Form 1-A Maverick Lifestyle Inc.

  
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      Maverick Lifestyle, Inc.
      NV
      2022
      0001934836
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      7427 NC Hwy 58 South
      Stantonsburg
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      631-964-1111
      William R. Eilers, Esq.
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      Pursuant to Section 4(a)(2)
    
  

File No. [●]

 

Preliminary Offering Circular dated

 

An Offering Statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the Offering Statement filed with the Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the Offering Statement in which such Final Offering Circular was filed may be obtained.

 

Maverick Lifestyle, Inc.

7427 NC Hwy 58 South

Stantonsburg, NC 27883

252.864.8084

www.mvrkfarms.com

 

UP TO 10,000,000 SHARES OF COMMON STOCK

 

This is a public offering (the “Offering”) of securities of Maverick Lifestyle, Inc., a Nevada corporation (the “Company”). We are offering a maximum of $25,000,000 of securities (the “Maximum Offering”) pursuant to this Offering. We are offering up to 10,000,000 Shares of Common Stock. This Offering will expire on the first to occur of (a) the sale of all Shares offered hereby, (b) twelve months from the day this Offering is qualified, subject to extension for up to one hundred-eighty (180) days in the sole discretion of the Company, or (c) when the Company’s board of directors elects to terminate the Offering (as applicable, the “Termination Date”). We will hold closings upon the receipt of investors’ subscriptions and acceptance of such subscriptions by the Company. Subscriptions are irrevocable and the purchase price is non-refundable as expressly stated in this offering circular (this “Offering Circular”). If, on the initial closing date, we have sold less than the Maximum Offering, then we may hold one or more additional closings for additional sales, until the earlier of: (i) the sale of the Maximum Offering or (ii) the Termination Date. The Shares are being offered on a “best efforts” basis therefore, we reserve the right, subject to applicable securities laws, to begin applying the proceeds from the Offering towards our business strategy, development expenses, offering expenses and other uses as more specifically set forth in this Offering Circular (See section “Use of Proceeds”). We expect to commence the sale of the Shares within two calendar days of the qualification date of the offering statement on which this Offering Circular is a part (the “Offering Statement”) and it will be a continuous offering pursuant to Rule 251(d)(3)(i)(F).

 

Investing in our Securities involves a high degree of risk. See “Risk Factors” for a discussion of certain risks that you should consider in connection with an investment in our Securities.

 

Our board of directors used its business judgment in setting the consideration for the Shares to be issued under the Offering. The sales price per Unit bears no relationship to our book value or any other measure of our current value or worth.

 

Title of Each Class of Securities to be Qualified		Amount to be Qualified				Price to public				Underwriting discount and commissions				Proceeds to Maverick Lifestyle Inc.(2)
One share of Common Stock			10,000,000			$	2.50				(1	)		$	24,750,000
Total Offering:			10,000,000			$	2.50				(1	)		$	24,750,000

 

(1)

The Company has engaged Dalmore Group, LLC, member FINRA/SIPC (“Dalmore”), to act as the broker-dealer of record in connection with this Offering, but not for underwriting or placement agent services. This includes the 1% commission, but it does not include the one-time set-up fee and consulting fee payable by the Company to Dalmore. See “Plan of Distribution” for more details. To the extent that the Company’s officers and directors make any communications in connection with the Offering they intend to conduct such efforts in accordance with an exemption from registration contained in Rule 3a4-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, therefore, none of them is required to register as a broker-dealer.

 

(2)

Net proceeds do not reflect deduction of expenses of this offering, which we will pay from the proceeds, and which we estimate will be approximately $3,000,000 to cover estimated sales commissions, branding fees, legal, audit, marketing, and filing costs associated with this offering if fully subscribed.

 

This Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sales of these Shares in any state or jurisdiction in which such offer, solicitation or sale would be unlawful, prior to registration or qualification under the laws of any such state.

 

 

The Company is using the Offering Circular format in its disclosure in this Offering Circular.

 

The common stock of the Company is not quoted or traded on any national securities exchange.

 

THE SECURITIES UNDERLYING THIS OFFERING STATEMENT MAY NOT BE SOLD UNTIL QUALIFIED BY THE SECURITIES AND EXCHANGE COMMISSION. THIS OFFERING CIRCULAR IS NOT AN OFFER TO SELL, NOR SOLICITING AN OFFER TO BUY, ANY SHARES OF OUR COMMON STOCK IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH SALE IS PROHIBITED.

 

AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION, WHICH WE REFER TO AS THE COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF ANY SUCH STATE. WE MAY ELECT TO SATISFY OUR OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO (2) BUSINESS DAYS AFTER THE COMPLETION OF OUR SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.

 

GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN TEN PERCENT (10%) OF THE GREATER OF YOUR ANNUAL INCOME OR YOUR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(D)(2)(I)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO WWW.INVESTOR.GOV.

 

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.

 

The date of this Offering Circular is September [●], 2022

 

*   *   *

 

 

Table of Contents

 

Cautionary Statements Regarding Forward-Looking Statements		iii
Offering Circular Summary		1
The Offering		2
Risk Factors		3
Statements Regarding Forward-looking Statements		21
Indemnification of Directors and Officers		22
Use of Proceeds		23
Dilution		24
Plan of Distribution		25
Business		27
Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
Executive Compensation		43
Certain Relationships and Related Party Transactions		44
Security Ownership of Management & Certain Security Holders		45
Description of Capital Stock		46
Dividend Policy		47
Legal Matters		47
Experts		47
Where You Can Find More Information		48
Index to Financial Statements		F-1

 

*   *   *

 

 

In this Offering Circular, unless the context indicates otherwise, references to “Maverick Lifestyle, Inc.”, “we”, the “Company”, “our” and “us” refer to the activities of and the assets and liabilities of the business and operations of Maverick Lifestyle, Inc., and its subsidiary.

 

State Law Exemption and Purchase Restrictions

 

Our Shares are being offered and sold only to “qualified purchasers” (as defined in Regulation A). As a Tier 2 offering pursuant to Regulation A, this offering will be exempt from state law “Blue Sky” review, subject to meeting certain state filing requirements and complying with certain anti-fraud provisions, to the extent that our Shares offered hereby is offered and sold only to “qualified purchasers” or at a time when our Shares are listed on a national securities exchange. “Qualified purchasers” include: (i) “accredited investors” under Rule 501(a) of Regulation D under the Securities Act (“Regulation D”) and (ii) all other investors so long as their investment in our Shares do not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons). Accordingly, we reserve the right to reject any investor’s subscription in whole or in part for any reason, including if we determine in our sole and absolute discretion that such investor is not a “qualified purchaser” for purposes of Regulation A.

 

To determine whether a potential investor is an “accredited investor” for purposes of satisfying one of the tests in the “qualified purchaser” definition, the investor must be a natural person who has:

 

1.

an individual net worth, or joint net worth with the person’s spouse or spousal equivalent, that exceeds $1,000,000 at the time of the purchase, excluding the value of the primary residence of such person; or

 

2.

earned income exceeding $200,000 in each of the two most recent years or joint income with a spouse or spousal equivalent exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

 

If the investor is not a natural person, different standards apply. See Rule 501 of Regulation D for more details.

 

For purposes of determining whether a potential investor is a “qualified purchaser,” annual income and net worth should be calculated as provided in the “accredited investor” definition under Rule 501 of Regulation D. In particular, net worth in all cases should be calculated excluding the value of an investor’s home, home furnishings and automobiles.

 

 

Cautionary Statements Regarding Forward-Looking Statements

 

This Offering Statement contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act’). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance, or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

 

These factors include, among others:

 

●

current or future financial performance;

 

●

management’s plans and objectives for future operations;

 

●

uncertainties associated with product research and development

 

●

uncertainties associated with dependence upon the actions of government regulatory agencies;

 

●

product plans and performance;

 

●

management’s assessment of market factors; and

 

●

statements regarding our strategy and plans.

 

Actual results could differ materially from the results described in the forward-looking statements due to the risks and uncertainties set forth in this Offering Statement and those described from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”).

 

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Offering Statement and include information concerning possible or assumed future results of our operations, including statements about business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts. These forward-looking statements represent our intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties, and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Offering Statement. All subsequent written and oral forward-looking statements concerning other matters addressed in this Offering Statement and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Offering Statement.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances, or assumptions underlying such statements, or otherwise.

 

*   *   * 

 

 

Risk Factors

 

In the execution of our business strategy, our operations and financial condition are subject to certain risks. A summary of certain material risks is provided below, and you should take such risks into account in evaluating any investment decision involving the Company. This section does not describe all risks applicable to us and is intended only as a summary of certain material factors that could impact our operations in the industries in which we operate. Other sections of this Offering Statement contain additional information concerning these and other risks.

 

Risks Relating to Our Business Generally

 

There is substantial doubt about our ability to continue as a going concern.

 

We had had net losses $1,646,648 and $1,676,518 for the years ended December 31, 2021 and 2020, respectively. Additionally, the Company had an accumulated deficit of approximately $4,434,166 on December 31, 2021. These conditions, among others, raise substantial doubt about our ability to continue as a going concern for a period of twelve months for the issuance date of this report.

 

Management cannot provide assurance that we will ultimately achieve sufficient profitable operations or become cash flow positive or raise additional debt and/or equity capital. Management believes that our capital resources are not currently adequate to continue operating and maintaining its business strategy for a period of twelve months from the issuance date of this report. The Company may seek to raise capital through additional debt and/or equity financings and generate sufficient revenues to fund its operations in the future.

 

The Report of our Independent Registered Public Accountant firm issued in connection with our audited consolidated financial statement for the years ended December 31, 2021 and 2020 express substantial doubt about our ability to continue as a going concern.

 

Although management believes there is substantial doubt about our ability to continue as a going concern, they do not reflect any adjustments that might result if we are unable to continue our business.

 

Our business strategy relating to the development and introduction of new products and services exposes us to risks such as limited customer and/or market acceptance and additional expenditures that may not result in additional net revenue.

 

An important component of our business strategy is to focus on new products and services that enable us to provide immediate value to our customers. Customer and/or market acceptance of these new products and services cannot be predicted with certainty, and if we fail to execute properly on this strategy or to adapt this strategy as market conditions evolve, our ability to grow revenue and our results of operations may be adversely affected. If we fail to successfully implement our business strategy, our financial performance and our growth could be materially and adversely affected.

 

If we fail to successfully implement our business strategy, our financial performance and our growth could be materially and adversely affected.

 

Our future financial performance and success are dependent in large part upon our ability to implement our business strategy successfully. Implementation of our strategy will require effective management of our operational, financial, and human resources and will place significant demands on those resources. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Offering Statement for more information regarding our business strategy. There are risks involved in pursuing our strategy, including the ability to hire or retain the personnel necessary to manage our strategy effectively.

 

In addition to the risks set forth above, implementation of our business strategy could be affected by a number of factors beyond our control, such as increased competition, legal developments, government regulation, general economic conditions, increased operating costs or expenses, and changes in industry trends. We may decide to alter or discontinue certain aspects of our business strategy at any time. If we are not able to implement our business strategy successfully, our long-term growth and profitability may be adversely affected. Even if we are able to implement some or all of the initiatives of our business strategy successfully, our operating results may not improve to the extent we anticipate, or at all.

 

 

If we fail to successfully improve our customer experience, including the development of new product offerings and the enhancement of our existing product offerings, our ability to retain existing customers and attract new customers, our business, financial condition, and operating results, may be materially adversely affected.

 

Our customers have a wide variety of options for purchasing raw product, including traditional and online stores and brick and mortar, and consumer tastes and preferences may change from time to time.  Our ability to retain existing customers, attract new customers and increase customer engagement with us will depend in part on our ability to successfully improve our customer experience, including by creating and introducing new product offerings and improving upon and enhancing our existing product offerings.  If our new or enhanced product offerings are unsuccessful, including because they fail to generate sufficient revenue or operating profit to justify our investments in them, our business and operating results could be materially adversely affected.  Furthermore, new customer demands, tastes or interests, superior competitive offerings or a deterioration in our product quality or our ability to bring new or enhanced product offerings to market quickly and efficiently could negatively affect the attractiveness of our products and the economics of our business and require us to make substantial changes to and additional investments in our product offerings or business model.

 

Developing and launching new product offerings or enhancements to our existing product offerings involves significant risks and uncertainties, including risks related to the reception of such product offerings by our existing and potential future customers, increases in operational complexity, unanticipated delays or challenges in implementing such offerings or enhancements, increased strain on our operational and internal resources (including an impairment of our ability to accurately forecast demand and related supply), inability to adequately support new offerings or enhancements with sufficient marketing investment and negative publicity in the event such new or enhanced product offerings are perceived to be unsuccessful.   In addition, developing and launching new product offerings and enhancements to our existing product offerings may involve significant upfront capital investments and such investments may not prove to be justified.  Any of the foregoing risks and challenges could materially adversely affect our ability to attract and retain customers as well as our visibility into expected operating results, and could materially adversely affect our business, financial condition, and operating results.

 

Our business depends on a strong and trusted brand, and any failure to maintain, protect or enhance our brand, including as a result of events outside our control, could materially adversely affect our business.

 

We have developed a strong and trusted brand, and we believe our future success depends on our ability to maintain and grow the value of the Maverick Lifestyle brands.  Maintaining, promoting, and positioning our brand and reputation will depend on, among other factors, the success of our safety, quality assurance, marketing and merchandising efforts and our ability to provide a consistent, high-quality customer experience.  Any negative publicity, regardless of its accuracy, could materially adversely affect our business.  Brand value is based in large part on perceptions of subjective qualities, and any incident that erodes the loyalty of our customers or suppliers, including adverse publicity or a governmental investigation or litigation, could significantly reduce the value of our brand and significantly damage our business.

 

In addition, in recent years, there has been a marked increase in the use of social media platforms and other forms of Internet-based communications that provide individuals with access to broad audiences, and the availability of information on social media platforms is virtually immediate, as can be its impact.  Many social media platforms immediately publish the content their participants post, often without filters or checks on accuracy of the content posted.  Furthermore, other Internet-based or traditional media outlets may in turn reference or republish such social media content to an even broader audience.  Information concerning us, regardless of its accuracy, may be posted on such platforms at any time.  Information posted may be adverse to our interests or may be inaccurate, each of which may materially harm our brand, reputation, performance, prospects and business, and such harm may be immediate, and we may have little or no opportunity to respond or to seek redress or a correction.

 

The value of our brand also depends on effective customer support to provide a high-quality customer experience, which requires significant personnel expense.  If not managed properly, this expense could impact our profitability.  Failure to manage or train our own or outsourced customer support representatives properly could compromise our ability to handle customer complaints effectively.

 

 

Changes in macroeconomic conditions may adversely affect our business.

 

Economic difficulties and other macroeconomic conditions could reduce the demand and/or the timing of purchases for certain of our services from customers and potential customers. In addition, changes in economic conditions could create liquidity and credit constraints. We cannot assure you that we would be able to secure additional financing if needed and, if such funds were available, that the terms and conditions would be acceptable to us.

 

The effects of the outbreak of the novel coronavirus (“COVID-19”) have negatively affected the global economy, the United States economy, and the global financial markets, and may disrupt our operations and our clients’ and counterparties’ operations, which could have an adverse effect on our business, financial condition, and results of operations.

 

The effects of the outbreak of the novel coronavirus have negatively affected the global economy, the United States economy, and the global financial markets, and may disrupt our operations and our clients’ and counterparties’ operations, which could have an adverse effect on our business, financial condition, and results of operations.

 

The ongoing COVID-19 global and national health emergency has caused significant disruption in the international and United States economies and financial markets. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability. The United States now has the world’s most reported COVID-19 cases, and all 50 states and the District of Columbia have reported cases of individuals infected with COVID-19. All states have declared states of emergency. Similar impacts have been experienced in every country in which we do business. Impacts to our business could be widespread and global, and material impacts may be possible, including the following:

 

●

Our employees contracting COVID-19;

 

●

Reductions in our operating effectiveness as our employees work from home or disaster-recovery locations;

 

●

Unavailability of key personnel necessary to conduct our business activities;

 

●

Unprecedented volatility in global financial markets;

 

●

Reductions in revenue across our operating businesses;

 

●

Closure of our offices or the offices of our clients; and

 

●

De-globalization.

 

Furthermore, the Company has been following the recommendations of local health authorities to minimize exposure risk for its employees for the past several weeks, including the temporary closures of its offices and having employees work remotely to the extent possible, which has to an extent adversely affected their efficiency. In addition, the cancellation of in-person meetings and conferences has had an adverse impact on the Company’s business and financial condition and has hampered the Company’s ability to meet with customers to promote products, generate revenue and access usual sources of liquidity on reasonable terms, which in turn has negatively impacted the Company’s cash flow and its ability to pay for certain professional services.

 

We are still assessing our business operations and system supports and the impact COVID-19 may have on our results and financial condition, but there can be no assurance that this analysis will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sectors in particular. To date, the Company has been able to avoid layoffs and furloughs of employees.

 

As the situation continues to evolve, the Company will continue to closely monitor market conditions and respond accordingly.

 

The further spread of the COVID-19 outbreak may materially disrupt banking and other financial activity generally and in the areas in which we operate. This would likely result in a decline in demand for our products and services, which would negatively impact our liquidity position and our business strategies. Any one or more of these developments could have a material adverse effect on our and our consolidated subsidiaries’ business, operations, consolidated financial condition, and consolidated results of operations.

 

 

A failure of our information technology or systems could adversely affect our business.

 

Our ability to deliver our products and services depends on effectively using information technology. We rely upon our information technology and systems, employees, and third parties for operating and monitoring all major aspects of our business. These technologies and systems and, therefore, our operations could be damaged or interrupted by natural disasters, power loss, network failure, improper operation by our employees, data privacy or security breaches, computer viruses, computer hacking, network penetration or other illegal intrusions or other unexpected events. Any disruption in the operation of our information technology or systems, regardless of the cause, could adversely impact our operations, which may adversely affect our financial condition, results of operations and cash flows.

 

We depend on our management team.

 

The Company’s future success primarily depends on the efforts of the existing management team, particularly, Victor Krahn, our Chief Executive Officer, Justin Vick, our Chief Executive Officer, and Bryce Foreman, our Chief Technology Officer. Loss of the services of any of our management team could materially and adversely affect the Company’s business prospects. We do not carry “key-man” life insurance on the lives of any of our employees or advisors. As sufficient funds become available, the Company intends to hire additional qualified personnel. Significant competition exists for such personnel and, accordingly, our compensation costs may increase significantly. The Company believes it will be able to recruit and retain personnel with the skills required for present needs and future growth but cannot assure it will be successful in those efforts.

 

In order to be successful, we must attract, engage, retain, and integrate key employees and have adequate succession plans in place, and failure to do so could have an adverse effect on our ability to manage our business.

 

Our success depends, in large part, on our ability to attract, engage, retain, and integrate qualified executives and other key employees throughout all areas of our business. Identifying, developing internally, or hiring externally, training and retaining highly skilled managerial and other personnel are critical to our future, and competition for experienced employees can be intense. Failure to successfully hire executives and key employees or the loss of any executives and key employees could have a significant impact on our operations. The loss of services of any key personnel, the inability to retain and attract qualified personnel in the future, or delays in hiring may harm our business and results of operations. Further, changes in our management team may be disruptive to our business, and any failure to successfully integrate key newly hired employees could adversely affect our business and results of operations.

 

We face competition for staffing, which may increase our labor costs and reduce profitability.

 

We compete with other hemp and cannabis in recruiting qualified management, including executives with the required skills and experience to operate and grow our business, and staff personnel for the day-to-day operations of our business. These challenges may require us to enhance wages and benefits to recruit and retain qualified management and other professionals. Difficulties in attracting and retaining qualified management and other professionals, or in controlling labor costs, could have a material adverse effect on our profitability.

 

We are or may become a party to litigation that could potentially force us to pay significant damages and/or harm our reputation.

 

We could be subject to certain legal proceedings, which potentially involve large claims and significant defense costs (see “Legal Proceedings”). These legal proceedings and any other claims that we may face in the future, whether with or without merit, could result in costly litigation, and divert the time, attention, and resources of our management. The coverage limits of our insurance policies may not be adequate to cover all such claims and some claims may not be covered by insurance. Additionally, insurance coverage with respect to some claims against us or our directors and officers may not be available on terms that would be favorable to us, or the cost of such coverage could increase in the future. Further, although we believe that we have conducted our operations in compliance with applicable statutory and contractual requirements and that we have meritorious defenses to outstanding claims, it is possible that resolution of these legal matters could have a material adverse effect on our results of operations. In addition, legal expenses associated with the defense of these matters may be material to our results of operations in a particular financial reporting period.

 

We compete in an industry that is brand-conscious, so brand name recognition and acceptance of our products are critical to our success.

 

Our business is substantially dependent upon awareness and market acceptance of our products and brands by our target market: trendy, young consumers looking for a distinctive product tonality and/or the perceived benefits of hemp, CBD and CBG in their smokables as compared to nicotine or tobacco-based smokables. In addition, our business depends on acceptance by our independent distributors and retailers of our brands that have the potential to provide incremental sales growth. If we are not successful in the growth of our brand and product offerings, we may not achieve and maintain satisfactory levels of acceptance by independent distributors and retail consumers. In addition, we may not be able to effectively execute our marketing strategies in light of the various closures and cancellations caused by the COVID-19 pandemic. Any failure of our brands to maintain or increase acceptance or market penetration would likely have a material adverse effect on our revenues and financial results.

 

 

Third parties may infringe on our brands, trademarks, and other intellectual property rights, which may have an adverse impact on our business.

 

We currently rely on a combination of trademark and other intellectual property laws and confidentiality procedures to establish and protect our proprietary rights, including our brands. If we fail to successfully enforce our intellectual property rights, the value of our brands, services and products could be diminished and our business may suffer. Our precautions may not prevent misappropriation of our intellectual property.

 

We may not be able to discover or determine the extent of any unauthorized use or infringement or violation of our intellectual property or proprietary rights.  Third parties also may take actions that diminish the value of our proprietary rights or our reputation.  The protection of our intellectual property may require the expenditure of significant financial and managerial resources.  Moreover, the steps we take to protect our intellectual property may not adequately protect our proprietary rights or prevent third parties from continuing to infringe or misappropriate these rights.  We also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology or other intellectual property rights, which could materially adversely affect our business, financial condition, and operating results.

 

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to obtain and use information that we regard as proprietary.  Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity.  Such litigation could be costly, time-consuming and distracting to management, result in a diversion of resources, the impairment or loss of portions of our intellectual property and could materially adversely affect our business, financial condition, and operating results.  Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights.  These steps may be inadequate to protect our intellectual property.  We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property.  Despite our precautions, it may be possible for unauthorized third parties to use information that we regard as proprietary to create product offerings that compete with ours

 

We may be subject to intellectual property rights claims.

 

Third parties may make claims against us alleging infringement of their intellectual property rights. Any intellectual property claims, regardless of merit, could be time-consuming and expensive to litigate or settle and could significantly divert management’s attention from other business concerns. In addition, if we were unable to successfully defend against such claims, we may have to pay damages, stop selling the service or product or stop using the software, technology or content found to be in violation of a third party’s rights, seek a license for the infringing service, product, software, technology, or content or develop alternative non-infringing services, products, software, technology, or content. If we cannot license on reasonable terms, develop alternatives, or stop using the service, product, software, technology, or content for any infringing aspects of our business, we may be forced to limit our service and product offerings. Any of these results could reduce our revenue and our ability to compete effectively, increase our costs or harm our business.

 

We rely on third parties to provide us with adequate raw goods supply, freight, and fulfillment and Internet and networking services, the loss or disruption of any of which could cause our revenue, earnings, or reputation to suffer.

 

We rely on third-party manufacturers to supply all of the products we sell as well as packaging materials. If we are unable to obtain sufficient quantity, quality and variety of products and packaging materials in a timely and low-cost manner from our manufacturers, we will be unable to fulfill our customers’ orders in a timely manner, which may cause us to lose revenue and market share or incur higher costs, as well as damage the value of our brands.

 

Currently, all of our order fulfillment is handled by one third-party provider. Also, almost all of our direct-to-consumer customer orders are shipped by one third-party provider and almost all of our orders for retail programs are shipped by another third-party provider. Should these providers be unable to service our needs for even a short duration, our revenue and business could be adversely affected. Additionally, the cost and time associated with replacing these providers on short notice would add to our costs. Any replacement fulfillment provider would also require startup time, which could cause us to lose sales and market share.

 

 

Our business also depends on a number of third parties for Internet access and networking, and we have limited control over these third parties. Should our network connections go down, our ability to fulfill orders would be delayed. Further, if our websites or call center become unavailable for a noticeable period of time due to Internet or communication failures, our business could be adversely affected, including harm to our brands and loss of sales.

 

Therefore, we are dependent on these third parties. The services we require from these parties may be disrupted by a number of factors, including the following:

 

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Labor disruptions;

 

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Delivery problems;

 

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Financial condition or results of operations;

 

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Internal inefficiencies;

 

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Equipment failure;

 

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Severe weather;

 

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Fire;

 

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Natural or man-made disasters; and

 

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With respect to our suppliers, shortages of product or United States Department of Agriculture (“USDA”) or FDA compliance issues.

 

Competition from traditional and large, well-financed tobacco or nicotine cigarette manufacturers or distributors may adversely affect our distribution relationships and may hinder development of our existing markets, as well as prevent us from expanding our markets.

 

The smokables industry is highly competitive. We compete with other smokables companies, including with “Big Tobacco” manufacturers and distributors, for shelf space in retail outlets and for marketing focus by our distributors, many of whom also distribute other smokables brands. Our products compete with both tobacco-based and hemp-based smokables, many of which are marketed by companies with substantially greater financial resources than ours. We also compete with regional hemp smokables producers and “private label” smokables suppliers.

 

Our direct competitors in the hemp smokables industry mainly include medium size independent companies and distributors as well as regional or niche smokables companies. These national and international competitors have advantages such as lower production costs, larger marketing budgets, greater financial and other resources, and more developed and extensive distribution networks than ours. We may not be able to grow our volumes or maintain our selling prices, whether in existing markets or as we enter new markets.

 

Increased competitor consolidations, market-place competition, particularly among branded hemp smokables products, and competitive product and pricing pressures could impact our earnings, market share and volume growth. If, due to such pressure or other competitive threats, we are unable to sufficiently maintain or develop our distribution channels, we may be unable to achieve our current revenue and financial targets. As a means of maintaining and expanding our distribution network, we intend to engage in omni channel marketing efforts, consumer education and awareness, and strategic sponsorships as well as introduce additional brands. We may not be successful in doing this, or it may take us longer than anticipated to achieve market acceptance of these new products and brands, if at all. Other companies may be more successful in this regard over the long term. Competition, particularly from companies with greater financial and marketing resources than ours, could have a material adverse effect on our existing markets, as well as on our ability to expand the market for our products.

 

 

We compete in an industry characterized by rapid changes in consumer preferences and public perception, so our ability to continue developing new products to satisfy our consumers’ changing preferences will determine our long-term success.

 

Failure to introduce new brands, products or product extensions into the marketplace as current ones mature and to meet our consumers’ changing preferences could prevent us from gaining market share and achieving long-term profitability. Product lifecycles can vary, and consumers’ preferences and loyalties change over time. We may not succeed at innovating new products to introduce to our consumers. Customer preferences also are affected by factors other than taste, such as health and nutrition considerations and obesity concerns, shifting consumer needs, changes in consumer lifestyles, increased consumer information and competitive product and pricing pressures. Sales of our products may be adversely affected by the negative publicity associated with these issues. In addition, there may be a decreased demand for our products as a result of the COVID-19 pandemic. If we do not adequately anticipate or adjust to respond to these and other changes in customer preferences, we may not be able to maintain and grow our brand image and our sales may be adversely affected.

 

We may be unable to respond effectively to technological changes in our industry, which could reduce the demand for our products.

 

Our future business success will depend upon our ability to maintain and enhance our product portfolio with respect to advances in technological improvements for certain products and market products that meet customer needs and market conditions in a cost-effective and timely manner. We may not be successful in gaining access to new products that successfully compete or are able to anticipate customer needs and preferences, and our customers may not accept one or more of our products. If we fail to keep pace with evolving technological innovations or fail to modify our products and services in response to customers’ needs or preferences, then our business, financial condition and results of operations could be adversely affected.

 

We may experience a reduced demand for some of our products due to health concerns and legislative initiatives against smokables products.

 

Consumers are concerned about health and wellness; public health officials and government officials are increasingly vocal about nicotine smoking, nicotine vaping, and their adverse consequences. There has been a trend among many public health advocates to pursue generalized reduction in consumption of smokables products, as well as increased public scrutiny, new taxes on smokables products, and additional governmental regulations concerning the marketing and labeling/packing of smokable products. Additional or revised regulatory requirements, whether labeling, tax or otherwise, could have a material adverse effect on our financial condition and results of operations. Further, increasing public concern with respect to smokables could reduce demand for our hemp smokables products.

 

Legislative or regulatory changes that affect our products, including new taxes, could reduce demand for products or increase our costs.

 

Taxes imposed on the sale of certain of our products by federal, state, and local governments in the United States, or other countries in which we operate could cause consumers to shift away from purchasing our hemp smokables products. These taxes could materially affect our business and financial results.

 

Our ability to develop, commercialize and distribute hemp smokables products and comply with laws and regulations governing cannabis, hemp or related products will affect our operational results.

 

As of December 31, 2020, more than 40 states had enacted legislation to establish hemp production programs pursuant to the 2018 farm bill (the Agricultural Improvement Act of 2018, the “2018 Farm Bill”), which legalized the regulated production of hemp. The 2018 Farm Bill was signed into law on December 20, 2018. The 2018 Farm Bill removed hemp from the U.S. Controlled Substances Act (the “CSA”) and established a federal regulatory framework for hemp production in the United States. Among other provisions, the 2018 Farm Bill: (a) explicitly amends the CSA to exclude all parts of the cannabis plant (including its cannabinoids, derivatives, and extracts) containing a delta-9 THC concentration of not more than 0.3% on a dry weight basis from the CSA’s definition of “marihuana”; (b) permits the commercial production and sale of hemp; (c) precludes states, territories, and Indian tribes from prohibiting the interstate transport of lawfully-produced hemp through their borders; and (d) establishes the USDA as the primary federal agency regulating the cultivation of hemp in the United States, while allowing states, territories, and Indian tribes to obtain (or retain) primary regulatory authority over hemp activities within their borders after receiving approval of their proposed hemp production plan from the USDA. Any such plan submitted by a state, territory, or Indian tribe to the USDA must meet or exceed minimum federal standards and receive USDA approval. Any state, territory, or Indian tribe that does not submit a plan to the USDA, or whose plan is not approved by the USDA, will be regulated by the USDA; provided that, states retain the ability to prohibit hemp production within their borders.

 

 

Marijuana continues to be classified as a Schedule I substance under the CSA. As a result, any cannabinoids (including CBD) derived from marijuana, as opposed to hemp, or any products derived from hemp containing in excess of 0.3% THC on a dry-weight basis, remain Schedule I substances under U.S. federal law. Cannabinoids derived from hemp are indistinguishable from those derived from marijuana, and confusion surrounding the nature of our smokables products containing hemp or CBD, inconsistent interpretations of the definition of “hemp”, inaccurate or incomplete testing, farming practices and law enforcement vigilance or lack of education could result in our products being intercepted by federal and state law enforcement as marijuana and could interrupt and/or have a material adverse impact on the Company’s business. The Company could be required to undertake processes that could delay shipments, impede sales, or result in seizures, proper or improper, that would be costly to rectify or remove and which could have a material adverse effect on the business, prospects, results of operations or financial condition of the Company. If the Company makes mistakes in processing or labeling, and THC in excess of 0.3% on a dry-weight basis is found in our products, the Company could be subject to enforcement and prosecution under local, state, and federal laws which would have a negative impact on the Company’s business and operations.

 

Under the 2018 Farm Bill, states have authority to adopt their own regulatory regimes, and as such, regulations will likely continue to vary on a state-by-state basis. States take varying approaches to regulating the production and sale of hemp and hemp-derived products under state food and drug laws. The variance in state law and that state laws governing hemp production are rapidly changing may increase the chance of unfavorable law enforcement interpretation of the legality of Company’s operations as they relate to the cultivation of hemp. Further, such variance in state laws that may frequently change increases the Company’s compliance costs and risk of error.

 

While some states explicitly authorize and regulate the production and sale of hemp products or otherwise provide legal protection for authorized individuals to engage in commercial hemp activities, other states maintain outdated drug laws that do not distinguish between marijuana, hemp and/or hemp-derived CBD, resulting in hemp being classified as a controlled substance under state law. In these states, sale of CBD, notwithstanding origin, is either restricted to state medical or adult-use marijuana program licensees or remains otherwise unlawful under state criminal laws. Variance in hemp regulation across jurisdictions is likely to persist. This patchwork of state laws may, for the foreseeable future, materially impact the Company’s business and financial condition, limit the accessibility of certain state markets, cause confusion amongst regulators, and increase legal and compliance costs.

 

There are no express protections in the United States under applicable federal or state law for possessing or processing hemp biomass derived from lawful hemp not exceeding 0.3% THC on a dry weight basis and intended for use in finished product, but that may temporarily exceed 0.3% THC during the interim processing stages. While it is a common occurrence for hemp biomass to have variance in THC content during interim processing stages after cultivation but prior to use in finished products, there is risk that state or federal regulators or law enforcement could take the position that such hemp biomass is a Schedule I controlled substance in violation of the CSA and similar state laws. Further, there is a risk that state regulators and/or law enforcement may interpret provisions of state law prohibiting unlawful marijuana activity to apply to in-process hemp at any facility where we manufacture our hemp smokables products so that such activity is considered unlawful under state law.

 

In the event that the Company’s operations are deemed to violate any laws or if we are deemed to be assisting others to violate a state or federal law, the Company could be subject to enforcement actions and penalties, and any resulting liability could cause the Company to modify or cease its operations.

 

 

Continued development of the industrial hemp and cannabis industries will be dependent upon new legislative authorization of industrial hemp and cannabis at the state level, and further amendment or supplementation of legislation at the federal level. Any number of events or occurrences could slow or halt progress all together in this space. While progress within the industrial hemp and cannabis industries is currently encouraging, growth is not assured. While there appears to be ample public support for favorable legislative action, numerous factors may impact or negatively affect the legislative process(es) within the various states where we have business interests. Any one of these factors could slow or halt use of industrial hemp and cannabis, which could negatively impact our business and financial results.

 

In addition, the general manufacture, labeling and distribution of our hemp smokables products is regulated by various federal, state, and local agencies. These governmental authorities may commence regulatory or legal proceedings, which could restrict the permissible scope of our product claims or the ability to sell products in the future.

 

The shifting compliance environment and the need to build and maintain robust systems to comply with different compliance in multiple jurisdictions increases the possibility that we may violate one or more of the requirements. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to our business, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, any of which could adversely affect the ability to operate our business and its financial results.

 

International expansion efforts would likely significantly increase our operational expenses.

 

We may in the future expand into other geographic areas, which could increase our operational, regulatory, compliance, reputational and foreign exchange rate risks. The failure of our operating infrastructure to support such expansion could result in operational failures and regulatory fines or sanctions. Future international expansion could require us to incur a number of up-front expenses, including those associated with obtaining regulatory approvals, as well as additional ongoing expenses, including those associated with infrastructure, staff, and regulatory compliance. We may not be able to successfully identify suitable acquisition and expansion opportunities or integrate such operations successfully with our existing operations.

 

Our reliance on distributors, retailers and brokers could affect our ability to efficiently and profitably distribute and market our products, maintain our existing markets and expand our business into other geographic markets.

 

Our ability to maintain and expand our existing markets for our products, and to establish markets in new geographic distribution areas, is dependent on our ability to establish and maintain successful relationships with reliable distributors, retailers and brokers strategically positioned to serve those areas. Most of our distributors, retailers and brokers sell and distribute competing products, including tobacco-based or nicotine-based smokables products, and our products may represent a small portion of their businesses. The success of our distribution network will depend on the performance of the distributors, retailers, and brokers in our network. There is a risk they may not adequately perform their functions within the network by, without limitation, failing to distribute to sufficient retailers or positioning our products in localities that may not be receptive to our product. Our ability to incentivize and motivate distributors to manage and sell our products is affected by competition from other hemp smokables companies who have greater resources than we do. To the extent that our distributors, retailers, and brokers are distracted from selling our products or do not employ sufficient efforts in managing and selling our products, including re-stocking the retail shelves with our products, our sales and results of operations could be adversely affected. Furthermore, such third parties’ financial position or market share may deteriorate, which could adversely affect our distribution, marketing, and sales activities.

 

Our ability to maintain and expand our distribution network and attract additional distributors, retailers and brokers will depend on a number of factors, some of which are outside our control. Some of these factors include:

 

	·	the level of demand for our brands and products in a particular distribution area;
	·	our ability to price our products at levels competitive with those of competing products; and
	·	our ability to deliver products in the quantity and at the time ordered by distributors, retailers, and brokers.

 

We may not be able to successfully manage all or any of these factors in any of our current or prospective geographic areas of distribution. Our inability to achieve success with regards to any of these factors in a geographic distribution area will have a material adverse effect on our relationships in that particular geographic area, thus limiting our ability to maintain or expand our market, which will likely adversely affect our revenues and financial results.

 

We incur significant time and expense in attracting and maintaining key distributors, and loss of distributors or retails accounts would harm our business.

 

 

Our marketing and sales strategy depends in large part on the availability and performance of our independent distributors. We currently do not have, nor do we anticipate in the future that we will be able to establish, long-term contractual commitments from some of our distributors. We may not be able to maintain our current distribution relationships or establish and maintain successful relationships with distributors in new geographic distribution areas. Moreover, there is the additional possibility that we may have to incur additional expenditures to attract and maintain key distributors in one or more of our geographic distribution areas in order to profitably exploit our geographic markets.

 

We currently have approximately 350 distributors who service numerous retail accounts. If we were to lose any of our distributors, or if they were to lose national, regional, or larger retail accounts, our financial condition and results of operations could be adversely affected. While we continually seek to expand and upgrade our distributor network, we may not be able to maintain our distributor or retailer base. The loss of any of our distributors, or their significant retail accounts, could have adverse effects on our revenues, liquidity, and financial results, could negatively impact our ability to retain our relationships with our other distributors and our ability to expand our market, and would place increased dependence on our other independent distributors and national accounts.

 

Our ability to source quality ingredients and other products is critical to our business, and any disruption to our supply or supply chain could materially adversely affect our business.

 

We depend on frequent deliveries of raw materials and other products from a variety of local, regional, national, and international suppliers, and some of our suppliers may depend on a variety of other local, regional, national, and international suppliers to fulfill the purchase orders we place with them.  The availability of such ingredients and other products at competitive prices depends on many factors beyond our control, including the number and size of farms, ranches and other suppliers that provide crops and other raw materials that meet our quality and production standards.

 

We rely on our suppliers, and their supply chains, to meet our quality and production standards and specifications and supply ingredients and other products in a timely and safe manner.  We have developed and implemented a series of measures to ensure the safety and quality of our third party-supplied products, including using contract specifications, certificates of identity for some products or ingredients, sample testing by suppliers and sensory based testing.  However, no safety and quality measures can eliminate the possibility that suppliers may provide us with defective or out-of-specification products against which regulators may take action or which may subject us to litigation or require a recall.  Suppliers may provide us with raw materials that is or may be unsafe, raw material that is below our quality standards or raw material that is improperly labeled.  In addition to a negative customer experience, we could face possible seizure or recall of our products and the imposition of civil or criminal sanctions if we incorporate a defective or out-of-specification item into one of our deliveries.

 

Furthermore, there are many factors beyond our control which could cause shortages or interruptions in the supply of our ingredients and other products, including adverse weather, environmental factors, natural disasters, unanticipated demand, labor or distribution problems, changes in law or policy, raw material safety issues by our suppliers and their supply chains, and the financial health of our suppliers and their supply chains.  Production of the agricultural products used in our business may also be materially adversely affected by drought, water scarcity, temperature extremes, scarcity of agricultural labor, changes in government agricultural programs or subsidies, import restrictions, scarcity of suitable agricultural land, crop conditions, crop or animal diseases or crop pests.  Failure to take adequate steps to mitigate the likelihood or potential effect of such events, or to effectively manage such events if they occur, may materially adversely affect our business, financial condition, and operating results, particularly in circumstances where an ingredient or product is sourced from a single supplier or location.

 

In addition, unexpected delays in deliveries from suppliers that ship directly to our fulfillment centers or increases in transportation costs (including through increased fuel costs) could materially adversely affect our business, financial condition, and operating results.  Labor shortages or work stoppages in the transportation industry, long-term disruptions to the national transportation infrastructure, reduction in capacity and industry-specific regulations such as hours-of-service rules that lead to delays or interruptions of deliveries could also materially adversely affect our business, financial condition, and operating results.

 

International instability and tensions could impact trade agreements and lead to supply interference or interruptions.

 

We purchase some goods internationally from China, South Korea, Canada, and more. Our suppliers also have tiered global supply chains for raw materials. Interruption in trade could impact the cost or availability of components for our manufactured products. This could lead to delays, price increases, reduced margin, or lost sales impacting overall profitability.

 

 

Changes in hemp costs and availability could materially adversely affect our business.

 

The future success of our business depends in part on our ability to anticipate and react to changes in supply costs and availability.  We are susceptible to increases in costs as a result of factors beyond our control, such as general economic conditions, market changes, increased competition, general risk of inflation, exchange rate fluctuations, seasonal fluctuations, shortages or interruptions, weather conditions, changes in global climates, global demand, safety concerns, generalized infectious diseases, changes in law or policy, declines in fertile or arable lands, product recalls and government regulations.  In particular, deflation in raw material prices could reduce the attractiveness of our product offerings relative to competing products and thus impede our ability to maintain or increase overall sales, while inflation, particularly periods of rapid inflation, could reduce our operating margins as there may be a lag between the time of the price increase and the time at which we are able to increase the price of our product offerings.  We generally do not have long-term supply contracts or guaranteed purchase commitments with our suppliers, and we do not hedge our commodity risks.  In limited circumstances, we may enter into strategic purchasing commitment contracts with certain suppliers, but many of these contracts are relatively short in duration and may provide only limited protection from price fluctuations, and the use of these arrangements may limit our ability to benefit from favorable price movements.  As a result, we may not be able to anticipate, react to or mitigate against cost fluctuations which could materially adversely affect our business, financial condition, and operating results.

 

Packaging, labeling, and advertising requirements are subject to varied interpretation and selective enforcement.

 

Voluntary statements made by us or by certain third parties, whether on package labels or labeling, on websites, in print, in radio, on social media channels, or on television, can be subject to FDA regulation, FTC regulation, USDA regulation, state and local regulation, or any combination of the foregoing.  These statements may be subject to specific requirements, subjective regulatory evaluation, and legal challenges by plaintiffs.  FDA, FTC, USDA and state- and local-level regulations and guidance can be confusing and subject to conflicting interpretations.  Guidelines, standards, and market practice for, and consumers’ understandings of, certain types of voluntary statements, such as those characterizing the nutritional and other attributes of products, continue to evolve rapidly, and regulators may attempt to impose civil or criminal penalties against us if they disagree with our approach to using voluntary statements.  Furthermore, in recent years the FDA has increased enforcement of its regulations with respect to nutritional, health and other claims related to our products, and plaintiffs have commenced legal actions against a number of companies that market products positioned as “natural” or “healthy,” asserting false, misleading, and deceptive advertising and labeling claims, including claims related to such products being “all natural” or that they lack any genetically modified ingredients.  Should we become subject to similar claims or actions, consumers may avoid purchasing products from us or seek alternatives, even if the basis for the claim is unfounded, and the cost of defending against any such claims could be significant.  The occurrence of any of the foregoing risks could materially adversely affect our business, financial condition, and operating results.

 

Our industry is highly competitive. If any of our competitors or a new entrant into the market with significant resources has products similar to ours, our business could be significantly affected.

 

Competition is intense in the smokeable hemp industry, and we must remain competitive in the areas of new trends in hemp smokeables program efficacy, price, flavors, customer service and brand recognition. Some of our competitors have substantially greater resources. Our business could be adversely affected if someone with significant resources decided to imitate our services or products. Any increased competition from new entrants into our segments’ industry or any increased success by existing competition could result in reductions in our sales or prices, or both, which could have an adverse effect on our business and results of operations.

 

If we do not continue to receive referrals from existing customers, our customer acquisition cost may increase.

 

We rely on word-of-mouth advertising for a portion of our new customers. If our brands suffer or the number of customers acquired through referrals drops due to other circumstances, our costs associated with acquiring new customers and generating revenue will increase, which will, in turn, have an adverse effect on our profitability.

 

Changes in customer preferences could negatively impact our operating results.

 

Our continued success depends, to a large degree, upon the continued popularity of our key brands. Changes in customer tastes and preferences away from our brands, and any failure to provide innovative responses to these changes, may have a materially adverse impact on our business, financial condition, operating results, and cash flows. 

 

Our success is also dependent on our innovation including maintaining a robust array of product options and improving the quality of existing items. If we do not continually expand our product offerings or provide customers with items that are desirable in taste and quality, our business could be adversely impacted.

 

 

The industry in which we operate is subject to governmental regulation that could increase in severity and hurt results of operations.

 

The industry in which we operate is subject to federal, state, and other governmental regulation. Certain federal and state agencies, such as the FTC, regulate and enforce such laws relating to advertising, disclosures to customers, privacy, customer pricing and billing arrangements and other customer protection matters. A determination by a federal or state agency, or a court, that any of our practices do not meet existing or new laws or regulations could result in liability, adverse publicity, and restrictions on our business operations.

 

Other aspects of the industry in which we operate are also subject to government regulation. For example, the manufacturing, labeling and distribution of our products are subject to strict USDA and FDA requirements and hemp manufacturers are subject to rigorous inspection and other requirements of the USDA and FDA, and companies operating in foreign markets must comply with those countries’ requirements for proper labeling, controls, and other matters. Additionally, remedies available in any potential administrative or regulatory actions may include product recalls and requiring us to refund amounts paid by all affected customers or pay other damages, which could be substantial.

 

Laws and regulations directly applicable to communications, operations, or commerce over the Internet such as those governing intellectual property, privacy, libel, and taxation, are becoming more prevalent and some remain unsettled. If we are required to comply with new laws or regulations or new interpretations of existing laws or regulations, or if we are unable to comply with these laws, regulations or interpretations, our business could be adversely affected.

 

Future laws or regulations, including laws or regulations affecting our marketing and advertising practices, relations with customers, employees, service providers, or our services and products, may have an adverse impact on us.

 

Disruptions in our data and information systems could harm our reputation and our ability to run our business.

 

We rely extensively on data and information systems for our supply chain, order processing, fulfillment operations, financial reporting, human resources and various other operations, processes, and transactions.  Furthermore, a significant portion of the communications between, and storage of personal data of, our personnel, customers and suppliers depend on information technology.  Our data and information systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches (including breaches of our transaction processing or other systems that could result in the compromise of confidential customer data), catastrophic events, data breaches and usage errors by our employees or third-party service providers.  Our data and information technology systems may also fail to perform as we anticipate, and we may encounter difficulties in adapting these systems to changing technologies or expanding them to meet the future needs of our business.  If our systems are breached, damaged or cease to function properly, we may have to make significant investments to fix or replace them, suffer interruptions in our operations, incur liability to our customers and others or face costly litigation, and our reputation with our customers may be harmed.  We also rely on third parties for a majority of our data and information systems, including for third party hosting and payment processing.  If these facilities fail, or if they suffer a security breach or interruption or degradation of service, a significant amount of our data could be lost or compromised and our ability to operate our business and deliver our product offerings could be materially impaired.  In addition, various third parties, such as our suppliers and payment processors, also rely heavily on information technology systems, and any failure of these systems could also cause loss of sales, transactional or other data and significant interruptions to our business.  Any material interruption in the data and information technology systems we rely on, including the data or information technology systems of third parties, could materially adversely affect our business, financial condition, and operating results.

 

Our business is subject to data security risks, including security breaches.

 

We, or our third-party vendors on our behalf, collect, process, store and transmit substantial amounts of information, including information about our customers.  We take steps to protect the security and integrity of the information we collect, process, store or transmit, but there is no guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this information despite such efforts.  Security breaches, computer malware, computer hacking attacks and other compromises of information security measures have become more prevalent in the business world and may occur on our systems or those of our vendors in the future.  Large Internet companies and websites have from time to time disclosed sophisticated and targeted attacks on portions of their websites, and an increasing number have reported such attacks resulting in breaches of their information security.  We and our third-party vendors are at risk of suffering from similar attacks and breaches.  Although we take steps to maintain confidential and proprietary information on our information systems, these measures and technology may not adequately prevent security breaches and we rely on our third-party vendors to take appropriate measures to protect the security and integrity of the information on those information systems.  Because techniques used to obtain unauthorized access to or to sabotage information systems change frequently and may not be known until launched against us, we may be unable to anticipate or prevent these attacks.  In addition, a party who is able to illicitly obtain a customer’s identification and password credentials may be able to access the customer’s account and certain account data.

 

 

Any actual or suspected security breach or other compromise of our security measures or those of our third party vendors, whether as a result of hacking efforts, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering or otherwise, could harm our reputation and business, damage our brand and make it harder to retain existing customers or acquire new ones, require us to expend significant capital and other resources to address the breach, and result in a violation of applicable laws, regulations or other legal obligations.  Our insurance policies may not be adequate to reimburse us for direct losses caused by any such security breach or indirect losses due to resulting customer attrition.

 

We rely on email and other messaging services to connect with our existing and potential customers.  Our customers may be targeted by parties using fraudulent spoofing and phishing emails to misappropriate passwords, payment information or other personal information or to introduce viruses through Trojan horse programs or otherwise through our customers’ computers, smartphones, tablets, or other devices.  Despite our efforts to mitigate the effectiveness of such malicious email campaigns through product improvements, spoofing and phishing may damage our brand and increase our costs.  Any of these events or circumstances could materially adversely affect our business, financial condition, and operating results.

 

Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.

 

If we become a public company, we will be required to comply with the rules of the SEC implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting.  We will be required to disclose changes made in our internal controls and procedures on a quarterly basis and to make annual assessments of our internal control over financial reporting pursuant to Section 404.  As an emerging growth company, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the date we are no longer an emerging growth company.  At such time, our independent registered public accounting firm, and management, may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed, or operating.

 

To comply with the requirements of being a public company, we will undertake various actions, and may need to take additional actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff.  Testing and maintaining internal control can divert our management’s attention from other matters that are important to the operation of our business.  Additionally, when evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404.  If we identify any material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting once we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Common Stock could be materially adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

 

Risks Related to an Investment in Our Shares, Our Common Stock, and this Offering

 

There is currently no market for our Common Stock, a trading market for our Common Stock may never develop, and our common stock prices may be volatile and could decline substantially.

 

Our common stock is not listed on a trading exchange Even if we are listed on an exchange, these marketplaces, our stockholders may find it difficult to obtain accurate quotations as to the market value of their shares of our Common Stock and may find few buyers to purchase their stock and few market makers to support its price. As a result of these and other factors, investors may be unable to resell shares of our Common Stock at or above the price for which they purchased them, at or near quoted bid prices, or at all. Further, an inactive market may also impair our ability to raise capital by selling additional equity in the future and may impair our ability to enter into strategic partnerships or acquire companies or products by using shares of our Common Stock as consideration.

 

Moreover, there can be no assurance that any stockholders will sell any or all of their shares of Common Stock and there may initially be a lack of supply of, or demand for, our Common Stock. In the case of a lack of supply for our Common Stock, the trading price of our Common Stock may rise to an unsustainable level, particularly in instances where institutional investors may be discouraged from purchasing our Common Stock because they are unable to purchase a block of shares in the open market due to a potential unwillingness of our stockholders to sell the amount of shares at the price offered by such investors and the greater influence individual investors have in setting the trading price. In the case of a lack of demand for our Common Stock, the trading price of our Common Stock could decline significantly and rapidly at any time.

 

 

We intend to list shares of our Common Stock on a national securities exchange in the future, but we do not now, and may not in the future, meet the initial listing standards of any national securities exchange, which is often a more widely traded and liquid market. Some, but not all, of the factors which may delay or prevent the listing of our Common Stock on a more widely-traded and liquid market include the following: our stockholders’ equity may be insufficient; the market value of our outstanding securities may be too low; our net income from operations may be too low; our Common Stock may not be sufficiently widely held; we may not be able to secure market makers for our Common Stock; and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our Common Stock listed. Should we fail to satisfy the initial listing standards of the national exchanges, or our Common Stock is otherwise rejected for listing, the trading price of our Common Stock could suffer and the trading market for our Common Stock may be less liquid, and our Common Stock price may be subject to increased volatility. 

 

Therefore, an active, liquid, and orderly trading market for our Common Stock may not initially develop or be sustained, which could significantly depress the public price of our Common Stock and/or result in significant volatility, which could affect your ability to sell your Common Stock. Even if an active trading market develops for our Common Stock, the market price of our Common Stock may be highly volatile and subject to wide fluctuations. Our financial performance, government regulatory action, tax laws, interest rates and market conditions in general could have a significant impact on the future market price of our Common Stock.

 

Our CEO has significant voting power and may take actions that may not be in the best interests of our other stockholders.

 

Stockholders have limited ability to exercise control over the Company’s daily business affairs and implement changes in its policies because management beneficially owns a majority of the current shares of Common Stock. As of June 30, 2022, the Company’s Chief Executive Officer, Mr. Victor Krahn beneficially owns approximately 95% of the Common Stock. (See “Security Ownership of Management & Certain Security Holders”). As directors and officers of the Company, the Company’s management team has a fiduciary duty to the Company and must act in good faith in the manner it reasonably believes to be in the best interest of its stockholders. As stockholders, the management team is entitled to vote its shares in its own interest, which may not always be in the best interest of the stockholders.

 

Upon trading, our Common Stock will likely be deemed a “penny stock,” which makes it more difficult for our investors to sell their shares.

 

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a person’s account for transactions in penny stocks, and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination, and that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

 

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our Common Stock if and when such shares are eligible for sale and may cause a decline in the market value of its stock.

 

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities, and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

 

As an issuer of a “penny stock,” the protection provided by the federal securities laws relating to forward-looking statements does not apply to us.

 

Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.

 

If we are able to have a market for our Common Stock, prices may be volatile which could cause the value of an investment in our Common Stock to decline.

 

The market price of our Common Stock may be highly volatile and subject to wide fluctuations. Our financial performance, government regulatory action, tax laws, interest rates and market conditions in general could have a significant impact on the future market price of our Common Stock. The public price of our Common Stock may be subject to wide fluctuations in response to the risk factors described in this Offering Statement and others beyond our control, including:

 

●

the number of shares of our Common Stock publicly owned and available for trading;

 

●

actual or anticipated quarterly variations in our results of operations or those of our competitors;

 

●

our actual or anticipated operating performance and the operating performance of similar companies in our industry;

 

●

our announcements or our competitors’ announcements regarding, significant contracts, acquisitions, or strategic investments;

 

●

general economic conditions and their impact on the hemp and cannabis markets;

 

●

the overall performance of the equity markets;

 

●

threatened or actual litigation;

 

●

changes in laws or regulations relating to our industry;

 

●

any major change in our board of directors or management;

 

●

publication of research reports about us or our industry or changes in recommendations or withdrawal of research coverage by securities analysts; and

 

●

sales or expected sales of shares of our Common Stock by us, and our officers, directors, and significant stockholders.

 

In addition, the stock market in general has experienced extreme price and volume fluctuations that often have been unrelated or disproportionate to the operating performance of those companies. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. Such litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources and harm our business, operating results, and financial condition.

 

 

We do not expect to pay any cash dividends to the holders of the Common Stock in the foreseeable future and the availability and timing of future cash dividends, if any, is uncertain.

 

We expect to use cash flow from future operations to support the growth of our business and do not expect to declare or pay any cash dividends on our Common Stock in the foreseeable future. Our board of directors will determine the amount and timing of stockholder dividends, if any, that we may pay in future periods. In making this determination, our directors will consider all relevant factors, including the amount of cash available for dividends, capital expenditures, covenants, prohibitions, or limitations with respect to dividends, applicable law, general operational requirements, and other variables. We cannot predict the amount or timing of any future dividends you may receive, and if we do commence the payment of dividends, we may be unable to pay, maintain or increase dividends over time. Therefore, you may not be able to realize any return on your investment in our Common Stock for an extended period of time, if at all.

 

Future sales of our Common Stock, or the perception that such sales may occur, may depress our share price, and any additional capital through the sale of equity or convertible securities may dilute your ownership in us.

 

We may in the future issue our previously authorized and unissued securities. We are authorized to issue 490,000,000 shares of Common Stock and 10,000,000 shares of preferred stock (none of which are issued and outstanding) with such designations, preferences, and rights as determined by our board of directors. The potential issuance of such additional shares of Common Stock will result in the dilution of the ownership interests of the holders of our Common Stock and may create downward pressure on the trading price, if any, of our Common Stock.

 

The exercise, conversion, or exchange of convertible securities, including for other securities, will dilute the percentage ownership of our stockholders. The dilutive effect of the exercise or conversion of these securities may adversely affect our ability to obtain additional capital. The holders of these securities may be expected to exercise or convert such securities at a time when we would be able to obtain additional equity capital on terms more favorable than such securities or when our Common Stock is trading at a price higher than the exercise or conversion price of the securities. The exercise or conversion of outstanding securities will have a dilutive effect on the securities held by our stockholders. We have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other stockholders not participating in such exchange.

 

We may issue preferred stock whose terms could adversely affect the voting power or value of our Common Stock.

 

Our certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations, and relative rights, including preferences over our Common Stock with respect to dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our Common Stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events, or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might grant to holders of preferred stock could affect the value of the Common Stock.

 

We will continue to incur significant costs in staying current with reporting requirements. Our management will be required to devote substantial time to compliance initiatives. Additionally, the lack of an internal audit group may result in material misstatements to our financial statements and ability to provide accurate financial information to our stockholders.

 

Our management and other personnel will need to devote a substantial amount of time to compliance initiatives to maintain reporting status. Moreover, these rules and regulations, which are necessary to remain as a public reporting company, will be costly because external third-party consultant(s), attorneys, or other firms may have to assist us in following the applicable rules and regulations for each filing on behalf of the company.

 

 

We currently do not have an internal audit group, and we may eventually need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge to have effective internal controls for financial reporting. Additionally, due to the fact that our officers and directors have limited experience as an officer or director of a reporting company, such lack of experience may impair our ability to maintain effective internal controls over financial reporting and disclosure controls and procedures, which may result in material misstatements to our financial statements and an inability to provide accurate financial information to our stockholders.

 

Moreover, if we are not able to comply with the requirements or regulations as a public reporting company in any regard, we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

 

Many of our officers and directors lack significant experience in, and with, the reporting and disclosure obligations of publicly traded companies in the United States.

 

Many of our officers and directors lack significant experience in, and with the reporting and disclosure obligations of publicly traded companies, and with serving as an officer and or director of a publicly traded company. In the event that our Common Stock is quoted on an exchange, this lack of experience may impair our ability to maintain effective internal controls over financial reporting and disclosure controls and procedures, which may result in material misstatements to our financial statements and an inability to provide accurate financial information to our stockholders. Consequently, our operations, future earnings and ultimate financial success could suffer irreparable harm due to our officers’ and director’s ultimate lack of experience in our industry and with publicly traded companies and their reporting requirements in general.

 

The subscription agreement for the purchase of common stock from the Company contains an exclusive forum provision, which will limit investor’s ability to litigate any issue that arises in connection with the offering anywhere other than the Federal courts in Nevada. 

 

The subscription agreement states that it shall be governed by the local law of the State of Nevada and the United States, and the party’s consent to the exclusive forum of the Federal courts in Nevada for any action deriving from the subscription agreement itself or under the Securities Act of 133 or the Securities Exchange Act of 1934. They will not have the benefit of bringing a lawsuit in a more favorable jurisdiction or under more favorable law than the local law of the State of Nevada for matters not addressed by the Securities Act or the Securities Exchange Act. Moreover, we cannot provide any certainty as to whether a court would enforce such a provision. In addition, you cannot waive compliance with the federal securities laws and the rules and regulations thereunder as Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. The combination of both potentially unfavorable forum and the lack of certainty regarding enforceability poses a risk regarding litigation related to the subscription to this Offering and should be considered by each investor before signing the subscription agreement.

 

Risks Relating to the Internet

 

We are dependent on our telephone, Internet and management information systems for the sales and distribution of our potential products.

 

Our success depends, in part, on our ability to provide prompt, accurate and complete service to our customers on a competitive basis and our ability to purchase and promote products, manage inventory, ship products, manage sales and marketing activities and maintain efficient operations through our telephone and proprietary management information system. A significant disruption in our telephone, Internet or management information systems could harm our relations with our customers and the ability to manage our operations. We can offer no assurance that our back-up systems will be sufficient to prevent an interruption in our operations in the event of disruption in our management information systems, and an extended disruption in the management information systems could adversely affect our business, financial condition, and results of operations.

 

 

Online security breaches could harm our business.

 

The secure transmission of confidential information over the Internet is essential to maintain consumer confidence in our website. Substantial or ongoing security breaches of our system or other Internet-based systems could significantly harm our business. Any penetration of our network security or other misappropriation of our users’ personal information could subject us to liability. We may be liable for claims based on unauthorized purchases with credit card information, fraud, or misuse of personal information, such as for unauthorized marketing purposes. These claims could result in litigation and financial liability. We rely on licensed encryption and authentication technology to effect secure transmission of confidential information, including credit card numbers. It is possible that advances in computer capabilities, new discoveries or other developments could result in a compromise or breach of the technology we use to protect customer transaction data. We may incur substantial expense to protect against and remedy security breaches and their consequences. A party that can circumvent our security systems could steal proprietary information or cause interruptions in our operations. We cannot guarantee that our security measures will prevent security breaches. Any breach resulting in misappropriation of confidential information would have a material adverse effect on our business, financial condition, and results of operations.

 

Government regulation and legal uncertainties relating to the Internet and online commerce could negatively impact our business operations.

 

Online commerce is rapidly changing, and federal and state regulation relating to the Internet and online commerce is evolving. The U.S. Congress has enacted Internet laws regarding online privacy, copyrights, and taxation. Due to the increasing popularity of the Internet, it is possible that additional laws and regulations may be enacted with respect to the Internet, covering issues such as user privacy, pricing, taxation, content, copyrights, distribution, antitrust and quality of products and services. The adoption or modification of laws or regulations applicable to the Internet could harm our business operations.

 

Changing technology could adversely affect the operation of our website.

 

The Internet, online commerce and online advertising markets are characterized by rapidly changing technologies, evolving industry standards, frequent new product, and service introductions, and changing customer preferences. Our future success will depend on our ability to adapt to rapidly changing technologies and address its customers’ changing preferences. However, we may experience difficulties that delay or prevent us from being able to do so.

 

Risks Related to our Indebtedness

 

We have debt which could adversely affect our ability to raise additional capital to fund operations and prevent us from meeting our obligations under outstanding indebtedness.

 

We currently owe approximately $9,750,000 in a convertible promissory note derived from the initial purchase of the MVRK brand secured by the assets of the Company. If we are found in default of the terms of the promissory note and cannot negotiate new terms, we may be subject to foreclose of some or all of our assets, rendering our business incapacitated.

 

 

Statements Regarding Forward-looking Statements

______

 

This Offering Statement contains various “forward-looking statements.” You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “would,” “could,” “should,” “seeks,” “approximately,” “intends,” “plans,” “projects,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions. These statements may be impacted by a number of risks and uncertainties.

 

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, and results of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks before you make an investment decision with respect to Shares. For a further discussion of these and other factors that could impact our future results, performance, or transactions, see the section entitled “Risk Factors.”

 

 

Indemnification of Directors and Officers

 

Our articles of incorporation provide that no director or officer of the Company shall be personally liable to the Company or any of its stockholders for damages for breach of fiduciary duty as a director or officer involving any act or omission of any such director or officer; provided, however, that the foregoing provision does not eliminate or limit the liability of a director or officer (i) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (ii) the payment of dividends in violation of the Nevada General Corporation Law.

 

Our bylaws provide that we shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that he is or was a director or officer of the Company, or, while a director or officer of the Company, is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, association or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with which action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

 

We do not currently maintain standard policies of insurance under which coverage is provided (a) to our directors, officers, employees and other agents against loss arising from claims made by reason of breach of duty or other wrongful act, and (b) to us with respect to payments which may be made by us to such officers and directors pursuant to the above indemnification provision or otherwise as a matter of law, although we may do so in the future.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the SEC such indemnification is against public policy and is, therefore, unenforceable.

 

*   *   *

 

 

Use of Proceeds

 

If we raise the maximum of $25,000,000 in the Offering, our net proceeds (after our estimated offering expenses of $2,984,500) will be $$22,015,500.

 

We will use these net proceeds for the following:

 

			100%				75%				50%				25%
Gross Offering Proceeds		$	25,000,000			$	18,750,000			$	12,500,000			$	6,250,000
Offering Expenses (1)		$	2,984,500			$	2,728,125			$	2,106,250			$	1,296,875
Net Proceeds		$	22,015,500			$	16,021,875			$	10,393,750			$	4,953,125
Principal Uses of Proceeds
Marketing and Advertising		$	15,410,850			$	11,215,313			$	7,275,625			$	3,467,188
Capital Expenditures – Facilities Expansion		$	440,310			$	320,438			$	207,875			$	99,063
Repayment of Notes		$	2,862,015			$	2,082,844			$	1,351,188			$	643,906
General and Administrative Costs		$	1,100,775			$	801,094			$	519,688			$	247,656
Working Capital		$	2,201,550			$	1,602,188			$	1,039,375			$	495,313
Total Principal Uses of Net Proceeds		$	22,015,500			$	16,021,875			$	10,393,750			$	4,953,125

 

(1)	Expenses are generally calculated as described in the table below.

 

			100%				75%				50%				25%
Offering Expenses
Legal & Compliance/Accounting		$	300,000			$	300,000			$	300,000			$	300,000
Broker Dealer Commission		$	250,000			$	187,500			$	125,000			$	62,500
Offering Marketing		$	1,290,000			$	1,352,500			$	1,040,000			$	540,000
Offering Administration		$	1,094,500			$	838,125			$	591,250			$	344,375
Other		$	50,000			$	50,000			$	50,000			$	50,000
Net Offering Expenses		$	2,984,500			$	2,728,125			$	2,106,250			$	1,296,875

 

The precise amounts that we will devote to each of the foregoing items, and the timing of expenditures, will vary depending on numerous factors.

 

As indicated in the table above, if we raise only 75%, or 50%, or 25% of the maximum amount of this Offering, we would expect to use the resulting net proceeds for the same purposes as we would use the net proceeds from a sale of 100% of the maximum amount of this Offering, and in approximately the same proportions, until such time as such use of proceeds would leave us without working capital reserve.

 

The expected use of net proceeds from this Offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve and change. The amounts and timing of our actual expenditures, specifically with respect to working capital, may vary significantly depending on numerous factors. The precise amounts that we will devote to each of the foregoing items, and the timing of expenditures, will vary depending on numerous factors. As a result, our management will retain broad discretion over the allocation of the net proceeds from this Offering.

 

In the event we do raise the maximum amount of this Offering, we may seek additional financing from other sources in order to support the intended use of proceeds indicated above. If we secure additional equity funding, investors in this offering would be diluted. In all events, there can be no assurance that additional financing would be available to us when wanted or needed and, if available, on terms acceptable to us.

 

*   *   *

 

 

Dilution

 

If you purchase Shares in this Offering, your ownership interest in our Common Stock will be diluted immediately, to the extent of the difference between the price to the public charged for each share in this offering and the net tangible book value per share of our Common Stock after this offering.

 

Our historical net tangible book value as of June 30, 2022 was $(10,222,987) or $(-0.3408) per then-outstanding share of our Common Stock. Historical net tangible book value per share equals the amount of our total tangible assets less total liabilities, divided by the total number of shares of our Common Stock outstanding, all as of the date specified.

 

The following table illustrates the per share dilution to new investors discussed above, assuming the sale of, respectively, 25%, 50%, 75% and 100% of the shares offered for sale in this offering (after deducting estimated offering expenses of $50,000) at a price of $2.50 per Share:

 

			25%				50.0%				75%				100%
Net Value After the Offering		$	(6,957,486.80	)		$	(451,111.80	)		$	6,420,763.20			$	13,480,138.20
# Total Shares			31,300,000				33,800,000				36,300,000				38,800,000
Net Book Value Per Share		$	-0.2223			$	-0.0133			$	0.1769			$	0.3474
Increase in NBV/Share		$	0.1327			$	0.3416			$	0.5318			$	0.7024
Dilution to new shareholders		$	2.7223			$	2.5133			$	2.3231			$	2.1526
Percentage Dilution to New			108.89	%			100.53	%			92.92	%			86.10	%

 

*   *   *

 

 

Plan of Distribution

 

The Company’s Units are being offered on a “best-efforts” basis through broker-dealer(s) who are registered with the Financial Industry Regulatory Authority (“FINRA”). As of the date of this Offering Circular, a selling agreement Dalmore Group, LLC (“Dalmore”) for offering in those states selected by the Company and approved by the respective state. We are selling our shares through a Tier 2offering pursuant to Regulation A (Regulation A+) under the Securities Act of 1933, as amended (the “Securities Act”). The Company has engaged Dalmore Group, LLC, a New York limited liability company and FINRA/SIPC registered broker-dealer (“Dalmore”), to provide broker-dealer services in connection with this Offering, but not for underwriting or private placement agent services. This offering is being conducted on a best-efforts, for up to 10,000,000 Shares at a fixed price of $2.50 per share; The price of the offering shall be fixed for the duration of the offering. There is no minimum investment required from any individual investor. The Shares are intended to be sold directly through the efforts of our officers and directors. The Shares are being offered for a period not to exceed 360 days. The offering will terminate on the earlier of: (i) the date when the sale of all shares is completed, or (ii) 360 days from the effective date of this document (unless extended by the Board of Directors for an additional 90 days). For more information, see the section titled “Use of Proceeds” herein.

 

Dalmore will be paid 1% of the aggregate Offering Price of Company Shares sold in this Offering. In addition, the Company shall pay a one-time fee of $20,000.00 for consulting services once FINRA issues a No Objection Letter. The Company has already paid a one-time setup fee of $5,000.00 for out-of-pocket expense.

 

Procedures for Subscribing

 

When you decide to subscribe for Offered Shares in this Offering, you should:

 

Contact us via phone or email.

 

	1.	Electronically receive, review, execute and deliver to us a subscription agreement; and
	2.	Deliver funds directly by check, wire, or electronic funds transfer via ACH to the specified account maintained by us.

 

Any potential investor will have ample time to review the subscription agreement, along with their counsel, prior to making any final investment decision. We shall only deliver such subscription agreement upon request after a potential investor has had ample opportunity to review this Offering Circular.

 

Right to Reject Subscriptions. After we receive your complete, executed subscription agreement and the funds required under the subscription agreement have been transferred to the escrow account, we have the right to review and accept or reject your subscription in whole or in part, for any reason or for no reason. We will return all monies from rejected subscriptions immediately to you, without interest or deduction.

 

Acceptance of Subscriptions. Upon our acceptance of a subscription agreement, we will countersign the subscription agreement and issue the shares subscribed at closing. Once you submit the subscription agreement and it is accepted, you may not revoke or change your subscription or request your subscription funds. All accepted subscription agreements are irrevocable.

 

Expenses

 

The Company will pay all expenses incidental to the registration of the Shares, which we expect to be $ $2,984,500, assuming we raise the maximum amount of this Offering.

 

Other Selling Restrictions

 

Other than in the United States, no action has been taken by us that would permit a public offering of our Shares in any jurisdiction where action for that purpose is required. Our Shares may not be offered or sold, directly or indirectly, nor may this Offering Circular or any other offering material or advertisements in connection with the offer and sale of shares of our Shares be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this Offering Circular comes are advised to inform themselves about and to observe any restrictions relating to this offering and the distribution of this Offering Circular. This Offering Circular does not constitute an offer to sell or a solicitation of an offer to buy our Shares in any jurisdiction in which such an offer or solicitation would be unlawful.

 

 

Investment Limitations

 

Generally, no sale may be made to you in this Offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth (please see above on how to calculate your net worth). Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

 

Because this is a Tier 2, Regulation A Offering, most investors must comply with the 10% limitation on investment in the Offering. The only investor in this Offering exempt from this limitation is an “accredited investor” as defined under Rule 501 of Regulation D under the Securities Act (an “Accredited Investor”). If you meet one of the following tests you should qualify as an Accredited Investor:

 

(i)

You are a natural person who has had individual income in excess of $200,000 in each of the two most recent years, or joint income with your spouse in excess of $300,000 in each of these years, and have a reasonable expectation of reaching the same income level in the current year;

 

(ii)

You are a natural person and your individual net worth, or joint net worth with your spouse, exceeds $1,000,000 at the time you purchase Offered Shares (please see above on how to calculate your net worth);

 

(iii)

You are an executive officer or general partner of the issuer or a manager or executive officer of the general partner of the issuer;

 

(iv)

You are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or the Code, a corporation, a Massachusetts or similar business trust or a partnership, not formed for the specific purpose of acquiring the Offered Shares, with total assets in excess of $5,000,000;

 

(v)

You are a bank or a savings and loan association or other institution as defined in the Securities Act, a broker or dealer registered pursuant to Section 15 of the Exchange Act, an insurance company as defined by the Securities Act, an investment company registered under the Investment Company Act of 1940 (the “Investment Company Act”), or a business development company as defined in that act, any Small Business Investment Company licensed by the Small Business Investment Act of 1958 or a private business development company as defined in the Investment Advisers Act of 1940;

 

(vi)

You are an entity (including an Individual Retirement Account trust) in which each equity owner is an accredited investor;

 

(vii)

You are a trust with total assets in excess of $5,000,000, your purchase of Offered Shares is directed by a person who either alone or with his purchaser representative(s) (as defined in Regulation D promulgated under the Securities Act) has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment, and you were not formed for the specific purpose of investing in the Offered Shares; or

 

(viii)

You are a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has assets in excess of $5,000,000.

 

Transfer Agent and Registrar 

 

The Company’s transfer agent, Vstock Transfer. will serve as transfer agent to maintain stockholder information on a book-entry basis. We will not issue shares in physical or paper form. Instead, our shares will be recorded and maintained on our stockholder register.

 

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Business

 

Business Overview

 

Maverick Lifestyle, Inc. was formed on March 25, 2022 (the “Company”) in the State of Nevada as holding company for MVRK Farms LLC (“MVRK Farms”) and MVRK Tobacco Manufacturing LLC (“MVRK Tobacco”), both wholly owned Delaware subsidiaries. On March 25, 2022, the Company exchanged 14,400,000 shares of common stock to the shareholders of MVRK Farms and 13,800,000 shares of common stock to the shareholders of MVRK Tobacco. On March 25.2022 Maverick Lifestyle Inc. was incorporated in the state of Nevada. As a result, the consolidated financials represent the historic financials of the subsidiaries. The Company is authorized to issue up to 490,000,000 shares of Common Stock, of which currently 30,000,000 shares are issued and outstanding, and 10,000,000 shares of preferred shares to be designated at the discretion of the Board of Directors, of which 0 shares are currently issued and outstanding.

 

Our business is primarily engaged in the manufacturing, branding, marketing, distribution and sales of products infused with hemp-derived cannabinoids (including but not limited to delta-8-THC, delta-9-THC, delta-10-THC, HHC, CBD, CBG and CBN) such as pre rolled hemp joints and hemp cigarettes, hemp cigarillos, blunts, disposable live resin vapes, gummies and unique edibles (a “Hemp Canna-Infused Products Company”).

 

Our business is also engaged in the development of high speed rolling manufacturing technology specifically designed for the hemp and cannabis industry, such as converting high speed tobacco rolling machines to roll stickier products such as D8, HHC infused hemp, packing machines to automatically package rolled products into consumer packaging ready for the shelf, factory scaled machines to process raw hemp and the processes and equipment to add terpenes and flavors to hemp, to infuse hemp with cannabinoids and to formulate into ready to roll base material.

 

Management of the Company is open-minded to the concept of also acquiring operating businesses and/or assets involving products containing marijuana, distilled spirits, beer, wine, online marketing, and real estate.

 

Maverick Farms provides choice, affordability, and an unrivaled legal smoking experience for both existing tobacco marijuana consumers and new hemp smokers as the leading preferred adult-use alternative to unhealthy tobacco products and expensive, inaccessible cannabis consumption. We were founded in 2019 upon the premise to give smokers a zero-conviction alternative to tobacco and nicotine addiction via a “better for you product” with our BLAZ brand CBD hemp cigarette which continues to be a disruptive force to big tobaccos legacy smoking products. Growing quickly across all states and selling millions of sticks of BLAZ to thousands of loyal customers we saw the opportunity and were not content to stop there and have since quickly evolved to encompass factory operations and capitalize on a new opportunity within the hemp product landscape, namely alternative cannabinoids such as d8 and HHC which derived from hemp replicate the taste, feel and attributes of cannabis. This is the product category hemp has been eager for and Maverick Lifestyle will come to dominate.

 

Products

 

We manufacture, distribute and market premium grade smokable filtered and unfiltered, CBD, Delta-8, HHC infused hemp pre-rolls, blunts, hemp vapes and gummies containing less than 0.3% THC levels in accordance with the Farm Bill passed in 2018. We offer these products in various formats including, 20 pack and 10 pack pre-rolled cigarettes/ joints, 2 pack foil wrapped cigarillos/ blunts, as well as a single stick offered in a plastic tube that provides customers an opportunity to try the product at a lower price point and sampling out for marketing purposes. We have a number of display units and promotional items retailers can use to display and retail our products.

 

 

Maverick Lifestyle Brands – Best in Class!

 

At Maverick Lifestyle we plan to continue to evolve the flavor profiles with natural terpenes and adjust the potency in all our new releases this year within our DVNT brand. DVNT has been developed to produce a product that appeals to cannabis consumers that want a similar experience to cannabis and its flavor profile, but mostly they want to get lit. DVNT checks all these boxes, a cool brand, high potency at an affordable price, available everywhere, a true winner!

 

On the purely CBD hemp side our STAR USA brand has the profile of a traditional tobacco cigarette in flavor and odor and thus mimics the tastes and smells similar to tobacco when combusted. Our one-of-a-kind hemp treatment process eliminates the cannabis odor profile of hemp and similarly, to fine-cut tobacco, our base material is derived entirely from plant matter, yet it has no tobacco content whatsoever. This in house process forms a significant part of the value of STAR USA brand and is a closely guarded trade secret.

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution

 

Maverick Lifestyle has over a dozen active sales reps and ambassadors covering territory across the United States who have sampled out, placed, and sold our products direct to smoke shops, c stores, gas stations, CBD stores and distributors in key metro areas and target markets. Today we have a footprint of at least 20,000 retail storefronts and 200 distributors nationwide and growing. Hemp smokeables are part of a new and exciting category that requires education and marketing support at the ground level to succeed. Our retailers and distributors love the low tax high margin direct relationship we have with them as compared to typical low margin unhealthy tobacco products.

 

We have established a network of retailers across more than 30 states that purchase direct from us regularly and through our established small to mid-sized key distributors. Through a combination of direct to retailer, direct to consumer online, in-store, and via social media campaigns targeted towards smokers aged 21 or older, the Company has cultivated considerable interest, made real sales across all of our brands across the United States and internationally.

 

Since our inception in 2019, through building our loyal following of hemp enthusiasts we have used influencer campaigns and directed traffic to our websites, for e-commerce sales of all our brands to consumers throughout the United States. The site uses graphics, blog posts, news stories and testimonials to inform the consumer of the benefits of using hemp instead of tobacco and nicotine and cannabis. Customers are then able to purchase packs and cartons directly from the website and have them shipped to them throughout the U.S. as allowed by federal laws.

 

The Market and Our Strategy

 

Maverick Lifestyle intends to make our DVNT brand of D8, HHC, CBG (hemp-based THC) smokeables a household name akin to the Cookies of the weed world. Leveraging social media, word of mouth, event marketing, dedicated sales force, and superior cost structure we deliver high quality high potency products consumers are coming back for on a daily basis. Maverick intends to take advantage of the changing landscape regarding low nicotine regulation and flavor bans coming into effect with the current administration FDA guidelines and market our nicotine free STAR USA hemp cigarettes aggressively.

 

As a background we note that the current market for combustible (smokable) products worldwide is valued at $932 billion. On top of this the USA legal cannabis market is valued at $30 billion annually and growing at 30% a year. The combustible market includes traditional cigarettes, cigars, electronic vapes, and combustible hemp products, but has historically been dominated by traditional cigarettes, which account for 75% of the worldwide tobacco sales. The CDC states that 34 million American adults currently smoke cigarettes and over 70% have some desire to quit. On the Cannabis front, only reporting in legal states the market for pre-rolled products increased 38% in 2021and continues growing fast as consumers are flocking to a convenient way to enjoy flower versus grinding and rolling their own. With the advent of Hemp based THC cannabinoids such as D8, D10, HHC the hemp smokeable market is set to eclipse the cannabis market as consumers on the heavily populated east and south coast of America where Cannabis is not yet legal recreationally now have access to a legal, convenient, affordable way to get high. Indeed, this experience, one that customers desire is by far the fastest growing and most lucrative segments in the nascent hemp and CBD industry, with expectations that the market will experience fivefold growth in the next five years.

 

While the alternative cannabinoid market has many products, the combustible market has a smaller number of competitors of which Maverick is one. Grandview Research has shown that smoking hemp is becoming more acceptable in mainstream society for those who smoke and for its many health benefits, and even a chosen alternative to cannabis consumption with D8 and HHC compounds. In fact, Hemp Industry Daily reports tobacco smokers are 191% more likely to use hemp pre-rolls than the general population. Approximately 29% of cigarette smokers have indicated interested in smokable hemp. Our strategy is to capitalize on the current growing demand for smokable hemp and cannabis like products by offering nicotine-free, tobacco-free and cannabis free legal organically grown hemp that is better for you than tobacco and a richer consumer experience than cannabis. Our ability to speak to the consumer trend of high potency, smooth smoking affordable formats is second to none. We will continue to command premium pricing for all of our distributed and proprietary branded products. In addition, our large manufacturing capacity draw brands into our factory for white label business and enhanced revenue streams.

 

 After engaging directly in the sales landscape for the past 2 plus years, we know that our prices reflect the best value to customers and margins to B2C partners in terms of price to quality, price to potency and price to scale to a national market. Additionally, we believe our manufacturing prowess and rapid execution abilities, enable us to scale quickly, adapt rapidly to meet evolving preferences and demand in any part of the United States and internationally.

 

 

Our Competitive Strengths

 

We believe the following competitive strengths contribute to Company’s success and differentiate us from our competitors:

 

Low Cost Scaled Manufacturing. Proprietary machinery technology. Marketing and Sales experience. Brand recognition. Revenue generating hemp smokeable company. Social media marketing. Experienced proven track record industry team veterans. Brand and customer awareness. Established proven supply chain. Nimble and dynamic outlook.

 

When compared to other producers of hemp cigarettes, our product mix is unique in that the products offered by these other companies are outsourced and are often out of date before hitting the shelves, they are usually more costly and less potent and furthermore they do not closely resemble cannabis products in their form factor and potency or tobacco cigarettes in their taste and smell, or other valuable experiential attributes. Likewise, when compared to producers of cannabis and or tobacco smokeable joints, cigarettes, blunts or cigarillos, our product is unique in that it is designed to closely replicate the user experience of these products affordably, though it does so with no cannabis or tobacco or nicotine content! Thus, these “direct” competitors can mainly be categorized as marketing companies versus Mavericks true end to end farm to factory to shelf to feeling juggernaut.

 

Proposed expansion of sales and marketing programs

 

The US hemp industry gained massive growth with the passing of the 2018 farm bill. Hemp derived THC products have blown up with massive country wide adoption amongst consumers. The US smoke shop and convenience industry has experienced unprecedented growth in sales from hemp derived cannabinoid products due the existing infrastructure of tobacco supply chains. Many companies have also leveraged massive ecommerce platforms to drive large online businesses with high margin sales.

 

Maverick Lifestyle is poised to rapidly scale sales and marketing budgets to increase consumer awareness and adoption of our products. We are ready to implement nationwide digital and retail marketing programs that put our products into consumers hands. MVRK will run digital campaigns along with massive event samplings. Game changing celebrity endorsements will also be pursued. This expansion will require the hiring of a chief marketing officer, digital and retail teams, agency spend, and exploration of celebrity endorsement. Programs are coordinated and scaled in regional teams to maintain effective insights and response to varying market conditions.

 

MVRK Tobacco

 

MVRK Tobacco is a wholly owned subsidiary of Maverick Lifestyle Inc. and is the equipment holding company. Through MVRK Tobacco, Maverick Lifestyle holds all the manufacturing equipment necessary to produce its proprietary hemp rolled products and to further innovate the tobacco machinery to scale complex high speed manufacturing problems to the benefit of the highest quality lowest cost production for Maverick Lifestyle.

 

Government Regulation

 

Trade Regulations

 

Our suppliers generally source or manufacture finished goods in parts of the world that may be affected by the imposition of duties, tariffs, or other import regulations by the United States. We believe that our redundant network of suppliers provides sufficient capacity to mitigate any dependency risks on a single supplier.

 

We buy necessary components or ingredients for our products from suppliers or factories both domestically and internationally as needed. We do not depend on any single supplier. However, if we are unable to continue to obtain our finished products from international locations or if our suppliers are unable to source raw materials, it could significantly disrupt our business. Further, we are affected by economic, political, and other conditions in the United States and internationally, including those resulting in the imposition or increase of import duties, tariffs and other import regulations and widespread health emergencies, which could have a material adverse effect on our business.

 

 

Laws and Regulations Relating to Our Products

 

The production, distribution and sale in the United States of many of our products are subject to the Federal Food, Drug, and Cosmetic Act, the Federal Trade Commission Act, the Lanham Act, state consumer protection laws, competition laws, federal, state and local workplace health and safety laws, various federal, state and local environmental protection laws, various other federal, state and local statutes applicable to the production, transportation, sale, safety, advertising, labeling and ingredients of such products, and rules and regulations adopted pursuant to these laws. Outside the United States, the distribution and sale of our many products and related operations are also subject to numerous similar and other statutes and regulations.

 

On December 20, 2018, the Agricultural Improvement Act of 2018, which is also known as the “2018 Farm Bill,” was enacted and, among other things, further legalized hemp under U.S. federal law, but with compliance still being required with all applicable state hemp laws. The 2018 Farm Bill includes certain benefits for the hemp industry in the United States, including: (i) the extension of the protections for hemp research and researchers and the conditions in which hemp research can be done, (ii) the protection of hemp farmers and hemp production under federal crop insurance programs, (iii) the permitting of the cultivation, interstate transportation and sale of hemp and hemp products in the U.S. in compliance with all other applicable federal and state laws, and (iv) the removal of hemp and hemp derived products from Schedule 1 of the Controlled Substances Act (“CSA”).

 

As of January 1, 2021, federal law and the laws of 47 states in the United States and the District of Columbia have legalized hemp, 36 states in the United States, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands have enacted laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis/marijuana and consumer use of cannabis/marijuana in connection with medical treatment, and 15 states in the United States, the District of Columbia, Guam, and the Northern Mariana Islands have legalized cannabis/marijuana for adult recreational use. Other states are considering similar legislation. Conversely, under the federal CSA, the policies and regulations of the federal government and its agencies are that cannabis/marijuana has no medical benefit, and a range of activities are prohibited, including cultivation, possession, personal use, and interstate distribution of cannabis/marijuana.

 

Our activities in the United States only involve legal hemp in compliance with the CSA. The hemp and the marijuana plants are both part of the same cannabis genus, except that hemp does not have more than 0.3% dry weight content of delta-9-tetrahydrocannabinol (“THC”). While 2018 Farm Bill legalized hemp and cannabinoids extracted from hemp in the United States, such extracts remain subject to state laws and regulation by other U.S. federal agencies such as the FDA, U.S. Drug Enforcement Administration (“DEA”), and the U.S. Department of Agriculture (“USDA”). The same plant, with a higher THC content is marijuana, which is legal under certain state laws, but which is currently not legal under U.S. federal law. The similarities between these plants can cause confusion.

 

A California law known as Proposition 65 requires a specific warning to appear on any product containing a component listed by the state as having been found to cause cancer or birth defects. The state maintains lists of these substances and periodically adds other substances to these lists. Proposition 65 exposes all food and beverage producers to the possibility of having to provide warnings on their products in California because it does not provide for any generally applicable quantitative threshold below which the presence of a listed substance is exempt from the warning requirement. Consequently, the detection of even a trace amount of a listed substance can subject an affected product to the requirement of a warning label. However, Proposition 65 does not require a warning if the manufacturer of a product can demonstrate that the use of that product exposes consumers to a daily quantity of a listed substance that is:

 

	●	below a “safe harbor” threshold that may be established;
	●	naturally occurring;
	●	the result of necessary cooking; or
	●	subject to another applicable exemption.

 

In January 2019, New York State’s governor announced the “Consumer Right to Know Act,” a proposed law that would impose similar and potentially more stringent labeling requirements than California Proposition 65. The law has not yet been adopted, and to our knowledge California Proposition 65 remains the most onerous state-level chemical exposure labeling statutory scheme. However, due in part to the large size of California’s market, promotional products sold or distributed anywhere in the United States may be subject to California Proposition 65.

 

We are unable to predict whether a component found in a product that we assisted a client in producing might be added to the California list in the future. Furthermore, we are also unable to predict when or whether the increasing sensitivity of detection methodology may become applicable under this law and related regulations as they currently exist, or as they may be amended.

 

We are subject to various federal, state, and local laws and regulations, including but not limited to, laws and regulations relating to labor and employment, U.S. customs and consumer product safety, including the Consumer Product Safety Improvement Act, or the “CPSIA.” The CPSIA created more stringent safety requirements related to lead and phthalates content in children’s products. The CPSIA regulates the future manufacture of these items and existing inventories and may cause us to incur losses if we offer for sale or sell any non-compliant items. Failure to comply with the various regulations applicable to us may result in damage to our reputation, civil and criminal liability, fines and penalties and increased cost of regulatory compliance. These current and any future laws and regulations could harm our business, results of operations and financial condition.

 

 

Legal requirements apply in various jurisdictions in the United States and overseas requiring deposits or certain taxes or fees be charged for the sale, marketing, and use of certain non-refillable beverage containers. The precise requirements imposed by these measures vary. Other types of beverage container-related deposit, recycling, tax and/or product stewardship statutes and regulations also apply in various jurisdictions in the United States and overseas. We anticipate additional, similar legal requirements may be proposed or enacted in the future at local, state, and federal levels, both in the United States and elsewhere.

 

New legislation or regulation, the application of laws from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and e-commerce generally could result in significant additional taxes on our business. Further, we could be subject to fines or other payments for any past failures to comply with these requirements. The continued growth and demand for e-commerce is likely to result in more laws and regulations that impose additional compliance burdens on e-commerce companies.

 

Laws and Regulations Relating to Data Privacy

 

In the ordinary course of our business, we might collect and store in our internal and external data centers, cloud services and networks sensitive data, including our proprietary business information and that of our customers, suppliers, and business collaborators, as well as personal information of our customers and employees. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. The number and sophistication of attempted attacks and intrusions that companies have experienced from third parties has increased over the past few years. Despite our security measures, it is impossible for us to eliminate this risk.

 

A number of U.S. states have enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal information, such as social security numbers, financial information, and other sensitive personal information. For example, all 50 states and several U.S. territories now have data breach laws that require timely notification to affected individuals, and at times regulators, credit reporting agencies and other bodies, if a company has experienced the unauthorized access or acquisition of certain personal information. Other state laws, particularly the California Consumer Privacy Act, as amended (“CCPA”), among other things, contain disclosure obligations for businesses that collect personal information about residents in their state and affords those individuals new rights relating to their personal information that may affect our ability to collect and/or use personal information. The Virginia Consumer Data Protection Act (“CDPA”) also establishes rights for Virginia consumers to control how companies use individuals’ personal data. The CDPA dictates how companies must protect personal data in their possession and respond to consumers exercising their rights, as prescribed by the law, regarding such personal data. The CDPA will go into effect on January 1, 2023. Meanwhile, several other states and the federal government have considered or are considering privacy laws like the CCPA. We will continue to monitor and assess the impact of these laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business.

 

Outside of the U.S., data protection laws, including the EU General Data Protection Regulation (the “GDPR”), also might apply to some of our operations or business collaborators. Legal requirements in these countries relating to the collection, storage, processing, and transfer of personal data/information continue to evolve. The GDPR imposes, among other things, data protection requirements that include strict obligations and restrictions on the ability to collect, analyze and transfer EU personal data/information, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances, and possible substantial fines for any violations (including possible fines for certain violations of up to the greater of 20 million Euros or 4% of total company revenue). Other governmental authorities around the world have enacted or are considering similar types of legislative and regulatory proposals concerning data protection.

 

The interpretation and enforcement of the laws and regulations described above are uncertain and subject to change and may require substantial costs to monitor and implement and maintain adequate compliance programs. Failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include substantial civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.

 

Environmental Regulations

 

We use certain plastic, glass, fabric, metal, and other products in our business which may be harmful if released into the environment. In view of the nature of our business, compliance with federal, state, and local laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has had no material effect upon our operations or earnings, and we do not expect it to have a material impact in the foreseeable future.

 

 

Tax Laws and Regulations

 

Changes in tax laws or regulations in the jurisdictions in which we do business, including the United States, or changes in how the tax laws are interpreted, could further impact our effective tax rate, further restrict our ability to repatriate undistributed offshore earnings, or impose new restrictions, costs or prohibitions on our current practices and reduce our net income and adversely affect our cash flows.

 

We are also subject to tax audits in the United States and other jurisdictions and our tax positions may be challenged by tax authorities. Although we believe that our current tax provisions are reasonable and appropriate, there can be no assurance that these items will be settled for the amounts accrued, that additional tax exposures will not be identified in the future or that additional tax reserves will not be necessary for any such exposures. Any increase in the amount of taxation incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, results of operations and financial condition.

 

Other Regulations

 

We are subject to international, federal, national, regional, state, local and other laws and regulations affecting our business, including those promulgated under the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the rules and regulations of the Consumer Products Safety Commission, the Food, Drug, and Cosmetic Act, the Foreign Corrupt Practices Act of 1977 (FCPA), various securities laws and regulations including but not limited to the Securities Exchange Act of 1934, the Securities Exchange Act of 1933, and the Nasdaq Stock Market LLC Rules, various labor, workplace and related laws, and environmental laws and regulations. Failure to comply with such laws and regulations may expose us to potential liability and have an adverse effect on our results of operations. to hire and train additional internal and external resources to ensure we remain in substantial compliance with our governmental obligations. We monitor changes in these laws and believe that we are in material compliance with applicable laws.

 

Trademarks

 

The following table describes the current trademark applications by MVRK Farms LLC

 

Trademark		Jurisdiction		Status		Application #
TM: DVNT (word)		United States of America		Pending		97/161,716
TM: DVNT (design)		United States of America		Pending		97/161,648
TM: STAR USA (design)		United States of America		Pending		97/162,123
TM: STAR USA (word)		United States of America		Pending		97/162,205

 

Employees

 

Except our executive staff, the Company currently has no employees.

 

Properties

 

The use of 80,000 sq/ft manufacturing facility located in Stantonsburg, North Carolina is subleased from North Carolina Tobacco Manufacturing LLC (“NCTM”) which is an entity owned by Victor Krahn, our CEO. The landlord is MVRK Holdings LLC which is also owned by Victor Krahn. The sublease agreement has payment terms of $1,000 annually.

 

Legal Proceedings

 

From time to time, the Company is involved in litigation matters relating to claims arising from the ordinary course of business. While the results of such claims and legal actions cannot be predicted with certainty, the Company’s 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.

 

Holders

 

As of June 30, 2022, there were approximately 2 record holders of our common stock. The number of record holders does not include beneficial owners of common stock whose shares are held in the names of banks, brokers, nominees, or other fiduciaries.

 

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Except for the historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this Report. Our actual results or actions may differ materially from these forward-looking statements for many reasons. Our discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes and with the understanding that our actual future results may be materially different from what we currently expect. See “CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION” above. As used herein, the terms “we,” “us,” “our” and the “Company” refers to Maverick Lifestyle, Inc., a Nevada corporation, and its subsidiaries unless otherwise stated.

 

Overview

 

Maverick Lifestyle, Inc. was formed on March 25, 2022 (the “Company”) in the State of Nevada as holding company for MVRK Farms LLC (“MVRK Farms”) and MVRK Tobacco Manufacturing LLC (“MVRK Tobacco”), both wholly owned Delaware subsidiaries. As a result, the consolidated financials represent the historic financials of the subsidiaries. The Company is authorized to issue up to 490,000,000 shares of Common Stock, of which currently 30,000,000 shares are issued and outstanding, and 10,000,000 shares of preferred shares to be designated at the discretion of the Board of Directors, of which 0 shares are currently issued and outstanding.

 

Results of Operations

 

For the Years Ended December 31, 2021 and 2020

 

The Company is in the business of manufacturing, packaging, and distributing smokeable hemp pre rolls

 

Product Sales

 

During the years ended December 31, 2021 and 2020, sales amounted to $2,413, 422 and $1,038,610, respectively, an increase of $1,374,812 or 132%.

  

Cost of Sales

 

The primary components of cost of sales are the hemp raw material, packaging, manufacturing costs to roll the hemp, machine costs, maintenance, distribution fees, marketing costs such as trades shows, signage, point of sale materials, promotions at retail and distribution level, sampling programs, sales team members, influencers and ambassadors and internet marketing including social media. Our increase in cost of sales is mainly driven by increase sales. In addition, we have begun distributing new products that have higher cost due to regulations and higher costs of raw materials.

 

During the years ended December 31, 2021 and 2020, cost of sales amounted to $1,002,171 and $253,998, respectively, an increase of $3 748,173 or 295% due to increase these numbers don’t make sense… cost of sales increase is due higher quality products and internet marketing. It also has to do with us taking on new products that have a much higher cost.

 

 

Depreciation

 

During the years ended December 31, 2021 and 2020, cost due to depreciation was $1,886,588 and $1,524,963, respectively. Depreciation is mostly attributed to the equipment held by MVRK Tobacco Manufacturing, LLC.

 

General and Administrative

 

During the years ended December 31, 2021 and 2020, costs related to general and administrative expenditures was $442,332 and $363,807, respectively.

   

Operating Expenses

 

For the years ended December 31, 2021and 2020, operating expenses consisted of the following:

 

		Year Ended December 31,
		2021				2020
Cost of Sales		$	1,002,171			$	253,998
Depreciation			1,886,588				1,524,963
General and administrative			442,332				363,807
Total		$	3,331,091			$	2,142,768

 

●

Cost of sales expense: Cost of sales is made up of the packaging, filters, tipping paper, paper/wrapper, hemp filler, and flavorings.  In 2021 we also started distributing vape devices that carried a high cost per device as thus drove up the overall Cost of sales.

 

●

Depreciation expenses:  Based on equipment that is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. The fixed assets consist of manufacturing equipment, with a useful life of 7 years. We regularly evaluate the estimated remaining useful lives of the property and equipment to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation. Maintenance and repairs are charged to expense as incurred.

 

●

General and administrative expenses: This includes expenses related to office supplies, legal, promotional items, insurances, trade shows, consulting fees, dues/subscriptions, and bank fees.

 

Loss from Operations

 

During the year ended December 31, 2021, loss from operations amounted to $917,669 as compared to 1,014,158 or the year ended December 31, 2020. The increase was attributed mainly to an increase in sales as described above.

 

Other Income (Expense)

 

 During year ended December 31, 2021, other income, net amounted to $(728,979) as compared to other income, net of $(572,360) for the year ended December 31, 2020. Most other expenses were derived from interest expenses related to outstanding debt obligations.

 

Liquidity and Capital Resources

 

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had a working capital deficit of $2,333,923 and cash of 103,714 as of December 31, 2021 and a working capital deficit of $1,676,518 and $30,143 of cash as of December 31, 2020.

   

Cash Flows

 

The following table provides detailed information about our net cash flows:

 

		Year Ended December 31,
		2021				2020
Net cash used in operating activities		$	508,787			$	30,143
Net cash provided by investing activities			-				-
Net cash provided by (used in) financing activities			-				-
Net change in cash		$	73,571			$	30,143

 

 

We have an accumulated deficit and have incurred operating losses since our inception and expect losses to continue during fiscal year 2020. This raises substantial doubt about our ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital, implement its business plan and generate sufficient revenues. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Net Cash Provided by Operating Activities 

 

Net cash provided in operating activities was $505,787 for the year ended December 31, 2021, despite a net loss of $1,646,648 and an inventory cost of $1,165,181 due to being offset by $1,886,588 in depreciation expenses, and $1,068,215 in accounts payable.

 

Results of Operations

 

For the Six Months Ended June 30, 2022 and June 30, 2021

 

The Company is in the business of manufacturing, packaging, and distributing smokeable hemp pre rolls

 

Product Sales

 

During the six months ended June 30, 2022, sales amounted to $404,435.

  

Cost of Sales

 

The primary components of cost of sales are the hemp raw material, packaging, manufacturing costs to roll the hemp, machine costs and maintenance, distribution fees, marketing costs such as trades shows, signage, internet marketing. directly attributable to sales.

 

During the six months ended June 30 2022, cost of sales amounted to $411,947.

 

Depreciation

 

During the six months ended June 30, 2022, cost due to depreciation was $609,911. Depreciation is mostly attributed to the equipment held by MVRK Tobacco Manufacturing, LLC.

 

General and Administrative

 

During the six months ended June 30, 2022, costs related to general and administrative expenditures was $185,871.

   

Operating Expenses

 

For the six months ended June 30, 2022, operating expenses consisted of the following:

 

		Six months ended June 30,
		2022
Cost of Sales		$	411,947
Depreciation			609,911
General and administrative			185,871
Total		$	1,207,729

 

●

Cost of sales expense: Cost of sales is made up of the packaging, filters, tipping paper, paper/wrapper, hemp filler, and flavorings.  In 2021 we also started distributing vape devices that carried a high cost per device as thus drove up the overall Cost of sales. This has continued into 2022.

 

●

Depreciation expenses:  Based on equipment that is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. The fixed assets consist of manufacturing equipment, with a useful life of 7 years. We regularly evaluate the estimated remaining useful lives of the property and equipment to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation. Maintenance and repairs are charged to expense as incurred.

 

●

General and administrative expenses: This includes expenses related to office supplies, legal, promotional items, insurances, trade shows, consulting fees, dues/subscriptions, and bank fees.

 

 

Loss from Operations

 

During the six months ended June 30, 2022, loss from operations amounted to $803,298.

 

Other Income (Expense)

 

During six months ended June 30, 2022, other income, net amounted to $(219,375). Most other expenses were derived from interest expenses related to outstanding debt obligations.

 

Liquidity and Capital Resources

 

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had a working capital deficit of $1,256,740 and cash of $59,015.86 as of June 30, 2022.

   

Cash Flows

 

The following table provides detailed information about our net cash flows:

 

		Six months Ended June 30, 2022
Net cash used in operating activities		(549,862		)
Net cash provided by investing activities			0
Net cash provided by (used in) financing activities			0
Net change in cash			44,698

 

We have an accumulated deficit and have incurred operating losses since our inception and expect losses to continue during fiscal year 2022. This raises substantial doubt about our ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital, implement its business plan and generate sufficient revenues. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Net Cash Provided by Operating Activities 

 

Net cash provided in operating activities was $(549,862) for the six months ended June 30, 2022, mostly due to a net loss of $1,022,669.

 

Cash Requirements

 

We currently have no external sources of liquidity, such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital. 

 

We are dependent on our product sales to fund our operations and may require the sale of additional common stock and preferred stock to maintain operations. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans, and/or financial guarantees. 

 

Going Concern

 

The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, for the year ended December 31, 2021, the Company had net loss and cash used in operations of 1,646,648 and $73,571, respectively. As of December 31, 2021, the Company had an accumulated deficit, stockholders’ deficit, and working capital deficit of 3,323,166, $303,166 and $2,33923, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. The Company’s primary source of operating funds in 2021 was primarily from product sales. The Company has experienced net losses from operations since inception but expects these conditions to improve in the near term and beyond as it develops its business model.

 

Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. Management believes that the Company’s capital resources are not currently adequate to continue operating and maintaining its business strategy for a period of twelve months from the issuance date of this report. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail or cease operations. These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires our management to make assumptions, estimates, and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.

 

We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our consolidated financial statements.  We believe the critical accounting policies in Note 2 to the consolidated financial statements appearing in our audited financial statements for the years ended December 31, 2020 and 2021 included in this Form 10-K, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.  

 

Use of Estimates

 

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates as of December 31, 2020 and 2021 include the assumptions used in the redemption recognition method for unredeemed gift cards, collectability of note receivable, estimates of current and deferred income taxes and deferred tax valuation allowances, valuation of derivative liabilities, and the fair value of non-cash equity transactions.

  

Fair Value of Financial Instruments and Fair Value Measurements

 

FASB ASC 820 - Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on December 31, 2020. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

 

The three levels of the fair value hierarchy are as follows:

 

	Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
	Level 2—Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
	Level 3—Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The carrying amounts reported in the consolidated balance sheets for cash, due from and to related parties, prepaid expenses, accounts payable and accrued liabilities approximate their fair market value based on the short-term maturity of these instruments.

 

Derivative Liabilities

 

The Company has certain financial instruments that are embedded derivatives associated with capital raises. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10 – Derivative and Hedging – Contract in Entity’s Own Equity. This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment, or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment.

 

 

In July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. For public business entities, the amendments in Part I of the ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. 

 

Revenue Recognition

 

It is the Company’s policy that revenues from product sales is recognized in accordance with ASC 606 “Revenue Recognition.” Five basic steps must be followed before revenue can be recognized; (1) Identifying the contract(s) with a customer that creates enforceable rights and obligations; (2) Identifying the performance obligations in the contract, such as promising to transfer goods or services to a customer; (3) Determining the transaction price, meaning the amount of consideration in a contract to which an entity expects to be entitled to in exchange for transferring promised goods or services to a customer; (4) Allocating the transaction price to the performance obligations in the contract, which requires the company to allocate the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or service promised in the contract; and (5) Recognizing revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer. The amount of revenue recognized is the amount allocated to the satisfied performance obligation.

 

Revenue from product sales is recorded at the net sales price, or “transaction price,” which includes estimates of variable consideration that result from allowances for returns. The Company constrains revenue by giving consideration to factors that could otherwise lead to a probable reversal of revenue. Collectability of revenue is reasonably assured based on historical evidence of collectability between the Company and its customers.

 

Revenues from sales to distributors are recognized at the time the products are delivered to the customers.

 

Revenues equipment usage is recognized at the time the products are manufactured on the Company’s facilities.

 

Inflation and Changing Prices

 

Neither inflation nor changing prices for the year ended December 31, 2021 had a material impact on our operations. However, we expect significant impact from current inflation trends for the remainder of 2022.

 

Off-Balance Sheet Arrangements

 

None.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

Not applicable.

 

*   *   *

 

 

Directors, Executive Officers & Corporate Governance

 

The following table sets forth the names, positions and ages of our directors and executive officers as of the date of this report.

 

Name		Age		Position		Commencement of Service as Officer/Director
Victor Krahn		51		Chief Executive Officer and Director		March 25, 2022
Bryce Foreman		33		Chief Technology Officer		March 25, 2022
Justin Vick		38		Chief Financial Officer		March 25, 2022

 

 

Victor Krahn, Chief Executive Officer, and Director

 

Victor Krahn became the Chief Executive Officer of the Company and a member of the Board of the Directors at the inception of the Company. Prior to this, Mr. Krahn was the President of BC Tweed JV, and founding partner of SunSelect Produce Inc. Victor is a visionary entrepreneur, and skilled operator of large-scale high tech complex projects. Having established SunSelect as a leader of vegetable production inside of over 200 acres of glass greenhouses over the course of 25 years serving major retailers in North America such as Albertsons, Costco, Walmart, Whole Foods, Victor is an excellent collaborator, team leader and creative problem solver. Turning his attention to the nascent Canadian cannabis space in early 2017 Victor joint ventured with Canopy Growth and created BC Tweed. Transforming his 70 acres of glass greenhouses in Canada to grow Health Canada Licensed Cannabis for the largest publicly traded Cannabis company he successfully operated the largest cannabis facility in the world through 2018 at which time Canopy Growth Corp acquired his interest and completed a highly successful exit for Victor and his family. Victor is a graduate of University of the Fraser Valley with a degree in Architectural Technology.

 

Bryce Foreman, Chief Technology Officer

 

Bryce Foreman joined the MVRK family in 2020 as a founder and Chief Technology Officer. Since 2018, Bryce also provides business analyst services for Canopy Growth / SunSelect Produce managing construction projects and facility conversions, implementation and management of operating systems, and general forecasting and analytics. Prior to joining the Company, Bryce worked for Atlas RFID as a software systems analyst, where he provided process and data analysis for mega-construction projects, built analytics to track global logistics for over $6 billion in materials. He also provided general software systems management. Bryce is a key component of the strategic advantage of Maverick Lifestyle branding and business strategy. Bryce is a graduate of MacEwan University.

 

Justin Vick, Chief Financial Officer

 

Justin joined MVRK family in 2020 as Chief Financial Officer and Chief Operations Officer. Since joining the Company Just has acted as the principal accounting officer. In addition, he has provided support in HR - recruitment, payroll management, benefits programs, trainings, safety, procurement, regulatory compliance, and quality control, as well as project management on new developing brands. Prior to joining the Company, Justin was a controller for Freedom Industries, Inc. and prior to that an account manager for Joyner Keeney, PLLC. Justin began his career as analyst for Siemens. Justin is a graduate of North Carolina State University.

 

Involvement in Certain Legal Proceedings

 

To the best of our knowledge, none of our directors, executive officer or promoter and control person (as identified under “Certain Relationships and Related Transactions”) has, during the past ten years:

 

●

been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

●

had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation, or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

 

●

been subject to any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

 

 

●

been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

 

●

been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

●

been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates, or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

 

Committees; Audit Committee Financial Expert

 

Our board does not have an Audit Committee or other committees.

 

Changes in Nominating Procedures

 

None.

   

Family Relationships 

 

None of the directors and officers is related to any other director or officer of the Company.

 

Board Oversight in Risk Management

 

Our Chief Executive Officer, who is our principal executive officer, also serves on the Board of Directors, and we do not have a lead director. In the context of risk oversight, we believe that our selection of one person to serve in both positions provides the Board with additional perspective which combines the operational experience of a member of management with the oversight focus of a member of the Board. The business and operations of our Company are managed by our Board as a whole, including oversight of various risks, such as operational and liquidity risks that our Company faces. Because our Board includes a member of our management, this individual is responsible for both the day-to-day management of the risks we face as well as the responsibility for the oversight of risk management.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

None.

 

*   *   *

 

 

Executive Compensation

 

The following table sets forth information concerning the total compensation paid during the year ended December 31, 2021 and six months ended June 30, 2022.

 

SUMMARY COMPENSATION TABLE

FOR OUR NAMED EXECUTIVE OFFICERS

  

Name and Principal Position		Year			Salary				Bonus				Stock Awards				Option Awards(1)				All Other Compensation				Total
Victor Krahn		2022			$	—			$	—			$	—			$	—			$	—			$	—
Chief Executive Officer;		2021			$	—			$	—			$	—			$	—			$	—			$	—
Bryce Forman		2022			$	102,000			$	—			$	—			$	—			$	—			$	102,000
Chief Technology Officer		2021			$	102,000			$	—			$	—			$	—			$	—			$	102,000
Justin Vick		2022			$	180,000			$	—			$	—			$	—			$	—			$	180,000
Chief Financial Officer		2021			$	180,000			$	—			$	—			$	—			$	—			$	180,000

 

(1)	See Option Equity Award Described Below.

 

Employment Agreement with Executives

 

No executives have formal agreements with the Company.

  

Outstanding Equity Awards at 2021 Fiscal Year-End for Named Executive Officers

 

The following table sets forth certain information concerning the outstanding equity awards as of December 31, 2021, for each named executive officer. 

 

		Option Awards																				Stock Awards
Name		Number of Securities Underlying Unexercised Options (#) Exercisable				Number of Securities Underlying Unexercised Options (#) Unexercisable				Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options				Option Exercise Price($)				Option Expiration Date				Number of Shares or Units of Stock that Have Not Vested				Market Value of Shares or Units of Stock that Have Not Vested				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested
Victor Krahn			—				—				—				—				—				—				—				—				—
Bryce Foreman			—				—				—				—				—				—				—				—				—
Justin Vick			300,000				—				900,000				0.05				3/31/2027				—				—				—				—

 

Compensation of Directors

 

The following table sets forth certain information regarding the compensation paid to our directors during the fiscal year ended December 31, 2021:

 

Name

Fees earned or cash paid

Stock Awards

Option Awards

All other compensation

Total

Victor Krahn

$

—

$

—

$

—

$

—

$

—

 

All directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified, or until their earlier death, resignation, or removal. Officers are elected by and serve at the discretion of the board.

 

Our directors are reimbursed for expenses incurred by them in connection with attending board meetings, but they do not receive any other compensation for serving on the board.

 

*   *   *

 

 

Certain Relationships and Related Party Transactions

 

Currently, we have no independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

 

●

the director is, or at any time during the past three years was, an employee of the Company;

 

●

the director or a family member of the director accepted any compensation from the Company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);

 

●

a family member of the director is, or at any time during the past three years was, an executive officer of the Company;

 

●

the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the Company made, or from which the Company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);

 

●

the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the Company served on the compensation committee of such other entity; or

●

the director or a family member of the director is a current partner of the Company’s outside auditor, or at any time during the past three years was a partner or employee of the Company’s outside auditor, and who worked on the company’s audit

 

Related Party Transactions

  

On March 25, 2022, the Company purchased 100% of the membership interests in MVRK Farms LLC, a Delaware limited liability company, held by Victor Krahn and Bryce Foreman, in exchange for 14,400,000 shares of common stock of the Company. In addition, on the same day, the Company purchased 100% of MVRK Tobacco Manufacturing, LLC, Delaware corporation, in exchange for 14,400,000 shares of common stock. As a result, the Company became a holding company with 2 wholly owned subsidiaries.

 

In addition, 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 is owned 100% by Victor Krahn, our CEO. 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.

 

*   *   *

 

 

Security Ownership of Management & Certain Security Holders

 

The following tables sets forth certain information regarding beneficial ownership of our common stock as of August 1, 2022 by (i) each person (or group of affiliated persons) who is known by us to own more than five percent of the outstanding shares of our common stock, (ii) each director, executive officer, and director nominee, and (iii) all of our directors and executive officers as a group.

 

The number of shares of common stock beneficially owned by each person is determined under the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which such person has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days after the date hereof, through the exercise of any stock option, warrant or other right. Unless otherwise indicated, each person has sole investment and voting power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.

 

 

Shareholder		Class of Stock		No. of Shares				% of Class				Voting Rights				% of Voting Rights				% Voting Rights Post Offering
Victor Krahn		Common			27,600,000				95.83	%			27,600,000				95.83	%			71.13	%
Bryce Foreman		Common			1,200,000				4.17	%			1,200,000				4.17	%			3.09	%
Justin Vick		Common			0				0.00	%			0				0.00	%			0.00	%
ALL OFFICERS AND DIRECTORS					28,800,000				100.00	%			28,800,000				100.00	%			74.23	%
ALL BENEFICIAL OWNERS					28,800,000				100.00	%			28,800,000				100.00	%			0.00	%

 

(1)	Victor Krahn, the Company’s sole director and CEO, holds 100% of his holdings in the Company through Maverick Collective, Inc.

 

*   *   *

 

 

Description of Capital Stock

 

Authorized Capital Stock

 

The authorized capital of the Company consists of 490,000,000 shares of common stock, par value $0.001 per share and 10,000,000 shares of preferred stock, par value $0.001 per share. As the date of this offering, there are 28,800,000 shares of common capital stock of the Company issued.

 

Common Stock

 

The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of shareholders, including the election of directors. There is no right to cumulate votes in the election of directors. The holders of Common Stock are entitled to any dividends that may be declared by the board of directors out of funds legally available for payment of dividends subject to the prior rights of holders of preferred stock and any contractual restrictions we have against the payment of dividends on Common Stock. In the event of our liquidation or dissolution, holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock. Holders of Common Stock have no preemptive rights and have no right to convert their Common Stock into any other securities.

 

Preferred Stock

 

We currently have 10,000,000 shares of “blank check” preferred stock to be designated at the discretion of the Board of Directors. Currently there are no shares have been designated nor have any shares been issued.

 

*   *   *

 

 

Dividend Policy

 

We have not declared cash dividends on our Common Stock since our inception and we do not anticipate paying any cash dividends in the foreseeable future. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.

 

*   *   *

 

Legal Matters

 

Certain legal matters with respect to the shares of Shares offered hereby will be passed upon by Smith Eilers, PLLC

 

*   *   *

 

Experts

 

RBSM, LLP, Accountants and Advisors, our independent registered public accounting firm, has audited our consolidated financial statements included in our Annual Report on Form 10-K for the years ended December 31, 2021 and December 31, 2020 as set forth in their report, which is incorporated by reference in this Offering Circular. Our consolidated financial statements are incorporated by reference in reliance on RBSM, LLP, Accountants and Advisors’ reports, given on its authority as experts in accounting and auditing.

 

*   *   *

 

 

Where You Can Find More Information

 

We have filed with the SEC a Regulation A Offering Statement on Form 1-A under the Securities Act with respect to the Shares offered hereby. This Offering Circular, which constitutes a part of the Offering Statement, does not contain all of the information set forth in the Offering Statement or the exhibits and schedules filed therewith. For further information about us and the Shares offered hereby, we refer you to the Offering Statement and the exhibits and schedules filed therewith. Statements contained in this Offering Circular regarding the contents of any contract or other document that is filed as an exhibit to the Offering Statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the Offering Statement. Upon the consummation of this Offering, we will be required to file periodic reports, proxy statements, and other information with the SEC pursuant to the Exchange Act. You may read and copy this information at the SEC’s Public Reference Room, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, including us, that file electronically with the SEC. The address of this site is www.sec.gov.

 

*   *   *

 

 

MVRK Lifestyle Inc.

 

Consolidated Financial Statements as of December 31, 2021 and 2020

  

 

Table of Contents  

 

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020	F-3
Consolidated Statements of Operations for the year ended December 31, 2021, and the period from February 26, 2020 (“Inception”) through December 31, 2020	F-4
Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2021, and the period from Inception through December 31, 2020	F-5
Consolidated Statements of Cash Flows for the year ended December 31, 2021, and the period from Inception through December 31, 2020	F-6
Notes to the Consolidated Financial Statements	F-7

  

Report of Independent Registered Public Accounting Firm

 

To the Stockholders and the Board of Directors of MVRK Lifestyles, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of MVRK Lifestyle Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2021 and the period from February 26, 2020 (“Inception”) through December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the period from Inception through December 31, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America.

 

The Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the notes to the financial statements, the Company has suffered recurring losses from operations and will require additional capital to continue as a going concern. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in the notes to the financial statements. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

We have served as the Company’s auditor since 2021.

 

 

 

New York, NY

August 22, 2022

 

 

 

MVRK LIFESTYLE, INC.

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2021 AND 2020

 

		December 31,				December 31,
		2021				2020
ASSETS
CURRENT ASSETS:
Cash		$	103,714				30,143
Accounts Receivable, net of allowance for doubtful accounts of $101,282 and $83,578, respectively			68,867				222,578
Inventory			1,341,561				176,380
Due from related party			73,573				30,511
Other assets			-				88,781
Asset for recovery			24,117				4,321
Total Current assets			1,611,832				552,714
NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $3,406,659 and $1,524,963, respectively			9,794,566				11,641,912
Right of Use Asset			18,768				33,683
Total Non-current assets			9,813,334				11,675,595
TOTAL ASSETS		$	11,425,164				12,228,309
CURRENT LIABILITIES:
Accounts payable		$	1,135,421				62,999
Lease liability - current			15,993				14,915
Accrued interest			146,250				113,750
Accrued Expenses			20,608				-
Refund liability			69,177				20,588
Total Current liabilities			1,387,448				212,252
NON-CURRENT LIABILITIES:
Notes Payable-Related Party			9,750,000				9,750,000
Deferred Tax Liability			354,485				-
Other liabilities to related parties			1,214,483				903,807
Lease Liability - non-current			2,775				18,768
Total Non-current liabilities			11,321,743				10,672,575
TOTAL LIABILITIES			12,709,192				10,884,827
STOCKHOLDERS’ EQUITY:
Common stock, $0.01 par value per share, 1,000 shares authorized, issued, and outstanding			10				10
Additional Paid in Capital			3,019,990				3,019,990
Accumulated Deficit			(4,304,027	)			(1,676,518	)
TOTAL STOCKHOLDERS’ EQUITY			(1,284,027	)			1,343,482
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	11,425,164				12,228,309

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

MVRK LIFESTYLE, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2021 AND THE PERIOD FROM FEBRUARY 26,

2020 (“INCEPTION”) THROUGH DECEMBER 31, 2020

 

						Period From February 26, 2020 )
		Year Ended December 31, 2021				(“Inception” Through December 31, 2020
Revenue		$	2,250,071				1,038,610
OPERATING COSTS AND EXPENSES:
Cost of Sales			1,002,171				253,998
Depreciation			1,886,588				1,524,963
General and administrative			905,357				363,807
TOTAL OPERATING EXPENSES			3,794,116				2,142,768
LOSS FROM OPERATIONS			(1,544,045	)			(1,104,158	)
OTHER EXPENSE:
Interest expense			(728,987	)			(568,750	)
Other Expenses			8				(3,610	)
TOTAL OTHER EXPENSE			(728,979	)			(572,360	)
NET LOSS BEFORE INCOME TAX			(2,273,024	)			(1,676,518	)
Income tax expense			354,485				-
NET LOSS		$	(2,627,509	)			(1,676,518	)

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

MVRK LIFESTYLE, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2021 AND THE PERIOD FROM FEBRUARY 26, 2020 (“INCEPTION”) THROUGH DECEMBER 31, 2020

 

		Common Stock								Additional Paid in				Accumulated				Total Stockholders’
		Shares				Amount				Capital				Deficit				Equity
Inception: February 26, 2020			-			$	-			$	-			$	-			$	-
Shareholder’s contribution			1,000				10				3,019,990				-				3,020,000
Net income			-								-				(1,676,518	)			(1,676,518	)
Balance December 31, 2020			1,000			$	10			$	3,019,990			$	(1,676,518	)		$	1,343,482
Net income			-								-				(2,627,509	)			(2,627,509	)
Balance December 31, 2021			1,000			$	10			$	3,019,990			$	(4,304,027	)		$	(1,284,027	)

 

 The accompanying notes are an integral part of these consolidated financial statements

 

 

MVRK LIFESTYLE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2021 AND THE PERIOD FROM FEBRUARY 26,

2020 (“INCEPTION”) THROUGH DECEMBER 31, 2020

 

						Period From February 26, 2020 (“Inception”)
		Year Ended December 31 , 2021				Through December 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(2,627,509	)			(1,676,518	)
Reconciliation of net income to net cash provided by operating activities
Depreciation expense			1,886,588				1,524,963
Deferred income tax expense			354,485				-
Changes in operating assets and liabilities:
Accounts receivable			153,711				(222,578	)
Inventory			(1,165,181	)			(176,380	)
Right of Use Asset			14,915				(33,683	)
Lease liability			(14,915	)			33,683
Asset for recovery			(19,795	)			(4,321	)
Due from related party			(43,062	)			(30,511	)
Accrued interest			32,500				113,750
Other liabilities to related parties			707,651				506,932
Other assets			88,781				(88,782	)
Accounts payable			1,072,421				62,999
Accrued expenses			20,608				-
Refund liability			48,589				20,589
NET CASH PROVIDED BY OPERATING ACTIVITIES			509,788				30,143
Net change in cash			73,572				30,143
Cash and cash equivalents, beginning of period			30,143				-
Cash and cash equivalents, end of period		$	103,715				30,143
Interest paid		$	696,487				-
Income taxes paid		$	-				-
Non-cash Financing and Investing Activities
Contributions from shareholder		$	-				3,020,000
Note payable issued and due from Notes Payable		$	-				9,750,000
Amount paid by NCTM on behalf of the Company		$	-				903,807

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

MVRK Lifestyle Inc.

Notes to the Consolidated Financial Statements  

 

NOTE 1. ORGANIZATION, DESCRIPTION OF BUSINESS AND GOING CONCERN

 

MVRK Lifestyle Inc. (“Maverick” or the “Company”) was formed in the state of Nevada on March 25, 2022. At this time MVRK Tobacco Manufacturing LLC and MVRK Farms LLC became wholly owned subsidiaries of Maverick. This merger has been retroactively reflected to these financial statements effective February 26, 2020 (Inception).

 

Maverick is a supplier and distributor of high-end CBD and non-tobacco products.   

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and satisfaction of liabilities in the ordinary course of business. As shown in the accompanying consolidated financial statements, the Company had losses for all periods presented. The Company incurred a net loss of $2.6 million and $1.7 million for the year ended December 31, 2021 and for the period from Inception through December 31, 2020, respectively, and has an accumulated deficit of $4.3 million as of December 31, 2021. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

 

The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to obtain additional operating capital. The Company intends to finance its future development activities and its working capital from external financing. However, there can be no assurance that the Company will be successful in these endeavors.  

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, MVRK Tobacco Manufacturing LLC and MVRK Farms LLC. All material inter-company balances and transactions have been eliminated.

 

Use of Estimates

 

The preparation of these consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and disclosure in the accompanying notes. Actual results may differ from those estimates and such differences may be material to the consolidated financial statements. The more significant estimates and assumptions by management include among others: production costs for inventory, the valuation allowance on deferred tax assets, operating expense accruals, and revenue recognition.

 

Cash and Cash Equivalents

 

Cash equivalents include demand deposits with banks and all highly liquid investments with original maturities of three months or less. Cash equivalents are stated at cost plus accrued interest, which approximates fair value.

 

Property and Equipment

 

Property, plant, and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. The Company’s fixed assets consist of manufacturing equipment, which has a useful life of 7 years. The Company regularly evaluates the estimated remaining useful lives of the Company’s property and equipment to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation. Maintenance and repairs are charged to expense as incurred.

 

Inventories

 

Inventories are determined using the first-in, first-out (“FIFO”) basis and valued at the lower of cost or net realizable value. Raw materials primarily consist of unprocessed leaf tobacco. Production and freight costs, which are included in cost of goods sold are determined using the weighted average cost method. The Company reduces the carrying value of inventory for those items that are potentially excess, obsolete, or slow-moving based on changes in customer demand, technology developments or other economic factors.

 

 

MVRK Lifestyle Inc.
Notes to the Consolidated Financial Statements
(continued)

 

Revenue Recognition

 

It is the Company’s policy that revenues from product sales is recognized in accordance with ASC 606 “Revenue Recognition.” Five basic steps must be followed before revenue can be recognized; (1) Identifying the contract(s) with a customer that creates enforceable rights and obligations; (2) Identifying the performance obligations in the contract, such as promising to transfer goods or services to a customer; (3) Determining the transaction price, meaning the amount of consideration in a contract to which an entity expects to be entitled to in exchange for transferring promised goods or services to a customer; (4) Allocating the transaction price to the performance obligations in the contract, which requires the company to allocate the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or service promised in the contract; and (5) Recognizing revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer. The amount of revenue recognized is the amount allocated to the satisfied performance obligation.

 

Revenue from product sales is recorded at the net sales price, or “transaction price,” which includes estimates of variable consideration that result from allowances for returns. The Company constrains revenue by giving consideration to factors that could otherwise lead to a probable reversal of revenue. Collectability of revenue is reasonably assured based on historical evidence of collectability between the Company and its customers.

 

Revenues from sales to distributors are recognized at the time the products are delivered to the customers.

 

Revenues equipment usage is recognized at the time the products are manufactured on the Company’s facilities.

 

Leases

 

Upon inception, the Company adopted Accounting Standards Codification Topic 842, “Leases” (“ASC 842”) to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the consolidated balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to previous accounting guidance. The Company adopted ASC 842 utilizing the transition practical expedient added by the Financial Accounting Standards Board (“FASB”), which eliminates the requirement that entities apply the new lease standard to the comparative periods presented in the year of adoption.

 

The Company is involved in a lease contracts when the Company obtains the right to use the assets. Operating leases are included in the line items right-of-use asset, lease obligation, current, and lease obligation, long-term on the consolidated balance sheet. Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term in our statement of operations. The Company determines the lease term by agreement with lessor.

 

Income Taxes – MVRK Tobacco Manufacturing LLC and MVRK Farms LLC were included in the consolidated income tax return of the Maverick Collective, Inc., the Parent company, and operated under a tax sharing agreement with the Parent. In accordance with this tax sharing agreement, the allocation of the consolidated tax liability will be based on a separate return basis. Under this method, the Company is required to remit to the Parent any tax liability; however, the Company is not given current credit or refunds for net losses until future net taxable income is generated by the Company in an amount sufficient to realize such credits or refunds. Effective, March 22, 2022, MVRK Tobacco Manufacturing LLC and MVRK Farms LLC became wholly owned subsidiaries of Maverick Lifestyles, Inc. Maverick Lifestyles, Inc. is not expected to be included in the consolidated tax return of Maverick Collective, Inc. during 2022.

 

 

MVRK Lifestyle Inc.
Notes to the Consolidated Financial Statements
(continued)

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. This method also requires the recognition of future tax benefits such as net operating loss carryforwards, to the extent that realization of such benefits is more-likely-than-not.

 

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

Recently Issued Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (“ASU 2016-13”), which requires the measurement of expected credit losses for financial instruments carried at amortized cost, such as accounts receivable, held at the reporting date based on historical experience, current conditions and reasonable forecasts. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financing Instruments—Credit Losses. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019. On November 15, 2019, the FASB delayed the effective date of FASB ASC Topic 326 for certain small public companies and other private companies. As amended, the effective date of ASC Topic 326 was delayed until fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition. The Company does not currently believe the adoption of this standard will have a significant impact on its consolidated financial statements, given its history of minimal bad debt expense relating to trade accounts receivable.

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions to the general principles in Topic 740 and simplifies other areas of the existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2019-12 on its consolidated financial statements.

 

NOTE 3. PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

		December 31, 2021				December 31, 2020
Manufacturing equipment and machinery		$	13,206,117			$	13,166,875
Less: Accumulated depreciation			(3,411,551	)			(1,524,963	)
Property and Equipment, net		$	9,794,566			$	11,641,912

 

 

MVRK Lifestyle Inc.
Notes to the Consolidated Financial Statements
(continued)

 

Depreciation expense associated with property and equipment is included in depreciation within the Company’s Statement of Operations and was $1,886,588 for the year ended December 31, 2021, and $1,524,963 for the period from February 26, 2020 (“Inception”) through December 31, 2020.

 

NOTE 4. RELATED PARTY TRANSACTIONS

 

On March 5, 2020, the Company entered into a loan with the BH Group LLC, owned by a former shareholder of the Company, in conjunction with an asset purchase agreement. The Company is jointly liable for the obligation, which is collectively signed by MaVeRicK Collective Inc. (“the Parent Company”), the Company’s parent company, as well as North Carolina Tobacco Manufacturing LLC (“NCTM”), Greener & Wilder LLC, MVRK Distribution LLC, MVRK Holdings LLC (“MVRK Holdings”), MVRK Distro LLC, North Carolina Tobacco Manufacturing LLC, North Carolina Tobacco Importers, LLC, and 21st Century Brands Distributing LLC, all of which are subsidiaries held by the parent company.

 

The loan was for the amount of $9,750,000 and accrues interest of 7% per annum for the first 18 months, and 9% per annum thereafter, compounding on a quarterly base. The outstanding principal amount and any accrued but unpaid interest shall be due and payable on March 5, 2023. During the year ended December 31, 2021, the Company incurred interest expense during the year of $842,737, of which $146,250 was accrued, and $696,487 was paid by NCTM on behalf of the Company at December 31, 2021. During the year ended December 31, 2020, the Company incurred interest expense during the year of $568,750, of which $113,750 was accrued, and $455,000 was paid by NCTM on behalf of the Company at December 31, 2020. The interest incurred is included as a non-current liability on the consolidated balance sheet as “Other liabilities to related parties.”

 

As of December 31, 2021, the Company had a $1,214,483 liability for other liabilities to related parties. $1,151,487 relates to interest expenses paid by NCTM on behalf of the Company (see above), $32,196 relates to accrued labor costs by NCTM (see footnote 5), and $30,800 relates to lease payments due to MRVK Tobacco Manufacturing LLC (“MTM”).

 

As of December 31, 2020, the Company had a $903,807 liability for other liabilities to related parties. $455,000 relates to interest expenses paid by NCTM on behalf of the Company (see above), $37,832 relates to accrued labor costs by NCTM (see footnote 5), $14,000 relates to lease payments due to MRVK Tobacco Manufacturing LLC (“MTM”) (see footnote 6), and $396,975 relates to equipment purchased by NCTM on behalf of the Company.

 

On March 5, 2020, the Company entered into an agreement with NCTM, allowing NCTM access to use the equipment for manufacturing and production. The agreement allows NCTM the right of use of its equipment for a fee of $.0002/stick manufactured by NCTM. During year ended December 31, 2021, the Company generated $43,063 of revenue, all of which was outstanding at December 31, 2021. During for the period from Inception through December 31, 2020, the Company generated $30,511 of revenue, all of which was outstanding at December 31, 2020. The balance was included in “Due from related party” on the consolidated Balance Sheet.

 

NOTE 5. INVENTORY

 

Inventories consist of the following at December 31, 2021 and 2020.

 

		December 31, 2021				December 31, 2020
Finished goods		$	623,919			$	25,558
Packaged goods			293,620				-
Raw materials			424,022				150,822
Total Inventory		$	1,341,561			$	176,380

 

 

MVRK Lifestyle Inc.
Notes to the Consolidated Financial Statements
(continued)

 

The Company’s raw materials are sent to NCTM for the production into final inventory. NCTM holds the finished goods in their warehouses until orders come in, and then ships out the final product to the customers. During the year ended December 31, 2021, the Company accrued production and labor costs from NCTM in the amount of $32,196, all of which was outstanding at year end. During the year ended December 31, 2020, the Company accrued production and labor costs from NCTM in the amount of $37,832, all of which was outstanding at year end. The production and labor costs were included in cost of goods sold.

 

NOTE 6. LEASE ACCOUNTING

 

On March 5, 2020, the Company entered into a sublease agreement with MRVK Tobacco Manufacturing LLC (“MTM”), a subsidiary held by the Parent Company, to lease an office building located in North Carolina. The Tenant of the office building is MVRK Holdings. The lease has a term of one year which management is reasonably certain to be extended for an additional two years. The lease calls for monthly payments in the amount of $1,400. During the year ended December 31, 2021, the Company incurred costs of $16,800, which were accrued and fully outstanding at December 31, 2021. During the year ended December 31, 2020, the Company incurred costs of $14,000, which were accrued and fully outstanding at December 31, 2020.

 

The Company’s weighted-average remaining lease term relating to its operating leases is 1.17 years, with a weighted-average discount rate of 7%.

 

The Company incurred $16,800 and $14,000 of lease expense for its operating lease for years ended December 31, 2021, and 2020, respectively.

 

The following table presents information about the amount and timing of liabilities arising from the Company’s operating leases as of December 31, 2021:

 

		For the Year Ended December 31,
2022		$	16,800
2023			2,800
Total undiscounted operating lease payments			19,600
Less: Imputed interest			831
Present value of operating lease liabilities		$	18,769

 

NOTE 7. PROVISION FOR INCOME TAXES

 

Income tax expense that is reflected in the results of operations for the years ended December 31, 2021 and 2020 were recognized by the previous owner of the LLCs, Maverick Collective, Inc.

 

 

MVRK Lifestyle Inc.
Notes to the Consolidated Financial Statements
(continued)

 

The tax effects of temporary differences which give rise to deferred tax assets (liabilities) are summarized as follows:

 

		For the Year Ended December 31,				For the Year Ended December 31,
		2021				2020
Depreciation		$	(379,488	)			(46,965	)
Allowance for doubtful accounts		$	25,003				19,698
			(354,485	)			(27,267	)
less: Valuation allowance			-				27,267
Total deferred tax assets		$	(354,485	)			-

 

Reconciliation of the statutory federal income tax to the Company’s effective tax:

 

		For the year ended December 31,				For the year ended December 31,
		2021				2020
Statutory federal tax rate			21.00	%			21.00
State rate net of federal benefit			-3.03				-0.18
Loss surrendered to Maverick Collective, Inc.			5.22				-22.45
Change in valuation allowance			(1.66	)			1.63
Provision for income taxes			21.53	%			-

 

The Company has a stand-alone tax net operating loss carryforward of approximately $4.7 million at December 31, 2021, partially as a result of accelerated depreciation for tax purposes. As MVRK Tobacco Manufacturing LLC and MVRK Farms LLC will not be included in the consolidated income tax return of the Maverick Collective, Inc., the net operating loss carryforwards on a standalone basis would not be available and the Company has recorded a deferred tax liability of $354,485 at December 31, 2021.

 

The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of December 31, 2021, the Company had no unrecognized tax benefits. There were no changes in the Company’s unrecognized tax benefits during the period from February 26, 2020 through December 31, 2021. The Company did not recognize any interest or penalties during fiscal 2021 related to unrecognized tax benefits.

 

NOTE 8. SUBSEQUENT EVENTS

 

Coronavirus (COVID-19) Impact

 

The spread of the coronavirus (COVID-19) outbreak in the United States has resulted in economic uncertainties which may negatively impact the Company’s business operations. While the disruption is expected to be temporary, there is uncertainty surrounding the duration and extent of the impact. The impact of the coronavirus outbreak on the consolidated financial statements cannot be reasonably estimated at this time.

 

Adverse events such as health-related concerns about working in our offices, the inability to travel and other matters affecting the general work environment could harm our business and our business strategy. While we do not anticipate any material impact to our business operations as a result of the coronavirus, in the event of a major disruption caused by the outbreak of pandemic diseases such as coronavirus, we may lose the services of our employees or experience system interruptions, which could lead to diminishment of our business operations. Any of the foregoing could harm our business and delay the implementation of our business strategy and we cannot anticipate all the ways in which the current global health crisis and financial market conditions could adversely impact our business.

 

Management is actively monitoring the global situation on its financial condition, liquidity, operations, industry and workforce. Given the daily evolution of the coronavirus and the global responses to curb its spread, the Company is not able to estimate the effects of the coronavirus on its results of operations, financial condition or liquidity for the fiscal year 2022.

 

As part of the formation of MVRK Lifestyles, Inc. two employees received restricted shares in MVRK Lifestyles, Inc.

 

 

MVRK Lifestyle - Consolidated Balance Sheet

 

ASSETS
CURRENT ASSETS:
Cash		$	59,015.86
Accounts Receivable, net of allowance for doubtful accounts		$	115,830.85
Inventory		$	749,764.11
Due from Related part		$	229,918.35
Other assets		$	-
Asset for Recovery		$	-
Total Current Assets		$	1,154,529.17
NON-CURRENT ASSETS
Property and equipment, net of accumulated depreciation		$	9,148,660.12
Notes Receivable related party		$	100,000.00
Right of Use Asset		$	22,285.44
Total Non-current assets		$	9,270,945.56
TOTAL ASSETS						$	10,425,474.73
LIABILITIES
CURRENT LIABILITIES:
Accounts payable		$	445,795.52
Accounts payable related part		$	94,026.45
Accrued Expenses		$	2,375.34
Lease liability - current		$	22,993.00
Accrued interest		$	73,125.00
Refund Liability		$	12,133.06
Total Current Liabilities		$	650,448.37
NON-CURRENT LIABILITIES
Notes payable - Related Party		$	9,750,000.00
Other Liabilities to related parties		$	1,278,991.77
Lease Liability - Non-current		$	2,775.00
Total Non-current liabilities		$	11,031,766.77
TOTAL LIABILITIES						$	11,682,215.14
STOCKHOLDERS EQUITY
Common stock, $.01 par value per share, 1000 shares authorized issued and outstanding		$	10.00
Additional Paid in Capital		$	3,019,990.00
Accumulated Deficit		$	(4,276,740.41	)
Total Stockholders’ equity		$	(1,256,740.41	)
TOTAL STOCKHOLDERS EQUITY						$	(1,256,740.41	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY						$	10,425,474.73

 

 

MVRK Lifestyle - Consolidated Statement of Operations

 

REVENUE						$	404,435.49
OPERATING COST AND EXPENSES:
Cost of Sales		$	411,947.15
Depreciation		$	609,910.67
General and administrative		$	185,871.24
Total Operating Expenses						$	1,207,729.06
PROFIT (LOSS) FROM OPERATIONS						$	(803,293.57	)
OTHER EXPENSES:
Interest expense		$	219,375.00
Other Expenses
Total Other Expenses						$	219,375.00
NET PROFIT (LOSS) BEFORE INCOME TAX						$	(1,022,668.57	)
Income tax expense
NET PROFIT (LOSS)						$	(1,022,668.57	)

 

 

		Period ending 06/30/2022				Year Ended 12/31/2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss		$	(1,022,669	)		$	(2,627,509	)
Reconciliation of net income to net cash provided by operating activities
Depreciation expense		$	609,911			$	1,886,588
Deferred income tax expense						$	354,485
Changes in operating assets and liabilities:
Accounts receivable		$	115,831			$	153,711
Notes Receivable Related parties		$	100,000
Inventory		$	(749,764	)		$	(1,165,181	)
Right of Use Asset		$	22,285			$	14,915
Lease Liablity		$	(22,993	)		$	(14,915	)
Asset for recovery		$	-			$	(19,795	)
Due from related party		$	(229,918	)		$	(43,062	)
Accrued Intererst		$	73,125			$	32,500
Other liablities to related parties		$	94,026			$	707,651
Other assets						$	88,781
Accounts payable		$	445,796			$	1,072,421
Accrued expenses		$	2,375			$	20,608
Refund liablity		$	12,133			$	48,589
NET CAS PROVIDED BY OPERATING ACTIVITIES		$	(549,862	)		$	509,787
Net change in cash		$	44,698			$	73,572
Cash and cash equivalents, beginning of period		$	103,715			$	30,143
Cash and cash equivalents, end of period		$	148,413			$	103,715
Interest paid		$	219,375			$	696,487
Income taxes paid		$	-			$	-
Non-Cash Financing and Investing activities		$	-			$	-
Contributions from shareholders		$	-			$	-
Note payable issued and due from Notes Payable		$	-			$	-
Amount paid by NCTM on behalf of the company		$	-			$	-

 

 

Item 16. Index to Exhibits

 

Exhibit Number		Description of Document		Date Filed
1.1		Dalmore Broker Dealer Agreement		Herewith
2.1		Certificate of Incorporation		Herewith
2.2		Bylaws of the Company		Herewith
3.1		Promissory Note		Herewith
4.1		Form of Subscription Agreement.		Herewith
6.1		MVRK Farms – North Carolina Tobacco Manufacturing - Manufacturing and Distribution Memorandum		Herewith
6.2		MVRK Equipment – North Carolina Tobacco Manufacturing – Right to Use Equipment Memorandum		Herewith
6.3		Sublease Agreement		Herewith
11.1		Consent of Auditor., Independent Registered Public Accounting Firm.		Herewith
11.2		Consent of Counsel*		Herewith
12.1		Opinion of Legality		Herewith

 

*	Included in Exhibit 12.1

 

 

SIGNATURES

 

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Vancouver, British Columbia, Canada, on August 23, 2022.

 

(Exact name of issuer as specified in its charter) Maverick Lifestyle, Inc.

 

This offering statement has been signed by the following persons in the capacities and on the dates indicated. (Signature)

 

By:	/s/ Victor Krahn
	Name:	Victor Krahn
	Title:	Chief Executive Officer (Principal Executive Officer)
	Date:	August 23, 2022

 

By:	/s/ Justin Vick
	Name:	/s/ Justin Vick
	Title:	Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer)
	Date:	August 23, 2022

 

SIGNATURES OF DIRECTORS:
/s/ Victor Krahn		8/23/2022
Victor Krahn		Date

 

 

II-2

 

Exhibit 1.1

 

 

Broker-Dealer Agreement

 

This agreement (together with exhibits and schedules, the “Agreement”) is entered into by and between Maverick Lifestyle Inc. (“Client”), a Nevada Corporation, and Dalmore Group, LLC., a New York Limited Liability Company (“Dalmore”). Client and Dalmore agree to be bound by the terms of this Agreement, effective as of July 29, 2022 (the “Effective Date”):

 

WHEREAS, Dalmore is a registered broker-dealer providing services in the equity and debt securities market, including offerings conducted via exemptions from registration with the Securities Exchange Commission (“SEC”);

 

WHEREAS, Client is offering securities directly to the public in an offering exempt from registration under Regulation A (the “Offering”); and

 

WHEREAS, Client recognizes the benefit of having Dalmore as a broker dealer of record and service provider for investors who participate in the Offering (collectively, the “Investors”).

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1.

Appointment, Term, and Termination.

 

a.

Services. Client hereby engages Dalmore to perform the services listed on Exhibit A attached hereto and made a part hereof, in connection with the Offering (the “Services”). Unless otherwise agreed to in writing by the parties, the services to be performed by Dalmore are limited to those Services.

 

b.

Term. The Agreement will commence on the Effective Date and will remain in effect for a period of twelve (12) months and will renew automatically for successive renewal terms of twelve (12) months each unless any party provides notice to the other party of non-renewal at least sixty (60) days prior to the expiration of the current term. If Client defaults in performing the obligations under this Agreement, the Agreement may be terminated (i) upon thirty (30) days written notice if Client fails to perform or observe any material term, covenant or condition to be performed or observed by it under this Agreement and such failure continues to be unremedied, (ii) upon written notice, if any material representation or warranty made by Client proves to be incorrect at any time in any material respect, or (iii) upon thirty (30) days written notice if Client or Dalmore commences a voluntary proceeding seeking liquidation, reorganization or other relief, or is adjudged bankrupt or insolvent or has entered against it a final and unappealable order for relief, under any bankruptcy, insolvency or other similar law, or either party executes and delivers a general assignment for the benefit of its creditors.

 

 

 

2.

Compensation. As compensation for the Services, Client shall pay to Dalmore the following fees:

 

a.

a fee equal to one percent (1%) on the aggregate amount raised by the Client (the “Offering Fee”). The Offering Fee shall only be payable after the Financial Industry Regulatory Authority (“FINRA”) department of Corporate Finance issues a no objection letter (the “No Objection Letter”) for the Offering. Client authorizes Dalmore to deduct the Offering Fee directly from the Client’s third-party escrow or payment account.

 

b.

a one-time expense fee of five thousand ($5,000) for out-of-pocket expenses incurred by Dalmore (the “Expense Fee”). The Expense Fee is due and payable upon execution of this Agreement. The Expense Fee shall cover expenses anticipated to be incurred by the firm such as FINRA filings and any other expenses incurred by Dalmore in connection with the Offering. Notwithstanding the foregoing, Dalmore will refund to the Client any portion of the Expense Fee that remains unused.

 

c.

A one-time consulting fee of twenty thousand ($20,000) (the “Consulting Fee”), of which $10,000 is due and payable within five (5) days of receipt of the No Objection Letter, and $10,000 is due and payable within thirty (30) days of receipt of the No Objection Letter. In the event the Consulting Fee is not paid by the first closing, Client authorizes Dalmore to deduct the Consulting Fee directly from the Client’s third-party escrow or payment account upon the first closing.

 

3.

Regulatory Compliance

 

a.

Client and all its third-party providers shall at all times (i) maintain all required registrations and licenses, including foreign qualification, if necessary; and (iii) pay all related fees and expenses (including all fees associated with FINRA filings), in each case that are necessary or appropriate to perform their respective obligations under this Agreement.

 

FINRA Corporate Filing Fee for this $10,000,000, best efforts offering will be $2,000 and will be a pass-through fee payable to Dalmore, from the Client, who will then forward it to FINRA as payment for the filing. This fee is due and payable prior to any submission by Dalmore to FINRA.

 

b.

Client and Dalmore will each be responsible for supervising the activities and training of their respective sales employees, as well as all of their other respective employees in the performance of functions specifically allocated to them pursuant to the terms of this Agreement.

 

 

 

c.

Client and Dalmore agree to promptly notify the other concerning any material communications from or with any Governmental Authority or Self Regulatory Organization with respect to this Agreement or the performance of its obligations unless such notification is expressly prohibited by the applicable Governmental Authority.

 

4.

Role of Dalmore. Client acknowledges and agrees that Dalmore’s sole responsibilities in connection with an Offering are set forth on Exhibit A, and that Dalmore is strictly acting in an administrative and compliance capacity as the broker dealer of record, and is not being engaged by the Client to act as an underwriter or placement agent in connection with the Offering. Dalmore will use commercially reasonable efforts to perform the Services. Dalmore (i) makes no representations with respect to the quality of any investment opportunity; (ii) does not guarantee the performance of any Investor; (iii) is not soliciting or approaching investors in connection with the Offering, (iv) is not an investment adviser, does not provide investment advice and does not recommend securities transactions, (v) in performing the Services is not making any recommendation as to the appropriateness, suitability, legality, validity or profitability of the Offering, and (vi) does not take any responsibility for any documentation created and used in connection with the Offering.

 

5.

Indemnification. Client shall indemnify and hold Dalmore, its affiliates and their representatives and agents harmless from, any and all actual or direct losses, liabilities, judgments, arbitration awards, settlements, damages and costs (collectively, “Losses”), resulting from or arising out of any third party suits, actions, claims, demands or similar proceedings (collectively, “Proceedings”) to the extent they are based upon (i) a breach of this Agreement by Client, (ii) the wrongful acts or omissions of Client, or (iii) the Offering.

 

6.

Confidentiality. For purposes of this Agreement, the term “Confidential Information” means all confidential and proprietary information of a party, including but not limited to (i) financial information, (ii) business and marketing plans, (iii) the names of employees and owners, (iv) the names and other personally-identifiable information of users of the third-party provided online fundraising platform, (v) security codes, and (vi) all documentation provided by Client or Investor, but shall not include (i) information already known or independently developed by the recipient without the use of any confidential and proprietary information, or (ii) information known to the public through no wrongful act of the recipient. During the term of this Agreement and at all times thereafter, neither party shall disclose Confidential Information of the other party or use such Confidential Information for any purpose without the prior written consent of such other party. Without limiting the preceding sentence, each party shall use at least the same degree of care in safeguarding the other party’s Confidential Information as it uses to safeguard its own Confidential Information. Notwithstanding the foregoing, a party may disclose Confidential Information (i) if required to do by order of a court of competent jurisdiction, provided that such party shall notify the other party in writing promptly upon receipt of knowledge of such order so that such other party may attempt to prevent such disclosure or seek a protective order; or (ii) to any applicable governmental authority as required by applicable law. Nothing contained herein shall be construed to prohibit the SEC, FINRA, or other government official or entities from obtaining, reviewing, and auditing any information, records, or data. Client acknowledges that regulatory record-keeping requirements, as well as securities industry best practices, require Dalmore to maintain copies of practically all data, including communications and materials, regardless of any termination of this Agreement.

 

 

 

7.

Notices. Any notices required by this Agreement shall be in writing and shall be addressed, and delivered or mailed postage prepaid, or faxed or emailed to the other parties hereto at such addresses as such other parties may designate from time to time for the receipt of such notices. Until further notice, the address of each party to this Agreement for this purpose shall be the following:

 

If to the Client:

 

Maverick Lifestyle Inc.

 

7427 North Carolina Hwy 58,

Stantonsburg, NC 27883

Attn: Victor Krahn, CEO

Tel: 604-309-6237

Email: [email protected]

 

If to Dalmore:

 

Dalmore Group, LLC

 

530 7th Avenue, Suite 902

New York, NY 10018

Attn: Etan Butler, Chairman

Tel: 917-319-3000

Email: [email protected]

 

8.

Miscellaneous.

 

a. ANY DISPUTE OR CONTROVERSY BETWEEN THE CLIENT AND PROVIDER RELATING TO OR ARISING OUT OF THIS AGREEMENT WILL BE SETTLED BY ARBITRATION BEFORE AND UNDER THE RULES OF THE ARBITRATION COMMITIEE OF FINRA.

 

b. This Agreement is non-exclusive and shall not be construed to prevent either party from engaging in any other business activities.

 

c. This Agreement will be binding upon all successors, assigns or transferees of Client. No assignment of this Agreement by either party will be valid unless the other party consents to such an assignment in writing. Either party may freely assign this Agreement to any person or entity that acquires all or substantially all of its business or assets. Any assignment by the either party to any subsidiary that it may create or to a company affiliated with or controlled directly or indirectly by it will be deemed valid and enforceable in the absence of any consent from the other party.

 

 

 

d. Neither party will, without prior written approval of the other party, reference such other party in any advertisement, website, newspaper, publication, periodical or any other communication, and shall keep the contents of this Agreement confidential in accordance with the provisions set forth herein.

 

e. THE CONSTRUCTION AND EFFECT OF EVERY PROVISION OF THIS AGREEMENT, THE RIGHTS OF THE PARTIES UNDER THIS AGREEMENT AND ANY QUESTIONS ARISING OUT OF THE AGREEMENT, WILL BE SUBJECT TO THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES TO THE EXTENT SUCH APPLICATION WOULD CAUSE THE LAWS OF A DIFFERENT STATE TO APPLY. The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party.

 

f. If any provision or condition of this Agreement is held to be invalid or unenforceable by any court, or regulatory or self-regulatory agency or body, the validity of the remaining provisions and conditions will not be affected and this Agreement will be carried out as if any such invalid or unenforceable provision or condition were not included in the Agreement.

 

g. This Agreement sets forth the entire agreement between the parties with respect to the subject matter hereof and supersedes any prior agreement relating to the subject matter herein. The Agreement may not be modified or amended except by written agreement.

 

h. This Agreement may be executed in multiple counterparts and by facsimile or electronic means, each of which shall be deemed an original but all of which together shall constitute one and the same agreement.

 

[SIGNATURES APPEAR ON FOLLOWING PAGE(S)]

 

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

	CLIENT: Maverick Lifestyle Inc.
	By	/s/ Victor Krahn
	Name:	Victor Krahn
	Its:	CEO
	Dalmore Group, LLC
	By	/s/ Etan Butler
	Name:	Etan Butler
	Its:	Chairman

 

 

 

Exhibit A

Services:

 

i.

Review Investor information, including KYC (Know Your Customer) data, AML (Anti-Money Laundering), OFAC compliance background checks (it being understood that KYC and AML processes may be provided by ara qualified third party);

ii.

Review each Investor’s subscription agreement to confirm such Investor’s participation in the Offering, and provide confirmation of completion of such subscription documents to Client;

iii.

Contact and/or notify the issuer, if needed, to gather additional information or clarification on an Investor;

iv.

Keep Investor information and data confidential and not disclose to any third-party except as required by regulatory agencies or in our performance under this Agreement (e.g. as needed for AML and background checks);

v.

Coordinate with third party providers to ensure adequate review and compliance;

vi.

Provide, or coordinate the provision by a third party, of an “invest now” payment processnti-Money Laundering), OFAC compliance background checks (it being understood that KYC and AML processes may be provided by ra qualified third party); ii. Review each Investor’s subscription agreement to confirm such Investor’s participation in the Offering, and provide confirmation of completion of such subscription documents to Client; iii. Contact and/or notify the issuer, if needed, to gather additional information or clarification on an Investor; iv. Keep Investor information and data confidential and not disclose to any third-party except as required by regulatory agencies or in our performance under this Agreement (e.g. as needed for AML and background checks); v. Coordinate with third party providers to ensure adequate review and compliance; vi. Provide, or coordinate the provision by a third party, of an “invest now” payment processing mechanism, including connection to a qualified escrow agent.

 

 

7

Exhibit 2.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 2.2

 

BYLAWS OF MAVERICK LIFESTYLE, INC.

 

ARTICLE I

 

OFFICES

 

SECTION 1.1 REGISTERED OFFICE AND AGENT. The initial registered office and registered agent of the Corporation shall be as set forth in the Corporation's Articles of Incorporation. The registered office or the registered agent may be changed by resolution of the Board of Directors, upon making the appropriate filing with the Secretary of State.

 

SECTION 1.2 PRINCIPAL OFFICE. The principal office of the Corporation shall be at 7427 NC Hwy 58 South, Stantonsburg, North Carolina 27883, provided that the Board of Directors shall have the power to change the location of the principal office.

 

SECTION 1.3 OTHER OFFICES. The Corporation may also have other offices at any places, within or out of the State of Nevada and the State of California, as the Board of Directors may designate, or as the business of the Corporation may require or as may be desirable.

 

SECTION 1.4 BOOKS AND RECORDS. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be maintained on any information storage device or method; provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to applicable law.

 

ARTICLE II

 

SHAREHOLDERS

 

SECTION 2.1 PLACE OF MEETING. Meetings of the shareholders shall be held either at the principal office of the Corporation or at any other place, either within or out of the State of California, as shall be determined by the board of directors and as shall be designated in the notice of the meeting or executed waiver of notice. If authorized by the Board of Directors, and subject to any guidelines and procedures adopted by the Board of Directors, shareholders not physically present at a meeting of shareholders, by means of remote communication may participate in a meeting of shareholders; and, may be considered present in person and may vote at a meeting of shareholders held at a designated place or held solely by means of remote communication, subject to the conditions imposed by applicable law. The Board of Directors may, in its discretion, determine that the meeting may be held solely by means of remote communication.

 

SECTION 2.2 ANNUAL MEETING. An annual meeting of shareholders, for the purpose of electing directors and transacting any other business as may be brought before the meeting, shall be held on the date and time set by the Board of Directors and stated in the notice of the meeting.

 

Failure to hold the annual meeting at the designated time does not result in the winding up or termination of the corporation. If the Board of Directors fails to call the annual meeting, any shareholder may make a demand in writing to any officer of the corporation that an annual meeting be held.

 

SECTION 2.3 SPECIAL SHAREHOLDERS' MEETINGS. Special meetings of the shareholders may be called by the President, the Board of Directors, or by the holders of at least 65% of all the shares entitled to vote at the proposed special meeting. The record date for determining shareholders entitled to call a special meeting is the date the first shareholder signs the notice of that meeting. Only business within the purpose or purposes described in the notice or executed waiver of notice may be conducted at a special meeting of the shareholders.

 

SECTION 2.4 NOTICE OF SHAREHOLDERS’ MEETING. Written notice stating the place, day and hour of the meeting, the means of any remote communications by which shareholders may be considered present and may vote at the meeting, and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten (10) days nor more than sixty (60) days before the date of the meeting, personally or by mail, by or at the direction of the President, the Secretary, or the officer or person calling the meeting, to each shareholder entitled to vote at the meeting unless the purpose of the meeting is for the transaction of business for which notice to all shareholders is required by law.

 

If mailed, the notice shall be deemed to be given when deposited in the United States mail addressed to the shareholder at the shareholder's address as it appears on the share transfer records of the Corporation, with postage thereon prepaid. Electronic notice constitutes written notice and is effective when transmitted in a form authorized by the shareholder.

 

 

Any person entitled to notice of a meeting may sign a written waiver of notice either before or after the time of the meeting. The participation or attendance at a meeting of a person entitled to notice constitutes waiver of notice, except where the person attends for the specific purpose of objecting to the lawfulness of the convening of the meeting.

 

SECTION 2.5 VOTING LISTS. The officer or agent having charge of the share transfer records for shares of the Corporation shall prepare a complete list of the shareholders entitled to vote at the meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number and class and series (if any) of shares held by each. The list shall be kept on file at the registered office or principal place of business of the Corporation and shall be subject to inspection by any shareholder at any time during usual business hours for a period of ten (10) days prior to the meeting. The list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share transfer records shall be prima-facie evidence as to who are the shareholders entitled to examine the list or transfer records or to vote at any meeting of shareholders. If any shareholders are participating in the meeting by means of remote communication, the list must be open to examination by the shareholders for the duration of the meeting on a reasonably accessible electronic network, and the information required to access the list must be provided to shareholders with the notice of the meeting. The Corporation shall take reasonable steps to ensure that the information is available only to shareholders of the Corporation.

 

SECTION 2.6 QUORUM OF SHAREHOLDERS. A quorum shall be present for any matter to be presented at that meeting if the holders of a majority of the shares entitled to vote at the meeting are represented at the meeting in person or by proxy.

 

Unless otherwise provided in the Articles of Incorporation or these Bylaws, once a quorum is present at a meeting of shareholders, the shareholders represented in person or by proxy at the meeting may conduct any business as may be properly brought before the meeting until it is adjourned, and the subsequent withdrawal from the meeting of any shareholder or the refusal of any shareholder represented in person or by proxy to vote shall not affect the presence of a quorum at the meeting. The shareholders represented in person or by proxy at a meeting of shareholders at which a quorum is not present may adjourn the meeting until a time and place as may be determined by a vote of the holders of a majority of the shares represented in person or by proxy at that meeting.

 

SECTION 2.7 CONDUCT OF MEETINGS. The Board of Directors of the Corporation may adopt, by resolution, rules and regulations for the conduct of the meeting of the shareholders as it shall deem appropriate. At every meeting of the shareholders the President, or in his or her absence or inability to act the Vice President, or, in his or her absence or inability to act the person whom the President shall appoint, shall act as chairman of, and preside at, the meeting. The secretary or, in his or her absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting, shall act as secretary of the meeting and keep the minutes thereof.

 

SECTION 2.8 VOTING OF SHARES. Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders, except to the extent that the Articles of Incorporation provides for more or less than one vote per share or limits or denies voting rights to the holders of the shares of any class or series.

 

Shares of stock owned by the Corporation itself or by another corporation or entity, the majority of the voting stock or interest of which is owned or controlled by the Corporation, shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. Nothing in this section shall be construed as limiting the right of the Corporation or any domestic or foreign corporation or other entity to vote stock, held or controlled by it in a fiduciary capacity, or with respect to which it otherwise exercises voting power in a fiduciary capacity, and to have such stock counted in determining the total number of outstanding shares.

 

Shares owned by another corporation, domestic or foreign, may be voted by any officer, agent, or proxy, or other legal representative authorized by the bylaws of the corporate shareholder to vote such shares, or in the absence of such a bylaw, by such legal representative that the board of directors of the shareholder corporation may designate.

 

Any shareholder may vote either in person or by proxy executed in writing by the shareholder. No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise provided in the proxy. A proxy shall be revocable unless the proxy form conspicuously states that the proxy is irrevocable and the proxy is coupled with an interest. Proxies coupled with an interest include the appointment as proxy of a pledgee; a person who purchased or agreed to purchase, or owns or holds an option to purchase, the shares; a creditor of the Corporation who extended it credit under terms requiring the appointment; an employee of the Corporation whose employment contract requires the appointment, or a party to a voting agreement created under Chapter 78 of Nevada Revised Statutes.

 

Shares registered in the name of a deceased person, a minor ward or a person under legal disability may be voted by his or her administrator, executor, or court appointed guardian, either in person or by proxy without a transfer of such shares into the name of such administrator, executor, or court appointed guardian. Shares registered in the name of a trustee may be voted by him or her, either in person or by proxy.

 

 

Shares registered in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his or her name if authority so to do is contained in an appropriate order of the court by which such receiver was appointed.

 

A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

 

Shareholders are prohibited from cumulating their votes in any election for directors of the corporation.

 

SECTION 2.9 ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action required by Chapter 78 of Nevada Revised Statutes to be taken at any annual or special meeting of shareholders, or any action which may be taken at any annual or special meeting of shareholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall have been signed by not less than the minimum number of holders of all the shares necessary and entitled to vote to authorize the action that is the subject of the consent.

 

SECTION 2.10 FIXING THE RECORD DATE. For the purpose of determining shareholders entitled to notice of, or to vote at, any meeting of shareholders, or shareholders entitled to receive payment of any distribution, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix, in advance, a date as the record date for any such determination of shareholders.

 

If no record date is fixed for the determination of shareholders entitled to notice of or to vote at an annual or special meeting of shareholders, the close of business on the day before the date on which notice of the meeting is first delivered to the shareholders shall be the record date for such determination of shareholders. In no event shall a record date be more than 70 days before the meeting or action requiring shareholder determination. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, such determination shall apply to any adjournment thereof. In lieu of the Board of Directors from time to time establishing record dates, the Board of Directors may establish a mechanism for determining record dates in all or specified instances.

 

If no record date is fixed for determination of shareholders entitled to a distribution (other than one involving a purchase, redemption, or other acquisition of the corporation's shares), the record date shall be the date the Board of Directors authorizes the distribution.

 

SECTION 2.11 SHAREHOLDER NOMINATIONS AND PROPOSALS. For business (including, but not limited to, director nominations) to be properly brought before an annual meeting by a shareholder, the shareholder or shareholders of record intending to propose the business (the “proposing shareholder”) must have given written notice of the proposing shareholder's nomination or proposal, either by personal delivery or by United States mail to the Secretary not later than sixty (60) calendar days prior to the date such annual meeting is to be held. If the current year's meeting is called for a date that is not within 30 days of the anniversary of the previous year's annual meeting, notice must be received not later than ten (10) calendar days following the day on which public announcement of the date of the annual meeting is first made. In no event will an adjournment or postponement of an annual meeting of shareholders begin a new time period for giving a proposing shareholder's notice as provided above.

 

For business to be properly brought before a special meeting of shareholders, the notice of the meeting sent by or at the direction of the person calling the meeting must set forth the nature of the business to be considered. A person or persons who have made a written request for a special meeting pursuant to Section 2.3 of these Bylaws may provide the information required for notice of a shareholder proposal under this section simultaneously with the written request for the meeting submitted to the Secretary or within ten (10) calendar days after delivery of the written request for the meeting to the Secretary.

 

A proposing shareholder's notice shall include as to each matter the proposing shareholder proposes to bring before either an annual or special meeting:

 

●

The name(s) and address(es) of the proposing shareholder, and the classes and number of shares of capital stock of the Corporation held by the proposing shareholder.

 

●

If the notice is in regard to a nomination of a candidate for election as director:

 

o

The name, age, business and residence address of the candidate;

 

o

The principal occupation or employment of the candidate, and

 

o

The class and number of shares of the Corporation beneficially owned by the candidate.

 

●

If the notice is about a proposal, other than a nomination of a candidate for election as director, a brief description of the business desired to be brought before the meeting and the material interest of the proposing shareholder in such proposal.

 

 

ARTICLE III

 

DIRECTORS

 

SECTION 3.1 BOARD OF DIRECTORS. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors of the Corporation. Directors need not be residents of the State of California or shareholders of the Corporation.

 

SECTION 3.2 NUMBER OF DIRECTORS. The number of directors shall be one (1) provided that the number may be increased or decreased from time to time by an amendment to these bylaws or articles of incorporation. A majority of the members of the Board of Directors may elect to increase the number of directors, but shall not descrease the number of directors. No decrease in the number of Directors shall have the effect of shortening the term of any incumbent director.

 

SECTION 3.3 TERM OF OFFICE. At the first annual meeting of shareholders and at each annual meeting thereafter, the holders of shares entitled to vote in the election of directors shall elect directors to hold office until the next succeeding annual meeting.

 

SECTION 3.4 VACANCIES. Any vacancy occurring in the Board of Directors, including vacancies derived from an increase in the number of members, may be filled by election at an annual or special meeting of shareholders called for that purpose or may be filled by the affirmative vote of a majority of the remaining directors even when the majority of the remaining directors is less than a quorum of the total number of directors specified in the Articles of Incorporation or bylaws.

 

A directorship to be filled by reason of an increase in the number of directors may be filled by election at an annual or special meeting of shareholders called for that purpose or may be filled by the Board of Directors for a term of office continuing only until the next election of one or more directors by the shareholders; provided that the Board of Directors may not fill more than two directorships during the period between any two successive annual meetings of shareholders.

 

SECTION 3.5 REMOVAL. Any director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of the director or directors, at any meeting of shareholders called expressly for that purpose.

 

SECTION 3.6 RESIGNATION. A director may resign at any time by giving written notice to the Board of Directors, its chairman, or to the president or secretary of the corporation. A resignation is effective when the notice is given unless the notice specifies a future date. The pending vacancy may be filled before the effective date, but the successor shall not take office until the effective date.

 

SECTION 3.7 REGULAR MEETINGS OF DIRECTORS. A regular meeting of the newly-elected Board of Directors shall be held without other notice immediately following each annual meeting of shareholders, at which the board shall elect officers and transact any other business as shall come before the meeting. The board may designate a time and place for additional regular meetings, by resolution, without notice other than the resolution.

 

SECTION 3.8 SPECIAL MEETINGS OF DIRECTORS. The President and/or the Chairman may call a special meeting of the Board of Directors at a time or place determined by the President and/or the Chairman. The President and/or the Chairman shall call a special meeting at the written request of two or more directors.

 

SECTION 3.9 NOTICE OF DIRECTORS’ MEETINGS. No notice shall be required for regular meetings of the Board of Directors.

 

All special meetings of the Board of Directors shall be held upon not less than two day's written notice stating the date, place and hour of meeting given to each director either personally or by mail. Notice of the date, time, place, or purpose of a regular or special meeting of the board of directors may be provided to a director by electronic transmission on consent of the director. The director may specify the form of electronic transmission to be used to communicate notice.

 

A written waiver of the required notice signed by a director entitled to the notice, before or after the meeting, is the equivalent of giving notice to the director who signs the waiver. Attendance of a director at any meeting shall constitute a waiver of notice of the meeting, except where the directors attend a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called or convened.

 

SECTION 3.10 QUORUM OF DIRECTORS. A majority of the number of directors shall constitute a quorum for the transaction of business. The act of the majority of the directors present at a meeting at which a quorum is present at the time of the act shall be the act of the Board of Directors, unless the act of a greater number is required by law or the Articles of Incorporation or these Bylaws. The directors at a meeting for which a quorum is not present may adjourn the meeting until a time and place as may be determined by a vote of the directors present at that meeting. Members of the Board of Directors may participate in and act at any meeting through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other.

 

 

SECTION 3.11 COMPENSATION. Directors shall not receive any stated salary for their services, but by resolution of the Board of Directors a fixed sum and expenses of attendance, if any, may be allowed for attendance at any meeting of the Board of Directors or committee thereof. A director shall not be precluded from serving the Corporation in any other capacity and receiving compensation for services in that capacity.

 

SECTION 3.12 ACTION WITHOUT MEETING. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, any action required or permitted to be taken at a meeting of the Board of Directors or any committee may be taken without a meeting if all members of the Board of Directors or committee consent in writing or by electronic transmission and the writings or electronic transmissions are filed with the minutes of the proceedings of the Board of Directors.

 

SECTION 3.13 COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors, by resolution adopted by a majority, may designate one or more directors to constitute one or more committees, to exercise the authority of the Board of Directors to the extent provided in the resolution of the Board of Directors and allowed under Chapter 78 of Nevada Revised Statutes.

 

A committee of the Board of Directors does not have the authority to do any of the following:

 

(a)

Approve or recommend to shareholders actions or proposals required by this act to be approved by shareholders.

 

(b)

Fill vacancies on the Board of Directors or any committee thereof.

 

(c)

Adopt, amend, or repeal the bylaws.

 

(d)

Authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors.

 

(e)

Authorize or approve the issuance or sale or contract for the sale of shares, or determine the designation and relative rights, preferences, and limitations of a voting group except that the Board of Directors may authorize a committee (or a senior executive officer of the corporation) to do so within limits specifically prescribed by the Board of Directors.

 

The designation of a committee of the Board of Directors and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed by law.

 

SECTION 3.14 DISCHARGE OF DUTIES. In discharging the duties of their respective positions, the Board of Directors and committees of the board may, in considering the best long term and short term interests of the corporation, consider the effects of any action (including without limitation, action which may involve or relate to a change or potential change in control of the corporation) upon employees, suppliers and customers of the corporation or its subsidiaries, communities in which offices or other establishments of the corporation or its subsidiaries are located, and all other pertinent factors.

 

ARTICLE IV

 

OFFICERS

 

SECTION 4.1 POSITIONS AND ELECTION. The officers of the corporation shall be elected by the Board of Directors and shall be a President and a Secretary and any other officers, including assistant officers and agents, as may be deemed necessary by the Board of Directors. Any two or more offices may be simultaneously held by the same person.

 

Officers shall be elected annually at the meeting of the Board of Directors held after each annual meeting of shareholders. Each officer shall serve until a successor is elected and qualified or until the death, resignation or removal of that officer. Vacancies or new offices shall be filled at the next regular or special meeting of the Board of Directors.

 

SECTION 4.2 REMOVAL. Any officer or agent may be removed by the Board of Directors with or without cause, whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights.

 

SECTION 4.3 OFFICERS’ DUTIES. The powers and duties of the officers of the corporation shall be as provided from time to time by the resolution of the Board of Directors. In the absence of such resolution, the respective officers shall have the powers and shall discharge the duties customarily and usually held and performed by like officers of corporations similar in organization and business purposes to the Corporation subject to the control of the Board of Directors.

 

 

SECTION 4.4 AUTHORITY TO EXECUTE AGREEMENTS. All agreements of the corporation shall be executed on behalf of the corporation by the President or any Vice-President, or such other officer or employee of the corporation authorized in writing by the President, with such limitations or restrictions on such authority as the President deems appropriate.

 

ARTICLE V

 

INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES

 

SECTION 5.1 INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. To the full extent permitted by the applicable provisions of Chapter 78 of Nevada Revised Statutes and other applicable law, the corporation shall advance or reimburse expenses to and indemnify any present and former directors, officers, employees, and agents of the corporation and persons serving or formerly serving at the request of the corporation as directors, officers, trustees, employees, agents or similar functionaries of another foreign or domestic corporation, employee benefit plan, other enterprise or entity against judgments, penalties (including excise and similar taxes), fines, settlements and reasonable expenses actually incurred by the person in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, any appeal in such action, suit or proceeding and any inquiry or investigation that could lead to such an action, suit or proceeding, because the person is or was acting in one of the capacities set forth above.

 

ARTICLE VI

 

SHARE CERTIFICATES AND TRANSFER

 

SECTION 6.1 CERTIFICATES REPRESENTING SHARES. The Corporation shall deliver certificates representing shares to which shareholders are entitled, provided that the Board of Directors may provide by resolution that some or all of any class or series shall be uncertificated shares that may be evidenced by a book- entry system maintained by the registrar of the stock. If shares are represented by certificate, each certificate shall be consecutively numbered and shall be signed by the President or a Vice President and the Secretary or Assistant Secretary and may be sealed with the seal of the Corporation. Any or all signatures may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be an officer before the certificate is issued, it may be issued by the Corporation with the same effect as if he or she were an officer at the date of its issuance.

 

Each certificate representing shares of the Corporation shall state upon the face thereof:

 

●

The name of the issuing corporation and that the corporation is organized under the laws of this state;

 

●

The name of the person to whom issued; and

 

●

The number and class of shares and the designation of the series, if any, the certificate represents. The Corporation shall, after the issuance or transfer of uncertificated shares, send to the registered owner of uncertificated shares a written notice containing the information required to be set forth or stated on certificates pursuant to Chapter 78 of Nevada Revised Statutes. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing shares of the same class and series shall be identical. No share shall be issued until the consideration therefor, fixed as provided by law, has been fully paid. No requirement of Chapter 78 of Nevada Revised Statutes, with respect to matters to be set forth on certificates representing shares of the Corporation, shall apply to or affect certificates outstanding when the requirement first becomes applicable to the certificates; but the requirements shall apply to all certificates thereafter issued whether in connection with an original issue of shares, a transfer of shares or otherwise.

 

SECTION 6.2 TRANSFERS OF SHARES. Shares of the Corporation shall be transferable in the manner prescribed by law and in these bylaws. Transfers of share shall be made on the books of the Corporation only by the holder of record thereof, by such person's attorney lawfully constituted in writing and, in the case of certificated shares, upon the surrender of the certificate thereof, which shall be cancelled before a new certificate or uncertificated shares shall be issued. No transfer of shares shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.

 

ARTICLE VII

 

DISTRIBUTIONS

 

SECTION 7.1 AUTHORIZATION. The Board of Directors of a corporation may authorize, and the corporation may make, distributions to its shareholders in cash, property, or shares of the corporation to the extent permitted by the Articles of Incorporation and Chapter 78 of Nevada Revised Statutes.

 

 

SECTION 7.2 ELIGIBLE SHARES. Unless the Board of Directors fixes a record date, the record date for determining shareholders entitled to a distribution is the date of the resolution of the Board of Directors authorizing the distribution.

 

ARTICLE VIII

 

MISCELLANEOUS

 

SECTION 8.1 SEAL. The Corporation may adopt a corporate seal in a form approved by the Board of Directors. The Corporation shall not be required to use the corporate seal and the lack of the corporate seal shall not affect an otherwise valid contract or other instrument executed by the Corporation.

 

SECTION 8.2 CHECKS, DRAFTS, ETC. All checks, drafts or other instruments for payment of money or notes of the Corporation shall be signed by an officer or officers or any other person or persons as shall be determined from time to time by Resolution of the Board of Directors.

 

SECTION 8.3 FISCAL YEAR. The fiscal year of the Corporation shall be as determined by the Board of Directors.

 

SECTION 8.4 INVALID PROVISIONS. If any one or more of the provisions of these Bylaws, or the applicability of any provision to a specific situation, shall be held invalid or unenforceable, the provision shall be modified to the minimum extent necessary to make it or its application valid and enforceable, and the validity and enforceability of all other provisions of these Bylaws and all other applications of any provision shall not be affected thereby.

 

SECTION 8.5 EMERGENCY BYLAWS AND EMERGENCY POWERS. The Board of Directors may adopt emergency bylaws in the event of an emergency, as defined in Chapter 78 of Nevada Revised Statutes, which shall cease to be effective upon termination of the emergency.

 

In anticipation of, or during an emergency as defined in Chapter 78 of Nevada Revised Statutes, the Board of Directors may modify lines of succession to accommodate the incapacity of any director, officer, employee, or agent, and may relocate the principal office or designate alternative principal offices or regional offices or authorize the officers to do so.

 

During an emergency as defined in Chapter 78 of Nevada Revised Statutes, notice of a meeting of the Board of Directors need be given only to those directors whom it is practicable to reach and may be given in any practicable manner, including by publication and radio.

 

During an emergency as defined in Chapter 78 of Nevada Revised Statutes, the director or directors in attendance at a meeting, or any greater number affixed by the emergency bylaws, constitute a quorum, and one or more officers of the corporation present at a meeting of the Board of Directors may be deemed to be directors for the meeting, in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum.

 

To the extent not inconsistent with the emergency bylaws adopted pursuant to this section, the regular bylaws of the corporation shall remain in full force and effect.

 

Action taken during an emergency as defined in Chapter 78 of Nevada Revised Statutes shall be binding on the corporation.

 

Action taken during an emergency as defined in Chapter 78 of Nevada Revised Statutes, so long as taken in good faith and in the absence of willful misconduct, may not be used to impose liability on a corporate director, officer, employee, or agent.

 

ARTICLE IX

 

AMENDMENT OF BYLAWS

 

SECTION 9.1 AMENDMENT OF BYLAWS. The shareholders shall have the exclusive power to amend or repeal these bylaws, or adopt new bylaws.

 

 

7

Exhibit 3.1

 

SECURED PROMISSORY NOTE

 

$9,750,000

March 5, 2020

 

FOR VALUE RECEIVED, the undersigned, MaVeRicK Collective Inc., a Delaware corporation, MVRK Tobacco Manufacturing LLC, a North Carolina limited liability company, MVRK Tobacco Importers LLC, a North Carolina limited liability company, MVRK Research LLC, a North Carolina limited liability company, MVRK Farms LLC, a Delaware limited liability company, Greener & Wilder LLC, a North Carolina limited liability company, MVRK Distribution LLC, a North Carolina limited liability company, MVRK Holdings LLC, a North Carolina limited liability company, MVRK Distro LLC, a Delaware limited liability company, North Carolina Tobacco Manufacturing LLC, a Delaware limited liability company, North Carolina Tobacco Importers, LLC, a North Carolina limited liability company, and 21^st Century Brands Distributing LLC, a Delaware limited liability company (jointly and severally, the “Borrowers”), promise to pay to the order of BH Group, LLC (together with any successors or assigns, the “Lender”), the principal sum of NINE MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS and no cents ($9,750,000.00), together with interest on the unpaid balance and all other charges, as provided below. This Note evidences the Borrowers’ or their affiliates’ obligation to pay to the Lender a portion of the purchase price payable pursuant to the Asset Purchase Agreement, dated on or about the date hereof, by and among the Borrowers, the Sellers named therein and the other parties thereto (such agreement, as amended and restated as described above and as it may be further amended from time to time, is referred to in this Note as the “Asset Purchase Agreement”). Capitalized terms used herein and not otherwise defined shall have the respective meanings given in the Asset Purchase Agreement.

 

Interest Rate. Commencing on the date hereof, interest shall accrue on the outstanding principal balance of this Note at the rate of seven percent (7%) per annum until the 18 month anniversary of the date of issuance of this Note; thereafter the rate shall increase to nine percent (9%) per annum, in each case compounding on a quarterly basis. The Default Rate set forth in this Note may apply to amounts outstanding under this Note after an Event of Default (as defined below)

 

Payment Terms. Beginning on May 1, 2020, the Borrowers shall pay all accrued interest in arrears on a quarterly basis no later than the first (1^st ) day of May, August, November, and February of each year. The outstanding principal amount and any accrued but unpaid interest shall be due and payable on March 5, 2023 (the “Maturity Date”), or at such earlier time that the entire amount of this Note becomes due and payable in full (whether by acceleration or otherwise).

 

If any payment on this Note becomes due and payable on a day other than a Business Day, such payment date shall be extended to the next succeeding Business Day, without any interest or other payment in respect of such delay. “Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York are authorized or obligated by law or regulation to close.

 

All payments hereunder shall be made by the Borrowers to the Lender in United States currency at 641 Fifth Street, Lakewood, New Jersey 08701 (or at such other address as the Lender may specify by notice in writing), in immediately available funds, on or before 3:00 p.m. (New York, New York time) on the due date thereof. Payments received by the Lender prior to the occurrence of an Event of Default will be applied: first to accrued interest; and second to outstanding principal; after the occurrence of an Event of Default, payments will be applied to the amounts due under this Note as the Lender determine in their sole discretion.

 

 

Prepayments. The Borrowers may make prepayments of principal, in whole or in part, at any time without premium or penalty. Amounts repaid under this Note may not be reborrowed.

 

Default Rate. To the extent permitted by applicable law, upon and after the occurrence of an Event of Default (whether or not the Lender has accelerated payment of this Note), interest on principal and overdue interest shall be payable on demand at a rate per annum equal to twelve percent (12%) (the “Default Rate”).

 

Collateral. This obligations of the Borrowers under this Note are secured by (i) a Security Agreement (the “Security Agreement ”) of even date herewith executed by the Borrower (as defined below) in favor of Lender; and (ii) a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing by MVRK Holdings LLC securing the Borrowers’ obligations hereunder (the “Mortgage”).

 

Default. The occurrence of any or all of the following events shall constitute an “Event of Default” hereunder:

 

(a)

Borrowers shall fail to pay within five (5) Business Days of when due any payment of principal or interest under this Note;

 

(b)

Any Borrower defaults in any obligation to the Lender, the Sellers or the Owner (as applicable) under the Asset Purchase Agreement, the Security Agreement, or the Mortgage, which default is not cured within fifteen days after Borrowers have received written notice of such default;

 

(c)

Any Borrower makes an assignment for the benefit of creditors, or admits in writing such Borrower’s inability to pay or generally fails to pay such Borrower’s debts as they mature or become due, or petitions or applies for the appointment of a trustee or other custodian, liquidator or receiver of such Borrower or of any substantial part of the assets of such Borrower, or commences any case or other proceeding relating to such Borrower under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or takes any action to authorize or in furtherance of any of the foregoing, or if any such petition or application is filed or in any such case or other proceeding is commenced against any Borrower and such Borrower indicates such Borrower’s approval thereof, consent thereto, or acquiescence therein; or

 

(d)

A decree or order is entered appointing any such trustee, custodian, liquidator, or receiver or adjudicating any Borrower bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of any Borrower in an involuntary case under federal bankruptcy laws as now or hereafter constituted, and such decree or order remains in effect for more than sixty (60) days, whether or not consecutive.

 

Remedies. At any time during the continuance of an Event of Default, or at any time thereafter, at the option of Lender, all obligations of Borrowers under this Note shall become immediately due and payable upon notice or demand to the Borrowers, and the Lender shall then have in any jurisdiction where enforcement hereof is sought, in addition to all other rights and remedies provided by agreement or at law or in equity, the rights and remedies of a secured party under the Uniform Commercial Code. All rights and remedies of the Lender are cumulative and are not exclusive of any rights or remedies provided by laws or any other agreement, and may be exercised separately or concurrently.

 

 

Waiver; Amendment. No delay or omission on the part of the Lender in exercising any right hereunder shall operate as a waiver of such right or of any other right under this Note. No waiver of any right under this Note shall be effective unless in writing and signed by the Lender, nor shall a waiver on one occasion be construed as a waiver of any such right on any future occasion. Nor shall any amendment be effective unless in writing and signed by Borrowers and the Lender. Without limiting the generality of the foregoing, the acceptance by the Lender of any late payment shall not be deemed to be a waiver of the Event of Default arising as a consequence thereof. The Borrowers waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note or of any collateral for the obligations, and assent to any extensions or postponements of the time of payment or any and all other indulgences under this Note or with respect to any such collateral, or to any and all substitutions, exchanges or releases of any such collateral, or to any and all additions or releases of any other parties or persons primarily or secondarily liable under this Note, which from time to time be granted by the Lender in connection herewith regardless of the number or period of any extensions.

 

Set-Off. Pursuant to Section 7.6(a) of the Asset Purchase Agreement, the Borrowers (or any of them) may set off payment obligations under this Note against the indemnification obligations of the Seller Indemnifying Parties under the Asset Purchase Agreement.

 

Lender Records. The entries on the records of the Lender (including any appearing on this Note) shall, except for demonstrable error, be prima facie evidence of the aggregate principal amount outstanding under this Note, interest accrued thereon, and the amounts of principal and interest due from the Borrowers.

 

Governing Law; Consent to Jurisdiction. This Note shall be governed by, and construed in accordance with, the laws of the State of Delaware. The Borrowers agree that any suit for the enforcement of this Note may be brought in the courts of the State of Delaware or any federal court sitting in Delaware and consent to the jurisdiction of each such court and to service of process in any such suit being made upon the Borrowers by mail at the address specified in the Asset Purchase Agreement. The Borrowers hereby waive any objection that they may now or hereafter have to the venue of any such suit or any such court or that such suit was brought in an inconvenient court.

 

Notices. Any notice required or permitted to be given hereunder shall be given in accordance with Section 10.3 of the Asset Purchase Agreement.

 

Expenses. The Borrowers shall pay on demand all reasonable costs and expenses in connection with the enforcement of this Note.

 

WAIVER OF JURY TRIAL. THE BORROWERS AND THE LENDER, BY ITS ACCEPTANCE OF THIS NOTE, HEREBY WAIVE TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF: (A) THIS NOTE OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED IN CONNECTION WITH THE NOTE, OR (B) THE VALIDITY, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.

 

 

Severability; Authorization to Complete; Paragraph Headings. If any provision of this Note shall be invalid, illegal or unenforceable, such provision shall be severable from the remainder of this Note and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Paragraph headings are for the convenience of reference only and are not a part of this Note and shall not affect its interpretation.

 

Certain References. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person, persons, entity or entities may require. The terms “herein,” “hereof” or “hereunder” or similar terms used in this Note refer to this entire Note and not only to the particular provision in which the term is used.

 

Assignments. Neither this Note nor the proceeds hereof shall be assignable by the Borrowers without the Lender’s prior written consent, and any attempted assignment without the Lender’s prior written consent shall create a default under this Note. This Note, the Security Agreement and the Mortgage may be assigned, in whole or in part, by the Lender and its successors or assigns; provided, that, any such assignee shall be deemed to have acknowledged and agreed to the setoff rights of the Borrowers as set forth herein and in Section 7.6(a) of the Asset Purchase Agreement.

 

 

IN WITNESS WHEREOF, the Borrowers have caused this Note to be duly executed and delivered on the date first above written.

 

	MAVERICK COLLECTIVE INC.
	By:	/s/ Victor Krahn
		Name:	Victor Krahn
		Title:	President & Secretary
	MVRK TOBACCO MANUFACTURING LLC
	By:	/s/ Victor Krahn
		Name:	Victor Krahn
		Title:	President & Secretary
	MVRK TOBACCO IMPORTERS LLC
	By:	/s/ Victor Krahn
		Name:	Victor Krahn
		Title:	President & Secretary
	MVRK RESEARCH LLC
	By:	/s/ Victor Krahn
		Name:	Victor Krahn
		Title:	President & Secretary
	MVRK FARMS LLC
	By:	/s/ Victor Krahn
		Name:	Victor Krahn
		Title:	President & Secretary
	GREENER & WILDER LLC
	By:	/s/ Victor Krahn
		Name:	Victor Krahn
		Title:	President & Secretary

 

Signature Page to Secured Promissory Note

 

 

	MVRK DISTRIBUTION LLC
	By:	/s/ Victor Krahn
		Name:	Victor Krahn
		Title:	President & Secretary
	MVRK HOLDINGS LLC
	By:	/s/ Victor Krahn
		Name:	Victor Krahn
		Title:	President & Secretary
	MVRK DISTRO LLC
	By:	/s/ Victor Krahn
		Name:	Victor Krahn
		Title:	President & Secretary
	NORTH CAROLINA TOBACCO MANUFACTURING LLC
	By:	/s/ Victor Krahn
		Name:	Victor Krahn
		Title:	President & Secretary
	NORTH CAROLINA TOBACCO IMPORTERS, LLC
	By:	/s/ Victor Krahn
		Name:	Victor Krahn
		Title:	President & Secretary
	21ST CENTURY BRANDS DISTRIBUTING LLC
	By:	/s/ Victor Krahn
		Name:	Victor Krahn
		Title:	President & Secretary

 

Signature Page to Secured Promissory Note

 

 

Exhibit 4.1

 

SUBSCRIPTION AGREEMENT

 

Name of Investor: _______________________

 

Re: Maverick Lifestyle, Inc. ____________________________ Shares (the "Shares")

Gentlemen:

 

1.

Subscription. The undersigned hereby tenders this subscription and applies to purchase the number of Shares in Maverick Lifestyle, Inc., a Nevada corporation (the "Company") indicated below, pursuant to the terms of this Subscription Agreement. The purchase price of each Share is $2.50 per share payable in cash in full upon subscription. The undersigned further sets forth statements upon which you may rely to determine the suitability of the undersigned to purchase the Shares. The undersigned understands that the Shares are being offered pursuant to the Offering Circular filed with the Securities and Exchange Commission and its exhibits (the "Offering Circular"). In connection with this subscription, the undersigned represents and warrants that the personal, business and financial information provided to the Company along with this Subscription Agreement, is complete and accurate, and presents a true statement of the undersigned's financial condition.

 

2.

Representations and Understandings. The undersigned hereby makes the following representations, warranties and agreements and confirms the following understandings:

 

a.

The undersigned has received a copy of the Offering Circular, has reviewed it carefully, and has had an opportunity to question representatives of the Company and obtain such additional information concerning the Company as the undersigned requested. All questions of the undersigned have been satisfactorily answered prior to making this investment.

 

b.

The undersigned has sufficient experience in financial and business matters to be capable of utilizing such information to evaluate the merits and risks of the undersigned's investment, and to make an informed decision relating thereto; or the undersigned has utilized the services of his, her or its financial advisor or other investment representative and together they have sufficient experience in financial and business matters that they are capable of utilizing such information to evaluate the merits and risks of the undersigned's investment, and to make an informed decision relating thereto.

 

c.

The undersigned has evaluated the risks of this investment in the Company, including those risks particularly described in the Offering Circular, and has determined that the investment is suitable for him, her or it. The undersigned has adequate financial resources for an investment of this character, and at this time could bear a complete loss of his investment. The undersigned understands that any projections or other forward-looking statements that were made in the Offering Circular are mere estimates and may not reflect the actual results of the Company's operations. The undersigned understands that the Use of Proceeds made in the Offering Circular are estimates, are not binding, and are subject to the Company's discretion, and may not reflect the actual use of proceeds by the Company of the funds they receive from this offering and from your investment.

 

 

d.

The undersigned understands that the Shares and the underlying securities are not being registered under the Securities Act of 1933, as amended (the "1933 Act") on the ground that the issuance thereof is exempt under Regulation A of Section 3(b) of the 1933 Act, and that reliance on such exemption is predicated in part on the truth and accuracy of the undersigned's representations and warranties, and those of the other purchasers of Shares.

 

e.

The undersigned understands that the Shares are being offered pursuant to a broker/dealer registration or an exemption from such registration in the state of ______________. Therefore, undersigned is a resident of the state of ______________ or has otherwise undergone the purchase of the Shares in the state of ________________.

 

f.

The amount of this investment by the undersigned does not exceed 10% of the greater of the undersigned's net worth, not including the value of his/her primary residence, or his/her annual income in the prior full calendar year, as calculated in accordance with Rule 501 of Regulation D promulgated under Section 4(a)(2) of the Securities Act of 1933, as amended, unless the undersigned is an "accredited investor," as that term is defined in Rule 501 of Regulation D promulgated under Section 4(a)(2) of the Securities Act of 1933, as amended, or is the beneficiary of a fiduciary account, or, if the fiduciary of the account or other party is the donor of funds used by the fiduciary account to make this investment, then such donor, who meets the requirements of net worth, annual income or criteria for being an "accredited investor."

 

g.

The undersigned has no need for any liquidity in his investment and is able to bear the economic risk of his investment for an indefinite period of time. The undersigned has been advised and is aware that: (a) there is no public market for the Shares and a public market for the underly securities may not develop; (b) it may not be possible to liquidate the investment readily; and (c) the Shares have not been registered under the Securities Act of 1933 and applicable state law and an exemption from registration for resale may not be available.

 

h.

All contacts and contracts between the undersigned and the Company regarding the offer and sale to him of Shares have been made within the state indicated below his signature on the signature page of this Subscription Agreement and the undersigned is a resident of such state.

 

 

i.

The undersigned has relied solely upon the Offering Circular and independent investigations made by him or her or his or her representatives and advisors with respect to the Shares subscribed for herein, and no oral or written representations beyond the Offering Circular have been made to the undersigned or relied upon by the undersigned by the Company, its representatives or assigns, or any other person or entity.

 

j.

The undersigned agrees not to transfer or assign this subscription or any interest therein.

 

k.

The undersigned hereby acknowledges and agrees that, except as may be specifically provided herein, the undersigned is not entitled to withdraw, terminate or revoke this subscription.

 

l.

If the undersigned is a partnership, corporation, limited liability company or trust, it has been duly formed, is validly existing, has full power and authority to make this investment, and has not been formed for the specific purpose of investing in the Shares. This Subscription Agreement and all other documents executed in connection with this subscription for Shares are valid, binding and enforceable agreements of the undersigned.

 

m.

The undersigned meets any additional suitability standards and/or financial requirements that may be required in the jurisdiction in which he or she resides or is purchasing in a fiduciary capacity for a person or account meeting such suitability standards and/or financial requirements, and is not a minor.

 

n.

Reserved.

 

3.

Reserved.

 

4.

Issuer-Directed Offering; No Underwriter. The undersigned understands that the offering is being conducted by the Company directly (issuer-directed) and the Company has not engaged a selling agent such as an underwriter or placement agent.

 

5.

Foreign Investors. If the undersigned is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), the undersigned hereby represents that he or she has satisfied himself or herself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Shares or any use of this Subscription Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Shares, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Shares. The undersigned’s subscription and payment for and continued beneficial ownership of the Shares will not violate any applicable securities or other laws of the undersigned’s jurisdiction.

 

 

6.

Valuation. The undersigned acknowledges that the price of the Shares was set by the Company on the basis of the Company’s internal valuation and no warranties are made as to value. The undersigned further acknowledges that future offerings of securities by the Company may be made at lower valuations, with the result that the undersigned’s investment will bear a lower valuation.

 

7.

Reserved.

 

8.

Taxpayer Identification Number/Backup Withholding Certification. Unless a subscriber indicates to the contrary on the Subscription Agreement, he, she or it will certify that his taxpayer identification number is correct and, if not a corporation, IRA, Keogh, or Qualified Trust (as to which there would be no withholding), he is not subject to backup withholding on interest or dividends. If the subscriber does not provide a taxpayer identification number certified to be correct or does not make the certification that the subscriber is not subject to backup withholding, then the subscriber may be subject to twenty-eight percent (28%) withholding on interest or dividends paid to the holder of the Shares.

 

9.

Governing Law. This Subscription Agreement will be governed by and construed in accordance with the laws of the Nevada and the laws of the United States. Unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America in the state of Nevada shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising from this Agreement, arising from the Securities Act of 1933 or arising from the Securities Exchange Act of 1934. Any person or entity purchasing or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to this provision.

 

10.

Acknowledgement of Risks Factors. The undersigned has carefully reviewed and thoroughly understands the risks associated with an investment in the Shares as described in the Offering Circular. The undersigned acknowledges that this investment entails significant risks.

 

[this space left intentionally blank – signature page to follow]

 

 

[Signature page – Maverick Lifestyle, Inc. Regulation A+ Subscription Agreement]

 

The undersigned has (have) executed this Subscription Agreement on this _____ day of ___________, 2022, at ______________.

 

SUBSCRIBER
Signature
(Print Name of Subscriber)
(Street Address)
(City, State and Zip Code)

(Social Security or Tax Identification Number)

Number of Shares: ___________________________

Dollar Amount of Shares ($2.50 per Share) $ _______________________

 

 

SUBSCRIPTION ACCEPTED:

_____________________________________ DATE: _____________________

 

Maverick Lifestyle, Inc.
By:	Victor Krahn
	Chief Executive Officer

 

 

Exhibit 6.1

 

 

March 05, 2020

 

Memo: Manufacturing/Distribution Agreement

 

Manufacturing/Distribution Agreement between MVRK Farms LLC (MVRK) and North Carolina Tobacco Manufacturing LLC (NCTM).

 

MVRK has engaged NCTM to be both the manufacturer and distribution partner for its products.

 

The fee for this agreement shall be $.005/stick sold.

 

Exhibit 6.2

 

 

MVRK Tobacco Manufacturing LLC

 

March 05, 2020

 

Memo: Equipment Right of Use

 

Equipment Right of Use Agreement between MVRK Tobacco Manufacturing LLC LLC (MVRKT) and North Carolina Tobacco Manufacturing LLC (NCTM).

 

MVRKT will allow NCTM the right of use of its equipment for a fee of $.0002/stick manufactured by NCTM. NCTM will have no control over the use of the equipment.

Exhibit 6.3

 

SUBLEASE AGREEMENT

 

This SUBLEASE (the “Sublease”), made and entered into as of the 5^th day of March, 2020, by and between NORTH CAROLINA TOBACCO MANUFACTURING, LLC, a Delaware limited liability company (hereinafter called “Tenant”), and MVRK FARMS LLC, a Delaware limited liability company (“MVRK Farms”), Greener & Wilder LLC, a North Carolina limited liability company (“G&W”), and MVRK RESEARCH LLC, a Delaware limited liability company (“Research”) (MVRK Farms, G&W and Research are collectively referred to hereinafter as “Subtenant”).

 

W  I  T  N  E  S  S  T  H:

 

WHEREAS, Tenant has previously entered into a Lease Agreement with MVRK HOLDINGS LLC (“Landlord”), dated March 5, 2020 (the “Prime Lease”). Tenant now desires to sublet the leased property to the Subtenant, and the Subtenant desires to sublet the leased property from the Tenant.

 

NOW, THEREFORE, for good and valuable consideration, the parties agree as follows:

 

1. Premises. Tenant, in consideration of the sublease payments provided in this Sublease, sublets to Subtenant 400 sq. ft. of the Demised Premises located at 7427 NC Hwy 58 South, Stantonsburg, North Carolina 27883 (the “Premises”). Subtenant will also have rights to utilize the equipment at the Premises provided it does not interfere with normal production.

 

2. Term and Possession. The term of this Sublease shall begin on March 5, 2020 and unless terminated sooner pursuant to the terms of this Sublease, it will continue for the remainder of the term provided in the Prime Lease, which terminates upon notice. Subtenant’s tenancy will terminate on notice, unless Landlord, Tenant and Subtenant sign another written agreement prior to the end of tenancy providing for an additional period of tenancy. Subtenant is not responsible for finding a replacement upon the termination of its tenancy.

 

3. Sublease Payments. Subtenant shall pay to Tenant sublease payments of $1,000.00 per year, payable on or before December 31 of each lease year. Sublease payments shall be made to Tenant at 7427 NC Hwy 58 South, Stantonsburg, North Carolina 27883, which may be changed from time to time by Tenant.

 

4. Notice. Any notice required or permitted hereunder shall be in writing and forwarded to the recipient by hand delivery, United States Mail, postage prepaid, Certified Mail Return Receipt Requested, or by nationally recognized overnight courier (i.e., Federal Express), addressed to the party below to receive notice. Notice shall be deemed to be delivered when actually received by the designated recipient below.

 

Tenant:

 

North Carolina Tobacco Manufacturing, LLC

7427 NC Hwy 58 South

Stantonsburg, North Carolina 27883

 

 

Subtenant:

 

MVRK Farms LLC, Greener & Wilder LLC

and MVRK Research LLC

7427 NC Hwy 58 South

Stantonsburg, North Carolina 27883

 

Landlord:

 

MVRK Holdings LLC

7427 NC Hwy 58 South

Stantonsburg, North Carolina 27883

 

Such addresses may be changed from time to time by any party by providing notice to the other interested parties as described above.

 

5. Governing Law. This Sublease shall be construed in accordance with the laws of the State of North Carolina.

 

6. Incorporation of Prime Lease. This Sublease is subject to all of the terms of the Prime Lease with the same force and effect as if each provision of the Prime Lease were included in this Sublease, except as otherwise provided in this Sublease. All of the obligations of Tenant under the Prime Lease shall be binding upon Subtenant. All of the obligations of Landlord under the Prime Lease shall inure to the benefit of Subtenant. It is the intent of the parties that, except as otherwise provided in this Sublease, the relationship between Tenant and Subtenant shall be governed by the various provisions of the Prime Lease as if those provisions were included in this Sublease in full, except that the terms “Landlord,” “Tenant” and “Lease” as used in the Prime Lease, shall instead refer to, respectively, “Tenant,” “Subtenant” and “Sublease”.

 

7. Intended Use. Subtenant intends to use the Premises in connection with its smokable industrial hemp products, including storage, sales, shipping and marketing of the same.

 

8. This Sublease may be executed in counterparts, each of which shall be deemed an original and each of which shall together constitute one and the same agreement. A fully executed copy, pdf or facsimile copy of this Sublease shall be deemed an original for all purposes.

 

[Signatures Immediately Following]

 

 

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the date first written above.

 

LANDLORD:				TENANT:
MVRK HOLDINGS LLC				North Carolina Tobacco Manufacturing, LLC
By:				By:
	Name:	Victor Krahn			Name:	Victor Krahn
	Title:	Member			Title:	Member

 

SUBTENANT:
MVRK RESEARCH LLC
By:
Name:	Victor Krahn
Title:	Member
MVRK FARMS LLC
By:
Name:	Victor Krahn
Title:	Member
GREENER & WILDER LLC
By:
Name:	Victor Krahn
Title:	Member

 

 

3

Exhibit 11.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We consent to the inclusion in this Offering Statement on Form 1-A of the MVRK Lifestyle, Inc. (the “Company”) of our report dated August 22, 2022 which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, relating to the consolidated financial statements of the Company, which appears in this Offering Statement. We also consent to the reference to us under the heading “Experts” in such Offering Statement.

  

New York, NY

August 23, 2022

 

Exhibit 12.1

 

 

August 19, 2022

 

Gentlemen:

 

We are acting as counsel to Maverick Lifestyle, Inc. (the “Company”) in connection with the preparation and filing with the Securities and Exchange Commission, under the Securities Act of 1933, as amended, of the Company’s Offering Statement on Form 1-A.  The Offering Statement covers 10,000,000 shares of common stock offered at $2.50 per share. (the “Shares”)

 

In our capacity as such counsel, we have examined and relied upon the originals or copies certified or otherwise identified to our satisfaction, of the Offering Statement, the form of Subscription Agreement and such corporate records, documents, certificates and other agreements and instruments as we have deemed necessary or appropriate to enable us to render the opinions hereinafter expressed.

 

On the basis of such examination, we are of the opinion that:

 

1.

The Shares have been duly authorized by all necessary corporate action of the Company, and the Company has sufficient shares authorized and unencumbered to fulfill the underlying offering.

 

2.

The Shares each in their own regard, valid and binding obligations of the Company enforceable against the Company according with the terms described therein.

 

3.

When issued and sold by the Company against payment therefor pursuant to the terms of the Subscription Agreement, the Shares will be validly issued, fully paid and non-assessable.

  

We hereby consent to the use of our name in the Offering Statement and we also consent to the filing of this opinion as an exhibit thereto.  In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the rules and regulations of the Commission thereunder.

 

Very truly yours,

 

/s/ William R. Eilers
Eilers Law Group, P.A