UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C
(Rule 14c-101)
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF
THE SECURITIES EXCHANGE ACT OF 1934
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|X| Preliminary Information Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
|_| Definitive Information Statement
GreenShift Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
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GreenShift Corporation
535 W. 34th Street, Suite 203
New York, New York 10001
646-792-2635
Dear stockholders:
This Information Statement is circulated to advise the stockholders of
GreenShift Corporation ("the Company") of an action already approved by written
consent of the stockholders who collectively hold a majority of the Company's
voting stock. Pursuant to Rule 14c-2 under the Securities Exchange Act of 1934,
as amended, the proposals will not be effective until twenty (20) days after the
date this Information Statement is mailed to you. Consequently, this Information
Statement is being sent to you for informational purposes only.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY
The action to be effective twenty (20) days after the mailing of this
Information Statement is to authorize the Company's Board of Directors, without
further consent of the stockholders of the Company, to withdraw the Company's
election to be regulated as a Business Development Company ("BDC") under the
Investment Company Act of 1940, as amended.
Attached hereto for your review is an Information Statement relating to the
above-described action.
Very truly yours,
/s/ Kevin Kreisler
------------------------------
Kevin Kreisler
Chairman and Chief Executive Officer
May __, 2006
New York, N.Y.
GreenShift Corporation
535 W. 34th Street, Suite 203
New York, New York 10001
646-792-2635
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INFORMATION STATEMENT
PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14c-2 THEREUNDER
-------------------------------------
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS REQUIRED IN
CONNECTION WITH THIS INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
This Information Statement is being furnished on or about May [__], 2006,
to the holders of record as of the close of business on May 5, 2006 (the "Record
Date"), of shares of the voting stock of GreenShift Corporation (the "Company"),
a Delaware corporation. The purpose of this Information Statement is to notify
you that: (i) on April 24, 2006, the Board of Directors (the "Board") decided to
withdraw the Company's election to be regulated as a business development
company ("BDC") under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); (ii) on April 24, 2006, the Company received a
written consent (the "Written Consent") in lieu of a meeting of stockholders
from Viridis Capital, LLC ("Viridis Capital"), a company incorporated in New
Jersey and the holder of 1,000,000 shares of Series C Preferred Stock
(representing approximately 70% of the Company's outstanding votes), approving
and authorizing the withdrawal of the Company's election to be regulated as a
BDC; and (iii) at a time to be determined by the Board, but no sooner than
twenty (20) calendar days after the mailing of this Information Statement, the
Board will file or cause to be filed a Withdrawal Notice with the Securities and
Exchange Commission (the "SEC") to withdraw the Company's election to be
regulated as a BDC. You are urged to read the enclosed Information Statement in
its entirety.
Expenses in connection with the distribution of this Information Statement
are anticipated to be less than $10,000 and will be paid by the Company.
Background
On April 11, 2005, the Company elected to be regulated as a BDC pursuant to
section 54 of the Investment Company Act. As a BDC, the Company is subject to
some of the provisions of the Investment Company Act applicable to registered
closed-end investment companies. BDCs, however, generally are provided greater
flexibility with respect to management compensation, capital structure,
transactions among affiliates and other matters than registered closed-end
investment companies. Nevertheless, as a BDC, the Company remains subject to
significant regulation of its activities, as described below under "Investment
Company Act Provisions Applicable to BDCs."
Historically, the Company's business has been to invest in the securities
of portfolio companies attractive to the Company, rather than to operate as an
operating company. The Board has determined, however, that in the current
environment the Company would be better served to focus its efforts on the
operation of business rather than act as a passive investor. In consideration of
the future operations of the Company and its planned operations, the Board has
evaluated and discussed the feasibility of the Company continuing as a BDC. The
Board believes that, given the changing nature of the Company's business and
investment focus from investing, reinvesting, owning, holding, or trading in
investment securities toward that of an operating company whose focus will be in
the business of facilitating the efficient use of natural resources, the
significant regulatory regime governing BDCs is no longer appropriate and may in
fact negatively affect the Company's future growth. Based on an analysis of the
current holdings of the Company and its proposed plan of future operations, the
Board believes that the Company will not be deemed to be an investment company
after de-election. On April 24, 2006, the Board of Directors voted, subject to
stockholder approval, to withdraw the Company's election to be regulated as a
BDC, and set the Record Date for such stockholder approval.
Section 58 of the Investment Company Act provides that a BDC may not change
the nature of its business, so as to cease to be or withdraw its election as a
BDC, unless it is authorized to do so by a majority of its issued and
outstanding voting securities. On April 24, 2006, Viridis Capital, which owns
preferred stock that represents 70% of the outstanding votes of the Company,
adopted a Written Consent which authorized and approved the withdrawal of the
Company's election to be regulated as a BDC at a time deemed appropriate by the
Board and in accordance with applicable law so that the Company may begin
conducting business as an operating company rather than as a BDC.
The withdrawal of the Company's election to be regulated as a BDC will
become effective upon receipt by the SEC of the Company's application for
withdrawal. The Company does not anticipate filing the application of withdrawal
until it can be reasonably certain that it will not be deemed to be an
investment company without the protection of its BDC election and at such time
as the Board deems appropriate. After the Company's application for withdrawal
of its BDC election is filed with the SEC, the Company will no longer be subject
to the regulatory provisions of the Investment Company Act applicable to BDCs
generally, including regulations related to its capital structure, composition
of its Board, affiliated transactions, custody of securities and stock
compensation arrangements. Stockholder approval for withdrawal of the Company's
election to be regulated as a BDC is valid for one year following the date of
such approval. If no application for withdrawal is filed for the one year
following April 24, 2006, the Company will be required to present the matter to
the stockholders again for approval prior to filing a withdrawal application.
Investment Company Act Provisions Applicable to BDCs and
Effect of Withdrawal of Election to Be Regulated As a BDC
Investment Company Act Provisions Applicable to BDCs
A BDC must (i) be a domestic company; (ii) have registered a class of its
securities or have filed a registration statement with the SEC pursuant to
section 12 of the Securities Exchange Act of 1934 (the "Exchange Act"); (iii)
operate for the purpose of investing in the securities of eligible portfolio
companies; (iv) offer to extend significant managerial assistance to such
eligible portfolio companies; and (v) have filed (or, under certain
circumstances, intend to file) a notice of election to be regulated as a BDC
with the SEC.
The Investment Company Act imposes, among others, the following regulations
on BDCs, which are intended to protect the investors of investment companies:
o A BDC may not change the nature of its business or fundamental
investment policies without the prior approval of the stockholders;
o A BDC must carry its investments at their market value if a public
trading market exists for its portfolio securities or at fair value if
one does not (rather than at cost as operating companies do) in its
financial reports, rather than at book value;
o The composition of a BDC's board is restricted (e.g., a majority of
its members must be independent);
o A BDC may only engage in transactions with affiliates of the BDC under
certain circumstances;
o The issuance of senior equities and debt securities by a BDC is
subject to certain asset coverage limitations;
o A BDC's right to issue options, rights and warrants to purchase its
stock is restricted;
o There are prohibitions and restrictions on investing in certain types
of companies, such as brokerage firms, insurance companies and other
investment companies;
o There are limits on the types of assets that a BDC may acquire. A BDC
may not acquire any asset other than "qualifying assets" unless, at
the time the acquisition is made, such "qualifying assets" represent
at least 70% of the value of the BDC's total assets. "Qualifying
Assets" generally include: (i) securities purchased in transactions
not involving any public offering from the issuer of such securities,
which issuer is an eligible portfolio company; an eligible portfolio
company is defined as any issuer that (a) is organized and has its
principal place of a business in the United States, (b) is not an
investment company other than a SBIC wholly-owned by the BDC, and (c)
does not have any class of publicly-traded securities with respect to
which a broker may extend credit; (ii) securities received in exchange
for or distributed with respect to securities described above, or
pursuant to the exercise of options, warrants or rights relating to
such securities; and (iii) cash, cash items, Government securities, or
high quality debt securities maturing in one year or less from the
time of investment. A BDC may invest in public company securities and
other investments that are not "qualifying assets" but such
investments may not exceed 30% of the BDC's total asset value at the
time of such investment;
o A BDC generally may not issue common stock at a per share price less
than the then-current net asset value of the common stock without the
prior approval of stockholders; and
o A BDC is restricted in its ability to repurchase its shares directly
from stockholders.
Effect of Withdrawal of Election to Be Regulated As a BDC
If the Company ceases to be regulated as a BDC, the Company will no longer
be subject to regulation under the Investment Company Act, including the
provisions listed above that are intended to protect the interests of investors
in investment companies. However, the Board would continue to be subject to
customary principles of fiduciary duty with respect to a corporation and its
stockholders.
In addition, in the event that the Company withdraws its election to be
regulated as a BDC and becomes an operating company, the fundamental nature of
the Company's business will change from that of investing in a portfolio of
securities, with the goal of achieving gains on appreciation and dividend
income, to that of being actively involved in the business of facilitating the
efficient use of natural resources, with the goal of generating income from the
operations of this business.
The withdrawal of the Company's election as a BDC under the Investment
Company Act will result in a significant change in the Company's method of
accounting. BDC financial statement presentation and accounting utilizes the
value method of accounting used by investment companies, which allows BDCs to
recognize income and value their investments at market value as opposed to
historical cost. As an operating company, the required financial statement
presentation and accounting for securities held will be either fair value or
historical cost methods of accounting, depending on the classification of the
investment and the Company's intent with respect to the period of time it
intends to hold the investment. Change in the Company's method of accounting may
reduce the market value of its investments in privately held companies by
eliminating the Company's ability to report an increase in value of its holdings
as the increase occurs. Also, as an operating company, the Company would have to
consolidate its financial statements with subsidiaries, thus eliminating the
portfolio company reporting benefits available to BDCs.
The Company does not believe that the withdrawal of its election to be
regulated as a BDC will have any impact on its federal income tax status, since
it has never elected to be regulated as a regulated investment company under
Subchapter M of the Internal Revenue Code. Electing for treatment as a regulated
investment company under Subchapter M generally allows a qualified investment
company to avoid paying corporate level federal income tax on income it
distributes to its stockholders. Instead, the Company has always been subject to
corporate level federal income tax on its income (without regard to any
distributions it makes to its stockholders) as a "regular" corporation under
Subchapter C of the Code. There will be no change in its federal income tax
status as a result of it becoming an operating company.
Withdrawal of the Company's election to be regulated as a BDC will not
affect the Company's registration under section 12(b) of the Exchange Act. Under
the Exchange Act, the Company is required to file periodic reports on Form 10-K,
Form 10-Q, Form 8-K, proxy statements and other reports required under the
Exchange Act. Withdrawal of the Company's election to be regulated as a BDC is
not expected to have any effect on the Company's current common stocks trading
on the OTC Bulletin Board.
Reasons for the Potential Withdrawal of the Company as a BDC
Given the planned investment focus, asset mix, business and operations of
the Company, the Board believes that it is prudent for the Company to withdraw
its election as a BDC as soon as practicable to eliminate many of the
regulatory, financial reporting and other requirements and restrictions imposed
by the Investment company Act discussed above. For example:
o Issuance of Securities other than Common Stock. BDCs are limited or
restricted as to the type of securities other than common stock that
they may issue. The issuance of convertible securities and rights to
acquire shares of common stock (e.g., warrants and options) is
restricted primarily to prevent dilution of interests of existing
stockholders. In addition, issuances of senior debt and senior equity
securities require that certain asset coverage tests and other
criteria be satisfied on a continuing basis. This significantly
restricts the Company's ability to raise new capital through the
issuance of debt, particularly convertible debt, because the amount of
financing raised through debt is limited by the size of the Company's
assets even if a lender is willing to enter into a debt financing
transaction. Operating companies, including holding companies
operating through subsidiaries, benefit from having maximum
flexibility to raise capital through various financing structures and
means.
o Related Party Transactions. The Investment Company Act significantly
restricts among other things (i) transactions involving transfers of
property in either direction between the Company and most affiliated
persons of the Company (or the affiliated persons of such affiliated
persons) and (ii) transactions between the Company and such affiliated
persons (or the affiliated persons of such affiliated persons)
participating jointly on the one hand and third parties on the other.
The Board believes situations may arise in which it is in the
Company's best interests to engage in such transactions. If the
Company withdraws its election to be regulated as a BDC, it will no
longer be subject to these restrictions. The Board believes that even
after de-election to be regulated as a BDC the stockholders of the
Company will be adequately protected by the fiduciary obligations
imposed on the Company's directors under state corporate law, which
generally requires that the disinterested members of the Board
determine fairness to the Company of an interested-party transaction
(provided full disclosure of all material facts regarding the
transaction and the interested party's relationship with the Company
is made), and SEC disclosure rules, which require the Company to
include specified disclosure regarding transactions with related
parties in its SEC filings.
o Business Focus. The nature of the Company's business is changing from
a business that intended to be in the business of investing,
reinvesting, owning, holding, or trading in investment securities
toward that of an operating company whose focus is on facilitating the
efficient use of natural resources. The Board believes that BDC
regulation would be inappropriate for such activities.
o Issuance of Common Stock. A BDC may not issue shares of its common
stock at a price less than the then net asset value per share without
prior stockholder approval. Often, the market prices for BDC stocks
have been lower than net asset value, thus, making it much more
difficult for BDCs to raise equity capital. While this restriction
provides stockholders of an investment company with appropriate and
meaningful protection against dilution of their indirect investment
interest in portfolio securities, the Company's Board believes that
this would essentially be irrelevant to the interests of investors in
an operating company, who look to its consolidated earnings stream and
cash flow from operations for investment value.
o Compensation of Executives. The Investment Company Act limits the
extent to which and the circumstances under which executives of a BDC
may be paid compensation other than in cash. For example, the issuance
of stock as compensation for services is generally prohibited. The
Board believes that after de-election the Company will have greater
flexibility in the structuring of employee compensation package that
will enable the Company to attract and retain additional talented and
qualified personnel and to more fairly reward and effectively motivate
its personnel in accordance with industry practice.
o Eligible Investments. As a BDC, the Company may not acquire any asset
other than certain qualifying assets unless, at the time the
acquisition is made, qualifying assets represent at least 70% of the
value of the total assets of the Company. Because of the limitations
on the type of investments the Company may make, as well as the
Company's total asset composition, the Company may not be able to
participate in some attractive and prudent investment opportunities as
long as the Company remains a BDC.
Moreover, the Company incurs significant general and administrative costs
in order to comply with the regulations imposed by the Investment Company Act.
Management devotes considerable time to issues relating to compliance with the
Investment Company Act and the Company bears the costs of compliance including
legal and accounting fees. The Board believes that resources now being expended
on Investment Company Act compliance matters could be utilized more productively
if devoted to the operation of the Company's business. The Board has determined
that the costs of compliance with the Investment Company Act are substantial,
especially when compared to the Company's relative size and net income, and that
it would therefore be in the financial interests of the stockholders for the
Company to cease to be regulated under the Investment Company Act altogether.
The Board believes that the above reasons, among others, indicate that the
restrictions of the Investment Company Act would have the effect of dampening
market interest in the Company and hindering its financial growth in the future.
The Board has determined that the most efficient way to reduce these costs,
improve profitability, and eliminate the competitive disadvantages the Company
experiences due to compliance with the many requirements and restrictions
associated with operating as a BDC under the Investment Company Act would be to
withdraw the Company's election to be regulated as a BDC.
Vote Required & Manner of Approval
For the reasons discussed above, on April 24, 2006, the Board voted,
subject to stockholder approval, to withdraw the Company's election to be
regulated as a BDC. Under section 58 of the Investment Company Act, the
termination of the Company's status as a BDC must be approved by the holders of
a majority of the voting power of the Company. Under Delaware General
Corporations Law, stockholders of the Company may take action without a meeting
of the stockholders and without prior notice if a consent or consents in
writing, setting forth the action so taken, is signed by the holders of the
outstanding voting shares holding not less than the minimum number of votes that
would be necessary to approve such action at a stockholders meeting. This action
is effective when written consents from holders of record of a majority of the
outstanding shares of voting stock are executed and delivered to the
corporation. As of the Record Date, there were 113,128,762 shares of common
stock and 1,000,000 shares of Class C Preferred stock issued and outstanding,
representing a total of 377,095,873 votes. Each share of Common Stock represents
1 vote and each share of Series C Preferred Stock represents 257 votes.
Accordingly, the minimum number of required votes to approve the termination of
the Company's status as a BDC is 192,318,895, which is a majority of the
possible number of votes.
On April 24, 2006, the Company received a Written Consent from stockholders
holding 263,967,111 votes of the Company (representing approximately 70% of the
outstanding number of votes), which authorized and approved the withdrawal of
the Company's election to be regulated as a BDC. Accordingly, the approval of at
least a majority of the outstanding shares has been obtained. As a result, no
vote or proxy is required by the stockholders to approve the withdrawal of the
Company's election to be regulated as a BDC.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information concerning the
beneficial ownership of the Company's voting stock as of May 5, 2006, by (i)
each stockholder known by the Company to be a beneficial owner of more than five
percent (5%) of its outstanding common stock, (ii) each executive officer and
director, and (iii) all directors and officers as a group. Information relating
to beneficial ownership of common stock by the Company's principal stockholders
and management is based upon information furnished by each person using
"beneficial ownership" concepts under the rules of the SEC. Under these rules, a
person is deemed to be a beneficial owner of a security if that person has or
shares voting power, which includes the power to vote or direct the voting of
the security, or investment power. The person is also deemed to be a beneficial
owner of any security of which that person has a right to acquire beneficial
ownership within 60 days. Under the SEC rules, more than one person may be
deemed to be a beneficial owner of the same security, and a person may be deemed
to be a beneficial owner of a security as to which he or she may not have any
pecuniary beneficial interest.
The percentages below are calculated based on 113,128,762 shares of common
stock and 1,000,000 shares of Class C Preferred stock issued and outstanding.
Number of Shares of Voting
Name Stock Beneficially Owned Percentage of Number of Votes
- ---- ------------------------ -----------------------------
Viridis Capital, LLC(1) 1,000,000 Class C Preferred Stock 70%
James Grainer 1,275,000 Common Stock .36%
All officers and directors as a 1,275,000 Common Stock .36%
group (4 persons)
1,000,000 Class C Preferred Stock 70%(2)
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(1) As of April 1, 2006, Mr. Kevin Kreisler is the sole stockholder of Viridis
Capital, LLC, which controls the Company based upon its ownership of 70% of
the Company's outstanding number of votes.
(2) Includes shares owned by Viridis Capital, LLC, which is controlled by Mr.
Kevin Kreisler.
Interest of Certain Persons In or In Opposition to Matters to be Acted Upon
No person has any interest, direct or indirect, by security holdings or
otherwise, in the filing of the Withdrawal Notice that is not shared by all
other stockholders.
Delaware General Corporations Law
The Company is distributing this Information Statement to its stockholders
in full satisfaction of any notice requirement it may have under the Delaware
General Corporations Law. No dissenters' rights with respect to the receipt of
the Written Consent or the filing of the Withdrawal Notice are afforded to the
Company's stockholders under the Delaware General Corporations Law.
Other Matters
The Board knows of no other matters other than those described in this
Information Statement which have been approved or considered by the holders of a
majority of the shares of the Company's voting stock.
IF YOU HAVE ANY QUESTIONS REGARDING THIS INFORMATION STATEMENT PLEASE CONTACT:
Mr. Kevin Kreisler
Chairman and Chief Executive Officer
GreenShift Corporation
535 W. 34th Street, Suite 203
New York, NY 10001
###-##-####
By order of the Board of Directors of
GreenShift Corporation
/s/ Kevin Kreisler
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Kevin Kreisler
Chairman and Chief Executive Officer
SK 25093 0001 662021 v3