Hemp product company Maverick Lifestyle aims for micro IPO (pending: MVRK)

Vladyslaw Hawrylov

A Quick Overview of Maverick Lifestyle Inc.

According to an SEC S-1 registration statement, Maverick Lifestyle Inc. (MVRK) has filed to raise $15 million in an initial public offering of its Class A common stock.

The company produces and sells hemp-derived products to consumers in the United States.

Maverick Lifestyle Inc. has recently generated declining revenue and gross profits on a minuscule basis.

I’ll give a final opinion when we learn more about the IPO.

Maverick overview

Maverick Lifestyle Inc., based in Stantonsburg, North Carolina, was founded to develop, manufacture and sell hemp and canna-infused products to consumers in various product forms.

Management is led by CEO Victor Krahn, who has been with the company since its founding in 2022 and was previously co-founder of a hemp tobacco products company that was acquired by the company in 2022.

The The Company’s core offerings include:

• Pre-rolled hemp joints and cigarettes

• Hemp cigarillos

• Blunts

• Disposable vapes

• Gummy bears and puffball edibles.

As of June 30, 2023, Maverick has recognized $3 million in fair market value investments from investors.

Maverick customer acquisition

The Company sells its products through approximately 200 distributors and management estimates that its products are available in 10,000 retail locations nationwide.

The company currently ships its products directly to 25 states in the United States

The share of general and administrative expenses in total revenue has trended down as revenue has fallen, as the following figures show:

General and administration	Expenses vs. Income
Period	percentage
Six mos. Ended June 30, 2023	29.2%
2022	20.9%
2021	40.2%

click to enlarge

(Source – SEC.)

The general and administrative efficiency multiplier, which is defined as how many dollars of additional new revenue are generated by each dollar of general and administrative expenses, declined to negative (0.7x) in the most recent reporting period, as shown in the following table:

General and administration	Efficiency rate
Period	Several
Six mos. Ended June 30, 2023	-0.7
2022	0.0

click to enlarge

(Source – SEC.)

Mavericks market and competition

According to a 2023 market research report from Grand View Research, the U.S. tobacco market was an estimated $75.9 billion in 2021 and is expected to reach $102.5 billion by 2030.

This represents a forecast CAGR (Compound Annual Growth Rate) of 3.4% from 2022 to 2030.

The main drivers of this expected growth are changing consumer preferences for novel products.

Additionally, the following graphic shows the historical and projected future growth trajectory of the US tobacco market through 2030:

Grand View Research

Key competitors or other industry participants include:

• Philip Morris International

• Japan tobacco

• Imperial Brands Plc

• Altria Group

• Pyxus International

• Swedish Match AB

• Scandinavian tobacco group

• Vector Group LTD

• Universal Corporation.

A Hemp Industry Daily report quotes Nielsen as pegging the U.S. smokable hemp market at $75 million in 2020, with an estimated growth to $350 million by 2025.

Maverick Lifestyle Inc. Financial Performance

The company’s recent financial results can be summarized as follows:

• Falling sales

• Declining gross profit but increasing gross margin

• Continued operating losses

• Increased cash flow from operations.

Below are relevant financial results derived from the Company’s registration statement:

Total sales
Period	Total sales	% Variance vs. Previous
Six mos. Ended June 30, 2023	$922,106	-16.7%
2022	$2,249,915	0.0%
2021	$2,250,071
Gross profit (loss)
Period	Gross profit (loss)	% Variance vs. Previous
Six mos. Ended June 30, 2023	$596,073	-14.3%
2022	$1,279,715	2.5%
2021	$1,247,900
Gross margin
Period	Gross margin	% Variance vs. Previous
Six mos. Ended June 30, 2023	64.64%	1.8%
2022	56.88%	2.6%
2021	55.46%
Operating profit (loss)
Period	Operating profit (loss)	Operating margin
Six mos. Ended June 30, 2023	$(616,112)	-66.8%
2022	$(1,077,271)	-47.9%
2021	$(1,544,045)	-68.6%
Net income (loss)
Period	Net income (loss)	Net margin
Six mos. Ended June 30, 2023	$(1,004,235)	-108.9%
2022	$(1,600,286)	-71.1%
2021	$(2,627,509)	-116.8%
Cash flow from operating business
Period	Cash flow from operating business
Six mos. Ended June 30, 2023	$230,956
2022	$(13,544)
2021	$112,813
(Glossary of terms.)

click to enlarge

(Source – SEC.)

As of June 30, 2023, Maverick had $204,294 in cash and $12.2 million in total liabilities.

Cash flow from operations was $225,401 for the twelve months ended June 30, 2023.

Maverick Lifestyle Inc. IPO Details

Maverick intends to raise gross proceeds of $15 million through an initial public offering of its Class A common stock, although the final figure may vary.

No existing shareholders have expressed interest in purchasing shares at the IPO price.

Management says it will use the net proceeds from the IPO as follows:

for marketing and advertising;

for the recruitment of key personnel;

for machine upgrades; And

the remainder for working capital.

(Source – SEC.)

There is no presentation of the company roadshow by management.

With respect to outstanding litigation, management “does not believe that there are any claims or actions pending or threatened against the Company that, if ultimately resolved, would have a material adverse effect on our business, results of operations, financial condition or cash flows.”

The listed underwriters of the IPO are Boustead Securities and Sutter Securities.

Commentary on Maverick’s IPO

Maverick Lifestyle Inc. is seeking public capital market investments in the United States to support the Company’s general cash flow needs.

The company’s financials resulted in declining revenue, lower gross profit but higher gross margin, continued operating losses and a transition to positive cash flow from operations.

Cash flow from operations was $225,401 for the twelve months ended June 30, 2023.

The share of general and administrative expenses in total sales trended downward as revenue declined. The multiplier for general and administrative efficiency fell to negative (0.7x) in the last reporting period.

The Company currently plans not to pay dividends and to retain future profits, if any, to reinvest them in the Company’s growth and working capital needs.

The market opportunity for hemp-based smoking products in the US is moderate, but could lead to significant growth in the coming years.

Business risks to the Company’s prospects as a public company include a relative lack of consumer awareness of hemp-based smoking products and the need for continued education and marketing to increase awareness and sales.

In addition, the regulatory compliance environment in various U.S. states may be unpredictable and may negatively impact various market participants.

As we learn more about Maverick Lifestyle Inc.’s IPO pricing and valuation assumptions, I will provide an update.

Expected IPO pricing date: To be announced.