GNOLF Genoil Inc (PK)

---

 

UNITED STATES

Exhibit
99.1	Consolidated Financial Statements March 31, 2015 and 2014

		Genoil Inc.
		(Registrant)
Date: December 14, 2015	By:	/s/ David Lifschultz
	Name:	David Lifschultz
	Title:	CEO

SEC 1815 (04-09)	Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

---

Exhibit 99.1

Consolidated Financial Statements

March 31, 2015 and 2014

 

 

 

 

 

 

 

1. REPORTING ENTITY AND GOING CONCERN

 

Genoil Inc. ("Genoil") was incorporated under the Canada Business Corporations Act in September 1996. The consolidated financial statements of Genoil Inc. at March 31, 2015 comprise Genoil Inc. and its subsidiaries, Genoil USA Inc., Genoil Emirates LLC ("Emirates LLC") and Two Hills Environmental Inc. ("Two Hills") (collectively the "Company"). The Company is a technology development company focused on providing innovative solutions to the oil and gas industry through the use of proprietary technologies. The Company's business activities are primarily directed to the development and commercialization of its upgrader technology, which is designed to economically convert heavy crude oil into light synthetic crude. The Company is listed on the TSX Venture Exchange under the symbol GNO as well as the Nasdaq OTC Bulletin Board using the symbol GNOLF.OB. The Company's registered address is care of Bennett Jones LLP, Suite 4500, 855 - 2^nd Street SW, Calgary, Alberta.

These consolidated financial statements have been presented on a going concern basis. The Company reported a net loss of $107,777 (2014 - $153,271) and used funds for operating activities of $73,685 (2014 - $62,746) for the three month period ended March 31, 2015. The Company had a net working capital deficiency of $4,338,109 ($4,115,103 at December 31, 2014) and a cumulative deficit of $87,636,244 ($87,528,467 at December 31, 2014) as at March 31, 2015. These factors indicate material uncertainties that cast significant doubt about to the Company's ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on commercializing its technologies, achieving profitable operations and obtaining the necessary financing in order to develop these technologies further. The outcome of these matters cannot be predicted at this time. The Company will continue to review the prospects of raising additional debt and equity financing to support its operations until such time that its operations become self-sustaining, to fund its research and development activities and to ensure the realization of its assets and discharge of its liabilities. While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate sufficient funds for future operations.

The Company is not expected to be profitable during the ensuing twelve months and therefore must rely on securing additional funds from either issuance of debt or equity financing for cash consideration. During the three months ended March 31, 2015, the Company received net cash proceeds of $9,865 (2014 - $13,925) pursuant to financing activities.

Management, utilizing close personal relationships, has been successful in raising capital through periodic private placements of the Company's common shares. Although these shares are subject to a "hold" period on both the United States and Canadian stock markets, the investors' confidence in the undertakings of management, with respect to future positive market performance of the Company's common stock, permits this avenue of financing to exist. External sources of debt financing are not available to the Company due to its precarious financial position.

1.

REPORTING ENTITY AND GOING CONCERN (CONTINUED)

The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should the Company be unable to continue its operations. Such adjustments could be material.

2.

BASIS OF PREPARATION

(a)	Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and the Interpretations of the IFRS Interpretations Committee ("IFRIC") and in effect at the closing date of March 31, 2015. These consolidated financial statements were authorized for issue by the Board of Directors on December 13, 2015.

(b)	Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars ("CAD"), which is Genoil's functional currency and presentation currency. The functional currencies of the Company's subsidiaries are as follows:

 

Genoil USA Inc.	USD
Genoil Emirates LLC	USD
Two Hills Environmental Inc.	CAD

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

(a)	Basis of Consolidation:

The consolidated financial statements incorporate the financial statements of Genoil and entities controlled by it. Control is achieved where Genoil has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

 

3.

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Genoil has the following subsidiaries:

§

Genoil USA Inc., incorporated in Delaware, United States, which is a wholly-owned subsidiary of the Genoil.

§

Genoil Emirates LLC, incorporated in the United Arab Emirates, which will focus upon the fields of oil and water processing and treatment in the United Arab Emirates. Emirates LLC is jointly-owned by S.B.K. Commercial Business Group LLC and Genoil. As at December 31, 2013, Emirates LLC had not yet commenced operations and holds no assets.

§

Two Hills Environmental Inc., incorporated in Canada and registered in Alberta, which is a wholly-owned subsidiary of Genoil. Two Hills was formed to enter into the oilfield waste disposal industry by capitalizing upon its current undeveloped asset base. The asset base comprises a site under which three salt caverns have been formed in the Lotsberg Formation beneath the earth's surface. Such caverns are used in the oilfield disposal industry as a destination for oilfield wastes.

The financial results of Genoil's subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed where necessary to align them with the policies adopted by Genoil.

Intercompany balances and transactions, and any unrealized income and expenses arising from intercompany transactions, are eliminated in preparing the consolidated financial statements.

(b)	Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Generally, foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an operation's functional currency are recognized in the consolidated statement of loss and comprehensive loss.

(c)	Cash and cash equivalents

Cash includes cash on hand and cash at banks. Cash equivalents include short term deposits held in money market funds with original maturities of less than three months and that are not subject to any risk of change in value.

3.

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d)	Trade and other receivables

Trade and other receivables, except for taxes prepaid and advances to suppliers, are initially recognized at fair value and subsequently accounted at amortized cost using the effective interest method less provision for impairment of such receivables. Taxes prepaid and advances to suppliers are accounted for at actually paid amounts. A provision for impairment of trade and other receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. An allowance is made for all receivables outstanding in excess of 90 days. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The amount of the provision is recognized in profit or loss. The primary factors that the Company considers whether a receivable is impaired is its overdue status.

(e)	Property and equipment

Property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost is determined as the expenditure directly attributable to the asset at acquisition, only when it is probable that future economic benefits will flow to the Company and the cost can be reliably measured. When an asset is disposed of, its carrying cost is derecognized. All repairs and maintenance costs are charged to profit or loss during the financial period in which they are incurred.

Depreciation over the estimated useful life of assets is provided on the following bases and annual rates:

Type	Method	Rate
Office Equipment	Straight line	5 years
Upgrader	Straight line	15 years
Crystal Sea Test Unit	Straight line	15 years

The Company allocates the amount initially recognized in respect of an item of property and equipment to its significant components and depreciates separately each such component, where applicable. The estimated residual value and useful lives of the property and equipment are reviewed at the end of each reporting period and adjusted if required.

The gains or losses on disposal of an item of property or equipment are determined by comparing the proceeds from disposal with the carrying amount of the property and equipment and are included in profit or loss.

(f)	Intangible assets

Intangible assets acquired outside business combinations are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated depreciation and any accumulated impairment losses. Internally generated intangible assets are not capitalized and the expenditure is reflected in profit or loss.

 

 

 

3.

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangible assets resulting from an acquisition are recorded at fair value. Fair value is estimated by management based on the expected discounted future cash flows associated with the intangible asset. Intangible assets with a finite life are amortized over the estimated useful life and intangible assets with an indefinite life are not subject to depreciation. Intangible assets are tested for impairment at each reporting period. Any impairment is identified by comparing the fair value of the intangible asset to its carrying value. Any excess of the carrying value of the intangible asset over the implied fair value is the impairment amount and will be charged to profit or loss in the period of the impairment.

Patents and technology rights are recorded at cost and are amortized at 10% on a declining-balance basis.

 

4. INTANGIBLE ASSETS

 

		Technology Rights		Patents		Mineral Rights		Total
Cost of deemed cost
As at December 31, 2013		2,095,518		713,061		1,628,685		4,437,264
Additions		-		-		-		-
Impairment		-		-		-		-
As at December 31, 2014	$	2,095,518	$	713,061	$	1,628,685	$	4,437,264
Additions		-		-		-		-
Impairment		-		-		-		-
As at March 31, 2015	$	2,095,518	$	713,061	$	1,628,685	$	4,437,264

Accumulated amortization and impairment
As at December 31, 2013		2,095,518		656,324		1,628,685		4,380,527
Amortization		-		5,674		-		5,674
Impairment		-		-		-		1,671,236
As at December 31, 2014	$	2,095,518	$	661,997	$	1,628,685	$	4,386,201
Amortization		-		1,418		-		1,418
Impairment		-		-		-		-
As at March 31, 2015	$	2,095,518	$	663,415	$	1,628,685	$	4,387,619

Net book value
As at December 31, 2014	$	-	$	51,064	$	-	$	51,064
As at March 31, 2015	$	-	$	49,646	$	-	$	49,646

 

 

5. PROMISSORY NOTES

As at March 31, 2015, there are three outstanding promissory notes which are past due. The aggregate note balance, including accrued interest, totaled $104,803 at March 31, 2015. The terms of these promissory notes are as follows:

	Principal	Interest rate	Accumulated interest	Ending balance
Promissory note 1	$51,759	-	$Nil	$51,759
Promissory note 2	US$25,000	12%	US$8,094	$35,414
Promissory note 3	$15,686	12%	$1,984	$17,630

 

6. CONVERTIBLE NOTES

 

		Series A				Series E				Series F				Total
Balance, December 31, 2013		$	152,313			$	2,060,288				-			$	2,212,601
Accretion			18,868				-				-				18,868
Partial conversions			-				(315,000	)			-				(315,000	)
Interest accrued			-				250,675				-				250,675
Balance, December 31, 2014		$	171,181			$	1,995,963				-			$	2,167,144
Accretion			-				-				4,717				4,717
Reclassification			(171,181	)			-				171,181				-
Interest accrued			-				-								-
Balance, March 31, 2015		$	-			$	1,995,963			$	175,898			$	2,171,861

Series A

The remaining series A convertible notes are non-interest bearing and have an outstanding principal of $153,213. The maturity date was December 23, 2014. The Company will continue to record accretion at the original effective interest rate of 12% up to the maturity date. At the holder's option, the notes may be converted to common shares of the Company at a rate of $0.44 per share at any time prior to maturity. The convertible note may also be converted at the Company's option if the Company's common share trading price exceeds $1.55 per share for 30 consecutive trading days during the term of the note.  On January 1, 2015 the series A convertible notes were superseded by series F convertible notes with the same principal value.

 

 

6. CONVERTIBLE NOTES (Continued)

Series E

The series E convertible notes carry interest at 12% per annum, accrued semi-annually, and are convertible into common shares of the Company at the option of the holder. The outstanding principal balance at March 31, 2015 is $912,356 (December 31, 2014 - $1,227,356) and the difference between the principal and book value represents accrued interest. Interest accruing in 2014 and 2015 has been classified as accounts payable and accrued expenses.  Prior to the 2014 fiscal year, accrued interest was added to the note account balance.  Approximately 32% of the amount is due to companies controlled by the Chairman and CEO. The notes had an original maturity date of October 6, 2009 and an original conversion price of $0.27 per share. The maturity date was extended to October 6, 2010 and then again to October 6, 2011.

In July 2012, the Company received regulatory approval to extend the maturity date to October 6, 2013. The extended notes continue to carry interest at 12% per annum, accrued semi-annually, and are convertible into common shares of the Company at $0.10 per share at the option of the holder. As a result of the change in the conversion price, a loss of $844,533 has been recorded.

On November 15, 2013, the Company extended the notes for another two years maturing on October 6, 2015. The extended notes continue to carry interest at 12% per annum, accrued semi-annually, and are convertible into common shares of the Company at $0.015 per share at the option of the holder. As a result of the change in the conversion price, a loss of $2,526,742 has been recorded in the current year.

Series F

The series F convertible notes carry interest at 12% per annum, accrued semi-annually, and are convertible into common shares of the Company at the option of the holder. The outstanding principal balance at March 31, 2015 is $175,898. Interest accruing in 2014 and 2015 has been classified as accounts payable and accrued expenses.  Prior to the 2014 fiscal year, accrued interest was added to the note account balance.  Approximately 32% of the amount is due to companies controlled by the Chairman and CEO. The notes have a maturity date of January 1, 2018 and a conversion price of $0.015 per share.

7. SHARE CAPITAL

(a)	Authorized

Unlimited number of common shares without par value

10,000,000 Class A Preferred shares, issuable in series, none of which are outstanding

(b)	Issued and outstanding common shares

		Number				Amount
Balance, December 31, 2013			381,208,834			$	59,179,822
Private placements (i), (ii)			24,142,668				360,650
Share issue expenses			-				-
Balance, December 31, 2014			405,351,502			$	59,540,472
Private placements			-				360,650
Share issue expenses			-				-
Balance, March 31, 2015			405,351,502			$	59,540,472

(i)

In March 2014 the Company issued 3,042,668 shares of common stock at $0.015 CAD per share for total gross proceeds of $45,650, and granted 3,042,668 warrants with a strike price of $0.05 CAD in connection with the share issuance.

(ii)

In March 2014 the Company issued 21,100,000 shares of common stock at a price of $0.015 USD per share to settle $316,500 in debt as part of shares for debt settlement agreements with various parties for consulting services performed.

The warrants issued in US dollars represented a derivative financial instrument recognized at fair value on the date of issuance with the remainder of the proceeds attributed to the derivative liability.

As at December 31, 2015, the derivative component was determined to be $573,799 (December 31, 2014 - $629,610). The fair value adjustment on derivative liability was a gain of $55,811 (loss of $19,411 for the three months ended March 31, 2014) which represents the movement in the fair value of the derivative liability during the period plus the net issuance/exercise of warrants of $-0- (2014 - $-0-).

(iii)

7.

SHARE CAPITAL (Continued)

The fair value of warrants issued during the three months ended March 31, 2015 and the 2014 fiscal year were estimated on the dates of grant using the Black-Scholes pricing model based on the following assumptions:

	2015	2014
Volatility	177%	183%
Expected life	4.75 years	5 years
Risk-free rate	1.74%	1.74%
Dividend yield	-	-
Weighted average fair value	$0.02	$0.02

8.

SUBSEQUENT EVENTS

the Company's management has reviewed all material events and there are no additional material subsequent events to report.

 

---