UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                          _________________________

                                 FORM 10-QSB
                          _________________________


                 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

                 FOR THE FISCAL QUARTER ENDED MARCH 31, 2006

                        COMMISSION FILE NO.: 0-28887


                            GREENSHIFT CORPORATION
            ______________________________________________________
            (Exact name of registrant as specified in its charter)


          Delaware                                        22-3328734
    ____________________________________________________________________
     (State of other jurisdiction of                 (IRS Employer
      incorporation or organization                   Identification No.)

        535 West 34th Street, Suite 203, New York, NY       10001
    ____________________________________________________________________
       (Address of principal executive offices)           (Zip Code)


                                (646) 792-2634
              __________________________________________________
              (Registrant's telephone number including area code)

Check mark whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant as 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 is a shell company (as
defined in Rule 12b-2 of the Exchange Act)  Yes [ ]  No  [X]

The number of outstanding shares of common stock as of May 19, 2006 was:
107,138,707.

Transitional Small Business Disclosure Format:  Yes  [ ]    No  [X].

<PAGE>
                         QUARTERLY REPORT ON FORM 10QSB
                  FOR THE FISCAL QUARTER ENDED MARCH 31, 2006
                              TABLE OF CONTENTS

                                                               Page No
Part I	Financial Information
Item 1. Financial Statements......................................3

	After Filing Election to be Regulated as an Investment
         Company Balance Sheet as of March 31, 2006 (Unaudited)...4

	Statement of Operations (Unaudited):
         Three Months Ended March 31, 2006........................5

	Statement of Changes in Net Assets (Unaudited):
         Three Months Ended March 31, 2006....................... 6

	Statement of Cash Flows (Unaudited):
         Three Months Ended March 31, 2006....................... 7

	Statement of Investments (Unaudited):
         As of Three Months Ended March 31, 2006................. 8

	Prior to Filing Election to be Regulated as an Investment
         Company
         Consolidated Balance Sheet as of March 31, 2005
          (Unaudited) ............................................9

         Consolidated Statement of Operations (Unaudited) -
          Three Months Ended March 31, 2005......................10

         Consolidated Statement of Cash Flows (Unaudited) -
          For the Three Months Ended March 31, 2005..............11

         Notes to Unaudited Consolidated Financial Statements....12

Item 2.	Management's Discussion and Analysis or Plan of
         Operation...............................................29

Item 3. Controls and Procedures .................................43

Part II	Other Information

Item 1. Legal Proceedings........................................44

Item 2.	Changes in Securities and Small Business Issuer
         Purchases of Equity Securities..........................44

Item 3. Defaults Upon Senior Securities .........................44

Item 4. Submission of Matters to a Vote of Security Holders......44

Item 5. Other Information........................................44

Item 6. Exhibits and Reports on Form 8K..........................44

Signatures                                                       45

<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

  GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                                BALANCE SHEET
                            AS OF MARCH 31, 2006
                                (UNAUDITED)
                                                             3/31/06
                                                           -----------
                                                           (unaudited)
ASSETS
 Portfolio at value:
  Companies more than 25% owned (cost: $9,900,428)        $  11,754,632
  Companies 5% to 25% owned (cost: $1,250,430)                1,250,430
  Companies less than 5% owned (cost: $603,000)                 747,250
  Notes Receivable (cost: $4,088,867)                         4,088,867
                                                            -----------
 Total portfolio at value (cost: $15,842,725)                17,841,179

 Accrued interest, dividends and fees receivable                180,302
 Other assets                                                   138,911
 Deferred financing fees                                        353,802
 Cash and cash equivalents                                      322,474
                                                            -----------
 Total assets                                             $  18,836,668
                                                            ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
 Liabilities:
  Notes payable and debentures (maturing within one
   year: $2,266,294)                                      $   7,356,663
  Accounts payable and other liabilities                        425,950
                                                            -----------
 Total liabilities                                            7,782,613

Shareholders' equity:
 Series C preferred stock, $0.001 par value:
  1,000,000 shares authorized and outstanding                     1,000
 Common stock, $0.001 par value, 200,000,000 authorized;
  107,703,395 shares issued and outstanding                     107,703
 Additional paid in capital                                  10,434,876
 Net unrealized appreciation on portfolio                     1,998,454
 Cumulative deficit                                            (887,033)
 Cumulative effect of conversion to BDC                         717,000
 Retained deficit from operations prior to conversion
  to BDC                                                     (1,317,945)
                                                            -----------
 Total shareholders' equity                                  11,054,055
                                                            -----------
 Total liabilities and stockholders' equity                $ 18,836,668
                                                            ===========
 Net asset value per common share                          $        .10
                                                            ===========

The notes to the financial statements are an integral part of these statements.

<PAGE>                                -3-

     GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                             STATEMENT OF OPERATIONS
                   FOR THE THREE MONTHS ENDED MARCH 31, 2006


                                                          For The Three Months
                                                          Ended March 31, 2006
                                                          --------------------
                                                               (unaudited)
Interest and related portfolio income:
 Interest and dividends:
  Companies more than 25% owned                              $    42,024
  Companies 5% to 25% owned                                       20,155
  Companies less than 5% owned                                     3,889
                                                              ----------
 Total interest and dividends                                     66,068

Fees and other income:
 Companies more than 25% owned                                        --
 Companies 5% to 25% owned                                            --
 Companies less than 5% owned                                         --
                                                              ----------
 Total fees and other income                                          --
                                                              ----------
 Total interest and related portfolio income                 $    66,068
                                                              ==========
Operating Expenses:
 Interest                                                        224,682
 Employee                                                        202,742
 Administrative                                                  363,909
 Change in fair market value of derivatives                     (441,414)
                                                              ----------
 Total expenses                                                  349,919
                                                              ----------
Net investment (loss) before income taxes                       (283,851)

Income tax expense (benefit)                                          --
                                                              ----------
Net investment (loss)                                        $  (283,851)
                                                              ==========
Net realized and unrealized gains:
 Net unrealized gains (losses):
  Companies more than 25% owned                              $   165,631
  Companies 5% to 25% owned                                           --
  Companies less than 5% owned                                        --
                                                              ----------
 Total net unrealized gains                                      165,631
Net change in unrealized appreciation                            165,631
                                                              ----------
Total net gains                                              $   165,631
                                                              ==========
Net decrease in net assets resulting from operations         $  (118,220)
                                                              ==========

Basic and diluted earnings per common share                  $      0.00
                                                              ==========

Weighted average common shares outstanding                   108,785,938

The notes to the financial statements are an integral part of these statements.

<PAGE>                                -4-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                       STATEMENT OF CHANGES IN NET ASSETS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2006
                                  (UNAUDITED)


                                                          For The Three Months
                                                          Ended March 31, 2006
                                                          --------------------
                                                               (unaudited)

Operations:
 Net investment income (loss)                                $  (283,851)
 Net realized gains                                                   --
 Net change in unrealized appreciation or depreciation           165,631
 Cumulative effect of conversion to BDC                               --
                                                              ----------
 Net decrease in net assets resulting from operations           (118,220)

Shareholder distributions:
 Common stock dividends                                               --
 Preferred stock dividends                                            --
                                                              ----------
Net decrease in net assets resulting from shareholder
 distributions                                                        --

Capital share transactions:
 Issuance of common stock for portfolio investments              528,000
 Issuance of preferred stock for portfolio investments                --
 Issuance of common stock upon conversion of debt              2,192,016
 Sale of common stock                                            269,069
                                                              ----------
Net increase in net assets resulting from capital share
 transactions                                                  2,989,085

Total increase in net assets                                   2,870,865

Net assets at beginning of period                            $ 8,183,190

Net assets at end of period                                  $11,054,055

Net asset value per common share                             $      0.10

Common shares outstanding at end of period                   107,703,395






The notes to the financial statements are an integral part of these statements.

<PAGE>                                -5-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                              STATEMENT OF CASH FLOWS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2006
                                   (UNAUDITED)

                                                          For The Three Months
                                                          Ended March 31, 2006
                                                          --------------------
                                                               (unaudited)
Cash flows from operating activities:
 Net decrease in net assets resulting from operations:       $  (118,220)
  Adjustments:
   Net unrealized gain on portfolio investments                 (165,631)
   (Gain)/loss on fair market value of derivative
    liabilities                                                 (441,414)
   Accretion of note discount                                     96,740
   Change in accrued interest and fees receivable                (57,346)
   Change in prepaid expenses and other assets                   (55,860)
   Change in accounts payable and accrued liabilities             41,645
   Change in investment payable                                 (260,000)
   Depreciation and amortization                                  91,354
                                                              ----------
 Net cash (used in) operating activities                        (868,732)
                                                              ----------
Cash flows from financing activities:
 Sale of common stock                                            269,090
 Borrowings under notes payable and debentures                 2,280,000
                                                              ----------
 Net cash provided by financing activities                     2,549,090
                                                              ----------
Cash flows from investing activities:
 Purchases of office equipment                                    (4,737)
 Investments funded                                           (1,481,313)
                                                              ----------
 Net cash (used in) investment activities                     (1,486,050)
                                                              ----------

Net increase in cash and cash equivalents                        194,308

Cash and cash equivalents at beginning of period                 128,166
                                                              ----------
Cash and cash equivalents at end of period                   $   322,474
                                                              ==========

Supplemental schedule of non-cash financing and
 investing activities:
 Issuance of common stock upon investment in portfolio
  company                                                    $   411,333
 Issuance of debentures in return for equity in portfolio
  company                                                        520,349
 Assumption of debentures upon investment in portfolio
  company                                                      1,150,369
 Issuance of common stock in satisfaction of investment
  payable                                                        116,667
 Issuance of common stock upon conversion of debentures and
  accrued interest                                             2,191,995


The notes to the financial statements are an integral part of these statements.

<PAGE>                                -6-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                             STATEMENT OF INVESTMENTS
                               AS OF MARCH 31, 2006
                                    (UNAUDITED)
<TABLE>

                                                                                          March 31, 2006 (unaudited)
Portfolio Company                                                                 -------------------------------------------
(Nature of Business)                 Investment                                    Principal        Cost         Value
-----------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                                           <C>           <C>           <C>

Veridium Corporation (1) (2)         Series D Preferred Stock (1,000,000 shares)   $        --   $  4,893,990  $4,503,469
New York, NY                         8% Convertible Debenture                        1,720,219      1,720,219   1,720,219
(Environmental Services)
_____________________________________________________________________________________________________________________________
INSEQ Corporation (1) (3)            Common Stock (3,000,000,000 shares)                    --        595,863     595,863
New York, NY                         Series A Preferred Stock (675,000 shares)              --        993,104   1,003,439
(Manufacturing & Distribution)       Series C Preferred Stock (400,000 shares)                      1,550,369   1,550,369
                                     8% Convertible Debenture                          254,368        254,368     254,368
_____________________________________________________________________________________________________________________________
GreenWorks Corporation (4)           Common Stock (1,500,000 shares)                        --        942,000   3,176,390
Mount Arlington, New Jersey          8% Convertible Debenture                           49,509         49,509      49,509
(Engineering Services)
_____________________________________________________________________________________________________________________________
Ovation Products Corporation (5)     Common Stock (1,500,000 shares)                        --      1,000,000   1,000,000
Nashua, New Hampshire
(Clean Water Technologies)
_____________________________________________________________________________________________________________________________
Mean Green BioFuels Corporation (5)  Common Stock (500,000 shares)                          --        176,435     176,435
New York, New York                   8% Convertible Debenture                           44,496         44,496      44,496
(BioFuels Production and Distribution)
_____________________________________________________________________________________________________________________________
Aerogel Composite, Inc. (6)          Common Stock (365 shares)                              --        436,667     436,667
Hartford, Connecticut
(Clean Energy & Emissions Technologies)
_____________________________________________________________________________________________________________________________
Sterling Planet, Inc. (7)            8% Convertible Debenture                        1,233,333      1,233,333   1,233,333
Norcross, Georgia
(Renewable Energy Sales)
_____________________________________________________________________________________________________________________________
TerraPass, Inc.  (7)                 Common Stock (68,717 membership units)                           250,430     250,430
Menlo Park, California
(Renewable Energy Sales)
_____________________________________________________________________________________________________________________________
General Ultrasonics Corporation (8)  Common Stock (1,000,000 shares)                        --            500         500
New York, New Jersey                 Series A Preferred Stock (1,000,000 shares)                          500         500
(Clean Energy Technologies)          8% Convertible Debenture                          365,691        365,691     365,691
_____________________________________________________________________________________________________________________________
Hugo International Telecom,
 Inc. (1)(9)                         Preferred Stock (300,000 shares)                       --        311,000     311,000
Mount Arlington, New Jersey          8% Convertible Debenture                          215,015        215,015     215,015
(Development Stage)
_____________________________________________________________________________________________________________________________
TDS (Telemedicine), Inc. (1) (10)    Common Stock (3,000,000 shares)                        --        103,000     247,250
Mount Arlington, New Jersey          8% Convertible Debenture                          206,236        206,236     206,236
(Development Stage)
_____________________________________________________________________________________________________________________________
General Hydrogen Corporation (11)    Common Stock (500,000 shares)                          --        500,000     500,000
Richmond, British Columbia, Canada
(Fuel Cell Technologies)
_____________________________________________________________________________________________________________________________

</TABLE>

(1)  Denotes public company.
(2)  The value reported here is based on an independent third party
     assessment of Veridium's current enterprise value. Certain of the
     Company's holdings in Veridium are dilution protected at 25% of the
     fully diluted capital stock of Veridium until December 31, 2006, and
     include holdings that are price-protected in the aggregate amount of
     $2.5 million. After taking account for the application of these
     dilution and price-protections, the Company held about 70% of
     Veridium's fully diluted capital stock as of March 31, 2006.
(3)  The value reported here is based on an independent third party
     assessment of INSEQ's current enterprise value. The Company's common
     stock holdings in INSEQ are dilution protected until December 31,
     2006 at 80% of the fully diluted capital stock of INSEQ.
(4)  The value reported here is based on an independent third party
     assessment of GreenWorks' current enterprise value.
(5)  The Company holds about 12% of Ovation Products Corporation and 50%
     of Mean Green BioFuels Corporation.  The value for each of these
     companies is deemed to be equal to the Company's cost as of March 31, 2006.
(6)  The Company owns 30% of Aerogel.   The Company's investment is shown at
     cost.
(7)  The Company's investments in Sterling Planet, Inc., and TerraPass, Inc.,
     are shown at cost.
(8)  General Ultrasonics Corporation is a pre-revenue subsidiary owned 70%
     by the Company, the value of which is deemed to be equal to the
     Company's cost as of March 31, 2006.
(9)  The Company's holdings in Hugo International Telecom, Inc., are shown
     here at cost. The Company holds 300,000 shares of this portfolio
     company's Series B Preferred Stock, which shares include a coupon of
     8% and voting rights that are fixed at 67% until conversion.
(10) The Company's holdings in TDS are shown here at cost and are price
     protected in this amount.
(11) The company holds about 3% of General Hydrogen Corporation.  The
     Company's investment is shown at cost.


The notes to the financial statements are an integral part of these
statements.

<PAGE>                                -7-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEET
                         AS OF MARCH 31, 2005 (UNAUDITED)
         PRIOR TO FILING ELECTION TO BE REGULATED AS INVESTMENT COMPANY

                                                              3/31/05
                                                            (unaudited)
                                                            ------------
ASSETS:
Current assets:
 Cash                                                       $        --
 Accounts receivable, net                                       434,103
 Unbilled revenues                                              243,501
 Costs and earnings in excess of billings
  on uncompleted projects                                        72,026
 Deferred financing fees                                        108,333
 Prepaid expenses and other current assets                      141,717
 Assets to be disposed of                                       205,289
                                                             ----------
 Total current assets                                         1,204,969

Property and equipment, net                                     133,327

Other Assets:
 Security and other deposits                                     26,911
 Costs and earnings in excess of billings on
  uncompleted projects                                          239,675
 Deferred financing costs, net                                  171,528
 Property held for sale                                          59,298
                                                             ----------
 Total other assets                                             497,412
                                                             ----------
TOTAL ASSETS                                                $ 1,835,708
                                                             ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
 Accounts payable                                           $   841,832
 Accrued salary costs                                            54,743
 Accrued other                                                  774,275
 Payroll taxes payable                                          258,638
 Billings in excess of costs and earnings
  on uncompleted projects                                        26,493
 Line of credit                                               1,196,972
 Notes payable to non-affiliated parties                         57,262
 Installment loans payable                                       63,571
 Capital lease obligations                                       13,038
 Deferred revenues                                              115,525
 Liabilities to be disposed of                                  483,893
                                                             ----------
 Total current liabilities                                    3,886,242

Accrued employee benefits                                        47,838
Accrued other                                                    30,592
Billings in excess of costs and earnings
 on uncompleted projects                                         39,739
Convertible debenture                                           500,000
Notes payable - deferred financing                              250,000
Notes payable to non-affiliated parties                         214,494
Installment loans payable, net of current maturities              2,910
Capital lease obligations, net of current maturities             11,000
Deferred revenues                                               489,788
                                                             ----------
Total liabilities:                                            5,472,603
                                                             ----------
Stockholders' equity:
 Common stock $ 0.001 par value, authorized
  100,000,000 shares; 8,615,275 shares issued and
  outstanding                                                     8,615
 Additional paid-in capital                                   3,256,986
 Accumulated deficit                                         (6,902,496)
                                                             ----------
 Total stockholders' equity (impairment)                     (3,636,895)
                                                             ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $ 1,835,708
                                                             ==========

The notes to the consolidated financial statements are an integral part of
these statements.

<PAGE>                                -8-

  GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
            FOR THE THREE MONTHS ENDED MARCH 31, 2005 (UNAUDITED)
         PRIOR TO FILING ELECTION TO BE REGULATED AS INVESTMENT COMPANY


                                                               3/31/05
                                                            ------------
Revenues                                                    $   920,385
Cost of revenues                                                457,301
                                                             ----------
Gross profit                                                    463,084

Operating expenses:
 Selling, general and administrative expenses                   304,799
 Stock-based compensation                                       925,837
                                                             ----------
Total operating expenses                                      1,230,636
                                                             ----------
Operating loss                                                 (767,552)

Interest expense                                                (53,276)
Gain on sale of fixed assets                                         --
                                                             ----------
Loss from continuing operations                                (820,828)

Loss from discontinued operations                                (8,622)
                                                             ----------
Net loss                                                    $  (829,450)
                                                             ==========

Loss per common share from continuing operations            $     (0.17)
Loss per share form discontinued operations                 $     (0.01)
                                                             ----------
Total loss per common Net loss per common share, basic
 and diluted                                                $     (0.18)
                                                             ==========

Weighted average shares of common stock outstanding           4,778,727
                                                              =========

The notes to the consolidated financial statements are an integral part of
these statements.

<PAGE>                                -9-

     GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                    FOR THE THREE MONTHS ENDED MARCH 31, 2005
         PRIOR TO FILING ELECTION TO BE REGULATED AS INVESTMENT COMPANY


                                                               3/31/05
                                                             -----------
CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss from continuing operations                        $  (820,828)

 Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
  Depreciation and amortization                                  23,074
  Amortization of deferred financing  costs                      22,222
  Gain on sale or disposal of equipment                              --
  Equity issued in exchange for services rendered		918,015
  Change in provision for doubtful accounts                      19,732
 (Increase) Decrease in assets:
  Accounts receivable                                           (74,086)
  Unbilled revenues                                             (72,045)
  Prepaid expenses and other current assets                      43,261
  Cost and estimated earnings in excess of billings on
   uncompleted projects                                          (7,397)
  Security and other deposits                                       (50)
 Increase (decrease) in liabilities:
  Accounts payable, accrued and payroll taxes payable           170,529
  Billings in excess of costs and estimated earnings on
   uncompleted projects                                         (17,074)
  Deferred revenues                                              (9,775)
 Cash provided by (used in) continuing operations               195,578
 Loss from discontinued operations                               (8,622)
 (Increase) decrease in net assets of discontinued operations  (120,523)
 Cash (used in) provided by discontinued operations            (129,145)
                                                             ----------
 Net cash provided by (used in) operating activities             66,433
                                                             ----------
CASH FLOWS FROM INVESTING ACTIVITIES
 Proceeds from sale of property & equipment                          --
                                                             ----------
 Net cash provided by (used in) investing activities                 --
                                                             ----------
CASH FLOWS FROM FINANCING ACTIVITIES
 Loans from stockholders                                             --
 Repayment of stockholder loans                                      --
 Loans from non-affiliated parties                                7,948
 Repayment of loans from non-affiliated parties                  (4,580)
 Repayment of installment loans and capital lease obligations   (69,801)
                                                             ----------
 Net cash (used in) provided by financing activities            (66,433)
                                                             ----------
Increase (decrease) in cash                                          --

Cash at beginning of period                                          --
                                                             ----------
Cash at end of period                                       $        --
                                                             ==========

The notes to the consolidated financial statements are an integral part of
these statements.

<PAGE>                               -10-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                         NOTES TO  FINANCIAL STATEMENTS

1.	ORGANIZATION

GreenShift Corporation (f/k/a GreenWorks Corporation), a Delaware
corporation ("we", "our", "us", "GreenShift" or the "Company"), is a
closed-end management investment company that has elected to be regulated
as a business development company ("BDC") under the Investment Company Act
of 1940 ("1940 Act").

We were formerly known as GreenWorks Corporation and our former operations
were conducted through our wholly owned subsidiary, GreenWorks Engineering
Corporation. On April 1, 2005, we acquired majority equity stakes in
Veridium Corporation ("Veridium") (OTC Bulletin Board: VRDM) and INSEQ
Corporation ("INSEQ") (OTC Bulletin Board: INSQ) from affiliates of Kevin
Kreisler, our chairman and chief executive officer. We subsequently filed
an election on Form N54A pursuant to Section 54 of the 1940 Act to be
regulated as a BDC, and we changed our name from "GreenWorks Corporation"
to "GreenShift Corporation". We also changed the name of our former
operating subsidiary from "GreenWorks Engineering Corporation" to "GreenWorks
Corporation."

GreenShift's business model is to develop and support companies and
technologies that facilitate the efficient use of natural resources and
catalyze transformational environmental gains. GreenShift plans to use
equity and debt capital to support and drive the value of its existing
portfolio of companies and to make investments in a diversified mix of
strategically compatible growth stage public and private businesses and
technologies. GreenShift's portfolio as of December 31, 2005 included
investments in the following proactive companies:

  Portfolio Company                         Type of Business
--------------------------------------------------------------------------------
* Veridium Corporation (OTCBB: VRDM)....... Clean Technology & Environmental
                                            Services
* INSEQ Corporation (OTCBB: INSQ).......... Manufacturing & Commodities
                                            Distribution
* GreenWorks Corporation................... Engineering Services
* Ovation Products Corporation............. Clean Water Technologies
* Mean Green BioFuels Corporation.......... BioFuels Production and Distribution
* Sterling Planet, Inc..................... Renewable Energy Sales
* TerraPass, Inc........................... Renewable Energy Sales
* General Ultrasonics Corporation.......... Clean Energy Technologies
* General Hydrogen Corporation............. Fuel Cell Technologies & Products
* Hugo International Telecom, Inc.
  (Pink Sheets: HGOI)...................... Development Stage
* TDS (Telemedicine), Inc.
  (Pink Sheets: TDST)...................... Development Stage

In accordance with specific rules prescribed for investment companies,
subsidiaries hold investments on behalf of the Company or provide
substantial services to the Company.  Portfolio investments are held for
purposes of deriving investment income and future capital gains. The
financial results of the Company's portfolio investments are not
consolidated in the Company's financial statements.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

Conversion to Investment Company Accounting

The results of operations for 2005 are divided into two periods. The period
from January 1, 2005 through March 31, 2005 reflects the Company's results
prior to commencing operations as a regulated BDC under the 1940 Act. The
period subsequent to March 31, 2005 reflects the Company's results of
operations as a BDC. Accounting principles used in the preparation of the
financial statements beginning April 1, 2005 are different from those used
for prior periods and, therefore, the financial position and results of
operations of these periods are not directly comparable, and are presented
separately herein. The primary differences in accounting principles are due
to the requirements of the 1940 Investment Company Act and Regulation S-X.
The Company filed an election to become regulated as a BDC under the 1940
Act on April 1, 2005. The controlling sections of the 1940 Act and the
relevant accounting sections of Regulation S-X require that (1) a BDC may
not consolidate the operations of its portfolio companies with operations
of the BDC and (2) a BDC must provide to its investors the cost basis, fair
market value, and the net realized gain or loss and or the net unrealized
gain or loss of each of its portfolio investments on a quarterly basis.
Accordingly, to comply with the various BDC requirements, the Company, and
its wholly owned subsidiary, GreenWorks Corporation (f/k/a GreenWorks
Engineering Corporation, and its wholly owned subsidiary, Enviro-Sciences
(of Delaware), Inc., which had previously reported consolidated financial
statements made the appropriate adjustments to deconsolidate assets,
liabilities and operations that had previously been reported on a consolidated
basis.

<PAGE>                               -11-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                        NOTES TO FINANCIAL STATEMENTS

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The condensed interim financial statements included herein, prepared by the
Company for the three months ended March 31, 2005 are unaudited, and have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission with regard to Regulation S-B and Article 10 of
Regulation S-X. In the opinion of management, these financial statements
include all adjustments which, except as described elsewhere herein, are of
a normal recurring nature and are necessary for a fair presentation of the
Company's financial position, results of operations, and cash flows for the
periods presented.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
Company's management to make certain estimates and assumptions.  These
estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of the contingent assets and liabilities at the
date of the financial statements.  These estimates and assumptions will
also affect the reported amounts of certain revenues and expenses during
the reporting period.  Actual results could differ materially based on any
changes in the estimates and assumptions that the Company uses in the
preparation of its financial statements that are reviewed no less than
annually.  Actual results could differ materially from these estimates and
assumptions due to changes in environmental industry-related regulations or
future operational plans, and the inherent imprecision associated with
estimating such future matters. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in this report.

Investments are presented in three categories: companies more than 25%
owned, which represent portfolio companies where the Company directly or
indirectly owns more than 25% of the outstanding voting securities of such
portfolio company and, therefore, are deemed controlled by the Company
under the 1940 Act; companies owned 5% to 25%, which represent portfolio
companies where the Company directly or indirectly owns 5% to 25% of the
outstanding voting securities of such portfolio company or where the
Company holds one or more seats on the portfolio company's board of
directors and, therefore, are deemed to be an affiliated person under the
1940 Act; and companies less than 5% owned which represent portfolio
companies where the Company directly or indirectly owns less than 5% of the
outstanding voting securities of such portfolio company and where the
Company has no other affiliations with such portfolio company. The interest
and related portfolio income and net realized gains (losses) from the
portfolio and other sources are included in the companies less than 5%
owned category on the  statement of operations. In the ordinary course of
business, the Company enters into transactions with portfolio companies in
the more than 25% owned and the 5% to 25% owned categories that may be
considered related party transactions.

VALUATION OF PORTFOLIO INVESTMENTS

The Company has retained the services of an independent third party
valuation company, Business Valuation Center of Reston, Virginia ("BVC"),
to provide an assessment of the fair market value of the Company's
investments. The Company's financial statements for the three months ended
March 31, 2006 have been prepared in connection with BVC's conclusions as
of December 31, 2005, and have been adjusted by the Company for any
significant changes subsequent to December 31, 2005.  BVC's conclusions
were based on a variety of conventionally accepted valuation methods.

The Company, as a BDC, has invested in illiquid securities including debt
and equity securities of companies. The Company's investments are generally
subject to restrictions on resale and generally have a thinly-traded or no
established trading market. The Company values substantially all of its
investments at fair value as determined in good faith by the Board of
Directors in accordance with the Company's valuation policy. The Company
determines fair value to be the amount for which an investment could be
exchanged in an orderly disposition over a reasonable period of time
between willing parties other than in a forced or liquidation sale. The
Company's valuation policy considers the fact that little or no ready
market exists for substantially all of the securities in which it invests.
The Company's valuation policy is intended to provide a consistent basis
for determining the fair value of the portfolio. The Company will record
unrealized depreciation on investments when it believes that an investment
has become impaired, including where collection of a loan or realization of
an equity security is doubtful, or when the enterprise value of the
portfolio company does not currently support the cost of the Company's debt
or equity investments. Enterprise value means the entire value of the
company to a potential buyer, including the sum of the values of debt and
equity securities used to capitalize the enterprise at a point in time. The
Company will record unrealized appreciation if it believes that the
underlying portfolio company has appreciated in value and the Company's
equity security has also appreciated in value. The value of investments in
publicly traded securities is determined using quoted market prices
discounted for restrictions on resale, if any.

<PAGE>                               -12-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

LOANS AND DEBT SECURITIES

For loans and debt securities, fair value generally approximates cost
unless the borrower's enterprise value, overall financial condition or
other factors lead to a determination of fair value at a different amount.

When the Company receives nominal cost warrants or free equity securities
("nominal cost equity"), the Company allocates its cost basis in its
investment between its debt securities and its nominal cost equity at the
time of origination. At that time, the original issue discount basis of the
nominal cost equity is recorded by increasing the cost basis in the equity
and decreasing the cost basis in the related debt securities.

Interest income is recorded on an accrual basis to the extent that such
amounts are expected to be collected. For loans and debt securities with
contractual payment-in-kind interest, which represents contractual interest
accrued and added to the loan balance that generally becomes due at
maturity, the Company will not accrue payment-in-kind interest if the
portfolio company valuation indicates that the payment-in-kind interest is
not collectible. Interest on loans and debt securities is not accrued if
the Company has doubt about interest collection. In addition, interest may
not accrue on loans or debt securities to portfolio companies that are more
than 50% owned by the Company depending on such company's capital
requirements. Loan origination fees, original issue discount, and market
discount are capitalized and then amortized into interest income using the
effective interest method. Upon the prepayment of a loan or debt security,
any unamortized loan origination fees are recorded as interest income and
any unamortized original issue discount or market discount is recorded as a
realized gain. Prepayment premiums are recorded on loans and debt
securities when received.

The weighted average yield on loans and debt securities is computed as the
(a) annual stated interest rate plus the annual amortization of loan
origination fees, original issue discount, and market discount on accruing
loans and debt securities less the annual amortization of loan origination
costs, divided by (b) total loans and debt securities at value. The
weighted average yield is computed as of the balance sheet date.

EQUITY SECURITIES

The Company's equity interests in portfolio companies for which there is no
liquid public market are valued at fair value based on the enterprise value
of the portfolio company, which is determined using various factors,
including cash flow from operations of the portfolio company and other
pertinent factors, such as recent offers to purchase a portfolio company,
recent transactions involving the purchase or sale of the portfolio
company's equity securities, or other liquidation events. The determined
equity values are generally discounted to account for restrictions on
resale or minority ownership positions.

The value of the Company's equity interests in public companies for which
market quotations are readily available is based on the average closing
public market price for the ten days preceding the balance sheet date. The
Company's policy is to value its equity interests in public companies at a
discount of 25% from the public market value of the security, subject to
considerations including certain restrictions on liquidation and the
divergence of such value from the deemed enterprise value of the portfolio
company.

Dividend income is recorded on preferred equity securities on an accrual
basis to the extent that such amounts are expected to be collected, and on
common equity securities on the record date for private companies or on the
ex-dividend date for publicly traded companies.

NET REALIZED GAINS OR LOSSES AND NET CHANGE IN UNREALIZED APPRECIATION OR
DEPRECIATION

Realized gains or losses are measured by the difference between the net
proceeds from the repayment or sale and the cost basis of the investment
without regard to unrealized appreciation or depreciation previously
recognized, and include investments charged off during the year, net of
recoveries. Net change in unrealized appreciation or depreciation reflects
the change in portfolio investment values during the reporting period,
including the reversal of previously recorded unrealized appreciation or
depreciation when gains or losses are realized.

<PAGE>                               -13-

  GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                        NOTES TO  FINANCIAL STATEMENTS

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

FEE INCOME

Fee income includes fees for guarantees and services rendered by the
Company to portfolio companies and other third parties such as diligence,
structuring, transaction services, management services, and other advisory
services. Guaranty fees are recognized as income over the related period of
the guaranty. Diligence, structuring, and transaction services fees are
generally recognized as income when services are rendered or when the
related transactions are completed. Management and other advisory services
fees are generally recognized as income as the services are rendered.

GUARANTEES

The Company accounts for guarantees under FASB Interpretation No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others (the
"Interpretation"). In accordance with the Interpretation, guarantees
meeting the characteristics described in the Interpretation, and issued or
modified after December 31, 2002, are recognized at fair value at
inception. However, certain guarantees are excluded from the initial
recognition provisions of the Interpretation. See Note 5 for disclosures
related to the Company's guarantees.

FINANCING COSTS

Debt financing costs are based on actual costs incurred in obtaining debt
financing and are deferred and amortized as part of interest expense over
the term of the related debt instrument. Costs associated with the issuance
of common stock, such as underwriting, accounting and legal fees, and
printing costs are recorded as a reduction to the proceeds from the sale of
common stock.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in banks and all highly liquid
investments with original maturities of three months or less.

GOING CONCERN

The Company's financial statements for the three months ended March 31,
2006, were prepared assuming that the Company would continue as a going
concern. At March 31, 2006, the Company had $322,474 in cash and total
liabilities of $7,782,613. Due to this financial condition, the Company's
auditors had issued a going concern note as these matters raised
substantial doubt as to the Company's then-current ability to fund
operations.  The Company continues to seek alternative and multiple sources
of financing to address its moving forward cash needs.

STOCK COMPENSATION PLANS

The Company has a stock-based employee compensation plan pursuant to which
no stock or options were issued during the three months ended March 31,
2006. The Company accounts for this plan under the recognition and
measurement principles of FASB Statement No. 123R, Accounting for Share-
Based Payments, and related interpretations. In December 2004, the FASB
issued Statement No. 123 (Revised 2004), Share-Based Payment (the
"Statement"), which requires companies to recognize the grant-date fair
value of stock options and other equity-based compensation issued to
employees in the income statement. The Statement expresses no preference
for a type of valuation model and was originally effective for most public
companies' interim or annual periods beginning after June 15, 2005. In
April 2005, the Securities and Exchange Commission issued a rule deferring
the effective date to January 1, 2006, for most companies. The scope of the
Statement includes a wide range of share-based compensation arrangements
including share options, restricted share plans, performance-based awards,
share appreciation rights, and employee share purchase plans. The Statement
replaces FASB Statement No. 123, Accounting for Stock-Based Compensation,
and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.

FEDERAL AND STATE INCOME TAXES

The Company intends to comply with the requirements of the Internal Revenue
Code ("Code") that are applicable to regulated investment companies
("RIC"). The Company and its subsidiaries that qualify as a RIC intend to
distribute or retain through a deemed distribution all of their annual
taxable income to shareholders; therefore, the Company has made no
provision for income taxes for these entities.

<PAGE>                               -14-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                       NOTES TO FINANCIAL STATEMENTS

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

PER SHARE INFORMATION

Basic earnings per common share is calculated using the weighted average
number of common shares outstanding for the period presented. Diluted
earnings per common share reflects the potential dilution that could occur
if options to issue common stock were exercised into common stock. Earnings
per share is computed after subtracting dividends on preferred shares.

While the Company's various debenture holders are subject to restrictions
on conversion limiting ownership to certain minority percentages of our
common stock, without this restriction our various debentures outstanding
at March 31, 2006, could be converted into 73,027,840 shares at the
respective conversion prices on March 31, 2006, which would dilute the
interest of our current shareholders by over 60%.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from these
estimates. The financial statements include portfolio investments at value
of $17.8 million at March 31, 2006.  At March 31, 2006, 95% of the
Company's total assets represented portfolio investments whose fair values
have been determined by the Board of Directors in good faith in the absence
of readily available market values.  Because of the inherent uncertainty of
valuation, the Board of Directors' determined values may differ
significantly from the values that would have been used had a ready market
existed for the investments, and the differences could be material.

DERIVATIVE FINANCIAL INSTRUMENTS

Certain of the Company's debt and equity instruments include embedded
derivatives that require bifurcation from the host contract under the
provisions of SFAS No. 133. Under the provisions of this statement, the
Company records the related derivative liabilities at fair value and
records the accounting gain or loss resulting from the change in fair
values at the end of each reporting period.

NOTES RELATING TO THE COMPANY'S OPERATIONS PRIOR TO FILING ELECTION TO BE
 REGULATED AS AN INVESTMENT COMPANY

Going Concern

Prior to converting to investment company accounting, the Company's
financial statements for the three months ended March 31, 2005, were
prepared assuming that the Company would continue as a going concern. The
Company incurred a loss of $(829,450) during the three months ended March
31, 2005, at which time the Company had no cash, and current liabilities
from continuing operations exceeded current assets by $2,197,380. Due to
this financial condition, the Company's auditors had issued a going concern
note as these matters raised substantial doubt as to the Company's then-
current ability to fund operations.  The Company continues to seek
alternative and multiple sources of financing to address its moving forward
cash needs.

Net Income or Loss Per common Share

Prior to converting to investment company accounting, for the three months
ended March 31, 2005, the Company computed its net income or loss per
common share under the provisions of SFAS No. 128, "Earnings per Share" and
SAB No. 98. Under the provisions of SFAS 128 and SAB 98, 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. The computation of
diluted earnings (loss) per share does assume exercise of securities that
would have a dilutive effect on earnings (loss) per share.

<PAGE>                               -15-

   GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                        NOTES TO FINANCIAL STATEMENTS

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Supplemental Disclosure for Stock-Based Compensation

The Company applies SFAS Opinion No.123 in accounting for stock-based
compensation.. SFAS No. 123, "Accounting for Stock-Based Compensation",
defined a fair value method accounting for stock options and other equity
instruments. Under the fair value method, compensation cost is measured at
the grant date based on the fair value of the award and is recognized over
the service period, which is usually the vesting period. Pro forma expenses
are based on the underlying value of the options granted by the Company.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model and expensed over the vesting period.
The following weighted average assumptions were used to calculate the fair
value of options granted during the three months ended March 31, 2005:

                                                     3/31/05
                                                    ---------
     Dividend yield                                        0
     Expected volatility                                  69%
     Risk-free interest rate                             4.1%
     Expected life                                        10 years

The following is a summary of the status of the options outstanding as of
March 31, 2005:
                                  Number of       Weighted Average
                                     Shares         Exercise Price
                                 ----------       ----------------
     Outstanding at 1/1/2005             --           $     --
     Granted                     13,250,000               0.08
     Exercised                           --                 --
     Forfeited                           --                 --
                                 ----------            -------
     Outstanding at 3/31/05      13,250,000           $   0.08
                                 ==========            =======

Supplemental Disclosure of Cash Flow Information

The following supplements the Company's statements of cash flows for the
three months ended March 31, 2005, prior to converting to investment
company accounting:

     Cash paid during the period ended March 31, 2005 for:

     Interest        $    27,203
     Income taxes    $        --

<PAGE>                               -16-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS

3.	INVESTMENT COMPANY

INVESTMENT POLICY

The Company uses equity and debt capital to support its existing portfolio
of companies and to make investments in a diversified mix of growth stage
public and private businesses that make positive contributions to the use
of natural resources. The Company's investment objective is to generate
both current income and capital appreciation through debt and equity
investments.

BUSINESS DEVELOPMENT COMPANY

The Company has elected to be treated as a business development company
under the 1940 Act. The 1940 Act contains prohibitions and restrictions
relating to transactions between business development companies and their
affiliates (including any investment advisers or sub-advisers), principal
underwriters and affiliates of those affiliates or underwriters and
requires that a majority of the directors be persons other than "interested
persons," as that term is defined in the 1940 Act. In addition, the 1940
Act provides that we may not change the nature of the Company's business so
as to cease to be, or to withdraw our election as, a business development
company unless approved by a majority of our outstanding voting securities
voting as a class.

The Company may invest up to 100% of its assets in securities acquired
directly from issuers in privately negotiated transactions. With respect to
such securities, the Company may, for the purpose of public resale, be
deemed an "underwriter" as that term is defined in the Securities Act. The
Company's intention is to not write (sell) or buy put or call options to
manage risks associated with the publicly traded securities of the
Company's portfolio companies, except that the Company may enter into
hedging transactions to manage the risks associated with interest rate and
currency rate fluctuations. However, the Company may purchase or otherwise
receive warrants to purchase the common stock of its portfolio companies in
connection with acquisition financing or other investment. Similarly, in
connection with an acquisition, the Company may acquire rights to require
the issuers of acquired securities or their affiliates to repurchase them
under certain circumstances. The Company also does not intend to acquire
securities issued by any investment company that exceed the limits imposed
by the 1940 Act. Under these limits, the Company generally cannot acquire
more than 3% of the voting stock of any registered investment company,
invest more than 5% of the value of the Company's total assets in the
securities of one investment company or invest more than 10% of the value
of the Company's total assets in the securities of more than one investment
company.

With regard to that portion of the Company's portfolio which may be
invested in securities issued by investment companies, it should be noted
that such investments might subject our stockholders to additional
expenses. None of these policies are fundamental and may be changed without
stockholder approval.

QUALIFYING ASSETS

Under the 1940 Act, a business development company may not acquire any
asset other than assets of the type listed in Section 55(a) of the 1940
Act, which are referred to as qualifying assets, unless, at the time the
acquisition is made, qualifying assets represent at least 70% of the
company's total assets. The principal categories of qualifying assets
relevant to the Company's planned business are the following:

     (1)     Securities purchased in transactions not involving any public
offering from the issuer of such securities, which issuer (subject to
certain limited exceptions) is an eligible portfolio company, or from any
person who is, or has been during the preceding 13 months, an affiliated
person of an eligible portfolio company, or from any other person, subject
to such rules as may be prescribed by the SEC. An eligible portfolio
company is defined in the 1940 Act as any issuer which:

     is organized under the laws of, and has its principal place of
     business in, the United States;

     is not an investment company (other than a small business investment
     company wholly owned by the business development company) or a
     company that would be an investment company but for certain exclusions
     under the 1940 Act; and

     satisfies any of the following:

<PAGE>                                -17-

     GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                         NOTES TO  FINANCIAL STATEMENTS

3.	INVESTMENT COMPANY (continued)

QUALIFYING ASSETS (continued)

     does not have any class of securities with respect to which a
     broker or dealer may extend margin credit;

     is controlled by a business development company or a group of
     companies including a business development company and the
     business development company has an affiliated person who is a
     director of the eligible portfolio company; or

     is a small and solvent company having total assets of not more
     than $4 million and capital and surplus of not less than $2
     million.

     (2)     Securities of any eligible portfolio company which the Company
controls.

     (3)     Securities purchased in a private transaction from a U.S.
issuer that is not an investment company or from an affiliated person of
the issuer, or in transactions incident thereto, if the issuer is in
bankruptcy and subject to reorganization or if the issuer, immediately
prior to the purchase of its securities was unable to meet its obligations
as they came due without material assistance other than conventional
lending or financing arrangements.

     (4)     Securities of an eligible portfolio company purchased from any
person in a private transaction if there is no ready market for such
securities and the Company already owns 60% of the outstanding equity of
the eligible portfolio company.

     (5)     Securities received in exchange for or distributed on or with
respect to securities described in (1) through (4) above, or pursuant to
the exercise of warrants or rights relating to such securities.

     (6)     Cash, cash equivalents, U.S. Government securities or high-
quality debt securities maturing in one year or less from the time of
investment.

The SEC has proposed a regulation under the 1940 Act to expand the
definition of eligible portfolio company in a manner that would promote the
flow of capital to small, developing and financially troubled companies.
This regulation would define eligible portfolio company with reference to
whether a company has any class of securities listed on an exchange. The
Company continues to monitor this issue closely and intends to adjust its
investment focus as needed to comply with and/or take advantage of this
rule if it is adopted or of any other future administrative position,
judicial decision or legislative action.

MANAGERIAL ASSISTANCE TO PORTFOLIO COMPANIES

In addition, a business development company must have been organized and
have its principal place of business in the United States and must be
operated for the purpose of making investments in the types of securities
described in (1), (2) or (3) above. However, in order to count portfolio
securities as qualifying assets for the purpose of the 70% test, the
business development company must either control the issuer of the
securities or must offer to make available to the issuer of the securities
(other than small and solvent companies described above) significant
managerial assistance; except that, where the business development company
purchases such securities in conjunction with one or more other persons
acting together, one of the other persons in the group may make available
such managerial assistance. Making available managerial assistance means,
among other things, any arrangement whereby the business development
company, through its directors, officers or employees, offers to provide,
and, if accepted, does so provide, significant guidance and counsel
concerning the management, operations or business objectives and policies
of a portfolio company.

INVESTMENT CONCENTRATION

The Company intends to concentrate on environmentally proactive investments
and to invest, under normal circumstances, at least 80% of the value of the
Company's net assets (including the amount of any borrowings for investment
purposes) in qualified companies. This 80% policy is not a fundamental
policy and therefore may be changed without the approval of the Company's
stockholders. However, the Company may not change or modify this policy
unless we provide our stockholders with at least 60 days' prior notice.

<PAGE>                               -18-

  GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                        NOTES TO FINANCIAL STATEMENTS

4.	PORTFOLIO

The Company's investment activity principally involves providing financing
through privately negotiated long-term debt and equity investments.

The Company's investments in private companies are generally illiquid and
subject to restrictions on resale. Private finance investments are
generally structured as loans and debt securities that carry a relatively
high fixed rate of interest, which may be combined with equity features,
such as conversion privileges, or warrants or options to purchase a portion
of the portfolio company's equity at a pre-determined strike price, which
is generally a nominal price for warrants or options in a private company.
The annual stated interest rate is only one factor in pricing the
investment relative to the Company's rights and priority in the portfolio
company's capital structure, and will vary depending on many factors,
including if the Company has received nominal cost equity or other
components of investment return, such as loan origination fees or market
discount. The stated interest rate may include some component of
contractual payment-in-kind interest, which represents contractual interest
accrued and added to the loan balance that generally becomes due at
maturity. At March 31, 2006, 100% of the Company's loans and debt
securities had fixed interest rates.

Loans and debt securities generally have a maturity of one to ten years,
with interest-only payments in the early years and payments of both
principal and interest in the later years, although debt maturities and
principal amortization schedules vary.

Equity interests issued by private companies may be subject to restrictions
on their resale and are generally illiquid. The Company may incur closing
costs associated with making control investments, which will be added to
the cost basis of the Company's equity investment. Equity securities
generally do not produce a current return, but are held with the potential
for investment appreciation and ultimate gain on sale.

The Company's largest investments at March 31, 2006, were in Veridium
Corporation ("Veridium") (OTC Bulletin Board: VRDM), INSEQ Corporation
("INSEQ") (OTC Bulletin Board: INSQ), GreenWorks Corporation
("GreenWorks"), Sterling Planet, Inc. ("Sterling Planet"), and Ovation
Products Corporation ("Ovation"), accounting for 33.0%, 18.1%, 17.1%, 6.5%
and 5.0% respectively, of our total assets.

VERIDIUM CORPORATION

Veridium (OTC Bulletin Board: VRDM) is a publicly traded environmental
management company. Veridium is currently implementing a restructuring plan
which includes the cessation of operations of Veridium's industrial waste
recycling facility and is planned to include the reorganization of its
services business. Veridium expects that these initiatives will enhance
operating results in the immediate term and enable Veridium to grow its
business more effectively.

During the three months ended March 31, 2006, the Company purchased
convertible debentures in Veridium totaling $623,107, earned $29,743 in
interest income, and received no other related portfolio income from
Veridium.

Our chairman and chief executive officer, Kevin Kreisler, is also the
chairman, chief executive officer and president of Veridium Corporation. As
the controlling shareholder of the Company, who is in turn the controlling
shareholder of Veridium, Mr. Kreisler has unconditionally guaranteed
certain of Veridium's debts with its creditors.

INSEQ CORPORATION

INSEQ (OTC Bulletin Board: INSQ) is a publicly traded corporation whose
mission is to directly facilitate the efficient utilization of natural
resources including metals, chemicals, fuels and plastics. INSEQ recently
acquired Warnecke Design Services, Inc., a specialty metal manufacturer
that comprised the majority of INSEQ's operations as of March 31, 2006.
INSEQ is also subject to an agreement to acquire Independent Metal Sales,
Inc.

During the three months ended March 31, 2006, the Company earned $2,444 in
interest income from INSEQ.

Our chairman and chief executive officer, Kevin Kreisler, is also the
chairman of INSEQ, and our president and chief financial officer, James
Grainer, is also the president and chief financial officer of INSEQ. As the
controlling shareholder of the Company, who is in turn the controlling
shareholder of INSEQ, Mr. Kreisler and the Company have unconditionally
guaranteed certain of INSEQ's debts with its creditors.

<PAGE>                               -19-

   GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS

4.	PORTFOLIO  (CONTINUED)

GREENWORKS CORPORATION

GreenWorks is an environmental engineering services company that intends to
acquire and consolidate a series of qualified engineering services
companies during 2006. GreenWorks provides consulting, technical and
engineering services to alleviate the environmental problems of its
clients. GreenWorks' clients include Fortune 100 and other industrial
companies, commercial firms, engineering and construction contractors, law
firms, utilities, real estate developers and government entities.
GreenWorks is currently producing about $4.3 million in revenue per year
and has a backlog of another $2 million in sales. GreenWorks intends to go
public during 2006 in line with its completion of qualified acquisitions.

During the three months ended March 31, 2006, the Company earned $990 in
interest income from GreenWorks.

Our chairman and chief executive officer, Kevin Kreisler, is also the
chairman of GreenWorks, and our president and chief financial officer,
James Grainer, is also the chief financial officer of GreenWorks.

OVATION PRODUCTS CORPORATION

Ovation is a development stage company with patented and proprietary
technologies involving new implementations of vapor compression
distillation.  Ovation has invested over $9 million developing technology
that offers dramatic price and performance advantages over competing clean
water technologies. Ovation is finalizing the development of its initial
product, the Clean Water Appliance - a fire-hydrant sized appliance that
can generate 25 gallons of pure water per hour from a variety of dirty
water input sources at a cost of approximately $0.004 per gallon, or about
1.2% of the cost of traditional home distillation methods. Ovation expects
that its Clean Water Appliance will be available in 2006 and will sell for
a fraction of the price of commercial distillation systems.

To achieve this small size, low cost and high efficiency, Ovation's
products incorporate patented new implementations of a proven distillation
process called vapor compression. Ovation has been granted 11 patents for
its technology and system, and has filed for an additional 5 patents to
date. Ovation's technology has been refined to the point where Ovation has
been able to reduce energy loss by over 98% and distill water for about
1.2% of the cost of traditional home methods. Ovation believes that its
Clean Water Appliance is the most efficient commercial distiller in the
world, of any size.

GreenShift acquired 1,500,000 shares, or about 12%, of Ovation's
outstanding stock for $1 million at an effective rate of $0.67 per share.
Ovation recently filed to become publicly traded and expects to commence
trading in the first quarter 2006.

MEAN GREEN BIOFUELS CORPORATION

Mean Green is a development-stage company that the Company formed to
finance, build and operate biofuels production and distribution
infrastructure in the United States.

During three months ended March 31, 2006, the Company earned $597 in
interest income from Mean Green. Our chairman and chief executive officer,
Kevin Kreisler, is the chairman of Mean Green.

STERLING PLANET, INC.

Sterling Planet is the nation's leading retail renewable energy provider
through the sourcing and sale of renewable energy certificates ("RECs").
RECs, or green tags, enable retail residential and non-residential
consumers to purchase green, or environmentally friendly, energy through
their existing utility and offset reliance on power generated from fossil
fuel sources. RECs represent all of the positive environmental attributes
of renewable power generation from sources such as solar, wind and organic
bioenergy power and can be purchased and used by consumers regardless of
whether or not their local utility has access to green power generation.

Under the terms of its agreement with Sterling, GreenShift purchased
$1,233,333 in 8% convertible notes in Sterling, and warrants to purchase up
to an additional $500,000 of Sterling common stock upon Sterling's
completion of a larger venture capital raise. During the three months ended
March 31, 2006, the Company earned $20,155 in interest income and received
no other related portfolio income from Sterling.

<PAGE>                               -20-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

4.	PORTFOLIO (CONTINUED)

TERRAPASS, INC.

TerraPass is a development stage company founded by professor Karl Ulrich
and a group of his students at the Wharton School at the University of
Pennsylvania. TerraPass allows consumers to pay to offset their car's
emissions through investment in clean-energy alternatives such as wind and
bioenergy power by purchasing a "TerraPass" - a decal sold through the
TerraPass website that is certified to eliminate the equivalent of a single
car's carbon dioxide emissions. TerraPass allows a broad audience of
consumers to participate in this emerging trend, by purchasing carbon
dioxide credits and renewable energy certificates ("RECs") on behalf of its
customers that subsidize and increase the production of green, or
environmentally friendly energy, and offset consumption of fossil fuel
sources.

Under the terms of its agreement with TerraPass, GreenShift purchased a 10%
stake in TerraPass for $250,000 and warrants to acquire an additional 15%
of TerraPass for another $250,000.

AEROGEL COMPOSITE, INC.

ACI has patented nanotechnology for the preparation of aerogel composites
for a wide variety of applications. Applications of ACI's Hyrogel(tm) carbon
aerogel supported catalysts are planned to include hydrogen powered
stationary and mobile PEM fuel cells, direct methanol fuel cells (DMFC) for
portable electronic devices such as laptop computers and cell phones, and
other metal oxide aerogel supported catalyst for catalytic converters for
gasoline and diesel powered vehicles and other internal combustion engines.

Aerogels are solid-state substances similar to gels but where the liquid
phase is replaced with gas. Aerogels have a highly dendritic tree-like
structure and rank among the world's lowest density solids. They have a
remarkably high surface area and are very porous and light. Their
microstructure and physical properties can be manipulated at the nanometer
scale by selection of raw material and modification of manufacturing
conditions. Aerogel products can be engineered to exhibit desired thermal,
acoustic, mechanical and/or chemical properties. Aerogel materials can be
produced as monoliths, thin-films, powders, or micro-spheres to respond to
given application requirements.

Under the terms of its agreement with ACI, GreenShift purchased 25% of
ACI's outstanding stock and received certain commercial rights in return
for GreenShift's investment and its provision of strategic business
development and other services.  Under its agreement, GreenShift has the
option to acquire an additional 5% of ACI.

Our chairman and chief executive officer, Kevin Kreisler, is a board member
of ACI.

HUGO INTERNATIONAL TELECOM, INC. ("HUGO")

Hugo is a shell company whose plan for 2006 is to complete one or more
suitable acquisitions. On August 20, 2005, the Company acquired 300,000
shares of Hugo's Series B Preferred Stock for $300,000. These shares are
convertible into Hugo common stock at the rate of $1.15 per share and have
voting rights equal to 67% of the fully diluted capital stock of Hugo. Our
chairman and chief executive officer, Kevin Kreisler, is also the chairman
of Hugo.  As of March 31, 2006, the Company purchased 8% convertible
debentures in Hugo totaling $215,015. During the three months ended March
31, 2006, the Company earned $4,160 in interest income from Hugo.

TDS TELEMEDICINE, INC. ("TDS")

TDS (Pink Sheets: TDST) is a development stage public company whose plan is
to complete one or more acquisitions of strategically compatible companies.
Our chairman and chief executive officer, Kevin Kreisler, is also the
chairman of TDS. As of March 31, 2006, the Company purchased 8% convertible
debentures in TDS totaling $206,236 and beneficially owns about 5% of TDS.
During the three months ended March 31, 2006, the Company earned $3,887 in
interest income from TDS.

<PAGE>                               -21-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

4.	PORTFOLIO (CONTINUED)

GENERAL ULTRASONICS CORPORATION

General Ultrasonics Corporation ("GEC") is a development stage company that
owns the exclusive rights to a proprietary new ultrasonic reformation
process uses water, hydrocarbons and high intensity ultrasonic energies to
synthesize clean burning fuels including hydrogen. The process was designed
for low cost reformation of standard petroleum hydrocarbon products, but
has the capability to produce hydrogen-rich gases, other synthetic gases
and fuels, and other products from qualified carbon-based, hydrocarbon-
based, and other liquids, solids and gases.

General Ultrasonics' business model is to leverage its technological
capabilities to develop and commercialize innovative technologies,
processes and products.

During three months ended  March 31, 2006, the Company purchased
convertible debentures in General Ultrasonics totaling $365,691 and earned
$3,827 in related interest income.

Our chairman and chief executive officer, Kevin Kreisler, is also the
chairman, chief  executive officer and president of General Ultrasonics
Corporation.

GENERAL HYDROGEN CORPORATION

General Hydrogen Corporation is a leading developer of hydrogen fuel cell-
based power systems for electric forklifts, industrial vehicles and other
off-road equipment. General Hydrogen has right-sized fuel cell technology
to a scale that enables their commercially viable today. Their business
model is based on replacing lead-acid batteries in centralized industrial
applications with high-performance power packs that contain a Ballard fuel
cell. They capitalize effectively on existing plant infrastructure while
creating a realizable economic return on an impressively short payback
period for their clients.

During three months ended March 31, 2006, the Company purchased 500,000
shares of common stock (approximately 3% of the outstanding common stock)
of General Hydrogen for $500,000.

<PAGE>                               -22-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                        NOTES TO FINANCIAL STATEMENTS

5.	FINANCING ARRANGEMENTS

At March 31, 2006, the Company was subject to the following financing
arrangements
                                                    3/31/06
                                                   ---------
     Short-term borrowings                        $   53,879
     Current portion of convertible debentures:
      Candent Debenture, 5% convertible
       debentures, due December 2006               2,212,415
                                                   ---------
     Total current portion of convertible
      debentures                                  $2,212,415
     Convertible debt, net of current portion:
      Cornell Capital Partners, 5% convertible
       debenture                                   5,090,369
                                                   ---------
     Total convertible debentures, net of
      current maturities                          $5,090,369
                                                   =========

On April 1, 2005, Kevin Kreisler, the Company's chairman and chief
executive officer, transferred majority ownership in Veridium and INSEQ to
the Company in return for 46.3 million shares of the Company's common
stock, 1.0 million shares of the Company's Series B Preferred Stock, and
the assumption by the Company of certain liabilities due to Cornell Capital
Partners, LP, ("Cornell"), Cedar Crescent Holdings, Ltd., Castlerigg Master
Investments, Ltd., and Stranco Investments, Ltd. (Cedar Crescent,
Castlerigg and Stranco are collectively referred to herein as "CCS"),
Lakeland Bank ("Lakeland"), Candent Corporation ("Candent"), Serenity
Capital, L.L.C. ("Serenity"), and Mr. Kreisler.

SHORT TERM BORROWINGS:

The Company has a variable interest rate line of credit with Lakeland Bank
(7.5% at March 31, 2006), which had an outstanding balance of $53,879 as of
March 31, 2006, representing the entire line.

CANDENT DEBENTURE

During the quarter ended March 31, 2006, Candent purchased an additional
$1,110,349 in 5% debentures.  As of March 31, 2006 the total amount due to
Candent was $2,214,415, which amount is convertible into Company common
stock at the lesser of $0.10 per share or the average of the three lowest
closing market prices of the Company's common stock for the thirty days
preceding conversion provided that the Company is not registered as a
business development company under Section 54 of the Investment Company Act
of 1940, as amended; and, provided further that in the event conversions
are subsequently permissible the shareholder may not receive shares
issuable upon any permissible conversion of any portion of its debentures
where such conversion would bring the shareholder to greater than 4.95% of
the Company's outstanding common stock, in which case the relevant number
of conversion shares are held in escrow by the Company pending compliance
with this limitation. The president of Candent is the wife of the Company's
chairman. All of the issued and outstanding capital stock of Candent is
held in trust for the benefit of its president.

During the quarter ended March 31, 2006, Candent effected conversions
totaling $289,847 for which Candent received 3,450,556 shares of GreenShift's
common stock.

CORNELL DEBENTURE

On April 1, 2005, the Company issued Cornell Capital Partners, LP
("Cornell") an amended and restated convertible debenture in the amount of
$2,535,611. This debenture bears interest at 5%, matures on April 1, 2008,
and was convertible into Company common stock, at Cornell's option at the
lower of the Company's net asset value or the average of the three lowest
closing market prices for GreenShift's common stock for the month preceding
any such conversion.  Based on the terms of the conversion option of the
debentures, the Company determined that this conversion option required
bifurcation and classification as a derivative liability under the
provisions of SFAS 133.

The conversion feature was measured at fair value based on the issuance
date, with the corresponding discount on the debt amortized over the term
of the debt instrument.  The total discount and derivative liability
recorded was $175,135 and the derivative liability was marked to fair value
for subsequent periods, reslting in a derivative liability of $441,414 as
of December 31, 2005.  Due to the full conversion of the $2,535,611
debenture into common stock ($735,611 was converted during the year ended
December 31, 2005 and $1,800,000 was converted during the quarter ended
March 31, 2006), the derivative liability was $0 at March 31, 2006,
resulting in income for the change in fair value of the derivative
liability of $441,414 for the quarter ended March 31, 2006.

<PAGE>                               -23-

   GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS

5.	FINANCING ARRANGEMENTS (CONTINUED)

CORNELL DEBENTURE (continued)

During the year ended December 31, 2005, Cornell purchased an additional
$2,040,000 in 5% convertible debentures.  These debentures are convertible
into GreenShift's common stock at the lesser of $0.10 per share or the
average of the three lowest closing market prices of GreenShift's common
stock for the thirty days preceding conversion provided that GreenShift is
not registered as a business development company under Section 54 of the
Investment Company Act of 1940, as amended; and, provided further that the
shareholder may not convert any portion of its debentures where such
conversion would bring the shareholder to greater than 4.95% of
GreenShift's outstanding common stock, in which case the relevant number of
conversion shares are held in escrow by the Company pending compliance with
this limitation.

On February 7, 2006, Cornell purchased an additional $3,050,369 in 5%
debentures due on February 7, 2008 and committed to purchase an additional
$1,900,000 in debentures on or before April 15, 2006. This debenture is
convertible into GreenShift's common stock at the lesser of $0.10 per share
or the average of the three lowest closing market prices of GreenShift's
common stock for the thirty days preceding conversion provided that
GreenShift is not registered as a business development company under
Section 54 of the Investment Company Act of 1940, as amended; and, provided
further that the shareholder may not convert any portion of its debentures
where such conversion would bring the shareholder to greater than 4.95% of
GreenShift's outstanding common stock, in which case the relevant number of
conversion shares are held in escrow by the Company pending compliance with
this limitation.

Cornell effected conversions on the April 1, 2005 debenture totaling
$1,902,148 during the quarter ended March 31, 2006, of which $1,800,000
related to principal and $102,148 related to interest, for which Cornell
received a total of 21,468,503 shares of GreenShift's common stock.
As of March 31, 2006, the total principal amount due to Cornell for the
above noted debentures was $5,090,369.

THE CORNELL DEBENTURE COULD INCREASE OUR OUTSTANDING SHARES BY OVER 60%

While Cornell is subject to restrictions on conversion of the Cornell
Debenture limiting Cornell's ownership to 9.9% of our common stock, without
this restriction the debenture could be converted into 50,903,690 shares at
the market price on December 31, 2005. The issuance of these shares would
dilute the interest of our current shareholders by over 60%.

The conversion features of the debentures issued by the Company prior to
its election to be treated as a business development company were approved
on April 11, 2005 by a vote of a Company shareholder holding the majority
of the Company's voting power, Viridis Capital, a wholly owned affiliate of
Kevin Kreisler, the Company's chairman and chief executive officer.

6.	SHAREHOLDERS' EQUITY

FORM 1-E AND OFFERING CIRCULAR UNDER REGULATION E

The Company filed a Form 1-E and Offering Circular with the U.S. Securities
and Exchange Commission on April 22, 2005, pursuant to which the Company
plans to offer for sale up to $5 million of its common stock.  This
offering commenced on May 6, 2005, pursuant to an exemption from
registration in Regulation E of the 1940 Act as set forth in Rule 604(a)
thereunder. Copies of this offering circular are available upon request.

On July 22, 2005, the Company received a letter from the Staff of
Securities and Exchange Commission (the "Letter"), which raised various
issues including among other things issues as to whether all material
information about the Company was included in the Offering Circular. The
Company responded to the Staff's comments on August 12, 2005, addressing
the Staff's concerns. It is the Company's position that all material
information about the Company, both prior to and after the Company filed
its election to be regulated as an investment company under the 1940 Act,
had been included in the Offering Circular.

<PAGE>                               -24-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS

6.	SHAREHOLDERS' EQUITY (CONTINUED)

DEBENTURE CONVERSIONS

During the quarter ended March 31, 2006, Cornell converted a total of
$1,902,148 in debentures and accrued interest into 21,468,503 shares of the
Company's common stock and Candent effected conversions totaling $289,847
for which Candent received 3,450,556 shares of the Company's common stock.

SALE OF COMMON STOCK

On February 2, 2006 Highgate House Funds, Ltd. purchased 3,203,447 shares
of the Company's common stock for $269,090.

ISSSUANCE OF COMMON STOCK FOR PORTFOLIO INVESTMENTS

During the quarter ended March 31, 2006, GreenShift issued 1,388,889 shares
of common stock to Aerogel Composites for a $116,667 payment of
GreenShift's investment payable.

During the quarter ended March 31, 2006, GreenShift issued 588,235 shares
of common stock to GreenWorks Corporation in exchange for a $30,000
promissory note from GreenWorks.

During the quarter ended March 31, 2006, GreenShift issued 5,555,556 shares
of common stock to Sterling Planet, and in exchange Sterling Planet issued
an additional $283,333 of debentures to GreenShift.

During the quarter ended March 31, 2006, GreenShift issued 1,166,668 shares
of common stock to TDS (Telemedecine), Inc. as an additional $98,000 equity
investment in TDS.

SERIES B PREFERRED STOCK CONVERTED TO SERIES C PREFERRED STOCK

On February 15, 2006 GreenShift filed a Certificate of Designation creating
a class of 1,000,000 shares of Series C Preferred Stock.  The holder of
each share of Series C Preferred Stock is entitled to cast 257 votes at any
shareholders meeting.  In the event that the Board of Directors declares a
dividend, the holder of each share of Series C Preferred Stock will receive
a dividend equal to that paid to the holder of 257 shares of common stock.
In the event of a liquidation of GreenShift, the holder of a share of
Series C Preferred Stock will receive $.001 and have no further
participation in the liquidation.  The holder of a share of Series C
Preferred Stock may convert it into 257 shares of common stock, but only
if, at the time of the conversion, GreenShift is not registered with the
SEC as a Business Development Company.

On February 15, 2006 GreenShift Interim Corp. surrendered all of its
1,000,000 shares of Series B Preferred Stock. In exchange, GreenShift
issued to GreenShift Interim Corp all 1,000,000 authorized shares of Series
C Preferred Stock. Kevin Kreisler, GreenShift's Chief Executive Officer, is
the sole owner of Viridis Capital, LLC, which owns all the equity in
GreenShift Interim Corp.

SURRENDER OF SHARES BY GREENSHIFT INTERIM CORP.

On February 17, 2006 GreenShift Interim Corp. surrendered to GreenShift all
of the 47,440,678 shares of GreenShift common stock in its name.  GreenShift
subsequently cancelled 46,300,000 of the shares surrendered, and the balance
of 1,140,678 shares will be cancelled in the second quarter of 2006.

<PAGE>                               -25-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                        NOTES TO FINANCIAL STATEMENTS

7.	RELATED PARTY TRANSACTIONS

TRANSACTIONS WITH OUR PRESIDENT AND CHIEF FINANCIAL OFFICER

The Company is party to a consulting agreement in the original amount of
$150,000 with its president and chief financial officer, James Grainer, for
Mr. Grainer's services from prior to April 1, 2005 relative to the
Company's formation.  As of March 31, 2006, the amount due to Mr. Grainer
was paid in full.

MANAGEMENT SERVICE AGREEMENTS

GreenShift has entered into various management service agreements with
related entities in which it may have a controlling ownership interest. The
management of GreenShift also holds senior management positions at these
various controlled entities. Accordingly, GreenShift management is directly
involved in the negotiations of such management agreements on the part of
the related entities. Pursuant to the agreements GreenShift will provide or
oversee a variety of management services, including but not limited to
financial, strategic development, operational, regulatory, administrative,
risk management, insurance, and other services.

In general, GreenShift's management services agreements provide that
GreenShift will be paid a quarterly management fee for services provided
and earned throughout the quarter. Consistent with these agreements,
GreenShift recognizes management fee income on a quarterly basis. A limited
number of agreements provide that GreenShift will have earned its fee at
the time it has entered into an agreement to provide certain designated
management services. The related entities that are a party to these
agreements may be very early stage companies or companies that are going
through various stages of financial restructuring.  Accordingly some of
these entities may not have adequate financial resources to fulfill their
payment obligations under the agreement. If any of these related entities
cannot fulfill their payment obligations this would result in the reduction
of management fee income previously recognized by GreenShift.

The entities that are currently a party to a management services agreement
are the following: Veridium Corporation, INSEQ Corporation, GreenWorks
Corporation, Mean Green BioFuels Corporation, Hugo International Telecom,
Inc., and TDS (Telemedicine), Inc.

For the quarter ended March 31, 2006, the Company did not accrue any
management fees relating to the  management services agreements with
portfolio companies due to the fact that such fees may not be realizable in
the near term.  GreenShift will recognize income for the management fees
due from portfolio companies at such time that it determines that the fees
are likely to be realizable.

8.	SUBSEQUENT EVENTS

TRANSACTIONS WITH CORNELL CAPITAL PARTNERS

On April 17, 2006, Cornell Capital Partners completed its previously
committed purchase of $1,900,000 in convertible debentures. These
debentures are convertible into GreenShift's common stock at the lesser of
$0.10 per share or the average of the three lowest closing market prices of
GreenShift's common stock for the thirty days preceding conversion provided
that GreenShift is not registered as a business development company under
Section 54 of the Investment Company Act of 1940, as amended; and, provided
further that the shareholder may not convert any portion of its debentures
where such conversion would bring the shareholder to greater than 4.95% of
GreenShift's outstanding common stock, in which case the relevant number of
conversion shares are held in escrow by the Company pending compliance with
this limitation.  As of May 15, 2006, the total principal amount due to
Cornell was $6,990,369.

TRANSACTIONS WITH CANDENT CORPORATION

On May 5, 2006, Candent Corporation completed its previously committed
purchase of $275,000 in convertible debentures.  These debentures are
convertible into GreenShift's common stock at the lesser of $0.10 per share
or the average of the three lowest closing market prices of GreenShift's
common stock for the thirty days preceding conversion provided that
GreenShift is not registered as a business development company under
Section 54 of the Investment Company Act of 1940, as amended; and, provided
further that the shareholder may not convert any portion of its debentures
where such conversion would bring the shareholder to greater than 4.95% of
GreenShift's outstanding common stock, in which case the relevant number of
conversion shares are held in escrow by the Company pending compliance with
this limitation.  As of May 15, 2006, the total principal amount due to
Candent was $2,487,415.

<PAGE>                               -26-

    GREENSHIFT CORPORATION (F/K/A GREENWORKS CORPORATION) AND SUBSIDIARIES
                        NOTES TO FINANCIAL STATEMENTS

8.	SUBSEQUENT EVENTS (CONTINUED)

TRANSACTIONS WITH INSEQ CORPORATION

On May 5, 2006, GreenShift converted 3,000,000,000 shares of INSEQ
Corporation common stock and GreenShift's remaining INSEQ Series A
Preferred Stock into 1,000,000 shares of INSEQ Series D Preferred Stock.
INSEQ's Series D Preferred Stock may be converted by the holder into common
stock. The conversion ratio is such that the full 1,000,000 shares will
convert into common shares representing 80% of the INSEQ common shares
outstanding after the conversion.  The holder of Series D Preferred Stock
may cast the number of votes at a shareholders meeting or by written
consent that equals the number of common shares into which the Preferred
Stock is convertible on the record date for the shareholder action. In the
event that INSEQ declares a dividend payable to its common shareholders,
the holders of Series D Preferred Stock will receive the dividend that
would be payable if the Series D shares were converted into common shares.
In the event of a liquidation of INSEQ, the holders of Series D shares will
receive a preferential distribution of $0.001 per share, and will then
share in the distribution as if the Series D shares had been converted into
common shares.

TRANSACTIONS WITH STERLING PLANET

On May 5, 2006, GreenShift purchased additional 8% convertible debentures
in Sterling Planet totaling $200,000.

WITHDRAWAL OF ELECTION TO BE REGULATED AS A BUSINESS DEVELOPMENT COMPANY

On April 24, 2006, the Board of Directors decided to withdraw  the
Company's  election  to be  regulated  as a business  development company
("BDC")  under the  Investment  Company  Act of 1940,  as amended.  On
April 24,  2006,  the  Company  received a written  consent  in lieu of a
meeting of  stockholders from Viridis Capital,  LLC, the Company's majority
shareholder,  approving and authorizing  the withdrawal of the Company's
election to be regulated as a BDC.  Detailed information regarding the
withdrawal of the BDC election can be found in the Schedule 14C Definitive
Information Statement filed with the Securities and Exchange Commission on
May 17, 2006.  It is expected that the Company will file the Withdrawal
Notice with the Securities and Exchange Commission to withdraw the
Company's election to be regulated as a BDC prior to June 30, 2006.

<PAGE>                               -27-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

In addition to historical information, this Report contains forward-looking
statements, which are generally identifiable by use of the words
"believes," "expects," "intends," "anticipates," "plans to," "estimates,"
"projects," or similar expressions. These forward-looking statements are
subject to certain risks and uncertainties that could cause actual results
to differ materially from those reflected in these forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in the sections entitled "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's opinions only as of
the date hereof. We undertake no obligation to revise or publicly release
the results of any revision to these forward-looking statements.

OVERVIEW

We are a business development company that provides long-term debt and
equity investment capital to companies and technologies that facilitate the
efficient use of natural resources and catalyze transformational
environmental gains. Our financing is generally used to fund growth,
acquisitions, buyouts, recapitalizations, note purchases, bridge
financings, and other types of financings. We generally invest in private
companies and companies that are public but that lack access to additional
public capital or whose securities may not be marginable.

Our earnings depend primarily on the level of interest and dividend income,
fee and other income, and net gains or losses earned on our investment
portfolio after deducting interest expense on borrowed capital and
operating expenses. Interest income results from the stated interest rate
earned on a loan or debt security and the amortization of loan origination
fees and discounts. The level of interest income is directly related to the
balance of the interest-bearing investment portfolio outstanding during the
period multiplied by the weighted average yield. Our ability to generate
interest income is dependent on economic, regulatory, and competitive
factors that influence new investment activity, the amount of loans and
debt securities for which interest is not accruing and our ability to
secure debt and equity capital for our investment activities.

Because we are a regulated investment company for tax purposes, we intend
to distribute substantially all of our annual taxable income as dividends
to our shareholders.

PORTFOLIO AND INVESTMENT ACTIVITY

The total portfolio at value, investment activity, and the yield on
interest-bearing investments at and for the three months ended March 31,
2006, were as follows:

                                          3/31/06
                                        -----------
Portfolio at value                     $ 17,841,179
Investments funded                        3,500,031
Change in accrued or reinvested
 interest                                    57,346
Principal collections related to
 investment repayments or sales                  --
Yield on interest-bearing investments         8.00%

The level of investment activity for investments funded and principal
repayments for our investments can vary substantially from period to period
depending on many factors, including the amount of debt and equity capital
available to middle market companies, the level of merger and acquisition
activity for such companies, the general economic environment, and the
competitive environment for the types of investments we make. We believe
that merger and acquisition activity in the middle market was strong during
the first quarter of 2006, which when combined with a lower interest rate
environment resulted in an increase in private finance investments funded,
as well as increased repayments. The first quarter of the year tends to be
a seasonally slower period for deal closings as the industry recovers from
what is typically an active fourth quarter closing schedule.

Investments funded for the three months ended March 31, 2006 consisted of
the following:

                                           3/31/06
                                        ------------
Companies more than 25% owned           $  1,090,581
Companies 5% to 25% owned                         --
Companies less than 5% owned                 598,000
Notes receivable                           1,811,451
                                         -----------
Total                                   $  3,500,031
                                         ===========

<PAGE>                               -28-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

PORTFOLIO AND INVESTMENT ACTIVITY (continued)

We intend to continue a balanced approach to private finance investing that
emphasizes a complementary mix of non-control investments and buyout
investments, subject to regulatory diversity requirements. The combination
of these two types of investments provides current interest and related
portfolio income and the potential for future capital gains. Our current
strategy is to focus on buyout and recapitalization transactions where we
can control a portfolio company to manage risk and where we can potentially
realize more attractive total returns from both current interest and fee
income and future capital gains. In addition to our mezzanine investing, we
are also focusing on smaller strategically compatible middle market
companies for non-control transactions where we can provide either or both
equity and/or debt financing.

We generally fund new investments using cash. In addition, we may acquire
securities in exchange for our common equity. Also, we may acquire new
securities through the reinvestment of previously accrued interest and
dividends in debt or equity securities, or the current reinvestment of
interest and dividend income through the receipt of a debt or equity
security (payment-in-kind income). From time to time we may opt to reinvest
accrued interest receivable in a new debt or equity security in lieu of
receiving such interest in cash.

At March 31, 2006, we had no outstanding investment commitments.

The Company's largest investments at March 31, 2006, were in Veridium
Corporation ("Veridium") (OTC Bulletin Board: VRDM), INSEQ Corporation
("INSEQ") (OTC Bulletin Board: INSQ), GreenWorks Corporation
("GreenWorks"), Sterling Planet, Inc. ("Sterling Planet"), and Ovation
Products Corporation ("Ovation"), accounting for 30.0%, 18.1%, 17.1%, 6.5%,
and 5.0% respectively, of our total portfolio value.

Veridium Corporation

At March 31, 2006 our investment in Veridium totaled $6,614,209 at cost and
$6,223,888 at value, or 30.0% of our total assets. Total interest and
related portfolio income earned from our investment in Veridium for the
three months ended March 31, 2006, was $29,743. Net change in unrealized
appreciation or depreciation for the three months ended March 31, 2006,
includes $1,316,000 of unrealized appreciation related to Veridium.

Veridium (OTC Bulletin Board: VRDM) is a publicly traded environmental
management company. Veridium is currently implementing a restructuring plan
which includes the cessation of operations of Veridium's industrial waste
recycling facility and is planned to include the reorganization of its
services business. Veridium expects that these initiatives will enhance
operating results in the immediate term and enable Veridium to grow its
business more effectively.

Our chairman and chief executive officer, Kevin Kreisler, is also the
chairman, chief executive officer and president of Veridium Corporation. As
the controlling shareholder of the Company, who is in turn the controlling
shareholder of Veridium, Mr. Kreisler has unconditionally guaranteed
certain of Veridium's debts with its creditors.

INSEQ Corporation

At March 31, 2006, our investment in INSEQ totaled $3,393,705 at cost and
$3,149,671 at value, or 18.1% of our total assets. Total interest and
related portfolio income earned from our investment in INSEQ for the three
months ended March 31, 2006, was $2,444 which includes interest income of
$2,444. Net change in unrealized appreciation or depreciation for the three
months ended March 31, 2006, includes $1,150,369 of unrealized depreciation
related to INSEQ.

INSEQ is a publicly traded corporation whose mission is to directly
facilitate the efficient utilization of natural resources including metals,
chemicals, fuels and plastics.

Our chairman and chief executive officer, Kevin Kreisler, is also the
chairman of INSEQ, and our president and chief financial officer, James
Grainer, is also the president and chief financial officer of INSEQ. As the
controlling shareholder of the Company, who is in turn the controlling
shareholder of INSEQ, Mr. Kreisler and the Company have unconditionally
guaranteed certain of INSEQ's debts with its creditors.

<PAGE>                               -29-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

PORTFOLIO AND INVESTMENT ACTIVITY (continued)

GreenWorks Corporation

At March 31, 2006, our investment in GreenWorks totaled $991,509 at cost
and $3,225,899 at value, or 17.1% of our total assets. Total related
portfolio income earned from our investment in GreenWorks for the three
months ended March 31, 2006, was $990 in interest income. Net change in
unrealized appreciation or depreciation for the three months ended March
31, 2006, includes $0 unrealized appreciation related to GreenWorks.

GreenWorks is an environmental engineering services company that provides
consulting, technical and engineering services to alleviate the
environmental problems of its clients. GreenWorks' clients include Fortune
100 and other industrial companies, commercial firms, engineering and
construction contractors, law firms, utilities, real estate developers and
government entities.

Our chairman and chief executive officer, Kevin Kreisler, is also the chair-
man of GreenWorks, and our president and chief financial officer, James
Grainer, is also the president and chief financial officer of GreenWorks.

Sterling Planet, Inc.

At March 31, 2006, our investment in Sterling totaled $1,233,333 at cost
and $1,233,333 at value, or 6.5% of our total assets. Total interest and
related portfolio income earned from our investment in Sterling for the
three months ended March 31, 2006, was $20,155.  Net change in unrealized
appreciation or depreciation for the three months ended March 31, 2006,
includes no unrealized appreciation related to Sterling.

Sterling Planet is the nation's leading retail renewable energy provider
through the sourcing and sale of renewable energy certificates ("RECs").
RECs, or green tags, enable retail residential and non-residential
consumers to purchase green, or environmentally friendly, energy through
their existing utility and offset reliance on power generated from fossil
fuel sources. RECs represent all of the positive environmental attributes
of renewable power generation from sources such as solar, wind and organic
bioenergy power and can be purchased and used by consumers regardless of
whether or not their local utility has access to green power generation.

Ovation Products Corporation

At March 31, 2006, our investment in Ovation totaled $1,000,000 at cost and
$1,000,000 at value, or 5.0% of our total assets. We did not realize any
interest or related portfolio income from our investment in Ovation for the
three months ended March 31, 2006.  Net change in unrealized appreciation
or depreciation for the three months ended March 31, 2006, includes no
unrealized appreciation related to Ovation.

Ovation is a development stage company with patented and proprietary
technologies involving new implementations of vapor compression
distillation.  Ovation has invested over $9 million developing technology
that offers dramatic price and performance advantages over competing clean
water technologies. Ovation is finalizing the development of its initial
product, the Clean Water Appliance - a fire-hydrant sized appliance that
can generate 25 gallons of pure water per hour from a variety of dirty
water input sources at a cost of approximately $0.004 per gallon, or about
1.2% of the cost of traditional home distillation methods. Ovation expects
that its Clean Water Appliance will be available in 2006 and will sell for
a fraction of the price of commercial distillation systems.  Our chairman
and chief executive officer, Kevin Kreisler, is a board member of Ovation.

<PAGE>                               -30-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

RESULTS OF OPERATIONS

Total Interest and Related Portfolio Equity Income

Total interest and related portfolio income includes interest and dividend
income, loan payments, and fees and other income. We generated $66,068 in
interest and dividend income during the three months ended March 31, 2006.
Fees and other income for the three months ended March 31, 2006 was
composed of the following:

                                                            3/31/06
                                                          -----------
Management services provided to portfolio companies       $       --
Transactional and other services provided to portfolio
 companies                                                        --
Structuring and diligence services provided for portfolio
 companies                                                        --
Other income                                                      --
                                                           ---------
Total                                                     $       --
                                                           =========

Fees and other income are generally related to specific transactions or
services and therefore may vary substantially from period to period
depending on the level and types of services provided.

Operating Expenses

Operating expenses include interest, employee, and administrative expenses.
Our interest expense is mostly associated with our various convertible
debentures, and totaled $224,862 during the three months ended March 31,
2006. Employee expenses include salaries, employee benefits and bonuses,
and totaled $202,742 during the three months ended March 31, 2006.
Administrative expenses include legal and accounting fees, valuation
assistance fees, insurance premiums, the cost of leases for our offices,
stock record expenses, directors' fees, and various other expenses, and
totaled $363,909 during the three months ended March 31, 2006.  Change in
the fair market value of derivatives relates to the conversion features of
certain of our debentures and totaled $441,414 in income for the three
months ended March 31, 2006.

Realized Gains and Losses

Net realized gains primarily result from the sale of equity securities
associated with certain investments, and the sale of debt, bonds and
preferred shares. Net realized gains for the three months ended March 31,
2006, were $0. When we exit an investment and realize a gain or loss, we
make an accounting entry to reverse any unrealized appreciation or
depreciation, respectively, we had previously recorded to reflect the
appreciated or depreciated value of the investment.  For the three months
ended March 31, 2006, we made no such reversals.

Change in Unrealized Appreciation or Depreciation

We determine the value of each investment in our portfolio on a quarterly
basis, and changes in value result in unrealized appreciation or
depreciation being recognized in our statement of operations. Value, as
defined in Section 2(a)(41) of the Investment Company Act of 1940, is (i)
the market price for those securities for which a market quotation is
readily available and (ii) for all other securities and assets, fair value
is as determined in good faith by the Board of Directors.  Since there is
typically no readily available market value for the investments in our
portfolio, we value substantially all of our portfolio investments at fair
value as determined in good faith by the Board of Directors pursuant to a
valuation policy and a consistently applied valuation process.

The Company relies on the services of an independent third party valuation
company, Business Valuation Center of Reston, Virginia ("BVC"), to provide
an independent assessment of the fair market value of the Company's
investments. The Company's financial statements for the three months ended
March 31, 2006 have been prepared in connection with BVC's conclusions as
of December 31, 2005, and have been adjusted by the Company for any
significant changes subsequent to December 31, 2005.  BVC's conclusions
were based on a variety of conventionally accepted valuation methods.

At March 31, 2006, portfolio investments recorded at fair value constituted
greater than 95% of our total assets. Because of the inherent uncertainty
of determining the fair value of investments that do not have a readily
available market value, the fair value of our investments determined in
good faith by the Board of Directors may differ significantly from the
values that would have been used had a ready market existed for the
investments, and the differences could be material.

<PAGE>                               -31-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

RESULTS OF OPERATIONS (continued)

There is no single standard for determining fair value in good faith. As a
result, determining fair value requires that judgment be applied to the
specific facts and circumstances of each portfolio investment while
employing a consistently applied valuation process for the types of
investments we make. Unlike banks, we are not permitted to provide a
general reserve for anticipated loan losses. Instead, we are required to
specifically value each individual investment on a quarterly basis. We will
record unrealized depreciation on investments when we believe that an
investment has become impaired, including where collection of a loan or
realization of an equity security is doubtful, or when the enterprise value
of the portfolio company does not currently support the cost of our debt or
equity investment. Enterprise value means the entire value of the company
to a potential buyer, including the sum of the values of debt and equity
securities used to capitalize the enterprise at a point in time. We will
record unrealized appreciation if we believe that the underlying portfolio
company has appreciated in value and our equity security has also
appreciated in value. Changes in fair value are recorded in the statement
of operations as net change in unrealized appreciation or depreciation.

As a business development company, we have invested in illiquid securities
including debt and equity securities of companies, and preferred shares.
The structure of each private finance debt and equity security is
specifically negotiated to enable us to protect our investment and maximize
our returns. We include many terms governing interest rate, repayment
terms, prepayment penalties, financial covenants, operating covenants,
ownership parameters, dilution parameters, liquidation preferences, voting
rights, and put or call rights. Our investments are generally subject to
restrictions on resale and generally have no established trading market.
Because of the type of investments that we make and the nature of our
business, our valuation process requires an analysis of various factors.
Our fair value methodology includes the examination of, among other things,
the underlying investment performance, financial condition, and market
changing events that impact valuation.

Valuation Methodology

Our process for determining the fair value of a private finance investment
begins with determining the enterprise value of the portfolio company. The
fair value of our investment is based on the enterprise value at which the
portfolio company could be sold in an orderly disposition over a reasonable
period of time between willing parties other than in a forced or
liquidation sale. The liquidity event whereby we exit a private finance
investment is generally the sale, the recapitalization or, in some cases,
the initial public offering of the portfolio company.

There is no one methodology to determine enterprise value and, in fact, for
any one portfolio company, enterprise value is best expressed as a range of
fair values, from which we derive a single estimate of enterprise value. To
determine the enterprise value of a portfolio company, we analyze its
historical and projected financial results. We generally require portfolio
companies to provide annual audited and quarterly unaudited financial
statements, as well as annual projections for the upcoming fiscal year.
Typically in the private equity business, companies are bought and sold
based on multiples of EBITDA, cash flow, net income, revenues or, in
limited instances, book value.

The private equity industry uses financial measures such as EBITDA or
EBITDAM (Earnings Before Interest, Taxes, Depreciation, Amortization and,
in some instances, Management fees) in order to assess a portfolio
company's financial performance and to value a portfolio company. EBITDA
and EBITDAM are not intended to represent cash flow from operations as
defined by U.S. generally accepted accounting principles and such
information should not be considered as an alternative to net income, cash
flow from operations, or any other measure of performance prescribed by
U.S. generally accepted accounting principles. When using EBITDA to
determine enterprise value, we may adjust EBITDA for non-recurring items.
Such adjustments are intended to normalize EBITDA to reflect the portfolio
company's earnings power. Adjustments to EBITDA may include compensation to
previous owners, acquisition, recapitalization, or restructuring related
items or one-time non-recurring income or expense items.

In determining a multiple to use for valuation purposes, we generally look
to private merger and acquisition statistics, discounted public trading
multiples or industry practices. In estimating a reasonable multiple, we
consider not only the fact that our portfolio company may be a private
company relative to a peer group of public comparables, but we also
consider the size and scope of our portfolio company and its specific
strengths and weaknesses. In some cases, the best valuation methodology may
be a discounted cash flow analysis based on future projections. If a
portfolio company is distressed, a liquidation analysis may provide the
best indication of enterprise value.

<PAGE>                               -32-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

RESULTS OF OPERATIONS (continued)

Change in Unrealized Appreciation or Depreciation (continued)

Valuation Methodology (continued)

If there is adequate enterprise value to support the repayment of our debt,
the fair value of our loan or debt security normally corresponds to cost
unless the borrower's condition or other factors lead to a determination of
fair value at a different amount. The fair value of equity interests in
portfolio companies is determined based on various factors, including the
enterprise value remaining for equity holders after the repayment of the
portfolio company's debt and other preference capital, and other pertinent
factors such as recent offers to purchase a portfolio company, recent
transactions involving the purchase or sale of the portfolio company's
equity securities, or other liquidation events. The determined equity
values are generally discounted when we have a minority position,
restrictions on resale, specific concerns about the receptivity of the
capital markets to a specific company at a certain time, or other factors.

As a participant in the private equity business, we invest primarily in
private middle market companies for which there is generally no publicly
available information. Because of the private nature of these businesses,
there is a need to maintain the confidentiality of the financial and other
information that we have for the private companies in our portfolio. We
believe that maintaining this confidence is important, as disclosure of
such information could disadvantage our portfolio companies and could put
us at a disadvantage in attracting new investments. Therefore, we do not
intend to disclose financial or other information about our portfolio
companies, unless required, because we believe doing so may put them at an
economic or competitive disadvantage, regardless of our level of ownership
or control.

To balance the lack of publicly available information about our private
portfolio companies, we will continue to work with independent third-party
consultants to obtain assistance in determining fair value for a portion of
the private finance portfolio each quarter. We work with these consultants
to obtain assistance as additional support in the preparation of our
internal valuation analysis for a portion of the portfolio each quarter
(for all investments with a cost or value greater than $250,000). In
addition, we may receive independent assessments of a particular private
finance portfolio company's value in the ordinary course of business, most
often in the context of a prospective sale transaction or in the context of
a bankruptcy process. The valuation analysis prepared by management using
these independent valuation resources is submitted to our Board of
Directors for its determination of fair value of the portfolio in good
faith.

At December 31, 2005, Business Valuation Center, Inc. ("BVC") assisted us
by reviewing our valuations of our portfolio companies. For the remaining
quarters in 2006, we intend to periodically obtain valuation assistance
from BVC and possibly other third parties when deemed necessary.  We
currently anticipate that we will generally obtain assistance for all
companies in the portfolio at least once during the course of the year.
Valuation assistance may not be obtained for new companies that enter the
portfolio after September 30 of any calendar year during that year.
Professional fees for valuation assistance during the three months ended
March 31, 2006 were approximately $0.

OTHER MATTERS

Per Share Amounts

All per share amounts included in the Management's Discussion and Analysis
of Financial Condition and Results of Operations section have been computed
using the weighted average common shares outstanding to compute basic
earnings per share, which were $0.00 with 108.8 million weighted average
common shares outstanding for the three months ended March 31, 2006.

FINANCIAL CONDITIONS, LIQUIDITY AND CAPITAL RESOURCES

Our portfolio is expected to generate cash flow from which we plan to pay
dividends to shareholders and fund new investment activity. Cash generated
from the portfolio includes cash flow from net investment income and net
realized gains and principal collections related to investment repayments
or sales. Cash provided by our operating activities before new investment
activity for the three months ended March 31, 2006, was $0.
From the cash provided by operating activities before new investments, we
make new portfolio investments, fund our operating activities, and pay
dividends to shareholders. We also raise new debt and equity capital from
time to time in order to fund our investments and operations.

<PAGE>                               -33-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

FINANCIAL CONDITIONS, LIQUIDITY AND CAPITAL RESOURCES (continued)

We paid no dividends during the three months ended March 31, 2006, and we
do not expect to do so in the near future. Dividends will generally be
determined based upon an estimate of annual taxable income, which includes
our taxable interest, dividend and fee income, as well as taxable net
capital gains. As discussed above, taxable income generally differs from
net income for financial reporting purposes due to temporary and permanent
differences in the recognition of income and expenses, and generally
excludes net unrealized appreciation or depreciation, as gains or losses
are not included in taxable income until they are realized. Taxable income
includes non-cash income, such as changes in accrued and reinvested
interest and dividends and the amortization of discounts and fees. Cash
collections of income resulting from contractual payment-in-kind interest
or the amortization of discounts and fees generally occur upon the
repayment of the loans or debt securities that include such items. Non-cash
taxable income is reduced by non-cash expenses, such as realized losses and
depreciation and amortization expense.

Our Board of Directors reviews the dividend rate quarterly, and may adjust
the quarterly dividend throughout the year. Dividends are declared based
upon our estimate of annual taxable income available for distribution to
shareholders. Our goal is to declare what we believe to be sustainable
increases in our regular quarterly dividends. To the extent that we earn
annual taxable income in excess of dividends paid for the year, we may
spill over the excess taxable income into the next year and such excess
income will be available for distribution in the next year. Excess taxable
income spilled over and paid out in the next year may be subject to a 4%
excise tax (see "Other Matters - Regulated Investment Company Status"
above). We believe that spilling over excess taxable income into future
periods may provide increased visibility with respect to taxable earnings
available to pay the regular quarterly dividend.

Because we are a regulated investment company, we distribute our taxable
income and, therefore, from time to time we will raise new debt or equity
capital in order to fund our investments and operations.

At March 31, 2006 our total assets, total debt outstanding, total
shareholders' equity, debt to equity ratio and asset coverage for senior
indebtedness were as follows:

                                                    3/31/06
                                                  -----------
Total assets                                     $ 18,836,668
Total debt outstanding                              7,782,613
Total shareholders' equity                         11,054,055
Debt to equity ratio                                     0.70
Asset coverage ratio (1)                                  242%

(1)  As a business development company, we are generally required to
     maintain a minimum ratio of 200% of total assets to total borrowings.

We currently target a debt to equity ratio ranging between 0.75:1.00 to
1.00:1.00. We believe that it is prudent to operate with a larger equity
capital base and less leverage, but we may from time to time increase our
leverage to exploit compelling investment opportunities. During the three
months ended March 31, 2006, we completed $4,160,718 in debt financing to
provide cash for our operations and investments.

CRITICAL ACCOUNTING POLICIES

The financial statements are based on the selection and application of
critical accounting policies, which require management to make significant
estimates and assumptions. Critical accounting policies are those that are
both important to the presentation of our financial condition and results
of operations and require management's most difficult, complex, or
subjective judgments. Our critical accounting policies are those applicable
to the valuation of investments and certain revenue recognition matters as
discussed below.

Valuation of Portfolio Investments

As a business development company, we invest in illiquid securities
including debt and equity securities of companies. Our investments are
generally subject to restrictions on resale and generally have little to no
established trading market. We value substantially all of our investments
at fair value as determined in good faith by the Board of Directors in
accordance with our valuation policy. We determine fair value to be the
amount for which an investment could be exchanged in an orderly disposition
over a reasonable period of time between willing parties other than in a
forced or liquidation sale. Our valuation policy considers the fact that no
ready market exists for substantially all of the securities in which we
invest. Our valuation policy is intended to provide a consistent basis for
determining the fair value of the portfolio. We will record unrealized
depreciation on investments when we

<PAGE>                               -34-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

believe that an investment has become impaired, including where collection
of a loan or realization of an equity security is doubtful, or when the
enterprise value of the portfolio company does not currently support the
cost of our debt or equity investments. Enterprise value means the entire
value of the company to a potential buyer, including the sum of the values
of debt and equity securities used to capitalize the enterprise at a point
in time. We will record unrealized appreciation if we believe that the
underlying portfolio company has appreciated in value and our equity
security has also appreciated in value. The value of investments in
publicly traded securities is determined using quoted market prices
discounted for restrictions on resale, if any.

Loans and Debt Securities

For loans and debt securities, fair value generally approximates cost
unless the borrower's enterprise value, overall financial condition or
other factors lead to a determination of fair value at a different amount.
When we receive nominal cost warrants or free equity securities ("nominal
cost equity"), we allocate our cost basis in our investment between debt
securities and nominal cost equity at the time of origination. At that
time, the original issue discount basis of the nominal cost equity is
recorded by increasing the cost basis in the equity and decreasing the cost
basis in the related debt securities.

Interest income is recorded on an accrual basis to the extent that such
amounts are expected to be collected. For loans and debt securities with
contractual payment-in-kind interest, which represents contractual interest
accrued and added to the loan balance that generally becomes due at
maturity, we will not accrue payment-in-kind interest if the portfolio
company valuation indicates that the payment-in-kind interest is not
collectible. Interest on loans and debt securities is not accrued if we
have doubt about interest collection. Loans in workout status that are
classified as Grade 4 or 5 assets under our internal grading system do not
accrue interest. In addition, interest may not accrue on loans or debt
securities to portfolio companies that are more than 50% owned by us depending
on such company's capital requirements. Loan origination fees, original issue
discount, and market discount are capitalized and then amortized into
interest income using the effective interest method. Upon the prepayment of
a loan or debt security, any unamortized loan origination fees are recorded
as interest income and any unamortized original issue discount or market
discount is recorded as a realized gain. Prepayment premiums are recorded
on loans and debt securities when received.

Equity Securities

Our equity interests in portfolio companies for which there is no liquid
public market are valued at fair value based on the enterprise value of the
portfolio company, which is determined using various factors, including
cash flow from operations of the portfolio company and other pertinent
factors, such as recent offers to purchase a portfolio company, recent
transactions involving the purchase or sale of the portfolio company's
equity securities, or other liquidation events. The determined equity
values are generally discounted to account for restrictions on resale or
minority ownership positions.

The value of our equity interests in public companies for which market
quotations are readily available is based on the closing public market
price on the balance sheet date. Securities that carry certain restrictions
on sale are typically valued at a discount from the public market value of
the security.

Dividend income is recorded on preferred equity securities on an accrual
basis to the extent that such amounts are expected to be collected, and on
common equity securities on the record date for private companies or on the
ex-dividend date for publicly traded companies.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or
Depreciation

Realized gains or losses are measured by the difference between the net
proceeds from the repayment or sale and the cost basis of the investment
without regard to unrealized appreciation or depreciation previously
recognized, and include investments charged off during the year, net of
recoveries. Net change in unrealized appreciation or depreciation reflects
the change in portfolio investment values during the reporting period,
including the reversal of previously recorded unrealized appreciation or
depreciation when gains or losses are realized.

Fee Income

Fee income includes fees for guarantees and services rendered by us to
portfolio companies and other third parties such as diligence, structuring,
transaction services, management services, and other advisory services.
Guaranty fees are recognized as income over the related period of the
guaranty. Diligence, structuring, and transaction services fees are
generally recognized as income when services are rendered or when the
related transactions are completed. Management and other advisory services
fees are generally recognized as income as the services are rendered.

<PAGE>                               -35-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

BUSINESS RISK FACTORS

WE HAVE NEGLIGIBLE OPERATIONS TO DATE, SO OUR ABILITY TO INCREASE OUR NET
ASSET VALUE IS SPECULATIVE.

We only recently initiated operations as an investment company. No
assurances can be given that we will be able to increase our net asset
value in the future.

WE MAY CHANGE OUR INVESTMENT POLICIES WITHOUT FURTHER SHAREHOLDER APPROVAL.

We may change our investment policies without shareholder approval.  We
currently do not intend to change our investment policies and do not expect
to do so in the future, although we may do so.  We will notify our
shareholders if we do change our investment policies.

OUR INVESTMENTS MAY NOT GENERATE SUFFICIENT INCOME TO COVER OUR OPERATIONS.

We intend to make investments into qualified companies that will provide
the greatest overall return on our investment.  However, certain of those
investments may fail, in which case we will not receive any return on our
investment.  In addition, our investments may not generate income, either
in the immediate future, or at all.  As a result, we may have to sell
additional stock, or borrow money, to cover our operating expenses.

WE NEED TO RAISE CAPITAL IN ORDER TO FULFILL OUR BUSINESS PLAN.

We have generated no revenues and have extremely limited cash liquidity and
capital resources.  Any equity financings could result in dilution to our
stockholders.  Debt financing may result in high interest expense.  Any
financing, if available, may be on unfavorable terms.  If we cannot obtain
adequate funds, we may be required to reduce or curtail operations.

INVESTING IN OUR STOCK IS HIGHLY SPECULATIVE AND YOU COULD LOSE SOME OR ALL
OF YOUR INVESTMENT.

The value of our common stock may decline and may be affected by numerous
market conditions, which could result in the loss of some or the entire
amount invested in our stock.  The securities markets frequently experience
extreme price and volume fluctuations that affect market prices for
securities of companies generally and very small capitalization companies
such as us in particular.

WE ARE SUBJECT TO REGULATORY RISKS AS A BUSINESS DEVELOPMENT COMPANY.

We are subject to regulation as a BDC.  The loans and other investments
that we expect to make in small business concerns are extremely
speculative.  Many of these concerns will be privately held.  Even if a
public market for their securities later develops, the securities we
purchase are likely to be restricted from sale or other transfer for
significant periods of time.  These securities will be very illiquid.

WE HAVE RECEIVED A LETTER FROM THE STAFF OF SECURITIES AND EXCHANGE
COMMISSION THAT RAISED CONCERNS AS TO WHETHER ALL MATERIAL INFORMATION
ABOUT THE COMPANY WAS INCLUDED IN OUR RECENT FORM 1-E AND OFFERING CIRCULAR
FILED PURSUANT TO REGULATION E OF THE 1940 ACT.

We filed a Form 1-E and Offering Circular with the U.S. Securities and
Exchange Commission on April 22, 2005, pursuant to which we plan to offer
for sale up to $5 million of its common stock. This offering commenced on
May 6, 2005, pursuant to an exemption from registration in Regulation E of
the 1940 Act as set forth in Rule 604(a) thereunder. Copies of this
offering circular are available upon request. On July 22, 2005, we received
a letter from the Staff of Securities and Exchange Commission (the
"Letter"), which raised various issues including among other things issues
as to whether all material information about the Company was included in
the Offering Circular. The Company responded to the Staff's comments on
August 12, 2005, addressing the Staff's concerns. It is our position that
all material information about the Company, from both prior to and after we
filed our election to be regulated as an investment company under the 1940
Act, had been included in the Offering Circular. We intend to resolve the
issues raised by the Staff as promptly as practicable.

OUR BUSINESS DEVELOPMENT COULD BE HINDERED IF WE LOST THE SERVICES OF OUR
CHIEF EXECUTIVE OFFICER OR OUR CHIEF FINANCIAL OFFICER.

Kevin Kreisler and James Grainer are our only executive officers.
Together, they are responsible for strategizing not only our business plan
but also the means of financing it.  If either Mr. Grainer or Mr. Kreisler
were to leave us or become unable to fulfill his responsibilities, our
business would be imperiled.  At the very least, there would be a delay in
the development of our plans until a suitable replacement for the officer
could be retained.

<PAGE>                               -36-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

BUSINESS RISK FACTORS

VIRIDIS CAPITAL LLC CONTROLS 80% OF THE COMPANY'S VOTING POWER AND HAS THE
ABILITY TO EXERCISE SIGNIFICANT INFLUENCE OVER MATTERS SUBMITTED FOR
STOCKHOLDER APPROVAL AND ITS INTERESTS MAY DIFFER FROM OTHER STOCKHOLDERS.

Viridis Capital, LLC, an affiliate of Kevin Kreisler, our chairman and
chief executive officer, owns the majority of our common stock.
Accordingly, Viridis will have significant influence in determining the
outcome of any corporate transaction or other matter submitted to our
stockholders for approval, including mergers, acquisitions, consolidations
and the sale of all or substantially all of our assets, and also has the
power to prevent or cause a change in control.  The interests of these
stockholders may differ from the interests of the other stockholders.

THE ISSUANCE OF SHARES UNDER OUR AGREEMENTS WITH CORNELL CAPITAL PARTNERS
COULD INCREASE OUR OUTSTANDING SHARES BY OVER 60%.

While Cornell is subject to restrictions on conversion of the Cornell
Debenture limiting Cornell's ownership to 9.9% of our common stock, without
this restriction the Cornell Debenture could be converted into 50,903,690
shares at the market price on March 31, 2006, which would dilute the
interest of our current shareholders by over 60%.

SUBSTANTIALLY ALL OF OUR PORTFOLIO INVESTMENTS ARE RECORDED AT FAIR VALUE
AS DETERMINED IN GOOD FAITH BY OUR BOARD OF DIRECTORS AND, AS A RESULT,
THERE IS UNCERTAINTY REGARDING THE VALUE OF OUR PORTFOLIO INVESTMENTS.

At March 31, 2006, portfolio investments recorded at fair value were
approximately 95% of our total assets. Pursuant to the requirements of the
1940 Act, we value substantially all of our investments at fair value as
determined in good faith by our Board of Directors on a quarterly basis.
Since there is typically no readily available market value for the
investments in our portfolio, our Board of Directors determines in good
faith the fair value of these investments pursuant to a valuation policy
and a consistently applied valuation process.

The Company relies on the services of an independent third party valuation
company, Business Valuation Center of Reston, Virginia ("BVC"), to provide
an independent assessment of the fair market value of the Company's
investments. The Company's financial statements for the three months ended
March 31, 2006 have been prepared in connection with BVC's conclusions as
of December 31, 2005, and have been adjusted by the Company for any
significant changes subsequent to December 31, 2005.  BVC's conclusions
were based on a variety of conventionally accepted valuation methods.
There is no single standard for determining fair value in good faith. As a
result, determining fair value requires that judgment be applied to the
specific facts and circumstances of each portfolio investment while
employing a consistently applied valuation process for the types of
investments we make. Unlike banks, we are not permitted to provide a
general reserve for anticipated loan losses; we are instead required by the
1940 Act to specifically value each individual investment on a quarterly
basis and record unrealized depreciation for an investment that we believe
has become impaired, including where collection of a loan or realization of
an equity security is doubtful, or when the enterprise value of the
portfolio company does not currently support the cost of our debt or equity
investment. Enterprise value means the entire value of the company to a
potential buyer, including the sum of the values of debt and equity
securities used to capitalize the enterprise at a point in time. We will
record unrealized appreciation if we believe that the underlying portfolio
company has appreciated in value and our equity security has also
appreciated in value. Without a readily available market value and because
of the inherent uncertainty of valuation, the fair value of our investments
determined in good faith by the Board of Directors may differ significantly
from the values that would have been used had a ready market existed for
the investments, and the differences could be material.

THERE IS LIKELY TO BE NO LIQUID MARKET FOR OUR PORTFOLIO INVESTMENTS.

Our current investments are, and we expect that most of our intended
investments will be, either equity securities acquired directly from small
companies or below investment grade subordinated debt securities.  Our
portfolio of equity securities will usually be subject to restrictions on
resale or otherwise have no established trading market.  The illiquidity of
most of our portfolio may adversely affect our ability to dispose of such
securities at times when it may be advantageous for us even if our
portfolio companies are able to develop commercially viable products; the
market for new products and services is highly competitive and rapidly
changing.  Commercial success is difficult to predict and the marketing
efforts of our expected portfolio companies may not be successful.

<PAGE>                               -37-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

BUSINESS RISK FACTORS

WE PLAN TO INVEST PRIMARILY IN SMALL, PRIVATE COMPANIES.

There are significant risks inherent in our planned venture capital
business.  We intend to invest a substantial portion of our assets in early
stage or start-up companies.  These private businesses tend to be thinly
capitalized, unproven small companies with risky technologies that lack
management depth and have not attained profitability or have no history of
operations.  Because of the speculative nature and the lack of a public
market for these investments, there is significantly greater risk of loss
than is the case with traditional investment securities.  We expect that
some of our investments will be a complete loss or will be unprofitable and
that some will appear to be likely to become successful but never realize
their potential.  We intend to be risk seeking rather than risk averse in
our approach to venture capital and other investments.  Neither our
investments nor an investment in our stock is intended to constitute a
balanced investment program.  We may need to rely to a large extent upon
proceeds from sales of investments rather than investment income to defray
a significant portion of our operating expenses.  Such sales are
unpredictable and may not occur.

OUR QUARTERLY RESULTS WILL FLUCTUATE.

Our quarterly operating results could fluctuate as a result of a number of
factors.  These factors include, among other things, variations in and the
timing of the recognition of realized and unrealized gains or losses, the
degree to which portfolio companies encounter competition in their markets
and general economic conditions.  As a result of these factors, results for
any one quarter should not be relied upon as being indicative of
performance in future quarters.

ECONOMIC RECESSIONS OR DOWNTURNS COULD IMPAIR OUR PORTFOLIO COMPANIES AND
HARM OUR OPERATING RESULTS.

Many of the companies in which we have made or will make investments may be
susceptible to economic slowdowns or recessions. An economic slowdown may
affect the ability of a company to engage in a liquidity event such as a
sale, recapitalization, or initial public offering. Our nonperforming
assets are likely to increase and the value of our portfolio is likely to
decrease during these periods. These conditions could lead to financial
losses in our portfolio and a decrease in our revenues, net income, and
assets. Our business of making private equity investments and positioning
them for liquidity events also may be affected by current and future market
conditions. The absence of an active senior lending environment or a slow
down in middle market merger and acquisition activity may slow the amount
of private equity investment activity generally. As a result, the pace of
our investment activity may slow. In addition, significant changes in the
capital markets could have an effect on the valuations of private companies
and on the potential for liquidity events involving such companies. This
could affect the timing of exit events in our portfolio and could
negatively affect the amount of gains or losses upon exit.

OUR BORROWERS MAY DEFAULT ON THEIR PAYMENTS, WHICH MAY HAVE A NEGATIVE
EFFECT ON OUR FINANCIAL PERFORMANCE.

We make long-term unsecured, subordinated loans and invest in equity
securities, which may involve a higher degree of repayment risk. We
primarily invest in companies that may have limited financial resources and
that may be unable to obtain financing from traditional sources. Numerous
factors may affect a borrower's ability to repay its loan, including the
failure to meet its business plan, a downturn in its industry, or negative
economic conditions. Deterioration in a borrower's financial condition and
prospects may be accompanied by deterioration in any related collateral and
may have a negative effect on our financial results.

OUR PRIVATE FINANCE INVESTMENTS MAY NOT PRODUCE CURRENT RETURNS OR CAPITAL
GAINS.

Our private finance investments are typically structured as unsecured debt
securities with a relatively high fixed rate of interest and with equity
features such as conversion rights, warrants, or options. As a result, our
private finance investments are generally structured to generate interest
income from the time they are made and may also produce a realized gain
from an accompanying equity feature. We cannot be sure that our portfolio
will generate a current return or capital gains.

<PAGE>                               -38-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

BUSINESS RISK FACTORS

OUR FINANCIAL RESULTS COULD BE NEGATIVELY AFFECTED IF A SIGNIFICANT
PORTFOLIO INVESTMENT FAILS TO PERFORM AS EXPECTED.

We purchase controlling equity positions in companies and our total debt
and equity investment in controlled companies may be significant
individually or in the aggregate. Investments in controlled portfolio
companies are generally larger and in fewer companies than our investments
in companies that we do not control. As a result, if a significant
investment in one or more controlled companies fails to perform as
expected, our financial results could be more negatively affected and the
magnitude of the loss could be more significant than if we had made smaller
investments in more companies. Our largest investments at March 31, 2006,
were in Veridium, INSEQ, GreenWorks, Sterling Planet, and Ovation,
accounting for 33.0%, 18.1%, 17.1%, 6.5%, and 5.0% respectively, of our
total assets value, of which Veridium, INSEQ and GreenWorks continue to
struggle with liquidity and operational issues relating to each of their
businesses, including, as applicable, cash flow restrictions, working
deficiencies, and ongoing settlement negotiations of outstanding payroll
taxation and environmental regulatory matters. Specifically, GreenWorks'
wholly-owned subsidiary, ESI, is currently resolving outstanding payroll
tax liabilities arising from its former operations prior to ESI's
acquisition of the assets of ESI-NJ.

WE BORROW MONEY, WHICH MAGNIFIES THE POTENTIAL FOR GAIN OR LOSS ON AMOUNTS
INVESTED AND MAY INCREASE THE RISK OF INVESTING IN US.

Borrowings, also known as leverage, magnify the potential for gain or loss
on amounts invested and, therefore, increase the risks associated with
investing in our securities. We borrow from and issue senior debt
securities to banks, insurance companies, and other lenders. Lenders of
these senior securities have fixed dollar claims on our assets that are
superior to the claims of our common shareholders. If the value of our
assets increases, then leveraging would cause the net asset value
attributable to our common stock to increase more sharply than it would
have had we not leveraged. Conversely, if the value of our assets
decreases, leveraging would cause net asset value to decline more sharply
than it otherwise would have had we not leveraged. Similarly, any increase
in our income in excess of  interest payable on the borrowed funds would
cause our net income to increase more than it would without the leverage,
while any decrease in our  income would cause net income to decline more
sharply than it would have had we not borrowed. Such a decline could
negatively affect our ability to make common stock dividend payments.
Leverage is generally considered a speculative investment technique.  At
March 31, 2006, we had $7.4 million of outstanding indebtedness bearing a
weighted average annual interest cost of about 5%. In order for us to cover
these annual interest payments on indebtedness, we must achieve annual
returns on our assets of at least 2%.

WE MAY NOT BORROW MONEY UNLESS WE MAINTAIN ASSET COVERAGE FOR INDEBTEDNESS
OF AT LEAST 200%, WHICH MAY AFFECT RETURNS TO SHAREHOLDERS.

We must maintain asset coverage for total borrowings of at least 200%. Our
ability to achieve our investment objective may depend in part on our
continued ability to maintain a leveraged capital structure by borrowing
from banks, insurance companies or other lenders on favorable terms. There
can be no assurance that we will be able to maintain such leverage. If
asset coverage declines to less than 200%, we may be required to sell a
portion of our investments when it is disadvantageous to do so.  As of
March 31, 2006, our asset coverage for  indebtedness was 242%.

OUR BUSINESS DEPENDS ON OUR KEY PERSONNEL.

We depend on the continued services of our executive officers and other key
management personnel. If we were to lose any of these officers or other
management personnel, such a loss could result in inefficiencies in our
operations and lost business opportunities, which could have a negative
effect on our business.

<PAGE>                               -39-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

BUSINESS RISK FACTORS

CHANGES IN INTEREST RATES MAY AFFECT OUR COST OF CAPITAL AND NET INVESTMENT
INCOME.

Because we borrow money to make investments, our net investment income is
dependent upon the difference between the rate at which we borrow funds and
the rate at which we invest these funds. As a result, there can be no
assurance that a significant change in market interest rates will not have
a material adverse effect on our net investment income. In periods of
rising interest rates, our cost of funds would increase, which would reduce
our net investment income. We use a combination of long-term and short-term
borrowings and equity capital to finance our investing activities. We
utilize our revolving line of credit as a means to bridge to long-term
financing. Our long-term fixed-rate investments are financed primarily with
long-term fixed-rate debt and equity. We may use interest rate risk
management techniques in an effort to limit our exposure to interest rate
fluctuations. Such techniques may include various interest rate hedging
activities to the extent permitted by the 1940 Act. We have analyzed the
potential impact of changes in interest rates on interest income net of
interest expense. Assuming that the balance sheet were to remain constant
and no actions were taken to alter the existing interest rate sensitivity,
a hypothetical immediate 1% change in interest rates would have affected
the net income by less than 1% over a one year horizon. Although management
believes that this measure is indicative of our sensitivity to interest
rate changes, it does not adjust for potential changes in credit quality,
size and composition of the assets on the balance sheet and other business
developments that could affect net increase in net assets resulting from
operations, or net income. Accordingly, no assurances can be given that
actual results would not differ materially from the potential outcome
simulated by this estimate.

RESULTS MAY FLUCTUATE AND MAY NOT BE INDICATIVE OF FUTURE PERFORMANCE.

Our operating results may fluctuate and, therefore, you should not rely on
current or historical period results to be indicative of our performance in
future reporting periods. Factors that could cause operating results to
fluctuate include, but are not limited to, variations in the investment
origination volume and fee income earned, variation in timing of
prepayments, variations in and the timing of the recognition of net
realized gains or losses and changes in unrealized appreciation or
depreciation, the degree to which we encounter competition in our markets,
and general economic conditions.

OUR ABILITY TO INVEST IN PRIVATE COMPANIES MAY BE LIMITED IN CERTAIN
CIRCUMSTANCES.

If we are to maintain our status as a business development company, we must
not acquire any assets other than "qualifying assets" unless, at the time
of and after giving effect to such acquisition, at least 70% of our total
assets are qualifying assets. If we acquire debt or equity securities from
an issuer that has outstanding marginable securities at the time we make an
investment, these acquired assets cannot be treated as qualifying assets.
This result is dictated by the definition of "eligible portfolio company"
under the 1940 Act, which in part looks to whether a company has
outstanding marginable securities.

Amendments promulgated in 1998 by the Federal Reserve expanded the
definition of a marginable security under the Federal Reserve's margin
rules to include any non-equity security. Thus, any debt securities issued
by any entity are marginable securities under the Federal Reserve's current
margin rules. As a result, the staff of the SEC has raised the question as
to whether a private company that has outstanding debt securities would
qualify as an "eligible portfolio company" under the 1940 Act.

Until the question raised by the staff of the SEC pertaining to the Federal
Reserve's 1998 change to its margin rules has been addressed by
legislative, administrative or judicial action, we intend to treat as
qualifying assets only those debt and equity securities that are issued by
a private company that has no marginable securities outstanding at the time
we purchase such securities or those that otherwise qualify as an "eligible
portfolio company" under the 1940 Act.

The SEC has recently issued proposed rules to correct the unintended
consequence of the Federal Reserve's 1998 margin rule amendments of
apparently limiting the investment opportunities of business development
companies. In general, the SEC's proposed rules would define an eligible
portfolio company as any company that does not have securities listed on a
national securities exchange or association. We are currently in the
process of reviewing the SEC's proposed rules and assessing its impact, to
the extent such proposed rules are subsequently approved by the SEC, on our
investment activities. We do not believe that these proposed rules will
have a material adverse effect on our operations.

<PAGE>                               -40-

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

BUSINESS RISK FACTORS

WE WILL FACE A LOT OF COMPETITION, MOST OF WHICH IS BETTER CAPITALIZED AND
MORE EXPERIENCED THAN US.

We will face competition in our investing activities from private venture
capital funds, investment affiliates of large industrial, technology,
service and financial companies, small business investment companies,
wealthy individuals and foreign investors. As a BDC, we are required to
disclose quarterly the name and business description of portfolio companies a
nd value of any portfolio securities.  Many of our competitors are not
subject to this disclosure requirement.  Our obligation to disclose this
information could hinder our ability to invest in certain portfolio companies.
Additionally, other regulations, current and future, to which some of our
competitors may not be subject, may make us less attractive as a potential
investor to a given portfolio company than a private venture capital fund.

CHANGES IN THE LAW OR REGULATIONS THAT GOVERN US COULD HAVE A MATERIAL
IMPACT ON US OR OUR OPERATIONS.

We are regulated by the SEC and the Small Business Administration. In
addition, changes in the laws or regulations that govern business
development companies, regulated investment companies, real estate
investment trusts, and small business investment companies may
significantly affect our business. Any change in the law or regulations
that govern our business could have a material impact on us or our
operations. Laws and regulations may be changed from time to time, and the
interpretations of the relevant laws and regulations also are subject to
change, which may have a material effect on our operations.

DUE TO THE CONCENTRATION OF OUR INVESTMENTS, OUR PORTFOLIO MAY BE SUBJECT
TO INCREASED RISK OF DEPRECIATION ARISING FROM THE POSSIBILITY THAT ONE OR
MORE OF OUR PORTFOLIO COMPANIES MAY FAIL TO REALIZE THEIR RESPECTIVE
BUSINESS PLANS.

Our investments include a number of operating companies that have yet to
realize their business plans, and each face a number of issues relating to
their ability to do so. If one or more of our portfolio companies fails to
affect their business plan, the value of our portfolio may be subject to
significant depreciation.

WE MAY CHANGE OUR INVESTMENT POLICIES WITHOUT FURTHER SHAREHOLDER APPROVAL.

We many change our investment policies without shareholder approval.  We
currently do not intend to change our investment policies and do not expect
to do so in the future, although we may do so.  We will notify our
shareholders if we do change our investment policies.

INVESTING IN OUR STOCK MAY BE INAPPROPRIATE FOR YOUR RISK TOLERANCE.

Our planned investments into other companies, in accordance with our
investment objective and principal strategies, result in a far above
average amount of risk and volatility and may well result in loss of
principal.

WE WILL BE QUOTED ON THE OTC BULLETIN BOARD FOR THE IMMEDIATE FUTURE.

We currently do not meet the eligibility requirements for listing on the
NASDAQ Stock Market. Until we meet those standards and are accepted into
the NASDAQ Stock Market, or unless we are successful in securing a listing
on the American Stock Exchange or some other exchange, our common stock
will be quoted only on the OTC Bulletin Board.  Such a listing is
considered less prestigious than a NASDAQ Stock Market or an exchange
listing, and many brokerage firms will not recommend Bulletin Board stocks
to their clients.  This situation may limit the liquidity of your shares.

OUR COMMON STOCK PRICE MAY BE VOLATILE.

The trading price of our common stock may fluctuate substantially. The
price of the common stock may be higher or lower than the price you pay for
your shares, depending on many factors, some of which are beyond our
control and may not be directly related to our operating performance. These
factors include, but are not limited to, the following:

     *  price and volume fluctuations in the overall stock market from time
        to time;

     *  significant volatility in the market price and trading volume of
        securities of business development companies or other financial
        services companies;

     *  changes in regulatory policies or tax guidelines with respect to
        business development companies or regulated investment companies;

     *  actual or anticipated changes in our earnings or fluctuations in our
        operating results or changes in the expectations of securities
        analysts;

<PAGE>                               -41-

ITEM 3.  Controls and Procedures

(a) 	As of the end of the period covered by this quarterly report on Form
        10QSB, the Company's chief executive officer and chief financial
        officer conducted an evaluation of the Company's disclosure controls
        and procedures (as defined in Rules 13a-15 and 15d-15 of the
        Securities Exchange Act of 1934). Based upon this evaluation, the
        Company's chief executive officer and chief financial officer
        concluded that the Company's disclosure controls and procedures are
        effective in timely alerting them of any material information
        relating to the Company that is required to be disclosed by the
        Company in the reports it files or submits under the Securities
        Exchange Act of 1934.

(b) 	There have been no changes in the Company's internal control over
        financial reporting that occurred during the quarter ended March 31,
        2006, 2006 that have materially affected, or are reasonably likely to
        materially affect, the Company's internal control over financial
        reporting.

<PAGE>                               -42-


PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

     None.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended March 31, 2006, Cornell Capital Partners
converted a total of $1,902,148 of debt and interest into 21,468,543 shares
of the Company's common stock, Candent Corporation converted a total of
$289,847 of debt into 3,450,556 shares of the Company's common stock, and
Highgate House Funds purchased 3,203,447 shares of the Company's common
stock for $269,090.  Each of the sales was exempt pursuant to Section 4(2)
of the Securities Act since the sale was not made in a public offering and
was made to an entity whose principals has access to detailed information
about the Company and which was acquiring the shares for its own account.
There was no underwriter.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

ITEM 5.   OTHER INFORMATION

     None.

ITEM 6.   EXHIBITS

The following are exhibits filed as part of the Company's Form 10-QSB for
the period ended March 31, 2006:

Exhibit Number      Description
--------------      --------------------------------------------------------
31.1                Certification of Chief Executive Officer pursuant to
                    Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act
                    of 1934, as adopted pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.

31.2                Certification of Chief Financial Officer pursuant to
                    Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act
                    of 1934, as adopted pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.

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.



                                SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized on the
date indicated.

                                     GREENSHIFT CORPORATION

                                     By: /S/ KEVIN KREISLER
                                     -------------------------------------
                                     KEVIN KREISLER
                                     Chairman and Chief Executive Officer
Date:  May 19, 2006

                                     By: /S/ JAMES GRAINER
                                     -------------------------------------
                                     JAMES GRAINER
                                     President and Chief Financial Officer
Date:  May 19, 2006