A Quick Take On Maverick Lifestyle Inc.

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

The firm manufactures and sells hemp-derived products to consumers in the United States.

Maverick Lifestyle Inc. has recently produced declining top line revenue and gross profit from a tiny base.

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

Maverick Overview

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

Management is headed by Chief Executive Officer Victor Krahn, who has been with the firm since its inception in 2022 and was previously co-founder of a hemp smokables company, which was acquired by the company in 2022.

The company’s primary offerings include the following:

• Pre-rolled hemp joints and cigarettes

• Hemp cigarillos

• Blunts

• Disposable vapes

• Gummies and puff ball edibles.

As of June 30, 2023, Maverick has booked fair market value investment of $3 million from investors.

Maverick Customer Acquisition

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

The company currently ships its products direct to 25 states in the U.S.

General and Administrative expenses as a percentage of total revenue have trended lower as revenues have decreased, as the figures below indicate:

General and Administrative	Expenses vs. Revenue
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 multiple, defined as how many dollars of additional new revenue are generated by each dollar of General and Administrative expense, fell to negative (0.7x) in the most recent reporting period, as shown in the table below:

General and Administrative	Efficiency Rate
Period	Multiple
Six Mos. Ended June 30, 2023	-0.7
2022	0.0

Click to enlarge

(Source – SEC.)

Maverick’s Market & Competition

According to a 2023 market research report by Grand View Research, the U.S. tobacco market was an estimated $75.9 billion in 2021 and is forecast 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 for this expected growth are changing consumer preferences for novel products.

Also, the chart below shows the historical and projected future growth trajectory of the U.S. tobacco market through 2030:

Major competitive or other industry participants include the following:

• Philip Morris International

• Japan Tobacco

• Imperial Brands Plc

• Altria Group

• Pyxus International

• Swedish Match AB

• Scandinavian Tobacco Group

• Vector Group LTD

• Universal Corporation.

A report by Hemp Industry Daily cited Nielsen as putting 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:

• Declining topline revenue

• Dropping gross profit but increasing gross margin

• Continued operating losses

• Increased cash flow from operations.

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

Total Revenue
Period	Total Revenue	% Variance vs. Prior
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. Prior
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. Prior
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 Operations
Period	Cash Flow From Operations
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 during the twelve months ending June 30, 2023, was $225,401.

Maverick Lifestyle Inc. IPO Details

Maverick intends to raise $15 million in gross proceeds from an IPO of its Class A common stock, although the final figure may differ.

No existing shareholders have indicated an 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 hiring key personnel;

for machine upgrades; and

the remainder for working capital.

(Source – SEC.)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management “does not believe that there are claims or actions, pending or threatened against the Company, the ultimate disposition of which would have a material adverse effect on our business, results of operations, financial condition, or cash flows.”

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

Commentary About Maverick’s IPO

Maverick Lifestyle Inc. is seeking U.S. public capital market investment to fund its general corporate cash flow requirements.

The company’s financials have generated falling top line revenue, reduced gross profit but higher gross margin, ongoing operating losses, and a swing to positive cash flow from operations.

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

General and Administrative expenses as a percentage of total revenue trended lower as revenue decreased; its General and Administrative efficiency multiple fell to negative (0.7x) in the most recent reporting period.

The firm currently plans to pay no dividends and to retain future earnings, if any, for reinvestment back into the company’s growth and working capital requirements.

The market opportunity for hemp-based smoking products in the U.S. is moderate but may produce significant growth in the coming years.

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

Also, the regulatory compliance environment in various U.S. states can be unpredictable, affecting various market participants in negative ways.

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

Expected IPO Pricing Date: To be announced.