gersq22011.htm

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.	Yes	X	No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the prior 12 months (or for such shorter period that the registrant was required to submit and post such files).	Yes	X	No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer[ ] Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).	Yes		No	X

As of August 8, 2011, there were 13,903,397,418 shares of common stock outstanding.

Part I	Financial Information	Page No

Item 1	Financial Statements	3

	Consolidated Balance Sheets as of June 30, 2011 (unaudited)
	and December 31, 2010	4

	Consolidated Statements of Operations for the Three and Six Months
	Ended June 30, 2011 (unaudited) and 2010 (unaudited)	5

	Consolidated Statements of Cash Flows for the Six Months
	Ended June 30, 2011 (unaudited) and 2010 (unaudited)	6

	Notes to Consolidated Financial Statements	7

Item 2	Management’s Discussion and Analysis of Financial Condition	23
	and Results of Operations

Item 3	Quantitative and Qualitative Disclosures about Market Risk	30

Item 4	Controls and Procedures	30

Part II	Other Information

Item 1	Legal Proceedings	31

Item 1A	Risk Factors	33

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3	Defaults upon Senior Securities	34

Item 4	Reserved	34

Item 5	Other Information	34

Item 6	Exhibits	34

	Signatures	35

		6/30/2011			12/31/2010
ASSETS

Current Assets:
Cash	$	1,407,149		$	18,420
Accounts receivable, net of doubtful accounts		636,778			194,571
Inventories, net		1,253,559			1,275,815
Prepaid expenses and other assets		259,223			644,781
Total current assets		3,556,709			2,133,587

Other Assets:
Property and equipment, net		--			8,746,240
Intangible assets, net		139,530			516,131
Minority investments		2,501,324			2,501,324
Note receivable		500,000			500,000
Deposits		46,736			47,571
Assets to be disposed, net of current		--			7,500
Total other assets		3,187,590			12,318,766

TOTAL ASSETS		6,744,299			14,452,353

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:
Accounts payable		3,977,014			4,657,016
Accrued expenses		2,753,383			1,789,800
Accrued expenses – deferred employee compensation		1,918,301			2,012,876
Accrued interest payable		2,878,266			3,608,050
Accrued interest payable – related party		1,336,624			1,057,052
Deferred revenue		216,704			300,396
Billings in excess		394,544			--
Note payable – related party		--			--
Current portion of long term debt		1,806,322			1,846,575
Current portion of convertible debentures, net		855,323			858,713
Convertible debentures – related party		--			4,985,001
Amounts due to minority shareholders		839,669			839,669
Liabilities of discontinued operations, current		316,133			316,133
Total current liabilities		17,292,283			22,271,281

Long term Liabilities:
Asset retirement obligation		--			651,182
Liability for preferred stock – related party		942,661			938,641
Convertible debentures – related party		4,431,041			--
Convertible debentures, net of current		28,310,102			45,737,327
Total long term liabilities		33,683,804			47,327,150

Total Liabilities		50,976,087			69,598,431

Stockholders’ Equity (Deficit):
Convertible preferred stock, $0.0001 par value, 5,000,000 shares authorized:
Series B: 2,480,544 shares issued and outstanding		2,481			2,481
Series D: 798,880 and 791,034 shares issued and outstanding, respectively		799			791
Common stock: $0.0001 par value, 20,000,000,000 authorized 12,709,647,409 and
13,980,670,938 shares issued and outstanding, respectively		1,270,965			1,398,068
Additional paid in capital		113,761,174			112,526,248
Accumulated deficit		(159,267,207	)		(169,073,666	)
Total stockholders’ equity (deficit)		(44,231,788	)		(55,146,078	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	6,744,299		$	14,452,353

	Three Months Ended						Six Months Ended
		6/30/2011			6/30/2010			6/30/2011			6/30/2010

Revenue	$	3,148,257		$	2,029,318		$	5,879,657		$	3,300,818
Performance bonuses		--			--			4,986,568			--
Total revenue		3,148,257			2,029,318			10,866,225			3,300,818

Costs of goods sold		1,456,029			1,439,313			2,390,281			2,223,707
Gross profit		1,692,228			590,005			8,475,944			1,077,111

Operating expenses:
Sales, general and administrative expenses		1,182,525			1,477,937			2,184,433			3,511,580
Total operating expenses		1,182,525			1,477,937			2,184,433			3,511,580

Income (loss) from operations		509,703			(887,932	)		6,291,511			(2,434,469	)

Other Income (Expense):
Gain (loss) on extinguishment of debt		17,733			--			5,908,693			--
Gain (loss) on sale of asset		--			--			(222,199	)		--
Liquidated damages		--			--			(650,000	)		--
Amortization of debt discount & deferred financing		(8,334	)		(8,333	)		(16,667	)		(21,733	)
Interest income		19,729			17,949			37,673			35,704
Miscellaneous income		2,500			120,591			2,500			120,591
Change in conversion liabilities		(67,977	)		(489,168	)		500,768			(692,180	)
Change in conversion liabilities - related party		(2,378	)		143,493			11,502			(91,606	)
Interest expense		(519,640	)		(184,135	)		(1,518,795	)		(441,610	)
Interest expense – related party		(278,541	)		(719,928	)		(538,527	)		(1,417,731	)
Total other income (expense), net		(836,908	)		(1,119,531	)		3,514,948			(2,508,565	)

Income (loss) before provision for income taxes		(327,205	)		(2,007,463	)		9,806,459			(4,943,034	)

(Provision for)/benefit from income taxes		--			--			--			--
Income (loss) from continuing operations		(327,205	)		(2,007,463	)		9,806,459			(4,943,344	)

Discontinued Operations:
Gain (loss) from disposal of discontinued operations		--			--			--			--
Income (loss) from discontinued operations		--			(152,066	)		--			(149,328	)
Total income (loss) from discontinued operations		--			(152,066	)		--			(149,328	)

Net income (loss)	$	(327,205	)	$	(2,159,529	)	$	9,806,459		$	(5,092,362	)

Weighted average common shares outstanding, basic		13,785,900,459			1,356,359,504			14,391,478,330			1,068,225,872
Weighted average common shares outstanding, diluted		13,785,900,459			1,356,359,504			535,261,841,581			1,068,225,872

Earnings (Loss) per Share:
Income (loss) from continuing operations	$	0.00		$	(0.00	)	$	0.00		$	(0.00	)
Income (loss) from discontinued operations		0.00			(0.00	)		0.00			(0.00	)
Net income (loss) per share – basic and diluted	$	0.00		$	(0.00	)	$	0.00		$	(0.00	)

	Six Months Ended
		6/30/2011			6/30/2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	9,806,459			(5,092,362	)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		115,309			529,686
Amortization of intangibles		12,315			55,173
Amortization of debt discount and deferred financing costs		16,667			21,733
Non-cash payment of performance bonus applied to convertible debenture		(4,986,568	)		--
Loss (gain) on extinguishment of debt		(5,908,693	)		--
Loss on sale of assets		222,199			--
Change in net assets of disposal group		7,500			298,394
Change in conversion liabilities		(512,270	)		783,786
Stock compensation		--			7,500
Accretion of asset retirement obligation		--			19,690
Interest accretion on notes receivable		(35,704	)		(35,704	)
Expenses incurred by issuance of debentures		188,774			--
Forgiveness of debt		--			(120,630	)

Changes in operating assets and liabilities:
Accounts receivable		(442,207	)		(179,695	)
Prepaid expenses		(415,011	)		77,940
Inventory		(21,344	)		--
Deposits		835			(600	)
Deferred revenue		(83,693	)		--
Accrued interest		1,448,204			1,414,005
Accrued interest – related party		420,308			441,610
Billings in excess		394,544			--
Accounts payable and accrued expenses		756,316			676,394
Net cash provided by (used in) operating activities		983,940			(1,104,080	)

CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of inventory components		43,600			--
Proceeds from sale of property, plant and equipment		2,500,000			--
Additions to and acquisition of property, plant and equipment		(13,739	)		(145,573	)
Loans to related party		(17,060	)		--
Net cash provided by (used in) investing activities		2,512,801			(145,573	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable - related party		(89,437	)		--
Proceeds from convertible debentures – related party		61,425			1,608,163
Loan due to an affiliate		--			(55,969	)
Repayment of convertible debentures		(2,000,000	)		(327,011	)
Repayment of convertible debentures – related party		(80,000	)		--
Net cash provided by (used in) financing activities		(2,108,012	)		1,225,183

Net increase (decrease) in cash		1,388,729			(24,470	)
Cash at beginning of period		18,420			39,415
Cash at end of period	$	1,407,149		$	14,945

The Company accounts for its 10% investment in ZeroPoint Clean Tech, Inc. under the cost method. Application of this method requires the Company to periodically review these investments in order to determine whether to maintain the current carrying value or to write off some or all of the investments. While the Company uses some objective measurements in its review, the review process involves a number of judgments on the part of the Company’s management. These judgments include assessments of the likelihood of ZeroPoint to obtain additional financing, to achieve future milestones, make sales and to compete effectively in its markets. In making these judgments the Company must also attempt to anticipate trends in ZeroPoint’s industry as well as in the general economy.

We generate revenue by licensing our technologies to ethanol producers in exchange for ongoing royalty and other license fees. Several plants were licensed to use our technologies as of the end of 2010 and during the second quarter of 2011. Prior to February 15, 2011, we were also party to license agreements with ethanol producers located in Wisconsin, New York, Indiana, and Michigan. These producers were granted the right to use our technologies and equipment at their locations in return for royalties equal to the spread between the market price of the corn oil recovered by our licensees with our technologies and equipment and a discounted purchase price. Our sales and costs of sales include the sales and the costs of the corn oil produced by these licensees with our technologies and equipment through February 15, 2011, the effective date of the YA Corn Oil Transaction (see Note 9, Debt Obligations, below).

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of June 30, 2011, the Company had $1,407,149 in cash, and current liabilities exceeded current assets by $13,735,574. Further, the Company’s operating income for the six months ended June 30, 2011 was primarily due to completion of the YA Corn Oil Transaction and the subsequent realization by the Company of non-cash bonuses totaling $4,986,568 (see Note 9, Debt Obligations, below). These matters raise substantial doubt about the Company’s ability to continue as a going concern. Our ability to satisfy our obligations will depend on our success in obtaining financing, our success in developing revenue sources, and our success in negotiating with the creditors. Management’s plans to resolve the Company’s working capital deficit include increasing revenue. There can be no assurances that the Company will be able to eliminate its working capital deficit and that the Company’s historical operating losses will not recur. The accompanying financial statements do not contain any adjustments which may be required as a result of this uncertainty.

We determined our reporting units in accordance with FASB ASC 280, “Segment Reporting” (“ASC 280”). We evaluate a reporting unit by first identifying its operating segments under ASC 280. We then evaluate each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, we evaluate those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, we determine if the segments are economically similar and, if so, the operating segments are aggregated. We have one operating segment and reporting unit. We operate in one reportable business segment; we provide technologies and related products and services to U.S.-based ethanol producers. We are organized and operated as one business. We exclusively sell our technologies, products and services to ethanol producers that have entered into license agreements with the Company. No sales of any kind occur, and no costs of sales of any kind are incurred, in the absence of a license agreement. A single management team that reports to the chief operating decision maker comprehensively manages the entire business. We do not operate any material separate lines of business or separate business entities with respect to our technologies, products and services. The Company does not accumulate discrete financial information according to the nature or structure of any specific technology, product and/or service provided to the Company’s licensees. Instead, management reviews its business as a single operating segment, using financial and other information rendered meaningful only by the fact that such information is presented and reviewed in the aggregate. Discrete financial information is not available by more than one operating segment, and disaggregation of our operating results would be impracticable.

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collection is reasonably assured. The Company recognizes revenue from licensing of the Company’s corn oil extraction technologies when corn oil sales occur. Licensing royalties are recognized as earned by calculating the royalty as a percentage of gross corn oil sales by the ethanol plants. For the purposes of assessing royalties, the sale of corn oil is deemed to occur when shipped, which is when four basic criteria have been met: (i) persuasive evidence of a customer arrangement; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured, and (iv) product delivery has occurred, which is generally upon shipment to the buyer of the corn oil. Deposits from customers are not recognized as revenues, but as liabilities, until the following conditions are met: revenues are realized when cash or claims to cash (receivable) are received in exchange for goods or services, or when assets received in such exchange are readily convertible to cash or claim to cash, or when such goods or services are transferred. When an income item is earned, the related revenue item is recognized and any deferred revenue is reduced. To the extent revenues are generated from the Company’s licensing support services, the Company recognizes such revenues when the services are completed and billed.

BASIC AND DILUTED INCOME (LOSS) PER SHARE

The Company computes its net income or loss per common share under the provisions of ASC 260, “Earnings per Share,” whereby basic net income or loss per share is computed by dividing the net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Dilutive net loss per share excludes potential common shares issuable upon conversion of all derivative securities if the effect is anti-dilutive. Thus, common stock issuable upon exercise or conversion of options, warrants, convertible preferred stock, or convertible debentures are excluded from computation of diluted net loss per share, but are included in computation of diluted net income per share. During the six months ended June 30, 2011, we reported net income and accordingly included potentially dilutive instruments in the fully diluted net income per share calculation. However, we reported net losses during the quarters ended June 30, 2011 and June 30, 2010, and the six months ended June 30, 2010, and, in accordance with ASC 260, dilutive instruments were excluded from the net loss per share calculation for such periods.

FINANCIAL INSTRUMENTS

The carrying values of accounts receivable, other receivables, accounts payable, and accrued expenses approximate their fair values due to their short term maturities. The carrying values of the Company’s long-term debt approximate their fair values based upon a comparison of the interest rate and terms of such debt to the rates and terms of debt currently available to the Company. It was not practical to estimate the fair value of the convertible debt. In order to do so, it would be necessary to obtain an independent valuation of these unique instruments. The cost of that valuation would not be justified in light of the materiality of the instruments to the Company.

In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) 2011-04, "Fair Value Measurement (Topic 820) Amendment to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs." ASU No. 2011-04 is intended to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs, by ensuring that fair value has the same meaning in U.S. GAAP and IFRSs and that their respective disclosure requirements are the same except for inconsequential differences in wording and style. The amendments in ASU No 2011-04 apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity's shareholders' equity in the financial statements. Some of the disclosures required by ASU No. 2011-04 are not required for nonpublic entities. These amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the Board does not intend for the amendments to result in a change in the application of the requirements in ASC Topic 820. Some of the amendments clarify the Board's intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The adoption of ASU 2011-04 did not have a material impact on the Company's results of operations or financial condition.

In December 2010, the FASB issued ASU 2010-29, “Business Combinations (ASC Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations.” The amendments in this ASU affect any public entity as defined by ASC Topic 805 that enters into business combinations that are material on an individual or aggregate basis. The amendments in this ASU specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The adoption of ASU 2010-29 did not have a material impact on the Company’s results of operations or financial condition.

In December 2010, the FASB issued ASU 2010-28, “Intangibles — Goodwill and Other (ASC Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.” The amendments in this ASU modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with the existing guidance and examples, which require that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. For public entities, the amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. The adoption of ASU 2010-28 did not have a material impact on the Company’s results of operations or financial condition.

In April 2010, the FASB issued ASU 2010-17, Revenue Recognition — Milestone Method (“ASU 2010-17”). ASU 2010-17 provides guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. A vendor can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. The following criteria must be met for a milestone to be considered substantive. The consideration earned by achieving the milestone should (i) be commensurate with either the level of effort required to achieve the milestone or the enhancement of the value of the item delivered as a result of a specific outcome resulting from the vendor’s performance to achieve the milestone; (ii) be related solely to past performance; and (iii) be reasonable relative to all deliverables and payment terms in the arrangement. No bifurcation of an individual milestone is allowed and there can be more than one milestone in an arrangement. Accordingly, an arrangement may contain both substantive and non-substantive milestones. ASU 2010-17 is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The adoption of ASU 2010-17 did not have a material effect on the Company’s results of operations or financial condition.

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to FASB ASC Topic 605, Revenue Recognition ) (“ASU 2009-13”). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-13 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The adoption of ASU 2009-13 did not have a material impact on the Company’s results of operations or financial condition.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

Effective July 1 2009, the Company adopted ASC 820, Fair Value Measurements and Disclosures. This topic defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This guidance supersedes all other accounting pronouncements that require or permit fair value measurements. The Company accounted for the convertible debentures in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of the Company’s common shares.

Effective July 1 2009, the Company adopted ASC 820-10-55-23A, Scope Application to Certain Non-Financial Assets and Certain Non-Financial Liabilities, delaying application for non-financial assets and non-financial liabilities as permitted. ASC 820 establishes a framework for measuring fair value, and expands disclosures about fair value measurements. In January 2010, the FASB issued an update to ASC 820, which requires additional disclosures about inputs into valuation techniques, disclosures about significant transfers into or out of Levels 1 and 2, and disaggregation of purchases, sales, issuances, and settlements in the Level 3 rollforward disclosure. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

Level 1	quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active exchange-traded securities and exchange-based derivatives

Level 2	inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges

Level 3	unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded, non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing models

Balance of embedded derivative as of December 31, 2009	$	4,629,312
Write off due to restructured terms		325,656
Fair value of warrants and conversion feature of debentures at issuance		428,381
Reductions in fair value due to conversion of principal		760,387
Gain on fair value adjustments to embedded derivatives		(480,254	)
Balance of embedded derivatives at December 31, 2010		5,663,482

Write off due to restructured terms		(1,542,609	)
Present value of beneficial conversion features of new debentures		33,469
Accretion adjustments to fair value – beneficial conversion features		164,306
Reductions in fair value due to repayments/redemptions		(710,044	)
Reductions in fair value due to principal conversions		(104,934	)
Balance at June 30, 2011	$	3,503,670

The fair value of the conversion features are calculated at the time of issuance and the Company records a conversion liability for the calculated value. The Company recognizes the initial expense for the conversion liability which is added to the carrying value of the debenture or the liability for preferred stock. The Company also recognizes expense for accretion of the conversion liability to fair value over the term of the note. The Company has adopted ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in each debenture and/or convertible preferred share could result in the note principal and/or preferred shares being converted to a variable number of the Company’s common shares.

		6/30/2011
Current portion of long term debt:
Mortgages and other term notes	$	21,743
Current portion of convertible notes payable		50,000
Current portion of subsidiary notes payable		1,734,579
Total current portion of long term debt	$	1,806,322

Current portion of convertible debentures:
Convertible debentures	$	551,236
Note discounts		(18,529	)
Conversion liabilities		322,616
Total current portion of convertible debentures	$	855,323

Long term convertible debentures:
Convertible debentures to YA Global Investments, L.P.	$	21,310,521
Convertible debentures to Minority Interest Fund (II), LLC		3,693,864
Convertible debentures to Viridis Capital, LLC		337,939
Convertible debentures to Andypolo, LP		4,391,643
Convertible debentures to Stuttgart, LP		271,237
Conversion liabilities		2,735,939
Total long term convertible debentures	$	32,741,143

Transaction”) were to close effective August 1, 2010 (the “Effective Date”) subject to satisfaction of certain closing conditions. The conditions to effectiveness of this transaction were satisfied and the transaction was deemed effective for reporting purposes as of February 15, 2011. Since the conditions of closing were not satisfied as of December 31, 2010, the Company’s results of operations for the year ended December 31, 2010 were reported on the basis that the closing of the YA Corn Oil Transaction had not occurred as of such date. The YACO Agreements call for three GreenShift-owned corn oil extraction facilities based on GreenShift’s patented and patent-pending technologies and GreenShift’s interest in a fourth facility to be transferred as of August 1, 2010 to a newly formed joint venture entity, YA Corn Oil Systems, LLC (“YA Corn Oil”). In exchange, $10,000,000 of the convertible debt issued by GreenShift to YA Global shall be deemed satisfied as of August 1, 2010. GreenShift will also receive a 20% equity stake in YA Corn Oil and the right to receive 20% of YA Corn Oil’s distributable cash upon the realization by YA Corn Oil of a 20% internal rate of return on its invested capital. GreenShift further agreed to provide management services to the YA Corn Oil for the ongoing operation and maintenance of the transferred extraction facilities in exchange for certain management and brokerage fees, as well as earnings-based performance bonuses to be paid in the form of additional reduction of GreenShift’s convertible debt due to YA Global. The conditions for the YA Corn Oil Transaction were satisfied as of February 15, 2011, and the Company subsequently earned a performance bonus of $2,486,568 as of February 28, 2011 and another bonus of $2,500,000 as of March 31, 2011. The Company recognized a $5.9 million gain on extinguishment of debt and reduced liabilities for asset retirement obligation and accounts payable by an additional $847,000 as a result of the completion of the YA Corn Oil Transaction. The performance bonuses earned during the second quarter 2011 were recognized as revenue and applied to reduction of the Company’s convertible debt with YA Global pursuant to the terms of the YACO Agreements. The Company additionally posted an accrual of $650,000 during the six months ended June 30, 2011 for liquidated damages that have not been, but may be, assessed by YA Corn Oil relating to certain conditions involving third party documentation that have not yet been fulfilled.

In connection with the completion of the YA Corn Oil Transaction, the Company issued YA Global an amended and restated convertible debenture in the amount of $33,308,023, inclusive of previously accrued interest (the “A&R Debenture”). The A&R Debenture matures on December 31, 2012 and bears interest at the rate of 6% per annum. YA Global shall have the right, but not the obligation, to convert any portion of the A&R Debenture into the Company’s common stock at a rate equal to the lesser of (a) $1.00 or (b) 90% of the lowest daily volume weighted average price of the Company’s common stock during the 20 consecutive trading days immediately preceding the conversion date. YA Global will not be permitted, however, to convert into a number of shares that would cause it to own more than 4.99% of the Company’s outstanding common shares. The A&R Debenture is additionally subject to ongoing compliance conditions, including the absence of change of control events, timely issuance of common shares upon conversion. As of June 30, 2011, there were no outstanding events of default under the A&R Debenture. The difference between August 1, 2010 date of the YACO Agreements and the February 15, 2011 effective date for reporting purposes resulted in an increased interest expense of $915,464 as of December 31, 2010 that was subsequently, on February 15, 2011, eliminated in connection with the completion of the YA Corn Oil Transaction.

While the YA Corn Oil Transaction was deemed effective for reporting purposes as of February 15, 2011, the date upon which the contractual conditions for closing were satisfied, the Effective Date of the YA Corn Oil Transaction for purposes of satisfying debt to YA Global was August 1, 2010. The initial balance of the A&R Debenture stated above ($33,308,023) was derived by subtracting $10,000,000 due to the Company for the sale to YA Corn Oil of the above-referenced corn oil extraction systems from the $41,476,871 and $1,574,582 in principal and accrued interest due as of July 31, 2010, plus an additional $256,759 in legal fees incurred by the Company but paid by YA Global. The A&R Debenture was then reduced during the first quarter by $4,986,568 from YA Corn Oil performance bonuses earned, $2,000,000 paid to YA Global in cash, $40,500 from conversion by YA Global into Company common stock, and an additional $1,651 from Viridis Capital.

The amount due to YA Global under the A&R Debenture was reduced during 2010 by $720,932 from conversion by YA Global into the Company’s common stock, plus an additional $257,229 paid to YA Global from Viridis Capital, LLC (the Company’s majority shareholder), which amount was applied to the Company’s balance with YA Global pursuant to the terms of the December 2009 Forbearance Agreement by and between Viridis, the Company and YA Global (see Note 9, Debt Obligations, below). Of these amounts, YA Global received $168,023 from conversion into Company common stock and $103,030 from Viridis Capital between August 1, 2010 and December 31, 2010.

The Company accounted for the A&R Debenture in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the A&R Debenture could result in the note principal being converted to a variable number of the Company’s common shares. The Company had determined the fair value of the A&R Debenture at December 31, 2010 to be $45,908,129 which represented the face value of the debenture plus the present value of the conversion feature. During the six months ended June 30, 2011, the Company recognized a reduction in conversion liability relating to the A&R Debenture at a present value of $1,542,609 for the conversion liability portion of the gain on extinguishment of debt, of $134,555 for the conversions during the period, and $646,954 for repayments during the period and recorded an expense of $164,306 for the accretion of the present value of the conversion liability for the period. The carrying value of the A&R Debenture was $23,192,830 at June 30, 2011, including principal of $21,310,521 and the value of the conversion liability. The liability for the conversion feature shall increase from its present value of $1,882,309 at June 30, 2011 to its estimated settlement value of $2,145,615 at December 31, 2012. Interest expense of $1,174,660 for the A&R Debenture was accrued for the six months ended June 30, 2011.

As of December 31, 2010, the Company had convertible debentures payable to Minority Interest Fund (II), LLC (“MIF”) in an aggregate principal amount of $3,988,326 (the “MIF Debenture”). The convertible debt issued to MIF bears interest at a rate of 20% and matures on December 31, 2012. MIF is entitled to convert the accrued interest and principal of the MIF convertible debenture into common stock of the Company at a conversion price equal to 80% of the lowest daily volume weighted average price for the twenty trading days preceding conversion. During the six months ended June 30, 2011, MIF converted $386,624 of the principal balance and interest due to MIF into 4,523,420,925 shares of Company common stock. The Company accounted for the MIF Debenture in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the MIF Debenture could result in the note principal being converted to a variable number of the Company’s common shares. The Company determined the value of the MIF Debenture at December 31, 2010 to be $4,407,852 which represented the face value of the debenture of $3,988,326 plus the present value of the conversion feature. During the six months ended June 30, 2011, the Company recognized a reduction in the conversion liability at present value of $63,607 for the conversions and recorded an expense of $4,107 for the fair value of new advances less assignments plus the accretion to fair value of the conversion liability for the six months. The carrying value of the MIF Debenture was $4,053,890 at June 30, 2011, and included principal of $3,693,864 and the value of the conversion liability. The liability for the conversion feature at its present value of $360,026 at June 30, 2011 equals its estimated settlement value. Interest expense of $498,427 for these obligations was accrued for the six months ended June 30, 2011.

As of December 31, 2010, the Company had convertible debentures payable to Viridis Capital, LLC in an aggregate principal amount of $518,308 (the “Viridis Debenture”). The debentures bear interest at 20% and mature on December 31, 2012. Viridis is entitled to convert the accrued interest and principal of the convertible debenture into common stock of the Company at a conversion price equal to 90% of the lowest daily volume weighted average price for the twenty trading days preceding conversion. The Company accounted for the Viridis Debenture in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the Viridis Debenture could result in the note principal being converted to a variable number of the Company’s common shares. The

Company determined the value of the Viridis Debenture at December 31, 2010 to be $577,149 which represented the face value of the debenture of $518,308 plus the present value of the conversion feature. The increase in the debenture during the year ended December 31, 2010 was due to Viridis’ payments to YA Global under the Forbearance Agreement, totaling $257,229, which amount was applied to reduce the Company’s balance with YA Global under the A&R Debenture. The Company recognized a reduction in conversion liabilities at present value of $19,890 for reductions during the period, and recorded an expense of $262 for the accretion to fair value of the conversion liability for the six months ended June 30, 2011. Viridis Capital assigned $112,020 of the Viridis Debenture to a related party during the six months ended June 30, 2011. The carrying value of the Viridis Debenture was $377,151 at June 30, 2011, including principal of $337,939 and the value of the conversion liability. The liability for the conversion feature shall increase from its present value of $39,213 at June 30, 2011 to its estimated settlement value of $40,000 at December 31, 2012. Interest expense of $40,100 for these obligations was accrued for the six months ended June 30, 2011.

During the six months ended June 30, 2011, YA Global assigned $4,391,643 in convertible debt to Andypolo, LP (“Andypolo” and the “Andypolo Debenture”). Andypolo shall have the right, but not the obligation, to convert any portion of the A&R Debenture into the Company’s common stock at a rate equal to the lesser of (a) $1.00 or (b) 90% of the lowest daily volume weighted average price of the Company’s common stock during the 20 consecutive trading days immediately preceding the conversion date. The Company accounted for the Andypolo Debenture in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the Andypolo Debenture could result in the note principal being converted to a variable number of the Company’s common shares. The Company determined the value of the Andypolo Debenture upon assignment to be $4,809,790 which represented the face value of the debenture of $4,391,643 plus the present value of the conversion feature. During the six months ended June 30, 2011, the Company recorded an expense of $9,973 for the accretion to fair value of the conversion liability for the period. The carrying value of the Andypolo Debenture was $4,819,763 at June 30, 2011, including principal of $4,391,643 and the value of the conversion liability. The liability for the conversion feature shall increase from its present value of $428,120 at June 30, 2011 to its estimated settlement value of $487,961 at December 31, 2012. Interest expense of $56,309 for these obligations was accrued for the six months ended June 30, 2011.

During the six months ended June 30, 2011, YA Global assigned $321,237 in convertible debt to Stuttgart, LP (“Stuttgart” and the “Stuttgart Debenture”). Stuttgart shall have the right, but not the obligation, to convert any portion of the A&R Debenture into the Company’s common stock at a rate equal to the lesser of (a) $1.00 or (b) 90% of the lowest daily volume weighted average price of the Company’s common stock during the 20 consecutive trading days immediately preceding the conversion date. The Company accounted for the Stuttgart Debenture in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the Stuttgart Debenture could result in the note principal being converted to a variable number of the Company’s common shares. The Company determined the value of the Stuttgart Debenture upon assignment to be $351,824 which represented the face value of the debenture of $321,237 plus the present value of the conversion feature. During the six months ended June 30, 2011, $50,000 in principal was converted into common stock. During the six months ended June 30, 2011, the Company recorded an expense of $729 for the accretion to fair value of the conversion liability for the period and recognized a reduction in conversion liability at present value of $5,046 for the conversions. The carrying value of the Stuttgart Debenture was $297,507 at June 30, 2011, including principal of $271,237 and the value of the conversion liability. The liability for the conversion feature shall increase from its present value of $26,270 at June 30, 2011 to its estimated settlement value of $30,137 at December 31, 2012. Interest expense of $9,320 for these obligations was accrued for the six months ended June 30, 2011.

As of June 30, 2011, the Company owed $69,489 in convertible debt to various unrelated lenders. Each such lender is entitled to convert the accrued interest and principal of their debenture into common stock of the Company at a conversion price equal to 50% of the average closing market price for the twenty trading days preceding conversion. The Company accounted for these debentures in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in these debentures could result in the note principal being converted to a variable number of the Company’s common shares. The Company determined the value of these debentures at December 31, 2010 to be $202,300 which represented the face value of the debenture plus the present value of the

conversion feature. During the six months ended June 30, 2011, the Company recorded an expense of $3,683 for the accretion to fair value of the conversion liability for the period and recognized a reduction in conversion liability at present value of $18,027 for conversions of $30,000 filed during 2011. The carrying value of these debentures was $157,957 at June 30, 2011, including principal of $69,489 and the value of the conversion liability. The liability for the conversion feature has been fully recognized for one of these debentures. For the other debenture, the liability for the conversion feature shall increase from its present value of $28,687 at June 30, 2011 to its estimated settlement value of $30,000 at December 31, 2011. Interest expense of $18,086 for these obligations was accrued for the six months ended June 30, 2011.

On June 10, 2010, the Company entered into the Second Amended and Restated Technology Acquisition Agreement with Cantrell Winsness Technologies, LLC (“CWT”). As partial consideration under the agreement, the Company agreed to pay CWT members an additional one-time payment in the form of 1,000,000 shares of Series F Preferred Stock (“CWT Preferred Shares”) with a face value of $10 per preferred share. Each preferred share shall be convertible into shares of the Company’s common stock commencing six months after the date of the amendment at a rate equal to 90% of the then current trailing five day trailing average closing market price for the Company’s common stock. CWT members shall not sell shares of the Company’s common stock at a monthly rate greater than 5% of the average trading volume for the Company’s common stock for each preceding calendar month. The Company shall have the right to redeem any portion or all of the preferred shares on a pro-rated per preferred share basis in return for cash paid to members at a rate equal to the face value of the preferred shares redeemed until the preferred shares have been fully redeemed. The Company accounted for the CWT Preferred Shares in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the CWT convertible preferred shares could result in the preferred shares being converted to a variable number of the Company’s common shares. The Company determined the value of the CWT Preferred Shares at the grant date to be $925,926 which represented the estimated value of the preferred shares based on common shares into which they could be converted at the grant date, which included the present value of the conversion feature, which was determined to be $428,381. During the year ended December 31, 2010, the Company recognized a total expense of $925,962 based on the grant date value, including $497,545 in professional fees for the agreement modification and the $428,381 for the conversion liability at present value. The Company recognized a reduction in conversion liability at present value of $29,621 for the redemptions that occurred in connection with payments of royalties under the agreement and recorded an expense of $33,640 for the accretion to fair value of the conversion liability for the six months ended June 30, 2011. The carrying value of the liability for the CWT Preferred Shares was $942,661 at June 30, 2011, including the grant date value plus the accretion, less redemptions of the conversion liability during the year. The liability for the conversion feature shall increase from its present value of $445,116 at June 30, 2011 to its estimated settlement value of $1,041,804 at June 10, 2020.

On June 9, 2009, JMJ Financial Corporation (“JMJ”) issued the Company a 14.4% secured promissory note in the amount of $500,000 (the “JMJ Note”) in return for $600,000 in 12% convertible debt (the “JMJ Debenture”) issued by the Company. The principal balance due under the JMJ Note was $500,000 as of June 30, 2011 and accrued interest receivable under the JMJ Note was $148,143. The principal and accrued interest for the JMJ Note and JMJ Debenture has been presented as of June 30, 2011, at their face value, without offset. The JMJ Debenture is convertible into Company common stock at a rate equal to 70% of the lowest closing market price for the Company’s common stock for the twenty trading days preceding conversion. The Company accounted for the JMJ Debenture dated June 9, 2009 in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the JMJ Debenture could result in the note principal being converted to a variable number of the Company’s common shares. The Company determined the value of the $600,000 JMJ Debenture at December 31, 2010 to be $656,677, which represented the face value of the debenture plus the present value of the conversion feature minus the unamortized debt discount. During the six months ended June 30, 2011, an expense of $24,288 has been recorded to recognize the present value of the conversion features for additional accrued interest and for the accretion to fair value of the conversion liability. The carrying value of the JMJ Debenture was $697,366 at June 30, 2010, which represented the face value of the debenture plus the present value of the conversion feature minus the unamortized debt discount. The liability for the conversion feature shall increase from its present value of $234,147 at June 30, 2011 to its estimated settlement amount of $260,482 at June 11, 2012. For the six months ended June 30, 2011, interest expense of $28,667 for these obligations was incurred.

ASC 480, Distinguishing Liabilities from Equity, sets forth the requirements for determination of whether a financial instrument contains an embedded derivative that must be bifurcated from the host contract, therefore the Company evaluated whether the conversion feature for Series D Preferred Stock would require such treatment; one of the exceptions to bifurcation of the embedded conversion feature is that the conversion feature as a standalone instrument would be classified in stockholders’ equity. Management has determined that the conversion option would not be classified as a liability as a standalone instrument, therefore it meets the exception for bifurcation of the embedded derivative under ASC 815, Derivatives and Hedging. ASC 815, Derivatives and Hedging, addresses whether an instrument that is not under the scope of ASC 480, Distinguishing Liabilities from Equity, would be classified as liability or equity; one of the factors that would require liability classification is if the Company does not have sufficient authorized shares to effect the conversion. If a company could be required to obtain shareholder approval to increase the company's authorized shares in order to net-share or physically settle a contract, share settlement is not controlled by the company. About 80% of the Company’s outstanding shares of Series D Preferred Stock are owned by Viridis Capital, LLC, an entity controlled by Kevin Kreisler, the chairman and chief executive officer of the Company. If all the Series D shares held by Viridis Capital were converted and exceeded the number of authorized common shares, there would be no contingent factors or events that a third party could bring up that would prevent Mr. Kreisler from authorizing the additional shares. As Mr. Kreisler, through Viridis Capital, is the Company’s majority shareholder, there would be no need to have to go to anyone outside the Company for approval. As a result, the share settlement is controlled by the Company and with ASC 815, Derivatives and Hedging. The Company assessed all other factors in ASC 815, Derivatives and Hedging, to determine how the conversion feature would be classified.

Viridis Capital, LLC (“Viridis Capital”), the majority shareholder of the Company, and its sole member, Kevin Kreisler, the Company’s founder, chairman and chief executive officer, have guaranteed nearly all of the Company’s senior debt (in the outstanding amount of about $21 million as of June 30, 2011). Viridis Capital has pledged all of its assets, including its shares of Company Series D Preferred Stock, to YA Global to secure the repayment by the Company of its obligations YA Global (see Note 11, Stockholders’ Equity, below). Viridis Capital paid YA Global a total of $1,810,837 between January 1, 2007 and December 31, 2010 to reduce Company debt due to YA Global pursuant to the terms of the Forbearance Agreement.

The Company issued 7,728,976,480 shares of common stock upon the conversion of an aggregate of $634,124 in debt during the six months ended June 30, 2011 (see Note 9, Debt Obligations, above). At times, certain conversion features were below par of common stock at issuance on the conversion date. The Company recognized an $188,774 in additional interest expense related to those conversions. In addition, during the six months ended June 30, 2011, Viridis Capital, LLC, the Company’s majority shareholder, canceled 9 billion shares of Company common stock previously issued to Viridis Capital upon partial conversion of the Company’s Series D preferred stock.

written consent that equals the number of common shares into which the Series D Shares are convertible on the record date for the shareholder action. In the event the Board of Directors declares a dividend payable to Company common shareholders, the holders of Series D Shares will receive the dividend that would be payable if the Series D Shares were converted into Company common shares prior to the dividend. In the event of a liquidation of the Company, the holders of Series D Shares will receive a preferential distribution of $0.001 per share, and will share in the distribution as if the Series D Shares had been converted into common shares.

During the year ended December 31, 2010, 8,920 shares of Series D Preferred Stock were converted into 10 billion shares of Company common stock by Viridis Capital, all of which shares were subsequently surrendered to the Company and cancelled between November 2010 and May 12, 2011. Viridis Capital is the majority shareholder of the Company and its sole member, Kevin Kreisler, is the Company’s founder, chairman and chief executive officer. Viridis Capital (along with our chairman personally and an entity held in trust for the benefit of our chairman's wife (the “Kreisler Trust”)), has provided GreenShift and its affiliated companies and subsidiaries with more than about $8.4 million in financing, more than half of which was subsequently canceled, forgiven and contributed to shareholders' equity. Viridis Capital and Kevin Kreisler have guaranteed all of the Company’s debt due to YA Global (see Note 10, Guaranty Agreements, above). Viridis Capital has also guaranteed all amounts due to Cantrell Winsness Technologies, LLC in connection with the acquisition by the Company’s subsidiary of its patented and patent-pending extraction technologies (see Note 13, Related Party Transactions, below).

On June 10, 2010, the Company entered into the Second Amended and Restated Technology Acquisition Agreement with Cantrell Winsness Technologies, LLC (“CWT”). As partial consideration under the agreement, the Company agreed to pay CWT members an additional one-time payment in the form of 1,000,000 shares of Series F Preferred Stock (“CWT Preferred Shares”) with a face value of $10 per preferred share. Each preferred share shall be convertible into shares of the Company’s common stock commencing six months after the date of the amendment at a rate equal to 90% of the then current trailing five day trailing average closing market price for the Company’s common stock. CWT members shall not sell shares of the Company’s common stock at a monthly rate greater than 5% of the average trading volume for the Company’s common stock for each preceding calendar month. The Company shall have the right to redeem any portion or all of the preferred shares on a pro-rated per preferred share basis in return for cash paid to members at a rate equal to the face value of the preferred shares redeemed until the preferred shares have been fully redeemed. The Company accounted for the CWT Preferred Shares in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the CWT convertible preferred shares could result in the preferred shares being converted to a variable number of the Company’s common shares. The Company determined the value of the CWT Preferred Shares at the grant date to be $925,926 which represented the estimated value of the preferred shares based on common shares into which they could be converted at the grant date, which included the present value of the conversion feature, which was determined to be $428,381. During the year ended December 31, 2010, the Company recognized a total expense of $925,962 based on the grant date value, including $497,545 in professional fees for the agreement modification and the $428,381 for the conversion liability at present value. The Company recognized a reduction in conversion liability at present value of $29,621 for redemptions that occurred from payments of royalties under the agreement and recorded an expense of $33,640 for the accretion to fair value of the conversion liability for the six months ended June 30, 2011. The carrying value of the liability for the CWT Preferred Shares was $942,661 at June 30, 2011, including the grant date value plus the accretion less redemptions of the conversion liability during the year. The liability for the conversion feature shall increase from its present value of $445,116 at June 30, 2011 to its estimated settlement value of $1,053,271 at June 10, 2020. The only conditions under which the Company would be required to redeem its convertible preferred stock for cash would be in the event of a liquidation of the Company or in the event of a cash-out merger of the Company.

On October 13, 2009, GS CleanTech filed a legal action in the United States District Court, Southern District of New York captioned GS CleanTech Corporation v. GEA Westfalia Separator, Inc.; and DOES 1-20, alleging infringement of the ‘858 Patent ("New York I Action"). On October 13, 2009, GS CleanTech filed a Motion to Dismiss with the same court relative to a separate complaint filed previously by Westfalia captioned GEA Westfalia Separator, Inc. v. GreenShift Corporation that alleged (1) false advertising in violation of the Lanham Act § 43(a); (2) deceptive trade practices and false advertising in violation of New York General Business Law §§ 349, 350 and 350-a; and (3) common law unfair competition ("New York II Action"). On October 13, 2009, Westfalia filed its First Amended Complaint in the New York II Action to include as a plaintiff, ethanol production company Ace Ethanol, LLC , and to add claims seeking a declaratory judgment of invalidity and non-infringement of the ‘858 Patent. On October 13, 2009, ICM, Inc. filed a complaint in the United States District Court, District of Kansas in the matter captioned ICM, Inc. v. GS CleanTech Corporation and GreenShift Corporation, alleging unfair competition, interference with existing and prospective business and contractual relationships, and deceptive trade practices and also seeking a declaratory judgment of invalidity and non-infringement of the ‘858 Patent.

On October 15, 2009, in the New York I Action, GS CleanTech filed a Notice of Filing First Amended Complaint for infringement of the ‘858 Patent, along with a copy of the First Amended Complaint, which added ICM, Ace Ethanol, Lifeline Foods LLC and ten additional DOES as defendants in the New York I Action. On October 23, 2009, GS CleanTech's First Amended Complaint in the New York I Action was entered by the court. On November 5, 2009, in ICM’s Kansas lawsuit, GS CleanTech filed a motion to dismiss or, in the alternative, to transfer the Kansas case to New York for inclusion in the New York I Action. Also on November 5, 2009, in ICM’s Kansas lawsuit, ICM filed a motion to enjoin CleanTech and GreenShift from prosecuting the claims against ICM in the New York I Action.

During May 2010, GS CleanTech commenced the following additional actions: GS CleanTech Corporation v. Lincolnland Agri-Energy, LLC, in the United States District Court, Northern District of Illinois; GS CleanTech Corporation v. Al-Corn Clean Fuel, LLC; Chippewa Valley Ethanol Company, LLLP; Heartland Corn Products, LLC and Bushmills Ethanol, Inc., in the United States District Court, District of Minnesota; GS CleanTech Corporation v. United Wisconsin Grain Producers, LLC, in the United States District Court, Western District of Wisconsin; GS CleanTech Corporation v. Iroquois BioEnergy Company, LLC, in the United States District Court, Northern District of Indiana; GS CleanTech Corporation v. Blue Flint Ethanol, LLC, in the United States District Court, District of North Dakota; and, GS CleanTech Corporation v. Amaizing Energy Atlantic, LLC; Amaizing Energy Cooperative; Amaizing Energy Denison, LLC; Amaizing Holding Company, LLC; and Lincolnway Energy, LLC, in the United States District Court, Northern District of Iowa.

As part of the MDL Case, on November 15, 2010, GS CleanTech amended its complaint filed in the New York I Action to include a claim of patent infringement personally against the founder, CEO and President of ICM, and ICM amended its complaint filed in the Kansas action to include a claim seeking a declaratory judgment that the '858 Patent is unenforceable. On November 30, 2010, in the MDL Case, GS CleanTech filed a motion to dismiss ICM's amended complaint (including its claim seeking a declaratory judgment that the '858 Patent is unenforceable) or, in the alternative, to transfer the Kansas case to New York for inclusion in the New York I Action. ICM has opposed the motion to dismiss. On December 10, 2010, in the MDL Case, GS CleanTech filed motions to strike the affirmative defenses that the '858 Patent is unenforceable asserted by Cardinal Ethanol, LLC; Big River Resources Galva, LLC; and Big River Resources West Burlington, LLC; and Lincolnland Agri-Energy, LLC. Each defendant has opposed the respective motion to strike. On February 14, 2011, GS CleanTech notified the court in the MDL Case that it will not be proceeding with a motion for preliminary injunction. On February 24, 2011, in the MDL Case, in connection with its breach of contract counterclaim against GreenShift Corporation, Adkins Ethanol, LLC filed a motion for judgment on the pleadings or in the alternative partial summary judgment on the issue of liability on the issue of breach of contract and partial summary judgment on the issue of damages. On March 24, 2011, GreenShift filed an opposition to Adkins’ motion.

There have been no substantive rulings on the merits on any of the actions included in the MDL Case and Management is unable to characterize or evaluate the probability of any outcome at this time. The Company intends to take all necessary steps to bring infringement of its patents 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 ‘858 Patent.

The Company’s subsidiary, GS COES (Yorkville I), LLC, is party to an action entitled Nosan, et at v. GS COES (Yorkville I), LLC, et. al., pending as Oakland County, Michigan Circuit Court Case No. 10-110329-CK, an action by nineteen plaintiffs to recover on a guarantee by the subsidiary secured by a pledge in support of a bridge loan arrangement under which a variety of lenders claim to be owed the aggregate principal amount of $1,734,579, plus interest for claimed breach of their subordinated loan to GS CleanTech Corporation. GreenShift Corporation and GS CleanTech Corporation are not currently parties to this action. The Court has granted a Motion for Change of Venue to allow transfer to Lenawee County, Michigan where the underlying bridge loan arrangement is currently being litigated. GS COES intends to vigorously defend this action. This case is in the discovery phase. At this stage of the proceedings, we cannot evaluate the likelihood of an unfavorable outcome.

GreenShift, GS CleanTech, GS COES, Kevin Kreisler and Viridis Capital, LLC claiming breach of contract and seeking damages plus attorney fees, interest and cost. In response, the Company and its subsidiaries has asserted additional claims against Biofuels Industries Group and third party complaints against three of the bridge lenders claiming lender liability and various other claims in excess of $25,000. On June 6, 2011 Biofuels filed for Chapter 11 bankruptcy protection in the Southern District of Michigan, Eastern Division, under which protection the collateral upon which the lien was recorded was sold for substantially less than the first mortgage holder’s claimed balance in excess of $9,000,000. Documentation confirming priority claim to the proceeds has been requested, but is not yet received. Recovery by GS CleanTech on the construction lien does not appear at this time. As to the other claims, this case is in the discovery stage, but was stayed secondary to the bankruptcy filing. We are unable to evaluate the likelihood of an unfavorable outcome or the range of possible loss in the event of an adverse verdict at this time.

On October 31, 2006, the Company guaranteed a secured note issued by a wholly owned subsidiary of the Company’s former subsidiary, GS AgriFuels Corporation, in the principal amount of $6,000,000 to Stillwater Asset-Backed Fund, LP. The balance due to Stillwater at December 31, 2010 was $2,071,886. This obligation is guaranteed by the Company, however, Stillwater is party to an intercreditor agreement with the Company’s senior lender which provides that no payments can be made by the Company against the balance due to Stillwater until the senior lender has been fully paid. The operations of GS AgriFuels were discontinued during 2009. Viridis Capital, LLC subsequently acquired the stock of GS AgriFuels during 2010.

Effective December 31, 2010, Viridis Capital, LLC and the Company entered into an agreement pursuant to which Viridis acquired the stock of GS AgriFuels Corporation and GS Design, Inc., from the Company for $5,000. The terms of the agreement provided for the acknowledgment by the parties of the continuing first priority security interest of the Company’s senior lender on the stock and assets of each entity, and the continuing guarantees and obligations of both Viridis and the Company with respect to amounts due from the Company to its senior lender. In addition, Viridis and the Company entered into an addendum to the December 31, 2010 agreement, pursuant to which Viridis agreed to indemnify and hold the Company harmless from and against any and all claims that may be asserted against the Company involving the acquired entities.

Effective December 31, 2009, GS CleanTech Corporation, a wholly-owned subsidiary of the Company, executed an Amended and Restated Technology Acquisition Agreement with Cantrell Winsness Technologies, LLC (“CWT”), David F. Cantrell, David Winsness, Gregory P. Barlage and John W. Davis (the “Sellers”) pursuant to which the parties amended and restated the method of calculating the purchase price for the Company’s corn oil extraction technology (the “Technology”). In June 2010, the Company entered into the Second Amended and Restated Technology Acquisition Agreement (the “TAA”), with an effective date of January 1, 2010, which amended the terms under which the Company pays for the ongoing use of its patent and patent-pending corn oil extraction technologies (the “Technology”). The Company’s obligations under the TAA are guaranteed by Viridis Capital, LLC. The TAA, as amended, provides for the

payment to the Sellers of a royalty fee equal to the lesser of $0.10 per gallon or a percentage of net cash flows. The amended TAA also calls for the issuance to the Sellers of Series F preferred shares, a new class of redeemable Company preferred stock (see Note 11, Shareholders’ Equity, above), and the reduction of the royalty fees payable by the Company to $0.025 per gallon upon redemption of such preferred stock. The reduction of the royalty fees payable is completed ratably upon redemption of the Series F preferred stock. Prior to December 31, 2009, license fees were payable for the use of the Company’s corn oil extraction technologies at a rate of $150,000 per system in addition to an ongoing royalty of $0.10 per gallon of corn oil extracted with the Technology. During 2009, the Company incurred license fees of $750,000, royalty fees of $147,832, and prepaid royalty fees of $300,000. The license fees were capitalized with $107,143 and $160,714 being amortized and included in the Company’s cost of sales for the years ended December 31, 2010 and 2009, respectively. On July 1, 2009, the Company issued unsecured convertible debentures (collectively, the “TAA Debentures”) to each of David Cantrell (in the amount of $787,205), David Winsness (in the amount of $251,103), Greg Barlage (in the amount of $267,445) and John W. Davis (in the amount of $255,964) in consideration for the full payment amounts due and/or accrued pursuant to the TAA (as well as accrued salaries of $85,587 and unreimbursed expenses of $128,298). The TAA Debentures were acquired by MIF in September 2009. The Company prepaid royalty fees of $337,811 for use of the Technology during 2011, and royalty fees of $210,000 were offset against the prepaid royalty fees and included in the Company’s cost of sales for the six months ended June 30, 2011. Prepaid royalties were $66,625 at June 30, 2011.

		6/30/2011		6/30/10

Cash paid for the following:
Interest	$	--	$	3,276
Income taxes		--		--
Total		--		3,276

Performance bonuses applied to convertible debentures	$	4,986,568	$	--
Debentures converted into common stock		634,124		2,913,866
Forgiveness of affiliate payable		180,000		--
Stock issued for compensation		--		7,500
Forgiveness of affiliate receivable charged against paid in capital		--		327,011
Increase in affiliate receivable from transfer of affiliate accounts payable		--		231,715
Transfer of construction in progress into inventory		--		2,248,302
Direct payment of convertible debentures by affiliate, increasing affiliated debenture		--		153,375

On July 22, 2011, the Company announced its intention to complete a 1 for 1,000 reverse stock split. All stock prices, share amounts, per share information, stock options and stock warrants in this report do not reflect the impact of the reverse stock split, as the reverse split is not expected to become effective until the latter half of the third quarter of 2011. Every thousand shares of issued and outstanding Company common stock will be automatically combined into one issued and outstanding share of common stock, without any change in the par value per share. The reverse split will reduce the number of outstanding shares of common stock from about 14 billion to about 14 million.

On July 22, 2011, the U.S. Patent and Trademark Office (“USPTO”) issued a notice of allowance for Company patent application number 11/241,231, titled “Method of Processing Ethanol Byproducts and Related Subsystems” (the “’231 Patent Application”). The USPTO issued the new notice of allowance for the ‘231 Patent Application after reviewing all of the alleged prior art, arguments and other materials of all of the defendants in the Company’s pending litigation for infringement of the Company’s patented corn oil extraction processes. The Company consequently believes that the allowance of the '231 Patent Application by the USPTO significantly increases the strength of the Company’s legal position and provides further substantial confirmation of the validity of the Company’s patents.

The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This report contains “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to our outlook or expectations for earnings, revenues, expenses, asset quality or other future financial or business performance, strategies or expectations, or the impact of legal, regulatory or supervisory matters on our business, results of operations or financial condition. Specifically, forward-looking statements may include statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target,” “may,” “could,” “should,” “will,” or similar expressions. Any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Forward-looking statements contained herein reflect management’s judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Future performance cannot be ensured. Although we believe that our expectations regarding future events are based on reasonable assumptions, any or all forward-looking statements in this report may turn out to be incorrect. They may be based on inaccurate assumptions or may not account for known or unknown risks and uncertainties. Consequently, no forward-looking statement is guaranteed, and actual future results may vary materially from the results expressed or implied in our forward-looking statements. The cautionary statements in this report expressly qualify all of our forward-looking statements. In addition, we are not obligated, and do not intend, to update any of our forward-looking statements at any time unless an update is required by applicable securities laws. Factors that could cause actual results to differ from those expressed or implied in the forward-looking statements include, but are not limited to, those discussed in Part I, Item 1A, Risk Factors of our annual report on Form 10-K for the year ended December 31, 2010. Specifically, we may experience significant fluctuations in future operating results due to a number of economic conditions, including, but not limited to, competition, the actions of third parties infringing our patents, commodity market risks, financial market risks, counter-party risks, risks associated with changes to federal policy or regulation or to the laws upon which our intellectual property rights are based, the timely completion of corn oil extraction projects by our licensees, the amount of corn oil recovered by our licensees, and other risk factors detailed in our reports filed with the SEC. Actual results may differ materially from projected results due, without limitation, to unforeseen developments.

Our corn oil extraction technologies are widely considered to be the quickest and best path for margin improvement for corn ethanol producers today. The current market value of corn oil recovered by our licensees is about $3.60 per gallon – more than six times higher than its value without use of our patented corn oil extraction processes. Our corn oil extraction technologies increase corn-to-biofuel yields while reducing the energy and greenhouse gas intensity of corn ethanol production for dry mill ethanol producers. These benefits correspond to increased ethanol producer income ranging from about $0.08 to more than $0.20 per gallon of ethanol produced, depending on the extent to which the producer uses our patented and patent-pending extraction technologies, and ethanol producer paybacks of less than 1 year at current market prices. No technologies have been developed, commercialized and made available to corn ethanol producers in the history of the ethanol industry that begin to approach these results.

About 15% of the ethanol industry has licensed our patented and patent-pending corn oil extraction technologies. We believe that this amount will grow to at least 20% by the end of 2011. In February 2010, the EPA published its estimate that 70% of the U.S. ethanol industry will use back-end corn oil extraction technology to produce 40% of America’s biodiesel feedstock by 2022. At the end of 2010, industry publications were predicting the adoption of back-end corn oil extraction by the entire industry. If that actually occurs, if our patented technologies actually standardize and shift the majority of the U.S. ethanol industry into increased efficiency and profitability, then we will have fulfilled our founding mission of building value by developing and using technology to catalyze disruptive environmental gain.

We believe that the first, best and most cost-effective way to achieve positive environmental change of any magnitude is to develop technology-driven economic incentives that motivate large groups of people and companies to make incremental environmental contributions that are collectively very significant. At projected levels of adoption, that is precisely what our patented corn oil extraction technologies will have done by sustainably producing globally-meaningful quantities of new carbon-neutral liquid fuels for distribution through existing fossil fuel supply chains; displacing more than 20 million barrels per year of crude oil; 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 more than an estimated $2 billion per year of increased income into the corn ethanol industry – the foundation of North America’s renewable fuel production capability.

Our business continues to improve. We won significant new business during the first half of 2011, increasing licensed penetration to 15% of the industry and nearly doubling the amount of production licensed to use our extraction technologies from 1.0 billion gallons per year (“BGY”) at the end of 2010 to more than about 1.9 BGY of ethanol production today. We produced about $1.3 million in operating income during the first two quarters of 2011 (excluding the impact of one-time performance bonuses), up from about $2.4 million in operating losses incurred during the first two quarters of 2010. We reduced our debt to YA Global and its affiliates by about $7 million to about $26 million, down about 21% from the balance due at the start of 2011.

Our financial performance for the balance of 2011 and beyond can be expected to be most significantly impacted by the rate at which our existing and new licensees commence production, the amount of corn oil that our licensees produce, the market price for that corn oil, and the extent to which we collect reasonable royalties. A number of our licensees were in various stages of deploying or optimizing the performance of the systems needed to use our technologies at the end of the second quarter of 2011. Notwithstanding the impact of new license agreements that we may enter into or fluctuation in the market price for corn oil, we expect that our quarterly results of operations will continue to improve sequentially at least until the second quarter of 2012 as all of our existing licensees commence and achieve full production. In addition, future results may be improved by the impact of event-driven systems integration contracts as we have recently experienced a significant increase in interest for our engineering and other services in connection with the design, construction, integration and modification of corn oil extraction systems for new and prospective new licensees.

This disclosure is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions that we believe are proper and reasonable under the circumstances. We continually evaluate the appropriateness of estimates and assumptions used in the preparation of our consolidated financial statements. Actual results could differ materially from those estimates. Key accounting policies, including but not limited to those relating to revenue recognition, property and equipment, impairment of long-lived assets and goodwill, derivative financial instruments, and accounting for income taxes, are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements. See further discussion of our critical accounting policies and estimates, as well as significant accounting policies, in our Form 10-K, as amended, for the year ended December 31, 2010.

Some ethanol producers have faced financial distress recently, culminating with bankruptcy filings by several companies over the past three years. This, in combination with continued volatility in the capital markets has resulted in reduced availability of capital for the ethanol industry generally. Construction of corn oil extraction systems by our licensees is capital intensive and our licensees may not be able to access the capital they need to pay for the components, equipment and installation services needed to implement our technologies (despite the fact that a new licensee would see a return of capital within less than a year at current corn oil market prices). Our results of operations are dependent on the ability of our licensees to capitalize and profitably operate their businesses. Our financial and operational performance therefore depends to significant extent on numerous factors including prevailing economic conditions, volatile commodity prices, and financial, business and other factors beyond our control.

The domestic market for ethanol is largely dictated by federal mandates for blending ethanol with gasoline. The Renewable Fuel Standard (“RFS”) mandate level for 2011 of 12.6 billion gallons approximates current domestic production levels. Future demand will be largely dependent upon the economic incentives to blend based upon the relative value of gasoline versus ethanol, taking into consideration the blender’s credit and the RFS. Any significant increase in production capacity beyond the RFS level might have an adverse impact on ethanol prices. Additionally, the RFS mandate with respect to ethanol derived from grain could be reduced or waived entirely. A reduction or waiver of the RFS mandate could adversely affect the prices of ethanol and the financial performance of existing and potential licensees, and could thus adversely affect our business. The volumetric ethanol excise tax credit, or VEETC, is currently set to expire on December 31, 2011. Referred to as the blender’s credit, VEETC provides companies with a tax credit to blend ethanol with gasoline. The Food, Conservation and Energy Act of 2008, or the 2008 Farm Bill, amended the amount of tax credit provided under VEETC to 45 cents per gallon of pure ethanol and 38 cents per gallon for E85, a blended motor fuel containing 85% ethanol and 15% gasoline. The elimination or further reduction of VEETC or other federal tax incentives to the ethanol industry may have an adverse impact on our business by reducing the demand and market price for ethanol, which could adversely affect the financial performance of our licensees. To the extent that such laws are modified, the demand for ethanol may be reduced, which could negatively and materially affect the ability of our licensees and, derivatively, our own ability to operate profitably.

Our licensees sell the corn oil they produce with our technologies into several markets, and primarily for refining into biodiesel or renewable diesel. The production of biodiesel is made significantly more competitive by federal and state tax incentives. These incentives are meant to lower the cost of biodiesel in comparison to petroleum diesel. The biodiesel industry has been dependent on the continuation of certain federal subsidies and regulatory support. The biodiesel tax credit expired on December 31, 2009 and was not reinstated until December 2010. While its reinstatement was made retroactive to January 1, 2010, the credit is scheduled to expire on December 31, 2011 and may not be timely renewed, if at all. The revocaion or amendment of any one or more of those laws, regulations or programs could adversely affect the market for corn oil and our financial condition.

Our revenues are derived from our technology licensing activities and the provision of related products and services. We issue royalty-bearing licenses to ethanol producers that use our patented and patent-pending technologies. In return, we receive ongoing royalty fees under our license agreements that are based on the market value of the corn oil produced by our licensees. Our license agreements also call for our provision of technical services to our licensees, which we provide to maximize the benefit of our technologies to our clients and, derivatively, GreenShift by way of increased royalty income. These services include design, procurement, integration and ongoing support services. During 2011 and 2010, some of our license agreements provided for royalties in the form of a discounted corn oil purchase price. In these cases, our royalty payments were equal to the gross profit realized upon sale of corn oil, or the difference between the market price of the corn oil produced and our discounted purchase price in each relevant license.

Selling, general and administrative expenses consist of payroll, office expenses, insurance, and professional fees for accounting, legal, consulting and investor relations activities. Payroll, including employee salaries, incentives and benefits, are the largest single category of expenditures in selling, general and administrative expenses. Other income (expense) includes interest earned, interest expenses, amortization expenses, income or expenses relating to the changing value of the conversion benefit embedded into our convertible debentures and other non-operating items. Notably, our agreements with our lenders provide for the accrual of our interest expenses pending conversion or other payment.

We entered into agreements during 2010 with our senior lender, YA Global Investments, L.P. (“YA Global”), for the sale of several GreenShift-owned corn oil extraction systems to YA Corn Oil Systems, LLC (“YA Corn Oil”) in exchange for the satisfaction of convertible debt due to YA Global and the right to receive certain distributions from YA Corn Oil. We fulfilled the conditions for effectiveness of this transaction as of February 15, 2011. Our results of operations for the six months ended June 30, 2011 include a gain of about $5.9 million due to the sale of extraction systems. In addition, we earned performance bonuses from YA Corn Oil in the amount of about $4.9 million which are included in revenue for the six months ended June 30, 2011.

Total revenues for the six months ended June 30, 2011 were $10.9 million as compared the $3.3 million generated during the six months ended June 30, 2010. The increase in revenue during 2011 was due to the impact of new licenses executed during 2010, increased corn oil production by our licensees, the increased market value of corn oil, and the award of one-time, non-cash performance bonuses of about $5.0 million in connection with the YA Corn Oil Transaction. Revenue in future periods will not include these non-recurring performance bonuses, however, a number of our licensees were in various stages of deploying or optimizing the performance of the systems needed to use our technologies at the end of the second quarter of 2011. Revenue in future periods can be expected to increase sequentially at least until the second quarter of 2012 as all of our existing licensees commence and achieve full production. Revenue growth moving forward will also be affected by the degree to which

we enter into new license agreements and fluctuation in the market price for corn oil. In addition, increased revenue in future periods can be expected from event-driven systems integration contracts providing for our services in connection with the design, construction, integration and modification of corn oil extraction systems for new and prospective new licensees.

Costs of sales for the six months ended June 30, 2011 and June 30, 2010 were $2.4 million and about $2.2 million, respectively. Gross profit for the six months ended June 30, 2011 was about $8.5 million, or about $3.5 million net of the YA Corn Oil performance bonuses described above. This amount compares to about $1.1 million for the same period last year. The net increase in gross profit during the quarter was primarily due to increased sales from our existing license agreements discussed above. We expect to achieve increased economies of scale in future periods with respect to our costs of sales and gross profit as all of our existing licensees commence production and as we execute new licenses for our technologies.

Operating expenses for the six months ended June 30, 2011 and 2010 were about $2.2 million and $3.5 million, respectively. Operating expenses during the first half of 2011 included about $763,000 in professional fees and about $87,000 in depreciation expenses incurred in connection with our previously-owned extraction systems. The decreased operating expenses during the quarter as compared to the same period last year were the result of our cost-cutting activities during 2010. Professional fees can be expected to increase moving forward as we defend against patent infringement. While we have no desire to litigate and hope to eventually eliminate this expense, we must and will take all necessary steps to bring infringement of our patents to an end. We expect to continue to incur increased expenses in this regard for the foreseeable future. These expenses can be expected to delay or otherwise adversely affect our ability to achieve profitability. However, these operating expenses can be expected to decrease overall as a percentage of revenue in future periods, given the leaner cost structure associated with our streamlined licensing model, and as we continue to realize increased economies of scale from our existing and new licensing activities.

Income from operations during the six months ended June 30, 2011 was about $6.3 million, or about $1.3 million net of the $5.0 million in performance bonuses earned from YA Corn Oil during the six month period and depreciation expenses of about $87,000 for extraction systems that we no longer own. We anticipate improving on this result in future quarters in connection with the commencement and realization of full production by existing and new licensees. Our costs of sales and operating expenses moving forward will be primarily comprised of (1) technology royalties; (2) employee costs; (3) travel, materials and other expenses incidental to execution of our license support services; (4) general and administrative costs relating to our offices, utilities and insurance; and (5), professional fees relating to accounting, corporate and litigation activities. As discussed above, we expect that the license agreements we have executed to date will provide sufficient revenue to more than cover all of these costs on an ongoing basis.

Other income (expense) for the six months ended June 30, 2011 included a gain upon extinguishment of debt of about $5.9 million, relating mostly to the completion during the quarter of the YA Corn Oil Transaction. Net of this amount, other expenses for the six months ended June 30, 2011 and 2010 were about $2.4 million and $2.5 million, respectively. Both amounts consisted primarily of non-cash items. The amount for 2011 included about $2.1 million in accrued interest expense; an accrual of $650,000 for liquidated damages that have not yet been assessed but may be in connection with certain third party documentation conditions of the YA Corn Oil Transaction; about $222,000 in non-cash loss realized in connection with the sale of previously-owned extraction systems during the quarter; and a non-cash gain of about $512,000 due to the change in value of the conversion features embedded in the Company’s outstanding convertible debt. The amount for 2010 included about $1.9 million in accrued interest expense and a non-cash loss of about $784,000 due to the change in value of the conversion features embedded in the Company’s outstanding convertible debt. Excluding the change in value of the conversion features, which cannot be predicted, and the impact of additional debt reduction, we expect that other expenses in future quarters will be consistent with the $839,000 in other expense incurred during the second quarter of 2011, which amount corresponds to about $3.4 million on an annualized basis. Thus, to meet the profitability target stated above, we will need to be generating operating income at an annualized rate in excess of this amount by the end of this year.

Net income for the six months ended June 30, 2011 was about $9.8 million as compared to a net loss of about $5.1 million from the same period in 2010. However, the net income realized during 2011 included the non-cash and non-recurring items discussed above. For comparison purposes, we would have realized a net loss of about $642,000 during the six months ended June 30, 2011 without the impact of the non-recurring items discussed above relating to the YA Corn Oil Transaction and the sale of extraction systems (corresponding to an aggregate gain of about $10 million) and the non-cash gain of $512,000 associated with the change in value of the conversion features embedded in the Company’s outstanding convertible debt. The corresponding net loss for the same period in 2010 would have been about $3.8 million without the $784,000 charge in that quarter from the change in value of our convertible debt and depreciation expenses of about $530,000. The reduction of our net loss during 2011, net of the above non-recurring items, as compared to the net loss from the same period in 2010 was due to the combination of factors discussed above, primarily including the impact of our cost-cutting measures during 2010 and new license agreements. We expect net loss to continue to decrease during the second half of 2011 as we realize increased economies of scale in connection with the commencement and realization of full production by our existing licensees. Importantly, we believe that the license agreements we have executed to date will provide us with sufficient recurring revenue to transition to pre-tax profit on an annualized basis by the end of 2011, depending on the amount of corn oil produced by our licensees and the market price for corn oil.

We accounted for our convertible debt in accordance with ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of our common shares. The conversion feature on these debentures is variable and based on trailing market prices. It therefore contains an embedded derivative. The fair value of the conversion features is calculated at the time of issuance and we record a conversion liability for the calculated value. We recognize additional interest expense for the conversion liability which is added to the principal of the debenture for financial reporting purposes (without an actual increase in the amount we owe to the relevant lender). We also recognize interest expense for accretion of the conversion liability to fair value over the term of the note. The conversion liability is valued at the end of each reporting period and results in a gain or loss for the change in fair value. Due to the volatile nature of our stock, the change in the derivative liability and the resulting gain or loss is usually material to our results. The principal amount on our convertible debentures due to various lenders was about $30 million as of June 30, 2011, and included an unamortized note discount of about $18,000 and conversion liabilities of about $3.0 million. For the six months ended June 30, 2011, we recognized additional interest expense of $164,305 for accretion of the debt discount and about $348,000 for the value of the conversion features of our convertible debt (about $5,000 of which was associated with debt due to related parties).

able to satisfy our goals. Our business is highly impacted by commodity price volatility, primarily in the market for corn oil. While demand for extracted corn oil is strong in the biodiesel and multiple other markets, decreases in the price of corn oil will have a negative impact on the amount of cash we are able to produce from our operating activities. Moreover, to the extent that our existing and potential new licensees are all corn ethanol producers, our business is also subject to commodity price risk in the markets for ethanol, distillers grain, corn and natural gas. These risks are partially mitigated for us by the fact that use of our corn oil extraction technologies will enhance the liquidity and financial position of licensed ethanol producers and provide our licensees with vitally important cash flows during periods of reduced ethanol producer margins. Still, our ability to generate cash flow may be adversely affected if, for example, a new licensee were forced by a reduced crush spread and profitability to suspend operations prior to installing a corn oil extraction system.

During the years ended December 31, 2010 and 2009, Viridis Capital, LLC ("Viridis"), Minority Interest Fund (II), LLC ("MIF"), Acutus Capital, LLC (“Acutus”), and management personnel provided us with the cash resources we needed for our overhead needs, including all legal expenses incurred in the prosecution of infringing use of our patented technologies. Viridis is owned by our chairman, MIF is owned by a family member of our chairman, and Acutus is owned by our chairman's attorney. These investors collectively provided us with a total of about $2.1 million and about $4.3 million during the years ended December 31, 2010 and 2009, respectively. In total, Viridis (along with our chairman personally and an entity held in trust for the benefit of our chairman's wife (the "Kreisler Trust")), MIF and current management have provided GreenShift and its affiliated companies and subsidiaries with more than about $14.8 million between January 1, 2005 and December 31, 2010. Viridis, the Kreisler Trust and our chairman collectively loaned about $8.4 million of this amount, about half of which was subsequently canceled, forgiven and contributed to shareholders' equity. While each of these related parties have stated their willingness to provide additional capital if required, we do not anticipate that we will to have rely on proceeds from financing activities completed with these and other investors to subsidize operating expenses moving forward. Our expectation here is based on our belief that we will produce sufficient cash flows from operating activities on an ongoing basis to cover all of our overhead needs moving forward.

Our principal executive officer and principal financial officer participated in and supervised the evaluation of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). The Company’s chief executive officer and chief financial officer determined that, as of the end of the period covered by this report, the Company had a material weakness because it did not have a sufficient number of personnel with an appropriate level of knowledge and experience of generally accepted accounting principles in the United States of America (U.S. GAAP) that are commensurate with the Company’s financial reporting requirements. As a result, Management concluded that the Company’s disclosure controls and procedures were not effective at June 30, 2011.

GreenShift Corporation, GS CleanTech Corporation and GS COES (Yorkville I), LLC, are party to the matter captioned Dynalectric of Michigan II, Inc. v. Biofuels Industries Group, et al, Lenawee County, Michigan Circuit Court Case No. 09-3584-CK. This action was originally filed as a lien foreclosure and unjust enrichment claim by Dynalectric of Michigan II, Inc., which claim was resolved. GreenShift, as assignee of GS CleanTech, filed a counterclaim, cross-claim and third party complaint against various parties asserting a claim for money due in the amount of $1,442,082, plus interest, attorney fees and costs, and for foreclosure of its construction lien. Biofuels Industries Group then asserted counterclaims, cross-claims and third party complaints against GreenShift, GS CleanTech, GS COES, Kevin Kreisler and Viridis Capital, LLC claiming breach of contract and seeking damages plus attorney fees, interest and cost. In response, the Company and its subsidiaries has asserted additional claims against Biofuels Industries Group and third party complaints against three of the bridge lenders claiming lender liability and various other claims in excess of $25,000. On June 6, 2011 Biofuels filed for Chapter 11 bankruptcy protection in the Southern District of Michigan, Eastern Division, under which protection the collateral upon which the lien was recorded was sold for substantially less than the first mortgage holder’s claimed balance in excess of $9,000,000. Documentation confirming priority claim to the proceeds has been requested, but is not yet received. Recovery by GS CleanTech on the construction lien does not appear at this time. As to the other claims, this case is in the discovery stage, but was stayed secondary to the bankruptcy filing. We are unable to evaluate the likelihood of an unfavorable outcome or the range of possible loss in the event of an adverse verdict at this time.

Our investors should consider the risks that could affect us and our business as set forth in Part I, Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2010. Although we have attempted to discuss meaningful factors, our investors need to be aware that other factors and risks may become important in the future. New risks may emerge at any time. We cannot predict such risks or estimate the extent to which they may affect our operations and financial performance. Investors should carefully consider the discussion of risks and the other information included or incorporated by reference in this Quarterly Report on Form 10-Q, including the Cautionary Information Regarding Forward-Looking Information provided above in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Delaware		20-3148296
(State or other jurisdiction		(IRS Employer
of incorporation or organization)		Identification No.)

5950 Shiloh Road East, Suite N, Alpharetta, Georgia		30005
(Address of principal executive offices)		(Zip Code)
	(212) 994-5374
	(Registrant’s telephone number)

Year		Amount
2011	$	2,357,558
2012		30,005,204
2013		--
2014		--
2015		--
Thereafter		--
Total minimum payments due under current and long term obligations	$	32,362,762

		Amount
Principal balance due to YA Global as of July 31, 2010	$	41,476,781
Accrued interest due to YA Global as of July 31, 2010		1,574,482
Legal fees, YA Corn Oil Transaction		256,759
Sale of extraction systems to YA Corn Oil		(10,000,000	)
First performance bonus		(2,486,568	)
Second performance bonus		(2,500,000	)
Cash payments		(2,000,000	)
Stock payments		(168,023	)
Amounts paid by Viridis Capital, LLC		(103,030	)
Principal balance due to YA Global as of March 31, 2011	$	26,050,401

Exhibit Number	Description

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 as incorporated herein by reference

31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 as incorporated herein by reference

32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to the Sarbanes-Oxley Act of 2002 as incorporated herein by reference

By:	/s/	KEVIN KREISLER
		KEVIN KREISLER
		Chief Executive Officer
Date:		August 9, 2011

By:	/s/	EDWARD CARROLL
		EDWARD CARROLL
		Chief Financial Officer &
		Chief Accounting Officer
Date:		August 9, 2011

Embedded conversion liabilities as of June 30, 2011:
Level 1	$	--
Level 2		--
Level 3		3,503,670
Total	$	3,503,670