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 December 2, 2021 announcing the proposed reverse takeover of the Company by the members of ARCpoint (the “Proposed Transaction”), the Company, ARCpoint, 1000151427 Ontario Inc. (a wholly owned subsidiary of the Company) (“RSI Subco”), ARCpoint Finance Corp. (a wholly owned subsidiary of ARCpoint) (“ARCpoint Finco”) and all of the securityholders of ARCpoint have entered into a definitive business combination agreement (the “Business Combination Agreement”) in respect of the Proposed Transaction on April 27, 2022.

Terms of the Proposed Transaction

Pursuant to the terms of the Business Combination Agreement, the parties have agreed that prior to the closing of the Proposed Transaction, the Company will, among other things, (A) consolidate its common shares on a 3.1579031 to 1 basis (the “Consolidation”), (B) continue its corporate existence from British Columbia to the federal jurisdiction under Canada Business Corporations Act under the new business name of “ARCpoint Inc.” or such other name as may be may be requested by ARCpoint and approved by the applicable regulatory authority (the “Continuance”),   and (C) create Class A Subordinate Voting Shares (“SVS”) and Class B Proportionate Voting Shares (“PVS”) and reclassify its post-Consolidation common shares into SVS (the “Share Restructuring”) for the purpose of structuring the resulting issuer of the Proposed Transaction (the “Resulting Issuer”) as a “foreign private issuer” under applicable U.S. securities laws. Each SVS will entitle its holder to one vote per SVS and every 500 SVS are convertible into one PVS under limited circumstances. Each PVS will carry 500 votes and 500 times of the economic interest of each SVS in respect of dividend payments and distribution upon dissolution or liquidation and every PVS is convertible into 500 SVS under limited circumstances. The existence of the SVS and PVS will not impact on the relative voting power and economic interests of the holders thereof. It is the parties’ intention that the SVS will be listed on the TSX Venture Exchange (the “Exchange”) following the closing of the Proposed Transaction, and the PVS will not be listed for trading on the Exchange but may be converted into Exchange-listed SVS under limited circumstances.

Subject to approval of the Exchange and the satisfaction of the conditions precedent to the Proposed Transaction, upon closing of the Proposed Transaction, the Company, RSI Subco and ARCpoint Finco will complete a three-cornered amalgamation (the “Amalgamation”) pursuant to which RSI Subco and ARCpoint Finco will amalgamate. In connection with the Amalgamation, each common share of RSI Pubco will be exchanged for one common share of the amalgamated entity and each common share of ARCpoint Finco will be exchanged for one SVS of the Resulting Issuer. Following the Amalgamation, RSI will acquire 25,000 ARCpoint Class A Common Units held by Felix Mirando for US$2,500,000 payable by an unsecured 1.88% interest bear promissory note with a maturity date of April 26, 2031 (the Promissory Note”) to be issued at Closing (the “Leveraged Acquisition”). Immediately after giving effect to the Leveraged Acquisition, the remaining securities of ARCpoint will be exchanged with the securities of the Company as follows: (A) each Class A Common Unit of ARCpoint will be exchanged for one PVS; and (B) each Class B Common Unit of ARCpoint will be exchanged for 500 SVS (collectively, the “Securities Exchange”).

Closing of the Proposed Transaction (the “Closing”) is subject to, among other things: (A) ARCpoint Finco completing a private placement of subscription receipts for minimum aggregate gross proceeds of $4,350,000 which is intended to constitute the concurrent financing of the Proposed Transaction (the “Concurrent Financing”), (B) the implementation of the Consolidation, the Continuance and the Share Restructuring by RSI, (C) completion and execution of all definitive transaction documents (including accuracy of representations and warranties, compliance of covenants and satisfaction of customary conditions) and receipt of all requisite approvals and consents for and in connection with the Proposed Transaction as contemplated in the Business Combination Agreement including: (i) approval by the Exchange for the Proposed Transaction and the proposed new insiders of the Resulting Issuer; (ii) approval by the board of directors of the Company and the board of managers of ARCpoint; and (iii) approval by the shareholders of the Company and all members of ARCpoint.

RSI currently has 36,835,278 Common Shares without par value issued and outstanding, as well as 1,400,000 options to acquire Common Shares of RSI at an exercise price of $0.10 per share. After giving effect to the Consolidation, the Share Restructuring and the Proposed Transaction, RSI will have approximately 11,664,474 SVS, 443,332 SVS purchase options (the “Resulting Issuer Options”) issued and outstanding, with each Resulting Issuer Option exercisable to purchase one SVS of the Resulting Issuer at an exercise price of $0.32 per SVS (all such numbers subject to minor deviation as a result of the effects of rounding at the individual securityholder level).

At the time of Closing, ARCpoint will have 148,894 Class A Common Units and 31,409 Class B Common Units issued and outstanding. Assuming full subscription of the minimum amount of the Concurrent Financing, ARCpoint Finco will have 7,631,579 Common Shares (“Finco Shares”) and 3,815,790 Finco Share purchase warrants (“Finco Warrants”) issued and outstanding immediately prior to the closing of the Proposed Transaction (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 at the time of Closing, in connection with the Leveraged Acquisition, RSI will issue the Promissory Note with a principal amount of US$2.5 million to Felix Mirando to acquire 25,000 ARCpoint Class A Common Units held by Mr. Mirando, and in connection with the Securities Exchange, RSI will issue to the securityholders of ARCpoint and ARCpoint Finco the following: (A) 123,894 PVS in exchange for 123,894 Class A Common Units of ARCpoint at a deemed price of $284.89 per PVS, (B) 15,704,500 SVS in exchange for 31,409 Class B Common Units of ARCpoint, and 7,631,579 SVS in exchange for 7,631,579 Finco Shares (assuming full subscription of the minimum amount of the Concurrent Financing), at a deemed price of $0.57 per SVS, (D) 3,815,790 SVS purchase warrants in exchange for 3,815,790 Finco Warrants, and (E) such number of SVS purchase options as may be required to replace ARCpoint Finco’s broker warrants to be issued in connection with the Concurrent Financing on a one for one basis.

Concurrent Financing Update

In connection with the Proposed Transaction, ARCpoint Finco intends to complete a private placement of subscription receipts at a price of $0.57 per subscription receipt on a partially brokered basis for minimum aggregate gross proceeds of $4,350,000. It is anticipated that each subscription receipt to be issued pursuant to the Concurrent Financing will be automatically exchanged for one Finco Share and one-half of a Finco Share purchase warrant immediately prior to the Closing of the Proposed Transaction. Upon closing of the Concurrent Financing, ARCpoint FinCo will issue compensation warrants to brokers and finders who facilitated the Financing. The structure and the terms and conditions of the Concurrent Financing remain subject to confirmation by ARCpoint and the agent(s) (the “Agent”) to be engaged in connection with the Concurrent Financing. The proceeds of the Private Placement will be held in escrow subject to satisfaction of certain escrow release conditions prior to the closing of the Proposed Transaction. The definitive terms of the Concurrent Financing will be announced and confirmed in a subsequent press release once binding terms and particulars of the Concurrent Financing have been agreed upon between ARCpoint and the Agent.

Proposed Board of Directors and Management of the Resulting Issuer

Subject to approval the Exchange, upon completion of the Proposed Transaction, it is currently anticipated that the board of directors of the Resulting Issuer will consist of five directors including Felix Mirando, John Constantine, Adam Ho, David Keys and a fifth director to be nominated by ARCpoint, and management of the Resulting Issuer swill be comprised of John Constantine (Chief Executive Officer) and Dano Jukanovich (Chief Financial Officer and Corporate Secretary). The Company will disclose in a subsequent press release the backgrounds of all persons who are expected to be considered insiders of the Resulting Issuer after the fifth director of the Resulting Issuer is confirmed.

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 125 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.