Greenshift Corporation (GERS)

[TMH0312]

Thought I'd drop this here for people who are interested in some reading. Just some information on the Greenshift/Attis Joint Venture. Would recommend reading the full purchase agreement. It's pretty interesting. Good luck everybody!


All Sources:


Attis 10-Q - Pgs:12-15

https://www.sec.gov/Archives/edgar/data/949721/000121390018011473/f10q0618_attisindustries.htm

Full Purchase Agreement

https://www.sec.gov/Archives/edgar/data/949721/000121390018007157/f8k052518ex10-1_attisindus.htm

Biodiesel Magazine Article

http://www.biodieselmagazine.com/articles/2516394/attis-industries-acquires-clean-technology-licensing-business


Flux Carbon LLC (JVCo) - Securities Purchase Agreement



https://www.sec.gov/Archives/edgar/data/949721/000121390018007157/f8k052518ex10-1_attisindus.htm



3.8 Title to 80% Units. Except for encumbrances as defined and itemized in Section 3.8 of the Seller Disclosure Schedule, Original Member has good and valid title to the 80% Units, in each case free and clear of all claim, charge, lease, covenant, easement, encumbrance, security interest, lien, option, pledge, rights of others, or restriction (whether on voting, sale, transfer, disposition or otherwise), whether imposed by agreement, understanding, law, equity or otherwise, of any kind or character (collectively, “Liens”).



3.9 Title to Assets. JVCo has good and marketable title to the Flux IP and all of the assets reflected in the JVCo Financial Statements as owned by them (other than assets disposed of since the date of the last JVCo Financial Statements in the Ordinary Course of Business or as contemplated by this Agreement), or acquired since the date of the last JVCo Financial Statements, or as set forth in Section 3.9 of the Seller Disclosure Schedule (“JVCo Assets”), free and clear of any and all Liens, except as set forth in the Seller Disclosure Schedule.



3.9.2 Intangible Personal Property; Intellectual Property Assets. Section 3.9.2 of the Seller Disclosure Schedule contains a complete and accurate list and summary of all Intellectual Property owned or possessed by JVCo, or which JVCo has the right to use pursuant to a valid and enforceable, written license, sublicense, agreement, or permission (collectively and together with the Intangible Personal Property, the “Intellectual Property Assets”). Such Intellectual Property Assets constitute all of the Intellectual Property necessary for the operation of the businesses of JVCo as presently conducted. The Intellectual Property Assets do not infringe on the intellectual property rights of any Person. JVCo is the owner or licensee of all right, title and interest in and to each of the Intellectual Property Assets, free and clear of all Liens except for Permitted Encumbrances. JVCo has the right to use all of the Intellectual Property Assets without payment to any third party except as disclosed in the applicable agreements disclosed in then Seller Disclosure Schedule. JVCo owns or has the right to use pursuant to ownership, license, sublicense, agreement, permission, or free and unrestricted availability to general public, all of the Intellectual Property Assets used by JVCo, subject to the terms of applicable agreements itemized in the Seller Disclosure Schedule. JVCo has not interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of third parties, and neither Seller nor JVCo, or their respective members, managers, directors and officers and employees has ever received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that JVCo must license or refrain from using any intellectual property rights of any third party). Except as disclosed in the Seller Disclosure Schedule, to the Knowledge of Seller, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any proprietary intellectual property rights of JVCo.



Attis' 10-Q - Information Pertaining to JVCo Joint Venture

https://www.sec.gov/Archives/edgar/data/949721/000121390018011473/f10q0618_attisindustries.htm



Pg 12
ACCOUNTING FOR ACQUISITIONS



Effective May 25, 2018, the Company, Attis’s wholly-owned subsidiary, Innovations, GreenShift Corporation (“GreenShift”), and GreenShift’s wholly-owned subsidiary, GS CleanTech Corporation (“CleanTech”), among others, entered into a Securities Purchase Agreement (“JVCo Acquisition Transaction”) and related transaction documents pursuant to which the Company acquired 80% of the membership interest units (“80% Units”) of FLUX Carbon LLC (“JVCo”). Under the acquisition method of accounting outlined in ASC 805, the identifiable assets acquired, and liabilities assumed in the JVCo Acquisition Transaction are recorded at their acquisition date fair values and are included in the Company’s consolidated financial position.



Pg 14
FLUX CARBON LLC JVCO ACQUISITION TRANSACTION



Effective May 25, 2018 (the “Closing Date”), the Company, Innovations, the Company’s wholly-owned subsidiary, GreenShift, and GreenShift’s wholly-owned subsidiary, GS CleanTech, and Candent Corporation (“Candent”) among others, entered into a SPA and related transaction documents pursuant to which Attis acquired 80% of the membership interest units (“80% Units”) of JVCo, and $10,000,000 of GreenShift’s subordinate secured debt, in exchange for an earn-out based purchase price equal to the greater of (i) $18,000,000 (“Floor Price”); (ii) five (5) times Company’s Consolidated EBITDA during 2018, 2019, and 2020; (iii) four (4) times Company’s Consolidated EBITDA during 2021, 2022, and 2023; (iv) three (3) times Company’s Consolidated EBITDA during 2024 and 2025; (v) two (2) times Company’s Consolidated EBITDA during 2026; or (vi), one (1) times Company’s Consolidated EBITDA during 2027. The agreements additionally call for Attis to pay $200,000 over sixty days, and for GreenShift to pay certain working capital surplus equal to about $200,000 to the Company. An initial payment against the SPA purchase price was paid at Closing in the form of 2,000,000 restricted shares of Attis’s common stock and 180,000 shares of Attis’s Series G Stock. GreenShift is required to use the first proceeds received upon sale of the shares to pay or refinance its senior secured debt. In connection with closing under the SPA, 100% of the issued and outstanding equity of Advanced Lignin Biocomposites LLC (“ALB”) and 49% of the issued and outstanding equity of Genarex FD LLC (“GFD”) was transferred to JVCo.



The SPA transaction documents also include an Amended and Restated Limited Liability Attis Operating Agreement and a Management Agreement (“Company Agreements”) under which GreenShift and CleanTech have in essence ‘outsourced’ its operations to the Company, which the parties have agreed to fully capitalize to meet a number of specific objectives, including servicing the continuing and future needs of licensees, investing in growth with the parties’ combined intellectual properties, protecting GreenShift’s intellectual properties, and supporting all pending and future litigation for infringement and related matters. The Company agreements further require that no distributions shall be paid by the Company prior to the date on which GreenShift’s senior secured lender is fully paid.



On and subject to the terms and conditions of the SPA and related transaction documents, at the Closing, GreenShift issued to Attis a subordinate secured convertible debenture in the original principal amount of $10,000,000 (“Debenture”). Commencing November 22, 2018, the Debenture shall be convertible into GreenShift’s common stock at the sole and exclusive option of the holder in one or more installments up to 9.9% of the GreenShift’s issued and outstanding common stock at the time of conversion (when taken with any other shares of GreenShift common stock held by the holder at the time of conversion). The Debenture converts into GreenShift common stock at the greater of (i) $0.10 per share or (ii) 100% of the lowest closing market price per share for the GreenShift common stock for the thirty (30) Trading Days preceding conversion. The Debenture shall accrue interest at the lesser of 2% or the minimum allowable rate under applicable law and shall be waived if the GreenShift Debenture is converted or otherwise fully paid on or before June 30, 2028. The Debenture shall be exclusively paid in the form of GreenShift common stock, provided, however, that the principal balance due under the Debenture shall be reduced on a dollar for dollar basis in an amount equal to any distributions paid as provided for in the SPA and Company Agreements.



Effective May 25, 2018, Attis Industries, Inc. acquired 4,900 membership interest units of GFD corresponding to 49% of the issued and outstanding equity of GFD. The remaining 51% of GFD is owned by Sutra, which entity holds the super-majority voting and management control of GFD.



GFD was formed as a research and development platform for developing sustainable bio-based products for the plastics industry. GFD takes low cost by-products from the corn ethanol industry and has developed cost effective additives for the plastics industry. This drives the cost of plastics down using renewable non-fossil fuel-based feedstock.



The following table summarizes the estimated fair value of the JVCo assets acquired at the date of acquisition:


Long-term Note receivable: 10,000,000

Intangible Intellectual Property: 18,000,000

Purchase Price: 28,000,000



Biodiesel Magazine Article Pertaining to the Joint Venture




http://www.biodieselmagazine.com/articles/2516394/attis-industries-acquires-clean-technology-licensing-business



Attis Industries Acquires Clean Technology Licensing Business



Attis Industries Inc. executed and closed on a series of transactions with GreenShift Corp., resulting in its acquisition of an 80 percent stake in Flux Carbon LLC, a new joint venture company that holds the rights to an expansive portfolio of clean technologies and manages an existing engineering and licensing business.



The existing business generated approximately $7 million per year in sales with gross margins of about 70 percent for the three-year period ending Dec. 31, 2017. It can be expected to initially contribute about $2 million to $3 million per year to the Attis Industries’ earnings.

The joint venture also holds various investments in early-stage technology development companies, and the rights to many proprietary, patented and patent-pending technologies, including (i) methods for real-time data acquisition, verification, and analytics in renewable energy applications, (ii) methods of using blockchain to manage commodity risk in emerging carbon and agricultural markets, (iii) low temperature catalysis of carbon dioxide into renewable fuels, (iv) power production from low temperature thermal emissions, and (v) methods to increase the efficiency and profitability of corn ethanol production facilities by intercepting and processing corn ethanol coproducts into value-added renewable offsets for fossil fuel-derived products.



“We're very excited to complete this acquisition,” said CEO Jeffrey Cosman. “Not only is the transaction accretive to our balance sheet and earnings, but our existing biorefining technology portfolio has strong application potential in the corn ethanol industry—the primary industry in which GreenShift has operated for 15 years, and in which GreenShift has many existing licensees and relationships. We’re already speaking to some of those relationships about some extremely exciting proposals involving construction of co-located biorefineries based on our combined technologies.”



The company agreed to pay an earn-out based purchase price with a floor of $18 million. An initial payment was paid at closing in the form of restricted shares of the company’s stock, including 180,000 shares of the company’s Series G preferred stock. GreenShift is required to use the first proceeds received upon sale of the shares to pay or refinance its senior secured debt.



The transaction documents also include management agreements under which GreenShift has in essence ‘outsourced’ its operations to Flux Carbon, which the parties have agreed to fully capitalize to meet a number of specific objectives, including servicing the continuing and future needs of licensees, investing in growth with the parties’ combined intellectual properties, protecting GreenShift’s intellectual properties, and supporting all pending and future litigation for infringement and related matters.



Flux Carbon’s rights cover a series of patents granted to GreenShift’s wholly owned subsidiary, GS CleanTech Corp., involving the extraction of oil from corn ethanol coproducts. About a third of the corn processed by dry mill ethanol plants is converted into ethanol. Another third is emitted to the atmosphere as a relatively pure stream of carbon dioxide. The final third is dried and sold as a commercial animal feed for about 8 cents per pound. CleanTech and its inventors developed and commercialized a process that intercepts the flow of that final third in the plant, extracts corn oil, and returns the stream back to the host for completion of drying. The extracted oil is then most commonly sold as a feedstock for refining into biodiesel for about 25 cents per pound.



CleanTech has licensed its portfolio of corn oil extraction patents to producers of about 12 percent of the 15 billion gallons of ethanol produced annually in the U.S. However, CleanTech estimates that upwards of 90 percent of the corn ethanol industry practices methods covered by CleanTech’s patents, and some of those patents are the subject of litigation, which CleanTech has asserted against about 10 percent of the industry alleging infringing use since 2010.



To put those amounts into perspective, a 90 percent market adoption rate equates to an estimated industrywide output of corn oil capable of offsetting more than about 20 million barrels of fossil fuel-derived crude oil per year, while saving trillions of cubic feet per year of natural gas, eliminating tens of millions of metric tons per year of greenhouse gas emissions, and infusing about $500 million per year of increased income into the corn ethanol industry. A single 100 MMgy ethanol plant extracting about a third of its oil will produce about 23 million pounds of oil per year, and about $4 million in bottom line revenue at current commodity prices. CleanTech’s early adopter licensees pay ongoing royalty fees equal to a percentage of their corn oil sales.



CleanTech suffered a setback in 2014, that has created an extraordinary opportunity for Attis, when, without having conducted a trial or holding a hearing on the merits, the district court issued a summary judgment decision ruling that a 2003 bench test was proof that the patents-in-suit were reduced to practice and therefore invalid. Based thereon, the district court made a later determination that the patents-in-suit were obtained by inequitable conduct. Those determinations and other related and derivative rulings, as well as all of the defendants’ adverse claims, were submitted to the U.S. Patent and Trademark Office as part of the prosecution of several additional post-ruling corn oil extraction patents. The USPTO allowed those patents after considering the very information that the district court relied upon for its prior rulings. CleanTech has filed a notice of appeal seeking reversal of each of the adverse rulings, and appeal briefs will be filed in the coming months.



“We believe that we can be helpful in resolving this litigation,” Cosman said. “CleanTech has compelling reasons for its beliefs that the district court made some basic mistakes early on, and that each ruling was based on a misunderstanding of law that will be reversed. We’re familiar with the technologies and processes. We’ve looked at the history. We’re prepared to support the various stages of trial and appeal that may be necessary, but our primary focus will be on continued innovation, facilitating fair settlement, and investing in shared value creation with like-minded producers based on our full biorefining portfolio.”



The purchase price and other Flux Carbon transaction terms were designed to value the transaction on the basis of Flux Carbon’s existing business, investments, and multisector intellectual property rights—not including any matters that are subject to current or anticipated patent litigation, or CleanTech’s various contract and other claims involving more than $50 million in damages.