Form S-1 Direct Communication

As filed with the U.S. Securities and Exchange Commission on November 28, 2025

Registration No. 333-             

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

Direct Communication Solutions, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		5045		20-5517542
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

 

11021 Via Frontera, Suite C

San Diego, CA 92127

(858) 798-7100

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)

 

William Espley

Chief Executive Officer

Direct Communication Solutions, Inc.

11021 Via Frontera, Suite C

San Diego, CA 92127

(858) 798-7100

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

Mark C. Lee Olivia Y. Wang Rimon, P.C. 400 Madison Ave, Suite 11D New York, NY 10017 (718) 504-9773

Zhaocong “Richard” Xu, Esq. McLaughlin & Stern, LLP 260 Madison Ave, 18th Floor New York, NY10016 Telephone: (212) 448 1100

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

	Large accelerated filer	☐	Accelerated filer	☐
	Non-accelerated filer	☒	Smaller reporting company	☒
			Emerging growth company	☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

 

 

 

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the United States Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION

DATED    , 2025

 

[   ] Shares of Class A Common Stock

 

 

Direct Communication Solutions, Inc. 

 

This is a firm commitment initial public offering (“IPO”) of shares of Class A common stock of Direct Communication Solutions, Inc. We expect the initial public offering price will be between $[   ] and $[   ] and the assumed offering price is the midpoint of this range.

 

Although this is our IPO for securities in the United States, our common stock is presently quoted on the OTCQX under the symbol “DCSX,” on the Canadian Securities Exchange (“CSE”) under the symbol “DCSI,” and the Frankfurt Stock Exchange under the symbol “7QU0.” We have applied to have our common stock listed on the NYSE American under the symbol “DCSX”. No assurance can be given that our application will be approved. If our application is not approved, we will not consummate this offering. On [   ], 2025, the last reported sale price for our stock on the OTCQX was $[   ] per share. The trading price of our common stock has been, and may continue to be, subject to wide price fluctuations in response to various factors, many of which are beyond our control, including those described in “Risk Factors.”

 

Upon shareholder approval at our annual general meeting to be held on December 8, 2025, (i) our authorized capital stock will consist of 500,000,000 shares of Class A common stock, par value $0.00001 per share, and 500,000,000 shares of Class B common stock, par value $0.00001 per share, (ii) all 2,487,222 shares of our currently issued and outstanding common stock will be designated as Class A common stock, and (iii) Mike Yao Zhou, our director, will receive a one-time right to elect to convert 571 shares of Class A common stock owned directly by him and 528,571 Class A common stock owned indirectly by him into Class B shares on a one-for-one basis, which Mr. Zhou plans to exercise upon the completion of this offering. Upon consummation of this offering, Mr. Zhou will beneficially own all shares of our issued and outstanding Class B common stock. Holders of Class A common stock and Class B common stock will have the same rights except for voting, conversion, and transfer rights. Each share of Class A common stock will be entitled to one vote. Upon (i) our company successfully raising aggregate financing of not less than $10,000,000 and (ii) the shares of our Class A common stock being approved for listing on the NYSE American LLC or NASDAQ and commencing trading on such exchange (collectively, the “Sunrise Conditions”), each share of Class B common stock will be entitled to 20 votes. Prior to the satisfaction of the Sunrise Conditions, each share of Class B common stock will be entitled to one vote. Assuming the satisfaction of the Sunrise Conditions, the Class B common stock held by Mr. Zhou will constitute approximately [ ]% of our total issued and outstanding shares and [ ] % of the aggregate voting power of our total issued and outstanding shares immediately after this offering, assuming that the underwriters do not exercise their option to purchase additional shares. See “Description of Capital Stock” for more details and “Risk Factors—Risks Related to this Offering and Ownership of Our Common Stock—Our dual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A common stock may view as beneficial” for a description on related risks.

 

The number of shares of Class A common stock offered by this prospectus and all other applicable information has been determined based on an assumed public offering price of $[   ] per share, which is the midpoint of the estimated price range for this offering. The actual public offering price per share of our Class A common stock will be determined between the underwriters and us at the time of pricing, considering our historical performance and capital structure, prevailing market conditions, and overall assessment of our business. Therefore, the assumed public offering price used throughout this prospectus may not be indicative of the actual public offering price for our Class A common stock. See “Underwriting - Determination of Offering Price” for additional information.

 

Investing in our common stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of the material risks of investing in our common stock under the heading “Risk Factors” beginning on page 9 of this prospectus.

 

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

		Per Share				Total
Initial public offering price		$				$
Underwriting discounts and commissions(1)		$				$
Proceeds to us, before expenses(2)		$				$

  

(1)

Underwriting discounts and commissions do not include a non-accountable expense allowance equal to 7.5% of the gross proceeds of the public offering price payable to the underwriters. This table does not include a non-accountable expense allowance equal to 1% of the gross proceeds of this offering payable to the underwriters. We refer you to “Underwriting” beginning on page 67 for additional information regarding underwriters’ compensation.

 

(2)	The amount of offering proceeds to us presented in this table does not give effect to any exercise of the: (i) over-allotment option (if any) we have granted to the underwriters as described below or (ii) warrants to purchase shares of our Class A common stock to be issued to the underwriters.

 

 

We have granted a 45-day option to the underwriters to purchase up to [   ] additional shares of Class A common stock equal to 15% of the aggregate number of shares of Class A common stock sold in the offering solely to cover over-allotments, if any.

 

In addition to the underwriting discounts listed above, upon closing of this offering, we have agreed to issue to Chaince Securities, LLC and Revere Securities LLC, acting as representatives of the underwriters, or its designees, up to [   ] warrants equal to five percent (5%) of the total numbers of shares of Class A common stock issued in the offering (including any shares of Class A common stock sold as a result of the exercise of the underwriters’ over-allotment option) (the “Warrants”), exercisable at any time and from time to time, in whole or in part, during the two and a half-year period commencing six months immediately following the date of commencement of sales of the securities issued in this offering, at a per share price equal to 120% of the initial public offering price. The registration statement of which this prospectus forms a part also covers the Warrants and the shares of Class A common stock issuable upon the exercise thereof.

 

The underwriters expect to deliver the securities to purchasers on or about       , 2025.

 

 

The date of this prospectus is        , 2025

 

 

 

 

 

TABLE OF CONTENTS

 

PROSPECTUS SUMMARY	1
THE OFFERING	5
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA	7
RISK FACTORS	9
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	26
USE OF PROCEEDS	27
MARKET FOR OUR COMMON STOCK	28
DIVIDEND POLICY	29
CAPITALIZATION	30
DILUTION	31
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	33
BUSINESS	43
MANAGEMENT	48
EXECUTIVE COMPENSATION	52
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	55
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT	57
DESCRIPTION OF CAPITAL STOCK	58
SHARES ELIGIBLE FOR FUTURE SALE	64
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS	65
UNDERWRITING	68
LEGAL MATTERS	78
EXPERTS	78
WHERE YOU CAN FIND MORE INFORMATION	78
INDEX TO FINANCIAL STATEMENTS	F-1

 

 

General Information

 

Unless otherwise indicated in this prospectus, the terms “DCS,” “we,” “us” and “our” refer to Direct Communication Solution, Inc. and, where appropriate, its consolidated subsidiaries.

 

You should rely only upon the information contained in this prospectus or in any free writing prospectus prepared by us. We have not, and the underwriters have not, authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the information appearing in this prospectus and in any free writing prospectus prepared by us is accurate only as of their respective dates or on the date or dates specified in these documents. Our assets, business, cash flows, financial condition, liquidity, results of operations, and prospects may have changed since those dates.

 

This prospectus describes the specific details regarding this offering and the terms and conditions of our common stock being offered hereby and the risks of investing in shares of our common stock. For additional information, please see the section entitled “Where You Can Find More Information.”

 

You should not interpret the contents of this prospectus or any free writing prospectus to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in shares of our common stock.

 

Financial Information

 

We present our consolidated financial statements in United States dollars, and our financial statements included elsewhere in this prospectus are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). Unless otherwise indicated, any other financial information included or incorporated by reference in this prospectus has been prepared in accordance with U.S. GAAP. Certain financial information that we have historically filed in Canada on its System for Electronic Document Analysis and Retrieval (“SEDAR”) profile has been prepared in accordance with International Financial Reporting Standards (“IFRS”). U.S. GAAP differs in certain material respects from IFRS. As a result, certain financial information included in this prospectus may not be comparable to the financial information we have historically reported at www.sedar.com. This prospectus does not include any explanation of the principal differences or any reconciliation between U.S. GAAP and IFRS.

 

Exchange Rate Data

 

Unless otherwise noted, all translations from Canadian dollar to U.S. dollars in this prospectus are made at US$1.00 = CAD $1.44, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on December 31, 2024.

 

Trademarks

 

We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks and trade names or products in this prospectus is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will assert, to the fullest extent under applicable law, our rights or the right of the applicable owner of these trademarks, service marks and trade names.

 

Market and Industry Data

 

Unless otherwise indicated, information contained in this prospectus concerning our industry, competitive position and the markets in which we operate is based on information from independent industry and research organizations, other third-party sources and management estimates. Because this information involves a number of assumptions and limitations, you are cautioned not to give undue weight to such information. We have not independently verified market data and industry forecasts provided by any of these or any other third-party sources referred to in this prospectus. Management estimates are derived from publicly available information released by independent industry analysts and other third-party sources, as well as data from our internal research, and are based on assumptions we made upon reviewing such data, and our experience in, and knowledge of, such industry and markets, which we believe to be reasonable. In addition, projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

 

 

RISK FACTORS 

 

An investment in shares of our common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties described below and all of the other information contained in this prospectus, including our consolidated financial statements and the related notes appearing at the end of this prospectus, before deciding whether to invest in shares of our common stock. If any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely affected. In that event, the trading price of our common stock could decline and you could lose all or part of your investment in shares of our common stock. Additional risks of which we are not presently aware or that we currently believe are immaterial may also harm our business and results of operations. Some statements in this prospectus, including such statements in the following risk factors, constitute forward-looking statements. See the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

 

Risks Related to Our Financial Position and Need for Capital

 

Because we have a limited operating history, our future revenue growth remains uncertain and we may not achieve profitability.

 

We have a limited operating history upon which to base an evaluation of our business and prospects. Although we seek to increase revenues through organic growth and the development of new revenue streams, we cannot assure you that our revenues will increase in future quarters or future years. Operating results for future periods are subject to numerous uncertainties and we cannot provide assurance that we will achieve or sustain profitability. Profitability depends on many factors, including, our success in expanding our product offerings and our customer base, the control of our expense levels, the success of our business activities and general economic conditions. We may make investments in marketing, technology and further development of our operating infrastructure which entail long-term commitments. Our industry as a whole may be adversely affected by industry trends, economic factors and new regulations. Despite our efforts to expand our revenues and achieve profitable operations, we may not be successful. Our prospects must be considered in light of the risks encountered by companies in a relatively early stage of development, particularly companies in new and rapidly evolving markets. We cannot provide assurance we will successfully address any of these risks. If events or circumstances occur such that we do not meet our operating plan as expected, we may be required to reduce our planned research and development activities, incur additional restructuring charges or reduce other operating expenses which may cast substantial doubt on our ability to achieve our intended business objectives.

 

We may need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

 

Our working capital may not be sufficient to allow us to execute our business plan as fast as we would like or may not be sufficient to take full advantage of all available strategic opportunities. Our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

 

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our products. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities may dilute our existing stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and it may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and it may be required to relinquish rights to some of our technologies or product candidate or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.

 

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product, or be unable to execute our business plans, develop or enhance our services, expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

 

 

Our management and our independent registered public accountant, in their report on our financial statements as of and for the year ended December 31, 2024, have concluded that due to our need for additional capital, and the uncertainties surrounding our ability to raise such funding, substantial doubt exists as to our ability to continue as a going concern.

 

As a result of our recurring losses from operations and ongoing negative cash flows, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of, and for the year ended, December 31, 2024 and as of, and for nine months ended, September 30, 2025, describing the existence of substantial doubt about our ability to continue as a going concern. If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or a part of their investment. We may also be forced to make reductions in spending, including delaying or curtailing our planned business strategy, or to extend payment terms with our suppliers or other counterparties. Future reports from our independent registered public accounting firm may also contain statements expressing doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding on commercially reasonable terms or at all. Such substantial doubt does not give effect to the receipt of any proceeds from this offering.

 

Defaults and covenant violations under certain of our outstanding loans could require immediate repayment and adversely affect our liquidity.

 

On June 7, 2024, as the result of a vendor changing its terms with us from billing devices and device management subscriptions from a payment term of 36 months down to 30 days reducing the frequency of occurrence for long term payables, we entered into an agreement with the vendor to restructure the payables into a long-term loan with a principal of $3,200,000, bearing interest at 10%. The interest is due quarterly, and the principal will be due on June 7, 2029. As of September 30, 2025, we recorded $400,264 accrued interest and finance fee and a carrying balance of $3,600,265 of the loan was outstanding. During the nine months ended September 30, 2025, we paid $50,000 interest expenses but have fallen behind on interest payments. Although the lender has not yet issued a formal demand letter or declared a default as of the date of this prospectus, this breach of the loan agreement entitles the lender to demand immediate repayment of the full loan balance.

 

In March 2025, we entered into two loan agreements with third parties for proceeds of $284,500 and $175,000. The loans are repayable in 35 and 65 weekly payments, respectively, starting April 2025, bearing an Estimated Annual Percentage Rate at 84.26% and 43.31%, respectively, and are secured by a general security agreement on our assets. As of September 30, 2025, we were not in compliance with the covenant of both loan agreements that prohibits entering additional financing arrangements without the lenders’ consent and were also in arrears on interest payments for the loan with proceeds of $284,500. While the lenders have not yet taken formal action, the non-compliance could allow them to demand immediate repayment of the full loan balances, exercise their rights under the related security agreements and personal guarantee, and seek contractual damages and collection costs.

 

In April 2025, we entered into a loan agreement with a third party for proceeds of $235,000. The loan is payable in 26 weekly payments, starting April 2025, bearing an Estimated Annual Percentage Rate at 165% and is secured by a general security agreement on our assets. As of September 30, 2025, we were not in compliance with a covenant of the loan agreement that prohibits the sale or pledge of our receivables and were also in arrears on the interest payments. While the lender has not yet taken formal action, the non-compliance could allow the lender to demand immediate repayment of the full loan balance, exercise its rights under the related security agreement and personal guarantee, and seek contractual damages and collection costs.

 

 

Risks Related to Our Business, Strategy and Industry

 

The industry in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed.

 

The IoT market in which we compete require continuous innovation and are highly competitive, rapidly evolving, subject to changing technology, shifting customer needs and frequent introductions of new products and services. Our competitors in the IoT enterprise marketplace include vendors of IoT devices and products, cloud platform providers for certain hardware and application vendors, hardware providers offering sensors and cloud integration partners, and IoT platforms from companies that have existing relationships with hardware and software companies. We compete on a service basis, by offering fully integrated IoT device connectivity to a variety of niche markets. New competitors could launch new businesses in our markets at a relatively low cost since technological and financial barriers to entry are relatively low. Some of our current and potential competitors may have competitive advantages, such as greater name recognition, longer operating histories, significant installed bases, broader geographic scope, and larger marketing budgets, as well as substantially greater financial, technical, personnel, and other resources. In addition, our potential competitors may have established marketing relationships and access to larger customer bases, and have major distribution agreements with consultants, system integrators and resellers. We may also experience competition from smaller, younger competitors that may be more agile in responding to customers’ demands. These competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements or provide competitive pricing. As a result, even if our services are more effective than the products and services that our competitors offer, potential customers might select competitive products and services in lieu of purchasing our products and services. For these reasons, we may not be able to compete successfully against our current and future competitors, which could negatively impact our future sales and harm our business and financial condition.

 

In order to differentiate our products and services from competitors’ products, we must continue to focus on research and development, including software development, and enhance and improve our existing services and adapt to current technologies. If our existing or new products and services fail to achieve widespread market acceptance, if existing customers do not subscribe to our paid subscription services, or if we are unsuccessful in capitalizing on opportunities in the connected IoT market, our future growth may be slowed and our business, results of operations and financial condition could be materially adversely affected.

 

Our efforts to expand our products and services and to develop and integrate our existing services in order to keep pace with technological developments may not succeed and may reduce our revenue growth rate and harm our business.

 

We seek to derive revenue from integrating our IoT and machine-to-machine (M2M) product mix, building unique IoT solutions, and from subscriptions to our SaaS cloud computing application services, and we expect this will continue for the foreseeable future. Our efforts to expand our products and services may not result in long term success or significant revenue for us. The markets for certain of our offerings, including our data integration offerings, remain relatively new. In addition, if we fail to anticipate or identify significant Internet-related and other technology trends and developments early enough, or if we do not devote appropriate resources to adapting to such trends and developments, our business could be harmed. Further, if we are unable to develop enhancements to and new features for our existing or new services that keep pace with rapid technological developments, our business could be harmed. The success of enhancements, new features and services depends on several factors, including the timely completion, introduction and market acceptance of the feature, service or enhancement by customers, administrators and developers, as well as our ability to seamlessly integrate all of our product and service offerings and develop adequate selling capabilities in new markets. Failure in this regard may significantly impair our revenue growth as well as negatively impact our operating results if the additional costs are not offset by additional revenues. In addition, because our services are designed to operate over various network technologies and on a variety of mobile devices, operating systems and computer hardware and software platforms, we will need to continuously modify and enhance our services to keep pace with changes in Internet-related hardware, software, communication, browser, app development platform and database technologies, as well as continue to maintain and support our services on legacy systems. We may not be successful in either developing these modifications and enhancements or in bringing them to market timely. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our research and development or service delivery expenses. Any failure of our services to operate effectively with future network platforms and technologies could reduce the demand for our services, result in customer dissatisfaction and harm our business.

 

 

Defects or disruptions in our services could diminish demand for our services and subject us to substantial liability.

 

Because our services are complex and incorporate a variety of third-party hardware and proprietary and third-party software, our services may have errors or defects that could result in unanticipated downtime for our subscribers and harm to our reputation and our business. Cloud services frequently contain undetected errors when first introduced or when new versions or enhancements are released. We may from time to time experience system outages resulting in disruptions to, our services. Defects affecting our services may be found following the introduction of new software or enhancements to existing software or in software implementations in varied information technology environments. Internal quality assurance testing and end-user testing may reveal service performance issues or desirable feature enhancements that could lead us to reallocate service development resources or postpone the release of new versions of our software. Such defects could also create vulnerabilities that could inadvertently permit access to protected customer data. Since our customers use our services for important aspects of their business, any errors, defects, disruptions in service or other performance problems, or delays in the development and release of future enhancements to our currently available software, could hurt our reputation and may damage our customers’ businesses. As a result, customers could elect to not renew our services or delay or withhold payment to us. We could also lose future sales or customers may make warranty or other claims against us, which could be detrimental to our reputation and result in an increase in our allowance for doubtful accounts, an increase in collection cycles for accounts receivable or the expense and risk of litigation.

 

We may be adversely affected by natural disasters, pandemics, and other catastrophic events, and by man-made problems such as war and regional geopolitical conflicts around the world, that could disrupt our business operations, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

 

Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce, and the global economy, and thus could have an adverse effect on us. Our business operations are also subject to interruption by fire, power shortages, flooding, and other events beyond our control. In addition, our global operations expose us to risks associated with public health crises, such as pandemics and epidemics, which could harm our business and cause our operating results to suffer. Further, acts of war, armed conflict, terrorism and other geopolitical unrest, such as the conflicts in the Middle East and Ukraine and tensions between China and Taiwan, could cause disruptions in our business or the businesses of our partners or the economy as a whole.

 

In the event of a natural disaster, including a major earthquake, blizzard, or hurricane, or a catastrophic event such as a fire, power loss, cyberattack, or telecommunications failure, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in development of our platform, lengthy interruptions in service, breaches of data security, and loss of critical data, all of which could have an adverse effect on our future operating results. Climate change could result in an increase in the frequency or severity of such natural disasters. Moreover, any of our office locations or data centers may be vulnerable to the adverse effects of climate change. For example, California, where our operations are primarily located, is a state that frequently experiences earthquakes, wildfires, and resultant air quality impacts and power shutoffs associated with wildfire prevention, heatwaves, and droughts. These events can, in turn, have impacts on inflation risk, food security, water security, and on our employees’ health and well-being. Additionally, all the aforementioned risks will be further increased if we do not implement an effective disaster recovery plan or our partners’ disaster recovery plans prove to be inadequate.

 

Our business is subject to online security risks, including security breaches and enterprise data theft.

 

Security remains a significant issue across the entire IoT ecosystem. An increasing number of organizations have reported breaches of their security on their connected devices and many companies have been the subject of sophisticated and highly targeted attacks. Maintaining the security of computer information systems and communication systems is a critical issue for us and our customers. Malicious actors may develop and deploy malware that is designed to manipulate our systems, including our internal network, or those of our vendors or customers. Additionally, outside parties may attempt to fraudulently induce our employees to disclose sensitive information in order to gain access to our information technology systems, our data or our customers’ data. A party who is able to illicitly breach a client’s security protocol could access enterprise and transaction data. We have access to or host confidential information as part of our client relationship management and transactional processing platforms. Our security measures may not detect or prevent security breaches that could harm our or our client’s business. We devote considerable resources to network security, data encryption and other security measures to protect our hardware and software systems and enterprise and client information, but these measures may not provide absolute security. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches. Furthermore, advances in computer capabilities, new discoveries in the field of cryptography, biometric identification or other developments may not prevent the technology used by us to protect transactional data from being breached or compromised. A party that is able to circumvent our security measures could misappropriate proprietary information, cause interruption in our or our client’s operations, or damage the computers or business of our users. Any compromise of our client’s system security could result in the unauthorized release of confidential information, violate applicable privacy and other laws, expose us to a risk of loss or litigation and possible liability, and harm our reputation and, therefore, our business. Our insurance policies carry coverage limits which may not be adequate to reimburse us for losses caused by security breaches.

 

 

Privacy concerns and laws, evolving regulation of cloud computing, cross-border data transfer restrictions and other domestic or foreign regulations may limit the use and adoption of our services and adversely affect our business.

 

Regulation related to the provision of services over the Internet is evolving, as federal, state and foreign governments continue to adopt new, or modify existing, laws and regulations addressing data privacy and the collection, processing, storage, transfer and use of data. Although currently focused primarily on consumer personal data, domestic data privacy laws, such as the California Consumer Privacy Act (“CCPA”) effective January 2020, could continue to evolve and expose us to regulatory burdens. Further, data privacy laws and regulations, such as the European Union’s (“EU”) General Data Protection Regulation that took effect in May 2018, impose obligations on data controllers and data processors. Additionally, certain countries have passed or are considering passing laws requiring local data residency. We strive to comply with our applicable policies and applicable laws, regulations, contractual obligations, and other legal obligations relating to privacy, data protection, and data security to the extent possible. However, the regulatory framework for privacy, data protection and data security worldwide is, and is likely to remain for the foreseeable future, uncertain and complex, and it is possible that these or other actual or alleged obligations may be interpreted and applied in a manner that we do not anticipate or that is inconsistent from one jurisdiction to another and may conflict with other legal obligations or our practices. Further, any significant change to applicable laws, regulations or industry practices regarding the collection, use, retention, security or disclosure of data, or their interpretation, or any changes regarding the manner in which the consent of users or other data subjects for the collection, use, retention or disclosure of such data must be obtained, could increase our costs and require us to modify our products and services, possibly in a material manner, which we may be unable to complete, and may limit our ability to store and process user data or develop new products, services and features. These and other requirements could reduce demand for our services, require us to take on more onerous obligations in our contracts, restrict our ability to store, transfer and process data or, in some cases, impact our ability or our customers’ ability to offer our services in certain locations, to deploy our solutions, to reach current and prospective customers, or to derive insights from customer data globally. The costs of compliance with, and other burdens imposed by, privacy laws, regulations and standards may limit the use and adoption of our services, reduce overall demand for our services, make it more difficult to meet expectations from or commitments to customers, lead to significant fines, penalties or liabilities for noncompliance, impact our reputation, or slow the pace at which we close transactions, any of which could harm our business.

 

In addition to government activity, privacy advocacy and other industry groups have established or may establish new self-regulatory standards that may place additional burdens on our ability to provide our services globally. Our customers may expect us to meet voluntary certification and other standards established by third parties. If we are unable to maintain these certifications or meet these standards, it could adversely affect our ability to provide our solutions to certain customers and could harm our business. Furthermore, the uncertain and shifting regulatory environment and trust climate may cause concerns regarding data privacy and may cause our customers or our customers’ customers to resist providing the data necessary to allow our customers to use our services effectively. Even the perception that the privacy of personal information or the security of enterprise information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our products or services and could limit adoption of our cloud-based solutions.

 

Weakened global economic conditions may adversely affect our industry, business and results of operations.

 

Our overall performance depends in part on worldwide economic and geopolitical conditions. The United States and other key international economies have experienced cyclical downturns from time to time in which economic activity was impacted by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies and overall uncertainty with respect to the economy. These economic conditions can arise suddenly and the full impact of such conditions can remain uncertain. In addition, geopolitical developments, such as trade disputes, new or increased tariffs, or changes to fiscal and monetary policy can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets. For more information, see “—Changes to United States tariff and import/export regulations may have a negative effect on our Company and, in turn, harm us.” Moreover, these conditions can affect the rate of information technology spending and could adversely affect our customers’ ability or willingness to purchase our IoT services, delay prospective customers’ purchasing decisions, reduce the value or duration of their subscription contracts, or affect attrition rates, all of which could adversely affect our future sales and operating results.

 

 

Our business is subject to government regulation and future regulation or regulatory changes may increase the cost of compliance and doing business.

 

We are subject to various federal, state and local laws, regulations and administrative practices affecting our business. These include the requirement to obtain business licenses and certifications, and other such legal requirements, regulations and administrative practices required of businesses in general. The foregoing regulatory matters may also be applicable to any of our collaborative partners or licensees. In addition, we are currently or potentially subject to laws and regulations affecting our operations in a number of areas, including data privacy requirements, intellectual property ownership and infringement, and security. We cannot predict the impact, if any, that future internet or IoT-related regulation or regulatory changes might have on our business. In certain jurisdictions, these regulatory requirements may be more stringent than in the United States. Noncompliance with applicable regulations or requirements could subject us to:

 

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investigations, enforcement actions, and sanctions;

 

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mandatory changes to our solutions and services;

 

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disgorgement of profits, fines, and damages;

 

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civil and criminal penalties or injunctions;

 

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claims for damages by our customers or channel partners;

 

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termination of contracts; and

 

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loss of intellectual property rights.

 

If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, financial condition, and results of operations could be adversely affected. In addition, responding to any action will likely result in a significant diversion of our management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could materially harm our business, financial condition, and results of operations. Additionally, companies in the technology industry have recently experienced increased regulatory scrutiny. Any reviews by regulatory agencies or legislatures may result in substantial regulatory fines, changes to our business practices, and other penalties, which could negatively affect our business and results of operations. Changes in social, political, and regulatory conditions or in laws and policies governing a wide range of topics may cause us to change our business practices. Further, our expansion into a variety of new use cases for our solution could also raise a number of new regulatory issues. Compliance with these laws, regulations, and similar requirements may be onerous and expensive, and variances and inconsistencies from jurisdiction to jurisdiction may further increase the cost of compliance and doing business. Any such costs, which may rise in the future as a result of changes in these laws and regulations or in their interpretation, could individually or in the aggregate make our services less attractive to our customers, delay the introduction of new products or services in one or more regions, or cause us to change or limit our business practices.

 

Industry-specific regulation and other requirements and standards are evolving and unfavorable industry-specific laws, regulations, interpretive positions or standards could harm our business.

 

Our customers and potential customers conduct business in a variety of industries, including manufacturing, automotive, agriculture, retail, transportation and logistics and telecommunications. Regulators in certain industries have adopted and may in the future adopt regulations or interpretive positions regarding the use of cloud computing and other outsourced services. The costs of compliance with, and other burdens imposed by, industry-specific laws, regulations and interpretive positions may limit our customers’ use and adoption of our services and reduce overall demand for our services. Compliance with these regulations may also require us to devote greater resources to support certain customers, which may increase costs. If we are unable to comply with these guidelines or controls, or if our customers are unable to obtain regulatory approval to use our services where required, our business may be harmed. In addition, an inability to satisfy the standards of certain voluntary third-party certification bodies that our customers may expect may have an adverse impact on our business and results. If in the future we are unable to achieve or maintain industry-specific certifications or other requirements or standards relevant to our customers, it may harm our business and adversely affect our results.

 

 

Further, in some cases, industry-specific laws, regionally-specific, or product-specific laws, regulations, or interpretive positions may also apply directly to us as a service provider. The interpretation of many of these statutes, regulations, and rulings is evolving in the courts and administrative agencies and an inability to comply may have an adverse impact on our business and results. Any failure or perceived failure by us to comply with such requirements could have an adverse impact on our business. We may in the future be subject to litigation containing allegations that one of our customers violated an industry-specific law. A determination that we violated such a law could expose us to significant damage awards that could, individually or in the aggregate, materially harm our business.

 

Our business may expose us to product liability claims for damages resulting from the design or manufacture of our products. Product liability claims, whether or not we are ultimately held liable for them, could have a material adverse effect on our business and results of operations.

 

We may be subject to product liability claims for certain of our products if they are alleged to be defective or cause harmful effects. Product liability claims or other claims related to our products, regardless of their outcome could require us to spend significant time and money in litigation, divert management time and attention, require us to pay significant damages, harm our reputation or hinder acceptance of our products. Any successful product liability claim may prevent us from obtaining adequate product liability insurance in the future on commercially desirable or reasonable terms. An inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of our products.

 

Our operations are subject to the effects of a rising rate of inflation which may adversely impact our financial condition and results of operations.

 

Inflation in the United States began to rise significantly in the second half of the calendar year 2021. This is primarily believed to be the result of the economic impacts from the COVID-19 pandemic, including the global supply chain disruptions, strong economic recovery and associated widespread demand for goods, and government stimulus packages, among other factors. For instance, global supply chain disruptions have resulted in shortages in materials and services. Such shortages have resulted in inflationary cost increases for labor, materials, and services across the economy, and could continue to cause costs to increase as well as scarcity of certain products. We are experiencing inflationary pressures in certain areas of our business, including with respect to employee wages, however, we cannot predict any future trends in the rate of inflation or associated increases in our operating costs and how that may impact our business. To the extent we are unable to recover higher operating costs resulting from inflation or otherwise mitigate the impact of such costs on our business, our revenues and gross margins could decrease, and our financial condition and results of operations could be adversely affected.

 

In addition, inflation is often accompanied by higher interest rates. The possibility of high inflation and extended economic downturn could reduce our ability to incur debt or access capital and impact our results of operations and financial condition even after these conditions improve.

 

Risks Related to our Intellectual Property

 

Our inability to protect our intellectual property rights could diminish the value of our products, weaken our competitive position and reduce our future revenue.

 

We rely on a combination of patent, copyright and trademark laws, trade secrets, some software security measures (e.g., to protect trade secrets), license agreements and nondisclosure agreements to protect our intellectual property, all of which offer only limited protection. We pursue the registration of trademarks but currently hold no patents on our products. Our commercial success may depend in large part on our ability to protect our trade secrets, and to obtain patent and other intellectual property protection in the United States and other countries with respect to our proprietary technology and products. We intend to seek to protect our proprietary position by filing and prosecuting patent applications in the United States related to our technologies and products that are important to our business. However, the steps we take to protect our intellectual property rights may be limited or inadequate. For instance, we will not be able to protect our intellectual property rights if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property rights, or unauthorized or unlawful use of our technology, software, or intellectual property rights. In addition, a counterparty to a nondisclosure agreement may breach the agreement, and litigation to enforce our rights could cause us to divert resources away from our business operations.

 

Effective trade secret, copyright, trademark, domain name and patent protection is expensive to develop and maintain, in terms of initial and ongoing protection measures, registration requirements and the costs of maintaining and defending our rights. Any of our future patents, trademarks or other intellectual property rights may be discovered through third party reverse engineering or careless or departing employees, challenged by others, or invalidated through administrative process or litigation. We may be required to protect our intellectual property, a process that is expensive and may not be successful or which we may not pursue in every jurisdiction. We may, over time, increase our investment in protecting our intellectual property through patent filings that could be expensive and time-consuming. We may be unable to obtain patent protection for the technology covered in our patent applications or the patent protection may not be obtained quickly enough to meet our business needs.

 

Monitoring unauthorized use of our intellectual property is difficult and costly. Our efforts to protect our proprietary rights may not be adequate to prevent misappropriation of our intellectual property. Further, we may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. There is also no guarantee that third parties will abide by the terms of our agreements or that we will adequately be able to enforce our contractual rights. Our competitors may also independently develop similar technology without infringing our intellectual property rights. In addition, the laws of many countries do not protect our proprietary rights to as great an extent as the laws of the United States. Moreover, laws in the United States and elsewhere change rapidly, and any future changes could adversely affect us and our intellectual property. Our failure to meaningfully protect our intellectual property could result in competitors offering products that incorporate our most technologically advanced features, which could reduce demand for our products, affect our brand, cause us to incur significant expenses and harm our business.

 

 

We may in the future be sued by third parties for various claims including alleged infringement or appropriation of proprietary rights.

 

The software and internet industries are characterized by the existence of a large number of trade secrets, patents, trademarks and copyrights and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. From time to time, third parties may assert exclusive patent, copyright, trademark and other intellectual property rights against us, demanding license or royalty payments or seeking payment for damages, injunctive relief and other available legal remedies through litigation. Our technologies may be subject to injunction if they are found to infringe the rights of a third-party or we may be required to pay damages, or both. Further, many of our subscription agreements may require us to indemnify our customers for third-party intellectual property infringement claims, which would increase the cost to us of an adverse ruling on such a claim.

 

The outcome of any claims or litigation, regardless of the merits, is inherently uncertain. Any claims and lawsuits, and the disposition of such claims and lawsuits, whether through settlement or licensing discussions, or litigation, could be time-consuming and expensive to resolve, divert management attention from executing our business plan, result in efforts to enjoin our activities, lead to attempts on the part of other parties to pursue similar claims and, in the case of intellectual property claims, require us to change our technology, change our business practices, pay monetary damages or enter into short- or long-term royalty or licensing agreements.

 

Any adverse determination related to intellectual property claims or other litigation could prevent us from offering our services to others, could be material to our financial condition or cash flows, or both, or could otherwise adversely affect our operating results. In addition, depending on the nature and timing of any such dispute, an unfavorable resolution of a legal matter could materially affect our current or future results of operations or cash flows in a particular quarter.

 

Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, misappropriation, violation, and other losses.

 

In some cases our agreements with customers and other third parties include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement, misappropriation or violation, damages caused by us to property or persons, or other liabilities relating to or arising from our solution or other contractual obligations. Pursuant to certain agreements, we do not have a cap on our liability and any payments under such agreements would harm our business, financial condition, and results of operations. Although we normally limit our liability with respect to some of these indemnity obligations via contract, we may still incur substantial liability related to them. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business and results of operations.

 

Risks Related to the Company

 

Any inability to attract and retain qualified key management and technical personnel would impair our ability to implement our business plan.

 

Our success depends in large part upon the continued services of our key management, technical and other specialized personnel. The loss of one or more members of our management team or other key employees could delay our growth and development and materially harm our business, financial condition, results of operations and prospects. The relationships that our team have cultivated within the IoT industry make us particularly dependent upon their continued employment or services with us. Because our management team is not obligated to provide us with continued service, they could terminate their employment or services with us at any time without penalty, subject to providing any required advance notice. We do not maintain key person life insurance policies for any members of our management team. The technology industry is subject to substantial and continuous competition for personnel with high levels of experience in designing, developing and managing software and Internet-related services, as well as competition for sales executives and operations personnel. Our future success and growth will depend in large part on our continued ability to attract and retain our technical and management personnel. We face the risk that if we are unable to retain existing personnel, or to attract and integrate qualified new personnel, our business, financial condition and results of operations will be adversely affected.

 

Any failure in our delivery of high-quality technical support services may adversely affect our relationships with our customers and our financial results.

 

Our customers depend on our support organization to resolve technical issues relating to our applications. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. Increased customer demand for these services, without corresponding revenues, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on our applications and business reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our service offerings to existing and prospective customers, and our business, operating results and financial position.

 

 

We have significant customer concentration, with a limited number of customers accounting for a substantial portion of our revenues.

 

We derived revenue from one customer, One Step GPS LLC, totaling 40.4%, 22.5% and 33% of our total revenue for the nine months ended September 30, 2025 and years ended December 31, 2024 and 2023, respectively. As of September 30, 2025, December 31, 2024 and December 31, 2023, One Step GPS LLC accounted for a total of 10.9%, 18% and 19% of accounts receivable, respectively.

 

There are risks whenever a large percentage of total revenues are concentrated with a limited number of customers. It is not possible for us to predict the level of demand for our products and services that will be generated by this customer in the future. In addition, revenues from larger customers may fluctuate from time to time based on their business needs and customer experience, the timing of which may be affected by market conditions or other factors outside of our control. Our larger customers could also potentially pressure us to reduce the prices we charge for our products and services, which could have an adverse effect on our margins and financial position and could negatively affect our revenues and results of operations. If our largest customers terminates its relationship with us, such termination could negatively affect our revenues and results of operations

 

We may not be able to successfully implement our growth strategy on a timely basis or at all.

 

Although we are researching and developing new markets and products and improving existing products, our research and market development activities may not prove profitable or ultimately prove successful. As we grow, we will need to expand our internal sales, marketing and distribution capabilities to commercialize our products, or enter into collaborations with third parties to perform these services. If we markets our products directly, we will need to commit significant financial and managerial resources to develop a marketing and sales force with technical expertise and supporting distribution, administration and compliance capabilities. If we rely on third parties with such capabilities to market our products or decide to co-promote products with collaborators, we will need to establish and maintain marketing and distribution arrangements with third parties, and there can be no assurance that we will be able to enter into such arrangements on acceptable terms or at all. In entering into third-party marketing or distribution arrangements, any revenue we receive will depend upon the efforts of the third parties and there can be no assurance that such third parties will establish adequate sales and distribution capabilities or be successful in gaining market acceptance of any product. If we are not successful in commercializing our products, either on our own or through third parties, our business, financial condition and results of operations could be materially adversely affected.

 

Changes to United States tariff and import/export regulations may have a negative effect on our Company and, in turn, harm us.

 

The United States has recently enacted and proposed to enact significant new tariffs. Additionally, President Trump has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs. There continues to exist significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. Any of these factors could depress economic activity and restrict our access to suppliers or customers and have a material adverse effect on their business, financial condition and results of operations, which in turn would negatively impact us.

 

Regulations related to conflict minerals may cause us to incur additional expenses and could limit the supply and increase the costs of certain metals used in the manufacturing of our products.

 

We are subject to requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that require us to conduct due diligence on and disclose whether or not our products contain conflict minerals as defined under these provisions. The implementation of these requirements could adversely affect the sourcing, availability, and pricing of the materials used in the manufacture of components used in our IoT devices. In addition, we incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of minerals that may be used in or necessary for the production of our IoT devices and, if applicable, potential changes to IoT devices, processes, or sources of supply as a consequence of such due diligence activities. It is also possible that we may face reputational harm if we determine that certain of our IoT devices contain minerals not determined to be conflict-free or if we are unable to alter our products, processes, or sources of supply to avoid such materials.

 

We may be unable to compete successfully against existing and future competitors, which could harm our margins and our business.

 

The IoT business is intensely competitive. We face competition from a large number of existing companies who have significantly greater financial, technical, manufacturing, marketing and distribution resources as well as greater experience than we have. We believe that the general financial success of companies within the IoT market will continue to attract new competitors to the industry, which has a relatively low barrier to entry in some segments, including large technology companies that could expand their platforms or acquire one of our competitors.

 

We can provide no assurance that we will be able to compete successfully against current or potential competitors. Many of our current and potential competitors have longer operating histories, better brand recognition and significantly greater financial, technical and marketing resources than we do. Many of these competitors may have well-established relationships with manufacturers and other key strategic partners and can devote substantially more resources to such relationships. As a result, they may be able to secure equipment, technology, products and systems, among other things that we may need, from vendors on more favorable terms, fulfill customer orders or requests more efficiently and adopt more aggressive pricing policies than we can. They also may be able to secure a broader range of technologies, products and systems from or develop close relationships with primary vendors. Some competitors may price their products, services, capabilities and systems below cost in an attempt to gain market share.

 

Increased competition may result in price reductions, reduced gross margin and loss of market share, any of which could harm our business and adversely affect our operating results and financial condition. We may not be able to compete successfully and respond to competitive pressures. Our inability to compete effectively with current or future competitors could harm our business and have a material adverse effect on our results of operations and financial condition.

 

 

Risks Related to our Dependence on Third Parties

 

We rely on third-party manufacturers and suppliers to produce key product components, and shortages, delays and interruptions in supply could impair the delivery of our products and services and harm our business. 

 

We rely on third parties to supply key components used in our products. We do not own manufacturing facilities or supply sources for such components and materials. There can be no assurance that our supply of materials will not be limited, interrupted, restricted in certain geographic regions or of satisfactory quality or continue to be available at acceptable prices. In particular, any replacement of our manufacturers could require significant effort and expertise because there may be a limited number of qualified manufacturers. Any shortage or delay in the supply of key product components would harm our ability to meet scheduled product deliveries. Many of the components used in our products are specifically designed for use in our products, some of which are obtained from sole source suppliers. If demand for a specific component increases, we may not be able to obtain an adequate quantity of that component in a timely manner. Other factors that may affect our suppliers’ ability or willingness to supply components to us include internal management or reorganizational issues, such as roll-out of new equipment which may delay or disrupt supply of previously forecasted components, or industry consolidation and divestitures, which may result in changed business and product priorities among certain suppliers. It could be difficult, costly and time consuming to obtain alternative sources for these components, or to change product designs to make use of alternative components. In addition, difficulties in transitioning from an existing supplier to a new supplier could create delays in component availability that would have a significant impact on our ability to fulfill orders for our products. We may be forced to enter into an agreement with another third party, which we may not be able to do on reasonable terms, if at all. In some cases, the technical skills or technology required to manufacture our product components may be unique or proprietary to the original manufacturer and it may have difficulty, or there may be contractual restrictions prohibiting us from transferring such skills or technology to another third party and a feasible alternative may not exist.

 

If we are unable to obtain a sufficient supply of components, or if we experience any interruption in the supply of components, or if our suppliers or manufacturers fail to perform their obligations to us in relation to quality, timing or otherwise, our cost of obtaining these components may increase. Component shortages and delays affect our ability to meet scheduled product deliveries, may damage our brand and reputation in the market, and cause us to lose sales and market share. At times, we may elect to use more expensive transportation methods, such as air freight, to make up for manufacturing delays caused by component shortages, which may affect our ability to supply products within budget and reduce our margins. In addition, at times sole suppliers of highly specialized components may provide components that are either defective or do not meet the criteria required by our customers, distributors or other channel partners, resulting in delays, lost revenue opportunities and material write-offs.

 

We rely on third parties for technologies that are vital to the functionality of our products and the loss of these relationships could harm our business.

 

We rely on third parties to obtain non-exclusive patented hardware and software license rights in technologies that are incorporated into and necessary for the operation and functionality of most of our products. In these cases, because the intellectual property we license is available from third parties, barriers to entry into certain markets may be lower for potential or existing competitors than if we owned exclusive rights to the technology that we license and use. Moreover, if a competitor or potential competitor enters into an exclusive arrangement with any of our key third-party technology providers, or if any of these providers unilaterally decides not to do business with us for any reason, our ability to develop and sell products containing that technology would be severely limited.

 

If third-party developers and providers do not continue to embrace our service model and enterprise cloud computing services, or if our customers seek warranties from us for third-party applications, integrations, data and content, our business could be harmed.

 

A core part of our enterprise solutions is the interoperability of our platform with third-party IoT products and protocols. Our success depends on the willingness of a growing community of third-party developers and technology providers to build applications and provide integrations, data and content that are complementary to our services. Without the continued development of these applications and provision of such integrations, data and content, both current and potential customers may not find our services sufficiently attractive, which could impact future sales. Further, if these third parties were to alter their products, applications and content, we could be adversely impacted if we fail to timely create compatible versions of our products and solutions. A lack of interoperability may also result in significant redesign costs, and harm relations with our customers. Further, the mere announcement of an incompatibility problem relating to our products could materially adversely affect our business, results of operations and financial condition.

 

To the extent our competitors supply products that compete with ours, it is possible these competitors could design their technologies to be closed or proprietary systems that are incompatible or work less effectively with our products. As a result, end-users may have an incentive to purchase products that are compatible with the products and technologies of our competitors over our products.

 

In addition, for those customers who authorize a third-party technology partner access to their data, we do not provide any warranty related to the functionality, security and integrity of the data transmission or processing. Despite contract provisions to protect us, customers may look to us to support and provide warranties for the third-party applications, integrations, data and content, even though not developed or sold by us, which may expose us to potential claims, liabilities and obligations, all of which could harm our business.

 

Our ability to deliver our services is dependent on the development and maintenance of the infrastructure of the Internet by third parties.

 

The Internet’s infrastructure is comprised of many different networks and services that are highly fragmented and distributed by design. This infrastructure is run by a series of independent third-party organizations that work together to provide the infrastructure and supporting services of the Internet under the governance of the Internet Corporation for Assigned Numbers and Names (ICANN) and the Internet Assigned Numbers Authority (IANA), now under the stewardship of ICANN. The Internet has experienced a variety of outages and other delays as a result of damages to portions of its infrastructure, denial-of-service attacks or related cyber incidents, and it could face outages and delays in the future. These outages and delays could reduce the level of Internet usage or result in fragmentation of the Internet, resulting in multiple separate Internets. These scenarios are not under our control and could reduce the availability of the Internet to us or our customers for delivery of our Internet-based services. Any resulting interruptions in our services or the ability of our customers to access our services could result in a loss of potential or existing customers and harm our business.

 

Any interruptions or delays in services from third-parties, including data center hosting facilities, cloud computing platform providers and other hardware and software vendors, or our inability to adequately plan for and manage service interruptions or infrastructure capacity requirements, could impair the delivery of our services and harm our business.

 

We currently serve our customers from third-party data center hosting facilities and cloud computing platform providers located in the United States and other countries. We also rely on computer hardware purchased or leased from, software licensed from, and cloud computing platforms provided by, third parties in order to offer our services, including database software, hardware and data from a variety of vendors. Any damage to, or failure of our systems generally, including the systems of our third-party platform providers, could result in interruptions in our services. As we increase our reliance on these third-party systems, our exposure to damage from service interruptions may increase. Interruptions in our services may cause us to issue credits or pay penalties, cause customers to make warranty or other claims against us or to terminate their subscriptions and adversely affect our attrition rates and our ability to attract new customers, all of which would reduce our revenue. Our business would also be harmed if our customers and potential customers believe our services are unreliable.

 

These hardware, software, data and cloud computing platforms may not continue to be available at reasonable prices, on commercially reasonable terms or at all. Any loss of the right to use any of these hardware, software or cloud computing platforms could significantly increase our expenses and otherwise result in delays in the provisioning of our services until equivalent technology is either developed by us, or, if available, is identified, obtained through purchase or license and integrated into our services. If we do not accurately plan for our infrastructure capacity requirements and we experience significant strains on our data center capacity, our customers could experience performance degradation or service outages that may subject us to financial liabilities, result in customer losses and harm our business. As we add data centers and capacity and continue to move to cloud computing platform providers, we may move or transfer our data and our customers’ data. Despite precautions taken during this process, any unsuccessful data transfers may impair the delivery of our services, which may damage our business.

 

We may face fines, penalties, or other costs, either directly or vicariously, if any of our partners, resellers, contractors, vendors or other third parties fail to adhere to their compliance obligations under our policies and applicable law.

 

We use a number of third parties to perform services or act on our behalf in areas like sales, network infrastructure, administration, research, and marketing. It may be the case that one or more of those third parties fail to adhere to our policies or violate applicable federal, state, local, and international laws, including but not limited to, those related to corruption, bribery, economic sanctions, and export/import controls. Despite the significant efforts in asserting and maintaining control and compliance by these third parties, we may be held fully liable for third parties’ actions as fully as if they were a direct employee of ours. Such liabilities may create harm to our reputation, inhibit our plans for expansion, or lead to extensive liability either to private parties or government regulators, which could adversely impact our business, financial condition, and results of operations.

 

Risks Related to this Offering and Ownership of Our Common Stock

 

An active, liquid trading market for our common stock does not currently exist and may not develop after this offering, and as a result, you may not be able to sell your common stock at or above the public offering price, or at all.

 

Prior to this offering, shares of our common stock were quoted on the OTC Markets Group, Inc. OTCQX Marketplace under the symbol “DCSX,” the CSE under the symbol “DCSI,” and the Frankfurt Stock Exchange under the symbol “7QU0.” Trading on the OTCQX marketplace, CSE and the Frankfurt Stock Exchange has been infrequent and in limited volume. Although we intend to apply to list our shares of Class A common stock on NYSE American in connection with this offering, an active trading market for shares of our common stock may never develop or be sustained following this offering. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. The public offering price for our common stock will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell your common stock at or above the public offering price or at any other price or at the time that you would like to sell. An inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to expand our business by using our common stock as consideration in an acquisition.

 

 

Our dual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A common stock may view as beneficial.

   

Upon shareholder approval at our annual general meeting to be held on December 8, 2025, (i) our authorized capital stock will consist of 500,000,000 shares of Class A common stock, par value $0.00001 per share, and 500,000,000 shares of Class B common stock, par value $0.00001 per share, (ii) all 2,487,222 shares of our currently issued and outstanding common stock will be designated as Class A common stock, and (iii) Mike Yao Zhou, our director, will receive a one-time right to elect to convert 571 shares of Class A common stock owned directly by him and 528,571 Class A common stock owned indirectly by him into Class B shares on a one-for-one basis, which Mr. Zhou plans to exercise upon the completion of this offering. Upon consummation of this offering, Mr. Zhou will beneficially own all shares of our issued and outstanding Class B common stock. Holders of Class A common stock and Class B common stock will have the same rights except for voting, conversion, and transfer rights. See “Description of Capital Stock” for more details.

 

Upon (i) our company successfully raising aggregate financing of not less than $10,000,000 and (ii) the shares of our Class A common stock being approved for listing on the NYSE American LLC or NASDAQ and commencing trading on such exchange (collectively, the “Sunrise Conditions”), each share of Class B common stock will be entitled to 20 votes. Prior to the satisfaction of the Sunrise Conditions, each share of Class B common stock will be entitled to one vote. Assuming the satisfaction of the Sunrise Conditions, the Class B common stock held by Mr. Zhou will constitute approximately [ ]% of our total issued and outstanding shares and [ ] % of the aggregate voting power of our total issued and outstanding shares immediately after this offering, assuming that the underwriters do not exercise their option to purchase additional shares. As such, holders of our Class B common stock will have considerable influence over matters requiring shareholder approval, such as electing directors and approving material mergers, acquisitions or other business combination transactions. This concentration of ownership will limit your ability to influence corporate matters and may discourage, delay or prevent a change of control of our company that holders of Class A common stock may view as beneficial, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of our Class A common stock.

 

Our dual-class voting structure may render our Class A common stock ineligible for inclusion in certain stock market indices, and thus adversely affect the trading price and liquidity of our Class A common stock.

 

Certain index providers have announced restrictions on including companies with multi-class share structures in certain of their indices. As a result, our dual-class voting structure may prevent the inclusion of our Class A common stock in such indices, which could adversely affect the trading price and liquidity of our Class A common stock.

 

We may terminate our listing on the Canadian stock exchange in connection with our proposed listing on NYSE American, which could adversely affect the liquidity and market price of our securities.

 

In connection with our NYSE American listing, we may elect to voluntarily delist from the CSE either prior to or following our NYSE American listing. Delisting from the CSE would reduce the number of trading venues for our securities, which may adversely affect the liquidity of our shares. Reduced liquidity may impair the ability of shareholders to buy or sell our Class A common stock at the desired time or price.

 

Moreover, the termination of our Canadian listing could affect the investment decisions of certain existing shareholders who are subject to investment mandates or preferences for securities listed on Canadian exchanges, potentially resulting in increased selling pressure. Additionally, delisting may negatively affect our visibility and brand recognition in the Canadian capital markets, and we may no longer qualify for certain indices or benefit from analyst coverage in Canada.

 

There is no assurance that our NYSE American listing will provide sufficient replacement liquidity or market support to offset the effects of delisting from the CSE. As a result, the market price of our securities and our overall access to capital could be negatively impacted.

 

 

The market price of our common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your securities at or above the public offering price.

 

The market price of equity securities of technology companies has historically experienced high levels of volatility. If you purchase securities in this offering, you may not be able to resell those securities at or above the public offering price. Following the completion of this offering, the market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control and may not be related to our operating performance, including:

 

●

announcements of new offerings, products, services or technologies, commercial relationships, acquisitions or other events by us or our competitors;

 

●

price and volume fluctuations in the overall stock market from time to time;

 

●

significant volatility in the market price and trading volume of technology companies in general and of companies in the digital advertising industry in particular;

 

●

fluctuations in the trading volume of our shares or the size of our public float;

 

●

actual or anticipated changes or fluctuations in our operating results;

 

●

whether our operating results meet the expectations of securities analysts or investors;

 

●

actual or anticipated changes in the expectations of investors or securities analysts;

 

●

litigation involving us, our industry, or both;

 

●

regulatory developments in the United States, foreign countries, or both;

 

●

general economic conditions and trends;

 

●

major catastrophic events;

 

●

lockup releases or sales of large blocks of our common stock;

 

●

departures of key employees; or

 

●

an adverse impact on the company from any of the other risks cited in this prospectus.

 

In addition, if the stock market for technology companies, or the stock market generally, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. The trading price of our common stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

 

You may be diluted by future issuances of common stock in connection with our incentive plans, acquisitions or otherwise; future sales of such shares in the public market, or the expectations that such sales may occur, could lower our stock price.

 

Our amended and restated certificate of incorporation, as amended (“certificate of incorporation”) authorizes us to issue shares of our common stock for the consideration and on the terms and conditions established by our Board in its sole discretion. We could issue a significant number of shares of common stock in the future in connection with investments or acquisitions. Any of these issuances could dilute our existing stockholders, and such dilution could be significant. Moreover, such dilution could have a material adverse effect on the market price for the shares of our common stock.

   

A significant number of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

 

Subject to certain exceptions, without the prior written consent of Chaince Securities, LLC and Revere Securities LLC, as representatives of the underwriters, we, during the period ending three months after the closing of this offering, and our officers and directors, and our 5% or greater stockholders, during the period ending six months after the closing of this offering, have agreed not to: (1) offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into, exchangeable for or that represent the right to receive shares of common stock; (2) file or cause to be filed any registration statement with the SEC relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or (3) enter into any swap or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of common stock, subject to certain exceptions. Chaince Securities, LLC and Revere Securities LLC, in their sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. See “Underwriting.”

 

The market price of our common stock may decline significantly when the restrictions on resale by our existing stockholders lapse. A decline in the market price of our common stock might impede our ability to raise capital through the issuance of additional shares of common stock or other equity securities.

 

 

You will incur immediate dilution in the net tangible book value of the shares you purchase in this offering.

 

The public offering price of our common stock will be higher than the net tangible book value per share of outstanding common stock prior to completion of this offering. Based on our net tangible book value as of September 30, 2025 and upon the issuance and sale of shares of common stock by us at the assumed public offering price of $[   ] per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, if you purchase our common stock in this offering, you will suffer immediate dilution of approximately $[   ] per share in net tangible book value. Dilution is the amount by which the offering price paid by purchasers of our common stock in this offering will exceed the as adjusted net tangible book value per share of our common stock upon completion of this offering. If the underwriters exercise their option to purchase additional shares, you will experience future dilution. As of September 30, 2025, there were 448,929 shares of common stock available for issuance under the 2023 Stock Plan. You may experience additional dilution upon future equity issuances or the exercise of stock options to purchase common stock granted to our directors, officers and employees under our current and future stock-based compensation plans, including our 2023 Stock Plan.

 

We are selling a substantial number of shares of our common stock in this offering, which could cause the price of our common stock to decline.

 

In this offering, we will sell up to [   ] shares of Class A common stock (assuming no exercise by the underwriters of their over-allotment option). The existence of the potential additional shares of our common stock in the public market, or the perception that such additional shares may be in the market, could adversely affect the price of our common stock. We cannot predict the effect, if any, that market sales of those shares of common stock or the availability of those shares of common stock for sale will have on the market price of our common stock.

 

We have broad discretion in how we use the proceeds of this offering and may not use these proceeds effectively, which could affect our results of operations and cause our stock price to decline.

 

We will have considerable discretion in the application of the net proceeds of this offering. Because of the number and variability of factors that will determine our use of the net proceeds, their ultimate use may vary substantially from their currently intended use. Management might not apply our net proceeds in ways that ultimately increase the value of your investment. While we expect to use the net proceeds from this offering as set forth in “Use of Proceeds,” we are not obligated to do so. As a result, investors will be relying upon management’s judgment with only limited information about our specific intentions for the use of the balance of the net proceeds of this offering. We may use the net proceeds for purposes that do not yield a significant return or any return at all for our stockholders. In addition, pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

 

We do not anticipate paying any cash dividends on our common stock in the foreseeable future.

 

We currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to fund the development and growth of our business. We do not intend to pay any dividends to holders of our common stock in the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our Board taking into account various factors, including our business, operating results and financial condition, current and anticipated cash needs, plans for expansion, any legal or contractual limitations on our ability to pay dividends under our loan agreements or otherwise. As a result, if our Board does not declare and pay dividends, the capital appreciation in the price of our common stock, if any, will be your only source of gain on an investment in shares of our common stock, and you may have to sell some or all of your common stock to generate cash flow from your investment.

  

If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock, its trading price and volume could decline.

 

We expect the trading market for our common stock to be influenced by the research and reports that industry or securities analysts publish about us, our business or our industry. As a new public company, we do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our stock may be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline and our common stock to be less liquid. Moreover, if one or more of the analysts who cover us downgrades our stock or publishes inaccurate or unfavorable research about our business, or if our results of operations do not meet their expectations, our stock price could decline.

 

We are an “emerging growth company” and our compliance with the reduced reporting and disclosure requirements applicable to “emerging growth companies” may make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the JOBS Act, and we have elected to take advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” These provisions include, but are not limited to: being permitted to have only two years of audited financial statements and only two years of related selected financial data and management’s discussion and analysis of financial condition, and results of operations disclosures; being exempt from compliance with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act; being exempt from any rules that could be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements; being subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and not being required to hold nonbinding advisory votes on executive compensation or on any golden parachute payments not previously approved.

 

In addition, while we are an “emerging growth company,” we will not be required to comply with any new financial accounting standard until such standard is generally applicable to private companies. As a result, our financial statements may not be comparable to companies that are not “emerging growth companies” or elect not to avail themselves of this provision.

 

We may remain an “emerging growth company” until as late as the fiscal year-end following the fifth anniversary of the completion of this public offering, though we may cease to be an “emerging growth company” earlier under certain circumstances, including if (i) we have more than $1.235 billion in annual revenue in any fiscal year, (ii) we become a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates as of the end of the second quarter of that fiscal year or (iii) we issue more than $1.0 billion of non-convertible debt over a three-year period.

 

The exact implications of the JOBS Act are still subject to interpretations and guidance by the SEC and other regulatory agencies, and we cannot assure you that we will be able to take advantage of all of the benefits of the JOBS Act. In addition, investors may find our common stock less attractive to the extent we rely on the exemptions and relief granted by the JOBS Act. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may decline or become more volatile.

 

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members.

 

As a result of this offering, we will become subject to the reporting requirements of the Exchange Act, as amended, the Sarbanes-Oxley Act, the Dodd-Frank Act, and other applicable securities rules and regulations. Compliance with these rules and regulations involves significant legal and financial compliance costs, may make some activities more difficult, time-consuming or costly and may increase demand for our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. To maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. We may need to hire more employees in the future or engage outside consultants, which will increase our costs and expenses.

 

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business may be adversely affected.

 

We may be subject to additional regulatory burdens resulting from our public listing.

 

We are working with our legal, accounting and financial advisors to identify those areas in which changes should be made to our financial management control systems to manage our obligations as a public company listed on NYSE American. These areas include corporate governance, corporate controls, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas, including our internal controls over financial reporting. However, we cannot assure holders of our common stock that these and other measures that we might take will be sufficient to allow us to satisfy our obligations as a public company listed on NYSE American on a timely basis. In addition, compliance with reporting and other requirements applicable to public companies listed on NYSE American will create additional costs for us and will require the time and attention of management. We cannot predict the amount of additional costs that we might incur, the timing of such costs or the impact that management’s attention to these matters will have on our business.

 

We have identified two material weaknesses in our internal control over financial reporting. If we do not adequately remediate the material weaknesses, or if we experience additional material weaknesses in the future or otherwise fail to maintain effective internal controls, we may be unable to accurately or timely report our results of operations or prevent fraud, and investor confidence and the market price of our Class A common stock may be materially and adversely affected.

 

Our management has not completed an assessment of the effectiveness of our internal controls over financial reporting, and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. In the course of preparing our consolidated financial statements, we identified two material weaknesses in our internal control over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses that have been identified are (i) a lack of internal control to verify that reports generated across various accounting modules had been reconciled to trial balances for the purpose of financial reporting; and (ii) a lack of internal control to ensure that work in process and build assemblies were included in the inventory reserve analysis at financial reporting dates.

 

 

We intend to implement measures designed to improve our internal control over financial reporting to address the underlying causes of these issues, including hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework. However, the implementation of these measures may not fully address the weaknesses, and we cannot conclude that they have been fully remediated. Our failure to remediate these weaknesses or our failure to discover and address any other material weaknesses could result in inaccuracies in our consolidated financial statements and impair our ability to comply with applicable financial reporting requirements and related regulatory requirements. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control for purposes of identifying and reporting material weaknesses. Had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional material weaknesses may have been identified. Our failure to implement and maintain effective internal controls over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, which may result in volatility in and a decline in the market price of our Class A ordinary shares.

 

Upon completion of this offering, we will become a public company in the U.S. subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 will require that we include a report of management on our internal control over financial reporting in our annual report on 10-K. In addition, once we cease to be an “emerging growth company,” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified, if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated, or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational, and financial resources and systems for the foreseeable future. We may be unable to complete our evaluation testing and any required remediation in a timely manner.

 

If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

 

Following this offering, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the applicable listing standards of NYSE American. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on our personnel, systems, and resources.

 

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend significant resources, including accounting-related costs, and significant management oversight.

 

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on NYSE American. We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting as part of our second annual report on Form 10-K.

 

 

Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such times, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed, or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could materially and adversely affect our business, financial condition, and results of operations and could cause a decline in the trading price of our common stock.

 

Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management or hinder efforts to acquire a controlling interest in us, and the market price of our common stock may be lower as a result.

 

There are provisions in our certificate of incorporation and bylaws that may make it difficult for a third party to acquire, or attempt to acquire, control of our company, even if a change in control was considered favorable by our stockholders. Such provisions include:

 

●

our certificate of incorporation and amended and restated bylaws authorizes only our board of directors to fill vacant directorships, including newly created seats, and the number of directors constituting our board of directors will be permitted to be set only by a resolution adopted by a majority vote of our entire board of directors;

 

●

a prohibition on stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

 

●

a special meeting of our stockholders may only be called by the chairperson of our board of directors, our Chief Executive Officer, or a majority of our board of directors;

 

●

our certificate of incorporation does not provide for cumulative voting;

 

●

certain litigation against us can only be brought in Delaware; and

 

●

advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.

 

In addition, as a Delaware corporation, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibit a person who owns 15% or more of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. Any provision in our certificate of incorporation or our bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

 

Our certificate of incorporation includes an exclusive forum clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

 

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any complaint asserting any internal corporate claims, including claims in the right of the Company that are based upon a violation of a duty by a current or former director, officer, employee or stockholder in such capacity, or as to which the Delaware General Corporation Law confers jurisdiction upon the Court of Chancery. In addition, our certificate of incorporation provides that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. This forum selection provision will not apply to claims brought to enforce a duty or liability created by the Exchange Act.

 

This choice of forum provision may limit a stockholder’s ability to bring a claim in other judicial forums for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees in jurisdictions other than Delaware, or federal courts, in the case of claims arising under the Securities Act. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have a material adverse effect on our business, financial condition or results of operations.

 

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing provisions. The exclusive forum clause may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. See the section entitled “Description of Capital Stock— Choice of Forum for Certain Lawsuits.”

 

Investors may face greater difficulty enforcing judgments against certain of our directors and officers because they reside outside the United States.

 

Among our five directors, three reside in Canada and one resides in People’s Republic of China. In addition, both our Chief Executive Officer and Chief Financial Officer reside in Canada. As a result, investors may not be able to effect service of process within the United States upon these persons or enforce against them in U.S. courts, judgments predicated on U.S. securities laws. Likewise, it may also be difficult for an investor to enforce in U.S. courts, judgments obtained against these persons in courts located in jurisdictions outside of the United States.

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” All statements other than statements of historical facts contained in this prospectus may be forward-looking statements. These forward-looking statements can generally be identified using forward-looking terminology, including the terms “believes,” “estimates,” “continues,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will,” “would” or “should” or, in each case, their negative or other variations or comparable terminology. Such statements are not guarantees of future performance and involve several assumptions, risks and uncertainties that could cause actual results to differ materially from expected results. They appear in several places throughout this prospectus, and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies, future acquisitions and the industry in which we operate.

 

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the “Risk Factors” section of this prospectus, which include, but are not limited to, risks related to the following:

 

●

The development of our products and services will require significant capital resources;

 

●

Limited operating history on which to judge our business prospects and management;

 

●

Our ability to gain market acceptance of our products and services;

 

●

Our ability to protect our intellectual property and to develop, maintain and enhance a strong brand;

 

●

Our ability to compete and succeed in a highly competitive and evolving industry;

 

●

Our industry’s ability to manage the threat of security breaches and data theft on connected devices;

 

●

Our reliance on third parties to produce key product components and provide industry and technology solutions;

 

●

Our ability to raise capital and the availability of future financing;

 

●

The impact of sustained adverse market events, such as increased tariffs, on our and our customers’ business operation;

 

●

Our ability to manage our research, development, expansion, growth and operating expenses;

 

●

The failure of an active public market for our common stock to develop;

 

●

Volatility in the price of our common stock;

 

●

Future sales of our common stock, or the perception in public markets that these sales may occur;

 

●

The fact that we have no expectations of paying any cash dividends for the foreseeable future;

 

●

Securities or industry analysts do not publish research or publish inaccurate or unfavorable research about us or our business;

 

●

Other risks, uncertainties and factors set forth in this prospectus, including those set forth under “Risk Factors,” Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.”

 

These factors should not be construed as exhaustive and should be read with the other cautionary statements in this prospectus.

 

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this prospectus. The matters summarized under “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this prospectus could cause our actual results to differ significantly from those contained in our forward-looking statements. In addition, even if our results of operations, financial condition and liquidity, and industry developments are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods.

 

Considering these risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this prospectus speaks only as of the date of such a statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments, except as required by applicable law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.

 

 

USE OF PROCEEDS

 

Assuming a public offering price of $[   ] per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, we estimate that the net proceeds to us from the sale of our common stock in this offering will be $[   ] (or $[   ] if the underwriters exercise their over-allotment option in full), after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.

 

Each $1.00 increase (decrease) in the assumed public offering price would increase (decrease) the net proceeds to us from this offering by approximately $[   ] (or $[   ] if the underwriters exercise their over-allotment option in full), assuming the number of shares we sell, as set forth on the cover page of this prospectus, remains the same, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.

 

The principal purposes of this offering are to increase our capitalization and financial flexibility, list our common stock on NYSE American and facilitate our future access to the capital markets. We intend to use the net proceeds from this offering for working capital and other general corporate purposes, including potential increases in our staffing, marketing and inventory and expenditures related to research and development, as follows: 

 

●

approximately $[   ] for increases in marketing;

 

●

approximately $[   ] for increase in inventory;

 

●

approximately $[   ] for increases in our staffing;

 

	●	approximately $[   ] for expenditures related to research and development;
	●	approximately $[   ] for repayment of loans;

 

●

approximately $[   ] for expenditures related to expand and enhance our global strategic partnerships; and

 

●

approximately $[   ] for working capital reserves.

 

We do not currently have a specific plan for a significant portion of the remaining net proceeds. As of the date of this prospectus, we cannot specify with certainty all of the particular uses of the net proceeds that we receive from this offering and, as a result, are not able to allocate the net proceeds among any potential uses at this time in light of the variety of factors that will impact how we ultimately utilize such net proceeds. Accordingly, we will have broad discretion in using these proceeds. See “Risk Factors—Risks Related to this Offering and Ownership of Our Common Stock—We have broad discretion in how we use the proceeds of this offering and may not use these proceeds effectively, which could affect our results of operations and cause our stock price to decline.” We may also use a portion of the net proceeds of this offering for the potential future acquisitions of, or investments in, technologies or businesses that complement our business, although we have no present commitments or agreements to enter into any such acquisitions or make any such investments.

 

The timing and amount of our actual expenditure will be based on many factors, including cash flows from operations and the anticipated growth of our business. Pending their use, we intend to invest the net proceeds of this offering in a variety of capital-preservation investments, including short- and intermediate-term, interest-bearing, investment-grade securities.

 

 

MARKET FOR OUR COMMON STOCK AND RELATED MATTERS

 

Our common stock is presently quoted on the OTCQX under the symbol “DCSX,” the CSE under the symbol “DCSI,” and the Frankfurt Stock Exchange under the symbol “7QU0.” We have applied to have our common stock listed on NYSE American under the symbol “DCSX”. No assurance can be given that our application will be approved. If our application is not approved, we will not complete this offering.

 

As of the date of this prospectus, there were 118 holders of record of our common stock.

 

 

DIVIDEND POLICY

 

Since our inception, we have not paid any dividends on our common stock, and we currently expect that, for the foreseeable future, all earnings, if any, will be retained for use in the development and operation of our business. In the future, our Board may decide, at its discretion, whether dividends may be declared and paid to holders of our common stock.

 

 

CAPITALIZATION

 

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2025:

 

●

on an actual basis; and

 

●

on an as adjusted basis, giving effect to (i) the sale and issuance by us of [     ] shares of Class A common stock in this offering, based upon an initial public offering price of $[     ] per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us and (ii) the conversion of $[    ] outstanding under a convertible note into [    ] shares of common stock.

 

This table should be read in conjunction with, and is qualified in its entirety by reference to, “Summary Historical Consolidated Financial Data,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.

 

		As of September 30, 2025
		Actual				As Adjusted(1)
Cash		$	487,401
Current debt			7,046,620
Credit facility			290,413
Long-term debt			487,719
Stockholders’ equity (deficit):
Common stock, with a par value of $0.00001; 5,714,286 shares authorized; 2,305,079 and [     ] shares issued and outstanding at December 31, 2024 and as adjusted, respectively			61
Additional paid in capital			9,110,556
Accumulated other comprehensive (loss) income			-
Accumulated deficit			(17,694,883	)
Total stockholders’ equity (deficit)			(8,584,266	)
Total Capitalization		$	(759,514	)

 

Each $1.00 increase (decrease) in the assumed public offering price of $[   ] per share would increase (decrease) the as adjusted amount of each of cash and cash equivalents, working capital, total assets and total stockholders’ equity by approximately $[   ], assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 100,000 shares in the number of shares offered by us at the assumed public offering price of $[   ] per share would increase (decrease) the as adjusted amount of each of cash and cash equivalents, working capital, total assets and total stockholders’ equity by approximately $[   ].

 

(1)	Unless we indicate otherwise, all information in this section entitled “Capitalization”:

 

	●	assumes no exercise by the underwriters of their over-allotment option;
	●	assumes no exercise of the warrants to be issued to the representatives of the underwriters in this offering;
	●	excludes [     ] shares of Class A common stock issuable upon the exercise of outstanding options at a weighted exercise price of $[     ] per share;
	●	excludes [     ] shares of Class A common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $[     ] per share;
	●	excludes [     ] shares of Class A common stock issuable upon the exercise of convertible debentures, assuming an offering price of [     ] per share, the midpoint of the price range on the cover of this prospectus; and
	●	excludes [     ] shares of Class A common stock reserved for future issuance under our 2023 Stock Plan, as well as any automatic increases in the shares of common stock reserved for future issuance under the 2023 Stock Plan.

 

 

DILUTION

 

If you invest in shares of our Class A common stock in this offering, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the as adjusted net tangible book value per share of our common stock immediately after the closing of this offering.

 

Our historic net tangible book value of our common stock as of September 30, 2025 was approximately $[   ], or $[   ] per share, based on the number of shares of our common stock outstanding as of September 30, 2025. Historic net tangible book value per share represents our total tangible assets less our total liabilities, divided by the number of outstanding shares of common stock.

 

After giving effect to (i) the receipt of the net proceeds from our sale of [   ] shares of common stock in this offering at an assumed public offering price of $[   ] per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting underwriting discount and estimated offering expenses payable by us, and (iii) the conversion of $[   ] outstanding under convertible debentures into [   ] shares of our common stock, our as adjusted net tangible book value as of September 30, 2025, would have been [   ], or $[   ] per share. This represents an immediate increase in as adjusted net tangible book value of [   ] per share to our existing stockholders and an immediate dilution of $[   ] per share to investors purchasing securities in this offering.

 

We calculate dilution per share to new investors by subtracting the historic net tangible book value per share from the public offering price per share paid by the new investor. The following table illustrates the dilution to new investors on a per share basis:

 

Assumed public offering price						$
Historic net tangible book value per share as of September 30, 2025		$		)
Increase in net tangible book value per share attributable to new investors in this offering		$
As adjusted net tangible book value per share after this offering						$
Dilution in net tangible book value per share to new investors in this offering						$

 

If the underwriters’ option to purchase additional shares to cover over-allotments is exercised in full, the as adjusted net tangible book value per share after giving effect to this offering would be $[   ] per share, representing an immediate increase to existing stockholders in net tangible book value from historical net tangible book value of $[   ] per share, and immediate dilution to new investors in this offering of $[   ] per share.

 

Each $1.00 increase or decrease in the public offering price, would increase or decrease, as applicable, our as adjusted net tangible book value per share by $[   ] per share, and would increase or decrease, as applicable, dilution per share to new investors in this offering by $[   ] per share, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of 100,000 in the number of shares of common stock offered by us would increase or decrease, as applicable, our as adjusted net tangible book value per share by approximately $[   ] per share and increase or decrease, as applicable, the dilution to new investors by $[   ] per share, assuming the public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

 

The following table summarizes, on an as adjusted basis as of September 30, 2025, the differences between the number of shares of common stock purchased from us, the total cash consideration and the average price per share paid to us by existing stockholders and by new investors purchasing shares in this offering at the assumed initial public offering price of $[   ] per share, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. As the table shows, new investors purchasing shares of common stock in this offering will pay an average price per share substantially higher than our existing investors paid.

 

Shares Purchased

Total Consideration

Average Price Per

Number

Percent

Amount

Percent

Share

Existing stockholders

New investors participating in this offering

 

If the underwriters exercise their option to purchase additional shares in full, the number of shares of common stock held by existing stockholders will be reduced to [   ]% of the total number of shares of common stock to be outstanding after this offering, and the number of shares of common stock held by investors participating in this offering will be further increased to [   ]% of the number of shares to be outstanding after this offering.

 

The tables and calculations above are based on [   ] shares of our common stock outstanding as of September 30, 2025 on an actual basis and exclude:

 

	●	assumes no exercise by the underwriters of their over-allotment option;
	●	assumes no exercise of the warrants to be issued to the representatives of the underwriters in this offering;
	●	excludes [     ] shares of Class A common stock issuable upon the exercise of outstanding options at a weighted exercise price of $[     ] per share;
	●	excludes [     ] shares of Class A common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $[     ] per share;
	●	excludes [     ] shares of Class A common stock issuable upon the exercise of convertible debentures, assuming an offering price of [     ] per share, the midpoint of the price range on the cover of this prospectus; and
	●	excludes [     ] shares of Class A common stock reserved for future issuance under our 2023 Stock Plan, as well as any automatic increases in the shares of common stock reserved for future issuance under the 2023 Stock Plan.

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our results of operations and financial condition should be read together with “Summary Historical Consolidated Financial” and the financial statements and related notes included elsewhere in this prospectus. Such discussion and analysis reflects our historical results of operations and financial position and does not give effect to the completion of this offering. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this prospectus

 

Overview

 

We are a provider of Internet of Things (IoT) products, services and solutions. We deliver enhanced one-stop solutions that connect assets to increase visibility, operational efficiency, and profitability. We provide our solutions and services to a variety of industries including Asset Location Management, Supply Chain Logistics and Transportation. We are a chosen global partner of service providers, value-added collaborators, system integrators, and enterprises due to our commitment to quality and demonstrated experience. Our customers include technology distributors, cellular network operators, fleet service providers and any business that needs to monitor or draw data from their machine-based assets. We serve our clients by simplifying IoT Technologies, making them less costly, easier to deploy and overall, more efficient. We intend to continue expanding our long-standing relationships and work strategically with our partners, to jointly build leading IoT solutions based on integrated hardware, cloud-based software, and other services.

 

Our current SaaS solutions include MiFleet™, which provides fleet and vehicle SaaS telematics, MiSensors™, which provides machine-to-machine device management and service enablement for wireless sensors, and MiFailover™, which provides high-speed wireless internet failover to small and medium-sized businesses as a redundancy solution to continue to run their business in the event the internet is not available. In addition, we have deployed MiConnectivity to provide wireless data connectivity for global connectivity through our fully integrated SIM management platform and MiServices™ to provide managed services solution that includes all-inclusive device readiness program and engineering support. These services include software development, hardware integration and logistics support from SIM to shipment, including device preparation, custom labeling, packaging, configuration confirmation, and system-side checks.

 

We were incorporated in 2006 and have traditionally been a distributor of IoT components and a system integrator that assisted clients in installing such components into their installed systems and applications. We have focused on providing hardware items and solutions that have aided in data collection, analysis and management. Since 2021 we have been transitioning from a value-add hardware reseller to a SaaS-based, recurring revenue, customized solutions provider, offering turnkey IoT solutions for new and existing customers. SaaS and other services revenue accounted for approximately 35.2% and 26.5% of our total revenue for the year ending December 31, 2024 and the nine months ending September 30, 2025, respectively.

 

The global costs and prices of IoT sensors and products continue to drop in price and margin. As a response to this, and an interest to develop more vertically integrated, comprehensive solutions, we began to develop software applications and databases that can analyze and manage the data that its IoT hardware has traditionally just collected. We believe that this will provide us with the opportunity to increase our gross and net profit margins by providing more services and software – through the cloud and/or via a SaaS business model. Currently, we focus on three primary business units for generating growth in our revenue streams.

 

Smart Hardware Provider. We utilize smart hardware from an expanding group of suppliers to deploy through our strategic agreements with channel partners including Verizon, U.S. Cellular, Synnex and Hyperion Partners as the basis to develop our own end-to-end SaaS based intelligent business solutions.

 

SaaS Software Solutions Provider. Our products and services then enable devices to communicate with each other and with servers or cloud-based application infrastructures. These software applications address and solve real-world data collection and monitoring problems to best serve our customers and manage their evolving business requirements.

 

Industry Technology Innovation. We have sold to customers within various smart hardware-related vertical markets that are tied to the broad IoT market. These areas have included markets such as fleet management, healthcare, retail point-of-sale, industrial, energy and utilities and safety and security. As we apply our competencies, we can now address a broadening spectrum of software application markets.

 

We are continuing to evolve from our smart hardware distribution base of mobile broadband hardware to providing end-to-end solutions for mobile internet, and vertical markets. We serve our clients by simplifying IoT technologies, making them less costly, easier to deploy and overall, more efficient. We intend to continue to leverage our long-standing relationships with strategic partners and jointly build differentiated IoT solutions based on integrated third-party equipment along with our application software. We believe this mixed hardware and software implementation will allow us to build new, more robust, solutions that address multiple customer problems operating on a single company platform.

 

 

Outlook

 

We continue to expand the industries we serve which now include property management, restaurants, healthcare, cold chain management, retail, offices, fleet management, public safety, and construction.

 

Large cellular network providers have transitioned to 5G wireless technologies and we believe our relationships with the cellular network providers along with our customizable IoT product and service offerings, will provide us with significant sales opportunities. Our relationships throughout the IoT ecosystem are key to success.

 

Key Business Metrics

 

The following table shows a summary of our key business metrics as of the periods presented:

 

		December 31, 2024				September 30, 2025
Annual recurring revenue (“ARR”)		$	2,792,541			$	2,982,533

 

ARR

 

We believe that ARR is a key indicator of the trajectory of our business performance, enables measurement of the progress of our business initiatives, and serves as an indicator of future growth. We define ARR as the annualized value of subscription contracts that have commenced revenue recognition as of the measurement date. ARR highlights trends that may be less visible from the face of our financial statements due to ratable revenue recognition. ARR does not have a standardized meaning and is not necessarily comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and is not intended to be combined with or to replace it. ARR is not a forecast and the active contracts at the date used in calculating ARR may or may not be extended or renewed.

 

Results of Operations for the Year Ended December 31, 2024

 

Revenues for the year ended December 31, 2024 were $6,408,150 compared to $13,027,675 for the year ended December 31, 2023. The 51% decrease was primarily due to a decrease in product revenue from $10,500,565 in 2023 to $3,492,622 in 2024, as a result of the restructuring of the Company’s sales strategy to prioritize high-margin recurring SaaS revenue over lower-margin, one-time hardware sales, which was partially offset by an increase in solutions and other services revenue from $2,527,110 in 2023 to $2,915,528 in 2024.

 

Cost of revenues for the year ended December 31, 2024 were $4,239,467 compared to $8,598,869 for the year ended December 31, 2023, as a result of the restructuring of the Company’s sales strategy to prioritize high-margin recurring SaaS revenue over lower-margin, one-time hardware sales.

 

The Company went through and aggressively reworked the pricing models to achieve healthier margins. The Company also expanded the portfolio of product offerings, which permitted higher margin sales.

 

General and administrative expenses for the year ended December 31, 2024 were $4,512,076 compared to $8,657,068 for the year ended December 31, 2023. The decrease was primarily due to (i) a decrease in professional services fees from $3,072,330 in 2023 to $1,041,901 in 2024, as the Company ceased its previous IPO process in the fourth quarter of 2023, and (ii) a decrease in compensation and benefits from $3,468,826 in 2023 to $2,509,091 in 2024, as a result of the Company’s restructuring process and the Company’s decision to preserve working capital for operations.

 

Research and development expenses for the year ended December 31, 2024 were $258,561 compared to $515,691 for the year ended December 31, 2023. The decrease was a result of reduced testing for new hardware devices and fewer resources allocated to R&D.

 

Interest expense and accretion for the year ended December 31, 2024 were $1,029,725 compared to $493,077 for the year ended December 31, 2023. The increase was primarily due to the interest expense of additional loans, promissory notes, and convertible debentures that were obtained for financing in 2024.

 

Gain on debt extinguishment for the year ended December 31, 2024 was $2,914,776 compared to nil for the year ended December 31, 2023. The Company entered into an agreement with a vendor to restructure the payables into a long-term loan with a principal of $3,200,000, bearing interest at 10%. As a result, the balance of $2,914,776 of the payables owed to this vendor was forgiven.

 

Net changes in fair value of derivatives for the year ended December 31, 2024 was due to an increase in liability for $1,349,769 compared to a decrease in liability for $359,062 for year ended December 31, 2023. The increase in liability was primarily due to the promissory notes and convertible debentures the Company entered into in 2024.

 

Net loss for the year ended December 31, 2024 was $1,742,951 compared to $5,182,196 for the year ended December 31, 2023. The decrease was primarily the result of cost-cutting initiatives and preservation of work capital for operations.

 

 

 

Results of Operations for the Nine Months Ended September 30, 2025

 

Revenues for the nine months ended September 30, 2025 were $7,204,034 compared to $4,890,399 for the nine months ended September 30, 2024. The 47% increase was primarily due to an increase in product revenue from $3,719,152 for the nine months ended September 30, 2024 to $4,875,852 for the nine months ended September 30, 2025, driven by higher demand for as customers cleared their overstocked inventories. Revenue from solutions and other services also contributed to the growth, increasing by 7% from $1,171,247 in the same period as last year to $2,328,182.

 

Cost of revenues for the nine months ended September 30, 2025 were $4,602,323 compared to $3,064,248 for the nine months ended September 30, 2024.

 

The Company’s gross margin for the nine months ended September 30, 2025 was consistent with the prior year period.

 

General and administrative expenses for the nine months ended September 30, 2025 were $3,375,824 compared to $3,012,913 for the nine months ended September 30, 2024. The increase was primarily due to (i) an increase in compensation and benefits from $1,841,700 in nine months ended September 30, 2024 to $2,244,588 in the same period in 2025, as a result of the vesting of stock options granted in the prior period, and (ii) a bad debt expense of $49,863 compared to a bad debt recovery of $139,189 in the same period as last year. These increases were partially offset by decreases in professional fees and advertising and marketing expenses due to no major campaigns, and other expenses including bank fees and information technology. There were no significant changes in other components of general and administrative expenses.

 

Research and development expenses for the nine months ended September 30, 2025 were $72,386 compared to $214,757 for the nine months ended September 30, 2024. The decrease was due to less R&D activities planned during the period.

 

Interest expense and accretion for the nine months ended September 30, 2025 were $1,697,644 compared to $635,028 for the nine months ended September 30, 2024. The increase was primarily due to the interest expense of the additional loans, promissory notes, and convertible debentures that were obtained for financing during the end of last year as well as the new additional loans and promissory notes that were obtained in the current period.

 

Gain on debt extinguishment for the nine months ended September 30, 2025 was nil compared to $2,914,776 for the nine months ended September 30, 2024. The Company entered into an agreement with a vendor in September 2024 to restructure the payables into a long-term loan with a principal of $3,200,000, bearing interest at 10%. As a result, the balance of $2,914,776 of the payables owed to this vendor was forgiven.

 

Net changes in fair value of derivatives was a gain of $1,555,845 for the nine months ended September 30, 2025, compared to a loss of $29,962 in the same period as las year. This favorable change was primarily driven by a decline in the Company’s stock price, which reduced the fair value of derivative liabilities.

 

The Company reported a net loss of $979,298 for the nine months ended September 30, 2025, compared to net income of $857,267 for the nine months ended September 30, 2024. The swing to a loss was primarily the result of a gain on debt extinguishment recorded in 2024 that did not recur in 2025, combined with an increase in interest expense in the current period. These factors were partially offset by an improvement in operating performance as the loss from operations narrowed to $846,499 in 2025 from $1,401,519 in 2024, driven by higher gross profit. The loss was further offset by a favorable change in the fair value of derivatives in 2025.

 

Liquidity and Capital Resources

 

 We define capital as consisting of issued share capital, reserves and accumulated deficit. We expect to fund our operating costs over the next twelve months from expanding sales of our current products and solutions that support our growth and raising additional capital as necessary. Our continuing operations and financial viability are dependent upon the extent to which we can successfully raise the capital to implement our future plans and ultimately on generating sufficient revenue to attain profitable operations. As of December 31, 2024 and September 30, 2025, we had a working capital deficiency of $5,286,995 and $8,323,370, respectively. We were not subject to any externally imposed capital requirements or debt covenants.

 

In January 2020, we entered into a two-year agreement with TAB Bank (“TAB”) for a $2,500,000 credit facility. On September 30, 2025, the outstanding balance on the credit facility was $290,413. The agreement is extended automatically for a successive one-year term, with the current expiry date being January 23, 2026. Interest is payable monthly at a rate the greater of (a) 90-Day SOFR rate plus 4.50% and (b) 6.41%. Under the TAB Bank credit facility, we are obligated to assign all our accounts receivables, and we may request advances up to 90% of domestic accounts less than 90 days from the invoice date and not subject to offset up to $2,000,000. In addition, there is an administration fee equal to 0.008% per diem of the outstanding daily obligations. Alternatively, we may borrow an amount limited to the lesser of: (a) 50% of the cost of eligible inventory, (b) 50% of funds employed and, (c) $500,000 (the “Inventory Advance”). In addition, there is an administration fee equal to 0.01% per diem of the outstanding daily obligations.

 

 

On June 7, 2024, as the result of a vendor changing its terms with us from billing devices and device management subscriptions from a payment term of 36 months down to 30 days reducing the frequency of occurrence for long term payables, we entered into an agreement with the vendor to restructure the payables into a long-term loan with a principal of $3,200,000, bearing interest at 10%. The interest is due quarterly, and the principal will be due on June 7, 2029. As of September 30, 2025, we recorded $400,264 accrued interest and finance fee and a carrying balance of $3,600,265 of the loan was outstanding. During the nine months ended September 30, 2025, we paid $50,000 interest expenses but has fallen behind on interest payments. Although the lender has not yet issued a formal demand letter or declared a default as of the date of this prospectus, this breach of the loan agreement entitles the lender to demand immediate repayment of the full loan balance.

 

During the year ended December 31, 2023, we entered into two loan agreements and pledged $110,532 of inventory as collateral. We entered into two additional loan agreements during the year ended December 31, 2024, and pledged an additional $234,312 of inventory as collateral. During the year ended December 31, 2024, we recorded $122,044 (2023- $7,157) of interest expense and finance charges in the consolidated statement of loss and comprehensive loss in connection to the four loan agreements. During the nine months ended September 30, 2025, one loan matured and was repaid. Upon the maturity and repayment of this loan, we incurred a penalty of $242,568 for breaching the terms of the loan agreement. As of September 30, 2025, $209,326 of this penalty has been paid, and the remaining balance of $33,241 is included in accrued liabilities. The outstanding loans have the following terms as of September 30, 2025. During the nine months ended September 30, 2025, we recorded $26,222 of interest expense in connection with the three loan agreements. As of September 30, 2025, a carrying balance of $92,537 (December 31, 2024 - $160,233) relating to the loans was outstanding.

 

		Loan 1				Loan 2				Loan 3
Expected term (months)			60				36				24
Interest rate			6.77	%			19.02	%			16	%
Payable within 12 months		$	11,866			$	14,956			$	40,042
Payable not due in 12 months		$	25,673				-				-

 

In April 2024, we entered into a promissory note agreement of $100,000, bearing interest at 19% per annum (accruing semi - annually and payable every six months), and maturing on April 15, 2026, or a period of 24 months. As additional consideration, we issued 10,000 purchase warrants on September 11, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.00 per share for a period of 24 months from the date of issuance.

 

In May 2024, we entered into a loan agreement with a third party for proceeds of $250,000. The loan is repayable in 24 monthly payments starting May 2024, bearing interest at 22.2%, and is secured by a general security agreement on our assets. In May 2024, we also entered into a promissory note of $100,000, bearing interest at 19% per annum (accruing annually and payable at maturity date), and maturing on May 24, 2026, or a period of 24 months. As additional consideration, we issued 10,000 purchase warrants on September 11, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.00 per share for a period of 24 months from the date of issuance.

 

In June 2024, we entered into a promissory note of $100,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on June 28, 2026, or a period of 24 months. As additional consideration, we issued 20,000 purchase warrants on September 11, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.00 per share for a period of 24 months from the date of issuance.

 

In July 2024, we entered into a promissory note of $50,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on July 8, 2026, or a period of 24 months. As additional consideration, we issued 10,000 purchase warrants on September 11, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.00 per share for a period of 24 months from the date of issuance.

 

In August 2024, we entered into (i) two loan agreements with third parties for proceeds of $174,221 and $200,000, which have been repaid; (ii) a promissory note of $250,000, bearing interest at 19% per annum (accruing semi-annually and payable every six months), and maturing on August 24, 2026, or a period of 24 months; and (iii) another promissory note of $75,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on August 31, 2026, or a period of 24 months. As additional consideration for the promissory note maturing on August 24, 2026, we issued 50,000 purchase warrants on October 16, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $3.09 per share for a period of 24 months from the date of issuance. As additional consideration for the promissory note maturing on August 31, 2026, we issued 15,000 purchase warrants on October 9, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $3.14 per share for a period of 24 months from the date of issuance.

 

 

In September 2024, we issued replacement convertible promissory debentures totaling $1,741,589, bearing interest at 15% per annum (accruing annually and payable at maturity), and maturing on September 14, 2025 (which has subsequently been extended to October 10, 2026), or a period of 12 months to settle indebtedness related to the convertible debentures issued in 2022. The debentures are not prepayable by us unless approved by the holders of a majority in principal amount of the debentures. Under the debentures, we have agreed to customary covenants, including regarding payment of principal and interest, continuing lawful conduct of business, payment of taxes, compliance with laws, limitation on distribution or declaration of dividends to shareholders, limitations on liens and encumbrances. Upon a default, all principal and interest due or accruing shall become immediately due and payable. Events of default include failure to make payments of principal or interest that remains uncured for 30 business days after notice by holder, failure to observe or perform any covenant or agreement that remains uncured for 30 business days after notice by holder, any order or petition for winding up, any assignment or bulk sale of assets, or petition for bankruptcy filed or presented against us, any bankruptcy or insolvency proceeding being commenced against us, we cease or threaten to cease our business, or any appointment of a receiver or receiver manager. The debentures are non-negotiable and non-transferable. The debentures are convertible, at the option of the holder, into our common stock at a price of $6 per share. In connection with the issuance of the debentures, on October 10, 2024, we issued 196,582 share purchase warrants as additional compensation. Each warrant entitles the holder to purchase one common stock at a price of CAD $3.20  per share for a period of 24 months from the date of issuance of the warrants.

 

As of December 31, 2024, we had outstanding warrants as follows:

 

Date of Expiry		Number of Warrants Outstanding				Exercise Price				Weighted Average Remaining Life (years)
September 11, 2026			50,000			CAD $	2.00				1.70
October 9, 2026			15,000			CAD $	3.14				1.77
October 10, 2026			196,582			CAD $	3.20				1.78
October 16, 2026			50,000			CAD $	3.09				1.79

 

In November 2024, we entered into (i) a promissory note of $100,000, bearing interest at 19% per annum (accruing semi-annually and payable every 6 months), and maturing on November 22, 2026, or a period of 24-months; and (ii) a promissory note of $50,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on November 27, 2026, or a period of 24-months. As additional consideration, we issued 20,000 purchase warrants on January 10, 2025. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

In December 2024, we entered into (i) a promissory note with an aggregated total of $200,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on December 10, 2026, or a period of 24-months; and (ii) a promissory note of $50,000, bearing interest at 19% per annum (accruing annually and payable annually), and maturing on December 26, 2026, or a period of 24-months. As additional consideration, we issued 45,000 purchase warrants on January 10, 2025. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

In January 2025, we entered into a promissory note of $50,000, bearing interest at 15% per annum (accruing annually and payable on maturity date), and maturing on January 10, 2027, or a period of 24-months. As additional consideration, we issued 10,000 purchase warrants on January 10, 2025. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

In March 2025, we entered into two loan agreements with third parties for proceeds of $284,500 and $175,000. The loans are repayable in 35 and 65 weekly payments, respectively, starting April 2025, bearing an Estimated Annual Percentage Rate at 84.26% and 43.31%, respectively, and are secured by a general security agreement on our assets. As of September 30, 2025, we were not in compliance with the covenant of both loan agreements that prohibits entering additional financing arrangements without the lenders’ consent and were also in arrears on interest payments for the loan with proceeds of $284,500. While the lenders have not yet taken formal action, the non-compliance could allow them to demand immediate repayment of the full loan balances, exercise their rights under the related security agreements and personal guarantee, and seek contractual damages and collection costs.

 

In April 2025, we entered into a loan agreement with a third party for proceeds of $235,000. The loan is payable in 26 weekly payments, starting April 2025, bearing an Estimated Annual Percentage Rate at 165% and is secured by a general security agreement on our assets. As of September 30, 2025, we were not in compliance with a covenant of the loan agreement that prohibits the sale or pledge of our receivables and were also in arrears on the interest payments. While the lender has not yet taken formal action, the non-compliance could allow the lender to demand immediate repayment of the full loan balance, exercise its rights under the related security agreement and personal guarantee, and seek contractual damages and collection costs.

 

 

In June 2025, we issued a promissory note with an aggregated total $150,000, bearing interest at 19% per annum (accruing annually and payable annually) for a period of 24 months. As additional consideration, we issued a purchase warrant concurrently, entitling the holder to purchase 30,000 shares of common stock at a price of CAD $3.12 per share for a period of 24 months from the date of issuance.

 

In July 2025, we entered into a promissory note for $1,386,000 with an Original Issue Discount of $126,000 with a related party. The promissory note, which is in the nature of a bridge loan, will be funded in up to six monthly tranches of up to $210,000 each. Each tranche matures 12 months from its respective advance date. The loan bears interest at a rate of 10% per annum.

 

In July 2025, we entered into a supply chain loan agreement with a related party for a total amount up to $500,000. The loan carries fixed interest amount of $30,000, payable annually in advance. The loan is personally guaranteed by William Espley.

 

As of December 31, 2024, we had outstanding and exercisable stock options as follows:

 

Date of Expiry		Number of Options Outstanding				Number of Options Exercisable				Exercise Price				Weighted Average Remaining Life (years)
October 5, 2027			178,572				178,572			$	3.29				2.76
February 4, 2032			6,427				5,847			$	2.87				7.10
February 24, 2032			10,715				10,715			$	2.87				7.15
March 14, 2032			8,572				6,696			$	4.13				7.21
May 9, 2027			52,857				52,857			$	8.40				2.35
May 9, 2027			14,286				14,286			$	5.53				2.35
December 23, 2029			177,500				-			CAD $	7.20				4.98

 

As of September 30, 2025, we had outstanding and exercisable stock options as follows:

 

Date of Expiry		Number of Options Outstanding				Number of Options Exercisable				Exercise Price				Weighted Average Remaining Life (years)
October 5, 2027			178,571				178,571			$	3.29				2.01
February 4, 2032			6,429				6,238			$	2.87				6.35
February 24, 2032			10,715				10,715			$	2.87				6.41
March 14, 2032			8,571				7,834			$	4.13				6.46
May 9, 2027			52,857				52,857			$	8.40				1.61
May 9, 2027			14,286				14,286			$	5.53				1.61
December 23, 2029			177,500				177,500			$	5.17				4.23

 

As of September 30, 2025, we had outstanding warrants as follows:

 

Date of Expiry		Number of Warrants Outstanding				Exercise Price				Weighted Average Remaining Life (years)
September 11, 2026			50,000			CAD $	2.00				0.95
October 9, 2026			15,000			CAD $	3.14				1.02
October 10, 2026			196,582			CAD $	3.20				1.03
October 16, 2026			50,000			CAD $	3.09				1.04
January 10, 2027			35,000			CAD $	2.95				1.28
June 16, 2027			30,000			CAD $	3.12				1.71

 

 

Cash Flows

 

		Years Ended December 31,								Nine Months Ended September 30,
		2024				2023				2025				2024
Net cash used in operating activities			(360,299	)			(3,417,330	)			(452,743	)			(687,289	)
Net cash used in investing activities			-				(5,213	)			-				-
Net cash provided by (used in) financing activities			937,266				(114,008	)			333,155				751,483

 

Cash flows used in operating activities during the nine months ended September 30, 2025 were $452,743, compared to cash flows used of $687,289 during the nine months ended September 30, 2024.

 

Net cash used in operating activities during the nine months ended September 30, 2025 was $452,743 which was primarily attributable to net loss of $979,298, net noncash adjustment of positive $1,434,476, and adjustments for changes in working capital of negative $907,921. The adjustments for changes in working capital mainly included (i) an increase in prepaid expenses of $578,557, (ii) an increase in accrued liabilities of $74,164, partially offset by (i) an decrease in accounts and other receivable of $31,172, (ii) a decrease in inventory of $49,127, (ii) a decrease in accounts payable of $44,199, and (iii) a decrease in deferred revenue of $1,436,144.

 

Net cash used in operating activities during the nine months ended September 30, 2024 was $687,289, which was primarily attributable to net income of $857,267, net noncash adjustment of negative $2,148,300 and adjustments for changes in working capital of positive $649,012. The adjustments for changes in working capital mainly included (i) an increase in accounts and other receivable of $685,434, (ii) an increase in prepaid expenses of $24,341, (iii) an increase in inventory of $333,511, (iv) an increase in deferred revenue of $96,232, partially offset by (i) a decrease in accounts payable of $25,582 and (ii) a decrease in accrued liabilities of $464,924.

 

Cash flows used in operating activities during the year ended December 31, 2024 were $360,299 compared to $3,417,330 during the year ended December 31, 2023.

 

Net cash used in operating activities during the year ended December 31, 2024 was $360,299, which was primarily attributable to net loss of $1,742,951, net noncash adjustment of negative $329,020, and adjustments for changes in working capital of positive $1,711,672. The adjustments for changes in working capital mainly included (i) an increase in accounts and other receivable of $743,207, (ii) an increase in inventory of $402,437, (iii) an increase in deferred revenue of $1,696,900, partially offset by (i) a decrease in prepaid expenses of $520,356, (ii) a decrease in accounts payable of $224,960, and (iii) a decrease in accrued liabilities of $385,556.

 

Net cash used in operating activities during the year ended December 31, 2023 was $3,417,330, which was primarily attributable to net loss of $5,182,196, net noncash adjustment of positive $910,739 and adjustments for changes in working capital of positive $854,127. The adjustments for changes in working capital mainly included (i) an increase in accounts and other receivable of $1,858,950, (ii) an increase in prepaid expenses of $715,540, (iii) an increase in accrue liabilities of $179,846, partially offset by (i) a decrease in accounts payable of $1,806,752, (ii) a decrease in inventory of $61,477, and (iii) a decrease in deferred revenue of $32,521.

 

Cash flows used in investing activities during the nine months ended September 30, 2025 and 2024 were $nil and $nil.

 

Cash flows used in investing activities during the year ended December 31, 2024 were nil versus $5,213 during the year ended December 31, 2023. The difference was primarily due to the purchase of equipment in the comparative period.

 

 

Cash flows provided by financing activities during the nine months ended September 30, 2025 were $333,155 cash, compared to $751,483 cash provided by financing activities during the nine months ended September 30, 2024. The difference was primarily attributable to (i) lease payments of $176,643 in 2025 compared to $171,495 in 2024, (ii) net borrowing of $84,329 on credit facility and payment on loans of $1,187,770 in 2025 compared to net repayment of $53,876 on credit facility and payment on loans of $557,670 in 2024, (iii) $nil payment on convertible debenture in 2025 compared to $60,000 in 2024, (iv) proceeds of $200,000 from promissory notes, $694,000 from loans, $635,261 loans from a related party, $83,978 from exercise of warrants in 2025 compared to proceeds of $675,000 from promissory notes, $919,525 from loans, $nil loan from a related party received, and $nil from exercise of warrants in 2024.

 

Cash flows provided by financing activities during the year ended December 31, 2024 were $937,266 compared to $114,008 cash flows used in financing activities during the year ended December 31, 2023. The difference was primarily due to repayments on credit facility were $37,930 in 2024 compared to borrowing $244,015 in 2023. During the year ended December 31, 2024, we received $1,025,000 in promissory notes and $799,835 from loans and there were nil promissory notes received and $140,087 loan received in 2023. In addition, the Company repaid $559,834 of the loans and $60,000 of convertible debentures in 2024, and there were $275,000 repayment of the loans and nil repayment of convertible debenture in 2023.

    

Critical Accounting Estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, each as of the date of the financial statements, and revenue and expenses during the periods presented. On an ongoing basis, management evaluates their estimates and assumptions, and the effects of any such revisions are reflected in the financial statements in the period in which they are determined to be necessary. Management bases its estimates on historical experience and on various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our consolidated financial statements.

 

Information about critical estimates in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are, but not limited to the following:

 

●

Allowance for doubtful accounts receivable – We make allowances for doubtful accounts based on its best estimate of the amount of probable credit losses in existing accounts receivable. These are determined based on analyzing known uncollectible accounts, aged receivables, economic conditions, historical losses, and changes in customer payment cycles and the customers’ creditworthiness.

 

●

Provision for excess and obsolete inventory - Inventory is valued at the lower of cost and net realizable value. Net realizable value for inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. All these estimates involve uncertainty relating to future pricing, demand and market conditions. Provisions are made in profit or loss of the current period on any difference between book value and net realizable value.

 

●

Fair value of stock options and warrants, and derivative liability - Determining the fair value of warrants and stock options requires judgements related to the choice of a pricing model, the estimation of stock price volatility, the expected forfeiture rate and the expected term of the underlying instruments. Any changes in the estimates or inputs utilized to determine fair value could have a significant impact on our future operating results or on other components of shareholders’ equity (deficiency).

 

●

Fair value of the liability component of hybrid financial instrument at initial recognition – Determining the fair value of the liability component requires judgement related to market rate of interest. The market rate of interest used is based on judgement including our own credit risk, economic environment terms, and interest rate charged to comparable companies. Changes in assumptions can materially affect the fair value estimate of the financial instrument.

 

●

Income taxes - Tax provisions are based on enacted or substantively enacted laws. Changes in those laws could affect amounts recognized in profit or loss both in the period of change, which would include any impact on cumulative provisions, and future periods. Deferred tax assets, if any, are recognized to the extent.

 

 Critical Accounting Judgements

 

Our significant accounting policies are more fully described in Note 1 to our consolidated financial statements included elsewhere in this prospectus. We believe that the following critical accounting policies are the most significantly affected by judgments and assumptions used in the preparation of our consolidated financial statements: Revenue recognition. 

 

●

Deferred income taxes – judgements are made by management to determine the likelihood of whether deferred income tax assets at the end of the reporting period will be realized from future taxable earnings. To the extent that assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in respect of deferred tax assets as well as the amounts recognized in profit or loss in the period in which the change occurs.

 

 

●

Going concern – In assessing whether the going concern assumption is appropriate, management considers all available information about the future, which is at least, but not limited to, twelve months from the end of the reporting period. Our ability to continue operations is dependent on management’s ability to secure additional financing. Management is actively pursuing such additional sources of financing, and while it has been successful in doing so in the past, there can be no assurance it will be able to do so in the future.

 

●

Revenue Recognition – We sell several telematics devices bundled with a multi-year software licenses under the same contractual arrangement, giving rise to considerations on whether there are distinct performance obligations requiring separate recognition and whether we are acting as principal or agent in the contract. Key considerations in determining whether the performance obligations are distinct are whether the promise to deliver the hardware component of the contract is separately identifiable from other contractual promises as well as the level of interdependency between the components of the contract. We have concluded the bundled contract represents one performance obligation and that we are acting as principal in the arrangement, resulting in us recognizing revenue and cost of sales on a gross basis on delivery of the telematics device. Significant judgement is involved in the assessments made by management.

 

Financial Instruments

 

Our financial assets include cash and amounts receivable. The carrying value of cash and amounts receivable approximates their fair value due to their short term to maturity.

 

Our financial liabilities include accounts payables, loans, derivative liability, credit facility, and customer deposits. The carrying value of these items approximates their fair value, which is the amount recorded on the consolidated statement of financial position.

 

Financial Risk Factors

 

Credit risk

 

In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or legal entity, whether they are a wholesale, retail or end-user customer, geographic location, industry, aging profile, maturity and existence of previous financial difficulties. Trade and other receivables relate mainly to our wholesale and retail customers.

 

Trade and other receivables consist of:

 

		December 31, 2024
Accounts receivables		$	678,636
Other receivables			144,377
Allowance for doubtful accounts			(66,055	)
Total		$	756,958

 

		September 30, 2025
Accounts receivables		$	765,919
Other receivables			81,048
Allowance for doubtful accounts			(108,700	)
Total		$	738,267

 

During the year ended December 31, 2024, $57,072 of bad debt recovery had been recognized in the consolidated statement of operating loss and comprehensive loss.

 

During the nine months period ended September 30, 2025, $49,863 of bad debt expenses had been recognized in the consolidated statement of operating loss and comprehensive loss.

 

Aged trade receivable listing:

 

Days outstanding		December 31, 2024
Current		$	2,282,645
1 – 30			(1,870,748	)
31 – 60			114,022
61 - 90			157,871
> 90			(5,154	)
Total		$	678,636

 

 

Days outstanding		September 30, 2025
Current		$	471,540
1 – 30			122,946
31 – 60			12,549
61 - 90			35,459
> 90			123,425
Total		$	765,919

 

The company’s maximum exposure to credit risk is the combined carrying amount of its financial assets as at December 31, 2024 is $1,364,647.

 

The company’s maximum exposure to credit risk is the combined carrying amount of its financial assets as at September 30, 2025 is $1,226,368.

 

Liquidity risk

 

Liquidity risk is the risk that we will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Our approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to our reputation.

 

We examine current forecasts of our liquidity requirements so as to make certain that there is sufficient cash for its operating needs. These forecasts take into consideration matters such as our plan to use debt for financing its activity, compliance with any required financial covenants and liquidity ratios, and compliance with external requirements such as laws or regulation.

 

We have a factoring agreement with external funding. Our accounts payable and accrued liabilities have contractual terms of 30 to 90 days, with the exception of one vendor where payment terms of 36 months have been granted. We are exposed to liquidity risk.

 

Market risk

 

a) Currency Risk

 

We are located in the United States and virtually all transactions including our sales and debt are negotiated in US dollars.

 

b) Interest Rate Risk

 

Our debt has fixed interest rates and is not exposed to interest rate risk until maturity. Our credit facility is variable based on the 90 day SOFR rate. A 1% increase in the 90 day SOFR rate would not have a significant impact on profit and loss.

 

c) Price Risk

 

Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices other than those arising from interest rate risk, financial market risk or currency risk. We are not exposed to significant price risk.

 

Concentration risk

 

We derived revenue from one customer, One Step GPS LLC, totaling 40.4%, 22.5% and 33% of our total revenue for the nine months ended September 30, 2025 and years ended December 31, 2024 and 2023, respectively. As of September 30, 2025, December 31, 2024 and December 31, 2023, One Step GPS LLC accounted for a total of 10.9%, 18% and 19% of accounts receivable, respectively.

 

To manage the concentration of customer risk, we continuously look for opportunities to diversify revenue streams and expand our customer base via marketing. All contracts with customers are signed for a term, and we ensure the customer needs are being met by building exceptional customer service relationships.

 

We have concentrations in the purchases with our suppliers. For the years ended December 31, 2024 and 2023, the two largest suppliers accounted for a total of 83% and 81% of total purchases, respectively. For the nine months ended September 30, 2025 and 2024, the two largest suppliers accounted for a total of 80.8% and 86.5% of our total purchases, respectively.

 

To mitigate the concentration of vendor risk, we continuously look for opportunities to build a supply chain in different geographic locations (Eastern Europe and Asia), and all vendors are selected after extensive due diligence and testing by our QA team.

 

Off-Balance Sheet Arrangements

 

We have not entered into any off-balance sheet arrangements.

 

 

BUSINESS

 

Our Company

  

Direct Communication Solutions, Inc. is a technology innovation company in the sensor sector of information technology solutions for the Internet of Things (IoT) market. We were established in 2006 and are headquartered in San Diego, California. We focus our business on generating revenue streams and growth in the following three principal areas.

 

Smart Hardware Provider. We deploy smart hardware to our customers from an expanding group of suppliers through strategic agreements with channel partners including Verizon Communications, Inc., United States Cellular Corp., Synnex Corporation and Hyperion Partners, and use this deployment as the basis to develop our own end-to-end SaaS based intelligent business solutions. We identify the right device for our client with a focus on the most suitable technology (4G LTE, Bluetooth, WiFi, etc.), price and the features & capabilities of the device to collect the data to solve the client’s problem. Our specialty is aiding global Original Equipment Manufacturers, or OEMs, with devices that are not available or approved to operate in North America and guide the OEM with regulatory guidance, feature requirements and preparing the equipment for the North American market. We assist OEMs who manufacture 4G/5G LTE cellular routers, gateways, GPS devices or Bluetooth/LoraWan Sensors to enter the North American market

 

SaaS Software Solutions Provider. Our products and services then enable the smart hardware devices we deploy to communicate with each other and with server or cloud-based application infrastructures. Our software applications address and solve real-world data collection and monitoring problems to best serve our customers and manage their evolving business requirements. Our software platform is highly customizable and scalable, supporting best in class devices from industry leading manufacturers. Our software applications are customizable to meet the specific requirements of our customers, providing visibility into the critical assets of that allow our customers to efficiently and effectively run their business through the data points provided by our software applications.

 

Industry Technology Innovation. Our customers include participants in various smart hardware-related vertical markets that are tied to the broad IoT market, including the fleet management, retail point-of-sale, industrial, energy and utilities and safety and security markets. As we continue to apply our core competencies, we believe that we will be able to address a broadening spectrum of software application markets.

 

We continue to evolve from our smart hardware distribution base of mobile broadband hardware to providing end-to-end solutions for mobile internet, and vertical markets. We expect to continue to leverage our long-standing relationships with our strategic partners and to build differentiated IoT solutions based on integrating third-party equipment with our proprietary application software. We believe that this mixed hardware and software implementation will allow us to build new and more robust solutions that address multiple customer needs operating on a single company platform.

 

Our Products and Services

 

Our full-service IoT solutions allow our customers to obtain real-time data on their operations, assets, and overall business performance. We serve our clients by simplifying IoT technologies, making them less costly and easier to deploy, thereby solving real-world problems and providing our clients with key actionable insights that enable them to run their businesses more effectively and efficiently. Our products and services include Smart Hardware Solutions, Cloud-based SaaS Solutions, Managed Services and Data Solutions.

 

Smart Hardware Solutions

 

We provide smart hardware based on the latest 4G/5G technologies that is available for the global IoT business ecosystem. Our smart hardware devices enable end-to-end data intelligence collection and operational analysis to better serve the business needs of our customers. Our global ecosystem of partners and vendors allows us to leverage our smart hardware portfolio into new recurring revenue streams by providing our customers with connectivity, engineering, and logistics services.

 

GPS Device Portfolio. Because of our clients’ complex business demands, we offer our clients a broad selection of GPS devices. Our extensive ecosystem of GPS devices allows us to provide the right device with the optimal features and functionality to satisfy client requirements. Our GPS device offerings are designed to track, provide data on actionable items and provide detailed reporting on key data points related to our clients’ assets and vehicles. We maintain strategic partnerships with multiple global GPS device manufacturers and are able to access the most appropriate devices on the market to cover substantially all use cases, ranging from basic tracking to dash cameras and ruggedized in-vehicle tablets for electronic logging device (ELD) and workforce management. Additionally, we provide our clients with technical and integration services through our in-house engineers to customize devices in a way that will meet our clients’ requirements. 

 

Sensor Portfolio. We offer a diverse suite of sensors that enable our clients to deploy IoT sensor ecosystems that can address their monitoring needs by providing key insights into actionable items and that can alert them to potential problems within their business before those problems impact business operations. Our extensive sensor portfolio encompasses multiple sensor types and technologies. IoT sensors can detect potential issues and provide actionable intelligence across a wide range of metrics from water leaks in a facility building to possible contamination throughout an operation process. Because sensors can provide advanced insight into potential issues, they allow clients to access data on preventative maintenance early. Sensors can also provide predictive maintenance data, allowing business owners to identify a problem and correct it before it becomes an issue requiring costly repairs or the replacement of valuable assets that can have a significant financial impact. Sensors can be seen as a type of “insurance” for machines.

 

 

Cloud-based SaaS Solutions

 

We offer cloud-based SaaS solutions that are designed to be user-friendly and accessible from both web and mobile applications. These solutions are applicable to multiple industries and can be integrated with other third-party applications, which can add additional value to clients and thereby increase our revenues. Our SaaS solutions collect raw data and enable real-time visibility into alerts, notifications, and predictive maintenance through customizable on-demand reporting.

 

MiFleet. MiFleet is a transportation and logistics-focused cloud-based platform for small and medium sized businesses of any complexity. Our MiFleet platform is customizable to client requirements and leverages our smart hardware device portfolio, which we believe gives us a significant competitive advantage in the market due to our extensive GPS tracking devices ecosystem. We designed our software platform to optimize fleet operational efficiencies by lowering costs related to fuel consumption, labor, and maintenance. The MiFleet platform also integrates IoT sensor data to track high value assets and goods as they move through the global supply chain. Combining sensors into MiFleet creates additional value and can provide critical tools for managing costs related to lost or perishable products by tracking location and sensor data such as temperature or humidity. 

 

MiSensors. MiSensors is our proprietary cloud-based software platform for IoT sensor deployment, device management and service enablement of our extensive offering of sensor types and technologies. The MiSensors platform is a real-time monitoring solution for IoT sensors that allows our clients to set sensor reporting rules based on their business requirements and receive alerts via email or SMS in the event of a trigger notification. MiSensors allows our clients to deploy customizable IoT sensor ecosystems quickly and easily across multiple business locations, to create hierarchies based on roles, and to set sensor reporting values based on business needs.

 

Video Telematics. Our video telematics solutions and services complement our fleet-tracking technologies by incorporating cellular dash cameras and video analytics into our product offerings. Video telematics is a fast-growing segment of IoT that provides additional value to our clients and can create higher recurring revenues for us. Our video telematics solutions and services enhance our transportation/logistics offerings by providing real-time video to our clients that we combine with Artificial Intelligence (AI) analysis to identify risky driver behavior, which a company can then act on and correct through coaching, training, or driver termination. Video telematics can also be a valuable tool in helping reduce the risk of unnecessary litigation by capturing video evidence in the event of an accident. Some insurance providers have begun to see the value in video telematics and have offered discounts on premiums based on a reduction of the risk of frivolous lawsuits, which is another potential benefit of the solution.

 

Managed Services and Connectivity Solutions

 

We also provide technical services that extend our business reach and capture additional opportunities that are syngeneic with our core solutions through delivery of data connectivity and active managed services. Our service solutions are continuous and can recur throughout the customer lifecycle via optimization. Our knowledge and deep understanding of the IoT industry allows us to provide simple integration services, or custom solution design services based on specific customer requests.

 

MiConnectivity. MiConnectivity is our global data solution for cellular data connectivity. It can provide additional value to our clients and can increase our recurring revenues by bundling data connectivity with our SaaS platforms and smart hardware. MiConnectivity can provide our customers with valuable insight into the cellular data costs of IoT solutions through analytics and optimization of rate plans across multiple providers of IoT connectivity in one platform. By integrating multiple cellular network technologies, we are able to offer our clients access to global connectivity for multiple devices and technologies. MiConnectivity can help our customers reduce their overall connectivity costs by leveraging our substantial and growing connectivity subscriber base. In addition to providing reduced connectivity costs and valuable insight into device activity and performance, we are also able to provide our clients with customized support in the event issues arise, since we are providing the platform to manage all their devices on a global scale. We believe that MiConnectivity is a cost-effective addition for any customer that needs data services when purchasing our products and solutions.

 

MiServices. MiServices is our managed services offering that provides our customers a “worry-free” experience when deploying our IoT devices and solutions. Through MiServices we offer engineering and logistical services as a paid service that reduces the cost and complexity of configuring and deploying IoT devices for our clients. Our offering is flexible and can be tailored to our clients’ needs depending on their technical capabilities. MiServices can provide itemized services or can provide a full suite of device deployment services. MiServices offers script development, loading configurations, SIM card insertion, carrier APN settings, pairing device and SIM card, activation services, device readiness validation and custom labeling and packaging. Once deployed, our customers can rely on MiServices for maintenance, technical support and troubleshooting for errors, which can greatly reduce the time and costs for the end-user and thereby increase the efficiency of the customer’s operation.

  

Our Competitive Strengths

 

We believe that we have attributes that differentiate us from our competitors and provide us with significant competitive advantages. Our key competitive strengths include:

 

●

Industry Expertise: Our executive leadership team, consisting of our Chief Executive Officer, our Chief Operating Officer, our Chief Technology Officer, and our Chief Financial Officer, has over 60 years combined experience in the technology and IoT industry. The team’s experience and skills are diverse, unique and complement each other in the areas of IoT devices/equipment, software and cellular wireless connectivity. The core of the team has worked together for almost a decade and is committed to our continued growth and overall success.

 

 

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Our Culture: We acknowledge our customer as the most valuable component in our business. We strive to represent ourselves as an extension of our clients’ organizations, and we believe this has contributed greatly to our long-lasting relationships with our customers. Because of our deep involvement with our customers’ business needs, we are able to focus on the delivery of solutions that can meet and exceed their expectations.

 

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Our Knowledge: We believe that our broad experience and deep engineering roots are what our clients seek. We strive to simplify complex solutions for mass adoption by working closely with our customer and looking at technology through their eyes to come up with an approach that can be greatly simplified to accommodate their dedicated market segment. We have the privilege of working with some of the most experienced professionals in their respective markets, which helps strengthens our team and our solution offerings.

 

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Our Staff: Each of our three departments – Sales, Engineering and Operations – function within their respective boundaries of expertise. Our sales team focuses on customer desires and expectations, and our engineering team creates and builds the solution, while our operations team focuses on the overall delivery and customer experience.

 

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Our Competitive Nature: We strive to find what we believe to be the best solutions at the optimal price points to provide our customers with a competitive advantage.

 

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Partnerships: We have a demonstrated history of working with North America’s leading cellular wireless carrier partners. Our relationships have allowed us to create solutions that operate on our partners’ cellular networks and enable our partners’ sales channel to leverage our IoT solutions. We are a Platinum partner with Verizon and Mr. Bursey, our Chief Executive Officer, participates in the Verizon IoT Advisory Council, which we believe provides us with valuable insight into future IoT trends and market segments.

 

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One Stop Solutions Provider: We believe that our consultative approach, which is predicated on a deep understanding of the inner workings of IoT solutions, gives us a competitive advantage. Our industry is largely fragmented into device manufacturers, software developers and cellular connectivity resellers. In contrast, we offer an “a-la-cart” portfolio that can address each independent need or can combine all elements into a single solution tailored to a customer’s need.

 

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Distinctive Solution: Our level of exposure, understanding and experience all contribute to our ability to differentiate ourselves in creating many custom-tailored solutions in the IoT Market. Our clients turn to us to solve a problem – typically a unique problem – and together we collaborate with them in putting the pieces of the solution together, which can include a device, wireless connectivity and software or a software API.

 

Our Growth Strategy

 

We seek to connect new and existing devices to eliminate inefficiencies by obtaining real time data for our customers. The adoption of IoT has outpaced traditional products and services in improving business outcomes. The IoT industry is appealing to many industry verticals. Our growth strategy includes:

 

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Expand and Enhance Global Strategic Partnerships: We intend to stay relevant and to avoid supply chain disruptions by establishing, expanding, and enhancing our relationships with leading IoT companies and original equipment manufacturers (OEMs). We believe that this approach should give us immediate access to some of the most important products available on the market, which will allow us to satisfy our existing customer base and expand our reach to new customers. We also intend to collaborate with new potential partners in the blockchain telecommunication and IoT industries for additional growth.

 

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Reach New Customers-SaaS: We intend to integrate new partnership products and software into our SaaS solutions, which we expect will allow us to create an open ecosystem and expand the value proposition of our SaaS, and thereby increase our revenues by charging for this additional value. We believe that a diversified inventory will provide us with a significant advantage in increasing our SaaS growth. In addition, while we expect to continue to leverage our network of carriers, dealers, and value-add resellers to reach new customers, we also intend to selectively invest in precision marketing programs that will educate targeted groups of potential customers, which we expect will result in a high conversion rate to paying customers. Our execution of this element of our growth strategy is dependent upon our raising fund in this offering.

 

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Enter New Verticals: We currently have an established presence in the transportation and logistics markets. However, there are numerous other markets, such as the environment, social and governance (ESG) market, that are underserved and which we intend to address. For example, the IoT plays a critical role in enabling ESG data collection, analysis, and management, and to penetrate this market we are creating a Smart ESG Program and an ESG-specific app that are designed to provide customers with information that they can use to improve their overall performance. Our execution of this element of our growth strategy is dependent upon our raising fund in this offering. This element of our growth strategy will be a lower priority than the strategy outlined under the “Reach new customers-Saas” bullet above in the event we realize a lower level of funding in this offering than we currently anticipate.

 

 

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Invest in New Technologies: We seek to develop new proprietary technologies in a variety of sectors. Our existing team of engineers are actively developing new solutions to sell into our existing customer base. Our execution of this element of our growth strategy is dependent upon our raising funds in this offering.

 

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Increase Staffing: We intend to hire additional personnel, specifically engineers and business development professionals, to grow our business with the goal of dedicating more time to customer relationships and retention while continuing to develop new products. Our execution of this strategy is dependent upon raising fund in this offering.

 

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Acquisitions: We will take an opportunistic approach regarding strategic acquisitions of accretive companies with high growth potential, and expect to focus on SMB Telematics solutions providers. When evaluating strategic acquisitions, we expect to examine any new technologies, new market verticals, and cross-selling opportunities that a target may provide us. Although we believe acquisitions may play a critical role in our future growth, we do not have any agreements, commitments or plans for any specific acquisitions at this time. Our execution of this strategy is dependent upon raising fund in this offering.

 

Our History

 

Direct Communication Solutions, Inc. was formed as a Florida corporation on September 9, 2006 and reorganized on April 3, 2017 under the laws of the State of Delaware. Since our inception, we have been a technology solutions integrator focusing on connecting the IoT. We provide information technology solutions for the IoT market. We distribute IoT components, including sensors and system integrators. Our wireless engineers and industry experts assist clients in integrating components into their systems and applications. We develop industry-specific product and software applications. Our software applications and scalable cloud services collect and assess business-critical data from various types of assets. We generate revenue from product sales, SaaS, managed services and connectivity solutions.

 

In January 2020, we closed an initial public offering in Canada, consisting of the issuance of 1,328,500 shares of common stock. Our Common Stock began trading on the Canadian Securities Exchange (the “CSE”) under the symbol “DCSI” on January 6, 2020. We are a reporting company in Canada and comply with applicable quarterly and annual reporting requirements. Our fiscal year end is December 31. Our Canadian filings on SEDAR can be found online at www.sedar.com. Our financial statements on SEDAR are prepared in accordance with International Financial Reporting Standards (“IFRS”).

 

On June 19, 2020, we began trading on the OTCQB Venture Market (“OTCQB”) under the symbol “DCSX.” Neither the Company nor any predecessor has been in bankruptcy, receivership or any similar proceeding. We are not, and never have been, a shell company (as defined in Rule 405 of the Securities Act of 1933 and Rule 12b-2 of the Exchange Act of 1934). Our primary SIC Code is 5045 (Computers, Peripherals and Software).

 

Our Industry

 

IoT or Internet of Things is the interconnection of various devices, machines or appliances that generate data. The aim of IoT is not just to create data, but also to extract valuable insights and information from the data generated by various devices. Devices include vehicles, smart phones/gadgets, appliances and other products that have electronic sensors and software embedded into their core systems. Connectivity, cloud computing, and marketing automation are all driving IoT demand. Numerous industries, governments and consumers utilize IoT to enhance operational efficiency, mitigate risks, improve functional visibility, increase revenue streams, and ensure maximum customer engagement. 

 

According to Fortune Business Insights, the global (IoT) market is projected to grow from $714.48 billion in 2024 to $4,062.34 billion by 2032, at a CAGR of 24.3%.

 

Research and Development

 

We continue to invest in the research and develop of products and solutions which complement our current core offerings. Our efforts are focused on a proprietary device management platform, as well as a remote monitoring and inventory management system.

 

The proprietary device management offers overall efficiencies and organizational tools to both our internal operations as well as provide a value-add application for our customer to automate device preparation prior to deployments, analyze in field devices and provide historical status events. Cost reduction of in field devices is the objective.

 

The remote monitoring and management system provides a global overview to manage company assets, equipment usage and insight into product replenishment. Key data points will drive predictive stock replenishment, equipment servicing and historical data to aid in future decision making processes.

  

Customer Concentration

 

We derived revenue from one customer, One Step GPS LLC, totaling 40.4%, 22.5% and 33% of our total revenue for the nine months ended September 30, 2025 and years ended December 31, 2024 and 2023, respectively. As of September 30, 2025, December 31, 2024 and December 31, 2023, One Step GPS LLC accounted for a total of 10.9%, 18% and 19% of accounts receivable, respectively. See “Risk Factors – Risks Related to our Business and Industry – We have significant customer concentration, with a limited number of customers accounting for a substantial portion of our revenues.”

 

Competition

 

The IoT marketplace for service and solutions providers is highly fragmented. Most vendors offering software and/or hardware address only part of specific industry verticals or a portion of one-stop solutions services.

 

 

Over the past few years, sensor prices have dropped considerably due in part to technology innovations. At the same time, the cost of internet bandwidth has also declined precipitously, with the introduction of new technologies like 4G/5G, Category M1 and NBIoT (Narrow Band IoT). Concurrently with this, smartphones are now becoming the personal gateway to the IoT, serving as a remote control or hub for the connected home, connected car, or the health and fitness devices consumers are increasingly starting to wear.

 

The principal competitive factors impacting the market for our products and services are global scale, innovation, reputation, customer service, product quality, functionality, reliability, time-to-market, responsiveness and price. Our continued success in our vertical markets will depend in part upon our ability to continue to innovate and design quality products and deploy solutions at competitive prices and with superior support services to our customers.

 

Based on the current market, we believe we are positioned favorably against our competitors. Our products and services allow us to provide the customer a one-stop solutions services from hardware, and software to connectivity. However, some of our competitors have longer operating histories, larger and broader customer bases, more established relationships with a broader set of suppliers, greater brand recognition, and greater financial, research and development, marketing, distribution, and other resources. We will explore our strengths and opportunities in the market and may choose to enter or expand into new markets as needed.

 

Government Regulation

 

We believe that we are in material compliance with all federal and state regulatory requirements applicable to our business, however regulation related to the provision of services over the Internet is evolving, as federal, state and foreign governments continue to adopt new, or modify existing, laws and regulations addressing data privacy and the collection, processing, storage, transfer and use of data. Furthermore, our customers and potential customers conduct business in a variety of industries, and regulators in certain industries have adopted and may in the future adopt regulations or interpretive positions regarding the use of cloud computing and other outsourced services. We may be subject to laws and regulations governing issues such as privacy, data security, the use of biometric data, labor and employment, anti-discrimination, whistleblowing and worker confidentiality obligations, product liability, consumer protection and warnings, marketing, taxation, competition, arbitration agreements and class action waiver provisions, and terms of service, among other issues. We are committed to complying with, and helping our customers comply with, applicable regulations and requirements. See “Risk Factors – Risks Related to our Business and Industry – Privacy concerns and laws, evolving regulation of cloud computing, cross-border data transfer restrictions and other domestic or foreign regulations may limit the use and adoption of our services and adversely affect our business,” “Risk Factors – Risks Related to our Business and Industry – Our business is subject to government regulation and future regulation or regulatory changes may increase the cost of compliance and doing business,” and “Risk Factors – Risks Related to our Business and Industry – Industry-specific regulation and other requirements and standards are evolving and unfavorable industry-specific laws, regulations, interpretive positions or standards could harm our business.”

 

Intellectual Property

 

We rely on a combination of patent, copyright and trademark laws, trade secrets, some software security measures (e.g., to protect trade secrets), license agreements and nondisclosure agreements to protect our intellectual property. We pursue registration of trademarks but currently hold no patents on our products.

 

Human Capital Management

 

As of the date of this prospectus, we have 11 employees, all of whom are full-time. We have no collective bargaining agreements with our employees, and we have not experienced any work stoppages. We believe that our relations with our employees are good and have been maintained in a normal and customary manner.

 

The success of our business depends on large part on our ability to attract, retain and develop a diverse population of talented and high-performing employees. We believe that we have attracted a core of seasoned professionals with strong track records and deep experience in the IoT Industry, and these individuals are complemented a group of employees who are eager to learn and who benefit from the experience and leadership of our senior management. We prioritize and invest in creating opportunities to help employees grow and build their careers through ongoing training and exposure to new opportunities within our company and externally with our clients.

 

Our culture is an extension of our dedicated staff and is based on our core values. We are loyal. We are trusted. We all have a growth mindset, set to achieve the goals of our company and the goals of our clients. We focus on being an extension of our client’s business – executing on tasks as though we are truly a part of their business. 

 

We believe our performance-based approach to compensation has created a culture of winning; group collaboration and a team first mentality. Our staff understands that no matter the role within the company we all have a direct impact on the success of the business. Everyone’s actions contribute to the business.

 

Properties

 

Our corporate headquarters is located at 11021 Via Frontera, San Diego, California. This facility comprises approximately 11,543 square feet of space, pursuant to a lease agreement expiring on October 31, 2026. We do not own or lease any other real property. We believe that this facility is suitable to meet our needs, and that, should it be needed, suitable additional or alternative space will be available to accommodate any expansion of our operations.

 

Legal Proceedings

 

From time to time, we may be involved in various litigation matters arising in the ordinary course of our business.

 

On October 27, 2025, former employee Rhonda Bass filed a lawsuit for breach of contract against us in the San Diego Superior Court. The lawsuit seeks payment of a contractual severance of $175,000 plus penalties and interest for late payment. We have not yet responded to the complaint and are currently engaged in settlement discussions with the plaintiff.

 

MANAGEMENT

 

The following table sets forth certain information as of the date of this prospectus about our executive officers and members of our Board.

 

Name		Position
William Espley		Chief Executive Officer, Director and Chairman of the Board
Ying Xu		Chief Financial Officer
Eric Placzek		Chief Technology Officer
David Scowby		Chief Operating Officer
Mike Yao Zhou		Director
Shujie Zhong		Director
Gunther Schuhmann		Director Nominee
Dr. Michael Xing He		Director Nominee

 

William Espley was appointed director of the Company in February 2018, the Interim Chief Executive Officer of the Company in September 2025, and the Chief Executive Officer of the Company in November 2025. From 2003-2010, Mr. Espley was a founding investor in, and served as Investor Relations principal for, Net 1 UEPS Technologies, Nasdaq-listed payment systems provider. Mr. Espley was also a member of the board of directors of American Bullion Minerals Ltd., a mining claims company, from 2008 to 2011, and was its Vice President from 1997 to 2002. He is currently the President and a director of White Tiger Venture Group Ltd., a position he has held since 2015, and the President and a director of Predictive Health Analytics Inc., a position he has held since 2017. From 1994 to 1996, Mr. Espley was a licensed registered representative for C.M. Oliver & Co., a member firm of all of the Canadian stock exchanges. Prior to that, Mr. Espley was a founder and served as President of Professional Canadian Investment Group Inc. (PROCAN), a venture capital company that funded technology and oil & gas companies, from 1985 to 1994.

 

Mr. Espley’s expertise in business acquisition planning and financing, as well as his venture capital, investor relations and board experience, all qualify him to serve on our Board.

 

Ying Xu was appointed our Interim Chief Financial Officer in May 2025 and Chief Financial Officer in November 2025. Ms. Xu has over 16 years of experience in audit, mergers and acquisitions, and executive advisory, with a primary focus on Canadian and U.S. public companies across various industries. Ms. Xu is the co-founder of Ethos CPA LLP, a boutique public accounting firm where she has been a Partner since August 2019. Prior to that, Ms. Xu served as the Canadian CFO for MINISO, a major international retail chain, from August 2017 to August 2019. Her prior positions include Senior Assurance Manager at MNP LLP and an auditor at Ernst & Young in Vancouver, among others. Ms. Xu received her Bachelor of Business Administration degree from Simon Fraser University in 2008 and is a Chartered Professional Accountant in British Columbia, Canada.

 

Dave Scowby has served as our Chief Operations Officer since October 2018, and before that was Vice President, Product Development at the Company from July 2013 to October 2018. Before joining the Company, Mr. Scowby was Director of Sales at ALK Technologies, Inc. (now a Trimble Company, PC*MILER), a transportation and logistics technology company, from June 1995 to September 2003, was Executive Director, Syncwise Division at L1 Technologies, Inc., a technology services provider, from September 2011 to July 2013, and was the founder and President of Kings Management, LLC a sports management company, from July 2004 to December 2007. Mr. Scowby holds a B.S.E. in Engineering & Operations Research Management, and a Certificate in Architectural Design, both from Princeton University.

 

Eric Placzek is our Chief Technology Officer, a position he has held since September 2018. Mr. Placzek joined the company in 2014 as Field Applications Engineer. Prior to 2014, Mr. Placzek was Field Applications Engineer of CalAmp Corp., a connected intelligence company. Prior to joining CalAmp Eric held the position of Systems Test Engineer at 7Layers (now Bureau Veritas), a testing, inspection and certification company. Mr. Placzek holds a Bachelors of Science in Electrical Engineering and a Masters of Science in Computer Engineering from California State Polytechnic Pomona. 

 

Mike Yao Zhou was appointed director of the Company in September 2025 and previously served as a director of the Company from May 2021 to March 2024. From 2019 to the present, Mr. Zhou has served as owner and President of MYZ Corporate Relations Ltd., a private investment and consulting firm that is primarily involved with the North American capital markets. From 2017 to 2018. Mr. Zhou was an Analyst and Associate with PI Financial, a privately-owned Canadian brokerage firm, where he worked directly with the firm’s Vice President and Managing Director. From 2013 to 2015, he was Corporate Development Manager for BiYond Corp., an IoT services company. Mr. Zhou has been a member of the board of directors of the following Canadian public company: Explorex Resource Inc. (which is now known as Raffles Financial Group), a natural resources exploration company from August 15, 2019 to April 16, 2021. Mr. Zhou holds the Project Management Professional designation from the Project Management Institute, and a Bachelor of Science Degree in Statistics and Economics with Minor in Commerce (Saunders School of Business) from the University of British Columbia.

 

Mr. Zhou’s extensive experience in capital markets, corporate development, and public company governance make him qualified to serve on our Board.

 

Shujie Zhong was appointed director of the Company in June 2025. Mr. Zhong is a marketing expert, operations manager, and social media veteran. She has served in various positions in technology companies, such as ByteDance Technology, in the marketing and operations departments. Ms. Zhong holds a Master of Science Degree from the University of East Anglia, Norwich School of Business.

 

Ms. Zhong’s experience in process optimization, influencer outreach & campaigns, and product launches makes her qualified to serve on our Board.

 

 

Gunther Schuhmann is a nominee for our board of directors. Mr. Schumann is a seasoned professional with over 30 years of experience in the helical and driven piling industry. Mr. Schumann has served as Vice President of Sales and Procurement at Helical Pile Solutions Ltd., a division of JAVA GROUP, since June 2022, and previously served as General Manager beginning in January 2020. Prior to that, he spent over 26 years as Vice President of Sales and Business Development at Helical Pier Systems. In addition, Mr. Schumann has served on the board of directors for Steadright Critical Minerals Inc. since October 2021 and a member of its audit committee since September 2022, where he contributes to both strategic direction and operational oversight of the company. Mr. Schumann holds a Bachelor of Arts degree in Accounting and Economics from Bethany College.

 

Mr. Schuhmann’s deep industry and financial acumen make him qualified to serve on our Board.

 

Dr. Michael Xing He is a nominee for our board of directors. Dr. He is the founder of Morgan International Capital LLC, a California-based mortgage company providing a comprehensive suite of lending products. Dr. He is a licensed California mortgage broker and has overseen the company’s strategic direction and daily operations since 2021. Dr. He was also the co-founder of Galileo Robotics (January 2018 to December 2019), the co-founder and CEO of Yeelens Technology (January 2014 to April 2017), and the co-founder and CEO of Srers LLC (June 2013 to April 2015). Prior to these roles, Dr. He held a series of technical and leadership roles at prominent high-technology firms in New York and California. In addition, he has authored multiple publications in his areas of expertise and is an active private investor with participation in a range of early-stage ventures. Dr. He holds a Doctorate degree in Electrical and Computer Engineering from the University of Miami.

 

Dr. He’s robust technical expertise and leadership skills make him qualified to serve on our Board.

 

Corporate Governance

 

Composition of our Board of Directors

 

Our business and affairs are managed under the direction of our Board. The number of directors will be fixed by our Board, subject to the terms of our certificate of incorporation and amended and restated bylaws. Our board currently consists of three directors.

 

When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable our Board to satisfy its oversight responsibilities effectively in light of our business and structure, the Board focuses primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business.

 

Corporate Governance Profile

 

We have structured our corporate governance in a manner we believe closely aligns our interests with those of our stockholders. Notable features of our corporate governance structure include the following:

 

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Our Board is not staggered, with all of our directors subject to annual re-election;

 

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Three of our five directors are independent for purposes of NYSE American listing standards; and

 

●

We do not have a shareholder rights plan.

 

Our directors will stay informed about our business by attending meetings of our Board and its committees and through supplemental reports and communications. Our independent directors will meet regularly in executive sessions without the presence of our corporate officers or non-independent directors.

 

Role of the Board in Risk Oversight

 

We face a number of risks, including those described under the section entitled “Risk Factors” included elsewhere in this prospectus. The Board actively manages the Company’s risk oversight process and receives periodic reports from management on areas of material risk to the Company, including operational, financial, legal, and regulatory risks. The Board committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee assists the Board with its oversight of the Company’s major financial risk exposures. The Compensation Committee assists the Board with its oversight of risks arising from the Company’s compensation policies and programs. The Corporate Governance and Nominating Committee assists the Board with its oversight of risks associated with board organization, board independence, and corporate governance. While each committee is responsible for evaluating certain risks and overseeing the management of those risks, the entire Board is regularly informed about the risks.

  

Director Independence

 

NYSE American requires that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominations committees be independent, or, if a listed company has no nominations committee, that director nominees be selected or recommended for the board’s selection by independent directors constituting a majority of the board’s independent directors. NYSE American further requires that audit committee members satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act and that compensation committee members satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act.

 

 

Prior to the completion of this offering, our Board undertook a review of the independence of our directors and considered whether any director has a material relationship with us that could compromise that director’s ability to exercise independent judgment in carrying out that director’s responsibilities. Our Board has affirmatively determined that each of Shujie Zhong, Gunther Schuhmann and Dr. Michael Xing He qualify as an independent director, as defined under the applicable corporate governance standards of NYSE American. These rules require that our Audit Committee be composed of at least three members, one of whom must be independent on the date of listing on NYSE American, a majority of whom must be independent within 90 days of the effective date of the registration statement containing this prospectus, and all of whom must be independent within one year of the effective date of the registration statement containing this prospectus.

 

Board Leadership

 

Mr. Espley serves as the chairman of the Board.  The Board does not have a lead independent director. To help ensure the independence of the Company’s Board, the independent directors of the Board intend to meet without members of management at various times during the year.

 

Board Committees

 

We currently have an audit committee, and our Board of Directors will establish a compensation committee and a nominating and corporate governance committee, each of which will operate pursuant to a charter to be adopted by our Board of Directors and will be effective upon the effectiveness of the registration statement of which this prospectus is a part. Upon the effectiveness of the registration statement of which this prospectus is a part, the composition and functioning of all of our committees will comply with all applicable requirements of the Sarbanes-Oxley Act of 2002, NYSE American and SEC rules and regulations.

 

Following the completion of this offering, the full text of our audit committee charter, compensation committee charter, and nominating and corporate governance charter will be posted on the investor relations portion of our website at www.dcsbusiness.com. We do not incorporate the information contained on, or accessible through, our corporate website into this prospectus, and you should not consider it a part of this prospectus.

 

Audit Committee

 

Upon completion of this offering, Shujie Zhong, Gunther Schuhmann and Mike Yao Zhou will serve on the Audit Committee, which will be chaired by Gunther Schuhmann. The committee’s primary duties are to:

 

	●	review and discuss with management and our independent auditor our annual and quarterly financial statements and related disclosures, including disclosure under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the results of the independent auditor’s audit or review, as the case may be;
	●	review our financial reporting processes and internal control over financial reporting systems and the performance, generally, of our internal audit function;
	●	oversee the audit and other services of our independent registered public accounting firm and be directly responsible for the appointment, independence, qualifications, compensation and oversight of the independent registered public accounting firm, which reports directly to the Audit Committee;
	●	provide an open means of communication among our independent registered public accounting firm, management, our internal auditing function and our Board;
	●	review any disagreements between our management and the independent registered public accounting firm regarding our financial reporting;
	●	prepare the Audit Committee report for inclusion in our proxy statement for our annual stockholder meetings;
	●	establish procedures for complaints received regarding our accounting, internal accounting control and auditing matters; and
	●	approve all audit and permissible non-audit services conducted by our independent registered public accounting firm.

 

All members of our Audit Committee will meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NYSE American company guide. Our Board of Directors has determined that Gunther Schuhmann qualifies as an “audit committee financial expert” within the meaning of applicable SEC regulations. In making this determination, our Board of Directors considered the nature and scope of experience that Gunther Schuhmann has previously had. Our Board of Directors has determined that Gunther Schuhmann and Shujie Zhong satisfy the relevant independence requirements for service on the Audit Committee set forth in the rules of the SEC and the NYSE American company guide. Both our independent registered public accounting firm and management will periodically meet privately with our Audit Committee.

 

Compensation Committee

 

Upon completion of this offering, Shujie Zhong, Gunther Schuhmann and Dr. Michael Xing He will serve on the Compensation Committee, which will be chaired by Dr. Michael Xing He. The committee’s primary duties are to:

 

●

approve corporate goals and objectives relevant to chief executive officer compensation and evaluate performance in light of those goals and objectives;

 

 

	●	determine and approve executive officer compensation, including base salary and incentive awards;
	●	make recommendations to the Board regarding compensation plans; and
	●	administer our stock plan.

 

Our Compensation Committee determines and approves all elements of executive officer compensation. It also provides recommendations to the Board with respect to non-employee director compensation. The Compensation Committee may not delegate its authority to any other person, other than to a subcommittee.

 

Our Board of Directors has determined that each member of the Compensation Committee is “independent” as defined in the applicable NYSE American company guide rules. Each member of our Compensation Committee will be a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act, and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended.

 

Nominating and Corporate Governance Committee

 

Upon completion of this offering, Shujie Zhong, Gunther Schuhmann and Dr. Michael Xing He will serve on the Nominating and Corporate Governance Committee, which will be chaired by Shujie Zhong. The committee’s primary duties are to:

 

	●	consider director nominees recommended by stockholders and recommend nominees for election as directors;
	●	oversee the evaluation of the Board;
	●	review our Board’s committee structure and composition and make recommendations; and
	●	develop, recommend and oversee our corporate governance principles, including our Code of Business Ethics and Conduct.

 

Code of Business Ethics and Conduct

 

Prior to the effectiveness of the registration statement of which this prospectus is a part, our Board will adopt a written code of business ethics and conduct that applies to our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Following the effectiveness of the registration statement of which this prospectus is a part, a current copy of the code will be posted on the investor relations section of our website, which is located at www.dcsbusiness.com. If we make any substantive amendments to, or grant any waivers from, the code of business ethics and conduct for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a Current Report on Form 8-K.

 

 

EXECUTIVE COMPENSATION

 

We are a “smaller reporting company” under applicable SEC rules and are providing disclosure regarding our executive compensation arrangements pursuant to the rules applicable to emerging growth companies, which means that we are not required to provide a compensation discussion and analysis and certain other disclosures regarding our executive compensation. The following discussion relates to the compensation of Chris Bursey, our former President, Chief Executive Officer and Director, and our two other most highly compensated executive officers as of December 31, 2024, Dave Scowby, our Chief Operating Officer, and Eric Placzek, our Chief Technology Officer.

 

Summary Compensation Table

 

The following Summary Compensation Table contains information regarding compensation for 2023 and 2024 that we paid to Mr. Bursey and our two other most highly compensated executive officers as of December 31, 2024.

 

Name and Principal Position		Year		Salary ($)				Bonus ($)				Stock awards ($)				Option awards ($)(1)				Nonequity incentive plan compensation ($)				Nonqualified deferred compensation earnings ($)				All other compensation ($)				Total ($)
Chris Bursey		2024			258,000				-				-				-				-				-				-				258,000
Chief Executive Officer		2023			215,000				-				-				-				-				-				66,049				281,049
Dave Scowby		2024			230,000				-				-				240				-				-				-				230,240
Chief Operating Officer		2023			200,000				-				-				1,144				-				-				28,634				229,778
Eric Placzek		2024			213,333				-				-				480				-				-				-				213,813
Chief Technology Officer		2023			200,000				-				-				4,555				-				-				7,734				204,555

 

(1)

The dollar amounts reported in this column represent the aggregate grant date fair value for financial statement reporting purposes of the option awards granted during the respective fiscal year as calculated in accordance with Financial Accounting Standard Board Accounting Standards Codification Topic 718. These amounts reflect our accounting expense for these option awards and do not represent the actual economic value that may be realized by each applicable named executive officer.  The valuation assumptions we used in calculating the fair value of these stock awards and option awards are set forth in Note 10 to our audited financial statements included elsewhere in this prospectus.

 

Employment Agreements

 

We have employment agreements with Chris Bursey, David Scowby and Eric Placzek. Each agreement can be terminated by either party upon at least thirty days prior written notice. The Company may terminate the executive officer’s employment, for cause, as defined in the agreement, at any time, without any advance notice. Subject to the notice provisions described in the agreement, the executive officer may terminate employment with us for good reason as defined in the agreement. Subject to the agreement provisions, in situations where the Company terminates the executive officer’s employment without cause, or the executive officer resigns for good reason, then the executive officer will be, under certain conditions, entitled to severance compensation from the Company equal to fifty percent (50%) of executive officer’s then current base salary plus payments of medical insurance premiums for six (6) months following termination. In addition, all of Executive’s outstanding equity awards granted from and after the date on which the Company’s shares of common stock were listed on the CSE shall become immediately vested for the portion that would have vested or become exercisable had employment continued through the next vesting date. In the event of the resignation or termination of the executive officer after a change in control, as defined in the agreement, the severance compensation will be increased to one hundred percent (100%) of executive officer’s then current base salary.

 

 

Fiscal Year 2024 Outstanding Equity Awards at Fiscal Year-End Table

 

The following table lists all of the outstanding equity awards held on December 31, 2024 by Mr. Bursey and our two other most highly compensated executive officers as of December 31, 2024.

 

		Option Awards
Name		Number of securities underlying unexercised options exercisable (#)				Number of securities underlying unexercised options unexercisable (#)				Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)				Option exercise price				Option grant date		Option expiration date
Chris Bursey(1)			20,000				-				-			$	1.68			01/07/20		01/07/30
Eric Placzek(2)			250,000				-				-			$	0.47			10/05/17		10/05/27
			50,000				-				-			$	0.41			02/24/22		02/24/32
			250,000				-				-			$	1.55			05/09/22		05/09/27
			20,000												CAD $7.20			12/23/24		12/23/29
David Scowby(3)			1,000,000				-				-			$	0.47			10/05/17		10/05/27
			25,000				-				-			$	0.41			02/24/22		02/24/32

 

(1)

On January 7, 2020, Mr. Bursey was granted options to purchase 20,000 shares of our common stock. The options have an exercise price of $1.68 per share, which was 110% of the fair market value of our common stock on the date of grant, vest ratably over 24 months from the date of grant, and expire on the 10th anniversary of the date of grant. On February 9, 2022, these 20,000 options were canceled.

 

(2)

On October 5, 2017, Mr. Placzek was granted options to purchase 250,000 shares of our common stock. The options have an exercise price of $0.47 per share, which was the fair market value of our common stock on the date of grant, vest ratably over 48 months from the date of grant, and expire on the 10th anniversary of the date of grant.

 

On February 24, 2022, Mr. Placzek was granted options to purchase 50,000 shares of our common stock. The options have an exercise price of $0.41 per share, which was the fair market value of our common stock on the date of grant, vest ratably over 24 months from the date of grant, and expire on the 10th anniversary of the date of grant.   On May 9, 2022, Mr. Placzek was granted options to purchase 250,000 shares of our common stock. The options have an exercise price of $1.55 per share, which was the fair market value of our common stock on the date of grant, vest immediately from the date of grant, and expire on the fifth anniversary of the date of grant.

 

On December 23, 2024, Mr. Placzek was granted options to purchase 20,000 shares of our common stock. The options have an exercise price of CAD $7.20, which was the fair market value of our common stock on the date of the grant, vested immediately, and expire on December 23, 2029.

 

(3)

On October 5, 2017, Mr. Scowby was granted options to purchase 1,000,000 shares of our common stock. The options have an exercise price of $0.47 per share, which was the fair market value of our common stock on the date of grant, vested immediately, and expire on the 10th anniversary of the date of grant. On February 24, 2022, Mr. Scowby was granted options to purchase 50,000 shares of our common stock. The options have an exercise price of $0.41 per share, which was the fair market value of our common stock on the date of grant, vest ratably over 24 months from the date of grant, and expire on the 10th anniversary of the date of grant.

 

Equity Incentive Plans

 

2023 Stock Plan

 

Purpose. The purpose of our 2023 Omnibus Plan (the “2023 Stock Plan”) is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company.

 

The Company intends that securities issued pursuant to the 2023 Stock Plan be exempt from requirements of registration and qualification of such securities pursuant the exemptions afforded by Rule 701 promulgated under the Securities Act and any applicable exemptions under applicable state securities laws, and the 2023 Stock Plan shall be so construed. Further, the Company intends that awards granted pursuant to the 2023 Stock Plan be exempt from or comply with Section 409A of the U.S. Internal Revenue Code (the “Code”) (including any amendments or replacements of such section), and the 2023 Stock Plan shall be so construed.

 

Term of Plan. The 2023 Stock Plan shall continue in effect until its termination by the Board; provided, however, that all Awards shall be granted, if at all, within ten (10) years from December 11, 2023. “Award” means an Option, stock appreciation right, dividend equivalent right, restricted stock, restricted stock unit, or other right or benefit under the 2023 Stock Plan.

 

Administration of the Plan. The 2023 Stock Plan shall be administered by the Board or a committee designated by the Board. Awards are granted solely at the discretion of the Board. The administrator has the full and final power and authority, in its discretion, to determine, among other things, (i) the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of Common Stock to be subject to each Award, (ii) the type of Award granted, and (iii) the terms, conditions and restrictions applicable to each Award.

 

Persons Eligible for Awards. Awards may be granted only to employees, consultants and directors of the Company.

 

Shares Subject to the Plan. Subject to customary adjustments such as merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, the maximum aggregate number of shares of common stock that may be issued under the 2023 Stock Plan is 1,000,000 and consists of authorized but unissued or reacquired shares of Common Stock or any combination thereof. As of September 30, 2025, there were 448,929 shares of common stock available for issuance under the 2023 Stock Plan.

 

Stock Options. Options shall be evidenced by award agreements specifying the number of shares of common stock covered thereby, in such form as the Board shall from time to time establish. The exercise price for each Option shall be established in the discretion of the Board; provided, however, that (a) the exercise price per share for an Option shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option and (b) no Incentive Stock Option granted to a stockholder who owns more than ten percent (10%) of the Company’s voting stock shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Common Stock on the effective date of grant of the Option.

 

An Incentive Stock Option may be granted only to a person who, on the effective date of grant, is an Employee.

 

No Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option. No Incentive Stock Option granted to a stockholder who owns more than ten percent (10%) of the Company’s voting stock shall be exercisable after the expiration of five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement.

 

Tax Withholding. The Company shall have the right to deduct from any and all payments made under the 2023 Stock Plan, or to require the plan participant, through payroll withholding, cash payment or otherwise, to make adequate provision for, the federal, state, local and foreign taxes (including any social insurance), if any, required by law to be withheld by the Company with respect to an Award or the shares acquired pursuant thereto.

 

Rights as a Stockholder. A plan participant shall have no rights as a stockholder of the Company with respect to any shares covered by an Award until the date of the issuance of such shares, as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company.

 

Amendment or Termination of Plan. The Board may amend, suspend or terminate the 2023 Stock Plan at any time. However, without the approval of the Company’s stockholders obtained within the prior or following twelve (12) months, there shall be (a) no increase in the maximum aggregate number of shares of Common Stock that may be issued under the 2023 Stock Plan, except by operation of the adjustment provisions of the 2023 Stock Plan, (b) no change in the class of persons eligible to receive Awards or the exercise price of Options, (c) no extension of the expiration date of the 2023 Stock Plan, (d) amendment of an Award granted under the 2023 Stock Plan that reduces its exercise price per share, cancels and regrants new Awards with lower prices per share than the original prices per share of the cancelled Awards, or cancels any Awards in exchange for cash or the grant of replacement Awards with an exercise price that is less than the exercise price of the original Awards, essentially having the effect of a repricing, without approval by the Company’s stockholders, and (e) no other amendment of the 2023 Stock Plan that would require approval of the Company’s stockholders under any applicable law, regulation or rule, including the rules of any stock exchange or quotation system upon which the Stock may then be listed or quoted, and the Company.

 

Compensation Recovery Policy

 

Prior to the completion of this offering, we will adopt a Compensation Recovery Policy in accordance with the final rules regarding recovery of erroneously awarded executive officer compensation in connection with an accounting restatement, as adopted by the SEC in October 2022, and consistent with the corresponding NYSE American listing standards (together, the “Clawback Rules”). Pursuant to the Compensation Recovery Policy, and subject to certain limited exceptions in the Clawback Rules, in the event we are required to restate our financial statements, we are required to recoup erroneously awarded incentive-based compensation (as described in the Clawback Rules, including both cash and equity compensation) paid to any current or former executive officer (as described in the Clawback Rules) during the three completed fiscal years immediately prior to the date the accounting restatement was required. The amount recoverable is the amount of any incentive-based compensation received by the executive officer based on the financial statements prior to the restatement that exceeds the amount that such executive officer would have received had the incentive-based compensation been determined based on the financial restatement.

 

Equity Award Grant Practices

 

We grant equity awards on a discretionary basis in connection with certain events such as the commencement or anniversary of employment, promotion, high performance, or the closing of an acquisition. We do not grant awards in anticipation of the release of material nonpublic information, and we do not time the release of material nonpublic information for the purpose of affecting the value of any equity awards or executive compensation.

 

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

Other than the transaction disclosed below, and compensation arrangements, including employment, termination of employment and change in control arrangements, with our directors and executive officers, including those discussed in the sections entitled “Management” and “Executive Compensation,” there have been no transactions since January 1, 2025, including currently proposed transactions to which we have been or are to be a party in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets at December 31, 2023, December 31, 2024 and September 30, 2025, and in which any of our directors (including nominees), executive officers or beneficial holders of more than 5% of our capital stock, or any immediate family members of and any entities affiliated with any such person, had or will have a direct or indirect material interest.

 

Chris Bursey, our former President and Chief Executive Officer, incurred operating expenses on behalf of the company totaling $188,755 and $74,185 during the nine months ended September 30, 2025 and the year ended December 31, 2024, respectively. In addition, Mr. Bursey has personally guaranteed our March 2025 loan agreement for proceeds of $284,500, our March 2025 loan agreement for proceeds of $235,000, and our promissory note dated July 14, 2025. For more details of these loans, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.” On September 24, 2025, we entered into a release agreement with Mr. Bursey, pursuant to which, in consideration for the release of all claims, demands, actions, causes of actions, judgments, rights, fees, damages, debts, obligations, liabilities, and expenses by Mr. Bursey and his heirs, executors, representatives, administrators, agents, and assigns from the beginning of time up to and including the date of the agreement, we agreed to (i) make direct payments to Mr. Bursey’s creditors in the aggregate amount of $93,768.64, which Mr. Bursey represents and warrants are bona fide expenses incurred on behalf of our company; (ii) continue to employ Mr. Bursey as the Founder of our company for a salary of $10,000 per month through the completion of this offering and $20,000 per month during the first year following this offering; (iii) use a portion of the proceeds of this offering to repay outstanding balances under certain high-interest loan agreements and a bridge loan that Mr. Bursey has personally guaranteed; (iv) grant Mr. Bursey incentive stock options valued at $400,000, with 50% vesting on the one-year anniversary of this offering and 50% vesting on the 180th day thereafter; and (v) pay Mr. Bursey a bonus of $200,000 on the one-year anniversary of this offering, subject to the Board’s reasonable determination that he has satisfactorily performed his duties.

 

John Hubler, previously a member of the Company’s Board of Directors from April 2023 to September 2024, is a partner of BH IoT Group. For the years ended December 31, 2023 and 2024 and the nine months ended September 30, 2025, the Company recorded $180,000, $140,000 and nil, respectively, in professional fees in connection with its engagement of BH IoT Group to assist in building complete IoT bundled solutions. As of the date of this prospectus, no amounts have been accrued for such services in 2025.

 

Mike Yao Zhou, a member of the Company’s Board of Directors from May 2021 to March 2024 and since September 2025, is the owner of MYZ Corporate Relations, Ltd. For the years ended December 31, 2023 and 2024 and the nine months ended September 30, 2025, the Company recorded $104,000, nil and nil, respectively, in professional fees in connection with its engagement of MYZ Corporate Relations, Ltd. to provide consulting services on strategic matters related to business development opportunities, product development and marketing strategies. As of the date of this prospectus, no amounts have been accrued for such services in 2025.

 

In addition, during the six months ended June 30, 2025, a company controlled by a family member of Mr. Zhou advanced an aggregate of $136,100 to our company to pay off certain outstanding consulting fees. The advance is non-interest-bearing and repayable on demand. On July 14, 2025, we entered into a promissory note for $1,386,000 with the same related party, which replaced the aforementioned advance. This promissory note, structured as a bridge loan, features an Original Issue Discount of $126,000 and will be funded in up to six monthly tranches of up to $210,000 each. Each tranche matures 12 months from its respective advance date. The loan bears interest at a rate of 10% per annum. As of September 30, 2025, the Company had received three tranches of loan totaling $494,061. The carrying amount of the loan as of September 30, 2025 was $497,955, which included an accrued interest of $3,894. On July 1, 2025, we entered into a supply chain loan agreement with the same related party for up to $500,000. The loan carries a fixed interest amount of $30,000, payable annually in advance. The loan is personally guaranteed by William Espley. As of September 30, 2025, we had drawn $141,200 under this agreement and recorded interest expenses of $2,118.

 

 

Konstantin Lichtenwald, the Chief Financial Officer of the Company from April 2022 to May 2025 is a Managing Director of Zeus Capital Ltd and a principal of Zeus Accounting Solutions Corp., formerly known as Lichtenwald Professional Corp (“LPC”). For the years ended December 31, 2023 and 2024 and the nine months ended September 30, 2025, the Company recorded (i) $180,000, $180,000 and $75,000, respectively, in professional fees in connection with its engagement of Zeus Capital Ltd. to assist the Company with corporate finance and strategic initiatives and (ii) $156,250, $150,000 and $62,500, respectively, in professional fees in connection with its engagement of LPC to provide CFO service fees. As of the date of this prospectus, $137,500 has been accrued for such services in 2025.

 

David Diamond, previously a member of the Company’s Board of Directors from July 2022 to December 2023, provided additional service to the Company in 2023 in connection with its plans for NYSE up-listing. For the years ended December 31, 2023 and 2024, the Company recorded $52,500 and nil, respectively, in professional fees in connection with these services.

 

Julie Hajduk, previously a member of the Company’s Board of Directors from July 2022 to June 2025, is a principal at Purple Crown Communications Corp. For the year ended December 31, 2024, the Company recorded $10,000 in professional fees and $6,000 in marketing fees in connection with services provided by Ms. Hajduk. The total amount recorded for such services for the year ended December 31, 2023 was $22,500. As of the date of this prospectus, no amounts have been accrued for such services in 2025.

 

Ying Xu, our Chief Financial Officer, entered into an agreement with us on May 31, 2025 to provide us with interim CFO service fees for a fee of $12,500 per month. We recorded $50,000 of professional fees on the consolidated statement of operations for the nine months ended September 30, 2025 and owed $18,750 to Ms. Xu as of September 30, 2025.

 

Following completion of this offering, our audit committee will have the primary responsibility for reviewing and approving or disapproving “related party transactions,” which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed the lesser of $120,000 and one percent of our average total assets at year-end in which a related person has or will have a direct or indirect material interest. Related party transactions have the potential to create actual or perceived conflicts of interest between us and our directors, officers and significant stockholders or their immediate family members. Upon completion of this offering, our policy regarding transactions between us and related persons will provide that a related person is defined as a director, executive officer, nominee for director or greater than 5% beneficial owner of any class of our voting securities, in each case since the beginning of the most recently completed year, and any of their immediate family members. Our audit committee charter that will be in effect upon completion of this offering will provide that our audit committee shall review and approve or disapprove any related party transactions.

 

 

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

 

Our only outstanding class of voting securities is our common stock. The following table sets forth information known to us about the beneficial ownership of our common stock as of the date of this prospectus by (i) each current director and director nominee; (ii) each named executive officer; and (iii) all of our executive officers and directors as a group. Other than as set forth below, no person known to us beneficially owns 5% or more of the outstanding common stock as of the date of this prospectus.

 

Unless otherwise indicated in the footnotes, each person listed in the following table has sole voting power and investment power over the common stock listed as beneficially owned by that person. The percentages reflect beneficial ownership immediately prior to and immediately after the completion of this offering and are based on 1,958,080 shares of our common stock outstanding as of as of the date of this prospectus, [   ] shares of our Class A common stock outstanding after the completion of this offering, and 529,142 shares of our Class B common stock outstanding after the completion of this offering. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to options, convertible securities or other rights, held by such person that are currently exercisable or will become exercisable within 60 days of the date of this prospectus, are considered outstanding. We did not, however, deem such shares outstanding for the purpose of computing the percentage ownership of any other person. The percentages are adjusted to reflect the assumed sale of the shares of common stock, but without giving effect to the exercise of the representatives’ warrants, and the exercise of the underwriters’ option to purchase additional shares of our Class A common stock to cover overallotments, if any. Unless otherwise indicated in the footnotes, the address for each listed person is Direct Communication Solutions, Inc., 11021 Via Frontera, Suite C, San Diego, California 92127.

 

Named Executive Officers and Directors:		Number of shares of Common Stock Beneficially Owned Immediately Before the Offering				Ownership Percentage and Voting Power				Number of shares of Class A Common Stock Beneficially Owned Immediately After the Offering				Ownership Percentage				Voting Power				Number of shares of Class B Common Stock Beneficially Owned Immediately After the Offering				Ownership Percentage				Voting Power
William Espley(1)			155,908				6.2	%
Ying Xu			-				-
Eric Placzek(2)			98,712				3.8	%
David Scowby(3)			166,428				6.3	%
Mike Yao Zhou(4)			529,142				21.3	%
Shujie Zhong			-				-
Gunther Schuhmann			1,500				*
Dr. Michael Xing He			-				-
All directors and executive officers as a group (eight persons)			951,690				34.7	%
5% or Greater Stockholders:
Cede & Co.**			1,131,064				45.5	%
Superchain Investment One Limited(5)			528,571				21.3	%
CDS & Co.**			259,679				10.4	%

 

*

Less than 1%.

**

Cede & Co. and CDS & Co. are clearing houses and represent the interest of multiple shareholders and there is no way of knowing if anyone in particular beneficially holds over 10% of the voting rights attached to our shares.

(1)

Representing (i) 56,677 shares owned directly by William Espley, (ii) 42,088 of these shares held by White Tiger Venture Corp. a company controlled by William Espley, (iii) 42,857 held by White Tiger Management International Ltd., a company controlled by William Espley, and (iv) 14,286 shares underlying options held by William Espley, which can be exercised at his discretion.

(2)

Representing (i) 140 shares owned directly by Eric Placzek and (ii) 98,572 shares underlying options held by Eric Placzek, which can be exercised at his discretion.

(3)

Representing (i) 20,000 shares owned directly by David Scowby, (ii) 146,428 shares underlying options held by David Scowby, which can be exercised at his discretion.

(4)

Representing 571 shares owned directly by Mike Yao Zhou and 529,092 shares of common stock held by Superchain Investment One Limited, a British Virgin Islands company wholly owned by MCNM International Holding Limited, a British Virgin Islands company wholly owned by Mike Yao Zhou.

(5)

Representing 528,571 shares of common stock held by Superchain Investment One Limited, a British Virgin Islands company wholly owned by MCNM International Holding Limited, a British Virgin Islands company wholly owned by Mike Yao Zhou.

 

 

DESCRIPTION OF CAPITAL STOCK

 

The following is a summary of the material provisions of our capital stock, as well as other material terms of our certificate of incorporation and amended and restated bylaws as proposed to be in effect prior to the consummation of the offering. Reference is made to the more detailed provisions of, and the descriptions are qualified in their entirety by reference to, the certificate of incorporation and amended and restated bylaws, forms of which are filed with the SEC as exhibits to the registration statement of which this prospectus is a part, and applicable law.

 

General

 

Our authorized capital stock consists of 5,714,286 shares of common stock, par value $0.00001 per share, of which 2,487,222 shares are issued and outstanding as of the date of this prospectus, held by 118 stockholders of record. Upon shareholder approval at our annual general meeting to be held on December 8, 2025, (i) our authorized capital stock will consist of 500,000,000 shares of Class A common stock (each, a “Class A share”), par value $0.00001 per share, and 500,000,000 shares of Class B common stock (each, a “Class B share”), par value $0.00001 per share, (ii) all 2,487,222 shares of our currently issued and outstanding common stock will be designated as Class A common stock, and (iii) Mike Yao Zhou will receive a one-time right to elect to convert 571 Class A shares owned directly by him and 528,571 Class A shares owned indirectly by him into Class B shares on a one-for-one basis, which Mr. Zhou plans to exercise upon the completion of this offering. Upon completion of this offering, there will be [   ] shares of Class A common stock outstanding, after giving effect to the conversion of $[   ] outstanding under a convertible note into [   ] shares of common stock but not the exercise of the underwriters’ option to purchase additional shares to cover over-allotments, if any, and 529,142 shares of Class B common stock.

 

Common Stock

 

Dividend Rights

 

The holders of our common stock are entitled to dividends when and as declared by the Board from funds legally available therefor if, as and when determined by the Board in its sole discretion, subject to provisions of law, and any provision of our certificate of incorporation, as amended from time to time. The payment of dividends on the common stock will be a business decision to be made by our Board from time to time based upon results of our operations and our financial condition and any other factors that our Board considers relevant. Payment of dividends on the common stock may be restricted by loan agreements, indentures and other transactions entered into by us from time to time.

 

No dividend will be declared or paid on the Class B shares unless we simultaneously declare or pay, as applicable, equivalent dividends (on a per share basis) on the Class A shares. In the event of the payment of a dividend in the form of shares, stockholders of Class A shares shall receive Class A shares, unless otherwise determined by the Board.

 

Voting Rights

 

Holders of our common stock are entitled to notice of and to attend any meeting of the stockholders of our company, except a meeting of which only stockholders of another particular class or series of shares of our company have the right to vote. Stockholders of Class A shares are entitled to one vote in respect of each Class A share held at each such meeting. Upon (i) our company successfully raising aggregate financing of not less than $10,000,000 and (ii) the shares of our Class A common stock being approved for listing on the NYSE American LLC or NASDAQ and commencing trading on such exchange (collectively, the “Sunrise Conditions”), holders of Class B shares will be entitled to 20 votes per Class B share at each such meeting. Prior to the satisfaction of the Sunrise Conditions, stockholders of Class B shares are entitled to one vote in respect of each Class B share held at each such meeting. Notwithstanding the foregoing, at any meeting of stockholders of Class B shares called to consider a special separate resolution that would authorize or create shares of any class or series having preferences superior to or on a parity with the Class B share, each Class B share will entitle the holder to one vote and each fraction of a Class B share shall entitle the holder to the corresponding fraction of one vote.

 

Except as described above or except as provided in the DGCL, Class A share and Class B shares are equal in all respects and will vote together as if they were shares of a single class. In connection with any Change of Control Transaction as defined below requiring approval of the stockholders of Class A share and Class B shares under the DGCL, stockholders of Class A share and Class B shares are treated equally and identically, on a per share basis, unless (i) different treatment of the shares of each such class is approved by a majority of the votes cast by the stockholders of outstanding Class A share or their proxyholders in respect of a resolution approving such Change of Control Transaction, voting separately as a class at a meeting of the stockholders of that class called and held for such purpose or (ii) different treatment of the shares of each such class is approved by a majority of the votes cast by the stockholders of outstanding Class B share or their proxyholders in respect of a resolution approving such Change of Control Transaction, voting separately as a class at a meeting of the stockholders of that class called and held for such purpose. A “Change of Control Transaction” means an amalgamation, arrangement, recapitalization, business combination or similar transaction of our company, other than an amalgamation, arrangement, recapitalization, business combination or similar transaction that would result in (i) the voting securities of our company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the continuing entity or its direct or indirect parent) more than 50% of the total voting power of the voting securities of our company, the continuing entity or its direct or indirect parent, and more than 50% of the total number of our outstanding shares, the continuing entity or its direct or indirect parent, in each case as outstanding immediately after such transaction, and (ii) the stockholders of our company immediately prior to the transaction owning voting securities of our company, the continuing entity or its direct or indirect parent immediately following the transaction in substantially the same proportions (vis-a- vis each other) as such stockholders owned the voting securities of our company immediately prior to the transaction (provided that in neither event shall the exercise of any exchangeable shares of a subsidiary of our company that are exchangeable into shares of our company be taken into account in such determination).

 

 

Notwithstanding the foregoing, the stockholders of Class A shares are entitled to vote as a separate class, in addition to any other vote of shareholders that may be required, in respect of any alteration, repeal or amendment of our certificate of incorporation which would: (i) adversely affect the rights or special rights of the stockholders of Class A shares, (including an amendment to the terms of our certificate of incorporation which provide that any Class B shares sold or transferred to a person that is not Mike Yao Zhou, any corporation that is directly controlled by Mike Yao Zhou and any corporation directly controlled by a corporation directly controlled by Mike Yao Zhou and organized under the laws of the British Virgin Islands (collectively, a “Permitted Holder”) are automatically converted into Class A shares); or (ii) affect the stockholders of Class A shares and Class B shares differently, on a per share basis; or (iii) create any class or series of shares ranking equal to or senior to the Class A shares; and in each case such alteration, repeal or amendment shall not be effective unless a resolution in respect thereof is approved by a majority of the votes cast by stockholders of outstanding Class A shares.

 

There is no cumulative voting, which means that the holders of a majority of our voting shares will be able to elect all of the directors then standing for election.

 

Conversion Rights

 

If an offer to purchase Class B shares is, by reason of applicable securities legislation or the requirements of any stock exchange on which the Class B shares are listed, made to all or substantially all stockholders of Class B shares and is not made concurrently with an offer to purchase Class A shares that is identical to the offer to purchase Class B shares in terms of price per share and percentage of outstanding shares to be taken up exclusive of shares owned immediately prior to the offer by the offeror, and in all other material respects, and that has no condition attached other than the right not to take up and pay for shares tendered if no shares are purchased pursuant to the offer for Class B shares, each outstanding Class A share are convertible into one (1) Class B share at the option of each holder of Class A shares during the period commencing on the eighth day after such an offer is made and terminating on the last date on which stockholders of Class B shares may accept the offer.

 

Each Class B share is convertible, at the option of the holder thereof, at any time after the date of issuance of such share at the office of our company or any transfer agent for such shares, into one fully paid and non-assessable Class A share. In addition, upon the first date that any Class B share are held by a person other than by a Permitted Holder by way of transfer, acquisition, purchase and sale agreement or otherwise, the Permitted Holder which held such Class B share until such date, without any further action, will automatically be deemed to have exercised his, her or its rights to convert such Class B share into one fully paid and non- assessable Class A share.

 

Preemptive or Similar Rights

 

Holders of our common stock are not entitled to a right of first refusal to subscribe for, purchase or receive any part of any issue of shares, or bonds, debentures or other securities of our company now or in the future.

 

Liquidation Rights

 

In the event of the liquidation, dissolution or winding-up of our company, whether voluntary or involuntary, or in the event of any other distribution of assets of our company among its stockholders for the purpose of winding up its affairs, (i) the stockholders of Class A shares shall, subject to the prior rights of the stockholders of any shares of our company ranking in priority to the Class A shares, be entitled to participate ratably in the remaining property of our company along with all stockholders of Class B shares and other stockholders of Class A shares (on a per share basis), and (ii) the stockholders of Class B shares will, subject to the prior rights of the stockholders of any shares of our company ranking in priority to the Class B shares, be entitled to participate ratably along with all other stockholders of Class B shares and Class A share (on a per share basis).

 

Alteration to Rights

 

As long as any Class A shares remain outstanding, we will not, without the consent of the stockholders of the Class A shares by separate special resolution alter or amend our certificate of incorporation if the result would (i) prejudice or interfere with any right or special right attached to the Class A shares, or (ii) affect the rights or special rights of stockholders of Class A shares or Class B shares on a per share basis as provided herein.

 

 

As long as any Class B shares remain outstanding, we will not, without the consent of the stockholders of the Class B shares by separate special resolution alter or amend our certificate of incorporation if the result would (i) prejudice or interfere with any right or special right attached to the Class B shares, or (ii) affect the rights or special rights of stockholders of Class A shares or Class B shares on a per share basis as provided herein. In addition, we will not take any action which would authorize or create shares of any class or series having preferences superior to or on a parity with the Class B shares without the consent of the stockholders of a majority of the outstanding Class B shares expressed by special separate resolution.

 

Stock Split or Reverse Stock Split

 

No stock split or reverse stock split of the Class A shares shall occur unless, simultaneously, the Class B shares also undergo a stock split or reverse stock split or otherwise adjusted so as to maintain and preserve the relative rights of the stockholders of the shares of each of the said classes. No stock split and reverse stock split of the Class B shares shall occur unless, simultaneously, the Class A shares are split or reverse split or otherwise adjusted so as to maintain and preserve the relative rights of the stockholders of the shares of each of the said classes.

 

Transfer of Class B Shares

 

Except in accordance with the terms of any coattail agreement dated the same date as the Class B shares are first issued or as expressly provided herein, including upon conversion into Class A shares, no Class B share may be sold, transferred, assigned, pledged or otherwise disposed of without the written consent of the Board, and the Board is not required to give any reason for refusing to consent to any such sale, transfer or disposition.

 

Convertible Securities

 

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” for more details.

 

Annual Stockholders Meeting

 

Our Amended and Restated Bylaws provide that annual stockholders meetings will be held at a date, time and place, if any, as exclusively selected by our board of directors. To the extent permitted under applicable law, we may conduct meetings by remote communications, including by webcast. 

 

 

Indemnification of Directors and Officers

 

Our governing documents limit the liability of, and require us to indemnify, our directors to the fullest extent permitted by the DGCL. The DGCL permits a corporation to limit or eliminate a director’s personal liability to the corporation or the holders of its capital stock for breaches of directors’ fiduciary duties as directors. This limitation is generally unavailable for acts or omissions by a director which (i) were not in good faith, (ii) were the result of intentional misconduct or a knowing violation of law, (iii) the director derived an improper personal benefit from (such as a financial profit or other advantage to which the director was not legally entitled) or (iv) breached the director’s duty of loyalty. The DGCL also prohibits limitations on director liability under Section 174 of the DGCL, which relates to certain unlawful dividend declarations and stock repurchases. Our certificate of incorporation and amended and restated bylaws include provisions that eliminate, to the extent allowable under the DGCL, the personal liability of directors or officers for monetary damages for actions taken as a director or officer, as the case may be. Our certificate of incorporation and amended and restated bylaws also provide that we must indemnify and advance reasonable expenses to our directors and officers to the fullest extent authorized by the DGCL. We are also expressly authorized to carry directors’ and officers’ insurance for our directors, officers and certain employees for certain liabilities. We maintain insurance that insures our directors and officers against certain losses and which insures us against our obligations to indemnify the directors and officers.

 

There is currently no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is being sought.

 

Delaware Anti-Takeover Statute

 

We are subject to Section 203 of the Delaware General Corporation Law, which prohibits persons deemed to be “interested stockholders” from engaging in a “business combination” with a publicly held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the Board of Directors. A Delaware corporation may “opt out” of these provisions with an express provision in its original certificate of incorporation or an express provision in its certificate of incorporation or bylaws resulting from a stockholders’ amendment approved by at least a majority of the outstanding voting shares. We have not opted out of these provisions. As a result, mergers or other takeover or change in control attempts of us may be discouraged or prevented.

 

Choice of Forum for Certain Lawsuits

 

Our certificate of incorporation provides that (unless we consent in writing to the selection if an alternative forum) the Court of Chancery of the State of Delaware will be the exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a breach of fiduciary duty owed by any director, officer, employee or agent of the Company to us or to our stockholders; (iii) any action asserting a claim arising under the Delaware General Corporation Law or our certificate of incorporation or bylaws or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine.

 

This exclusive forum provision does not apply to actions in which the Court of Chancery in the State of Delaware concludes that an indispensable party is not subject to the jurisdiction of the Delaware courts, or for actions in which a federal court has assumed exclusive jurisdiction of a proceeding. The choice of forum provision in our certificate of incorporation does not waive our compliance with our obligations under the federal securities laws and the rules and regulations thereunder. Moreover, the provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act or by the Securities Act. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Further, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, both state and federal courts have jurisdiction to entertain claims under the Securities Act. We will propose an amendment to our certificate of incorporation at the next meeting of shareholders to clarify that the exclusive forum provision will not preclude or contract the scope of exclusive federal or concurrent jurisdiction for any actions brought under the federal securities laws and the rules and regulations thereunder, including the Securities Act and the Exchange Act, or otherwise limit the rights of any stockholder to bring any claim under such laws, rules or regulations in any United States federal district court of competent jurisdiction.

 

 

These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find the choice of forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

 

Provisions of Our Certificate of Incorporation and Bylaws to be Adopted and Delaware Law That May Have an Anti-Takeover Effect

 

Provisions of the DGCL and our certificate of incorporation and amended and restated bylaws could make it more difficult to acquire our company by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions, summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of these provisions outweigh the disadvantages of discouraging certain takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms and enhance the ability of our board of directors to maximize stockholder value. However, these provisions may delay, deter or prevent a merger or acquisition of us that a stockholder might consider is in its best interest, including those attempts that might result in a premium over the prevailing market price of our common stock.

 

Removal of Directors; Vacancies.

 

Vacancies and newly created directorships on the board of directors, whether resulting from an increase in the number of directors or the death, removal or resignation of a director, will be filled only by our board of directors and not by stockholders.

 

No Cumulative Voting.

 

The DGCL provides that a stockholder’s right to vote cumulatively in the election of directors does not exist unless the certificate of incorporation specifically provides otherwise. Our certificate of incorporation does not provide for cumulative voting.

 

Requirements for Advance Notification of Stockholder Meetings, Nominations and Proposals.

 

Our amended and restated bylaws provide that special meetings of the stockholders may be called only by or at the direction of the board of directors, the chairperson of our board or the chief executive officer. Our amended and restated bylaws prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control or management of our company.

 

Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as director. In order for any matter to be “properly brought” before a meeting, a stockholder will have to comply with such advance notice procedures and provide us with certain information. Our amended and restated bylaws allow the chairman of the meeting of stockholders to adopt rules and regulations for the conduct of meetings which may have the effect of precluding the conduct of certain business at a meeting if such rules and regulations are not followed. These provisions may also defer, delay or discourage a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to influence or obtain control of our company.

 

 

Stockholder Action by Written Consent.

 

The DGCL permits any action required to be taken at any annual or special meeting of the stockholders to be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of stock entitled to vote thereon were present and voted, unless the certificate of incorporation provides otherwise. Our certificate of incorporation precludes stockholder action by written consent.

 

Limitations on Liability and Indemnification of Officers and Directors.

 

The limitation of liability and indemnification provisions in our certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent we pay the settlement costs and damage awards against directors and officers pursuant to these indemnification provisions.

 

Preferred Stock

 

We have no shares of preferred stock outstanding or authorized.

 

Authorized but Unissued Shares

 

Our authorized but unissued shares of common stock will be available for future issuance without your approval. The DGCL does not require stockholder approval for any issuance of authorized shares. However, the applicable stock exchange listing requirements require stockholder approval of certain issuances equal to or exceeding 20% of the then-outstanding voting power or the then-outstanding number of shares of common stock. No assurances can be given that our shares will remain so listed. We may use additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock could render more difficult or discourage an attempt to obtain control of our company by means of a proxy contest, tender offer, merger or otherwise.

  

Listing

 

We have applied to list our Class A common stock on NYSE American under the symbol “DCSX.” Our common stock is currently traded on OTCQX under the symbol “DCSX,”, the CSE under the symbol “DCSI,” and the Frankfurt Stock Exchange under the symbol “7QU0.” On [   ], 2025, the last reported sale price for our stock on the OTCQX was $[    ] per share.

 

Transfer Agent and Registrar

 

The transfer agent and registrar for our common stock will be TSX Trust Company, at its principal office in Toronto, Ontario, Canada, and American Stock Transfer & Trust Company, LLC will be appointed to act as co-transfer agent and co-registrar for the purpose of registering our common stock and transfers of our common stock, at its principal office in Brooklyn, New York, United States.

  

 

SHARES ELIGIBLE FOR FUTURE SALE

 

Prior to this offering, shares of our common stock were quoted on the OTC Markets Group, Inc. OTCQX Marketplace under the symbol “DCSX,” the CSE under the symbol “DCSI,” and the Frankfurt Stock Exchange under the symbol “7QU0.” Future sales of substantial amounts of our common stock in the public market, or the perception that such sales may occur, could adversely affect market prices prevailing from time to time. Further, because only a limited number of shares will be available for sale shortly after this offering due to existing contractual and legal restrictions on resale as described below, there may be sales of substantial amounts of our common stock in the public market after the restrictions lapse. This may adversely affect the prevailing market price and our ability to raise equity capital in the future.

 

Upon completion of this offering, [   ] shares of Class A common stock and 529,142 shares of Class B common stock will be outstanding. Of these shares, [   ] shares of our Class A common stock (assuming no exercise of the underwriters’ option to purchase additional shares, and no exercise or conversion of outstanding options, warrants, or other securities convertible into or exchangeable for shares of our common stock) sold in this offering will be freely transferable without restriction or further registration under the Securities Act, except for any shares purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act. Of the remaining shares of our common stock that will be outstanding, [   ] shares of Class A common stock and 529,142 shares of Class B common stock are “restricted shares” as defined in Rule 144. Restricted shares may be sold in the public market only if registered under the Securities Act or if they qualify for an exemption from registration under Rule 144. As a result of the contractual 180-day lock-up period described below, the shares subject to lock-up agreements will be available for sale in the public market only after 180 days from the date of this prospectus (generally subject to resale limitations).

 

Rule 144

 

In general, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell such securities, provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, the sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or any time during the 90 days preceding, the sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of the following:

 

●

1% of the number of shares of our common stock then outstanding, which will equal approximately [   ] shares immediately after this offering; or

 

●

the average weekly trading volume of our common stock on NYSE American during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;

 

provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Such sales both by affiliates and by non-affiliates must also comply with the manner of sale and notice provisions of Rule 144 to the extent applicable.

 

Rule 701

 

Rule 701 generally allows a stockholder who purchased shares of our capital stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701.

 

Lock-up Agreements

 

The Company and any successors of the Company, each of our directors and executive officers, and our 5% and greater stockholders, have agreed not to or are otherwise restricted in their ability to, subject to certain limited exceptions, (1) offer, pledge, sell, contract to sell, grant any option to purchase, or otherwise dispose of our common stock or any securities convertible into or exchangeable or exercisable for common stock, or to enter into any hedge or other arrangement or any transaction that transfers, directly or indirectly, the economic consequence of ownership of the shares of our common stock, (2) file or cause to be filed any registration statement with the SEC relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or (3) enter into any swap or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of common stock, subject to certain exceptions, in the case of the Company and any successors of the Company for a period of three months after the closing of this offering, and in the case of our directors and executive officers and our 5% and greater stockholders for a period of six months after the closing of this offering, without the prior written consent of Chaince Securities, LLC and Revere Securities LLC, as representatives of the underwriters. See “Underwriting—Lock-up Agreements.” The underwriters do not have any present intention or arrangement to release any shares of our common stock subject to lock-up arrangements prior to the expiration of the three or six months lock-up period.

 

 

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

 

The following is a summary of the material U.S. federal income tax consequences relating to the acquisition, ownership, and disposition of common stock acquired pursuant to this offering by non-U.S. holders (as defined below). This summary deals only with common stock held as a capital asset (within the meaning of Section 1221 of the Code) and does not discuss the U.S. federal income tax consequences applicable to a non-U.S. holder that is subject to special treatment under U.S. federal income tax laws, including, but not limited to: a dealer in securities or currencies; a broker-dealer; a financial institution; a qualified retirement plan, individual retirement plan, or other tax-deferred account; a regulated investment company; a real estate investment trust; a tax-exempt organization; an insurance company; a person holding common stock as part of a hedging, integrated, conversion, or straddle transaction or a person deemed to sell common stock under the constructive sale provisions of the Code; a trader in securities that has elected the mark-to-market method of tax accounting; an accrual method taxpayer subject to special tax accounting rules under Section 451(b) of the Code; an entity that is treated as a partnership for U.S. federal income tax purposes; a person that received such common stock in connection with services provided; qualified foreign pension funds as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds; a corporation that is subject to the accumulated earnings tax; a person that owns or has owned, actually or constructively, more than 5% of our common stock; a corporation organized outside the United States, any state thereof or the District of Columbia that is nonetheless treated as a U.S. taxpayer for U.S. federal income tax purposes; a person that is not a non-U.S. holder; a “controlled foreign corporation;” a “passive foreign investment company;” or a U.S. expatriate and former citizens or long-term residents of the United States.

 

This summary is based upon provisions of the Code, its legislative history, applicable U.S. Treasury regulations promulgated thereunder, published rulings, and judicial decisions, all as in effect as of the date hereof. We have not sought, and will not seek, any ruling from the Internal Revenue Service, or IRS, with respect to the tax consequences discussed herein, and there can be no assurance that the IRS will not take a position contrary to the tax consequences discussed below or that any position taken by the IRS would not be sustained. Those authorities may be repealed, revoked, or modified, perhaps retroactively, or may be subject to differing interpretations, which could result in U.S. federal income tax consequences different from those discussed below. This summary does not address all aspects of U.S. federal income tax, does not deal with all tax considerations that may be relevant to stockholders in light of their personal circumstances, and does not address any state, local, foreign, gift, Medicare, estate (except to the limited extent set forth herein), or alternative minimum tax considerations.

 

For purposes of this discussion, a “U.S. holder” is a beneficial holder of common stock that is for U.S. federal income tax purposes: an individual citizen or resident of the United States; a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; an estate the income of which is subject to U.S. federal income taxation regardless of its source; or a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) was in existence on August 20, 1996 and has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

 

For purposes of this discussion, a “non-U.S. holder” is a beneficial owner of common stock that is neither a U.S. holder nor a partnership (or any other entity or arrangement that is treated as a partnership) for U.S. federal income tax purposes regardless of its place of organization or formation. If a partnership (or an entity or arrangement that is treated as a partnership for U.S. federal income tax purposes) holds common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding common stock is urged to consult its own tax advisors.

 

THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME, ESTATE, AND OTHER TAX CONSEQUENCES OF ACQUIRING, OWNING, AND DISPOSING OF OUR COMMON STOCK IN LIGHT OF THEIR SPECIFIC SITUATIONS, AS WELL AS THE TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, OR NON-U.S. TAX LAWS AND ANY OTHER U.S. FEDERAL TAX LAWS (INCLUDING THE U.S. FEDERAL ESTATE AND GIFT TAX LAWS) OR UNDER ANY APPLICABLE INCOME TAX TREATY.

 

Distributions on Our Common Stock

 

Distributions with respect to common stock, if any, generally will constitute dividends for U.S. federal income tax purposes to the extent paid out of current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Any portion of a distribution in excess of current or accumulated earnings and profits will be treated as a return of capital and will first be applied to reduce the holder’s tax basis in its common stock, but not below zero. Any remaining amount will then be treated as gain from the sale or exchange of the common stock and will be treated as described under “—Disposition of Our Common Stock” below.

 

Distributions treated as dividends that are paid to a non-U.S. holder, if any, with respect to shares of our common stock, will be subject to U.S. federal withholding tax at a rate of 30% (or such lower rate as may be specified in an applicable income tax treaty, provided the non-U.S. Holder furnishes a valid IRS Form W-8BEN or IRS Form W-8BEN-E (or applicable successor form or other documentation) to us or our paying agent certifying qualification for the lower treaty rate) of the gross amount of the dividends unless the dividends are effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States subject to the discussion below regarding foreign accounts and backup withholding. A non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaties.

 

 

 

If a non-U.S. holder is engaged in a trade or business in the United States and dividends with respect to the common stock are effectively connected with the conduct of that trade or business and, if required by an applicable income tax treaty, are attributable to a U.S. permanent establishment, then although the non-U.S. holder will generally be exempt from the 30% U.S. federal withholding tax, provided certain certification requirements are satisfied, the non-U.S. holder will be subject to U.S. federal income tax on those dividends on a net income basis at regular graduated U.S. federal income tax rates in the same manner as if such holder were a resident of the United States. Any such effectively connected income received by a foreign corporation may, under certain circumstances, be subject to an additional branch profits tax equal to 30% (or lower applicable income tax treaty rate) of its effectively connected earnings and profits for the taxable year, as adjusted under the Code. To claim the exemption from withholding with respect to any such effectively connected income, the non-U.S. holder must generally furnish to us or our paying agent a properly executed IRS Form W-8ECI (or applicable successor form). In the case of a non-U.S. holder that is an entity, Treasury regulations and the relevant tax treaty provide rules to determine whether, for purposes of determining the applicability of a tax treaty, dividends will be treated as paid to the entity or to those holding an interest in that entity. If a non-U.S. holder holds stock through a financial institution or other agent acting on the holder’s behalf, the holder will be required to provide appropriate documentation to such agent. Such holder’s agent will then be required to provide certification to us or our paying agent.

 

Disposition of Our Common Stock

 

Subject to the discussion below regarding backup withholding, a non-U.S. holder generally will not be subject to U.S. federal income tax on any gain from a sale, exchange or other disposition of our stock unless:

 

	(a)	that gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment maintained by the non-U.S. holder);
	(b)	the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or
	(c)	we are or have been a “United States real property holding corporation” within the meaning of Code Section 897(c)(2) for U.S. federal income tax purposes at any time during the shorter of the five-year period preceding the date of disposition or the holder’s holding period for our common stock, and certain other requirements are met.

 

If a non-U.S. holder is described in clause (a) of the preceding paragraph, the non-U.S. holder will generally be subject to tax on the net gain derived from the disposition at the regular graduated U.S. federal income tax rates in the same manner as if such non-U.S. holder were a U.S. person, unless an applicable income tax treaty provides otherwise. In addition, a non-U.S. holder that is a corporation may be subject to the branch profits tax at a rate equal to 30% (or lower applicable income tax treaty rate) of its effectively connected earnings and profits, as adjusted for certain items.

 

If the non-U.S. holder is an individual described in clause (b) of the preceding paragraph, the non-U.S. holder will generally be subject to a flat 30% tax on the gain derived from the disposition, which may be offset by U.S.-source capital losses even though the non-U.S. holder is not considered a resident of the United States, provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.

 

If the non-U.S. holder is described in clause (c) of the preceding paragraph, the non-U.S. holder will generally be subject to U.S. federal income tax in the same manner as gain that is effectively connected with the conduct of a U.S. trade or business, except that the branch profits tax generally will not apply. Although there can be no assurance, we believe that we are not, and we do not anticipate becoming, a United States real property holding corporation for U.S. federal income tax purposes. Even if we are treated as a United States real property holding corporation, gain realized by a non-U.S. holder on a disposition of our common stock will not be subject to U.S. federal income tax so long as (1) the non-U.S. holder owned, directly, indirectly and constructively, no more than five percent of our common stock at all times within the shorter of (x) the five-year period preceding the disposition, or (y) the holder’s holding period, and (2) our common stock is regularly traded on an established securities market. There can be no assurance that our common stock will continue to qualify as regularly traded on an established securities market. If any gain on your disposition is taxable because we are a United States real property holding corporation and your ownership of our common stock exceeds five percent, you will be taxed on such disposition generally in the manner applicable to U.S. persons and in addition, a purchaser of your common stock may be required to withhold tax with respect to that obligation. Such withheld tax is not an additional tax but merely an advance payment, which may be credited against the tax liability of persons subject to such withholding or refunded to the extent it results in an overpayment of tax and the appropriate information is timely supplied to the IRS.

 

Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

 

U.S. Federal Estate Tax

 

The estate of a nonresident alien individual is generally subject to U.S. federal estate tax on property it is treated as the owner of, or has made certain life transfers of, having a U.S. situs. Because we are a U.S. corporation, our common stock will be U.S. situs property and therefore will be included in the taxable estate of a nonresident alien decedent for U.S. federal estate tax purposes, unless an applicable estate tax treaty between the United States and the decedent’s country of residence provides otherwise.

 

 

Information Reporting and Backup Withholding Tax

 

We report to our non-U.S. holders and the IRS certain information with respect to any dividends we pay on our common stock, including the amount of dividends paid during each fiscal year, the name and address of the recipient, and the amount, if any, of tax withheld. All distributions to holders of common stock are subject to any applicable withholding. Information reporting requirements apply even if no withholding was required because the distributions were effectively connected with the non-U.S. holder’s conduct of a U.S. trade or business or withholding was reduced by an applicable income tax treaty. This information also may be made available under a specific treaty or agreement with the tax authorities in the country in which the non-U.S. holder resides or is established. Under U.S. federal income tax law, interest, dividends, and other reportable payments may, under certain circumstances, be subject to “backup withholding” at the then applicable rate (currently, 24%). Backup withholding, however, generally will not apply to distributions on our common stock to a non-U.S. holder, provided the non-U.S. holder furnishes to us or our paying agent the required certification as to its non-U.S. status, such as by providing a valid IRS Form W-8BEN, IRS Form W-8BEN-E or IRS Form W-8ECI, or otherwise establishes an exemption. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person that is not an exempt recipient. Backup withholding is not an additional tax but merely an advance payment, which may be credited against the tax liability of persons subject to backup withholding or refunded to the extent it results in an overpayment of tax and the appropriate information is timely supplied to the IRS.

 

Information reporting and backup withholding will generally apply to the proceeds of a disposition of our common stock by a non-U.S. holder effected by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a non-U.S. holder and satisfies certain other requirements, or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds to a non-U.S. holder where the transaction is effected outside the United States through a non-U.S. office of a broker. However, information reporting but not backup withholding will apply in a manner similar to dispositions effected through a U.S. office of a broker, if a non-U.S. holder sells our common stock through a non-U.S. office of a broker that has certain connections with the United States.

  

Withholding on Payments to Foreign Accounts

 

Certain withholding taxes may apply under Section 1471 through 1472 of the Code (which are commonly referred to as the Foreign Account Tax Compliance Act (“FATCA”)) to certain types of payments made to “foreign financial institutions” (as specially defined under these rules) and certain other non-U.S. entities if certification, information reporting and other specified requirements are not met. A 30% withholding tax may apply to “withholdable payments” if they are paid to a foreign financial institution or to a non-financial foreign entity, unless (a) the foreign financial institution undertakes certain diligence and reporting obligations and other specified requirements are satisfied, (b) the non-financial foreign entity either certifies it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner and other specified requirements are satisfied or (c) the foreign financial institution or non-financial foreign entity otherwise qualified for an exemption from these rules.

 

“Withholdable payment” generally means any payment of interest, dividends, rents, and certain other types of generally passive income if such payment is from sources within the United States. U.S. Treasury Regulations proposed in December 2018 (and upon which taxpayers and withholding agents are entitled to rely until final regulations are issued) eliminate possible withholding under these rules on the gross proceeds from any sale or other disposition of our common stock, previously scheduled to apply beginning January 1, 2019. If the payee is a foreign financial institution, it must enter into an agreement with the U.S. Treasury requiring, among other things, that it undertake to identify accounts held by certain U.S. persons or U.S.-owned foreign entities, annually report certain information about such accounts and withhold 30% on payments to account holders whose actions prevent it from complying with these reporting and other requirements, or comply with comparable requirements under an applicable inter-governmental agreement between the United States and the foreign financial institution’s home jurisdiction. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. If an investor does not provide us with the information necessary to comply with these rules, it is possible that distributions to such investor that are attributable to withholdable payments, such as dividends, will be subject to the 30% withholding tax.

 

Holders should consult their own tax advisers regarding the implications of FATCA on their investment in shares of our common stock.

 

 

UNDERWRITING

 

Chaince Securities, LLC (“Chaince”) and Revere Securities LLC are acting as representatives of the underwriters. Subject to the terms and conditions of an underwriting agreement between us and the representatives, we have agreed to sell to each underwriter named below, and each underwriter named below has severally agreed to purchase, at the public offering price less the underwriting discounts set forth on the cover page of this prospectus, the number of shares of Class A common stock listed next to its name in the following table:

  

Underwriters:		Number of Shares
Chaince Securities, LLC
Revere Securities LLC
Total

 

The underwriting agreement provides that the obligations of the underwriters to pay for and accept delivery of the shares of Class A common stock offered by this prospectus are subject to various conditions and representations and warranties, including the approval of certain legal matters by their counsel and other conditions specified in the underwriting agreement. The shares of Class A common stock are offered by the underwriters, subject to prior sale, when, as and if issued to and accepted by them. The underwriters reserve the right to withdraw, cancel or modify the offer to the public and to reject orders in whole or in part. The underwriters are obligated to take and pay for all of the shares of Class A common stock offered by this prospectus if any such securities are taken, other than those securities covered by the over-allotment option described below. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ over-allotment option described below unless and until such time as it elects to exercise such option. The underwriters will offer the shares to the public at the initial public offering price set forth on the cover of this prospectus and to selected dealers at the initial public offering price less a selling concession not in excess of $[ ] per share. After this offering, the initial public offering price, concession, and reallowance to dealers may be reduced by the representative. No change in those terms will change the amount of proceeds to be received by us as set forth on the cover of this prospectus.

 

We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, liabilities arising from breaches of representations and warranties contained in the underwriting agreement, and to contribute to payments the underwriters may be required to make in respect thereof.

 

Over-Allotment Option

 

We have granted the underwriters an over-allotment option. This option, which is exercisable for up to 45 days after the closing of this offering, permits the underwriters to purchase up to an aggregate of up to [   ] additional shares of Class A common stock, representing 15% of the shares of Class A common stock sold in the offering. The purchase price to be paid per additional share of common stock shall be equal to the public offering price of one share of common stock, less the underwriting discount. The underwriters may exercise this option in full or in part at any time and from time to time within such 45 days period.

 

To the extent this option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase, and we will be obligated to sell the additional shares in about the same percentage of the additional shares of Class A common stock as the number listed next to such underwriter’s name in the preceding table bears to the total number of shares of Class A common stock listed next to the name of each underwriter in the preceding table.

 

Discounts, Commissions and Reimbursement

 

The underwriters propose initially to offer the shares of Class A common stock to the public at the public offering price set forth on the cover page of this prospectus. Any shares of Class A common stock sold by the underwriters to securities dealers may be sold at a discount of up to $            per share (7.5% of the public offering price) from the public offering price. If all of the shares of Class A common stock offered by us are not sold at the public offering price, the underwriters may change the offering price and other selling terms by means of a supplement to this prospectus.

 

The following table shows the public offering price, underwriting discounts and commissions and proceeds, before expenses, to us. The information assumes either no exercise or full exercise of the over-allotment option we granted to the representatives of the underwriters.

 

Per Share

Total Without Over-Allotment Option

Total With Full Over-Allotment Option

Public offering price

$

$

$

Underwriting discounts and commissions (7.5%)

$

$

$

Proceeds, before expenses to us

$

$

$

Non-accountable expense allowance (1.0%)(1)

$

$

$

 

We have agreed to pay a non-accountable expense allowance to the underwriters equal to 1.0% of the gross proceeds received at the completion of the offering. Additionally, we have agreed to pay the representatives an advisory fee of $50,000 ($20,000 upon signing of certain engagement letter agreement dated October 1, 2025 (the “Engagement Letter”), and the remaining $30,000 to be paid upon the first public filing of the registration statement of this prospectus forms a part.

 

 

We have agreed to be responsible for and pay all reasonable, necessary and accountable out-of-pocket expenses relating to the offering, including, without limitation (i) all filing fees and communication expenses relating to the registration of the securities to be sold in the offering (including the securities subject to the underwriters’ over-allotment option) with the SEC; (ii) all filing fees and expenses associated with the review of the offering by FINRA; (iii) all fees and expenses relating to the listing of the shares of our common stock to be sold in the offering (including the shares of Class A common stock issuable upon exercise of the representatives’ warrants) on NYSE American, or such other national securities exchange on which our common stock may be listed, including any fees charges by The Depository Trust for new securities; (iv) all fees, expenses and disbursements relating to background checks of our officers, directors and related entities; (v) all fees, expenses and disbursements relating to the registration or qualification of such shares of Class A common stock under the “blue sky” securities laws of such states, if applicable, as the representatives may reasonably designate; (vi) all fees, expenses and disbursements relating to the registration, qualification or exemption of such shares of Class A common stock under the securities laws of such foreign jurisdictions as the representatives may reasonably designate; (vii) the costs of all mailing and printing of the underwriting documents (including, without limitation, the underwriting agreement, any blue sky surveys and, if appropriate, any agreement among underwriters, selected dealers’ agreement, underwriters’ questionnaire and power of attorney), registration statements, prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final prospectuses as the representatives may reasonably deem necessary; (viii) the costs and expenses of a public relations firm; (ix) the costs of preparing, printing and delivering certificates representing the common stock in the event that we determine to deliver certificated shares of Class A common stock; (x) fees and expenses of the transfer agent for the shares of Class A common stock; (xi) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from us to the underwriters; (xii) the costs associated with post-Closing advertising the offering in the national editions of the Wall Street Journal and New York Times; (xiii) the costs associated with bound volumes of the public offering materials as well as commemorative mementos and Lucite tombstones, each of which we or our designee will provide within a reasonable time after the closing of this offering in such quantities as the representatives may reasonably request; (xiv) the fees and expenses of our accountants; (xv) the fees and expenses of our legal counsel and other agents and representatives; (xvi) the fees and expenses of the underwriter’s legal counsel; (xvii) the cost associated with the underwriters’ use of Ipreo’s book-building, prospectus tracking and compliance software for the offering; (xviii) data services and communications expenses, (xix) the underwriters’ actual accountable “road show” expenses and (xx) the representatives’ market making and trading, and clearing firm settlement expenses for the offering.

 

We have agreed to reimburse the underwriters, promptly when invoiced, for all of its reasonable, out-of-pocket expenses (including, but not limited to, travel, due diligence expenses, reasonable fees and expenses of its legal counsel, roadshow and background check on the Company’s principals) in connection with the performance of its services hereunder not to exceed an aggregate of $250,000, regardless of whether the offering occurs, provided that any expense over $5,000 shall require prior written or email approval of the Company. Upon the earlier of the termination of the Engagement Letter or the closing of the offering, we have agreed to pay promptly in cash any unreimbursed expenses that have accrued as of such date. Any expense advancement will be returned to us to the extent the representative’s out-of-pocket accountable expenses are not actually incurred in accordance with FINRA Rule 5110(g)(4)(A).

 

Our total estimated expenses of the offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding underwriting discounts and commissions, are approximately $[   ].

  

Representative’s Warrants

 

Upon closing of this offering, we have agreed to issue to the representatives, or their designees, the Warrants equal to five percent (5%) of the total numbers of shares of Class A common stock issued in this offering (including any shares of Class A common stock sold as a result of the exercise of the underwriters’ over-allotment option), exercisable at any time and from time to time, in whole or in part, during the two and a half-year period commencing six months immediately following the date of commencement of sales of the securities issued in this offering, at a per share price equal to one hundred twenty percent (120%) of the initial public offering price, for nominal consideration and may be exercised on a cashless basis.

 

The Warrants and the shares of Class A common stock underlying the Warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to FINRA Rule 5110(e)(1)(A). The representative and its affiliates or employees (or permitted assignees under FINRA Rule 5110(e)(1)) may not sell, transfer, assign, pledge, or hypothecate the Warrants or the shares of Class A common stock underlying the Warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the Warrants or the underlying shares for a period of 180 days following the date of commencement of sales of the public offering except as permitted by FINRA Rule 5110(e)(2), except that (i) they may be transferred, in whole or in part, to any member participating in the offering and its officers or partners, its registered persons or affiliates, if all transferred securities remain subject to the lock-up restriction for the remainder of the 180-day lock-up period pursuant to FINRA Rule 5110(e)(2)(B)(i), (ii) they may be exercised or converted, in whole or in part, if all securities received remain subject to the lock-up restriction for the for the remainder of the 180-day lock-up period, (iii) they may be transferred back to the issuer in a transaction exempt from registration with the SEC, or other exceptions as provided under FIRNA Rule 5110(e)(2). The representative and its affiliates or employees will also be entitled to one demand registration of the sale of the shares underlying the Warrants at our expense and unlimited “piggyback” registration rights for a period of three years at our expenses. The Warrants will provide for adjustment in the number and price of such warrants and the shares underlying such warrants in the event of recapitalization, merger, or other structural transaction to prevent mechanical dilution. The piggyback registration right provided will not be greater than seven years from the date of commencement of sales of the offering in compliance with FINRA Rule 5110(g)(8)(D).

 

 

We will bear all fees and expenses attendant to registering the shares of Class A common stock issuable upon exercise of the Warrants, other than underwriting discounts and commissions incurred and payable by the holders. The exercise price and number of shares of Class A common stock issuable upon exercise of the Warrants may also be adjusted in certain circumstances, including in the event of a share dividend, extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation. The warrant exercise price and/or underlying shares may also be adjusted for issuances of shares of Class A common stock at a price below the warrant exercise price.

 

Lock-Up Agreements

 

Pursuant to “lock-up” agreements, the Company and any successors of the Company, our executive officers and directors, and holders of 5% or greater of our outstanding shares of common stock, have agreed, without the prior written consent of the representatives not to (1) directly or indirectly, offer to sell, sell, pledge or otherwise transfer or dispose of any of shares of (or enter into any transaction or device that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) our common stock, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of our common stock, (3) file or make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities of ours or publicly disclose the intention to do any of the foregoing, subject to customary exceptions, for a period of six (6) months in the case of our executive officers and directors and holders of 5% or greater of our outstanding shares of common stock, and thee (3) months in the case of the Company and any successors of the Company , after the closing date of this offering.

 

Right of First Refusal

 

Until six months from the closing date of this offering, Chaince will have an irrevocable right of first refusal to provide investment banking services to the Company on an exclusive basis in the matters below, at Chaince’s sole discretion, for each and every future public and private equity and debt offering, including all equity linked financings, during such six month period for us, or any successor to our Company or any subsidiary of our Company, on terms and conditions customary to Chaince. Chaince will have the sole right to determine whether or not any other broker-dealer will have the right to participate in any such offering and the economic terms of any such participation. For these purposes, investment banking services shall include, (a) acting as lead or joint-lead manager for any underwritten public offering; (b) acting as lead or joint book-runner and/or lead or joint placement agent, initial purchaser in connection with any private offering of securities of the Company; and (c) acting as financial advisor in connection with any sale or other transfer by the Company, directly or indirectly, of a majority or controlling portion of its capital stock or assets to another entity, any purchase or other transfer by another entity, directly or indirectly, of a majority or controlling portion of the capital stock or assets of the Company, and any merger or consolidation of the Company with another entity. In compliance with FINRA Rule 5110(g)(6)(A), in no circumstances the right of first refusal shall have a duration of more than three years from the commencement of sales of the public offering or the termination date of the engagement between the Company and Chaince. The right of first refusal granted hereunder may be terminated by the Company for “Cause,” which shall mean a material breach by Chaince of the Engagement Letter or a material failure by Chaince to provide the services as contemplated by the Engagement Letter.

 

Discretionary Accounts

 

The underwriters do not intend to confirm sales of the shares of Class A common stock offered hereby to any accounts over which they have discretionary authority.

 

NYSE American Listing

 

We have applied to list our common stock on NYSE American under the symbol “DCSX”. No assurance, however, can be given that our application will be approved. This offering will only occur if a national securities exchange approves the listing of our common stock.

 

Determination of Offering Price

 

The public offering price of the common stock we are offering was negotiated between us and the underwriters. Factors considered in determining the public offering price of the common stock include our history and prospects, the stage of development of our business, our business plans for the future and the extent to which they have been implemented, an assessment of our management, general conditions of the securities markets at the time of the offering and such other factors as were deemed relevant.

 

 

Other Relationships

 

From time to time, certain of the underwriters and/or their affiliates may in the future provide, various investment banking and other financial services for us for which they may receive customary fees. In the course of their businesses, the underwriters and their affiliates may actively trade our securities or loans for their own account or for the accounts of customers, and, accordingly, the underwriters and their affiliates may at any time hold long or short positions in such securities or loans. Except for services provided in connection with this offering, no underwriter has provided any investment banking or other financial services to us during the 180-day period preceding the date of this prospectus and we do not expect to retain any underwriter to perform any investment banking or other financial services for at least 90 days after the date of this prospectus.

 

Price Stabilization, Short Positions and Penalty Bids

 

In order to facilitate the offering of our common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of our common stock. In connection with the offering, the underwriters may purchase and sell our common stock in the open market. These transactions may include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriters of a greater number of securities than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional securities in the offering. The underwriters may close out any covered short position by either exercising the over-allotment option to purchase securities or purchasing securities in the open market. In determining the source of securities to close out the covered short position, the underwriters will consider, among other things, the price of securities available for purchase in the open market as compared to the price at which they may purchase securities through the over-allotment option to purchase securities. “Naked” short sales are sales in excess of the over-allotment option to purchase securities. The underwriters must close out any naked short position by purchasing securities in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our securities in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of securities made by the underwriters in the open market before the completion of the offering.

 

The underwriters may also impose a penalty bid. This occurs when a particular underwriter or dealer repays selling concessions allowed to it for distributing common stock in this offering because the underwriter repurchases the common stock in stabilizing or short covering transactions.

 

Finally, the underwriters may bid for, and purchase, securities in market making transactions, including “passive” market making transactions as described below.

 

These activities may stabilize or maintain the market price of our common stock at a price that is higher than the price that might otherwise exist in the absence of these activities. The underwriters are not required to engage in these activities, and may discontinue any of these activities at any time without notice. These transactions may be effected on the national securities exchange on which shares of our common stock are traded, in the over-the-counter market, or otherwise.

 

In connection with this offering, the underwriters or their affiliates may engage in passive market making transactions in our securities immediately prior to the commencement of sales in this offering, in accordance with Rule 103 of Regulation M under the Exchange Act. Rule 103 generally provides that:

 

	●	a passive market maker may not effect transactions or display bids for our common stock in excess of the highest independent bid price by persons who are not passive market makers;
	●	net purchases by a passive market maker on each day are generally limited to 30% of the passive market maker’s average daily trading volume in our common stock during a specified two-month prior period or 200 shares of Class A common stock, whichever is greater, and must be discontinued when that limit is reached; and
	●	passive market making bids must be identified as such.

 

Indemnification

 

We have agreed to indemnify the underwriters against liabilities relating to this offering arising under the Securities Act and the Exchange Act, liabilities arising from breaches of some or all of the representations and warranties contained in the underwriting agreement, and to contribute to payments that the underwriters may be required to make for these liabilities.

 

Electronic Distribution

 

This prospectus in electronic format may be made available on websites or through other online services maintained by one or more of the underwriters, or by their affiliates. Other than this prospectus in electronic format, the information on any underwriter’s website and any information contained in any other website maintained by an underwriter is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors.

 

 

Selling Restrictions

 

No action has been taken in any jurisdiction (except in the United States) that would permit a public offering of our securities, or the possession, circulation or distribution of this prospectus or any other material relating to us or our securities in any jurisdiction where action for that purpose is required. Accordingly, our securities may not be offered or sold, directly or indirectly, and this prospectus or any other offering material or advertisements in connection with our securities may be distributed or published, in or from any country or jurisdiction, except in compliance with any applicable rules and regulations of any such country or jurisdiction. 

 

Abu Dhabi Global Market (“ADGM”). This prospectus relates to an Exempt Offer as that term is defined in Rule 4.3.1 of the Markets Rulebook of the Financial Services Regulatory Authority (“FSRA”). This prospectus is intended for distribution only to persons of a type specified in 4.3.1 of the FSRA Markets Rulebook. It must not be delivered to, or relied on by, any other person. The FSRA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The FSRA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for this prospectus. The Class A common stock to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the Class A common stock offered should conduct their own due diligence on the Class A common stock. If you do not understand the contents of this prospectus, you should consult an authorized financial advisor.

 

Australia. This prospectus:

 

	●	does not constitute a product disclosure document or a prospectus under Chapter 6D.2 of the Corporations Act 2001 (the “Corporations Act”);
	●	has not been, and will not be, lodged with the Australian Securities and Investments Commission (“ASIC”), as a disclosure document for the purposes of the Corporations Act and does not purport to include the information required of a disclosure document under Chapter 6D.2 of the Corporations Act;
	●	does not constitute or involve a recommendation to acquire, an offer or invitation for issue or sale, an offer or invitation to arrange the issue or sale, or an issue or sale, of interests to a “retail client” (as defined in section 761G of the Corporations Act and applicable regulations) in Australia; and
	●	may only be provided in Australia to select investors who are able to demonstrate that they fall within one or more of the categories of investors, or Exempt Investors, available under section 708 of the Corporations Act.

 

The Class A common stock may not be directly or indirectly offered for subscription or purchased or sold, and no invitations to subscribe for or buy the Class A common stock may be issued, and no draft or definitive offering memorandum, advertisement or other offering material relating to any Class A common stock may be distributed in Australia, except where disclosure to investors is not required under Chapter 6D of the Corporations Act or is otherwise in compliance with all applicable Australian laws and regulations. By submitting an application for the Class A common stock, you represent and warrant to us that you are an Exempt Investor.

 

As any offer of Class A common stock under this prospectus will be made without disclosure in Australia under Chapter 6D.2 of the Corporations Act, the offer of those securities for resale in Australia within 12 months may, under section 707 of the Corporations Act, require disclosure to investors under Chapter 6D.2 if none of the exemptions in section 708 applies to that resale. By applying for the Class A common stock, you undertake to us that you will not, for a period of 12 months from the date of issue of the Class A common stock, offer, transfer, assign or otherwise alienate those securities to investors in Australia except in circumstances where disclosure to investors is not required under Chapter 6D.2 of the Corporations Act or where a compliant disclosure document is prepared and lodged with ASIC.

 

This prospectus contains general information only and does not take account of the investment objectives, financial situation, or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.

 

 

Canada. The Class A common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the Class A common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

 

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

 

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the Underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

 

Dubai International Financial Centre (“DIFC”). This prospectus relates to an Exempt Offer in accordance with the Markets Rules 2012 of the Dubai Financial Services Authority (the “DFSA”). This prospectus is intended for distribution only to persons of a type specified in the Markets Rules 2012 of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus supplement nor taken steps to verify the information set forth herein and has no responsibility for this prospectus. The securities to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

 

In relation to its use in the DIFC, this prospectus is strictly private and confidential and is being distributed to a limited number of investors and must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose. The interests in the securities may not be offered or sold directly or indirectly to the public in the DIFC.

 

European Economic Area. In relation to each Member State of the European Economic Area (each a “Member State”), no Class A common stock have been offered or will be offered pursuant to the offering to the public in that Member State prior to the publication of a prospectus in relation to the Class A common stock which has been approved by the competent authority in that Member State or, where appropriate, approved in another Member State and notified to the competent authority in that Member State, all in accordance with the Prospectus Regulation, except that offers of Class A common stock may be made to the public in that Member State at any time under the following exemptions under the Prospectus Regulation:

 

	●	to any legal entity which is a qualified investor as defined under the Prospectus Regulation;
	●	to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the Underwriters for any such offer; or
	●	in any other circumstances falling within Article 1(4) of the Prospectus Regulation.

  

provided that no such offer of shares shall require us or any of our representatives to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation and each person who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with the representative and us that it is a “qualified investor” as defined in the Prospectus Regulation.

 

In the case of any shares being offered to a financial intermediary as that term is used in Article 5 of the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a nondiscretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Member State to qualified investors as so defined or in circumstances in which the prior consent of the representative has been obtained to each such proposed offer or resale.

 

For the purposes of this provision, the expression an “offer to the public” in relation to any Class A common stock in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any Class A common stock to be offered so as to enable an investor to decide to purchase or subscribe for any Class A common stock, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129 (as amended).

 

 

France. This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code Monétaire et Financier) and Articles 211-1 et seq. of the General Regulation of the French Autorité des Marchés Financiers (“AMF”). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. 

 

This document and any other offering material relating to the securities have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.

 

Such offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D. 744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation; and/or (ii) a restricted number of non-qualified investors (cercle restreint d’investisseurs) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2 and D.411-4, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.

 

Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code.

 

Ireland. The information in this document does not constitute a prospectus under any Irish laws or regulations, and this document has not been filed with or approved by any Irish regulatory authority, as the information has not been prepared in the context of a public offering of securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”). The securities have not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a public offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations; and (ii) fewer than 100 natural or legal persons who are not qualified investors.

 

Hong Kong. The Class A common stock have not been offered or sold and will not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules promulgated thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the Class A common stock has been or may be issued or has been or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to Class A common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules promulgated thereunder.

 

Israel. The securities offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority (the ISA), nor have such securities been registered for sale in Israel. The shares may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus. The ISA has not issued permits, approvals or licenses in connection with the offering or publishing of the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the securities being offered. Any resale in Israel, directly or indirectly, to the public of the securities offered by this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities laws and regulations.

 

 

Italy. The offering of the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Societ - $$ - Aga e la Borsa, “CONSOB”) pursuant to Italian securities legislation, and, accordingly, no offering material relating to the securities may be distributed in Italy, and such securities may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (“Decree No. 58”), other than:

 

●

to Italian qualified investors, as defined in Article 100 of Decree no. 58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999 (“Regulation no. 1197l”) as amended (“Qualified Investors”); and

 

●

in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended.

 

Any offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:

 

●

made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws; and

 

●

in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws.

 

Any subsequent distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and Regulation No. 11971, as amended, unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring the securities for any damages suffered by the investors.

 

Japan. The Class A common stock have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold directly or indirectly in Japan or to, or for the benefit of any Japanese person or to others, for re-offering or re-sale directly or indirectly in Japan or to any Japanese person, except in each case pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law of Japan and any other applicable laws, rules and regulations of Japan. For purposes of this paragraph, “Japanese person” means any person resident in Japan, including any corporation or other entity organized under the laws of Japan.

 

People’s Republic of China. This prospectus may not be circulated or distributed in the PRC and the Class A common stock may not be offered or sold and will not offer or sell to any person for re-offering or resale directly or indirectly to any resident of the PRC except pursuant to applicable laws, rules and regulations of the PRC. For the purpose of this paragraph only, the PRC does not include Taiwan and the special administrative regions of Hong Kong and Macau.

 

Portugal. This document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document and any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales, and distributions of securities in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investors may receive this document, and they may not distribute it or the information contained in it to any other person.

 

Qatar. In the State of Qatar, the offer contained herein is made on an exclusive basis to the specifically intended recipient thereof, upon that person’s request and initiative, for personal use only and shall in no way be construed as a general offer for the sale of securities to the public or an attempt to do business as a bank, an investment company, or otherwise in the State of Qatar. This prospectus and the underlying securities have not been approved or licensed by the Qatar Central Bank or the Qatar Financial Centre Regulatory Authority or any other regulator in the State of Qatar. The information contained in this prospectus shall only be shared with any third parties in Qatar on a need to know basis for the purpose of evaluating the contained offer. Any distribution of this prospectus by the recipient to third parties in Qatar beyond the terms hereof is not permitted and shall be at the liability of such recipient.

 

 

Saudi Arabia. This prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations issued by the Capital Market Authority. The Capital Market Authority does not make any representation as to the accuracy or completeness of this prospectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this prospectus. Prospective purchasers of the securities offered hereby should conduct their own due diligence on the accuracy of the information relating to the securities. If you do not understand the contents of this prospectus you should consult an authorized financial adviser.

 

Singapore. This prospectus or any other offering material relating to the Class A common stock has not been registered as a prospectus with the Monetary Authority of Singapore under the Securities and Futures Act, Chapter 289 of Singapore, or the SFA. Accordingly, (a) the Class A common stock have not been, and will not be, offered or sold or made the subject of an invitation for subscription or purchase of such Class A common stock in Singapore, and (b) this prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Class A common stock have not been and will not be circulated or distributed, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor as specified in Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275 of the SFA) and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

 

Where the Class A common stock are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

 

	(a)	a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
	(b)	a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Class A common stock pursuant to an offer made under Section 275 of the SFA except:
	(a)	to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
	(b)	where no consideration is or will be given for the transfer;
	(c)	where the transfer is by operation of law;
	(d)	as specified in Section 276(7) of SFA; or
	(e)	as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

 

Sweden. This document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading Act). Only such investors may receive this document, and they may not distribute it or the information contained in it to any other person.

 

 

Switzerland. The Class A common stock will not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this prospectus nor any other offering or marketing material relating to our Company or the Class A common stock have been or will be filed with or approved by any Swiss regulatory authority. In particular, this prospectus will not be filed with, and the offer of the Class A common stock will not be supervised by, the Swiss Financial Market Supervisory Authority, and the offer of the Class A common stock has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (the “CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of the Class A common stock.

 

Taiwan. The Class A common stock have not been and will not be registered or filed with, or approved by the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations and may not be offered or sold within Taiwan through a public offering or in circumstances which constitute an offer within the meaning of the Securities and Exchange Act of Taiwan or relevant laws and regulations that requires a registration, filing or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorized to offer, sell, give advice regarding or otherwise intermediate the offering and sale of the Class A common stock in Taiwan.

 

United Arab Emirates Outside of the DIFC and the ADGM. This prospectus has not been reviewed, approved, or licensed by the Securities and Commodities Authority (“SCA”) and does not constitute a public offering of securities in the UAE as that term is defined in SCA Chairman Resolution No. 13/R.M. of 2021 Concerning the Regulations Manual of the Financial Activities and Status Regularization Mechanisms Rulebook (“SCA Rulebook”). This prospectus will only be made available on an exempt Private Offering basis pursuant to Article 6, Chapter 5, of Section 3 of the SCA Rulebook to Professional Investors or Counterparties, as each of the terms is defined in the SCA Rulebook, respectively, or on a reverse solicitation basis. Nothing in this prospectus constitutes the provision of any type of financial service engagement in any of the financial activities set out in Article 1, Chapter 2 of the SCA Rulebook.

 

The SCA accepts no liability in relation to the marketing, issuance and/or sale of the shares and is not making any recommendation with respect to any investment. Nothing contained in this prospectus is intended to constitute UAE investment, legal, tax, accounting or other professional advice. This prospectus is for the information of prospective investors only and nothing in this prospectus is intended to endorse or recommend a particular course of action. Prospective investors should consult with an appropriate professional for specific advice rendered on the basis of their situation.

 

United Kingdom. This prospectus is only being distributed to and is only directed at, and any offer subsequently made may only be directed at: (i) persons who are outside the United Kingdom; (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”); or (iii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons falling within (1)-(3) together being referred to as “relevant persons”). The Class A common stock are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire the Class A common stock will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this prospectus or any of its contents.

 

 

LEGAL MATTERS

 

The validity of the shares of common stock offered hereby will be passed upon for us by Rimon, P.C. McLaughlin & Stern, LLP is acting as counsel for the underwriters.

 

EXPERTS

 

The consolidated financial statements of Direct Communication Solutions, Inc. as of December 31, 2024 and 2023 and for the years then ended included in this prospectus have been so included in reliance on the reports of Davidson & Company LLP, an independent registered public accounting firm, which are included herein, given on the authority of said firm as experts in auditing and accounting.

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

We have filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the shares of Class A common stock being offered by this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement.

 

Upon completion of this offering, we will be subject to the information and periodic requirements of the Exchange Act and, in accordance therewith, file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address is www.sec.gov. We also maintain a website at www.dcsbusiness.com. The information contained in, or that can be accessed through, our website is not incorporated by reference in, and is not part of, this prospectus. You may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

 

 

INDEX TO FINANCIAL STATEMENTS

 

		Page
Audited Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 731)		F-3
Consolidated Balance Sheets as of December 31, 2024 and 2023		F-4
Consolidated Statements of Operations for the years ended December 31, 2024 and 2023		F-5
Consolidated Statements of Stockholders Equity (Deficit) for the years ended December 31, 2024 and 2023		F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023		F-7
Notes to Consolidated Financial Statements		F-8

 

		Page
Unaudited Condensed Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 731)
Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024		F-29
Condensed Consolidated Statements of Operations for the nine months ended September 30, 2025 and 2024		F-30
Condensed Consolidated Statements of Stockholders Equity (Deficit) for the nine months ended September 30, 2025 and 2024		F-31
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024		F-32
Notes to Condensed Consolidated Financial Statements		F-33

 

 

 

 

Direct Communication Solutions, Inc.

 

Consolidated Financial Statements
December 31, 2024 and 2023

 

 

 

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and Directors of Direct Communication Solutions, Inc.

 

Opinion on the Consolidated Financial Statements

 

We have audited the accompanying consolidated balance sheets of Direct Communication Solutions, Inc. (the “Company”), as of December 31, 2024 and 2023, and the related consolidated statements of operations, changes in stockholders’ deficiency, and cash flows for the years ended December 31, 2024 and 2023, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Direct Communication Solutions, Inc. as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years ended December 31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

We have served as the Company’s auditor since 2017.

 

	/s/ DAVIDSON & COMPANY LLP
Vancouver, Canada	Chartered Professional Accountants
June 6, 2025

 

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

 (in U.S. Dollars)

 

		December 31, 2024				December 31, 2023
ASSETS		$				$
Current
Cash			603,344				30,723
Restricted cash			4,345				-
Accounts and other receivables, net of allowance of $66,055 and $175,283 respectively			756,958				1,393,093
Inventory, net of provision of $505,218 and $308,646 respectively			356,930				955,939
Prepaid expenses			625,041				104,685
Current assets			2,346,618				2,484,440
Equipment			6,592				15,018
Security deposit			50,056				50,056
Right-of-use assets			329,671				509,491
Total assets			2,732,937				3,059,005
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY
Current
Accounts payable			950,368				6,665,085
Accrued liabilities			502,526				887,938
Credit facility			206,084				244,015
Current debt			1,966,113				1,525,914
Deferred revenue			1,786,274				89,374
Derivative instrument			2,014,526				1,092
Lease liabilities			207,722				181,441
Current liabilities			7,633,613				9,594,859
Lease liabilities			194,805				402,528
Long term debt			4,126,776				44,161
Long term accounts payable			-				625,019
Total liabilities			11,955,194				10,666,567
Stockholders’ deficiency
Common stock, no par value; 5,714,286 shares authorized; 2,305,079 shares issued and outstanding;
At December 31, 2024 and 2023			61				61
Reserves			7,493,267				7,365,011
Accumulated deficit			(16,715,585	)			(14,972,634	)
Total stockholders’ deficiency			(9,222,257	)			(7,607,562	)
Total liabilities and shareholders’ deficiency			2,732,937				3,059,005

 

Nature of Operations and Significant Accounting Policies (Note 1) Commitments (Note 15)
Approved on June 4, 2025 on behalf of the Board:
“Chris Bursey”	“Bill Epsley”
Chris Bursey – CEO & Director	Bill Epsley – Director

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in U.S. Dollars)

 

		Year ended December 31,
		2024				2023
		$				$
Revenues
Products			3,492,622				10,500,565
Solutions and other services			2,915,528				2,527,110
Total revenues			6,408,150				13,027,675
Cost of Revenues
Products			3,070,442				7,706,420
Solutions and other services			1,169,025				892,449
Total cost of revenues			4,239,467				8,598,869
Gross profit			2,168,683				4,428,806
OPERATING EXPENSES
Research and development			258,561				515,691
General and administrative
Compensation and benefits			2,509,091				3,468,826
Depreciation and amortization			188,246				420,966
Professional fees			1,041,901				3,072,330
Bank fees and interest			154,965				272,532
Bad debt expense (recovery)			(57,072	)			121,695
Facilities			90,226				78,455
Information technology			153,725				191,783
Advertising and marketing			91,174				246,727
Other			385,060				877,926
Total operating expenses			4,815,877				9,266,931
Loss from operations			(2,647,194	)			(4,838,125	)
Other income (expense):
Changes in fair value of derivative			(1,349,769	)			359,062
Rental income			12,000				-
Expense recovery			356,961				-
Gain on debt extinguishment			2,914,776				-
Impairment of intangible			-				(210,056	)
Interest expense and accretion			(1,029,725	)			(493,077	)
Net income (loss)			(1,742,951	)			(5,182,196	)
Weighted average number of common stock: Basic			2,305,079				2,305,079
Diluted			2,305,079				2,305,079
Basic loss per share		$	(0.76	)		$	(2.25	)
Diluted loss per share		$	(0.76	)		$	(2.25	)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY (in U.S. Dollars)

 

		Number of Common Stock (1)				Common Stock Amount				Reserves				Accumulated Deficit				Total Stockholders’ Deficiency
						$				$				$				$
Balance, January 1, 2023			2,305,091				61				7,226,964				(9,790,438	)			(2,563,413	)
Stock-based compensation expense			-				-				138,047				-				138,047
Share consolidation ratio adjustment			(12	)			-				-				-				-
Net loss for the year			-				-				-				(5,182,196	)			(5,182,196	)
Balance, December 31, 2023			2,305,079				61				7,365,011				(14,972,634	)			(7,607,562	)
Balance, January 1, 2024			2,305,079				61				7,365,011				(14,972,634	)			(7,607,562	)
Stock-based compensation expense			-				-				128,256				-				128,256
Net loss for the year			-				-				-				(1,742,951	)			(1,742,951	)
Balance, December 31, 2024			2,305,079				61				7,493,267				(16,715,585	)			(9,222,257	)

 

(1)

As of February 9, 2023, the Company proceeded with a Share Consolidation of the Company’s shares at a consolidation ratio of 7-for-1. As a result, the comparative periods have been retroactively restated to reflect the Share Consolidation for numbers of shares and warrants. See Note 8 - Common Stock and Common Stock Warrants for more information.

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in U.S. Dollars)

 

		Years ended December 31,
		2024				2023
		$				$
Cash provided by / (used for):
Operating Activities:
Net loss for the year			(1,742,951	)			(5,182,196	)
Items not affecting cash:
Accretion and Interest on convertible debentures and promissory notes			535,228				412,047
Bad debt expense			(57,072	)			121,695
Depreciation and amortization			188,246				420,967
Accretion of lease liability			48,363				65,264
Accrued interest			196,394				3,276
Stock-based compensation			128,256				138,047
Gain on debt extinguishment			(2,914,776	)			-
Impairment of intangible			-				210,056
Provision for excess and obsolete inventory			196,572				(101,550	)
Derivative adjustment to fair market value			1,349,769				(359,062	)
Net change in non-cash working capital items:
Accounts and other receivables			743,207				1,858,950
Inventory			402,437				(61,477	)
Prepaid expenses			(520,356	)			715,540
Contract assets			-				541
Accounts payable			(224,960	)			(1,806,752	)
Accrued liabilities			(385,556	)			179,845
Deferred revenue			1,696,900				(32,521	)
Net cash used in operating activities			(360,299	)			(3,417,330	)
Investing Activities:
Purchase of equipment			-				(5,213	)
Net cash used in investing activities			-				(5,213	)
Financing Activities:
Lease payments			(229,805	)			(223,110	)
Repayment on convertible debenture			(60,000	)			-
Net (repayments) borrowings on credit facility			(37,930	)			244,015
Proceeds from promissory note			1,025,000				-
Proceeds from loan			799.835				140,087
Payments on notes payable			(559,834	)			(275,000	)
Net cash used in financing activities			937,266				(114,008	)
Change in cash and restricted cash for the year			576,966				(3,536,551	)
Cash and restricted cash, beginning of the year			30,723				3,567,274
Cash and restricted cash, end of the year			607,689				30,723

 

			2024				2023
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest expense:			203,726				24,150
Income taxes			-				-

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1.	Nature of Operations and Significant Accounting Policies

 

Direct Communication Solutions, Inc. (the “Company” or “DCS”) was incorporated in Florida on September 9, 2006 and reincorporated in Delaware in April 2017. The Company is a provider of solutions for the Internet of Things (“IoT”), including monitoring-as-a-service (“MaaS”) solutions for the telematics market. The Company’s range of products includes GPS devices, modems, embedded modules, routers and mobile tracking machine-to-machine (“M2M”) devices, communications and applications software and cloud services.

 

The Company’s M2M products and solutions enable devices to communicate with each other and with server or cloud-based application infrastructures and include M2M embedded modules, integrated M2M communications devices and SaaS delivery platforms, including MiFleet, which provides fleet and vehicle SaaS telematics, MiSensors, which provides easy M2M device management and service enablement for wireless sensors and MiFailover which provides high-speed wireless internet failover to small and medium sized businesses as a redundancy solution to continue to run their business in the event the internet isn’t available.

 

Source some inventory outside the U.S., which are subject to trade and customs laws, regulations and tax requirements such as sanctions orders or tariffs set by governments through mutual agreements or unilateral actions. If additional tariffs or trade restrictions are implemented by the United States or other countries in connection with a global trade war, the cost of the Company’s inventory manufactured in other countries and imported into the United States or other countries could increase, which in turn could adversely affect the demand for these products and have an adverse effect on our business.

 

The Company’s shares trade on the Canadian security exchange (“CSE”) under the symbol “DCSI.” The Company’s shares also trade on the OTCQX market, a U.S. trading platform, under the symbol “DCSX,” and on the Frankfurt Stock Exchange market under the symbol 7QU0.

 

Basis of Presentation and Going Concern

 

These accompanying consolidated financial statements, including comparatives, have been prepared in accordance with United States’ Generally Accepted Accounting Principles (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for financial information.

 

The accompanying consolidated financial statements have been prepared on a historical cost basis except for certain financial liabilities measured at fair value.

 

The consolidated financial statements include the accounts of the Company and its direct wholly owned subsidiary, Direct Communication Solutions, Canada (“DCS Canada”), which is inactive. All intercompany transactions and balances have been eliminated on consolidation.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of its liabilities in the normal course of business.

 

The Company has historically incurred losses and has an accumulated deficit of $ 16,715,585. As at December 31, 2024, the Company has working capital deficiency of $5,286,995, which is not considered sufficient to fund operations at their current levels for the next twelve months. Therefore, the Company will be required to generate additional funding through operations or external financing, which cannot be assured. These conditions raise substantial doubt on the Company’s ability to continue as a going concern.

 

In March 2020, the World Health Organization declared COVID-19 (“COVID-19” or the “pandemic”) to be a public health pandemic of international concern, which has led to adverse impacts on the U.S. and global economies and continues to impact our supply chain and operations. More recently, we have experienced supply shortages as a result of global supply imbalances driven by component shortages, disruptions in accessible labor, other freight and logistical challenges and other related macro-economic factors. These supply imbalances negatively impacted all parts of our business during fiscal 2022 and 2023 and slowly recovered in fiscal 2024.

 

The Company sources some inventory outside the U.S., which are subject to trade and customs laws, regulations and tax requirements such as sanctions orders or tariffs set by governments through mutual agreements or unilateral actions. If additional tariffs or trade restrictions are implemented by the United States or other countries in connection with a global trade war, the cost of the Company’s inventory manufactured in other countries and imported into the United States or other countries could increase, which in turn could adversely affect the demand for these products and have an adverse effect on our business.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.”) requires management to make estimates and assumptions that affect the recorded amounts of assets and liabilities reported in the consolidated financial statements and accompanying notes. Accordingly, actual results could differ materially from those estimates. Significant estimates include allowance for doubtful accounts receivable, provision for excess and obsolete inventory, valuation of stock options and warrants, fair value of derivative liability, possible product returns and income taxes.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. At December 31, 2024 and 2023, there were no cash equivalents.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Trade and other accounts receivable are reported at face value less any provisions for uncollectible accounts considered necessary. Accounts receivable primarily includes trade receivables from customers. The Company provides an allowance for its accounts receivable for estimated losses that may result from its customers’ inability to pay. The Company determines the amount of the allowance by analyzing known uncollectible accounts, aged receivables, economic conditions, historical losses, and changes in customer payment cycles and the customers’ credit-worthiness. Amounts later determined and specifically identified to be uncollectible are charged or written off against this allowance. To minimize the likelihood of un-collectability, the Company reviews its customers’ credit-worthiness periodically based on credit scores generated by independent credit reporting services, its experience with its customers, and the economic condition of its customers’ industries. Material differences may result in the amount and timing of expense for any period if the Company were to make different judgments or utilize different estimates.

 

Inventories and Provision for Excess and Obsolete Inventory

 

Inventories are stated at the lower of cost, (based on the weighted average cost method) or net realizable value. The Company reviews the components of its inventory and its inventory purchase commitments on a regular basis for excess and obsolete inventory based on estimated future usage and sales. Write-downs in inventory value or losses on inventory purchase commitments depend on various items, including factors related to customer demand, economic and competitive conditions, technological advances or new product introductions by the Company or its customers that vary from its current expectations. Whenever inventory is written down, a new cost basis is established, and the inventory is not subsequently written up if market conditions improve.

 

The Company believes that, when made, the estimates used in calculating the inventory provision are reasonable and properly reflect the risk of excess and obsolete inventory. If customer demand for the Company’s inventory is substantially less than its estimates, inventory write-downs may be required, which could have a material adverse effect on its consolidated financial statements.

 

Property and Equipment

 

Property and equipment are initially stated at cost and depreciated using the straight-line method. Depreciation is determined on a straight-line basis over the estimated useful lives of the assets, which ranges from three to five years. Leasehold improvements are depreciated over the shorter of the related remaining lease period or useful life. Amortization is calculated on a straight-line method to write off the cost of the assets to their residual values over their estimated useful lives. The amortization rates applicable to each category of equipment are as follows:

 

Class of equipment		Rate
Computer equipment		3 years
Furniture and fixtures		5 years
Office equipment		5 years
Tooling		5 years

 

Impairment of Long-Lived Assets

 

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. These circumstances are assessed on an annual basis. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount and the fair value less costs to sell.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Long-Term Liabilities

 

Long-term liabilities consist of accounts payable to a vendor with repayment terms longer than twelve months and loans with collateral that are due more than one year in the future.

 

Fair Value of Financial Instruments

 

The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, the most advantageous market for the specific asset or liability.

 

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non- recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

 

The three tiers are defined as follows:

 

●

Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

 

●

Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

 

●

Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

 

The Company believes the carrying amounts of cash, restricted cash, accounts receivable, accounts payable, accrued liabilities, lease liabilities, credit facility, and current debt approximate fair value due to their short-term maturities.

 

The following table represents the Company’s financial instruments that are measured at fair value as of December 31, 2024 and 2023:

 

		Level 1				Level 2				Level 3				Total
December 31, 2024
Derivative Liability		$	-			$	-			$	2,014,526			$	2,014,526
December 31, 2023
Derivative Liability		$	-			$	-			$	1,092			$	1,092

 

Income Taxes

 

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary, differences between the financial reporting and tax basis of assets and liabilities, as well as of operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. The Company records valuation allowances to reduce deferred tax assets to the amount the Company believes is more likely than not to be realized.

 

The Company’s income tax filings are subject to audit by various taxing authorities. The Company’s open audit periods are 2018-2024. In evaluating the Company’s tax provisions and accruals, future taxable income, and the reversal of temporary differences, interpretations, and tax planning strategies are considered. The Company believes their estimates are appropriate based on current facts and circumstances. Accordingly, as of December 31, 2024, the Company has no uncertain tax positions that qualify for recognition or disclosure in the accompanying consolidated financial statements.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

The Company is a C Corporation for income tax purposes.

 

Revenue and Cost of Revenue

 

The Company generates a portion of its revenue from the sale of wireless modems, routers and modules to wireless operators, OEM customers and value added resellers and distributors. In addition, the Company generates revenue from the sale of asset-management solutions utilizing wireless technology and M2M communication devices predominantly to transportation and industrial companies, medical device manufacturers and security system providers. Revenue from product sales is generally recognized upon the transfer of title of the product to the customer. Revenues from SaaS services are recognized pro-rata over the contract term. The Company records deferred revenue for cash payments received from customers in advance of when revenue recognition criteria are met.

 

The Company considers the five basic revenue recognition criteria when assessing appropriate revenue recognition as follows:

 

●

Identify contracts;

 

●

Identify performance obligations;

 

●

Determine transaction prices;

 

●

Allocate the transaction prices; and

 

●

Recognize revenue when obligations had been satisfied.

 

The Company provides SaaS subscriptions for its fleet management and vehicle finance applications in which customers are provided with the ability to wirelessly communicate with monitoring devices installed in vehicles and other mobile assets via software applications hosted by either the Company or partner vendor. When the customer purchases the monitoring device, the Company recognizes the revenue at the time of purchase. The Company recognizes revenues from SaaS services over the term of the contract. In certain customer arrangements, the Company provides integrated SaaS-based solutions. The transaction for the integrated solutions includes the price of the devices and application subscriptions in a monthly payment. We recognize revenue for the sales of the devices upon transfer of control to the customer and recognize revenue for the related subscription services over the service period. The allocation of the transaction price is based on relative estimated stand-alone selling prices for the devices and applications subscriptions. Timing of revenue recognition may differ from the timing of our invoicing to customers. Contract assets are comprised of performance under the contract in advance of billings to our customers. The Company’s outstanding performance obligations in relation to customer contracts at December 31, 2024 will be completed upon transfer of ownership (or deemed transfer) of goods and as services are rendered. The Company’s payment terms require payment to be made within 30 days after the customer accepts transfer of ownership or a notice of completion. The outstanding performance obligations at year end require the Company to provide (i) access to the MiFleet platform and, if purchased, (ii) wireless data.

 

The Company’s cost of revenue for products is composed of the cost of hardware purchased and labor for any services performed on the hardware before it is shipped. Cost of revenue for solutions and other services includes labor for services, license fees for fleet management platform and wireless data.

 

The Company sells several telematics devices bundled with a multi-year software licenses under the same contractual arrangement, giving rise to considerations on whether there are distinct performance obligations requiring separate recognition and whether the Company is acting as principal or agent in the contract. Key considerations in determining whether the performance obligations are distinct are whether the promise to deliver the hardware component of the contract is separately identifiable from other contractual promises as well as the level of interdependency between the components of the contract. The Company has concluded the bundled contract represents one performance obligation and that the Company is acting as principal in the arrangement, resulting in the Company recognizing revenue and cost of sales on a gross basis on delivery of the telematics device. Significant judgment is involved in the assessments made by management.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Research and Development

 

Expenditures on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding are recognized in profit or loss as incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. No development costs have been capitalized to date.

 

Shipping and Handling Costs

 

The Company incurs certain expenses related to preparing, packaging, and shipping its products to its customers, mainly third-party transportation fees. All costs related to these activities are included as a component of cost of revenues in the statements of operations. All costs billed to the customer are included as revenues in the statements of operations.

 

Warranty Costs

 

The Company’s warranty policy generally provides one year for products following the date of purchase. As the Company receives a one year warranty from its vendors, the Company has little exposure to out-of-pocket warranty costs. Historically, the Company has incurred minimal warranty costs which are expensed when incurred. The Company has not accrued any warranty costs for the years ended December 31, 2024 and 2023.

 

Advertising and Marketing Costs

 

Advertising and marketing costs are expensed as incurred and are included in general and administrative expenses in the accompanying consolidated financial statements. The Company had $91,174 (2023 - $246,727) advertising and marketing expenses for the years ended December 31, 2024.

 

Currency and Foreign Exchange

 

These consolidated financial statements are expressed in U.S. dollars as the Company’s operations are based only in the United States. The Company’s functional currency, the currency of the primary economic environment in which the entities operate and measured in, is U.S. dollars. Virtually all of the Company’s non-monetary or monetary assets and liabilities are in U.S. dollar currency. All revenues earned from customers outside the U.S. were denominated in

U.S dollars.

 

Stock-Based Compensation

 

The Company measures and recognizes compensation expenses for all stock-based payment awards based on the estimated fair values of the awards as of the grant date. Stock option awards are accounted for based on the grant-date fair value estimated using the Black-Scholes option pricing model. Compensation expense is recognized over the service period using the straight-line method.

 

Basic and Diluted Net Loss per Share of Common Stock

 

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares that were outstanding during the period. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to acquire common stock were exercised or converted into common stock. Potentially dilutive securities are excluded from the diluted net loss per share computation in loss periods as their effect would be anti-dilutive.

 

Leases

 

We determine if an arrangement contains a lease at inception based on whether or not the Company has the right to control the asset during the contract period and other facts and circumstances.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

We are the lessee in a lease contract when we obtain the right to control the asset. Operating leases are included in the line items other assets and other liabilities in our consolidated balance sheet. Operating lease right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on our consolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated statement of income. We determine the lease term by assuming the exercise of renewal options that are reasonably certain. As most of our leases do not provide an implicit interest rate, we use our local incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

 

Derivative Financial Instruments

 

The Company classifies as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined in ASC Subtopic 815-40 “Contracts in Entity’s Own Equity.” The Company classifies as assets or liabilities any contracts (including embedded conversion features) that require net-cash settlement including a requirement to net cash settle the contract if an event occurs and if that event is outside our control or give the counterparty a choice of net-cash settlement or settlement in shares. The Company assesses classification of its derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. As of December 31, 2024, the Company determined the warrant portion of the convertible debenture issued in September 2024 and the warrant portion issued in connection to promissory notes are considered derivative liabilities, and the fair valued at December 31, 2024 is $2,014,526 (2023 - $Nil).

 

Recent Accounting Pronouncements

 

Certain new standards, amendments and interpretations, and improvements to existing standards have been published by the FASB and United States Securities and Exchange Commission but are not yet effective and have not been adopted early by the Company. Management anticipates that all the relevant pronouncements will be adopted in the first reporting period following the date of application unless noted. Information on new standards, amendments and interpretations, and improvements to existing standards which could potentially impact the Company’s financial statements are detailed as follows:

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which improve the transparency of disclosures related to the income tax rate reconciliation and income taxes paid. The amendments are effective for the Company in fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the guidance and its impact to the financial statements.

 

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires all public entities to disclose information about purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion foreach income statement line item that contains those expenses. The amendments are effective for the Company in fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 27, 2027. Early adoption is permitted on either a prospective or retrospective basis. The Company is currently evaluating the guidance and its impact to the financial statements.

 

Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Company’s financial statements.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

2.

Inventory

 

Inventory consists of the following:

 

		December 31,
		2024				2023
Components and raw materials		$	831,308			$	1,224,163
Allowance of components and raw materials			(474,684	)			(291,774	)
Assemblies			30,840				40,422
Allowance of assemblies			(30,534	)			(16,872	)
		$	356,930			$	955,939

 

During the year ended December 31, 2024, a total of $3,070,442 inventory was expensed as cost of sales (2023 - $7,706,420).

 

As discussed in Note 5, TAB has a lien on all the Company’s assets which includes inventory. During the year ended December 31, 2024, the Company had pledged $344,844 (2023 - $110,532) of inventory as collateral for two loans (Note 6).

 

3.

Equipment

 

Equipment consists of the following:

 

		December 31,
		2024				2023
Computer equipment and purchased software		$	152,938			$	152,938
Furniture and fixtures			51,427				51,427
Tooling			59,300				59,300
			263,665				263,665
Less—accumulated depreciation			(257,073	)			(248,647	)
		$	6,592			$	15,018

 

Depreciation expenses were $8,426 and $31,093 for the years ended December 31, 2024 and 2023, respectively.

 

4.	Accrued Liabilities and Accounts Payable

 

Accrued liabilities consist of the following:

 

		December 31,
		2024				2023
Payroll related expenses		$	175,132			$	186,385
Interest accrued (Note 6)			196,394				213,592
Other			131,000				487,961
		$	502,526			$	887,938

 

Accounts payable consist of the following:

 

		December 31,
		2024				2023
Vendor payable due within 12 months		$	950,368			$	6,665,085
Vendor payable not due within 12 months		$	-			$	625,019

 

During the year ended December 31, 2023, a vendor changed its terms with the Company from billing devices and device management subscriptions with a payment term of 36 months to a payment term of 30 days reducing the frequency of occurrence for long term payables. The Company renegotiated the terms of the outstanding balance into a long-term loan.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

5.	Credit Facility

 

In January 2020, the Company entered into a two-year agreement with TAB Bank (“TAB”) for a $2,500,000 credit facility. Under the TAB Bank credit facility, the Company is obligated to assign all its accounts receivables and the Company may request advances up to 90% of domestic accounts less than 90 days from the invoice date and not subject to offset up to $2,000,000. Interest is payable monthly at a rate the greater of (a) 90-Day SOFR rate plus 4.50% and (b) 6.41%. In addition, there is an administration fee equal to 0.008% per diem of the outstanding daily obligations.

 

The agreement is extended automatically on each subsequent anniversary date unless the Company provides a cancellation notice 90 days prior to the anniversary date. As of December 31, 2024, the expiry date is January 23, 2025. The agreement was automatically renewed on January 23, 2025.

 

The Company may also borrow an amount limited to the lesser of: (a) 50% of the cost of eligible inventory, (b) 50% of funds employed and, (c) $500,000 (the “Inventory Advance”). Under the Inventory Advance, interest is payable monthly at a rate the greater of (a) 90-Day SOFR rate plus 4.50% and (b) 6.41%. In addition, there is an administration fee equal to 0.01% per diem of the outstanding daily obligations.

 

The Company does not retain any legal or equitable interest in any accounts receivables account sold under this credit facility. The Company assumes full risk of non-payment and guarantees full payment of all accounts. The Company granted a security interest in all its assets as collateral for its obligations under the facility. The credit facility consists of the following balances as at December 31, 2024 and 2023:

 

		December 31,
		2024				2023
Carrying amount of available credit limit in connection to the credit facility		$	239,426			$	406,808
Outstanding balance			206,084				244,015
Debt issuance cost amortized to interest expense			-				-

 

6.

Debt

 

Convertible Promissory Debenture

 

In November and December 2021, the Company had issued convertible promissory debentures totaling $275,000. The debentures accrued interest at a rate of 10% per annum and was payable semi-annually unless the holder elected to defer payment. All unpaid principal and accrued interest are due two years from date of issuance in 2023. The holder of the debenture at any time could convert in whole or any part principal and interest into common stocks of the Company at a conversion price of $7.00 per share. In the event of default, all principal and interest due shall become immediately due and payable. At December 31, 2023, the principal and interest has been paid off in full. During the year ended December 31, 2023, the Company accrued $24,150 of interest associated with the Convertible Promissory Debentures which had been paid off during the year ended December 31, 2023.

 

On April 7, 2022, the Company received convertible debenture financing for the aggregate amount of $100,000 (U.S.). Subscribers may convert all or part of the principal amount outstanding under the debentures into shares of common stock of the company. The debentures are convertible into units at the higher of $8.33 per share or a price equal to the price of the shares or units of the next financing carried out before the second anniversary of the closing date less a 30% discount.

 

The units comprise a share and one-half of one warrant, where a whole warrant shall be exercisable at $2.80 per common stock for a two-year term. The debentures have a maturity date of the second anniversary of the closing date and bear an interest rate of 10 per cent per annum, payable semi-annually. At December 31, 2024, the Company recorded $Nil accrued interest associated with the convertible debentures (December 31, 2023 - $17,343), which had been paid off during the year ended December 31, 2024.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

In September 2022, the Company issued additional convertible promissory debentures totalling $1,500,000, bearing interest at 10% per annum (accruing annually and payable at maturity), and maturing on September 9, 2024, or a period of 24-months. The Debentures are convertible, at the option of the holder, to common stocks of DCS at a price of $8.33 or a price equal to the price of the shares of the next financing carried out before the second anniversary of the closing date at 25% premium. Upon issuance of the debentures, the Company also issued 107,143 share purchase warrants. Each warrant entitles the holder to purchase one common stock at a price of $6.02 per share for a period of 24 months from the date of issuance of the debentures. At December 31, 2024, the Company settled indebtedness by issuing additional convertible promissory debentures and paid off during the year ended December 31, 2024.

 

On September 13, 2024, the Company issued replacement convertible promissory debentures totaling $1,741,589, bearing interest at 15% per annum (accruing annually and payable at maturity), and maturing on September 13, 2025, or a period of 12-months to settle indebtedness related to the convertible debentures issued in 2022. The Debentures are convertible, at the option of the holder, to common stocks of DCS at a price of $6. Upon issuance of the debentures, the Company agreed to issue 196,582 share purchase warrants as additional compensation subject to CSE approval. Each warrant entitles the holder to purchase one common stock at a price of CAD $3.20 per share for a period of 24 months from the date of issuance of the warrant. The warrants had been issued during the year ended December 31, 2024.

 

The Company recorded the conversion features with fixed exercise prices and the debt as a single unit with the debt in accordance with ASU 2020-06 and recorded the fair value of the warrants as an embedded derivative separated from the host contract in accordance with ASC 815. The fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statements of operations. The Company uses a derivative valuation technique to fair value the components of the hybrid contract on initial recognition, including the debt component, the conversion features, and the warrants. The following significant inputs and assumptions were used in the model:

 

		December 31, 2024				December 31, 2023
Expected term (years)			1.70				0.69
Risk-free interest rate			2.96	%			4.834	%
Expected volatility			150	%			100	%
Dividend yield			0.00	%			0.00	%
Estimated forfeitures			0.00	%			0.00	%

 

The following table presents the Company’s embedded warrants of its convertible debt measured at fair value on a recurring basis As of December 31, 2024 and 2023, determined based on “Level 3” inputs.

 

		Derivative
Balance at December 31, 2022		$	360,154
Net changes in fair value included in net loss			(359,062	)
Balance at December 31, 2023			1,092
Initial recognition			283,978
Net changes in fair value included in net loss			875,851
Balance at December 31, 2024			1,160,921

 

The debt component of the convertible debenture is subsequently measured at amortized costs. The following table presents the debt component of the convertible debt measured at its fair value on initial recognition $1,035,556 and subsequently carried at amortized cost using the interest rate of 32.06% per annum over 24 months period. On September 14, 2024, the Company issued replacement convertible promissory debentures, and derecognized the convertible debt issued in the prior period. The debt component of the replacement convertible promissory debentures measured at its fair value on initial recognition of $1,395,104 and subsequently carried at amortized cost using the interest rate of 37% per annum over the 12 months period. As of December 31, 2024, the total accrued interest was $77,298 (December 31, 2023 - $Nil) recorded in accrued liabilities.

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Date		Beg. Balance				Additions				Accretion				End. Balance
			$				$								$
December 31, 2022			1,035,556				-				58,217				1,093,773
December 31, 2023			1,093,773				-				232,939				1,326,712
September 14, 2024			1,326,712				(1,500,000	)			173,288				-
September 14, 2024			-				1,395,104				-				1,395,104
December 31, 2024			1,395,104				-				81,380				1,476,484

 

Loans

 

In April 2024, the Company entered into a promissory note agreement of $100,000, bearing interest at 19% per annum (accruing semi - annually and payable every six months), and maturing on April 15, 2026, or a period of 24- months. As additional consideration, the Company issued 10,000 purchase warrants on September 11, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.00 per share for a period of 24 months from the date of issuance.

 

In May 2024, the Company entered into a promissory note of $100,000, bearing interest at 19% per annum (accruing annually and payable at maturity date), and maturing on May 24, 2026, or a period of 24-months. As additional consideration, the Company issued 10,000 purchase warrants on September 11, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.00 per share for a period of 24 months from the date of issuance.

 

In June 2024, the Company entered into a promissory note of $100,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on June 28, 2026, or a period of 24-months. As additional consideration, the Company issued 20,000 purchase warrants on September 11, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.00 per share for a period of 24 months from the date of issuance.

 

In July 2024, the Company entered into a promissory note of $50,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on July 8, 2026, or a period of 24-months. As additional consideration, the Company issued 10,000 purchase warrants on September 11, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.00 per share for a period of 24 months from the date of issuance.

 

In August 2024, the Company entered into a promissory note of $75,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on August 31, 2026, or a period of 24-months. As additional consideration, the Company issued 15,000 purchase warrants on October 9, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $3.14 per share for a period of 24 months from the date of issuance.

 

In August 2024, the Company entered into another promissory note of $250,000, bearing interest at 19% per annum (accruing semi-annually and payable every six months), and maturing on August 24, 2026, or a period of 24-months. As additional consideration, the Company issued 50,000 purchase warrants on October 16, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $3.09 per share for a period of 24 months from the date of issuance.

 

In November 2024, the Company entered into another promissory note of $100,000, bearing interest at 19% per annum (accruing semi-annually and payable every 6 months), and maturing on November 22, 2026, or a period of 24- months. As additional consideration, the Company issued 10,000 purchase warrants on January 10, 2025. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

In November 2024, the Company entered into another promissory note of $50,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on November 27, 2026, or a period of 24-months. As additional consideration, the Company issued 10,000 purchase warrants on January 10, 2025. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

In December 2024, the Company entered into promissory notes with an aggregated total of $200,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on December 10, 2026, or a period of 24-months. As additional consideration, the Company will issue 40,000 purchase warrants subject to CSE approval. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

In December 2024, the Company entered into another promissory note of $50,000, bearing interest at 19% per annum (accruing annually and payable annually), and maturing on December 26, 2026, or a period of 24-months. As additional consideration, the Company will issue 5,000 purchase warrants subject to CSE approval. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

The Company records the fair value of the warrants exercisable with a variable amount of cash receivable due to foreign exchange as an embedded derivative separate from the host contract. The fair value of the derivative liabilities is revalued on each Statement of Financial Position date with corresponding gains and losses recorded in profit or loss. The Company uses a derivative valuation technique to fair value the components of the hybrid contract on initial recognition, including the debt component and the warrants. The following significant inputs and assumptions were used in the model:

 

		December 31, 2024				December 31, 2023
Expected term (years)			1.7-2				-
Risk-free interest rate			4.21%-4.25	%			-
Expected volatility			119.54%-186.17	%			-
Dividend yield			0.00	%			-
Estimated forfeitures			0.00	%			-

 

The following table presents the Company’s warrant component of its promissory notes measured at fair value on a recurring basis as of December 31, 2024 and 2023, determined based on “Level 3” inputs.

 

		Derivative
		$
Balance at December 31, 2022 and 2023			-
Initial recognition during the year			324,135
Net changes in fair value included in net loss			529,470
Balance at December 31, 2024			853,605

 

The debt component of the loans subsequently measured at amortized costs. The following table presents the debt component of the loans measured at its fair value on initial recognition and subsequently carried at amortized cost using the effective interest rate (“EIR”) per annum over the loan period. As of December 31, 2024, the total accrued interest was recorded in current debt and long-term debt in accordance with the loan payment terms.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Loan ID			Date		EIR			Beg. Balance				Additions & Payments				Interest & Accretion				End. Balance				Total Interest accrued
					%			$				$				$				$				$
1			April 15. 2024		21				-				95,130				-				95,130				-
2			May 24, 2024		21				-				95,816				-				95,816				-
3			June 28, 2024		23				-				81,644				-				81,644				-
4			July 8, 2024		25				-				39,568				-				39,568				-
5			August 31, 2024		37				-				47,109				-				47,109				-
6			August 24, 2024		42				-				166,724				-				166,724				-
7			November 22, 2024		35				-				87,502				-				87,502				-
8			November 27, 2024		34				-				33,281				-				33,281				-
9			December 26, 2024		40				-				25,888				-				25,888				-
10			December 10, 2024		62				-				78,204				-				78,204				-
1			December 31, 2024		21				95,130				(9,500	)			15,117				100,747				4,034
2			December 31, 2024		21				95,816				(9,500	)			12,628				98,944				2,004
3			December 31, 2024		23				81,644				-				10,273				91,917				7,644
4			December 31, 2024		25				39,568				-				5,031				44,599				3,616
5			December 31, 2024		37				47,109				-				6,089				53,199				3,760
6			December 31, 2024		42				166,724				-				26,458				193,182				16,788
7			December 31, 2024		35				87,502				-				2,448				89,950				2,030
8			December 31, 2024		34				33,281				-				1,055				34,336				699
9			December 31, 2024		40				25,888				-				196				26,084				130
10			December 31, 2024		62				78,204				-				2,770				80,974				1,726

 

Pursuant to a vendor changing its terms with the Company from billing devices and device management subscriptions from a payment term of 36 months down to 30 days reducing the frequency of occurrence for long term payables, the Company entered into an agreement to restructure the payables into a long-term loan with a principal of $3,200,000, bearing interest at 10%. The interest will be due quarterly, and the principal will be due in 5 years. The balance of $2,914,776 of the payables was forgiven and recognized in the Company’s consolidated statement of operating loss and comprehensive loss. As at December 31, 2024, the Company recorded $196,394 of accrued interest and finance fee and a carrying balance of $3,396,394 of the loan was outstanding.

 

Loans with collateral

 

In May 2024, the Company entered into a loan agreement with a third party for proceeds of $250,000. The proceeds will be used for operating purposes. The loan is repayable in 24 monthly payments starting May 2024, bearing interest at 22.2%, and is secured by a general security agreement on the Company’s assets.

 

In August 2024, the Company entered into two loan agreements with third parties for proceeds of $174,221 and $200,000. The proceeds will be used for operating purposes. The loans are repayable in 65 and 35 weekly payments, respectively, starting August 2024, bearing interest at 23.5% and 37.24% respectively, and are secured by a general security agreement on the Company’s assets.

 

During the year ended December 31, 2023, the Company entered into two loan agreements and pledged $110,532 (2022- $Nil) of inventory as collateral. The Company entered into two additional loan agreements during the years ended December 31, 2024 and pledged an additional $234,312 of inventory as collateral. The loans have the following terms as of December 31, 2024.

 

		Loan 1				Loan 2				Loan 3				Loan 4
Expected term (months)			12				60				36				24
Interest rate			35.28	%			6.77	%			19.02	%			16	%
Payable within 12 months		$	1,371			$	11,320			$	20,142			$	57,594
Payable not due in 12 months			-			$	34,169			$	9,921			$	25,716

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

During the year ended December 31, 2024, the Company recorded $122,044 (2023- $7,157) of interest expense and finance charges in the consolidated statement of loss and comprehensive loss in connection to the four loan agreements. As of December 31, 2024, a carrying balance of $160,233 (2023 of $143,362) the loans were outstanding.

 

Deferred Revenue

 

The Company record a contract liability when we receive consideration in advance of transferring goods or services to a customer. At December 31, 2024, our contract liability balance was $1,786,274 (2023 - $89,374). During the year ended December 31, 2024, the Company recognized $89,374 of revenue that was included in the contract liability balance at December 31, 2023.

 

7.

Leases

 

On May 27, 2021, the Company entered into a lease agreement whereby the Company will lease premises in San Diego, California effective November 1, 2021. The lease (“Lease) will have an initial 60 month term. Not less than nine months prior to the expiration of the Lease, the Company has an option to extend the Lease term for an additional five years at then current market rates. The right to use leased asset was measured at the amount of the lease liability of $899,102 using the Company current incremental borrowing rate of 10%.

 

The following table presents the Company’s leases balances As of December 31, 2024 and 2023 under ASC 842.

 

		Balance December 31,				Balance December 31,
		2024				2023
Right-of-use assets, net		$	329,671			$	509,491
Lease liabilities – current			207,722				181,441
Lease liabilities – non-current			194,805				402,528

  

Depreciation expenses of $179,820 (2023 - $179,820) was recorded in general and administrative expense in the consolidated statements of operations for the year ended December 31, 2024. The remaining lease term as of December 31, 2024 was 1.8 years. The weighted-average discount rate as of December 31, 2024 was 10%. For the years ended December 31, 2024 and 2023, cash outflows from operating leases were $229,804 and $223,110, respectively.

 

Future minimum lease payments under the lease agreement as of December 31, 2024 are as follows:

 

Years Ending December 31:
2025		$	236,702
2026			202,160
		$	438,862

 

The Company does not have any short-term or low value leases.

 

8.	Common Stock and Common Stock Warrants

 

Effective February 9, 2023, the Company consolidated 7 common stocks for 1 common stock (the “Stock Consolidation”). The Stock Consolidation was effected in the form of cancelling 6 common stocks for each common stock owned by shareholders of record at the close of business on February 9, 2023. All share data and stock-based compensation plans presented herein have been retroactively adjusted to give effect to the Stock Consolidation.

 

Common Stock

 

Holders of common stock are entitled to one vote for each share held. The Company has not declared any dividends since incorporation. The Company has 5,714,286 common stocks authorized with a par value of $0.00001.

 

There were no transactions affecting common stock during the year ended December 31, 2024 and 2023.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Warrants

 

In September 2022, the Company issued convertible promissory debentures (note 6) and upon issuance of the debentures, the company also issued 107,143 share purchase warrants. Each warrant entitles the holder to purchase one common stock at a price of $6.02 per share for a period of 24 months from the date of issuance of the debentures. In September 2024, the issued 107,143 share purchase warrants expired.

 

In September 2024, the Company issued convertible promissory debentures (Note 6) and upon issuance of the debentures, the company agreed to issue 196,582 share purchase warrants, subject to CSE approval. Each warrant entitles the holder to purchase one common stock at a price of $2.36 per share for a period of 24 months from the date of issuance of the warrant. The warrants were issued on October 10, 2024.

 

From April to August 2024, the Company entered into promissory note agreements (Note 6) and subsequently issued 115,000 purchase warrants during the year ended December 31, 2024. Each warrant entitles the holder to purchase one common stock at various price of CAD $2.00 to CAD $3.14 per share for a period of 24 months from the date of issuance depending on the promissory notes term. The Company determined the warrants represent an embedded derivative and has accounted for the warrants in derivative liability.

 

From November to December 2024, the Company entered into promissory note agreements (Note 6) and agreed to issue 65,000 purchase warrants in connection to the promissory note. Each warrant entitles the holder to purchase one common stock at the price of CAD $2.95 per share for a period of 24 months from the date of issuance depending on the promissory notes term. Subsequent to the year-end December 31, 2024, 55,000 of the purchase warrants have been issued.

 

The Company determined the warrants represent an embedded derivative and has accounted for the warrants in derivative liability.

 

The following table summarizes the warrant activity for the years ended December 31, 2024 and 2023:

 

		Number of warrants				Weighted average exercise price
Outstanding, December 31, 2022 and 2023			107,143			$	6.02
Granted			311,582				2.08
Expired			(107,143	)			6.02
Outstanding, December 31, 2024			311,582			$	2.08

 

The following table summarizes the warrants outstanding as at December 31, 2024:

 

Date of Expiry		Number of Warrants Outstanding				Exercise Price				Weighted Average Remaining Life (years)
September 11, 2026			50,000				CAD $2.00				1.70
October 9, 2026			15,000				CAD $3.14				1.77
October 10, 2026			196,582				CAD $3.20				1.78
October 16, 2026			50,000				CAD $3.09				1.79

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

9.	Stock Options and Restricted Shares Unit (“RSU”)

 

In October 2017, the Company’s board of directors and stockholders approved the 2017 Stock Plan (2017 Plan) under which 500,000 shares of common stock are reserved for the granting of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and performance awards to employees, directors and consultants. Recipients of stock option awards are eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. The maximum term of awards granted under the 2017 Plan is ten years and vesting is determined by the board of directors. Stock awards are generally not exercisable prior to the applicable vesting date, unless otherwise accelerated under the terms of the applicable stock plan agreement. Unvested shares of the Company’s common stock issued in connection with an early exercise allowed by the Company may be repurchased by the Company upon termination of the optionee’s service with the Company. The vesting terms of each option grant are at the discretion of the Board of Directors.

 

In December 2023, the Board of Directors and a majority of the stockholders approved to replace the 2017 Stock Plan with the 2023 Omnibus Plan. Any previously granted stock options shall continue to exist under the 2023 Omnibus plan, and the number of authorized shares for combined issuance of awards, including stock options, as of December 31, 2024 is 1,000,000.

 

The following table summarizes stock option transactions under the 2023 Omnibus Plan:

 

		Number of Options				Weighted average exercise price
Outstanding, December 31, 2022			542,286			$	4.03
Forfeited			(1,429	)		$	2.87
Outstanding December 31, 2023			540,857			$	4.03
Granted			177,500			$	5.00
Forfeited			(269,428	)		$	3.66
Outstanding December 31, 2024			448,929			$	4.64

 

During the year ended December 31, 2024, the Company granted 177,500 (2023 - Nil) options with an exercise price of CAD$7.20 and vesting term of 4 months, and an expiry date of 5 years to certain employees and officers of the Company.

 

At December 31, 2024, the Company had outstanding and exercisable stock options as follows:

 

Date of Expiry		Number of Options Outstanding				Number of Options Exercisable				Exercise Price				Weighted Average Remaining Life (years)
October 5, 2027			178,572				178,572			$	3.29				2.76
February 4, 2032			6,427				5,847			$	2.87				7.10
February 24, 2032			10,715				10,715			$	2.87				7.15
March 14, 2032			8,572				6,696			$	4.13				7.21
May 9, 2027			52,857				52,857			$	8.40				2.35
May 9, 2027			14,286				14,286			$	5.53				2.35
December 23, 2029			177,500				-			Cad $	7.20				4.98

 

As of December 31, 2024, there was $704,243 of total unrecognized stock-based compensation cost related to outstanding nonvested equity awards that is expected to be recognized as an expense over the remaining vesting period of 1.09 years to 4.98 years.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

The Company uses a Black-Scholes option valuation model to determine the fair value of stock-based compensation under ASC Topic 718, Stock Compensation. The expected volatility is based on the historical volatility of a peer group of publicly-traded companies. The risk-free interest rate is based on the yield on the measurement date of a zero-coupon U.S. Treasury bond whose maturity period approximately equals the option’s expected term.

 

The expected life represents the time the options granted are expected to be outstanding. Forfeitures are adjusted in the period when forfeitures occur.

 

The following are the assumptions used in the Black-Scholes option valuation model for option granted during the years ended December 31, 2024 and 2023:

 

		December 31, 2024				December 31, 2023
Fair value of common stock		$	5.00				-
Expected term (years)			5				-
Risk-free interest rate			4.4	%			-
Expected volatility			120.7	%			-
Dividend yield			-				-
Estimated forfeitures			-				-

 

Pursuant to the approval of 2023 Omnibus Plan, the maximum number of common shares that may be issued for all awards, including RSU, is 1,000,000 shares. The following table summarizes RSU transactions under the 2023 Omnibus Plan:

 

		Number of RSU				Weighted average Fair value
Outstanding, December 31, 2022 and 2023		-				-
Granted			142,144			$	5.10
Outstanding, December 31, 2024			142,144			$	5.10

 

During the year ended December 31, 2024, the Company granted 142,144 RSUs to certain officers and directors of the Company with vesting terms of four months, and recorded share-based compensation expense of $47,536 (2023 - $Nil) relating to the vesting portion of RSUs.

 

10.	Related Party Agreements

 

John Hubler, previously a member of the Company’s Board of Directors, is a partner of BH IoT Group. Mr. Hubler rejoined the Company as a director in April 2023 and resigned in September 2024. In November 2020, the Company entered into an agreement with BH IoT Group to assist in building complete IoT bundled solutions. The Company entered into an initial Phase 1 project expected to last 3 months. At the end of Phase1, both parties agreed to continue the relationship on a month-to-month basis. John Hubler was considered as a related party starting April 2023 up to August 2024. The Company recorded $140,000 (2023 - $180,000) related party professional fees on the consolidated statement of operations for the year ended December 31, 2024.

 

Mike Yao Zhou, previously a member of the Company’s Board of Directors, is the owner of MYZ Corporate Relations, Ltd. Mr. Zhou resigned in March 2024. In May 2021, the Company entered into an agreement with MYZ Corporate Relations, Ltd. to provide consulting services on strategic matters related to business development opportunities, product development and marketing strategies for a monthly fee of $4,000. The agreement is effective for one year and will automatically renew annually unless terminated by either party. Mike Yao Zhou was considered a related party up to March 5, 2024. The Company recorded $Nil of professional fees on the consolidated statement of operations for the year ended December 31, 2024 (2023 - $104,000). As at December 31, 2024, the Company owed $Nil (2023 - $32,000) to MYZ Corporate Relations, Ltd.

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Mr. Lichtenwald, a member of the Company’s Board of Directors, is a principal at Zeus Capital Ltd. In April 2022, Mr. Lichtenwald was appointed the new CFO of the Company, and on June 30, 2022, Mr. Lichtenwald resigned as a director. In November 2021, the Company entered into an agreement with Zeus Capital Ltd. to assist the company with corporate finance and strategic initiatives for a monthly fee of $15,000. The agreement is effective for one year and will automatically renew annually unless terminated by either party. The Company recorded $180,000 of professional fees on the consolidated statement of operations for the year ended December 31, 2024 (2023 - $180,000). As at December 31, 2024, the Company owed $32,650 (2023 - $Nil) to Zeus Capital Ltd..

 

Also, Mr. Lichtenwald is a principal of Zeus Accounting Solutions Corp., formerly known as Lichtenwald Professional Corp (“LPC”). The Company entered into an agreement with LPC to provide CFO service fees of $12,500 monthly, effective April 2022. The Company recorded $150,000 of professional fees on the consolidated statement of operations for the year ended December 31, 2024 (December 31, 2023 - $156,250). As at December 31, 2024, the Company owed $22,700 (2023 - $Nil) to Zeus Accounting Solutions Corp.

 

In July 2022, the Company appointed David Diamond as a new director and Chair of the Audit Committee. Mr. Diamond provides services and is compensated via director fees of $2,500 monthly. Since April 2023, Mr. Diamond provided additional service to the Company in connection to its plans for NYSE up-listing, The Company recorded

$52,500 of related party professional fees on the consolidated statement of operations for the year ended December 31, 2023 compared to $Nil for the year ended December 31, 2024. Mr. Diamond resigned effective December 22, 2023.

 

Julie Hajduk, a member of the Company’s Board of Directors, is a principal at Purple Crown Communications Corp. Ms. Hajduk provides services and is compensated via director’s fees of $2,500 monthly. Since May 2023, Ms. Hajduk provided additional service to the Company in connection to its plans for NYSE up-listing, The Company recorded $6,000 (2023 - $17,750)of related party marketing fees and $10,000 (2023 - $22,500) of related party professional fees on the consolidated statement of operations for the year ended December 31, 2024. As at December 31, 2024, the Company owed $12,000 (2023 - $Nil) to Purple Crown Communications Corp.

 

11.	Segment Information

 

Operating segments are defined as components of an enterprise (business activity from which it earns revenue and incurs expenses) for which discrete financial information is available and regularly reviewed by the chief decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker (CODM) is its Chief Executive Officer. The Company views its operations and manages its business as a single operating and reporting segment.

 

Although all operations are based in the U.S., the Company generated a portion of its revenue from customers outside of the U.S. Information about the Company’s revenue from different geographic regions for the years ended December 31, 2024 and 2023 is as follows:

 

		Year ended December 31,
		2024				2023
		$				%				$				%
United States			5,905,980				92.2	%			12,398,162				95.2	%
Canada			399,640				6.2	%			434,066				3.3	%
Others combined			102,530				1.6	%			195,447				1.5	%
Total Revenue			6,408,150				100.0	%			13,027,675				100.0	%

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Revenue Type (in ’000)		December 31, 2024								December 31, 2023
		$				%				$				%
Product			3,680.6				57.4	%			10,500.5				80.6	%
Software as a Service (SaaS)			2,256.8				35.2	%			1,833.4				14.0	%
Engineering/Support Service			81.4				1.3	%			259.6				2.0	%
Wireless Data			366.1				5.7	%			412.4				3.2	%
Commission Income			23.3				0.4	%			21.8				0.2	%
Total Revenue			6,408.2				100.0	%			13,027.7				100.0	%

 

All of the Company’s significant identifiable assets were located in the United States as of December 31, 2024 and 2023.

 

12.	Concentrations of Risk

 

The Company derived revenue from one customer totaling 22.5% and 33% of the Company’s total revenue for years ended December 31, 2024 and 2023, respectively. At December 31, 2024 and 2023, one customer accounted for a total of 18% and 19% of accounts receivable, respectively.

 

To manage the concentration of customer risk, the Company continuously looks for opportunities to diverse revenue streams and expand client base via marketing. All contracts with customers are signed for a term, and the Company ensures the customer needs are being met by building exceptional customer service relationships.

 

The Company has concentrations in the purchases with its suppliers. For the year ended December 31, 2024 and 2023, the two largest suppliers accounted for a total of 83% and 81% of total purchases, respectively.

 

13.	Income Taxes

 

The Company is an S Corporation for income tax purposes.

 

A reconciliation of income taxes at statutory rates with the reported taxes is as follows:

 

		2024				2023
Net Loss before Tax		$	1,742,951			$	5,182,196
Expected income tax (recovery)			(341,808	)			(1,376,187	)
Change in statutory, foreign tax, foreign exchange rates and other			155,073				-
Permanent differences			310,322				19,779
Adjustment to prior years provisions versus statutory tax returns			(103,712	)			-
Changes in unrecognized deductible temporary differences			(19,875	)			1,356,408
Total income tax expense (recovery)		$	-			$	-

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

The significant components of the Company’s deferred tax assets that have not been included on the consolidated statement of financial position are as follows:

 

		2024				2023
		$				$
Deferred Tax Assets (Liabilities)
Allowance for bad debts			16,583				46,722
Inventory reserves			105,100				63,186
Right-of-use assets			(82,763	)			(135,806	)
Lease liabilities			101,053				155,658
Accrued vacation			22,708				24,321
Sec. 263A Unicap			25,493				15,439
Fixed asset basis difference including depreciation			(1,116	)			1,888
State income taxes -California mandatory lag method			226				243
Capitalized R&D			255,669				317,180
Federal R&D Credit			113,797				-
Non-qualified stock options			124,404				135,815
Non-capital losses available for future period			2,580,418				2,653,156
			3,261,572				3,277,802
Unrecognized deferred tax assets			(3,261,572	)			(3,277,802	)
Net Deferred Tax Assets (Liabilities)		$	-			$	-

 

The significant components of the Company’s temporary differences, unused tax credits and unused tax losses that have not been included on the consolidated statement of financial position are as follows:

 

		2024				Expiry Date Range		2023				Expiry Date Range
Temporary Differences
Allowance for bad debts		$	66,055			No expiry date		$	175,283			No expiry date
Inventory reserves			418,648			No expiry date			237,051			No expiry date
Right-of-use assets			(329,671	)		No expiry date			(509,491	)		No expiry date
Lease liabilities			402,527			No expiry date			583,969			No expiry date
Accrued vacation			90,452			No expiry date			91,245			No expiry date
Sec. 263A Unicap			101,548			No expiry date			71,596			No expiry date
Fixed asset basis difference including depreciation			(4,444	)		No expiry date			7,084			No expiry date
State income taxes -California mandatory lag method			900			No expiry date			900			No expiry date
Capitalized R&D			1,270,377			No expiry date			1,546,822			No expiry date
Non-qualified stock options			495,542			No expiry date			509,526			No expiry date
Non-capital losses available for future period			9,899,008			20 years			9,515,336			20 years

 

 

DIRECT COMMUNICATION SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

14.	Other Expenses

 

During the year ended December 31, 2024, the Company had the following expenses:

 

		Years ended December 31
		2024				2023
		$				$
Insurance			132,798				413,423
Licenses and fees			50,364				72,597
Office expenses			42,561				155,823
Automobile expense			1,376				2,632
Meals and entertainment			47,632				87,764
Travel expense			42,160				124,304
Utilities			52,116				64,575
Tax filing fees			5,063				4,127
Software expense			10,990				14,387
Cost recovery – Tetlit			-				(75,000	)
Other			-				13,294
Total			385,060				877,926

 

15.	Commitments

 

Effective October 1, 2021, the Company has agreed to an annual purchase commitment for a period of three years with a significant vendor. The Company’s obligation to the vendor shall be satisfied by the submission of non-cancelable orders for each contract year with an aggregate value equal to or in excess of $8 million. During the year ended December 31, 2023, the Company revised the agreement with the significant vendor by eliminating the minimum spend to “Forecast” and waiving the penalty fees.

 

16.	Subsequent Events

 

Subsequent to December 31, 2024, the Company:

 

●

Entered into another promissory note of $50,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on January 10, 2027, or a period of 24-months. As additional consideration, the Company issued 10,000 purchase warrants;

 

●

Issued 65,000 share purchase warrants with an exercise price of $2.95 CAD and an expiry date of January 10, 2027 in connection to the promissory notes the Company entered into during November 2024 to January 2025;

 

●

Issued 40,000 common shares for gross proceeds of $83,980 in connection with the exercise of warrants at $2.95 CAD per common share; and

 

●

Issued 142,144 shares in connection with the vesting of 142,144 RSUs.

 

 

 

Direct Communication Solutions, Inc.

 

Condensed Consolidated Financial Statements

(Expressed in US Dollars)

 

As at and for the three and nine months ended

September 30, 2025 and 2024

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct Communication Solutions, Inc.

Condensed Consolidated Statements of Financial Position

(Expressed in US dollars)

As at September 30, 2025 and December 31, 2024

 

		September 30, 2025				December 31, 2024
		(Unaudited)
		$				$
ASSETS
Current
Cash			487,401				603,344
Restricted cash			700				4,345
Accounts and other receivables			738,267				756,958
Inventory			373,001				356,930
Prepaid expenses			46,484				625,041
Current assets			1,645,853				2,346,618
Equipment			2,178				6,592
Security deposit			50,056				50,056
Right-of-use assets			194,805				329,671
Total assets			1,892,892				2,732,937
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY
Current
Accounts payable			906,169				883,018
Accounts payable - RPT			-				67,350
Accrued liabilities			780,560				502,526
Credit facility			290,413				206,084
Current debt			7,046,620				1,966,113
Deferred revenue			350,130				1,786,274
Derivative instrument			365,973				2,014,526
Lease liabilities			229,358				207,722
Current liabilities			9,969,223				7,633,613
Lease liabilities			20,216				194,805
Long term debt			487,719				4,126,776
Total liabilities			10,477,158				11,955,194
Shareholders’ deficiency
Common stock, $0.00001 par value, 5,714,286 shares authorized, 2,487,223 shares and 2,305,079 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively			61				61
Reserves			9,110,556				7,493,267
Accumulated deficit			(17,694,883	)			(16,715,585	)
Total shareholders’ deficiency			(8,584,266	)			(9,222,257	)
Total liabilities and shareholders’ deficiency			1,892,892				2,732,937

 

Nature of operations and going concern (Note 1)

Commitments and contingencies (Note 14)

 

Approved on ***, 2025 on behalf of the Board:

 

“Bill Epsley”		“Ying Xu”
Bill Epsley – CEO & Director		Ying Xu – CFO

 

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

 

 

Direct Communication Solutions, Inc.

Condensed Consolidated Statements of Operating Loss and Comprehensive Loss

(Expressed in US dollars)

Nine Month Periods Ended September 30, 2025 and 2024

 

				For the nine months ended September 30,
				2025				2024
		Notes		$				$
Revenues:
Products					4,875,852				2,719,152
Solutions and other services					2,328,182				2,171,247
Total Revenues		12			7,204,034				4,890,399
Cost of Revenues
Products					3,681,731				2,213,781
Solutions and other services					920,592				850,467
Total cost of revenues					4,602,323				3,064,248
Gross Profit					2,601,711				1,826,151
OPERATING EXPENSES
Research and development					72,386				214,757
General and administrative
Compensation and benefits					2,244,588				1,841,700
Depreciation and amortization		3,7			139,280				141,819
Professional fees					380,625				463,536
Bank fees					102,474				123,929
Bad debt expense (recovery)					49,863				(139,189	)
Facilities					61,368				68,989
Information technology					112,868				124,455
Advertising and marketing					(2,994	)			90,674
Other		13			287,752				297,000
Total Operating Expenses					3,448,210				3,227,670
Net Operating Loss					(846,499	)			(1,401,519	)
OTHER INCOME (EXPENSES)
Changes in fair value of derivative		6			1,555,845				(29,962	)
Rental Income					9,000				9,000
Gain on debt extinguishment					-				2,914,776
Interest expense and accretion		5, 6, 7			(1,697,644	)			(635,028	)
Net income (loss) for the period					(979,298	)			857,267
Weighted Average number of common shares:
Basic					2,424,789				2,305,079
Diluted					2,424,789				2,818,123
Income (loss) per share – basic and diluted
Basic				$	(0.40	)		$	0.37
Diluted				$	(0.40	)		$	0.30

 

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

 

 

Direct Communication Solutions, Inc.

Condensed Consolidated Statements of Changes in Shareholders Deficiency

(Expressed in US dollars)

As at September 30, 2025 and December 31, 2024

 

		Number of Common stocks				Common Stock Amount				Reserves				Accumulated Deficit				Total Shareholders’ (Deficiency)
						$				$				$				$
Balance, January 1, 2024			2,305,079				61				7,365,011				(14,972,634	)			(7,607,562	)
Stock-based compensation expense			-				-				31,494				-				31,494
Net income for the period			-				-				-				857,267				857,267
Balance, September 30, 2024 (Unaudited)			2,305,079				61				7,396,505				(14,115,367	)			(6,718,801	)
Balance, January 1, 2025			2,305,079				61				7,493,267				(16,715,585	)			(9,222,257	)
Stock-based compensation expense			-				-				1,379,646				-				1,379,646
Exercise of warrants			40,000				-				237,643				-				237,643
Restricted share unites vested			142,144				-				-				-				-
Net loss for the period			-				-				-				(979,298	)			(979,298	)
Balance, September 30, 2025 (Unaudited)			2,487,223				61				9,110,556				(17,694,883	)			(8,584,266	)

 

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

 

 

Direct Communication Solutions, Inc.

Condensed Consolidated Statements of Cash Flows

(Expressed in US dollars)

Nine Month Periods Ended September 30, 2025 and 2024

 

		For the nine months ended September 30
		2025				2024
		(Unaudited)				(Unaudited)
		$				$
Cash provided by / (used for):
Operating Activities:
Net loss for the period			(979,298	)			857,267
Items not affecting cash:
Accretion and interest on convertible debentures and promissory note			724,679				292,954
Accrued interest for loan			641,947				316,141
Bad debt expense (recovery)			49,863				(139,189	)
Depreciation and amortization			139,280				141,819
Changes in fair value of derivative			(1,555,845	)			29,962
Gain on debt extinguishment			-				(2,914,776	)
Accretion of lease liability			23,690				37,980
Gain or loss on FX			(1,840	)			-
Stock-based compensation			1,379,646				31,494
Provision for excess and obsolete inventory			33,056				55,315
Net change in non-cash working capital items:
Accounts and other receivables			(31,172	)			685,434
Inventory			(49,127	)			333,511
Prepaid expenses			578,557				24,341
Accounts payable			(44,199	)			(25,582	)
Accrued liabilities			74,164				(464,924	)
Deferred revenue			(1,436,144	)			96,232
Net cash used in operating activities			(452,743	)			(687,289	)
Financing Activities:
Lease payments			(176,643	)			(171,495	)
Net (repayments) borrowings on credit facility			84,329				(53,876	)
Payment on convertible debenture			-				(60,000	)
Proceeds from promissory notes			200,000				675,000
Proceeds from loans			694,000				919,525
Loan from a related party			635,261				-
Payments on loans			(1,187,770	)			(557,670	)
Proceeds from exercise of warrants			83,978				-
Net cash provided by financing activities			333,155				751,483
Change in cash for the period			(119,588	)			64,194
Cash and restricted cash, beginning of the period			607,689				30,723
Cash and restricted cash, end of the period			488,101				94,917

 

		2025				2024
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest expense:			465,084				115,871
Income taxes			-				-

 

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

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

1.

NATURE OF OPERATIONS AND GOING CONCERN

 

Direct Communication Solutions, Inc. (the “Company” or “DCS”) was incorporated in Florida on September 9, 2006 and reincorporated in Delaware in April 2017. The Company is a provider of solutions for the Internet of Things (“IoT”), including monitoring-as-a-service (“MaaS”) solutions for the telematics market. The Company’s range of products includes GPS devices, modems, embedded modules, routers and mobile tracking machine-to-machine (“M2M”) devices, communications and applications software and cloud services.

 

The Company’s M2M products and solutions enable devices to communicate with each other and with server or cloud-based application infrastructures and include M2M embedded modules, integrated M2M communications devices and SaaS delivery platforms, including MiFleet, which provides fleet and vehicle SaaS telematics, MiSensors, which provides easy M2M device management and service enablement for wireless sensors and MiFailover which provides high-speed wireless internet failover to small and medium sized businesses as a redundancy solution to continue to run their business in the event the internet isn’t available.

 

The Company sources some inventory outside the U.S., which are subject to trade and customs laws, regulations and tax requirements such as sanctions orders or tariffs set by governments through mutual agreements or unilateral actions. If additional tariffs or trade restrictions are implemented by the United States or other countries in connection with a global trade war, the cost of the Company’s inventory manufactured in other countries and imported into the United States or other countries could increase, which in turn could adversely affect the demand for these products and have an adverse effect on our business.

 

The Company’s shares trade on the Canadian security exchange (“CSE”) under the symbol DCSI. The Company’s shares also trade on the OTCQ markets, a U.S. trading platform, under the symbol DCSX, and on the Frankfurt Stock Exchange market under the symbol 7QU0.

 

Basis of Presentation and Going Concern

 

The accompanying unaudited condensed consolidated financial statements of the Company and its wholly owned subsidiaries (Collectively, the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP) for interim financial reporting. All inter-company transactions and balances between the Company and its subsidiaries are eliminated upon consolidation. These unaudited interim financial statements do not include certain information and footnote disclosures as required by the U.S. GAAP for complete annual financial statements. Accordingly, these statements should be read in conjunction with the Company’s audited consolidated financial statements for the years ended December 31, 2024 and 2023.

 

In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements for the years December 31, 2024 and 2023. The results of operations for the nine-month periods ended September 30, 2025 and 2024 are not necessarily indicative of the results for the full years.

 

The financial information as of December 31, 2024 presented in the unaudited condensed consolidated financial statements is derived from the audited consolidated financial statements for the year ended December 31, 2024.

 

The accompanying consolidated financial statements have been prepared on a historical cost basis except for certain financial liabilities measured at fair value.

 

The consolidated financial statements include the accounts of the Company and its direct wholly owned subsidiary, Direct Communication Solutions, Canada (“DCS Canada”), which is inactive. All intercompany transactions and balances have been eliminated on consolidation.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

1.

NATURE OF OPERATIONS AND GOING CONCERN (cont’d)

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of its liabilities in the normal course of business.

 

The Company has historically incurred losses and has an accumulated deficit of $17,694,883 (December 31, 2024: $16,715,585). As at September 30, 2025, the Company has working capital deficiency of $8,323,370 (December 31, 2024: $5,286,995), which is not considered sufficient to fund operations at their current levels for the next twelve months. Therefore, the Company will be required to generate additional funding through operations or external financing, which cannot be assured. These conditions raise substantial doubt on the Company’s ability to continue as a going concern.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.”) requires management to make estimates and assumptions that affect the recorded amounts of assets and liabilities reported in the consolidated financial statements and accompanying notes. Accordingly, actual results could differ materially from those estimates. Significant estimates include allowance for doubtful accounts receivable, provision for excess and obsolete inventory, valuation of stock options and warrants, fair value of derivative liability, possible product returns and income taxes.

 

Fair Value of Financial Instruments

 

The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, the most advantageous market for the specific asset or liability.

 

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non- recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

 

The three tiers are defined as follows:

 

●

Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

 

●

Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

 

●

Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

 

The Company believes the carrying amounts of cash, restricted cash, accounts receivable, accounts payable, accrued liabilities, lease liabilities, credit facility, and current debt approximate fair value due to their short-term maturities.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

1.

NATURE OF OPERATIONS AND GOING CONCERN (cont’d)

 

The following table represents the Company’s financial instruments that are measured at fair value as of September 30, 2025 and December 31, 2024:

 

September 30, 2025		Level 1				Level 2				Level 3				Total
Derivative Liability		$	-			$	-			$	365,973			$	365,973
December 31, 2024
Derivative Liability		$	-			$	-			$	2,014,526			$	2,014,526

 

Recent Accounting Pronouncements

 

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires all public entities to disclose information about purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion foreach income statement line item that contains those expenses. The amendments are effective for the Company in fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 27, 2027. Early adoption is permitted on either a prospective or retrospective basis. The Company is currently evaluating the guidance and its impact to the financial statements.

 

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated balance sheets, statements of income (loss) and comprehensive income (loss) and statements of cash flows.

 

From time to time, new accounting pronouncements are issued by the FASB or other standard-setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the accompanying financial statements and disclosures.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

2.

INVENTORY

 

Inventory consists of the following:

 

		September 30,				December 31,
		2025				2024
Components and raw materials		$	876,982			$	831,308
Allowance for components and raw materials			(506,559	)			(474,684	)
Assemblies			34,293				30,840
Allowance for assemblies			(31,715	)			(30,534	)
		$	373,001			$	356,930

 

During the nine month periods ended September 30, 2025, a total of $3,681,731 inventory was expensed as cost of sales (2024 - $2,213,781).

 

As discussed in Note 5, TAB has a lien on all the Company’s assets which includes inventory. As at September 30, 2025, the Company had pledged $130,576 (December 31, 2024 - $344,844) of inventory as collateral for three loans (Note 6).

 

3.

EQUIPMENT

 

Equipment consists of the following:

 

		September 30,				December 31,
		2025				2024
Computer equipment and purchased software		$	152,938			$	152,938
Furniture and fixtures			51,427				51,427
Tooling			59,300				59,300
			263,665				263,665
Less—accumulated depreciation			(261,487	)			(257,073	)
		$	2,178			$	6,592

 

Depreciation expenses were $4,414 and $5,060 for nine months ended September 30, 2025, and 2024, respectively.

 

4.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

Accrued liabilities consist of the following:

 

		September 30,				December 31,
		2025				2024
Payroll related expenses		$	132,275			$	175,132
Interest accrued (Note 6)			400,264				196,394
Penalty accrued (Note 6)			33,241				-
Other			214,780				131,000
		$	780,560			$	502,526

 

Accounts payable consist of the following:

 

		September 30,				December 31,
		2025				2024
Vendor payable due within 12 months		$	906,169			$	950,368
Vendor payable not due within 12 months		$	-			$	-

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

5.

CREDIT FACILITY

 

In January 2020, the Company entered into a two-year agreement with TAB Bank (“TAB”) for a $2,500,000 credit facility. Under the TAB Bank credit facility, the Company is obligated to assign all its accounts receivables, and the Company may request advances up to 90% of domestic accounts less than 90 days from the invoice date and not subject to offset up to $2,000,000. Interest is payable monthly at a rate the greater of (a) 90-Day SOFR rate plus 4.50% and (b) 6.41%. In addition, there is an administration fee equal to 0.008% per diem of the outstanding daily obligations.

 

The agreement is further extended automatically for a successive one-year term. As of December 31, 2024, the expiry date is January 23, 2025. The agreement was automatically renewed on January 23, 2025.

 

The Company may also borrow an amount limited to the lesser of: (a) 50% of the cost of eligible inventory, (b) 50% of funds employed and, (c) $500,000 (the “Inventory Advance”). Under the Inventory Advance, interest is payable monthly at a rate the greater of (a) 90-Day SOFR rate plus 4.50% and (b) 6.41%. In addition, there is an administration fee equal to 0.01% per diem of the outstanding daily obligations.

 

The Company does not retain any legal or equitable interest in any accounts receivables account sold under this credit facility. The Company assumes full risk of non-payment and guarantees full payment of all accounts. The Company granted a security interest in all its assets as collateral for its obligations under the facility. The credit facility consists of the following balances as at September 30, 2025 and December 31, 2024:

 

		September 30,				December 31,
		2025				2024
Carrying amount of available credit limit in connection to the credit facility		$	335,758			$	239,426
Outstanding balance			290,413				206,084

 

6.

DEBT

 

Convertible Promissory Debentures

 

On April 7, 2022, the Company received convertible debenture financing for the aggregate amount of $100,000. Subscribers may convert all or part of the principal amount outstanding under the debentures into units of the Company. The debentures are convertible into units at the higher of $8.33 or a price equal to the price of the shares or units of the next financing carried out before the second anniversary of the closing date, less a 30% discount.

 

The units comprise a share and one-half of one warrant, where a whole warrant shall be exercisable at $2.80 per common stock for a two-year term. The debentures have a maturity date of the second anniversary of the closing date and bear an interest rate of 10% per annum, payable semi-annually. During the year ended December 31, 2024, the Company had paid off the convertible debenture and interest in full.

 

In September 2022, the Company issued additional convertible promissory debentures totalling $1,500,000, bearing interest at 10% per annum (accruing annually and payable at maturity), and maturing on September 9, 2024, or a period of 24-months. The Debentures are convertible, at the option of the holder, to common stocks of DCS at a price of $8.33 or a price equal to the price of the shares of the next financing carried out before the second anniversary of the closing date at 25% premium. Upon issuance of the debentures, the Company also issued 107,143 share purchase warrants. Each warrant entitles the holder to purchase one common stock at a price of $6.02 per share for a period of 24 months from the date of issuance of the debentures. At December 31, 2024, the Company settled indebtedness by issuing additional convertible promissory debentures and paid off during the year.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

6.	DEBT (cont’d)

 

On September 13, 2024, the Company issued replacement convertible promissory debentures totaling $1,741,589, bearing interest at 15% per annum (accruing annually and payable at maturity), and maturing on September 14, 2025, or a period of 12-months to settle indebtedness related to the convertible debentures issued in 2022. The Debentures are convertible, at the option of the holder, to common stocks of DCS at a price of $6. Upon issuance of the debentures, the Company agreed to issue 196,582 share purchase warrants as additional compensation subject to CSE approval. Each warrant entitles the holder to purchase one common stock at a price of CAD $3.20 per share for a period of 24 months from the date of issuance of the warrant. The warrants had been issued during the year ended December 31, 2024.

 

The Company recorded the conversion features with fixed exercise prices and the debt as a single unit with the debt in accordance with ASU 2020-06 and recorded the fair value of the warrants as an embedded derivative separated from the host contract in accordance with ASC 815. The fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statements of operations. The Company uses a derivative valuation technique to fair value the components of the hybrid contract on initial recognition, including the debt component, the conversion features, and the warrants. The following significant inputs and assumptions were used in the model:

 

		September 30, 2025				December 31, 2024
Expected term (years)			1.03				1.70
Stock Price			CAD2.28				CAD8.00
Risk-free interest rate			3.64	%			2.96	%
Expected volatility			98.29	%			150	%
Dividend yield			0.00	%			0.00	%
Estimated forfeitures			0.00	%			0.00	%

 

The following table presents the Company’s embedded warrants of its convertible debt measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024, determined based on “Level 3” inputs.

 

		Derivative
		$
Balance at December 31, 2023			1,092
Initial recognition			283,978
Net changes in fair value included in net loss			875,851
Balance at December 31, 2024			1,160,921
Net changes in fair value included in net loss			(985,855	)
Balance at September 30, 2025			175,066

 

The debt component of the convertible debenture is subsequently measured at amortized cost. The following table presents the debt component of the convertible debt measured at its fair value on initial recognition $1,035,556 and subsequently carried at amortized cost using the interest rate of 32.06% per annum over 24 months period. On September 14, 2024, the Company issued replacement convertible promissory debentures, and derecognized the convertible debt issued in the prior period. The debt component of the replacement convertible promissory debentures measured at its fair value on initial recognition of $1,395,104 and subsequently carried at amortized cost using the interest rate of 37% per annum over the 12 months period. As of September 30, 2025, total accrued interest of $274,408 (December 31, 2024 - $77,298) was recorded in accrued liabilities. The Company was in default on the loan that matured on September 14, 2025. Subsequently, on October 9, 2025, management secured an agreement with the lender to extend the loan’s maturity by one year.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

6.	DEBT (cont’d)

 

Date		Beg. Balance				Additions				Accretion				End. Balance
		$				$				$				$
December 31, 2022			1,035,556				-				58,217				1,093,773
December 31, 2023			1,093,773				-				232,939				1,326,712
September 14, 2024			1,326,712				(1,500,000	)			173,288				-
September 14, 2024			-				1,395,104				-				1,395,104
December 31, 2024			1,395,104				-				81,380				1,476,484
September 30, 2025			1,476,484				-				265,105				1,741,589

 

Loans

 

In April 2024, the Company entered into a promissory note agreement of $100,000, bearing interest at 19% per annum (accruing semi - annually and payable every six months), and maturing on April 15, 2026, or a period of 24-months. As additional consideration, the Company issued 10,000 purchase warrants on September 11, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.00 per share for a period of 24 months from the date of issuance.

 

In May 2024, the Company entered into a promissory note of $100,000, bearing interest at 19% per annum (accruing semi- annually and payable every six months), and maturing on May 24, 2026, or a period of 24-months. As additional consideration, the Company issued 10,000 purchase warrants on September 11, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.00 per share for a period of 24 months from the date of issuance.

 

In June 2024, the Company entered into a promissory note of $100,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on June 28, 2026, or a period of 24-months. As additional consideration, the Company issued 20,000 purchase warrants on September 11, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.00 per share for a period of 24 months from the date of issuance.

 

In July 2024, the Company entered into a promissory note of $50,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on July 8, 2026, or a period of 24-months. As additional consideration, the Company issued 10,000 purchase warrants on September 11, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.00 per share for a period of 24 months from the date of issuance.

 

In August 2024, the Company entered into a promissory note of $75,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on August 31, 2026, or a period of 24-months. As additional consideration, the Company issued 15,000 purchase warrants on October 9, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $3.14 per share for a period of 24 months from the date of issuance.

 

In August 2024, the Company entered into another promissory note of $250,000, bearing interest at 19% per annum (accruing semi-annually and payable every six months), and maturing on August 24, 2026, or a period of 24-months. As additional consideration, the Company issued 50,000 purchase warrants on October 16, 2024. Each warrant entitles the holder to purchase one common stock at a price of CAD $3.09 per share for a period of 24 months from the date of issuance.

 

In November 2024, the Company entered into another promissory note of $100,000, bearing interest at 19% per annum (accruing semi-annually and payable every 6 months), and maturing on November 22, 2026, or a period of 24- months. As additional consideration, the Company issued 10,000 purchase warrants on January 10, 2025. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

6.	DEBT (cont’d)

 

In November 2024, the Company entered into another promissory note of $50,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on November 27, 2026, or a period of 24-months. As additional consideration, the Company issue 10,000 purchase warrants on January 10, 2025. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

In December 2024, the Company entered into promissory notes with an aggregated total of $200,000, bearing interest at 15% per annum (accruing annually and payable at maturity date), and maturing on December 10, 2026, or a period of 24-months. As additional consideration, the Company issued 40,000 purchase warrants on January 10, 2025. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

In December 2024, the Company entered into promissory note of $50,000, bearing interest at 19% per annum (accruing annually and payable annually), and maturing on December 26, 2026, or a period of 24-months. As additional consideration, the Company issue 5,000 purchase warrants on January 10, 2025. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

In January 2025, the Company entered into promissory note of $50,000, bearing interest at 15% per annum (accruing annually and payable on maturity date), and maturing on January 10, 2027, or a period of 24-months. As additional consideration, the Company issued 10,000 purchase warrants on January 10, 2025. Each warrant entitles the holder to purchase one common stock at a price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

In June 2025, the Company entered into promissory notes with an aggregated total $150,000, bearing interest at 19% per annum (accruing annually and payable annually), and maturing on June 26, 2027, or a period of 24-months. As additional consideration, the Company issued a purchase warrant concurrently, entitling the holder to purchase 30,000 shares of common stock at a price of CAD $3.12 per share for a period of 24 months from the date of issuance.

 

The Company records the fair value of the warrants exercisable with a variable amount of cash receivable due to foreign exchange as an embedded derivative separate from the host contract. The fair value of the derivative liabilities is revalued on each Statement of Financial Position date with corresponding gains and losses recorded in profit or loss. The Company uses a derivative valuation technique to fair value the components of the hybrid contract on initial recognition, including the debt component and the warrants. The following significant inputs and assumptions were used in the model:

 

		September 30, 2025				December 31, 2024
Expected term (years)			0.95-1.71				1.70-2.00
Stock price			2.28-4.36				0.66-5.40
Risk-free interest rate			3.64%-4.25	%			4.21%-4.25	%
Expected volatility			96.38%-188.28	%			119.54%-186.17	%
Dividend yield			0.00	%			0.00	%
Estimated forfeitures			0.00	%			0.00	%

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

6.

DEBT (cont’d)

 

The following table presents the Company’s embedded warrants of its promissory notes measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024, determined based on “Level 3” inputs.

 

		Derivative
		$
Balance at December 31, 2023			-
Initial recognition during the year			324,135
Net changes in fair value included in net loss			529,470
Balance at December 31, 2024			853,605
Initial recognition during the year			62,794
Warrants exercised			(153,665	)
Net changes in fair value included in net loss			(571,827	)
Balance at September 30, 2025			190,907

 

The debt component of the loans subsequently measured at amortized costs. The following table presents the debt component of the loans measured at its fair value on initial recognition and subsequently carried at amortized cost using the effective interest rate (“EIR”) per annum over the loan period. As of September 30, 2025 and December 31, 2024, the total accrued interest was recorded in current debt and long-term debt in accordance with the loan payment terms.

 

Loan ID		Date		EIR				Beg. Balance				Additions & Payments				Interest & Accretion				End. Balance				Total Interest accrued
					%				$				$				$				$				$
1		December 31, 2024			21				95,130				(9,500	)			15,117				100,747				4,034
2		December 31, 2024			21				95,816				(9,500	)			12,628				98,944				2,004
3		December 31, 2024			23				81,644				-				10,273				91,917				7,644
4		December 31, 2024			25				39,568				-				5,031				44,599				3,616
5		December 31, 2024			37				47,109				-				6,089				53,199				3,760
6		December 31, 2024			42				166,724				-				26,458				193,182				16,788
7		December 31, 2024			35				87,502				-				2,448				89,950				2,030
8		December 31, 2024			34				33,281				-				1,055				34,336				699
9		December 31, 2024			40				25,888				-				196				26,084				130
10		December 31, 2024			62				78,204				-				2,770				80,974				1,726
1		September 30, 2025			21				100,747				-				16,870				117,617				18,245
2		September 30, 2025			21				98,944				-				16,348				115,292				16,215
3		September 30, 2025			23				91,917				-				17,464				109,381				18,863
4		September 30, 2025			25				44,599				-				9,096				53,695				9,226
5		September 30, 2025			37				53,199				-				16,631				69,830				12,174
6		September 30, 2025			42				193,182				(23,750	)			62,286				231,718				28,565
7		September 30, 2025			35				89,950				(9,500	)			18,719				99,169				6,741
8		September 30, 2025			34				34,336				-				9,766				44,102				6,309
9		September 30, 2025			40				26,084				(4,750	)			12,540				33,874				2,486
10		September 30, 2025			62				80,974				-				45,903				126,877				24,164
11		September 30, 2025			38				-				30,892				9,497				40,389				5,404
12		September 30, 2025			34				-				70,876				7,248				78,124				5,518
13		September 30, 2025			34				-				35,438				3,624				39,062				2,759

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

6.	DEBT (cont’d)

 

Pursuant to a vendor changing its terms with the Company from billing devices and device management subscriptions from a payment term of 36 months down to 30 days reducing the frequency of occurrence for long term payables, the Company entered into an agreement to restructure the payables into a long-term loan with a principal of $3,200,000, bearing interest at 10%. The interest will be due quarterly, and the principal will be due in 5 years. The balance of $2,914,776 of the payables was forgiven and recognized in the Company’s consolidated statement of operating loss and comprehensive loss during the year ended December 31, 2024. As at September 30, 2025, the Company recorded $400,264 (December 31, 2024 - $196,394) accrued interest and finance fee and a carrying balance of $3,600,265 (December 31, 2024 - $3,396,394) of the loan was outstanding. During the nine months period ended September 30, 2025, the Company paid $50,000 interest expenses. The Company has fallen behind on interest payments. Although the lender has not yet issued a formal demand letter or declared a default as of the reporting date, this breach of the loan agreement entitles the lender to demand immediate repayment of the full loan balance. Therefore, the entire loan balance has been reclassified from long-term to short-term as at September 30, 2025.

 

Related party loans

 

During the six months period ended June 30, 2025, a company controlled by a family member of Mr. Mike Zhou, a principal shareholder of the Company, advanced $136,100 to the Company to support its operations (note 10). The funds were used to pay off outstanding consulting fees. The advance is non-interest-bearing and repayable on demand. On July 14, 2025, the Company entered into a promissory note for $1,386,000 with the same related party, which replaced the above mentioned advance on demand. This promissory note, structured as a bridge loan, features an Original Issue Discount (OID) of $126,000. It is to be funded in up to six monthly tranches of up to $210,000 each. Each tranche matures 12 months from its respective advance date. The loan bears interest at a rate of 10% per annum and is personally guaranteed by the Company’s CEO. As of September 30, 2025, the Company has received three tranches of loan totaling $494,061. The loan bears effect interest rate of 18.37%. The carrying amount of the loan was $497,955, which included accrued interest of $3,894.

 

Separately, in July 2025, the Company entered into a supply chain loan agreement with the same related party for up to $500,000. The loan carries fixed interest amount of $30,000, payable annually in advance. The loan is personally guaranteed by the Chairman of the Board of Directors. As of September 30, 2025, the Company has drawn $141,200 under this agreement and has recorded interest expenses of $2,118.

 

Loans with collateral

 

In May 2024, the Company entered into a loan agreement with a third party for proceeds of $250,000. The proceeds will be used for operating purposes. The loan is repayable in 24 monthly payments starting May 2024, bearing interest at 22.2%, and is secured by a general security agreement on the Company’s assets.

 

In August 2024, the Company entered into two loan agreements with third parties for proceeds of $174,221 and $200,000. The proceeds will be used for operating purposes. The loans are repayable in 65 and 35 weekly payments, respectively, starting August 2024, bearing interest at 23.5% and 37.24% respectively, and are secured by a general security agreement on the Company’s assets. The loans were fully paid in March 2025.

 

In March 2025, the Company entered into a loan agreement with a third party for proceeds of $284,500 . The loan is repayable in 35 weekly payments, starting April 2025, bearing Estimated Annual Percentage Rate at 84.26%, and is secured by a general security agreement on the Company’s assets. The loan is also personally guaranteed by the Company’s former CEO. The estimated weekly payment is based on 1.97% of the Company’s estimated weekly projected revenue. The Company incurred the total cost of the financing of $90,500 relating to this loan. As of September 30, 2025, the Company was not in compliance with a covenant of the loan agreement that prohibits entering into additional financing arrangements without the lender’s consent and has also fallen behind on interest payments. While the lender has not yet taken formal action, the non-compliance could allow the lender to demand immediate repayment of the full loan balance, exercise its rights under the related security agreement and personal guarantee, and seek with contractual damages and collection costs.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

6.	DEBT (cont’d)

 

In March 2025, the Company entered into a loan agreement with a third party for proceeds of $175,000. The loan is repayable in 65 weekly payments, starting April 2025, bearing Annual Percentage Rate at 43.31%, and is secured by a general security agreement on the Company’s assets. The Company incurred the total cost of the financing of $50,575 relating to this loan. As of September 30, 2025, the Company was not in compliance with a covenant of the loan agreement that prohibits entering into additional financing arrangements. While the lender has not yet taken formal action, this non-compliance could allow the lender to demand immediate repayment of the full loan balance, exercise its rights under the related security agreement and personal guarantee, and seek with contractual damages and collection costs.

 

In April 2025, the Company entered into a loan agreement with third party for proceeds of $235,000. The loan is payable in 26 weekly payments, starting April 2025, bearing Estimated Annual Percentage Rate at 165%, and is secured by a general security agreement on the Company’s assets. The loan is also personally guaranteed by the Company’s former CEO. The estimated weekly payment is based on the 18% share of the Company’s projected revenue. The Company incurred the total cost of the financing of $100,000 relating to this loan. As of September 30, 2025, the Company was not in compliance with a covenant of the loan agreement that prohibits the sale or pledge of the Company’s receivable and was also fallen behind on interest payments. While the lender has not yet taken formal action, the non-compliance could allow the lender to demand immediate repayment of the full loan balance, exercise its rights under the related security agreement and personal guarantee, and seek with contractual damages and collection costs.

 

During the year ended December 31, 2023, the Company entered into two loan agreements and pledged $110,532 of inventory as collateral. The Company entered into two additional loan agreements during the year ended December 31, 2024 and pledged an additional $234,312 of inventory as collateral. During the nine months period ended September 30, 2025, one loan matured and was repaid. Upon the maturity and repayment of this loan, the Company incurred a penalty of $242,568 for breaching the terms of the loan agreement. As of September 30, 2025, $209,326 of this penalty has been paid, and the remaining balance of $33,241 is included in accrued liabilities.

 

The outstanding loans have the following terms as of September 30, 2025.

 

		Loan 1				Loan 2				Loan 3
Expected term (months)			60				36				24
Interest rate			6.77	%			19.02	%			16	%
Payable within 12 months		$	11,866			$	14,956			$	40,042
Payable not due in 12 months		$	25,673				-				-

 

During the nine months period ended September 30, 2025, the Company recorded $26,222 (2024-$64,912) of interest expense in the consolidated statement of loss and comprehensive loss in connection to the three loan agreements. As of September 30, 2025, a carrying balance of $92,537 (December 31, 2024 - $160,233) relating to the loans were outstanding.

 

Deferred Revenue

 

The Company record a contract liability when we receive consideration in advance of transferring goods or services to a customer. At September 30, 2025, our contract liability balance was $350,130 (December 31, 2024 - $1,786,274). During the nine months period ended September 30, 2025, the Company recognized $1,756,290 (2024 - $82,367) of revenue that was included in the contract liability balance at December 31, 2024.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

7.

LEASES

 

On May 27, 2021, the Company entered into a lease agreement whereby the Company will lease premises in San Diego, California effective November 1, 2021. The lease (“Lease”) has an initial 60-month term. Not less than nine months prior to the expiration of the Lease, the Company has an option to extend the Lease term for an additional five years at then current market rates. The right to use leased asset was measured at the amount of the lease liability of $899,102 using the Company current incremental borrowing rate of 10%.

 

The following table presents the Company’s leases balances As of September 30, 2025 and December 31, 2024 under ASC 842.:

 

		Balance				Balance
		September 30,				December 31,
		2025				2024
Right-of-use assets, net		$	194,805			$	329,671
Lease liabilities – current			229,358				207,722
Lease liabilities – non-current			20,216				194,805

 

Depreciation expenses of $134,865 (2024 - $134,865) was recorded in general and administrative expense in the consolidated statements of operations for the nine months period ended September 30, 2025. The remaining lease term as of September 30, 2025 was 1.08 years. The weighted-average discount rate as of September 30, 2025 was 10%. For the nine months period ended September 30, 2025, cash outflows from operating leases were $176,643 (2024 - $171,495).

 

Future minimum lease payments under the lease agreement as of September 30, 2025 are as follows:

 

Years Ending December 31:
2025		$	60,059
2026			202,160
		$	262,219

 

The Company does not have any short-term or low value leases.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

8.	COMMON STOCK AND COMMON STOCK WARRANTS

 

Common Stock

 

Holders of common stock are entitled to one vote for each share held. The Company has not declared any dividends since incorporation. The Company has 5,714,286 common stocks authorized with a par value of $0.00001.

 

There were no transactions affecting common stock during the year ended December 31, 2024.

 

During the nine months period ended September 30, 2025, 40,000 common shares were issued pursuant to 40,000 share purchase warrants exercised at $2.95 CAD per share for gross proceeds of $83,978. An amount of $153,665 previously recognized as a warrant derivative liability has been reallocated to share capital.

 

During the nine months period ended September 30, 2025, 142,144 common shares were issued pursuant to the vesting of 142,144 RSUs.

 

Warrants

 

In September 2022, the Company issued convertible promissory debentures (note 6) and upon issuance of the debentures, the company also issued 107,143 share purchase warrants. Each warrant entitles the holder to purchase one common stock at a price of $6.02 per share for a period of 24 months from the date of issuance of the debentures. In September 2024, the issued 107,143 share purchase warrants expired.

 

In September 2024, the Company issued convertible promissory debentures (Note 6) and upon issuance of the debentures, the company agreed to issue 196,582 share purchase warrants, subject to CSE approval. Each warrant entitles the holder to purchase one common stock at a price of $2.36 per share for a period of 24 months from the date of issuance of the warrant. The warrants were issued on October 10, 2024.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

8.

COMMON STOCK AND COMMON STOCK WARRANTS (cont’d)

 

From April to August 2024, the Company entered into promissory note agreements (Note 6) and subsequently issued 115,000 purchase warrants during the year ended December 31, 2024. Each warrant entitles the holder to purchase one common stock at various price of CAD $2.00 to CAD $3.14 per share for a period of 24 months from the date of issuance depending on the promissory notes term. The Company determined the warrants represent an embedded derivative and has accounted for the warrants in derivative liability.

 

From November to December 2024, the Company entered into promissory note agreements (Note 6) and agreed to issue 65,000 purchase warrants in connection to the promissory note. Each warrant entitles the holder to purchase one common stock at the price of CAD $2.95 per share for a period of 24 months from the date of issuance depending on the promissory notes term. As of September 30, 2025, all 65,000 purchase warrants have been issued.

 

During January 2025, the Company entered into a promissory note agreement (Note 6) and issued 10,000 purchase warrants in connection to the promissory note. Each warrant entitles the holder to purchase one common stock at the price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

During June 2025, the Company entered into two promissory note agreements (Note 6) and issue 30,000 purchase warrants in connection to the promissory note. Each warrant entitles the holder to purchase one common stock at the price of CAD $3.12 per share for a period of 24 months from the date of issuance.

 

The Company determined the warrants represent an embedded derivative and has accounted for the warrants in derivative liability.

 

The following table summarizes the warrant activity for the nine months period ended September 30, 2025 and the year ended December 31, 2024:

 

		Number of warrants				Weighted average exercise price
Outstanding, December 31, 2024			107,143			$	6.02
Granted			311,582				2.08
Expired			(107,143	)			6.02
Outstanding, December 31, 2024			311,582			$	2.08
Granted			105,000				2.21
Exercised			(40,000	)			2.05
Outstanding, September 30, 2025			376,582			$	2.21

 

The following table summarizes the warrants outstanding as at September 30, 2025:

 

Date of Expiry		Number of Warrants Outstanding				Exercise Price				Weighted Average Remaining Life (years)
September 11, 2026			50,000			CAD $	2.00				0.95
October 9, 2026			15,000			CAD $	3.14				1.02
October 10, 2026			196,582			CAD $	3.20				1.03
October 16, 2026			50,000			CAD $	3.09				1.04
January 10, 2027			35,000			CAD $	2.95				1.28
June 16, 2027			30,000			CAD $	3.12				1.71

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

9.

STOCK OPTIONS AND RESTRICTED SHARES UNIT (“RSU”)

 

In October 2017, the Company’s board of directors and stockholders approved the 2017 Stock Plan (2017 Plan) under which 500,000 shares of common stock are reserved for the granting of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and performance awards to employees, directors and consultants. Recipients of stock option awards are eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. The maximum term of awards granted under the 2017 Plan is ten years and vesting is determined by the board of directors. Stock awards are generally not exercisable prior to the applicable vesting date, unless otherwise accelerated under the terms of the applicable stock plan agreement. Unvested shares of the Company’s common stock issued in connection with an early exercise allowed by the Company may be repurchased by the Company upon termination of the optionee’s service with the Company. The vesting terms of each option grant are at the discretion of the Board of Directors.

 

In December 2023, the Board of Directors and a majority of the stockholders approved to replace the 2017 Stock Plan with the 2023 Omnibus Plan. Any previously granted stock options shall continue to exist under the 2023 Omnibus plan, and the number of authorized shares for combined issuance of awards, including stock options, as of September 30, 2025 is 1,000,000.

 

The following table summarizes stock option transactions under the 2023 Omnibus Plan:

 

		Number of Options				Weighted average exercise price
Outstanding, December 31, 2023			540,857			$	4.03
Granted			177,500			$	5.00
Forfeited			(269,428	)		$	3.66
Outstanding, December 31, 2024 and September 30, 2025			448,929			$	4.64

 

At September 30, 2025, the Company had outstanding and exercisable stock options as follows:

 

Date of Expiry		Number of Options Outstanding				Number of Options Exercisable				Exercise Price				Weighted Average Remaining Life (years)
October 5, 2027			178,571				178,572			$	3.29				2.01
February 4, 2032			6,429				6,238			$	2.87				6.35
February 24, 2032			10,715				10,715			$	2.87				6.41
March 14, 2032			8,571				7,834			$	4.13				6.46
May 9, 2027			52,857				52,857			$	8.40				1.61
May 9, 2027			14,286				14,286			$	5.53				1.61
December 23, 2029			177,500				177,500			$	5.17				4.23

 

As of September 30, 2025, there was $1,865 (December 31, 2024 - $704,243) of total unrecognized stock-based compensation cost related to outstanding nonvested equity awards that is expected to be recognized as an expense over the remaining vesting period of 1.61 years to 4.23 years.

 

The Company uses a Black-Scholes option valuation model to determine the fair value of stock-based compensation under ASC Topic 718, Stock Compensation. The expected volatility is based on the historical volatility of a peer group of publicly-traded companies. The risk-free interest rate is based on the yield on the measurement date of a zero-coupon U.S. Treasury bond whose maturity period approximately equals the option’s expected term.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

9.	STOCK OPTIONS AND RESTRICTED SHARES UNIT (“RSU”) (cont’d)

 

The expected life represents the time the options granted are expected to be outstanding. Forfeitures are adjusted in the period when forfeitures occur.

 

The following are the assumptions used in the Black-Scholes option valuation model for option granted during the nine months period ended September 30, 2025 and year ended December 31, 2024:

 

		September 30,				December 31,
		2025				2024
Fair value of common stock			-			$	5.00
Expected term (years)			-				5
Risk-free interest rate			-				4.4	%
Expected volatility			-				120.7	%
Dividend yield			-				-
Estimated forfeitures			-				-

 

Pursuant to the approval of 2023 Omnibus Plan, the maximum number of common shares that may be issued for all awards, including RSU, is 1,000,000 shares. The following table summarizes RSU transactions under the 2023 Omnibus Plan:

 

		Number of RSU				Weighted average Fair value
Outstanding, December 31, 2023			-				-
Granted			142,144			$	5.10
Outstanding, December 31, 2024			142,144			$	5.10
Vested			(142,144	)		$	(5.10	)
Outstanding, September 30, 2025			-			$	-

 

During the nine months period ended September 30, 2025, no RSUs were granted compared to 142,144 RSUs granted to certain officers and directors of the Company during the year ended December 31, 2024. The Company recorded share-based compensation expenses of $677,398 (2024 – $47,536) relating to the vesting portion of RSUs.

 

10.

RELATED PARTY AGREEMENTS

 

Related parties and related party transactions impacting the accompanying financial statements are summarized below and include transactions with the following individuals or entities:

 

Remuneration attributed to key management personnel

 

Key management personnel include those persons having authority and responsibility for planning, directing, and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of executive and non-executive members of the Company’s Board of Directors and corporate officers.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

10.

RELATED PARTY AGREEMENTS (cont’d)

 

Remuneration attributed to key management personnel can be summarized as follows:

 

		Nine months ended September 30,
		2025				2024
		$				$
Salary			560,570				584,903
Consulting fees			187,500				417,500
Marketing Service			-				6,000
Share-based compensation			78,806				960
RSU			677,398				-
Total			1,504,274				1,009,363

 

Transaction with related parties

 

Chris Bursey, the President and Chief Executive Officer of the Company incurred $188,755 (2024 – $74,185) operating expenses on behalf of the Company during the nine months period ended September 30, 2025. As of September 30, 2025, the Company owed $97,496 to Mr. Bursey (December 31, 2024 – a receivable balance of $2,259). The outstanding balance was included in accounts payable. In September 2025, Mr. Bursey resigned as the director and the CEO of the Company.

 

John Hubler, previously a member of the Company’s Board of Directors, is a partner of BH IoT Group. Mr. Hubler rejoined the Company as a director in April 2023 and resigned in September 2024. In November 2020, the Company entered into an agreement with BH IoT Group to assist in building complete IoT bundled solutions. The Company entered into an initial Phase 1 project expected to last 3 months. At the end of Phase1, both parties agreed to continue the relationship on a month-to-month basis. John Hubler was considered as a related party starting April 2023 up to August 2024. The Company recorded $Nil (2024 - $140,000) related party professional fees on the consolidated statement of operations for the nine months period ended September 30, 2025.

 

Mike Zhou, previously a member of the Company’s Board of Directors, is the owner of MYZ Corporate Relations, Ltd. Mr. Zhou resigned in March 2024. In May 2021, the Company entered into an agreement with MYZ Corporate Relations, Ltd. to provide consulting services on strategic matters related to business development opportunities, product development and marketing strategies for a monthly fee of $4,000. The agreement is effective for one year and will automatically renew annually unless terminated by either party. The Company recorded $Nil of professional fees on the consolidated statement of operations for the nine months period ending September 30, 2025 (2024 - $nil). As at September 30, 2025, the Company owed $Nil (December 31, 2024 - $nil) to MYZ Corporate Relations, Ltd. Mike Zhou became the Company’s major shareholder following an ownership restricting completed in September 2025. A company controlled by a family member of Mr. Zhou lent $494,061 of promissory loan and $141,200 supplier chain loan to the Company during the nine months period ended September 30, 2025. The amount is recorded under current debt (see note 6).

 

Mr. Lichtenwald, previously a member of the Company’s Board of Director and the CFO of the Company, is a principal at Zeus Capital Ltd. On June 30, 2022, Mr. Lichtenwald resigned as a director. In November 2021, the Company entered into an agreement with Zeus Capital Ltd. to assist the company with corporate finance and strategic initiatives for a monthly fee of $15,000. The agreement is effective for one year and will automatically renew annually unless terminated by either party. The Company recorded $75,000 of professional fees on the consolidated statement of operations for the nine months period ended September 30, 2025 (2024 - $135,000). As at September 30, 2025, the Company owed $30,000 (December 31, 2024 - $32,650) to Zeus Capital Ltd.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

10.	RELATED PARTY AGREEMENTS (cont’d)

 

Also, Mr. Lichtenwald is a principal of Zeus Accounting Solutions Corp., formerly known as Lichtenwald Professional Corp (“LPC”). The Company entered into an agreement with LPC to provide CFO service fees of $12,500 monthly, effective April 2022. The Company recorded $62,500 of professional fees on the consolidated statement of operations for the nine months period ended September 30, 2025 (2024 - $112,500). As at September 30, 2025, the Company owed $25,000 (December 31, 2024 - $22,700) to Zeus Accounting Solutions Corp. Mr. Lichtenwald resigned as the CFO in May 2025.

 

Julie Hajduk, a member of the Company’s Board of Directors, is a principal at Purple Crown Communications Corp. Ms. Hajduk provides services and is compensated via director’s fees of $2,500 monthly. Since May 2023, Ms. Hajduk provided additional service to the Company in connection to its plans for NYSE up-listing, The Company recorded $Nil (2024 - $6,000) of related party marketing fees and $Nil (2024 - $10,000) of related party professional fees on the consolidated statement of operations for the nine months period ended September 30, 2025. As at September 30, 2025, the Company owed $Nil (December 31, 2024 - $12,000) to Purple Crown Communications Corp. Ms. Hajduk resigned as a director in June 2025.

 

On May 31, 2025, the Company entered into an agreement with Ying Xu to provide interim CFO service fees of $12,500 monthly. The Company recorded $50,000 of professional fees on the consolidated statement of operations for the nine months period ended September 30, 2025 (2024 - $nil). As at September 30, 2025, the Company owed $18,750 (December 31, 2024 - $nil) to Ms. Xu.

 

11.	SEGMENT INFORMATION

 

Operating segments are defined as components of an enterprise (business activity from which it earns revenue and incurs expenses) for which discrete financial information is available and regularly reviewed by the chief decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker (CODM) is its Chief Executive Officer. The Company views its operations and manages its business as a single operating and reporting segment.

 

Although all operations are based in the U.S., the Company generated a portion of its revenue from customers outside of the U.S. Information about the Company’s revenue from different geographic regions for the nine months ended September 30, 2025 and 2024 is as follows:

 

		September 30
		2025								2024
		$				%				$				%
United States			6,530,493				90.7	%			4,574,882				93.6	%
Canada			248,689				3.4	%			246,328				5.0	%
Others combined			424,852				5.9	%			69,189				1.4	%
Total Revenue			7,204,034				100.0	%			4,890,399				100.0	%

 

		September 30
Revenue Type (in ’000)		2025								2024
		$				%				$				%
Product			4,875.9				77.7	%			2,719.2				55.6	%
Software as a Service (SaaS)			1,907.5				26.5	%			1,661.7				34.0	%
Engineering/Support Service			161.3				2.2	%			212.9				4.4	%
Wireless Data			251.1				3.5	%			280.0				5.7	%
Commission Income			8.3				0.1	%			16.6				0.3	%
Total Revenue			7,204.1				100.0	%			4,890.4				100.0	%

 

All of the Company’s significant identifiable assets were located in the United States as of September 30, 2025 and December 31, 2024.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

12.	CONCENTRATION RISK

 

The Company derived revenue from one customer totaling 40.39% and 27.0% of the Company’s total revenue for nine months ended September 30, 2025 and 2024, respectively. At September 30, 2025 and December 31, 2024, one customer accounted for a total of 10.9% and 11.6% of accounts receivable, respectively.

 

To manage the concentration of customer risk, the Company continuously looks for opportunities to diverse revenue streams and expand client base via marketing. All contracts with customers are signed for a term, and the Company ensures the customer needs are being met by building exceptional customer service relationships.

 

The Company has concentrations in the purchases with its suppliers. For the nine months ended September 30, 2025 and 2024, the two largest suppliers accounted for a total of 80.8% and 86.5% of total purchases, respectively.

 

13.	OTHER EXPENSES

 

During the nine months ended September 30, 2025 and 2024, the Company had the following expenses in other expenses:

 

		Nine months ended September 30
		2025				2024
		$				$
Insurance			95,620				101,412
Licenses and fees			15,980				39,626
Office expenses			61,397				38,021
Automobile expense			237				1,165
Meals and entertainment			30,769				25,436
Travel expense			23,532				25,565
Utilities			40,171				42,450
Tax filing fees			(78	)			12,335
Software expense			12,964				10,990
Foreign exchange gain			(1,840	)			-
Total			287,752				297,000

 

14.	COMMITMENTS AND CONTINGENCIES

 

Contingencies

 

The Company accounts for loss contingencies in accordance with ASC Topic 450 and other related guidelines.

 

As of September 30, 2025 and as at the date of the prospectus, the Company’s management is of the opinion that there are no contingencies to account for.

 

Commitments

 

As of September 30, 2025, the Company did not have any significant capital and other commitments.

 

 

Direct Communication Solutions, Inc.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

For the Nine Months Periods Ended September 30, 2025 and 2024

 

15.

INCOME TAXES

 

The Company is an S Corporation for income tax purposes.

 

A reconciliation of income taxes at statutory rates for the nine months periods ended September 30, 2025 and 2024 with the reported taxes is as follows:

 

		2025				2024
Net loss before tax		$	(979,298	)		$	857,267
Expected income tax (recovery)			(245,211	)			252,881
Change in statutory, foreign tax, foreign exchange rates and other			65,491				155,073
Permanent differences			(37,002	)			12,811
Adjustment to prior year provision versus statutory tax returns			(100	)			(103,712	)
Changes in unrecognized deductible temporary differences			216,822				(317,053	)
Total income tax expense (recovery)			-				-

 

The significant components of the Company’s deferred tax assets that have not been included on the consolidated statement of financial position are as follows:

 

		2025				2024
Deferred Tax Assets (Liabilities)
Allowance for bad debts		$	26,590			$	2,741
Inventory reserves			110,496				69,638
Right-of-use assets			(47,653	)			(94,048	)
Lease liabilities			61,051				113,085
Accrued vacation			21,283				21,872
Sec. 263A Unicap			19,588				23,613
Fixed asset basis difference including depreciation			(1,075	)			(1,485	)
State income taxes -California mandatory lag method			220				226
Capitalized R&D			271,089				247,390
Federal R&D Credit			113,797				113,797
Non-qualified stock options			121,219				124,404
Non-capital losses available for future period			2,781,789				2,343,162
			3,478,394				2,964,394
Unrecognized deferred tax assets			(3,478,394	)			(2,964,394	)
Net Deferred Tax Assets (Liabilities)		$	-			$	-

 

16.

SUBSEQUENT EVENTS

 

Subsequent to September 30, 2025, the company secured an agreement with the lender to extend convertible loan’s maturity to October 10, 2026. All other material terms of the debenture and associated share purchase warrants, including the 15% per annum interest rate and the conversion price of US$6.00 per share, remain unchanged.

 

 

PART II

 

INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 13. Other Expenses of Issuance and Distribution

 

The following table sets forth all costs and expenses, other than underwriting discounts and commissions, paid or payable by us in connection with the sale of the common stock being registered. All amounts shown are estimates except for the SEC registration fee, the FINRA filing fee and the listing fee for NYSE American.

 

		Amount Paid or to be Paid
SEC registration fee		$	2,071.50
FINRA filing fee			2,750
NYSE American listing fee			65,000
Printing and engraving expenses			35.000
Legal fees and expenses			300,000
Accounting fees and expenses			60,000
Transfer agent and registrar fees and expenses			35,000
Consulting fees and related expenses			30,000
Miscellaneous expenses			40,000
Total		$	534,856.50

 

Item 14. Indemnification of Directors and Officers

 

Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act. The Registrant’s certificate of incorporation requires the Registrant to indemnify its directors and officers to the maximum extent permitted by the Delaware General Corporation Law, and the Registrant’s amended and restated bylaws provide that the Registrant will indemnify its directors and officers and permit the Registrant to indemnify its employees and other agents, in each case to the maximum extent permitted by the Delaware General Corporation Law. We will enter into indemnification agreements with each of our officers and directors a form of which is filed as an exhibit to this Registration Statement.

 

These agreements will require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified.

 

Item 15. Recent Sales of Unregistered Securities

 

In the three years preceding the filing of this registration statement, the Registrant issued the following securities that were not registered under the Securities Act.  

 

The Registrant believes that each of the following issuances was exempt from registration under the Securities Act in reliance on Regulation D under the Securities Act or pursuant to Section 4(a)(2) of the Securities Act regarding transactions not involving a public offering or in reliance on Regulation S under the Securities Act regarding sales by an issuer in offshore transactions. The Registrant believes that our issuances of awards granted under our share incentive plans to our employees, directors, officers and consultants were exempt from registration under the Securities Act in reliance on Rule 701 under the Securities Act. No underwriters were involved in these issuances of securities.

 

In September 2022, the Registrant sold $1.5 million in aggregate principal amount of unsecured convertible debentures to six investors and issued warrants to purchase 750,000 shares of our common stock in connection therewith.

 

On September 11, 2024, the Registrant issued an aggregate of 50,000 share purchase warrants, each entitling the holder to purchase one common stock at a price of CAD $2.00 per share for a period of 24 months from the date of issuance, of which 10,000 were issued in connection with the promissory note agreement the Registrant entered into in April 2024, 10,000 were issued in connection with the promissory note agreement the Registrant entered into in May 2024, 20,000 were issued in connection with the promissory note agreement the Registrant entered into in June 2024, and 10,000 were issued in connection with the promissory note agreement the Registrant entered into in July 2024.

 

 

On October 9, 2024, in connection with a promissory note the Registrant entered into in August 2024, the Registrant issued 15,000 share purchase warrants, each entitling the holder to purchase one common stock at a price of CAD $3.14 per share for a period of 24 months from the date of issuance.

 

On October 10, 2024, in connection with the convertible promissory debentures that the Registrant entered into in September 2024, the Registrant issued 196,582 share purchase warrants, each entitling the holder to purchase one common stock at a price of CAD $3.20 per share for a period of 24 months from the date of issuance.

 

On October 16, 2024, in connection with a promissory note the Registrant entered into in August 2024, the Registrant issued 50,000 share purchase warrants, each entitling the holder to purchase one common stock at a price of CAD $3.09 per share for a period of 24 months from the date of issuance.

 

On January 10, 2025, in connection with the promissory notes the Registrant entered into in November and December 2024 and January 2025, the Registrant issued 65,000 share purchase warrants, each entitling the holder to purchase one common stock at a price of CAD $2.95 per share for a period of 24 months from the date of issuance.

 

On the same date, the Registrant issued 40,000 shares of common stock for gross proceeds of $83,978 in connection with the exercise of warrants at CAD $2.95 per share.

 

The Registrant granted stock options to its directors, officers, employees, consultants, and other service providers to purchase an aggregate of 1,000,000 shares of its common stock under the 2023 Stock Plan with per share exercise prices ranging from $2.87 to $8.40, and the Registrant has not issued any shares of its common stock upon exercise of stock options under its 2023 Stock Plan.

 

During the nine months ended September 20, 2025, the Registrant issued 142,144 shares of common stock upon the vesting of 142,144 RSUs.

 

Item 16. Exhibits and Financial Statement Schedules

 

(a) Exhibits

 

The following documents are filed as exhibits to this registration statement:

 

Exhibit No.		Description
1.1*		Form of Underwriting Agreement
3.1		Amended and Restated Certificate of Incorporation, dated December 16, 2019
3.2		Certificate of Amendment to the Amended and Restated Certificate of Incorporation, dated February 9, 2023
3.3		Proposed Certificate of Amendment to the Amended and Restated Certificate of Incorporation, dated October 29, 2025
3.4		Amended and Restated Bylaws, as currently in effect
4.1*		Form of Representatives’ Warrants
4.2		Form of Convertible Debenture
4.3		Form of Warrant Agreement for Convertible Debenture Financing
4.4		Form of Securities for Debt Amendment Agreement
5.1*		Opinion of Rimon, P.C.
10.1+		Direct Communication Solutions, Inc. Amended and Restated 2023 Stock Plan, and form of stock option agreement thereunder
10.2+		Employment Agreement, dated September 30, 2019, between Direct Communication Solutions Inc. and David Scowby
10.3+		Employment Agreement, dated September 30, 2019, between Direct Communication Solutions Inc. and Eric Placzek
10.4+		Employment Agreement between Direct Communication Solutions Inc. and William F. Espley
10.5*+		Employment Agreement between Direct Communication Solutions Inc. and Ying Xu
10.6		Promissory note, dated July 14, 2025
10.7+		Form of Indemnification Agreement between the Registrant and each of its directors and executive officers
10.8		Release Agreement, dated September 24, 2025, between Direct Communication Solutions Inc. and Chris Bursey
10.9*		Form of Lock Up Agreement (included in the Form of Underwriting Agreement)
10.10		Supply chain loan agreement, dated July 1, 2025
10.11		Credit agreement, dated June 7, 2024
21.1		List of Subsidiaries of the Registrant
23.1		Consent of Davidson & Company LLP
23.2*		Consent of Rimon, P.C. (included in Exhibit 5.1)
24.1		Power of Attorney (included on signature page)
99.1		Consent of Gunther Schuhmann
99.2		Consent of Michael Xing He
107		Filing Fee Table

 

*	To be filed by amendment.
+	Indicates management contract or compensatory plan

  

(b) Financial Statement Schedules

 

All schedules have been omitted because the information required to be set forth in the schedules is either not applicable or is shown in the financial statements or notes thereto.

 

 

Item 17. Undertakings

 

(a)	The undersigned registrant (which we refer to as the “Registrant”) hereby undertakes:

 

(1)

To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

 

(i)

To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended;

 

(ii)

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the U.S. Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

 

(iii)

To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement.

  

(2)

That, for the purpose of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3)

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

(4)

That, for the purpose of determining liability under the Securities Act of 1933, as amended, to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

(5)

That, for the purpose of determining liability of the Registrant under the Securities Act of 1933, as amended, to any purchaser in the initial distribution of the securities: The Registrant undertakes that in a primary offering of securities of the Registrant pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

  

(i)

Any preliminary prospectus or prospectus of the Registrant relating to the offering required to be filed pursuant to Rule 424;

 

(ii)

Any free writing prospectus relating to the offering prepared by or on behalf of the Registrant or used or referred to by the Registrant;

 

(iii)

The portion of any other free writing prospectus relating to the offering containing material information about the Registrant or its securities provided by or on behalf of the Registrant; and

 

(iv)

Any other communication that is an offer in the offering made by the Registrant to the purchaser.

  

(b)	The undersigned registrant hereby further undertakes to provide to the underwriters at the closing date specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

 

(c)

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

  

(d)	The Registrant hereby further undertakes that:

 

(1)

For purposes of determining any liability under the Securities Act of 1933, as amended, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933, as amended, shall be deemed to be part of this Registration Statement as of the time it was declared effective.

 

(2)

For the purpose of determining any liability under the Securities Act of 1933, as amended, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in Vancouver, BC, Canada on the 28th day of November 2025.

 

	DIRECT COMMUNICATION SOLUTIONS, INC.
	By:	/s/ William F. Espley
		William F. Espley
		Chief Executive Officer and Director

 

POWER OF ATTORNEY

 

Each officer and director of Direct Communication Solutions, Inc. whose signature appears below constitutes and appoints William F. Espley his or her true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for him or her and in his or her name, place and stead, in any and all capacities, to execute any or all amendments including any post-effective amendments and supplements to this registration statement, and any additional registration statement filed pursuant to Rule 462 under the Securities Act, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said each attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 

****

 

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

SIGNATURE		TITLE		DATE
/s/ William F. Espley		Chief Executive Officer and Director		November 28, 2025
William F. Espley		(principal executive officer)
/s/ Ying Xu		Chief Financial Officer		November 28, 2025
Ying Xu		(principal financial and accounting officer)
/s/ David Scowby		Chief Operating Officer		November 28, 2025
David Scowby
/s/ Eric Placzek		Chief Technology Officer		November 28, 2025
Eric Placzek
/s/ Mike Yao Zhou		Director		November 28, 2025
Mike Yao Zhou
/s/ Shujie Zhong		Director		November 28, 2025
Shujie Zhong

 

ATTACHMENTS / EXHIBITS

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, DATED DECEMBER 16, 2019

CERTIFICATE OF AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, DATED FEBRUARY 9, 2023

PROPOSED CERTIFICATE OF AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, DATED OCTOBER 29, 2025

AMENDED AND RESTATED BYLAWS, AS CURRENTLY IN EFFECT

FORM OF CONVERTIBLE DEBENTURE

FORM OF WARRANT AGREEMENT FOR CONVERTIBLE DEBENTURE FINANCING

SECURITIES FOR DEBT AMENDMENT AGREEMENT

DIRECT COMMUNICATION SOLUTIONS, INC. AMENDED AND RESTATED 2023 STOCK PLAN, AND FORM OF STOCK OPTION AGREEMENT THEREUNDER

EMPLOYMENT AGREEMENT, DATED SEPTEMBER 30, 2019, BETWEEN DIRECT COMMUNICATION SOLUTIONS INC. AND DAVID SCOWBY

EMPLOYMENT AGREEMENT, DATED SEPTEMBER 30, 2019, BETWEEN DIRECT COMMUNICATION SOLUTIONS INC. AND ERIC PLACZEK

EMPLOYMENT AGREEMENT BETWEEN DIRECT COMMUNICATION SOLUTIONS INC. AND WILLIAM F. ESPLEY

PROMISSORY NOTE, DATED JUNE 20, 2025

FORM OF INDEMNIFICATION AGREEMENT BETWEEN THE REGISTRANT AND EACH OF ITS DIRECTORS AND EXECUTIVE OFFICERS

RELEASE AGREEMENT, DATED SEPTEMBER 24, 2025, BETWEEN DIRECT COMMUNICATION SOLUTIONS INC. AND CHRIS BURSEY

SUPPLY CHAIN LOAN AGREEMENT, DATED JULY 1, 2025

CREDIT AGREEMENT, DATED JUNE 7, 2024

LIST OF SUBSIDIARIES OF THE REGISTRANT

CONSENT OF DAVIDSON & COMPANY LLP

CONSENT OF GUNTHER SCHUHMANN

CONSENT OF MICHAEL XING HE

FILING FEE TABLE

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