ARCpoint Inc. — Interim / Quarterly Report 2021

Aug 20, 2021

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended June 30, 2021

(Unaudited)

(In Canadian Dollars)

RSI International Systems Inc.

Notice to Reader:

These condensed consolidated interim financial statements of RSI International Systems Inc. (the "Company") have been prepared by management and reviewed by the Audit Committee and approved and authorized for issue by the Board of Directors of the Company. In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its external auditors have not reviewed these condensed consolidated interim financial statements, notes to condensed consolidated financial statements and the related quarterly Management Discussion and Analysis.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(Unaudited, in Canadian dollars)

	Notes	June30,2021	December 31,2020
ASSETS
Current
Cash		$4,113	$29,609
Short-term investment –GIC		5,032,132	5,009,617
Interest receivables -GIC		4,043	56,131
Lease receivables	4,7	81,608	174,606
Prepaid Expenses		34,431	39,491
		$5,156,327	$5,309,454
LIABILITIES AND SHAREHOLDERS' EQUITYCurrentAccounts Payable & Accrued LiabilitiesLease liability	4,7	$34,99481,608	$57,168174,606
		116,602	231,774
Shareholders' Equity
Share Capital	5	5,633,039	5,633,039
Contributed Surplus		696,609	696,609
Deficit		(1,289,923)	(1,251,968)
		5,039,725	5,077,680
		$5,156,327	$5,309,454

Note 1 – Nature of operations

RSI INTERNATIONAL SYSTEMS INC. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited in Canadian dollars)

		Three months ended		Six months ended
	Notes	June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020
EXPENSES
Business Development and Travel	$	-$	-$	- $	4,375
Filing and Transfer Agent Fees		2,388	3,762	5,302	10,339
Foreign Exchange (Gain) Loss		(706)	-	(706)	-
Interests and Bank Charges		216	2,962	1,275	3,329
Interest income		(4,544)	(17,962)	(20,428)	(44,741)
Office and Miscellaneous		5,089	8,174	8,918	12,574
Professional Fees		24,657	23,367	43,594	54,142
Stock-based Compensation		-	7,793	-	20,693
Lease accretion gain, net	4	-	(648)	-	(1,422)
		27,100	27,448	37,955	59,289
NET LOSS AND COMPREHENSIVELOSS FOR THE PERIOD		(27,100)	(27,448)	(37,955)	(59,289)
Loss per share - Basic and Diluted	$	(0.00)$	(0.00) $	(0.00)$	(0.00)
Weighted average number of shares
outstanding – basic & diluted		36,835,278	36,835,278	36,835,278	36,835,278

RSI INTERNATIONAL SYSTEMS INC. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited, in Canadian dollars, except share number)

		Issued Common Shares
	Number	Amount Received	Contributed Surplus	Deficit	Total Equity
		$	$	$	$
BALANCE, DECEMBER 31, 2020	36,835,278	5,633,039	696,609	(1,251,968)	5,077,680
Net and comprehensive lossfor the period	-	-	-	(37,955)	(37,955)
BALANCE, JUNE30, 2021	36,835,278	5,633,039	696,609	(1,289,923)	5,039,725
BALANCE, DECEMBER 31, 2019	36,835,278	5,633,039	668,892	(1,092,267)	5,209,664
Stock-based compensation	-	-	20,693	-	20,693
Net and comprehensive lossfor the period	-	-	-	(59,289)	(59,289)
BALANCE,JUNE30, 2020	36,835,278	5,633,039	689,585	(1,151,556)	5,171,068

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited, in Canadian dollars)

	Three months ended				Six months ended
	Notes	June 30, 2021		June 30, 2020		June 30, 2021	June 30, 2020
CASH FLOWS FROM OPERATINGACTIVITIES
Net loss for the period		$	(27,100)	$(27,448)	$	(37,955)	$	(59,289)
Items not affecting cash:
Lease accretion gain, net			-	(648)		-		(1,422)
Stock-based compensation			-	7,793		-		20,693
Changes in Non-Cash Working Capital Items:			(27,100)	(20,303)		(37,955)		(40,018)
Receivables			(4,544)	(19,160)		(20,427)		62,751
Prepaid expenses			2,792	2,739		5,060		5,479
Accounts payable and accrued liabilities			(21,190)	(98,690)		(22,174)		(106,387)
			(50,042)	(135,414)		(75,496)		(78,175)
Interest on lease liability payment			-	-		-		(8,462)
Interest on lease receivable receipt			-	-		-		9,236
Variable lease expense payment			-	-		-		(34,238)
Variable lease expense receipts			-	-		-		22,590
Net Cash (Used in) Flow by OperatingActivities			(50,042)	(135,414)		(75,496)		(89,049)
CASH FLOWS FROM INVESTINGACTIVITIES
Acquisition of short term investment			-	-		-		(108,617)
Lease receivable receipts			-	-		-		27,668
Interest received from short term investment			-	-		71,249		-
Proceeds from sale of short term investment			50,000	-		5,059,617		-
Investment in short term investment			-	-		(5,080,866)		-
Net Cash (Used in) Flow by InvestingActivities			50,000	-		50,000		(80,949)
CASH FLOWS FROM FINANCINGACTIVITIES
Lease payments	6		-	-		-		(41,901)
Net Cash Used In Financing Activities			-	-		-		(41,901)
Change in Cash During the period			(42)	(135,414)		(25,496)		(211,899)
Cash, Beginning of period			4,155	193,443		29,609		269,928
Cash, End of period			$ 4,113	$58,029		$ 4,113	$	58,029
SUPPLEMENTAL CASH FLOW INFOMRMATION
Lease liability – paid by sublessee (note 4(a))						(100,725)		-
Lease receivable– proceed deposited directly to landlord(note 4(a))						100,725		-

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ENDED JUNE 30, 2021 AND 2020 (Unaudited, in Canadian dollars)

1. NATURE OF OPERATIONS

RSI International Systems Inc. (the "Company") is a publicly listed company incorporated under the laws of British Columbia, Canada. The address of the Company's head and registered office is Suite 1201 – 1166 Alberni Street, Vancouver, BC, V6E 3Z3. The condensed consolidated interim financial statements of the Company as at and for the period ended June 30, 2021 include the Company and its subsidiary. The Company was in the business of providing an integrated web-based real-time reservation and property management system to the hotel and resort industries. The Company sold its RoomKeyPMS business in Q1 2019 and is currently looking for other ventures to build value for its shareholders.

On August 13, 2019, the Company transitioned from the TSX-V to the NEX, the Company's trading symbol changed from RSY to RSY.H. There was no change in the Company's name, its CUSIP number and there was no consolidation of capital. The NEX is a separate board of the TSX-V.

These condensed consolidated interim financial statements were approved and authorized for issue by the Board of Directors on August 20, 2021.

These condensed consolidated interim financial statements have been prepared using International Financial Reporting Standards applicable to a going concern, which assumes that the Company will be able to realize its assets and discharge its liabilities and commitments in the normal course of operations for the foreseeable future.

During the period ended June 30, 2021, net loss was $37,955 (2020 – $59,289). The Company also has a working capital of $5,039,725 (December 31, 2020 – $5,077,680) and an accumulated deficit as of June 30, 2021 of $1,289,923 (December 31, 2020 – $1,251,968).

Accordingly, there is a material uncertainty that may cast significant doubt on the validity of this assumption. Although the Company has a positive working capital, the Company has no operating revenue that will cover all of its o operating expenses. The Company's ability to continue as a going concern is dependent on its ability to raise equity financing or the attainment of profitable operations. If the going concern assumption was not appropriate for these consolidated financial statements, then adjustment may be necessary in the carrying values of assets and liabilities and the reported expenses. These condensed consolidated interim financial statement does not reflect any adjustment, which could be material, to the carrying amounts of assets and liabilities, reported revenues and expenses, and balance sheet classification used, that would be necessary if the Company were unable to continue as a going concern.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ENDED JUNE 30, 2021 AND 2020 (Unaudited, in Canadian dollars)

COVID-19

During March 2020, there was a global outbreak of COVID-19 (coronavirus), which has had a significant impact on businesses through the restrictions put in place by the Canadian, provincial and municipal governments regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown the extent of the impact the COVID-19 outbreak may have on the Company as this will depend on future developments that are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions, and quarantine/isolation measures that are currently, or may be put, in place by Canada and other countries to fight the virus.

For period ended June 30, 2021, COVID19 has hindered business travel and corporate development opportunities for the Company. Impact in 2021 remains unknown.

One of the key risks identified by the Company is the collections of lease receivable from the sublease related to the office space (note 4). The Company and its landlord decreased the lease payments from the sublessee and the Company. In addition, the sublessee is paying the Company's landlord directly to mitigate this risk.

2. SIGNIFICANT ACCOUNTING POLICIES

These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standards ("IAS") 34 Interim Financial Reporting have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). Accordingly, certain information and footnote disclosure normally included in annual financial statements prepared in accordance with IFRS have been omitted or condensed, and therefore these condensed consolidated interim financial statements should be read in conjunction with the December 31, 2020 audited annual consolidated financial statements and the notes.

These unaudited condensed consolidated interim financial statements are based on the IFRS effective as of the date these unaudited condensed consolidated interim financial statements were authorized for issuance by the Company's Board of Directors (see note 1), and follow the same accounting policies and methods of computation as the most recent annual consolidated financial statements.

3. KEY ASSUMPTIONS AND SIGNIFICANT JUDGEMENTS

Significant Accounting Judgments and Estimates

The preparation of the condensed consolidated interim financial statements in conformity with IFRS requires management to make judgments and estimates and form assumptions that affect the reported amount of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, revenues and expenses. Management uses historical experience and various other factors it believes to be reasonable under the given circumstances as the basis for its judgments and estimates. Actual outcomes may differ from these estimates under different assumptions and conditions.

In preparing these condensed consolidated interim financial statements, significant judgments made by management in applying the Company's accounting policies and the key sources of estimation were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2020.

	June30, 2021	December 31, 2020
	$	$
	Carrying Value	Carrying Value
Lease receivables (a)
Total	81,608	174,606
Current	(81,608)	(174,606)
Long term	-	-
Lease liability (b)
Total	81,608	174,606
Current	(81,608)	(174,606)
Long term	-	-

4. LEASES

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ENDED JUNE 30, 2021 AND 2020 (Unaudited, in Canadian dollars)

	June30, 2021	December 31, 2020
	$	$
	Undiscounted value	Undiscounted value
Lease receivables (a)
Total	83,938	184,663
Current	(83,938)	(184,663)
Long term	-	-
Lease liability (b)
Total	83,938	184,663
Current	(83,938)	(184,663)
Long term	-	-

• a) Accretion gain on the lease receivables for the six months ended June 30, 2021 is $7,728 (2020 - $17,309); in addition, the Company received $nil (2020 - $59,494) from subleasing office space. A security deposit of $nil (2020 - $28,997) was applied to one of the month's sublease payment for period ended June 30, 2021. During the period ended June 30, 2021, the sublessee paid $100,725 (2020 - $nil) to the Company's landlord directly.
• b) Accretion expense on the lease liabilities for the six months ended June 30, 2021 is $7,728 (2020 - $15,859); in addition, the Company paid $nil (2020 - $84,601) for leasing the office space, as it was paid directly from sublessee to the Company's landlord (see note 4(a)).

5. SHARE CAPITAL

Authorized: Unlimited common shares without par value

Escrow Shares

As at June 30, 2021, the Company has no escrow shares.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ENDED JUNE 30, 2021 AND 2020 (Unaudited, in Canadian dollars)

Stock Options

A summary of the Company's stock options is as follows:

			Weighted
	Number of	Average
	Shares		Exercise Price
Options outstanding as at December 31, 2020	1,825,000	$	0.12
Expired	-		-
Granted	-		-
Options outstanding as atJune30, 2021	1,825,000	$	0.12

As at June 30, 2021, the Company has the following stock options outstanding:

	Number ofOptions	Number ofOptions	Exercise	Expiry
Date Issued	Outstanding	Exercisable	Price	Date
January 23, 2017	425,000	425,000	$0.20	January 23, 2022
May 1, 2019	1,400,000	1,400,000	$0.10	May 1, 2024
	1,825,000	1,825,000

Warrants

As at June 30, 2021, the Company has no warrants (December 31, 2020 – no warrants) outstanding.

6. RELATED PARTY TRANSACTIONS

The Company's related parties include its subsidiaries, associates over which it exercises significant influence, and key management personnel. Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel include officers, directors or companies with common directors of the Company

Related party transactions not otherwise disclosed in these consolidated financial statements are as follows:

1. The Company paid remuneration for management services to a company controlled by the CEO totaling $18,900 (2020 - $18,000).

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ENDED JUNE 30, 2021 AND 2020 (Unaudited, in Canadian dollars)

1. The Company paid remuneration for management services to a company controlled by the CFO totaling $18,900 (2020 - $18,000).

As at June 30, 2021 the Company had amounts payable of $3,150 (December 31, 2020 - $4,825) to these parties which has been included in accounts payable.

These transactions are in the normal course of the operations on normal commercial terms and conditions and at exchange rates, which is the amount of consideration established and agreed to by the related parties.

7. FINANCIAL INSTRUMENTS

Fair Value

Set out below is a comparison by class of the carrying amounts of the Company's financial instruments that are carried in the Consolidated Statements of Financial Position:

	June30, 2021	December 31, 2020
	$	$
Financial Assets
Amortized cost:
Cash	4,113	29,609
Short-term investment	5,032,132	5,009,617
Interest receivable	4,043	56,131
Lease receivable	81,608	174,606
Financial Liabilities
Amortized cost:
Accounts payable and accrued liabilities	34,994	57,168
Lease liability	81,608	174,606

The carrying value of cash, interest receivable and accounts payable and accrued liabilities approximates the fair value because of the short-term of these instruments.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ENDED JUNE 30, 2021 AND 2020 (Unaudited, in Canadian dollars)

Financial Risk Management

Credit Risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. As at June 30, 2021, the Company's maximum exposure to credit risk is in the carrying value of its cash and short-term investment. The Company limits its exposure to credit loss by placing its cash and short-term investments with high credit quality financial institutions.

Currency Risk

The functional currency of RSI is the Canadian dollar. As at June 30, 2021, most of the foreign currency risk is related to US dollar funds held in bank US$nil (December 31, 2020 - US$15,155), denominated in US dollar. Therefore, the Consolidated Statements of Operations and Comprehensive Income (Loss) is impacted by fluctuations in the valuation of the US dollar in relation to the Canadian dollar.

The Company does not hedge its exposure to currency fluctuations. The Company has completed a sensitivity analysis to estimate the impact that a change in foreign exchange rates would have on the net loss of the Company, based on the Company's financial instruments in US dollar as at year end. This sensitivity analysis shows that a change of +/- 10% in US$ foreign exchange rate would have a +/- $nil (2020 - +/- $3,030) impact on the Consolidated Statements of Operations and Comprehensive Loss.

Interest Rate Risk

The Company is only subject to interest rate risk on its short-term investment balance in the bank and there is unlikely to be a material impact on Consolidated Statements of Operations and Comprehensive Loss.

Liquidity Risk

Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time.

As at June 30, 2021, the Company had total payable in the amount of $34,994 due within 12 months (December 31, 2020 - $57,168). As at June 30, 2021, the Company held cash and short-term investment of $5,036,245 (December 31, 2020 - $5,039,226).

The Company's objective in managing liquidity risk is to maintain sufficient readily available reserves to meet its liquidity requirements at any point in time. With the current cash balance

RSI INTERNATIONAL SYSTEMS INC. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ENDED JUNE 30, 2021 AND 2020 (Unaudited, in Canadian dollars)

and working capital position, management expects it is sufficient to meet the Company's liquidity requirements.

Management of Capital

The Company's objectives in managing capital are to ensure sufficient liquidity to pursue its strategy of growth combined with strategic acquisitions and to provide returns to its shareholders. RSI defines capital that it manages as the aggregate of its shareholders' equity, which is comprised of issued capital, contributed surplus and deficit. The Company manages its capital structure and makes adjustments to it in light of general economic conditions, the risk characteristics of the underlying assets and the Company's working capital requirements. In order to maintain or adjust its capital structure, the Company, upon approval from its Board of Directors, may issue shares, issue debt, pay dividends or undertake other activities as deemed appropriate under the specific circumstances.

The Company was not subject to any other externally imposed capital requirements as at June 30, 2021. The Company's overall strategy with respect to management of capital at June 30, 2021 remains fundamentally unchanged from the year ended December 31, 2020.