• Facilities - Our nightclub facilities are within ready access to the principal business, tourist and/or commercial districts in the metropolitan areas in which they are located. The facilities have state of the art sound systems, lighting and professional stage design. Our nightclubs maintain an upscale level of decor and furniture furnishings to create a professional appearance. Three of our nightclubs offer VIP rooms. Our VIP rooms are open to individuals who purchase annual memberships. They offer a higher level of service and are elegantly appointed and spacious.
  
  
• Professional On-Site Management - Our nightclubs are managed by persons who are experienced in the restaurant and/or hospitality industry. The managers for the nightclubs are responsible for maintaining a quality and professionally run nightclub. At a higher level, our Area Directors oversee the management of several nightclubs within a specified geographical area. The Company currently has 12 Area Directors who have 18 to 26 years of experience in the industry.
  
  
• Food and Beverage Operations - Many of our nightclubs offer a first-class bar and food service. Three of our nightclubs offer a full service restaurant that provides customers with exceptional food, service and luxury. At most locations, we provide a selective variety of food including, but not limited to, hot and cold appetizers, pizza, and other limited food choices. Some of our nightclub operations do not have liquor licenses. Those of our nightclubs that carry BYOB "bring your own bottle" permits, sell non-alcoholic beverages. Experienced chef and bar managers are responsible for training, supervising, staffing and operating the food and beverage operations at each nightclub.
  
  
• Entertainment - Our nightclubs provide a high standard of attractive, talented and courteous female adult performers and waitresses. We maintain the highest standards for appearance, attitude, demeanor, dress and personality. The provided entertainment encourages repeat visits, increases the average length of a patron's stay and attracts customers to a late night destination - all of which create added revenue.
  

Management believes that there is a significant opportunity for industry consolidation as there are many profitable first-class clubs, which are available for acquisition on favorable terms. In fact, it is estimated that in the United States alone there are 3,500 adult entertainment nightclubs. Management also believes in acquiring established nightclubs in existing locations in order to avoid the substantial costs and risks associated with building and licensing nightclubs in new locations with no existing customer base.

The adult entertainment nightclub industry is highly fragmented with most nightclub owners owning only one club. Adult entertainment nightclubs are rarely advertised for sale; but rather, their availability is made known through word-of-mouth within the industry. The Company, through its extensive contacts in the industry, is aware of numerous nightclubs that are for sale throughout the United States. Typically, these nightclubs become available for sale because of owners reaching retirement age, increased operating expenses causing decreased profitability, and inability or unwillingness to commit capital in order to upgrade older nightclubs.

In the Company's professional opinion, there are many opportunities to create clusters of nightclubs in desirable markets. This approach not only limits the competition within a certain market, but also allows the Company to target different demographic segments within a certain geographic area and better leverage marketing and operations synergies as well. In evaluating acquisition opportunities in new markets, the Company will exercise its potential, over time, to build competitive clusters in as many markets as financial and managerial resources will allow. The Company will analyze a number of factors which it believes are important to its success, including: purchase price of property, the potential for consolidation of other properties in the market, the opportunity for operational efficiencies and increased cash flow through streamlined operations, and the general economic conditions of the market. The Company's acquisition strategy contemplates the ongoing evaluation of existing nightclubs and their relocation, upgrade or sale if they do not satisfy operating objectives.

Of paramount importance to delivering impressive cash flow results is the leveraging of operating synergies and the careful, yet tough management of operating expenses. The Company believes that the benefits of consolidation - namely, centralized management, more efficient operations, less costly overhead, and increased market recognition and identity of the clubs under shared name branding, will increase the current profitability of these nightclubs. Moreover, all levels of the Company's management are charged with the justification of all operating expenses. Management is always looking for ways to operate more efficiently and less expensively in all areas of nightclub operations.

The Company and nightclub senior management have utilized these principals over many years with proven success. Corporate and nightclub management are in general agreement on these basic values and strategies, which creates a consistent and unified environment throughout the organization.


Compliance Policies and Controls
IEC has developed comprehensive policies aimed at ensuring that the operation of each nightclub is conducted in conformance with local, state and federal laws and they are designed to assure our clients a quality and enjoyable experience. We have a "no tolerance" policy on illegal drug use in or around the facilities. We continually monitor the actions of entertainers, employees and customers to ensure that proper behavior standards are met.

We believe that operational and accounting controls are essential to the successful operation of a cash intensive nightclub and bar business. IEC has also developed and implemented internal operating and accounting controls to track cash, credit card transactions, and food and beverage inventory. These controls also help to maintain the accuracy of our operating and accounting records. In particular, IEC has developed special software programs to capture operating information and generate reports for efficient management and control of the nightclub. We review all revenue information on a shift basis. This information is recorded in a sales journal, which includes all of the credit cards receipts, register receipts, deposits, and any other sales information for each shift. Once the sales journal is completed by a nightclub manager, it is signed off by a supervisor or Area Director for accuracy, recalculated the following morning by our money counter and matched to the deposit. A copy of this sales journal is faxed into the corporate office for accounting review and recording. Analysis of the daily information enables IEC to detect any variance from expected operating results based on expectations and historical trends.


Advertising and Promotion
Our ability to attract patrons to a nightclub for the first time is critical to a nightclub's success. Promotions, advertising and special offers are the typical means to market a nightclub. We use a variety of highly targeted methods to reach our customers including local radio, billboards, billboard trucks, internet, newspaper and magazine ads, and professional sporting events.

We extensively utilize a marketing program developed by IEC. Our nightclubs are marketed as a safe and upscale environment for adult entertainment. The marketing strategy is to attract new customers, increase the frequency of visits by existing customers and establish a higher level of name recognition. The target market is the business-convention traveler, local professionals and business people. In addition, IEC conducts various promotional activities throughout the year to keep the nightclubs' names before the public. In order to be good corporate citizens, the nightclubs actively sponsor and participate in local charitable events and make contributions to local charities.


Employees and Independent Contractors
As of December 31, 2008, we had approximately 1,030 employees, of which 140 were full-time management employees including corporate and administrative operations, and approximately 890 who were engaged in entertainment, and food and beverage service, including bartenders and waitresses. None of our employees is represented by a union nor have we ever suffered a work stoppage. As of December 31, 2008, we had independent contractor relationships with approximately 2,000 entertainers, who are self-employed and perform at our locations on a non-exclusive basis. Independent contractors/entertainers pay a fee to the nightclub to perform.


Industry Background
For years, sexual content has been continually increasing in the media including movies, television, magazines, newspapers, and the internet. Capitalizing on this opportunity, businesses that were not previously involved in the industry have now become major providers of adult entertainment. These include hotel chains, cable and satellite television companies, national video store companies and long distance telephone carriers.

Public acceptance and demand for the premium quality adult entertainment nightclubs have become common in both cities and suburbs throughout the United States as there is an increasingly open and healthy attitude toward sexuality. There is a strong existing and developing market among businessmen, professionals and other affluent persons for first-class adult entertainment nightclubs.

The social acceptance and accelerating growth in adult entertainment includes adult entertainment nightclubs, particularly first class adult entertainment nightclubs, which are popular among affluent customers for social and business entertainment

The demographic market for adult entertainment nightclubs is substantial as nightclubs appeal to men of all age groups. Within this market, there are two general categories of nightclubs, each having distinct differences in entertainment quality, atmosphere and food service. On the lower-end are "strip clubs" which typically have small facilities and a low-grade atmosphere. These clubs generally cater to a blue-collar clientele, have limited or non-existent food service and a small number of entertainers who are not of the caliber of the upper-scale clubs. The upper-scale clubs are termed "gentlemen's clubs." These clubs are characterized by their large facilities and featuring dozens of entertainers on any given night. They offer a variety of entertainment such as sports on television monitors, billiard tables, VIP rooms and specialty acts. Their target market/audience is a more affluent clientele of businessmen and professionals for whom gentlemen's clubs are increasingly becoming a viable and attractive entertainment option. In addition, they are no longer limited to providing evening entertainment; daytime operations are also growing, particularly during the lunch hour. Food is prepared by an on-site chef and the menu typically offers a wide variety of entrees and appetizers. Most clubs provide a buffet at least once a week as a promotion special.


Competition
The adult nightclub entertainment business is highly competitive with respect to price, location and quality of the facility, entertainment, service, and food and beverages. Due to the highly fragmented nature of the adult nightclub industry, exact industry details are sparse about the actual number of operating nightclubs in the United States. However, various sources state that there are approximately 3,000 to 4,000 adult nightclubs in the United States with no clear industry leader. We have many competitors in the metropolitan areas in which we are located and/or intend to expand. Some of our competitors have substantially greater financial resources and a longer history of operations than the nightclubs currently owned by the Company. Changes in customer preferences, economic conditions, demographic trends and the location, number of and quality of competing nightclubs could adversely affect our business, as could a shortage of experienced local management and hourly employees. We believe that our nightclubs enjoy a high level of repeat business and customer loyalty due to our upscale restaurant atmosphere, food quality, premium entertainment, perceived price-value relationship and efficient service. Although we believe that we are well positioned to compete successfully, there can be no assurance that we will be able to maintain our high level of name recognition and prestige within the marketplace.


Government Regulations
Our business is regulated by local zoning, local and state liquor licensing, local ordinances and state and federal, time, place and manner free speech restrictions. In states in which we currently operate, liquor licenses renew annually, and are considered to be a "privileged" license that could be subject to suspension or revocation. The adult entertainment provided by our nightclubs has elements of free speech and expression and, therefore, enjoys some protection under the First Amendment to the U.S. Constitution. However, the protection is limited to expression, and not conduct. In addition to various regulatory requirements affecting the sale of alcoholic beverages, in many cities where we operate, the location of a topless cabaret is subject to restriction by city ordinance. These ordinances affect the locations in which sexually oriented businesses may be operated by typically requiring minimum distances to schools, churches, and other sexually oriented businesses, and containing restrictions based on the percentage of residences within the immediate vicinity of the sexually oriented business. The granting of a sexually oriented business permit is not subject to discretion; such a business permit must be granted if the proposed operation satisfies the requirements of the applicable ordinance.

In all states where we operate, management believes that we comply with applicable laws, regulations and ordinances governing the sale of alcohol and the operation of sexually oriented businesses. While our nightclubs are generally well established in their respective markets, there can be no assurance that local, state and/or federal licensing and other regulations will permit our nightclubs to remain in operation or be profitable in the future.