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Direct Communication Solutions, Inc.

Condensed Interim Consolidated Financial Statements (Expressed in US Dollars)

For the three and six months ended June 30, 2021 (Unaudited)

Direct Communication Solutions, Inc. Condensed Interim Consolidated Statements of Financial Position (Unaudited and Expressed in US dollars) As at June 30, 2021 and December 31, 2020

	June 30, 2021	December 31, 2020
ASSETS
Current
Cash	$ 964,356	$ 1,473,749
Trade Receivables (Note 15)	1,658,009	1,344,052
Inventory (Note 3)	547,490	701,547
Prepaid expenses(Notes 5 and 10)	377,925	30,675
Current assets	3,547,780	3,550,023

Property and equipment (Note 4)	86,831	105,387
Security Deposits (Note 10)	68,770	18,714
Contract assets	6,938	10,140
Intangible (Note 6)	630,166	630,166
Other assets (Note 5)	192,313	-
Right-of-use assets(Note 10)	77,802	171,163
Total assets	$ 4,610,600	$ 4,485,593

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts Payable	$ 1,976,183	$ 2,376,558
Accrued liabilities (Note 7)	394,886	447,832
Credit facility (Note 8)	1,466,786	490,602
Customer deposits	18,496	16,557
Deferred revenue	39,206	64,022
Lease liabilities(Note 10)	79,306	182,123
Current liabilities	3,974,863	3,577,694

Note Payable(Note 9)	434,105	422,500
Total liabilities	4,408,968	4,000,194

Shareholders' equity
Common stock (Note 11)	61	56
Reserves	6,426,708	5,742,430
Accumulated deficit	(6,225,137)	(5,257,087)
Total shareholders’ equity	201,632	485,399
Total liabilities and shareholders' equity	$ 4,610,600	$ 4,485,593

Nature of Operations and Going Concern (Note 1) Subsequent Events (Note 17)

Approved on August 12, 2021 on behalf of the Board:

“Chris Bursey” “ Ed O’Sullivan ” Chris Bursey – CEO & Director Ed O’Sullivan – Director

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

Direct Communication Solutions, Inc. Condensed Interim Consolidated Statements of Operating Loss and Comprehensive Loss (Unaudited and Expressed in US dollars) Three and Six Month Periods Ended June 30, 2021 and 2020

	For the three months ended June 30, For the six months ended June 30,	For the three months ended June 30, For the six months ended June 30,	For the three months ended June 30, For the six months ended June 30,	For the three months ended June 30, For the six months ended June 30,
	2021 2020	2021 2020
	Revenues:
	Products $3,232,185 $2,669,412	$7,067,985 $5,540,000
	Solutions and other services 474,947 527,889	950,744 1,098,643
	Total Revenues(Note 12) 3,707,132 3,197,301	8,018,729 6,638,643
	Cost of Revenues
	Products 2,555,466 2,106,974	5,547,670 4,502,208
	Solutions and other services 141,355 114,083	287,612 238,539
	Total cost of revenues 2,696,821 2,221,057	5,835,282 4,740,747
	Gross Profit 1,010,311 976,244	2,183,447 1,897,896


	OPERATING EXPENSES
	Research and development 328,086 251,082	671,655 495,886
	General and administrative
	Compensation and benefits 823,378 647,505	1,615,793 1,324,280
	Professional fees 341,316 263,336	662,036 664,615
	Bank fees 78,322 61,404	168,193 144,377
	Facilities 46,680 44,065	93,360 88,129
	Other 141,976 172,116	322,622 280,058
	Total OperatingExpenses 1,759,758 1,439,508	3,533,659 2,997,345
	Net Operating Loss (749,447) (463,264)	(1,350,212) (1,099,449)

	OTHER INCOME (EXPENSES)
	Gain on debt extinguishment (Note 9) ‐ ‐	422,500 ‐
	Interest Expense (21,615) (30,830)	(40,338) (63,998)
	Net loss for theperiod (771,062) (494,094) (968,050) (1,163,447)

	Weighted Average number of common shares:
	Basic and Diluted 15,631,640 13,403,300 15,421,446 13,359,503

	Loss per share – basic and diluted ($0.05) ($0.04)	($0.06) ($0.09)

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

Direct Communication Solutions, Inc.

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Deficiency) (Unaudited and Expressed in US dollars)

									Total
	Number of								Shareholders’
	Common	Common Stock							Equity
	Shares		Amount		Reserves	Accumulated Deficit			(Deficiency)
Balance, December 31,2019	12,074,800		26	$	2,379,149	$	(3,309,511)	$	(930,336)
Issuance of shares in an initial public offering, net of offering costs	1,328,500		13		1,740,692		-		1,740,705
Issuance of warrants to placement agent in conjunction with initial
public offering	-		-		32,358		-		32,358
Stock-based compensation expense	-		-		113,768		-		113,768
Net and comprehensive loss	-		-		-		(669,353)		(669,353)
Balance, March 31,2020	13,403,300		39		4,265,967		(3,978,864)		287,142
Stock-based compensation expense	-		-		122,716		-		122,716
Net and comprehensive loss	-		-		-		(494,094)		(494,094)
Balance, June 30,2020	13,403,300	$	39	$	4,388,683	$	(4,472,958)	$	(84,236)
Balance, December 31,2020	15,098,500		56		5,742,430		(5,257,087)		485,399
Stock-based compensation expense	-		-		67,290		-		67,290
Exercise of warrants	533,140		5		426,507		-		426,512
Net and comprehensive loss	-		-		-		(196,988)		(196,988)
Balance, March 31,2021	15,631,640	$	61	$	6,236,227	$	(5,454,075)	$	782,213
Stock-based compensation expense	-		-		190,481		-		190,481
Net and comprehensive loss	-		-		-		(771,062)		(771,062)
Balance, June 30,2021	15,631,640	$	61	$	6,426,708	$	(6,225,137)	$	201,632

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

Direct Communication Solutions, Inc. Condensed Interim Consolidated Statements of Cash Flows (Unaudited and Expressed in US dollars) Six Month Period Ended June 30, 2021 and 2020

		2021		2020
Cash provided by / (used for):
Operating Activities:
Net loss for the period	$	(968,050)	$	(1,163,447)
Items not affecting cash:
Depreciation		115,317		98,157
Finance costs for right-of-use assets		9,116		23,075
Amortization of loans payable discount		-		9,055
Amortization of debt issuance costs for credit facility		7,021		9,063
Gain on debt extinguishment		(422,500)		-
Stock-based compensation		257,771		236,484
Deferred offering costs		-		114,623
Provision for bad debts		(4,315)		(59,704)
Provision for excess and obsolete inventory		2,527		52,312
Net change in non-cash working capital items:
Accounts receivable		(309,642)		793,602
Inventory		151,530		(124,368)
Prepaid expenses		(347,250)		(3,075)
Contract assets		3,202		-
Security deposits		(50,056)		-
Other assets		(192,313)		-
Accounts payable		(400,375)		(1,977,463)
Accrued liabilities		(52,946)		(67,142)
Customer deposits		1,939		(36,022)
Deferred revenue		(24,816)		(19,829)
Net cash used in operating activities		(2,223,840)		(2,114,679)
Investing Activities:
Additions of intangible assets		-		(32,416)
Purchases ofpropertyand equipment		(3,400)		(16,297)
Net cash used in investing activities		(3,400)		(48,713)
Financing Activities:
Net proceeds from issuance of shares in an initial public offering (Note 13)		-		1,820,165
Proceeds from note payable		434,105		422,500
Repayments of debt		-		(30,000)
Lease payments		(111,933)		(111,670)
Net borrowings (repayments) on credit facility		969,163		69,725
Exercise of warrants		426,512		-
Net cashprovided by financing activities		1,717,847		2,170,720
Change in cash for the period		(509,393)		7,328
Cash,beginningof theperiod		1,473,749		408,787
Cash, end of theperiod		$ 964,356		$416,115
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest expense:		24,200		20,031
Income taxes		-		-
Supplemental disclosure of non-cash investing and financing activities
Forgiveness of note		422,500		-
Deferred offering cost paid in the current year		-		71,704
Allocation of deferred offering cost to share issuance costs		-		47,102
Issuance of warrants to placement agent for initial public offering		-		32,358

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

Direct Communication Solutions, Inc. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited and Expressed in US dollars unless otherwise stated) For the Three and Six Month Periods Ended June 30, 2021 and 2020

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.

On October 2, 2017, the Company completed its acquisition (the “Acquisition”) of Two Lions Technologies, a private Canadian company (“Two Lions”). Concurrently with the Acquisition, the Company changed the name of Two Lions to Direct Communications Solutions, Canada (“DCS Canada”). DCS Canada has been inactive since its acquisition.

On January 7, 2020, the Company completed an Initial Public Offering listing on the Canadian Securities Exchange (Note 11)

On June 19, 2020, the Company became listed in the United States on the OTCQB Market and on December 16, 2020 graduated to the OTCQX Market.

Going Concern

The accompanying condensed interim 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 recently incurred operating losses and as of June 30, 2021, had an accumulated deficit of $6,225,137. As of June 30, 2021, the Company had available cash totaling $964,356. The Company may finance its operations through a variety of ways, including the issuance of debt or sales of equity. Successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure. If events or circumstances occur such that the Company does not meet its operating plan as expected, the Company may be required to reduce planned research and development activities, incur additional restructuring charges or reduce other operating expenses which may raise substantial doubt on its ability to achieve its intended business objectives. These additional reductions in expenditures, if required, could have an adverse impact on the Company’s ability to achieve certain of its business objectives.

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

2. BASIS OF PREPARATION

Statement of compliance

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and their interpretations as issued by the International Accounting Standards Board (“IASB”). The condensed consolidated interim financial statements have been prepared in conformity with IAS 34 Interim Financial Reporting and do not include all the information required for full annual consolidated financial statements in accordance with IFRS and should be read in conjunction with the audited consolidated financials for the year ended December 31, 2020.

Basis of consolidation

These condensed interim consolidated financial statements of the Company have been prepared on the historical cost basis, except for financial instruments classified as financial instruments at fair value through profit and loss, which are stated at their fair value. In addition, the consolidated financial statements have been prepared using the accrual basis of accounting.

These condensed interim consolidated financial statements incorporate the financial statements of the Company and its wholly controlled subsidiaries. These consolidated financial statements of the Company are presented in United States dollars, which is the functional currency of the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The consolidated financial statements include the accounts of the Company and its direct wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

The condensed interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries:

Name of Subsidiary	Place of Incorporation	Ownership
Direct Communication Solutions, Canada(i)	British Columbia, Canada	100%

(i) The accounts of this subsidiary has been included in these condensed interim consolidated financial statements from October 2, 2017 onwards.

Foreign currency translation

Items included in the financial statements of each entity in the Company are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”) and has been determined for each entity within the Company. The functional currency of Direct Communication Solutions, Inc., is the U.S dollar. DCS Canada’s functional currency is in Canadian Dollar. The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21 The Effects of Changes in Foreign Exchange Rates .

Transactions in currencies other than the entity’s functional currency are translated at the exchange rates in effect on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange in effect as at the statement of financial position date. Non-monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailing at the time of the acquisition of the assets or assumption of the liabilities. Foreign currency differences arising on translation are recognized in the statement of operating income (loss).

Use of estimates and judgements

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

2. BASIS OF PREPARATION (cont’d)

i) Critical accounting estimates

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about critical estimates in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated interim financial statements are, but not limited to the following:

Allowance for doubtful accounts receivable - The Company makes 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 historical write-off experiences and customer economic data.
Provision for excess and obsolete inventory - Inventory is valued at the lower of cost and net realizable value. Cost of inventory includes cost of purchase (purchase price, import duties, transport, handling, and other costs directly attributable to the acquisition of inventories), cost of conversion, and other costs incurred in bringing the inventories to their present location and condition. 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. 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 - Determining the fair value of warrants and stock options requires judgments 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 the Company’s future operating results or on other components of shareholders’ equity (deficiency).
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 it is considered probable that those assets will be recoverable. This involves an assessment of when those deferred tax assets are likely to reverse.
Estimated product returns -Revenue from product sales is recognized net of estimated sales discounts, credits, rebates and allowances. The Company recognizes product returns when incurred due to the infrequent occurrence of returns.

ii) Critical accounting judgments

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

Deferred income taxes – judgments 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 – As disclosed in Note 1 to the consolidated financial statements.

3. INVENTORY

Inventory consists of the following:

Components and raw materials Assemblies	June 30 2021 $ 285,530 261,960 $ 547,490	December 31 2020
		$ 451,691 249,856
		$ 701,547

Inventory has been reduced by $474,786 and $472,259 as a provision for excess and obsolete inventory at June 30, 2021 and December 31, 2020, respectively.

4. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

Computer equipment and purchased software Furniture, fixtures and tooling Tooling Leasehold improvements Less—accumulated depreciation	June 30 2021 $ 140,297 38,427 59,300 7,538 245,562 (158,731) $ 86,831	December 31 2020
		$ 140,297 38,427 55,900 7,538
		242,162 (136,775)
		$ 105,387

Depreciation expense was $21,956 and $10,027 for the six months ended June 30, 2021 and 2020, respectively.

5. PREPAID EXPENSES AND OTHER ASSETS

In January 2021, the Company engaged Gold Standard Media to provide marketing and consulting services to raise public awareness of the Company. The agreement is for a term of two years commencing in March 2021. The Company prepaid an aggregate cost of $576,940 of which $276,940 is for advertising and $300,000 is for publishing and other services. The Company will recognize the expense ratably over the two-year period. As of June 30, 2021, the prepaid balances associated with this agreement are recorded as:

Prepaid expenses Other assets	June 30 2021 $ 288,471 192,313 $ 480,784	December 31 2020
		$ - -
		$ -

6. INTANGIBLE ASSET

Intangible asset consists of development costs for the design and construction of the Company’s Brewsee™ keg management and monitoring system (“Brewsee”).

monitoring system (“Brewsee”).
Balance at December 31, 2020	$ 630,166
Additions	-
Amortization	-
Balance at June 30,2021	$630,166

As Brewsee is not completed and available to sell, it is not being amortized.

7. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

Accrued liabilities consist of the following:
Payroll related expenses Accrued sales tax Other	June 30 2021	December 31 2020
	$ 214,733 103,033 77,120 $ 394,886	$ 232,926 133,924 80,982
		$ 447,832

8. CREDIT FACILITY

In January 2020, the Company terminated its credit facility with Gibraltar Capital and 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 receivable and the Company may request advances up to 90% of domestic accounts less than 90 days from 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 LIBOR 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 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 LIBOR 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 account sold under this credit facility. The Company assumes full risk of non-payment and guarantees full payment of all accounts. At June 30, 2021 and December 31, 2020, the carrying amount of the accounts transferred was $1,283,931 and $611,524, respectively.

At June 30, 2021 and December 31, 2020, the outstanding balance on the credit facility was $1,466,786 and $490,602, respectively. For the six months ended June 30, 2021 and 2020, debt issuance costs of $7,021 and $9,063 associated with the TAB credit facility were amortized to interest expense, respectively. The unamortized portion of the debt issuance costs at June 30, 2021 was $7,292.

9. DEBT

Inventory Financing

In May 2017, the Company purchased $158,660 of inventory by agreeing to financing from the vendor of monthly payments of $6,000 over 36 months totalling $216,000. The Company recorded the $57,340 difference between the payments and the value of the inventory as a discount to the financing and is amortizing the discount using the effective interest rate method over the 36-month period. The Company made payments of $0 and $30,000 in the six month period ended June 30, 2021 and 2020, respectively. Interest expense recognized associated with the discount and the unamortized portion of the discount for the six months ended June 30, 2021 and 2020 was $0 and $9,055, respectively. The inventory financing was paid in full in May 2020.

Loans

On April 20, 2020, the Company was granted a loan (the “Loan”) from TAB in the aggregate amount of $422,500 pursuant to the Paycheck Protection Program (the “PPP”) established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) in the United States. The Loan, which was in the form of a Note dated April 10, 2020 matures April 10, 2022 and bears interest at a rate of 1.00% per annum, payable monthly commencing on November 10, 2020. The Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Loan and accrued interest are forgivable after twenty-four weeks as long as the borrower uses the proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. On March 5, 2021, the Company received notice from the U.S. Small Business Administration and TAB Bank the Loan was forgiven in full. The Company recorded a gain of debt extinguishment of $422,500 under Other Income in the condensed interim consolidated statements of operating loss and comprehensive loss.

On February 19, 2021, the Company was granted a second loan (the “Second Loan”) from TAB in the aggregate amount of $434,105 pursuant to the PPP. The Second Loan, which was in the form of a Note dated February 19, 2021 matures February 19, 2026 and bears interest at a rate of 1.00% per annum, payable in 44 equal monthly payments commencing on June 19, 2022. The Second Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Second Loan and accrued interest are forgivable after 24 weeks as long as the borrower uses the proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The Company intends to use the entire Second Loan amount for eligible purposes.

10. RIGHT-OF-USE ASSETS & LEASE LIABILITIES

Right of use asset

During the first-time application of IFRS 16 to operating leases, the right to use leased assets were generally measured at the amount of the lease liabilities using the Company current incremental borrowing rate of 13%.

In June 2019, the Company entered into a lease agreement for approximately 3,232 square feet in San Diego, California for office and other related uses. The term of the lease is 29 months commencing July 1, 2019. The base rent is $5,818 per with 3% increases effective December 1, 2019 and 2020. The right to use leased asset was measured at the amount of the lease liability of $147,819 using the Company current incremental borrowing rate of 13%.

The following table present the right-of-use-assets as at January 1, 2021 and June 30, 2021:

As at December 31, 2020	$ 171,163
Amortization	(93,361)
Balance at June 30,2021	$77,802

Lease liabilities

The incremental borrowing rate for lease liabilities initially recognized as of January 1, 2019 and as of July 1, 2019 was 13%.

As at December 31, 2020	$ 182,123
Cash flows:
Lease payments	(111,933 )
Non-cash changes:
Interest expenses	9,116
Balance at June 30, 2021 – current portion	$ 79,306

The Company does not face a significant liquidity risk with regard to its lease liability. Lease liability is monitored within the Company treasury function.

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

Entry into a Lease Agreement

On May 27, 2021, the Company entered into a lease agreement with Bernardo Windell LLC (“Landlord”) whereby the Company will lease premises in San Diego, California effective November 1, 2021. The lease (“Lease) will have an initial 60 month term and include approximately 11,543 rentable square feet. The initial rent for the lease is approximately $1.55 per square foot plus operating expenses and is subject to an annual increase. Not less than six 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.

In conjunction with entering the Lease, the Company paid a security deposit of $50,056. In addition, the Company paid $22,712 for first month rent and operating expenses which is reflected in prepaid expenses.

11. SHARE CAPITAL

(a) Authorized

40,000,000 common shares authorized with a par value of $0.00001.

(b) Common share transactions

Transactions for the six months ended June 30, 2021

In March 2021, 533,140 common shares were issued due to the exercising of 533,140 warrants for proceeds of $426,512.

Transactions for the six months ended June 30, 2020

On January 7,2020, the Company closed its initial public offering and sold 1,328,500 shares of common stock at CAD$2.00 ($1.53 equivalent) per share for net proceeds of $1,773,063 after certain expenses and share issuance costs of $248,085 of which $47,102 were paid during the year ended December 31, 2019. In conjunction with the offering, the Company issued a warrant to the underwriter to purchase 106,280 shares of common stock with an exercise price of $2.00 CAD per share and a term of two years. The Company estimated the fair value of the warrants at $32,358 and recorded this value in reserves in shareholders’ equity.

(c) Stock options

In October 2017, the Company’s board of directors and stockholders approved the 2017 Stock Plan under which 3,500,000 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.

In June 2019, the Board of Directors and a majority of the stockholders approved the following amendments to the 2017 Stock Plan: (a) increase in the number of authorized shares for issuance to 4,100,000 and (b) add an annual evergreen provision that will adjust the number of authorized shares reserved for issuance to an amount equal to 29.99% of the Company’s issued common stock. As a result of the evergreen provision, the number of authorized shares for issuance increased to 4,528,040 effective January 2021.

The following table summarizes stock option transactions under the 2017 Plan:

	Number of	Weighted average
	Options	exercise price
Outstanding, December 31, 2019	2,750,000	$ 0.47
Granted	1,045,000	1.33
Forfeited	(75,000)	1.28
Outstanding, December 31, 2020	3,720,000	0.70
Granted	800,000	1.49
Forfeited	(73,333)	1.13
Outstanding, June 30, 2021	4,446,667	$ 0.83

At June 30, 2021, the Company had outstanding and exercisable stock options as follows:

				Weighted
	Number of	Number of		Average
	Options	Options	Exercise	Remaining
Date of Expiry	Outstanding	Exercisable	Price	Life(years)
October 5, 2027	2,750,000	2,666,667	$ 0.47	6.27
January 7, 2030	671,667	483,334	$ 1.53	8.52
May 20, 2030	225,000	100,520	$ 0.79	8.89
March 19, 2031	675,000	78,125	$ 1.59	9.72
June 1,2031	125,000	0	$0.97	9.92

The Company uses a Black-Scholes option valuation model to determine the fair value of stock-based 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 estimated at the time of grant and adjusted, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The following are the assumptions used in the Black-Scholes option valuation model for option granted during the six months ended June 30, 2021 and 2020:

ed June 30, 2021 and 2020:
Fair value of common stock Expected term (years) Risk-free interest rate Expected volatility Dividend yield	2021 2020
	$0.97 - $1.59 $0.79 - $1.53 5.52 - 6.08 5.31 – 6.08 1.05% - 1.14% 0.44% - 1.68% 40.75%-49.26% 30.23% - 40.49% 0.00% 0.00%

During the six-month period ending June 30, 2021, the Company recognized $256,077 (2020-$236,484) in stock-based compensation relating to the vesting of options.

In June 2021, the Company modified an option for a former Board of Director to extend the period to exercise 66,667 vested options from 90 days to one year (the “Modification”). The Company recognized an additional $1,694 in stock-based compensation associated with the Modification

(d) Warrants

The following table summarizes the warrant activity:

	Number of	Weighted average
	warrants	exercise price
As at January 1, 2020	-	$ -
Granted	1,104,944	0.87
As at December 31,2020	1,104,944	0.87
Exercised	(533,140)	0.80
Forfeited	(465,524)	0.80
As at June 30, 2021	106,280	$1.61

The outstanding warrants expire January 7, 2022.

12. 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. All of the Company’s significant identifiable assets were located in the United States. As at June 30, 2021 and December 31, 2020.

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 is as follows:

Six months ended June 30,

United States Canada Others combined Total revenues	2021 $7,814,685 97.5% 171,606 2.1% 32,438 0.4% $8,018,729 100.0%	2020
		$6,356,815 95.8% 131,146 2.0% 150,682 2.3%
		$6,638,643 100.0%

13. CONCENTRATION RISK

The Company derived revenue from one and two customer(s) totaling 33% and 28% of the Company’s total revenue for the six months ended June 30, 2021 and 2020, respectively. At June 30, 2021 and December 31, 2020, one and two customer(s) accounted for 49% and 47% of total accounts receivable, respectively.

The Company has concentrations in the purchases with its suppliers. For the six months ended June 30, 2021 and 2020, one supplier accounted for 82% and 89% of total purchases, respectively.

14. CAPITAL MANAGEMENT

The CEO has overall responsibility for the establishment and oversight of the Company’s risk management framework.

The Company defines capital as consisting of loans, credit facility, and shareholder’s equity (deficiency). The Company’s objectives when managing capital are to support the creation of shareholder value, as well as to ensure that the Company is able to meet its financial obligations as they become due.

The Company manages its capital structure to maximize its financial flexibility making adjustments to it in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. The Company does not presently utilize any quantitative measures to monitor its capital, but rather relies on the expertise of the Company’s management to sustain the future development of the business. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

At June 30, 2021 and 2020, the Company is not subject to any externally imposed capital requirements or debt covenants. The change to the Company’s approach to capital management during the periods ended June 30, 2021 and 2020 relate to the issuance of shares in an initial public offering.

The Company has in place an accounts receivable credit facility whereby the Company assigns all its accounts receivable and can request advances up to 90% of eligible accounts up to $2,000,000 and inventory advances up to $500,000 (Note 9).

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

15. FINANCIAL INSTRUMENTS

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values.

Financial instruments measured at fair value are classified into three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; Level 3 – Inputs that are not based on observable market data.

The fair values of the Company’s cash, trade receivables, accounts payable, accrued liabilities and credit facility and long term debt approximate carrying value, which is the amount recorded on the consolidated statement of financial position.

The following table illustrates the classification of the Company’s financial instruments within the fair value hierarchy as at June 30, 2021 and December 31, 2020:

		Level 1
June 30, 2021:
Cash	$	964,356$	-$	-
December 31, 2020:
Cash	$	1,473,749$	-$	-

The Company is exposed to varying degrees to a variety of financial instrument related risks:

Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company places its cash with institutions of high credit worthiness. Management has assessed there to be a low level of credit risk associated with its cash balances.

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company's customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk. Approximately 33% of the Company's revenue (2020 - 28%) is attributable to sales transactions with one customer (2020 - two customers).

The Company has established a credit policy under which each major new customer is analyzed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The Company's review includes external ratings, when available, and in some cases bank references. Purchase limits and terms are established for each customer and reviewed periodically. Customers that fail to meet the Company's benchmark creditworthiness may transact with the Company only on a prepayment basis.

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 the Company's wholesale and retail customers.

Trade and other receivables consist of:

		June 30, 2021	December 31, 2020	December 31, 2020
Accounts Receivable	$	1,681,640	$	1,371,998
Allowance for doubtful accounts		(23,631)		(27,946)
Total	$	1,658,009	$	1,344,052

Aged trade receivable listing:

Days outstanding		June 30, 2021	December 31, 2020	December 31, 2020
Current	$	1,365,403	$	1,194,982
1 – 30		267,839		84,895
31 – 60		33,239		80,914
61 - 90		8,487		1,192
> 90		6,672		10,015
Total	$	1,681,640	$	1,371,998

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's 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 the Company's reputation.

The Company examines current forecasts of its liquidity requirements so as to make certain that there is sufficient cash for its operating needs. These forecasts take into consideration matters such as the Company's 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.

The Company has a credit facility with external funding (Note 9). The Company’s accounts payable and accrued liabilities have contractual terms of 30 to 90 days.

Market risk

a) Currency Risk

The Company is located in the United States and virtually all transactions including the company’s sales and debt are negotiated in US dollars.

b) Interest Rate Risk

The Company’s debt has fixed interest rates and are not exposed to interest rate risk until maturity. The Company’s credit facility is variable based on the prime rate. A 1% increase in the prime rate in 2021 would result in approximately $5,000 additional interest expense for the six months ended June 30, 2021.

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. The Company is not exposed to significant price risk.

16. RELATED PARTY TRANSACTIONS

Related parties and related party transactions impacting the accompanying financial statements are summarized below and include transactions with the following individuals or entities:

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.

Remuneration attributed to key management personnel can be summarized as follows:

	Six Months Ended June 30, 2021 Six Months Ended June 30, 2020
Salary Consulting fees Share-based compensation Totals	$473,486 $411,177 234,200 151,065 159,311 171,676
	$866,977 $733,918

As at June 30, 2021, $80,419 (December 31, 2020 – $74,496) was included in accounts payable and accrued liabilities for fees owed to executives.

17. SUBSEQUENT EVENTS

The Company evaluated subsequent events through August 12, 2021, which is the date the condensed interim consolidated financial statements are available for issuance.

Temporary Increase in Credit Facility

On July 27, 2021, the Company entered into an Addendum to its credit facility with TAB Bank whereby the Company in its discretion, can take a one-time overadvance of an amount up to $500,000 (“Overadvance”). The interest rate for the Overadvance is 12.4% per annum. The Overadvance and accrued interest is due in full no later than 90 days after the Company takes the Overadvance. The Company received the Overadvance on August 6, 2021.

Forgiveness of Second Loan

On August 5, 2021, the Company received notice from TAB Bank the Second Loan was forgiven in full.

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Getchell Gold Corp. — Interim / Quarterly Report 2021

42601_rns_2021-08-12_8352a9f7-cffc-4d50-8085-3516e4f40ffb.pdf

Direct Communication Solutions, Inc.

Direct Communication Solutions, Inc. Condensed Interim Consolidated Statements of Operating Loss and Comprehensive Loss (Unaudited and Expressed in US dollars) Three and Six Month Periods Ended June 30, 2021 and 2020

Direct Communication Solutions, Inc.

Direct Communication Solutions, Inc. Condensed Interim Consolidated Statements of Cash Flows (Unaudited and Expressed in US dollars) Six Month Period Ended June 30, 2021 and 2020

1. NATURE OF OPERATIONS AND GOING CONCERN

Going Concern

2. BASIS OF PREPARATION

Statement of compliance

Basis of consolidation

Foreign currency translation

Use of estimates and judgements

2. BASIS OF PREPARATION (cont’d)

ii) Critical accounting judgments

3. INVENTORY

4. PROPERTY AND EQUIPMENT

5. PREPAID EXPENSES AND OTHER ASSETS

6. INTANGIBLE ASSET

7. ACCRUED LIABILITIES

8. CREDIT FACILITY

9. DEBT

Inventory Financing

Loans

10. RIGHT-OF-USE ASSETS & LEASE LIABILITIES

Right of use asset

Lease liabilities

Entry into a Lease Agreement

11. SHARE CAPITAL

(a) Authorized

(b) Common share transactions

Transactions for the six months ended June 30, 2020

(c) Stock options

(d) Warrants

12. SEGMENT INFORMATION

13. CONCENTRATION RISK

14. CAPITAL MANAGEMENT

15. FINANCIAL INSTRUMENTS

Credit risk

Liquidity risk

Market risk

c) Price Risk

16. RELATED PARTY TRANSACTIONS

17. SUBSEQUENT EVENTS

Temporary Increase in Credit Facility

Forgiveness of Second Loan

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Getchell Gold Corp. Interim / Quarterly Report 2021