- Company attempting to go current
- Reverse merging in a company called Firetainment Inc.
- Young enthusiastic CEO
- Low risk of possible R/S coming at 1:25
Wednesday, 06-27-2018, Madison Ventures (MAVT), a company that trades by appointment the last few months, out of the blue released not 1 but two 10-Q filings today. Quick review on OTCMarkets.com reveal the company as having the “stop sign” and limited information. These sudden filings are often a sign the company is up to something…why else would a shell-like business want to get current? They are only one attorney’s opinion letter away from current reporting status that could be a matter of days.
The ole adage… where there is smoke there is fire, is “on point” yet again. If investors missed or forgot about the 8-K’s back in late April, the latest 10-Q again revealed the merger agreement ironically with a Florida corporation named Firetainment. According to the April 8-K, the deal is set to close late June, and today is June 27th, so one would like to assume the deal is done!
Reverse Merger Info
Taken from today’s Q section 9: Subsequent Events
On April 23, 2018, the Company entered into a Plan of Reorganization and Agreement of Securities Exchange (the “Agreement”) with Firetainment Inc. (“Firetainment”), a Florida Corporation. The Agreement will result in the merger of Firetainment into Madison Ventures with the corporation to survive as Firetainment Inc. Pursuant to the Agreement the Company agreed to issue Firetainment two hundred million (200,000,000) common shares in exchange for all of the shares of Firetainment. This issuance will result in a change in control of the Company. Under the Agreement, upon execution, Firetainment received the immediate right to the appointment of the directors and officers of the surviving corporation by the resignation of the existing sole director and officer of the Company and the simultaneous appointment of its own designee being the newly appointed sole director and officer. The closing of the Agreement will take place upon the delivery and completion of Firetainment audited statements for the period ending March 31, 2018, unless another time or date, or both, are agreed to in writing by the parties.
The New CEO
Also, on April 23, 2018, the Board of Directors appointed William Shawn Clark as our Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer as well as our Sole Director. Concurrent with Mr. Clarks’ appointment, Eugenio Gregorio resigned as Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer as well as our Sole Director. Mr. Clark, the Chief Executive Officer of Firetainment, is now our sole officer and director.
William “Shawn” Clark, in our opinion based off his LinkedIn profile, looks to be a young enthusiastic entrepreneur with a passion for fabrication and a goal to turn his company into the number one manufacturer of outdoor fire products in the industry.
Since its founding in 2011, Firetainment, Inc. has made its mark in the outdoor furniture industry as the only high-end fire pit table manufacturer that enables hibachi-style cooking at home. Established by Shawn Clark and Kevin Fulp, Firetainment has more than 150 dealers throughout the country.
The company website (http://www.firetainment.com) states:
“We build the fire pit tables everyone loves.”
Whether you’re cooking sirloins with the family or unwinding with a glass of cabernet sauvignon, our “Firetaining” centers will undoubtedly become the heart of your home. Each of our all-season fire pit tables is handcrafted in the USA from the finest materials and are ANSI certified. Firetainment Inc, headquartered in Orlando, FL, is recognized throughout the casual furniture marketplace for being the outdoor fire product innovators, with a main focus on customer service, quality components, and design function. Our sophisticated, modern designs complement any outdoor space and can be designed for an even better custom fit. Select from one of our classic customizable fire pit tables for every outdoor space or allow us to personally design one to fit your commercial entertaining and cooking needs.
We put a call into Shawn and spoke to Karen in customer service. We have yet to reach Mr. Clark and ask additional questions investors like ourselves want to know. If and when we get a chance to interview the CEO, we will update our article and alert our readers. We did uncover over 100 distributor outlets in the state of Florida.
Social Media Presence
Firetainment also has a LinkedIn profile, where we found they have 11-50 employees.
Their twitter account (@firetainment) has 517 followers with many shared video tweets on business and manufacturing. Future shareholders will soon boost those numbers and anticipate the account will be a means of communicating with the investment community as well as marketing products.
Their firepits can be found on Pinterest and Etsy, Wayfair, and their Facebook presence is very healthy with nearly 14,900 page likes and (34) 5-star reviews.
Share Structure and Reverse Split
According to the 10-Q as of September of 2017, there were 29.4M issued and outstanding with an authorized amount of 300M. Note: Madison Ventures were to give 200M to Firetainment for 100% of it’s company. We must assume based on these numbers the O/S has to be 229.4M. The reverse split was defined as part of the corporate cleanup and should not be treated as a precondition of the merger. In fact the filing uses the verbiage “as soon as practical” indicating that its not an absolute requirement.
The April 27, 2018 8-K first mentioned the 25-1 Reverse Split. The filing states…
Additionally, at execution the Parties agreed to proceed to undertake as soon as practicable the necessary filings required by and/or with FINRA and/or the State of Nevada to execute a corporate name change and a symbol change to Madison Ventures, and to effectuate a roll-back of the existing issued and outstanding and authorized shares of Madison Ventures on the basis of a 25 for 1 reverse split, followed by a subsequent increase to the then authorized capital of Madison Ventures following the completion of the defined reverse split.
The Parties project the formal closing for the transaction to occur by the end of June 2018, with issuance of the control block of shares, and the filing of a Super 8-K consummating all elements remaining as described by the Closing. Such Super 8-K will contain combined audited financial statements under SEC guidelines.
Investor Summary
All the prerequisites of the merger agreement appear to have been completed. The company had completed all the required filings for March 31, 2018 and completed the change of control. What this ultimately means for investors is that a real functioning company is coming into this shell. This is a company that likely does millions of revenues with over 100 distributors. If we did napkin math and assumed 70% of the business came from 30% of the customers and each customer did ONLY 1 sale per month at $1500/sale that translates into $540K in annual sales. Instead of just 1 sale per month per distributor (30) consider 1 sale per week and that translates int $2.34 million in annual sales. This company has a niche fire cabinet business and the real speculation for investors should be focused on why this company wants access to the public markets . The most obvious answer is to raise money and the 1:25 reverse split might turn off most investors as they myopically focus on that topic, but the investors that can connect the dots might see the much bigger play. This is a sales and marketing company with a great concept and if they needed money for a large order they wouldn’t go into the capital markets or Shark Tank to get it but rather turn to purchase order financing and factoring. Based on a UCC-1 search the only secured debtor is the property manager leaving that financing option wide open if they want to grow. The company is also strategically located adjacent to Superior Metal Fabricators and Superior Lazers who are the likely contract manufacturers for them. Based on the UCC filing dating back to Jan 2014, these manufacturing companies likely have a 4 year relationship and that could mean that Firetainment might have net terms in place and have zero need for growth financing.
So again why the public markets? A couple alternative ideas come to mind. The first is that the CEO has had great growth in his business and is eyeing an acquisition synergistic with the existing business and distributor network that has been built. This means that the CEO needs money OR currency in the form of stock to execute a roll up strategy. The other idea is that one or more large retailers like Lowes (LOW), Home Depot (HD), Costco (COST), Walmart (WMT), or Fred Meyer will want to put this in their line of outdoor furniture. If one of these large retailers is about ready to cut a massive purchase order a public company is more appealing. The reason a public company makes sense is that these retailers want to be assured the manufacturer will stand behind the product and could force a private company to sign a personal guarantee. Incorporating eliminates this risk to the proprietor and allows the prospective buyer a more transparent opportunity to do due diligence on their manufacturer. Madison Ventures is truly a sleeping giant. Much more will be known once the company does its first press release and announces its intentions but for the speculative investor connecting the dots the risk of a money raise seems nil while the risk that Firetainment has a solid underlying business with large purchase orders in the wings is extremely high. On a valuation basis this type of company should be worth a minimum of 1-3 times sales so a big purchase order in the wings could dramatically alter this stocks trajectory.
Disclosure: The staff at PSInvestor has NOT been compensated by the company for the above-mentioned article but are long shares of the company bought on the open market and reserve the right to buy additional or sell shares of the mentioned security. To read our full disclaimer, please click here.