Where we are Vs Where we want to be

We appear to be operating the company using operating income produced by royalties from Corn Oil Extraction Licenses.  We also appear to not quite have enough operating income to service our other expenses - namely the servicing of our legacy debt.  The difference is being made up in the conversion of debt to equity - namely the dilution of common stock.  In my opinion, for the reason I just stated, any talk of a stock buy back now is premature.  We are selling stock (granted at a slower and slower rate) to raise money to service the debt.  Where would the money come to buy back the stock?  Sell stock at a discount to buy the same stock back at market prices??  Sounds good only if you are a broker working on commission!


In about four months the company expects to be operating at a profit "on an annualized basis".  That means that they may not show a profit for 2011, however they expect to show an ever increasing profit moving forward.  They will have more income than necessary to meet all expenses, including the servicing of the debt.  Since at that point, and not before (although the rate should continue to shrink), forced dilution will stop, hopefully for good.


At some point, say after a solid profitable 1Q, I would expect an announcement of how that profit is being utilized.  Debt reduction is key, however a small but steady buyback program at that point might be a very cost effective way to get the word out that this puppy has turned the corner.  Dilution is the albatross to new investment - especially here. 


In my opinion, a small but steady buyback, maybe based on a set fraction of the profits over a quarter or two would be far more effective at getting the word out than the same amount of money spent on an expanded PR program.   The company must reduce and eliminate the debt, but a solid share struture with an increasing pps will help to facilitate that. 

As we get into the 2Q - With profit, a small buyback program, decreasing debt, increasing stock price - New finacing should be available at this point to allow conventional finacing to wipe out the high rates we needed to attrack finacing when GERS was high risk.  As we become low risk - and not before -then our finacing rates will reflect that. 

Lets talk share structure.  The reason Mr. Kreisler holds 80% of the company through preferred shares is because it is collateral for the legacy debt.  This arrangment protects YAGI, the chief creditor, from the dilution which other shareholders suffer.  It may sound unfair to us, but if we had 50 Million dollars to invest in the company we might be able to demand a pretty sweet deal as well.  Mr. Kreisler cannot sell those shares, never has sold any and GreenShift would be in default if he tried to.  The idea that he is being enriched because he holds shares he cannot sell is simply not true on its face.  Also as part of the agreement he cannot promise those shares to anyone - he cannot even promise to get rid of them when YAGI is paid off.  To do so would also put GreenShift in technical default.  However, he has ran up to the line and used language to suggest that is what will happen.  I fully expect the 80% preferred shares will be gone when their purpose has been served (Legacy debt paid off).  I am not saying a new share structure in a profitable company will not reward the present management handsomely (as well as the shareholders), however the 80% dilution proof structure in my opinion will be gone.  The 80% share structure impedes investment as much as the present low share price - so even management has a reason to see it gone.  

Conclusions that the SkunK has come to: 
1.  Dilution will shrink but continue until we are profitable. (end of this year?)
2.  Any future buy back will NOT come until we are securely profitable. (1-2 profitable Qs)
3.  Profit, a small buyback program, decreasing debt, increasing stock price may combine to produce finacing that can eliminate remaining YAGI debt in one fell swoop. 
4.  With YAGI debt gone, the 80% protected preferreds will disappear in a new share structure.
5.  Although I did not discuss litigation, a decent settlement would likely send my timeline applecart rolling up the hill like a runaway train.  Basically put the foot on the gas and compress the timeline into days and weeks, instead of months.

Like always - Make your own decisions,
GLTA,
SkunK