Ynvisible Interactive Inc. — Interim / Quarterly Report 2020

Sep 1, 2020

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Three and Six Months Ended June 30, 2020 and 2019

(Unaudited - Expressed in Canadian Dollars)

Notice of No Auditor Review of Condensed Interim Consolidated Financial Statements

In accordance with National Instrument 51-102 Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of these condensed interim consolidated financial statements they must be accompanied by a notice indicating that the condensed interim consolidated financial statements have not been reviewed by an auditor.

The accompanying condensed interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company's management. The Company's external auditors have not performed a review of these condensed interim consolidated financial statements.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited - Expressed in Canadian Dollars)

	As at
		June 30,		December 31,
		2020		2019
ASSETS
Current assets
Cash	\$	2,189,638	\$	2,126,725
Amounts receivable		797,356		601,172
Prepaid expenses		132,940		174,304
Total current assets		3,119,934		2,902,201
Non-current assets
Deposits		16,200		24,791
Right-of-use assets (Note 6)		875,371		1,044,866
Fixed assets (Note 7)		2,196,458		2,308,251
Intangible assets (Note 8)		423,042		269,483
Total non-current assets		3,511,071		3,647,391
Total assets	\$	6,631,005	\$	6,549,592
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities (Note 9)	\$	1,156,470	\$	621,949
Current portion of lease liabilities (Note 6)		369,113		337,407
Deferred project grants		896,941		864,860
Total current liabilities		2,422,524		1,824,216
Non-current liabilities Lease liabilities (Note 6)		544,891		705,484
Long-term liabilities		-		5,694
Total non-current liabilities		544,891		711,178
Total liabilities		2,967,415		2,535,394
SHAREHOLDERS' EQUITY
Share capital (Note 10)		16,572,214		14,993,969
Reserve (Note 10) Obligation to issue shares (Note 10)		1,822,600 50,224		1,668,405 160,072
Deficit		(14,858,394)		(12,982,391)
Accumulated other comprehensive income		76,946		174,143
Total shareholders' equity		3,663,590		4,014,198
Total liabilities and shareholders' equity	\$	6,631,005	\$	6,549,592

Note 1 – Corporate Information and Going Concern

Approved and authorized for issue on behalf of the Board of Directors on August 31, 2020:

"Alexander Helmel"	"Duarte Mineiro"
Director	Director

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited - Expressed in Canadian Dollars)

	Three Months Ended June 30,		Six Months Ended June 30,
	2020	2019	2020		2019
Revenue
Sales Cost of sales	\$ 77,264 \$ (33,093)	- -	\$ 137,096 (96,600)	\$	- -
Gross profit	44,171	-	40,496		-
Expenses
Compensation and consulting (Note 9)	590,200	391,012	1,109,192		766,037
Depreciation (Notes 6, 7, and 8)	165,467	43,478	323,766		84,933
Development and production	24,689	155,993	55,528		206,959
Interest and bank charges	7,516	8,211	14,694		8,348
Marketing and promotion	211,244	31,861	275,291		43,386
Office facilities and services	89,459	35,470	187,376		91,312
Professional fees	133,736	68,766	211,105		184,184
Share-based compensation (Notes 9
and 10)	64,147	187,010	165,581		256,010
Transfer and listing fees (recovery)	21,067	(181)	39,118		20,387
Travel and project investigation	5,465	59,857	40,173		116,978
Total operating expenses	1,312,990	981,477	2,421,824		1,778,534
Loss from operations	(1,268,819)	(981,477)	(2,381,328)		(1,778,534)
Other items
Income and gains	110,137	5,232	189,501		3,232
Expenses and losses	(3,726)	(7,095)	(6,005)		(14,191)
EU co-funded projects grants	142,727	106,621	261,582		244,278
Write-off of intangible assets	-	7,954	-		7,954
Prototype project revenue	24,050	26,744	49,539		50,710
Total other items	273,188	139,456	494,617		291,983
Loss before income taxes	(995,631)	(842,021)	(1,886,711)		(1,486,551)
Income tax expense	(10)	-	(678)		-
Net loss for the period	(995,641)	(842,021)	(1,887,389)		(1,486,551)
Other comprehensive gain (loss)
Foreign currency translation
adjustment	(44,816)	11,643	(97,197)		30,611
Comprehensive loss for the period	\$ (1,040,457) \$	(830,378)	\$ (1,984,586)	\$	(1,455,940)
Basic and diluted loss per common
share	\$ (0.01) \$	(0.01)	\$ (0.02)	\$	(0.03)
Weighted average number of
common shares outstanding	77,736,229	60,385,835	75,628,534		58,372,010

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)

(Unaudited - Expressed in Canadian Dollars)

	Common Shares			Accumulated Other
	Class A	Class A		Obligation to		Comprehensive	Total Shareholders'
	Number	Amount	Reserve	issue shares	Deficit	Income	Equity
	#	\$	\$	\$	\$	\$	\$
Balance, December 31, 2018	53,141,679	8,905,438	1,088,000	-	(9,836,801)	158,563	315,200
Shares issued by private placement	15,910,629	5,268,192	133,568	-	-	-	5,401,760
Finders' units issued for private placement	587,226	190,540	6,662	-	-	-	197,202
Warrants issued for finder's fees for private
placement	-	(157,629)	157,629	-	-	-	-
Share issue costs	-	(366,699)	-	-	-	-	(366,699)
Stock options exercised	75,000	43,500	(21,000)	-	-	-	22,500
Stock options expired	-	-	(221,000)	-	221,000	-	-
Stock options cancelled	-	-	(64,471)	-	64,471	-	-
Share-based compensation	-	-	256,010	-	-	-	256,010
Net loss for the period	-	-	-	-	(1,486,551)	-	(1,486,551)
Other comprehensive income	-	-	-	-	-	30,611	30,611
Balance, June 30, 2019	69,714,534	13,883,342	1,335,398	-	(11,037,881)	189,174	4,370,033
Shares issued in exchange for Ynvisible SA
shares	49,392	18,790	-	(12,210)	-	-	6,580
Shares issued in exchange for Ynvisible
Production shares	3,564,474	1,119,193	-	-	-	-	1,119,193
Obligation to issue shares	-	-	-	172,282	-	-	172,282
Share issue costs	-	169,846	-	-	-	-	169,846
Share issue costs by shares issuance	-	(197,202)	-	-	-	-	(197,202)
Stock options cancelled	-	-	(36,027)	-	36,027	-
Share-based compensation	-	-	369,034	-	-	-	369,034
Net loss for the period	-	-	-	-	(1,980,537)	-	(1,980,537)
Other comprehensive loss	-	-	-	-	-	(15,031)	(15,031)
Balance, December 31, 2019	73,328,400	14,993,969	1,668,405	160,072	(12,982,391)	174,143	4,014,198
Shares issued by private placement	7,500,000	1,500,000	-	-	-	-	1,500,000
Finders' shares issued for private placement	252,875	50,575	-	-	-	-	50,575
Shares issued in exchange for Ynvisible SA
shares	318,400	109,848	-	(109,848)	-	-	-
Share issue costs	-	(31,603)	-	-	-	-	(31,603)
Share issue costs by shares issuance	-	(50,575)	-	-	-	-	(50,575)
Stock options cancelled	-	-	(11,386)	-	11,386	-	-
Share-based compensation	-	-	165,581	-	-	-	165,581
Net loss for the period	-	-	-	-	(1,887,389)	-	(1,887,389)
Other comprehensive loss	-	-	-	-	-	(97,197)	(97,197)
Balance, June 30, 2020	81,399,675	16,572,214	1,822,600	50,224	(14,858,394)	76,946	3,663,590

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - Expressed in Canadian Dollars)

	Six Months Ended June 30,
		2020		2019
Operating activities
Net loss for the period	\$	(1,887,389)	\$	(1,486,551)
Items not involving the use of cash:
Depreciation		323,766		84,933
Gain on forgiveness of debt		-		(7,954)
Share-based compensation		165,581		256,010
Unrealized foreign exchange loss (gain)		40,578		(9,357)
Interest expense on lease liabilities		8,773		-
Changes in working capital items:
Amounts receivable		(196,184)		338,495
Prepaid expenses		41,364		(42,765)
Deposits		8,591		(294)
Accounts payable and accrued liabilities		402,942		(65,709)
Deferred project grants		32,081		(398,314)
Cash used in operating activities		(1,059,897)		(1,331,506)
Investing activities
Purchase of fixed assets		(24,438)		(43,471)
Purchase of intangible assets		(40,020)		(9,921)
Cash used in investing activities		(64,458)		(53,392)
Financing activities
Proceeds on issuance of shares		1,500,000		5,401,760
Share issue costs		(31,603)		(169,497)
Stock options exercised		-		22,500
Long term debt repaid		(5,694)		(42,109)
Repayment of lease liabilities		(178,238)		(37,624)
Cash provided by financing activities		1,284,465		5,175,030
Effect of foreign exchange		(97,197)		30,611
Net change in cash		62,913		3,820,743
Cash, beginning of period		2,126,725		957,078
Cash, end of period	\$	2,189,638	\$	4,777,821
Non-cash transactions
Capitalization of right-of-use assets and lease liabilities	\$	-	\$	314,186
Reclassification of stock options exercised	\$	-	\$	21,000
Reclassification of stock options expired	\$	-	\$	221,000
Reclassification of stock options cancelled	\$	11,386	\$	64,471
Value of warrants issued in private placement	\$	-	\$	133,568
Finders' shares issued for private placement	\$	50,575	\$	-
Finder's unit issued for private placement	\$	-	\$	197,202
Intangible assets in accounts payable and accrued
liabilities	\$	131,580	\$	-
Value of finders' warrants issued in private placement	\$	-	\$	157,629

YNVISIBLE INTERACTIVE INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS For the three and six months ended June 30, 2020 and 2019

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

1. CORPORATE INFORMATION AND GOING CONCERN

Ynvisible Interactive Inc. (the "Company") was incorporated on September 2, 1983 under the laws of British Columbia, Canada. The address of the Company's head office and principal place of business is 830 – 1100 Melville Street, Vancouver, British Columbia, Canada, V6E 4A6, and the registered and records office is located at 1500 – 1055 West Georgia Street, Vancouver, British Columbia, Canada, V6E 4N7.

The Company's principal business activity is the development and sale of electrochromic ("EC") displays. The Company's shares traded on the TSX Venture Exchange ("TSXV") under the symbol "YNV".

These condensed interim consolidated financial statements have been prepared by management on a going concern basis, which presume the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future. During the six months ended June 30, 2020, the Company incurred a net loss of \$1,887,389 (June 30, 2019 - \$1,486,551) and as at June 30, 2020, had an accumulated deficit of \$14,858,394 (December 31, 2019 - \$12,982,391).

The Company's ability to continue as a going concern, to fund work commitments and to ensure adequate working capital is dependent upon achieving profitable operations or upon obtaining sufficient additional financing. These factors may cast significant doubt on the Company's ability to continue as a going concern. These condensed interim consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue in business. Management believes that the Company has sufficient working capital to meet the Company's obligations over the next twelve months.

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, potentially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our product and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time.

2. BASIS OF PRESENTATION

Statement of compliance

These condensed interim consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") applicable to the preparation of interim financial statements, including International Accounting Standard ("IAS"), Interim Financial Reporting ("IAS 34").

This financial report does not include all of the information required of a full annual financial report and is intended to provide users with an update in relation to events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the end of the last annual reporting period. It is therefore recommended that this financial report be read in conjunction with the annual financial statements of the Company for the years ended December 31, 2019 and 2018.

2. BASIS OF PRESENTATION (continued)

Basis of Consolidation

These condensed interim consolidated financial statements include the accounts of the Company, its 100% owned subsidiary YD Ynvisible, S.A., Portugal ("Ynvisible SA"), Ynvisible GmbH, Germany, which is 100% owned by Ynvisible SA, and Ynvisible Production AB ("Ynvisible Production"), Sweden, which is 100 % owned by the Company. All intercompany transactions and balances have been eliminated on consolidation.

Basis of Measurement and Presentation

The Company's condensed interim consolidated financial statements have been prepared on a historical cost basis except for the revaluation of certain financial assets and financial liabilities to fair value. The comparative figures presented in these condensed interim consolidated financial statements are in accordance with IFRS and may have been reclassified to conform to the current period's presentation.

The preparation of condensed interim consolidated financial statements requires the use of certain critical accounting estimates and the exercise of management's judgment in applying the Company's accounting policies. Areas involving a high degree of judgment or complexity and areas where assumptions and estimates are significant to the Company's condensed interim consolidated financial statements are discussed in Note 4.

3. SIGNIFICANT ACCOUNTING POLICIES

The condensed interim consolidated financial statements have been prepared on a historical cost basis using the accrual basis of accounting, except for cash flow information and as otherwise specified, as set out in the accounting policies below.

Foreign Currency Translation

The functional currency of the Company is the Canadian dollar. The Company's functional currency is also the presentation currency. The functional currency of Ynvisible SA and Ynvisible GmbH is the European Euro. The functional currency of Ynvisible Production is the Swedish krona.

Transactions in currencies other than the Company's functional currency are recorded at the rates of exchange prevailing at the dates of the transactions. The Company translates monetary assets and liabilities denominated in foreign currencies at period-end rates. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at average rates in effect during the period except for depreciation which is translated at historical rates. The resulting gains or losses are reflected in profit or loss in the period of translation.

At the entity level, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate in effect at the financial position date and non-monetary assets and liabilities are translated at the exchange rates in effect at the date of the transaction. Income and expenses are translated at rates approximating the exchange rates in effect at the time of the transactions. All exchange gains and losses are credited or charged to profit or loss in the period in which they arise.

4. CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES

When preparing the financial statements in conformity with IFRS, management undertakes a number of judgments, estimates and assumptions about the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The actual results may differ from the judgments, estimates and assumptions made by management.

Significant areas of estimation uncertainty considered by management in preparing the financial statements are as follows:

• a. The amounts disclosed related to fair values of stock options and warrants issued and the resulting effects on profit or loss are based on estimates of future volatility of the Company's share price, expected lives of the options and expected dividends.
• b. The valuation of deferred income tax assets is based on estimates of the probability of the Company utilizing certain tax pools and assets and on the impact of future changes in legislation, tax rates and interpretations by taxation authorities.
• c. The application of IFRS 16 requires the Company to make judgments that affect the valuation of the right-of-use assets and the valuation of lease liabilities. These include: determining agreements in scope of IFRS 16, determining the contract term and determining the interest rate used for discounting of future cash flows. The lease term determined by the Company is comprised of the non-cancellable period of lease agreements, periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. The present value of the lease payment is determined using a discount rate representing the rate of a commercial mortgage rate, observed in the period when the lease agreement commences or is modified.

5. ACQUISITION OF YNVISIBLE PRODUCTION AB

On August 21, 2019, the Company completed the acquisition of Ynvisible Production pursuant to which the Company acquired 100% of the issued and outstanding shares of Ynvisible Production. Ynvisible Production is a printed electronics contract manufacturing company based in Linköping, Sweden.

Pursuant to the terms of the transaction, the Company issued an aggregate of 3,564,474 common shares of the Company (the "Payment Shares") with a fair value of \$1,119,193. The Payment Shares were subjected to a statutory hold period that expired on December 21, 2019, as well as a voluntary hold period until February 20, 2020 for 25% of the Payment Shares and August 20, 2020 for an additional 25% of the Payment Shares.

The acquisition has been accounted for using the acquisition method pursuant to IFRS 3, Business Combinations. Under the acquisition method, assets and liabilities are recorded at their fair values on the date of acquisition. The excess consideration given over the fair value of the net assets acquired is recorded as goodwill.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2020 and 2019

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

5. ACQUISITION OF YNVISIBLE PRODUCTION AB (continued)

	Total
Consideration:
Common shares	\$ 1,119,193
Total consideration	\$ 1,119,193
Allocated as follows:
Bank indebtedness	\$ (15,374)
Amounts receivable	37,024
Prepaid expenses	3,089
Deposits	9,486
Right-of-use assets	852,701
Option agreement value for manufacturing equipment*	1,326,000
Intangible assets	119,000
Accounts payable and accrued liabilities	(136,565)
Current portion of lease liabilities	(241,110)
Loans payable	(294,720)
Lease liabilities	(611,591)
Goodwill	71,253
	\$ 1,119,193

*Subsequent to the acquisition, the Company exercised the option agreement and the value of the manufacturing equipment was transferred to fixed assets (Note 7).

6. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

Right-of-Use Assets

	Leases
Cost:
At December 31, 2018	\$ -
Adjustment on initial adoption	368,734
Additions	852,701
At December 31, 2019 and June 30, 2020	\$ 1,221,435
Depreciation:
At December 31, 2018	\$ -
Charge for the year	176,569
At December 31, 2019	\$ 176,569
Charge for the period	169,495
At June 30, 2020	\$ 346,064
Net book value:
At December 31, 2019	\$ 1,044,866
At June 30, 2020	\$ 875,371

Depreciation of right-of-use assets is calculated using the straight-line method over the remaining lease term.

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

6. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

Lease Liabilities

Lease liabilities recognized as of January 1, 2019	\$ 368,734
Additions	852,701
Lease payments made	(185,652)
Interest expense on lease liabilities	15,956
Foreign exchange adjustment	(8,848)
At December 31, 2019	1,042,891
Lease payments made	(178,238)
Interest expense on lease liabilities	8,773
Foreign exchange adjustment	40,578
	914,004
Less: current portion	(369,113)
At June 30, 2020	\$ 544,891

The remaining minimum future lease payments, excluding estimated operating costs, for the term of the lease including assumed renewal periods are as follows:

Fiscal 2020	\$ 183,292
Fiscal 2021	\$ 341,392
Fiscal 2022	\$ 316,201
Fiscal 2023	\$ 86,677
Fiscal 2024	\$ 9,872

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2020 and 2019

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

7. FIXED ASSETS

			Leasehold
		Manufacturing	Building
Costs	Equipment	Equipment*	Improvements	Office	Laboratory**	Other	Total
Balance, December 31, 2018	\$ 466,897	\$ -	\$ 33,949	\$ 28,732	\$ -	\$ 55,614	\$ 585,192
Additions	34,721	1,834,126	7,964	62,800	13,149	16,018	1,968,778
Balance, December 31, 2019	501,618	1,834,126	41,913	91,532	13,149	71,632	2,553,970
Additions	19,493	-	-	1,473	-	3,472	24,438
Adjustments	-	-	-	6,694	(4,091)	(2,603)	-
Balance, June 30, 2020	\$ 521,111	\$ 1,834,126	\$ 41,913	\$ 99,699	\$ 9,058	\$ 72,501	\$ 2,578,408
Accumulated Depreciation
Balance, December 31, 2018	\$ 74,100	\$ -	\$ 1,414	\$ 4,320	\$ -	\$ 17,527	\$ 97,361
Charge for the year	52,596	62,310	5,655	11,308	-	16,489	148,358
Balance, December 31, 2019	126,696	62,310	7,069	15,628	-	34,016	245,719
Charge for the period	28,444	91,646	3,133	8,290	-	4,718	136,231
Balance, June 30, 2020	\$ 155,140	\$ 153,956	\$ 10,202	\$ 23,918	\$ -	\$ 38,734	\$ 381,950
Carrying Value
Balance, December 31, 2019	\$ 374,922	\$ 1,771,816	\$ 34,844	\$ 75,904	\$ 13,149	\$ 37,616	\$ 2,308,251
Balance, June 30, 2020	\$ 365,971	\$ 1,680,170	\$ 31,711	\$ 75,781	\$ 9,058	\$ 33,767	\$ 2,196,458

* The manufacturing equipment included the option agreement value of \$1,326,000 upon acquisition of Ynvisible Production (Note 5).

**The laboratory is currently being equipped and the equipment is not yet being depreciated.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2020 and 2019

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

8. INTANGIBLE ASSETS

	Patents and
Costs	Software	Customer List*	IP Rights*	License	Goodwill**	Total
Balance, December 31, 2018	\$ 99,183	\$ -	\$ -	\$ -	\$ -	\$ 99,183
Additions	9,921	-	-	119,476	71,253	200,650
Balance, December 31, 2019	\$ 109,104	\$ -	\$ -	\$ 119,476	\$ 71,253	\$ 299,833
Additions	-	128,700	42,900	-	-	171,600
Balance, June 30, 2020	\$ 109,104	\$ 128,700	\$ 42,900	\$ 119,476	\$ 71,253	\$ 471,433
Accumulated Depreciation
Balance, December 31, 2018	\$ 14,711	\$ -	\$ -	\$ -	\$ -	\$ 14,711
Charge for the year	9,298	-	-	6,341	-	15,639
Balance, December 31, 2019	\$ 24,009	\$ -	\$ -	\$ 6,341	\$ -	\$ 30,350
Charge for the period	5,407	4,195	1,398	7,041	-	18,041
Balance, June 30, 2020	\$ 29,416	\$ 4,195	\$ 1,398	\$ 13,382	\$ -	\$ 48,391
Carrying Value
Balance, December 31, 2019	\$ 85,095	\$ -	\$ -	\$ 113,135	\$ 71,253	\$ 269,483
Balance, June 30, 2020	\$ 79,688	\$ 124,505	\$ 41,502	\$ 106,094	\$ 71,253	\$ 423,042

* In May 2020, the Company entered into a business transfer agreement with rdot AB ("rdot") to acquire customer lists and IP rights in the amount of \$171,600 (Swedish krona 1,200,000) ("Fixed Purchase Price") to be paid in 4 equal instalments on May 18, 2020 ("Closing Date") (paid), August 1, 2020, November 1, 2020 and February 1, 2021. In addition, rdot is entitled to a contingent consideration ("Success Fees") based on the Company's revenue generated from rdot customers during the period May 18, 2020 – May 17, 2023, in the following:

Time period from closing date	Percentage on invoiced sales for rdot customer	Percentage on invoiced sales for Shared customer
Month 1-12	15%	7.5%
Month 13-24	12%	6%
Month 25-36	5%	2.5%

If sales related to rdot/Shared customer were ordered or booked in one of the time periods, but invoiced at a later time period, the Success Fees percentage is calculated using the formula: (year booked percentage + year invoiced percentage)/2. Each instalment of the Success Fees shall be paid within 30 days after the closing of each fiscal quarter.

**The goodwill is related to the acquisition of Ynvisible Production (Note 5).

YNVISIBLE INTERACTIVE INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS For the three and six months ended June 30, 2020 and 2019

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

9. RELATED PARTY TRANSACTIONS

Related party transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Key Management Compensation

	Six Months Ended June 30,
	2020	2019
Compensation and consulting	\$ 286,704	222,008
Share-based compensation	56,468		74,363
	\$ 343,172	\$	296,371

As at June 30, 2020, accounts payable and accrued liabilities include \$31,151 (December 31, 2019 - \$43,453) due to officers and directors. Accounts payable and accrued liabilities due to related parties are unsecured, and have no specified terms of repayment. During the six months ended June 30, 2020, the Company received \$39,714 (June 30, 2019 - \$39,714) in rent payments from a company controlled by a director of the Company.

10. SHARE CAPITAL AND RESERVE

Authorized

Unlimited number of Class A common shares without par value. Unlimited number of Class B non-voting convertible common shares without par value, convertible to Class A common shares on a one-for-one basis.

Issued

For the six months ended June 30, 2020:

On February 6, 2020, the Company issued 318,400 common shares with a value of \$109,848 to the Squeeze-Out Minority Shareholders (defined below) in exchange for 318,400 common shares of Ynvisible SA.

On May 14, 2020, the Company closed a non-brokered private placement of 7,500,000 common shares of the Company at \$0.20 per common share for gross proceeds of \$1,500,000 (the "May 2020 Offering"). The Company paid finders cash commissions in the aggregate amount of \$23,100 and incurred other expenses of \$8,503 related to the May 2020 Offering. In addition, 252,875 common shares valued at \$50,575 were issued to finders.

For the year ended December 31, 2019:

On January 10, 2019, the Company closed a non-brokered private placement of 3,339,200 units of the Company at \$0.30 per unit for gross proceeds of \$1,001,760 (the "January 2019 Offering"). Each unit consists of one common share in the capital of the Company and one-half of a share purchase warrant. Each whole warrant will entitle the holder to purchase one additional common share in the capital of the Company at a price of \$0.60 per warrant for a period of three years from the closing of the January 2019 Offering. A value of \$133,568 was allocated to the warrants.

1. SHARE CAPITAL AND RESERVE (continued)

Issued (continued)

For the year ended December 31, 2019: (continued)

If at any time commencing 4 months from the date the warrants are issued, if for the preceding 7 consecutive trading days, the daily volume weighted average trading price of the Company's shares is greater than \$0.75, the Company may accelerate the expiry date of the warrants by giving notice to the holders thereof and in such case the warrants will expire on the 30th calendar day after the date of such notice ("Accelerated Expiry").

The Company paid finders a cash commission in the aggregate amount of \$12,444 and incurred other expenses of \$8,133 on the January 2019 Offering. In addition, 166,553 units valued at \$49,966 were issued to finders. Each finder's unit consists of one share and one-half of a warrant. Each warrant will entitle the holder to purchase one additional common share at a price of \$0.60 per warrant for a period of three years from the closing of the January 2019 Offering, subject to the Accelerated Expiry. A value of \$6,662 was allocated to the warrants, using the residual value pricing model.

On June 5, 2019, the Company closed a non-brokered private placement of 12,571,429 units of the Company at \$0.35 per unit for gross proceeds of \$4,400,000 (the "June 2019 Offering"). Each unit consists of one common share in the capital of the Company and one-half of a share purchase warrant. Each whole warrant will entitle the holder to purchase one additional common share in the capital of the Company at a price of \$0.60 per warrant for a period of three years from the closing of the June 2019 Offering. The warrants are subject to the Accelerated Expiry.

The Company paid finders a cash commission in the aggregate amount of \$126,133 and incurred other expenses of \$22,736 on the June 2019 Offering. In addition, 420,673 units valued at \$147,236 were issued to finders and 729,553 non-transferable finder's warrants were issued to finders to purchase an aggregate of 729,553 shares of the Company. Each finder's unit consists of one share and one-half of a warrant. Each warrant will entitle the holder to purchase one additional common share at a price of \$0.60 per warrant for a period of three years from the closing of the June 2019 Offering, subject to the Accelerated Expiry. The finder's warrants were valued at \$157,629 using the Black-Scholes pricing model with the following assumptions: estimated life of three years, risk-free rate of 1.42%, volatility of 90%, and nil forecasted dividend yield.

On July 2, 2019, the Company issued 14,000 common shares with a value of \$6,580 to the SEA Minority Shareholders (defined below) in exchange for 14,000 common shares of Ynvisible SA.

On August 20, 2019, the Company issued an aggregate of 3,564,474 common shares with a fair value of \$1,119,193 for the acquisition of Ynvisible Production (Note 5).

On December 4, 2019, the Company issued 35,392 common shares with a value of \$12,210 to the SEA Minority Shareholders (defined below) in exchange for 35,392 common shares of Ynvisible SA.

Escrow Shares

As at June 30, 2020, there are 4,477,651 Class A common shares held in escrow (December 31, 2019 - 6,716,452).

10. SHARE CAPITAL AND RESERVE (continued)

Obligation to Issue Shares

On November 9, 2018, the board of directors of the Company approved the issuance of up to 1,032,496 common shares of the Company (the "SEA Shares") to certain Ynvisible SA minority shareholders (the "SEA Minority Shareholders") pursuant to the terms of share exchange agreements (the "Post-RTO Share Exchange Agreements") between the Company and the SEA Minority Shareholders. The board of directors corrected the number of SEA Shares being issued to the SEA Minority Shareholders to 1,022,496 on September 4, 2019.

On September 4, 2019, the Company implemented a squeeze-out transaction, as per the applicable Portuguese law, pursuant to the RTO transaction, whereby the Company acquired the remaining 499,369 shares of Ynvisible SA, on a one-for-one basis for the Class A common shares of the Company, held by certain minority shareholders of Ynvisible SA. (the "Squeeze-Out Minority Shareholders"). Accordingly, the Company recorded an obligation to issue 499,639 Class A common shares with a fair value of \$172,282, which has been reported as RTO transaction costs. As a result of the squeeze-out transaction, the Company now owns 100% of Ynvisible SA.

During the year ended December 31, 2019, the Company issued 35,392 common shares with a value of \$12,210 related to squeeze-out transaction. During the six months ended June 30, 2020, the Company issued 318,400 commons shares with a value of \$109,848 related to the squeeze-out transaction, and as at June 30, 2020, the Company recorded a balance of \$50,224 (December 31, 2019 – \$160,072) for obligation to issue shares

Stock Options

The Company has a fixed stock option plan, which follows the policies of the TSXV regarding stock option awards granted to employees, directors and consultants. According to the plan, the Company may grant incentive stock options up to a total of 10% of the Company's issued and outstanding common shares issued.

In May 2019, the Company granted 1,675,000 stock options to various directors, officers, and consultants of the Company at an exercise price of \$0.37 per share for a period of five years, vesting as follows: 1/3rd on four months from the date of grant, 1/3rd on eight months from the date of grant and 1/3rd on twelve months from the date of grant. The options were valued at \$526,673, of which \$466,838 was recognized during the year ended December 31, 2019 and \$54,983 was recognized during the six months ended June 30, 2020, using the Black-Scholes pricing model.

In October 2019, the Company granted 535,000 stock options to various employees and consultants of the Company at an exercise price of \$0.30 per share for a period of five years, vesting as follows: 1/3rd on four months from the date of grant, 1/3rd on eight months from the date of grant and 1/3rd on twelve months from the date of grant. The options were valued at \$129,594, of which \$58,164 was recognized during the year ended December 31, 2019 and \$60,335 was recognized during the six months ended June 30, 2020, using the Black-Scholes pricing model.

In December 2019, the Company granted 300,000 stock options to a director and an officer of the Company at an exercise price of \$0.20 per share for a period of five years, vesting as follows: 1/3rd on four months from the date of grant, 1/3rd on eight months from the date of grant and 1/3rd on twelve months from the date of grant. The options were valued at \$46,723, of which \$3,043 was recognized during the year ended December 31, 2019 and \$33,276 was recognized during the six months ended June 30, 2020, using the Black-Scholes pricing model.

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

10. SHARE CAPITAL AND RESERVE (continued)

Stock Options (continued)

In May 2020, the Company granted 325,000 stock options to various employees and a consultant of the Company at an exercise price of \$0.33 per share for a period of five years, vesting as follows: 1/3rd on four months from the date of grant, 1/3rd on eight months from the date of grant and 1/3rd on twelve months from the date of grant. The options were valued at \$83,133, of which \$16,987 was recognized during the six months ended June 30, 2020, using the Black-Scholes pricing model.

Share-based compensation recognized during the six months ended June 30, 2020 was \$165,581 (June 30, 2019 - \$256,010) from vesting of options. The Company's valuation of share purchase options granted during the period was estimated using the Black-Scholes option pricing model with the following assumptions:

	For the six months ended June 30,
	2020 2019
Risk-free interest rate	0.40% - 1.64%	1.49%
Expected dividend yield and forfeiture	0%	0%
Expected stock price volatility	107% - 119%	119%
Expected option life in years	5	5

During the six months ended June 30, 2020, 40,000 stock options were cancelled, and the fair value of \$11,386 attributable to these stock options was transferred from reserves to deficit.

During the year ended December 31, 2019, the Company issued 75,000 common shares in relation to the exercise of 75,000 stock options for total proceeds of \$22,500 and the fair value of \$21,000 attributable to these stock options was transferred from reserves to share capital. Additionally, 1,250,000 stock options expired unexercised and 310,000 stock options were cancelled, and the fair value of \$321,498 attributable to these stock options was transferred from reserves to deficit.

Stock option transactions and the number of stock options outstanding are summarized as follows:

	Six Months	Ended June 30, 2020	Year Ended December 31, 2019
	Number of Weighted Average Options Exercise Price		Number of	Weighted Average Exercise Price
			Options
	#	\$	#	\$
Outstanding, beginning	5,125,000	0.33	4,250,000	0.34
Granted	325,000	0.33	2,510,000	0.33
Exercised	-	-	(75,000)	0.30
Cancelled	(40,000)	0.37	(310,000)	0.33
Expired	- -		(1,250,000)	0.40
Outstanding, end	5,410,000	0.32	5,125,000	0.33

YNVISIBLE INTERACTIVE INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2020 and 2019

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

10. SHARE CAPITAL AND RESERVE (continued)

Stock Options (continued)

As at June 30, 2020, the following options were granted and vested:

Expiry Date	Weighted Exercise Price	Number of Options Outstanding	Number of Options Vested and Exercisable	Weighted Remaining Contractual Life
January 19, 2023	\$0.30	1,925,000	1,925,000	2.56 years
February 21, 2023	\$0.40	275,000	275,000	2.65 years
May 25, 2023	\$0.30	300,000	300,000	2.90 years
September 25, 2023	\$0.31	150,000	150,000	3.24 years
May 1, 2024	\$0.37	1,600,000	1,600,000	3.84 years
October 2, 2024	\$0.30	535,000	344,166	4.26 years
December 18, 2024	\$0.20	300,000	100,000	4.47 years
May 20, 2025	\$0.33	325,000	-	4.89 years
	\$0.32	5,410,000	4,694,166	3.39 years

Warrants

Warrant transactions and the number of warrants outstanding are summarized as follows:

	Six Months	Ended June 30, 2020	Year Ended December 31, 2019
	Number of Weighted Average Warrants Exercise Price		Number of Warrants	Weighted Average Exercise Price
	#	\$	#	\$
Outstanding, beginning	8,978,478	0.60 -	-	-
Issued	-		8,978,478	0.60
Outstanding, end	8,978,478 0.60		8,978,478	0.60

As at June 30, 2020, the following warrants were outstanding:

Expiry Date	Weighted Exercise Price	Number of Warrants Outstanding	Weighted Remaining Contractual Life
January 9, 2022	\$0.60	1,752,876	1.53 years
June 5, 2022	\$0.60	7,225,602	1.93 years
	\$0.60	8,978,478	1.85 years

11. FAIR VALUES AND RISK MANAGEMENT

The Company's financial instruments consist of cash, amounts receivable, deposits, accounts payable and accrued liabilities, lease liabilities, and long-term liabilities. Cash is measured at fair value based on Level 1 input of the fair value hierarchy. The fair value of amounts receivable, deposits, accounts payable and accrued liabilities, lease liabilities, and long-term liabilities approximate their carrying values.

The Company is exposed to financial risks arising from its financial assets and liabilities. The Company manages its exposure to financial risks by operating in a manner that minimizes its exposure to the extent practical. The main financial risks affecting the Company are:

Credit Risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company's cash is exposed to minimal credit risk. The credit risk on cash is low because the counterparties are highly rated banks.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's cash is exposed to minimal interest rate risk as the Company invests cash at floating rates of interest in highly liquid instruments, when applicable.

Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company ensures that it has sufficient capital to meet short term financial obligations after taking into account its cash on hand.

Foreign Currency Risk

The Company's functional currency is the Canadian dollar. The Company funds the operations of Ynvisible SA in Portugal, Ynvisible GmbH in Germany, and Ynvisible Production in Sweden by using Euros and Swedish krona, respectively, converted from its Canadian dollar bank accounts. Based on the Company's Euro and Swedish krona denominated financial instruments at June 30, 2020, a 10% change in exchange rates between the Canadian dollar and the Euro and Swedish krona, respectively, would result in an approximately \$34,900 and \$69,300, respectively, change in foreign exchange gain or loss.

12. CAPITAL MANAGEMENT

Management determines the Company's capital structure and makes adjustments to it based on funds available to the Company, in order to support its business operations. The Board of Directors has not established quantitative return on capital criteria for capital management but rather relies upon the expertise of the management team to sustain the future development of the business. As the Company does not generate significant revenue, the Company is dependent upon external financing to fund technology and business development as well as its administrative costs. The Company will spend existing working capital and raise additional amounts as needed. The Company will continue to assess new business verticals for its technology and know-how, and may seek to acquire an interest in supporting business opportunities, if management feels there is sufficient economic potential, provided it has adequate financial resources to do so.

Management reviews its capital management approach on an ongoing basis and believes that its approach, given the relative size of the Company, is reasonable. There have been no changes in the Company's approach to capital management during the six months ended June 30, 2020. The Company is not subject to externally imposed capital requirements.

YNVISIBLE INTERACTIVE INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS For the three and six months ended June 30, 2020 and 2019 (Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

13. SEGMENTED DISCLOSURE

The Company has one operating segment, being the development and sale of EC displays in Europe. At June 30, 2020, the Company's assets, liabilities and comprehensive loss are geographically located as follows:

	Europe	Canada	Total
ASSETS
Current assets
Cash	\$ 709,872	\$ 1,479,766	\$ 2,189,638
Amounts receivable	772,845	24,511	797,356
Prepaid expenses	85,675	47,265	132,940
Total current assets	1,568,392	1,551,542	3,119,934
Non-current assets
Deposits	2,105	14,095	16,200
Right-of-use assets	832,072	43,299	875,371
Fixed assets	2,196,458	-	2,196,458
Intangible assets	351,789	71,253	423,042
Total non-current assets	3,382,424	128,647	3,511,071
Total assets	\$ 4,950,816	\$ 1,680,189	\$ 6,631,005
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	\$ 1,021,641	\$ 134,829	\$ 1,156,470
Current portion of lease liabilities	321,905	47,208	369,113
Deferred project grants	896,941	-	896,941
Total current liabilities	2,240,487	182,037	2,422,524
Non-current liabilities
Lease liabilities	544,891	-	544,891
Total liabilities	\$ 2,785,378	\$ 182,037	\$ 2,967,415
Comprehensive loss for the six months ended June 30, 2020	\$ 1,369,371	\$ 615,215	\$ 1,984,586

YNVISIBLE INTERACTIVE INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS For the three and six months ended June 30, 2020 and 2019

(Unaudited - Expressed in Canadian Dollars Unless Otherwise Noted)

13. SEGMENTED DISCLOSURE (continued)

At December 31, 2019, the Company's assets, liabilities and comprehensive loss were geographically located as follows:

	Europe	Canada	Total
ASSETS
Current assets
Cash	\$ 481,939	\$ 1,644,786	\$ 2,126,725
Amounts receivable	572,843	28,329	601,172
Prepaid expenses	122,915	51,389	174,304
Total current assets	1,177,697	1,724,504	2,902,201
Non-current assets
Deposits	10,696	14,095	24,791
Right-of-use assets	979,918	64,948	1,044,866
Fixed assets	2,308,251	-	2,308,251
Intangible assets	198,230	71,253	269,483
Total non-current assets	3,497,095	150,296	3,647,391
Total assets	\$ 4,674,792	\$ 1,874,800	\$ 6,549,592
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	\$ 480,318	\$ 141,631	\$ 621,949
Current portion of lease liabilities	292,935	44,472	337,407
Deferred project grants	864,860	-	864,860
Total current liabilities	1,638,113	186,103	1,824,216
Non-current liabilities
Lease liabilities	681,176	24,308	705,484
Long-term liabilities	5,694	-	5,694
Total non-current liabilities	686,870	24,308	711,178
Total liabilities	\$ 2,324,983	\$ 210,411	\$ 2,535,394
Comprehensive loss for the year ended
December 31, 2019	\$ 1,908,029	\$ 1,543,479	\$ 3,451,508