Wednesday, July 27, 2011

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

10 comments:

nobody12378 said...

Skunk,

Thank you very much for your insights. I know it is difficult to lay it (your credibility) on the line as you did, and I think your position is well thought out. And, you stated the obvious, which if you were just a pumper you would not; despite all the good things that have happened to GERS they do not have enough cash to pay their bills. This is hard to accept considering Zeropoint, licenses, etc. But the litigation is very, very expensive with all up front costs. We can conjure up other posibilities for thier cash drain as well, the 10-Q2 and 10-Q3 should be informative in this regard. Implied in your position is an important litmus test. When, not if, GERS prevails in the litigation, what do they do with the windfall? This will speak volumes about the company's true intent relative to shareholder equity.

Again than you. I was wondering if you would care to comment on the reason for the 1000:1 R/S versus a 10:1 split that would have served the stated objectives? Your perspective on this difference would be appreciated by many of us.

Anonymous said...

skunk...thanks for your events summary!

nobody12378 said...

Skunk,

I think that you mean 2011 not 2010?

Anonymous said...

Thank you Skunk!The voice of reason once again.

Slashnuts said...

Most men fail and give up hope on investments right before victory because they can't keep their emotions in-check.. Some are letting their emotions get too much involved here and it's clouding their judgement.



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+ Another 400 million gallons of ethanol production licensed but not yet announced, with another 650 million being licensed from now, till the end of the year. Who and where are all these new licenses coming from?

2.6 billion gallons by the end of the year means GERS will be able to eliminate the remaining debt. After the debt's gone, a buyback can start. I think at that time we'll see KK let go of some or all of his preferred shares.

The most important thing is that we'll be profitable next quarter. The minimum dilution from here till then will stop.

I believe the one time fees from all the new licenses is the main reason for needing a little more cash.

1.3 BILLION ADDITIONAL GALLONS BEING LICENSED THIS YEAR EQUATES TO ABOUT 26 COES. A ONE TIME$150,000 PER SYSTEM GOES TO THE INVENTORS WHICH IS ABOUT $3.9 MILLION.

As of Q111's report, the loss was only $350,000, after you account for the bonus/debt deal. In the same period of 2010, the loss was $2.9 million. In the same period of 2009, the loss was $11.8 million. IT'S JUST GROWING PAINS PEOPLE. Take out the one time $3.9 million, and were profitable. We just have to work through this till Q4, the fees will be behind us and we'll be highly profitable.


Profitable by the end of the year and debt free soon, no doubt

Litigation costs were less than 1/4 million in Q111's report....Look at all the business we've gained from it. Well worth it and necessary.

Again the cash crunch is do to short-term growing pains...

Anonymous said...

Thanks for the post Slash! Now explain where all the money went!! This is just more of the same crap!

If you read between the lines, what they are asking you to do is wait for 2-3 positive Quarters starting in 2012. That should put you about where we are now, heading into fall. Which is about the same time they will have to announce another REVERSE SPLIT because the 2011 R/S share price post split will be back to .0001. They will also have multiple excuses for why they just cant seem to break from toxic debt!!

In short, they want to paint the picture that things are changing. That the company is turning the corner. They want you to think of this as a "long term" investment, because they need more time to take your money!!

People are getting wise to this SCAM as every day passes. History is just repeating itself. Go back and look at the history of this company year after year and you will see the only constant is R/S!

6M buys today vs. 44M sells. People are heading for the exit.

AIMO

jlglex said...

Did anyone else notice that there has been a change to the IHUB page on Greenshift?

It now reads ...

"CAPITAL STRUCTURE: TBD"

And, those words are highlighted in yellow. I think that they may be engaging in a radical, voluntary capital restructure.

Anonymous said...

Hello jlglex - As the new mod, I did a little work on the ibox. i plan to update the capital structure - once im sure i understand it LOL. Best Regards, Olie

skribe said...

They need to maintain and payback shareholder value, if when money is available an option would be a dispersion of earnings to the shareholders with a dividend of shares or cash, or a buyback. Or with the settlement award if or when that happens.
It would be ethically right to make sure one who had helped you is rewarded in turn.
Not take from and leave the others without.
It is up to each and everyone of us as we are human and we must make that decision to do what is right and not to ignore it or brush it aside with technical excuses and greed, but to take action and do what is right, to help others.
GreenShift would not have been possible without the funding of Common Stockholders, it's a symbiosis and we are a big part of the puzzle. $113 million additional paid in capital, way to go guys! Market cap of $1 to $2 million.
Fundamentally it looks like the company is doing fantastic with much progression and future potential, it looks like the Officers and employees are doing great along with their main creditor YAGI. Yet because of the technicalities of the financing arrangement with YAGI, long time GERS shareholders investments have been massively devalued from multiple reverse splits and continued dilution. We all know how public stock works and collectively the mass of common stockholders funding without a doubt helped finance the building of the company. The Common Stockholders gave the energy, the currency of their value by supporting and funding the company by buying the Common Stock. The energy of their contributed value is in the structure of the company. If GreenShift is composed of energy, then a significant amount of that came from the Common Stockholders. Their reward is due and should not be left behind as the insiders reap the rewards of success. Hopefully this will be the last r/s before the stock significantly takes off, rewarding shareholders with some large gains, which they deserve. I've only been invested for about 1 year now, I bought in right after the last r/s, I actually bought some positions which I still hold, I've never sold, at .0012 where it bounced up a bit after the split, only to slowly head down to .0001 where we are now awaiting the newly announced 1 for 1000. This will be my first r/s with this company, but I've been through reverse splits with other companies and have known their effects.
I only show concern for my fellow common shareholders who have been in way longer than me and can see the effects the reverse splits and dilution have on their investments. For if the cycle continues the same could happen to all the newer investors.
But the company is changing and now headed for success so this time it will be different!
The company has our backs and is dedicated to building shareholder value.


Glta!

Anonymous said...

Sorry Jiglex, I know you had hope that they were going to change their behavior and the capital structure of the company. Looks like it will never happen. Your money is gone my friend.

Well, technically its not gone. It probably went towards a down payment on KK's luxury NY apartment! Did you know its in the same building as Mariah Cary? He runs in affluent circles!!

BOLTU! AIMO

 
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