USA (212) 688-8868 sales@genoil.net

GENOIL INC. PROPOSES CANCELLATION OF EXTENDED NOTES (2008-05-23)

GENOIL INC. PROPOSES CANCELLATION OF EXTENDED NOTES
2008-05-23

Calgary, Alberta, Canada – May 23, 2008 – As previously announced, on October 10, 2006 Genoil Inc. (TSX.V: GNO; OTCBB: GNOLF.OB) entered into loans (the “Loans”) from Lifschultz Enterprises Co., LLC (“Enterprises”), Sidney B. Lifschultz 1992 Family Trust (the “Trust”), and Lifschultz Family Partnership LP, each of which entities are affiliated with the Corporation’s Chairman and Chief Executive Officer (collectively, the “Lenders”), for an original aggregate principal amount of $968,825.19.

 

Such Loans were evidenced by the issuance of convertible promissory notes (the “Original Notes”) carrying an annual interest rate of 12%, having a conversion price of $0.75, and having a maturity date of April 6, 2007.  In connection with the issuance of the Original Notes, the Corporation additionally granted an aggregate of 322,941 common share purchase warrants (the “Original Warrants”), exercisable at any time prior to April 6, 2007 at a price of $0.98 per share for 322,941 common shares of the Corporation, such exercise price being 130% of the conversion price of the Original Notes, to the Lenders.

 

The Corporation and each of Enterprises and the Trust agreed, by way of a Note Extension Agreement, to extend the maturity date of the Original Notes and the term of the Original Warrants from April 6, 2007 until October 6, 2007, with such notes (the “Extended Notes”) and warrants (the “Extended Warrants”) to continue on the same terms in all other respects.  As announced in October 2007, the Corporation and each of Enterprises and the Trust agreed, by way of a second Note Extension Agreement, to extend the term of the Extended Notes and the Extended Warrants from October 6, 2007 until April 6, 2008, with such notes (the “Second Extended Warrants”) and warrants (the “Seconded Extended Warrants”) to continue on the same terms in all other respects.

 

As previously announced on April 4, 2008, the Corporation and each of Enterprises and the Trust agreed, by way of a Note Extension and Amendment Agreement (the “Agreement”), and subject to receipt of all necessary regulatory and Stock Exchange approvals, to extend the maturity date of the Second Extended Notes from April 6, 2008 until October 6, 2008.  The Corporation and each of Enterprises and the Trust also agreed, by way of the Agreement, and subject to receipt of all necessary regulatory and Stock Exchange approvals, to extend the term of the Second Extended Warrants for a similar six month term, from April 6, 2008 to October 6, 2008.

 

In consideration for the agreement of Enterprises and the Trust to extend the maturity date of the Second Extended Notes, the Corporation further agreed as part of the Agreement, and subject to receipt of all necessary regulatory and Stock Exchange approvals, that the Second Extended Notes would be convertible into common shares of the Corporation at the current market price of the Corporation’s common shares such that the holders would be entitled to one common share for each $0.49 of principal and accrued interest amount so converted.  The exercise price of the Second Extended Warrants would be $0.64, such exercise price being 130% of the conversion price of the Second Extended Notes.  As at April 6, 2008, the principal amount of the Second Extended Notes, together with the interest accrued thereon, was equal to $908,388.73.

 

As previously announced on May 2, 2008, the Corporation was unable to obtain TSX Venture Exchange approval for the amendment of the conversion price of the Second Extended Notes and the exercise price of the Second Extended Warrants.  As such, the Corporation and each of Enterprises and the Trust agreed, by way of an Amended Note Extension and Amendment Agreement (the “Amended Agreement”) not to amend the conversion price of the Second Extended Notes and the exercise price of the Second Extended Warrants and simply to extend the maturity date of the Second Extended Notes from April 6, 2008 until October 6, 2008.  The Corporation and each of Enterprises and the Trust also agreed, by way of the Amended Agreement, to extend the term of the Second Extended Warrants for a similar six month term, from April 6, 2008 to October 6, 2008.

 

The terms of the Amended Agreement received the necessary Stock Exchange approval, but the TSX Venture Exchange has indicated that this is the final extension permitted pursuant to the rules of the TSX Venture Exchange.  As such, shareholders of the Corporation will be asked to approve the cancellation of the extended convertible promissory notes (the “Third Extended Notes”) and common share purchase warrants (the “Third Extended Warrants”) and the proposed issuance of new convertible promissory notes and common share purchase warrants to Enterprises and the Trust, as described in the Information Circular relating to the upcoming Annual and Special Meeting of Shareholders of the Corporation.

 

The proposed cancellation of the Third Extended Notes and Third Extended Warrants and the proposed issuance of new convertible promissory notes (the “New Notes”) in an aggregate principal amount equal to the principal amount of the Third Extended Notes outstanding, together with interest accrued thereon, is being enacted to satisfy the Corporation’s commitment to do so made concurrently with the third extension of the notes and warrants described above.  The New Notes, if approved, will have a conversion price equal to the closing price of the Corporation’s shares on May 22, 2008, being $0.38, and the new common share purchase warrants (the “New Warrants”), if approved, will be exercisable for common shares of the Corporation at an exercise price equal to 150% of the conversion price of the New Notes, being $0.57, such New Notes and New Warrants having a term of 1 year from their date of issuance and otherwise having identical terms as the Third Extended Notes and Third Extended Warrants.  Without the Corporation’s agreement to seek approval for such New Notes     and New Warrants, Enterprises and the Trust would not have entered into such extended loans, with the issuance of such New Notes and New Warrants forming an inducement and being issued in consideration of Enterprises and the Trust’s agreement to such an extension.

About Us 

Genoil is an international engineering technology development company based in Alberta, Canada that develops innovative hydrocarbon, oil and water separation, and marine technologies.

 

For further information contact:

David Lifschultz

Chairman and CEO

(212) 688-8868

www.genoil.net

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ADVISORY: The TSX Venture Exchange has neither approved nor disapproved of the information contained herein.