SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
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Preliminary Information Statement
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Confidential, for use of the Commission only
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[x]
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Definitive Information Statement
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(Name of Registrant as Specified In Its Charter)
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Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Price per unit or other underlying value of transaction pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the filing fee is calculated and state how it was determined.)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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GREENSHIFT CORPORATION
5950 Shiloh Road East, Suite N
Alpharetta, GA 30005
INFORMATION STATEMENT
To the Holders of the Voting Stock:
The purpose of this Information Statement is to notify you that the holder of shares representing a majority of the voting power of GreenShift Corporation (the “Company”) has given its written consent to a resolution adopted by the Board of Directors of the Company to amend the articles of incorporation so as to effect a reverse split of the Company’s common stock in a ratio of
1-for-1,000
. We anticipate that this Information Statement will be mailed on August 17, 2011 to shareholders of record. On or after September 6, 2011, the amendment of the articles of incorporation will be filed with the Delaware Secretary of State and will become effective.
The Board of Directors approved the amendment primarily in order to comply with GreenShift’s agreements with its senior creditor, YA Global Investments, L.P. (“YA Global”). The convertible debt instruments held by YA Global require that GreenShift maintain a sufficient number of shares of authorized common stock to enable conversion of the convertible debt issued by GreenShift to YA Global. The Board of Directors anticipates that in the near future GreenShift will have no shares available for issuance upon conversion and will therefore be in default of those debt instruments. Although GreenShift’s ambition is to satisfy its debt to YA Global in cash deriving from operating activities or one or more potential future financing transactions, it is necessary that the potential for default be eliminated. In addition, until we are able to fully pay off our remaining debt, our lenders will continue to have the right to receive payment upon demand in the form of common stock at a discount to its market price. Since the market price of our stock in recent months has been about equal to its par value and since we are not permitted to issue common stock for consideration less than par value under Delaware law, we are forced to incur costly penalties at the time of each issuance of shares to our lenders. The magnitude of these penalties is likely to increase in direct proportion to the amount of debt paid in stock. These costs can be expected to interfere with our ability to achieve consistent profitability. A reverse split would allow the Company to avoid these costs and the potential future debt default.
Delaware corporation law permits holders of a majority of the voting power to take shareholder action by written consent. Accordingly, the Company will not hold a meeting of its shareholders to consider or vote upon the amendment of the Company’s certificate of incorporation.
WE ARE NOT ASKING YOU FOR A PROXY.
YOU ARE REQUESTED NOT TO SEND US A PROXY.
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August 17, 2011
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KEVIN KREISLER, Chairman
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VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
We determined the shareholders of record for purposes of this shareholder action at the close of business on July 19, 2011 (the “Record Date”). The table below lists the authorized voting stock as of the Record Date, the number of shares of each class that were outstanding on the Record Date, and the voting power of each class. Each share of common stock is entitled to one vote. Each share of Series B Preferred Stock is entitled to 25 votes. The holders of the Series D shares are entitled to a portion of the aggregate voting power equal to 80% multiplied by a fraction, the numerator of which is the number of outstanding Series D shares and the denominator of which is 1,000,000.
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Security
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Authorized
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Outstanding
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Voting Power
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Common Stock
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20,000,000,000
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13,903,397,418
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13,903,397,418
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Series B Preferred Stock
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2,865,333
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2,519,219
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62,980,475
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Series D Preferred Stock
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1,000,000
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978,534
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50,108,561,228
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The following table sets forth information regarding the voting stock beneficially owned by each member of our Board of Directors, by our officers and directors as a group, and by any person who, to our knowledge, owned beneficially more than 5% of any class of voting stock as of July 19, 2011.
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Name and Address
Of Beneficial Owner
(1)
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Common
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% of Class
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Series B Preferred
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% of Class
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Series D Preferred
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% of Class
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Percentage of Voting Power
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Kevin Kreisler
(2)
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148,639
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<0.01%
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--
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--
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791,034
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80.85%
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63.28%
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Edward Carroll
(3)
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167,435
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<0.01%
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393,183
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13.56%
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187,500
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19.15%
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15.00%
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David Winsness
(3)
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97,667
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<0.01%
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360,933
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12.45%
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--
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--
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<0.01%
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Greg Barlage
(3)
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108,804
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<0.01%
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356,478
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12.30%
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--
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--
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<0.01%
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Richard Krablin
(3)
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58,522
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<0.01%
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376,183
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12.99%
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--
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--
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<0.01%
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Officers and Directors
as a group (5 persons)
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581,067
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<0.01%
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1,487,186
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51.30%
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978,534
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100.00%
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78.28%
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(1)
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The address of each shareholder is c/o GreenShift Corporation, 5950 Shiloh Road East, Suite N, Alpharetta, Georgia, 30005.
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(2)
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All shares listed for Mr. Kreisler are owned of record by Viridis Capital, LLC, of which Mr. Kreisler is the sole member.
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(3)
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Shares of Company Series B Preferred Stock are convertible at the fixed rate of 1 Series B Share to 25 Company common shares.
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AMENDMENT OF THE CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE SPLIT OF THE COMMON STOCK
The Board of Directors of the Company has adopted a resolution to amend the articles of incorporation so as to effect a reverse split of the Company’s common stock in a ratio of 1-for-1,000 (the “Reverse Split”). The holder of shares representing a majority of the voting power of the Company’s outstanding voting stock has given its written consent to the resolution.
The Board of Directors approved the amendment primarily in order to comply with GreenShift’s agreements with its senior creditor, YA Global Investments, L.P. (“YA Global”). The convertible debt instruments held by YA Global require that GreenShift maintain a sufficient number of shares of authorized common stock to enable conversion of the convertible debt issued by GreenShift to YA Global. The Board of Directors anticipates that it is possible that GreenShift will have no shares available for issuance upon conversion and will therefore be in default of those debt instruments. Although GreenShift’s ambition is to satisfy its debt to YA Global in cash deriving from operating activities or one or more potential future financing transactions, it is necessary that the potential for default be eliminated. In addition, until we are able to fully pay off our remaining debt, our lenders will continue to have the right to receive payment upon demand in the form of common stock at a discount to its market price. Since the market price of our stock in recent months has been about equal to its par value and since we are not permitted to issue common stock for consideration less than par value under Delaware law, we are forced to incur costly penalties at the time of each issuance of shares to our lenders. The magnitude of these penalties is likely to increase in direct proportion to the amount of debt paid in stock. These costs can be expected to interfere with our ability to achieve consistent profitability. A reverse split would allow the Company to avoid these costs and the potential future debt default.
Under Delaware corporation law, the consent of the holder of a majority of the voting power is effective as shareholders’ approval. We will file the Amendment with the Secretary of State of Delaware on or after September 6
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2011, and it will become effective on the date of such filing (the “Effective Date”). The Amendment to the Certificate of Incorporation provides that each thousand
shares of common stock outstanding on the Effective Date will be exchanged for one post-Reverse Split share of Company common stock (“New Common Stock”). No fractional shares or scrip will be issued; rather, shareholders who would otherwise be entitled to a fractional share as a result of the Reverse Split will be issued one whole share of New Common Stock in lieu of the fraction.
The Board of Directors and the majority shareholder have approved the amendment to the certificate of incorporation in order to provide GreenShift with flexibility in pursuing its long-term business objectives. The primary reason for the reverse split is the requirement contained in GreenShift’s agreements with its lenders to maintain a sufficient number of shares of authorized common stock to enable conversion of debt issued by GreenShift to its lenders. Additional reasons for the reverse split include:
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Management may in the future to pursue opportunities to obtain capital in order to fully implement GreenShift’s business plan. A reserve of common shares available for issuance from time-to-time will enable GreenShift to entertain a broad variety of financing proposals.
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Management may utilize the additional shares in connection with corporate acquisitions, joint venture arrangements, or for other corporate purposes, including the solicitation and compensation of key personnel.
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Management has not entered into any commitment to issue any shares except upon conversion of outstanding debentures. Moreover, Management has no plans at this time that will involve the issuance of additional shares, other than a general plan to pursue additional financing. Management has not, however, discussed the terms of any specific financing with any potential investor.
The following table shows the debentures currently outstanding. In each case the creditor has the right to convert the principal amount of the debt into GreenShift common stock. In no case does GreenShift have a contractual or other right to redeem the debt with stock or to force the creditor to convert the debt into stock.
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Derivative Security
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Creditor
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Issue Date
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Original Principal
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Outstanding Principal
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Shares Issuable
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A&R Convertible Debenture
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YA Global Investments, L.P.
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12/2009
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$
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42,727,603
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$
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26,023,401
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289,148,900,000
(1)
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Related Party Debenture
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Minority Interest Fund (II), LLC
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12/2008
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$
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1,386,851
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$
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3,754,264
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41,714,044,444
(2)
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Related Party Debenture
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Viridis Capital, LLC
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12/2009
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$
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540,167
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$
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407,939
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4,532,655,556
(2)
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Other Debentures
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Various Holders
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6/2009
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$
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1,265,000
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$
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551,237
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6,124,855,556
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341,520,455,556
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________________________
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(1)
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The principal amount and accrued interest on the A&R Convertible Debentures issued to YA Global Investments, L.P. (“YA Global”), are convertible by the holder into common stock at a conversion rate equal to 90% of the average closing market price of the Company’s common stock for the 20 days prior to conversion. The A&R Convertible Debentures accrue interest at 6% per annum and are due December 31, 2012. At a conversion rate of $0.0001 on July 19, 2011, the A&R Convertible Debentures could be converted into 289,148,900,000 common shares.
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(2)
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The principal amount and accrued interest on the unsecured Related Party Debenture issued to Minority Interest Fund (II), LLC (“MIF”), is convertible by the holder into common stock at a conversion rate equal to 90% of the average closing market price of the Company’s common stock for the 20 days prior to conversion. The Related Party Debenture accrues interest at 20% per annum and is due December 31, 2012. The Related Party Debenture includes a number of debentures issued between December 31, 2008 and December 31, 2009. At a conversion rate of $0.0001 on July 19, 2011, the Related Party Debentures could be converted into 46,246,700,000 common shares.
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All of the foregoing derivative securities are currently exercisable, and the debentures will remain exercisable until satisfied. In the event that any of the foregoing derivative securities were converted or exercised, GreenShift would not be able to issue the requisite common stock, and would be in default, unless the number of common shares available for issuance is increased. Conversion of those debentures would improve GreenShift’s balance sheet by reducing its debt to equity ratio, and increase its ability to obtain future financing. However, conversion would also dilute the interest of current shareholders in the equity in GreenShift. The additional authorized common stock is necessary to accommodate those conversions, should they occur.
The New Common Stock will not be different from the common stock held by the Company’s stockholders prior to the Reverse Split. The stockholders will have the same relative rights following the Effective Date as they had prior to the Effective Date, except to the extent the proportion of shares that they own is affected by the rounding up of fractional shares.
As a result of the Reverse Split, there will be about twenty billion common shares available for issuance. The Board of Directors will be authorized to issue the additional common shares without having to obtain the approval of the Company’s shareholders. Delaware law requires that the Board use its reasonable business judgment to assure that the Company obtains “fair value” when it issues shares. Nevertheless, the issuance of the additional shares would dilute the proportionate interest of current shareholders in the Company. The issuance of the additional shares could also result in the dilution of the value of shares now outstanding, if the terms on which the shares were issued were less favorable than the contemporaneous market value of the Company’s common stock.
The Reverse Split, with the resulting increase in the number of shares available for issuance, is not being done for the purpose of impeding any takeover attempt. Nevertheless, the power of the Board of Directors to provide for the issuance of shares of common stock without shareholder approval has potential utility as a device to discourage or impede a takeover of the Company. In the event that a non-negotiated takeover were attempted, the private placement of stock into “friendly” hands, for example, could make the Company unattractive to the party seeking control of the Company. This would have a detrimental effect on the interests of any stockholder who wanted to tender his or her shares to the party seeking control or who would favor a change in control.
Reverse Split Procedures; Fractional Shares
On the Effective Date of the Reverse Split, the outstanding certificates representing shares of the Company’s common stock will be automatically converted into certificates representing shares of post-reverse common stock (“New Common Stock”). It is not necessary for a shareholder to obtain a replacement certificate in order to be registered in the record books of the corporation as the owner of the appropriate number of share of New Common Stock. Every shareholder who wishes to receive a replacement certificate, however, may do so by surrendering to the Transfer Agent his certificate representing shares of pre-Reverse Split common stock and paying the Transfer Agent’s standard fee. In exchange, he will receive a replacement certificate representing the appropriate number of share of New Common Stock. The name and address of the Transfer Agent are:
Interwest Transfer Co., Inc.
1981 East 4800 South, Suite 100
Salt Lake City, Utah 84117
801-272-9294
To avoid the existence of fractional shares of our common stock, a stockholder who would otherwise hold a fractional share as a result of the Reverse Stock Split will be entitled to receive one full share of common stock in lieu of such fractional shares upon surrender of their stock certificates to our transfer agent.
No Dissenters Rights
Under Delaware law, shareholders are not entitled to dissenters’ rights with respect to the amendment of the Certificate of Incorporation to reverse split the common stock.
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