Current, Quarterly or Annual Report by a Foreign Issuer — Form 6-K — SEA’34
Filing Table of Contents
Document/ExhibitDescriptionPagesSize
1: 6-K Current Report HTML 16K
2: EX-99.1 Financial Statements HTML 138K
3: EX-99.2 Management's Discussion and Analysis HTML 53K
4: EX-99.3 Miscellaneous Exhibit HTML 6K
5: EX-99.4 Miscellaneous Exhibit HTML 6K
Genoil
Inc. (“Genoil”) was incorporated under the Canada
Business Corporations Act in September 1996. The consolidated
financial statements of Genoil Inc. 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 quoted
on the OTC Markets under the symbol GNOLF. The Company’s
registered address is care of Bennett Jones LLP, Suite 4500, 855 -
2nd Street SW,
Calgary, Alberta.
These
consolidated financial statements have been presented on a going
concern basis. The Company reported a net loss of $323,761 for the
three months ended March 31, 2021. The Company used funds in
operating activities of $96,429 for the three months ended March31, 2021. The Company had a net working capital deficiency of
$2,358,978 on March 31, 2021. The Company had stockholders’
deficit of $7,027,578 on March 31, 2021. These factors indicate
material uncertainties that cast substantial doubt about 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 expanding
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, 2021the Company received
net proceeds of $73,500 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 the United States 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.
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.
F-6
2. SIGNIFICANT ACCOUNTING POLICIES
The
accounting policies set out below have been applied consistently to
all periods presented in these consolidated financial
statements.
(a)
Principles of
Consolidation:
The
consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States
and 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.
Genoil USA Inc.,
incorporated in Delaware, United States, which is a wholly owned
subsidiary of 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. Genoil Emirates LLC is jointly owned by
S.B.K. Commercial Business Group LLC and Genoil. As of March 31,2020, 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
translation
The
reporting currency of the Company is the United States Dollar. The
functional currency of Genoil and its subsidiaries is the United
States Dollar. Transactions denominated in currencies other than
the functional currency are translated at the exchange rates
prevailing at the dates of the transactions. Exchange gains and
losses are reflected in income.
(c)
Use of estimates and judgments
The
preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of
America (GAAP) requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
By their nature, judgments, estimates and assumptions are subject
to measurement uncertainty and changes in such judgments, estimates
and assumptions in future periods could result in a material change
in future financial statements. Actual results may differ from
these estimates.
Judgment
is used in situations where there is a choice or assessment
required by management. Estimates and underlying assumptions are
required on an ongoing basis and revisions are recognized in the
year in which such estimates are revised.
F-7
(d)
Cash and cash
equivalents
The
Company considers all short-term investments with original
maturities of three months or less to be cash
equivalents.
(e)
Stock-based
compensation
The
Company grants common stock, stock options, and Price Appreciation
Certificates to employees, directors, and consultants for various
services rendered to the company. Share-based payments to these
individuals are measured at the fair value of the securities issued
and amortized over the vesting periods. The amount recognized as a
share-based payment expense during a reporting period is adjusted
to reflect the number of awards expected to vest. The offset to
this recorded cost is to contributed surplus. A forfeiture rate is
estimated on the grant date and is subsequently adjusted to reflect
the actual number of options that vest. At the time of exercise,
the consideration and related contributed surplus recognized to the
exercise date are credited to share capital.
(f)
Income tax
Income
tax expense comprises current and deferred tax. Income tax expense
is recognized in profit or loss except to the extent that it
relates to items recognized directly in equity, in which case it is
recognized in equity.
Current
tax is the expected tax payable on the taxable income for the
period, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of
previous years.
Deferred
tax is recognized using the liability method, providing for
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for taxation purposes. Deferred tax is not recognized on the
initial recognition of assets or liabilities in a transaction that
is not a business combination. In addition, deferred tax is not
recognized for taxable temporary differences arising on the initial
recognition of goodwill. Deferred tax is measured at the tax rates
that are expected to be applied to temporary differences when they
reverse, based on the laws that have been enacted or substantively
enacted by the reporting date. Deferred tax assets and liabilities
are offset if there is a legally enforceable right to offset, and
they relate to income taxes levied by the same tax authority on the
same taxable entity, or on different tax entities, but they intend
to settle current tax liabilities and assets on a net basis or
their tax assets and liabilities will be realized
simultaneously.
A
deferred tax asset is recognized to the extent that it is probable
that future taxable profits will be available against which the
temporary difference can be utilized. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that
it is no longer probable that the related tax benefit will be
realized.
(g)
Loss per
share
Basic
earnings (loss) per share is calculated by dividing the income
(loss) attributable to common shareholders of the Company by the
weighted average number of common shares outstanding during the
period. Diluted earnings (loss) per share is determined by
adjusting the income (loss) attributable to common shareholders and
the weighted average number of common shares outstanding for the
effects of dilutive instruments such as stock options and warrants.
The calculation assumes the proceeds on exercise of options and
warrants are used to repurchase shares at the current market price.
All options and warrants are anti-dilutive when the Company is in a
loss position.
(h)
Recent accounting pronouncements:
The
Company has evaluated recent accounting pronouncements and their
adoption has not had and is not expected to have a material impact
on the Company’s financial position or
operations.
F-8
3. DETERMINATION OF FAIR VALUES
A
number of the Company’s accounting policies and disclosures
require the determination of fair value, for both financial and
non-financial assets and liabilities. When applicable, further
information about the assumptions made in determining fair values
is disclosed in the notes specific to that asset or liability. The
Company is required to classify fair value measurements using a
hierarchy that reflects the significance of the inputs used in
making the measurements.
The
fair value hierarchy is as follows:
▪
Level 1 –
quoted prices in active markets for identical assets or
liabilities;
▪
Level 2 –
inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly or
indirectly; and,
▪
Level 3 –
inputs for the asset or liability that are not based on observable
market data.
Cash
and cash equivalents have been measured using level 1
inputs.
The
fair value of cash and cash equivalents, due from related parties,
trade and other payables, accrued interest payable, convertible
notes, and due to related parties approximates their carrying value
due to their short term to maturity.
The
fair values of stock options and Price Appreciation Certificates
are measured using the Black-Scholes pricing model. Measurement
inputs include share price on measurement date, exercise price of
the instrument, expected forfeiture rate (based on historic
forfeitures), expected volatility (based on weighted average
historic volatility adjusted for changes expected due to publicly
available information), weighted average expected life of the
instruments (based on historical experience and general option
holder behavior), expected dividends, and the risk-free interest
rate.
4. DUE FROM RELATED PARTIES
Due from related parties consist of:
March 31,
December 31,
Borrower
2021
2020
Lifschultz
Enterprise Company LLC (an entity controlled by David Lifschultz,
Genoil chief executive officer, and Bruce Abbott, Genoil chief
operating officer)
$159,083
$152,719
Totals
$159,083
$152,719
On July7, 2020, the Company agreed to satisfy a total of $3,875,000 then
owed to David Lifschultz and Bruce Abbott through (1) Company
reduction of a total of $1,676,984 of the Company’s
receivable balances from David Lifschultz and Bruce Abbott (see
above) and (2) Company issuance of new convertible debentures
totaling $2,198,016 to David Lifschultz ($1,099,008) and Bruce
Abbott ($1,099,008). (see Note 6)
The
receivables are non-interest bearing and are due on
demand.
F-9
5. ACCRUED INTEREST PAYABLE TO RELATED PARTIES
Accrued interest payable to related parties consist
of:
March
31,
December
31,
Lender
2021
2020
Lifeschultz
Enterprise Company LLC
$1,287,797
$1,242,826
Sidney
B. Lifschultz 1992 Family Trust (an entity controlled by David
Lifschultz)
465,071
448,830
David
Lifschultz
302,249
262,178
Bruce
Abbott
302,239
262,169
Totals
$2,357,356
$2,216,004
The
accrued interest payable relates to the convertible notes
outstanding (see Note 6).
6. CONVERTIBLE
NOTES
Convertible notes consist of:
March
31,
December
31,
Lender
2021
2020
Lifeschultz
Enterprise Company LLC
$1,499,026
$1,499,026
Sidney
B. Lifschultz 1992 Family Trust
541,353
541,353
David
Lifschultz
1,335,699
1,335,699
Bruce
Abbott
1,335,686
1,335,686
Totals
$4,711,764
$4,711,764
On July7, 2020, the Company agreed to satisfy a total of $3,875,000 then
owed to David Lifschultz and Bruce Abbott through (1) Company
reduction of a total of $1,676,984 of the Company’s
receivable balances from David Lifschultz and Bruce Abbott (see
Note 4) and (2) Company issuance of new convertible debentures
totaling $2,198,016 to David Lifschultz ($1,099,008) and Bruce
Abbott ($1,099,008).
The
notes bear interest at 12% and their maturity was extended on April27, 2020 to August 27, 2022. The notes are convertible into shares
of Genoil common stock at a price of $0.01 per share ($0.015 per
share prior to April 27, 2020).
F-10
7. DUE TO RELATED PARTIES
Due to related parties consist of:
March
31,
December
31,
Creditor
2021
2020
Occupancy
costs payable to Bruce Abbott and David Lifschultz for use of
Mamaroneck New York property from January 1, 2018 to September 30,2020
$46,875
$46,875
Bruce
Abbott
24,657
17,844
Due
to David Lifeschultz
19,229
-
Totals
$90,762
$64,719
The
payables are non-interest bearing and are due on
demand.
On July3, 2020, the Estate of Sidney B. Lifschultz distributed its
$3,750,000 receivable from the Company to David Lifschultz
($1,875,000) and Bruce Abbot ($1,875,000).
On July7, 2020, the Company agreed to satisfy a total of $3,875,000 then
owed to David Lifschultz and Bruce Abbott through (1) Company
reduction of a total of $1,676,984 of the Company’s
receivable balances from David Lifschultz and Bruce Abbott (see
Note 4) and (2) Company issuance of new convertible debentures
totaling $2,198,016 to David Lifschultz ($1,099,008) and Bruce
Abbott ($1,099,008) (see Note 6).
Beginning
on October 1, 2020, the Company agreed to reimburse David
Lifschultz and Bruce Abbott for out-of-pocket expenses that they
incurred on behalf of the Company for occupancy and related costs.
The amount is €10,780, or approximately $12,800 per month and
is split evenly between David Lifschultz and Bruce Abbott. For the
three months ended March 31, 2021, the total expense for this
occupancy arrangement was $38,459.
8.
SHARE
CAPITAL
Preferred
Stock
There
are 10,000,000 shares of Class A Preferred Stock authorized but
none are outstanding.
Common
Stock
There
are an unlimited number of shares of common stock, no par value,
authorized to be issued.
During
the first quarter of 2021, the Company sold a total of 7,450,000
shares of common stock (and warrants) in private placements for
total proceeds of $73,500.
During
the first quarter of 2021, the Company issued a total of 1,300,000
shares of common stock as compensation for services. The fair value
of the shares issued (at dates of issuance) totaled
$26,000.
F-11
Warrants
In
conjunction with the private placements, the Company issued
warrants to purchase common stock. The following is a summary of the warrants activity for the
period December 31, 2019 to March 31, 2021.
At
March 31, 2021, the 136,318,838 warrants outstanding had a weighted
average exercise price of $0.04 per share, a weighted average
remaining contractual life of 2.08 years, and an aggregate
intrinsic value of $0.
9. STOCK-BASED COMPENSATION
Stock-based compensation consists of:
For the Three Months
Ended
March,
31
March,31
Type of Security
2021
2020
Price
Appreciation Certificates
$-
$-
Options
issued to outside directors and consultants
In lieu
of compensation the Company has entered into agreements
(“Price Appreciation Certificates”) with David
Lifschultz and Bruce Abbott whereby, at the request of the
executives, the Company agrees to pay the equivalent sum of the
rise in the Company’s stock price based on the agreed upon
number of shares, from a fixed per share amount to the average of
the last 10 trading days (volume weighted average
price).
The
number of shares reflect a potential salary for the two executives
that only exist if the price of the shares rise above the price
appreciation base amount. The Company has no obligation to pay the
two executives if the stock does not rise. The Company, at its
exclusive option and benefit, can proceed with a private placement
at the share price on the date of exercise and the executive will
subscribe to this private placement for the entire sum advanced by
the Company.
The
Company accounts for these Price Appreciation Certificates as an
equity instrument due to its exclusive option to require a
subscription to a private placement (in an amount equal to the
compensation due to the respective executive). The expense is
measured at the fair value of the instrument at the date of grant
using a Black-Scholes option pricing model.
At
December 31, 2019, the 486,100,000 Price Appreciation Certificates
outstanding had a weighted average exercise price of $0.04 per
share, a weighted average remaining contractual life of 2.84 years,
and an aggregate intrinsic value of $0.
At
December 31, 2020, the 505,400,000 Price Appreciation Certificates
outstanding had a weighted average exercise price of $0.03 per
share, a weighted average remaining contractual life of 3.35 years,
and an aggregate intrinsic value of $0.
At
March 31, 2021 the 505,400,000 Price Appreciation Certificates
outstanding had a weighted average exercise price of $0.03 per
share, a weighted average remaining contractual life of 3.10 years,
and an aggregate intrinsic value of $0.
OPTIONS
The
Company has a stock option plan for directors, officers, employees
and consultants. The term and vesting conditions of each option may
be fixed by the Board of Directors when the option is granted, but
the term cannot exceed 10 years. The maximum number of shares that
may be reserved for issuance under the plan is fixed at 69,819,579.
The maximum number of shares that may be optioned to any one person
is 5% of the shares outstanding at the date of the grant. The
options issued during the three months ended March 31, 2021 all
vested immediately.
The
fair value of stock options granted during the three months ended
March 31, 2021 and 2020 was estimated on the dates of grant using
the Black-Scholes option pricing model based on the following
assumptions:
2021
2020
Volatility
319.60%
228.0%-260.7%
Expected
life
5 years
5 years
Risk-free
rate
0.56%
0.29%-0.66%
Dividend
yield
-
-
Forfeiture
rate
0%
0%
Stock
Price at Valuation
$0.01
$0.01-$0.02
Exercise
Price
$0.01
$0.01
F-13
At
December 31, 2019, the 56,090,000 stock options outstanding had a
weighted average exercise price of $0.06 per share, a weighted
average remaining contractual life of 2.68 years, and an aggregate
intrinsic value of $0.
At
December 31, 2020, the 57,140,000 stock options outstanding had a
weighted average exercise price of $0.05 per share, a weighted
average remaining contractual life of 2.50 years, and an aggregate
intrinsic value of $0.
At
March 31, 2021, the 61,890,000 stock options outstanding had a
weighted average exercise price of $0.05 per share, a weighted
average remaining contractual life of 2.56 years, and an aggregate
intrinsic value of $0.
10. INCOME TAXES
Based
on management’s present assessment, the Company has not yet
determined that a deferred tax asset attributable to the future
utilization of the net operating loss carryforward as of March 31,2021 will be realized. Accordingly, the Company has maintained a
100% valuation allowance against the deferred tax asset in the
financial statements at March 31, 2021. The Company will continue
to review this valuation allowance and make adjustments as
appropriate.
Current
United States income tax laws limit the amount of loss available to
be offset against future taxable income when a substantial change
in ownership occurs. Therefore, the amount available to offset
future taxable income may be limited.
All tax
years remain subject to examination by major taxing
jurisdictions.
11. COMMITMENTS AND CONTINGENCIES
From
2003 to 2017, the Company used a residential property in Larchmont
New York owned by the Estate of Sidney B. Lifschultz (an entity
controlled by CEO David Lifschultz) for office and marketing
purposes. The agreed rental amount for such use was $250,000 per
year, or a total of $3,750,000 for the 15 years. The $3,750,000 was
unpaid and included in “Due to Related Parties” at
December 31, 2019 (see Note 7). On July 3, 2020, the Estate of
Sidney B. Lifschultz distributed its $3,750,000 receivable from the
Company to David Lifschultz ($1,875,000) and Bruce Abbot
($1,875,000).
On July7, 2020, the Company agreed to satisfy a total of $3,875,000 then
owed to David Lifschultz and Bruce Abbott through (1) Company
reduction of a total of $1,676,984 of the Company’s
receivable balances from David Lifschultz and Bruce Abbott (see
Note 4) and (2) Company issuance of new convertible debentures
totaling $2,198,016 to David Lifschultz ($1,099,008) and Bruce
Abbott ($1,099,008) (see Note 6).
From
January 1, 2018 to September 30, 2020, the Company used a
residential property in Mamaroneck New York paid by COO Bruce
Abbott and CEO David Lifschultz for office and marketing purposes.
The agreed rental amount for such use was $15,625 per quarter. As
of March 31, 2021 and December 31, 2020 $46,875 was unpaid and
included in “Due to Related Parties” (see Note
7).
Beginning
on October 1, 2020, the Company agreed to reimburse David
Lifschultz and Bruce Abbott for out-of-pocket expenses that they
incurred on behalf of the Company for occupancy and related costs.
The amount is €10,780, or approximately $12,800 per month and
is split evenly between David Lifschultz and Bruce Abbott. For the
three months ended March 31, 2021, the total expense for this
occupancy arrangement was $38,459.
12. SUBSEQUENT EVENTS
On
April 14 2021, the Company granted a total of 60,000,000 Price
Appreciation Certificates to the CEO and COO as compensation for
services. The fair value of the Price Appreciation Certificates (at
date of issuance) totaled $599,784 and was estimated using the
Black-Scholes option pricing model based on the following
assumptions: (1) stock price of $0.01 per shares, (2) exercise
prices of $0.01 per share, (3) expected volatility of 318.4%, (4)
expected term of 5 years, (5) risk-free interest rate of 0.87%, and
(6) dividend rate of 0%.
F-14
Dates Referenced Herein and Documents Incorporated by Reference
