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Adult Entertainment Capital Launches Investment Vehicle for Industry

Helmed by Wall Streeter Todd Ault, the ‘business development corporation’ will fund, acquire adult businesses with capital from traditional investors
Adult Entertainment Capital Launches Investment Vehicle for Industry
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Sep 2, 2008 6:00 PM PDT    Text size: 
TUSTIN, Calif. — Adult Entertainment Capital Inc. launched today, as “the first publicly traded and licensed investment capital option for the adult industry,” as described in a company press release, with Wall Streeter Milton “Todd” Ault III at the helm.

Described by Ault as a business development corporation, the company will acquire and invest in adult businesses, similar to a private equity firm or holding company, without requiring its adult partners to disclose their financial reports.

“Let say that I was General Electric. Under the current way this is done, if I bought Vivid, I would have to consolidate them on balance sheet,” Ault told XBIZ.

“Let’s say that you’ve been in the adult business for 10 years and you want to retire and you want to sell your business. You can sell your business to my company, and still keep your business private, but still have access to public funds,” he explained. “So you could sell out your business, take stock in our company or cash. Now we own you, and we have to report that we own you and what out position is worth, but we don’t have to consolidate what you’re paid, how much your sales are, what your revenue is, who you do business is — we’re not required to report any of those things. Under the [Small Business Economic] Development Act of 1980, we don’t have to consolidate your losses or your gains, or any of that. It’s a unique way of investing without having to report the operations of each business.”

The publicly traded company allows traditional investors to purchase stock in the company, thereby adding to the amount of capital available for investment into adult businesses — funding that has typically been inaccessible to adult businesses in the past.

“A BDC, or business development corporation, chartered under the 1940 [Investment Company] Act, is an investment fund which trades publicly, which any Tom, Dick or Harry can buy in the open market, by simply having a brokerage account,” Ault said further.

Ault started his financial career with investment firm Dean Witter Reynolds before moving to Prudential Securities. From 1998 to 2005, he worked with Strome Susskind, a $1.2 billion hedge fund, accoridng to a company statement.

In 2007, Ault founded Zealous Holdings, Inc., a financial services holding company with investments in various mainstream industries and businesses. Zealous has now become Adult Entertainment Capital, Inc., and is listed as trading at one cent per share. Adult Entertainment Capital is currently trading in the over-the-counter [OTC] market under the abbreviation ZLST, though the initials will change within a few days.

Ault said that the current economic climate in the adult industry is challenging, but also provides opportunity for needed restructuring among companies that need access to capital investment, or are looking for a buyout.

“We think there has been over-saturation,” Ault said, “and we think there is an opportunity to take some of those business, consolidated them into one business — a holding enterprise that protects that privacy but has access to public capital — and let the industry become self-financing because, suddenly, there’s someone out there that is willing to provided this capital. They can go to more traditional sources that they otherwise could not get to and that changes the way the industry is financed.”

Adult Entertainment Capital also has plans to provide financial and business planning across a broad spectrum, in order to create a diverse portfolio for the corporation and, according to Ault, will reinvest revenue into the company.

“As we build capital in the business and we get return on our investment, we’re going to turn around and invest it right back into adult,” he explained.

“I think there can be a lot of money, but I think the foundation for the sea change in the way people think of the business is being owned by a BDC — we’re public, we’re audited, our investments are audited — we’re going to bring to the table more stable financing, so theoretically, over time, these funds are going to have more stable, transparent financing, you’re going to have more investment capital flow that way,” Ault said.

Plans are to heavily promote the new investment vehicle to all sectors of the industry including video and online producers, mobile providers, product manufacturers, as well as club and adult lifestyle resort owners.

He also said he is especially interested in investing in online credit card payment processors, and at ways to monetize tube sites through potential mainstream advertising opportunities.

The company will make its first appearance at the Venus Berlin trade show, to be held in October, and will also host a booth at January’s Adult Entertainment Expo, as well as increasing presence through print advertising campaigns.

To date, the company said it is working with Internet/mobile content provider Rock Candy, and is getting ready to launch a pay-per-view subscription service with SpiceTV and PlaygirlTV’s founder Mark Graff. Just this week, Adult Entertainment Capital signed a letter of intent to purchase subscription cable channel ComedyNet.com, of which Graff is CEO.

Ault said that he also is in talks with European producer Pierre Woodman.

“It’s really important for us to become a staple for the adult business to come to,” Ault said.

In order to concentrate his efforts on the adult industry, Ault said he has divested himself from other business partnerships, including as CEO of holding company Ault Glazer & Co..

“I’m actually not going to own anything else, except for this company,” he said. “This is my new venture and my wife is going to be joining me fulltime. She’s going to be helping me and I’ve got the support of my family behind it.”

And as for concerns with investors that may be hesitant to put money into the adult industry, Ault is banking on those that are interested in the possibility of profit through the company.

“It does provide tremendous returns when managed properly,” Ault emphasized. “It is a legitimate investment. There is an opportunity to allow an industry, which is completely legal and a huge portion of the economy, to have access to capital markets.”

However, Ault added, “There are too many people that think that you can just go right into adult and make money right away. You’re not going to have long-term staying power if you don’t understand that you have to invest in technology and infrastructure. There’s always the person that’s going to build the next Girls Gone Wild, and then there’s the other 300 that don’t do anything.”

For more information, contact Adult Entertainment Capital directly at (949) 885-7399 or via email info@adultentertainmentcapital.com

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