Direct Communication : MD&D Annual

Direct Communication Solutions, Inc.

Management's Discussion and Analysis

For the Year Ended December 31, 2021

Amounts in United States dollars unless stated otherwise

Direct Communication Solutions, Inc.

Management's Discussion and Analysis For the Year Ended December 31, 2021

United States dollars unless otherwise stated

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis of Direct Communication Solutions, Inc. (the "Company", "DCS", "we" and "our" refer to Direct Communication Solutions, Inc.) provides an analysis of the Company's performance and financial condition for the year ended December 31, 2021. This management discussion and analysis should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2021 (the "Financial Statements"), which were prepared in accordance with International Financial Reporting Standards ("IFRS").

All amounts referred to in this management discussion and analysis are prepared in accordance with IFRS and presented in United States dollars ($ or US$), unless otherwise indicated. C$ refers to Canadian dollars.

The following information is prepared as at April 21, 2022.

Forward-looking Statements

This management discussion and analysis contains "forward-looking information" which may include, but is not limited to, statements with respect to the future financial or operating performances of the Company; revenues; the timing and amount of estimated future operating, capital and development expenditures and requirements for additional capital. Often, but not always, forward-looking information can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes", or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might", or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this management discussion and analysis based on the opinions and estimates of management, and the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, estimates or opinions, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, potential investors should not place undue reliance on forward-looking statements.

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Direct Communication Solutions, Inc.

Management's Discussion and Analysis For the Year Ended December 31, 2021

United States dollars unless otherwise stated

Overview

Direct Communication Solutions, Inc. provides Internet of Things (IoT) products, services and solutions. The Company has two main focuses to its business: (i) Hardware distribution, where we resell products from CalAmp and ATrack Technology Inc. and (ii) Software as a Service "SaaS" solutions. Our products and solutions enable devices to communicate with each other and with server or cloud-based application infrastructures.

The Company's 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 recently deployed MiServices™ to provide engineering support to its distribution customers. These services include software development, hardware integration and logistics support such as SIM card insertion, activation, provisioning, labeling and device readiness checks.

Our corporate headquarters is in San Diego, California.

Incorporated in 2006, the Company traditionally has been a distributor of IoT components and a system integrator that assisted clients in installing such components into their installed systems and applications. The Company has focused on providing hardware items and solutions that have aided in data collection, analysis and management.

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. This provides us the opportunity to increase its gross and net profit margins by providing more services and software - through the cloud and/or via a SaaS/MaaS (Module as a Service) business model.

The Company has traditionally sold within various 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 & utilities, and safety and security. As the Company transitions to software, SaaS and services it can now address traditional software application markets. In addition, we are planning to launch applications within the beer, transportation and cannabis marketplaces. Both the beer and cannabis markets have very similar needs when it comes to sensors and utilizing the big data from those sensors. Both are temperature sensitive and have a very limited shelf-life, therefore, the logistics data that can be obtained from these sensors makes the operational side of these verticals so critical.

We intend to continue to leverage our long-standing relationship with its strategic partners and jointly build unique IoT solutions based on its integrated third party equipment along with new application software. 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.

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Direct Communication Solutions, Inc.

Management's Discussion and Analysis For the Year Ended December 31, 2021

United States dollars unless otherwise stated

Significant Highlights

The following highlights and developments for the year ended December 31, 2021 and to the date of this management discussion and analysis:

• • Released MiSensors MiTag BT sensor which has an IP67 water-resistant design, provides Bluetooth wireless connectivity and 8 sensors in one device.

• • Launched MiFleet + Vision and added the Flex product portfolio (solar tracker) to enhance our telematics offerings.

• • Entered into distribution agreement with Ingram Micro to provide IoT solutions to the Ingram Micro channel.

• • Entered into an agreement with Bluesky Communications to offer MiFleet to their customers. Initial deployment will upgrade over 300 vehicles.

• • Appointed first distributor in North American market by TOPFLYtech to provide distribution, logistics and technical support.

• • Entered into an agreement with IT&E, the widest 4G LTE data network in the Marianas and Guam, to provide their customer base with MiFleet as a fleet and asset management solution.

• • Started development of a comprehensive set of tools that are propriety that will automate the entire provisioning and activation process for GPS tracking devices, across all manufacturers.

• • Launched MiFleet Drive, a consumer-focused mobile application and MiFleet Bolt, which provides extended battery life for tracking high value assets through our MiFleet platform.

• • Entered into a strategic partnership with AMIT Wireless to expand our IoT product offerings.

COVID-19 Impact on Operations and Financial Position

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The outbreak led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. The outbreak and preventative or protective actions that governments have taken in respect of this coronavirus have resulted in a period of business disruption, reduced customer traffic, negative impact on our order fulfillment, reduced operations, and has adversely affected workforces, economies, and financial markets globally. Furthermore, several of our key products are manufactured in Asia in locations subject to quarantines and factory closures. The magnitude of the impact of COVID-19 outbreak on our business and operations remains uncertain. In addition, we may experience disruptions to our business operations resulting from quarantines, or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design our products and solutions in a timely manner or meet required customer commitments.

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Direct Communication Solutions, Inc.

Management's Discussion and Analysis For the Year Ended December 31, 2021

United States dollars unless otherwise stated

Outlook

DCS is a value-added reseller of IoT telematics devices, and a developer of our own end-to-end SaaS based intelligent business solutions. Our customers include technology distributors, cellular 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. Since 2018 we started to transition from a 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 16% of total corporate revenue in 2020.

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.

DCS continues to seek new partnerships to expand its product offerings. We entered into an agreement with TopFlyTech to become their first distributor in the North American market. TopFlytech offers solar powered GPS devices which solve the problem of monitoring high value assets which have no direct access to power.

The large cellular providers are moving towards a technology sunset on their legacy 2G networks. This will affect all 2G devices deployed on their networks and force a transition to solutions with 4G technologies. We believe our relationships with the cellular providers along with our product and service offerings, will allow us significant sales opportunities.

Total backlog for our products as of December 31, 2021 and December 31, 2020 was $16.3 million and $2.9 million, respectively. Our backlog for products increased year-over-year as we continue to experience significant supply shortages primarily caused by the lingering impact of the COVID-19 pandemic. As a result of the ongoing supply shortages, we reduced our workforce by 9 employees in September 2021. We continue to face delays in receiving some of our components and do not know at this time when these problems will be resolved.

We originally intended to finalize development and commence sales of BrewSee®, our wireless beer keg monitoring solution in the fourth quarter of 2020. Due to the ongoing COVID-19 pandemic, we lowered the development priority of BrewSee. With our target market of bars and restaurants being significantly impacted with lockdowns, we made the decision to reallocate engineering resources to other products and solutions. We have decided to refine some of the features of BrewSee that will be integrated into the hardware design. We now anticipate completing development in early 2022 and commence sales mid 2022.

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