Debt

3 Months Ended

Jun. 30, 2011

Debt

Debt Disclosure [Text Block]

NOTE 9 DEBT OBLIGATIONS

The following is a summary of the Company’s financing arrangements as of June 30, 2011:

		6/30/2011
Current portion of long term debt:
Mortgages and other term notes	$	21,743
Current portion of convertible notes payable		50,000
Current portion of subsidiary notes payable		1,734,579
Total current portion of long term debt	$	1,806,322
Current portion of convertible debentures:
Convertible debentures	$	551,236
Note discounts		(18,529	)
Conversion liabilities		322,616
Total current portion of convertible debentures	$	855,323
Long term convertible debentures:
Convertible debentures to YA Global Investments, L.P.	$	21,310,521
Convertible debentures to Minority Interest Fund (II), LLC		3,693,864
Convertible debentures to Viridis Capital, LLC		337,939
Convertible debentures to Andypolo, LP		4,391,643
Convertible debentures to Stuttgart, LP		271,237
Conversion liabilities		2,735,939
Total long term convertible debentures	$	32,741,143

A total of $30,556,441 in principal from the convertible debt noted above is convertible into the common stock of the Company. The following chart is presented to assist the reader in analyzing the Company’s ability to fulfill its fixed debt service requirements (net of note discounts) as of June 30, 2011 and the Company’s ability to meet such obligations:

Year		Amount
2011	$	2,357,558
2012		30,005,204
2013		--
2014		--
2015		--
Thereafter		--
Total minimum payments due under current and long term obligations	$	32,362,762

YA GLOBAL INVESTMENTS, L.P.

On June 17, 2010, the Company and its subsidiaries signed a series of agreements with YA Global Investments, L.P. (“YA Global”) to reduce convertible debt due from the Company to YA Global (the “YACO Agreements”). On July 30, 2010, the Company and YA Global entered into an agreement pursuant to which the transactions contemplated by the YACO Agreements (the “YA Corn Oil Transaction”) were to close effective August 1, 2010 (the “Effective Date”) subject to satisfaction of certain closing conditions. The conditions to effectiveness of this transaction were satisfied and the transaction was deemed effective for reporting purposes as of February 15, 2011. Since the conditions of closing were not satisfied as of December 31, 2010, the Company’s results of operations for the year ended December 31, 2010 were reported on the basis that the closing of the YA Corn Oil Transaction had not occurred as of such date. The YACO Agreements call for three GreenShift-owned corn oil extraction facilities based on GreenShift’s patented and patent-pending technologies and GreenShift’s interest in a fourth facility to be transferred as of August 1, 2010 to a newly formed joint venture entity, YA Corn Oil Systems, LLC (“YA Corn Oil”). In exchange, $10,000,000 of the convertible debt issued by GreenShift to YA Global shall be deemed satisfied as of August 1, 2010. GreenShift will also receive a 20% equity stake in YA Corn Oil and the right to receive 20% of YA Corn Oil’s distributable cash upon the realization by YA Corn Oil of a 20% internal rate of return on its invested capital.GreenShift further agreed to provide management services to the YA Corn Oil for the ongoing operation and maintenance of the transferred extraction facilities in exchange for certain management and brokerage fees, as well as earnings-based performance bonuses to be paid in the form of additional reduction of GreenShift’s convertible debt due to YA Global. The conditions for the YA Corn Oil Transaction were satisfied as of February 15, 2011, and the Company subsequently earned a performance bonus of $2,486,568 as of February 28, 2011 and another bonus of $2,500,000 as of March 31, 2011. The Company recognized a $5.9 million gain on extinguishment of debt and reduced liabilities for asset retirement obligation and accounts payable by an additional $847,000 as a result of the completion of the YA Corn Oil Transaction. The performance bonuses earned during the second quarter 2011 were recognized as revenue and applied to reduction of the Company’s convertible debt with YA Global pursuant to the terms of the YACO Agreements. The Company additionally posted an accrual of $650,000 during the six months ended June 30, 2011 for liquidated damages that have not been, but may be, assessed by YA Corn Oil relating to certain conditions involving third party documentation that have not yet been fulfilled.

In connection with the completion of the YA Corn Oil Transaction, the Company issued YA Global an amended and restated convertible debenture in the amount of $33,308,023, inclusive of previously accrued interest (the “A&R Debenture”). The A&R Debenture matures on December 31, 2012 and bears interest at the rate of 6% per annum. YA Global shall have the right, but not the obligation, to convert any portion of the A&R Debenture into the Company’s common stock at a rate equal to the lesser of (a) $1.00 or (b) 90% of the lowest daily volume weighted average price of the Company’s common stock during the 20 consecutive trading days immediately preceding the conversion date. YA Global will not be permitted, however, to convert into a number of shares that would cause it to own more than 4.99% of the Company’s outstanding common shares. The A&R Debenture is additionally subject to ongoing compliance conditions, including the absence of change of control events, timely issuance of common shares upon conversion. As of June 30, 2011, there were no outstanding events of default under the A&R Debenture. The difference between August 1, 2010 date of the YACO Agreements and the February 15, 2011 effective date for reporting purposes resulted in an increased interest expense of $915,464 as of December 31, 2010 that was subsequently, on February 15, 2011, eliminated in connection with the completion of the YA Corn Oil Transaction.

While the YA Corn Oil Transaction was deemed effective for reporting purposes as of February 15, 2011, the date upon which the contractual conditions for closing were satisfied, the Effective Date of the YA Corn Oil Transaction for purposes of satisfying debt to YA Global was August 1, 2010. The initial balance of the A&R Debenture stated above ($33,308,023) was derived by subtracting $10,000,000 due to the Company for the sale to YA Corn Oil of the above-referenced corn oil extraction systems from the $41,476,871 and $1,574,582 in principal and accrued interest due as of July 31, 2010, plus an additional $256,759 in legal fees incurred by the Company but paid by YA Global. The A&R Debenture was then reduced during the first quarter by $4,986,568 from YA Corn Oil performance bonuses earned, $2,000,000 paid to YA Global in cash, $40,500 from conversion by YA Global into Company common stock, and an additional $1,651 from Viridis Capital.

The amount due to YA Global under the A&R Debenture was reduced during 2010 by $720,932 from conversion by YA Global into the Company’s common stock, plus an additional $257,229 paid to YA Global from Viridis Capital, LLC (the Company’s majority shareholder), which amount was applied to the Company’s balance with YA Global pursuant to the terms of the December 2009 Forbearance Agreement by and between Viridis, the Company and YA Global (see Note 9, Debt Obligations, below). Of these amounts, YA Global received $168,023 from conversion into Company common stock and $103,030 from Viridis Capital between August 1, 2010 and December 31, 2010.

The following schedule reconciles the balance due to YA Global as of July 31, 2010 to the balance due to YA Global under the A&R Debenture as of March 31, 2011, including the impact of the YA Corn Oil Transaction and other payments and costs described above:

		Amount
Principal balance due to YA Global as of July 31, 2010	$	41,476,781
Accrued interest due to YA Global as of July 31, 2010		1,574,482
Legal fees, YA Corn Oil Transaction		256,759
Sale of extraction systems to YA Corn Oil		(10,000,000	)
First performance bonus		(2,486,568	)
Second performance bonus		(2,500,000	)
Cash payments		(2,000,000	)
Stock payments		(168,023	)
Amounts paid by Viridis Capital, LLC		(103,030	)
Principal balance due to YA Global as of March 31, 2011	$	26,050,401

The Company accounted for the A&R Debenture in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the A&R Debenture could result in the note principal being converted to a variable number of the Company’s common shares. The Company had determined the fair value of the A&R Debenture at December 31, 2010 to be $45,908,129 which represented the face value of the debenture plus the present value of the conversion feature. During the six months ended June 30, 2011, the Company recognized a reduction in conversion liability relating to the A&R Debenture at a present value of $1,542,609 for the conversion liability portion of the gain on extinguishment of debt, of $134,555 for the conversions during the period, and $646,954 for repayments during the period and recorded an expense of $164,306 for the accretion of the present value of the conversion liability for the period. The carrying value of the A&R Debenture was $23,192,830 at June 30, 2011, including principal of $21,310,521 and the value of the conversion liability. The liability for the conversion feature shall increase from its present value of $1,882,309 at June 30, 2011 to its estimated settlement value of $2,145,615 at December 31, 2012. Interest expense of $1,174,660 for the A&R Debenture was accrued for the six months ended June 30, 2011.

RELATED PARTY OBLIGATIONS

As of December 31, 2010, the Company had convertible debentures payable to Minority Interest Fund (II), LLC (“MIF”) in an aggregate principal amount of $3,988,326 (the “MIF Debenture”). The convertible debt issued to MIF bears interest at a rate of 20% and matures on December 31, 2012. MIF is entitled to convert the accrued interest and principal of the MIF convertible debenture into common stock of the Company at a conversion price equal to 80% of the lowest daily volume weighted average price for the twenty trading days preceding conversion. During the six months ended June 30, 2011, MIF converted $386,624 of the principal balance and interest due to MIF into 4,523,420,925 shares of Company common stock. The Company accounted for the MIF Debenture in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the MIF Debenture could result in the note principal being converted to a variable number of the Company’s common shares. The Company determined the value of the MIF Debenture at December 31, 2010 to be $4,407,852 which represented the face value of the debenture of $3,988,326 plus the present value of the conversion feature. During the six months ended June 30, 2011, the Company recognized a reduction in the conversion liability at present value of $63,607 for the conversions and recorded an expense of $4,107 for the fair value of new advances less assignments plus the accretion to fair value of the conversion liability for the six months. The carrying value of the MIF Debenture was $4,053,890 at June 30, 2011, and included principal of $3,693,864 and the value of the conversion liability. The liability for the conversion feature at its present value of $360,026 at June 30, 2011 equals its estimated settlement value. Interest expense of $498,427 for these obligations was accrued for the six months ended June 30, 2011.

As of December 31, 2010, the Company had convertible debentures payable to Viridis Capital, LLC in an aggregate principal amount of $518,308 (the “Viridis Debenture”). The debentures bear interest at 20% and mature on December 31, 2012. Viridis is entitled to convert the accrued interest and principal of the convertible debenture into common stock of the Company at a conversion price equal to 90% of the lowest daily volume weighted average price for the twenty trading days preceding conversion. The Company accounted for the Viridis Debenture in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the Viridis Debenture could result in the note principal being converted to a variable number of the Company’s common shares.  The

Company determined the value of the Viridis Debenture at December 31, 2010 to be $577,149 which represented the face value of the debenture of $518,308 plus the present value of the conversion feature. The increase in the debenture during the year ended December 31, 2010 was due to Viridis’ payments to YA Global under the Forbearance Agreement, totaling $257,229, which amount was applied to reduce the Company’s balance with YA Global under the A&R Debenture. The Company recognized a reduction in conversion liabilities at present value of $19,890 for reductions during the period, and recorded an expense of $262 for the accretion to fair value of the conversion liability for the six months ended June 30, 2011. Viridis Capital assigned $112,020 of the Viridis Debenture to a related party during the six months ended June 30, 2011. The carrying value of the Viridis Debenture was $377,151 at June 30, 2011, including principal of $337,939 and the value of the conversion liability. The liability for the conversion feature shall increase from its present value of $39,213 at June 30, 2011 to its estimated settlement value of $40,000 at December 31, 2012.  Interest expense of $40,100 for these obligations was accrued for the six months ended June 30, 2011.

OTHER CONVERTIBLE DEBENTURES

During the six months ended June 30, 2011, YA Global assigned $4,391,643 in convertible debt to Andypolo, LP (“Andypolo” and the “Andypolo Debenture”). Andypolo shall have the right, but not the obligation, to convert any portion of the A&R Debenture into the Company’s common stock at a rate equal to the lesser of (a) $1.00 or (b) 90% of the lowest daily volume weighted average price of the Company’s common stock during the 20 consecutive trading days immediately preceding the conversion date.  The Company accounted for the Andypolo Debenture in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the Andypolo Debenture could result in the note principal being converted to a variable number of the Company’s common shares. The Company determined the value of the Andypolo Debenture upon assignment to be $4,809,790 which represented the face value of the debenture of $4,391,643 plus the present value of the conversion feature. During the six months ended June 30, 2011, the Company recorded an expense of $9,973 for the accretion to fair value of the conversion liability for the period. The carrying value of the Andypolo Debenture was $4,819,763 at June 30, 2011, including principal of $4,391,643 and the value of the conversion liability. The liability for the conversion feature shall increase from its present value of $428,120 at June 30, 2011 to its estimated settlement value of $487,961 at December 31, 2012. Interest expense of $56,309 for these obligations was accrued for the six months ended June 30, 2011.

During the six months ended June 30, 2011, YA Global assigned $321,237 in convertible debt to Stuttgart, LP (“Stuttgart” and the “Stuttgart Debenture”). Stuttgart shall have the right, but not the obligation, to convert any portion of the A&R Debenture into the Company’s common stock at a rate equal to the lesser of (a) $1.00 or (b) 90% of the lowest daily volume weighted average price of the Company’s common stock during the 20 consecutive trading days immediately preceding the conversion date.  The Company accounted for the Stuttgart Debenture in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the Stuttgart Debenture could result in the note principal being converted to a variable number of the Company’s common shares.   The Company determined the value of the Stuttgart Debenture upon assignment to be $351,824 which represented the face value of the debenture of $321,237 plus the present value of the conversion feature. During the six months ended June 30, 2011, $50,000 in principal was converted into common stock. During the six months ended June 30, 2011, the Company recorded an expense of $729 for the accretion to fair value of the conversion liability for the period and recognized a reduction in conversion liability at present value of $5,046 for the conversions. The carrying value of the Stuttgart Debenture was $297,507 at June 30, 2011, including principal of $271,237 and the value of the conversion liability. The liability for the conversion feature shall increase from its present value of $26,270 at June 30, 2011 to its estimated settlement value of $30,137 at December 31, 2012. Interest expense of $9,320 for these obligations was accrued for the six months ended June 30, 2011.

As of June 30, 2011, the Company owed $69,489 in convertible debt to various unrelated lenders. Each such lender is entitled to convert the accrued interest and principal of their debenture into common stock of the Company at a conversion price equal to 50% of the average closing market price for the twenty trading days preceding conversion. The Company accounted for these debentures in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in these debentures could result in the note principal being converted to a variable number of the Company’s common shares.  The Company determined the value of these debentures at December 31, 2010 to be $202,300 which represented the face value of the debenture plus the present value of the conversion feature. During the six months ended June 30, 2011, the Company recorded an expense of $3,683 for the accretion to fair value of the conversion liability for the period and recognized a reduction in conversion liability at present value of $18,027 for conversions of $30,000 filed during 2011. The carrying value of these debentures was $157,957 at June 30, 2011, including principal of $69,489 and the value of the conversion liability. The liability for the conversion feature has been fully recognized for one of these debentures. For the other debenture, the liability for the conversion feature shall increase from its present value of $28,687 at June 30, 2011 to its estimated settlement value of $30,000 at December 31, 2011. Interest expense of $18,086 for these obligations was accrued for the six months ended June 30, 2011.

REDEEMABLE PREFERRED EQUITY

On June 10, 2010, the Company entered into the Second Amended and Restated Technology Acquisition Agreement with Cantrell Winsness Technologies, LLC (“CWT”).  As partial consideration under the agreement, the Company agreed to pay CWT members an additional one-time payment in the form of 1,000,000 shares of Series F Preferred Stock (“CWT Preferred Shares”) with a face value of $10 per preferred share.  Each preferred share shall be convertible into shares of the Company’s common stock commencing six months after the date of the amendment at a rate equal to 90% of the then current trailing five day trailing average closing market price for the Company’s common stock.  CWT members shall not sell shares of the Company’s common stock at a monthly rate greater than 5% of the average trading volume for the Company’s common stock for each preceding calendar month. The Company shall have the right to redeem any portion or all of the preferred shares on a pro-rated per preferred share basis in return for cash paid to members at a rate equal to the face value of the preferred shares redeemed until the preferred shares have been fully redeemed.  The Company accounted for the CWT Preferred Shares in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the CWT convertible preferred shares could result in the preferred shares being converted to a variable number of the Company’s common shares.   The Company determined the value of the CWT Preferred Shares at the grant date to be $925,926 which represented the estimated value of the preferred shares based on common shares into which they could be converted at the grant date, which included the present value of the conversion feature, which was determined to be $428,381. During the year ended December 31, 2010, the Company recognized a total expense of $925,962 based on the grant date value, including $497,545 in professional fees for the agreement modification and the $428,381 for the conversion liability at present value.  The Company recognized a reduction in conversion liability at present value of $29,621 for the redemptions that occurred in connection with payments of royalties under the agreement and recorded an expense of $33,640 for the accretion to fair value of the conversion liability for the six months ended June 30, 2011. The carrying value of the liability for the CWT Preferred Shares was $942,661 at June 30, 2011, including the grant date value plus the accretion, less redemptions of the conversion liability during the year. The liability for the conversion feature shall increase from its present value of $445,116 at June 30, 2011 to its estimated settlement value of $1,041,804 at June 10, 2020.

OTHER CONVERTIBLE SECURITIES

On June 9, 2009, JMJ Financial Corporation (“JMJ”) issued the Company a 14.4% secured promissory note in the amount of $500,000 (the “JMJ Note”) in return for $600,000 in 12% convertible debt (the “JMJ Debenture”) issued by the Company. The principal balance due under the JMJ Note was $500,000 as of June 30, 2011 and accrued interest receivable under the JMJ Note was $148,143. The principal and accrued interest for the JMJ Note and JMJ Debenture has been presented as of June 30, 2011, at their face value, without offset. The JMJ Debenture is convertible into Company common stock at a rate equal to 70% of the lowest closing market price for the Company’s common stock for the twenty trading days preceding conversion. The Company accounted for the JMJ Debenture dated June 9, 2009 in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the JMJ Debenture could result in the note principal being converted to a variable number of the Company’s common shares. The Company determined the value of the $600,000 JMJ Debenture at December 31, 2010 to be $656,677, which represented the face value of the debenture plus the present value of the conversion feature minus the unamortized debt discount. During the six months ended June 30, 2011, an expense of $24,288 has been recorded to recognize the present value of the conversion features for additional accrued interest and for the accretion to fair value of the conversion liability. The carrying value of the JMJ Debenture was $697,366 at June 30, 2010, which represented the face value of the debenture plus the present value of the conversion feature minus the unamortized debt discount. The liability for the conversion feature shall increase from its present value of $234,147 at June 30, 2011 to its estimated settlement amount of $260,482 at June 11, 2012. For the six months ended June 30, 2011, interest expense of $28,667 for these obligations was incurred.

ASC 480, Distinguishing Liabilities from Equity, sets forth the requirements for determination of whether a financial instrument contains an embedded derivative that must be bifurcated from the host contract, therefore the Company evaluated whether the conversion feature for Series D Preferred Stock would require such treatment; one of the exceptions to bifurcation of the embedded conversion feature is that the conversion feature as a standalone instrument would be classified in stockholders’ equity. Management has determined that the conversion option would not be classified as a liability as a standalone instrument, therefore it meets the exception for bifurcation of the embedded derivative under ASC 815, Derivatives and Hedging. ASC 815, Derivatives and Hedging, addresses whether an instrument that is not under the scope of ASC 480, Distinguishing Liabilities from Equity, would be classified as liability or equity; one of the factors that would require liability classification is if the Company does not have sufficient authorized shares to effect the conversion. If a company could be required to obtain shareholder approval to increase the company's authorized shares in order to net-share or physically settle a contract, share settlement is not controlled by the company. About 80% of the Company’s outstanding shares of Series D Preferred Stock are owned by Viridis Capital, LLC, an entity controlled by Kevin Kreisler, the chairman and chief executive officer of the Company. If all the Series D shares held by Viridis Capital were converted and exceeded the number of authorized common shares, there would be no contingent factors or events that a third party could bring up that would prevent Mr. Kreisler from authorizing the additional shares. As Mr. Kreisler, through Viridis Capital, is the Company’s majority shareholder, there would be no need to have to go to anyone outside the Company for approval. As a result, the share settlement is controlled by the Company and with ASC 815, Derivatives and Hedging. The Company assessed all other factors in ASC 815, Derivatives and Hedging, to determine how the conversion feature would be classified.