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GreenShift Issues Shareholder Letter
GreenShift Corporation's (OTCBB: GSHF) chairman and chief executive officer, Kevin Kreisler, issued the following letter to its shareholders today:
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Dear Shareholders:
This last quarter has been an exciting time for GreenShift. We completed a series of key investments, we acquired rights to a number of innovative green technologies, we helped our portfolio companies to reduce their various debts, and we initiated operations in two new portfolio companies. We accomplished our goals for the quarter and we expect a derivative increase to our net asset value for the quarter. While we will publish our results of operations for the third quarter later this month, I wanted to discuss the status of a number of our current initiatives with you.
Our primary goals for the fourth quarter 2005 are to enhance the intrinsic value of our various holdings and increase our net asset value through the following core activities:
-- The restructuring and refinancing of three of our majority-owned portfolio companies - Veridium Corporation (OTC Bulletin Board: VRDM), INSEQ Corporation (OTC Bulletin Board: INSQ) and GreenWorks Corporation. Together, these companies are generating about $2.5 million per year in EBITDA on $25 million per year in revenues, and we intend to streamline each of their respective general and administrative expenses and reduce each of their interest expenses. Both INSEQ and GreenWorks are profitable and we are implementing measures currently that we believe will bring Veridium's operations immediately into a profitable mode;
-- The completion by INSEQ, which is about 70% owned by GreenShift, of its two pending acquisitions, which are expected to bring an additional $17 million in revenue and $1.7 million in EBITDA to INSEQ. Additionally, we have held favorable discussions with 3 new acquisition targets for INSEQ, 2 targets for Veridium and 2 targets for GreenWorks. We hope to resolve terms with at least one additional acquisition for each company this year;
-- The initiation of projects that will stimulate immediate term positive cash flows for our new portfolio companies, GreenShift Industrial Design Corporation ("GIDC"), Tornado Trash Corporation ("Tornado Trash"), and Mean Green BioFuels Corporation ("MGB").
-- The completion of construction of a mobile system based on our Tornado Generator(TM) technology that we intend to deploy in the gulf coast region as a demonstration of our capabilities processing and recycling debris and other wastes. Since the Tornado Generator(TM) is a new technology, we will need to demonstrate its capabilities to decision-makers in the region under live operating conditions. To this end, we recently executed a strategic alliance with an approved contractor in the region that we expect will play a role in our deployment, and we are working with lobbyists to secure the necessary local government backing for testing;
-- The acquisition by GIDC, our technology holding and transfer company, of rights to several additional technologies to round out our initial portfolio of innovative green technologies. Our targets include a new biologic emissions control technology, a new thermal depolymerization technology, a new technology for processing coal, and a new implementation of a pyrolysis technology. We believe that each of these technologies are incremental advances that are capable of cost-effective application today at the point source;
-- The completion of investments in companies with innovative technologies in industrial fuel cells, air and water emissions control, electronics recycling, and metal mining;
-- The completion of our plans to take GreenWorks and Tornado Trash public in transactions that we are structuring to involve a spin-out of shares in each company to the GreenShift shareholders; and,
-- The completion of the restructuring of my own holdings in GreenShift, which will include the cancellation of about 50 million shares of GreenShift common stock, 1,000,000 shares of GreenShift Series B Preferred Stock, and my dilution protections, in return for a new class of preferred stock with a fixed face value equal to 80% of GreenShift's Net Asset Value ("NAV") on September 30, 2005.
Look at the flow of natural resources through commerce today. We basically take stuff out of the ground and then we refine it and process, distribute, consume and dispose. Each stage is wasteful and the entire flow horribly inefficient.
We see these inefficiencies as opportunities.
Take your light switch for example. We take coal out of the ground, distribute it to a utility who then burns it to boil steam which then turns a turbine that produces electric current that is then channeled to your light switch. A great deal of our electricity today comes from burning coal. More than 70% of the energy value of that coal is lost at the power plant and another 20% is lost due to various upstream inefficiencies in the way power is distributed to your light switch. Increasing efficiency, even incrementally, at any point in this flow will reduce costs, reduce the need for virgin coal, and reduce pollution. Our goal is to surgically target investments in companies and technologies that reduce these types of inefficiencies.
If we can help a company or a great many individuals consume natural resources even slightly more efficiently, then we will help them to save money, increase productivity, reduce their need for virgin natural resources and decrease their impact on the environment.
Last quarter, I spoke of these incremental increases in efficiency, these small "green shifts" in practices or technologies that stimulate both profit and environmental gain. This effect is the core of our business model and the foundation of our investment strategy, but there is another compelling aspect of our model - something our CFO calls investment symbiosis.
While much of what we do is venture capital, we are active operational investors and we use the entirety of our resources to help support and drive value for our investments. We are not just targeting investments that meet our profitability and environmental impact goals, we are targeting investments that do so with services, products or technologies that are strategic to our other portfolio holdings.
Consider our Ovation Products investment. Ovation has a remarkable new form of vapor compression distillation that purifies water for an ongoing cost comparable to that of tap water. When we acquired our stake in Ovation, we secured license rights to the Ovation technology for GIDC for fields of use outside of their core market, and manufacturing rights for INSEQ. GIDC is currently targeting agricultural and other wastewater applications that seek to use the Ovation technology in concert with our Tornado Generator(TM) technology. If they successfully close a sale, these technologies will drive cash flows into our 100% owned GIDC, manufacturing revenues into our 70% owned INSEQ, and royalties to our more than 10% owned Ovation.
Thus, our relatively small investment in sales for GIDC not only increases GIDC's value, but it also drives value through to INSEQ and Ovation. The intrinsic value of all three companies increases which then in turn disproportionately enhances our net asset value. While this increase in value helps all three companies, it helps to accelerate a return on our investment in Ovation without us selling a single share in Ovation.
We very much intend to leverage this effect for each of our existing and new investments as we continue to gather momentum in executing our business model.
I thank you for your continued investment interest as we continue with a growth process that is very exciting to me. We are pleased with our progress so far this year and we are enthusiastic about our path going forward. We are grateful for your continued support and involvement and look forward to communicating with you later this month after we publish our results of operations for the third quarter 2005.
Best Regards,
Kevin Kreisler
Chairman and Chief Executive Officer
GreenShift Corporation
About GreenShift Corporation
GreenShift Corporation is a publicly traded business development company (BDC) whose mission is to develop and support companies and technologies that facilitate the efficient use of natural resources and catalyze transformational environmental gains.
BDCs are regulated by the Investment Company Act of 1940 and are essentially publicly-traded equity funds where shareholders and financial institutions provide capital in a regulated environment for investment in a pool of long-term, small and middle-market companies through the use of senior debt, mezzanine financing, and equity funding.
GreenShift plans to use equity and debt capital to support and drive the value of its existing portfolio of companies and to make investments in a diversified mix of strategically compatible growth stage public and private businesses and technologies. GreenShift's current portfolio includes investments in the following environmentally proactive companies:
-- Veridium Corporation (OTC Bulletin Board: VRDM);
-- INSEQ Corporation (OTC Bulletin Board: INSQ);
-- GreenWorks Corporation;
-- Ovation Products Corporation;
-- Tornado Trash Corporation;
-- Mean Green BioFuels Corporation;
-- Ethanol Oil Recovery Systems, LLC;
-- GreenShift Industrial Design Corporation;
-- Sterling Planet, Inc.;
-- TerraPass Inc.; and,
-- Coriolis Energy Corporation;
-- TDS (Telemedicine), Inc.;
In addition, GreenShift hopes to add investments in wind power, hydropower, practical centralized applications of hydrogen power, alternative fuels, infrastructure and mining to its portfolio during 2005 and 2006.
Additional information regarding GreenShift Corporation is available online at www.greenshift.com.
Safe Harbor Statement
This press release contains statements, which may constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Those statements include statements regarding the intent, belief or current expectations of GreenShift Corporation, and members of their management as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those in forward-statements include fluctuation of operating results, the ability to compete successfully and the ability to complete before-mentioned transactions. The company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.
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