Interim Consolidated Financial Statements

March 31, 2010

(Unaudited)

GENOIL INC.
Index to Interim Consolidated Financial Statements
Three months ended March 31, 2010

	Page
FINANCIAL STATEMENTS
Interim Consolidated Balance Sheets	1
Interim Consolidated Statements of Loss and Deficit	2
Interim Consolidated Statements of Cash Flows	3
Notes to Interim Consolidated Financial Statements	4 - 15

Responsibility for Financial Statements

The interim consolidated financial statements of Genoil Inc. have been prepared by and are the responsibility of the Company's management. They include the selection of appropriate accounting principles, judgments and estimates necessary to comply with Canadian generally accepted accounting principles.

The auditors of Genoil Inc. have not performed a review of these unaudited interim consolidated financial statements.

Interim Consolidated Balance Sheets
March 31, 2010 and December 31, 2009
(Unaudited)

	C$	C$
	March	December
	(Unaudited)	(Audited)
	2010	2009
ASSETS
CURRENT
Cash and cash equivalents	$ 113,794	$ 9,140
Receivables	7,608	14,304
Prepaid expenses and deposits	260,615	275,479
	382,017	298,923
PROPERTY, PLANT AND EQUIPMENT	1,868,495	1,917,937
INTANGIBLE ASSETS	1,837,116	1,883,560
	$ 4,087,628	$ 4,100,420
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities	$ 606,711	$ 894,547
Due to related parties	161,608	172,124
Convertible Notes - current portion (Note 3)	1,434,193	1,379,275
Due to Investors	-	168,289
	2,202,512	2,614,235
CONVERTIBLE NOTES (Note 3)	179,038	173,823
	2,381,550	2,788,058
SHAREHOLDERS' EQUITY
Share capital (Note 5)	52,532,052	52,207,086
Contributed surplus (Note 4)	19,064,537	17,147,498
Accumulated deficit	(69,890,511)	(68,042,222)
	1,706,078	1,312,362
	$ 4,087,628	$ 4,100,420
SUBSEQUENT EVENTS (Note 8)
GOING CONCERN (Note 2)

APPROVED BY THE BOARD

/signed/ D.K. Lifschultz__ D.K. Lifschultz - Director

/signed/ T. Bugg _______T. Bugg - Director

See notes to consolidated financial statements

1

GENOIL INC.
Interim Consolidated Statements of Loss and Deficit
Three months ended March 31
(Unaudited)

	C$	C$
	2010	2009
EXPENSES
Administrative expenses	$ 440,983	$ 601,862
Stock-based compensation	1,233,848	630,570
Amortization	95,887	114,662
Accretion (Note 3)	17,630	45,427
Development expenses	9,049	7,508
Interest	43,823	49,650
Foreign exchange gain/loss	7,069	1,914
LOSS FROM OPERATIONS	1,848,289	1,451,593
INTEREST INCOME	-	19
NET LOSS	(1,848,289)	(1,451,574)
DEFICIT - BEGINNING OF PERIOD	(68,042,222)	(62,889,226)
DEFICIT - END OF PERIOD	$ (69,890,511)	$ (64,340,800)

See notes to consolidated financial statements

2

GENOIL INC.
Interim Consolidated Statements of Cash Flows
Three months Ended March 31
(Unaudited)

	C$	C$
	2010	2009
OPERATING ACTIVITIES
Net loss	$ (1,848,289)	$ (1,451,574)
Items not affecting cash:
Amortization	95,887	114,662
Accrued interest	42,504	37,876
Accretion of convertible notes	17,630	45,427
Stock-based compensation	1,233,848	630,570
	(458,420)	(623,039)
Changes in non-cash working capital:
Receivables	6,696	1,702
Accounts payable and accrued liabilities	(87,002)	(23,070)
Prepaid expenses and deposits	14,864	31,218
Due to Investors	(168,289)	262,776
	(233,731)	272,626
Cash flow used by operating activities	(692,151)	(350,413)
INVESTING ACTIVITY
Purchase of equipment	-	(1,461)
Cash flow used by investing activity	-	(1,461)
FINANCING ACTIVITIES
Advances to related parties	(10,516)	46,620
Issuance of common shares	807,321	-
Share issue expense	-	(9,239)
Cash flow from financing activities	796,805	37,381
INCREASE (DECREASE) IN CASH	104,654	(314,493)
Cash - beginning of period	9,140	446,891
CASH - END OF PERIOD	$ 113,794	$ 132,398
CASH FLOWS SUPPLEMENTARY INFORMATION
Interest paid	$ 1,319	$ 11,773
Income taxes paid	$ -	$ -

See notes to consolidated financial statements

3

GENOIL INC.
Notes to Interim Consolidated Financial Statements
Three months ended March 31, 2010
(Unaudited)

1.	INTERIM FINANCIAL STATEMENTS
	These interim financial statements follow the same accounting policies and methods in their application as the most recent annual consolidated financial statements.
	The interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the applicable Canadian Securities Commissions and Regulatory Authorities. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
	These statements reflect all adjustments which, in the opinion of management, are necessary for fair presentation of the information therein. These statements should be read in conjunction with the audited financial statements of the Company for the years ended December 31, 2009 and 2008.
	Results of operations for the interim periods are not indicative of annual results.
2.	NATURE OF BUSINESS AND ABILITY TO CONTINUE AS A GOING CONCERN
	Genoil Inc. (the “Company”) was incorporated under the Canada Business Corporations Act. The Company is a technology development company focused on providing innovative solutions to the oil and gas industry through the use of proprietary technologies. The Company’s business activities are primarily directed to the development and commercialisation of its upgrader technology, which is designed to economically convert heavy crude oil into light synthetic crude. The Company is listed on the TSX Venture Exchange under the symbol GNO as well as the Nasdaq OTC Bulletin Board using the symbol GNOLF.OB.
	These financial statements have been prepared in accordance with Canadian generally accepted accounting principles on a going concern basis, which presumes the Company will be able to realize its assets and discharge its liabilities in the normal course of operations for the foreseeable future. As at March 31, 2010, the Company had incurred accumulated losses of $69,890,511 (2009 - $68,042,222) since inception.
	The ability of the Company to continue as a going concern is in substantial doubt and is dependent on achieving profitable operations, commercialising its upgrader technology, and obtaining the necessary financing in order to develop this technology further. The outcome of these matters cannot be predicted at this time. The Company will continue to review the prospects of raising additional debt and equity financing to support its operations until such time that its operations become self-sustaining, to fund its research and development activities and to ensure the realization of its assets and discharge of its liabilities. While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate sufficient funds for future operations.
	The Company is not expected to be profitable during the ensuing twelve months and therefore must rely on securing additional funds from either issuance of debt or equity financing for cash consideration.
	The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

4

GENOIL INC.
Notes to Interim Consolidated Financial Statements
Three months ended March 31, 2010
(Unaudited)

3.	CONVERTIBLE NOTES
		Series A	Series D	Series E	Total
	Gross amount received	$ 5,638,220	$ 968,825	$ 1,227,356	$ 7,834,401
	Value of warrants and conversion option	(3,822,864)	(51,036)	(166,216)	(4,040,116)
	Fair value of repayment obligation	$ 1,815,356	$ 917,789	$ 1,061,140	$ 3,794,285
	2006 balance	$ 2,157,505	$ 970,735	$ -	$ 3,128,240
	2007
	Accretion	301,611	25,862	-	327,473
	Interest accrued	-	124,226	-	124,226
	Conversions	(2,320,505)	-	-	(2,320,505)
	Ending balance	$ 138,611	$ 1,120,823	$ -	$ 1,259,434
	2008
	New issuances	-	-	1,061,140	1,061,140
	Accretion	16,588	-	39,315	55,903
	Interest accrued	-	106,533	35,184	141,717
	Redemption	-	(1,227,356)	-	(1,227,356)
	Ending balance	$ 155,199	$ -	$ 1,135,639	$ 1,290,838
	2009
	Accretion	18,624	-	139,180	157,804
	Interest accrued	-	-	104,456	104,456
	Ending balance	$ 173,823	$ -	$ 1,379,275	$ 1,553,098
	2010
	Accretion	5,215	-	12,415	17,630
	Interest accrued	-		42,503	42,503
	Ending balance	$ 179,038	$ -	$ 1,434,193	$ 1,613,231

(continues)

5

GENOIL INC.
Notes to Interim Consolidated Financial Statements
Three months ended March 31, 2010
(Unaudited)

3.	CONVERTIBLE NOTES (continued)
	Series A
	On December 23, 2004, the Company issued $5,638,220 of non-interest bearing convertible notes. These convertible notes are due on December 23, 2014. The note holders also received 3,203,534 warrants entitling them to purchase the same number of shares at a price of $0.85 per share at any time prior to December 23, 2009. At the holder’s option, the note may be converted to common shares of the Company at a rate of $0.44 per share at any time prior to maturity. The convertible note may also be converted at the Company’s option if the Company’s common share trading price exceeds $1.55 per share for 30 consecutive trading days during the term of the note.
	The fair value of the repayment obligation, being the present value of the future principal and interest payments using a discount factor of 12%, was estimated to be $1,815,356 on the date the agreement was signed. To estimate the fair value of the warrants, the Company used the Black-Scholes option- pricing model with the following assumptions: zero dividend yield; expected volatility of 100%; risk- free rate of 3%; and expected life of 5 years, resulting in a fair value of $834,153. The residual portion of the proceeds of $2,988,711 was allocated to the conversion option. Both the warrants and conversion option were recorded as debt discounts and are being accreted over the term of the debt.
	During 2007, notes with a face value of $132,679 were converted into common shares of the company at a price of $0.44 per share and 301,543 shares were issued.
	During November 2007, at the request of a large note holder, notes with a face value of $4,902,800 were converted into 2,785,681 preferred shares of the Company. The preferred shares are convertible into 11,142,724 common shares - the same number of common shares the convertible notes would have been convertible to. Per EIC - 96, the preferred shares were valued using the market price ($0.61) of the common shares on date of conversion. This value was allocated between long term debt and equity using the same basis as at the original issue of the notes. The fair value of the debt portion was calculated by discounting the face value at 16%, the estimated market rate for the Company. This resulted in a loss of $176,450 being recorded, while contributed surplus was reduced by $4,432,786. Had the Company used a market rate of 18%, a gain of $94,312 would have been recorded.

(continues)

6

GENOIL INC.
Notes to Interim Consolidated Financial Statements
Three months ended March 31, 2010
(Unaudited)

3.	CONVERTIBLE NOTES (continued)
	Series D
	On October 6, 2006, the Company issued $968,825 of convertible notes to entities controlled by a director and officer of the Company in settlement of debt owed to them. This convertible note is due on April 6, 2007 and has an interest rate of 12% per annum. The note holders also received 322,941 warrants entitling them to purchase the same number of shares at a price of $0.98 per share at any time prior to April 6, 2007. At the holder’s option, the note may be converted to common shares of the Company at a rate of $0.75 per share at any time prior to maturity. The convertible note may also be converted at the Company’s option if the Company’s common share trading price exceeds $1.55 per share for 30 consecutive trading days during the term of the note.
	The fair value of the repayment obligation, being the present value of the future principal and interest payments using a discount factor of 24%, was estimated to be $917,789 on the date the agreement was signed. The residual amount, being $51,036, was allocated to the fair value of the warrants and no value was allocated to the conversion option. The debt discount will be accreted over the term of the debt. To estimate the fair value of the warrants, the Company used the Black-Scholes option- pricing model with the following assumptions: zero dividend yield; expected volatility of 86%; risk-free rate of 4.37%; and expected life of 0.5 years.
	On April 6, 2007, the term of 78% of the notes and attached warrants was extended by six months to October 6, 2007. On that date it was again extended by six months. These notes have an original face value of $760.785 and 253.595 warrants attached. The extension was considered a renegotiation of the debt and the fair value ($25,484) of the warrant extension was expensed as interest paid. The balance of the notes, with a face value of $208,040 and accrued interest of $32,640 is now callable. The attached 69,346 warrants have expired. The Company has entered into a one year funding agreement that would provide the required capital, should this portion of the debt be called. The terms of this agreement is substantially the same as the original notes. One of the parties to this agreement is a director and officer of the Company.
	On October 6, 2008 the series D notes matured and were replaced with series E notes.
	Series E
	On October 6, 2008, series E notes, with a face value of $1,227,356, were issued to replace the series D notes plus accrued interest that matured on that date. About 90% of the amount is due to companies controlled by the Chairman and CEO. The notes have a term of one year, carry interest at 12% p.a., accrued semi-annually, and are convertible into common shares of the Company at $0.27 per share at the option of the holder. The note holders also received 1,136,442 warrants to purchase the same number of common shares of the Company at $0.41 per share.
	The fair value of the repayment obligation, being the present value of the future principal and interest payments using a discount factor of 28%, was estimated to be $1,061,140 on the date the agreement was signed. A total of $32,275, was allocated to the fair value of the warrants and $133,941 was allocated to the conversion option. The debt discount will be accreted over the term of the debt. To estimate the fair value of the warrants, the Company used the Black-Scholes option-pricing model with the following assumptions: zero dividend yield; expected volatility of 127%; risk-free rate of 2.93%; and expected life of 1 year.
	At October 6, 2009, the notes were extended for another year. The extension was considered a modification of the debt and the fair value ($49,798) of the warrant extension was recorded as a reduction to the note payable. The debt discount is to be accreted over the term of the debt.

7

GENOIL INC.
Notes to Interim Consolidated Financial Statements
Three months ended March 31, 2010
(Unaudited)

4.	CONTRIBUTED SURPLUS
		2010	2009
	Balance, beginning of period	$ 17,147,498	$ 14,106,075
	Options granted	1,233,848	2,065,540
	Options cancelled	-	(110,610)
	Warrants granted	683,191	1,086,493
	Balance, end of period	$ 19,064,537	$ 17,147,498

5.	SHARE CAPITAL
	Authorized:
	- An unlimited number of common shares without par value.
	- 10,000,000 Class A Preferred shares, issuable in series.

(continues)

8

GENOIL INC.
Notes to Interim Consolidated Financial Statements
Three months ended March 31, 2010
(Unaudited)

5.	SHARE CAPITAL (continued)
	Issued and outstanding common shares:
		Number	Amount
	2008
	Balance, beginning of year	232,912,757	$ 38,879,177
	Private placement (4)	11,533,919	2,501,098
	Stock options exercised	6,693,750	2,931,891
	Conversion of preferred shares	11,142,724	6,797,062
	Share issue expenses	-	(31,362)
	Balance, end of year	262,283,150	$ 51,077,866
	2009
	Private placement (5)	12,125,327	852,044
	Shares for debt (6)	2,265,192	329,072
	Share issue expenses	-	(51,896)
	Balance, end of year	276,673,669	$ 52,207,086
	2010
	Private placement	5,866,920	128,426
	Shares for debt	1,457,744	196,540
	Balance, end of quarter	283,998,333	52,532,052
	Issued and outstanding Class "A' Preferred shares:
		Number	Amount
	2008
	Balance, beginning of year	2,785,681	$ 6,797,062
	Conversion into common shares	(2,785,681)	$ (6,797,062)
	Balance, end of year	-	-
	2009
	Balance, beginning & end of year	-	-
	2010
	Balance, beginning & end of quarter	-	-
	TOTAL SHARE CAPITAL		$ 52,532,052

(continues)

9

GENOIL INC.
Notes to Interim Consolidated Financial Statements
Three months ended March 31, 2010
(Unaudited)

5.	SHARE CAPITAL (continued)
	1.	In June 2007, the Company issued 5,130,382 units at US$0.52 per unit. Each unit consisted of one common share and one-quarter non-transferable share purchase warrant. Each full warrant entitles the holder to purchase one common share at US$0.78 for a period of three years. C$2,399,621 of the proceeds was allocated to share capital and C$440,110 to warrants.  The value attributed to the warrants was calculated using the Black-Scholes model with expected volatility of 93%, risk free rate of 3.93% and dividend yield nil over their expected life of 3 years.
		The Company issued 234,692 warrants with an exercise price of $0.52 as a finders fee in connection with this private placement. The $76,157 value attributed to the warrants was calculated using the Black-Scholes model with expected volatility of 95%, risk free rate of 4.71% and dividend yield nil over an expected life of 2 years.
	2.	During 2007, the Company issued Class "A" Preferred shares in connection with the conversion of long term notes. The preferred shares can be converted into common shares at a ratio of four common shares for each preferred share. This can be done at the option of the holder of the preferred shares or, after five years, at the option of the Company. The preferred shares carry no voting power and can be redeemed by the Company at $1.76 per share at any time. In the event of liquidation, dissolution or winding up of the Company, the preferred shares shall have preference to receive up to $1.76 per share, before any distribution to any other share holders of the Company.
	3.	In March 2008, the Company issued 378,787 units at US$0.66 per unit. Each unit consisted of one common share and one-quarter non-transferable share purchase warrant. Each full warrant entitles the holder to purchase one common share at US$0.99 for a period of five years. C$206,158 of the proceeds was allocated to share capital and C$40,917 to warrants.  The value attributed to the warrants was calculated using the Black-Scholes model with expected volatility of 96%, risk free rate of 3.35% and dividiend yield nil over their expected life of 5 years.
	4.	In July 2008, the Company issued 11,155,132 units at US$0.23 per unit. Each unit consisted of one common share and one-quarter non-transferable share purchase warrant. Each full warrant entitles the holder to purchase one common share at US$0.29 for a period of two years. C$2,294,940 of the proceeds was allocated to share capital and C$295,666 to warrants. The value attributed to the warrants was calculated using the Black-Scholes model with expected volatility of 95%, risk free rate of 3.27% and dividend yield nil over their expected life of 2 years..

(continues)

10

GENOIL INC.
Notes to Interim Consolidated Financial Statements
Three months ended March 31, 2010
(Unaudited)

5.	SHARE CAPITAL (continued)
	5.	In May 2009, the Company raised US$1.39 million through a private placement, issuing 10,725,443 common shares at US$0.13 and 10,725,443 warrants with an exercise price of US$0.20 per common share and have a 2 year term. C$760,966 of the proceeds was allocated to share capital and C$890,403 was attributed to the warrants and credited to contributed surplus. The value attributed to the warrants was calculated using the Black- Scholes model with expected volatility of 114%, risk free rate of 0.80% and dividend yield nil over their expected life of 2 years.
		In October 2009, the Company raised US$181,985 through a private placement, issuing 1,399,884 common shares at US$0.13 and 1,399,884 warrants with an exercise price of US$0.20 per common share and have a 2 year term. Proceeds of C$91,078 were allocated to share capital and C$99,278 was attributed to warrants and credited to contributed surplus. The value attributed to the warrants was calculated using the Black-Scholes model with expected volatility of 120%, risk free rate of 1.3% and dividend yield nil over their expected life of 2 years.
	6.	The Company also completed three shares-for-debt transactions: the first one issuing 860,997 common shares at US$0.17 and 57,981 non-transferable share purchase warrants with an exercise price of &S$0.21, and second one issuing 506,322 common shares at US$0.13 and 506,322 warrants with an exercise price of US$0.20, and the third one issuing 897,873 common shares at C$0.13. The C$47,013 value attributed to the warrants, which was credited to contributed surplus, was calculated using the Black-Scholes model with expected volatility of 114%, risk free rate of 0.80% and dividend yield nil over their expected life of 2 years. There were no warrants issued in the third shares-for-debt transaction
	7.	In February 2010, the Company raised US$762,900 through a private placement, issuing 5,866,920 common shares at US$0.13 and 5,866,920 warrants with an exercise price of US$0.20 and have a two year term. C$128,426 of the proceeds was allocated to share capital and C$678,895 was attributed to the warrants and credited to contributed surplus. The value attributed to the warrants was calculated using the Black-Scholes option-pricing model with expected volatility of 121%, risk free rate of 1.21% and dividend yield nil over their expected life of 2 years.
		The Company also completed two shares-for-debt transactions. The first one issued 1,308,486 common shares at US$0.13 with no warrants, and the second one issued 149,258 common shares at US$0.13 and 37,314 non-transferable share purchase warrants with an exercise price of US$0.20. The C$4,296 value attributed to the warrants, which was credited to contributed surplus, was calculated using the Black-Scholes model with expected volatility of 121%, risk free rate of 1.21% and dividend yield nil over the expected life of 2 years.

11

GENOIL INC.
Notes to Interim Consolidated Financial Statements
Three months ended March 31, 2010
(Unaudited)

6.	STOCK OPTIONS
	The Company has a stock option plan for directors, officers, employees and consultants. The term and vesting conditions of each option may be fixed by the Board of Directors when the option is granted, but the term cannot exceed 10 years. The maximum number of shares that may be reserved for issuance under the plan is fixed at 52,944,600. The maximum number of shares that may be optioned to any one person is 5% of the shares outstanding at the date of the grant.
	Details of the stock options are as follows:

		Weighted		Weighted		Weighted
		Average		Average		Average
		Exercise		Exercise		Exercise
		Price		Price		Price
	Number	2010	Number	2009	Number	2008
Balance, beginning of year	43,730,000	$ 0.45	34,202,500	$ 0.45	39,091,250	$ 0.49
Granted	10,200,000	0.16	16,950,000	0.21	12,950,000	0.33
Cancelled	(3,630,000)	0.45	(7,422,500)	0.17	(11,145,000)	0.60
Exercised	-	-	-	-	(6,693,750)	0.24
Balance, end of quarter	50,300,000	$ 0.45	43,730,000	$ 0.45	34,202,500	$ 0.45
Exercisable, end of quarter	49,441,398	$ 0.30	41,377,916	$ 0.35	30,455,416	$ 0.43

The following is a summary of options outstanding and exercisable as at March 31, 2010:

	Outstanding			Vested
			WA		Remaining	WA
		Remaining	Outstanding		Vested	Vested
	Outstanding	Contractual	Exercise	Vested	Contractual	Exercise
Range	Options	Life	Price	Options	Life	Price
$0.00 to $0.39	36,650,000	4.13	$0.17	36,066,398	4.13	$0.17
$0.40 to $0.79	11,050,000	1.66	$0.55	10,800,000	1.64	$0.55
$0.80 to $1.590	2,500,000	0.17	$1.20	2,500,000	0.17	$1.20
$1.60 to $2.00	100,000	1.09	$1.65	75,000	1.09	$1.65
	50,300,000	3.39	$0.31	49,441,398	3.38	$0.31

12

GENOIL INC.
Notes to Interim Consolidated Financial Statements
Three months ended March 31, 2010
(Unaudited)

7.	WARRANTS
	A summary of the changes in share purchase warrants outstanding and exercisable at the end of the period is as follows:

C$ Warrants
	2010		2009		2008
		WA		WA		WA
	Total	Strike	Total	Strike	Total	Strike
	Warrants	Price	Warrants	Price	Warrants	Price
Balance, beginning of year	1,136,442	$ 0.41	5,539,976	$ 0.66	4,057,129	$ 0.82
Issued	-	-	1,136,442	$ 0.41	2,590,037	$ 0.45
Exercised	-	-	-	-	-	-
Expired	-	-	5,539,976	$ 0.66	1,107,190	$ 0.78
Forfeited	-	-	-	-	-	-
Balance, end of quarter	1,136,442	$ 0.41	1,136,442	$ 0.41	5,539,976	$ 0.66
US$ Warrants
	2010		2009		2008
		WA		WA		WA
	Total	Strike	Total	Strike	Total	Strike
	Warrants	Price	Warrants	Price	Warrants	Price
Balance, beginning of year	16,855,697	$ 0.26	4,400,759	$ 0.46	2,969,399	$ 0.89
Issued	5,904,235	0.20	12,689,630	$ 0.20	2,883,473	$ 0.31
Exercised	-	-	-	-	-	-
Expired	-	-	-	-	-	-
Forfeited	-	-	234,692	$ 0.52	1,452,113	1.04
Balance, end of quarter	22,759,932	$ 0.25	16,855,697	$ 0.26	4,400,759	$ 0.46
Total	23,896,374		17,992,139		9,940,735

The following is a summary of warrants as at March 31, 2010:

	Outstanding
	Outstanding	Remaining
Range	Warrants	Contractual Life
$0.000 to $0.390	21,382,640	1.37
$0.400 to $0.790	2,419,036	0.38
$0.800 to $1.190	94,696	2.93
	23,896,372	1.27

13

GENOIL INC.
Notes to Interim Consolidated Financial Statements
Three months ended March 31, 2010
(Unaudited)

8.	SUBSEQUENT EVENTS
	In April 2010, the Company issued 4,500,000 options to directors, consultants and employees of the Company. The options have an exercise price of C$0.14 and a 5 year term.
	On May 13, 2010 Genoil Inc. announced that it proposed to issue 810,279 common shares at a deemed price of $0.09 per share to conclude a definitive shares for debt settlement agreement with related parties for unpaid salaries. The total amount of indebtedness settled in this regard is $72,925.13. The shares issued in connection with the settlement of this debt are subject to a four month hold period from their date of issuance.
	On May 25, 2010, the Company announced that it has a proposed private placement for up to $500,000 at $0.13 by June 15, 2010 with an attached warrant at $0.13. The Warrants are exercisable until 24 months following their issue date at a price of US$0.13. The common shares and warrants issued in connection with this offering are subject to a four month old period.

9.	FINANCIAL INSTRUMENTS
	Credit Risk
	The Company is exposed to credit risk with respect to its cash and receivables. Receivables are comprised substantially of goods and services tax credits receivable from a Canadian tax agency and cash is placed with major financial institutions. Management believes this mitigates the risk associated with these financial instruments. Accordingly, the Company views credit risk as minimal.
	Fair Value
	The Company's financial instruments consist of cash and cash equivalents, receivables, due to investors, accounts payable and accrued liabilities, amounts due to related parties and convertible notes. The fair value of the convertible notes was calculated using discounted cashflow analysis and approximates the carrying value as the implicit interest rate is similar to current market rates. The fair value of the financial instruments, other than long-term convertible notes, approximates their carrying values due to their short term nature. The fair value of the long-term convertible note, using a discount rate of 24% (2009 - 24%, 2008 - 24%) at March 31, 2010, is approximately $110,700 (2009 - $105,000, 2008 - $84,700).
	The Company categorizes its financial assets and liabilities using a three-level hierarchy that reflects the significance of the inputs used in making fair value measurements for these assets and liabilities. The fair values of assets and liabilities included in Level 1 are determined by reference to quoted prices in active markets for identical assets and liabilities. Fair values of assets and liabilities in Level 2 are based on inputs other than Level 1 quote3d prices that are observable for the asset or liability either directly (as prices) or indirectly (derived from prices). The fair values of Level 3 assets and liabiliti4es are not based on observable market data. The disclosure of the fair value hierarchy excludes financial assets and liabilities where book value approximates fair value due to the liquid nature of the asset or liability.
	Currency Risk

(continues)

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GENOIL INC.
Notes to Interim Consolidated Financial Statements
Three months ended March 31, 2010
(Unaudited)

9.	FINANCIAL INSTRUMENTS (continued)
	The Company translates the results of its foreign operations into Canadian dollars using rates approximating the average exchange rate for the year. The exchange rate may vary from time to time and create foreign currency risk. As at year-end the Company had certain obligations denominated in US dollars and there are no contracts in place to manage the exposure. As at March 31, 2010 the Company had US$1,522 (2009 - US$1,993) in cash and US$25,335 (2009 - US$-Nil) included in accounts payable which is subject to foreign exchange fluctuation. The Company's operations are not significantly exposed to foreign exchange risk.
	Interest rate risk
	The Company is not exposed to significant interest rate risk due to the short-term nature of its monetary assets and liabilities and due to the long-term convertible notes not bearing interest.
	Liquidity Risk
	Liquidity risk is the risk that the Company will incur difficulties meeting its financial obligations as they are due. The Company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking harm to the Company's reputation. To facilitate its expenditures, the Company raises funds through private equity placements. As at March 31, 2010, the Company's financial liabilities were comprised of accounts payable and accrued liabilities, liabilities to related parties, and convertible notes which have a maturity of less than one year.

10.	COMPARATIVE FIGURES
	Certain of the comparative figures have been reclassified to conform to the current period's presentation.

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