San Diego, California--(Newsfile Corp. - December 1, 2025) - Direct Communication Solutions, Inc. (CSE: DCSI) (FSE: 7QU0) ("DCS" or the "Company").
Description of the Share Restructuring Transaction and its Material Terms:
The Company is undertaking a share capital restructuring (the "Restructuring") in which its existing shares of common stock will be redesignated as class A shares ("Class A Shares"), each carrying one vote per share, and a new class of class B shares ("Class B Shares") will be created with an authorized maximum of 500,000,000 shares. Mike Yao Zhou ("Zhou"), who currently holds 529,142 common shares (21.27% of outstanding shares) of the Company, of which he owns 571 shares of common stock are held directly by Zhou and 528,571 shares of common stock through Superchain Investment One Limited, a British Virgin Islands company wholly owned by MCNM International Holding Limited, a British Virgin Islands company wholly owned by Zhou (the "Zhou Shares").
The Restructuring is a "related party transaction" as defined under Part 1, Section 1.1 (Definitions) of the National Instrument MI 61-101 - Protection of Minority Security Holders in Special Transactions (the "MI 61-101"), where DCS is amending the terms of its shares of common stock that is beneficially owned, or is one over which control or direction is exercised, by Zhou (the related party), and Zhou has agreed to the amendment of the terms of such shares of common stock held, directly or indirectly, by him or any corporation that is directly controlled by Zhou and any corporation directly controlled by a corporation directly controlled by Zhou and organized under the laws of the British Virgin Islands.
Background to the Transaction:
Zhou acquired his 528,571 shares on June 17, 2025, when Chris Bursey disposed of all his 928,571 shares of common stock he held in the Company through private, off-exchange transactions as part of a distribution made to five unaffiliated recipients. Zhou was the primary recipient, receiving 528,571 shares, while the remaining four recipients each received 100,000 shares. Prior to this distribution, Zhou held only 571 shares of common stock; following it, his total holdings increased to 529,142 shares, representing approximately 21.3% of the issued shares. The distribution occurred in connection with Mr. Bursey's relinquishment of his role as Chief Executive Officer of the Company.
The Restructuring shall provide Zhou with a one-time right to convert any or all of Zhou's Class A Shares into Class B Shares. Zhou's Class B Shares will initially carry one vote per share and upon satisfaction of the conditions of financing and U.S. senior exchange listing on the NYSE American or, alternatively, NASDAQ (the "Sunrise Conditions"), such Class B Shares shall be deemed to carry twenty (20) votes per share. Class B Shares shall be convertible into Class A Shares at any time; however, Class B Shares will not be listed for trading on the Canadian Securities Exchange (the "CSE").
The Restructuring requires approval from disinterested shareholders and the CSE (with Zhou abstaining from such shareholder approval). Following the approval by the minority shareholders and the CSE, Articles of Amendment of the Articles of Incorporation of the Company will be filed with the Secretary of State of Delaware to implement the redesignation and creation of the new share classes.
Purpose and Business Reasons for the Reclassification:
The Restructuring is intended to support the Company's strategy of enhancing long-term shareholder value by enabling Zhou to participate more actively in the Company's strategic development. In connection with this initiative, Zhou has joined the Board and is assuming key responsibilities. Establishing the dual-class structure is also intended to support the Company's planned application to list its Class A Shares on the NYSE American or, alternatively, NASDAQ and to complete a minimum financing of US$10,000,000.
In discussions with the underwriters leading the Company's anticipated minimum US$10,000,000 financing in connection with DCS's planned listing and commencement of trading on the NYSE American or, alternatively, the NASDAQ Stock Market, the underwriters emphasized the importance of having a stabilized shareholder base during the transition to a senior U.S. exchange. To support market stability, they requested that Zhou hold a controlling position in the Company's share structure. The Company believes that proposed Restructuring will achieve market stabilization purposes and is intended to support Zhou's active role in guiding DCS's strategic growth initiatives. In addition to assuming a significant ownership position, Zhou has joined the Company's Board of Directors and taken on key responsibilities that position him to contribute directly to operational development and long-term shareholder value creation.
Anticipated Impact of the Restructuring on the Company's Business and Affairs:
The Restructuring is expected to facilitate the Company's planned senior U.S. stock-exchange listing and associated financing, thereby improving access to capital, liquidity, and the depth of the Company's shareholder base. The Company also expects enhanced strategic oversight from Zhou as the holder of Class B Shares. No operational changes to the Company's existing business are expected as a direct result of the Restructuring.
Interest of Related Parties and Resulting Ownership Changes:
Zhou is the only interested party in the foregoing Restructuring with an aggregate, directly and indirectly, holding the Zhou Shares (being 529,142 shares of common stock, which constitutes 21.27% of the total issued and outstanding share capital of the Company as at the date hereof). Until the Sunrise Conditions are satisfied, these Class B Shares will carry one vote per share and rank pari passu with Class A Shares. Upon satisfaction of the Sunrise Conditions, each Class B Share will carry twenty votes per share, resulting in an increase in Zhou's voting power while his economic interest remains unchanged. No other related parties or associated entities have an interest in the Restructuring, and no other security holder will experience a material change in ownership percentage.
The Board of Directors determined that Zhou should be granted the one-time right to convert his Class A Shares into Class B Shares carrying enhanced voting rights upon satisfaction of the 'Sunrise Conditions' because he is the primary and trusted point of contact for the underwriters leading the Company's proposed minimum US$10,000,000 financing for its senior U.S. exchange listing. In practice, Zhou has been the central liaison between DCS and the underwriting group, guiding discussions on investment structure, market positioning, and financing strategy. The Board considers Zhou to be the individual best positioned to maintain the confidence of the underwriters and to support the successful completion of the financing necessary for DCS's advancement to a senior U.S. exchange.
Board and Committee Review and Approval Process and Transaction Pros & Cons:
The Restructuring is subject to approval by a special resolution of disinterested shareholders, with Zhou abstaining from voting. The Board reviewed the terms of the Restructuring and determined it to be fair and in the best interests of the Company and its shareholders. The Board of Directors with a view to keeping the Company solvent and facilitating the financing to allow the Company to grow its business approved the Restructuring with Zhou abstaining without any dissent from within the Board approved the Restructuring and worked with the CSE to structure the implementation of the multi-voting structure upon the achievement of the Sunrise Conditions.
Full disclosure of the Restructuring and all related terms is provided in the Company's Information Circular for its 2025 Annual General and Special Meeting, filed on SEDAR+ on November 14, 2025.
The Board determined that the Restructuring is desirable because it supports the Company's objective of securing a senior U.S. exchange listing and the related minimum US$10,000,000 financing.
The Board considered that maintaining the Company's existing single-class structure would not provide the governance flexibility or strategic participation sought as part of Zhou's involvement.
The Restructuring's benefits include enhanced ability to raise capital, improved trading liquidity, and alignment with U.S. market expectations for growth-oriented issuers. After the Restructuring is concluded, the Company will continue with its course of business. Potential drawbacks considered included the creation of a multiple-voting class, but the Board determined that this was mitigated because the enhanced voting rights of Class B Shares only become effective once the Sunrise Conditions are satisfied and the Company achieves the targeted financing and senior-exchange listing. If the restructuring is not approved, the Company's viability could be jeopardized without replacement financing. The con of the Restructuring is that Zhou can outvote the other shareholders on any matter coming before the shareholders. Overall, the Board concluded that the advantages of improved capital-markets access and strengthened leadership participation outweigh the potential disadvantages.
Compliance with the MI 61-101 (formal valuation and minority approval requirements):
Under Section 5.4 of the MI 61-101, issuers must obtain an independent formal valuation for certain related party transactions, summarize or include that valuation in the disclosure document, identify who paid for it, comply with all related disclosure requirements, and ensure that the board or an independent committee selects the valuator and oversees the valuation process.
However, DCS is relying on the exemption in section 5.5(b) of MI 61-101, which provides that the formal valuation requirement in section 5.4 does not apply where the issuer's securities are not listed or quoted on any of the specified senior markets (including the TSX, NYSE, AMEX, NASDAQ, or certain foreign exchanges). Accordingly, DCS's securities are not listed on any of the senior markets specified in that referred to in Section 5.5(b), and as such, is exempt from obtaining a formal valuation for this related party transaction.
MI 61-101 Section 5.6 requires that a related party transaction cannot proceed unless it has obtained the approval of disinterested shareholders to ensure that the transaction is conducted fairly and transparently for minority investors.
In line with the requirement of approval by the minority shareholders under Section 5.7 of the MI 61-101, the proposed Restructuring will be submitted for approval by a special resolution of disinterested shareholders, with Zhou abstaining from voting. The Company is seeking minority approval in accordance with Section 5.6 and Part 8 of MI 61-101, and is not relying on any exemption under Section 5.7 of MI 61-101, as the Restructuring does not fall within the scope the exemption provided therein.
About Direct Communication Solutions, Inc.
DCSI is a technology solutions integrator focusing on connecting the Internet of Things. We provide real solutions that solve real problems. Our software applications and scalable cloud services collect and assess business-critical data from all types of assets. DCSI is headquartered in San Diego, California, Canadian Securities Exchange ("DCSI") and Frankfurt Stock Exchange ("7QU"). For more information, visit www.dcsbusiness.com. DCSI and the DCSI logo are among the trademarks of DCSI in the United States. Any other trademarks or trade names mentioned are the property of their respective owners.
Contacts:
Contacts: Bill Espley, CEO & Chairman of the Board
bespley@dcsbusiness.com
604-630-3072
Forward-Looking Statements
Neither the Canadian Securities Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Canadian Securities Exchange) accepts responsibility for the adequacy or accuracy of this release.
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/276560
SOURCE: Direct Communication Solutions, Inc.
