  --------  ----------  ------------  ------------

 Balance, September 30, 1998           6,467,353  $ 64,673  $8,941,378  $(2,407,582)  $ 6,598,469 
                                       =========  ========  ==========  ============  ============
</TABLE>

           See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                 RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997


                                                             1998          1997
                                                         ------------  ------------
<S>                                                      <C>           <C>
 Net loss                                                $  (604,864)  $(1,293,330)

 Adjustments to reconcile net loss to net
   cash used by operating activities:
   Depreciation and amortization                             440,055       311,464 
   Cumulative effect of accounting change                          -       151,138 
   Minority interest                                          (6,826)            - 
   Loss on sale of land                                       33,650 
   Other                                                      15,169 
   Changes in assets and liabilities:
     Accounts receivable                                     (56,975)       43,836 
     Inventories                                             (31,935)      (14,333)
     Prepaid expenses and other assets                       126,620      (150,207)
     Accounts payable and accrued liabilities                512,278       218,894 
     Income taxes payable/receivable                               -       187,770 
                                                         ------------  ------------
       Net cash provided (used) by operating activities      427,172      (544,768)
                                                         ------------  ------------

 Cash flows from investing activities:
   Additions to property and equipment and goodwill       (1,089,467)   (4,321,541)
   Proceeds from sale of land                                782,002             - 
                                                         ------------  ------------
       Net cash used by investing activities                (307,465)   (4,321,541)
                                                         ------------  ------------

 Cash flows from financing activities:
   Common stock issued, less offering costs                  775,000       152,246 
   Increase in long-term debt                                      -     2,070,332 
   Payments on long-term debt                               (654,473)     (148,862)
                                                         ------------  ------------
       Net cash provided by financing activities             120,527     2,073,716 
                                                         ------------  ------------

 Net increase (decrease) in cash                             240,234    (2,792,593)

 Cash at beginning of year                                   357,410     3,150,003 
                                                         ------------  ------------

 Cash at end of year                                     $   597,644   $   357,410 
                                                         ============  ============


 Cash paid during the period for:
   Interest                                              $   380,560   $   151,338 
                                                         ============  ============
</TABLE>

           See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 1998 AND 1997

1.   ORGANIZATION

     Rick's Cabaret  International,  Inc. (the "Company") was formed in December
     1994,  to  acquire  all  the  outstanding  capital  stock  of  Trumps  Inc.
     ("Trumps"),  a company owned 100% by the  Company's  sole  stockholder.  On
     October 13, 1995,  the Company  completed its public  offering of 1,840,000
     shares of common  stock.  The proceeds  from the sale of stock  amounted to
     approximately  $4,270,000 net of  underwriting  discounts,  commissions and
     expenses of the offering.  The Company  originally  owned a premiere  adult
     nightclub offering topless  entertainment and restaurant and bar operations
     and a  non-sexually  oriented  bar in Houston,  Texas.  The Company  opened
     another premier adult  nightclub in leased  facilities on Bourbon Street in
     New Orleans, Louisiana in January 1997, and during the year ended September
     30, 1998, the Company opened another  premier adult nightclub in a facility
     purchased in Minneapolis,  Minnesota.  Also during the year ended September
     30, 1998, the Company acquired  approximately 93% of the outstanding common
     stock of Taurus Entertainment  Companies,  Inc. ("Taurus"), a publicly held
     company which also owns adult  nightclubs  (see Note 3). In December  1998,
     the Company will open a fourth  premier adult  nightclub in north  Houston,
     located near George Bush Intercontinental Airport in premises leased from a
     subsidiary of Taurus.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis  of  Presentation

     The Company's financial statements have been presented on the basis that it
     is a going concern,  which  contemplates  the realization of assets and the
     satisfaction of liabilities in the normal course of business. The financial
     statements  do not  include  any  adjustments  that might  result  from the
     outcome  of this  uncertainty.  The  Company  has  reported  net  losses of
     $570,864 and $1,293,330 for the years ended September 30, 1998 and 1997 and
     net cash  resources  were used in operating  activities  for each year. The
     following is a summary of  management's  plan to raise capital and generate
     additional operating funds.

     Management has instituted plans to both increase the  profitability of each
     operating  unit in the  company  as well as to place  non-income  producing
     assets of the  company  on the market for sale.  Management  believes  that
     these  actions  will enable the  company to operate  the  company  from the
     company's internally  generated funds.  Scheduled principal payments in the
     fiscal year  ending  September  30, 1999 will be $107,000  less than in the
     year ended  September  30, 1998 and interest  expense will also be reduced.
     Steps  have  been  taken  in the  original  Houston  operation  to  restore
     profitability  by reductions  in  management  expense and increase in local
     promotions.  Management  believes that the profitability of the New Orleans
     operation will remain strong.

                                      F-7
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Basis of Presentation

     Management  also believes that the  Minneapolis  operation will continue to
     increase  its sales and will become  profitable  and that the new  location
     opened in December  1998 in north Houston will quickly  become  profitable.
     The Company has no present  plans for  expansion  in the fiscal year ending
     September 30, 1999 that will require additional cash.

     Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
     and its majority-owned subsidiaries.  All significant intercompany balances
     and transactions are eliminated in consolidation.

     Net Loss Per Common Share

     In March 1997, the Financial Accounting Standards Board issued Statement of
     Financial  Accounting  Standards No. 128,  Earnings Per Share ("SFAS 128").
     SFAS 128 provides a different method of calculating earnings per share than
     was formerly used in APB Opinion 15. SFAS 128 provides for the  calculation
     of basic and diluted earnings per share.  Basic earnings per share includes
     no  dilution  and is  computed  by  dividing  income  available  to  common
     stockholders  by the weighted  average number of common shares  outstanding
     for the period. Dilutive earnings per share reflects the potential dilution
     of securities that could share in the earnings of the Company.  The Company
     was required to adopt this standard in the fourth quarter of calendar 1997.
     Because the Company's potential dilutive  securities are antidilutive,  the
     accompanying presentation is only of basic loss per share.

     Use of Estimates and Assumptions

     Preparation  of the  Company's  financial  statements  in  conformity  with
     generally  accepted  accounting  principles  requires  management  to  make
     estimates  and  assumptions   that  affect  certain  reported  amounts  and
     disclosures. Accordingly, actual results could differ from those estimates.

     Inventories

     Inventories, consisting principally of liquor and food products, are stated
     at the lower of cost or market (first-in, first-out method).

     Cash  Equivalents

     For purposes of the  statement  of cash flows,  the Company  considers  all
     highly liquid debt instruments purchased with an original maturity of three
     months or less to be cash equivalents.

                                      F-8
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Property  and  Equipment

     Property and  equipment are stated at cost.  Cost of property  renewals and
     betterments are capitalized;  costs of property maintenance and repairs are
     charged against operations as incurred.  Depreciation is computed using the
     straight-line  method over the  estimated  useful  lives of the  individual
     assets, as follows:

          Building  and  improvements     31  years
          Equipment                      5-7  years
          Leasehold  improvements         40  years

     Revenue Recognition

     The Company  recognizes all revenues at point-of-sale upon receipt of cash,
     check or  charge  sale.  This  includes  VIP Room  Memberships,  since  the
     memberships are non-refundable  and the Company has no material  obligation
     for future performance.

     Income Taxes

     The Company  accounts for its income taxes in accordance  with Statement of
     Financial  Accounting  Standards  No.  109,  which  reflects  an asset  and
     liability  approach in accounting  for income  taxes.  The objective of the
     asset  and  liability  method  is to  establish  deferred  tax  assets  and
     liabilities for the temporary  differences  between the financial reporting
     basis and the tax basis of the Company's  assets and liabilities at enacted
     tax rates  expected  to be in effect  when such  amounts  are  realized  or
     settled.

     Change  in  Accounting  Principle  -  Preopening  Costs

     During the year ended  September  30,  1997,  the  Company  has changed its
     method  of  accounting  for  preopening  costs for new  locations  from the
     deferral method to directly expensing the costs in the period in which they
     were  incurred.  Management  believes  that the  direct  expense  method is
     preferable  because it does not subject future periods to losses  resulting
     from estimates of future  recoverability  and more reasonably matches costs
     with revenues.

     The change in accounting  principle  resulted in an increase in net loss of
     $151,138 for the year ended  September 30, 1997,  reflecting the cumulative
     effect of this  change  for the  periods  prior to 1997.  The effect of the
     change on the net loss before cumulative effect of the accounting change is
     an increase of approximately $312,000.

                                      F-9
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Advertising Costs

     During 1997,  the Company  deferred costs of  approximately  $101,000 which
     represents  expenditures  incurred  to develop a new  advertising  campaign
     which  will be used in other  locations  during the next  eighteen  months.
     These costs are for logo  design,  artwork and ad layouts,  a  photographic
     library and the associated  creative fees.  These costs are being amortized
     over eighteen months.  Amortization  amounted to approximately  $49,000 and
     $52,000 during the years ended September 30, 1998 and 1997, respectively.

3.   ACQUISITION

     On  August  11,  1998,  the  Company  acquired  approximately  93%  of  the
     outstanding common stock of Taurus Entertainment Companies, Inc. ("Taurus")
     for 1,143,426  shares of common stock.  This acquisition has been accounted
     for using the purchase method of accounting.  Accordingly, the accompanying
     financial  statements  include  the  operations  of Taurus from the date of
     acquisition.  Under  purchase  accounting,  the  total  purchase  price was
     allocated to the tangible and intangible  assets and  liabilities of Taurus
     based upon their  respective  estimated  fair values as of the closing date
     based upon valuations and other analyses.  The estimated purchase price and
     preliminary  adjustments  to the  historical  book  value of Taurus  are as
     follows:

<TABLE>
<CAPTION>
Purchase price, based on value
of common stock issued (including 300,000
<S>                                                    <C>
    shares issued as a commission on the transaction)  $2,007,750 
Book value of net assets acquired                        (174,176)
                                                       -----------

 Purchase price in excess of net assets acquired       $1,833,574 
                                                       ===========

Allocation of purchase price in excess of
    net assets acquired:

Increase in property, plant and equipment to
    fair market value                                  $1,031,000 
Goodwill                                                  802,574 
                                                       -----------

Total                                                  $1,833,574 
                                                       ===========
</TABLE>

     The following  unaudited pro forma  consolidated  information for the years
     ended  September 30, 1998 and 1997 give effect to the  transaction as if it
     had  occurred  at the  beginning  of each  year.  The  unaudited  pro forma
     consolidated  information is presented for informational  purposes only and
     is not necessarily indicative of the results

                                      F-10
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.     ACQUISITION  (CONTINUED)

of  operations  that would have been achieved had the transaction been completed
as  of  the  beginning  of  each  year, nor are they indicative of the Company's
future  results  of  operations.

<TABLE>
<CAPTION>
                                      1998          1997
                                  ------------  ------------
<S>                               <C>           <C>
Revenues                          $10,947,305   $ 8,037,965 
                                  ------------  ------------
Loss before cumulative effect of
    accounting change             $(1,166,340)  $(1,293,407)
                                  ------------  ------------
Net loss                          $(1,166,340)  $(1,444,545)
                                  ------------  ------------
Net loss per common share         $     (0.23)  $     (0.28)
                                  ------------  ------------
</TABLE>

     A facility in downtown  Minneapolis,  Minnesota  was  purchased in November
     1997, and renovated. The facility cost approximately  $3,000,000:  $200,000
     cash at closing,  95,000 shares of Company common stock, a 10% note payable
     of $200,000 due in eighteen  months and the balance of  $2,500,000 in a 10%
     note with a  twenty-year  amortization,  maturing in 2007 (see Note 4). The
     acquisition  resulted in recording  goodwill in the amount of approximately
     $2,423,000.  The Company also issued 52,632 shares for related  costs.  The
     Company  opened the location for  business in March 1998.  The  Minneapolis
     facility had  previously  been  operated as an adult  entertainment  venue.
     Because the Company did not buy a business in the transaction, no pro forma
     information is available.

4.   LONG-TERM DEBT

     Following is a summary of long-term debt at September 30:

<TABLE>
<CAPTION>
                                                                   1998         1997
                                                                -----------  -----------
<S>                                                             <C>          <C>
Note payable to a bank, payable $10,000 per month,
plus interest at 8.5%, collateralized by all assets of
the Companysubsidiary, RCI Entertainment
Louisiana, Inc.                                                 $  117,749   $  231,904 

Note payable to a bank, payable $9,919 per month,
including interest at 8.5%, matures July 2002,
collateralized by all assets of the Company
subsidiary, RCI Entertainment Louisiana, Inc.                      740,427      793,159 

Note payable to a bank, payable $13,434 per month,
including interest at the prime rate plus 1%, matures
December 2001, collateralized by land and building
in Houston, Texas.                                                 562,308      960,260 

                                      F-11
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.   LONG-TERM DEBT (CONTINUED)

                                                                      1998         1997 
                                                                -----------  -----------
12% convertible debenture, payable monthly (interest
only) until maturity July 2004.  See Note 9.                    $  364,000   $        - 

10% note payable to an individual, payable $12,314
per month, including interest, matures August 1999.                128,922            - 

9% notes payable to an individual, monthly payments
aggregating $22,732, including interest, maturing in
2018.  Collateralized by real estate in Minneapolis,
Minnesota.  See Note 3.                                          2,499,364            - 

 Note payable to partnership maturing March 2026,
 due in monthly installments of $576 including principal
 and interest at 12%; collateralized by real estate.                55,443            - 

 Note payable to partnership maturing July 2007,
 due in monthly installments of $653 including principal
 and interest at 12%; collateralized by real estate.                62,868            - 

 Note payable to corporation maturing December 2000,
 due in monthly principal installments of $2,000 plus
 interest at 9%; collateralized by real estate.                    147,854            - 

 Note payable to individual maturing July 2004,
 due in monthly installments of $2,868 including principal
 and interest at 12%; collateralized by real estate.               286,745            - 

 Note payable to individual maturing March 2006,
 due in monthly installments of $2,573, plus interest at
 9.25%; collateralized by real estate.                             310,455            - 

 Note payable to corporation maturing April 2002,
 due in monthly installments of $13,758 including
 principal and interest at 10%; collateralized by real estate.     528,970            - 

                                      F-12
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.   LONG-TERM DEBT (CONTINUED)

                                                                      1998         1997 
                                                                -----------  -----------
 Note payable to a financing company maturing
 August 2003, due in monthly installments of $5,380,
 including interest at 10%, collateralized by real estate          556,566            - 

 Various notes, at interest rates ranging from 6% to 12%,
 payable in monthly installments, including interest,
 aggregating approximately $8,500, collateralized by
 real estate.                                                      372,868      167,650 
                                                                -----------  -----------
                                                                 6,734,539    2,152,973 
 Less current maturities                                          (718,636)    (398,798)
                                                                -----------  -----------
                                                                $6,015,903   $1,754,175 
                                                                ===========  ===========
</TABLE>

     Substantially  all the  Company's  assets  are  pledged to secure the above
     debt.  The prime rate was 8.5% at  September  30, 1998.  Following  are the
     maturities of long-term debt for the years ending September 30:

<TABLE>
<CAPTION>
<S>          <C>
1999         $  718,636
2000            581,698
2001            524,900
2002            481,110
2003            669,870
Thereafter    3,758,325
             ----------
             $6,734,539
             ==========
</TABLE>

5.   INCOME TAXES

     Income tax expense (benefit)  consisted of current taxes for 1998 and 1997.
     Following is a reconciliation of income taxes (benefit) at the U.S. Federal
     tax  rate to the  amounts  recorded  by the  Company  for the  years  ended
     September 30:

<TABLE>
<CAPTION>
                                             1998        1997
                                          ----------  ----------
<S>                                       <C>         <C>
Tax credit on loss before income
    taxes at the statutory rate           $(384,996)  $(418,000)
Separate return limitation - unavailable
    loss carrybacks                         384,996     330,265 
                                          ----------  ----------
                                          $       -   $ (87,735)
                                          ==========  ==========
</TABLE>

                                      F-13
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.   INCOME TAXES (CONTINUED)

     The  components of the net deferred tax  asset/liability  are as follows at
     September 30:

<TABLE>
<CAPTION>
<S>                                     <C>           <C>
Operating loss carryforwards            $(1,139,000)  $(476,000)
Deferred tax asset valuation allowance    1,139,000     476,000 
                                        ------------  ----------
                                        $         -   $       - 
                                        ============  ==========
</TABLE>

     For  tax  purposes,  the  Company  has a net  operating  loss  carryforward
     amounting to approximately  $3,350,000 which will expire,  if not utilized,
     beginning in 2012.

6.   RELATED PARTY TRANSACTIONS

     During 1998 and 1997,  the Company paid $33,000 and $20,000,  respectively,
     for  accounting  services to an accounting  firm in which a director of the
     Company was a principal.

     Included in accounts payable in the accompanying consolidated balance sheet
     is approximately $122,000 payable to the Company's Chief Executive Officer,
     the result of his payment of certain  expenses  principally  related to the
     Minnesota acquisition.

7.   COMMITMENTS AND CONTINGENCIES

     Leases

     The  Company  formerly  leased its Houston  nightclub  space from a company
     whose  ownership  was subject to  litigation.  Ownership was claimed by the
     Company's sole  stockholder,  Mr. Robert  Watters,  and by a former Company
     stockholder.  Lease  payments were equal to the larger of $10,000 per month
     or 5% of gross receipts per month.  The lease expired in February 1996, and
     the Company began leasing the space on a  month-to-month  basis.  The lease
     provided that the Company was obligated to pay for any  maintenance  to the
     premises,  to maintain  adequate  insurance  on the building and to pay all
     utilities and taxes. Rental expense on the building amounted to $63,000 for
     the year  ended  September  30,  1997.  The  lawsuit  was  settled in 1996,
     resulting in the former  stockholder  owning the building.  The Company has
     purchased the property from the former stockholder.

     The Company  has entered  into an  operating  lease for a nightclub  in New
     Orleans, Louisiana. The 39 year lease commenced in May 1996 and is a triple
     net lease with the tenant  paying taxes,  maintenance  and  insurance.  The
     lease also  requires  certain  contingent  rentals based on revenues at the
     nightclub.  The Company also leases corporate office facilities.  Following
     is a schedule of minimum lease payments for the years ending September 30:

<TABLE>
<CAPTION>
<S>        <C>
1999       $ 425,445
2000         320,000
2001         300,000
2002         300,000
2003         300,000
Therafter  8,015,000
</TABLE>

                                      F-14
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

     Concentration of Credit Risk

     The  Company  invests its cash and  certificates  of deposit  primarily  in
     deposits with major banks.  Certain  deposits may be in excess of federally
     insured limits.  The Company has not incurred losses related to its cash on
     deposit with banks.

     Litigation

     In November,  1998, LMTD, Inc. initiated litigation against a subsidiary of
     one of the Company's  subsidiaries,  Citation Land, LLC ("Citation"),  in a
     case styled LMTD, Inc. v. Texas Warehouse  Company,  Inc., et al. Cause No.
     98-12570, in the 200th Judicial District Court of Travis County, Texas. The
     suit  seeks  specific  performance  and  damages  against  Texas  Warehouse
     Company, Inc. regarding a Purchase Option Agreement. Plaintiff also alleges
     a tortious  interference  claim against Citation in the amount of $540,000.
     Counsel for Citation  intends to file a counterclaim and or cross action at
     the time that its answer is due.  Counsel for  Citation  believes  that the
     exposure to Citation is minimal.  The Company intends to vigorously  defend
     itself in this matter and to deny all allegations.

     On October 15, 1998, All City Beverage and  Entertainment,  Inc.  initiated
     litigation  against one of the Company's  subsidiaries in a case styled All
     City Beverage and Entertainment,  Inc. v. Taurus  Entertainment  Companies,
     Inc.("Taurus"), Cause No. 98- 49119, in the 61st Judicial District Court of
     Harris County,  Texas.  The suit seeks damages in the amount of $25,000 and
     175,000  shares of  common  stock of  Taurus  in  connection  with an Asset
     Purchase  Agreement between All City Beverage and  Entertainment,  Inc. and
     Taurus.  Taurus  has  filed  a  counter-claim  asserting  that  there  were
     undisclosed obligations which Taurus was required to pay. The counter-claim
     seeks  damages  in an amount in excess of  $25,000.  This  matter is in the
     early stages of litigation and no discovery has taken place. Taurus intends
     to vigorously defend itself in this matter.

     The  Company is also the  subject  of other  routine  legal  matters in the
     ordinary course of business. The Company does not believe that the ultimate
     resolution  of the  above  matters  will  have  a  material  impact  on the
     Company's financial position or results of operations.

     Sexually Oriented Business Ordinance of Houston, Texas

     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  established new
     distances  that  Sexually  Oriented  Businesses  may be located to schools,
     churches, playgrounds and other sexually oriented

                                      F-15
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

     Sexually Oriented Business Ordinance of Houston, Texas

     businesses.  There were no provisions in the Ordinance exempting previously
     permitted  sexually  oriented   businesses  from  the  effect  of  the  new
     Ordinance.  In 1997,  the Company was informed  that Rick's  Cabaret at its
     location  at 3113  Bering  Drive  failed  to meet the  requirements  of the
     Ordinance and accordingly the renewal of the Company's  Business License at
     that location was denied. The location in north Houston opened in December,
     1998 similarly failed to meet the requirements of the Ordinance as passed.

     The Ordinance  provided  that a business  which was denied a renewal of its
     operating  permit  due  to  changes  in  distance  requirements  under  the
     Ordinance  would be entitled to continue in operation  for a period of time
     (the  "Amortization  Period")  if the owner were  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.

     The Company filed a written request with the City of Houston  requesting an
     extension of time during which the Company could 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 by the City of Houston to determine the  appropriate  Amortization
     Period to be  granted to the  Company.  At the  Hearing,  the  Company  was
     granted an amortization period through July 1998. The Company has the right
     to appeal any decision of the Hearing official to the district court in the
     State of Texas.

     In May,  1997, the City of Houston  agreed to defer  implementation  of the
     Ordinance until the  constitutionality  of the entire Ordinance was decided
     by court trial.  In February 1998 the U.S.  District Court for the Southern
     District of Texas, Houston, Division, struck down certain provisions of the
     Ordinance,  including the provision mandating a 1,500 foot distance between
     a club and schools, churches and other sexually oriented business,  leaving
     intact the  provision  of the 750 foot  distance as it existed in the prior
     Houston, Texas Ordinance.

     There  are  other  provisions  in the  Houston,  Texas  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
     that were upheld which may be  detrimental  to the business by the Company.
     The  Company,  in  concert  with other  sexually  oriented  businesses,  is
     appealing these aspects of the Houston, Texas Ordinance.

     The City of  Houston  and the  Company,  in  concert  with  other  sexually
     oriented businesses has appealed the court's rulings. In the event that the
     City of Houston is successful in an appeal, the Company's Houston locations
     could be out of compliance. Such an outcome could have an adverse impact on
     the Company's future.

                                      F-16
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

     Sexually Oriented Business Ordinance of Houston, Texas

     On April 1, 1998, the City of Houston began enforcing  certain  portions of
     the Ordinance,  including the distance requirement between a customer and a
     dancer while dancing,  and the  requirement  that dancers be licensed.  The
     City of Houston's enforcement of the recently implemented provisions of the
     Ordinance  could have an adverse impact on the Rick's  location in Houston,
     Texas.  The current  requirement of a three foot distance  between a dancer
     and a customer could reduce customer satisfaction and could result in fewer
     customers  at the  Houston  location.  The  requirement  that a  dancer  be
     licensed may result in fewer dancers  working,  which could have an adverse
     impact on the  Houston  location.  It is  unknown  what  future  impact the
     enforcement of the Ordinance may have on the Company's Houston locations.

     Fair Value of Financial Instruments

     The  following   disclosure  of  the  estimated  fair  value  of  financial
     instruments is made in accordance  with the  requirements  of SFAS No. 107,
     Disclosures about Fair Value of Financial  Instruments.  The estimated fair
     value amounts have been determined by the Company,  using available  market
     information and appropriate valuation methodologies.

     The fair value of financial  instruments  classified  as current  assets or
     liabilities  including  cash and cash  equivalents  and notes and  accounts
     payable  approximate  carrying value due to the short-term  maturity of the
     instruments.  The fair value of short-term and long-term  debt  approximate
     carrying value base on their  effective  interest rates compared to current
     market rates.

     Other

     The Company presently has a three year employment  agreement with Robert L.
     Watters (the  "Agreement")  to serve as its President  and Chief  Executive
     Officer.  The Agreement,  which extends through December 31, 2000, provides
     for an annual base salary of  $300,000.  The  Agreement  also allows for an
     annual bonus,  at the  discretion of the Board of Directors  (excluding Mr.
     Watters), based upon the financial performance, including evaluation of the
     income and  earnings of the Company  during the year.  The  Agreement  also
     provides for  participation  in all benefit plans maintained by the Company
     for salaried employees. The Agreement contains a confidentiality  provision
     and an  agreement  by Mr.  Watters not to compete with the Company upon the
     expiration of the Agreement.

8.   EMPLOYEE STOCK OPTION PLAN

     The Company has adopted a Stock Option Plan (the "Plan") for  employees and
     directors. The options granted under this Plan maybe either Incentive Stock
     Options,  as that term is defined in Section 422A of the  Internal  Revenue
     Code of 1986, as amended, or nonstatutory options taxed under Section 83 of
     the Internal Revenue Code of 1986, as amended. The Plan

                                      F-17
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.   EMPLOYEE STOCK OPTION PLAN (CONTINUED)

     is administered by the Board of Directors or by a Compensation Committee of
     the Board of Directors.  The Board of Directors has the exclusive  power to
     select the  participants in the Plan, to establish the terms of the options
     granted to each  participant,  provided  that all options  granted shall be
     granted at an exercise price equal to at least 85% of the fair market value
     of the Common Stock covered by the option on the grant date and to make all
     determinations  necessary or  advisable  under the Plan. A total of 300,000
     shares may be optioned and sold under the Company's Stock Option Plan.

     During the year ended September 30, 1998 and 1997,  options were granted as
     follows:

<TABLE>
<CAPTION>
                                        1998             1997
                                  ----------------  --------------
<S>                               <C>               <C>
Outstanding at beginning of year          105,000          105,000
Granted                                   230,000                -
Expired                                   (35,000)               -
Exercised                                       -                -
Outstanding at end of year                300,000          105,000
                                  ----------------  --------------
Exercisable at end of year                 50,000                -
                                  ----------------  --------------
Exercise price per share          $1.875 to $4.75   $3.00 to $4.75
</TABLE>

     SFAS 123

     In October 1995, the Financial  Accounting  Standards Board ("FASB") issued
     SFAS 123,  "Accounting  for Stock-Based  Compensation."  SFAS 123 defines a
     fair value  based  method of  accounting  for an employee  stock  option or
     similar equity  instrument and encourages all entities to adopt that method
     of accounting for all of their employee stock compensation plans. Under the
     fair value based  method,  compensation  cost is measured at the grant date
     based on the value of the award. However, SFAS 123 also allows an entity to
     continue to measure  compensation  cost for those plans using the intrinsic
     value  based  method  of  accounting  prescribed  by APB  Opinion  No.  25,
     "Accounting for Stock Issued to Employees."

     Under the intrinsic value based method, compensation cost is the excess, if
     any,  of the  quoted  market  price of the  stock  at  grant  date or other
     measurement date over the amount an employee must pay to acquire the stock.
     Entities electing to remain with the accounting in Opinion 25 must make pro
     forma disclosures of net income and earnings per share as if the fair value
     based  method of  accounting  had been  applied.  The pro forma  disclosure
     requirements  are  effective  for  financial  statements  for fiscal  years
     beginning  after  December  15,  1995.  The  Company has elected to measure
     compensation cost,  including options issued, under Opinion 25. The Company
     issued no options during the year ended September 30, 1997.

                                      F-18
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.   EMPLOYEE STOCK OPTION PLAN (CONTINUED)

     Pro forma  disclosures  as  required  by SFAS 123 for the fiscal year ended
     September 30, 1998 are as follows:

Pro forma net loss            $ (634,407)
                              -----------
Pro forma net loss per share  $     (.15)
                              -----------

     The fair  value of the  awards  was  estimated  at the grant  date  using a
     Black-Scholes  option  pricing  model with the following  weighted  average
     assumptions for 1998: risk-free interest rate of 4.4%; volatility factor of
     127%; and an expected life of the awards of one to four years. The weighted
     average  contractual life of the outstanding  options at September 30, 1998
     was 4.5 years.

9.   STOCKHOLDERS' EQUITY

     The Company has outstanding 1,160,000 warrants to purchase its common stock
     as a result  of its  public  offering.  The  warrants  are  exercisable  as
     follows:  920,000 at $3.00 per share until October 1998 (expired),  160,000
     at $4.35 per share until  October  2000 and 80,000 at $4.35 per share until
     October 1998 (expired).

     The Company acquired certain real estate in San Antonio,  Texas under terms
     of a 12%  subordinated  convertible  debenture  (Note 4). The  debenture is
     payable  monthly,  interest only,  until maturity in July 2004. The Company
     has the option to redeem the debenture,  in whole or in part, at its option
     if the closing price of the  Company's  common stock should equal or exceed
     $8.50 per share for a period of ten days.  The holder of the  debenture has
     the option to convert any portion of the  debenture to common shares of the
     Company at the  conversion  price of $2.75 per share.  The  debentures  are
     subordinated  to the  Company's  bank  debt and  other  "Senior  Debt",  as
     defined. The debentures are collateralized by the acquired real estate.

     Taurus  purchased  real  estate in  Houston,  Texas from Ralph  McElroy,  a
     principal stockholder of the Company, where Taurus operates an XTC Cabaret.
     The Company  acquired the property from Mr. McElroy for the same price that
     Mr. McElroy paid for the property. The Company financed the purchase of the
     property by the  issuance  of a six year  $286,744  Convertible  Debenture,
     secured by the real estate  acquired.  The  Company is a guarantor  of this
     Convertible  Debenture.  The principal balance of the Convertible Debenture
     is due in July, 2004, in one lump sum payment.  Interest is due and payable
     monthly, with the first interest payment beginning in September,  1998. The
     Convertible  Debenture  is  convertible  into shares of Common Stock of the
     Company at any time prior to maturity at the Conversion  Price of $2.75 per
     share.

                                      F-19
<PAGE>
               RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.  ACCOUNTING DEVELOPMENTS

     SFAS 129

     Statement  of  Financial   Accounting  Standards  No.  129,  Disclosure  of
     Information  about Capital  Structure  ("SFAS 129"),  effective for periods
     ending after  December  15,  1997,  establishes  standards  for  disclosing
     information  about  an  entity's  capital  structure.   SFAS  129  requires
     disclosure of the  pertinent  rights and  privileges of various  securities
     outstanding   (stock,   options,   warrants,   preferred  stock,  debt  and
     participating  rights)  including  dividend  and  liquidation  preferences,
     participant  rights,  call prices and dates,  conversion or exercise prices
     and redemption requirements.  Adoption of SFAS 129 has had no effect on the
     Company as it currently discloses the information specified.

     SFAS 130 

     In June 1997,  the  Financial  Accounting  Standards  Board  issued two new
     disclosure  standards.  Results of operations  and  financial  position are
     unaffected by  implementation  of these new standar  Statement of Financial
     Accounting   Standards  (SFAS)  130,  "Reporting   Comprehensive   Income",
     establishes  standards for reporting and display of  comprehensive  income,
     its components and accumulated balances. Comprehensive income is defined to
     include all changes in equity except those  resulting  from  investments by
     owners and  distributions  to owners.  Among  other  disclosures,  SFAS 130
     requires  that all items that are required to be  recognized  under current
     accounting standards as components of comprehensive income be reported in a
     financial  statement  that is displayed  with the same  prominence as other
     financial  statements.  Results of operations  and  financial  position are
     unaffected by implementation of this new standard.

     SFAS 131

     SFAS 131, "Disclosure about Segments of a Business Enterprise", establishes
     standards  for the way that public  enterprises  report  information  about
     operating segments in annual financial statements and requires reporting of
     selected   information  about  operating   segments  in  interim  financial
     statements  issued  to  the  public.  It  also  establishes  standards  for
     disclosures  regarding  products and services,  geographic  areas and major
     customers.  SFAS  131  defines  operating  segments  as  components  of  an
     enterprise about which separate financial  information is available that is
     evaluated  regularly by the chief operating  decision maker in deciding how
     to  allocate  resources  and  in  assessing  performance.  This  accounting
     pronouncement   will  not  have  an  effect  on  the  Company's   financial
     statements, since the Company only operates in one segment of business, the
     operation of adult night clubs.

                                      F-20
<PAGE>
<TABLE>
<CAPTION>
                               INDEX TO EXHIBITS

EXHIBIT     SEQUENTIAL
NUMBER      DESCRIPTION
-------     --------------------------------------------------------------------
<C>         <S>
3.1   *     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.

3.2   *     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.

4.1   *     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.

4.2   *     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.

4.3   *     Form of Debenture, which is incorporated by reference to the Company's Form 8-K
            dated August 11, 1998 Exhibit 4.1.

10.1  *     Form of Stock Exchange Agreement With Certain Taurus Holders, which is
            incorporated by reference to the Company's Form 8-K dated August 11, 1998 Exhibit
            10.1.

10.2  **    Employment Agreement with Robert L. Watters

10.3  **    Employment Agreement with Erich Norton White.

21.1  **    Subsidiaries

27.1  **    Financial Data Schedule
<FN>
______________________
*     Incorporated  by  reference
**    Filed  herewith
</TABLE>