RDARS Inc. — Interim / Quarterly Report 2023

Oct 30, 2023

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RDARS Inc.

Condensed Interim Financial Statements

August 31, 2023

The accompanying unaudited condensed interim financial statements of RDARS Inc. (the "Company") have been prepared by and are the responsibility of the management. The unaudited condensed interim financial statements have not been reviewed by the Company's auditors.

(Expressed in Canadian dollars, unless otherwise noted)

RDARS Inc.

Condensed Interim Statements of Financial Position As at August 31, 2023 (Unaudited)

	Notes	August 31, 2023	November 30, 2022
		$	$
ASSETS
Current assets
Cash and cash equivalents		5,011	575,248
Accounts receivable		161,200	-
Other receivables		-	166,518
Prepaid expenses and deposits		75,270	185,228
Total current assets		241,481	926,994
Non-current assets
Property and equipment	5	69,104	7,758
Intangible assets	6	1,461,139	1,252,532
Total non-current assets		1,530,243	1,260,290
Total assets		1,771,724	2,187,284
LIABILITIES AND SHAREHOLDERS’ EQUITY
(DEFICIENCY)
Current liabilities
Accounts payable and accrued liabilities	7	1,868,993	829,854
GST/HST payable		17,298	-
Current portion of lease liability	10	33,838	-
Convertible debenture host liability	9	748,367	585,629
Accrued interest on convertible debentures		20,526	24,793
Current portion of promissory notes payable	8	744,423	-
Loanspayable	14	136,006	-
Total current liabilities		3,569,451	1,440,276
Non-current liabilities
Long-term portion of lease liability	10	12,582	-
Long-termportion ofpromissorynotespayable	8	-	595,535
Total non-current liabilities		12,582	595,535
Total liabilities		3,582,033	2,035,811
Shareholders’ equity (deficiency)
Share capital	11	5,123,774	5,123,774
Contributed surplus	11	210,399	110,527
Warrants reserve	11	926,422	926,422
Options reserve	11	829,484	829,484
Convertible debentures reserve	11	65,730	165,602
Deficit		(8,966,118)	(7,004,336)
Total shareholders’ equity (deficiency)		(1,810,309)	151,473
Total liabilities and shareholders' equity (deficiency)		1,771,724	2,187,284

These condensed interim financial statements were approved for issuance on October 30, 2023 by the Board of Directors and signed on its behalf by:

/s/Anthony Heller (signed)____________ /s/Binyomin Posen (signed) _______ Director Director

The accompanying notes are an integral part of these condensed interim financial statements

RDARS Inc.

Condensed Interim Statements of Loss and Comprehensive Loss For the three months and nine months ended August 31, 2023 and 2022 (Unaudited)

Three months ended Nine months ended Notes August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 $ $ $ $	Three months ended Nine months ended Notes August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 $ $ $ $
Revenue 240,000 - 240,000 Cost ofgoods sold 167,261 - 167,261	- -
Grossprofit 72,739 - 72,739	-
Administrative expenses (271,572) (383,260) (1,042,294) Design development (156,726) (87,440) (429,820) Selling and marketing (61,776) (11,122) (231,386) Prototype engineering 6 (15,244) (5,534) (45,461) Depreciation 5 (12,650) - (29,614)	(1,018,347) (231,575) (11,122) (5,534) -
Total expenses (517,968) (487,356) (1,778,575)	(1,266,578)
Operating loss before other income (expenses) (445,229) (487,356) (1,705,836)	(1,266,578)
Other income (expenses) Interest expense (85,289) (136,121) (239,782) Interest income - 4,180 - Share-based compensation - - - Gain on derivative liability - 482,492 - Foreign currencytranslation loss 3 (6,662) (70,392) (16,164)	(347,858) 4,180 (24,725) 712,525 (41,018)
Total other income(expenses) (91,951) 280,159 (255,946)	303,104
Net loss and comprehensive loss (537,180) (207,197) (1,961,782)	(963,474)
Weighted average shares outstanding # 17,721,285 14,783,445 17,721,285 Net loss per share – Basic $ 12 (0.03) (0.01) (0.11) Net loss per share – Diluted $ 12 (0.03) (0.01) (0.11)*	13,141,350 (0.07) (0.07)

*Disclosed weighted average number of shares are based on effect of share consolidation at the rate of 20 pre consolidation share to 1 post consolidation share.

The accompanying notes are an integral part of these condensed interim financial statements

RDARS Inc.

Condensed Interim Statements of Changes in Shareholders' Equity (Deficiency) For the nine months ended August 31, 2023 and 2022 (Unaudited)

Notes	# of shares Share capital Contributed surplus Warrants reserve Options reserve Convertible debentures reserve	Deficit Total
	# $ $ $ $	$ $
Balance as at November 30, 2021 Share-based compensation Issuance of shares and warrants Conversion of convertible debenture Issuance of convertible debenture Net loss and comprehensive loss	12,311,280 1,249,937 - 275,098 - 13,596 - - - - 24,725 - 2,753,400 1,966,699 - 700,617- - - 1,719,041 1,451,713 - - - - - - - - - 15,825 - - - - - -	(3,979,743) (2,441,112) - 24,725 - 2,667,316 - 1,451,713 - 15,825 (963,474) (963,474)
Balance as at August 31,2022	16,783,721 4,668,349 - 975,715 24,725 29,421	(4,943,217) 754,993
Balance as at November 30, 2022	17,721,285 5,123,774 110,527 926,422 829,484 165,602	(7,004,336) 151,473
Repayment of debentures 11 Net loss and comprehensive loss	- - 99,872 - - (99,872) - - - - - -	- - (1,961,782) (1,961,782)
Balance as at August 31, 2023	17,721,285 5,123,774 210,399 926,422 829,484 65,730	(8,966,118) (1,810,309)

The number of shares gives retroactive effect to the June 2023 20 to 1 share consolidation (see note 1).

The accompanying notes are an integral part of these condensed interim financial statements

RDARS Inc.

Condensed Interim Statements of Cash Flows

For the nine months ended August 31, 2023 and 2022 (Unaudited)

	Notes	Nine months ended August 31,
		2023	2022
		$	$
Cash flows from operating activities:
Net loss		(1,961,782)	(963,474)
Interest expense on lease	10	4,928	-
Gain on debenture		-	(712,525)
Amortization of convertible debenture host liability		-	210,128
Share-based compensation		-	24,725
Interest accrued on debentures		146,020	109,114
Interest accrued on promissory notes	8	26,343	-
Depreciation	5	29,614	-
		(1,754,877)	(1,332,032)
Changes in non-cash workingcapital items	13	1,245,045	410,485
Net cash used in operatingactivities		(509,832)	(921,547)
Cash flows from investing activities:
Prototype development costs	6	(208,607)	(238,285)
Purchase ofpropertyand equipment	5	(27,418)	-
Net cash used in investingactivities		(236,025)	(238,285)
Cash flows from financing activities:
Proceeds from loan/borrowing	14	136,006	-
Proceeds from issuance of promissory notes	8	151,669	-
Repayment of promissory notes	8	(102,455)	-
Proceeds from issuance of debenture	9	170,000	45,150
Repayment of debentures	9	(157,550)	-
Lease payments	10	(22,050)	-
Restricted cash released from conversion of sub receipts		-	2,651,681
Proceeds from loanpayable to director		-	628,086
Net cashprovided by (used in)financingactivities		175,620	3,324,917
Net decrease in cash and cash equivalents		(570,237)	2,165,085
Cash and cash equivalents,beginningof theperiod		575,248	90,892
Cash and cash equivalents, end of theperiod		5,011	2,255,977

The accompanying notes are an integral part of these condensed interim financial statements

RDARS Inc.,

Condensed Interim Statements of Cash Flows For the nine months ended August 31, 2023 and 2022 (Unaudited)

Reconciliation of movement of liabilities to cash flows arising from financing activities, including changes arising from both cash and non-cash change:

	Accrued interest on convertible debentures Convertible debenture host liability Loans payable Promissory notes payable Lease Liability Contributed surplus Convertible debenture reserve Total $ $ $ $ $ $ $ $
	Balance as of November 30,2022 24,793 585,629 - 595,535 - 110,527 165,602 886,551
	Issuance of debenture (13,864) 183,864 - - - - - 170,000 Repayment of debentures (7,550) (150,000) - - - 99,872 (99,872) (157,550) Right of used assets 63,542 Lease payments (22,050) Interest on lease liability 4,928 Issuance of promissory notes - - - 225,000 - Repayment of promissory notes - - - (102,455) - Proceeds from loan - - 136,006 - -
	Total changes from financing cash flows (21,414) 33,864 136,006 122,545 46,420 99,872 (99,872) 12,450
	Other changes Interest accrued on debentures (8,159) - - - - - - (8,159) Accretion of discount on debentures 25,306 128,874 - - - - - 154,180 Interest accrued on promissory notes - - 49,974 - - - Effect of foreign exchange - - (23,631) - - -
	Balance as of August 31, 2023 20,526 748,367 136,006 744,423 46,420 210,399 65,730 1,045,022

The accompanying notes are an integral part of these condensed interim financial statements

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

1. Nature of Operations and Going Concern

RDARS Inc. (“RDARS” or the “Company”) was incorporated under the Ontario Business Corporations Act on May 16, 2019. The Company’s registered address is at 2 Covington Rd, Suite 507, North York, ON M6A 3E2. The name RDARS stands for Real-Time Drone Alarm Response System, which describes the Company’s prototype development of a real-time drone technology system for alarm response. On September 7, 2022, the Company commenced trading on the Canadian Securities Exchange (the “CSE”) under the symbol "RDRS". On November 1, 2022, the Company also commenced trading on the OTCQB® Venture Market under the symbol “RDRSF”. On June 6, 2023, the company consolidated its share capital at the rate of 20 pre consolidation share to 1 post consolidation share.

These condensed interim financial statements have been prepared with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The application of the going concern basis is dependent upon the Company achieving profitable operations to generate sufficient cash flows to fund continuing operations, or, in the absence of adequate cash flows from operations, obtaining additional financing to support operations for the foreseeable future. It is not possible to predict whether future financing efforts will be successful or if the Company will attain profitable levels of operations.

RDARS is a technology company in realization phase. The Company moved from development stage to realisation phase during three months ended August 31, 2023.

These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. As of August 31, 2023, the Company had not yet achieved profitable operations, had accumulated losses of $8,966,118 (August 31, 2022 - $4,943,217) since its inception and expects to incur further losses in the development of its business, and had a cash balance of $5,011 (August 31, 2022 – $2,255,977) and a working capital deficiency of $3,327,970 (August 31, 2022 – working capital proficiency of $1,392,647) indicates material uncertainties which cast significant doubt about the Company’s ability to continue as a going concern. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. The Company’s continuation as a going concern is dependent upon its ability to attain profitable operations and generate funds therefrom and/or raise equity capital or borrowings sufficient to meet current and future obligations.

Additionally, the Company has not yet paid and are in negotiation with the lender regarding promissory notes that became due on July 31[st] . These notes could be demanded any time and have to be repaid within 5 days or the company will face a risk of default if any of the events stipulated under the Note 8 (b) materialize. Also, as described in Note 17, the promissory note and convertible debentures due in October 2023 was not repaid/converted on maturity date and are under negotiation for extension.

All the above creates a significant doubt on the Company’s going concern.

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

2. Basis of Presentation

(a) Statement of Compliance

These unaudited condensed interim financial statements have been prepared in accordance with IAS 34, “Interim Financial Reporting of the International Financial Reporting Standards” (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and follow the same accounting policies and methods of application as the Company’s November 30, 2022, annual audited financial statements, unless otherwise noted. Accordingly, they should be read in conjunction with the Company’s most recent annual statements.

(b) Basis of Measurement

These condensed interim financial statements have been prepared on a going concern basis, under the historical cost convention, except for certain financial instruments which are measured at fair value upon initial recognition.

(c) Functional and presentation currency

The Company’s functional and presentational currency is Canadian dollars, and these condensed interim financial statements are presented in Canadian dollars, unless otherwise stated.

(d) Covid-19 Impact

On March 11, 2020, the World Health Organization recognized the outbreak of COVID-19 as a global pandemic. Government measures to limit the spread of COVID-19, including the closure of nonessential businesses, materially impact the Company’s operations during the subsequent months of 2020. Due to the rapid developments and uncertainty surrounding COVID-19, it is not possible to predict the impact that COVID-19 will have on the Company’s business, financial position and operating results in the future. Additionally, it is possible that estimates in the Company’s financial statements will change in the near term as a result of COVID-19. The Company is closely monitoring the impact of the pandemic on all aspects of its business.

3. Summary of significant accounting policies

(a) Property and equipment

Property and Equipment consists of computer hardware, office equipment and office furniture and right-of-use assets. These are recorded at cost less related accumulated depreciation and impairment losses. Cost includes all expenditures incurred to bring asset to the location and condition necessary for them to be operated in the manner intended by management. Depreciation is recognized based on the cost of the item less its estimated residual value, over its estimated useful life on a straight life basis.

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

Asset	Rate
Computer hardware	55%
Office equipment	55%
Office furniture	20%
Right-of-use assets	Term of lease

The assets’ residual values, useful lives and methods of depreciation are reviewed at each reporting date and adjusted prospectively if appropriate.

(b) Internally Generated Intangible Assets - Research and Development Expenditures

Expenditures on research activities are recognized as an expense in the period incurred. An internally generated intangible asset arising from development (or from the development phase of an internal project) is recognized if all of the following have been demonstrated:

• The technical feasibility of completing the intangible asset so that it will be available for use or sale;

• The intention to complete the intangible asset and use or sell it;

• The ability to use or sell the intangible asset;

• Understanding of how the intangible asset will generate probable future economic benefits;

• Availability of adequate technical, financial, and other resources to complete the development and to use or sell the intangible asset; and,

• The ability to reliably measure the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally generated intangible assets is the sum of the expenditures incurred from the date when the intangible asset first meets the recognition criteria listed above.

Where no internally generated intangible asset can be recognized, development expenditures are recognized in profit or loss in the period incurred.

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

All costs in the period were determined to be development expenses and are being capitalized. Some technical documentation costs related to the prototype were recognised in the statement of loss and comprehensive loss during the year. During the period ended August 31, 2023 the Company’s started sales of the prototype and started amortizing intangible assets on the basis of total expected number of units to be sold over the lifecycle of the product.

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

(c) Financial instruments

The Company recognizes a financial asset or a financial liability when it becomes a party to the contractual provisions of the instrument. Under IFRS 9, such financial assets or financial liabilities are initially recognized at fair value and the subsequent measurement depends on their classification.

Financial Assets

The Company classifies its financial assets into two categories, depending on the cash flow characteristics of the assets and the business objective for managing the assets. Financial assets are derecognized when the contractual rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership. The Company's accounting policy for each category is as follows:

Amortized cost - Assets are held within a business model with the objective of collecting their contractual cash flow; and the contractual cash flows consist solely of payments of principal and interest. They are recognized initially at fair value plus directly attributable transaction costs, and subsequently measured at amortized cost less cumulative impairment losses. A gain or loss on a debt investment is recognized in profit and loss when the asset is derecognized or impaired.

Fair value through other comprehensive income (FVOCI) - Assets that are held for collection of contractual cash flows and for selling the financial assets, and for which the contractual cash flows are solely payments of principal and interest, are measured at fair value through other comprehensive income. Interest income calculated using the effective interest method and gains or losses arising from impairment and foreign exchange are recognized in profit or loss. All other changes in the carrying amount of the financial assets are recognized in other comprehensive income. Upon derecognition, the cumulative gain or loss previously recognized in other comprehensive income is reclassified to profit or loss. The Company does not hold any financial assets measured at fair value through other comprehensive income.

Fair value through profit and loss (FVTPL) - Assets that do not meet the criteria for amortized cost or Fair value through other comprehensive income (FVOCI) are measured at FVTPL. A gain or loss on a financial asset measured at FVTPL that is not part of a hedging relationship is recognized in profit and loss and presented on a net basis in the period in which it arises. IFRS 9 contains an option to designate a financial asset as measured at FVTPL if doing so eliminates or significantly reduces an ‘accounting mismatch’ that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. The option to designate a financial asset at FVTPL is available at initial recognition and is irrevocable.

Financial assets are reclassified when and only when an entity changes its business model for managing financial assets. Any such reclassifications are applied prospectively from the date of the reclassification.

Financial Liabilities

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

Under IFRS 9, financial liabilities are primarily classified at amortized cost with limited exceptions. Financial liabilities are derecognized when the obligation specified in the contract is discharged, cancelled or expires. The Company's accounting policy for each category is as follows:

FVTPL - This category comprises derivatives, liabilities acquired or incurred principally for the purpose of selling or repurchasing it in the near term, and certain financial liabilities that were designated at FVTPL from inception. IFRS 9 contains an option to designate a financial liability as measured at FVTPL if doing so eliminates or significantly reduces an ‘accounting mismatch’ that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. The option to designate a financial liability at FVTPL is available at initial recognition and is irrevocable.

Amortized cost - Financial liabilities are recognized initially at fair value net of directly attributable transaction costs. They are subsequently recognized at amortized cost using effective interest method with interest expense recognized on an effective yield basis.

Financial assets and liabilities are offset, and the net amount is presented in the statement of financial position when the Company has a legal right to offset the amounts and it intends to either settle on a net basis or realize the asset and settle the liability simultaneously.

The Company’s classification and measurements of financial assets and liabilities are summarized below:

Financial Instrument	Classification and measurement
Cash and cash equivalents	Amortized cost
Accounts payable and accrued liabilities	Amortized cost
Loans payable to shareholders	Amortized cost
Convertible debenture host liability	Amortized cost
Accrued interest on convertible debentures	Amortized cost
Promissory notes payable	Amortized cost
Current and long-term portion of lease liability	Amortized cost
Convertible debenture derivative liability	FVTPL

Fair value hierarchy - IFRS 7, Financial instruments: Disclosures, establishes a fair value hierarchy that prioritizes the input to valuation techniques used to measure fair value as follows:

Level 1: Valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities. The Company currently has no level 1 financial instruments.

Level 2: Valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). The Company classifies the convertible debenture derivative liability as a level 2 financial instrument.

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

Level 3: Valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs). The Company currently has no level 3 financial instruments.

No amounts were transferred between fair value levels during the nine months ended August 31, 2023.

Risk Exposure

The Company has exposure to risks of varying degrees of significance which could affect its ability to achieve its strategic objectives. The principal financial risks to which the Company is exposed are credit risk, interest rate risks, foreign currency risk and liquidity risk.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its obligations.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates.

Foreign Currency risk

Currency risk relates to the risk that the fair values or future cash flows of the Company’s financial instruments will fluctuate because of the changes in foreign exchange rates.

Liquidity risk

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

(d) Right-of-use assets (“ROU”)

The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). ROU are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of ROU includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. ROU are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

(e) Lease liabilities

Lease liabilities include the present value of future fixed payments, less any lease incentives receivable, and the exercise price of a purchase option if it is reasonably certain to be exercised. Future fixed lease payments are discounted using the Company’s incremental borrowing rate if the rate implicit in the lease is not readily determinable. The term of each lease includes its noncancellable period. The term can also include periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option. After the commencement date, the Company continually measures its lease liabilities to reflect changes in lease payments, discount rates or the leases’ remaining term with an offsetting adjustment to ROU.

Each lease payment is comprised of both a financing and principal component. Financing costs are charged to the consolidated statements of loss and comprehensive loss over each lease’s term. Lease payments are applied against lease liabilities using the effective interest method.

Short-term leases with an initial lease term of less than 12 months are evaluated by class of the underlying asset whereas lease payments for low-value assets are evaluated on a lease-by-lease basis. Short-term and low-value leases are expensed.

(f) Revenue recognition

Under IFRS 15, Revenue is recognized at an amount that reflects the consideration to which the Company is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Company: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognizes revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.

The Company generates revenue from the of sale of its manufactured flagship product, the Eagle Watch Platform comprised of Eagle Nest Station, including Eagle Eye Drone Station, a drone station, Starlink Satcom System, a system to provide broadband internet access, one year Eagle Watch Command and Control service and five years of support and maintenance.

The contract includes the sale of a product and the provision of support and maintenance services for one to five years. According to the guidance, the product and the services are distinct goods or services that should be accounted separately if they can be separated and sold separately. If the goods and services are determined as a distinct, then the transaction price should be allocated to each performance obligation based on their relative standalone selling price. The standalone selling price is the price at which an entity would sell a promised good or service separately to a customer. If a standalone selling price is not directly observable, then the Company should estimate it. Revenue is

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

recognised for each performance obligation when it is satisfied by transferring control of the good or service to the customer. Control is the ability to direct the use of and obtain substantially all of the remaining benefits from an asset. For a product, control is transferred at a point in time when the customer obtains physical possession, legal title, risks and rewards of ownership, and present ability to use and sell it. For a service, control is transferred over time as the customer simultaneously receives and consumes the benefits of the service. This contract considers as a single performance obligation because none of the services can be sold separately and they have a single commercial objective. Attached services are embedded items and a standalone selling price is not directly observable and cannot be reasonably measured due to the lack of historical cost estimates. Revenue from this sale were recognised at a point in time, when controls of the goods transferred to the buyer.

(g) References to Audited financial statements

In addition to the significant accounting policies noted above, these Unaudited Interim Condensed Financial Statements and the accompanying notes were prepared using the accounting policies described in Note 3 of the Company’s Audited Financial Statements for the year ended November 30, 2022.

4. Significant Accounting Estimates and Judgements

The preparation of these condensed interim financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting year. Actual outcomes could differ from these estimates. These condensed interim financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the year in which the estimate is revised and future years if the revision affects both current and future years. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Significant judgements, estimates and assumptions that have the most significant effect on the amounts recognized in the financial statements include going concern, intangible assets and the fair value of financial instruments.

Valuation of Convertible Debentures Derivative Liability

Company-specific information is considered when determining whether the fair value of a derivative should be adjusted upward or downward at the end of each reporting period. In addition to companyspecific information, the Company will take into account trends in general market conditions and the share performance of comparable publicly traded companies when valuing equity investments. Use

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

of this valuation approach may involve uncertainties and determinations based on the Company’s judgment and any value estimated from these techniques may not be realized or realizable. Adjustment to the fair value of equity investments will be based upon management’s judgment and any value estimated may not be realized or realizable. The resulting values for non-publicly traded equity investments may differ from values that would be realized if a ready market existed.

Estimated useful lives, impairment considerations and amortization of intangible assets

Amortization of intangible assets is dependent upon estimates of useful lives and number of units to be sold during the lifecycle based on management’s judgment.

Determination of whether and when costs require capitalization for research and development activities requires significant judgement on the part of management. To do so, management must distinguish costs associated with the internally developed intangible asset and the cost of maintaining or enhancing the Company’s goodwill. Management must also determine at what point in time the asset crosses from the research to the development phase to trigger capitalization.

Impairment of definite long-lived assets is influenced by judgment in determining the indicators of impairment and estimates used to measure impairment losses.

Ability to continue as a going concern

In order to assess whether it is appropriate for the Company to continue as a going concern, management is required to apply judgement and make estimates with respect to future cash flow projections.

In arriving at this judgement, there were a number of assumptions and estimates involved in calculating these future cash flow projections. This includes making estimates regarding the timing and amounts of future expenditures and the ability and timing of raising additional financing.

Share-based compensation

The fair value of share-based compensation expenses is estimated using the Black-Scholes pricing model and rely on a number of estimates, such as the expected life of the warrants, the volatility of the underlying share price, the risk-free rate of return, and the estimated rate of forfeiture of warrants granted. Due to the emerging nature of the industry, volatility estimates require significant estimates. The Company estimated volatility based on historical share prices of companies operating in emerging industries.

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

5. Property and Equipment

Property and Equipment as of August 31, 2023 and November 30, 2022 were as follows:

Cost at: December 1,2021	Computer $ Office furniture $ Office equipment $ Right-of-use asset $ Total $
	- - - - -
Additions	4,539 - 4,584 - 9,123
November 30,2022	4,539 - 4,584 - 9,123
Additions	9,055 7,560 10,803 63,542 90,960
August 31, 2023	13,594 7,560 15,387 63,542 100,083
Accumulated depreciation at: December 1,2021 - - - - -
Charge for theperiod 687 - 678 - 1,365
November 30,2022 687 - 678 - 1,365
Charge for theperiod 4,347 876 5,052 19,339 29,614
August 31, 2023 5,034 876 5,730 19,339 30,979
Net book value at: November 30, 2022 3,852 - 3,906 - 7,758
August 31, 2023 8,560 6,684 9,657 44,203 69,104

6. Intangible assets

Intangible assets as of August 31, 2023, and November 30, 2022, were as follows:

Prototype	$
Balance as of December 1, 2021	793,416
Additions	459,116
Accumulated amortization	-
Balance as of November 30,2022	1,252,532
Additions	211,535
Accumulated amortization	(2,928)
Balance as of August 31, 2023	1,461,139

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

7. Accounts payable and accrued liabilities

Accounts payable and accrued liabilities as of August 31, 2023 and November 30, 2022 were as follows:

	August 31, 2023	November 30, 2022
	$	$
Administrative services	1,559,225	757,174
Design development	265,227	57,105
Selling and marketing	27,481	7,314
Prototype engineering	17,060	8,261
Total accountspayable and accrued liabilities	1,868,993	829,854

8. Promissory notes payable

Balances and activities for the nine months ended August 31, 2023 and 2022 were as follows:

Issue date:	July 31, 2022	May 31, 2023	July 5, 2023	Total
Maturity date:	October 1, 2023	September 30, 2023	July 30, 2023
	$	$		$
Balance as at December 1,2021	-	-	-	-
Balance as at August 31, 2022	-	-	-	-
Balance as at December 1, 2022	595,535	-	-	595,535
Additions_(a)(b)_	-	150,000	75,000	225,000
Repayment	(102,455)	-	-	(102,455)
Interest accrued	18,778	9,493	703	28,974
Lending fees accrued	-	21,000	-	21,000
Effect of foreign exchange	(13,873)	-	(9,758)	(23,631)
Balance as at August 31, 2023	497,985	180,493	65,945	744,423

• (a) On May 31, 2023 a new promissory note worth of $150,000 was issued with the lending fee of 6% per annum if the note is repaid by June 30, 2023; 10% per annum if repaid by July 31, 2023; 14% per annum if repaid by August 31, 2023; 18% per annum if repaid by September 30, 2023 and 25% per annum if not repaid by September 30, 2023. The interest is payable upon maturity of the promissory note. Of the total of $150,000, the Company received $76,669 in cash and $73,331 was converted from accounts payable. The promissory note is unsecured.

The promissory note together with accrued interest was repaid in October 2023.

RDARS Inc.

Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

• (b) On July 5, 2023 a new promissory note worth of $75,000 was issued payable on or before July 30, 2023 with the annual interest rate of 6%, which accrue from the date of advance of funds until the principle is repaid in full. The promissory note is unsecured.

In case of occurrence and continuance of any following events which are considered as events of default below, the lender has the option to declare the entire principal amount of the note together with all accrued interest:

- the borrower fails to pay the principal amount or interest and such failure continues for 5 days.

• the borrower becomes or acknowledges its insolvency or bankruptcy.

• the borrower enters into an arrangement or compromise with any of its creditors.

- any proceeding with respect to the borrower is commenced in any jurisdiction under Companie’s Creditors Arrangement Act or any similar legislation, unless the proceeding is being actively and diligently contested in good faith by appropriate and timely proceedings and indefinitely stayed within 30 days from the borrower’s appointment.

- an order, petition, or resolution is passed for the liquidation, dissolution or winding up of the borrower.

As of August 31, 2023 this promissory note together with accrued interest was not paid, nor demanded from the borrower. The Company is in negotiation to extend the maturity date of the promissory note.

9. Convertible Debentures

Balances and activities of the convertible debenture for the nine months ended August 31, 2023 and 2022 were as follows:

	March 11,	November	June 30,	May 4,
Issue date:	2021	22, 2021	2022	2023	Total
	December	October 1,	October 1,	May 4,
Maturity date:	31, 2022	2023	2023	2024
	$	$	$	$	$
Balance as at December 1, 2021	941,272	296,175	-	-	1,237,447
Accretion of discount	251,703	39,020	-	-	290,722
Gain on conversion of debenture	(63,859)	-	-	-	(63,859
Conversion of debenture to stock	(1,129,116)	-	-	-	(1,129,116)
Conversion of loan to debenture	-	-	323,737	-	323,737
Balance as at August 31, 2022	-	335,195	323,737	-	658,932
Balance as at December 1, 2022	-	290,952	294,677	-	585,629

RDARS Inc.

Notes to the condensed interim financial statements August 31, 2023

(Unaudited)

Accretion of discount	-	55,252	34,979	-	90,231
Issuance of debenture_(a)_	-	-	-	170,000	170,000
Repayment of debenture	-	(150,000)	-	-	(150,000)
Conversion of debenture_(b)_	-	-	(329,656)	343,520	13,864
Accretion of interest_(a) (b)_	-	-	-	38,643	38,643
Balance as at August 31, 2023	-	196,204	-	552,163	748,367

• (a) On May 4, 2023, the Company issued 170 new convertible debenture units at an issue price of $1,000 per debenture unit, for a total issue price of $170,000. The total principal amount payable upon maturity of convertible debenture units equals to $212,500 and the maturity date is May 4, 2024. The difference between issue price and amount payable upon maturity, being interest, is accreted over the term of the debenture, at an effective rate of 25% per annum. Interest expense related to this debenture units was $9,969 for the three months and $12,793 for the nine months ended August 31, 2023.This $212,500 debenture is convertible to common shares at a price of $0.30 per common share.

• (b) On May 4, 2023, the Company and the holder of the debentures issued on June 30, 2022 and maturing on October 1, 2023 agreed to convert the debenture balance of $329,656 and the interest accrued to date of $13,864, for an aggregate of $343,520, into new convertible debenture units. Interest expense related to this debenture units was $20,143 for the three and $25,850 for the nine months ended August 31, 2023. The total amount payable upon maturity of the new convertible debenture is $429,400 and the maturity date is May 4, 2024. The difference between issue price and amount payable upon maturity, being interest, is accreted over the term of the debenture, at an effective rate of 25% per annum. This $429,400 debenture is convertible to common shares at a price of $0.30 per common share.

10. Lease liability

The lease liability was measured at the present value of the remaining lease payments, at the effective interest rate of 15% per annum.

As of August 31, 2023, and 2022, the Company’s lease liabilities were as follows:

Lease liability	2023	2022
	$	$
Current portion	33,838	-
Long-termportion	12,582	-
Total lease liability	46,420	-

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

Balances and activities for the nine months ended August 31, 2023 and 2022 were as follows:

	Nine months ended	Nine months ended
	August 31, 2023	August 31, 2022
	$	$
Balance, the beginning of the period	-	-
Additions	63,542	-
Lease payments	(22,050)	-
Interest on lease liability	4,928	-
Balance, end of theperiod	46,420	-

11. Share capital

(a) Authorized

The Company is authorized to issue an unlimited number of common shares without par value. The holders of the common shares are entitled to one vote per share at meetings of the Company. All shares are ranked equally with regard to the Company's residual assets.

(b) Issued and outstanding

There were no shares issued during the nine months ended August 31, 2023 (4,472,441 – August 31, 2022).

On June 6, 2023, the company consolidated its share capital at the rate of 20 pre consolidation shares to 1 post consolidation share. As a result, the total outstanding number of shares reduced from 354,425,745 to 17,721,285. The total number of shares outstanding were 17,721,285 as of August 31, 2023.

(c) Stock options

On June 6, 2023, the company consolidated its options at the rate of 20 pre consolidation options to 1 post consolidation option. As a result, the total outstanding number of options reduced from 29,000,000 to 1,450,000. The total number of options outstanding were 1,450,000 as of August 31, 2023.

Number of options outstanding as of August 31, 2023 were as follows:

Outstanding	Exercisable	Expiration Date	Weighted Average Exercise Price
1,075,000	1,075,000	April 1, 2025	1.00
375,000	375,000	September 1,2027	1.00
1,450,000	1,450,000		1.00

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

Changes in options outstanding for the nine months ended August 31, 2023 and 2022 were as follows:

	For the nine	months ended	months ended	For the nine months ended	For the nine months ended	For the nine months ended
	August	**31, **	2023	August	**31, **	2022
			Weighted			Weighted
	Outstanding		average exercise	Outstanding		average exercise
			price			price
		#	$		#	$
Balance at the beginning of the period	1,450,000		1.00		-	-
Optionsgranted		-	-	1,075,000		1.00
Balance at the end of theperiod	1,450,000		1.00	1,075,000		1.00

All disclosed number of options are based on effect of option consolidation at the rate of 20 pre consolidation options to 1 post consolidation option.

(d) Warrants

On June 6, 2023, the company consolidated its warrants at the rate of 20 pre consolidation warrants to 1 post consolidation warrant. As a result, the total outstanding number of warrants reduced from 69,564,140 to 3,478,207. The total number of warrants outstanding were 3,478,207 as of August 31, 2023.

Changes in the warrants reserve for the nine months ended August 31, 2023 and 2022 were as follows:

	For the nine months ended	For the nine months ended
	August 31, 2023	August 31, 2022
	$	$
Balance at the beginningof theperiod	926,422	975,098
Balance at the end of theperiod	926,422	957,098

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

Changes in warrants outstanding for the nine months ended August 31, 2023 and 2022 were as follows:

	Nine months ended August 31,	Nine months ended August 31,	Nine months ended	August 31,
	2023		2022
	Outstanding	Weighted average exercise price	Outstanding	Weighted average exercise price
	#	$	#	$
Balance,beginningof theperiod	3,478,207	2.00	1,593,360	2.00
Warrantsgranted	-	-	3,478,207	2.00
Balance, end of theperiod	3,478,207	2.00	5,071,567	2.00

The following table is a summary of the Company’s warrants issued and outstanding as of August 31, 2023 and 2022:

	August 31,	2023		**August 31, **	2022
Outstanding	Exercise price	Expiry date	Outstanding	Exercise price	Expiry date
#	$		#	$
			1,593,360	0.40	November 27, 2022
350,000	2.00	November 22, 2023	350,000	2.00	November 22, 2023
374,807	2.00	June 30, 2024	374,807	2.00	June 30, 2024
2,753,400	2.00	July29,2024	2,753,400	2.00	July29,2024
3,478,207	2.00		5,071,567	1.50

All disclosed number of warrants are based on effect of warrant consolidation at the rate of 20 pre consolidation warrants to 1 post consolidation warrant.

(e) Contributed Surplus

Debentures issued in November 2021 were repaid in full on December 2, 2022. Equity conversion feature of $49,298 initially recognized towards these debentures was reclassed to contributed surplus from convertible debenture reserve.

On May 4, 2023 the Company repaid debenture previously issued on June 2022 and equity conversion feature of $50,574 that was initially recognized towards original debentures was reclassed to contributed surplus from convertible debenture reserve.

Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

RDARS Inc.

Changes in the contributed surplus for the nine months ended August 31, 2023 and 2022 were as follows:

	For the nine months ended	For the nine months
	August 31, 2023	ended August 31, 2022
	$	$
Balance at the beginning of the period	110,527	-
Repayment of debentures(Note 9)	99,872	-
Balance at the end of theperiod	210,399	-

12. Loss per share

All warrants and convertible debentures were determined to be antidilutive. As such, diluted loss per share equals basic loss per share.

13. Additional disclosures for statement of cash flows

Changes in working capital items for the nine months ended August 31, 2023 and 2022 are as follows:

	Nine months ended	Nine months ended
	August 31, 2023	August 31, 2022
	$	$
Decrease in accounts receivable	5,318	67,692
Decrease/(increase) in prepaid expenses and deposits	109,958	(9,500)
Increase in accountspayable and accrued liabilities	1,129,769	352,293
	1,245,045	410,485

14. Related party balances and transactions

The Company has entered into transactions with related parties during the period.

The following table represents balances with related parties as of August 31, 2023 and 2022 included in these condensed interim financial statements:

	August 31, 2023	August 31, 2022
	$	$
Balances, due to related parties
Accounts payable and accrued liabilities(a)	213,616	98,708
Promissory note and accrued interest (See Note 8)(b)	461,496	-
Convertible debenture host liability (See Note 9)(c)	147,153	-
Accrued interest on convertible debenture(c)	6,247	-
Loanspayable(d)	136,006	-

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

The following table represents transactions with related parties for the nine months ended August 31, 2023 and 2022 included in these condensed interim financial statements:

	Three months	Three months
	ended	ended
	August 31,	August 31,	Nine months ended	Nine months ended
	2023	2022	August 31, 2023	August 31, 2022
	$	$	$	$
Transactions for the period
Administrative expenses(e)	90,788	100,500	245,708	301,500

(a) Accounts payable and accrued liabilities relate to the Chief Technology Officer (“CTO”) and the Chief Financial Officer.

(b) Promissory notes and accrued interest relate to agreements with the CEO and a corporation controlled by a director. During the nine months ended August 31, 2023, $102,455 was repaid towards this promissory note.

(c) Convertible debenture host liability and accrued interest on debentures relate to the debentures held by a corporation controlled by a director.

(d) Loan received from one of the Directors of the Company. Loan is a demand loan with no interest or security.

• (e) Administration expenses relate to the CEO’s and CTO’s salary, consulting, travel and office expenses.

The transactions above are in the normal course of operations and are measured at the amount of consideration established and agreed to by the related parties.

15. Management of Capital

The Company manages its capital structure and makes adjustments to it based on the funds available to the Company and in order to support the development of its planned business activities. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. In order to carry out the planned business activities and pay for administrative costs, the Company will spend its existing working capital and raise additional funds as needed. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company’s approach to capital management during the three months ended August 31, 2023. The Company is not subject to externally imposed capital requirements.

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

The Company considers its capital to be shareholders’ equity (deficiency), which is comprised of capital stock, equity reserves, accumulated other comprehensive and deficit, supplemented by convertible debentures payable.

The Company’s objective when managing capital is to obtain adequate levels of funding to support its business activities, to obtain corporate and administrative functions necessary to support organizational functioning and obtain sufficient funding to further the development of its business. The Company raises capital, as necessary, to meet its needs and take advantage of perceived opportunities and, therefore, does not have a numeric target for its capital structure. Funds are primarily secured through equity capital raised by way of private placements. There can be no assurance that the Company will be able to continue raising equity capital in this manner.

16. Financial instruments and risk management

The Company has classified its financial instruments as follows:

	August 31, 2023	November 30, 2022
	$	$
Financial assets, measured at amortized cost
Cash and cash equivalents	5,011	575,248
Financial liabilities, measured at amortized cost
Accounts payable and accrued liabilities	1,868,993	829,854
Convertible debenture host liability	748,367	585,629
Accrued interest on convertible debentures	20,526	24,793
Loans payable	136,006	-
Lease liability	46,420	-
Promissorynotespayable	744,423	595,535

The carrying amount of the Company’s financial instruments approximates their fair value.

Risk Exposure and Management

The Company has exposure to risks of varying degrees of significance which could affect its ability to achieve its strategic objectives. The principal financial risks to which the Company is exposed are credit risk, interest rate risks, liquidity and funding risk and foreign currency risk.

(a) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its obligations. The company’s maximum exposure to credit risk at August 31, 2023 under its financial instruments is $5,011.

RDARS Inc. Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

All of the Company’s cash and cash equivalents are held with a major financial institution in Canada and management believes the exposure to credit risk with respect to such institutions is not significant.

(b) Liquidity risk

Liquidity risk arises through the excess of financial obligations over available financial assets due to at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available capital in order to meet its liquidity requirements.

As at August 31, 2023, the Company had cash of $ 5,011 .

The following obligations existed as of August 31, 2023 and November 30, 2022:

August 31, 2023	Total	Less than 1 year	1-5 years
	$	$	$
Accounts payable and accrued liabilities	1,868,993	1,868,993	-
GST/HST payable	17,298	17,298	-
Lease liability	46,420	33,838	12,582
Promissory notes payable	744,423	744,423	-
Loans Payable	136,006	136,006	-
Convertible debenture host liability and accrued
interest on convertible debentures	768,893	768,893	-
	3,582,033	3,569,451	12,582

November 30, 2022	Total	Less than 1 year	1-5 years
	$	$	$
Accounts payable and accrued liabilities	829,854	829,854	-
Promissory notes payable	595,535	-	595,535
Convertible debenture host liability and accrued
interest on convertible debentures	610,422	610,422	-
	2,035,811	1,440,276	595,535

(c) Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company has cash balances and interestbearing debt. The Company’s current policy is to invest excess cash in investment-grade short-term deposit certificates issued by banking institutions. The Company periodically monitors the investments its makes and is satisfied with credit ratings of its banks. Management believes the exposure to interest rate risk is not significant.

RDARS Inc.

Notes to the condensed interim financial statements August 31, 2023 (Unaudited)

(d) Foreign currency risk

Currency risk relates to the risk that the fair values or future cash flows of the Company’s financial instruments will fluctuate because of the changes in foreign exchange rates. The Company holds a bank account in US dollars. The fluctuation in foreign currencies in relation to the Canadian dollar will consequently impact the profitability of the Company and may also affect the value of the Company’s assets.

With all other variables remaining constant, had the United States dollar strengthened or weakened by 1% in relation to all currencies as of August 31, 2023, there would be $Nil impact on the net loss and comprehensive loss (November 30, 2022-$385).

17. Subsequent events

Maturity of promissory note without repayment

The promissory notes due on October 1, 2023 had not been repaid, nor demanded from the Company. The Company is in negotiations to extend the maturity date of the promissory notes.

Maturity of convertible debentures without repayment or conversion

The convertible debentures due on October 1, 2023 had not been repaid, nor demanded or converted to common shares. The Company is in negotiations to extend the maturity date of the debentures.

Issuance of secured convertible debentures

On September 12, 2023, the Company closed a non-brokered private placement of $933,748 of secured convertible debentures for aggregate proceeds of $675,000. The debentures bear interest at the rate of 8.5% per annum, payable monthly. The principal amount plus any accrued and unpaid interest is convertible into common shares at $0.15 per share at the option of the holder at any time. The debentures mature on September 12, 2024.

Amendment to warrant agreement

In September 2023, the terms of 12,500,000 non-transferable outstanding warrants on the Company’s common shares that are exercisable at a price of $0.10 per share until July 29, 2024 were amended to limit their exercise such that the holder cannot beneficially own in excess of 9.99% of the issued and outstanding common shares of the Company as a result of such exercise.