Item 1.01 Entry into a Material Definitive Agreement
On December 30, 2020, Generation Hemp, Inc. (the “Company”)
entered into Subscription Agreements (the “Subscription Agreements”) with certain accredited investors, including
Gary C. Evans, Chief Executive Officer of the Company (collectively, the “Purchasers”), pursuant to which the
Company agreed to offer, issue and sell to the Purchasers, an aggregate of 135 units (the “Units”). Each Unit
is comprise of (i) one share of Series B Redeemable Convertible Preferred Stock, no par value (the “Series B Preferred
Stock” or the “Shares”) the Company, and (ii) one warrant (the “Warrant(s)”) exercisable
for 50,000 shares of common stock of the Company (the “Common Stock”), in accordance with the terms and conditions
of this Subscription Agreement, at a purchase price (the “Offering Price”) of $10,000 per Unit.
The sale of the Units under the Subscription Agreements entered
into on December 30, 2020 resulted in aggregate gross proceeds to the Company of approximately $1.35 million, before deducting
estimated offering expenses payable by the Company. Substantially all of the proceeds raised in the offering shall be used in connection
with executing the acquisition strategy of the Company and for general corporate purposes.
On December 30, 2020, the Company filed a Certificate of Designation
of Preferences, Rights and Limitations of the Series B Preferred Stock with the Secretary of State of the State of Colorado (the
“Certificate of Designation”) creating a new series of authorized preferred stock of the Company designated
as the “Series B Convertible Preferred Stock.” The Certificate of Designation became effective with the Secretary of
State of the State of Colorado upon filing.
Each share of Series B Preferred Stock shall initially be convertible
into twenty-five thousand (25,000) shares of Common Stock (the “Conversion Shares”), subject to adjustment in
accordance with the Certificate of Designation.
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 (the “Stated Value”). 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 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 Corporation other than
pursuant to the terms of the Corporation’s 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 held by such
Purchaser may be converted, at their 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 to the Purchaser, 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 the Conversion Shares. 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 (the "Securities Act") 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 Corporation
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 share of Series B Preferred Stock may be redeemed by the Company
for the 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 shall be exercisable immediately upon issuance and
shall be exercisable until the 24-month anniversary of the date of issuance, at an exercise price of $0.352 per Warrant 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, as described in the Warrants. The Warrants may only be exercised
for cash.
The Preferred Shares, the Warrants and the Warrant Shares have not
been registered under the Securities Act, and are instead being offered pursuant to the exemption provided in Section 4(a)(2) under
the Securities Act and Rule 506(b) promulgated thereunder.
The foregoing summaries of the offerings, the securities to be issued
in connection therewith, the Subscription Agreements, the Preferred Stock and the Warrants do not purport to be complete and are
qualified in their entirety by reference to the definitive transaction documents. Copies of the Certificate of Designation, as
well as the form of Subscription Agreement and Warrant, are attached hereto as Exhibits 10.1, 3.1 and 4.1, respectively, and are
incorporated herein by reference.
On December 30, 2020, the Company issued a Subordinated
Promissory Note in principal amount of $500,000.00 to an accredited investor (the “Subordinated Note”).
The unpaid balance of the Subordinated Note shall bear interest at a rate of 10.00% 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 $5,000,000.00 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 shall receive a
warrant to purchase 500,000 shares of Common Stock on terms and conditions substantially similar to those provided in the above
described Warrant.