SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO.: 0-33513
Date of Report: January 25, 2008
GS ENVIROSERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware
20-8563731
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(State of other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
14b Jan Sebastian Drive, Sandwich, MA 02563
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(Address of principal executive offices) (Zip Code)
(508) 888-5478
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(Registrant's telephone number including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
__ Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
__ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
__ Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
__ Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
ITEM 2.01 COMPLETION OF ACQUISITION OF ASSETS
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION
ITEM 3.02 UNREGISTERED SALE OF EQUITY SECURITIES
GS CleanTech Stock Purchase
On January 25, 2008, GS EnviroServices entered into a Stock Purchase Agreement
with GS CleanTech Corporation, which owned 15 million shares of the common stock
of GS EnviroServices, representing 53% of the outstanding shares. The Agreement
provided that GS CleanTech would surrender to GS EnviroServices 8,733,333 shares
of GS EnviroServices common stock. In exchange, GS EnviroServices issued a
$2,000,000 convertible debenture to YA Global Investments, LP ("YAGI"), and YAGI
cancelled $2,000,000 of indebtedness owed to it by GS CleanTech.
The Stock Purchase Agreement, combined with a letter agreement between GS
EnviroServices and YAGI, further provides that if GS EnviroServices pays
$1,000,000 to YAGI on or before May 1, 2008, then the remaining 6,266,667 shares
of GS EnviroServices owned by GS CleanTech will be transferred to GS
EnviroServices.
As part of these transactions, GS CleanTech granted a proxy to the board of
directors of GS EnviroServices authorizing the board to vote the shares of GS
EnviroServices now in the name of GS CleanTech. The proxy with respect to the
8,733,333 exchanged for $2,000,000 terminates in the event of a default by GS
EnviroServices of its loan obligations to YAGI. The proxy with respect to the
6,266,667 shares will terminate on May 1, 2008.
Convertible Debenture
The Secured Convertible Debenture that GS EnviroServices issued to YAGI bears
interest at 10% per annum, payable monthly. Principal payments will be due as
follows:
- $1,000,000 due on February 11, 2008;
- $27,777.77 due on March 10, 2008 and on the first business day of
every month thereafter (although YAGI may defer any such monthly
payment to the Maturity Date);
- the balance due on February 11, 2009 (the "Maturity Date").
The Debenture provides that GS EnviroServices will be entitled to redeem the
Debenture at any time when the closing bid price for its common stock is less
than $.05 and no event of default has occurred. However, the Letter Agreement
described under "Guarantees" below provides that GS EnviroServices may redeem
the Debenture in full on or before May 10, 2008 if it makes the $1,000,000
payment for the 6,266,667 shares purchased from GS CleanTech under the Stock
Purchase Agreement described above.
YAGI may convert the accrued interest and principal into GS EnviroServices
common stock at a conversion rate equal to the lesser of $.05 or 80% of the
lowest closing bid price for the 30 trading days preceding conversion. However,
at no time may YAGI beneficially own more than 4.99% of the outstanding shares
of GS EnviroServices common stock.
The Debenture is secured by a pledge of all of the assets of GS EnviroServices.
In addition, GS EnviroServices' obligations under the Debenture has been
guaranteed by GS CleanTech, by its Chairman, Kevin Kreisler, by his holding
company, Viridis Capital, LLC, and by all of the other subsidiaries of GS
CleanTech. Each guarantor has pledged all of its assets to secure repayment of
the Loans and the Debentures.
Guarantees
On January 25, 2008, in connection with the transactions described above, a
financing was completed that resulted in GS EnviroServices Corporation becoming
the guarantor of up to $1,500,000 in debts owed by several of its affiliates,
pursuant to a Global Guaranty Agreement dated January 11, 2008. The beneficiary
of the guarantees was YA Global Investments, LP ("YAGI"), which committed to
extend credit to those affiliates. GS EnviroServices issued the guarantees in
consideration of the benefits it anticipates receiving from the other
transactions that occurred on that day.
The aggregate principal amount of the deets that GS EnviroServices guaranteed
was $37,419,148, consisting of:
- $6,931,279 owed by GS CleanTech;
- $18,500,000 owed by GS AgriFuels Corporation, a subsidiary of GS
CleanTech;
- $1,987,869 owed by GreenShift Corporation, which was the majority
shareholder in GS EnviroServices until 2007; and
- Up to $10,000,000 that may be borrowed by GS COES (Yorkville I) LLC, a
subsidiary of GS CleanTech.
Despite the magnitude of the debts it guaranteed, the total liability of GS
EnviroServices under its guarantee is $1.5 million. This occurs because the
Global Guaranty Agreement was modified by a letter agreement between YAGI and GS
EnviroServices dated January 11, 2008 (the "Letter Agreement"). The Letter
Agreement provides that the liability of GS EnviroServices under the Global
Guaranty Agreement will be limited to $1.5 million plus any costs of collection.
In addition, the potential liability will be further reduced by the amount of
any proceeds realized by YAGI from the sale of shares pledged by GS CleanTech
pursuant to the Amended Forbearance Agreement described below. The Letter
Agreement also provides that:
- if GS EnviroServices pays YAGI $1,000,000 on or before May 10, 2008,
the 6,266,666 shares identified below as "GS Pledged Shares Pool 1"
will be released from the pledge;
- if GS EnviroServices satisfies the $1,000,000 payment obligation under
its Debenture due on February 11, 2008, one-half of the 8,733,333
shares identified below as "GS Pledged Shares Pool 2" will be released
from the pledge; and
- when the Debenture issued by GS EnviroServices to YAGI is satisfied,
all of the shares in GS Pledged Shares Pool 2 will be released from
the pledge.
If, therefore, GS EnviroServices pays $3 million (plus interest on the
Debenture) on or before May 10, 2008, then it will be relieved of its guaranty
obligations. If it does not make that payment, then its total potential
liability to YAGI will consist of its obligations under the $2 million Debenture
and its guaranty of up to $1.5 million of its affiliates' debts.
Stock Issuance
To induce YAGI's entry into the Letter Agreement and other transactions recited
in this Report, GS CleanTech issued two million shares of its common stock to
YAGI.
Amended Forbearance Agreement
In connection with the financing transactions described in this Report, YAGI
entered into an Amended and Restated Forbearance Agreement with GS CleanTech,
GreenShift Corporation (its former parent), and Viridis Capital, LLC (its
majority shareholder). The Agreement recited that a default existed under
certain debentures issued to YAGI by GS CleanTech, which were guaranteed by
GreenShift and Viridis Capital. In order to secure the defaulted debentures, the
parties had, at the time of issuance of the debentures, pledged to YAGI the
following securities:
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Pledgor Pledged Shares Issuer
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Viridis 1,000,000 shares of Series C Preferred Stock GreenShift
convertible into common stock
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Viridis 750,000 shares of Series C Preferred Stock GS CleanTech
convertible into common stock
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GS CleanTech 1,000,000 shares of Series C
Preferred Stock GS Energy Corporation
convertible into common stock
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GS CleanTech 6,266,666 shares of common stock of GS GS EnviroServices
EnviroServices (defined as "GS Pledged Shares
Pool 1")
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GS CleanTech 8,733,333 shares of common stock of GS GS EnviroServices
EnviroServices (defined as "GS Pledged Shares
Pool 2")
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In the Amended and Restated Forbearance Agreement, the parties agreed that in
order to remedy the default under the Debentures, YAGI will be entitled to
exercise the right of conversion under the pledged preferred stock, and to sell
any of the resulting common shares or the pledged common shares. GS Pledged
Shares Pool 2, however, may be foreclosed upon only in the event of a default
under the $2,000,000 debenture issued by GS EnviroServices, discussed above. The
Agreement stipulates that YAGI may not at any time own more than 4.99% of the
outstanding common shares of any of the issuers. Each time YAGI takes shares
under the Agreement, 90% of the volume weighted average market price for the
five trading days preceding the delivery will be applied against the principal
amount of the Debentures. YAGI agreed that, if no other defaults occur under the
Debentures, it would waive all other rights and penalties available to it as a
result of the present defaults.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Exhibits
10-a Stock Purchase Agreement between GS CleanTech Corporation and GS
EnviroServices, Inc.
10-b Secured Convertible Debenture dated January 11, 2008 issued by GS
EnviroServices, Inc. to YA Global Investments, LP.
10-c Global Guaranty Agreement dated January 11, 2008 among GS
EnviroServices, Inc., Viridis Capital LLC, Kevin Kreisler, GreenShift
Corporation, GS AgriFuels Corporation, GS CleanTech Corporation, each
of their subsidiaries, and YA Global Investments, LP.
10-d Letter Agreement dated January 11, 2008 between GS EnviroServices,
Inc. and YA Global Investments, LP.
10-e Amended and Restated Forbearance Agreement dated as of January 11,
2008 among GS CleanTech Corporation, GreenShift Corporation, Viridic
Capital, LLC and YA Global Investments, LP.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 1, 2008 GS ENVIROSERVICES, INC.
By: /s/ James Green
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James Green, President