UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2023

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

DECISIONPOINT SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware		001-41376		37-1644635
(State of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

1615 South Congress Avenue Suite 103, Delray Beach, FL 33445

(Address of principal executive offices) (Zip code)

(561) 900-3723

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol		Name on Each Exchange on Which Registered
Common Stock, $0.001 par value		DPSI		NYSE American

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer	☐	Non-accelerated filer	☒	Emerging growth company	☐
Accelerated filer	☐	Smaller reporting 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 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 30, 2023, the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was $32.9 million.

The number of shares outstanding of the registrant’s Common Stock, $0.001 par value, was 7,680,334 as of March 21, 2024.

TABLE OF CONTENTS

Note About Forward-Looking Statements	ii

Part I
Item 1. Business	1
Item 1A. Risk Factors	7
Item 1B. Unresolved Staff Comments	17
Item 1C. Cybersecurity	17
Item 2. Properties	18
Item 3. Legal Proceedings	18
Item 4. Mine Safety Disclosures	18

Part II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6. Reserved	19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	29
Item 8. Financial Statements and Supplementary Data	F-1
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-4
Consolidated Statements of Income and Comprehensive Income	F-5
Consolidated Statements of Stockholders’ Equity	F-6
Consolidated Statements of Cash Flows	F-7
Notes to the Consolidated Financial Statements	F-8
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	30
Item 9A. Controls and Procedures	30
Item 9B. Other Information	30
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	30

Part III
Item 10. Directors, Executive Officers and Corporate Governance	31
Item 11. Executive Compensation	35
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	39
Item 13. Certain Relationships and Related Transactions, and Director Independence	40
Item 14. Principal Accounting Fees and Services	41

Part IV
Item 15. Exhibits and Financial Statement Schedules	42
Item 16. Form 10-K Summary	43
Signatures	45

Note Regarding Forward-Looking Statements

This annual report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s beliefs and assumptions and on information currently available to management. Some of the statements in the section captioned “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Business,” and elsewhere in this annual report contain forward-looking statements. In some cases, you can identify these statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of these terms or other comparable expressions that convey uncertainty of future events or outcomes, although not all forward-looking statements contain these terms.

These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Forward-looking statements in this annual report include, but are not limited to, statements about:

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our estimates regarding expenses, future revenue, capital requirements and liquidity;

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our plans to obtain any requisite outside funding for our current and proposed operations and potential acquisition and expansion efforts;

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the success of the Company’s plan for growth, both internally and through pursuit of suitable acquisition candidates;

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the concentration of our customers and the potential effect of the loss of a significant customer;

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debt obligations arising from our line of credit or otherwise;

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our ability to integrate the business operations of businesses that we acquire from time to time;

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the possibility that we may be adversely affected by other economic, business or competitive factors including market volatility, inflation, increases in interest rates, supply chain interruptions, and may not be able to manage other risks and uncertainties;

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our ability to compete with companies producing similar products and services;

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the scope of protection we are able to establish and maintain for intellectual property rights covering our products and technology;

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the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

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our ability to develop and maintain our corporate infrastructure, including our internal controls;

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our ability to develop innovative new products and services; and

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our financial performance.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Overview

DecisionPoint Systems, Inc. (“DecisionPoint”, the “Company”, “we” or “us”) was originally organized in August 2010 under the laws of the Province of Ontario and subsequently filed a Certificate of Corporate Domestication with the State of Delaware on June 14, 2011.

The Company, through its subsidiaries, consults, designs, and implements mobility-first enterprise solutions, retail solutions centered on Point-of-Sale systems and services that support our customer’s operations. DecisionPoint provides managed and professional services that better enable our customers to implement and manage complex projects on time and on budget. Our products and services are intended to help our clients improve their operations and drive greater productivity. DecisionPoint partners with hardware, software and services companies to combine enterprise-grade handheld computers, printers, tablets, smart phones and retail POS into solutions aimed to improve productivity, provide greater levels of customer services, allowing our customers to be more competitive. DecisionPoint leverages its software and services portfolio including our Mobile Conductor Platform which provides a “Direct Store Delivery” (DSD) solution to the wholesale distribution market via our proof-of-delivery and route accounting applications. Our ViziTrace Platform provides our customers with the ability to integrate radio frequency identification (“RFID”) technology’s into existing workflows, making them more efficient and effective in the marketplace. Our Managed Services and Managed Mobile Service offerings provide our customers a way to implement, manage, monitor, and maintain all these technologies for the lifetime of the implementation, while supporting and augmenting our customer’s IT teams.

Acquisitions have been an important element of our growth strategy and are expected to be in the future. We have supplemented our organic growth by identifying, acquiring and integrating businesses that results in broader, more sophisticated product offerings, while diversifying and expanding our customer base and markets. In 2018, we acquired Royce Digital Systems, Inc. (“RDS”), a provider of innovative enterprise solutions. RDS has expanded our product portfolio with mission critical printers, consumables and custom labels and a wide array of on-site professional services. Additionally, RDS has provided new opportunities in the healthcare sector which is incremental to our existing markets of Retail and Logistics. In December 2020, we acquired ExtenData Solutions, LLC (“ExtenData”), an enterprise mobility solutions provider headquartered in the Denver metropolitan area. ExtenData’s products and services are synergistic and complimentary to those provided by the Company. The ExtenData acquisition was intended to enhance and supplement the products and services offered by the Company and broaden our customer base. In January 2022, we acquired Advanced Mobile Group, LLC (“AMG”), a company that brings skills in voice directed technologies and RFID via the ViziTrace Platform. In April 2023, we acquired Macro Integration Services, Inc. (“Macro”), a project management and professional services and integrated solutions company.

Background – Products and Services

DecisionPoint delivers mobility-first managed service and integration solutions to healthcare, supply chain, and retail customers, enabling them to make better and faster decisions in the moments that matter—the decision points. Our mission is to help businesses consistently deliver on those moments—accelerating growth, improving worker productivity, and lowering risks and costs.

DecisionPoint’s products and services are intended to empower mobile workers through the implementation of various mobile technologies including specialized mobile business applications, wireless networks, mobile computers and a variety of consumer and mobile computing devices. We also provide a comprehensive managed services portfolio that includes consulting, integration, project management, software development, deployment, and life cycle management services. Those services include configuration, repair services, help desk, and implementation services helping our enterprise customers operationalize their mobile investments. We also provide deployment and installation services into the retail POS marketplace.

At DecisionPoint, we deliver to our customers solutions that enable them to make better, faster and more accurate business decisions by implementing industry-specific, enterprise grade wireless, scanning, RFID and mobile computing systems for their front-line mobile workers, inside and outside of the traditional workplace. Our solutions are designed to unlock mission critical information and deliver it to employees, at the point of activity, when needed, regardless of their location. As a result, our customers are able to move their business decision points closer to their customers: improving customer service levels, reducing costs and accelerating business growth.

Mobility solutions and usage, in general, continue to grow and change rapidly. Many companies are leveraging mobile solutions to deliver information to their associates and customers in new and innovative ways that create competitive differentiation. Rapid change and innovation lead to increasingly complex solutions and requirements. Internal IT staff can be overwhelmed by the complexity of managing and operationalizing these mobile solutions. DecisionPoint seeks to eliminate this complexity through our managed services offerings to allow our customers to focus their resources on business transformation and bottom-line results.

A comprehensive mobile solution requires close coordination with many suppliers such as Original Equipment Manufacturers (“OEMs”) manufacturers, carriers, security organizations, software providers and others.

We have developed an ‘ecosystem’ of partners to support the assembly and manufacturing provisions of our custom and off-the-shelf solutions, including handheld device manufacturers, independent software vendors and wireless carriers.

DecisionPoint has offices throughout North America with service centers located on both the East and West Coast allowing us to serve multi-location clients and their mobile workforces.

Our Markets and Primary Customer Industries

DecisionPoint is a mobile systems integrator providing enterprise mobility solutions to the retail, logistics and healthcare markets. These solutions span the complete technology life cycle from systems design and implementation capabilities to a complete portfolio of support services including repair center services and managed mobile services.

During 2022 we developed a new portal, VISION. VISION is intended to offer our customers a customizable solution for monitoring actions on everything in their IT infrastructure. Decisionpoint can manage the entire lifecycle of Mobility and IT infrastructure all in one view. VISION provides real-time visibility to manage the health, location, and status of mission-critical IT assets; VISION also enables clients to monitor the progress in major rollouts. This enables our customers to minimize downtime and simplifying the management of a large, distributed enterprise.

VISION is intended to allow customers to:

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Track assets by location and health status via an interactive map;

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Monitor servers, switches, PC’s, and POS systems;

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Deploy custom configured Mobile Devices and the surrounding Infrastructure;

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Engage in custom asset tagging;

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Engage in RMA creation with advanced exchange management

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Monitor and effect repair and refurbishment of assets

Retail In-Store Operations

We assist retail customers in selecting and procuring the correct mobile and POS technology, deploying and installing it and managing that technology for its entire life cycle. Our VISION portal and OnPoint asset management system helps our retail customers with distributed stores and networks manage support, repairs, returns and every facet of the life of their POS systems and mobile devices. This allows our customers’ IT resources to be leveraged for competitive advantage as we take care of this critical function.

Warehousing and Distribution

DecisionPoint provides products and services to large retailers, warehouses and third-party logistics providers to ensure their logistics operations are modern, efficient and provides them with a competitive advantage. We work closely with our customers to select the right technology in a rapidly changing world intended to give them return on investment throughout its lifetime of deployment. Applications such as Yard Management, Receiving, Picking, Hands-Free, and Voice are all components of a system that provide value. DecisionPoint assists our customers to manage the largest of projects with flawless execution along with the lifecycle management services that keep those IT assets operational.

Healthcare

Through the acquisition of RDS in 2018, DecisionPoint expanded its presence in healthcare. RDS has provided hardware, integration, IT Services, and a myriad of healthcare solutions to one of the largest systems in the country for 25+ years supporting clinical workflows throughout the healthcare systems. DecisionPoint currently provides service on-site for more than 30,000 IT assets, such as Barcode printers and scanners. That expertise combined with our account base of healthcare systems and healthcare manufacturing makes this vertical our second largest vertical as of December 31, 2023.

Wholesale Distribution

Through the acquisition of ExtenData, DecisionPoint added to its portfolio of reoccurring revenue with the MobileConductor (MC) software platform. MC is application software sold into the Direct Store Delivery (DSD) and Proof of Delivery (POD) marketplace in a SaaS model. MobileConductor enables us to provide complete in-vehicle solutions inclusive of hardware and services.

Field Sales and Service

DecisionPoint has and expects to roll-out a new tablet system for field representatives of large enterprise customers. DecisionPoint co-developed the software hand-in-hand with its customers operations team that is intended to improve the efficiencies of customer field representatives and make it easier for them to record deliveries, pick-ups and transact sales on the spot. This tablet system has been a multi-year project, which continues to evolve and improve our customer’s competitive position.

The field sales and service market is experiencing significant growth. This space has evolved and moved from rugged to consumer technologies in many instances. As a result, DecisionPoint intends to leverage our experience to expand our offerings and options for our customers as the technology changes and evolves. DecisionPoint intends to provide its complete line of services, including custom or packaged software solutions to these markets, representing another area of potential growth.

Services

Pointcare

In early 2024, DPS announced our new PointCare Services—a premier suite of deployment and managed services built to address all aspects of selecting, deploying, and managing enterprise technology.

All prior DecisionPoint Services have been fully integrated into the PointCare suite of services so all customers will benefit from the enhanced services programs that are available today. PointCare is also fully integrated with our Vision portal allowing for complete visibility of your assets covered under a PointCare contract.

PointCare allows us to handle all aspects of a customer’s complex technology deployment so they can focus on their business. Our consultative approach allows us to blueprint, prescribe, and deliver the services our customers need to deploy and sustain their mission critical Enterprise Mobility, Point of Sale, and RFID technology.

PointCare was specifically created to address every aspect needed to design, deploy, and manage the entire ecosystem around the technologies we provide. We’ve leveraged our extensive expertise in Mobility, Point of Sale, and RFID deployments to create an end-to-end service program that’s simple to incorporate into our customer’s processes.

Lifecycle Management

As part of our services, DecisionPoint, helps customers maximize the life of their IT assets. When OEMs discontinue a product or provide poor service on an aging product it can force our customers into an upgrade, they may not be ready to manage or afford. We work closely with our customers in all verticals to attempt to provide them extra value at the end of an asset’s lifecycle.

Deployment and Project Management

Project management and deployment services are also an area of focus for the Company. DecisionPoint’s project management team has handled nationwide retail point of sale deployments and a myriad of other projects that augment customer IT teams. The same applies to healthcare where we have the expertise to understand clinical workflows and how an IT implementation needs to be executed.

Managed Services

DecisionPoint offers a comprehensive product portfolio of managed services designed to simplify the complexity associated with designing, deploying and managing a mobile solution. Each product service is defined by specific deliverables and reporting requirements.

The product portfolio includes:

	●	Consulting – Solution Design & Business Process Review

	●	Technology Acquisition

	●	Project Management

	●	Software Integration and Development

	●	Deployment (depot and on-site)

	●	Repair Services (depot and on-site)

	●	Service Desk (tier 2 technical support

	●	Rex – Rapid Exchange Services

	●	OnPoint Services Hub (24x7x365 Asset Management Portal)

Customers can acquire our product service SKU’s a-la-carte or in a complete services bundle.

Customers receive real-time asset management and tracking information through DecisionPoint’s OnPoint™ Service Hub, an internally created customer service portal that provides our customers with a 24/7 view of their technology assets being managed by DecisionPoint.

As a Service

DecisionPoint also offers “as a service models” that include devices, services, software and consulting in one monthly recurring charge.

Software

The market for enterprise mobile software is generally specialized. Enterprise mobile software systems must support industry-specific and customer-specific business processes. For this reason, we utilize several avenues to provide mobile software solutions to meet our customers’ unique requirements, including:

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Software as a Service: SaaS is a core strategy to grow our recurring revenue base. In 2020, DecisionPoint acquired ExtenData’s MobileConductor™ , a software platform targeted at the Direct Store Delivery (DSD) and the Proof of Delivery (POD) markets. In 2022, DecisionPoint acquired Advanced Mobile Group’s VizeTrace™ , a software platform that manages RFID installations. Both MobileConductor and ViziTrace are owned platforms of DecisionPoint and part of its expanded IP portfolio. They will continue to be sold, supported and leveraged across our expanded base of customers nationwide.

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Resold specialized ISV applications: The software produced by specialized independent software vendors (“ISV”) is designed to fit a particular vertical market and application. Even still, it must be tailored to meet the needs of each customer and often requires integration to the customer’s enterprise system(s). Depending on the requirements, this tailoring is provided by DecisionPoint under contract with DecisionPoint.

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DecisionPoint custom development: When one of our off-the-shelf solutions or other ISV solution is not available, custom software can be created in-house using standardized programming platforms like the Microsoft.NET® framework, Java™, Android and Apple iOS. These are used when there is simply no other “off-the-shelf” way to meet the customer’s requirements or when a client believes their business requirements are so unique that only a custom solution will work. An increasingly popular requirement for many corporate clients, which we are able to fulfill, is a custom application that is written once, but supports multiple mobile operating systems.

Customers

Our customers include large enterprise companies across a wide range of industries including retail, healthcare, transportation and logistics. We had three customers who, together, represented 30% of the Company’s revenue for the year ended December 31, 2023.

No arrangement between us and any customer provide for a minimum amount of products or services that must be purchased by the customer nor require any customer to exclusively utilize us as a provider.

Backlog

At December 31, 2023, our backlog related to product orders that are expected to ship throughout 2024 was approximately $9.2 million.

Competition

The automatic identification and data capture (AIDC) business is one that is highly fragmented and covered by many competitors that range from a one-man shop to multi-billion-dollar companies. DecisionPoint attempts to separate itself from the competition with our expertise and ability to help a customer manage an entire project versus buying a product.

The following companies are examples of competitors in the AIDC Industry:

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CDW Corporation – CDW provides thousands of products as a general IT supplier.

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Denali Advanced Integration – Washington-based Denali Advanced Integration is a full system integration company with services ranging from IT Consulting, Managed Services and Enterprise Mobility Solutions.

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Other Competitors in the U.S. – Certain ‘catalog and online’ AIDC equipment resellers offer end-users deeply discounted, commodity-oriented products; however, they typically offer limited or no maintenance support beyond the manufacturer’s warranty (which generally results in slower repair turnaround time). More importantly, as end users have become increasingly dependent on value added resellers (“VAR”) and system integrators to provide platform design, integration and maintenance, end users typically do not place major purchase orders with such resellers.

Suppliers

Products from three suppliers totaled approximately 54% of our cost of sales for the year ended December 31, 2023.

Intellectual Property

We own and maintain a portfolio of intellectual property assets which we hope to continue to build. We believe that our intellectual property assets create great value to us and therefore we take steps to protect those assets.

Employees

As of December 31, 2023, we had a total of approximately 210 full-time employees. We have not experienced any work disruptions or stoppages and we consider relations with our employees to be good.

Legal Proceedings; Product Liability

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. Currently, we are not a party to any material legal proceedings or subject to any material claims. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

Available Information

Our annual and quarterly reports, along with all other reports and amendments filed with or furnished to the SEC, are publicly available free of charge on the Investor Relations section of our website at www.decisionpt.com as soon as reasonably practicable after these materials are filed with or furnished to the SEC. Our corporate governance policies, ethics code and board of directors’ committee charters are posted under the Investor Relations section of the website. We also routinely post important information for investors under the Investor Relations section of our website, including as a means of disclosing material information in compliance with our disclosure obligations under Regulation FD. The information contained on our website is not part of, and is not incorporated by reference in, this Annual Report on Form 10-K or any other report or document we file with or furnish to the SEC. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.

ITEM 1A. RISK FACTORS

Our operations and financial condition are subject to significant risks, including those described below. This report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward looking statements that may be affected by several risk factors, including those set forth below.

RISKS RELATING TO OUR BUSINESS AND INDUSTRY

Our working capital requirements may negatively affect our liquidity and capital resources.

At various times in our history, we have experienced negative working capital and minimal liquidity. If our working capital requirements vary significantly or if our short and long-term working capital needs exceed our cash flows from operations, we would look to our cash balances or other alternative sources of additional outside capital, which may not be available on satisfactory terms and in adequate amounts, if at all.

The mobile computing industry is characterized by rapid technological change, and our success depends upon the frequent enhancement of existing products and services and timely introduction of new products and services that meet our customers’ needs.

Customer requirements for mobile computing products and services are rapidly evolving and technological changes in our industry occur rapidly. To keep up with new customer requirements and distinguish us from our competitors, we must frequently introduce new products and services and enhancements of existing products and services. Enhancing existing products and services and developing new products and services is a complex and uncertain process. It often requires significant investments in research and development (“R&D”), which we do not undertake. Even if we made significant investments in R&D, they might not result in products or services attractive or acceptable to our customers. Furthermore, we may not be able to launch new or improved products or services before our competition launches comparable products or services. Any of these factors could cause our business or results or operations to suffer.

If we fail to continue to introduce new products that achieve broad market acceptance on a timely basis, we will not be able to compete effectively, and we will be unable to increase or maintain sales and profitability. Our future success depends on our ability to develop and introduce new products and product enhancements that achieve broad market acceptance. If we are unable to develop and introduce new products that respond to emerging technological trends and customers’ mission critical needs, our profitability and market share may suffer. The process of developing new technology is complex and uncertain, and if we fail to accurately predict customers’ changing needs and emerging technological trends, our business could be harmed.

We are active in the identification and development of new product and technology services and in enhancing our current products. However, in the enterprise mobility solutions industry, such activities are complex and filled with uncertainty. If we expend a significant amount of resources and our efforts do not lead to the successful introduction of new or improved products, there could be a material adverse effect on our business, profitability, financial condition and market share.

We may also encounter delays in the manufacturing and production of new products from our principal suppliers. Additionally, new products may not be commercially successful. Demand for existing products may decrease upon the announcement of new or improved products. Further, since products under development are often announced before introduction, these announcements may cause customers to delay purchases of any products, even if newly introduced, until the new or improved versions of those products are available. If customer orders decrease or are delayed during the product transition, we may experience a decline in revenue and have excess inventory on hand which could decrease gross profit margins. Our profitability might decrease if customers, who may otherwise choose to purchase existing products, instead choose to purchase lower priced models of new products. Delays or deficiencies in the development, manufacturing, and delivery of, or demand for, new or improved products could have a negative effect on our business or profitability.

Our products are highly technical and may contain undetected errors, product defects, security vulnerabilities, or software errors.

Our products, including our software products, are highly technical and complex and, when deployed, may contain errors, defects, or security vulnerabilities, especially when first introduced or when new models or versions are released. Such occurrences could result in damage to our reputation, lost revenue, diverted development resources, increased customer service and support costs, warranty claims, and litigation.

We warrant that our products will be free of defect for various periods of time, depending on the product. In addition, certain of our contracts include epidemic failure clauses. If invoked, these clauses may entitle the customer to return or obtain credits for products and inventory, or to cancel outstanding purchase orders even if the products themselves are not defective.

Errors, viruses, or bugs may be present in software or hardware that we acquire or license from third parties and incorporate into our products or in third-party software or hardware that our customers use in conjunction with our products. Our customers’ proprietary software and network firewall protections may corrupt data from our products and create difficulties in implementing our solutions. Changes to third-party software or hardware that our customers use in conjunction with our software could also render our applications inoperable. Any errors, defects, or security vulnerabilities in our products or any defects in, or compatibility issues with, any third-party hardware or software or customers’ network environments discovered after commercial release could result in loss of revenue or delay in revenue recognition, loss of customers, theft of trade secrets, data or intellectual property and increased service and warranty cost, any of which could adversely affect our business, financial condition, and results of operations.

Undiscovered vulnerabilities in our products alone or in combination with third-party hardware or software could expose them to hackers or other unscrupulous third parties who develop and deploy viruses and other malicious software programs that could attack our products. Actual or perceived security vulnerabilities in our products could harm our reputation and lead some customers to return products, to reduce or delay future purchases, or use competitive products.

We face competition from numerous sources and competition may increase, leading to a decline in revenues.

We compete primarily with well-established companies, many of which we believe have greater resources than us. We believe that barriers to entry are not significant and start-up costs are relatively low, so our competition may increase in the future. New competitors may be able to launch new businesses similar to ours, and current competitors may replicate our business model, at a relatively low cost. If competitors with significantly greater resources than ours decide to replicate our business model, they may be able to quickly gain recognition and acceptance of their business methods and products through marketing and promotion. We may not have the resources to compete effectively with current or future competitors. If we are unable to effectively compete, we will lose sales to our competitors and our revenues will decline.

Our competitors may be able to develop their business strategy and grow revenue at a faster pace than us, which would limit our results of operations and may force us to cease or curtail operations.

The wireless mobile solutions marketplace, while highly fragmented, is very competitive and many of our competitors are more established and have greater resources. We expect that competition will intensify in the future. Some of these competitors also have greater market presence, marketing capabilities, technological and personnel resources than the Company. As compared with our company therefore, such competitors may:

	●	develop and expand their infrastructure and service/product offerings more efficiently or more quickly;

	●	adapt more swiftly to new or emerging technologies and changes in client requirements;

	●	take advantage of acquisition and other opportunities more effectively;

	●	devote greater resources to the marketing and sale of their products and services; and

	●	leverage more effectively existing relationships with customers and strategic partners or exploit better recognized brand names to market and sell their services.

These current and prospective competitors include other wireless mobility solutions companies, hardware suppliers and in house IT departments.

A significant portion of our revenue is dependent upon a small number of customers, and the loss of any one or more of these customers would negatively impact our results of operations.

We had three customers who, together, represented 30% of the Company’s revenue for the year ended December 31, 2023.

Customer mix shifts significantly from year to year, but a concentration of the business with a few large customers is typical in any given year. A decline in our revenues could occur if a customer which has been a significant factor in one financial reporting period gives us significantly less business in the following period. Any one of our customers could reduce their orders for our products and services in favor of a more competitive price or different product at any time. The loss of a significant customer could have a material adverse impact on our Company.

Our contracts with these customers and our other customers do not include any specific purchase requirements or other requirements outside of the normal course of business. The majority of our customer contracts are on an annual basis for service support while on a purchase order basis for hardware purchases. Typical hardware sales are submitted on an estimated order basis with subsequent follow-on orders for specific quantities. These sales are ultimately subject to the time that the units are installed at all of the customer locations as per their requirements. Termination provisions are generally standard clauses based upon non-performance. General industry standards for contracts provide ordinary terms and conditions, while actual work and performance aspects are usually dictated by a Statement of Work which outlines what is being ordered, product specifications, delivery, installation and pricing.

If wireless carriers were to terminate or materially reduce their business relationships with us, our operating results would be materially harmed.

We have established key wireless carrier relationships with T-Mobile and Verizon. We have an informal arrangement with these carriers pursuant to which they provide us referrals of end users interested in field mobility solutions, and we, in turn, provide solutions which require cellular data networks. We do not have any binding agreements with these carriers. If these carriers were to terminate or materially reduce, for any reason, their business relationships with us, our operating results would be materially harmed.

Use of third-party suppliers and service providers could adversely affect our product quality, delivery schedules or customer satisfaction, any of which could have an adverse effect on our financial results.

In particular, we rely heavily on a number of privileged vendor relationships as a value-added reseller (“VAR”) for the Motorola Solutions Partner Pinnacle Club program, a manufacturer of bar code scanners and portable data terminals; as an Honors Solutions Provider for Intermec, a manufacturer of bar code scanners and terminals; as a Premier Partner with Zebra, a printer manufacturer, and O’Neil, the leading provider of ‘ruggedized’ handheld mobile printers. The loss of VAR status with any of these manufacturers could have a substantial adverse effect on our business. Our ability to meet financial objectives depends on our ability to timely obtain an adequate delivery of hardware as well as services from our vendors. Certain supplies are available from a single source or limited sources for which we may be unable to provide suitable alternatives in a timely manner. In addition, we may experience increases in vendor prices that could have a negative impact on our business. Credit constraints by our vendors could cause us to accelerate payables by us, impacting our cash flow. Any unanticipated expense, or disruption in our business or operations relating a limited number of suppliers could adversely affect our business, financial condition and results of operations.

Growth of, and changes in, our revenues and profits depend on the customer, product and geographic mix of our sales. Fluctuations in our sales mix could have an adverse impact on or increase the volatility of our revenues, gross margins and profits.

Sales of our products to large enterprises tend to have lower prices and gross margins than sales to smaller firms. In addition, our gross margins vary depending on the product or service delivered. Growth in our revenues and gross margins therefore depends on the customer, product and geographic mix of our sales. If we are unable to execute a sales strategy that results in a favorable sales mix, our revenues, gross margins and earnings may decline. Further, changes in the mix of our sales from quarter-to-quarter or year-to-year may make our revenues, gross margins and earnings more volatile and difficult to predict.

Our sales cycles can be long, unpredictable and require considerable time and expense, which may cause our operating results to fluctuate.

Our sales cycle, which is the time between initial contact with a potential customer and the ultimate sale, is often lengthy and unpredictable. Some of our potential customers may already have partial managed mobility solutions in place under fixed-term contracts, which may limit their ability to commit to purchase our solution in a timely fashion. In addition, our potential customers typically undertake a significant evaluation process that can last up to a year or more, and which requires us to expend substantial time, effort and money educating them about the capabilities of our offerings and the potential cost savings they can bring to an organization. Furthermore, the purchase of our products and services may require coordination and agreement across many departments within a potential customer’s organization, which further contributes to our lengthy sales cycle. As a result, we have limited ability to forecast the timing and size of specific sales. Any delay in completing, or failure to complete, sales in a particular quarter or year could harm our business and could cause our operating results to vary significantly.

Our revolving line-of-credit agreement and our loan agreements may limit our flexibility in managing our business, and defaults of any financial and non-financial covenants in these agreements could adversely affect us.

Our revolving-line-of-credit agreement as well as our term loan impose operating restrictions on us in the form of financial and non-financial covenants. These restrictions may limit the manner in which we can conduct our business and may restrict us from engaging in favorable business opportunities.

If we incur debt in future periods, our indebtedness may adversely affect our cash flow and our ability to operate our business.

As of December 31, 2023, we had availability under a line of credit of $8.7 million. Our current line of credit expires in July 2026. Our level of indebtedness relative to stockholders’ equity could have important consequences to you, including with respect to our ability to declare and pay a dividend, and significant effects on our business, including the following:

	●	certain of our debt obligations are secured by significant Company assets;

	●	our ability to obtain additional financing for working capital, capital expenditures, strategic acquisitions or general corporate purposes may be impaired;

	●	we could be at a competitive disadvantage compared to our competitors that may have proportionately less debt;

	●	our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate may be limited;

	●	our ability to fund a change of control offer may be limited; and

	●	we may be more vulnerable to economic downturns and adverse developments in our business.

We expect to obtain the funds to pay our day-to-day expenses and to repay our indebtedness primarily from our operations. Our ability to meet our expenses and make these payments therefore depends on our future performance, which will be affected by financial, business, economic and other factors, many of which we cannot control. Our business may not generate sufficient cash flow from operations in the future, and our currently anticipated growth in sales and cash flow may not be realized, either or both of which could result in our being unable to repay indebtedness, including the outstanding promissory notes, or to fund other liquidity needs. If we do not have enough funds, we may be in breach our debt covenants and/or be required to refinance all or part of our then existing debt, sell assets or borrow more funds, which we may not be able to accomplish on terms favorable to us, or at all. In addition, the terms of existing or future debt agreements may restrict us from pursuing any of these alternatives.

Our sales and profitability may be affected by changes in macro-economic, business or industry conditions.

If the economic climate in the U.S. or abroad deteriorates as a result of global conflicts in Europe (or elsewhere), rising interest rates, or otherwise, customers or potential customers could reduce or delay their technology investments. Reduced or delayed technology investments could decrease our sales and profitability. In this environment, our customers may experience financial difficulty, cease operations and fail to budget or reduce budgets for the purchase of our products and services. This may lead to longer sales cycles, delays in purchase decisions, payment and collection, and can also result in downward price pressures, causing our sales and profitability to decline. In addition, general economic uncertainty and volatility arising from geopolitical events and concerns, inflation, rises in energy prices, changes in interest rates and general declines in capital spending in the information technology sector make it difficult to predict changes in the purchasing requirements of our customers and the markets we serve. There are many other factors which could affect our business, including:

	●	the introduction and market acceptance of new technologies, products and services;

	●	new competitors and new forms of competition;

	●	the size and timing of customer orders;

	●	the size and timing of capital expenditures by our customers;

	●	adverse changes in the credit quality of our customers and suppliers;

	●	changes in the pricing policies of, or the introduction of, new products and services by us or our competitors;

	●	changes in the terms of our contracts with our customers or suppliers;

	●	the availability of products from our suppliers; and

	●	variations in product costs and the mix of products sold.

These trends and factors could adversely affect our business, profitability and financial condition and diminish our ability to achieve our strategic objectives.

We may be unable to protect our proprietary software and methodology.

Our success depends, in part, upon our proprietary software, methodology and other intellectual property rights. We rely upon a combination of trade secrets, nondisclosure and other contractual arrangements, and copyright and trademark laws to protect our proprietary rights. We generally enter into nondisclosure and confidentiality agreements with our employees, partners, consultants, independent sales agents and customers, and limit access to and distribution of our proprietary information. We cannot be certain that the steps we take in this regard will be adequate to deter misappropriation of our proprietary information or that we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights. We have attempted to put in place certain safeguards in our policies and procedures to protect intellectual property developed by employees. Our policies and procedures stipulate that intellectual property created by employees and its consultants remain our property. If we are unable to protect our proprietary software and methodology, the value of our business may decrease, and we may face increased competition.

We have not sought to protect our proprietary knowledge through patents and, as a result, our sales and profitability could be adversely affected to the extent that competing products/services were to capture a significant portion of our target markets.

We have generally not sought patent protection for our products and services, relying instead on our technical know-how and ability to design solutions tailored to our customers’ needs. Our sales and profitability could be adversely affected to the extent that competing products/services were to capture a significant portion of our target markets. To remain competitive, we must continually improve our existing personnel skill sets and capabilities and the provision of the services related thereto. Our success will also depend, in part, on management’s ability to recognize new technologies and services and make arrangements to license in or acquire such technologies so as to always be at the leading edge.

Assertions by a third party that our software products or technology infringes its intellectual property, whether or not correct, could subject us to costly and time-consuming litigation or expensive licenses.

Although we believe that our services and products do not infringe on the intellectual property rights of others, infringement claims may be asserted against us in the future. There is frequent litigation in the communications and technology industries based on allegations of infringement or other violations of intellectual property rights. As we face increasing competition, the possibility of intellectual property rights claims against us may increase. These claims, whether or not successful, could:

	●	divert management’s attention;

	●	in costly and time-consuming litigation;

	●	require us to enter into royalty or licensing agreements, which may not be available on acceptable terms, or at all; or

	●	require us to redesign our software products to avoid infringement.

As a result, any third-party intellectual property claims against us could increase our expenses and impair our business. In addition, although we have licensed proprietary technology, we cannot be certain that the owners’ rights in such technology will not be challenged, invalidated or circumvented. Furthermore, many of our customer agreements require us to indemnify our customers for certain third-party intellectual property infringement claims, which could increase our costs as a result of defending such claims and may require that we pay damages if there were an adverse ruling related to any such claims. These types of claims could harm our relationships with our customers, may deter future customers from purchasing our software products or could expose us to litigation for these claims. Even if we are not a party to any litigation between a customer and a third party, an adverse outcome in any such litigation could make it more difficult for us to defend our intellectual property in any subsequent litigation in which we are a named party.

We are dependent on information technology systems and infrastructure (cybersecurity).

We rely upon technology systems and infrastructure. Our technology systems are potentially vulnerable to breakdown or other interruption by fire, power loss, system malfunction, unauthorized access and other events such as computer hackings, cyber-attacks, computer viruses, worms or other destructive or disruptive software. Likewise, data privacy breaches by employees and others with permitted access to our systems may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. While we have invested heavily in the protection of data and information technology and in related training, there can be no assurance that our efforts will prevent significant breakdowns, breaches in our systems or other cyber incidents that could have a material adverse effect upon our reputation, business, operations or financial condition of the Company. In addition, significant implementation issues may arise as we continue to consolidate and outsource certain computer operations and application support activities.

We are subject to evolving privacy laws in the United States and other jurisdictions that are subject to potentially differing interpretations and which could adversely impact our business and require that we incur substantial costs.

Existing privacy-related laws and regulations in the United States and other countries are evolving and are subject to potentially differing interpretations, and various U.S. federal and state or other international legislative and regulatory bodies may expand or enact laws regarding privacy and data security-related matters. In addition, the California Consumer Privacy Act (the “CCPA”), which took effect in January 2020, was amended by the California Privacy Rights Act (“the “CPRA”) and took full effect in January 2023. The CCPA and CPRA, among other things, gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. Other U.S. states and the U.S. Congress have introduced, and some states like Virginia and Colorado have enacted in 2021, data privacy legislation, which may impact our business. Data privacy legislation, amendments and revisions to existing data privacy legislation, and other developments impacting data privacy and data protection may require us to modify our data processing.

We may need to raise additional funds, and these funds may not be available when we need them or may not be obtainable on favorable terms.

We may need to raise additional funds in order to fund our growth strategy and fully implement our business plan. Specifically, we may need to raise additional funds in order to pursue rapid expansion, develop new or enhanced services and products, and acquire complementary businesses or assets. Additionally, we may need funds to respond to unanticipated events that require us to make additional investments in or expenditures on behalf of our business. There can be no assurance that additional financing will be available when needed, on favorable terms, or at all. If funds are not available when we need them, then we may need to change our business strategy, reduce our rate of growth or suffer losses or other adverse impacts.

If we incur operating losses or do not raise sufficient additional capital, material adverse events may occur, including, but not limited to: 1) a reduction in the nature and scope of our operations, 2) our inability to fully implement our current business plan, and 3) defaults under our existing loan agreements. A covenant default would give one of our creditors the right to demand immediate payment of all outstanding amounts, which we would likely not be able to pay out of normal operations. There are no assurances that we can successfully implement our plans with respect to these liquidity matters.

Our inability to successfully implement our acquisition strategy could have a material adverse effect on our business.

We have grown in part as a result of our various acquisitions, including the acquisitions of Advanced Mobile Group, LLC, and Macro Integration Systems, Inc., and we anticipate continuing to grow in this manner. Although we expect to regularly consider additional strategic transactions in the future, we may not identify suitable opportunities or, if we do identify prospects, it may not be possible to consummate a transaction on acceptable terms. Antitrust or other competition laws may also limit our ability to acquire or work collaboratively with certain businesses or to fully realize the benefits of a prospective acquisition. Furthermore, a significant change in our business or the economy, an unexpected decrease in our cash flows or any restrictions imposed by our indebtedness may limit our ability to obtain the necessary capital or otherwise impede our ability to complete a transaction. Regularly considering strategic transactions can also divert management’s attention and lead to significant due diligence and other expenses regardless of whether we pursue or consummate any transaction. Failure to identify suitable transaction partners and to consummate transactions on acceptable terms, as well as the commitment of time and resources in connection with such transactions, could have a material adverse effect on our business, financial condition and results of operations.

Any failure to realize the anticipated benefits of an acquisition, including unanticipated expenses and liabilities related to acquisitions, could have a material adverse effect on our business.

We pursue each acquisition with the expectation that the transaction will result in various benefits, including growth opportunities and synergies from increased efficiencies. However, even if we are able to successfully integrate an acquired business, we may not realize some or all of the anticipated benefits within the anticipated timeframes or at all. Furthermore, we may experience increased competition that limits our ability to expand our business, we may not be able to capitalize on expected business opportunities, and general industry and business conditions may deteriorate. Acquisitions also expose us to significant risks and costs, and business and operational overlaps may lead to hidden costs. These costs can include unforeseen pre-acquisition liabilities or the impairment of customer relationships or acquired assets, such as goodwill. We may also incur costs and inefficiencies to the extent an acquisition expands the industries, markets or geographies in which we operate due to our limited exposure to and experience in a given industry, market or region. Acquisitions at times involve post-transaction disputes with the counterparty regarding a number of matters, including disagreements over the amount of a purchase price or other working capital adjustment or disputes regarding whether certain liabilities are covered by the indemnification provisions of the transaction agreement. We may underestimate the level of certain costs or the exposure we may face as a result of acquired liabilities. If any of these or other factors limit our ability to achieve the anticipated benefits of a transaction, or we encounter other unexpected transaction-related costs and liabilities, our business, financial condition and results of operations could be materially and adversely affected.

Future business combinations and acquisition transactions, if any, as well as recently closed business combinations and acquisition transactions, may not succeed in generating the intended benefits and may adversely affect our business.

Part of our growth strategy is to evaluate strategic acquisitions or relationships from time to time. The inability of our management to successfully integrate acquired businesses or technologies, and any related diversion of management’s attention, could have a material adverse effect on our business, operating results and financial condition.

Business combinations and other acquisition transactions may have a direct adverse effect on our financial condition, results of operations, liquidity or stock price. To complete acquisitions or other business combinations, we may have to use cash, issue new equity securities with dilutive effects on existing stockholders, take on new debt, assume contingent liabilities or amortize assets or expenses in a manner that might have a material adverse effect on our balance sheet, results of operations or liquidity. We are required to record business combination-related costs and other items as current period expenses, which would have the effect of reducing our reported earnings in the period in which an acquisition is consummated. These and other potential negative effects of an acquisition transaction could prevent us from realizing the benefits of such transaction and have a material adverse impact on our stock price, financial condition, results of operations and liquidity.

We must effectively manage the structure and size of our operations, or our company will suffer.

Our ability to successfully continue to implement our business plan requires an effective planning and management process. If funding is available, we intend to continue to attempt to increase the scope of our operations and acquire complementary businesses or assets. Implementing our business plan will require significant additional funding and resources. If we successfully grow our operations, we will need to hire additional employees and make significant capital investments. If we grow our operations, it will place a significant strain on our existing management and resources. If we grow, we will need to improve our financial and managerial controls and reporting systems and procedures, and we will need to expand, train and manage our workforce. If we need to reduce the size of our infrastructure, we may need to do it swiftly. Any failure to manage any of the foregoing areas efficiently and effectively would cause our business to suffer.

We are heavily dependent on our senior management, and a loss of a member of our senior management team could cause our stock price to decline.

If we lose members of our senior management, we may not be able to find appropriate replacements on a timely basis, and our business and value of our common stock could be adversely affected. Our existing operations and continued future development depend to a significant extent upon the performance and active participation of certain key individuals, including our Chief Executive Officer, our Senior Vice Presidents and certain other senior management individuals. We cannot guarantee that we will be successful in retaining the services of these or other key personnel. If we were to lose any of these individuals, we may not be able to find appropriate replacements on a timely basis and our financial condition and results of operations could be materially adversely affected.

Our inability to hire, train and retain qualified employees could cause our financial condition to weaken.

The success of our business is highly dependent upon our ability to hire, train and retain qualified employees. We face competition from other employers for people, and the availability of qualified people is limited. We must offer a competitive employment package in order to hire and retain employees, and any increase in competition for people may require us to increase wages or benefits in order to maintain a sufficient workforce, resulting in higher operation costs. Additionally, we must successfully train our employees in order to provide high quality services. In the event of high turnover or shortage of people, we may experience difficulty in providing consistent high-quality services. These factors could adversely affect our results of operations.

If our goodwill or amortizable intangible assets become impaired, we may be required to record a significant charge to earnings.

We review our goodwill and amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be evaluated for impairment at least annually. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable include a decline in stock price and market capitalization, decrease in estimated future cash flows, and slower growth rates in our industry. We may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or amortizable intangible assets is determined, resulting in a material adverse impact on our results of operations.

RISKS RELATING TO OUR SECURITIES

Despite our listing on the NYSE American, there can be no assurance that an active trading market for our common stock will be sustained, and the NYSE American may subsequently delist our common stock if we fail to comply with ongoing listing standards.

In May 2022, our common stock commenced trading on the NYSE American under the symbol “DPSI.” The NYSE American’s rules for listed companies require us to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our common stock. To satisfy the initial listing standards for the NYSE American, we had to execute a reverse stock split. In addition to specific listing and maintenance standards, the NYSE American has broad discretionary authority over the continued listing of securities, which it could exercise with respect to the listing of our common stock.

If we fail to meet those standards, as applied by NYSE American in its discretion, our common stock may be subject to delisting. We intend to take all commercially reasonable actions to maintain our NYSE American listing. If our common stock is delisted in the future, it is not likely that we will be able to list our common stock on another national securities exchange and, as a result, we expect our securities would be quoted on an over-the-counter market; however, if this were to occur, our stockholders could face significant material adverse consequences, including limited availability of market quotations for our common stock and reduced liquidity for the trading of our securities. In addition, in the event of such delisting, we could experience a decreased ability to issue additional securities and obtain additional financing in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our common stock is listed on NYSE American, shares of our common stock qualify as covered securities under the statute. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed on NYSE American, our securities would not qualify as covered securities under the statute, and we would be subject to regulation in each state in which we offer our securities.

Further, there can be no assurance that an active trading market for our common stock will be sustained despite our listing on the NYSE American.

The market price for our common stock may be volatile, and your investment in our common stock could decline in value.

The market price of our common stock could fluctuate significantly in response to various factors and events, including:

	●	the lack of an established trading market for our common stock;

	●	our ability to integrate operations, technology, products and services;

	●	our ability to execute on our business plan;

	●	operating results below expectations;

	●	our issuance of additional securities, including debt or equity or a combination thereof, which may be necessary to fund our operating expenses;

	●	announcements of technological innovations or new products by us or our competitors;

	●	the loss of any strategic relationship;

	●	economic and other external factors;

	●	period-to-period fluctuations in our financial results; and

	●	whether an active trading market in our common stock is maintained.

In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

In the past, securities class action litigation has often been brought against companies that experience volatility in the market price of their securities. Whether or not meritorious, litigation brought against us could result in substantial costs and a diversion of management’s attention and resources, which could adversely affect our business, operating results and financial condition.

We expect that our quarterly results of operations will fluctuate, and this fluctuation could cause our stock price to decline.

Our quarterly operating results are likely to fluctuate in the future. These fluctuations could cause our stock price to decline. The nature of our business involves variable factors which could cause our operating results to fluctuate.

Due to the possibility of fluctuations in our revenues and expenses, we believe that quarter-to-quarter comparisons of our operating results at times are not a good indication of our future performance.

If we or our existing stockholders sell a substantial number of shares of our common stock in the public market our stock price may decline even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares (particularly with respect to our affiliates, directors, executive officers or other insiders), could depress the market price of our common stock and could impair our future ability to obtain capital, especially through an offering of equity securities. If there are more shares of common stock offered for sale than buyers are willing to purchase, then the market price of our common stock may decline to a market price at which buyers are willing to purchase the offered shares of common stock and sellers remain willing to sell the shares.

In the future, we may issue additional shares to our employees, directors or consultants, under our equity compensation plan, in connection with corporate alliances or acquisitions, or to raise capital. Due to these factors, sales of a substantial number of shares of our common stock in the public market could occur at any time.

If securities analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.

The trading market for a company’s common stock often is based in part on the research and reports that securities and industry analysts publish about the company. We are not currently aware of any well-known analysts that are covering our common stock, and without analyst coverage it could be hard to generate interest in investments in our common stock. Furthermore, if analyst coverage does develop, and an analyst downgrades our stock or publishes unfavorable research about our business, or if our clinical trials or operating results fail to meet the analysts’ expectations, our stock price would likely decline.

We do not anticipate paying dividends on our common stock.

We have never declared or paid cash dividends on our common stock and do not expect to do so in the foreseeable future. The declaration of dividends is subject to the discretion of our board of directors and will depend on various factors, including our operating results, financial condition, future prospects, covenants in documents governing our debt obligations and any other factors deemed relevant by our board of directors. You should not rely on an investment in our company if you require dividend income from your investment in our company. The success of your investment will likely depend entirely upon any future appreciation of the market price of our common stock, which is uncertain and unpredictable. There is no guarantee that our common stock will appreciate in value.

Anti-takeover provisions in our charter documents and Delaware law, could discourage, delay, or prevent a change in control of our company and may affect the trading price of our common stock.

We are a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change in control would be beneficial to our existing stockholders.

Our Amended and Restated Certificate of Incorporation, as amended (the “Charter”), and our Amended and Restated Bylaws (the “Bylaws”) may discourage, delay, or prevent a change in our management or control over us that stockholders may consider favorable. Our Charter and Bylaws:

	●	provide that vacancies on our board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office;

	●	do not provide stockholders with the ability to cumulate their votes; and

	●	require advance notification of stockholder nominations and proposals.

In addition, our Charter permits the Board to issue up to 10 million shares of preferred stock with such powers, rights, terms and conditions as may be designated by the Board upon the issuance of shares of preferred stock at one or more times in the future. Specifically, the Charter permits the Board to approve the future issuance of all or any shares of the preferred stock in one or more series, to determine the number of shares constituting any series and to determine any voting powers, conversion rights, dividend rights, and other designations, preferences, limitations, restrictions and rights relating to such shares without any further authorization by our stockholders. The Board’s power to issue preferred stock could have the effect of delaying, deterring or preventing a transaction or a change in control of our company that might otherwise be in the best interest of our stockholders.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. CYBERSECURITY

We take a comprehensive approach to managing cybersecurity risk, starting with the integration of cybersecurity risk into our overall enterprise risk management framework, among other significant risks to the Company.

Board Oversight

Our Board of Directors holds the ultimate responsibility for overseeing risks to the Company. To support this governance, a Steering Committee, composed of members of management, including our Director of IT and certain members of the Board, assists with the specific focus on cybersecurity risks. Management provides the Board with comprehensive cybersecurity updates at least annually.

The Steering Committee thoroughly monitors the quality and effectiveness of the Company’s cybersecurity program. This encompasses the security of our internal information technology systems, products, and solutions, as well as our cyber incident response plan and resources. To stay informed, the Steering Committee receives regular updates from management on cybersecurity initiatives. These updates cover prevention, detection, mitigation, and remediation of cyber threats, along with the overall health of the Company’s cybersecurity program, results of third-party assessments, and the latest cyber threat trends. Additionally, the Steering Committee reviews the Company’s cybersecurity policies and methodologies to ensure continual service improvements. This demonstrates a company commitment to not only maintaining the existing cybersecurity framework but also proactively identifying and implementing enhancements.

Management’s Role and Experience

Our Director of IT, along with other members of management are responsible for day-to-day cyber risk management activities, including proactively identifying, assessing, prioritizing, managing and mitigating enterprise cybersecurity risks.

This encompasses several key functions:

●

Risk Identification and Assessment: Management must work to continuously identify potential cyber threats and vulnerabilities across the organization’s systems, networks, and data. Regular assessments analyze the likelihood and potential impact of these threats.

●

Prioritization and Response: Based on assessments, management must prioritize risk mitigation efforts, allocating resources effectively. This includes developing strategies to counter or reduce high-priority risks and implementing appropriate security controls.

●

Oversight and Implementation: Management oversees the implementation and enforcement of cybersecurity policies, procedures, and technical safeguards. This requires clear communication to employees and ongoing monitoring of compliance.

●

Incident Response Planning: Having a comprehensive and well-rehearsed incident response plan is crucial to minimize damage during a breach. Management plays a vital role in developing this plan, training personnel, and guiding the response when needed.

●

Employee Education and Awareness: Management establishes a cybersecurity-aware culture within the organization. This is done through regular training, awareness campaigns, and promoting a sense of shared responsibility for security.

●

Vendor Management: Third-party vendors can introduce risks. Management must ensure vendors adhere to the Company’s cybersecurity standards and assess their security practices throughout the partnership.

Our Director of IT is the senior-most security professional responsible for the implementation of the Company’s cybersecurity, product security, and corporate/physical security programs, and reports to the Senior Vice President of Managed Services. He has over 20 years of cybersecurity experience.

Cybersecurity Risk Management

The underlying controls of our cyber risk management program are based on recognized best practices and standards for cyber security and information technology, including the National Institute of Standards and Technology Cybersecurity Framework. Our approach to cybersecurity risk management includes the following key elements:

●

Endpoint Protection: Antivirus and Endpoint Detection and Response (EDR) solutions are deployed on all company computer assets, combined with Remote Endpoint Management for centralized monitoring and control.

●

Network Defense: Next-Generation Firewalls with Unified Threat Management provide perimeter security, while Microsoft 365 protection and Microsoft Defender enhance cloud-based safeguards especially email.

●

Centralized Monitoring: We leverage Security Information and Event Management (SIEM) solutions like Microsoft Sentinel for real-time threat detection and response.

●

Identity and Access Management: We have strict password policies which include multi-factor authentication.

●

Education and Awareness: Mandatory Security Awareness Training educates our workforce on best practices and evolving cyber threats performed annually.

●

Third-Party Risk Management (TPRM): Our TPRM function focuses on regular external vulnerability and security assessments by a network of expert partners provide an objective evaluation of our security posture.

There have been no material cybersecurity threats and incidents incurred to-date at the Company. However, there can be no guarantee that our policies and procedures will be followed in every instance or that those policies and procedures will be effective. Cybersecurity threats could materially affect our business strategy, results of operations, or financial condition, as further discussed in the risk factors in Part I, Item 1A of this report.

ITEM 2. PROPERTIES

Our primary administrative offices and warehouse are located in Laguna Hills, California where we lease approximately 31,000 square feet, of which we sublease approximately 16,000 square feet. We also lease approximately 89,000 square feet of office and warehouse space in Greensboro, North Carolina. We believe that our facilities are adequate for our current needs. As of the date of this annual report, our principal executive office is located at 1615 South Congress Avenue, Suite 103, Delray Beach, Florida.

ITEM 3. LEGAL PROCEEDINGS

ITEM 4. MINE SAFETY DISCLOSURES

None.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is currently listed on the NYSE American under the symbol “DPSI”.

As of March 21, 2024, there are 7,680,334 shares of our common stock outstanding.

Holders of Record

As of March 21, 2024, there were approximately 121 stockholders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes investors who are beneficial owners but whose shares are held in street name by brokers and other nominees.

Dividend Policy

We have never declared or paid any cash dividend on our common or capital stock.

Recent Sales of Unregistered Securities

The following sets forth information regarding all unregistered securities sold within the fiscal year ended December 31, 2023 and that were not previously reported:

In late September 2023, three holders exercised common stock warrants, which were originally issued by the Company in October 2018, for an aggregate of 17,063 shares of common stock at an exercise price of $1.40 per share for gross proceeds to the Company of $23,888.20. The shares of common stock were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder.

On October 27, 2023, one holder exercised common stock warrants, which were originally issued by the Company in October 2018, for 966 shares of common stock, on a cashless basis. This cashless exercise was completed pursuant to the exemption from registration contained in Section 3(a)(9) of the Securities Act.

In each transaction in which we relied on Section 4(a)(2) of the Securities Act and/or Rule 506(b) promulgated thereunder, we did not engage in any general solicitation or advertising and we offered the securities to a limited number of persons with whom we had pre-existing relationships. In addition, transactions exempt under Rule 506(b) were made exclusively to what the Company reasonably believed were accredited investors as defined in Rule 501 of the Securities Act. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof. No underwriters were involved in the above transactions.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

ITEM 6. RESERVED

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this annual report. Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements that are based on current expectations and involve various risks and uncertainties that could cause our actual results to differ materially from those expressed in these forward-looking statements.

Our financial statements are stated in United States Dollars (“$”) and are prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”). The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this annual report. In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

Overview

DecisionPoint is a provider and integrator of mobility and wireless systems for retail, logistics and healthcare markets. The Company designs, deploys and supports mobile computing systems that enable customers to access employers’ data networks at various locations (i.e. the retail selling floor, nurse workstations, warehouse and distribution centers or on the road deliveries via enterprise-grade handheld computers, printers, tablets, and smart phones). The Company also integrates data capture equipment including bar code scanners and radio frequency identification (RFID) readers.

In January 2022, we completed the acquisition of AMG, a privately held company headquartered in Doylestown, Pennsylvania. DecisionPoint acquired Advanced Mobile Group to expand DecisionPoint’s mobility-first enterprise solutions and service offerings and grow its capabilities in the mid-Atlantic region. AMG is a regional leader providing services, hardware, software, integration, and wireless networking solutions, with deep experience in warehousing and distribution, manufacturing, mobile workforce automation, retailing, and healthcare segments, and approximately 600 customers.

In April 2023, we completed the acquisition of Macro Integration Services, Inc. (“Macro”), a privately held company headquartered in Greensboro, North Carolina. We acquired Macro to increase profit margins through adding more services, expanding our regional presence, and adding new capabilities and deepening existing ones. This acquisition also strengthens our position in the traditional retail market while adding to adjacent retail verticals in food service and grocery.

General economic uncertainty and volatility arising from geopolitical events and concerns, inflation, rises in energy prices, changes in interest rates and general declines in capital spending in the information technology sector make it difficult to predict changes in the purchasing requirements of our customers and the markets we serve and whether our results of operations will be materially impacted.

Components of Results of Operations

Net Sales

Net sales reflect revenue from the sale of hardware, software, consumables and professional services (including hardware and software maintenance) to our clients, net of sales taxes.

Revenue is recognized when a customer obtains control of promised goods or services under the terms of a contract and is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. We do not have any material extended payment terms, as payment is due at or shortly after the time of the sale. Sales and other taxes collected concurrently with revenue producing activities are excluded from revenue.

Cost of Sales, Sales and Marketing Expenses, and General and Administrative Expenses

The following illustrates the primary costs classified in each major expense category:

Cost of sales, include:

	●	Cost of goods sold for hardware, software and consumables;

	●	Cost of services, including maintenance;

	●	Markdowns of inventory; and

	●	Freight expenses.

Sales and marketing expenses, include:

	●	Sales salaries, benefits and commissions;

	●	Consulting;

	●	Marketing tools;

	●	Travel; and

	●	Marketing promotions and trade shows.

General and administrative expenses, include:

	●	Corporate payroll and benefits;

	●	Depreciation and amortization;

	●	Rent;

	●	Utilities; and

	●	Other administrative costs such as maintenance of corporate offices, supplies, legal, consulting, audit and tax preparation and other professional fees.

Results of Operations

The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales (in thousands):

	Year Ended December 31,
	2023			2022
Statements of Operations Data:
Net sales	$	115,594		$	97,415
Cost of sales		86,769			74,320
Gross profit		28,825			23,095
Sales and marketing expenses		9,957			9,218
General and administrative expenses		14,093			9,430
Total operating expenses		24,050			18,648
Operating income		4,775			4,447
Interest expense		(1,156	)		(56	)
Other expense		-			(15	)
Income before income taxes		3,619			4,376
Income tax expense		(1,132	)		(1,265	)
Net income attributable to common shareholders	$	2,487		$	3,111
Percentage of Net Sales:
Net sales		100.0	%		100.0	%
Cost of sales		75.1	%		76.3	%
Gross profit		24.9	%		23.7	%
Sales and marketing expenses		8.6	%		9.5	%
General and administrative expenses		12.2	%		9.7	%
Total operating expenses		20.8	%		19.1	%
Operating income		4.1	%		4.6	%
Interest expense		-1.0	%		-0.1	%
Other expense		0.0	%		0.0	%
Income before income taxes		3.1	%		4.5	%
Income tax expense		-1.0	%		-1.3	%
Net income attributable to common shareholders		2.2	%		3.2	%

Results of Operations for the Year Ended December 31, 2023 compared to the Year Ended December 31, 2022

Net sales

	Year Ended
	December 31,				Dollar			Percent
	2023		2022		Change			Change
	(dollars in thousands)
Hardware and software	$	67,551	$	71,774	$	(4,223	)		(5.9	)%
Consumables		5,943		7,305		(1,362	)		(18.6	)%
Services		42,100		18,336		23,764			129.6	%
	$	115,594	$	97,415	$	18,179			18.7	%

Net sales increased by 18.7%, or $18.2 million, for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase in net sales was primarily driven by the acquisition of Macro on April 1, 2023 (and, thus, there were no corresponding sales by Macro included in our results of operations in 2022), which added $24.7 million in revenue ($4.5 million in hardware and $20.2 million in services revenue). Services revenue also increased due to two significant sales of deployment services in the current year of approximately $4.6 million which were offset by a decrease of $1.1 million professional services revenue. The increase in services revenue was offset by a $4.2 million decrease in hardware and software revenue primarily due to the $4.5 million in hardware sales by Macro and a $2.3 million increase in hardware sales to another one of our existing customers, offset by a $5.6 million decrease in hardware sales to one of our largest customers. Consumables decreased $1.4 million primarily due to decreased sales to one of our existing customers. Included in the prior year consumables sales was a one-time transaction of $1.2 million that did not recur during the year ending December 31, 2023.

Cost of sales

	Year Ended
	December 31,				Dollar			Percent
	2023		2022		Change			Change
	(dollars in thousands)
Hardware and software	$	55,321	$	56,952	$	(1,631	)		(2.9	)%
Consumables		4,286		5,262		(976	)		(18.5	)%
Services		27,162		12,106		15,056			124.4	%
	$	86,769	$	74,320	$	12,449			16.8	%

Cost of sales increased by 16.8%, or $12.4 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022, and this is increase is primarily due the $17.2 million increase in overall cost of sales associated with cost of sales of Macro that we acquired on April 1, 2023 (and, thus, there were no corresponding costs of sales of Macro included in our results of operations for 2022). This increase was offset by decreases in cost of sales of $1.6 million for hardware and software and $1.0 million in consumables which is consistent with decreases in sales of hardware and consumables in the current year.

Gross profit

	Year Ended
	December 31,
	2023			2022
	(dollars in thousands)
Gross profit:
Hardware and software	$	12,230		$	14,822
Consumables		1,657			2,043
Services		14,938			6,230
Total gross profit	$	28,825		$	23,095

Gross profit percentage:
Hardware and software		18.1	%		20.7	%
Consumables		27.9	%		28.0	%
Services		35.5	%		34.0	%
Total gross profit percentage		24.9	%		23.7	%

Gross profit increased $5.7 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily as a result of the increase in sales of services as noted above. Overall gross profit margin increased 1.2% due to a shift in mix to services with higher profit margins, driven by the Macro acquisition in 2023.

Sales and marketing expenses

	Year Ended December 31,						Dollar		Percent
	2023			2022			Change		Change
	(dollars in thousands)
Sales and marketing expenses	$	9,957		$	9,218		$	739		8.0	%
As a percentage of sales		8.6	%		9.5	%				-0.9	%

Sales and marketing expenses increased $0.7 million, or 8.0%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to the $0.7 million in additional expenses for Macro’s operations that were acquired on April 1, 2023 (and, thus, there were not corresponding sales and marketing expenses of Macro included in our results of operations for 2022).

General and administrative expenses

	Year Ended December 31,						Dollar		Percent
	2023			2022			Change		Change
	(dollars in thousands)
General and administrative	$	14,093		$	9,430		$	4,663		49.4	%
As a percentage of sales		12.2	%		9.7	%				2.5	%

General and administrative expenses increased $4.7 million, or 49.4%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase in these expenses was due to a $4.5 million increase in expenses primarily associated with Macro (which we acquired on April 1, 2023, and, thus, there were no corresponding general and administrative expenses by Macro included in our results of operations for 2022). In 2024, we expect to continue to realize the benefit of cost synergies which will result in lower general and administrative costs from Macro.

Interest expense. The increase in interest expense to $1.2 million for the 2023 fiscal year from $56,000 last year was due to the increased debt levels incurred for the Macro acquisition and the unwinding of the present value discount on the accrued earnout obligation incurred for the Macro acquisition. The adjustment of the present value calculation of the accrued earnout obligation resulted in an additional $0.8 million of interest expense for the year ended December 31, 2023.

Income tax expense. Income tax expense was approximately $1.1 million and $1.3 million for the years ended December 31, 2023 and December 31, 2022, respectively. The decrease is primarily due to the decrease in income before income taxes, period over period.

Net income. Net income was $2.5 million for 2023 compared to $3.1 million in 2022.

Liquidity and Capital Resources

As of December 31, 2023, our principal sources of liquidity were cash totaling $4.3 million and $8.7 million of availability under our line of credit. In recent years, we have financed our operations primarily through cash generated from operating activities, borrowings from term loans and our line of credit. Since December 31, 2018 through December 31, 2023 we have generated operating income. Based on our recent trends and our current projections, we expect to generate cash from operations for the year ending December 31, 2024. Given our projections, combined with our existing cash and credit facilities, we believe the Company has sufficient liquidity for at least the next 12 months. In addition, we believe cash generated from operating income and our existing credit facilities will be sufficient to meet our long-term liquidity needs beyond the next 12 months.

Part of our consideration for the acquisition of Macro included earnout payments to the sellers, which are subject to the financial performance of Macro in each of the two years following closing and are presented at net present values. The earnout is based on achieving EBITDA targets in years one and two following the Effective Date of $2.8 million and $3.8 million, respectively. At December 31, 2023, we have accrued $5.4 million and $4.3 million for the Year 1 and Year 2 earnouts at their net present values, respectively, which are due June 14, 2024 and June 14, 2025, respectively.

Our ability to continue to meet our cash requirements will depend on, among other things, macro-economic conditions, U.S. and global economic activity, continuing disruptions in supply chains and labor shortages across industry sectors, our ability to achieve anticipated levels of revenues and cash flow from operations, our ability to manage costs and working capital successfully and the continued availability of financing, if needed. We cannot provide any assurance that our assumptions used to estimate our liquidity requirements will remain accurate due to, among other things, volatile macro-economic conditions. In the event of a sustained market deterioration, and declines in net sales, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions. We cannot provide any assurance that we will be able to obtain any additional sources of financing or liquidity on acceptable terms, or at all.

Working Capital

	December 31, 2023			December 31, 2022		Increase/ (Decrease)
	(in thousands)
Current assets	$	34,657		$	32,272	$	2,385
Current liabilities		38,736			31,665		7,071
Working capital (deficit)	$	(4,079	)	$	607	$	(4,686	)

The working capital deficit as of December 31, 2023 was primarily due to the acquisition of Macro which closed on April 1, 2023.

Line of Credit

Our Loan and Security Agreement (the “Loan Agreement”) with MUFG Union Bank, National Association (the “Bank”), as amended, provides for a revolving line of credit of up to $10.0 million with our obligations being secured by a security interest in substantially all of our assets. Loans extended to us under the Loan Agreement are scheduled to mature on July 31, 2026. Effective March 27, 2023, we entered into an amendment letter (“Amendment”) with the Bank that served to amend certain terms of the Loan Agreement and increased the revolving line of credit available to us from $9.0 million to $10.0 million. The Amendment also served to modify certain covenants in the original Loan Agreement. On December 31, 2023, we had $1.3 million outstanding and $8.7 million available under this line of credit.

Outstanding balances of at least $150,000 under the Loan Agreement bear interest, at our option, either at a base interest rate equal to the Term secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”) plus 2.50% or a base rate equal to an index offered by the Bank (the “Index Rate”) for the interest period selected and is payable on the last day of each month, commencing April 30, 2023. The interest rate on outstanding balances under the Loan Agreement adjusts at the end of each SOFR rate period (1, 3, or 6 month term) selected by us, or if such balances bear interest based on the Index Rate, such rate shall vary when the index rate changes. As of December 31, 2023, the effective interest rate was 7.9%. We have the right to prepay variable interest rate balances, in whole or in part, at any time, without penalty or premium. Amounts outstanding with a base interest rate may be prepaid, in whole or in part, provided we have given the Bank written notice of at least five days prior to prepayment and pay a prepayment fee. At any time prior to the maturity date, we may borrow, repay and reborrow amounts under the Loan Agreement, subject to the prepayment terms, and, as long as the total outstanding does not exceed $10.0 million.

Under the Loan Agreement , as amended, we are subject to a variety of customary affirmative and negative covenants, including that we (i) maintain a ratio of total debt to EBITDA of not greater than 3.0:1.0 measured at the end of each quarter, (ii) maintain a fixed charge coverage ratio of not less than 1.35:1.00 to be measured as of the end of each fiscal quarter, and (iii) submit a pro-forma statement in advance showing compliance and overall satisfactory metrics post acquisition should the Company use any loan under the Loan Agreement for any acquisition with a purchase price in excess of $1,500,000. The Loan Agreement also prohibits us from, or otherwise imposes restrictions on us with respect to, among other things, liquidating, dissolving, entering into any consolidation, merger, division, partnership, or other combination, selling or leasing a majority of our assets or business or purchase or lease all or the greater part of the assets or business of another entity or person. As of December 31, 2023, we are in compliance with all loan covenants.

MUFG Promissory Note

We entered into a $5.0 million unsecured promissory note agreement, effective March 27, 2023, with the Bank. Principal and interest payments on this note are due in quarterly installments of $250,000 on the last day of each quarter commencing June 30, 2023, with an interest rate based on Term SOFR plus 2.5%, which was 7.9% at December 31, 2023. This note matures March 31, 2028.

Cash Flow Analysis

	Year Ended
	December 31,
	2023			2022
	(in thousands)
Net cash provided by operating activities	$	4,481		$	12,309
Net used in investing activities		(13,810	)		(6,002	)
Net cash provided by (used in) financing activities		5,987			(1,252	)
Net increase in cash	$	(3,342	)	$	5,055

Operating Activities

Net cash provided by operating activities decreased to $4.5 million for the year ended December 31, 2023 from $12.3 million for the year ended December 31, 2022. The decrease was primarily due to the paydown of our accounts payable.

Investing Activities

Net cash used in investing activities was $13.8 million for the year ended December 31, 2023, which is comprised of cash payments in connection with the acquisition of Macro, and capital expenditures of property and equipment. Net cash used in investing activities was $6.0 million for the year ended December 31, 2022, which was comprised of cash payments delivered in connection with the acquisition of AMG, the acquisition of the customer list and relationships of Boston Technologies, and capital expenditures of property and equipment.

Financing Activities

Net cash provided by financing activities was $6.0 million for the year ended December 31, 2023, which was primarily due to the proceeds from both the term loan ($5.0 million) and revolving line of credit ($1.3 million, net) used to fund the acquisition of Macro. These proceeds were offset by term loan repayments of $0.5 million during the year ended December 31, 2023. Net cash used in financing activities was $1.3 million for the year ended December 31, 2022 which comprised of payments for taxes on the cashless exercise of stock options.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that may have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements that have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). This preparation requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. US GAAP provides the framework from which to make these estimates, assumption and disclosures. We choose accounting policies within US GAAP that management believes are appropriate to accurately and fairly report our operating results and financial position in a consistent manner. Management regularly assesses these policies in light of current and forecasted economic conditions. While there are a number of significant accounting policies affecting our financial statements, we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments:

Revenue Recognition

We determine revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, a performance obligation is satisfied.

We combine contracts with the same customer into a single contract for accounting purposes when the contracts are entered into at or near the same time and the contracts are negotiated as a single commercial package, consideration in one contract depends on the other contract, or the services are considered a single performance obligation. If an arrangement involves multiple performance obligations, the items are analyzed to determine the separate units of accounting (that is, are they distinct and are they distinct in the context of the customer contract). The total contract transaction price is allocated to the identified performance obligations based upon the relative standalone selling prices of the performance obligations. The standalone selling price is based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost plus margin approach. We estimate the amount of total contract consideration we expect to receive for variable arrangements by determining the most likely amount we expect to earn from the arrangement based on the expected quantities of services we expect to provide, and the contractual pricing based on those quantities. We only include some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is subsequently resolved. We consider the sensitivity of the estimate, our relationship and experience with our client and variable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement.

As discussed in more detail below, revenue is recognized when a customer obtains control of promised goods or services under the terms of a contract and is measured as the amount of consideration, we expect to receive in exchange for transferring goods or providing services. We do not have any material extended payment terms, as payment is due at or shortly after the time of the sale. Sales, value-added and other taxes collected concurrently with revenue producing activities are excluded from revenue.

We recognize contract assets or unbilled receivables related to revenue recognized for services completed but not yet invoiced to our clients. Unbilled receivables are recorded when we have an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when we invoice clients, or receive customer cash payments, in advance of performing the related services under the terms of a contract. Remaining performance obligations represent the transaction price allocated to the performance obligations that are unsatisfied as of the end of each reporting period. Deferred revenue is recognized as revenue when we have satisfied the related performance obligation.

Hardware, consumables and software products - We recognize product revenue at the point in time when a client takes control of the hardware and/or software, which typically occurs when title and risk of loss have passed to the client. Our selling terms and conditions reflect that F.O.B ‘dock’ contractual terms establish that control is transferred from us at the point in time when the product is shipped to the customer.

Revenues from software license sales are recognized as a single performance obligation on a gross basis as we are acting as a principal in these transactions at the point the software license is delivered to the customer. Generally, software licenses are sold with accompanying third-party delivered software assurance, which allows customers to upgrade, at no additional cost, to the latest technology if new capabilities are introduced during the period that the software assurance is in effect. We determined that the accompanying third-party delivered software assurance is critical or essential to the core functionality of the software licensor because we do not sell the software license and standard warranty on a standalone basis (which indicates that the customer cannot benefit from the software license and standard warranty on its own), the software license and the standard warranty are not separately identifiable, the software license assurance warranty are inputs of a combined item in the contract, the assurance warranty and software license are highly interdependent and interrelated because the core functionality of the license is dependent on the assurance warranty, and our promise to provide the assurance warranty that is necessary for the software license to continue to provide significant benefit to the customer. As a result, the software license and the accompanying third party delivered software assurance are recognized as a single performance obligation.

We leverage drop-ship shipments with many of our partners and suppliers to deliver hardware and consumable products to our clients without having to physically hold the inventory at our warehouses, thereby increasing efficiency and reducing costs. We recognize revenue for drop-ship arrangements on a gross basis as the principal in the transaction when the product is received by the client because we control the product prior to transfer to the client. We also assume primary responsibility for the fulfillment in the arrangement, we assume inventory risk if the product is returned by the client, we set the price of the product charged to the client, we assume credit risk for nonpayment by our customer, and we work closely with clients to determine their hardware specifications.

Services - We provide services which include consulting, staging, deployment, installation, repair and customer specified software customization. The arrangement is based on either a time and material basis or a fixed fee. For our time and materials service contracts, we recognize revenues as those services are provided and consumed, as this is the best output measure of how the services are transferred to the customer. Fixed fee contracts are recognized in the period in which the services are performed or delivered using a proportional performance service model. Revenue is recognized on a gross basis in the period in which the services are performed or delivered.

Maintenance services - We sell certain OEM hardware and software maintenance support arrangements to our clients. We also offer an internal maintenance agreement related to hardware. These contracts are support service agreements for the hardware and/or software products that were acquired from us and others. Although these are third-party support agreements for maintenance on the specific hardware and/or software products, our internal help desk and systems engineers assist customers by providing technical assistance on the source of or how to fix the problem. In addition, we also provide a turn back feature, deploying replacements as needed while we manage the return and reverse logistics of the product back to the OEM. Revenue related to service contracts is recognized ratably over the term of the agreement, generally over one to three years.

We act as the principal in the transaction as the primary obligor for fulfillment in the arrangement, we set the price of the service charged to the customer, and we assume credit risk for the amounts invoiced. In addition, we manage back-end warranties, service contracts and repairs for multiple products and suppliers. We leverage our knowledge base of mobility best practices by consolidating multiple suppliers’ supplier’s maintenance requirements under a single point in contact through us. Our internal support team assists our customers first by performing an initial technical triage to determine the source of the problem including, but not limited to, physical damage and software issues and whether they can be handled remotely by the client or returned for repair. Further, we receive the returned products, confirm that the equipment is operational or not, either repair or refurbish the equipment internally or return it to the manufacturer directly to repair. We then obtain the product turn back from the manufacturer and either send it back out to a specific customer location or place in a customer’s spare pool. As a result, we recognize the revenue on a gross basis.

We defer costs to acquire contracts, including commissions, incentives and payroll taxes if they are incremental and recoverable costs of obtaining a customer contract with a term exceeding one year. Deferred contract costs are amortized to sales and marketing expense over the contract term, generally over one to three years. We have elected to recognize the incremental costs of obtaining a contract with a term of less than one year as a selling expense when incurred. We include deferred contract acquisition costs in “Prepaid expenses and other current assets” in the consolidated balance sheets.

Intangible Assets and Long-lived Assets

We evaluate our intangible and long-lived assets for impairment when events or circumstances arise that indicate intangible and long-lived assets may be impaired. Indicators of impairment include, but are not limited to, a significant deterioration in overall economic conditions, a decline in the market capitalization, the loss of significant business, or other significant adverse changes in industry or market conditions. Intangible assets with finite useful lives are amortized over their respective estimated useful lives using an accelerated method to their estimated residual values, if any. Our intangible assets consist of customer lists, customer relationships and trade names.

Goodwill

Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired. Goodwill is not amortized but tested for impairment at least annually and whenever events or changes in circumstance indicate that carrying values may not be recoverable. We assess the impairment of goodwill annually at each year-end and if indicators of impairment are present.

Factors that we consider important that could trigger an impairment assessment include, but not limited to, the following:

●

significant under-performance relative to historical and projected operating results;

●

significant changes in the manner of use of the acquired assets or business strategy; and

●

significant negative industry or general economic trends.

When performing the impairment review, we determine the carrying amount of a reporting unit by assigning assets and liabilities, including the existing goodwill, to each reporting unit. To evaluate whether goodwill is impaired, we compare the estimated fair value of each reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount. If the carrying amount of a reporting unit exceeds its fair value, the amount of the impairment loss will be recognized as the difference of the estimated fair value and the carrying value of the reporting unit under the new accounting standard.

Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue and expense growth rates, capital expenditures and the depreciation and amortization related to capital expenditures, changes in working capital, discount rates, risk-adjusted discount rates, future economic and market conditions and the determination of appropriate comparable companies. Due to the inherent uncertainty involved in making these estimates, actual future results related to assumed variables could differ from these estimates.

Business Combinations

We utilize the acquisition method of accounting for business combinations and allocate the purchase price of an acquisition to the various tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. We primarily establish fair value using the income approach based upon a discounted cash flow model. The income approach requires the use of many assumptions and estimates including future revenues and expenses, as well as discount factors and income tax rates. Other estimates include:

	●	Estimated step-ups or write-downs for fixed assets and inventory;

	●	Estimated fair values of intangible assets;

	●	Estimated liabilities assumed from the target; and

	●	Estimated earnout obligations.

While we use our best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the business acquisition date, these estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the purchase price allocation period, which is generally no more than one year from the business acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Business combinations also require us to estimate the useful life of certain intangible assets that we acquire and this estimate requires significant judgment.

Share-Based Compensation

We account for share-based compensation in accordance with the provisions of ASC Topic 718 “Compensation – Stock Compensation”. Under ASC 718, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant).

Share-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest during the period. Given that stock-based compensation expense recognized in the accompanying consolidated statements of income and comprehensive income is based on awards ultimately expected to vest. We account for forfeitures as they occur, rather than estimate expected forfeitures.

Compensation cost for stock awards, which from time to time may include restricted stock units (“RSUs”), is measured at the fair value on the grant date and recognized as expense, net of estimated forfeitures, over the related service period. The fair value of stock awards is based on the estimated fair value of our common stock on the grant date.

The estimated fair value of common stock option awards is calculated using the Black-Scholes option pricing model. The Black-Scholes model requires subjective assumptions regarding future stock price volatility and expected time to exercise, along with assumptions about the risk-free interest rate and expected dividends, all of which affect the estimated fair values of our common stock option awards. Given a lack of historical stock option exercises, the expected term of options granted is calculated as the average of the weighted vesting period and the contractual expiration date of the option. This calculation is based on a method permitted by the Securities and Exchange Commission in instances where the vesting and exercise terms of options granted meet certain conditions and where limited historical exercise data is available. The expected volatility is based on the historical volatility of the common stock of comparable public companies that operate in similar industries as us.

The risk-free rate selected to value any particular grant is based on the U.S. Treasury rate that corresponds to the expected term of the grant effective as of the date of the grant. The expected dividend assumption is based on our history and management’s expectation regarding dividend payouts.

Compensation expense for common stock option awards with graded vesting schedules is recognized on a straight-line basis over the requisite service period for the last separately vesting portion of the award, provided that the accumulated cost recognized as of any date at least equals the value of the vested portion of the award.

If there are any modifications or cancellations of the underlying vested or unvested stock-based awards, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense, or record additional expense for vested stock-based awards. Future stock-based compensation expense and unearned stock- based compensation may increase to the extent that we grant additional common stock options or other stock-based awards.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.

ITEM 8. FINANCIAL STATEMENTS

Index to Consolidated Financial Statements

		Page
Audited Annual Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID # 200)		F-2
Financial Statements:
Consolidated Balance Sheets		F-4
Consolidated Statements of Income and Comprehensive Income		F-5
Consolidated Statements of Stockholders’ Equity		F-6
Consolidated Statements of Cash Flows		F-7
Notes to Consolidated Financial Statements		F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

DecisionPoint Systems, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of DecisionPoint Systems, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for each of the years then ended, and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the years then ended, in conformity with U.S. generally accepted accounting principles.

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 audits 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 misstatement of the consolidated 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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition

Critical Audit Matter Description

The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company may enter into contracts to sell their products and services that contain non-standard terms and conditions and multiple performance obligations. For such contracts, significant interpretation may be required to determine the appropriate accounting, including the identification of all performance obligations, determination of when performance obligations are distinct and when they should be combined, allocation of the transaction price among performance obligations in the arrangement, the timing of the transfer of control of promised goods or services, and agent versus principal considerations.

Our assessment of management’s evaluation of the appropriate accounting for revenue recognition is significant to our audit because the revenue amounts are material to the consolidated financial statements, management’s assessment process involves significant judgment, and the application of U.S. generally accepted accounting principles in this area is complex.

How the Critical Audit Matter Was Addressed in the Audit

Our principal audit procedures related to the Company’s revenue recognition for customer contracts included the following:

●

We evaluated management’s significant accounting policies related to revenue from contracts with customers for reasonableness and compliance with U.S. generally accepted accounting principles.

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)

●

We tested management’s identification of performance obligations and its assessment of whether or not the performance obligations are distinct.

●

We evaluated the reasonableness of management’s estimate of stand-alone selling prices for products and services and the allocation of the transaction price among the identified performance obligations.

●

We tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the consolidated financial statements.

●

We evaluated management’s analysis of whether the Company is a principal (gross reporting of revenues) or an agent (net reporting of revenues) in its revenue transactions.

●

We selected a sample of revenue transactions for each of the Company’s significant revenue streams and obtained the related customer agreements and performed the following procedures:

Obtained and read source documents for each selection, including master agreements, customer purchase orders, shipping documents, and other documentation that was part of the agreement.

Tested management’s identification and treatment of the key contract terms.

Assessed whether the Company satisfied the related performance obligation and whether the revenue recognized approximated stand-alone selling price.

Assessed the terms in the customer agreement and evaluated the appropriateness of management’s application of the Company’s accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions.

Acquisition of Macro Integration Services, Inc.

Critical Audit Matter Description

On April 1, 2023, the Company closed its acquisition of 100% of equity interests of Macro Integration Services, Inc. (“MAC”) for net consideration of $25.6 million, including an earn-out obligation (the “Transaction”), as disclosed in Note 3 to the consolidated financial statements. The transaction is accounted for as a business combination and the Company allocated $5.5 million of the acquisition purchase price to definite-lived intangible assets and estimated the fair value of the earn-out obligation to be $9.0 million.

Auditing management’s allocation of the purchase price to the estimated fair value of the net assets acquired from MAC involved especially subjective and complex judgements due to the significant estimation required in determining the fair value of definite-lived intangible assets, including customer relationships and tradenames, and the fair value of the earn-out obligation. The significant estimations related to the definite-lived intangible assets involve projections of future cash flows, discount rates, customer attrition rates, economic lives, and other factors. The significant estimations related to the earn-out obligation involve projections of future EBITDA and determination of an appropriate present value discount factor.

How the Critical Audit Matter Was Addressed in the Audit

Our principal audit procedures related to testing management’s estimate of the fair values of definite-lived intangible assets acquired from MAC including evaluating the valuation methodology employed by the Company and testing the completeness and accuracy of key data supporting significant assumptions in the valuation model. For example, we compared the forecasted customer attrition rates to historical sales turnover data, and we tested the reasonableness of management’s projected sales and gross margins data by analyzing them against historical performance.

Our principal audit procedures related to testing management’s estimate of the fair value of the earnout obligation included testing the key assumptions in management’s forecasts for MAC EBITDA during the earnout period. For example, we compared management’s projected EBITDA to historical data and obtained an understanding of any material changes from historical trends.

	*/s/ Haskell & White LLP*
	HASKELL & WHITE LLP

We have served as the Company’s auditor since 2016.

Irvine, California

April 1, 2024

F-3

DecisionPoint Systems, Inc.

Consolidated Balance Sheets

(in thousands, except per share data)

	December 31,			December 31,
	2023			2022
ASSETS
Current assets:
Cash	$	4,300		$	7,642
Accounts receivable, net of allowance of $267 and $262 as of December 31, 2023 and December 31,2022, respectively		23,768			17,085
Inventory, net		2,133			4,417
Deferred costs		3,826			2,729
Prepaid expenses and other current assets		630			399
Total current assets		34,657			32,272
Operating lease assets		3,392			2,681
Property and equipment, net		2,973			1,817
Deferred costs, net of current portion		3,689			2,868
Deferred tax assets, net		1,161			848
Intangible assets, net		7,815			4,531
Goodwill		22,081			10,499
Other assets		172			41
Total assets	$	75,940		$	55,557
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	16,857		$	19,755
Accrued expenses and other current liabilities		6,566			4,528
Deferred revenue		8,066			6,021
Current portion of earnout consideration		5,370			829
Current portion of long-term debt		1,003			3
Current portion of operating lease liabilities		874			529
Total current liabilities		38,736			31,665
Deferred revenue, net of current portion		5,307			4,331
Revolving line of credit		1,300			-
Long-term debt, net of current portion		3,639			143
Noncurrent portion of operating lease liabilities		3,093			2,706
Long-term portion of earnout consideration		4,316			-
Other liabilities		6			130
Total liabilities		56,397			38,975
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued or outstanding		-			-
Common stock, $0.001 par value; 50,000 shares authorized; 7,680 and 7,416 shares issued and outstanding, respectively		8			7
Additional paid-in capital		38,902			38,429
Accumulated deficit		(19,367	)		(21,854	)
Total stockholders’ equity		19,543			16,582
Total liabilities and stockholders’ equity	$	75,940		$	55,557

See Accompanying Notes to the Consolidated Financial Statements.

F-4

DecisionPoint Systems, Inc.

Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share data)

	Year Ended
	December 31,
	2023		2022
Net sales:
Product	$	73,494	$	79,079
Service		42,100		18,336
Net sales

SEC Form 10-K filed by DecisionPoint Systems Inc.