Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Appointment
of Directors
On July 1, 2021, the Board of Directors (the “Board”)
of the Company approved that the number of directors be increased from one (1) to four (4) members and also recommended that stockholders
elect Gary C. Evans, Joe McClaugherty, Gary D. Elliston, and John Harris to the Board. On July 12, 2021, the Majority Stockholders, representing
57.2% of the outstanding voting power of the Company, elected Messrs. Evans, McClaugherty, Elliston, and Harris to the Board to each serve
as director of the Company with such terms to begin no sooner than the 20th calendar day after the date on which the Information
Statement and the accompanying notice are mailed to the Company’s stockholders (the “Effective Date”), which
is currently estimated to be on or about August 15, 2021.
There is
no arrangement or understanding between any of Messrs. Evans, McClaugherty, Elliston, and Harris and any other persons pursuant to which
Messrs. Evans, McClaugherty, Elliston, and Harris were elected as a director.
There are
no family relationships between any of Messrs. Evans, McClaugherty, Elliston, and Harris and any director or executive officer of the
Company.
Each of Messrs. Evans, McClaugherty, Elliston, and Harris, will enter into
the Company’s standard form of indemnification agreement, a copy of which has been attached as Appendix E to the Company’s
Preliminary Information Statement on Schedule 14C, filed with the Securities and Exchange Commission on July 14, 2021.
Related Transactions
Home Treasure Finders Merger On November 27, 2019, Generation Hemp,
Inc. (f/k/a Home Treasure Finders, Inc.) (“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, (b) possesses full voting rights,
on an as-converted basis, with the Common Stock, 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. 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 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.
Upon completion of the Transaction, Gary C. Evans, previous Chairman and
Chief Executive Officer of Energy Hunter Resources, Inc., became Chairman of the Board of Directors and Chief Executive Officer. In
addition, through this Transaction, Mr. Evans and Mr. McClaugherty, acquired their ownership of the Series A Preferred.
2021 Issuances of Common Stock Units – In the first quarter
of 2021, the Company issued 800,000 common stock units for total proceeds of $400,000. Each common stock unit consists of one share of
common stock and a warrant for the purchase of two shares of common stock for $0.50 each. Each warrant is exercisable any time before
its expiration on the second anniversary of its issuance. Mr. Evans purchased 100,000 commons stock units in this issuance.
Subordinated Promissory Note to Gary C. Evans – Gary C. Evans
made advances of $490,000 to the Company during 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 $22,393 at December 31, 2020.
December 2020 Issuance of Series B Preferred Stock Units –
On December 30, 2020, the Company sold to certain accredited investors, including Gary C. Evans (50 shares), CEO and chairman, and Gary
Elliston (25 shares), one of our incoming directors, an aggregate of 135 preferred 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.
On March 9, 2021, Mr. Elliston exercised cash warrants received by him in the Series B Preferred Stock Unit issuance for 1,250,000 shares
of common stock.
Gary C. Evans Convertible Note with EHR. In October and December
of 2019, Mr. Evans advanced EHR $370,770 under a convertible note bearing interest at 10% per annum. This note, including accrued interest,
was converted into 1,061,970 shares of common stock on December 31, 2019.
EHR Series C Preferred Stock – In the third quarter of 2019,
EHR raised $850,000 of additional funding through the issuance of 34,000 shares of EHR Series C Preferred Stock. The EHR Series C Preferred
Stock converted into 2,414,773 shares of EHR’s common stock upon completion of the Transaction. These common shares were initially
accounted for as non-controlling interests in EHR. In an exchange transaction effective November 27, 2019, the Company acquired these
non-controlling interests representing approximately 26% of the ownership of EHR through the issuance of 2,414,773 shares of Company common
stock and 14,488,638 warrants for the purchase of Company common stock. The warrants have an exercise price of $0.352 per share and expire
on November 27, 2021. The warrants may be redeemed beginning October 1, 2020 for $0.0001 per warrant at the Company’s option with
30-days advanced notice should the volume weighted average price 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. One-half of the warrants have
a cashless exercise feature.
In connection with the exchange transaction, on November 27, 2019, John
Harris, an incoming director, obtained beneficial ownership of 71,022 shares of common stock, 213, 068 cash warrants, and 213,068 cashless
warrants. On February 26, 2021, the cash warrants were exercised for the purchase of 213,068 shares of common stock. Also, at the time
of the exchange, Gary Elliston, an incoming director, received 710,227 shares of common stock, 2,130,682 cash warrants, and 2,130,682
cashless warrants. On March 9, 2021, Mr. Elliston exercised all of his cash warrants and received 2,130,682 shares of common stock. Lastly,
at the time of the exchange, Joe McClaugherty, also an incoming director, received 71,022 shares of common stock, 213, 068 cash warrants,
and 213,068 cashless warrants.
Item 5.07
Submission of Matters to a Vote of Security Holders.
The Common Stock and the Series A Preferred Stock of the Company are the
only classes of outstanding voting stock of the Company. As of July 1, 2021, there were 34,977,953 shares of Common Stock and 6,328,948
shares of Series A Preferred issued and outstanding. On July 12, 2021, the following holders of shares of the Common Stock and Series
A Preferred Stock, representing 57.2% of the outstanding voting power of the Company (the “Majority Stockholders”), executed
the written consent of the Majority Stockholders approving the Corporate Actions, described below (the “Corporate Actions”):
Name
of Majority Stockholder
|
|
Number
of Shares of Common Stock held
|
|
|
Number
of Shares of Series A Preferred held (1)
|
|
|
Number
of Votes held by Majority Stockholder (1)
|
|
|
Number
of Votes that Voted in favor of the Corporate Actions
|
|
|
Percentage of the Voting Equity that
Voted in favor of the Corporate Actions (2)
|
|
Gary C. Evans
|
|
|
1,161,970
|
|
|
|
3,000,000
|
|
|
|
37,161,970
|
|
|
|
37,161,970
|
|
|
|
33.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite Overseas (Holdings) Limited
|
|
|
1,000,000
|
|
|
|
2,105,262
|
|
|
|
26,263,144
|
|
|
|
26,263,144
|
|
|
|
23.7
|
%
|
Total
|
|
|
2,161,970
|
|
|
|
5,105,262
|
|
|
|
63,425,114
|
|
|
|
63,425,114
|
|
|
|
57.2
|
%
|
|
(1)
|
Each
share of the Series A Preferred Shaes (a) are, upon the occurrence of certain events, convertible
into 12 shares of Common Stock, (b) shall possess full voting rights, on an as-converted
basis, as the Common Stock of the Company, and (c) have no dividend rate.
|
|
(2)
|
Based
on 110,925,329 shares of Common Stock entitled to vote, including the number of shares of
Common Stock entitled to vote under the Series A Preferred Shares, on an as-converted basis.
|
Since the
Board and Majority Stockholders voted in favor of the Corporate Actions, all corporate actions necessary to authorize the Corporate Actions
have been taken.
Corporate
Actions:
Pursuant
to the above mentioned written consent, the Majority Stockholders approved by written consent the following matters:
Election
of Directors
The following
nominees for election to the Board were elected by the written consent of the Majority Stockholders.
Name of Director Nominee
|
|
Votes
FOR
|
|
|
Votes
AGAINST
|
|
|
Votes
ABSTAIN
|
|
Gary C. Evans
|
|
63,425,114
|
|
|
0
|
|
|
0
|
|
Joe McClaugherty
|
|
63,425,114
|
|
|
0
|
|
|
0
|
|
Gary D. Elliston
|
|
63,425,114
|
|
|
0
|
|
|
0
|
|
John Harris
|
|
63,425,114
|
|
|
0
|
|
|
0
|
|
Plan
of Conversion
The Majority
Stockholders have approved a change the state of incorporation of the Company from the State of Colorado to the State of Delaware (the
“Conversion”) through a plan of conversion (the “Plan of Conversion”), the Plan of Conversion pursuant to which
the Company will effect the Conversion, in compliance with the Delaware General Corporation Law (the “DGCL”) and the Colorado
Business Corporation Act. In connection with the Conversion, the Company will adopt a new certificate of incorporation (“Delaware
Certificate”) and bylaws under the laws of the State of Delaware. The Plan of Conversion and Delaware Certificate will be filed
with the Secretary of State for the State of Delaware after the Effective Date at the direction of the Board.
The written
consent vote for such action, as of July 12, 2021, was:
Written Consent Vote
|
|
Votes
FOR
|
|
|
Votes
AGAINST
|
|
|
Votes
ABSTAIN
|
|
Totals:
|
|
63,425,114
|
|
|
0
|
|
|
0
|
|
Ratification
of Auditors
The Board
has appointed Marcum LLP, certified public accountants to serve as our independent registered public accounting firm for the fiscal year
ending December 31, 2021. The Majority Stockholders ratified the Board’s appointment of Marcum LLP as the Company’s independent
registered public accounting firm for the fiscal year ending December 31, 2021.
The written
consent vote for such action, as of July 12, 2021, was:
Written Consent Vote
|
|
Votes
FOR
|
|
|
Votes
AGAINST
|
|
|
Votes
ABSTAIN
|
|
Totals:
|
|
63,425,114
|
|
|
0
|
|
|
0
|
|
Adoption
of the 2021 Omnibus Incentive Plan (the “2021 Plan”)
Our
2021 Plan was adopted by our Board on July 1, 2021. The 2021 Plan provides for the initial reservation of 15 million shares of Common
Stock for issuance thereunder, and provides that the maximum number of shares that may be issued pursuant to the exercise of ISOs is 15,000,000.
The number of shares of Common Stock available for issuance under the 2021 Plan constituted approximately 13.1% of the Company’s
fully diluted shares of Common Stock outstanding as of the date of Board approval, including shares issuable upon the conversion of Series
A and Series B Preferred Shares, as calculated on an as-converted basis. On the one-year anniversary date of the 2021 Plan, the number
of shares of Common Stock reserved for issuance thereunder shall automatically increase to 20% of the fully diluted shares of Common
Stock outstanding, including shares issuable upon the conversion of Series A and Series B Preferred Shares, as calculated on an as-converted
basis.
The
Majority Stockholders approved the 2021 Plan on July 12, 2021. The written consent vote, as of July 12, 2021, was:
Written Consent Vote
|
|
Votes
FOR
|
|
|
Votes
AGAINST
|
|
|
Votes
ABSTAIN
|
|
Totals:
|
|
63,425,114
|
|
|
0
|
|
|
0
|
|
Ratification
Of Indemnification Agreement
On
July 1, 2021 the Board adopted and, by written consent, on July 12, 2021, the Majority Shareholders approved a form of indemnification
agreement to be entered into by the Company and each of its current and future directors and executive officers following the Conversion.
The Board further authorized the Company to enter into an indemnification agreement with any other persons or categories of persons that
may be designated from time to time by the Board.
The written
consent vote for such action, as of July 12, 2021, was:
Written Consent Vote
|
|
Votes
FOR
|
|
|
Votes
AGAINST
|
|
|
Votes
ABSTAIN
|
|
Totals:
|
|
63,425,114
|
|
|
0
|
|
|
0
|
|