0001213900-21-005419.txt : 20210129 0001213900-21-005419.hdr.sgml : 20210129 20210129165509 ACCESSION NUMBER: 0001213900-21-005419 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 50 CONFORMED PERIOD OF REPORT: 20200930 FILED AS OF DATE: 20210129 DATE AS OF CHANGE: 20210129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Generation Hemp, Inc. CENTRAL INDEX KEY: 0001527102 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 263119496 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55019 FILM NUMBER: 21572031 BUSINESS ADDRESS: STREET 1: 5128 HORSESHOE TRAIL CITY: DALLAS STATE: TX ZIP: 75209 BUSINESS PHONE: (469) 209-6154 MAIL ADDRESS: STREET 1: P.O. BOX 540308 CITY: DALLAS STATE: TX ZIP: 75354 FORMER COMPANY: FORMER CONFORMED NAME: Home Treasure Finders, Inc. DATE OF NAME CHANGE: 20110801 10-Q 1 f10q0920_generationhemp.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

(Mark One)

 

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

or

 

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                 to                

 

Commission File Number: 000-55019

 

GENERATION HEMP, INC.

(Exact name of registrant as specified in its charter)

 

Colorado   26-3119496
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
5128 Horseshoe Trail    
Dallas, Texas   75209
(Address of principal executive offices)   (Zip code)

 

(469) 209-6154

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, no par value   GENH   OTC MARKETS

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of January 29, 2021, the registrant had 24,130,332 shares of common stock outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
   
  PART I. FINANCIAL INFORMATION  
   
Item 1. Financial Statements 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
Item 4. Controls and Procedures 19
     
  PART II. OTHER INFORMATION  
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 21
Item 4. Mine Safety Disclosures 21
Item 6. Exhibits 21
     
SIGNATURES 22

 

i

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (the “Quarterly Report”) includes “forward-looking statements” within the meaning of 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”). All statements, other than statements of historical fact included in this report, regarding our strategy, future operations, financial position, estimated revenue, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under, but not limited to, the heading “Item 1A. Risk Factors” included in the Annual Report of Generation Hemp, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2019 (the “Annual Report”) and other filings with the Securities and Exchange Commission (“SEC”).

 

Forward-looking statements may include statements about:

 

the risk that our results could be adversely affected by natural disaster, public health crises (including, without limitation, the recent Coronavirus Disease 2019, or COVID-19, outbreak), political crises, negative global climate patterns, or other catastrophic events;
the marketability of our products;
financial condition and liquidity of our customers;
competition in the hemp markets;
industry and market conditions;
purchases by major customers and our ability to renew sales contracts;
credit and performance risks associated with customers, suppliers, banks and other financial counterparties;
availability, timing of delivery and costs of key supplies, capital equipment or commodities;
our future capital requirements and our ability to raise additional capital to finance our activities;
the future trading of our common stock;
legal and regulatory risks associated with OTC Markets;
our ability to operate as a public company;
our ability to protect our proprietary information;
general economic and business conditions; the volatility of our operating results and financial condition;
our ability to attract or retain qualified senior management personnel and research and development staff;
timing for completion of major acquisitions or capital projects;
our ability to obtain additional financing on favorable terms, if required, to complete acquisitions as currently contemplated or to fund the operations and growth of our business;
operating or other expenses or changes in the timing thereof;
compliance with stringent laws and regulations, as well as changes in the regulatory environment, the adoption of new or revised laws, regulations and permitting requirements;
potential legal proceedings and regulatory inquiries against us; and
other risks identified in this Quarterly Report that are not historical.

 

We caution you that these forward-looking statements are subject to a number of risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control, incident to the development, production, gathering and sale of coal. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved or occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

 

All forward-looking statements, expressed or implied, included in this report are expressly qualified in their entirety by this cautionary statement and speak only as of the date of this Quarterly Report. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

 

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this report.

 

ii

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Generation Hemp, Inc.

Unaudited Condensed Consolidated Balance Sheets

 

   September 30,   December 31, 
   2020   2019 
Assets        
Current Assets        
Cash  $82,766   $101,337 
Current assets of discontinued operations held for sale   -    20,835 
Total Current Assets   82,766    122,172 
           
Property and Equipment          
Property and equipment   1,222,430    1,223,353 
Accumulated depreciation   (86,899)   (32,322)
Total Property and Equipment, Net   1,135,531    1,191,031 
           
Noncurrent assets of discontinued operations held for sale   -    1,196,161 
Investment in common stock, at cost   18,223    32,959 
           
Total Assets  $1,236,520   $2,542,323 
           
Liabilities and Equity (Deficit)          
Current Liabilities          
Accounts payable  $1,039,080   $685,692 
Accrued liabilities   284,393    269,410 
Accrued interest – related parties   389,995    247,500 
Notes payable – related parties   2,048,874    1,708,874 
Mortgage payable   614,346    626,086 
Common stock units issuable   150,000    - 
Current liabilities of discontinued operations held for sale   133,193    1,315,581 
Total Current Liabilities   4,659,881    4,853,143 
Lease liability   -    44,333 
SBA PPP loan   25,200    - 
Long-term liabilities of discontinued operations held for sale   122,222    119,657 
Total Liabilities   4,807,303    5,017,133 
           
Commitments and Contingencies          
           
Equity (Deficit)          
Series A preferred stock, no par value; $1.00 stated value; 6,500,000 shares authorized, 6,328,948 shares issued and outstanding   4,975,503    4,975,503 
Common stock, no par value; 100,000,000 shares authorized, 17,380,317 and 17,130,317 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively   6,083,480    6,029,328 
Common stock warrants   3,472,794    3,426,946 
Accumulated deficit   (17,873,743)   (16,722,036)
Generation Hemp equity   (3,341,966)   (2,290,259)
Noncontrolling interest   (228,817)   (184,551)
Total Equity (Deficit)   (3,570,783)   (2,474,810)
           
Total Liabilities and Equity (Deficit)  $1,236,520   $2,542,323 

 

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

 

1

 

 

Generation Hemp, Inc.

Unaudited Condensed Consolidated Statements of Operations

 

   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2020   2019   2020   2019 
                 
Revenue  $22,500   $-   $67,500   $- 
                     
Costs and Expenses                    
Depreciation and amortization   16,038    3,264    54,961    9,798 
Impairment expense   -    -    -    247,574 
Merger and acquisition costs   6,856    183,103    99,880    360,858 
General and administrative   108,728    91,083    883,565    707,694 
Total costs and expenses   131,622    277,450    1,038,406    1,325,924 
                     
Operating loss   (109,122)   (277,450)   (970,906)   (1,325,924)
                     
Other expense (income)                    
Interest and other income   -    (154)   (1)   (963)
Change in fair value of marketable security   (1,826)   9,630    14,736    234,309 
Interest expense   68,475    49,378    204,875    135,837 
Total other expense   66,649    58,854    219,610    369,183 
                     
Loss from continuing operations   (175,771)   (336,304)   (1,190,516)   (1,695,107)
(Loss) income from discontinued operations   (7,989)   (47,232)   (5,457)   2,215,442 
                     
Net (loss) income   (183,760)   (383,536)   (1,195,973)   520,335 
Less: net loss attributable to noncontrolling interests   (4,904)   -    (44,266)   - 
Net (loss) income attributable to Generation Hemp  $(178,856)  $(383,536)  $(1,151,707)  $520,335 
                     
Earnings (loss) per common share:                    
Loss from continuing operations                    
Basic  $(0.01)  $(0.65)  $(0.07)  $(3.74)
Diluted  $(0.01)  $(0.65)  $(0.07)  $(3.74)
(Loss) income from discontinued operations                    
Basic  $(0.00)  $(0.09)  $(0.00)  $4.89 
Diluted  $(0.00)  $(0.09)  $(0.00)  $0.03 
Earnings (loss) per share                    
Basic  $(0.01)  $(0.74)  $(0.07)  $1.15 
Diluted  $(0.01)  $(0.74)  $(0.07)  $0.01 

 

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

 

2

 

 

Generation Hemp, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

 

   EHR Series A
Redeemable
Preferred Stock
   Preferred Stock   Common Stock   Common
Stock
   Accumulated   Noncontrolling   Total
Stockholders’
Equity
 
   Shares   Amount   Shares   Amount   Shares   Amount   Warrants   Deficit   Interest   (Deficit) 
                                         
Balance at January 1, 2019   412,500   $9,118,691    6,328,948   $4,975,503    418,342   $889,697   $-   $(6,411,483)  $-   $(546,283)
Cancellation of Series A preferred stock in disposal of oil & gas property interests   (412,500)   (9,118,691)   -    -    -    -    -    -    -    - 
Net income   -    -    -    -    -    -    -    1,197,003    -    1,197,003 
Balance at March 31, 2019   -    -    6,328,948    4,975,503    418,342    889,697    -    (5,214,480)   -    650,720 
Net loss   -    -    -    -    -    -    -    (293,132)   -    (293,132)
Balance at June 30, 2019   -    -    6,328,948    4,975,503    418,342    889,697    -    (5,507,612)   -    357,588 
Private placement of common stock   -    -    -    -    165,611    125,000    -    -    -    125,000 
Series C convertible preferred stock issuance   -    -    34,000    850,000    -    -    -    -    -    850,000 
Net loss   -    -    -    -    -    -    -    (383,536)   -    (383,536)
                                                   
Balance at September 30, 2019   -   $-    6,362,948   $5,825,503    583,953   $1,014,697   $-   $(5,891,148)  $-   $949,052 
                                                   
Balance at January 1, 2020   -   $-    6,328,948   $4,975,503    17,130,317   $6,029,328   $3,426,946   $(16,722,036)  $(184,551)  $(2,474,810)
Issuance of common stock units   -    -    -    -    250,000    54,152    45,848    -    -    100,000 
Net loss   -    -    -    -    -    -    -    (712,566)   (30,075)   (742,641)
Balance at March 31, 2020   -    -    6,328,948    4,975,503    17,380,317    6,083,480    3,472,794    (17,434,602)   (214,626)   (3,117,451)
Net loss   -    -    -    -    -    -    -    (260,285)   (9,287)   (269,572)
Balance at June 30, 2020   -    -    6,328,948    4,975,503    17,380,317    6,083,480    3,472,794    (17,694,887)   (223,913)   (3,387,023)
Net loss   -    -    -    -    -    -    -    (178,856)   (4,904)   (183,760)
                                                   
Balance at September 30, 2020   -   $-    6,328,948   $4,975,503    17,380,317   $6,083,480   $3,472,794   $(17,873,743)  $(228,817)  $(3,570,783)

 

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

 

3

 

 

Generation Hemp, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

 

   For the nine months ended
September 30,
 
   2020   2019 
Cash Flows From Operating Activities        
Net (loss) income  $(1,195,973)  $520,335 
Income from discontinued operations   (5,457)   2,215,442 
Net loss from continuing operations   (1,190,516)   (1,695,107)
Adjustments to reconcile net loss from continuing operations to net cash from operating activities:          
Depreciation expense   54,961    9,798 
Loss on disposal of property and equipment   539    - 
Impairment expense   -    247,574 
Change in fair value of marketable securities   14,736    234,309 
Changes in operating assets and liabilities:          
Prepaid expenses and other assets   -    182,295 
Accounts payable and accrued liabilities   466,533    351,871 
Net cash from operating activities – continuing operations   (653,747)   (669,260)
Net cash from operating activities – discontinued operations   31,716    37,976 
Net cash from operating activities   (622,031)   (631,284)
           
Cash Flows From Investing Activities          
Additions to property and equipment   -    (394)
Proceeds from disposal of property and equipment   -    1,000 
Net cash from investing activities – continuing operations   -    606 
Net cash from investing activities – discontinued operations   -    (17,333)
Net cash from investing activities   -    (16,727)
           
Cash Flows From Financing Activities          
Proceeds from third party for shares to be issued   150,000    - 
Proceeds from issuance of common stock units   100,000    - 
Proceeds from private placement of common stock   -    125,000 
Proceeds from Series C convertible preferred stock issuance   -    850,000 
Proceeds from SBA PPP loan   25,200    - 
Proceeds from subordinated promissory note   340,000    - 
Payment of note payable   (11,740)   - 
Net cash from financing activities – continuing operations   603,460    975,000 
Net cash from financing activities – discontinued operations   -    - 
Net cash from financing activities   603,460    975,000 
           
Net change in cash   (18,571)   326,989 
           
Cash, beginning of period   101,337    426,952 
Cash, end of period  $82,766   $753,941 

 

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

4

 

 

Generation Hemp, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

1. BUSINESS

 

Generation Hemp, Inc. (the “Company”), formerly known as Home Treasure Finders, Inc. (“HTF”), was initially incorporated on July 28, 2008 in the State of Colorado. On March 3, 2014, the Company formed a wholly-owned subsidiary, HMTF Cannabis Holdings, Inc. to purchase properties that qualify for legal cultivation of cannabis. The Company generates income from its real estate holdings.

 

On November 27, 2019, HTF completed the purchase of approximately 68% of the common stock of Energy Hunter Resources, Inc. (“EHR”) through the issuance of 6,328,948 shares of the Company’s Series A Preferred Stock (“Series A Preferred”). Each share of the Series A Preferred; (a) converts into 12 shares of common stock of the Company, (b) possesses full voting rights, on an as-converted basis, with the common stock of the Company, and (c) has no dividend rate. The acquisition, together with the other transactions contemplated by the Stock Purchase Agreement, dated August 15, 2019 are referred to herein as the “Transaction”. In connection with the closing of the Transaction, HTF changed its name to Generation Hemp, Inc.

 

In an exchange transaction also effective November 27, 2019, the Company acquired an additional 26% of the common stock of EHR through the issuance of common stock and warrants.

 

The Company owns approximately 94% of the issued and outstanding common stock of EHR. Thus, EHR is a majority-owned subsidiary of the Company. EHR is an oil and gas exploration and production company whose core properties as of September 30, 2020 were located in the Cochran County, Texas within the Slaughter-Levelland Field of the San Andres formation in the Northwest Shelf of West Texas. EHR held an 8.0% interest in certain oil and gas and/ or oil, gas and mineral leases, lands interests, and other properties located in Cochran County. EHR’s oil & gas activities are currently held for sale and are presented in these consolidated financial statements as discontinued operations for each of the periods presented.

 

Going Concern and Management’s Plans The Company is dependent upon obtaining additional funding to continue ongoing operations, pursue its new strategy and execute its acquisition plans. The Company currently has limited revenue.

 

Management plans to continue to pursue additional funding opportunities, in order for the Company to meet its obligations as they become due and may not be successful in obtaining additional financing. In the event financing cannot be obtained, the Company may not be able to satisfy its obligations as they become due.

 

Based on these factors, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Response to the Coronavirus Disease 2019 (COVID-19) Pandemic on Our BusinessOn March 11, 2020, the World Health Organization declared the current COVID-19 outbreak to be a global pandemic, and on March 13, 2020, the United States declared a national emergency. In an effort to contain COVID-19 or slow its spread, governments around the world have enacted various measures, including orders to close all businesses not deemed “essential,” isolate residents to their homes or places of residence and practice social distancing when engaging in essential activities. These actions and the global health crisis caused by COVID-19 have created significant volatility, uncertainty and economic disruption.

 

Our business, results of operations and financial condition were adversely affected by the COVID-19 pandemic, especially beginning in mid-March, and such impact has materially worsened to date in the second and third quarters. The COVID-19 pandemic and measures taken to contain it have subjected our business, results of operations, financial condition, stock price and liquidity to a number of material risks and uncertainties, all of which may continue or worsen.

 

The extent of the potential effect of the COVID-19 pandemic will depend on future actions and outcomes, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the outbreak, the short-term and long-term economic impact of the outbreak (including the effect on consumer discretionary spending and our employees in the markets in which we operate), the actions taken to mitigate the impact of the virus, and the pace of economic and financial market recovery when the COVID-19 pandemic subsides, among others.

 

5

 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation—These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain disclosures have been condensed or omitted from these financial statements. Accordingly, they do not include all the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete consolidated financial statements, and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary to fairly present the financial position as of, and the results of operations for, all periods presented. In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the condensed consolidated financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results. Certain reclassifications have been made to the prior period’s consolidated financial statements and related footnotes to conform them to the current period presentation. Intercompany balances and transactions between consolidated entities are eliminated.

 

Common stock units issuable—From time to time, the Company accepts payment from investors for common stock unit subscriptions pursuant to approved offerings of securities. Amounts received before completion and closing of the offerings are reported as liabilities.

 

Fair Value Measurement—Our financial assets and liabilities consist of cash, accounts receivable, accounts payable and notes payable. The fair values of these instruments approximate their carrying amounts at each reporting date.

 

The Company’s non-financial assets measured at fair value on non-recurring basis include impairment measurements of oil and gas properties and the Company’s investment in common stock before it became publicly traded. These are considered Level 3 measurements as they involve significant unobservable inputs.

 

Major Customer and Concentration of Credit Risk—We have a limited number of customers. We estimate an allowance for doubtful accounts based on an analysis of specific customers, taking into consideration the age of past due accounts and an assessment of the customer’s ability to pay. An allowance for doubtful accounts was not needed as of September 30, 2020 or December 31, 2019.

 

Our rental income is derived from a single lessee on a commercial warehouse owned by the Company. There were no amounts due from this customer at September 30, 2020 or December 31, 2019.

 

Recent Accounting Pronouncements—In February 2016, the FASB issued ASU 2016-02, Leases, which aims to make leasing activities more transparent and comparable and requires substantially all leases be recognized by lessees on their balance sheet as a night-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases, Leases of mineral reserves and related land leases are exempted from the standard. The Company adopted ASU 2016-02 on January 1, 2019 and elected the package of practical expedients within the standard which permits the Company not to reassess prior conclusions about lease identification, lease classification and initial direct costs, The Company made an accounting policy election to not separate lease and non-lease components for all leases. The adoption of this standard resulted in the recognition of right-of-use assets and lease liabilities for the Company’s office lease totaling $279,111 on January 1, 2019.

 

6

 

 

3. DISCONTINUED OPERATIONS

 

In connection with the Transaction, management determined to fully divest of EHR’s oil and gas activities. These activities are presented as discontinued operations for each of the periods presented and are being actively marketed for sale.

 

The following is a summary of the carrying amounts of major classes of assets and liabilities of the discontinued operations to assets and liabilities held for sale:

 

   September 30,   December 31, 
   2020   2019 
Assets        
Accounts receivable -        
Current assets of discontinued operations held for sale  $-   $20,835 
           
Oil and Natural Gas Properties held for sale, at cost, using the successful efforts method   1,874,849    5,285,340 
Accumulated DD&A   (1,874,849)   (4,089,179)
Total oil and gas properties, net of discontinued operations held for sale   -    1,196,161 
Total assets of discontinued operations held for sale  $-   $1,216,996 
           
Liabilities          
Accrued liabilities  $24,242   $92,196 
Asset retirement obligations   56,834    52,776 
Revenue payable   52,117    70,609 
Note payable   -    1,100,000 
Current liabilities of discontinued operations held for sale   133,193    1,315,581 
           
Asset retirement obligations -          
Long term liabilities of discontinued operations held for sale   122,222    119,657 
Total liabilities of discontinued operations held for sale  $255,415   $1,435,238 

 

The following is a summary of the major classes of line items constituting loss on discontinued operations shown in the consolidated statements of operations:

 

   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2020   2019   2020   2019 
Revenue -                
Oil and gas sales  $13,036   $50,044   $93,361   $417,431 
                     
Costs and Expenses                    
Lease operating expense   16,762    66,555    77,099    303,780 
Depreciation, depletion & amortization   -    13,005    9,942    60,722 
Accretion   4,263    3,966    12,868    29,008 
Gain on disposal of oil & gas property interests   -    -    (24,008)   (1,666,790)
Impairment & abandonment   -    -    -    229,466 
Mergers & acquisition costs   -    -    -    100,000 
Total costs and expenses   21,025    83,526    75,901    (943,814)
                     
Other income   -    -    -    (881,697)
Interest expense   -    13,750    22,917    27,500 
                     
Income from discontinued operations  $(7,989)  $(47,232)  $(5,457)  $2,215,442 

 

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2019 Disposal of Oil & Gas Property InterestsOn March 1, 2019, the Company entered into a Termination, Repurchase and Release Agreement (the “Agreement”) with Lubbock Energy Partners LLC (“LEP”) wherein the Company reassigned a 52% working interest in the oil & gas assets acquired in the San Andres Acquisition #1 back to LEP (with the Company continuing to hold an 8% working interest in those assets) in exchange for the return and cancellation of 412,500 shares of the Company’s Series A Preferred Stock plus all accrued and unpaid dividends thereon and LEP’s assumption of the Company’s obligations under its Senior Subordinated Debentures totaling $400,000. Operatorship of the oil & gas assets was transferred by the Company to LEP, and amounts owed by the Company to LEP and all trade payables associated with the assets were memorialized in the form of a non-recourse promissory note totaling $1.1 million. The Company and LEP also entered into certain financial arrangements and mutual releases in order to settle all existing disputes relating to the assets arising prior to the effective date. The promissory note was due March 1, 2020, bore interest at 5% per annum and required no payments until maturity. The Company recognized a gain on disposal of $1,666,790 within the loss from discontinued operations in the consolidated statements of operations. In May 2020, the $1.1 million non-recourse promissory note and accrued interest thereon was settled upon LEP’s foreclosure of the Company’s Gap Band property interest.

 

Impairment of Oil & Gas Property InterestsIn the fourth quarter of 2019, the Company’s oil and gas properties became impaired due to the market decline and the Company’s determination to exit the oil and gas business. The Company’s interest in the San Andres Acquisition #1 was determined to be fully impaired and its interest in the Gap Band property was determined to have a fair value of $1.2 million. Impairment expense totaling $3,730,678 was recorded in the fourth quarter of 2019 within the loss from discontinued operations in the consolidated statements of operations to reduce the carrying values of the Company’s oil and gas property interests to their estimated fair values.

 

2020 Disposal of Gap Band Property InterestIn May 2020, LEP completed the foreclosure of the Company’s remaining ownership interest in the Gap Band property due to the Company’s default on its $1.1 million non-recourse promissory note and accrued interest thereon. The Company recognized a gain of $24,008 in the second quarter of 2020 as a result of this disposal.

 

4. NOTES PAYABLE—RELATED PARTIES

 

Senior Secured Promissory NoteOn March 31, 2017, the Company entered into a subscription agreement under which we issued a $3,000,000 10% Senior Secured Promissory Note with an initial maturity of September 1, 2017 to Satellite Overseas (Holdings) Limited (“SOHL”), a stockholder of the Company’s common shares. The Senior Secured Promissory Note was funded through three equal monthly draws of $1 million made in April, May, and June 2017. Upon maturity, at the option of the holder, the Senior Secured Promissory Note may either become due and payable or convert into shares of common stock at 75% of the share price in a qualified equity offering.

 

The Company and SOHL agreed to nine interim extensions of the maturity date. As extended, the maturity date was April 30, 2020. There have been no formal demands of repayment since this maturity. The interest rate of the Senior Secured Promissory Note is 12%.

 

The contingent put option in the Senior Secured Promissory Note is an embedded derivative that is recorded at fair value. The fair value calculation includes Level 3 inputs including the estimated fair value of the Company’s common stock and assumptions regarding the probability that the contingent put will be exercised. Management determined that the probability that the convertible note will be settled in shares was near zero at inception and has remained near zero during the term of the promissory note. The holder has indicated to the Company that they do not intend to exercise the conversion option. Therefore, the Company concluded that the fair value of the embedded derivative was near zero throughout the term of the convertible note.

 

The outstanding balance of the Senior Secured Promissory Note was $1,500,000 at September 30, 2020 and December 31, 2019. Accrued interest and fees on the Senior Secured Promissory Note were $372,500 and $247,500 at September 30, 2020 and December 31, 2019, respectively.

 

Convertible Promissory NoteIn October 2019, HTF issued a convertible promissory note to EHR in exchange for EHR’s payment of HTF’s accounts payable and Transaction expenses. The convertible promissory note bears interest at 4% per annum and matures on November 1, 2021. Commencing 180 days subsequent to the date of the convertible promissory note, any portion or all of the principal and accrued interest payable is convertible by the holder at any time prior to payment into the common stock of the Company at a rate of $0.352 of principal and/or interest per share.

 

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EHR distributed the convertible promissory note receivable to its shareholders prior to consummation of the Transaction. The outstanding balance owed by the Company under this convertible promissory note was $208,874 at September 30, 2020 and December 31, 2019.

 

Subordinated Promissory NoteOur CEO made advances totaling $340,000 during the first nine months of 2020 under a subordinated promissory note due September 30, 2021. The note bears interest at 10% per annum. Accrued interest on this subordinated promissory note totaled $17,495 at September 30, 2020.

 

5. OTHER INDEBTEDNESS

 

Mortgage Payable and Operating LeaseThe Company is obligated under a mortgage payable, dated September 15, 2014 and as amended October 1, 2019, secured by its warehouse property located in Denver, Colorado. The note provides for a 25 year amortization period and an initial interest rate of 9% annually. As amended, the note matured on July 15, 2020 but was extended under terms of the amendment to January 15, 2021 after payment by the Company of a extension fee of 1% of the then outstanding principal. The rate during this first extension period is 10% annually and the monthly payment is $5,590. The maturity date may be subsequently extended at the Company’s option to July 15, 2021 after payment again of a extension fee of 1% of the then outstanding principal. The interest rate will increase to 11% annually if this extension is made.

 

As of September 30, 2020, the balance of the mortgage payable was $614,346 and the present maturity is January 15, 2021. As of December 31, 2019, the balance of the mortgage payable was $626,086.

 

The Company leases the Denver warehouse property to a tenant under an operating leases expiring June 30, 2021 for a monthly rent of $7,500. The lease requires the tenant reimburse us for property taxes and insurance and maintains the interior and exterior of the warehouse (except for the roof). Minimum future rents for the remainder of 2020 are $22,500 and for 2021 are $45,000.

 

Paycheck Protection Program Loan Congress created the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to provide forgivable loans to eligible small businesses facing economic hardship to retain U.S. employees on their payroll during the Coronavirus Disease 2019 (“COVID-19”) pandemic.

 

PPP loan recipients may be eligible to have their loans forgiven if the funds were used for eligible expenses over the eight-week coverage period commencing when the loan was originally disbursed. The amount of forgiveness may be reduced if the percentage of eligible expenses attributed to nonpayroll expenses exceeds 25% of the loan, if employee headcount decreases, or compensation decreases by more than 25% for each employee making less than $100,000 per year, unless the reduced headcount or compensation levels are restored.

 

On April 29, 2020, Generation Hemp, Inc. received disbursement of an approved PPP loan in the amount of $25,200. The Company anticipates that this entire disbursement amount will be forgiven under the current program requirements for forgiveness eligibility.

 

6. COMMITMENTS AND CONTINGENCIES

 

LeasesOn March 31, 2019, the Company abandoned its office lease. This office lease required monthly payments of $10,802 until its expiration on May 31, 2021. No rent payments have been made since abandonment. The lessor has made a claim for rent and the Company has made a counterclaim due to the premises being uninhabitable due to the actions of other tenants located on the floor. At September 30, 2020, the Company had accrued unpaid rent totaling $252,583.

 

Rent expense for the three and nine months ended September 30, 2020 totaled $0 and $8,380, respectively. Rent expense for the three and nine months ended September 30, 2019 totaled $5,904 and $60,980, respectively.

 

LitigationFrom time to time, we are subject to various litigation and other claims in the normal course of business. Below is a discussion of two specific matters. We cannot estimate the ultimate outcome of these matters.

 

JDONE, LLC v. Grand Traverse Holdings, LLC and John Gallegos, Denver District Court Case No. 2019CV33723

 

JDONE is a wholly owned subsidiary of the Company and landlord of a commercial warehouse building that was leased to Grand Traverse on December 31, 2018 for a term of 61 months, with a personal guaranty from Defendant John Gallegos. On April 12, 2019, Grand Traverse presented JDONE with a forged, signed copy of the draft early termination amendment that JDONE had previously rejected. JDONE has suffered damages due to Defendant’s misconduct of $823,504 plus interest and attorney’s fees. A court ordered mediation was held in May 2020 without success. All material defendant motions have been denied by the court. The case is set for jury trial in calendar year 2021.

 

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KBSIII Tower at Lake Carolyn, LLC and Prime US-Tower at Lake Carolyn, LLC (collectively – “KBSIII”) vs. Energy Hunter Resources, Inc.

 

Plaintiff/Counterdefendant KBSIII is seeking lost rent on office space for periods after EHR vacated office premises located in Las Colinas, Texas. EHR has filed a counter suit alleging specific damages due to uninhabitable premises of the office space due to the intolerable conduct of other tenants located on the same floor. On December 23, 2020, the trial court entered a summary judgment against EHR for $230,712. The judgment provides for post-judgment interest at a rate of 5% per annum until paid and further provides for additional amounts owed should EHR pursue unsuccessful appeals to higher courts. The previous judge who entered the judgment has left the bench. A new judge has been appointed to this court and the Company has filed a motion for a new trial based upon erroneous amounts awarded in the summary judgment.

 

7. EQUITY

 

Issuance of common stock unitsIn February 2020, the Company issued 250,000 common units for $100,000. Each unit consisted of one share of common stock and a warrant for purchase of one common share for $0.40 per share. The warrant expires March 1, 2022 and contain certain anti-dilution provisions requiring a downward adjustment to the exercise price of the warrant if dilutive instruments are issued at prices less than the warrant exercise price. Proceeds of this issuance were used for general corporate purposes.

 

The common stock issued in the exchange was valued using the traded price of the common stock on February 20, 2020. The warrants were valued at $45,848 using a binomial lattice valuation model using inputs as of the exchange date. Our expected volatility assumption was based on the historical volatility of the Company’s common stock (252%). The expected life assumption was based on the expiration date of the warrant (two years). The risk-free interest rate for the expected term of the warrant was based on the U.S.Treasury yield curve in effect at the time of measurement (1.39%). The warrants are classified within equity in the consolidated balance sheets. Under GAAP, the anti-dilution provisions will be accounted for if and when these provisions are triggered.

 

Common stock warrants outstanding—Following is a summary of warrants outstanding as of September 30, 2020:

 

   # of
Warrants
   Exercise
Price (each)
   Expiration
Date
  Method of
Exercise
               
Issued upon exchange of EHR Series C Preferred Stock(1)   7,244,319   $0.352   November 27, 2021  Cash
Issued upon exchange of EHR Series C Preferred Stock(1)   7,244,319   $0.352   November 27, 2021  Cashless
Issued in February 2020 with common stock units(2)   250,000   $0.400   March 1, 2022  Cash

 

(1)May be redeemed beginning October 1, 2020 for $0.0001 per warrant at the Company’s option with 30 days advanced notice should the weighted average market price of common stock exceed $1.00 for any five out of seven consecutive trading days with a minimum average daily trading volume for such seven-day period of at least 25,000 shares of common stock.

 

(2)Contains certain anti-dilution provisions requiring a downward adjustment to the exercise price of the warrant if dilutive instruments are issued at prices less than the warrant exercise price.

 

8. INCOME TAXES

 

Income tax provisions for interim quarterly periods are generally based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items related specifically to interim periods.

 

An income tax benefit for the three or nine months ended September 30, 2020 was not recognized because the Company expects to incur a tax loss in the current year. This tax loss is expected to result in a net operating loss carryforward at year-end; which is expected to be fully offset by a valuation allowance.

 

The Company did not recognize any income tax benefit for the three or nine months ended September 30, 2019 because tax losses incurred for the year were fully offset by a valuation allowance against deferred tax assets.

 

There were no uncertain tax positions as of September 30, 2020.

 

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9. SUPPLEMENTAL CASH FLOW INFORMATION

 

   For the nine months ended
September 30,
 
   2020   2019 
         
Cash paid for interest  $        -   $       - 
Cash paid for taxes   -    - 
           
Noncash investing and financing activities:          
Initial recognition of right to use asset and lease liabilities   -    279,111 
Right of use asset amortization   -    31,537 
Apply deposit against lease liability   -    10,690 

 

10. EARNINGS (LOSS) PER SHARE

 

The following is the computation of earnings (loss) per basic and diluted share:

 

   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2020   2019   2020   2019 
Amounts attributable to Generation Hemp:                
Numerator                
Net loss from continuing operations attributable to common stockholders  $(171,367)  $(336,304)  $(1,146,592)  $(1,695,107)
(Loss) income from discontinued operations   (7,489)   (47,232)   (5,115)   2,215,442 
Net (loss) income attributable to common stockholders  $(178,856)  $(383,536)  $(1,151,707)  $520,335 
                     
Denominator                    
Weighted average shares used to compute basic EPS   17,380,317    520,949    17,500,308    452,920 
Dilutive effect of preferred stock   75,947,376    75,947,376    75,947,376    75,947,376 
Dilutive effect of common stock warrants   -    -    -    - 
Weighted average shares used to compute diluted EPS   93,327,693    76,468,325    93,447,684    76,400,296 
                     
Earnings (loss) per share:                    
Loss from continuing operations                    
Basic  $(0.01)  $(0.65)  $(0.07)  $(3.74)
Diluted  $(0.01)  $(0.65)  $(0.07)  $(3.74)
(Loss) income from discontinued operations                    
Basic  $(0.00)  $(0.09)  $(0.00)  $4.89 
Diluted  $(0.00)  $(0.09)  $(0.00)  $0.03 
Earnings (loss) per share                    
Basic  $(0.01)  $(0.74)  $(0.07)  $1.15 
Diluted  $(0.01)  $(0.74)  $(0.07)  $0.01 

 

The computation of diluted earnings per common share excludes the assumed conversion of the Series A Preferred Stock and exercise of common stock warrants in periods when we report a loss. The dilutive effect of the assumed exercise of outstanding warrants was calculated using the treasury stock method. A total of 14,738,638 outstanding warrants are excluded from the computation of diluted shares for the three months ended September 30, 2020 because their effect would be anti-dilutive. A total of 14,693,018 warrants were similarly excluded in the computation for the nine months ended September 30, 2020. The computation for the three and nine months ended September 30, 2019 excluded 14,488,638 outstanding warrants.

 

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11. SUBSEQUENT EVENTS

 

Issuance of Subordinated Promissory Note to Our CEOOur CEO made additional advances through 2020 under a subordinated promissory note due September 30, 2021. The total outstanding balance at January 29, 2021 was $490,000.

 

Issuance of Preferred Stock UnitsOn December 30, 2020, the Company sold to certain accredited investors, including Gary C. Evans, Chief Executive Officer, an aggregate of 135 common stock units comprised of (i) one share of Series B Redeemable Convertible Preferred Stock, no par value, and (ii) one warrant exercisable for 50,000 shares of common stock of the Company.

 

The sale of the preferred stock units for $10,000 each resulted in aggregate gross proceeds of approximately $1.35 million, before deducting estimated offering expenses payable by the Company. Substantially all of the proceeds raised in the offering were used to fund the acquisition of assets of Halcyon Thruput, LLC, expenses related thereto and for general corporate purposes.

 

Each share of Series B Preferred Stock is initially convertible into 25,000 shares of common stock, subject to adjustment. Holders of Series B Preferred Stock are entitled to receive dividends of 6.00% per annum based on the stated value equal to $10,000 per share. Except as otherwise required by law, the Series B Preferred Stock does not have voting rights. However, as long as any shares of Series B Preferred Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series B Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock, (b) alter or amend the related certificate of designation, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series B Preferred Stock, (d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its common stock, (e) enter into any agreement with respect to any of the foregoing, or (f) pay cash dividends or distributions on any equity securities of the Company other than pursuant to the terms of the its outstanding Series B Preferred Stock. The Series B Preferred Stock does not have a preference upon any liquidation, dissolution or winding-up of the Company.

 

Beginning the later of June 30, 2021 or the effectiveness of any registration statement registering the underlying common shares, all or any portion of the Series B Preferred Stock may be converted, at their holder’s option, into 25,000 shares of common stock, as adjusted for any stock dividends, splits, combinations or similar events.

 

At any time after the occurrence of a “Qualifying Event,” the Company, upon 5-day written notice, shall have the right to cause each share of Series B Preferred Stock (and all accrued in-kind dividends with respect thereto) to be converted into common stock. For purposes this automatic conversion of the Series B Preferred Stock, a "Qualifying Event" shall have occurred if (A) (1) the rolling five (5)-trading day volume-weighted average trading price of shares of the common stock exceeds $1.00, and (2) there shall be an effective registration statement under the Securities Act of 1933, as amended covering all of the shares of common stock which would be issuable upon conversion of all of the outstanding shares of Series B Preferred Stock or (B) the Company closes a firm commitment underwriting of the common stock on a Form S-1 Registration Statement with aggregate gross proceeds of at least $5,000,000 at a price per share equal to or greater than $1.00.

 

The Series B Preferred Stock may be redeemed by the Company for its stated value, plus accrued and unpaid dividends, at any time. On March 31, 2021, and June 30, 2021, September 30, 2021, December 31, 2021, a payment of 12.5% of the total amount of Series B Preferred Stock then outstanding plus accrued dividends will be due from the Company to each Holder of Series B Preferred Stock as a partial redemption by the Company of such Holder.

 

Each warrant is exercisable until the 24-month anniversary of the date of issuance at an exercise price of $0.352 per share. The exercise price of the warrants will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction. The warrants may only be exercised for cash.

 

Issuance of Subordinated Promissory Note and Warrants to InvestorOn December 30, 2020, the Company issued a subordinated promissory note in principal amount of $500,000 to an accredited investor. The unpaid balance of the Subordinated Note bears interest at a rate of 10% per annum. The subordinated note and accrued and unpaid interest are due September 30, 2021. The Company will make payments of principal of $250,000 on March 30 and September 30, 2021.

 

If at any time prior to September 30, 2021, the Company raises new equity capital in the amount of $5,000,000 or more, then within five (5) business days of closing, repayment of all outstanding principal and interest on the Subordinated Note will be due.

 

In addition, the holder of the Subordinated Note received a warrant to purchase 500,000 shares of Common Stock on terms and conditions substantially similar to those provided in the above described warrant.

 

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Acquisition of Assets of Halcyon Thruput, LLCOn January 11, 2021, the Company completed the acquisition of 100% of the assets of Halcyon Thruput, LLC (“Halcyon Thruput”) pursuant to the Asset Purchase Agreement dated March 7, 2020, as amended on January 11, 2021. The purchase consideration totaled approximately $5.1 million consisting of 6,250,000 shares of Company common stock valued at $2.5 million (valued at $0.40 per share; restricted from trading for a period of up to one year), $1.75 million in cash, a promissory note for $850 thousand issued by the Company’s subsidiary, GenH Halcyon Acquisition, LLC, and guaranteed by Gary C. Evans, CEO of the Company, and assumption of approximately $1.0 million of new indebtedness of Halcyon Thruput.

 

The Company will continue Halcyon Thruput’s business of providing post-harvest and midstream services to growers by drying, processing, cleaning, stripping harvested hemp directly from the field and wetbaled at its 48,000 square foot facility located in Hopkinsville, Kentucky.

 

Concurrent with the closing of the asset acquisition, the Company entered into term employment agreements with Jack Sibley and Watt Stephens to serve as Vice Presidents of GenH Halcyon Acquisition, LLC for a term of at least two years. The term employment agreements each provide for the issuance of 250,000 shares of restricted common stock of the Company as a signing bonus. Such shares are subject to restrictions on the trading or transfer of such common stock as described therein.

 

Further, the term employment agreements each provide for the payment by the executives of liquidated damages if the employee terminates his employment without good reason during the initial term, other than due to the employee’s death or disability. Such liquidated damages total $600,000 if such termination occurs on or prior to January 11, 2022 or $375,000 if such termination occurs after January 11, 2022 and prior to January 11, 2023.

 

* * * * *

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report, as well as the financial statements and related notes appearing elsewhere in this Quarterly Report. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. We caution you that our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences are discussed elsewhere in this Quarterly Report, particularly in the “Cautionary Note Regarding Forward-Looking Statements” and in our Annual Report under the heading “Item 1A. Risk Factors,” all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

 

Overview

 

We are a holding company active within the “hemp” space. We were initially incorporated on July 28, 2008 in the State of Colorado. On November 27, 2019, we completed the Transaction with Energy Hunter Resources, Inc. (“EHR”). As part of the Transaction, we changed our name from Home Treasure Finders, Inc. to Generation Hemp, Inc.

 

The Transaction was accounted for as a reverse merger, whereby EHR is considered to be the accounting acquirer and became a majority-owned subsidiary of the Company. Accordingly, the Company’s historical financial statements prior to the reverse merger were and will be replaced with the historical financial statements of EHR prior to the reverse merger and in this and all future filings with the U.S. Securities and Exchange Commission (the “SEC”). There is limited historical financial information about our Company upon which to base an evaluation of our future performance. We cannot guarantee that we will be successful in the hemp businesses. We are subject to risks inherent in a small company, including limited capital resources, delays and cost overruns due to price and cost increases. There is no assurance that future financing will be available to our Company on acceptable terms. Additional equity financing could result in dilution to existing shareholders.

 

We own approximately 94% of the issued and outstanding common stock of EHR. At December 31, 2019, EHR held an 8.0% interest in certain oil and gas and/ or oil, gas and mineral leases, lands interests, and other properties located in Cochran County and a 28.125% interest in certain oil and gas and/or oil, gas and mineral leases, lands interests, and other properties located in Karnes County. EHR’s oil & gas activities are currently held for sale and are presented in the consolidated financial statements as discontinued operations for each of the periods presented.

 

In May 2020, Lubbock Energy Partners LLC (“LEP”)  completed the foreclosure of the Company’s remaining ownership interest in the Gap Band property in Karnes County due to the Company’s default on its $1.1 million non-recourse promissory note and accrued interest thereon. The Company recognized a gain of $24,008 in the second quarter of 2020 as a result of this disposal.

 

Going Concern and Management’s Plans The Company is dependent upon obtaining additional funding to continue ongoing operations, pursue its new strategy and execute its acquisition plans.

 

Management plans to continue to pursue additional funding opportunities, in order for the Company to meet its obligations as they become due and may not be successful in obtaining additional financing. In the event financing cannot be obtained, the Company may not be able to satisfy its obligations as they become due.

 

Based on these factors, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Response to the Coronavirus Disease 2019 (COVID-19) Pandemic on Our BusinessOn March 11, 2020, the World Health Organization declared the current COVID-19 outbreak to be a global pandemic, and on March 13, 2020, the United States declared a national emergency. In an effort to contain COVID-19 or slow its spread, governments around the world have enacted various measures, including orders to close all businesses not deemed “essential,” isolate residents to their homes or places of residence and practice social distancing when engaging in essential activities. These actions and the global health crisis caused by COVID-19 have created significant volatility, uncertainty and economic disruption.

 

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Our business, results of operations and financial condition were adversely affected by the COVID-19 pandemic, especially beginning in mid-March, and such impact has materially worsened to date in the second and third quarters. The COVID-19 pandemic and measures taken to contain it have subjected our business, results of operations, financial condition, stock price and liquidity to a number of material risks and uncertainties, all of which may continue or worsen.

 

The extent of the potential effect of the COVID-19 pandemic will depend on future actions and outcomes, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the outbreak, the short-term and long-term economic impact of the outbreak (including the effect on consumer discretionary spending and our employees in the markets in which we operate), the actions taken to mitigate the impact of the virus, and the pace of economic and financial market recovery when the COVID-19 pandemic subsides, among others.

 

Results of Operations

 

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

 

The net loss for the three months ended September 30, 2020 was $179 thousand as compared with net loss of $384 thousand for the same period of 2019. The loss in the 2020 period was principally caused by the Company’s anticipated exit from oil & gas activities as discussed further below and pending expansion of our new business activities.

 

The Company reports its oil & gas activities as discontinued operations. Loss from discontinued operations was $8 thousand for the three months ended September 30, 2020 as compared with a loss of $47 thousand in the 2019 period.

 

The Company’s continuing operations were limited in each period to merger and acquisition activities including preparing for and closing the Transaction in 2019 and the pending Halcyon Thruput, LLC transaction in 2020. The Company has incurred significant professional fees for the preparation and audits or reviews of financial statements included in SEC filings.

 

Revenue. Revenue from continuing operations is presently limited. The Company leases its Denver warehouse under a lease for $7,500 per month.

 

Merger and Acquisition Costs. We incurred $7 thousand of costs for evaluating acquisition opportunities during the three months ended September 30, 2020 and $183 thousand in such expenses in the comparable 2019 period. The amount of future expenses of this type that we incur will depend upon our future acquisition activities.

 

General and Administrative Expense. General and administrative expenses totaled $109 thousand for the three months ended September 30, 2020 as compared with $91 thousand in 2019 period. Approximately two-thirds of these expenses were for professional fees for the preparation and audits or reviews of our financial statements included in SEC filings.

 

Depreciation and Amortization. Total depreciation and amortization expense was not significant in the 2020 or 2019 periods. We expect higher levels of depreciation expense as our asset base grows.

 

Other Income/Expense. Total other expense was $67 thousand for the three months ended September 30, 2020 as compared with $59 thousand for the comparable 2019 period. Higher levels of interest expense in the 2020 period were partially offset by the lower impact of the change in fair value of the marketable security we hold.

 

Income from Discontinued Operations. In the three months ended September 30, 2019, we recognized a loss from discontinued operations of $47 thousand as compared with $8 thousand in the three months ended September 30, 2020. The major classes of line items constituting the loss on discontinued operations is presented in Item I, “Financial Statements—Note 3—Discontinued Operations.”

 

15

 

 

On March 1, 2019, the Company entered into a Termination, Repurchase and Release Agreement (the “Agreement”) with LEP wherein the Company reassigned a 52% working interest in the oil & gas assets acquired in the San Andres Acquisition #1 back to LEP (with the Company continuing to hold an 8% working interest in those assets). Since the March 1, 2019 disposal and with continued downturns in oil & gas pricing and production for our remaining property interests, results of operations for the Company’s oil & gas activities have been significantly reduced. As a result, the Company recorded a substantial impairment of its oil and gas properties in the fourth quarter of 2019.

 

In May 2020, LEP completed the foreclosure of the Company’s remaining ownership interest in the Gap Band property in Karnes County due to the Company’s default on its $1.1 million non-recourse promissory note and accrued interest thereon. The Company recognized a gain of $24,008 in the second quarter of 2020 as a result of this disposal.

 

Until we fully dispose of our remaining oil & gas property interests, we expect that future revenues and costs will be substantially lower than incurred in previous periods as our ownership interests are lower and production activities have declined substantially. We do not anticipate making future investment of growth capital into these properties.

 

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

 

The net loss for the nine months ended September 30, 2020 was $1.2 million as compared with net income of $520 thousand for the same period of 2019. The loss in the 2020 period was principally caused by the Company’s anticipated exit from oil & gas activities as discussed further below and pending expansion of our new business activities.

 

The Company reports its oil & gas activities as discontinued operations. Loss from discontinued operations was $5 thousand for the nine months ended September 30, 2020 as compared with income of $2.2 million in the 2019 period. We recognized a gain on partial disposal of our oil & gas properties of $1.7 million in the nine months ended September 30, 2019. Since that disposal and with continued downturns in oil & gas pricing and production for our remaining property interests, results of operations for the Company’s oil & gas activities have been significantly reduced.

 

The Company’s continuing operations were limited in each period to merger and acquisition activities including preparing for and closing the Transaction in 2019 and the pending Halcyon transaction in 2020. The Company has incurred significant professional fees for the preparation and audits or reviews of financial statements included in SEC filings.

 

Revenue. Revenue from continuing operations is presently limited. The Company leases its Denver warehouse under a lease for $7,500 per month.

 

Impairment Expense. The Company recognized a $247 thousand impairment of its right-to-use asset for leased office space in the first quarter of 2019.

 

Merger and Acquisition Costs. We incurred $100 thousand of costs for evaluating acquisition opportunities during the nine months ended September 30, 2020 and $361 thousand in such expenses in the comparable 2019 period. The amount of future expenses of this type that we incur will depend upon our future acquisition activities.

 

General and Administrative Expense. General and administrative expenses totaled $884 thousand for the nine months ended September 30, 2020 as compared with $708 thousand in 2019 period. Approximately two-thirds of these expenses were for professional fees for the preparation and audits or reviews of our financial statements included in SEC filings.

 

Depreciation and Amortization. Total depreciation and amortization expense was not significant in the 2020 or 2019 periods. We expect higher levels of depreciation expense as our asset base grows.

 

Other Income/Expense. Total other expense was $220 thousand for the nine months ended September 30, 2020 as compared with $369 thousand for the comparable 2019 period. Higher levels of interest expense in the 2020 period were partially offset by the lower impact of the change in fair value of the marketable security we hold.

 

16

 

 

Income from Discontinued Operations. In the nine months ended September 30, 2019, we recognized income from discontinued operations of $2.2 million as compared with a loss of $5 thousand in the nine months ended September 30, 2020. The major classes of line items constituting the loss on discontinued operations is presented in Item I, “Financial Statements—Note 3—Discontinued Operations.”

 

On March 1, 2019, the Company entered into a Termination, Repurchase and Release Agreement (the “Agreement”) with LEP wherein the Company reassigned a 52% working interest in the oil & gas assets acquired in the San Andres Acquisition #1 back to LEP (with the Company continuing to hold an 8% working interest in those assets) in exchange for the return and cancellation of 412,500 shares of the Company’s Series A Preferred Stock plus all accrued and unpaid dividends thereon and LEP’s assumption of the Company’s obligations under its Senior Subordinated Debentures totaling $400,000. Operatorship of the oil & gas assets was transferred by the Company to LEP, and amounts owed by the Company to LEP and all trade payables associated with the assets were memorialized in the form of a non-recourse promissory note totaling $1.1 million. The Company and LEP also entered into certain financial arrangements and mutual releases in order to settle all existing disputes relating to the assets arising prior to the effective date. The promissory note was due March 1, 2020, bore interest at 5% per annum and required no payments until maturity. The Company recognized a gain on disposal of $1.7 million within income from discontinued operations in the first quarter of 2019. In May 2020, the $1.1 million non-recourse promissory note and accrued interest thereon was settled upon LEP’s foreclosure of the Company’s Gap Band property interest. The Company recognized a gain of $24,008 in the second quarter of 2020 as a result of this disposal.

 

We recognized other income of $882 thousand in 2019 as part of discontinued operations for option and promote fees on oil & gas property interest transactions with third parties. We do not expect such activities in the future.

 

Since the March 1, 2019 disposal and with continued downturns in oil & gas pricing and production for our remaining property interests, results of operations for the Company’s oil & gas activities have been significantly reduced. As a result, the Company recorded a substantial impairment of its oil and gas properties in the fourth quarter of 2019.

 

Until we fully dispose of our remaining oil & gas property interests, we expect that future revenues and costs will be substantially lower than incurred in previous periods as our ownership interests are lower and production activities have declined substantially. We do not anticipate making future investment of growth capital into these properties.

 

Liquidity and Capital Resources

 

Our primary source of cash from continuing operations is limited presently to rental income for the lease of our hemp warehouse in Denver, Colorado. Our primary uses of cash include general and administrative expenses and merger and acquisition expenses.

 

Cash flow information from continuing operations was as follows:

 

Cash used in operating activities during the nine months ended September 30, 2020 was $654 thousand as compared with $669 thousand for the same period of 2019.
Net cash used in investing activities was not significant in either period.
Cash flows from financing activities were $603 thousand and $975 thousand for the nine months ended September 30, 2020 and 2019, respectively, which was primarily due to net borrowings and private placements of common stock units during the periods.

 

17

 

 

Cash flow information from discontinued operations was as follows:

 

Cash flows from operating activities totaled $32 thousand during the 2020 period as compared with $38 thousand in 2019.
Net cash used in investing activities was $17 thousand for the nine months ended September 30, 2019. We had no cash flows from investing activities in the current year as we significantly curtailed oil & gas development efforts in 2019 as we were making our decision to exit this business.
There were no cash flows from financing activities in the nine months ended September 30, 2020 or 2019.

 

Funding Requirements

 

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we grow our hemp business.

 

We expect that we will require additional capital to fund operations, including hiring additional employees and completing acquisitions during the next twelve (12) month period.

 

Because of the numerous risks and uncertainties associated with the development and commercialization of our business, we are unable to estimate the amounts of increased capital outlays and operating expenses. Our future capital requirements will depend on many factors, including:

 

our success in identifying and making acquisitions of profitable operations;
our ability to negotiate operating contracts with growers and others within the hemp industry on favorable terms, if at all;
deriving revenue from our assets and operations; and
the cost of such operations and costs of being a public company.

 

Until such time, if ever, as we can generate substantial revenues, we expect to finance our cash needs through a combination of equity offerings and debt financings. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common shareholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our growth plans and future commercialization efforts.

 

Indebtedness

 

The Company’s indebtedness at September 30, 2020 is presented in Item I, “Financial Statements—Note 4—Notes Payable—Related Parties” and in Item I, “Financial Statements—Note 5—Other Indebtedness.”

 

We have also secured additional funding including certain indebtedness as discussed in Item I, “Financial Statements—Note 11—Subsequent Events.”

 

Off-Balance Sheet Arrangements

 

As of September 30, 2020, we had no material off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Quantitative and qualitative disclosures about market risk are included in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of our Annual Report on Form 10-K for the year ended December 31, 2019.

 

18

 

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, the principal executive officer believes that the Company’s disclosure controls and procedures are not effective due to the following material weaknesses.

 

We lacked the ability to have adequate segregation of duties in the financial statement preparation process. Further the Company did not maintain adequate documentation for review and supporting matters impacting financial reporting in gathering, analyzing and disclosing information needed to ensure that the information required to be disclosed by the Company in its periodic reports is recorded, summarized and processed timely.

 

Plan for Remediation of Material Weaknesses

 

Since these entity level controls have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

 

We believe that we have improved our internal control over financial reporting by taking certain corrective steps that we believe minimize the likelihood of a recurrence. We have designed a disclosure controls and procedures regime pursuant to which our management has, among other things:

 

(a)identified the definition, objectives, application and scope of our internal control over financial reporting;

 

(b)delineated the duties of each member of the group responsible for maintaining the adequacy of our internal control over financial reporting. This group consists of our Chief Executive Officer and independent consultants who were engaged to prepare and assure compliance with both our internal control over financial reporting as well as our disclosure controls and procedures and review our disclosure controls and procedures on a regular basis, subject to our management’s supervision.

 

We continue implementation of required key controls, the necessary steps required for procedures to ensure the appropriate communication and review of inputs necessary for the financial statement closing process, as well as for the appropriate presentation of disclosures within the financial statements. The remediation steps taken are subject to the Chief Executive Officer’s oversight. While management believes there have been significant improvements of internal controls over financial reporting since the year ended December 31, 2019, management anticipates that further continuing efforts will be needed to effectively remediate the material deficiencies relating to segregation of duties and maintaining adequate supporting documentation to substantiate the information reported in the financial statements which existed as of December 31, 2019, and to assure that complex transactions are properly recorded as the business continues to grow. Our management has been actively engaged in planning for, designing and implementing the corrective steps described above to enhance the effectiveness of our disclosure controls and procedures as well as our internal control over financial reporting. Our management is committed to achieving and maintaining a strong control environment, high ethical standards, and financial reporting integrity, and will take further steps to ensure that personnel are adequate in terms of sophistication and quantity to adequately assure that the financial reporting process is efficient and operated with the sufficient level of integrity to meet and surpass all regulatory standards.

 

19

 

 

While management is implementing corrective steps to remediate its internal control deficiencies, we cannot assure you that they will be sufficient enough to be free of a material weakness. If we should in the future conclude that our internal control over financial reporting suffers from a material weakness, we will be required to expend additional resources to improve it. Any additional instances of material deficiencies could require a restatement of our financial statements. If such restatements are required, there could be a material adverse effect on our investors’ confidence that our financial statements fairly present our financial condition and results of operations, which in turn could materially and adversely affect the market price of our common stock.

 

Changes in Internal Control over Financial Reporting

 

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities and migrating processes.

 

Other than the remediation activities undertaken by us as disclosed above, there have been no changes in our internal control over financial reporting during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

20

 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Due to the nature of our business, we may become, from time to time, involved in routine litigation or subject to disputes or claims related to our business activities. While the outcome of these proceedings cannot be predicted with certainty, in the opinion of our management, there are no pending litigation, disputes or claims against us which, if decided adversely, individually or in the aggregate, will have a material adverse effect on our financial condition, cash flows or results of operations. For a description of our legal proceedings, see Note 6 to the Condensed Consolidated Financial Statements included in Part I of this Quarterly Report.

 

Item 1A. Risk Factors

 

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in our Annual Report and the risk factors and other cautionary statements contained in our other SEC filings, which could materially affect our businesses, financial condition or future results.

 

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. There have been no material changes in our risk factors from those described in our Annual Report.

 

Item 4. Mine Safety Disclosures

 

No response required.

 

Item 5. Other Information

 

No response required.

 

Item 6. Exhibits

 

*31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
**32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

*Exhibit filed herewith.
**Furnished herewith. Pursuant to SEC Release No. 33-8212, this certification will be treated as “accompanying” this Quarterly Report on Form 10-Q and not “filed” as part of such report for purposes of Section 18 of the Exchange Act or otherwise subject to the liability under Section 18 of the Exchange Act, and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act, except to the extent that the registrant specifically incorporates it by reference.

 

21

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  GENERATION HEMP, INC.
     
January 29, 2021 By: Gary C. Evans
    Gary C. Evans
    Chairman and Chief Executive Officer

 

 

22

 

 

EX-31.1 2 f10q0920ex31-1_generation.htm CERTIFICATION

Exhibit 31.1

 

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002 

 

I, Gary C. Evans, certify that:

 

1) I have reviewed this Quarterly Report of Generation Hemp, Inc. on Form 10-Q;

 

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

 

4) I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))  for the Registrant and have;

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure the material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation.

 

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5) I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process summarize and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls over financial reporting.

 

DATE: January 29, 2021 By: /s/ Gary C. Evans
   

Gary C. Evans

Chairman

Chief Executive Officer

(Principal Executive Officer and Principal Accounting and Financial Officer)

EX-32.1 3 f10q0920ex32-1_generation.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT 0F 2002

  

In connection with the Quarterly Report of Generation Hemp, Inc. (the Company”) on Form 10-Q for the period ended herein as filed with the Securities and Exchange Commission (the “Report”), I. Gary C. Evans, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)The information contained in the Report fully presents, in all material respects, the financial condition and results of operations or the Company.

 

DATE: January 29, 2021 By: /s/ Gary C. Evans
   

Gary C. Evans

Chairman

Chief Executive Officer

(Principal Executive Officer and Principal Accounting and Financial Officer)

 

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The term employment agreements each provide for the issuance of 250,000 shares of restricted common stock of the Company as a signing bonus. Such shares are subject to restrictions on the trading or transfer of such common stock as described therein.</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><font style="font-family: Times New Roman, Times, Serif">&#160;</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><font style="font-family: Times New Roman, Times, Serif">Further, the term employment agreements each provide for the payment by the executives of liquidated damages if the employee terminates his employment without good reason during the initial term, other than due to the employee's death or disability. Such liquidated damages total $600,000 if such termination occurs on or prior to January 11, 2022 or $375,000 if such termination occurs after January 11, 2022 and prior to January 11, 2023.</font></p> 490000 May be redeemed beginning October 1, 2020 for $0.0001 per warrant at the Company's option with 30 days advanced notice should the weighted average market price of common stock exceed $1.00 for any five out of seven consecutive trading days with a minimum average daily trading volume for such seven-day period of at least 25,000 shares of common stock. Contains certain anti-dilution provisions requiring a downward adjustment to the exercise price of the warrant if dilutive instruments are issued at prices less than the warrant exercise price. 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Jan. 29, 2021
Document And Entity Information    
Entity Registrant Name Generation Hemp, Inc.  
Entity Central Index Key 0001527102  
Amendment Flag false  
Document Type 10-Q  
Document Period End Date Sep. 30, 2020  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2020  
Entity Filer Category Non-accelerated Filer  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Incorporation State Country Code CO  
Entity Interactive data current Yes  
Entity File Number 000-55019  
Entity Common Stock, Shares Outstanding   24,130,332
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Unaudited Condensed Consolidated Balance Sheets - USD ($)
Sep. 30, 2020
Dec. 31, 2019
Current Assets    
Cash $ 82,766 $ 101,337
Current assets of discontinued operations held for sale 20,835
Total Current Assets 82,766 122,172
Property and Equipment    
Property and equipment 1,222,430 1,223,353
Accumulated depreciation (86,899) (32,322)
Total Property and Equipment, Net 1,135,531 1,191,031
Noncurrent assets of discontinued operations held for sale 1,196,161
Investment in common stock, at cost 18,223 32,959
Total Assets 1,236,520 2,542,323
Current Liabilities    
Accounts payable 1,039,080 685,692
Accrued liabilities 284,393 269,410
Accrued interest – related parties 389,995 247,500
Notes payable – related parties 2,048,874 1,708,874
Mortgage payable 614,346 626,086
Common stock units issuable 150,000
Current liabilities of discontinued operations held for sale 133,193 1,315,581
Total Current Liabilities 4,659,881 4,853,143
Lease liability 44,333
SBA PPP loan 25,200
Long-term liabilities of discontinued operations held for sale 122,222 119,657
Total Liabilities 4,807,303 5,017,133
Commitments and Contingencies
Equity (Deficit)    
Series A preferred stock, no par value; $1.00 stated value; 6,500,000 shares authorized, 6,328,948 shares issued and outstanding 4,975,503 4,975,503
Common stock, no par value; 100,000,000 shares authorized, 17,380,317 and 17,130,317 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively 6,083,480 6,029,328
Common stock warrants 3,472,794 3,426,946
Accumulated deficit (17,873,743) (16,722,036)
Generation Hemp equity (3,341,966) (2,290,259)
Noncontrolling interest (228,817) (184,551)
Total Equity (Deficit) (3,570,783) (2,474,810)
Total Liabilities and Equity (Deficit) $ 1,236,520 $ 2,542,323
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Dec. 31, 2019
Common stock, par value
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 17,380,317 17,130,317
Common stock, shares outstanding 17,380,317 17,130,317
Series A Preferred Stock    
Preferred stock, par value $ 1.00 $ 1.00
Preferred stock, shares authorized 6,500,000 6,500,000
Preferred stock, shares issued 6,328,948 6,328,948
Preferred stock, shares outstanding 6,328,948 6,328,948
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Unaudited Condensed Consolidated Statements of Operations - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Income Statement [Abstract]        
Revenue $ 22,500 $ 67,500
Costs and Expenses        
Depreciation and amortization 16,038 3,264 54,961 9,798
Impairment expense 247,574
Merger and acquisition costs 6,856 183,103 99,880 360,858
General and administrative 108,728 91,083 883,565 707,694
Total costs and expenses 131,622 277,450 1,038,406 1,325,924
Operating loss (109,122) (277,450) (970,906) (1,325,924)
Other expense (income)        
Interest and other income (154) (1) (963)
Change in fair value of marketable security (1,826) 9,630 14,736 234,309
Interest expense 68,475 49,378 204,875 135,837
Total other expense 66,649 58,854 219,610 369,183
Loss from continuing operations (175,771) (336,304) (1,190,516) (1,695,107)
(Loss) income from discontinued operations (7,989) (47,232) (5,457) 2,215,442
Net (loss) income (183,760) (383,536) (1,195,973) 520,335
Less: net loss attributable to noncontrolling interests (4,904) (44,266)
Net (loss) income attributable to Generation Hemp $ (178,856) $ (383,536) $ (1,151,707) $ 520,335
Loss from continuing operations        
Basic $ (0.01) $ (0.65) $ (0.07) $ (3.74)
Diluted (0.01) (0.65) (0.07) (3.74)
(Loss) income from discontinued operations        
Basic 0.00 (0.09) 0.00 4.89
Diluted 0.00 (0.09) 0.00 0.03
Earnings (loss) per share        
Basic (0.01) (0.74) (0.07) 1.15
Diluted $ (0.01) $ (0.74) $ (0.07) $ 0.01
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Unaudited Condensed Consolidated Statements of Stockholders' Equity - USD ($)
EHR Series A Redeemable Preferred Stock
Preferred Stock
Common Stock
Common Stock Warrants
Accumulated Deficit
Noncontrolling Interest
Total
Balance at Dec. 31, 2018 $ 9,118,691 $ 4,975,503 $ 889,697 $ (6,411,483) $ (546,283)
Balance, shares at Dec. 31, 2018 412,500 6,328,948 418,342        
Cancellation of Series A preferred stock in disposal of oil & gas property interests $ (9,118,691)
Cancellation of Series A preferred stock in disposal of oil & gas property interests, shares (412,500)            
Net income (loss) 1,197,003 1,197,003
Balance at Mar. 31, 2019 $ 4,975,503 $ 889,697 (5,214,480) 650,720
Balance, shares at Mar. 31, 2019 6,328,948 418,342        
Balance at Dec. 31, 2018 $ 9,118,691 $ 4,975,503 $ 889,697 (6,411,483) (546,283)
Balance, shares at Dec. 31, 2018 412,500 6,328,948 418,342        
Net income (loss)             520,335
Balance at Sep. 30, 2019   $ 5,825,503 $ 1,014,697 (5,891,148) 949,052
Balance, shares at Sep. 30, 2019   6,362,948 583,953        
Balance at Mar. 31, 2019 $ 4,975,503 $ 889,697 (5,214,480) 650,720
Balance, shares at Mar. 31, 2019 6,328,948 418,342        
Net income (loss) (293,132) (293,132)
Balance at Jun. 30, 2019 $ 4,975,503 $ 889,697 (5,507,612) 357,588
Balance, shares at Jun. 30, 2019 6,328,948 418,342        
Private placement of common stock $ 125,000 125,000
Private placement of common stock, shares     165,611        
Series C convertible preferred stock issuance $ 850,000 850,000
Series C convertible preferred stock issuance, shares   34,000          
Net income (loss) (383,536) (383,536)
Balance at Sep. 30, 2019   $ 5,825,503 $ 1,014,697 (5,891,148) 949,052
Balance, shares at Sep. 30, 2019   6,362,948 583,953        
Balance at Dec. 31, 2019 $ 4,975,503 $ 6,029,328 3,426,946 (16,722,036) (184,551) (2,474,810)
Balance, shares at Dec. 31, 2019 6,328,948 17,130,317        
Issuance of common stock units $ 54,152 45,848 100,000
Issuance of common stock units, shares 250,000        
Net income (loss) (712,566) (30,075) (742,641)
Balance at Mar. 31, 2020 $ 4,975,503 $ 6,083,480 3,472,794 (17,434,602) (214,626) (3,117,451)
Balance, shares at Mar. 31, 2020 6,328,948 17,380,317        
Balance at Dec. 31, 2019 $ 4,975,503 $ 6,029,328 3,426,946 (16,722,036) (184,551) (2,474,810)
Balance, shares at Dec. 31, 2019 6,328,948 17,130,317        
Net income (loss)             (1,195,973)
Balance at Sep. 30, 2020   $ 4,975,503 $ 6,083,480 3,472,794 (17,873,743) (228,817) (3,570,783)
Balance, shares at Sep. 30, 2020   6,328,948 17,380,317        
Balance at Mar. 31, 2020 $ 4,975,503 $ 6,083,480 3,472,794 (17,434,602) (214,626) (3,117,451)
Balance, shares at Mar. 31, 2020 6,328,948 17,380,317        
Net income (loss) (260,285) (9,287) (269,572)
Balance at Jun. 30, 2020   $ 4,975,503 $ 6,083,480 3,472,794 (17,694,887) (223,913) (3,387,023)
Balance, shares at Jun. 30, 2020   6,328,948 17,380,317        
Net income (loss)         (178,856) (4,904) (183,760)
Balance at Sep. 30, 2020   $ 4,975,503 $ 6,083,480 $ 3,472,794 $ (17,873,743) $ (228,817) $ (3,570,783)
Balance, shares at Sep. 30, 2020   6,328,948 17,380,317        
XML 15 R6.htm IDEA: XBRL DOCUMENT v3.20.4
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($)
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Cash Flows From Operating Activities    
Net (loss) income $ (1,195,973) $ 520,335
Income from discontinued operations (5,457) 2,215,442
Net loss from continuing operations (1,190,516) (1,695,107)
Adjustments to reconcile net loss from continuing operations to net cash from operating activities:    
Depreciation expense 54,961 9,798
Loss on disposal of property and equipment 539
Impairment expense 247,574
Change in fair value of marketable securities 14,736 234,309
Changes in operating assets and liabilities:    
Prepaid expenses and other assets 182,295
Accounts payable and accrued liabilities 466,533 351,871
Net cash from operating activities – continuing operations (653,747) (669,260)
Net cash from operating activities – discontinued operations 31,716 37,976
Net cash from operating activities (622,031) (631,284)
Cash Flows From Investing Activities    
Additions to property and equipment (394)
Proceeds from disposal of property and equipment 1,000
Net cash from investing activities – continuing operations 606
Net cash from investing activities – discontinued operations (17,333)
Net cash from investing activities (16,727)
Cash Flows From Financing Activities    
Proceeds from third party for shares to be issued 150,000
Proceeds from issuance of common stock units 100,000
Proceeds from private placement of common stock 125,000
Proceeds from Series C convertible preferred stock issuance 850,000
Proceeds from SBA PPP loan 25,200
Proceeds from subordinated promissory note 340,000
Payment of note payable (11,740)
Net cash from financing activities – continuing operations 603,460 975,000
Net cash from financing activities – discontinued operations
Net cash from financing activities 603,460 975,000
Net change in cash (18,571) 326,989
Cash, beginning of period 101,337 426,952
Cash, end of period $ 82,766 $ 753,941
XML 16 R7.htm IDEA: XBRL DOCUMENT v3.20.4
Business
9 Months Ended
Sep. 30, 2020
Business [Abstract]  
BUSINESS

1. BUSINESS

 

Generation Hemp, Inc. (the "Company"), formerly known as Home Treasure Finders, Inc. ("HTF"), was initially incorporated on July 28, 2008 in the State of Colorado. On March 3, 2014, the Company formed a wholly-owned subsidiary, HMTF Cannabis Holdings, Inc. to purchase properties that qualify for legal cultivation of cannabis. The Company generates income from its real estate holdings.

 

On November 27, 2019, HTF completed the purchase of approximately 68% of the common stock of Energy Hunter Resources, Inc. ("EHR") through the issuance of 6,328,948 shares of the Company's Series A Preferred Stock ("Series A Preferred"). Each share of the Series A Preferred; (a) converts into 12 shares of common stock of the Company, (b) possesses full voting rights, on an as-converted basis, with the common stock of the Company, and (c) has no dividend rate. The acquisition, together with the other transactions contemplated by the Stock Purchase Agreement, dated August 15, 2019 are referred to herein as the "Transaction". In connection with the closing of the Transaction, HTF changed its name to Generation Hemp, Inc.

 

In an exchange transaction also effective November 27, 2019, the Company acquired an additional 26% of the common stock of EHR through the issuance of common stock and warrants.

 

The Company owns approximately 94% of the issued and outstanding common stock of EHR. Thus, EHR is a majority-owned subsidiary of the Company. EHR is an oil and gas exploration and production company whose core properties as of September 30, 2020 were located in the Cochran County, Texas within the Slaughter-Levelland Field of the San Andres formation in the Northwest Shelf of West Texas. EHR held an 8.0% interest in certain oil and gas and/ or oil, gas and mineral leases, lands interests, and other properties located in Cochran County. EHR's oil & gas activities are currently held for sale and are presented in these consolidated financial statements as discontinued operations for each of the periods presented.

 

Going Concern and Management's Plans The Company is dependent upon obtaining additional funding to continue ongoing operations, pursue its new strategy and execute its acquisition plans. The Company currently has limited revenue.

 

Management plans to continue to pursue additional funding opportunities, in order for the Company to meet its obligations as they become due and may not be successful in obtaining additional financing. In the event financing cannot be obtained, the Company may not be able to satisfy its obligations as they become due.

 

Based on these factors, there is substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Response to the Coronavirus Disease 2019 (COVID-19) Pandemic on Our BusinessOn March 11, 2020, the World Health Organization declared the current COVID-19 outbreak to be a global pandemic, and on March 13, 2020, the United States declared a national emergency. In an effort to contain COVID-19 or slow its spread, governments around the world have enacted various measures, including orders to close all businesses not deemed "essential," isolate residents to their homes or places of residence and practice social distancing when engaging in essential activities. These actions and the global health crisis caused by COVID-19 have created significant volatility, uncertainty and economic disruption.

 

Our business, results of operations and financial condition were adversely affected by the COVID-19 pandemic, especially beginning in mid-March, and such impact has materially worsened to date in the second and third quarters. The COVID-19 pandemic and measures taken to contain it have subjected our business, results of operations, financial condition, stock price and liquidity to a number of material risks and uncertainties, all of which may continue or worsen.

 

The extent of the potential effect of the COVID-19 pandemic will depend on future actions and outcomes, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the outbreak, the short-term and long-term economic impact of the outbreak (including the effect on consumer discretionary spending and our employees in the markets in which we operate), the actions taken to mitigate the impact of the virus, and the pace of economic and financial market recovery when the COVID-19 pandemic subsides, among others.

XML 17 R8.htm IDEA: XBRL DOCUMENT v3.20.4
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation—These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain disclosures have been condensed or omitted from these financial statements. Accordingly, they do not include all the information and notes required by accounting principles generally accepted in the United States of America ("GAAP") for complete consolidated financial statements, and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary to fairly present the financial position as of, and the results of operations for, all periods presented. In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the condensed consolidated financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results. Certain reclassifications have been made to the prior period's consolidated financial statements and related footnotes to conform them to the current period presentation. Intercompany balances and transactions between consolidated entities are eliminated.

 

Common stock units issuable—From time to time, the Company accepts payment from investors for common stock unit subscriptions pursuant to approved offerings of securities. Amounts received before completion and closing of the offerings are reported as liabilities.

 

Fair Value Measurement—Our financial assets and liabilities consist of cash, accounts receivable, accounts payable and notes payable. The fair values of these instruments approximate their carrying amounts at each reporting date.

 

The Company's non-financial assets measured at fair value on non-recurring basis include impairment measurements of oil and gas properties and the Company's investment in common stock before it became publicly traded. These are considered Level 3 measurements as they involve significant unobservable inputs.

 

Major Customer and Concentration of Credit Risk—We have a limited number of customers. We estimate an allowance for doubtful accounts based on an analysis of specific customers, taking into consideration the age of past due accounts and an assessment of the customer's ability to pay. An allowance for doubtful accounts was not needed as of September 30, 2020 or December 31, 2019.

 

Our rental income is derived from a single lessee on a commercial warehouse owned by the Company. There were no amounts due from this customer at September 30, 2020 or December 31, 2019.

 

Recent Accounting Pronouncements—In February 2016, the FASB issued ASU 2016-02, Leases, which aims to make leasing activities more transparent and comparable and requires substantially all leases be recognized by lessees on their balance sheet as a night-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases, Leases of mineral reserves and related land leases are exempted from the standard. The Company adopted ASU 2016-02 on January 1, 2019 and elected the package of practical expedients within the standard which permits the Company not to reassess prior conclusions about lease identification, lease classification and initial direct costs, The Company made an accounting policy election to not separate lease and non-lease components for all leases. The adoption of this standard resulted in the recognition of right-of-use assets and lease liabilities for the Company's office lease totaling $279,111 on January 1, 2019.

XML 18 R9.htm IDEA: XBRL DOCUMENT v3.20.4
Discontinued Operations
9 Months Ended
Sep. 30, 2020
Discontinued Operations [Abstract]  
DISCONTINUED OPERATIONS

3. DISCONTINUED OPERATIONS

 

In connection with the Transaction, management determined to fully divest of EHR's oil and gas activities. These activities are presented as discontinued operations for each of the periods presented and are being actively marketed for sale.

 

The following is a summary of the carrying amounts of major classes of assets and liabilities of the discontinued operations to assets and liabilities held for sale:

 

   September 30,   December 31, 
   2020   2019 
Assets        
Accounts receivable -        
Current assets of discontinued operations held for sale  $-   $20,835 
           
Oil and Natural Gas Properties held for sale, at cost, using the successful efforts method   1,874,849    5,285,340 
Accumulated DD&A   (1,874,849)   (4,089,179)
Total oil and gas properties, net of discontinued operations held for sale   -    1,196,161 
Total assets of discontinued operations held for sale  $-   $1,216,996 
           
Liabilities          
Accrued liabilities  $24,242   $92,196 
Asset retirement obligations   56,834    52,776 
Revenue payable   52,117    70,609 
Note payable   -    1,100,000 
Current liabilities of discontinued operations held for sale   133,193    1,315,581 
           
Asset retirement obligations -          
Long term liabilities of discontinued operations held for sale   122,222    119,657 
Total liabilities of discontinued operations held for sale  $255,415   $1,435,238 

 

The following is a summary of the major classes of line items constituting loss on discontinued operations shown in the consolidated statements of operations:

 

   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2020   2019   2020   2019 
Revenue -                
Oil and gas sales  $13,036   $50,044   $93,361   $417,431 
                     
Costs and Expenses                    
Lease operating expense   16,762    66,555    77,099    303,780 
Depreciation, depletion & amortization   -    13,005    9,942    60,722 
Accretion   4,263    3,966    12,868    29,008 
Gain on disposal of oil & gas property interests   -    -    (24,008)   (1,666,790)
Impairment & abandonment   -    -    -    229,466 
Mergers & acquisition costs   -    -    -    100,000 
Total costs and expenses   21,025    83,526    75,901    (943,814)
                     
Other income   -    -    -    (881,697)
Interest expense   -    13,750    22,917    27,500 
                     
Income from discontinued operations  $(7,989)  $(47,232)  $(5,457)  $2,215,442 

 

2019 Disposal of Oil & Gas Property InterestsOn March 1, 2019, the Company entered into a Termination, Repurchase and Release Agreement (the "Agreement") with Lubbock Energy Partners LLC ("LEP") wherein the Company reassigned a 52% working interest in the oil & gas assets acquired in the San Andres Acquisition #1 back to LEP (with the Company continuing to hold an 8% working interest in those assets) in exchange for the return and cancellation of 412,500 shares of the Company's Series A Preferred Stock plus all accrued and unpaid dividends thereon and LEP's assumption of the Company's obligations under its Senior Subordinated Debentures totaling $400,000. Operatorship of the oil & gas assets was transferred by the Company to LEP, and amounts owed by the Company to LEP and all trade payables associated with the assets were memorialized in the form of a non-recourse promissory note totaling $1.1 million. The Company and LEP also entered into certain financial arrangements and mutual releases in order to settle all existing disputes relating to the assets arising prior to the effective date. The promissory note was due March 1, 2020, bore interest at 5% per annum and required no payments until maturity. The Company recognized a gain on disposal of $1,666,790 within the loss from discontinued operations in the consolidated statements of operations. In May 2020, the $1.1 million non-recourse promissory note and accrued interest thereon was settled upon LEP's foreclosure of the Company's Gap Band property interest.

 

Impairment of Oil & Gas Property InterestsIn the fourth quarter of 2019, the Company's oil and gas properties became impaired due to the market decline and the Company's determination to exit the oil and gas business. The Company's interest in the San Andres Acquisition #1 was determined to be fully impaired and its interest in the Gap Band property was determined to have a fair value of $1.2 million. Impairment expense totaling $3,730,678 was recorded in the fourth quarter of 2019 within the loss from discontinued operations in the consolidated statements of operations to reduce the carrying values of the Company's oil and gas property interests to their estimated fair values.

 

2020 Disposal of Gap Band Property InterestIn May 2020, LEP completed the foreclosure of the Company's remaining ownership interest in the Gap Band property due to the Company's default on its $1.1 million non-recourse promissory note and accrued interest thereon. The Company recognized a gain of $24,008 in the second quarter of 2020 as a result of this disposal.

XML 19 R10.htm IDEA: XBRL DOCUMENT v3.20.4
Notes Payable—Related Parties
9 Months Ended
Sep. 30, 2020
Related Party Transactions [Abstract]  
NOTES PAYABLE—RELATED PARTIES

4. NOTES PAYABLE—RELATED PARTIES

 

Senior Secured Promissory NoteOn March 31, 2017, the Company entered into a subscription agreement under which we issued a $3,000,000 10% Senior Secured Promissory Note with an initial maturity of September 1, 2017 to Satellite Overseas (Holdings) Limited ("SOHL"), a stockholder of the Company's common shares. The Senior Secured Promissory Note was funded through three equal monthly draws of $1 million made in April, May, and June 2017. Upon maturity, at the option of the holder, the Senior Secured Promissory Note may either become due and payable or convert into shares of common stock at 75% of the share price in a qualified equity offering.

 

The Company and SOHL agreed to nine interim extensions of the maturity date. As extended, the maturity date was April 30, 2020. There have been no formal demands of repayment since this maturity. The interest rate of the Senior Secured Promissory Note is 12%.

 

The contingent put option in the Senior Secured Promissory Note is an embedded derivative that is recorded at fair value. The fair value calculation includes Level 3 inputs including the estimated fair value of the Company's common stock and assumptions regarding the probability that the contingent put will be exercised. Management determined that the probability that the convertible note will be settled in shares was near zero at inception and has remained near zero during the term of the promissory note. The holder has indicated to the Company that they do not intend to exercise the conversion option. Therefore, the Company concluded that the fair value of the embedded derivative was near zero throughout the term of the convertible note.

 

The outstanding balance of the Senior Secured Promissory Note was $1,500,000 at September 30, 2020 and December 31, 2019. Accrued interest and fees on the Senior Secured Promissory Note were $372,500 and $247,500 at September 30, 2020 and December 31, 2019, respectively.

 

Convertible Promissory NoteIn October 2019, HTF issued a convertible promissory note to EHR in exchange for EHR's payment of HTF's accounts payable and Transaction expenses. The convertible promissory note bears interest at 4% per annum and matures on November 1, 2021. Commencing 180 days subsequent to the date of the convertible promissory note, any portion or all of the principal and accrued interest payable is convertible by the holder at any time prior to payment into the common stock of the Company at a rate of $0.352 of principal and/or interest per share.

 

EHR distributed the convertible promissory note receivable to its shareholders prior to consummation of the Transaction. The outstanding balance owed by the Company under this convertible promissory note was $208,874 at September 30, 2020 and December 31, 2019.

 

Subordinated Promissory NoteOur CEO made advances totaling $340,000 during the first nine months of 2020 under a subordinated promissory note due September 30, 2021. The note bears interest at 10% per annum. Accrued interest on this subordinated promissory note totaled $17,495 at September 30, 2020.

XML 20 R11.htm IDEA: XBRL DOCUMENT v3.20.4
Other Indebtedness
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
OTHER INDEBTEDNESS

5. OTHER INDEBTEDNESS

 

Mortgage Payable and Operating LeaseThe Company is obligated under a mortgage payable, dated September 15, 2014 and as amended October 1, 2019, secured by its warehouse property located in Denver, Colorado. The note provides for a 25 year amortization period and an initial interest rate of 9% annually. As amended, the note matured on July 15, 2020 but was extended under terms of the amendment to January 15, 2021 after payment by the Company of a extension fee of 1% of the then outstanding principal. The rate during this first extension period is 10% annually and the monthly payment is $5,590. The maturity date may be subsequently extended at the Company's option to July 15, 2021 after payment again of a extension fee of 1% of the then outstanding principal. The interest rate will increase to 11% annually if this extension is made.

 

As of September 30, 2020, the balance of the mortgage payable was $614,346 and the present maturity is January 15, 2021. As of December 31, 2019, the balance of the mortgage payable was $626,086.

 

The Company leases the Denver warehouse property to a tenant under an operating leases expiring June 30, 2021 for a monthly rent of $7,500. The lease requires the tenant reimburse us for property taxes and insurance and maintains the interior and exterior of the warehouse (except for the roof). Minimum future rents for the remainder of 2020 are $22,500 and for 2021 are $45,000.

 

Paycheck Protection Program Loan Congress created the Paycheck Protection Program ("PPP") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") to provide forgivable loans to eligible small businesses facing economic hardship to retain U.S. employees on their payroll during the Coronavirus Disease 2019 ("COVID-19") pandemic.

 

PPP loan recipients may be eligible to have their loans forgiven if the funds were used for eligible expenses over the eight-week coverage period commencing when the loan was originally disbursed. The amount of forgiveness may be reduced if the percentage of eligible expenses attributed to nonpayroll expenses exceeds 25% of the loan, if employee headcount decreases, or compensation decreases by more than 25% for each employee making less than $100,000 per year, unless the reduced headcount or compensation levels are restored.

 

On April 29, 2020, Generation Hemp, Inc. received disbursement of an approved PPP loan in the amount of $25,200. The Company anticipates that this entire disbursement amount will be forgiven under the current program requirements for forgiveness eligibility.

XML 21 R12.htm IDEA: XBRL DOCUMENT v3.20.4
Commitments and Contingencies
9 Months Ended
Sep. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

6. COMMITMENTS AND CONTINGENCIES

 

LeasesOn March 31, 2019, the Company abandoned its office lease. This office lease required monthly payments of $10,802 until its expiration on May 31, 2021. No rent payments have been made since abandonment. The lessor has made a claim for rent and the Company has made a counterclaim due to the premises being uninhabitable due to the actions of other tenants located on the floor. At September 30, 2020, the Company had accrued unpaid rent totaling $252,583.

 

Rent expense for the three and nine months ended September 30, 2020 totaled $0 and $8,380, respectively. Rent expense for the three and nine months ended September 30, 2019 totaled $5,904 and $60,980, respectively.

 

LitigationFrom time to time, we are subject to various litigation and other claims in the normal course of business. Below is a discussion of two specific matters. We cannot estimate the ultimate outcome of these matters.

 

JDONE, LLC v. Grand Traverse Holdings, LLC and John Gallegos, Denver District Court Case No. 2019CV33723

 

JDONE is a wholly owned subsidiary of the Company and landlord of a commercial warehouse building that was leased to Grand Traverse on December 31, 2018 for a term of 61 months, with a personal guaranty from Defendant John Gallegos. On April 12, 2019, Grand Traverse presented JDONE with a forged, signed copy of the draft early termination amendment that JDONE had previously rejected. JDONE has suffered damages due to Defendant's misconduct of $823,504 plus interest and attorney's fees. A court ordered mediation was held in May 2020 without success. All material defendant motions have been denied by the court. The case is set for jury trial in calendar year 2021.

 

KBSIII Tower at Lake Carolyn, LLC and Prime US-Tower at Lake Carolyn, LLC (collectively – "KBSIII") vs. Energy Hunter Resources, Inc.

 

Plaintiff/Counterdefendant KBSIII is seeking lost rent on office space for periods after EHR vacated office premises located in Las Colinas, Texas. EHR has filed a counter suit alleging specific damages due to uninhabitable premises of the office space due to the intolerable conduct of other tenants located on the same floor. On December 23, 2020, the trial court entered a summary judgment against EHR for $230,712. The judgment provides for post-judgment interest at a rate of 5% per annum until paid and further provides for additional amounts owed should EHR pursue unsuccessful appeals to higher courts. The previous judge who entered the judgment has left the bench. A new judge has been appointed to this court and the Company has filed a motion for a new trial based upon erroneous amounts awarded in the summary judgment.

XML 22 R13.htm IDEA: XBRL DOCUMENT v3.20.4
Equity
9 Months Ended
Sep. 30, 2020
Equity [Abstract]  
EQUITY

7. EQUITY

 

Issuance of common stock unitsIn February 2020, the Company issued 250,000 common units for $100,000. Each unit consisted of one share of common stock and a warrant for purchase of one common share for $0.40 per share. The warrant expires March 1, 2022 and contain certain anti-dilution provisions requiring a downward adjustment to the exercise price of the warrant if dilutive instruments are issued at prices less than the warrant exercise price. Proceeds of this issuance were used for general corporate purposes.

 

The common stock issued in the exchange was valued using the traded price of the common stock on February 20, 2020. The warrants were valued at $45,848 using a binomial lattice valuation model using inputs as of the exchange date. Our expected volatility assumption was based on the historical volatility of the Company's common stock (252%). The expected life assumption was based on the expiration date of the warrant (two years). The risk-free interest rate for the expected term of the warrant was based on the U.S.Treasury yield curve in effect at the time of measurement (1.39%). The warrants are classified within equity in the consolidated balance sheets. Under GAAP, the anti-dilution provisions will be accounted for if and when these provisions are triggered.

 

Common stock warrants outstanding—Following is a summary of warrants outstanding as of September 30, 2020:

 

   # of
Warrants
   Exercise
Price (each)
   Expiration
Date
  Method of
Exercise
               
Issued upon exchange of EHR Series C Preferred Stock(1)   7,244,319   $0.352   November 27, 2021  Cash
Issued upon exchange of EHR Series C Preferred Stock(1)   7,244,319   $0.352   November 27, 2021  Cashless
Issued in February 2020 with common stock units(2)   250,000   $0.400   March 1, 2022  Cash

 

(1)May be redeemed beginning October 1, 2020 for $0.0001 per warrant at the Company's option with 30 days advanced notice should the weighted average market price of common stock exceed $1.00 for any five out of seven consecutive trading days with a minimum average daily trading volume for such seven-day period of at least 25,000 shares of common stock.

 

(2)Contains certain anti-dilution provisions requiring a downward adjustment to the exercise price of the warrant if dilutive instruments are issued at prices less than the warrant exercise price.
XML 23 R14.htm IDEA: XBRL DOCUMENT v3.20.4
Income Taxes
9 Months Ended
Sep. 30, 2020
Income Tax Disclosure [Abstract]  
INCOME TAXES

8. INCOME TAXES

 

Income tax provisions for interim quarterly periods are generally based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items related specifically to interim periods.

 

An income tax benefit for the three or nine months ended September 30, 2020 was not recognized because the Company expects to incur a tax loss in the current year. This tax loss is expected to result in a net operating loss carryforward at year-end; which is expected to be fully offset by a valuation allowance.

 

The Company did not recognize any income tax benefit for the three or nine months ended September 30, 2019 because tax losses incurred for the year were fully offset by a valuation allowance against deferred tax assets.

 

There were no uncertain tax positions as of September 30, 2020.

XML 24 R15.htm IDEA: XBRL DOCUMENT v3.20.4
Supplemental Cash Flow Information
9 Months Ended
Sep. 30, 2020
Supplemental Cash Flow Elements [Abstract]  
SUPPLEMENTAL CASH FLOW INFORMATION

9. SUPPLEMENTAL CASH FLOW INFORMATION

 

   For the nine months ended
September 30,
 
   2020   2019 
         
Cash paid for interest  $        -   $       - 
Cash paid for taxes   -    - 
           
Noncash investing and financing activities:          
Initial recognition of right to use asset and lease liabilities   -    279,111 
Right of use asset amortization   -    31,537 
Apply deposit against lease liability   -    10,690 
XML 25 R16.htm IDEA: XBRL DOCUMENT v3.20.4
Earnings (Loss) Per Share
9 Months Ended
Sep. 30, 2020
Earnings Per Share [Abstract]  
EARNINGS (LOSS) PER SHARE

10. EARNINGS (LOSS) PER SHARE

 

The following is the computation of earnings (loss) per basic and diluted share:

 

   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2020   2019   2020   2019 
Amounts attributable to Generation Hemp:                
Numerator                
Net loss from continuing operations attributable to common stockholders  $(171,367)  $(336,304)  $(1,146,592)  $(1,695,107)
(Loss) income from discontinued operations   (7,489)   (47,232)   (5,115)   2,215,442 
Net (loss) income attributable to common stockholders  $(178,856)  $(383,536)  $(1,151,707)  $520,335 
                     
Denominator                    
Weighted average shares used to compute basic EPS   17,380,317    520,949    17,500,308    452,920 
Dilutive effect of preferred stock   75,947,376    75,947,376    75,947,376    75,947,376 
Dilutive effect of common stock warrants   -    -    -    - 
Weighted average shares used to compute diluted EPS   93,327,693    76,468,325    93,447,684    76,400,296 
                     
Earnings (loss) per share:                    
Loss from continuing operations                    
Basic  $(0.01)  $(0.65)  $(0.07)  $(3.74)
Diluted  $(0.01)  $(0.65)  $(0.07)  $(3.74)
(Loss) income from discontinued operations                    
Basic  $(0.00)  $(0.09)  $(0.00)  $4.89 
Diluted  $(0.00)  $(0.09)  $(0.00)  $0.03 
Earnings (loss) per share                    
Basic  $(0.01)  $(0.74)  $(0.07)  $1.15 
Diluted  $(0.01)  $(0.74)  $(0.07)  $0.01 

 

The computation of diluted earnings per common share excludes the assumed conversion of the Series A Preferred Stock and exercise of common stock warrants in periods when we report a loss. The dilutive effect of the assumed exercise of outstanding warrants was calculated using the treasury stock method. A total of 14,738,638 outstanding warrants are excluded from the computation of diluted shares for the three months ended September 30, 2020 because their effect would be anti-dilutive. A total of 14,693,018 warrants were similarly excluded in the computation for the nine months ended September 30, 2020. The computation for the three and nine months ended September 30, 2019 excluded 14,488,638 outstanding warrants.

XML 26 R17.htm IDEA: XBRL DOCUMENT v3.20.4
Subsequent Events
9 Months Ended
Sep. 30, 2020
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

11. SUBSEQUENT EVENTS

 

Issuance of Subordinated Promissory Note to Our CEOOur CEO made additional advances through 2020 under a subordinated promissory note due September 30, 2021. The total outstanding balance at January 29, 2021 was $490,000.

 

Issuance of Preferred Stock UnitsOn December 30, 2020, the Company sold to certain accredited investors, including Gary C. Evans, Chief Executive Officer, an aggregate of 135 common stock units comprised of (i) one share of Series B Redeemable Convertible Preferred Stock, no par value, and (ii) one warrant exercisable for 50,000 shares of common stock of the Company.

 

The sale of the preferred stock units for $10,000 each resulted in aggregate gross proceeds of approximately $1.35 million, before deducting estimated offering expenses payable by the Company. Substantially all of the proceeds raised in the offering were used to fund the acquisition of assets of Halcyon Thruput, LLC, expenses related thereto and for general corporate purposes.

 

Each share of Series B Preferred Stock is initially convertible into 25,000 shares of common stock, subject to adjustment. Holders of Series B Preferred Stock are entitled to receive dividends of 6.00% per annum based on the stated value equal to $10,000 per share. Except as otherwise required by law, the Series B Preferred Stock does not have voting rights. However, as long as any shares of Series B Preferred Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series B Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock, (b) alter or amend the related certificate of designation, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series B Preferred Stock, (d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its common stock, (e) enter into any agreement with respect to any of the foregoing, or (f) pay cash dividends or distributions on any equity securities of the Company other than pursuant to the terms of the its outstanding Series B Preferred Stock. The Series B Preferred Stock does not have a preference upon any liquidation, dissolution or winding-up of the Company.

 

Beginning the later of June 30, 2021 or the effectiveness of any registration statement registering the underlying common shares, all or any portion of the Series B Preferred Stock may be converted, at their holder's option, into 25,000 shares of common stock, as adjusted for any stock dividends, splits, combinations or similar events.

 

At any time after the occurrence of a "Qualifying Event," the Company, upon 5-day written notice, shall have the right to cause each share of Series B Preferred Stock (and all accrued in-kind dividends with respect thereto) to be converted into common stock. For purposes this automatic conversion of the Series B Preferred Stock, a "Qualifying Event" shall have occurred if (A) (1) the rolling five (5)-trading day volume-weighted average trading price of shares of the common stock exceeds $1.00, and (2) there shall be an effective registration statement under the Securities Act of 1933, as amended covering all of the shares of common stock which would be issuable upon conversion of all of the outstanding shares of Series B Preferred Stock or (B) the Company closes a firm commitment underwriting of the common stock on a Form S-1 Registration Statement with aggregate gross proceeds of at least $5,000,000 at a price per share equal to or greater than $1.00.

 

The Series B Preferred Stock may be redeemed by the Company for its stated value, plus accrued and unpaid dividends, at any time. On March 31, 2021, and June 30, 2021, September 30, 2021, December 31, 2021, a payment of 12.5% of the total amount of Series B Preferred Stock then outstanding plus accrued dividends will be due from the Company to each Holder of Series B Preferred Stock as a partial redemption by the Company of such Holder.

 

Each warrant is exercisable until the 24-month anniversary of the date of issuance at an exercise price of $0.352 per share. The exercise price of the warrants will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction. The warrants may only be exercised for cash.

 

Issuance of Subordinated Promissory Note and Warrants to InvestorOn December 30, 2020, the Company issued a subordinated promissory note in principal amount of $500,000 to an accredited investor. The unpaid balance of the Subordinated Note bears interest at a rate of 10% per annum. The subordinated note and accrued and unpaid interest are due September 30, 2021. The Company will make payments of principal of $250,000 on March 30 and September 30, 2021.

 

If at any time prior to September 30, 2021, the Company raises new equity capital in the amount of $5,000,000 or more, then within five (5) business days of closing, repayment of all outstanding principal and interest on the Subordinated Note will be due.

 

In addition, the holder of the Subordinated Note received a warrant to purchase 500,000 shares of Common Stock on terms and conditions substantially similar to those provided in the above described warrant.

 

Acquisition of Assets of Halcyon Thruput, LLCOn January 11, 2021, the Company completed the acquisition of 100% of the assets of Halcyon Thruput, LLC ("Halcyon Thruput") pursuant to the Asset Purchase Agreement dated March 7, 2020, as amended on January 11, 2021. The purchase consideration totaled approximately $5.1 million consisting of 6,250,000 shares of Company common stock valued at $2.5 million (valued at $0.40 per share; restricted from trading for a period of up to one year), $1.75 million in cash, a promissory note for $850 thousand issued by the Company's subsidiary, GenH Halcyon Acquisition, LLC, and guaranteed by Gary C. Evans, CEO of the Company, and assumption of approximately $1.0 million of new indebtedness of Halcyon Thruput.

 

The Company will continue Halcyon Thruput's business of providing post-harvest and midstream services to growers by drying, processing, cleaning, stripping harvested hemp directly from the field and wetbaled at its 48,000 square foot facility located in Hopkinsville, Kentucky.

 

Concurrent with the closing of the asset acquisition, the Company entered into term employment agreements with Jack Sibley and Watt Stephens to serve as Vice Presidents of GenH Halcyon Acquisition, LLC for a term of at least two years. The term employment agreements each provide for the issuance of 250,000 shares of restricted common stock of the Company as a signing bonus. Such shares are subject to restrictions on the trading or transfer of such common stock as described therein.

 

Further, the term employment agreements each provide for the payment by the executives of liquidated damages if the employee terminates his employment without good reason during the initial term, other than due to the employee's death or disability. Such liquidated damages total $600,000 if such termination occurs on or prior to January 11, 2022 or $375,000 if such termination occurs after January 11, 2022 and prior to January 11, 2023.

XML 27 R18.htm IDEA: XBRL DOCUMENT v3.20.4
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation—These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain disclosures have been condensed or omitted from these financial statements. Accordingly, they do not include all the information and notes required by accounting principles generally accepted in the United States of America ("GAAP") for complete consolidated financial statements, and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary to fairly present the financial position as of, and the results of operations for, all periods presented. In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the condensed consolidated financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results. Certain reclassifications have been made to the prior period's consolidated financial statements and related footnotes to conform them to the current period presentation. Intercompany balances and transactions between consolidated entities are eliminated.

Common stock units issuable

Common stock units issuable—From time to time, the Company accepts payment from investors for common stock unit subscriptions pursuant to approved offerings of securities. Amounts received before completion and closing of the offerings are reported as liabilities.

Fair Value Measurement

Fair Value Measurement—Our financial assets and liabilities consist of cash, accounts receivable, accounts payable and notes payable. The fair values of these instruments approximate their carrying amounts at each reporting date.

 

The Company's non-financial assets measured at fair value on non-recurring basis include impairment measurements of oil and gas properties and the Company's investment in common stock before it became publicly traded. These are considered Level 3 measurements as they involve significant unobservable inputs.

Major Customer and Concentration of Credit Risk

Major Customer and Concentration of Credit Risk—We have a limited number of customers. We estimate an allowance for doubtful accounts based on an analysis of specific customers, taking into consideration the age of past due accounts and an assessment of the customer's ability to pay. An allowance for doubtful accounts was not needed as of September 30, 2020 or December 31, 2019.

 

Our rental income is derived from a single lessee on a commercial warehouse owned by the Company. There were no amounts due from this customer at September 30, 2020 or December 31, 2019.

Recent Accounting Pronouncements

Recent Accounting Pronouncements—In February 2016, the FASB issued ASU 2016-02, Leases, which aims to make leasing activities more transparent and comparable and requires substantially all leases be recognized by lessees on their balance sheet as a night-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases, Leases of mineral reserves and related land leases are exempted from the standard. The Company adopted ASU 2016-02 on January 1, 2019 and elected the package of practical expedients within the standard which permits the Company not to reassess prior conclusions about lease identification, lease classification and initial direct costs, The Company made an accounting policy election to not separate lease and non-lease components for all leases. The adoption of this standard resulted in the recognition of right-of-use assets and lease liabilities for the Company's office lease totaling $279,111 on January 1, 2019.

XML 28 R19.htm IDEA: XBRL DOCUMENT v3.20.4
Discontinued Operations (Tables)
9 Months Ended
Sep. 30, 2020
Discontinued Operations [Abstract]  
Schedule of discontinued operations to assets and liabilities
   September 30,   December 31, 
   2020   2019 
Assets        
Accounts receivable -        
Current assets of discontinued operations held for sale  $-   $20,835 
           
Oil and Natural Gas Properties held for sale, at cost, using the successful efforts method   1,874,849    5,285,340 
Accumulated DD&A   (1,874,849)   (4,089,179)
Total oil and gas properties, net of discontinued operations held for sale   -    1,196,161 
Total assets of discontinued operations held for sale  $-   $1,216,996 
           
Liabilities          
Accrued liabilities  $24,242   $92,196 
Asset retirement obligations   56,834    52,776 
Revenue payable   52,117    70,609 
Note payable   -    1,100,000 
Current liabilities of discontinued operations held for sale   133,193    1,315,581 
           
Asset retirement obligations -          
Long term liabilities of discontinued operations held for sale   122,222    119,657 
Total liabilities of discontinued operations held for sale  $255,415   $1,435,238 
Schedule of discontinued operations shown in the consolidated statements of operations
   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2020   2019   2020   2019 
Revenue -                
Oil and gas sales  $13,036   $50,044   $93,361   $417,431 
                     
Costs and Expenses                    
Lease operating expense   16,762    66,555    77,099    303,780 
Depreciation, depletion & amortization   -    13,005    9,942    60,722 
Accretion   4,263    3,966    12,868    29,008 
Gain on disposal of oil & gas property interests   -    -    (24,008)   (1,666,790)
Impairment & abandonment   -    -    -    229,466 
Mergers & acquisition costs   -    -    -    100,000 
Total costs and expenses   21,025    83,526    75,901    (943,814)
                     
Other income   -    -    -    (881,697)
Interest expense   -    13,750    22,917    27,500 
                     
Income from discontinued operations  $(7,989)  $(47,232)  $(5,457)  $2,215,442 
XML 29 R20.htm IDEA: XBRL DOCUMENT v3.20.4
Equity (Tables)
9 Months Ended
Sep. 30, 2020
Equity [Abstract]  
Schedule of warrants outstanding
   # of
Warrants
   Exercise
Price (each)
   Expiration
Date
  Method of
Exercise
               
Issued upon exchange of EHR Series C Preferred Stock(1)   7,244,319   $0.352   November 27, 2021  Cash
Issued upon exchange of EHR Series C Preferred Stock(1)   7,244,319   $0.352   November 27, 2021  Cashless
Issued in February 2020 with common stock units(2)   250,000   $0.400   March 1, 2022  Cash

 

(1)May be redeemed beginning October 1, 2020 for $0.0001 per warrant at the Company's option with 30 days advanced notice should the weighted average market price of common stock exceed $1.00 for any five out of seven consecutive trading days with a minimum average daily trading volume for such seven-day period of at least 25,000 shares of common stock.

 

(2)Contains certain anti-dilution provisions requiring a downward adjustment to the exercise price of the warrant if dilutive instruments are issued at prices less than the warrant exercise price.
XML 30 R21.htm IDEA: XBRL DOCUMENT v3.20.4
Supplemental Cash Flow Information (Tables)
9 Months Ended
Sep. 30, 2020
Supplemental Cash Flow Elements [Abstract]  
Schedule of supplemental cash flow information
   For the nine months ended
September 30,
 
   2020   2019 
         
Cash paid for interest  $        -   $       - 
Cash paid for taxes   -    - 
           
Noncash investing and financing activities:          
Initial recognition of right to use asset and lease liabilities   -    279,111 
Right of use asset amortization   -    31,537 
Apply deposit against lease liability   -    10,690 
XML 31 R22.htm IDEA: XBRL DOCUMENT v3.20.4
Earnings (Loss) Per Share (Tables)
9 Months Ended
Sep. 30, 2020
Earnings Per Share [Abstract]  
Schedule of earnings (loss) per basic and diluted share
   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2020   2019   2020   2019 
Amounts attributable to Generation Hemp:                
Numerator                
Net loss from continuing operations attributable to common stockholders  $(171,367)  $(336,304)  $(1,146,592)  $(1,695,107)
(Loss) income from discontinued operations   (7,489)   (47,232)   (5,115)   2,215,442 
Net (loss) income attributable to common stockholders  $(178,856)  $(383,536)  $(1,151,707)  $520,335 
                     
Denominator                    
Weighted average shares used to compute basic EPS   17,380,317    520,949    17,500,308    452,920 
Dilutive effect of preferred stock   75,947,376    75,947,376    75,947,376    75,947,376 
Dilutive effect of common stock warrants   -    -    -    - 
Weighted average shares used to compute diluted EPS   93,327,693    76,468,325    93,447,684    76,400,296 
                     
Earnings (loss) per share:                    
Loss from continuing operations                    
Basic  $(0.01)  $(0.65)  $(0.07)  $(3.74)
Diluted  $(0.01)  $(0.65)  $(0.07)  $(3.74)
(Loss) income from discontinued operations                    
Basic  $(0.00)  $(0.09)  $(0.00)  $4.89 
Diluted  $(0.00)  $(0.09)  $(0.00)  $0.03 
Earnings (loss) per share                    
Basic  $(0.01)  $(0.74)  $(0.07)  $1.15 
Diluted  $(0.01)  $(0.74)  $(0.07)  $0.01 
XML 32 R23.htm IDEA: XBRL DOCUMENT v3.20.4
Business (Details) - shares
1 Months Ended 9 Months Ended
Nov. 27, 2019
Sep. 30, 2020
Common stock purchase of approximately 68.00%  
Exchange transaction effective acquired additional, percentage 26.00%  
Owns approximately, percentage   94.00%
Description of business, description   Cochran County, Texas within the Slaughter-Levelland Field of the San Andres formation in the Northwest Shelf of West Texas. EHR held an 8.0% interest in certain oil and gas and/ or oil, gas and mineral leases, lands interests, and other properties located in Cochran County. EHR's oil & gas activities are currently held for sale and are presented in these consolidated financial statements as discontinued operations for each of the periods presented.
Converted common stock, shares 12  
Series A Preferred Stock [Member]    
Issuance of shares 6,328,948  
XML 33 R24.htm IDEA: XBRL DOCUMENT v3.20.4
Summary of Significant Accounting Policies (Details)
1 Months Ended
Jan. 02, 2019
USD ($)
Summary of Significant Accounting Policies (Textual)  
Right-of-use assets and lease liabilities $ 279,111
XML 34 R25.htm IDEA: XBRL DOCUMENT v3.20.4
Discontinued Operations (Details) - USD ($)
Sep. 30, 2020
Dec. 31, 2019
Assets    
Current assets of discontinued operations held for sale $ 20,835
Oil and Natural Gas Properties held for sale, at cost, using the successful efforts method 1,874,849 5,285,340
Accumulated DD&A (1,874,849) (4,089,179)
Total oil and gas properties, net of discontinued operations held for sale 1,196,161
Total assets of discontinued operations held for sale 1,216,996
Liabilities    
Accrued liabilities 24,242 92,196
Asset retirement obligations 56,834 52,776
Revenue payable 52,117 70,609
Note payable 1,100,000
Current liabilities of discontinued operations held for sale 133,193 1,315,581
Asset retirement obligations    
Long term liabilities of discontinued operations held for sale 122,222 119,657
Total liabilities of discontinued operations held for sale $ 255,415 $ 1,435,238
XML 35 R26.htm IDEA: XBRL DOCUMENT v3.20.4
Discontinued Operations (Details 1) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Revenue -        
Oil and gas sales $ 13,036 $ 50,044 $ 93,361 $ 417,431
Costs and Expenses        
Lease operating expense 16,762 66,555 77,099 303,780
Depreciation, depletion & amortization 13,005 9,942 60,722
Accretion 4,263 3,966 12,868 29,008
Gain on disposal of oil & gas property interests (24,008) (1,666,790)
Impairment & abandonment 229,466
Mergers & acquisition costs 100,000
Total costs and expenses 21,025 83,526 75,901 (943,814)
Other income (881,697)
Interest expense 13,750 22,917 27,500
Income from discontinued operations $ (7,989) $ (47,232) $ (5,457) $ 2,215,442
XML 36 R27.htm IDEA: XBRL DOCUMENT v3.20.4
Discontinued Operations (Details Textual) - USD ($)
3 Months Ended 6 Months Ended
Mar. 01, 2020
Mar. 01, 2019
Dec. 31, 2019
Jun. 30, 2020
May 31, 2020
Discontinued Operations (Textual)          
Oil & gas assets acquired percentage   52.00%      
Working interest percentage 5.00% 8.00%      
Exchange for the return and cancellation   412,500      
Debentures totaling   $ 400,000      
Promissory note, due date   Mar. 01, 2020      
Recognized a gain on disposal   $ 1,666,790   $ 24,008  
Promissory note and accrued interest   $ 1,100,000     $ 1,100,000
Determined to have a fair value     $ 1,200,000    
Loss from discontinued operations     $ 3,730,678    
XML 37 R28.htm IDEA: XBRL DOCUMENT v3.20.4
Notes Payable—Related Parties (Details) - USD ($)
1 Months Ended 9 Months Ended 12 Months Ended
Oct. 31, 2019
Jun. 30, 2017
May 31, 2017
Apr. 30, 2017
Mar. 31, 2017
Sep. 30, 2020
Dec. 31, 2019
Notes Payable—Related Parties (Textual)              
Interest rate 4.00%         12.00%  
Maturity date Nov. 01, 2021         Apr. 30, 2020  
Monthly draws   $ 1,000,000 $ 1,000,000 $ 1,000,000      
Convertible interest rate           75.00%  
Accrued interest and fees           $ 24,242 $ 92,196
Interest rate per share $ 0.352            
Outstanding balance amount           208,874 208,874
10% Senior Secured Promissory Note [Member]              
Notes Payable—Related Parties (Textual)              
Note Payable debt         $ 3,000,000    
Maturity date         Sep. 01, 2017    
Senior Secured Promissory Note [Member]              
Notes Payable—Related Parties (Textual)              
Note Payable debt           1,500,000 1,500,000
Accrued interest and fees           $ 372,500 $ 247,500
Subordinated Promissory Note [Member]              
Notes Payable—Related Parties (Textual)              
Interest rate           10.00%  
Note Payable debt           $ 340,000  
Note payable, description           Our CEO made advances totaling $340,000 during the first nine months of 2020 under a subordinated promissory note due September 30, 2021. The note bears interest at 10% per annum. Accrued interest on this subordinated promissory note totaled $17,495 at September 30, 2020.  
XML 38 R29.htm IDEA: XBRL DOCUMENT v3.20.4
Other Indebtedness (Details) - USD ($)
9 Months Ended 12 Months Ended
Sep. 30, 2020
Dec. 31, 2019
Dec. 31, 2021
Dec. 31, 2020
Apr. 29, 2020
Other Indebtedness (Textual)          
Mortgage payable, description The note provides for a 25 year amortization period and an initial interest rate of 9% annually. As amended, the note matured on July 15, 2020 but was extended under terms of the amendment to January 15, 2021 after payment by the Company of a extension fee of 1% of the then outstanding principal. The rate during this first extension period is 10% annually and the monthly payment is $5,590. The maturity date may be subsequently extended at the Company's option to July 15, 2021 after payment again of a extension fee of 1% of the then outstanding principal. The interest rate will increase to 11% annually if this extension is made.        
Mortgage payable $ 614,346 $ 626,086      
Mortgage maturity date Jan. 15, 2021        
Operating leases expiration date Jun. 30, 2021        
Monthly rent $ 7,500        
PPP loan amount         $ 25,200
PPP loan [Member]          
Other Indebtedness (Textual)          
Mortgage payable, description The amount of forgiveness may be reduced if the percentage of eligible expenses attributed to nonpayroll expenses exceeds 25% of the loan, if employee headcount decreases, or compensation decreases by more than 25% for each employee making less than $100,000 per year, unless the reduced headcount or compensation levels are restored.        
Forecast [Member]          
Other Indebtedness (Textual)          
Minimum future rents     $ 45,000 $ 22,500  
XML 39 R30.htm IDEA: XBRL DOCUMENT v3.20.4
Commitments and Contingencies (Details) - USD ($)
1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Apr. 12, 2019
Dec. 23, 2020
Sep. 30, 2020
Sep. 30, 2019
Mar. 31, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2018
Commitments and Contingencies (Textual)                
Accrued unpaid rent     $ 252,583     $ 252,583    
Rent expense     $ 0 $ 5,904   $ 8,380 $ 60,980  
Subsequent Event [Member]                
Commitments and Contingencies (Textual)                
Amount of summary judgment   $ 230,712            
Litigation Settlement interest percentage   5.00%            
Office [Member]                
Commitments and Contingencies (Textual)                
Lease         $ 10,802      
Lease expiration date         May 31, 2021      
Grand Traverse [Member]                
Commitments and Contingencies (Textual)                
Lease term               61 months
Interest and attorney fees $ 823,504              
XML 40 R31.htm IDEA: XBRL DOCUMENT v3.20.4
Equity (Details)
9 Months Ended
Sep. 30, 2020
$ / shares
shares
Issued in February 2020 [Member] | Common Stock Units [Member]  
Number of warrants | shares 250,000 [1]
Exercise Price (each) | $ / shares $ 0.400 [1]
Expiration Date Mar. 01, 2022 [1]
Method of Exercise Cash [1]
Issued upon exchange of EHR [Member] | Series C Preferred Stock [Member]  
Number of warrants | shares 7,244,319 [2]
Exercise Price (each) | $ / shares $ 0.352 [2]
Expiration Date Nov. 27, 2021 [2]
Method of Exercise Cash [2]
Issued upon exchange of EHR [Member] | Series C Preferred Stock [Member]  
Number of warrants | shares 7,244,319 [2]
Exercise Price (each) | $ / shares $ 0.352 [2]
Expiration Date Nov. 27, 2021 [2]
Method of Exercise Cashless [2]
[1] Contains certain anti-dilution provisions requiring a downward adjustment to the exercise price of the warrant if dilutive instruments are issued at prices less than the warrant exercise price.
[2] May be redeemed beginning October 1, 2020 for $0.0001 per warrant at the Company's option with 30 days advanced notice should the weighted average market price of common stock exceed $1.00 for any five out of seven consecutive trading days with a minimum average daily trading volume for such seven-day period of at least 25,000 shares of common stock.
XML 41 R32.htm IDEA: XBRL DOCUMENT v3.20.4
Equity (Details Textual) - Common Stock [Member] - USD ($)
1 Months Ended
Feb. 29, 2020
Feb. 20, 2020
Equity (Textual)    
Issued common units 250,000  
Issued common units, value $ 100,000  
Purchase of common share per share $ 0.40  
Warrant expiry date Mar. 01, 2022  
Warrants value   $ 45,848
Expected volatility assumption   252.00%
Expected life assumption   2 years
Warrant yield curve   1.39%
Warrants, description   May be redeemed beginning October 1, 2020 for $0.0001 per warrant at the Company’s option with 30 days advanced notice should the weighted average market price of common stock exceed $1.00 for any five out of seven consecutive trading days with a minimum average daily trading volume for such seven-day period of at least 25,000 shares of common stock.
XML 42 R33.htm IDEA: XBRL DOCUMENT v3.20.4
Supplemental Cash Flow Information (Details) - USD ($)
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Supplemental Cash Flow Elements [Abstract]    
Cash paid for interest
Cash paid for taxes
Noncash investing and financing activities:    
Initial recognition of right to use asset and lease liabilities 279,111
Right of use asset amortization 31,537
Apply deposit against lease liability $ 10,690
XML 43 R34.htm IDEA: XBRL DOCUMENT v3.20.4
Earnings (Loss) Per Share (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Numerator        
Net loss from continuing operations attributable to common stockholders $ (171,367) $ (336,304) $ (1,146,592) $ (1,695,107)
(Loss) income from discontinued operations (7,489) (47,232) (5,115) 2,215,442
Net (loss) income attributable to common stockholders $ (178,856) $ (383,536) $ (1,151,707) $ 520,335
Denominator        
Weighted average shares used to compute basic EPS 17,380,317 520,949 17,500,308 452,920
Dilutive effect of preferred stock 75,947,376 75,947,376 75,947,376 75,947,376
Dilutive effect of common stock warrants
Weighted average shares used to compute diluted EPS 93,327,693 76,468,325 93,447,684 76,400,296
Loss from continuing operations        
Basic $ (0.01) $ (0.65) $ (0.07) $ (3.74)
Diluted (0.01) (0.65) (0.07) (3.74)
(Loss) income from discontinued operations        
Basic 0.00 (0.09) 0.00 4.89
Diluted 0.00 (0.09) 0.00 0.03
Earnings (loss) per share        
Basic (0.01) (0.74) (0.07) 1.15
Diluted $ (0.01) $ (0.74) $ (0.07) $ 0.01
XML 44 R35.htm IDEA: XBRL DOCUMENT v3.20.4
Earnings (Loss) Per Share (Details Textual) - shares
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Earnings (Loss) Per Share (Textual)        
Warrants, shares 14,738,638 14,488,638 14,693,018 14,488,638
XML 45 R36.htm IDEA: XBRL DOCUMENT v3.20.4
Subsequent Events (Details) - USD ($)
1 Months Ended 9 Months Ended
Jan. 11, 2021
Sep. 30, 2021
Mar. 30, 2021
Jan. 29, 2021
Dec. 30, 2020
Oct. 31, 2019
Sep. 30, 2020
Sep. 30, 2019
Subordinated promissory note due date             Jan. 15, 2021  
Aggregate gross proceeds             $ 100,000
Receive dividends per annum           4.00% 12.00%  
Subsequent event, description             At any time after the occurrence of a “Qualifying Event,” the Company, upon 5-day written notice, shall have the right to cause each share of Series B Preferred Stock (and all accrued in-kind dividends with respect thereto) to be converted into common stock. For purposes this automatic conversion of the Series B Preferred Stock, a “Qualifying Event” shall have occurred if (A) (1) the rolling five (5)-trading day volume-weighted average trading price of shares of the common stock exceeds $1.00, and (2) there shall be an effective registration statement under the Securities Act of 1933, as amended covering all of the shares of common stock which would be issuable upon conversion of all of the outstanding shares of Series B Preferred Stock or (B) the Company closes a firm commitment underwriting of the common stock on a Form S-1 Registration Statement with aggregate gross proceeds of at least $5,000,000 at a price per share equal to or greater than $1.00.  
Series B preferred stock redeemed, description             The Series B Preferred Stock may be redeemed by the Company for its stated value, plus accrued and unpaid dividends, at any time. On March 31, 2021, and June 30, 2021, September 30, 2021, December 31, 2021, a payment of 12.5% of the total amount of Series B Preferred Stock then outstanding plus accrued dividends will be due from the Company to each Holder of Series B Preferred Stock as a partial redemption by the Company of such Holder.  
Issuance of warrant exercise price             $ 0.352  
New equity capital, description             If at any time prior to September 30, 2021, the Company raises new equity capital in the amount of $5,000,000 or more, then within five (5) business days of closing, repayment of all outstanding principal and interest on the Subordinated Note will be due.  
Warrant to purchase shares of common stock             500,000  
Shares of restricted common stock             250,000  
Term of employment agreements             Further, the term employment agreements each provide for the payment by the executives of liquidated damages if the employee terminates his employment without good reason during the initial term, other than due to the employee’s death or disability. Such liquidated damages total $600,000 if such termination occurs on or prior to January 11, 2022 or $375,000 if such termination occurs after January 11, 2022 and prior to January 11, 2023.  
Forecast [Member]                
Sale of common stock units         $ 10,000      
Aggregate gross proceeds         $ 1,350,000      
Series B preferred stock convertible into common stock         25,000      
Receive dividends per annum         6.00%      
Convertible common stock, description         Holders of Series B Preferred Stock are entitled to receive dividends of 6.00% per annum based on the stated value equal to $10,000 per share.      
Series B preferred stock converted, description         Beginning the later of June 30, 2021 or the effectiveness of any registration statement registering the underlying common shares, all or any portion of the Series B Preferred Stock may be converted, at their holder’s option, into 25,000 shares of common stock, as adjusted for any stock dividends, splits, combinations or similar events.      
Payments of principal   $ 250,000 $ 250,000          
Forecast [Member] | Gary C. Evans [Member]                
Aggregate preferred stock sold         135      
Warrant exercisable for preferred stock         50,000      
Forecast [Member] | Halcyon Thruput, LLC [Member]                
Acquisition of assets percentage 100.00%              
Shares of common stock value $ 2,500,000              
Purchase consideration $ 5,100,000              
Shares of common stock 6,250,000              
Asset purchase agreement, description (valued at $0.40 per share; restricted from trading for a period of up to one year), $1.75 million in cash, a promissory note for $850 thousand issued by the Company’s subsidiary, GenH Halcyon Acquisition, LLC, and guaranteed by Gary C. Evans, CEO of the Company, and assumption of approximately $1.0 million of new indebtedness of Halcyon Thruput.              
Chief Executive Officer [Member] | Forecast [Member]                
Aggregate preferred stock sold         135      
Warrant exercisable for preferred stock         50,000      
Accredited Investor [Member] | Forecast [Member]                
Subordinated promissory note due date         Sep. 30, 2021      
Principal amount         $ 500,000      
Note bears interest rate         10.00%      
Subordinated Promissory Note [Member]                
Receive dividends per annum             10.00%  
Subordinated Promissory Note [Member] | Chief Executive Officer [Member] | Forecast [Member]                
Subordinated promissory note due date       Sep. 30, 2021        
Outstanding balance       $ 490,000        
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