RSY.H RSI International Systems Inc

RSI International Systems Inc. (NEX: RSY.H) (the “Company” or “RSI”) and ARCpoint Group LLC (“ARCpoint”) are pleased to announce that further to the Company’s press release issued on April 27, 2022 announcing the terms of the business combination agreement (the “Business Combination Agreement”) in respect of the proposed reverse takeover of the Company by the members of ARCpoint (the “Proposed RTO”), ARCpoint and its wholly owned subsidiary ARCpoint Finance Corp. (“ARCpoint Finco”) have finalized the terms of the non-brokered private placement (the “Private Placement”) to be conducted concurrently with the Proposed RTO.

Pursuant to the Private Placement, ARCpoint Finco will offer a minimum of 4,777,778 subscription receipts (“Subscription Receipts”) and a maximum of 11,111,111 Subscription Receipts at a price of $0.45 (the “Subscription Price”) per Subscription Receipt for aggregate gross proceeds of a minimum of $2,150,000 and a maximum of $5,000,000.

In connection the Private Placement, ARCpoint Finco will enter into a subscription receipt agreement (the “Subscription Receipt Agreement”) with Odyssey Trust Company (“Odyssey”) to appoint Odyssey as its subscription receipt agent to hold the aggregate subscription proceeds from the Private Placement, less fifty percent (50%) of the cash commission (the “Cash Commission”) payable to eligible finders (the “Finders”) who assist with the Private Placement (such net amount, the “Escrowed Proceeds”, together with all interest and other income earned thereon, the “Escrowed Funds”) in escrow until satisfaction of the following conditions (the “Escrow Release Conditions”):

1. written confirmation from each of ARCpoint and RSI that all conditions to the completion of the Proposed RTO have been satisfied or waived, other than the release of the Escrowed Funds and the closing of the Proposed RTO, each of which will be completed forthwith upon release of the Escrowed Funds;
2. the Resulting Issuer Shares being conditionally approved for listing on the TSX Venture Exchange (the “Exchange”) and the completion, satisfaction or waiver of all conditions precedent to such listing, other than the release of the Escrowed Funds; and
3. ARCpoint Finco shall have delivered a release notice to Odyssey confirming that items (1) and (2) above have been satisfied (the “Release Notice”).

If Odyssey does not receive the Release Notice prior to 5:00 p.m. (Toronto time) on the date that is one hundred and twenty days (120) days after the closing date of the Private Placement or such later date as may be approved by holders of at least 66 2/3% of the Subscription Receipts (the “Release Deadline”), or if prior to such time, ARCpoint Finco announces to the public that it does not intend to satisfy the Escrow Release Conditions, Odyssey will return to holders of Subscription Receipts, within two (2) business days of the Release Deadline or such earlier date, an amount equal to the aggregate issue price of the Subscription Receipts held by them and their pro rata portion of any interest earned thereon. ARCpoint Finco will be responsible and liable, and will promptly pay, to the holders of Subscription Receipts for any shortfall between the aggregate gross proceeds of the Private Placement (including any applicable interest and income payable or that would have been earned) and the Escrowed Funds.

Upon satisfaction the Escrow Release Condition, each Subscription Receipt issued pursuant to the Private Placement will be automatically exchanged, without payment of any additional consideration and without further action on the part of the holder thereof, for one common share of ARCpoint Finco (a “Finco Share”) and one half (1/2) of a Finco Share purchase Warrant (each whole warrant, a “Warrant”) with each Warrant exercisable to purchase one (1) Finco Share at an exercise price of $0.675 per share for a term of three (3) years from the date of issue.

In connection with the Private Placement, ARCpoint Finco will pay certain finders 6.5% cash commissions (the “Cash Commission”) and 6.5% non-transferable compensation warrants (the “Compensation Warrants”) with each Compensation Warrant exercisable to purchase one (1) Finco Share at a price of $0.45 per share for a period of two (2) years.

Upon closing of the Proposed RTO, the Finco Shares, the Warrants and the Compensation Warrants will be exchanged for Class A Subordinate Voting Shares (“SVS”) and warrants with equivalent terms, respectively, of the resulting issuer of the Proposed RTO (the “Resulting Issuer”).

The net proceeds raised from the Private Placement will be used by ARCpoint for software development, asset acquisitions, working capital and general corporate purposes.

Amendments of the Business Combination Agreement

The Subscription Price represents a reduced valuation of ARCpoint (the “Updated ARCpoint Valuation”) due to the current market conditions which has led to a change to the proposed consolidation ratio for the common shares of RSI (the “RSI Shares”). Accordingly, the parties to the Proposed RTO have entered into an amending agreement (the “Amending Agreement”) to amend the Business Combination Agreement as follows:

1. the consolidation ratio (the “Consolidation Ratio”) for the consolidation of RSI Shares immediately prior to the closing of the Proposed RTO has been reduced from 3.1579031 to 2.4930814 pre-Consolidation RSI Shares for one post-consolidation RSI Share (the “Amended Consolidation Ratio”); and
2. the minimum offering sizing of the Private Placement has been reduced from $4,350,000 to $2,150,000;

The Updated ARCpoint Valuation also results in changes to the number of post-consolidation securities of RSI, the deemed prices of ARCpoint’s Class A Common Units and Class B Common Units and the number of shares of the Resulting issuer issuable upon closing of the Proposed Transaction as set out in the Company’s press release dated April 27, 2022 which shall be updated as follows:

After giving effect to the Consolidation based on the Amended Consolidation Ratio, RSI will have approximately 14,775,000 SVS and 561,554 SVS purchase options issued and outstanding, with each option exercisable to purchase one SVS of the Resulting Issuer at an exercise price of $0.25 per SVS (all such numbers subject to minor deviation as a result of the effects of rounding at the individual securityholder level).

Subject to approval by the Exchange, upon closing of the Proposed Transaction, it is anticipated that, RSI will issue to the securityholders of ARCpoint and ARCpoint Finco the following: (A) 123,894 Class B Proportionate Voting Shares (“PVS”) in exchange for 123,894 Class A Common Units of ARCpoint at a deemed price of $225 per PVS, (B) 15,704,500 SVS in exchange for 31,409 Class B Common Units of ARCpoint, 4,777,778 SVS in exchange for 4,777,778 Finco Shares assuming full subscription of the minimum amount of the Private Placement or 11,111,111 SVS in exchange for 11,111,111 Finco Shares assuming full subscription of the maximum amount of the Private Placement, at a deemed price of $0.45 per SVS, (D) 2,388,889 SVS purchase warrants in exchange for 2,388,889 Finco Warrants assuming full subscription of the minimum amount of the Private Placement or 5,555,556 SVS purchase warrants in exchange for 5,555,556 Finco Warrants assuming full subscription of the maximum amount of the Private Placement (all such numbers subject to minor deviation as a result of the effects of rounding at the individual securityholder level), and (E) such number of SVS purchase warrants as may be required to replace ARCpoint Finco’s broker warrants to be issued in connection with the Private Placement on a one for one basis.

RSI Shareholders Meeting Voting Results

The Company is pleased to announce that it has received the requisite shareholders approvals for all of the meeting matters required to be approved in connection with the Proposed Transaction at its annual general and special meeting (the “Meeting”) held on June 28, 2022.

Additional details regarding the Meeting and the Proposed RTO n are available in the management information circular provided to shareholders and news releases filed under the Company’s profile on SEDAR at www.sedar.com.

About ARCpoint Group LLC

ARCpoint is a leading US-based franchise system providing drug testing, alcohol screening, DNA and clinical lab testing, corporate wellness programs, and employment and background screening, among other services. The company is based in Greenville, South Carolina, USA. ARCpoint Franchise Group LLC, formed under the laws of the state of South Carolina in February 2005, is the franchisor of ARCpoint Labs and supports over 120 independently owned locations. ARCpoint sells franchises to individuals throughout the United States and provides support in the form of marketing, technology and training to new franchisees. ARCpoint Corporate Labs LLC develops corporate-owned labs committed to providing accurate, cost-effective solutions for customers, businesses and physicians. AFG Services LLC serves as the innovation center of the ARCpoint group of companies as it builds a proprietary technology platform and a physician network to equip all ARCpoint labs with best-in-class tools and solutions to better serve their customers. The platform also digitalizes and streamlines administrative functions such as materials purchasing, compliance, billing and physician services for ARCpoint franchise labs and other clients.

For more information, please contact:

RSI International Systems Inc. Adam Ho, CEO & DirectorPhone: (604) 329-1009Email: adamho@shaw.ca

ARCpoint Group LLC John Constantine, CEO & Director Phone: 864-271-3210E-mail: info@arcpointlabs.com

Completion of the Proposed Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable, disinterested shareholder approval. Where applicable, the Proposed Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Proposed Transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of the Company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the Proposed Transaction and has neither approved nor disapproved the contents of this news release.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes certain “forward-looking statements” under applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to: the terms and conditions of the Proposed Transaction; the terms and conditions of the proposed Private Placement; and the business and operations of the Resulting Issuer after completion of the Proposed Transaction. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; delay or failure to receive board, shareholder or regulatory approvals; and the results of operations. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company and ARCpoint disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Neither the Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this Press release.