Ziplink, Inc. (ZIPL)

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PTT and RICK, which are respectively in the AMEX and NASDAQ market are two stocks that are in the same industry as our ZIPL

Commentary:

PTT(VCG Holding Corp) owns 14 adult clubs and an upscale gentleman's lounge, trades in the AMEX

Revenues for 2006: $17M
Revenues for 2007: target of $40M
Projected revenues for 2008 and 2009:
$66M for 2008 and $92M for 2009

Net income: $8.6M for 2007
Projected net income for 2009: $18M

PTT was trading as low as .90 in June 2006 and hit as high as 12.65 in Feb 2007 but now trading at 6.50

Key Statistics for PTT

16.93M outstanding(also recently announced a stock repurchase of 10% or 1.6M of the outstanding)

Market Cap: $110M

P/E: 36

EPS: 0.18

RICK(Rick's Cabaret Int'l) which owns adult clubs in Houston, New York and other places, trades in the NASDAQ

Revenues for fiscal year ending Sept 30 2006: $24.5M from $14.8 the previous year

Projected revenues for 2007: $40-50M

Net income for 2007: $6M, which is greater than 3 times from 2006

The share price for RICK was trading around $5 in late December 2006 and hit a high of $11.10 in February 2007

Key Statistics for RICK

6.15M outstanding

Market Cap: $57.4M

P/E: 34.5

EPS: 0.27


Reasons why adult clubs are very good at producing revenues

1. The trend recently for adult clubs has been to gather acquisitions and increase their revenue producing potential. If you look at RICK's past acquisition in New York, it increased their revenues twicefold in the last 2 years. Also, VCG Holdings are acquiring clubs in the Southern states and along the Northeast, which is also accounting for their massive revenue explosion.
2. Clubs generally have low cost overhead.
For instance, most clubs nowadays have dancers pay the club a fee, in exchange for the tips to be received. Thus, they are generally working as independent contractors. Moreover, this keeps salary and benifit expenses low.
3. Adult clubs are revenue driven from the moment they open for business. Customers usually pay cover charges of $10-20 just to get in the door. Once they are inside, they pay high prices for beer or hard drinks. Also, private rooms are a luxury item in these places, inasmuch some would wind up spending up to $500 for the evening.
4. Adult clubs are generally resistant to economic downturns. As the saying goes, "Sex sells"


Final Conclusion:

ZIPL is in a very good position for us now.
Why? Because the share price is still cheap, considering the revenue potential and the share structure. They most likely will make key acquisitions after the merger, which will only increase the revenues and the bottom line. Another great thing about ZIPL is the person behind the adult club about to be merged. Susnar and his associates have enough money to buy out smaller clubs without any type of financing. The only drawback I see on ZIPL is that they are trading on the pinks and susceptible to manipulation, but if we have great buying pressure I don't see why this stock can't go to a $1 or more.