PART I
Item 1.
Identity of Directors, Senior Management and
Advisers
A. Directors and senior
management.
Not
required as this is an annual report under the Exchange Act.
B. Advisers.
Not
required as this is an annual report under the Exchange Act.
C. Auditors.
Not
required as this is an annual report under the Exchange Act.
Item 2.
Offer Statistics and Expected Timetable
Not
required as this is an annual report under the Exchange Act.
A. Selected financial
data.
Genoil
Inc.'s ("Genoil" or the "Corporation") financial statements are
prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) and
the standards of the Public Company Accounting Oversight Board
(United States). The following summary financial data should be
read together with the Consolidated Financial Statements and the
respective notes and the other information contained in this
document.
The
following selected consolidated financial data as of December 31,
2020, 2019, 2018, 2017 and 2016 and for the years ended December
31, 2020, 2019, 2018, 2017 and 2016 have been derived from Genoil's
audited Consolidated Financial Statements, which are included with
this document. The selected financial data for the years ended
December 31, 2020, 2019, and 2018, 2017 and 2016 is presented in
accordance with accounting principles generally accepted in the
United States of America (“GAAP”).
Genoil's
Consolidated Financial Statements are stated in United States
Dollars ("US$" or "$"). All dollar amounts provided in this annual
report are in United States Dollars unless otherwise
stated.
Selected
Consolidated Financial Information
(All
amounts in US dollars, except 2016 which is Canadian
dollars)
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Revenue
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-
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-
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-
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-
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-
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Income
(Loss) from continuing operations
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|
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Income
(Loss) for the period
|
(3,822,753)
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(3,294,314)
|
(7,323,820)
|
(6,720,177)
|
(1,112,137)
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|
|
|
|
|
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Income
(Loss) per share from continuing operations: Basic and
diluted
|
(4,256,284)
|
(3,632,162)
|
(7,422,318)
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(6,265,070)
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(1,986,724)
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|
|
|
|
|
|
|
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Income
(loss) per share: Basic and diluted
|
(0.01)
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(0.01)
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(0.01)
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(0.01)
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0.00
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Total
assets
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(0.01)
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(0.01)
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(0.01)
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(0.01)
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0.00
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|
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Net
assets
|
199,276
|
1,720,148
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1,663,070
|
992,876
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1,019,374
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Share
Capital
|
(6,863,296)
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(6,511,239)
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(6,167,969)
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(6,677,165)
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(3,687,065)
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Number
of Shares Outstanding
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596,178,029
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547,303,029
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532,312,029
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503,793,613
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465,397,192
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|
|
|
|
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|
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Value
|
50,460,594
|
49,847,884
|
49,463,347
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47,803,672
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61,660,886
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Retained
earnings (deficit)
|
(92,507,622)
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(88,251,338)
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(84,619,176)
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(77,196,858)
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(88,630,931)
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To
date, the Corporation has not issued any dividends to
shareholders.
Number
of Shares Issued
|
|
|
|
|
|
|
|
|
|
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Shares
outstanding
|
596,178,029
|
547,303,029
|
532,312,029
|
503,793,613
|
465,397,192
|
|
Shares
issued
|
48,875,000
|
14,991,000
|
28,518,416
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38,396,421
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45,721,520
|
B. Capitalization and
indebtedness.
Not
required as this is an annual report under the Exchange Act.
C. Reasons
for the offer and use of proceeds.
Not
required as this is an annual report under the Exchange Act.
D. Risk
factors.
Going Concern
To date
Genoil has not attained commercially viable operations from its
various patents and technology rights.
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.
General Risk Factors
An
investment in the Corporation's common shares ("Common Shares")
should be considered highly speculative. In addition to other
information in this Form 20-F, you should carefully consider the
following factors when evaluating Genoil and its
business.
Much of
the information included in this annual report includes or is based
upon estimates, projections or other "forward-looking statements".
Such forward-looking statements include any projections or
estimates made by the Corporation and its management in connection
with its business operations. While these forward-looking
statements, and any assumptions upon which they are based, are made
in good faith and reflect Genoil's current judgment regarding the
direction of its business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections,
assumptions or other future performance suggested in this
document.
The
section that follows addresses several of the risk factors related
to the Corporation's operations in more detail.
Genoil
has a history of substantial losses and negative cash flows. It
expects these losses and negative cash flows to continue in the
future. If it is unable to make a profit, the Corporation may not
be able to continue to operate its business.
Genoil
has not earned profits to date and it may not earn profits in the
future. Profitability, if achieved, may not be sustained. The
commercialization of its technologies requires financial resources
and capital infusions and future revenues may not be sufficient to
generate the funds required to continue its business development
and marketing activities. If the Corporation does not obtain
sufficient capital to fund its operations, it may be required to
forego certain business opportunities or discontinue operations
entirely.
Genoil
has incurred significant losses and expects to continue to incur
significantly greater costs than revenue received. Consequently,
the Corporation expects to incur losses in the near term. If Genoil
achieves profitability, it may not be able to sustain it. The
business of initiating, developing and implementing inventive or
innovative processes is inherently risky. Manpower and capital
employed may not result in the development of a commercial or
economic process. Once successfully developed, there is no
certainty that the intended market will be receptive to the
Corporation's technology. In all areas of its business, Genoil may
compete against entities that may have greater technical and
financial resources. The Corporation is completely dependent upon
external sources of financing which may not be available on
acceptable or economic terms.
The
intellectual property and technology developed by Genoil may not
work in the manner anticipated or the market may not be receptive
to its technology or other new technologies might be more feasible
to implement.
Genoil
develops technology for use in various industries. Part of the risk
in this type of undertaking is that the technology may not perform
as expected or its use may not be economical. The development of
intellectual property is expensive and time consuming and if the
developed product is not marketable, then no revenues will be
realized from its development.
The
marketability of Genoil's technologies depends on the ability of
those technologies to meet and adapt to the needs of industry
customers. The markets for Genoil's technologies may not develop
further and the current level of market acceptance of its products
may decrease or may not be sustainable. In order to continue
marketing its technology, the Corporation must adapt to rapid
changes in technology and customer requirements. The Corporation's
success will depend, in part, on its ability to enhance its
existing technology, gain market acceptance, and continue to
develop its products to meet increasingly demanding customer
requirements.
Genoil's
technology is still experimental so the demand for it is unknown.
The Corporation's potential market may not develop as it
anticipates and, accordingly, it may not be able to expand its
business or operate it profitably.
The
Corporation's technology has not been proven in any commercial
venture and, as such, any market for its technology will depend
significantly on its own efforts. As a result, future demand for
its technology is unknown. Genoil believes that many of its
potential customers are not fully aware of the benefits of its
technology. The Corporation must educate potential customers
regarding these benefits and convince them of its ability to
provide complete and reliable services. The market for its
technology may never become viable or grow further. If the market
for its technology does not grow or grows more slowly than it
currently anticipates, its business, financial condition and
operating results would be materially adversely
affected.
Key
contractors may terminate their engagements.
Skilled
and educated professionals are a fundamental component of the
development of intellectual property. If these key contractors
terminate their engagements with Genoil, the development of its
intellectual property may be hindered or delayed, increasing the
expenses associated with technology development. The Corporation's
success is dependent on the services of members of its senior
management team. The experience and talents of this team will be a
significant factor in its continued success and growth. The loss of
any senior management member could have a material adverse effect
on its operations and business prospects. Given its financial
situation, Genoil may not be able to retain or replace its key
personnel. The Corporation has no key man insurance.
Genoil
has issued common share purchase warrants, options, price
appreciation certificates(PACs) and convertible debt, the
conversion and/or exercise of which would have a dilutive effect on
its earnings per share.
As of
December 31, 2020, the following potentially dilutive instruments
were outstanding:
|
Warrants
|
130,668,838
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|
Options
|
57,140,000
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|
PACs
|
505,400,000
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Notes
|
471,176,400
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1,164,385,238
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Shares
o/s
|
596,178,029
|
|
Pot'l
Dil'n
|
195%
|
Furthermore, the
Corporation may enter into commitments in the future which would
require the issuance of additional Common Shares, and it may grant
additional stock options. The Corporation is authorized to issue an
unlimited number of Common Shares. Genoil issues Common Shares for
the purpose of raising funds for general working capital
requirements, to acquire additional technology, to accommodate
strategic partnerships, or for the satisfaction of
debts.
Third
parties may claim that Genoil infringes their proprietary
rights.
Genoil
potentially may be subjected to claims that it has infringed the
intellectual property rights of others. As the number of products
in the oil and gas technology industry increases, the Corporation
may become increasingly subject to infringement claims, including
patent and copyright infringement claims. In addition, previous
employers of its former, current or future employees may assert
claims that such employees have improperly disclosed to Genoil the
confidential or proprietary information belonging to those
employers. Any such claim, with or without merit, could be time
consuming to defend, result in costly litigation, divert
management's attention from its core business, require it to stop
selling or delay shipping, or cause the redesign of its product. In
addition, Genoil may be required to pay monetary amounts as
damages, for royalty or licensing arrangements, or to satisfy
indemnification obligations that it has with some of its
customers.
Genoil
may not be able to protect its proprietary
information.
Genoil
relies on a combination of copyright, patents and trade secret
laws, confidentiality procedures, contractual provisions and other
measures to protect its proprietary information. All of these
measures afford only limited protection. These measures may be
invalidated, circumvented or challenged, and others may develop
technologies or processes that are similar or superior to the
Corporation's technology. Despite its efforts to protect its
proprietary rights, unauthorized parties may attempt to copy
Genoil's products or to obtain or use information that it regards
as proprietary. Given its size and financial situation, Genoil may
not be ultimately effective in preventing misappropriation of its
proprietary rights.
Genoil's
intellectual property may become outdated or surpassed by industry
improvements.
Genoil
is a technology-based company and is involved in developing,
improving, and marketing its technology to customers. There is a
risk that new developments in Genoil's field of specialty will
arise, making its technology products less marketable. To enhance
its position in the technology industry, the Corporation must
continue to develop and improve its current products and develop
product extensions. There may not be a demand for the products or
capital available to finance their development in the
future.
Genoil
operates in a competitive market.
The
business of providing technology-based solutions to industry is
highly competitive. Some of Genoil's competitors may have greater
financial and marketing resources, greater market share and name
recognition than it has, which would allow them to quickly develop
market presence in the markets Genoil serves or allow them to
expand into new markets that Genoil intends to serve. Given its
size and financial position, the Corporation may not be able to
effectively compete with these competitors.
Potential
expansion and opportunities may arise.
Genoil
may continue to expand its operations or product lines through the
acquisition of additional businesses, products or technologies. It
may not be able to identify, acquire or profitably manage
additional businesses or successfully integrate any acquired
businesses, products or technologies without substantial expenses,
delays or other operational or financial challenges. Furthermore,
acquisitions may involve a number of additional risks, including
the diversion of management's attention, failure to retain key
personnel, unanticipated events or circumstances and legal
liabilities, some or all of which could have a material adverse
effect on Genoil's business, results of operations and financial
condition. In addition, acquired businesses, products or
technologies, if any, may not achieve anticipated revenues and
profitability. Acquisitions could also result in potentially
dilutive issuances of equity securities. The Corporation's failure
to manage its acquisition strategy could have a material adverse
effect on its business, results of operations and financial
condition.
U.S.
investors may have difficulty enforcing judgments against Genoil or
its management.
Genoil
is incorporated in Canada. Substantially all of its assets are
located outside the United States. As a result, U.S. investors may
not be able to:
●
effect
service of process upon the Corporation or these persons within the
United States; or
●
enforce
against the Corporation or these persons in United States courts,
judgments obtained in United States courts, including judgments
predicated on the civil liability provisions of the federal
securities laws of the United States; or
●
initiate
a derivative suit on the Corporation's behalf.
Item 4.
Genoil's Information
A. Genoil's
history and development.
The Company
Genoil
was created from an amalgamation on September 5, 1996 under the
Canada Business Corporations
Act of Genoil Inc. and Continental Fashion Group Inc., a
public company whose shares traded on the Alberta Stock Exchange.
At the time of the merger, Continental Fashion Group Inc. had no
assets, no liabilities and did not carry on any
business.
The
address of its head office is
One Rockefeller Center
11th Floor
New York, NY 10020
and its
phone number is 212-688-8868.
Recent History
2018
On
April 4, 2018, the Company signed an agreement to attract finances
and evaluate technologies to develop oil and gas fields in the
Astrakhan Region of Russia. This agreement is with the license
holder of this property; JSC Petroleumgas Company commonly known as
"AFB".
On
April 9, 2018, the Company, announced that high sulfur crude oil
samples from Pemex (the Mexican State-owned petroleum company) have
arrived at Genoil's engineering headquarters in Russia and that the
demonstration will be conducted soon in the presence of Pemex
engineers at our state-of-the-art multipurpose demonstration
facility hosted by the UFA Scientific Research Institute of
Petroleum Refining and Petrochemistry located in Bashkortostan.
Technical viability has already been proven and the purpose of this
commercial demonstration run will validate to Pemex the strength of
the economic model created by the Genoil Hydroconversion Process
from upgrading Pemex's heavy high sulfur crude oil into valuable
light sweet, low sulfur crude oil. The feedstock demonstration will
also support the engineering and design of a large-scale commercial
GHU facility currently under evaluation by Genoil, to be
constructed at the commercial crude center - Palomas in Veracruz
Mexico, and additional regions of Mexico as well as other target
project locations around the world. Genoil's engineering team is
being led by Raushan Telyashev, formerly General Director of Lukoil
and in charge of the all Lukoil design and R&D institutes for
downstream at the second largest oil company in Russia. In 2012,
Raushan was responsible to review all Lukoil Komi upgrading
solution strategies, had met with Genoil and had been advising the
lead team that had previously endorsed the successful demonstration
of Genoil's GHU process on Lukoil Komi crude oil. Future planned
demonstration runs shall create significant hard data that support
our industry-leading EPC partners as we work toward basic
engineering designs for commercial implementation. Correlations
with previous tests shall confirm, liquid yield output, reduction
of sulfur, acidity, metals and CAPEX costs.
On
September 5, 2018, the Company announced that Genoil will begin
testing of Pemex Heavy Crude Oil upgrading at our demonstration
facility in Russia. Our engineers will activate the catalyst and
will set up for the test which commenced on September 10, 2018.
Genoil will also prepare for a second test.
On
November 19, 2018, Genoil
announced that the corporation has signed an additional contract to
represent the Velikoye oil field on behalf of JSC PetroleumGas
"AFB" to investors. Genoil has already begun discussions with
several financing sources in Russia as well as a few different
interested oilfield services providers all of whom expect major
financial sponsorship from China on this project. Genoil is to earn
a fee for bringing investment to AFB.
On
November 21, 2018, the Company announced that Emile Heskey the
former professional footballer from the United Kingdom joined
Genoil to lead the company's business development in the Caribbean
region. Mr. Heskey will work through Genoil to raise finance for
much needed reconstruction of Islands affected by Hurricane Irma
and to help the local economies to get back on their feet. He will
assist Genoil in the entire Caribbean region to source project
opportunities where Genoil and our partner companies can do energy
related development and reconstruction work. Emile has a
relationship with many people in Antigua including Prime Minister
Gaston Browne who has met with the UK Secretary of State about
funding reconstruction of their Islands. The Antiguan government
had recently considered building a small refinery and Genoil
intends to reopen these important discussions.
2019
On June
12, 2019, the Company announced that Lic. José E. García
Torres, Legal Representative of the company Genoil Inc. and Dr.
Fernando Castrejón Vacio, Director of Product Technology of
the Instituto Mexicano del Petroleo "IMP", met to sign a Memorandum
of Understanding, which seeks to establish guidelines for
cooperation between Genoil and the IMP to jointly team up to
develop business opportunities in matters of improvement of heavy
and extra-heavy oils in Mexico. The interest of this Memorandum
includes the joint search for business opportunity, as well as the
development of potential investments in service projects, the
scaling of products, provision of technological services,
consulting and specialized advice, promotion of investment,
specialized training and marketing in everything related to the
Processing of Heavy Crude Oil, as well as for the process of
Hydrotreating. Also present for the signing ceremony was Dr. Jorge
Ancheyta Juárez, Product Manager for the Transformation of
Crude of IMP and Genoil engineer Mario Alberto Carreón
Rascón.
On July
3, 2019, the Company signed an advisory fee agreement with
Tuimaada-Neft, which is a leading oil and gas company in Russia
with an estimated 850 million tons of oil equivalent. This
agreement builds from our previous LOI that was signed in the
fourth quarter 2017. Genoil will advise and possibly have a
significant role in these development projects, which will include
EPC (engineering, procurement and construction), equity and debt
financing, oil field services, as well as oil field operations and
natural gas development.
On
October 7, 2019, the Company announces that the largest bank in
China and the largest bank in the world by total assets, deposits,
loans, number of customers and number of employees has been
formally retained. They have been working for the past several
months to bring strategic investors and finance for development the
massive Velikoye oil field in Russia.
On
October 10, 2019, the Company announced that Andrey Sergeev is
joining Genoil Inc. (the "Company"), through its United States
subsidiary, as Chief Geologist. Mr. Sergeev is a highly experienced
geologist whose worldwide career has led him to be well-regarded by
his peers throughout the industry.
2020
Genoil
grew its engineering team with the addition of Senior Vice
President of Engineering and Projects, Mr. Slavko Scepanovic, who
over his 30 year career has gained valuable experience, project
management and finance, raising over a billion dollars for energy
projects. He was the deputy director of Optima Group, since 2008.
Slavko, an expert in financing projects, worked with Zarubezhneft
to create the Optima division raising in excess of a billion
dollars for them. He has worked on many oil and gas projects in the
Russian Federation as well. He conducted technical feasibility
studies to determine conditions of financing and to provide funding
for those projects.
John I.
Novak has returned as a special advisor to Genoil. John has more
than 25 years of technical and senior management experience within
satellite communications at GM Hughes Electronics. Mr. Novak served
as Chief Business Strategist of Hughes, where he was responsible
for identifying and developing new business campaigns. He is
regularly advising Genoil’s top management and is an integral
part of new business development in Europe. He is responsible for
introducing Genoil to Munich Capital Partners who in turn
introduced Genoil to two refineries in Germany. The parties are in
discussions with Genoil to develop a refining project utilizing the
Genoil GHU technology.
Leslie
Vanderpool has also joined Genoil’s advisory board. Leslie
has extensive contacts in the financial world. She will assist
Genoil in introducing Genoil to large funds, assist in business
development and public relations. Leslie also knows many bankers,
industrialists and oil drillers. She will use many of her contacts
to generate interest in Genoil.
JR
Owens joined Genoil as Vice President and Chief Operating Officer
of Genoil USA focusing on North America. JR is President of Cat
Bottoms Fuel FS INC. ‘J.R.’ has more than thirty-four
years of oil industry experience as a consultant, global sourcing
advisor, loss control specialist, terminal manager and
trader.
Viscount (Lord)
Torrington joined Genoil as an advisory board member. He graduated
as a geologist from Oxford University in 1964 and after ten years
in the mining industry, largely in Southern Africa with Anglo
American Corporation and Lonrho, he became CEO of the Attock Oil
Company (later Anvil Petroleum), subsequently serving as Chairman
of Expro North Sea, a major UK-based international service
company.
Lord
Torrington also served on the House of Lords European Communities
Energy Committee, chairing it from 1984 to 1987. He is currently a
non-executive Director of Lansdowne Oil & Gas PLC and involved
in wildlife charities in Africa. Mr. Torrington’s career has
involved technical, administrative and financial roles in the
worldwide natural resources industries and contact or negotiation
with financial institutions and governments on all
continents.
On July
7, 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 and (2)
Company issuance of new convertible debentures totaling $2,198,016
to David Lifschultz ($1,099,008) and Bruce Abbott
($1,099,008).
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 year
ended December 31, 2020, the total amount was $38,459.
During
the first quarter of 2020, the Company sold a total of 20,950,000
shares of common stock (and warrants) in private placements for
total proceeds of $209,480.
During
the first quarter of 2020, the Company issued a total of 3,375,000
shares of common stock as compensation for services. The fair value
of the shares issued (at dates of issuance) totaled
$69,750.
During
the second quarter of 2020, the Company sold a total of 8,550,000
shares of common stock (and warrants) in private placements for
total proceeds of $85,490.
During
the second quarter of 2020, the Company issued a total of 150,000
shares of common stock as compensation for services. The fair value
of the shares issued (at dates of issuance) totaled
$1,500.
During
the third quarter of 2020, the Company sold a total of 7,950,000
shares of common stock (and warrants) in private placements for
total proceeds of $75,500.
During
the third quarter of 2020, the Company issued a total of 2,800,000
shares of common stock as compensation for services. The fair value
of the shares issued (at dates of issuance) totaled
$120,000
During
the fourth quarter of 2020, the Company sold a total of 5,100,000
shares of common stock (and warrants) in private placements for
total proceeds of $50,990.
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 year
ended December 31, 2020, the total amount was $38,459.
B. Business
overview.
General Development of the Business
Genoil's principal
business is the development of technologies relating to the oil and
gas industry. Its present goal is to commercialize its technologies
internationally.
The
Corporation owns rights to several patented and proprietary
technologies. A number of products that have been created from
these technologies are under development. None of its technologies
have been commercialized. A discussion of these products
follows.
No
consideration has been given to consumer boycotts as a result of
operations in Countries of Particular Concern as defined by the
International Religious Freedom
Act of 1998. Genoil is a Canadian company and as such the
International Religious Freedom
Act of 1998 does not apply to its operations. The
Corporation does not produce consumer products.
Genoil
formed a corporation in the Middle East with SBK Commercial
Business Group in the United Arab Emirates. The corporation is
named “Genoil Emirates”.
The
purpose of this new corporation is to create projects in the U.A.E.
for all of Genoil’s technologies, including: desulfurization,
oil upgrading and recycling, water purification port technologies,
well testing, and sand cleaning. Currently the United Arab Emirates
has the seventh largest oil reserves in the world and is looking to
expand production.
The
Genoil Emirates joint venture between Genoil and SBK Commercial
Business Group has significant promise. Genoil Emirates has
established its head office in Riyadh, 11321 Kingdome of Saudi
Arabia. The address is Building B, Near Gulf Commercial Complex
Olaya, P.O. Box: 230032. It also has a branch location at Khober
DAMAM, Block 7 Office 32 Khober, Telephone: +96614633181 Facsimile:
+96614664763.
Pilot Heavy Oil Upgrader
Genoil
has been primarily involved in the development and commercial
applications of its proprietary heavy oil upgrading technology
– the Genoil Hydroconversion Upgrader
(GHU®).
The
GHU® converts sour (high sulphur), heavy hydrocarbon feed
stocks into lighter oil with higher quality distillates for
conventional refining. The GHU® process uses a hydrogen
enrichment methodology based on catalytic hydrogenation and flash
separation.
The
GHU®’s unique intellectual property is in its
hydroconversion design and mixing devices. A GHU® provides
greater mass/heat transfer between hydrogen, crude and catalyst. As
a result, hydroconversion can be achieved at mild operating
conditions.
Sour,
acidic, heavy crude and residual by-products are converted into
lighter distillates, increasing the API (or lowering the density),
while maximizing denitrogenation, desulphurisation and
demetalisation to meet new regulatory requirements. The upgraded
crude product will have higher yields of naphtha, distillates and
vacuum gas oil with reduced levels of contaminants such as sulphur,
nitrogen and metals. Genoil’s process is designed
specifically to eliminate most of the sulphur from the feed
stocks.
The
Genoil GHU Upgrader has been designed to remove 99.5% of the
sulphur, as shown in its latest tests, while lightening the oil at
the same time, significantly raising its API gravity. In a January
12, 2009 press release, the cost model, based on data from December
8, 2008, during the height of the market crash, showed a margin of
profit of over $15.00 per bbl with a 30% IRR. $15.00 was the low
point in relation to the historical margins during the period that
oil was over $100.00 per barrel WTI. International regulations will
soon require bunker fuel to be upgraded and desulphurized due to
serious environmental concerns.
The
Genoil Upgrading Process yields zero waste and consumes no external
energy or hydrogen, deriving its hydrogen and energy from its own
residue. The cost structure is therefore much lower than standard
upgrading processes in hydrogenation and does not give off a waste
byproduct such as coking of 30%.
Upgrading heavy oil
is essentially a very undeveloped industry in relation to the 900
billion barrels of world heavy oil reserves. Most of the oil
presently coming out of the ground is light, in the vicinity of 76
million barrels a day, or 27.5 billion barrels a year. It is
readily seen that even if you allow for new oil discoveries and
further advances of recovery through technological enhancements in
field recovery, the time limit for this light oil reserve will last
no more than twenty or thirty years. As light oil productive
capability declines, a world pricing crisis may occur.
Genoil’s pilot plant in Alberta has progressed through the
development stage and the costs of commercialization have been
expensed.
Oil/Water Separation
The
Genoil Water Treatment Department has recently increased its
significance in the business model of the Corporation. Initially
developed for the bilge area of a ship, the Crystal Separator is
suitable for a wide range of applications, including off-shore oil
platforms, wastewater treatment plants, refineries, gasoline
service stations and ports. Genoil’s Crystal Sea oil and
water separator is a compact unit that is able to handle small
volumes from 2 GPM to 20 GPM using a compartmental process. The
Company is in the process of developing scaled up units that can
handle larger volumes.
Genoil
has successfully completed testing on its improved Crystal Sea
bilge water separator at Testing Service, Inc., in Salt Lake City,
Utah. The Crystal Sea units are state-of-the-art bilge separators
that have been certified by the US Coast Guard in accordance with
the International Maritime Organization Resolution MEPC 107 (49) in
2007. IMO regulations require bilge water separators to have an
effluent discharge of less than 15 ppm impurities for territorial
water and less than 5 ppm for discharge into inland waters.
Subsequently, our bilge oily water separators have been certified
by the American Bureau of Shipping (ABS).
In the
view of management, the Crystal Sea has advantages over competing
models including a smaller footprint, a simple operating system, no
requirement for back washing or flushing with fresh water or sea
water, therefore reduced maintenance, very little use of water and
no moving parts, except for a pump. In addition to that, the oil
removed using the Genoil bilge cleaner is dry enough and of a
quality that it can be reused by other utilities
onboard.
Genoil
has both a US and a Canadian patent for the Crystal technology, as
well as a PCT application. There are at least 10 separators in
operation in Romania, which were sold by the inventor, before
Genoil acquired the rights to the technology.
During
2010, Genoil was awarded a major patent for its breakthrough sand
decontamination technology by the United States patent office.
Genoil provides one of the best commercial, economic and
environmentally approved off the shelf solutions for soil and water
decontamination. As a result of continued research and development,
the sand decontamination patent constitutes a advancement of the
reactor design. The improved reactor enhances the sand cleaning
process in three stages and increases the rate of hydrocarbons
extracted from the sand. Consequently, the amount of hydrocarbons
removed increases while resulting in more separation in less time.
In addition, the amount of heat energy is also drastically reduced
resulting in greater operational savings. The reactor features a
method for retaining the dissolved contaminants and blocking their
transfer downstream in order to minimize the total dissolved solids
in the decontaminated sand. This patent is a result of
Genoil’s long term commitment to environmental technologies
offering practical solutions to cleanup environmental
disasters.
The
acquisition of 100% of the issued and outstanding common shares of
Two Hills Environmental Inc. conveys to Genoil surface title to 147
acres of land, together with certain subsurface mineral rights
contained within 2,500 adjacent acres. These multiple salt caverns
could potentially be utilized for a variety of purposes including
waste oil disposal, gas storage reservoirs and waste water
disposal.
This
site has potential as a waste oil/water disposal and treatment
facility due its convenient proximity to several waste disposal
companies. Alternatively, several of these massive salt caverns
could become natural gas storage facilities. Any development is
subject to obtaining the proper permits from the necessary
regulatory agencies, further detailed economic analysis and
obtaining appropriate financing.
Two
Hills was initially formed to enter into the oilfield waste
disposal industry by capitalizing upon its current undeveloped
asset base. This asset base is comprised of a site under which very
large salt caverns have been formed in the Lotsberg Formation
beneath the earth’s surface. Such caverns are prized in the
oilfield disposal industry due to their efficacy and safety as a
destination for oilfield wastes.
This
proven technology has been in operation at multiple locations for
over 20 years. Crystal technology is Coast Guard and IMO approved
which allows for discharge at sea, and does not require the use of
chemicals or filters.
Revenues from Product Sales
The
majority of Genoil's products continue to be at the
commercialization stage and have not recently produced
revenues.
Expenditures Relating to the Sale of Products
Genoil
is primarily involved in the development of its technologies for
commercial application. The Company
has been building its internal capabilities. Genoil utilizes
independent contractors to provide engineering and other services
for projects as needed. The operational sites are at – Two
Hills AB, and New York, NY, Dubai UAE.
Genoil
does not intend to commit to any expenditures of any other nature,
beyond expenditures necessary for the development and maintenance
of its technologies, in the near future.
While
Genoil’s primary commercial focus has been on the GHU, it has
also recently made advances with respect to potential near term
revenue opportunities from its Crystal products. Genoil anticipates
sales of Crystal units based on increasingly strict environmental
regulations. Therefore, the Company is anticipating the generation
of income in the short term from sale of oil/water separation
equipment. The Corporation continues to believe that the largest
potential for medium and long-term revenue is based on sales of the
GHU technology.
Geographic Markets
The
Company markets its technology mainly to potential customers in the
Middle East, Russia and China. The markets for Genoil’s
products are global.
Intellectual Property Rights
Genoil
has been granted 7 US patents (Patent nos. 6,527,960; 7,001,502;
7,014,756; 5,603,825, 7,510,689, 7,704,400, and, 7,754,076), 2
Canadian patents (No. 2,243,142 and 2,306,069). Genoil either owns
or licenses the rights to all intellectual properties used in its
products.
Genoil
has copyright, patent rights and trademarks, which are necessary
and contribute significantly to the preservation of its competitive
position in the markets which it addresses. It is possible that the
Corporation's patents and other intellectual property will be
challenged, invalidated or circumvented by third parties in the
future. In the future, it may not be able to obtain necessary
licenses on commercially reasonable terms. Genoil enters into
nondisclosure agreements with its suppliers, contractors and
employees, as appropriate, so as to limit access to and disclosure
of its proprietary information. These measures may not suffice to
deter misappropriation or independent third party development of
similar technologies, which may adversely affect the
Corporation.
Sales, Marketing and Distribution
Genoil
is presently involved in pursuing sales of its Oil/Water Separator
Units. Genoil is pursuing sales of Oil/Water Separators through its
international network of agents and various engineering firms that
deal with oil and gas companies throughout the world.
Genoil
intends to market its products and license its GHU technology
throughout the world's oil refining and production
industry
Competition
Genoil
is aware that several other companies may be presently pursuing the
development of technologies in the oil and gas industry. It
acknowledges that it is possible that some of these technologies
may be similar in nature to its products and technologies. Such
companies, should they be involved in selling or developing the
same technology as Genoil, may be potential competitors to the
Corporation. The Company believes that its patented fixed bed
catalyst hydroprocessing technology in the GHU is competitively
advantaged in the market by virtue of the expected comparatively
low capital and operating costs and high product yields for
operators relative to other coking or hydroprocessing
products.
Government Regulations
There
are several government regulations with which Genoil must comply.
Failure to comply with these regulations could adversely affect its
business. Certain government regulations require the imposition of
standards that are normally a part of industry knowledge, and as
such, would be understood and acted upon by the Corporation in the
normal course of doing business.
Genoil,
as a producer of technology and intellectual property, is not
generally subject to environmental regulations. Genoil specializes
in mechanical processes and as such its regular operations do not
fall within the scope of environmental protection
legislation.
The
Corporation was subject to securities regulation in the Canadian
jurisdictions in which it was a reporting issuer. As an issuer with
securities traded on the TSX Venture Exchange, the Company was
subject to its rules. The Corporation's shares are now quoted on
the Over the Counter (OTC) Markets Quotation System and as such,
the Corporation is subject to the OTC listing
requirements.
Plan of Operation
The
Company does not expect to generate significant revenue or cash
flow from its technologies or services for the 2021 year, and
possibly beyond.
The
Company expects revenue and cash flow to be generated in staged
phases following the execution of definitive agreements for the
implementation of the oily water separation technology for marine
use or on-shore units for ports and oil reclamation
sites.
On a
larger scale, Genoil also expects to generate revenues for the
design, implementation and procurement of its GHU® systems
and/or the licensing of its intellectual property.
The
Corporation has accumulated losses of $92.5 million to year ended
December 31, 2020 and is not realizing any cash flow as it has not
to date attained commercial operations in connection with its
various patents and technology rights.
Since
inception, Genoil has principally been a technology development
company. Since 2005, commercialization efforts have been underway
for Genoil’s GHU®. Genoil is marketing its GHU®
(and related engineering and design services) to refiners and
producers of sour, heavy crude around the world. The Company
believes that there is strong market potential for this technology.
The commercialization of Genoil’s Crystal units is
Genoil’s key short-term goal, while the GHU® represents
the next phase in the Company’s long-term
growth.
The
Company continues to focus its efforts on securing commercial
applications for its heavy oil upgrading and oil-water separation
technologies and exploring new avenues in energy related
industries.
At the
present time intensive efforts are being made in the Middle East,
Africa, the Caribbean, Mexico, Canada, and Asia to market the
GHU Upgrader and Crystal Sea Bilge Cleaning Units for ports. Agents
that are not performing are being changed and new agents are being
signed up to accelerate our efforts to roll out the technologies.
At the present time David K. Lifschultz, the CEO, is spending most
of his time marketing these technologies in Mexico, China, the
Middle East and Africa, and progress is being made.
Genoil
is aggressively marketing its GHU Upgrader technology to those
countries and companies that have substantial heavy oil reserves as
“peak oil” in light oil already has arrived in our
estimation, and a move developing and upgrading heavy oil is around
the corner.
Genoil
is making presentations at the highest levels for both the Crystal
units and GHU Upgraders to countries and companies in Mexico, Asia,
North and South America, Turkey, the Middle East, and Africa among
others, so that it will be in a position to benefit during the
transition to heavy oil, which it regards as occurring in the very
near future. Planning has to be done well in advance to effectuate
this change.
Genoil
has announced that the USPTO has allowed a patent for the reactor of its sand
decontamination process. The sand decontamination system has also
been patented recently and the two patents form a valuable addition
to the intellectual property of Genoil. The reactor plays a key
role in the sand decontamination process and its features are
designed to effectively remove oil from sand, separate oil from
sand and water and recover the oil in the reactor for reuse. An
innovative method is utilized for extracting oil from sand and
removing the oil from the path of the sand.
Also
novel is the formation of a blanket of sand of controlled thickness
at the bottom of the reactor in order to minimize the carryover of
contaminants between adjacent reactors. There is a significant
reduction of the amount of water that is being transferred upstream
by way of an entirely innovative approach in conveying sand from
one reactor to the adjacent one. The reactor is designed to
effectively operate at relatively low temperatures resulting in
important savings in energy. The reactor also operates in
conjunction with means for reducing oil and dissolved contaminants
to very low levels in order to meet the most stringent
environmental standards. Based on Genoil’s previous
experience with the sand washing system of Bear Trap, Alberta, the
newly patented reactor and the original approach in sand
decontamination should place the technology at the forefront of
current efforts to clean and protect the environment.
C.
Organizational
structure.
David
Lifschultz has headed Genoil as CEO since 2001. Since working for
Genoil, David has not received any cash compensation nor has he
sold any Genoil stock. Even while the stock was over $1.50 per
share he did not sell any shares. No executives or board members of
Genoil receive any cash compensation. They only receive shares and
options or Price Appreciation Certificates.
The
Company has been building its internal capabilities. Genoil
utilizes independent contractors to provide engineering and other
services for projects as needed. The operational sites are at
– Two Hills AB, New York, NY and Dubai UAE.
The
company seeks to work through commission agents who will receive
compensation when revenues are generated. Genoil is modeling its
operations in a similar way as Microsoft and Google followed when
they were in their infancy.
Some
consultants and the agents generally act as representatives on
Genoil’s behalf with respect to commercial opportunities in
their respective cities and countries. The Corporation intends to
rely upon the services of these representatives and to remunerate
them by means of sales commissions and incentive stock
options.
Genoil
has the following subsidiaries:
●
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. Emirates LLC is jointly owned by S.B.K.
Commercial Business Group LLC and Genoil. As of December 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.
D. Property,
plant and equipment.
Human Resources and Facilities
The
Company has been building its internal capabilities. Genoil
utilizes independent contractors to provide engineering and other
services for projects as needed. The operational sites are at
–Two Hills, Alberta, New York, NY and Dubai UAE.
The
company seeks to work through commission agents who will receive
compensation when revenues are generated. Genoil is modeling its
operations in a similar way as Microsoft and Google followed when
they were in their infancy.
Management
has been aggressive at attract real talented individuals who are
very experienced, knowledgeable and will assist Genoil in realizing
its objectives in different markets.
The
facilities operated by the Corporation are not subject to
environmental protection legislation and to its knowledge no
environmental issues exist that would potentially affect its
utilization of its assets.
Item 4A. Unresolved Staff
Comments
Not
applicable.
Item 5.
Operating and Financial Review and Prospects
Forward-Looking Statements
Statements in this
report, or any document filed by Genoil with the different
governing authorities, by or on behalf of it, to the extent not
directly and exclusively based on historical events, constitute
"forward-looking statements". These statements represent the
Corporation's intentions, plans, expectations, and beliefs, and no
assurance can be given that the results described in such
statements will be achieved.
Forward-looking
statements include, without limitation, statements evaluating
market and general economic conditions in the following sections,
and statements regarding future-oriented revenues, costs and
expenditures. Investors are cautioned not to place undue reliance
on these forward-looking statements, which reflect management's
analysis only as of the date of this document. These
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially.
Such risks and uncertainties with respect to the Corporation
include the effects of general economic conditions, changing
foreign exchange rates and actions by government authorities,
uncertainties associated with legal proceedings and negotiations,
industry supply levels, competitive pricing pressures and
misjudgements in the course of preparing forward-looking
statements.
Genoil
disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
A. Operating
results
Overview
Genoil's financial
statements are prepared in accordance with accounting principles
generally accepted in the United States of America
(“GAAP”), audited in accordance with the standards of
the Public Company Accounting Oversight Board (United States), and
are presented in US dollars unless otherwise
indicated.
Genoil
is actively involved in the marketing, development and commercial
applications of its proprietary technologies. Its pilot plant is
located at Two Hills, Alberta.
To
December 31, 2020, the Corporation has incurred significant
operating losses. The Corporation expects to continue to have
operating losses during the next year and expects to fund its
operations in the near term from capital stock offerings and
project loans.
As
Genoil’s business has not yet generated revenue from
operations, the Company requires cash infusions on a regular basis
as it seeks to grow, develop and market its
technologies.
The
Corporation 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, fund
any further research and development activities, and ensure the
commercial realization of its assets and discharge of its
liabilities. While the Corporation is expending its best efforts to
achieve the above plans, there is no assurance that any such
activity will generate sufficient funds for
operations.
Acquisition
On
November 29, 2010, Genoil announced that it had entered into an
agreement to acquire 100% of the issued and outstanding common
shares of Two Hills Environmental Inc. This acquisition conveyed to
Genoil surface title to 147 acres of land, together with certain
subsurface mineral rights contained within 2,500 adjacent acres and
access to 388,550 cubic meters of water to be derived yearly from
the North Saskatchewan River. This water is critical to the
development of local brine production, environmentally acceptable
disposal of oil sands and oil well production waste. These multiple
salt caverns could potentially be utilized for a variety of
purposes including waste oil disposal, gas storage reservoirs and
waste water disposal.
On
February 14, 2011, Genoil advised that it had paid a cash deposit
of $100,000, issued 2,500,000 common shares of Genoil to the former
shareholder of Two Hills, issued 2,500,000 common shares of Genoil
to a debtor and issued an option to purchase 250,000 common shares
of Genoil, at market price to an agent as commission for
structuring the acquisition.
This
site has potential as a waste oil/water disposal and treatment
facility due its convenient proximity to several waste disposal
companies. Alternatively, several of these massive salt caverns
could become natural gas storage facilities. Any development is
subject to obtaining the proper permits from the necessary
regulatory agencies, further detailed economic analysis and
obtaining appropriate financing.
B. Liquidity
and Capital Resources
Genoil’s
business is capital intensive, requiring cash infusions on a
regular basis as it seeks to grow its business. The Corporation
expects to be able to fund its capital expenditure program to the
end of 2020 using working capital and, to the extent required or
desirable, through funds raised in the capital markets and short
term loans.
In
2018, the Company sold a total of 17,425,507 shares of common stock
(and warrants) in private placements for total proceeds of
$879,875.
In
2018, the Company issued 11,092,909 shares of common stock as
compensation for services. The fair value of the shares issued was
$779,800.
In
2019, the Company sold a total of 8,836,667 shares of common stock
(and warrants) in private placements for total proceeds of
$234,490.
In
2019, the Company issued 6,154,333 shares of common stock as
compensation for services. The fair value of the shares issued was
$150,047.
During
the first quarter of 2020, the Company sold a total of 20,950,000
shares of common stock (and warrants) in private placements for
total proceeds of $209,480.
During
the first quarter of 2020, the Company issued a total of 3,375,000
shares of common stock as compensation for services. The fair value
of the shares issued (at dates of issuance) totaled
$69,750.
During
the second quarter of 2020, the Company sold a total of 8,550,000
shares of common stock (and warrants) in private placements for
total proceeds of $85,490.
During
the second quarter of 2020, the Company issued a total of 150,000
shares of common stock as compensation for services. The fair value
of the shares issued (at dates of issuance) totaled
$1,500.
During
the third quarter of 2020, the Company sold a total of 7,950,000
shares of common stock (and warrants) in private placements for
total proceeds of $75,500.
During
the third quarter of 2020, the Company issued a total of 2,800,000
shares of common stock as compensation for services. The fair value
of the shares issued (at dates of issuance) totaled
$120,000
During
the fourth quarter of 2020, the Company sold a total of 5,100,000
shares of common stock (and warrants) in private placements for
total proceeds of $50,990.
There
are no restrictions on the ability of the Subsidiaries to transfer
funds to Genoil in the form of cash dividends, loans or advances.
However, the Subsidiaries are not yet generating income and the
Corporation does not consider them as a source of
revenue.
C.
Research and development, patents
and licenses, etc.
Genoil
does not presently plan to conduct any major new research and
development, but will continue to refine and fine-tune its present
complement of technologies.
D. Trend
information.
Currently Genoil
has no sales inventory or production.
E. Off-Balance
Sheet Arrangements.
Genoil
has no off-balance sheet arrangements.
F.
Tabular Disclosure of Contractual Obligations.
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes
|
4,711,764
|
-
|
4,711,764
|
-
|
-
|
|
|
4,711,764
|
-
|
4,711,764
|
-
|
-
|
G. Safe
Harbour.
Not
applicable.
Item 6.
Directors, Senior Management and Employees
A. Directors and senior
management.
At year
end, the following were directors and officers of Genoil, their
residence, their principal occupations within the past five years,
and the periods during which each has served in such
capacity.
|
Name and Office Held
|
Principal Occupation For Past Five Years
|
Date of Birth
|
Appointment
|
Number of Securities Controlled by Director and Percentage of Total
(*)
|
|
David
K. LifschultzChairman and CEO
New
York, NY
|
Chief
Executive Officer of Genoil Inc. from 2002 to present
|
23-Nov-45
|
25-Feb-02
|
61,254,101
9.38%
|
|
|
Chairman
of the board of directors of Genoil Inc. from 2002 to
present.
|
|
|
|
|
|
|
|
|
|
|
Bruce
S. AbbottDirector and COO
New
York, NY
|
President,
COO and Director
|
27-Sep-76
|
10-Oct-13
|
6,540,000
1.00%
|
|
|
|
|
|
|
|
Bengt
Koch Director Morbylanga,
Sweden
|
Partner of Merchant Venture Investments
|
29-Oct-37
|
10-Oct-03
|
9,434,620
1.44%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HaiMing
Lai Director
Calgary,
Alberta
|
Professional
Engineer
(Resigned
September 2, 2020)
|
13-Jan-61
|
23-Nov-16
|
Nil
|
|
|
|
|
|
|
|
Thomas
F. Bugg
Calgary,
Alberta
Director
|
Business
Consultant
|
30-Sep-50
|
02-Sep-20
|
2,000,000
0.31%
|
|
|
|
|
|
|
|
Jose
Garcia Torres Director
|
International Banking
|
18-Aug-49
|
20-Apr-20
|
4,000,000
0.61%
|
|
Mexico
City, Mexico
|
|
|
|
|
|
|
|
|
|
|
|
Rolando Ramon
Director
|
Business
Consultant
|
16-Jan-17
|
28-Jan-19
|
1,750,000
0.27%
|
|
Lucas,
TX
|
|
|
|
|
(*) The “Numbers of Securities Controlled” are
comprised by common shares as of the most recent date, and options,
warrants and convertible notes exercisable/convertible within 60
days from December 31, 2020.
B. Compensation.
Share-Based Awards
An
important part of the Corporation's current compensation program is
the granting of share-based awards to the Named Executive Officers
(NEOs). These share-based awards have been granted in replacement,
or in lieu, of options to purchase Common Shares pursuant to the
Corporation's Option Plan. The granting of such awards is approved
by the Board upon recommendation from the Compensation Committee.
The Board considers previous grants when considering new
grants.
Further,
in lieu of cash 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.
Due to
financial constraints, neither of the NEOs has ever received any
cash compensation. Historically, the Corporation granted the NEOs
option-based awards which were to be renewed upon
expiration. The
share-based awards granted to Messrs. Lifschultz and Abbott were
granted: (i) as current compensation in lieu of options; or (ii) in
certain instances, in replacement of expired options granted as
compensation for previous years. The outstanding share-based awards
represent 17 years of compensation to Messrs. Lifschultz and
Abbott, the latter of whom was Mr. Lifschultz's aide before
becoming an officer and director of the Corporation. Accordingly,
their endeavors for the Corporation are to be rewarded only if the
Corporation is successful and that success is reflected in the
trading value of the Common Shares, thereby aligning management and
Shareholder objectives.
Summary Compensation Table
The
following table and notes thereto set out information concerning
the compensation paid to the NEOs for the five most recently
completed financial years ended December 31, 2020.
|
|
|
|
|
|
Non-equity incentive plan compensation($)
|
|
|
|
|
Name andPrincipal Position
|
Year
|
Salary($)
|
Share-based awards($)(1)
|
Option-based awards($)
|
Annual incentive plans
|
Long-term incentive plans
|
Pension value($)
|
All Other Compensation($)
|
Total Compensation ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Lifschultz,
|
2020
|
-
|
1,556,415
|
-
|
-
|
-
|
-
|
-
|
1,556,415
|
|
Chairman,
Chief Executive Officer and Chief Financial Officer
|
2019
2018
2017
2016
|
-
-
-
-
|
-
3,961,045
2,836,365
713,026
|
-
-
-
-
|
-
-
-
-
|
-
-
-
-
|
-
-
-
-
|
-
-
-
-
|
-
3,961,045
2,836,365
713,026
|
|
Bruce
Abbott, President and Chief Operating
Officer
|
2020
2019
2018
2017
|
-
-
-
-
|
1,197,243
2,430,766
2,260,870
1,209,870
|
-
-
-
-
|
-
-
-
-
|
-
-
-
-
|
-
-
-
-
|
-
-
-
-
|
1,197,243
2,430,766
2,260,870
1,209,870
|
|
|
2016
|
-
|
713,026
|
155,844
|
-
|
-
|
-
|
-
|
868,910
|
Notes:
(1)
The Company
accounts for Price Appreciation Certificates as an equity
instrument due to its exclusive option to require a subscription to
the private placement as determined by the fair value of the
instruments using a Black-Scholes pricing model.
The
fair value of Price Appreciation Certificates granted during 2020,
2019, 2018, 2017 and 2016 was estimated on the dates of grant using
the Black-Scholes pricing model.
C. Board
practices.
Directors are
elected annually to the Board of Directors (the
“Board”) at the Corporation's Annual General Meeting.
Directors may also, between Annual General Meetings, appoint one or
more additional Directors, provided such number of additional
directors does not exceed 1/3 of the existing number, to serve
until the next Annual General Meeting. No Director has a service
contract with Genoil providing for benefits upon termination of
employment.
Duties and Obligations of the Board of Directors
The
general duty of Genoil's Board of Directors is to oversee the
management of Genoil's business and affairs. In particular, the
Board of Directors is responsible for the following
matters:
(a)
adopting a strategic planning process which establishes the
Corporation's long-term goals and strategies, and monitoring the
success of its management in achieving those goals and implementing
the strategy;
(b)
identifying the principal risks with respect to all aspects of the
Corporation's business, ensuring that there are systems in place to
effectively monitor and manage such risks with a view to its
long-term viability, and achieving a proper balance between the
risks incurred and the potential return to its
members;
(c)
engaging in succession planning, including appointing, training and
monitoring senior management (which includes ensuring that
objectives are in place against which management's performance can
be measured), establishing and maintaining programs to train and
develop management, providing for the orderly succession of
management, and assessing the performance and contribution of
Genoil's Chief Executive Officer against mutually established
objectives;
(d)
ensuring that there are effective controls and information systems
in place for the Board of Directors to discharge its
responsibilities, such as an audit system which can inform the
Board of Directors about the integrity of the data and the
compliance of the financial information with appropriate accounting
principles, and the timely reporting of developments material to
the Corporation.
Composition of the Board of Directors
As of
December 31, 2020, Genoil's Board of Directors consisted of Messrs.
David Lifschultz, Rolando Ramon, Bruce Abbott, Bengt Koch, Thomas
F. Bugg, and Jose Garcia Torres. Of the Board, Messrs. Koch, Ramon,
Torres, Taylor and Bugg are "independent". Mr. David Lifschultz is
not independent as he is the Chairman and Chief Executive Officer
of the Corporation. Bruce Abbott is not considered to be
independent as he is the President.
The
definition of "independence" that Genoil uses when determining a
director's independence is derived from National Instrument 58-101,
published by the Canadian Securities Administrators and adopted in
all Canadian jurisdictions.
The
Board facilitates its exercise of independent supervision over
management by attempting to meet independently from management when
warranted, determining what additional information it needs from
management and seeking outside advice and support as it considers
appropriate. Generally, the Board attempts to ensure that all board
committees are composed in the majority by non-management directors
with consideration being had to the Corporation's current size and
board composition.
Committees of the Board of Directors
There
are currently two committees of the Board of Directors. The Audit
Committee is comprised of two directors, one of whom is a related
party. The Compensation Committee is comprised of all directors.
The mandate and activities of each committee are as
follows:
Audit Committee - The
Audit Committee consists of Bengt Koch and David Lifschultz. The
responsibilities of the Audit Committee include:
(a)
assisting the directors with meeting their responsibilities with
respect to financial reporting;
(b)
reviewing and reporting to the Board of Directors on all audited
financial statements the Corporation prepares and enhancing the
credibility and objectivity of all financial reports;
(c)
reviewing with management and with the external auditor any
proposed changes in major accounting policies, in the presentation
and impact of significant risks and uncertainties, and in key
estimates and judgments of management that may be material to
financial reporting;
(d)
questioning management and the external auditor regarding
significant financial reporting issues discussed during the fiscal
period and the method of resolution;
(e)
reviewing any problems experienced by the external auditor in
performing the audit, including any restrictions imposed by
management or significant accounting issues on which there was a
disagreement with management; and
(f)
reviewing the post-audit or management letters containing the
recommendations of the external auditor and management's response,
and following up any identified weaknesses.
Relevant Education and Experience
The
members of the Audit Committee have the following relevant
education and experience:
David K.
Lifschultz
Mr. Lifschultz is
the former CEO of Lifschultz Industries which was publicly traded
on the NASDAQ Exchange. He had extensive experience on the
Lifschultz Industries audit committee. He is presently CEO of the
Corporation and has periodically served on the Audit
Committee
Mr.
Lifschultz has experience in finance and supervising the Treasury
Department of three public companies: the Corporation, Lifschultz
Industries, and Trans-Air Freight System.
Mr.
Lifschultz's educational experience includes working in the
Treasury Department of Arrow-Lifschultz Freight Forwarders working
in and supervising the accounting, bookkeeping and all other
Treasury functions.
Bengt
Koch
Mr. Koch is the
former Executive Chairman of Atlantic Container Lines, a leading
Swedish container ship line. Mr. Koch will help guide the
Corporation's marketing and sales strategies for oil upgrading,
bunker fuel desulphurization and Crystal separator
markets.
Audit Committee Oversight
Since
the commencement of the Corporation's most recently completed
financial year, there have been no recommendations of the Audit
Committee to nominate or compensate an external auditor, which were
not adopted by the Board.
Compensation Committee - The
Compensation Committee consists of the entire Board.
The
Compensation Committee assists the Board in carrying out its
oversight responsibility with respect to corporate governance and
compensation matters, including making recommendations to the
Corporation's Board in respect of compensation issues relating to
directors, management and employees of the Corporation. The Board
has approved and adopted a formal charter for the Compensation
Committee. The Compensation Committee's primary duties and
responsibilities include, but are not limited to, the
following:
(a)
reviewing the
organization's structure;
(b)
management's
succession plans for executive management;
(c)
developing
compensation philosophies and principles; and
(d)
reviewing and
reporting to the Board its recommendations and determinations of
appropriate compensation of the Corporation's executive
officers.
Decisions Requiring the Prior Approval of the Board of
Directors
Each
committee of the Board of Directors makes recommendations to the
Board on an ongoing basis. Generally, recommendations from a
committee of the Board of Directors require the approval of the
full Board before they are implemented.
D. Employees.
The
Company has been building its internal capabilities.
Genoil
utilizes independent contractors to provide engineering and other
services for projects as needed. The operational sites are at
– Two Hills, Alberta, New York, NY and Dubai
UAE.
The
company seeks to work through commission agents who will receive
compensation when revenues are generated. Genoil is modeling its
operations in a similar way as Microsoft and Google followed when
they were in their infancy.
Genoil
has no labour unions and no temporary staff.
E. Share
ownership.
There
were 596,178,029 Common
Shares issued and outstanding as of December 31, 2020 (2019 –
547,303,029). Information as to share and option information for
directors, officers and key employees is discussed above in "Item
6. (A) Directors and Senior Management" and in "Item 6. (B)
Compensation."
Genoil has established a stock option plan with the objective of
advancing its interests by encouraging and enabling the acquisition
of a share interests by its directors, officers, employees and
consultants, in accordance with the policies and rules of the
applicable regulatory authorities. The full text of Genoil's stock
option plan is attached as an Exhibit to the Form 20-F for
2006
Item 7.
Major Shareholders and Related Party Transactions
A. Major
shareholders.
The
following table sets forth information as of May 17, 2021, with
respect to each person known to the Corporation to own more than 5%
of its Common Shares. As used in this table, "beneficial ownership"
means the sole or shared power to vote or direct the voting or to
dispose or direct the disposition of any security. For purposes of
this table, a person is deemed to be the beneficial owner of
securities that can be acquired within 60 days from December 31,
2020, through the exercise of any option or warrant. Shares subject
to options or warrants that are currently exercisable or
exercisable within 60 days are deemed outstanding for computing the
ownership percentage of the person holding such options or
warrants, but are not deemed outstanding for computing the
ownership percentage of any other person. The amounts and
percentages are based upon 596,178,029 Common Shares issued
and outstanding.
|
Class of Share
|
|
Identity of Person or Group
|
|
Number of Shares Beneficially Owned
|
|
Percentage of Share Stock Beneficially
Owned
|
|
Common
Shares
|
|
David
K. Lifschultz
|
|
61,254,101
|
|
10.27%
|
David
Lifschultz has acquired his shareholdings incrementally during the
past years through companies under his control and personally by
way of a series of purchases on the open market and private
placement subscriptions made for the purpose of providing financial
assistance to the Corporation so as to ensure it continues to meet
its financial obligations. Mr. Lifschultz is a resident in New
York.
As of
the date of this form and to the knowledge of our directors and
officers, there is no other person or entity who beneficially owns,
directly or indirectly, over more than 5% of the issued and
outstanding Common Shares.
To the
best of its knowledge, Genoil is not directly owned or controlled
by another corporation, by any foreign government or by any natural
or legal person.
To the
best of its knowledge, Genoil is not aware of any arrangements
which may result in a change of control of Genoil at a subsequent
date.
B. Related party
transactions.
|
|
|
|
|
|
|
|
|
Due from related
parties
|
$152,719
|
$1,675,625
|
|
Due to related
parties
|
(6,992,486)
|
(8,171,220)
|
|
Net
|
$(6,839,767)
|
$(6,495,595)
|
Transactions with Affiliates, Directors or Officers
Genoil's approach
for transactions with affiliates is that they must be on terms no
less favourable to the Corporation than could be obtained from
unaffiliated third parties.
In the
case of transactions involving a director, any of the Corporation's
directors who, in any way, whether directly or indirectly, have an
interest in a proposed contract or transaction with it, must
disclose the nature and extent of his interest to the Corporation's
Board and abstain from voting on the approval of the proposed
contract or transaction. If he or she fails to do so, he or she
must account to the Corporation for any profit made as a
consequence of entering into the contract or transaction, unless
the contract was fair and reasonable to the Corporation at the time
it was entered into, and after full disclosure of the nature and
extent of his or her interest, it is approved by the Corporation's
shareholders by way of a resolution passed by a majority of not
less than two-thirds of the votes cast at a duly convened
shareholders' meeting. In addition, any of the Corporation's
directors and officers who holds any office or possesses any
property whereby, whether directly or indirectly, duties or
interests might be created in conflict with his or her duties or
interests as a director or officer, must disclose that fact and the
nature and extent of the conflict. In the case of a director, the
disclosure must be made at a Board meeting.
In the
case of transactions involving an officer, the disclosure must be
made in writing to the Corporation's Chairman at a Board
meeting.
C. Interests of experts
and counsel.
Not
required as this is an annual report under the Exchange Act.
Item 8.
Financial Information
A. Consolidated
statements and other financial information.
Please
see "Item 3 Financial Statements" and Exhibit 19(a) for a list of
the financial statements filed as part of this annual report
statement.
Genoil
has neither declared nor paid dividends on any of its outstanding
Common Shares, and does not intend to do so in the foreseeable
future. It intends to retain any future earnings to finance the
expansion of its business. Any future determination to pay
dividends will be at the discretion of the Board of Directors and
will be dependent upon its earnings, capital requirements and
financial position, as well as any other factors deemed relevant by
the Board of Directors.
B. Significant
changes.
At the
annual and special meeting of the shareholders of Genoil held on
November 14, 2016, a special resolution was passed authorizing the
continuance of the Corporation from a corporation existing under
the laws of Canada to a corporation existing under the laws of the
Country of Curaçao. On May 29, 2019 the Company finally
received a letter of satisfaction from Corporations Canada
approving Genoil's move to Curacao. However, no such move has been
implemented to date.
Item 9.
The Offer and Listing
A. Offer and listing
details.
The
following is a summary of the trading history of the Common Shares
on the OTC Bulletin Board (in US dollars) for:
|
|
●
|
|
the
annual high and low market prices for the five most recent full
financial years;
|
|
|
●
|
|
the
quarterly high and low market prices for the two most recent full
financial years and any subsequent period; and
|
|
|
●
|
|
the
monthly high and low market prices for the most recent six
months.
|
|
|
Price
per share on OTC Bulletin Board
(US
$)
|
|
Year
|
|
|
|
Fiscal year ended
December 31, 2016
|
$0.090.09$0.0
|
0.02
|
|
Fiscal year ended
December 31, 2017
|
0.09
|
0.06
|
|
Fiscal year ended
December 31, 2018
|
0.06
|
0.04
|
|
Fiscal year ended
December 31, 2019
|
0.03
|
0.02
|
|
Fiscal year ended
December 31, 2020
|
0.03
|
0.02
|
|
Quarter
|
|
|
|
Fiscal year ended
December 31, 2019
|
|
|
|
First
Quarter
|
0.04
|
0.02
|
|
Second
Quarter
|
0.03
|
0.02
|
|
Third
Quarter
|
0.03
|
0.02
|
|
Fourth
Quarter
|
0.03
|
0.02
|
|
Fiscal year ended
December 31, 2020
|
|
|
|
First
Quarter
|
0.02
|
0.01
|
|
Second
Quarter
|
0.03
|
0.01
|
|
Third
Quarter
|
0.03
|
0.01
|
|
Fourth
Quarter
|
0.02
|
0.01
|
|
Most
Recent Six Months
|
|
|
|
November
2020
|
0.02
|
0.01
|
|
December
2020
|
0.02
|
0.01
|
|
January
2021
|
0.02
|
0.01
|
|
February
2021
|
0.02
|
0.01
|
|
March
2021
|
0.01
|
0.01
|
|
April
2021
|
0.01
|
0.01
|
B. Plan of
distribution.
Not
required as this is an annual report under the Exchange Act.
C. Markets.
The
issued and outstanding Common Shares are listed and posted for
trading on the OTC Bulletin Board under the symbol "GNOLF". The
Corporation's Common Shares are registered shares.
D. Selling
shareholders.
Not
required as this is an annual report under the Exchange Act.
E. Dilution.
Not
required as this is an annual report under the Exchange Act.
F. Expenses of the
issue.
Not
required as this is an annual report under the Exchange Act.
Item 10.
Additional Information
A. Share
capital.
Not
required as this is an annual report under the Exchange Act.
B. Memorandum and articles of
association.
Genoil
was formed by the amalgamation under the Canada Business Corporations Act (the
"CBCA") of Genoil Inc. and Continental Fashions Group Inc. ("CFG"),
a public company whose shares traded on the Alberta Stock Exchange.
At the time of the merger CFG had no assets, no liabilities and did
not carry on any business. Genoil was incorporated in April of 1996
under Certificate of Incorporation no. 324649-3. In June of 1996,
it amended and altered its Memorandum and Articles of Association.
This amendment was made to facilitate a reorganization of its share
capital in accordance with the amalgamation referenced above. The
Articles of Amalgamation, adopted in September of 1996, replaced
the Articles of Incorporation, as amended.
At the
Annual and Special Meeting of Shareholders of the Corporation, held
on May 31, 2006, shareholders of the Corporation passed a special
resolution authorizing the Corporation to amend its Articles to
create an additional class of share to be designed as "Class A
Preferred Shares" and to allow for the appointment of additional
directors of the Corporation between shareholder
meetings.
The
Articles of Amalgamation are subject to all the provisions of the
CBCA. The CBCA provides that a company incorporated under that Act
has all the powers and capacities of a natural person. The CBCA
further stipulates that a company must not carry on a business that
its articles prohibit. The Corporation's articles contain no
prohibitions on the nature of businesses that it may carry out.
Thus, it has the power and capacity of a natural
person.
The
following brief description of provisions of the CBCA, the
Corporation's amended and restated articles of incorporation and
by-laws do not purport to be complete and are subject in all
respects to the provisions of the CBCA, the Corporation's restated
articles of incorporation and by-laws.
Regulation SK Item
702 requires the Corporation to state the general effect of any
statute, charter provisions, by-laws, contract or other
arrangements under which any controlling persons, director or
officer of the registrant is insured or indemnified in any manner
against liability which he may incur in his capacity as
such.
Furthermore, the
by-laws of the Corporation provide that except in respect of an
action by or on behalf of the Corporation or other entity to
procure a judgment in its favour, the Corporation will indemnify a
director or officer of the Corporation against all costs, charges,
and expenses, including an amount paid to settle an action or
satisfy a judgment, reasonably incurred by the individual in
respect of any civil, criminal, administrative, investigative or
other proceeding in which the individual is involved because of
that association with the Corporation or other entity.
Directors' Conflicts of Interest
Section
120 of the CBCA requires every director who is, in any way,
directly or indirectly, interested in one of Genoil's proposed
material contracts or transactions, to disclose the nature and
extent of the director's interest in writing or by requesting to
have it entered in the minutes of the meeting of directors or of
meetings of committees of directors.
The
CBCA further provides that a director or officer who is required to
disclose an interest may not vote on any resolution to approve the
contract or transaction unless the contract or transaction, (i)
relates primarily to the director's or officer's remuneration as
one of the Corporation's directors, officers, employees or agents
or that of an affiliate, (ii) is for indemnity or insurance for the
director against liability incurred by the director or officer
acting in his or her capacity as a director or officer, or (iii) is
with an affiliate.
Borrowing Powers
The
Corporation's By-Law No. 3 states that the Board of Directors may
exercise borrowing powers provided for in this by-law. These powers
include borrowing money on credit, issuing bonds, debentures, notes
and other indebtedness, giving guarantees on behalf of the
Corporation and granting mortgages by the Corporation, among
others.
Directors
The
number of directors shall be not less than one and not more than
nine. The number of directors may be determined from time to time
by an ordinary resolution of the shareholders passed at a duly
convened general meeting. A director is not required to own any of
the Corporation's shares to be qualified to serve as a director. A
director is not required to retire under any age-limit
requirement.
Upon
the termination of each annual general meeting, all the directors
are deemed to cease serving as directors. The number of directors
to be elected at any such meeting will be the number of directors
then in office unless the directors or shareholders otherwise
determine.
If the
shareholders remove any director before the expiration of his or
her period of office and appoint another person in his or her
place, that person so appointed shall hold office only during the
remainder of the time that the director in whose place he or she is
appointed would have held the office if he or she had not been
removed. If the shareholders do not appoint another director to
replace the removed director the vacancy may be filled by the
directors.
The
directors of the Corporation, between annual meetings, may appoint
one or more additional directors of the Corporation to serve until
the next annual meeting, provided that the number of additional
directors of the Corporation shall not at any time exceed one-third
of the number of directors who held office at the expiration of the
last annual meeting of the Corporation.
The
directors, or any committee of directors, may take any action
required or permitted to be taken by them and may exercise any of
the authorities, powers and discretions for the time being vested
in or exercisable by them by way of a resolution either passed at a
meeting at which a quorum is present or consented to in writing
under the applicable section of the CBCA.
The directors
may appoint a president, one or more vice-presidents, a secretary,
a treasurer and other officers as determined by the Board,
including assistants to the Board. The directors may specify the
duties of and delegate powers to manage the business and affairs of
the directors to these officers. The Corporation may also appoint a
chairman of the Board, who must also be a director, and assign the
powers and duties assigned to the managing director or president,
under the by-laws, or other powers and duties.
Rights Attached to Shares
The
following is a description of the rights, preferences, and
restrictions attached to each class of the Corporation's
shares:
(a)
Unlimited Common Shares – Each Common Share carries the right
to one vote at any meeting of the Corporation's shareholders.
Dividends are payable on the Common Shares in the discretion of the
Board of Directors. After a period of six years, dividends that
have been paid but remain unclaimed by shareholders shall be
forfeited to the Corporation. In the event of the liquidation,
dissolution or winding-up of the Corporation or any distribution of
Genoil's assets for the purpose of winding up its affairs, the
Common Shares shall be entitled to receive Genoil's remaining
property. The Common Shares are not redeemable at the Corporation's
option or at the option of the holders. There are no sinking fund
provisions respecting the Common Shares. The holders of the Common
Shares are not liable for any further capital calls on such
shares.
(b) Up
to 10,000,000 Class A Preferred Shares – The Class A
Preferred Shares may at any time and from time to time be issued in
one or more series, each series consisting of such number of shares
as may, before their issuance, be determined by resolution of the
directors of the Corporation. Subject to the provisions of the
CBCA, the directors of the Corporation may by resolution fix before
the issue of Class A Preferred Shares the designation, rights,
privileges, restrictions and conditions attaching to each series of
the Class A Preferred Shares.
Alteration of the Rights of Shareholders
No
rights, privileges or restrictions attached to the Common Shares
may be altered except with the approval by resolution passed by the
vote of the holders of not less than two-thirds of the votes cast
in respect of a resolution to alter such rights.
There
are no limitations in Genoil's charter on the rights of
non-resident or foreign owners to hold Common Shares of
Genoil.
Shareholders' Meetings
The
CBCA requires the directors to call an annual general meeting of
shareholders not later than fifteen months after the last annual
general meeting and no later than six months after the end of the
Corporation's preceding financial year. The directors may, whenever
they think fit, convene a special meeting.
Notice
of a meeting must specify the time and place of a meeting, and, in
case of special business, the general nature of that business and
the text of any resolution. The accidental omission to give notice
of any meeting to, or the non-receipt of any notice by any of the
shareholders entitled to receive notice does not invalidate any
proceedings at that meeting.
All
business that is transacted at meetings of shareholders, with the
exception of consideration of the financial statements and
auditor's report, election of directors, appointment of Genoil's
auditor is deemed to be special business.
Genoil's Articles
stipulate that business shall be conducted at any general meeting
if there is quorum present at the opening of the meeting
notwithstanding that there ceases to be a quorum present throughout
the meeting. A quorum is shareholders entitled to vote or proxy
holders representing more than 10% of Genoil's outstanding shares
entitled to vote at the meeting.
Genoil's Articles
stipulate that the Chairman of the Board, or in his absence, the
Corporation's Managing Director, or in his absence the
Corporation's President shall preside as chairman of every general
meeting.
Unless
the directors otherwise determine, the instrument appointing a
proxyholder shall be deposited at a place specified for that
purpose in the notice convening the meeting, not less than
forty-eight hours before the time for holding the meeting at which
the proxyholder proposes to vote.
Notice
of every general meeting should be sent to:
(a)
each director;
(b) the
Corporation's auditor;
(c)
every shareholder entered in the securities registrar as the holder
of a share or shares carrying the right to vote at such meetings on
the record date or, if no record date was established by the
directors, on the date of mailing such notice; and
(d)
every person upon whom the ownership of a share devolves by reason
of his being a legal personal representative or a trustee in
bankruptcy of a shareholder where the shareholder, but for his
death or bankruptcy, would be entitled to vote.
No
other person is entitled to receive notice of general
meetings.
There
are no limitations to the rights of non-resident or foreign
shareholders to hold or exercise voting rights associated with
Genoil's securities.
These
provisions do not deviate significantly from U.S. law, insofar as
the following matters are concerned:
According to Rule
405 of the Securities Act,
the term "foreign private issuer" means any foreign issuer other
than a foreign government except an issuer meeting the following
conditions:
(a)
More than 50 percent of the outstanding voting securities of such
issuer are directly or indirectly owned of record by residents of
the United States; and
(b) Any
of the following:
(i) The
majority of the executive officers or directors are United States
citizens or residents;
(ii) More than 50
percent of the assets of the issuer are located in the United
States; or
(iii)
The business of the issuer is administered principally in the
United States.
Further, the
predominant rule in most U.S. jurisdictions is that an annual
meeting must be held every 13 months.
C. Material
contracts.
Genoil
has entered into the following material contracts in the ordinary
course of business for the two years preceding this registration
statement:
2019
On July
3, 2019, the Company signed an advisory fee agreement with
Tuimaada-Neft, which is a leading oil and gas company in Russia
with an estimated 850 million tons of oil equivalent. This
agreement builds from the previous LOI that was signed in the
fourth quarter 2017. Genoil will advise and possibly have a
significant role in these development projects, which will include
EPC (engineering, procurement and construction), equity and debt
financing, oil field services, as well as oil field operations and
natural gas development.
On
October 7, 2019, the Company retained the largest bank in China to
bring strategic investors and finance for development of the
massive Velikoye oil field in Russia.
D. Exchange
controls.
There
is no law or governmental decree or regulation in Canada that
restricts the export or import of capital or affects the remittance
of dividends, interest or other payments to a non-resident holder
of Common Shares, other than withholding tax requirements. See
"Taxation".
E. Taxation.
Genoil
has provided the following summary of the material Canadian federal
and U.S. federal income tax considerations generally applicable in
respect of the holding or disposing of Common Shares. This summary
does not address all possible tax consequences relating to an
investment in its Common Shares. There may be provincial,
territorial, state and local taxes applicable to a potential
shareholder, depending on the shareholder's particular
circumstances, which are not addressed in this summary. The tax
consequences to any particular holder, including a U.S. Holder of
common shares (defined below) will vary according to the status of
that holder as an individual, trust, corporation, or member of a
partnership, the jurisdiction in which the holder is subject to
taxation, the place where the holder is resident and generally,
according to the holder's particular circumstances.
U.S. Holder of Common Shares
References to a
"U.S. Holder of common shares" in this section include individuals,
corporations, trusts or estates who are holders of Common Shares
and who:
●
for
purposes of the Income Tax
Act (Canada) (the "ITA") and the Canada-United States Income Tax
Convention (1980), as amended by the protocol signed on July
29, 1997, (the "Treaty") are residents of the U.S. and have never
been residents of Canada;
●
for
purposes of the U.S. Internal Revenue Code of 1986 (the "Code") are
U.S. persons;
●
deal at
arm's length with Genoil for purposes of the ITA;
●
will
hold the Common Shares as capital property for purposes of the
ITA;
●
will
hold the Common Shares as capital assets for purposes of the
Code;
●
do not
and will not hold the Common Shares in carrying on a business in
Canada;
●
will
not perform independent personal services from a fixed base
situated in Canada; and
●
are not
or will not be subject to special provisions of Canadian or U.S.
federal income tax law, including, without limiting the generality
of the foregoing, financial institutions, real estate investment
trusts, shareholders that have a functional currency other than the
U.S. dollar, shareholders that own shares through a partnership or
other pass-through entity, shareholders that hold shares as part of
a straddle, hedge or conversion transaction, tax-exempt
organizations, qualified retirement plans, insurance companies,
shareholders who acquired their shares through the exercise of
employee stock options or otherwise as compensation and mutual fund
companies.
The
following summary of Canadian federal and U.S. federal income tax
considerations generally applicable to a U.S. Holder of Genoil's
Common Shares is based on the following, as at the time of this
statement:
●
the ITA
and the Income Tax Regulations (Canada) (the
"Regulations");
●
published
proposals to amend the ITA and the Regulations;
●
published
administrative positions and practices of the Canada Customs and
Revenue Agency;
●
published
Internal Revenue Service ("IRS") rulings;
●
published
administrative positions of the IRS;
●
published
jurisprudence that is considered applicable; and
All of
the foregoing is subject to material or adverse change, on a
prospective or retroactive basis, at any time. The tax laws of the
various provinces or territories of Canada and the tax laws of the
various state and local jurisdictions of the U.S. are not
considered in this summary.
This
summary is not exhaustive of all possible income tax consequences.
The following discussion is for general information only and is not
intended to be, nor should it be construed to be, legal or tax
advice to any holder or prospective holder of Genoil's Common
Shares and no opinion or representation with respect to any such
holder or prospective holder with respect to the income tax
consequences to any such holder or prospective holder is made.
Accordingly, it is recommended that holders and prospective holders
of the Corporation's Common Shares consult their own tax advisors
about the Canadian federal and provincial and U.S. federal, state,
local, and foreign tax consequences of purchasing, owning and
disposing of the Corporation's Common Shares.
Canadian Federal Income Tax Consequences
Disposition of Common Shares
Provided that the
Common Shares are listed on a "prescribed stock exchange", which
currently includes the TSX Venture Exchange but does not include
the OTC Markets, a U.S. Holder of Common Shares will not be subject
to tax in Canada under the ITA on capital gains realized on the
disposition of such Common Shares unless the shares are "taxable
Canadian property." Such Common Shares will be taxable Canadian
property if, in general, at any time during the sixty month period
immediately preceding the disposition, 25% or more of Genoil's
issued shares of any class (or an option to acquire 25% or more of
the issued shares of any class) were owned by such holder, or by
such holder and persons with whom such holder did not deal at arm's
length. If the Corporation's shares are taxable Canadian property
to a U.S. Holder of Common Shares, 50% of any resulting capital
gain realized on the disposition of such shares may be subject to
tax in Canada. However, the Treaty provides that gains realized by
a U.S. Holder of Common Shares on the disposition of shares of a
Canadian corporation will be exempt from federal tax in Canada
unless the value of the Canadian corporation is derived principally
from real property situated in Canada. It is the current position
of the Canada Revenue Agency that a U.S. limited liability company
is not entitled to the benefits of the Treaty.
Dividend Distributions on Genoil's Shares
Dividends paid on
Genoil's Common Shares held by a U.S. Holder of Common Shares will
be subject to Canadian non-resident withholding tax. The
Corporation is required to withhold taxes at source. Under the
Treaty, a withholding rate of 5% is applicable to corporations
resident in the United States and who are beneficial owners of at
least 10% of the voting shares of the Corporation. Under the
Treaty, a withholding rate of 15% is applicable in all other
cases.
United States Federal Income Tax Consequences
The
U.S. federal income tax consequences related to the disposition and
ownership of Common Shares, subject to the Foreign Personal Holding
Company Rules, Passive Foreign Investment Company and Controlled
Foreign Corporation Rules contained in the Code, are generally as
follows:
Disposition of Common Shares
On a
disposition of Common Shares, a U.S. Holder of Common Shares
generally will recognize a gain or loss. The gain or loss will be
equal to the difference between the amount realized on the sale and
the U.S. Holder of Common Share's adjusted tax basis in those
shares. Any such gain or loss will be a long-term capital gain or
loss if the shareholder has held the shares for more than one year.
Otherwise the gain or loss will be a short-term capital gain or
loss. However, a gain realized on the disposition of Common Shares
may be treated as ordinary income if the company was a "collapsible
corporation" within the meaning of the Code. The gain or loss will
generally be a U.S. source gain or loss.
A
collapsible corporation is usually formed to give a short-term
venture the appearance of a long-term investment in order to
portray income as capital gain rather than profit. Such a
corporation is typically formed for the sole purpose of purchasing
property and usually dissolved before the property has generated
substantial income. The Internal Revenue Service treats the income
earned through a collapsible corporation as ordinary income rather
than as capital gain.
Dividend Distributions on Shares
Dividend
distributions (including constructive dividends) paid by Genoil
will be required to be included in the income of a U.S. Holder of
Common Shares to the extent of the Corporation's current or
accumulated earnings and profits ("E&P") attributable to the
distribution without reduction for any Canadian withholding tax
withheld from such distributions. Even if such payment is in fact
not converted to U.S. dollars, the amount of any cash distribution
paid in Canadian dollars will be equal to the U.S. dollar value of
the Canadian dollars on the date of distribution based on the
exchange rate on such date. To the extent distributions the
Corporation pays on the Common Shares exceed the Corporation's
current or accumulated E&P, they will be treated first as a
return of capital up to a shareholder's adjusted tax basis in the
shares and then as capital gain from the sale or exchange of the
shares.
Dividends paid on
the Common Shares generally will not be eligible for the "dividends
received" deduction provided to corporations receiving dividends
from certain U.S. corporations. These dividends generally may be
subject to backup withholding tax, unless a U.S. Holder of Common
Shares furnishes the Corporation with a duly completed and signed
Form W-9. The U.S. Holder of Common Shares will be allowed a refund
or a credit equal to any amount withheld under the U.S. backup
withholding tax rules against the U.S. Holder of Common Share's
U.S. federal income tax liability, provided the shareholder
furnishes the required information to the IRS.
Foreign Tax Credit
A U.S.
Holder of Common Shares will generally be entitled to a foreign tax
credit or deduction in an amount equal to the Canadian tax
withheld. Dividends paid by Genoil generally will constitute
foreign source dividend income and "passive income" for purposes of
the foreign tax credit, which could reduce the amount of foreign
tax credits available to shareholders. There are significant and
complex limitations that apply to the credit.
Foreign Personal Holding Company Rules
Special
U.S. tax rules apply to a shareholder of a foreign personal holding
company ("FPHC"). Genoil would be classified as a FPHC in any
taxable year if both of the following tests are
satisfied:
●
at
least 60% of Genoil's gross income consists of "foreign personal
holding company income", which generally includes passive income
such as dividends, interest, royalties, gains from shares and
commodity transactions and rents; and
●
more
than 50% of the total voting power of all classes of voting shares
or the total value of outstanding shares is owned directly or
indirectly by five or fewer individuals who are U.S. citizens or
residents.
Passive Foreign Investment Company Rules
Special
U.S. tax rules apply to a shareholder of a Passive Foreign
Investment Company ("PFIC"). Genoil could be classified as a PFIC
if, after the application of certain "look through" rules, for any
taxable year, either:
●
75% or
more of the Corporation's gross income for the taxable year is
"passive income," which includes interest, dividends and certain
rents and royalties; or
●
the
average quarterly percentage, by fair market value of the
Corporation's assets that produce or are held for the production of
"passive income" is 50% or more of the fair market value of all of
its assets.
To the
extent Genoil owns at least 25% by value of the shares of another
corporation, it is treated for purposes of the PFIC tests as owning
its proportionate share of the assets of such corporation, and as
receiving directly its proportionate share of the income of such
corporation.
Distributions which
constitute "excess distributions" from a PFIC and dispositions of
Common Shares of a PFIC are subject to the following special
rules:
●
the
excess distributions (generally any distributions received by a
U.S. Holder of Common Shares on the shares in any taxable year that
are greater than 125% of the average annual distributions received
by such U.S. Holder of Common Shares in the three preceding taxable
years, or the U.S. Holder of Common Share's holding period for the
shares, if shorter) or gain would be allocated on a pro rata basis
over a U.S. Holder of Common Share's holding period for the
shares;
●
the
amount allocated to the current taxable year and any taxable year
prior to the first taxable year in which the Corporation is a PFIC
would be treated as ordinary income in the current taxable year;
and
●
the
amount allocated to each of the other taxable years would be
subject to the highest rate of tax on ordinary income in effect for
that year and to an interest charge based on the value of the tax
deferred during the period during which the shares are
owned.
U.S.
Holders of Common Shares who actually or constructively own shares
in a PFIC may be eligible to make certain elections which require
them to include income for the PFIC on an annual
basis.
Controlled Foreign Corporation Rules
Generally, if more
than 50% of the voting power or total value of all classes of
Genoil's shares are owned, directly or indirectly, by U.S.
shareholders, who individually own 10% or more of the total
combined voting power of all classes of the Corporation's shares,
the Corporation could be treated as a controlled foreign
corporation ("CFC") under Subpart F of the Code. This
classification would require such 10% or greater shareholders to
include in income their pro rata shares of its "Subpart F Income,"
as defined in the Code. In addition, a gain from the sale or
exchange of shares by a U.S. Holder of Common Shares who is or was
a 10% or greater shareholder at any time during the five year
period ending with the sale or exchange will be deemed ordinary
dividend income to the extent that the Corporation's E&P is
attributable to the shares sold or exchanged.
F. Dividends and paying
agents.
Not
required as this is an annual report under the Securities Act.
G. Statement by
experts.
Not
required as this is an annual report under the Securities Act.
H. Documents on
display.
No
longer required
I. Subsidiary
information.
Genoil
has the following subsidiaries:
●
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. Emirates LLC is jointly owned by S.B.K.
Commercial Business Group LLC and Genoil. As of December 31, 2019,
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.
Item 11.
Quantitative and Qualitative Disclosures About Market
Risk
Genoil
is not exposed to cash flow and translation risk due to changes in
the Canadian/United States dollar exchange rate and interest rate
fluctuations at this time due to the fact it does not currently
conduct any material business in Canada or the United
States.
Item 12.
Description of Securities Other than Equity
Securities
Not
required as this is an annual report under the Securities Act.