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.: 0-50469
Date of Report: May 15, 2008
GREENSHIFT CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 59-3764931
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(State of other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
One Penn Plaza, Suite 1612, New York, NY 10019
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(Address of principal executive offices) (Zip Code)
(212) 994-5374
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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 2.01 Completion of Acquisition of Assets
Effective May 15, 2008, pursuant to an Exchange Agreement dated as of that date,
the Company and the owners of Biofuels Industries Group, LLC (d/b/a
NextDiesel(TM)) ("BIG") exchanged Company stock in return for 100% of the equity
of BIG. This transaction is currently in escrow pending receipt of all final
post-closing deliverables, which are expected to be finalized within two days.
BIG owns and operates a biodiesel production facility in Adrian, Michigan based
on the Company's patent-pending biodiesel technology. This facility has a
current production capacity of 10 million gallons of biodiesel per year and it
already includes much of the equipment necessary to rapidly scale to 20 million
gallons per year. In addition, this facility has been specifically designed to
refine the Company's extracted corn oil supplies into biodiesel.
The Exchange Agreement and related transaction documents (collectively, the "BIG
Acquisition Agreement") provides for the following terms and conditions:
>> Vested Company Shares. The issuance by the Company to the BIG
shareholders of 20,000,000 shares of Company common stock.
>> Performance-based Company Shares. The issuance by the Company to the
BIG shareholders of 20,000 shares of the Company's new Series E
Preferred Stock (the "Series E Shares"), which shares are convertible
at a fixed rate of 1 preferred share to 1,000 common shares into a
total of 20,000,000 shares of Company common stock; provided, however,
that the Series E Shares shall be convertible into Company common
shares in proportion to the Company's earnings before interest, taxes,
depreciation and amortization and non-cash and non-recurring items
("EBITDA") and will be fully convertible into 20,000,00 common shares
if only if the Company achieves $50,000,000 in EBITDA during one year
period.
>> Performance-based Cash Hurdle. The payment by BIG to BIG's founding
shareholders of $1,000,000 in cash payable upon the realization by the
Company of $10,000,000 in annualized EBITDA.
>> Redemption of BIG Equity Investment. The redemption by BIG of BIG's
"Class A Membership Units" for a total of $9 million payable with a
12% coupon commencing January 30, 2009 at a rate equal to 30% of BIG's
net cash flows (after all operating costs and regular debt payments
have been paid) (the "Class A Redemption").
>> Guaranty of BIG's Founding Shareholders. BIG's founding shareholders
have agreed to keep their personal guaranties of BIG's senior loans in
place (the "BIG Loans") in return for a guaranty fee equal to 5% of
the balance due under the BIG Loans (the "Guaranty Fee"). The Company
has agreed to use its best efforts to refinance the BIG Loans to
remove these guaranties on or before the first anniversary of the
effective date of the acquisition. If this condition is not satisfied,
then the Guaranty Fee shall increase to 7% and BIG shall accelerate
and prepay the principal amount of the BIG Loans at the rate of
$1,000,000 plus 25% of BIG's net cash flows until paid in full (the
"Guaranty Payments").
>> Guaranty of the Company and its Founding Shareholder. The Company,
Viridis Capital, LLC and Kevin Kreisler (the "GreenShift Parties")
entered into a Contribution Agreement with NextFuels, LLC, the holding
company of the founding shareholders of BIG, relative to the agreement
of the GreenShift Parties to guaranty the guaranty of the BIG Loans by
BIG's founding shareholders. The obligations of the GreenShift Parties
under the Contribution Agreement are subordinated to the interests of
YA Global Investments, LP ("YAGI"), the Company's senior lender.
>> Potential Rescission. The Company's equity in BIG is subject to
rescission in the event that: (a) the BIG Loans are not timely
serviced and kept in good standing, (b) the Guaranty Payments, if
relevant, are not timely made, and (c) if the Class A Redemption
payments are not made to the extent that they are due. This term
expires automatically upon the full payment and/or refinancing of the
BIG Loans without the guaranty of the BIG founding shareholders and
the full payment of the Class A Redemption.
>> Consulting Agreement. BIG's chief executive officer and one of its
founding shareholders, Terry Nosan, entered into a consulting
agreement with BIG at closing pursuant to Mr. Nosan will provide
management services to BIG and the Company. Mr. Nosan was also
appointed to the Company's board of directors.
Series E Preferred Stock
Each share of Series E Preferred Stock may be converted by the holder into 1,000
shares of common stock. The holders would be entitled to cumulative dividend
rights equal to that of 1,000 common shareholders upon the declaration of
dividends on common stock, and have voting privileges of one vote to every one
common share. As noted above, the Series E Shares are only convertible into
Company common shares on a pro-rated basis in conjunction with the Company's
realization of $50,000,000 in EBITDA.
The following is a schedule of Company common shares potentially issuable upon
conversion of the Series E Shares in the event and to the extent that the
Company achieves the agreed upon EBITDA targets:
Annualized Number of Series E Shares Number of Common Shares
EBITDA Target ($) That Can Be Converted Issuable Upon Conversion
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$ 5,000,000 2,000 2,000,000
$ 10,000,000 4,000 4,000,000
$ 15,000,000 6,000 6,000,000
$ 20,000,000 8,000 8,000,000
$ 25,000,000 10,000 10,000,000
$ 30,000,000 12,000 12,000,000
$ 35,000,000 14,000 14,000,000
$ 40,000,000 16,000 16,000,000
$ 45,000,000 18,000 18,000,000
$ 50,000,000 20,000 20,000,000
Pro Forma Fully Diluted Shares of Common Stock Outstanding
The following schedule reconciles the Company current share structure with its
pro forma fully diluted share structure based on the shares of common stock
outstanding as of May 15, 2008 (after closing of the BIG acquisition described
above) plus the performance-based shares described above:
Current Issued Pro Forma Shares Outstanding Upon Satisfaction of
and Outstanding Performance-Based EBITDA Threshold
Common Stock $10,000,000 $25,000,000 $50,000,000 $75,000,000
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Public Float 56,044,957 56,044,957 56,044,957 56,044,957 56,044,957
Employee Pool 8,832,392 16,533,333 36,133,333 69,133,333 69,133,333
Viridis Capital, LLC 154,000 16,794,000 41,754,000 83,354,000 124,954,000
BIG Shareholder Group 20,000,000 24,000,000 30,000,000 40,000,000 40,000,000
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Pro Forma Shares Outstanding 85,031,348 113,172,290 163,932,290 248,532,290 290,132,290
Item 5.02 Election of Directors
On May 15, 2008, in connection with the closing of the acquisition of Biofuel
Industries Group, LLC, the Company's Board of Directors elected Terry J. Nosan
to serve as a member of the GreenShift Corporation Board of Directors.
Information regarding Mr. Nosan follows:
Terry J. Nosan (57), chief executive officer of Biofuel Industries Group,
LLC (d/b/a NextDiesel(TM)), is an attorney who has spent most of his
working career in the real estate development and construction business.
Mr. Nosan graduated the University of Michigan with a Bachelors Degree in
1972 and Detroit College of Law "Cum Laude" in 1976. Mr. Nosan worked for
State of Michigan Office of the Attorney General from 1976 through 1979. As
an Assistant Attorney General he represented various state departments in a
wide variety of business and civil matters before federal and state courts.
He also researched and drafted Attorney General Opinions which were
requested by the Governor, state legislators or department heads. Mr. Nosan
has also been a principal in numerous residential building companies
involved in the development and construction of over a thousand home sites,
homes and condominiums in the Metropolitan Detroit area. Mr. Nosan has also
developed, owned and operates various office and industrial properties.
Mr. Nosan and his partners became interested in the biodiesel business in
early 2005 when they were approached with an opportunity to invest in a
biodiesel production facility in another state. As they researched the
opportunity, they became extremely interested in the biodiesel industry
which was proven in Europe but just emerging in the United States. By mid
2005, Biofuel Industries Group was formed with partners Michael Horowitz,
Brad Schram and Tim VerVaecke to investigate the feasibility of starting a
biodiesel production facility. Over the next year, Mr. Nosan and his
partners learned about every phase of the business and hired consultants in
technical, risk management and sales and marketing areas to advise on the
feasibility of actually constructing and operating a production facility.
By fall of 2006 the Adrian, Michigan site for the NextDiesel facility had
been chosen due to its proximity to several large metropolitan markets, a
large amount of raw material (feedstock) available within reasonable
distance and access to rail and excellent roads. The facility received the
first Renewable Energy Renaissance Zone designation in the State of
Michigan. Construction commenced in December 2006 and the NextDiesel plant
began production in September 2007. Through his hands on involvement in the
design, construction, commissioning and operation of the NextDiesel
facility Mr. Nosan has gained a broad knowledge of all aspects of the
biodiesel business.
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.
GREENSHIFT CORPORATION
Dated: May 20, 2008 By: /s/ Kevin Kreisler
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Kevin Kreisler
Chief Executive Officer