S-1/A: Maverick Lifestyle Inc. Files Amendment for $18.5 Million IPO and Secondary Offering

Maverick Lifestyle Inc. has filed an amendment to its S-1 registration statement for an initial public offering of Class A Common Stock and a secondary offering by selling stockholders, targeting a total offering size of approximately $18.5 million.

Summary

• Maverick Lifestyle Inc., a hemp-canna infused products company, has filed Amendment No. 2 to its Form S-1 registration statement with the SEC.
• The filing outlines a proposed public offering of 1,222,222 shares of Class A Common Stock, with an expected initial public offering price between $4.50 and $5.00 per share.
• Additionally, fifteen security holders are offering 2,200,500 shares of Class A Common Stock in a resale prospectus.
• The company has applied to list its Class A Common Stock on the NASDAQ Capital Market under the symbol MVRK.
• Maverick Lifestyle Inc. was formed on March 25, 2022, and has a limited operating history.
• The company acknowledges it has incurred significant net losses since inception, including a net loss of $1.8 million for the year ended December 31, 2023, and has an accumulated deficit of approximately $7.7 million as of the same date.
• The company's independent registered public accounting firm has expressed substantial doubt as to its ability to continue as a going concern.
• The company intends to use the net proceeds from the offering for marketing and advertising, hiring key personnel, machine upgrades, general working capital, and other corporate purposes.
• The company is an emerging growth company and intends to take advantage of certain reduced reporting requirements.
• Victor Krahn, the CEO, controls approximately 87.2% of the voting power before the offering through Maverick Collective, Inc.
• Following the offering, Krahn will retain approximately 83.5% of all voting rights.
• The company is party to a convertible loan in the principal amount of $8.05 million with BH Group, LLC, which upon completion of the offering, will become convertible at the option of the lender into shares of common stock at the public offering price.
• The company acquired MVRK Holdings LLC in exchange for 560,000 shares of Class A Common Stock in October 2023.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While the company is targeting a growing market and has some competitive strengths, it also faces significant financial challenges, including net losses and doubts about its ability to continue as a going concern. The concentrated voting control and potential risks associated with the industry further contribute to a cautious sentiment.

Positives

• The company is targeting the growing smokable hemp and cannabis-like products market.
• The company has a low-cost scaled manufacturing facility.
• The company has proprietary machinery technology.
• The company has brand recognition in 25 states.
• The company has an experienced industry team.
• The company has a nimble and dynamic outlook.

Negatives

• The company has a limited operating history.
• The company has incurred significant net losses since inception.
• The company's independent registered public accounting firm has expressed substantial doubt as to its ability to continue as a going concern.
• The company faces competition from traditional and large, well-financed tobacco or nicotine cigarette manufacturers or distributors.
• The company may experience a reduced demand for some of its products due to health concerns and legislative initiatives against smokables products.
• The company relies on distributors and retailers, which could affect its ability to efficiently and profitably distribute and market its products.

Risks

• The company's independent registered public accounting firm has expressed substantial doubt as to its ability to continue as a going concern.
• The company's ability to develop, commercialize, and distribute hemp smokables products and comply with laws and regulations governing cannabis, hemp, or related products will affect its operational results.
• The company's business is subject to many regulations, and noncompliance is costly.
• The company's business depends on its ability to develop a strong and trusted brand, and any failure to maintain, protect, or enhance its brand could materially adversely affect its business.
• The company faces competition from traditional and large, well-financed tobacco or nicotine cigarette manufacturers or distributors.
• The company may experience a reduced demand for some of its products due to health concerns and legislative initiatives against smokables products.
• The company relies on distributors and retailers, which could affect its ability to efficiently and profitably distribute and market its products.
• The company has debt which could adversely affect its ability to raise additional capital to fund operations and prevent it from meeting its obligations under outstanding indebtedness.
• The structure of the company's common stock has the effect of concentrating voting control with Victor Krahn, which will limit or preclude your ability to influence corporate matters.

Future Outlook

The company expects to continue to incur net losses for the foreseeable future and may not achieve or maintain profitability in the future.

Management Comments

• Our goal is to provide choice, affordability, and a legal smoking experience for both existing tobacco and marijuana consumers and new hemp smokers as a preferred adult-use alternative to tobacco products and expensive, inaccessible cannabis consumption.
• We believe our manufacturing processes will allow us to realize attractive margins for all of our distributed and proprietary branded products.

Industry Context

The document highlights the growing demand for smokable hemp and cannabis-like products, particularly in regions where cannabis is not yet legal recreationally. It also notes the increasing acceptance of smoking hemp as an alternative to tobacco and cannabis consumption.

Comparison to Industry Standards

• The U.S. tobacco market was valued at $75.9 billion in 2021 according to Grand View Research.
• The U.S. legal cannabis market is valued at $16.1 billion annually and growing at 30% a year according to an article in zippia.com dated July 14, 2022.
• The hemp derived cannabinoid industry has risen in prominence in the years since the passage of the 2018 US Farm Bill and has been estimated recently in Whitney Economics October 2023 National Cannabinoid Report to have a demand of between $21.3 and $35.8 billion in the USA alone.
• The market for pre-rolled cannabis products in states in which it is legal increased 38% in 2021 according to MJBizDaily.com.

Related Party Transactions

• MVRK Farms has a manufacturing and distribution agreement with North Carolina Tobacco Manufacturing LLC (NCTM) for a fee of $0.005 per stick sold by NCTM.
• NCTM also pays a fee to MVRK Tobacco of $0.0002 per stick manufactured for the right to use the equipment held by MVRK Tobacco.
• On October 13, 2023, the company entered into an agreement to acquire MVRK Holdings LLC, which owns our manufacturing facility from an affiliate of Victor Krahn, our CEO and director in exchange for the issuance of 560,000 shares of our Class A Common Stock valued at $2.8 million, or $5.00 per share.
• On October 13, 2023, the company agreed to convert $3.3 million in outstanding debt (which as of June 30, 2024 totaled $3,986,947) held by affiliates of Mr. Krahn into shares of our Class A Common Stock on the closing of this offering, based on a conversion price equal to the initial public offering price.
• On January 31, 2024, the company issued an aggregate of 415,000 shares of Class A Common Stock at a purchase price of $1.00 per share, for total gross proceeds of $415,000 in a private placement transaction. Nick Krahn, the child of Victor Krahn, purchased 20,000 shares in this private placement.
• On September 1, 2024, the company entered into a consulting agreement with an entity affiliated with Setti Coscarella, a former director, pursuant to which we agreed to issue the entity 150,000 shares of our common stock upon the closing of this offering.

Stakeholder Impact

• Shareholders will experience immediate and substantial dilution in net tangible book value.
• The dual class structure concentrates voting control with Victor Krahn, limiting the ability of other shareholders to influence corporate matters.
• The company's ability to continue as a going concern is uncertain, which could impact the value of shareholders' investments.
• Employees' jobs and compensation could be affected by the company's financial performance and ability to secure funding.
• Customers may be impacted by the company's ability to continue providing products and services.
• Suppliers and creditors face risks related to the company's ability to meet its obligations.

Next Steps

• The company needs to secure approval to list its Class A Common Stock on Nasdaq.
• The company needs to successfully complete the IPO and secondary offering.
• The company needs to execute its strategy to leverage social media, word of mouth, event marketing, a dedicated sales force, and superior cost structure to deliver high quality, high potency products consumers will come back for on a daily basis.

Key Dates

Keywords

hemp, cannabinoids, smokables, IPO, offering, Class A Common Stock, MVRK, Maverick Lifestyle Inc.