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One for Your Watchlists: A new Generation in Hemp, a new Empire in the Making

·11 min read

Crude oil can be extracted from the hemp flower and other plant materials directly. If you take hemp from the field, it will be very wet, which means it will first need to be dried. It’s also going to need to be cleaned up and processed prior to extraction from the flower.

According to Gary Evans, CEO of Generation Hemp Inc. (OTCQB: GENH), a Dallas/Fort Worth-based company, “How hemp from the field is dried and processed can have a significant impact on its ultimate value. It can make or break the quality of the feedstock for the extraction process, which can make or break profit potential for the farmer.”

If anyone knows about oil extraction, it’s definitely Evans. He's a serial entrepreneur who spent more than 35 years of his career in oil, gas and renewable energies.

A New Generation is Born

Evans saw hemp as the next great frontier. He exited oil and gas to become a true advocate of the hemp industry. The more he was exposed to its history, the more deeply he felt about its potential to change lives and the environment.

“When I first started looking at a new industry out of oil and gas, what got me so excited about hemp was that I thought this was a completely new industry that could be environmentally friendly and where new capital investment could be brought into it to really grow something from the very beginning,” Evans said. He continued that it was an industry that’s been outlawed since the 1930s and that this was a perfect opportunity to change the world in many different ways.

“As we started exploring this embryonic business, we knew that the only way to really learn it was to have boots on the ground. There just wasn’t enough information circulating around to be truly informative.”

Evans and his team became students. He studied anything and everything he could get his hands on, learning the entire industry from inside and out. He and his team met with businesses and manufacturing plants in some of hemp’s most prominent states.

Time to get to Work

Evans and his team traveled to many states, including Colorado and Kentucky, both known for their impact on the hemp industry. They met with many farmers and cooperatives, extraction labs, and processors in drying and cleaning stripping facilities.

He learned what worked and what didn’t work — then he took notice of the various risks versus the rewards.

“Being a former oil and gas guy, I’ve had to deal with high risk my entire life,” Evans said. “The biggest risk in the oil and gas industry has been commodity price risk because oil and gas prices are always fluctuating.”

“You had to build your budgets and build your company around a very volatile commodity — it’s no different in hemp,” Evans continued. “Hemp prices, since I’ve been involved in just the last couple of years, have completely gyrated from very highs to very lows with supply and demand. So, it was in that regard that we decided to take a more measured approach in being careful because we were seeing a lot of businesses out there that we definitely knew weren’t going to make it.”

Evans realized that many of these companies were undercapitalized and overleveraged. Many of these businesses had no clue what they were doing or what they should be doing. And, quite a few of these companies ended up bankrupt over time.

He realized there was significant risk involved and that by mitigating this risk early on, he’d set his new company up against failure. Through due diligence, he was able to choose a sector in the hemp business that was less risky.

Evans’ Plan is Put Into Motion

Generation Hemp became the highly anticipated byproduct of a merger between Energy Hunter Resources Inc. and Home Treasure Finders Inc. (OTCPK: HMTF). The merger closed in late 2019. Renamed Generation Hemp, the company went on to make its first acquisition of Halcyon Thruput, LLC, and it is now becoming the go-to processor for drying, cleaning, stripping and storing hemp for farmers and growers across the region.

“It [this particular business model] did not have any commodity risk associated with it,” Evans said. “It was, in essence, a midstream company — or you could call it a tolling company — where you got paid a fee for handling the product, but you didn’t take the commodity risk of owning the product.”

According to Evans, “2019 was a bumper year for farmers growing hemp, so that created an oversupply of product, which drove down the price and obviously hurt a lot of companies,” he continued. “We made that decision, again, to stay in the midstream. So, we were largely isolated from that volatility. In fact, we were able to win a significant contract that helped grow our business. And we’re making good money right now where most of our competition is not.”

Generation Hemp Quickly Took up the Role of ‘Go-Between’

While the Food and Drug Administration (FDA) and USDA both work to create guidelines and regulations, companies have had several challenges in getting their products to market. Generation Hemp seeks to simplify these challenges for clients who don’t know the ins and outs of the business yet.

Most farmers and growers haven’t had the opportunity to really network with various channels within the industry. As a result, connecting with extraction labs or getting their extracted distillate and isolate products to consumer goods manufacturers can be a challenge and out of their wheelhouse.

The lack of processing capacity in most regions of the country makes it difficult for growers to get their harvests ready for market. Many farmers and growers still hang-dry their

hemp by hand, which requires expensive and hard-to-come-by labor as well as a lot of space and time. This process is often weather-sensitive, and the final product would still need to find a buyer.

As the Hemp Industry Begins to Blossom

Generation Hemp continues to serve the midstream sector, building a conglomerate of smaller yet successful product and service providers in the hemp sector. It’s forming relationships with those processors and connecting their clients directly with suppliers, who will then sell their goods.

“Many brokers have entered the space because of this, but brokers are often disconnected in other ways and are often detached and unreliable — both in how and whether they deliver and in their business dealings,” according to a spokesperson for Generation Hemp.

She continues, “As a service provider through our midstream company, we are trying to connect the dots as the go-between, who also has skin in the game as we are handling the material (drying, stripping, processing, storing) with service fees and repeat business we seek to retain.”

The truth is, many big businesses want an in to the hemp business. Aside from CBD and other cannabinoids, they want to get their hands on fiber primarily, but a total disconnect exists between need and what farmers are trying to do. As the largest processor of harvested hemp in the U.S., Generation Hemp serves as that connecting point.

Generation Hemp Acquires Halcyon Thruput LLC

Halcyon Thruput LLC caught Generation Hemp’s attention with its state-of-the-art drying and cleaning system. Evans said he loves how efficiently and effectively this equipment removes hemp stalks, stems and seeds. He knew that Halcyon would make all the difference to his company.

GenH Halcyon is now Generation Hemp’s wholly-owned subsidiary. Its heavy machinery can handle more than 50,000 pounds of wet hemp per day and is the reason Generation Hemp is considered the “dry cleaners for the hemp industry.”

GenH Halcyon’s advanced drying services ensure plants are handled and processed delicately to maximize quality and minimize degradation. It can easily take something that’s saturated with 80% to 90% moisture and processes it down to less than 10%.

Generation Hemp Leans in as Publicly Listed U.S. Pure Play Hemp Entity

In June 2020, Generation Hemp began preparing to uplist to Nasdaq as one of the few publicly traded pure-play hemp companies on a U.S. exchange. However, because of complications resulting from the pandemic and establishing itself within a new industry — as a new business — this was put on hold as the business continued to expand and restructure. The company is currently listed on the over-the-counter (OTC) markets (OTCQB: GENH) but plans to uplist later this year.

In the coming months, expect to see new product and service lines, such as Generation Hemp’s upcoming line of animal bedding.

Generation Hemp has a market capitalization of approximately $100 million on an as-converted basis. And, with a hybrid business approach, it continues to build a conglomerate of smaller businesses, each specializing in various sectors of the hemp industry, which most likely will fall under the parent company as a supply chain or fee-based service provider. As of now, the company will process 12 million pounds of hemp in the next two years, as secured through its current contracts, and anticipates additional announcements of more in the near future.

GenH Continues to vet Targets, Contemplates Possible Entry into THC Testing and CBD for Pets

Image by Free-Photos from Pixabay

Generation Hemp plans to expand into new sectors of the business. One of these would be the inclusion of a testing lab outside of the GenH Halcyon plant. This would provide another stable source of revenue.

The industry is seeing a shortage of certified and noncertified labs in an environment where meeting specific deadlines and criteria are imperative for businesses to fully operate under guaranteed compliance. Few labs are currently registered with the U.S. Drug Enforcement Administration (DEA) for the amount of hemp production expected in 2021 alone.

Although the 2018 Farm Bill made clear the difference between hemp and marijuana, banks could still lose their licenses if they are found to offer services to illegal hemp or marijuana businesses.

The industry is currently at a legal crossroad as the FDA and USDA have not provided clear guidance in the matter. Many states still lack direction as to what businesses can do and what businesses that serve those businesses are willing to do. Although banks basically have been granted the green light to serve the industry, a number of institutions refuse outright to open accounts, process transactions or lend to any company associated with hemp for fear of legal ramifications.

The Department of Agriculture (USDA) requires all hemp farmers to have their hemp tested regularly. Certified certificate of analysis (COA) testing is carried out by 3rd-party labs and extraction labs in key business sectors.

COA testing is essential for businesses to operate legally in this industry.

As a result, Evans’ company has been seriously looking at acquiring different businesses in this arena. Intensive risk management will take place before Evans decides whether to enter this market. Currently, his company offers testing for GenH Halcyon clients at the 48,000-square-foot facility. While it’s being performed as part of another service, a standalone facility is something of much greater interest and a strong possibility as the company moves forward.

For Those Who Like to see the Numbers

“ResearchAndMarkets” reports that as an agricultural commodity, “global industrial hemp markets will grow and reach $17.4 billion by 2027, up from $5.6 billion in 2020.”

At the time of the merger that resulted in Generation Hemp, Home Treasure Finders, Inc. was a public entity, trading at only $0.06 per share. When news got out that Evans was taking over the business, the shares climbed to $0.80. Naturally, it cooled down slightly but jumped once again in January 2021, when Generation Hemp closed its 1st acquisition. After upgrading to the OTCQB, it climbed again in March to $2.50 and, at one point, hit a peak of $3.50 per share.

As of July 1, 2021, the company had 34,977,953 shares of common stock and 6,328,948 shares of Series A Preferred stock outstanding, with each Series A Preferred share being convertible into twelve shares of common stock. Considering that this is a new company in a new industry, these numbers tell you one thing — you’ll definitely want to add it to your watchlist.

Due to the recent execution of new business contracts, Generation Hemp projects its revenues and EBITDA to double across the ensuing 12 months.

Cannabis investors should also know the difference between marijuana and hemp.

To learn more about hemp, industrial applications and Generation Hemp, visit https://www.genhempinc.com.

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