Greenshift Corporation (GERS)

[12thman]

Formal response to shareholder questions from GreenShift Corporation legal department.

Here is my initial inquiry to [e-mail].

"How does GreenShift plan to handle the unusually large number of common shares authorized and issued? And the preferred shares? Is a reverse split a possibility? Any possibility of a share buyback program which of course would be much more desireable for current shareholders and potential investors? What is the status of the litigation of patent infringment? Anything else that you can share with your patient shareholders?

Thanks much!"

They were happy to provide a response and expressed interest in maintaining communications in the future. The following is the response that I received from [e-mail]:

"Thank you for your interest and questions.

This is a very exciting time for us. As you know, we invented corn oil extraction technology and have since fully developed and commercialized the now-patented process. Our extraction technology is in high demand and is widely recognized as the quickest and most potent path to margin improvement available for ethanol producers today. A new corn oil extraction system at a 110 million gallon per year ethanol facility would pay for itself within less than 6 months, producing additional profit of about $0.08 per gallon of ethanol produced and about $9 million per year at current corn oil market prices.

In early 2010, the U.S. Environmental Protection Agency published its prediction that 70% of the U.S. ethanol industry would use corn oil extraction technology by 2022. At the end of 2010, industry publications were predicting the eventual adoption of the technology by the entire industry.

These statistics are impressive. However, the value we have created for ethanol producers has yet to translate into increased shareholder value. Building meaningful shareholder value moving forward will require us to remain single-mindedly focused on increasing sales, achieving profitability and cost-effectively reducing debt. We made significant strides on each front during 2010. An update in this regard will be provided to all of our shareholders shortly.

Specific responses to your questions are provided below:

1 - Authorized and Issued Common Stock

We financed our working capital needs subsequent to the issuance of our first two patents in 2009 with a form of convertible debt through which investors purchased securities that were convertible into our common stock at a discount to the market price at the time of conversion. We also used over $50 million of this type of financing to develop and commercialize our technology portfolio, including our patented corn oil extraction technologies.

This type of financing is expensive and potentially very dilutive - it is the main reason why our authorized and issued common shares are what they are today. That said, this type of debt can be cost-effective if the proceeds are used to generate sufficient recurring earnings to justify refinancing at higher equity values and thus lower overall costs of capital.

In our latest quarterly report, we disclosed our belief that our existing executed license agreements will generate sufficient revenue to cover our ongoing working capital requirements and, possibly, to achieve profitability depending on the amount of oil produced by our licensees and the market value of that oil. We also stated our belief that the refinancing and repayment of our remaining technology development debt is within sight. Achieving break-even and reducing debt by increasing sales can be expected to result in reduced issuance of common stock.

2 - Share Structure

Our view is that transitioning to profitability and thereafter demonstrating increasing earnings will enable meaningful value to be built for all of our shareholders; and that repaying all of our convertible debt will eliminate overhang and obstruction to that growth. Our plan is to simplify our share structure in conjunction with satisfaction of these goals, and to remain keenly focused on minimizing dilution as much as possible until then. While a share buyback may be feasible at some point given the significant economies of scale associated with licensing, any talk of specific structural issues would be premature today.

3 - Infringement

Ethanol producers recovering corn oil from stillage without a license are incurring liabilities at alarming rates. The Company intends to take all necessary steps to bring infringement of its patented corn oil extraction processes to an end, including filing additional lawsuits involving any and all infringing use of the Company’s patents. The Company further plans to seek additional relief for instances of willful infringement. The Company’s position is that any infringing ethanol producer is liable for any infringing use of the Company’s patented technologies beginning on the publication date of the application that led to the Company's first patent.

Thank you again for your interest and questions. We look forward to our next communication.

Regards,
GreenShift Corporation"



In a further communication I expressed my concern regarding the possibilty of GreenShift being taken private and received the following response.

"We are committed to building shareholder value for all shareholders. There is no plan to take the company private.

Regards,
GreenShift Corporation"


Feel free to post or PM me with specific questions for the company as I plan to remain a loyal shareholder for life. I see incredible potential with the GreenShift Corporation and anticipate debt relief and profitability through licensing and royalties as well as litigation settlement and/or judgements that will greatly benefit all shareholders.