DecisionPoint Systems, Inc. (Form: S-1, Received: 08/13/2020 17:20:38)

As filed with the Securities and Exchange Commission on August 13, 2020

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

DECISIONPOINT SYSTEMS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	7373	37-1644635
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number) 8697 Research Drive Irvine, California 92618	(I.R.S. Employer Identification Number)

	(949) 465-0065

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Steve Smith
Chief Executive Officer
DecisionPoint Systems, Inc.
8697 Research Drive

Irvine, California 92618
(949) 465-0065

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

Copies to:

Donald Figliulo, Esq.

Peter F. Waltz, Esq.

Polsinelli PC

150 N. Riverside Plaza, Suite 3000

Chicago, IL 60606

Telephone: (312) 819-1900

Facsimile: (312) 893-2164

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

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

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

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

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

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

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company þ

Emerging growth company ☐

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

CALCULATION OF REGISTRATION FEE

Title Of Each Class Of Securities To Be Registered	Amount to be registered(1)		Proposed maximum offering price per share(2)		Proposed maximum aggregate offering price		Amount Of Registration Fee(3)
Common Stock, par value $0.001 per share		13,092,722	$	1.50	$	19,639,083.00	$	2,549.15
Common Stock, Underlying Warrants		1,147,547	$	1.50	$	1,721,320.50	$	223.43
Total		14,240,269			$	21,360,403.50	$	2,772.58

(1)

Pursuant to Rule 416 under the Securities Act of 1933, as amended, the shares being registered hereunder include such indeterminate number of shares of common stock as may be issuable with respect to the shares being registered hereunder as a result of stock splits, stock dividends or similar transactions.

(2)

This price was designated by DecisionPoint Systems, Inc. The selling shareholders will sell shares of common stock at a price of $1.50 per share, or, if and when our common stock is quoted on the OTCQB market, at prevailing market prices, prices related to prevailing market prices or at privately negotiated prices. See “Plan of Distribution” contained in the prospectus.

(3)

Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.

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

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

SUBJECT TO COMPLETION, DATED AUGUST 13, 2020

PRELIMINARY PROSPECTUS

Shares

of Common Stock

This prospectus relates to the resale by the investors listed in the section of this prospectus entitled “Selling Stockholders” (the “Selling Stockholders”) of up to 14,240,269 shares (the “Shares”) of our common stock, par value $0.001 per share (the “Common Stock”). The Shares include 13,092,722 shares issued by the Company upon the conversion of previously outstanding shares of preferred stock in various private transactions that closed in March 2016 through March 2019, and in 2016 in satisfaction of other obligations, and 1,147,547 shares of Common Stock underlying warrants issued by the Company.

Our registration of the Shares covered by this prospectus does not mean that the Selling Stockholders will offer or sell any of the Shares. The Selling Stockholders may sell the Shares covered by this prospectus in a number of different ways and potentially at varying prices. For additional information on the possible methods of sale that may be used by the Selling Stockholders, you should refer to the section of this prospectus entitled “Plan of Distribution” beginning on page 28 of this prospectus. We will not receive any of the proceeds from the Shares sold by the Selling Stockholders.

No underwriter or other person has been engaged to facilitate the sale of the Shares in this offering. We will bear all costs, expenses and fees in connection with the registration of the Shares. The Selling Stockholders will bear all commissions and discounts, if any, attributable to their respective sales of the Shares.

You should read this prospectus, any applicable prospectus supplement and any related free writing prospectus carefully before you invest.

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 7 of this prospectus for information you should consider before buying shares of our common stock.

Our Common Stock is currently quoted on the OTC Pink Market under the symbol “DPSI”. On August 12, 2020, the last reported sale price for our Common Stock was $1.50 per share.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Prospectus dated , 2020

TABLE OF CONTENTS

Prospectus Summary	1
Summary Consolidated Financial Information	3
Risk Factors	7
Special Note Regarding Forward-Looking Statements	18
Description of Capital Stock	19
Use of Proceeds	21
Plan of Distribution	28
Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Description of Business	43
Management	50
Executive and Director Compensation	55
Certain Relationships and Related Party Transactions	58
Security Ownership of Certain Beneficial Owners and Management	59
Legal Matters	60
Experts	60
Where You Can Find More Information	60
Index to Consolidated Financial Statements	F-1

ABOUT THIS PROSPECTUS

You should rely only on the information we have provided in this prospectus, any applicable prospectus supplement and any related free writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. You must not rely on any unauthorized information or representation. This prospectus is an offer to sell only the Shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information in this prospectus, any applicable prospectus supplement or any related free writing prospectus is accurate only as of the date on the front of the document and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of the time of delivery of this prospectus or any sale of a security.

The Selling Stockholders are offering the Shares only in jurisdictions where such issuances are permitted. The distribution of this prospectus and the issuance of the Shares in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the issuance of the Shares and the distribution of this prospectus outside the United States. This prospectus does not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, the Shares offered by this prospectus by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the “SEC”), under which the Selling Stockholders may offer from time to time up to an aggregate of 14,240,269 shares of our Common Stock in one or more offerings. If required, each time a Selling Stockholder offers Common Stock, in addition to this prospectus, we will provide you with a prospectus supplement that will contain specific information about the terms of that offering. We may also authorize one or more free writing prospectuses to be provided to you that may contain material information relating to that offering. We may also use a prospectus supplement and any related free writing prospectus to add, update or change any of the information contained in this prospectus or in documents we have incorporated by reference. This prospectus, together with any applicable prospectus supplements and any related free writing prospectuses, includes all material information relating to this offering. To the extent that any statement that we make in a prospectus supplement is inconsistent with statements made in this prospectus, the statements made in this prospectus will be deemed modified or superseded by those made in a prospectus supplement. Please carefully read both this prospectus and any prospectus supplement.

Prospectus Summary

This summary highlights selected information contained elsewhere in this prospectus or incorporated by reference in this prospectus, and does not contain all of the information that you need to consider in making your investment decision. You should carefully read the entire prospectus, any applicable prospectus supplement and any related free writing prospectus, including the risks of investing in our Common Stock discussed under the heading “Risk Factors” contained in this prospectus, any applicable prospectus supplement and any related free writing prospectus, and under similar headings in the other documents that are incorporated by reference into this prospectus. You should also carefully read the information incorporated by reference into this prospectus, including our financial statements, “Management’s Discussion and Analysis”, and the exhibits to the registration statement of which this prospectus forms a part. Unless otherwise mentioned or unless the context requires otherwise, all references in this prospectus to “DecisionPoint”, the “Company”, “we”, “us”, “our” or similar references mean DecisionPoint Systems, Inc. and its consolidated subsidiaries.

The Company

DecisionPoint Systems, Inc., a Delaware corporation (“DecisionPoint”, “we”, “us” or the “Company”), through its subsidiary corporations, is a provider and integrator of mobility and wireless systems for business organizations. 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 develops and integrates data capture equipment including bar code scanners and radio frequency identification (RFID) readers. Mobile workers need information, access to corporate resources, decision support tools and the ability to capture information and report it back to the organization.

Background

DecisionPoint Systems, Inc., formerly known as Comamtech, Inc., was incorporated on August 16, 2010. On June 15, 2011, we entered into a Plan of Merger (the “Merger Agreement”) among the Company, its wholly-owned subsidiary, 2259736 Ontario Inc. and DecisionPoint Systems, Inc. (“Old DecisionPoint”). Pursuant to the Merger Agreement, Old DecisionPoint merged into Ontario 2259736 and became a wholly-owned subsidiary of the Company. Prior to the Merger, Comamtech was a “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act). In connection with this merger, the Company changed its name to DecisionPoint Systems, Inc., and 2259736 Ontario changed its name to DecisionPoint Systems International, Inc. (“DecisionPoint Systems International”). On June 15, 2011, both companies were reincorporated in the State of Delaware.

As described above, DecisionPoint has one wholly owned subsidiary, DecisionPoint Systems International. DecisionPoint Systems International has one wholly owned subsidiary, DecisionPoint Systems Group Inc. (“DPS Group”). DPS Group has three wholly owned subsidiaries, DecisionPoint Systems CA, Inc., DecisionPoint Systems CT, Inc and Royce Digital Systems, Inc. (“RDS”).

DPS Group acquired RDS in June 2018. RDS provides innovated enterprise print and mobile technologies, deployment services and on-site maintenance. RDS is located in Southern California. The acquisition was intended to increase the Company’s expertise and reach in the healthcare industry, other vertical markets and provide a stronger regional presence across California.

DecisionPoint Systems CA, Inc., formerly known as Creative Concepts Software, Inc. was founded in 1995 and is a provider of Enterprise Mobility Solutions. Enterprise Mobility Solutions are those computer systems that give an enterprise the ability to connect to people, control assets, and transact business from any location by using mobile computers, tablet computers, and smartphones to securely connect the mobile worker to the back office software systems that run the enterprise. Technologies that support Enterprise Mobility Solutions include national wireless carrier networks, Wi-Fi, local area networks, mobile computers, smartphones and tablets, mobile software applications, middleware and device security and management software.

DecisionPoint Systems CT, Inc. formerly known as Sentinel Business Systems, Inc. was founded in 1976 and has developed over time a family of enterprise data collection software solutions, products and services. DecisionPoint Systems CT, Inc. is a data collection systems integrator that sells and installs mobile devices, software, and related bar coding equipment, radio frequency identification (“RFID”) systems technology and provides custom solutions and other professional services.

Risk Factors

The Common Stock offered hereby involves a high degree of risks and uncertainties, including those highlighted in “Risk Factors” following the prospectus summary, and should not be purchased by investors who cannot afford the loss of their entire investment.

Corporate Information

Our principal executive offices are located at 8697 Research Drive, Irvine, California. Our telephone number is (949) 465-0065, and our website address is www.decisionpt.com. Unless expressly noted, none of the information contained on our website is part of this prospectus or any prospectus supplement.

The Offering Summary

The Shares offered by Selling Stockholders includes up to 14,240,269 shares of Common Stock, comprised of shares of Common Stock issued in 2016 upon conversion of then outstanding promissory notes and preferred stock and in satisfaction of other prior Company obligations; shares of Common Stock issued in a private placement in June 2018, shares of Common Stock issued in a private placement in October 2018 and shares issued to an affiliate in March 2019. In addition, the Shares include a total of 1,147,547 shares of Common Stock underlying warrants originally issued by the Company in March 2016, June 2018 and October 2018.

We will not receive any proceeds from the sale of the Common Stock by any Selling Stockholder.

Summary Consolidated Financial information

The following summary consolidated financial statements for the years ended December 31, 2019 and 2018 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the consolidated financial statements for the three months ended March 31, 2020 and 2019 from our unaudited financial statements appearing elsewhere in this prospectus. Our historical results are not necessarily indicative of results to be expected for any period in the future and our results for the interim periods are not necessarily indicative of results that may be expected for any full year. You should read this information together with our financial statements and related notes appearing elsewhere in this prospectus and the information in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

DecisionPoint Systems, Inc.

Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2020		2019
Net sales:
Product	$	15,095	$	6,086
Service		3,192		2,808
Net sales		18,287		8,894
Cost of sales:
Product		12,074		4,998
Service		1,895		1,788
Cost of sales		13,969		6,786
Gross profit		4,318		2,108
Operating expenses:
Sales and marketing expense		1,644		1,097
General and administrative expenses		1,148		1,215
Total operating expenses		2,792		2,312
Operating income (loss)		1,526		(204	)
Interest expense		99		172
Income before income taxes		1,427		(376	)
Income tax expense		398		(97	)
Net income (loss) and comprehensive income (loss) attributable to common shareholders	$	1,029	$	(279	)
Earnings (Loss) per share attributable to shareholders:
Basic	$	0.08	$	(0.02	)
Diluted	$	0.07	$	(0.02	)
Weighted average common shares outstanding
Basic		13,576		12,930
Diluted		15,642		12,930

DecisionPoint Systems, Inc.

Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share data)

(Unaudited)

	Year Ended December 31,
	2019		2018
Net sales:
Product	$	31,990	$	26,009
Service		11,899		9,149
Net sales		43,889		35,158
Cost of sales:
Product		25,866		21,614
Service		7,267		6,287
Cost of sales		33,133		27,901
Gross profit		10,756		7,257
Operating expenses:
Sales and marketing expense		4,907		3,341
General and administrative expenses		3,999		3,433
Total operating expenses		8,906		6,774
Operating income		1,850		483
Interest expense		649		391
Income before income taxes		1,201		92
Income tax expense (benefit)		310		(3,883	)
Net income and comprehensive income attributable to common shareholders	$	891	$	3,975
Earnings per share attributable to shareholders:
Basic	$	0.07	$	0.42
Diluted	$	0.06	$	0.35
Weighted average common shares outstanding
Basic		13,415		9,504
Diluted		15,341		11,328

DecisionPoint Systems, Inc.

Consolidated Balance Sheets

(in thousands, except per share data)

(Unaudited)

	March 31,			December 31,
	2020			2019
ASSETS
Current assets:
Cash	$	3,551		$	2,620
Accounts receivable, net		6,375			8,710
Inventory, net		693			3,825
Deferred costs		2,053			2,201
Prepaid expenses and other current assets		311			268
Total current assets		12,983			17,624
Operating lease assets		482			516
Property and equipment, net		252			239
Deferred costs, net of current portion		1,303			1,258
Deferred tax assets		2,272			2,659
Intangible assets		2,226			2,394
Goodwill		6,990			6,990
Other assets, net		19			19
Total assets	$	26,527		$	31,699
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,901		$	10,589
Accrued expenses and other current liabilities		2,464			2,222
Deferred revenue		4,012			3,630
Line of credit		—			3,177
Current portion of debt		83			144
Due to related parties		88			124
Current portion of operating lease liabilities		140			140
Total current liabilities		13,688			20,026
Deferred revenue, net of current portion		2,109			1,979
Long-term debt		411			390
Noncurrent portion of operating lease liabilities		351			388
Total liabilities		16,559			22,783
Commitments and contingencies
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; 13,576 and 13,576 shares issued and outstanding, respectively		14			14
Additional paid-in capital		38,165			38,142
Accumulated deficit		(28,211	)		(29,240	)
Total stockholders’ equity		9,968			8,916
Total liabilities and stockholders’ equity	$	26,527		$	31,699

DecisionPoint Systems, Inc.

Consolidated Balance Sheets

(in thousands, except per share data)

(Unaudited)

	December 31,
	2019			2018
ASSETS
Current assets:
Cash	$	2,620		$	2,450
Accounts receivable, net		8,710			8,190
Inventory, net		3,825			356
Deferred costs		2,201			1,966
Prepaid expenses and other current assets		268			141
Total current assets		17,624			13,103
Operating lease assets		516			—
Property and equipment, net		239			140
Deferred costs, net of current portion		1,258			746
Deferred tax assets		2,659			2,924
Intangible assets		2,394			3,127
Goodwill		6,990			6,990
Other assets, net		19			48
Total assets	$	31,699		$	27,078
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,589		$	6,704
Accrued expenses and other current liabilities		2,222			2,119
Deferred revenue		3,630			3,811
Line of credit		3,177			3,196
Current portion of debt		144			422
Due to related parties		124			108
Current portion of operating lease liabilities		140			—
Total current liabilities		20,026			16,360
Deferred revenue, net of current portion		1,979			1,079
Long-term debt		390			1,488
Noncurrent portion of operating lease liabilities		388			—
Other		—			452
Total liabilities		22,783			19,379
Commitments and contingencies
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; 13,576 and 12,875 shares issued and outstanding, respectively		14			13
Additional paid-in capital		38,142			37,817
Accumulated deficit		(29,240	)		(30,131	)
Total stockholders’ equity		8,916			7,699
Total liabilities and stockholders’ equity	$	31,699		$	27,078

Risk Factors

Before you invest in our common stock, you should understand the high degree of risk involved. You should carefully consider the following risks and other information in this prospectus, including our consolidated financial statements and related notes included elsewhere in this prospectus, before you decide to purchase shares of our common stock. The following risks may adversely impact our business and financial condition. As a result, the trading price of our common stock could decline and you could lose part or all of your investment.

RISKS RELATING TO OUR BUSINESS AND INDUSTRY

Our working capital requirements may negatively affect our liquidity and capital resources. At various times, 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.

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 monies 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.

A novel strain of coronavirus, COVID-19, may adversely affect our business operations and financial condition. In December 2019, an outbreak of COVID-19 was reported in Wuhan, China. On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and on March 13, 2020, President Donald J. Trump declared the virus a national emergency. This highly contagious disease has spread to most of the countries in the world and throughout the United States, creating a serious impact on customers, workforces, and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn. It has caused a disruption of the normal operations of many businesses, including the temporary closure or scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis. The pandemic may adversely affect our customers’ ability to perform their missions and is in many cases disrupting their operations. It may also impact the ability of our service providers, partners, and suppliers to operate and fulfill their contractual obligations, and result in an increase in their costs and cause delays in performance. These supply chain effects, and the direct effect of the virus and the disruption on our operations, may negatively impact both our ability to meet customer demand and our revenue and profit margins. Our employees, in some cases, are working remotely due either to safety concerns or to customer-imposed limitations and using various technologies to perform their functions. We could see delays or changes in customer demand, particularly in the retail sector if restrictions continue to be imposed on retailers by federal, state and local governments in response to the COVID-19 pandemic and government funding priorities change. Additionally, the disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital. Both the health and economic aspects of COVID-19 are highly fluid and the future course of each is uncertain. For these reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or preventative measures expand, we may experience a material adverse effect on our business operations, revenues and financial condition; however, its ultimate impact is highly uncertain and subject to change.

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.

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 mobile solutions companies such as CDW, Peak Ryzex, Stratix, Denali Advanced Integration, Optical Fushion, Barcoding Inc., and Quest Solution (OTCBB: OMNIQ);
	●	in certain areas our existing hardware suppliers, in particular Zebra Technologies / Motorola Solutions but also Intermec and others; and
	●	the in-house IT departments of many of our customers.

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 two customers who, together, represented 35% of the Company’s revenue for the year ended December 31, 2019. Our top three customers accounted for approximately 67% of consolidated net revenues during the three months ended March 31, 2020.

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 Sprint, 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 limit the manner in which we can conduct our business and may restrict us from engaging in favorable business opportunities. In addition, these restrictions limit our ability, among other things, to incur further debt, make future acquisitions and other investments, restrict making certain payments such as dividend payments, and restrict disposition of assets.

Our indebtedness may adversely affect our cash flow and our ability to operate our business. As of June 30, 2020, we had $2.8 million of total debt outstanding including promissory notes we issued in 2018 and availability under a line of credit of approximately $6.6 million. The line of credit expires in September 2020. 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:

	●	we must use a substantial portion of our cash flow from operations to pay interest on our debt obligations, which will reduce the funds available to use for operations and other purposes including our other financial obligations;
	●	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 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 economic, business or industry conditions. If the economic climate in the U.S. or abroad further deteriorates as a result of COVID-19 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 professional 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, 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.

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 implement our business plan requires an effective planning and management process. If funding is available, we intend to increase the scope of our operations and acquire complementary businesses. Implementing our business plan will require significant additional funding and resources. If we 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 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 suffer. 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, the person performing the function of our Chief Financial Officer, 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.

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

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.

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

Our application for the PPP Loan could in the future be determined to have been impermissible or could result in damage to our reputation.

In April and May 2020, we received loans (collectively, the “PPP Loan”), which were granted pursuant to the Paycheck Protection Program of the Coronavirus Aid Relief and Economic Security Act (the “CARES Act”). At the time we applied for the loans, we believed the Company qualified to receive the funds pursuant to the Paycheck Protection Program. A portion of the PPP Loan may be forgiven, as the proceeds were used for payroll costs, rent and utilities. In applying for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan necessary to support our ongoing operations. We made this certification in good faith after analyzing, among other things, our financial situation and access to alternative forms of capital, and believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan is consistent with the broad objectives of the Paycheck Protection Program of the CARES Act. The certification described above does not contain any objective criteria and is subject to interpretation. On April 23, 2020, the SBA issued guidance stating that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith. The lack of clarity regarding loan eligibility under the Paycheck Protection Program has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans. If, despite our good-faith belief at the time of our application that we satisfied all eligibility requirements for the PPP Loan, we are later determined to have violated any of the laws or governmental regulations that apply to us in connection with the PPP Loan, such as the False Claims Act, or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be subject to civil, criminal and administrative penalties. In addition, receipt of a PPP Loan may result in adverse publicity and damage to reputation, and a review or audit by the SBA or other government entity or claims under the False Claims Act could consume significant financial and management resources. Any of these events could have a material adverse effect on our business, results of operations and financial condition.

RISKS RELATING TO OUR SECURITIES AND THIS OFFERING

There has been a limited trading market for our common stock. Currently, our common stock is available for quotation on the OTC Pink Market under the symbol “DPSI.” We may attempt to cause our common stock to be quoted on the OTCQB Venture Market (or later a national stock exchange), however, each of the OTC Pink Market and the OTCQB Venture Market is generally understood to be a less active, and therefore less liquid, trading market than a national securities exchange. We cannot predict whether an active market for our common stock will ever develop in the future. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies or technologies by using common stock as consideration.

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 the Company’s 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 the capital stock develops and 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, including as part of this offering, 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, including pursuant to this offering, 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.

Our common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock. The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

	●	that a broker or dealer approve a person’s account for transactions in penny stocks; and
	●	the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

	●	obtain financial information and investment experience objectives of the person; and
	●	make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:

	●	sets forth the basis on which the broker or dealer made the suitability determination; and
	●	that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock. In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Although we may seek to list our common stock on a national securities exchange, there is no assurance that our common stock will ever be listed on a national securities exchange. While we may explore attempting to list our common stock on a national securities exchange, we cannot ensure that we will be able to satisfy the listing standards or that our common stock will be accepted for listing on any such exchange. Should we fail to satisfy the initial listing standards of such exchanges, or our common stock are otherwise rejected for listing, our common stock will continue to trade on the OTC Pink Market (or, potentially the OTCQB Venture Market), in which event the trading price of our common stock could suffer, the trading market for our common stock may be less liquid, and our common stock price may be subject to increased volatility.

Even if our common stock is later accepted for listing on a national securities exchange upon our satisfaction of the exchange’s initial listing criteria, there can be no assurance that an active trading market for our common stock will develop or be sustained, and the exchange may subsequently delist our common stock if we fail to comply with ongoing listing standards. In the event we are able to list our common stock on a national securities exchange upon our satisfaction of the exchange’s initial listing criteria, the exchange will 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. In addition to specific listing and maintenance standards, we expect any national securities exchange on which our common stock may become listed will have broad discretionary authority over the initial and continued listing of securities, which it could exercise with respect to the listing of our common stock.

If we fail to meet these continued listing requirements, our common stock may be subject to delisting. If our common stock is delisted and we are not able to list our common stock on another national securities exchange, 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.

Further, even if our common stock is ever listed on a national securities exchange, there can be no assurance that an active trading market for our common stock will develop or be sustained after our initial listing.

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 (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.

Special Note Regarding Forward-Looking Statements

This prospectus contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. Some of the statements in the section captioned “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and elsewhere in this prospectus 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 prospectus include, but are not limited to, statements about:

	●	our plans to obtain funding for our current and proposed operations;
	●	the ultimate impact of the COVID-19 pandemic, or any other health epidemic, on our business, our clientele or the global economy as a whole;
	●	debt obligations of the Company;
	●	our general history of operating losses;
	●	our ability to compete with companies producing products and services;
	●	the scope of protection we are able to establish and maintain for intellectual property rights covering our products and technology;
	●	the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
	●	our ability to develop and maintain our corporate infrastructure, including our internal controls;
	●	our ability to develop innovative new products; and
	●	our financial performance.

In addition, you should refer to the “Risk Factors” section of this prospectus for a discussion of other important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus forms a part with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Description of Capital Stock

This section summarizes our authorized and outstanding securities and certain of the provisions of our Certificate of Incorporation and our Bylaws.

General

The Company’s authorized capital stock consists of 60,000,000 shares of capital stock, par value $0.001 per share, of which 50,000,000 shares are common stock, par value $0.001 per share and 10,000,000 shares are preferred stock, par value $0.001 per share. As of August 13, 2020, the Company had 13,576,223 shares of common stock outstanding held by approximately 330 stockholders of record, and no shares of preferred stock outstanding.

On July 23, 2020, our board of directors unanimously approved, and recommended that our stockholders approve, a potential amendment to our Certificate of Incorporation that will give our board the discretion, until June 30, 2021, to effect a reverse split of our common stock whereby each outstanding 3 or 4 shares may be combined, converted and changed into one share of our common stock, with the final ratio (if any) as may be determined by and subject to final approval of our board (the “Reverse Stock Split Charter Amendment”). The consenting stockholders likewise have approved the Reverse Stock Split Charter Amendment by written consent in August 2020.

Pursuant to the authority provided by the consenting stockholders, our Board will have the sole discretion, until June 30, 2021, to elect whether to effect the reverse stock split and, if so, the number of shares— between 3 and 4—of our common stock which will be combined into one share of our common stock. If the board determines to effect one of the alternative Reverse Stock Split Charter Amendment, the Certificate of Incorporation would be amended accordingly.

If the board elects to effect the reverse stock split, the number of issued and outstanding shares of our common stock would be reduced in accordance with a reverse split ratio selected by the board from among the approved ratios described above. Except for adjustments that may result from the treatment of fractional shares as described below, each stockholder will hold the same percentage of outstanding common stock immediately following the reverse stock split as such stockholder held immediately prior to the reverse stock split. The Reverse Stock Split Charter Amendment would not change the number of authorized shares of our common stock.

Common Stock

The holders of our common stock (i) have equal ratable rights to dividends from funds legally available, therefore, when, as and if declared by our Board; (ii) are entitled to share in all of our assets available for distribution to holders of common stock upon liquidation, dissolution or winding up of our affairs; (iii) do not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights; and (iv) are entitled to one non-cumulative vote per share on all matters on which stockholders may vote.

Preferred Stock

The Company has authorized 10,000,000 shares of preferred stock. There is no preferred stock outstanding. Our Board may designate the rights, preferences, privileges and restrictions of the preferred stock, including dividend rights, conversion rights, voting rights, redemption rights, liquidation preference, sinking fund terms and the number of shares constituting any series or the designation of any series. The issuance of preferred stock could have the effect of restricting dividends on the common stock, diluting the voting power of the common stock, impairing the liquidation rights of the common stock or delaying, deterring or preventing a change in control. Such issuance could have the effect of decreasing the market price of the common stock. We currently have no plans to issue any shares of preferred stock.

Non-cumulative Voting

Holders of shares of our common stock do not have cumulative voting rights.

Dividends

We have not paid any cash dividends to stockholders. The declaration of any future cash dividend will be at the discretion of our Board and will depend upon our earnings, if any, our capital requirements and financial position, our general economic conditions, restrictive covenants in our loan documents, and other pertinent conditions. Currently, our credit agreement with Pacific Western Business Finance prohibits us from, among other things, paying dividends without the lender’s prior consent. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.

Securities Authorized for Issuance under Equity Compensation Plans

As of the date of this prospectus, we had issued (or committed to issue) an aggregate of 967,882 options to purchase shares of our common stock pursuant to the Amended 2014 Equity Incentive Plan (the “2014 Plan”). 232,118 shares of our common stock remain available for future grant or issuance under the 2014 Plan.

In September 2016, the Company amended the 2014 Plan to increase the number the shares of Common Stock reserved under the 2014 Plan to 1,200,000 shares. In August 2020, our stockholders approved an amendment to the 2014 that served to increase the number of shares of Common Stock reserved under the 2014 Plan to 2,200,000 shares.

Under the 2014 Plan, common stock incentives may be granted to officers, employees, directors, consultants, and advisors (and prospective directors, officers, managers, employees, consultants and advisors) of the Company and its affiliates can acquire and maintain an equity interest in the Company, or be paid incentive compensation, which may (but need not) be measured by reference to the value of the Company’s common stock.

The 2014 Plan permits the Company to provide equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock and other stock bonus awards and performance compensation awards.

The 2014 Plan is administered by the Board of Directors, or a committee appointed by the Board of Directors, which determines recipients and the number of shares subject to the awards, the exercise price and the vesting schedule. The term of stock options granted under the 2014 Plan cannot exceed ten years. Options shall not have an exercise price less than 100% of the fair market value of the Company’s common stock on the grant date, and generally vest over a period of five years. If the individual possesses more than 10% of the combined voting power of all classes of stock of the Company, the exercise price shall not be less than 110% of the fair market of a share of common stock on the date of grant.

Registration Rights

In connection with a private placement conducted in 2016 and also in connection with two separate private placements conducted by the Company in 2018 the Company agreed to provide the investors piggyback registration rights. Subject to certain exceptions, limitations and requirements, if the Company proposes to register shares of its common stock under the Securities Act, it agreed to provide investors in those offerings the opportunity to have the shares of Company common stock purchased in the applicable offering the opportunity to be included in that registration statement.

In addition, in connection with the private placement of convertible promissory notes conducted in 2016, commencing on the third anniversary date of that offering investors holding a majority of the shares of our Common Stock acquired upon conversion of the promissory notes are entitled to one demand right for the registration on Form S-1 of all of the shares of Common Stock acquired upon conversion of those promissory notes. The registration rights are subject to certain limitations and requirements. To date, no stockholders have exercised any this demand registration right.

Listing

Our common stock is currently quoted on the OTC Pink Market under the symbol “DPSI.” Previously, the Company’s common stock was quoted on the OTCQB, however, in January 2016, we elected to file a Form 15 with the SEC and terminated the registration of our Common Stock under the Exchange Act. The Company anticipates that its Common Stock will resume being quoted on the OTCQB and in the future may seek to list its Common Stock on a national securities exchange We cannot guarantee that our Common Stock will resume being quoted on the OTCQB, or that we will eventually be successful in listing our Common Stock on a national securities exchange in any particular time frame or at all and no assurance can be given that our application will be approved.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is Continental Stock Transfer & Trust Co. The transfer agent and registrar’s address is 1 State Street, 30^th Floor, New York, NY 10004.

Use of Proceeds

We will not receive any proceeds from the sale of common stock by the Selling Stockholders. All of the net proceeds from the sale of our common stock will go to the selling security holders as described below in the sections entitled “Selling Security Holders” and “Plan of Distribution.” We have agreed to bear the expenses relating to the registration of the common stock for the Selling Stockholders.

DILUTION

The Shares to be sold by the Selling Stockholders is Common Stock that is currently issued and outstanding or is underlying warrants previously issued by the Company. Accordingly, there will be no additional dilution to our existing stockholders.

SELLING SECURITY HOLDERS

The Common Stock being offered for resale by the Selling Stockholders consist of 14,240,269, consisting of shares of Common Stock issued shares of Common Stock issued in 2016 upon conversion of then outstanding promissory notes and preferred stock and shares issued in 2016 in satisfaction of other prior Company obligations (such as amounts then owed to affiliates and for other services rendered); shares of Common Stock issued in a private placement in June 2018, shares of Common Stock issued in a private placement in October 2018 and 700,000 shares issued to an affiliate in March 2019. In addition, the Shares include a total of 1,147,547 shares of Common Stock underlying warrants originally issued by the Company in March 2016, June 2018 and October 2018.

The following table sets forth the name of the selling security holders, the number of shares of common stock beneficially owned by each of the Selling Stockholders as of August 13, 2020 and the number of shares of common stock being offered by the Selling Stockholders. The shares being offered hereby are being registered to permit public secondary trading, and the Selling Stockholders may offer all or part of the shares for resale from time to time. However, the Selling Stockholders are under no obligation to sell all or any portion of such shares nor are the Selling Stockholders obligated to sell any shares immediately upon effectiveness of this prospectus. All information with respect to share ownership has been furnished by the Selling Stockholders.

Name of Selling Shareholder	Shares of Common Stock Beneficially Owned Before the Offering (1)		Maximum Number of Shares to be Offered		Number of Shares Beneficially Owned After the Offering (2)		Percentage of Ownership After the Offering
Albert J Esposito Tuw Fbo Margaret Esposito Susan E Thorstenn Ttee		41,764		41,764		—	*
Aldo Kokot And Mary Kokot Jtwros		5,304		5,304		—	*
Alexis J Bruce		4,978		4,978		—	*
Allan F Shapiro		3,457		3,457		—	*
Allison Bibicoff		63,813		63,813		—	*
Allyson M Defreitas Burnett Trust Uad 05/03/94 Allyson M Defreitas Burnett & Philip L Burnett Ttees		1,381		1,381		—	*
Anders C Allen Residuary Trust U/A Susan M Allen Uad 4/29/08 Robert W Allen Trustee		1,170		1,170		—	*
Andrew K Light		286,205		286,205		—	*

Andrew M Schatz & Barbara F Wolf Jt Wros	19,701		18,557		1,144	*
Angus Bruce Lauralee Bruce Jt Wros	28,131		28,131		—	*
Ann B Oldfather	117,500		117,500		—	*
Anna Kathleen Senyard	691		691		—	*
Annetta M Nuttall	689		689		—	*
Arnold Income Fund LP	16,907		16,907		—	*
Arnold Ventures Fund LP	28,180		28,180		—	*
Arthur H Finnel Living Trust Uad 01/10/13 Arthur H Finnel & Elsa V Finnel Ttees	689		689		—	*
Ashok Kumar Narang	124,269		124,269		—	*
Austin Brown	3,457		3,457		—	*
Barktones LLC	416,665		416,665		—	*
Berit M Allen Residuary Trust U/A Susan M Allen Uad 4/29/08 Robert W Allen Trustee	1,170		1,170		—	*
Big Red Investments Partnership Ltd	68,324		68,324		—	*
Bob M Chaiken & Laurie Lavalle-Chaiken	11		11		—	*
Brigitte Ferrada-Stetson	53,286		53,286		—	*
Broms Financial LLC	49,573		49,573		—	*
Bruce Newell	2,763		2,763		—	*
Bryan E Moss	3,457		3,457		—	*
C Mark Casey	7,375		7,375		—	*
Carol Francis	1,153		1,153		—	*
Charles Brand & Peggy A Brand	222,832		222,832		—	*
Christopher C Schreiber	5,000	(8)	5,000	(8)	—	*
Cibreo LLC	20,000		20,000		—	*
Craig Adelman	17,032		17,032		—	*
David A Random	147,466		147,466		—	*
David Frank Rios & Margaret Jo Rios 1999 Trust Dtd 6/22/99	23,861		23,861		—	*
David J Larkworthy Tod	11,929		11,929		—	*
David J Moulder	18,790		18,790		—	*
David L Allen	53,040		53,040		—	*
David M Rifkin	3,943		3,943		—	*
Dawn R Hagen	5,831		5,831		—	*
Denis Mcevoy Tod Dtd 3/19/2013	46,305	(8)	46,305	(8)	—	*
Donald B Mcculloch Trust Dtd 3/16/77 Donald B & Jacqueline M Mcculloch Co-Ttee	6,097		6,097		—	*
Donata Random	37,000		37,000		—	*
Donna Kennedy	1,153		1,153		—	*
Douglas A Friedrich Revocable Trust Uad 09/17/04 Douglas A Friedrich Ttee	30,000		30,000		—	*
Douglas E Hailey	103,525	(8)	103,525	(8)	—	*
Edward J Cook	139,996		139,996		—	*
Edward J Hart	13,830		13,830		—	*
Eugene T Szczepanski Amended & Restated Irevoc Trust Uad 5/4/04 Joseph E Szczepanski Trustee	36,827		36,827		—	*
Frances Deluca Revocable Living Trust Dtd 10/9/01 Fbo Ronald Deluca Robert Deluca & Antoinette Porco Ttees	7,214		7,214		—	*
Friedland Trust Uad 12/13/07 Stephen Freidland & Linda Friedland Ttees	13,371		13,371		—	*
Fuse Capital LLC	7,000		7,000		—	*
Gary A. Hafner And Leeann Hafner Jt Ten	4,147		4,147		—	*
Gary Arnold And Patricia Arnold Ten Com	49,573		49,573		—	*
Gary Kurnov Lauren Mazer Jt Ten	2,071		2,071		—	*
Gary L Gray	47		47		—	*
Gerald I Rosenfeld Pc Profit Sharing Trust Gerald I Rosenfeld Tr	1,381		1,381		—	*

Gilda Gaertner	9,350	(8)	9,350	(8)	—	*
Glenn R Hubbard	232,329		232,329		—	*
Gst Exempt Marital Trust Ua Susan M Allen Uad 4/29/08 Robert W Allen Trustee	21		21		—	*
H. Philip Howe Trust Uad 11/15/02 H Philip Howe Ttee	53,040		53,040		—	*
Harvey Bibicoff & Jacqueline Bibicoff Ttees Of The Bibicoff Family Trust Dtd	147,194		147,194		—	*
Heidi M Smith	24,418		24,418		—	*
Herb B Grimes	14,755		14,755		—	*
Hillson Partners LP	31,121		31,121		—	*
Holly Lee Loebel	1,321		1,321		—	*
Hope A. Taglich First Party Supplemental Needs Trust Uad 8/23/17 Michael Taglich Trustee (3)	12,679		12,679		—	*
Howard Halpern	1,850	(8)	1,850	(8)	—	*
Howard Kalka & Susan Kalka	116,461		116,461		—	*
Ivanka Marie Kokot	1,381		1,381		—	*
Jaden James Foutch Trust Uad 10/17/08 Heather A Busby Trustee	691		691		—	*
James B Deutsch & Deborah M Deutsch Jtwros	16,625		16,625		—	*
James Besselman & Susan Besselman	1,381		1,381		—	*
James Desocio	14,627		14,627		—	*
James E Puerner	2,763		2,763		—	*
James Ronald Foutch Jr	691		691		—	*
James Tadych & Patricia Tadych Rev Tr Uad 09/23/93 James & Patricia Tadych Ttees	276,687		276,687		—	*
Janet Sau-Han Ho	44,220		44,220		—	*
Jeffrey G Hipp & Mary Ann Hipp	24,673		24,673		—	*
Jeffrey L Sadar	63,371		63,371		—	*
Jeffrey R Williams & Patricia A Williams Jtwros	1,587		1,587		—	*
Jennifer Dendekker	7,500	(8)	7,500	(8)	—	*
Jeremy Bond	28,000		28,000		—	*
Joan B Rifkin	2,938		2,938		—	*
John Berry Worthington & Mary Elizabeth Worthington	11,934		11,934		—	*
John Brannen	20,000		20,000		—	*
John C Guttilla & Peggy Guttilla Jtwros	30,000		30,000		—	*
John C Lipman	90,168		90,168		—	*
John H Edmondson	13,260		13,260		—	*
John J Resich Jr Ttee John J Resich Jr Ret Trust	38,028		38,028		—	*
John L Palazzola Revocable Trust Uad11/29/92 John L Palazzola Ttee	37,116		37,116		—	*
John Nobile Tod Dtd 3/21/06	9,450	(8)	9,450	(8)	—	*
John R Bertsch Trust Dtd 12/4/2004 John R Bertsch Ttee	279,591		279,591		—	*
John R Worthington Marital Trust Uad 01/10/18 Christine H Worthington Trustee	23,868		23,868		—	*
John S Tschohl Tod Dtd 03/15/06	1,381		1,381		—	*
John W Crow	61,929		61,929		—	*
John W Egan & Mary Sue Egan Jt Ten	527		527		—	*
John Wiencek	12,250		12,250		—	*
Jordan R Kort	20,000		20,000		—	*
Joseph A Ruggiero & Joann Ruggiero Jt Ten	70,262		70,262		—	*
Joseph Debellis	75,000		75,000		—	*
Josephine Edmondson Warfield	13,260		13,260		—	*
Joshua M Allen Residuary Trust U/A Susan M Allen Uad 04/29/08 Robert W Allen Trustee	1,170		1,170		—	*
Juan V Noble	9,450	(8)	9,450	(8)	—	*
Julie M Foutch	691		691		—	*

Junge Revocable Trust Uad 12/09/91 - Jeffrey Allen Junge Ttee Amd 07/09/19	377,960		377,960		—	*
Karl L Fisher	15,912		15,912		—	*
Kathryn I Chaney	2,071		2,071		—	*
Keith Liggett	2,071		2,071		—	*
Keith R Schroeder	57,187		57,187		—	*
Kenneth M Cleveland	10,608		10,608		—	*
Kenneth W Cleveland	42,195		42,195		—	*
Kent Phippen	9,792		9,792		—	*
Kevin Conroy	4,563		4,563		—	*
Kiefer Light	53,500		53,500		—	*
Kyle G Buchakjian	9,597		9,597		—	*
Larry S Kaplan Marla B Kaplan Jt/Wros	14,065		14,065		—	*
Larry V Lowrance	6,891		6,891		—	*
Laura Lehmuller	9,327		9,327		—	*
Laura Mackey	4		4		—	*
Lauro Living Trust Uad 10/30/19 John Lauro & Christine L Lauro Ttees	689		689		—	*
Lawrence Yelin	3,040		3,040		—	*
Legendcap Opportunity Fund	40,000		40,000		—	*
Leonard Schleicher	65,000	(8)	65,000	(8)	—	*
Leslie Bodenstein	3,500		3,500		—	*
Lighthouse Capital LLC	74,000		74,000		—	*
Linda Taglich	9,350	(8)	9,350	(8)	—	*
Louis And Judith Miller Family Trust Louis & Judith Miller Ttees	17,116		17,116		—	*
Louis G Selvaggio	10,608		10,608		—	*
Lucy C Edmondson	13,260		13,260		—	*
Margaret Esposito	41,764		41,764		—	*
Mark Bourque	26,097		26,097		—	*
Mark J Butler	3,457		3,457		—	*
Mark Vaughan Andrea Vaughan Jt Ten	18,557		18,557		—	*
Marvin J Loutsenhizer	21,321		21,321		—	*
Mary Kay Berg	1,153		1,153		—	*
Matthew A Keefer	13,786		13,786		—	*
Matthew Dejesus Taglich	10,608		10,608		—	*
Matthew G Kiernan Cheryl A Kiernan Jt Ten	25,000		25,000		—	*
Matthew R Bong	25,829		25,829		—	*
Maurice Solomon	73,253		73,253		—	*
Michael A Rutledge Tanya Rutledge Jt Ten	26,520		26,520		—	*
Michael Brunone	7,400	(8)	7,400	(8)	—	*
Michael Foster & Kathryn L Foster Jtwros Tod Dtd 01/06/04	40,000		40,000		—	*
Michael N Taglich (3)	1,161,466	(8)	1,117,194	(8)	44,272	*
Michael N Taglich & Claudia Taglich (3)	311,343		311,343		—	*
Michael N Taglich Keogh-Account (3)	280,311		280,311		—	*
Michael P Hagerty	61,442		61,442		—	*
Michael Taglich Cust Fbo Amanda Taglich Utma Ny Until Age 21 (3)	13,371		13,371		—	*
Michael Taglich Cust Fbo Stella Taglich Utma Ny Until Age 21 (3)	13,371		13,371		—	*
Michael Taglich Cust For Lucy Taglich Utma Ny Until Age 21 (3)	25,363		25,363		—	*
Mitchell Spearman	41,413		41,413		—	*
Monica Bertsch	13,000		13,000		—	*
Mordecai Bluth	1,321		1,321		—	*

Nancy C Hubbard	11,929		11,929		—	*
Nicholas R Toms	11,974		11,974		—	*
Nicholas R Toms & Caroline M Toms	9,109		9,109		—	*
Nicholas Taglich & Juliana Taglich Jt/Wros	80,770		80,120		650	*
Nina Lisa Bertsch	70,000		70,000		—	*
Norper Investments	29,165		29,165		—	*
Nutie Dowdle	224,390		224,390		—	*
Nuview Ira Fbo Francis Bissaillon Ira	53,040		53,040		—	*
Nuview Ira Fbo Gordon Johnson Ira	37,128		37,128		—	*
Nuview Ira Fbo John C Guttilla - Ira Roth	1,518		1,518		—	*
Nuview Ira Fbo John Guttilla Ira (4)	40,642		10,642		30,000	*
Nuview Ira Fbo John T Glancy	25,000		25,000		—	*
Nuview Ira Fbo Lawrence Kane Ira	21,216		21,216		—	*
Nuview Ira Fbo Luisa Kane Ira	21,216		21,216		—	*
Nuview Ira Fbo Michael Wilson	26,520		26,520		—	*
Nuview Ira Fbo Peggy Guttilla Ira	9,971		9,971		—	*
Nuview Ira Fbo Robert F Taglich 9912135 Ira (5)	28,903		28,903		—	*
Nuview Ira Fbo Robert Taglich (5)	70,000		70,000		—	*
Nuview Ira Fbo Samuel E Leonard - Ira	1,381		1,381		—	*
Nuview Ira Fbo Starr F Schlobohm Jr - Inherited Ira	4,838		4,838		—	*
Nuview Ira Fbo Terry N Thuemling	15,900		15,900		—	*
Nuview Ira Fbo Timothy M Fitzpatrick Ira	10,608		10,608		—	*
Nuview Ira Fbo Vincent J Mcgill Ira	10,608		10,608		—	*
Olivia Sofia Taglich	10,608		10,608		—	*
Paladin Holdings LLC	406,079		406,079		—	*
Pamela M Walsh & Brian Walsh	36,067		36,067		—	*
Patricia Tschohl Tod	4,147		4,147		—	*
Patrick Heirigs	1,152		1,152		—	*
Paul Seid	69,601		69,601		—	*
Perrault Family Trust - Family Trust Uad 03/05/12 Karen D Perrault Ttee	12,195		12,195		—	*
Pershing Llc Cust Ar-And-Associates Individual(K) Fbo Arthur Resnikoff	4,147		4,147		—	*
Pershing Llc Cust Fbo Angel Rosario - Ira R/O	2,763		2,763		—	*
Pershing Llc Cust Fbo Arnold E Needleman - Ira R/O	3,457		3,457		—	*
Pershing Llc Cust Fbo David Random - Ira	6,915		6,915		—	*
Pershing Llc Cust Fbo Francine C Massie - Ira R/O	1,381		1,381		—	*
Pershing Llc Cust Fbo Janet Sau-Han Ho Ira	5,330		5,330		—	*
Pershing Llc Cust Fbo Richard S Smith - Roth Ira	689		689		—	*
Peter C Murphy	27,662		27,662		—	*
Peter Mangiameli	6,915		6,915		—	*
Pierre Elliott	11,929		11,929		—	*
Puddleglum Investments LLC	2,763		2,763		—	*
R2Mj LLC	3,457		3,457		—	*
Rachel T Baroni Trust Uad 12/31/94 Pj Baroni & Rt Baroni Ttees Amd 8/11/09	42,071		42,071		—	*
Richard Buchakjian	40,327		40,327		—	*
Richard Duke	134,469		134,469		—	*
Richard F Bero	5,829		5,829		—	*
Richard L Gerhardt	6,361		6,361		—	*
Richard Molinsky	50,000		50,000		—	*
Richard Oh	31,950	(8)	31,950	(8)	—	*

Rj Edmondson Tr Fbo Amy Uad 02/27/19 John H Edmondson Tr	13,260		13,260		—	*
Robert A Sourek Jr	53,040		53,040		—	*
Robert Banzer	12,500		12,500		—	*
Robert Brooks	107,961		107,961		—	*
Robert Chaiken	5,587		5,587		—	*
Robert F Taglich (5)	934,096	(8)	919,824	(8)	14,272	*
Robert F Taglich C/F Xavier F Taglich Under New York Ugma Minors Act (5)	10,608		10,608		—	*
Robert G Welty	35,831		35,831		—	*
Robert Koski	13,371		13,371		—	*
Robert L Debruyn Trust Uad 10/5/94 Robert L Debruyn & Tracey H Debruyn Ttee	118,557		118,557		—	*
Robert M Deluca Revocable Living Trust Uad 12/14/10 Robert M Deluca & Nichol M Deluca	7,001		7,001		—	*
Robert M Lorenzo	10,350	(8)	10,350	(8)	—	*
Robert Romanet & Maureen L Romanet Jt Ten	10,000		10,000		—	*
Robert Schroeder (6)	312,056	(8)	282,056	(8)	30,000	*
Robert W Allen Iii Residuary Trust U/A Susan M Allen Uad 4/29/08	1,170		1,170		—	*
Robert W Allen Jr	53,040		53,040		—	*
Robert W Allen Trust Uad 04/29/08 Robert W Allen Ttee	82,457		82,457		—	*
Robert W Main Ttee Under The Robert W Main Trust Dtd 9/7/05	2,763		2,763		—	*
Roger W Lunstra & Joyce M Lunstra Living Trust Dtd 6/15/07	26,508		26,508		—	*
Ronald A Bero	118,344		118,344		—	*
Ronald A Rayson	27,375		27,375		—	*
Ronald D Cowan Irrevocable Trust Uad 05/08/03 Marsha S Cowan Ttee	12,195		12,195		—	*
Ronald Johnson	57,008		57,008		—	*
Russell Bernier	29,800	(8)	29,800	(8)	—	*
Samuel E Leonard Trust Uad 2-5-90 Samuel E Leonard Ttee	25,304		25,304		—	*
Scot Holding Inc.	20,957		20,957		—	*
Scott Bennett Schneider & Tanya Rose Schneider Jt Ten	200,000		200,000		—	*
Shadow Capital LLC	130,973		130,973		—	*
Sophia Estelle Taglich	10,608		10,608		—	*
Spahr-Derebery Family Trust Uad 10-11-90 Gregory E Spahr & M Jennifer Derebery Ttee	214,580		214,580		—	*
Stanley A Bornstein	1,057		1,057		—	*
Stephen C Radocchia	1,587		1,587		—	*
Stephen Hughes	118,557		118,557		—	*
Stephen Koppekin	2,071		2,071		—	*
Sterling Family Investment LLC	435,580		435,580		—	*
Steve Mccalley	8,750		8,750		—	*
Steve Redmon & Brenda Redmon Jt Ten Wros	9,171		9,171		—	*
Steven Farber	1,381		1,381		—	*
Steven Heirigs	1,152		1,152		—	*
Steven R Berlin	17,498		17,498		—	*
Steven Smith (7)	776,520		776,520		—	*
Sullivan Associates Emp Ret Plan	3,457		3,457		—	*
Susan Thorstenn & Magnus Thorstenn Ten Comm	5,292		5,292		—	*
Sushrut Parikh	3,457		3,457		—	*
Tad Wilson	118,557		118,557		—	*
Taglich Brothers Inc. (3)	1,236		1,236		—	*
Terry J Kuras	30,000		30,000		—	*
The Antoinette Porco Revocable Living Trust Uad 11/16/92 Antoinette Porco Ttee Amd 2/23/18	7,001		7,001		—	*

The Carolyn L. Foutch Living Trust Uad 05/17/13 Carolyn L Foutch Ttee	53,981		53,981		—	*
The Claudia Hess Trust Uad 05/25/18 Claudia Worthington Hess Trustee	11,934		11,934		—	*
The Corbet L Clark Jr Living Trust Corbet L Clark Jr Trustee	20,000		20,000		—	*
The Ernest H Hill Living Trust Uad 12/17/2001 Gregory P Hill Trustee	31,929		31,929		—	*
The Hillary Bibicoff Revocable Trust Dtd 4/19/07 Hillary Bibicoff Ttee	22,597		22,597		—	*
The Ladendorf Family Revocable Living Trust Uad 04/11/11 Mark C Ladendorf & Debra L Ladendorf Ttees	55,675		55,675		—	*
The Sdm Irrevocable Trust Fbo Andrew Seid Uad 11/05/04 Paul Seid Ttee	86,974		86,974		—	*
The Sdm Irrevocable Trust Fbo Lauren Seid Uad 11/05/04 Paul Seid Ttee	86,974		86,974		—	*
The William W Kehl Revocable Trust Uad 12/06/17	80,000		80,000		—	*
Thomas Heirigs	50,523		50,523		—	*
Thomas J Leonard	8,750		8,750		—	*
Thomas L Ryan	5,831		5,831		—	*
Tina Marie Domenice	661		661		—	*
Todd Stuart Bodenstein	10,500		10,500		—	*
Tom C Mina	4,563		4,563		—	*
Tracey H Debruyn Trust Uad 10/5/94 Tracey H Debruyn & Robert L Debruyn Ttee	118,557		118,557		—	*
Vahan Buchakjian	3,500		3,500		—	*
Vincent M Palmieri	12,000	(8)	12,000	(8)	—	*
Vincent Milazzo	10,373		10,373		—	*
Wafgal Limited	11,660		11,660		—	*
Walter E Beisler	11,660		11,660		—	*
Weedie Trust Uad 07/20/16 Wendy H Tweety & Jeffrey C Tweedy Ttees	20,000		20,000		—	*
William Kyle Neely	95,889		95,889		—	*
William M Cooke	46,305	(8)	46,305	(8)	—	*
Wulf Paulick & Renate Paulick Jtwros	100,000		100,000		—	*
TOTAL	14,376,335		14,240,269		120,338	*

(1)

The beneficial ownership of the common stock by the selling stockholder set forth in the table is determined in accordance with Rule 13d-3 under the Exchange Act of 1934, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which the selling stockholders has sole or shared voting power or investment power and also any shares, which the selling stockholders has the right to acquire within 60 days.

(2)

Assumes all shares will be sold in the offering.

(3)

Michael N. Taglich is a director of the Company. Mr. Taglich is a control person of Taglich Brothers Inc.

(4)

John Guttilla is a director of the Company.

(5)

Robert F. Taglich is a beneficial owner of more than 5% of the Company’s common stock.

(6)

Robert Schroeder is a director of the Company.

(7)

Steven Smith is the President, CEO and a director of the Company.

(8)

Includes shares of common stock underlying warrants.

PLAN OF DISTRIBUTION

Each Selling Stockholder and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on the trading market or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. Until such time as our common stock is quoted on the OTCQB tier of the over-the-counter market, the Selling Stockholders must sell their shares at a fixed price of $1.50 per share. Once our common stock is quoted on the OTCQB tier of the over-the-counter market, the Selling Stockholders may sell their shares at prevailing market prices. Upon the effectiveness of the Registration Statement of which this Prospectus forms a part, we intend to apply for an upgrade of our OTC market tier from “Pink No Information” to “OTCQB.” Although we believe that we will be eligible for the OTCQB market tier upon becoming an SEC reporting issuer, we can provide no guarantee that out application for the OTCQB market will be accepted. A Selling Stockholder may use any one or more of the following methods when selling shares:

	●	ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
	●	block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
	●	purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
	●	an exchange distribution in accordance with the rules of the applicable exchange;
	●	privately negotiated transactions;
	●	settlement of short sales entered into after the date of this prospectus;
	●	broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share;
	●	a combination of any such methods of sale;
	●	through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; or
	●	any other method permitted pursuant to applicable law.

The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.

Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. Each Selling Stockholder does not expect these commissions and discounts relating to its sales of shares to exceed what is customary in the types of transactions involved.

The Selling Stockholders and any broker-dealers or agents that are involved in selling the Shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the Shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed us that it does not have any agreement or understanding, directly or indirectly, with any person to distribute the Common Stock.

The Shares will be sold only through registered or licensed brokers or dealers if required under applicable state or provincial securities laws. In addition, in certain states or provinces, the Shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the Shares may not simultaneously engage in market making activities with respect to our common stock for a period of two business days prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of our common stock by the Selling Stockholders or any other person.

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 prospectus. 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. We encourage you to review the information the “Special Note Regarding Forward Looking Statements” and “Risk Factors” sections in this prospectus.

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 prospectus. In this prospectus, 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, through its subsidiary corporations, is a provider and integrator of mobility and wireless systems for business organizations. 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 develops and integrates data capture equipment including bar code scanners and radio frequency identification (RFID) readers.

Known or Anticipated Trends

In 2019, we realized a 25% growth in revenue to $44 million, in part due to our acquisition of Royce Digital Systems, Inc. (“RDS”) in June of 2018. After completing the acquisition of RDS in June of 2018, DecisionPoint fully integrated both companies in 2019. This acquisition enabled the Company to build out its presence on the West Coast, expand into the healthcare industry and grow both its portfolio of services and recurring revenue base.

Strategies are underway to increase Company value proposition to customers by shifting to more professional services with recurring revenue potentials.

We currently do business with approximately 700 clients throughout the U.S.

In December 2019, a novel coronavirus disease (“COVID-19”) was initially reported, and in March 2020, the World Health Organization characterized COVID-19 as a pandemic. COVID-19 has had a widespread and detrimental effect on the global economy as a result of the continued increase in the number of cases and affected countries and actions by public health and governmental authorities, businesses, other organizations and individuals to address the outbreak, including travel bans and restrictions, quarantines, shelter in place, stay at home or total lock-down orders and business limitations and shutdowns. The ultimate impact of the COVID-19 pandemic on our business and results of operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the COVID-19 pandemic and any additional preventative and protective actions that governments, or we or our customers, may direct, which may result in an extended period of continued business disruption and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time, but we expect it will continue to have a material impact on our business, financial condition and results of operations. While business and revenue for the first half of 2020 started off strong, our customers, particularly those in the retail sector, have been significantly impacted by COVID-19.

Components of Results of Operations

Net Sales

Net sales reflect revenue from the sale of hardware, software, consumables and professional services to our clients, net of sales taxes. 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, whether the items have value on a standalone basis and whether there is objective and reliable evidence of their standalone selling price. 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.

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.

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 professional services;
	●	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:

	Three Months Ended March 31,						Year Ended December 31,
	2020			2019			2019			2018
Statements of Income Data:	(in thousands)
Net sales	$	18,287		$	8,894		$	43,889		$	35,158
Cost of sales		13,969			6,786			33,133			27,901
Gross profit		4,318			2,108			10,756			7,257
Sales and marketing expenses		1,644			1,097			4,907			3,341
General and administrative expenses		1,148			1,215			3,999			3,433
Total operating expenses		2,792			2,312			8,906			6,774
Operating income (loss)		1,526			(204	)		1,850			483
Interest expense		99			172			649			391
Income (Loss) before income taxes		1,427			(376	)		1,201			92
Income tax expense (benefit)		398			(97	)		310			(3,883	)
Net income (loss)	$	1,029		$	(279	)	$	891		$	3,975
Percentage of Net Sales:
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		76.4	%		76.3	%		75.5	%		79.4	%
Gross profit		23.6	%		23.7	%		24.5	%		20.6	%
Sales and marketing expenses		9.0	%		12.3	%		11.2	%		9.5	%
General and administrative expenses		6.3	%		13.7	%		9.1	%		9.8	%
Total operating expenses		15.3	%		26.0	%		20.3	%		19.3	%
Operating income (loss)		8.3	%		(2.3	)%		4.2	%		1.4	%
Interest expense		0.5	%		1.9	%		1.5	%		1.1	%
Income (Loss) before income taxes		7.8	%		(4.2	)%		2.7	%		0.3	%
Income tax expense (benefit)		2.2	%		(1.1	)%		0.7	%		(11.0	)%
Net income (loss)		5.6	%		(3.1	)%		2.0	%		11.3	%

Results of Operations for the Three Months Ended March 31, 2020 compared to the Three Months Ended March 31, 2019 (Unaudited)

Net sales

	Three Months Ended March 31,				Dollar			Percent
	2020		2019		Change			Change
	(dollars in thousands)
Hardware and software	$	14,075	$	4,960	$	9,115			183.8	%
Consumables		1,020		1,126		(106	)		(9.4	)%
Professional services		3,192		2,808		384			13.7	%
	$	18,287	$	8,894	$	9,393			105.6	%

Net sales increased by 105.6%, or $9.4 million, during the three months ended March 31, 2020 as compared to the same period of the prior year. The increase in net sales was primarily driven by an increase in hardware and software sales in the retail sector from one specific customer that completed equipment upgrades during the quarter. Significant customer equipment upgrades occur periodically and related net sales, and the timing of those net sales, are difficult to estimate with a high degree of certainty.

Cost of sales

	Three Months Ended March 31,				Dollar			Percent
	2020		2019		Change			Change
	(dollars in thousands)
Hardware and software	$	11,358	$	4,202	$	7,156			170.3	%
Consumables		716		796		(80	)		(10.1	)%
Professional services		1,895		1,788		107			6.0	%
	$	13,969	$	6,786	$	7,183			105.9	%

Cost of sales increased by 105.9%, or $7.2 million during the three months ended March 31, 2020 as compared to the prior year quarter primarily due to higher sales volume as discussed above.

Gross profit

	Three Months Ended March 31,
	2020			2019
	(dollars in thousands)
Gross profit:
Hardware and software	$	2,717		$	758
Consumables	$	304		$	330
Professional services	$	1,297		$	1,020
Total gross profit	$	4,318		$	2,108

Gross profit percentage:
Hardware and software		19.3	%		15.3	%
Consumables		29.8	%		29.3	%
Professional services		40.6	%		36.3	%
Total gross profit percentage		23.6	%		23.7	%

Gross profit increased $2.2 million for the three months ended March 31, 2020 as compared to the prior year period, primarily as a result of higher sales volume, which was driven by one specific retail customer that completed equipment upgrade activities during the quarter. Although the aggregate gross margin was relatively consistent between periods, we experienced slight gross margin improvement in each major revenue category during the current period quarter partly due to fixed personnel costs associated with higher net sales for the three months ended March 31, 2020.

Sales and marketing expenses

	Three Months Ended March 31,						Dollar		Percent
	2020			2019			Change		Change
	(dollars in thousands)
Sales and marketing expenses	$	1,644		$	1,097		$	547		49.9	%
As a percentage of sales		9.0	%		12.3	%		—		(3.3	)%

Sales and marketing expenses increased $0.5 million for the three months ended March 31, 2020 as compared to prior year primarily as a result of higher contract acquisition costs (i.e. sales commissions) associated with higher sales volume.

General and administrative expenses

	Three Months Ended March 31,						Dollar			Percent
	2020			2019			Change			Change
	(dollars in thousands)
General and administrative expenses	$	1,148		$	1,215		$	(67	)		(5.5	)%
As a percentage of sales		6.3	%		13.7	%		—			(7.4	)%

General and administrative expenses remained relatively flat for the three months ended March 31, 2020 as compared to the same period of the prior year. There were no significant changes in company headcount or our corporate cost structure during the periods.

Interest expense. The decrease in interest expense to $99,000 from $172,000, last year, was due to lower outstanding term debt and lower interest rates.

Income tax expense (benefit). Income tax expense was $398,000, or 27.9% of income before income taxes, compared to income tax benefit of $97,000, or 25.6% of loss before income taxes, last year.

Net income (loss). Net income was $1,029,000 compared to net loss of $279,000, last year.

Results of Operations for the Year Ended December 31, 2019 compared to the Year Ended December 31, 2018

Net sales

	Year Ended December 31,				Dollar		Percent
	2019		2018		Change		Change
	(dollars in thousands)
Hardware and software	$	27,184	$	23,231	$	3,953		17.0	%
Consumables		4,806		2,778		2,028		73.0	%
Professional services		11,899		9,149		2,750		30.1	%
	$	43,889	$	35,158	$	8,731		24.8	%

Net sales increased in 2019 primarily due to a $6.6 million increase in net sales resulting from the acquisition of RDS which was acquired in June 2018. Additionally, net sales from existing customers increased $2.1 million compared to 2018 primarily due to an increase in product upgrades. Professional services increased $2.8 million, or 30.1%, as compared to 2018 primarily due to an increase in professional services in connection with the initial implementation of our products and product upgrades.

Cost of sales

	Year Ended December 31,				Dollar		Percent
	2019		2018		Change		Change
	(dollars in thousands)
Hardware and software	$	22,597	$	19,639	$	2,958		15.1	%
Consumables		3,269		1,975		1,294		65.5	%
Professional services		7,267		6,287		980		15.6	%
	$	33,133	$	27,901	$	5,232		18.8	%

Cost of sales for year ended December 31, 2019 increased $5.2 million, or 18.8%, compared to the year ended December 31, 2018. The increase in cost of sales was primarily driven by the increase in net sales discussed above, which was primarily a result of including the results of RDS for 12 months in 2019 versus only six months in 2018.

Gross profit

	Year Ended December 31,
	2019			2018
	(dollars in thousands)
Gross profit:
Hardware and software	$	4,587		$	3,592
Consumables	$	1,537		$	803
Professional services	$	4,632		$	2,862
Total gross profit	$	10,756		$	7,257

Gross profit percentage:
Hardware and software		16.9	%		15.5	%
Consumables		32.0	%		28.9	%
Professional services		38.9	%		31.3	%
Total gross profit percentage		24.5	%		20.6	%

Gross profit increased $3.5 million in 2019 as compared to the prior year primarily as a result of higher sales volume. As a percentage of net sales, total gross profit increased 390 basis points primarily due an increase in the mix of product upgrades, which contain higher gross margins for product, and services as compared to gross margins associated with implementation costs for new customers. Additionally, gross margins increased due to reductions in headcount for professional services and software product lines coupled with higher margins associated with consumables and professional services for RDS.

Sales and marketing expenses

	Year Ended December 31,						Dollar		Percent
	2019			2018			Change		Change
	(dollars in thousands)
Sales and marketing expenses	$	4,907		$	3,341		$	1,566		46.9	%
As a percentage of sales		11.2	%		9.5	%		—		1.7	%

Sales and marketing expenses increased in 2019 as compared to 2018 primarily due to higher commissions associated with higher net sales coupled with increases in marketing expenses associated with our website and marketing tools for RDS and an increase in consulting costs associated with various marketing initiatives.

General and administrative expenses

	Year Ended December 31,						Dollar		Percent
	2019			2018			Change		Change
	(dollars in thousands)
General and administrative expenses	$	3,999		$	3,432		$	567		16.5	%
As a percentage of sales		9.1	%		9.8	%		—		(0.7	)%

General and administrative expenses increased in 2019 as compared to the prior year primarily as a result of higher share-based compensation costs of approximately $241,000 that resulted primarily from the issuance of a fully vested stock award to a certain officer.

Interest expense. The increase in interest expense to $649,000 from $391,000, for the year ended December 31, 2018, was due to higher outstanding term debt and higher interest rates.

Income tax expense (benefit). Income tax expense was $310,000, or 25.8% of income before income taxes, compared to income tax benefit of $3,883,000 of income before income taxes, for the year ended December 31, 2018. The income tax benefit last year was primarily attributable to the reversal of the valuation allowance against our net deferred income tax assets. Management reversed the valuation allowance as a result of the Company’s recent earnings, as well as forecasted future profits.

Net income (loss). Net income was $891,000 compared to $3,975,000, for the year ended December 31, 2018.

Liquidity and Capital Resources

As of March 31, 2020, our principal sources of liquidity were cash totaling $3.6 million and an accounts receivable-based line of credit that is scheduled to expire in September 2020 (as further described below). We have financed our operations primarily through cash generated from operating activities, borrowings from our credit facilities and sales of our common stock. We have historically generated operating losses and negative cash flows from operating activities as reflected in our accumulated deficit. Based on our recent trends and our current future projections, we expect to generate cash from operations for the year ending December 31, 2020. Given our projection, combined with our existing cash and credit facilities, we believe the Company has sufficient liquidity for at least the next 12 months.

Our ability to continue to meet our cash requirements will depend on, among other things, the duration of COVID-19 related restrictions on U.S. and global economic activity, 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 the unprecedented nature of the disruption to our operations and the unpredictability of the COVID-19 global pandemic. Consequently, our estimates of the duration of the pandemic and the severity of the impact on our future earnings and cash flows could change and have a material impact on our results of operations and financial condition. 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 (Deficit)

	March 31, 2020			December 31, 2019			Increase/ (Decrease)
(in thousands)
Current assets	$	12,983		$	17,624		$	(4,641	)
Current liabilities		13,688			20,026			(6,338	)
Working capital (deficit)		(705	)		(2,402	)		1,697

The decrease in the working capital deficit is primarily due to an increase in cash resulting from an increase in net sales and the related gross profit.

Line of Credit

Our amended and restated credit agreement with Pacific Western Business Finance (“PWBF”), formerly known as CapitalSource Business Financial Group, provides for a $7.25 million line of credit with a maturity date of September 2020. The line of credit bears interest at the prime rate plus 1.25% and is secured by substantially all of our U.S. assets.

As of March 31, 2020, availability under the line of credit was approximately $4.5 million, which is determined from a borrowing base calculation on our existing accounts receivable balance. As of June 30, 2020, we had no outstanding borrowings under the line of credit.

Promissory Notes

In October 2018, we completed a private placement of subordinated promissory notes in the principal amount of $1,500,000, of which $500,000 remains outstanding as of March 31, 2020. The promissory notes carry an interest rate of 12% per annum, are not collateralized, and require quarterly interest payments with a maturity date of April 30, 2021. In connection with these promissory notes, we issued warrants to the placement agent to purchase 52,500 shares of our common stock at an exercise price of $0.70 per share. The fair value of the warrants on the issuance date was $18,000. In addition, under the offering terms, we issued 525,000 shares of our common stock to the holders of these promissory notes. The estimated fair value of these shares was $262,500 and such amount has been presented as a debt discount and is being amortized to interest expense through the maturity date of the promissory notes.

In June 2018, we issued another promissory note with PWBF with a principal amount of $750,000. The note carries an annual interest rate of prime rate plus 1.25% (4.75% at March 31, 2020) with a maturity date of August 25, 2020. Principal payments are due and payable monthly in 26 consecutive payments each in the amount of $20,834 beginning June 25, 2018; and one payment of $208,333 due on the maturity date of August 25, 2020.

In April and May 2020, we received $740,000 and $471,000, respectively, in proceeds from loans from PWBF, which were granted pursuant to the Paycheck Protection Program of the Coronavirus Aid Relief and Economic Security Act (the “CARES Act”). At the time we applied for the loans, we believed the Company qualified to receive the funds pursuant to the Paycheck Protection Program.

Impact of CARES Act on Company Liquidity

On March 27, 2020, President Trump signed into law the CARES Act which, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. We continue to examine the impacts the CARES Act may have on our business. As discussed above, we received loans under the Paycheck Protection Program.

Cash Flow Analysis

	Three Months Ended March 31,
	2020			2019
	(in thousands)
Net cash provided by operating activities	$	4,204		$	779
Net cash (used in) provided by investing activities		(34	)		7
Net cash used in financing activities		(3,239	)		(1,331	)
Net change in cash and cash equivalents	$	931		$	(545	)

Operating Activities

Net cash provided by operating activities increased to $4.2 million for the three months ended March 31, 2020 from $0.8 million for the three months ended March 31, 2019. The increase was primarily due to an increase in operating income, as well as a decrease in our net working capital deficit.

Investing Activities

Net cash used in investing activities was $34,000 for the three months ended March 31, 2020 which is comprised of purchases of capital expenditures of property and equipment. Net cash provided by investing activities was $7,000 for the three months ended March 31, 2019 which comprised of cash acquired from the acquisition of RDS of $21,000, partially offset by purchases of capital expenditures of property and equipment of $14,000.

Financing Activities

Net cash used in financing activities was $3.2 million for the three months ended March 31, 2020 which comprised of the repayment of debt. Net cash used in financing activities for the three months ended March 31, 2019 was $1.3 million which comprised of the repayment of debt.

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 Policies and 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:

Accounts Receivable

Accounts receivable are stated at net realizable value, and as such, earnings are charged with a provision for doubtful accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine an allowance based on historical write-off experience and specific account information available. When internal collection efforts on accounts have been exhausted, the accounts are written off by reducing the allowance for doubtful accounts and the related customer receivable.

Inventory

Inventory consists solely of finished goods and is stated at the lower of cost or net realizable value. Cost is determined under the first-in, first-out (FIFO) method. We periodically review our inventory and make provisions as necessary for estimated obsolete and slow-moving goods. The creation of such provisions results in a reduction of inventory to net realizable value and a charge to cost of sales.

Intangible Assets and Long-lived Assets

We evaluate our intangible and long-lived assets for impairment annually 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 or 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 or if indicators or impairment are present.

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

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

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

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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:

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

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Estimated fair values of intangible assets; and

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Estimated liabilities assumed from the target

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.

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, whether the items have value on a standalone basis and whether there is objective and reliable evidence of their standalone selling price. 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. Observable prices are used to determine the standalone selling price of separate performance obligations, or a cost plus margin approach is used when observable prices are not available. 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 as accounts receivable when we have an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when we invoice clients in advance of performing the related services under the terms of a contract. 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. If we determine that the accompanying third-party delivered software assurance is critical or essential to the core functionality of the software license, 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 and we work closely with clients to determine their hardware specifications.

Professional services - We provide professional 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. Revenue is recognized on a gross basis in the period in which the services are performed or delivered.

We sell certain Original Equipment Manufacturer (“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. 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. This is in addition to the fact that our internal help desk and systems engineers assist customers by providing technical assistance on the source of or how to fix the problem. As a result, we recognize the revenue on a gross basis.

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, it has been reduced for estimated forfeitures. We account for forfeitures as they occur, rather than estimate expected forfeitures.

Compensation cost for stock awards, which 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.

Income Taxes

We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

Under ASC Topic 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC Topic 740 provides requirements for derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

description Of Business

Overview

DecisionPoint, through its subsidiary corporations, is a provider and integrator of mobility and wireless systems for business organizations. We design, deploy and support mobile computing systems that enable our 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). We also develop and integrate data capture equipment including bar code scanners and radio frequency identification (RFID) readers.

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. For example, much of our revenue growth in 2019 was fueled by the acquisition and integration of RDS, a provider of innovative enterprise solutions, in June of 2018 and our increased focus on developing a complete managed services portfolio. 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 Healthcare which is incremental to our existing markets of Retail and Logistics.

In early 2016, we elected to file a Form 15 with the SEC to voluntarily deregister our common stock and suspend our obligation to file periodic reports. This was due to the limited number of record holders of our common stock at that tie and because our common stock was thinly traded. By filing the Form 15 the Company was also able to reduce significant expenses associated with compliance efforts, professional fees and other administrative costs.

Our Story

DecisionPoint enables its clients to “move decisions closer to the customer” by “empowering the mobile worker”. We define the “mobile worker” as those individuals who are on the front line in direct contact with customers. These workers include field repair technicians, sales associates, healthcare providers, couriers, public safety employees and millions of other workers that deliver goods and or services throughout the country. Whether they are blue or white collar, mobile workers have many characteristics in common. Mobile workers need information, access to corporate resources, decision support tools and the ability to capture information and report it back to the organization.

DecisionPoint empowers these mobile workers through the implementation of various mobile technologies including specialized mobile business applications, wireless networks, mobile computers variety of consumer and rugged 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. DecisionPoint provides 24/7/365 asset visibility to our customers mobile estate through our OnPoint Services Hub – an asset management portal.

At DecisionPoint, we attempt to deliver to our customers the ability to make better, faster and more accurate business decisions by implementing industry-specific, enterprise 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 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 OEM 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. These partners include Hand Held Device Manufacturers (OEM’s): Zebra, Honeywell, Apple, Samsung, Panasonic, Datalogic, Verifone, Ingenico, Infinite Peripherals and others. Independent Software Vendors (ISV’s): BlueFletch, Syft and Kutir Mobile Device Management Providers (MDM): VMware (AirWatch), Soti, Ivanti and others. Wireless Carriers: AT&T, Verizon, T-Mobile. Wireless LAN Manufacturers: Cisco, Extreme Networks, Aruba, and others.

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.

Opportunity Analysis

Among technology segments, mobility, Managed Services and IoT represent large, potential growth markets. We believe this combined with investments in productivity enhancing technologies in the mobile space presents a strong opportunity for growth. Our investments in the key technologies intended to support managed mobile services are critical to our future.

The trends in investment combined with changes in technology are expected to drive customers to meet competitive needs as well as IT requirements. The anticipated end-of-life of the Microsoft Windows Mobile operating system, effective in 2020, is expected to require most all customers in our key markets to replace or upgrade nearly 100% of the mobile computers over the next three years. We believe this trend provides a potential on-going growth opportunity for the Company.

DecisionPoint has experience in this space and has written custom applications as well as partnered with some well-known software companies in the industry. Key ISV relationships forged with Bluefletch, Syft, and Kutir enable us to offer a cloud-based mobile application suite, designed to address this large and present opportunity.

Market Focus

Retail In-Store Operations

We assist retail customers in selecting the correct technology, deploying it and the managing that technology for its entire life cycle. Our OnPoint asset management system helps our retail customers with far-flung stores manage repairs, returns and every facet of the life of the device. This allows our customers IT resources to be leveraged for competitive advantage as we take care of this critical function. We brought Zebra mobile computers into our technical support center and configured each device to the precise specifications for that retailer including software applications, device settings, mobile device management (MDM), and network specific settings. Devices were combined with the accessories needed to complete the implementation, making the project easy to deploy on the store floor.

Warehousing and Distribution

DecisionPoint has experience helping large retailers, warehouses and third-party logistics 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, Voice, Hands-Free, and Voice are all components of a system that provide value. DecisionPoint assists our customers 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, 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 and represents opportunity for growth in 2020 and beyond. Continuous investment in new systems and capabilities provides DecisionPoint with potentially significant opportunity via account expansion and new account acquisition, including the Repair Services we are providing to so many of our key customers in all verticals.

Field Sales/Service

In 2019 and 2020, DecisionPoint has and expects to roll-out a new tablet system for the field representatives of Mission Linen Supply. DecisionPoint co-developed the software hand-in-hand with Mission Linen Supply’s operations team that will dramatically improve the efficiencies of the Field reps and make it easier for them to record deliveries, pick-ups and transact sales on the spot. This has been a multi-year project now in its second lifetime, which continues to evolve and improve their competitive position. We are committed to our customers and their success. The field sales/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 no matter how technology may change and evolve. DecisionPoint intends to provide its complete line of services, including custom or packaged software solutions to these markets, representing another area of potential growth.

FOCUS ON SERVICES

Lifecycle Management

DecisionPoint seeks to focus on the services intended to help our customers maximize the life of their IT assets. When OEM’s 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 that 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 and growth. DecisionPoint’s project management team has handled nationwide retail point of sale deployments and a myriad of other projects that augment our customers 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 with a keen eye for detail and a precise execution of the SOW’s we commit to execute.

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:

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Consulting – Solution Design & Business Process Review

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Technology Acquisition

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Project Management

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Software Integration and Development

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Deployment (depot and on-site)

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Repair Services (depot and on-site)

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Service Desk (tier 2 technical support

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Reverse logistics & End of Life (EOL) disposal services

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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

Unlike the market for standardized business software such as email or accounting, the market for enterprise mobile software is more 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.

Resold specialized ISV applications: The software produced by specialized ISVs 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 or by the ISV themselves under contract with DecisionPoint.

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

We value the relationship we have with our customers and understand the need for partners who add value to their businesses. We focus on key operational elements intended to resonate with our customers business needs, creating long term relationships that are the Company’s life blood.

In 2019, Kaiser Permanente and Pitney Bowes accounted for approximately 24% and 11% of our net sales, respectively. No other single customer in 2019 accounted for more than 10% of net sales.

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 vs. buying a product. Many competitors in this space compete on-line at low margins. We work closely with our strategic partners and receive best in class discounts, rebates, and support due to the value we present to the customer.

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

	●	*CDW* – CDW provides thousands of products as a general IT supplier. They have an internal sales team that pairs with an external sales team. In the AIDC space they have limited capability/ability to provide value add services.
	●	*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. Denali Advanced Integration partners with major mobility vendors Zebra, Honeywell, and Datalogic.
	●	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 VARs and Sis to provide platform design, integration and maintenance, end users typically do not place major purchase orders with such resellers.

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 the Company and therefore we take steps to protect those assets. However, because of the nature of our business and assets we have not sought patent or trademark protection of our intellectual property assets.

Employees

As of August 12, 2020, we had a total of approximately 80 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 that we will begin to file, along with all other reports and amendments filed with or furnished to the SEC, will be 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. The information on our website is not part of this prospectus or any report 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.

DESCRIPTION OF PROPERTY

Our company headquarters and executive offices are located in Irvine, California, where we lease approximately 10,000 square feet.

We believe that our facilities are adequate for our current needs.

MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our stock is quoted on the OTC Pink Market under the symbol “DPSI.” We were previously quoted over-the-counter until early 2018. There are 13,576,223 shares of our Common Stock outstanding. The information regarding public transactions involving our Common Stock reflects prices between dealers, and does not include retail markup, markdown, or commission, and may not represent actual transactions.

As of August 12, 2020, our Common Stock closed at $1.50 per share, as quoted on OTC Pink Market.

The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to a few exceptions which we do not meet. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.

There are currently 917,963 outstanding options and 1,147,548 outstanding warrants to purchase DecisionPoint common stock. We do not have any convertible debentures outstanding that permit the holder to convert the outstanding obligation into shares of our common stock.

The number of holders of record of shares of our common stock is 330.

There have been no cash dividends declared on our common stock. Dividends are declared at the sole discretion of our Board of Directors, subject to certain restrictions.

We currently have in place an equity compensation plan. A total of 2,200,000 shares of Common Stock are reserved for issuance under the 2014 Plan. The 2014 Plan provides that the Company may grant or award to eligible recipients various forms of equity compensation awards, including incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonus awards and other performance compensation. As of the date of this prospectus, there are 917,963 outstanding options to purchase shares of our common stock pursuant to the 2014 Plan. 232,118 shares of our common stock remain available for future grant or issuance under the 2014 Plan.

Substantially all of our outstanding shares of common stock, including all of the outstanding shares being registered hereby, are restricted or held by affiliates. These shares may be resold publicly in the United States only if they are subject to an effective registration statement under the Securities Act or pursuant to an exemption from the registration requirement such as that provided by Rule 144 promulgated under the Securities Act. In general, a person (or persons whose shares are aggregated) who at the time of a sale is not, and has not been during the three months preceding the sale, an affiliate of ours and has beneficially owned our restricted securities for at least six months may be entitled to sell the restricted securities without registration under the Securities Act, subject only to the availability of current public information about us, and will be entitled to sell restricted securities beneficially owned for at least one year without restriction. Persons who are our affiliates and have beneficially owned our restricted securities for at least six months may sell a number of restricted securities within any three-month period that does not exceed 1% of the then outstanding common shares of the same class. Sales by our affiliates under Rule 144 are also subject to certain requirements relating to manner of sale, notice and the availability of current public information about us. We cannot estimate the number of shares of our Common Stock that our existing stockholders will elect to sell under Rule 144.

Management

The following table sets forth the names, ages and positions of our executive officers, key employees and directors as of the date of this prospectus.

Name	Age	Position
Steve Smith	65	Chief Executive Officer and Director
Melinda Wohl	49	Vice President, Finance and Administration
Dave Peddemors	50	Vice President, Sales and Marketing
Robert Schroeder (1)(2)(3)	54	Director
Stanley Jaworski (2)(3)	70	Director and Chairman of the Board
Richard Bravman	65	Director
Michael Taglich (2)(3)	55	Director
John Guttilla (1)	64	Director

(1)

Member of the audit committee.

(2)

Member of the compensation committee.

(3)

Member of the nominating and corporate governance committee.

Executive Officers

Steve Smith, Chief Executive Officer and Director. Mr. Smith has been serving as Chief Executive Officer and as a director since April 11, 2016. Mr. Smith started his career as a sales account manager with Burroughs Corporation in 1977, assuming the role of Zone Manager less than two years later. He joined Telex Computer Products in 1981, and progressed through a series of sales and management roles over the following nine years, consistently earning recognition as a leading performer, including seven times as a “Millionaires Club” member. Mr. Smith began his focus on the AIDC industry in 1991, when he joined Ericsson Communications as Director of Sales and Marketing, with responsibilities over a pioneering mobile computing product there. He joined Symbol Technologies in 1995, as its Director of Business Development for its newly formed Transportation & Logistics business unit. Mr. Smith’s leadership contributions in that and a subsequent role as VP, Global Accounts, were instrumental in the emergence of this sector as a leading growth engine for Symbol. In recognition of those accomplishments, Mr. Smith was promoted to the position of Division VP and GM in 2002. Starting in 2006 Mr. Smith served as Sr. Vice President, Worldwide Sales and Services at Intelleflex, a Silicon Valley-based company delivering innovative solutions around radio frequency identification technologies, building out its go-to-market team and strategies from the company’s earliest stages, and securing major wins, including with The Boeing Company. Most recently, he has served in key sales leadership roles in Motorola Solutions and Zebra Technologies, immediate past and current owners of the former Symbol Technologies business, with responsibilities for global accounts such as The Coca-Cola Company and PepsiCo.

Melinda Wohl, Vice President, Finance and Administration. Ms. Wohl is the Vice President, Finance and Administration. Melinda brings over 20 years of accounting experience in the technology industry and has been a member of the DecisionPoint leadership team since 2004. Ms. Wohl is responsible for all aspects of Accounting, Finance, Human Resources and Payroll from the Company’s headquarters in Irvine, California. Prior to working for DecisionPoint, Ms. Wohl served as Corporate Controller for Abracon Corporation, a leading global manufacturer of electronic components. A California native, Melinda graduated with a Bachelor of Arts degree with an emphasis in Finance from California State University Fullerton.

David Peddemors, Vice President, Sales and Marketing. David Peddemors is the Vice President, Sales and Marketing. David joined DecisionPoint in May of 2019 and was tasked with the mission of growing sales and developing the modern marketing mechanisms that will drive growth for the corporation. Mr. Peddemors has held various sales and sales management roles with Avery Dennison, Psion Teklogix, Motorola Solutions, and Zebra Technologies. Mr. Peddemors’ career has been focused on solutions that incorporate rugged technologies, RFID, software, and systems solutions.

Directors

Stanley Jaworski, Director and Chairman of the Board. Stanley P. Jaworski, Jr. became a director October 3, 2014. He has served as Chairman since February 2016. Mr. Jaworski is VP Marketing for the Comodo Group, an internet security company. He was Vice President Marketing for the Americas of Motorola Solutions, Inc. (NYSE:MSI) from 2009 until May 2014. From 2007 to 2009, Mr. Jaworski was Chief Marketing Officer of VBrick Systems, Inc., which provides enterprise Internet protocol video solutions for corporate, education, worship, media and government markets worldwide, and from 2005 to 2007, he was Vice President, Worldwide Channel Marketing, of NetApp, Inc., a computer storage and data management company.

Richard Bravman, Director. Richard Bravman became a director on February 24, 2016. Mr. Bravman is an entrepreneurial leader with over 37 years of functional, general management, and board level experience in technology companies ranging in scale from start-up to global S&P 500 public companies, and across the growth stages in between. Mr. Bravman spent the first 25 years of his career in a variety of roles at Symbol Technologies (recently acquired by Zebra Systems). He joined in 1978 as its fifth employee, held numerous positions with increasing responsibilities, and most recently served as the company’s vice chairman and CEO. Mr. Bravman formed Coastal Ventures in 2004 and serves as its principal partner, providing strategic consulting and board services to the executive management of emerging and early stage technology companies, and to their investors. He currently also serves as COO of Affinity Solutions, an industry leader in precision marketing platform solutions.

Michael Taglich, Director. Mr. Taglich has served as a director since October 2014. Mr. Taglich has been President of Taglich Brothers, Inc., since its founding in 1992. Taglich Brothers is a New York-based full-service securities brokerage firm specializing in the micro-cap segment of the public securities markets. He is currently the Chairman of the Board of Air Industries Group Inc., a publicly traded aerospace and defense company (NYSE AIRI). He also serves on the board of BioVentrix, Inc., a privately held medical device company whose products are directed at heart failure treatment. He also serves as a director on a number of other public and private companies, including Bridgeline Digital, Inc. (NASDAQ BLIN) and privately held Icagen Inc., a drug screening company. Mr. Taglich brings extensive professional experience which spans various aspects of senior management, including finance, operations and strategic planning. Mr. Taglich received a Bachelor’s Degree in Business Administration from New York University.

John Guttilla, Director. John Guttilla became a director on October 3, 2014. He is a Partner in the accounting firm of RotenbergMeril where he is a member of the firm’s management committee and director of the firm’s Financial Services Department. He is also a director and Chairman of the Audit Committee of Orchids Paper Products Company (formerly NYSE MKT: TIS). Mr. Guttilla is a certified public accountant and holds a B.S. degree in Accounting from Fordham University and a Master’s in Taxation from St. John’s University.

Robert Schroeder, Director. Mr. Schroeder was elected to the Board of Directors on November 18, 2013, after being nominated to the board of directors, in connection with the Company’s sale of its then outstanding Series E Preferred Stock. Mr. Schroeder served as Chairman of the Board from October 2014 until February 2016. He currently serves as the Vice President of Investment Banking of Taglich Brothers and specializes in advisory services and capital raising for small public and private companies. Prior to that, Mr. Schroeder served as Senior Equity Analyst publishing sell-side research on publicly traded companies. Mr. Schroeder has been with Taglich since 1993. Prior to joining Taglich, Mr. Schroeder served in various positions in the brokerage and public accounting industries. Mr. Schroeder received a B.S. degree in accounting and economics from New York University. He currently serves on the board of directors of Air Industries Group, a publicly traded manufacturer of aerospace parts and assemblies. He also currently serves on the board of publicly traded Intellinetics, Inc., a provider of cloud-based enterprise content management solutions. He became Interim Chairman of the Board as of the close of business on October 3, 2014 and Chairman on November 10, 2014.

Code of Business Conduct and Ethics

The Board has adopted a Code of Business Conduct and Ethics that is applicable to DecisionPoint and to all our directors and officers and persons performing similar functions, including our principal executive officer and principal financial officer. A copy of the Company’s Code of Ethics may be obtained on our website at decisionpt.com/code-of-business-ethics/. We intend to disclose future amendments to such code, or any waivers of its requirements, applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions or our directors on our website identified above. The inclusion of our website address in this prospectus does not include or incorporate by reference the information on our website into this prospectus.

Board Leadership Structure and Role in Risk Oversight

We have a Board leadership structure whereby the positions of Chairman of the Board and Chief Executive Officer are separate. We believe this structure provides the Board with independent leadership and oversight of management and allows the Chief Executive Officer to concentrate on the Company’s business operations.

Our Board is comprised of six directors, four of whom are independent directors. All of our independent directors are highly accomplished and experienced business leaders in their respective fields, who have demonstrated leadership in significant enterprises and are familiar with board processes. We believe the current Board leadership structure facilitates effective communication, oversight and governance of the Company consistent with the best interests of the Company’s shareholders and other stakeholders.

The Board has delegated responsibility for the oversight of specific risks to Board committees as follows:

	●	The Audit Committee oversees our risk policies and processes relating to the financial statements and financial reporting processes, as well as key credit risks, liquidity risks, market risks and compliance, and the guidelines, policies and processes for monitoring and mitigating those risks.
	●	The Compensation Committee oversees the compensation of our chief executive officer and our other executive officers and reviews our overall compensation policies for employees.
	●	The Nominating and Corporate Committee oversees the nomination of candidates to the Board and risks related to our governance structure and processes.

Director Independence

We are not currently listed on a national securities exchange or in an inter-dealer quotation system that has requirements that a majority of the Board be independent. However, our Board has undertaken a review of the independence of the directors and considered whether any director has a material relationship with us that could compromise his ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Board has determined that Messrs. Schroeder, Guttilla, Jaworski, Bravman and Taglich are “independent directors” as defined under the Listing Rules of the Nasdaq Stock Market.

Committees of the Board of Directors

Our Board has established an audit committee, a compensation committee and a nominating and corporate governance committee. The composition and responsibilities of each of the committees of our Board is described below. Members will serve on these committees until their resignation or until as otherwise determined by our board of directors.

Audit Committee

Our audit committee is composed of Messrs. Schroeder and Guttilla. Mr. Guttilla serves as the chairperson of our audit committee. Our Board has determined that each member of our audit committee meets the requirements for independence and financial literacy under the applicable rules and regulations of the SEC and the Listing Rules of Nasdaq. Our Board has also determined that Mr. Guttilla is an “audit committee financial expert” as defined in the rules of the SEC and has the requisite financial sophistication as defined under the Listing Rules of Nasdaq. The responsibilities of our audit committee will include, among other things:

	●	selecting and hiring the independent registered public accounting firm to audit our financial statements;
	●	overseeing the performance of the independent registered public accounting firm and taking those actions as it deems necessary to satisfy itself that the accountants are independent of management;
	●	reviewing financial statements and discussing with management and the independent registered public accounting firm our annual audited and quarterly financial statements, the results of the independent audit and the quarterly reviews, and the reports and certifications regarding internal control over financial reporting and disclosure controls;
	●	preparing the audit committee report that the SEC requires to be included in our annual proxy statement;
	●	reviewing the adequacy and effectiveness of our internal controls and disclosure controls and procedures;
	●	overseeing our policies on risk assessment and risk management;
	●	reviewing related party transactions; and
	●	approving or, as required, pre-approving, all audit and all permissible non-audit services and fees to be performed by the independent registered public accounting firm.

Our audit committee operates under a written charter, which satisfies the applicable rules and regulations of the SEC and the Listing Rules of Nasdaq.

Compensation Committee

Our compensation committee is composed of Messrs. Jaworski, Schroeder and Taglich. Mr. Schroeder serves as the chairperson of our compensation committee. Our Board has determined that each member of our compensation committee meets the requirements for independence under the applicable rules and regulations of the SEC and listing standards of Nasdaq. Each member of the compensation committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act. The purpose of our compensation committee will be to oversee our compensation policies, plans and benefit programs and to discharge the responsibilities of our Board relating to compensation of our executive officers. The responsibilities of our compensation committee will include, among other things:

	●	reviewing and approving or recommending to the Board for approval compensation of our executive officers and directors;
	●	overseeing our overall compensation philosophy and compensation policies, plans and benefit programs for service providers, including our executive officers;
	●	reviewing, approving and making recommendations to our Board regarding incentive compensation and equity plans; and
	●	administering our equity compensation plans.

Our compensation committee will operate under a written charter, to be effective prior to the completion of this offering, which satisfies the applicable rules and regulations of the SEC and the listing standards of Nasdaq.

Corporate Governance and Nominating Committee

The corporate governance and nominating committee are composed of Messrs. Jaworski, Schroeder and Taglich. Mr. Schroeder serves as chairperson of our corporate governance and nominating committee. Our Board has determined that all members of our nominating and corporate governance committee meet the requirements for independence under the applicable rules and regulations of the SEC and Listing Rules of Nasdaq. The responsibilities of our nominating and corporate governance committee will include, among other things:

	●	identifying, evaluating and selecting, or making recommendations to our Board regarding, nominees for election to our Board and its committees;
	●	evaluating the performance of our Board and of individual directors;
	●	considering and making recommendations to our Board regarding the composition of our Board and its committees; and
	●	developing and making recommendations to our Board regarding corporate governance guidelines and matters.

Our nominating and corporate governance committee will operate under a written charter, to be effective prior to the completion of this offering, which satisfies the applicable rules and regulations of the SEC and the listing standards of Nasdaq.

Involvement in Certain Legal Proceedings

Mr. Guttilla previously served on the Board of Directors of Orchids Paper Products Company. In April 2019, Orchids Paper Products Company and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). Except for Mr. Guttilla, to our knowledge, during the last ten years, none of our directors and executive officers has:

	●	Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
	●	Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.
	●	Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.
	●	Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
	●	Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Family Relationships

There are no family relationships between or among any of our directors or executive officers and any other directors or executive officer.

Executive and Director Compensation

Our named executive officers for the year ended December 31, 2019, consisting of our principal executive officer and the next two most highly compensated executive officers, were:

●

Steve Smith, Chief Executive Officer;

●

Melinda Wohl, Vice President, Finance and Administration; and

●

David Peddemors, Vice President, Sales and Marketing.

Summary Compensation Table

The following table provides information regarding the compensation of our named executive officers during the years ended December 31, 2019 and December 31, 2018.

Name and Principal Position		Salary ($)		Bonus ($)(1)		Stock Awards ($)(2)		Option Awards ($)(3)		Non-Equity Incentive Plan Compensation ($)(4)		All Other Compensation ($)(5)		Total ($)
Steve Smith	2019		385,417		—		249,000		—		90,895		11,200		736,512
Chief Executive Officer	2018		350,000		—		—		—		—		11,000		11,000
Melinda Wohl	2019		174,933		—		—		—		31,850		7,514		214,297
Vice President of Finance	2018		173,687		—		—		7,750		—		6,951		188,388
David Peddemors (5)	2019		94,886		88,360		—		39,500		—		3,179		225,925
Vice President of Sales and Marketing

(1)

Amount reflects a discretionary cash bonus for individual performance.

(2)

Amounts reflect the grant date fair value of an unrestricted stock award granted to Mr. Smith in accordance with FASB ASC No. 718.

(3)

Amounts reflect the grant date fair value of stock options granted to an officer and in accordance with FASB ASC No. 718.

(4)

Amounts represent cash-based incentives.

(5)

Amounts represent the Company’s 401(k) match.

(6)

Mr. Peddemors was hired in May 2019.

Narrative to Summary Compensation Table

Except for our standard 401(k) plan available to employees, there are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers, in the past have, and in the future may receive stock options or restricted stock at the discretion of our board of directors in the future. Equity awards or stock options may be granted at the discretion of our board of directors from time to time. Certain executives are eligible for cash-based incentives for performance measures of net sales and EBITDA.

Annual Incentive Cash Bonus

The Compensation Committee approved annual cash bonuses based on performance measures of net sales and EBITDA, or net income before interest expense, taxes, depreciation and amortization.

Minimum, target and maximum performance thresholds were established for each of the performance measures. No bonuses are earned unless the performance exceeds the minimum threshold.

The following table shows the performance measure thresholds for each measure in 2019:

	Performance Threshold
	Minimum		Target		Maximum
Net sales (in millions)	$	34.5	$	46.5	$	61.2
EBITDA (in millions)	$	2.0	$	2.7	$	3.6

The following table represents the percentage of the respective executive’s base salary that would be earned upon achievement of the applicable performance thresholds.

	Steve Smith			Melinda Wohl
Minimum		0	%		0	%
Target		40	%		20	%
Maximum		80	%		40	%

Outstanding Equity Awards at Fiscal Year End

The following table sets forth information regarding outstanding equity awards held by our named executive officers as of December 31, 2019:

		Stock Option Awards
Name	Grant Date	Number of Securities Underlying Unexercised Stock Options Exercisable (#)		Number of Securities Underlying Unexercised Stock Options Unexercisable (#)		Option Exercise Price ($)		Option Expiration Date
Melinda Wohl	6/18/2018		14,583		10,417		0.50	6/18/2023
	10/27/2016		25,000		—		0.94	10/27/2021
	6/15/2011		28		—		1,084.90	6/15/2021
David Peddemors	12/31/2019		—		50,000		0.83	12/31/2024

Executive Employment Arrangements

In 2019, the Company was party an employment agreement with Mr. Smith as discussed below.

Employment Agreement with Mr. Smith

On March 25, 2019, we entered into an amended employment agreement with Mr. Smith with respect to his continuing employment with us. The agreement provides a fixed term of employment commencing on April 1, 2019 through March 31, 2022. The employment agreement provides for an annual base salary of $400,000 increasing to $410,000 on the first anniversary and $420,000 on the second anniversary of the effective date. Pursuant to the agreement, Mr. Smith is eligible for a cash incentive bonus based on the Company achieving performance measures of sales and EBITDA.

In addition, Mr. Smith was granted 700,000 shares of restricted common stock. The shares immediately vested upon grant on the effective date.

None of the other executive officers have any individual agreements with the Company.

Potential Payments Upon Termination or Change in Control

Under the terms of Mr. Smith’s employment agreement, if the Company terminates Mr. Smith without “cause” or in result of a “change in control”, the Company agreed to provide a severance payment equal to 12 months of the annual base salary on the date of termination. As of December 31, 2019, potential severance payments upon termination or change in control was $400,000.

None of the other executive officers are entitled to payments in connection with a termination or change in control.

Director Compensation

Our non-employee directors receive an annual cash retainer of $18,000 for their service on our board. In addition, Mr. Jaworski received an additional $23,250 for serving as Chairman of the Board.

Annual service for retainer purposes relates to the approximate 12-month period between annual meetings of our stockholders and all retainers are paid in quarterly installments. A prorated annual retainer will be paid to any person who becomes a member of our board, a committee chair or a member of any committee on a date other than the date of the annual meeting of our stockholders.

The following table sets forth the independent director compensation payments made during the year ended December 31, 2019. None of the directors received equity awards in 2019.

Name	Fees Earned or Paid in Cash ($)
Stanley Jaworski		41,250
Richard Bravman		18,000
John Guttilla		18,000
Michael Taglich		18,000
Robert Schroeder		18,000

Certain Relationships and Related Party Transactions

Other than the director and executive officer compensation arrangements discussed above in the sections titled “Management” and “Executive Compensation”, there has been no transaction since January 1, 2019, or any currently proposed transaction, in which:

	●	we have been or are to be a participant;
	●	the amount involved exceeded or will exceed the lesser of (i) $120,000 or (ii) 1% of the average of the Company’s total assets at year-end for the last two completed fiscal years; and
	●	any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock, or any immediate family member of or person sharing the household with any of these individuals or entities, had or will have a direct or indirect material interest.

Control by Officers and Directors

Our officers and directors and their affiliates beneficially own, in the aggregate, approximately 23.2% of our outstanding common stock as of August 13, 2020. As a result, in certain circumstances, these stockholders acting together may be able to determine matters requiring approval of our stockholders, including the election of our directors, or they may delay, defer or prevent a change in control of us. See the section of this prospectus captioned “Security Ownership of Certain Beneficial Owners and Management” below.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of August 13, 2020, as adjusted to reflect the sale of common stock offered by us in this offering, for:

	●	each person, or group of affiliated persons, who we know to beneficially own more than five percent (5%) of our common stock;
	●	each of our named executive officers;
	●	each of our directors and director nominees; and
	●	all of our executive officers and directors as a group.

The percentage of beneficial ownership information shown in the table prior to this offering is based on 13,576,223 shares of common stock outstanding as of August 13, 2020 and assumes no participation in this offering by the parties below.

Information with respect to beneficial ownership has been furnished by each director, officer or beneficial owner of more than five percent (5%) of our common stock. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of our common stock issuable pursuant to the exercise of stock options that are either immediately exercisable or exercisable within sixty (60) days of August 13, 2020. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.

Except as otherwise noted below, the address of each of the individuals and entities named in the table below is c/o DecisionPoint Systems, Inc., 8697 Research Drive, Irvine, CA 92618. Beneficial ownership representing less than 1% is denoted with an asterisk (*).

	Shares of Common Stock Beneficially Owned		%
Named Executive Officers and Directors:
Michael N. Taglich ⁽¹⁾		1,824,140		13.4	%
Steven Smith		776,520		5.7	%
Robert Schroeder ⁽²⁾		317,056		2.3	%
Richard Bravman ⁽³⁾		103,941		*
Stanley P. Jaworski, Jr. ⁽⁴⁾		123,941		*
Melinda Wohl ⁽⁵⁾		41,813		*
John Guttilla ⁽⁶⁾		85,613		*
David Peddemors ⁽⁷⁾		8,833		*
All current directors and executive officers as a group (8 persons)		3,281,857		24.2	%

5% Stockholders
Robert Taglich ⁽⁸⁾ 37 Main Street Cold Spring Harbor, NY 11724		1,043,607		7.7	%

Represents beneficial ownership of less than one percent (1%) of the outstanding common stock.

(1)	Includes: Warrants exercisable to acquire 113,479 shares at $1.03 per share, warrants exercisable to acquire 141,805 shares at $0.50 per share and warrants exercisable to acquire 15,750 shares at $0.70 per share. Also includes options to acquire 35,000 shares of common stock.

(2)

Includes: Warrants exercisable to acquire 102,121 shares at $1.03 per share, warrants exercisable to acquire 115,820 shares at $0.50 per share and warrants exercisable to acquire 15,750 shares at $0.70 per share. Also includes options to acquire 35,000 shares of common stock and 53,615 shares of common stock directly owned by Mr. Schroeder.

(3)	Consists of options to acquire to purchase 103,941 shares of common stock that may be exercised within 60 days of August 13, 2020.

(4)	Consists of options to acquire to purchase 123,941 shares of common stock that may be exercised within 60 days of August 13, 2020.

(5)	Includes: 130 shares of common stock and options exercisable to acquire 41,693 shares of common stock.

(6)	Consists of options to acquire 35,000 shares of common stock that may be exercised within 60 days of August 13, 2020 and 50,613 shares of common stock.

(7)	Consists of options to acquire 6,250 shares of common stock. Does not include options to 43,750 shares of commons stock that are not exercisable within 60 days of August 13, 2020.

(8)	Includes: Warrants exercisable to acquire 92,847 shares at $1.03 per share, warrants exercisable to acquire 141,805 shares at $0.50 per share and warrants exercisable to acquire 15,750 shares at $0.70 per share.

Legal Matters

The validity of the issuance of the shares of common stock offered hereby will be passed upon for us by Polsinelli PC, Chicago, Illinois.

Experts

The consolidated financial statements of DecisionPoint as of December 31, 2019 and 2018 included in this prospectus have been so included in reliance on the report of Haskell & White LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

Where You Can Find More Information

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of Common Stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

We will begin to file annual, quarterly and special reports and other information with the SEC. Our filings with the SEC will be available to the public on the SEC’s website at www.sec.gov. Those filings will also be available to the public on, or accessible through, our corporate website at: www.decisionpt.com. You may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information we file with the SEC or contained on or accessible through our corporate website or any other website that we may maintain is not part of this prospectus or the registration statement of which this prospectus is a part.

DecisionPoint Systems, Inc.

Index to Consolidated Financial Statements

	Page
Audited Annual Financial Statements

Report of Independent Registered Public Accounting Firm	F-2
Financial Statements:
Consolidated Balance Sheets	F-3
Consolidated Statements of Income and Comprehensive Income	F-4
Consolidated Statements of Stockholders’ Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7

Unaudited Interim Financial Statements

Financial Statements:
Consolidated Balance Sheets (unaudited)	F-24
Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)	F-25
Consolidated Statements of Stockholders’ Equity (unaudited)	F-26
Consolidated Statements of Cash Flows (unaudited)	F-27
Notes to Consolidated Financial Statements (unaudited)	F-28

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

DecisionPoint Systems, Inc.

Irvine, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of DecisionPoint Systems, Inc. (the “Company”) as of December 31, 2019 and 2018, and 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 referred to as 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, 2019 and 2018, 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.

Changes in Accounting Principles

As described in Note 2 to the consolidated financial statements, effective January 1, 2018, the Company adopted Financial Accounting Standards Board, ASU No. 2014-09, Revenue from Contracts with Customers, using the modified retrospective approach. In addition, as described in Notes 2 and 12 to the consolidated financial statements, effective January 1, 2019, the Company adopted Financial Accounting Standards Board, ASU No. 2016-02, Leases, using the modified retrospective approach.

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.

HASKELL & WHITE LLP

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

Irvine, California

May 28, 2020

F-2

DecisionPoint Systems, Inc.

Consolidated Balance Sheets

(in thousands, except per share data)

	December 31,
	2019			2018
ASSETS
Current assets:
Cash	$	2,620		$	2,450
Accounts receivable, net		8,710			8,190
Inventory, net		3,825			356
Deferred costs		2,201			1,966
Prepaid expenses and other current assets		268			141
Total current assets		17,624			13,103
Operating lease assets		516			—
Property and equipment, net		239			140
Deferred costs, net of current portion		1,258			746
Deferred tax assets		2,659			2,924
Intangible assets, net		2,394			3,127
Goodwill		6,990			6,990
Other assets, net		19			48
Total assets	$	31,699		$	27,078
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,589		$	6,704
Accrued expenses and other current liabilities		2,222			2,119
Deferred revenue		3,630			3,811
Line of credit		3,177			3,196
Current portion of debt		144			422
Due to related parties		124			108
Current portion of operating lease liabilities		140			—
Total current liabilities		20,026			16,360
Deferred revenue, net of current portion		1,979			1,079
Long-term debt		390			1,488
Noncurrent portion of operating lease liabilities		388			—
Other		—			452
Total liabilities		22,783			19,379
Commitments and contingencies (Notes 12 and 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; 13,576 and 12,875 shares issued and outstanding, respectively		14			13
Additional paid-in capital		38,142			37,817
Accumulated deficit		(29,240	)		(30,131	)
Total stockholders’ equity		8,916			7,699
Total liabilities and stockholders’ equity	$	31,699		$	27,078

See Accompanying Notes to the Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm.

F-3

DecisionPoint Systems, Inc.

Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share data)

	Year Ended December 31,
	2019		2018
Net sales:
Product	$	31,990	$	26,009
Service		11,899		9,149
Net sales		43,889		35,158
Cost of sales:
Product		25,866		21,614
Service		7,267		6,287
Cost of sales		33,133		27,901
Gross profit		10,756		7,257
Operating expenses:
Sales and marketing expense		4,907		3,341
General and administrative expenses		3,999		3,433
Total operating expenses		8,906		6,774
Operating income		1,850		483
Interest expense		649		391
Income before income taxes		1,201		92
Income tax expense (benefit)		310		(3,883	)
Net income and comprehensive income attributable to common shareholders	$	891	$	3,975
Earnings per share attributable to shareholders:
Basic	$	0.07	$	0.42
Diluted	$	0.06	$	0.35
Weighted average common shares outstanding
Basic		13,415		9,504
Diluted		15,341		11,328

See Accompanying Notes to the Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm.

F-4

DecisionPoint Systems, Inc.

Consolidated Statements of Changes in Stockholder’s Equity

(in thousands, except per share data)

	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2017		6,013	$	6	$	34,815	$	(34,161	)	$	660
Cumulative-effect adjustment from adoption of ASC 606 (Note 2)		—		—		—		55			55
Net income		—		—		—		3,975			3,975
Issuance of common stock in connection with private placement		6,336		6		2,655		—			2,661
Issuance of common stock in connection with private placement of subordinated debt		525		1		263		—			264
Share-based compensation expense		—		—		83		—			83
Exercise of stock options		1		—		1		—			1
Balance at December 31, 2018		12,875		13		37,817		(30,131	)		7,699
Net income		—		—		—		891			891
Common stock issued to officer (Note 10)		700		1		—		—			1
Share-based compensation expense		—		—		324		—			324
Exercise of stock options		1		—		1		—			1
Balance at December 31, 2019		13,576	$	14	$	38,142	$	(29,240	)	$	8,916

See Accompanying Notes to the Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm.

F-5

DecisionPoint Systems, Inc.

Consolidated Statements of Cash Flows

(in thousands)

	Years Ended December 31,
	2019			2018
Cash flows from operating activities
Net income	$	891		$	3,975
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		809			689
Amortization of deferred financing costs and note discount		304			57
Share-based compensation expense		324			83
Acquisition earn-out adjustment		(110	)		60
Deferred income taxes, net		265			(3,910	)
Allowance for doubtful accounts		5			(14	)
Changes in operating assets and liabilities:
Accounts receivable		(503	)		(1,743	)
Inventory, net		(3,469	)		250
Deferred costs		(746	)		(287	)
Prepaid expenses and other current assets		(148	)		36
Other assets, net		21			(29	)
Accounts payable		4,047			1,185
Accrued expenses and other current liabilities		275			23
Due to related parties		16			35
Operating lease liabilities		(163	)		—
Deferred revenue		717			1,417
Net cash provided by operating activities		2,535			1,827
Cash flows from investing activities
Purchases of property and equipment		(175	)		(84	)
Cash paid for Royce acquisition, net of cash acquired		(500	)		(4,189	)
Net cash used in investing activities		(675	)		(4,273	)
Cash flows from financing activities
Repayment of term debt		(1,636	)		(385	)
Line of credit		(19	)		(67	)
Proceeds from issuance of term debt		—			2,250
Debt issuance costs		(36	)		(165	)
Proceeds from issuance of common stock		—			3,168
Common stock issuance costs		—			(507	)
Proceeds from exercise of stock options		1			1
Net cash (used in) provided by financing activities		(1,690	)		4,295
Change in cash and cash equivalents		170			1,849
Cash and cash equivalents, beginning of year		2,450			601
Cash and cash equivalents, end of year	$	2,620		$	2,450
Supplemental disclosures of cash flow information
Cash paid for interest	$	412		$	325
Cash paid for income taxes		113			17
Supplemental disclosure of non-cash activities
Earn-out related to acquisition of Royce	$	—		$	1,050
Disposals of property and equipment		—			2
Fair value of warrants issued in connection with private placement offering		—			634
Fair value of warrants issued in connection with private placement of subordinated notes		—			53
Leased assets obtained in exchange for new operating lease liabilities		527			—

See Accompanying Notes to the Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm.

F-6

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

Note 1: Description of Business

DecisionPoint Systems, Inc., which we sometimes refer to as the company, we or us, is an enterprise mobility systems integrator that sells, installs, deploys and repairs mobile computing and wireless systems that are used both within a company’s facilities and in the field. These systems generally include mobile computers, mobile application software, and related data capture equipment including bar code scanners and radio frequency identification (“RFID”) readers. We also provide professional services, consulting, staging, kitting, deployment, maintenance, proprietary and third-party software and software customization as an integral part of our customized solutions for our customers. The suite of products utilizes the latest technologies to make complex mobile technologies easy to use, understand and keep running within all vertical markets such as; merchandising, sales and delivery; field service; logistics and transportation, healthcare and warehouse management.

On June 17, 2018, we acquired 100% of the outstanding stock of Royce Digital Systems, Inc. (“RDS”), located in Irvine, California for consideration of $5,601,602. RDS provides innovative enterprise print and mobile technologies, deployment services and on-site maintenance. See Note 3 for additional information.

Note 2: Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements of DecisionPoint Systems, Inc. and its subsidiaries have been prepared on an accrual basis of accounting in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”). The accompanying consolidated financial statements include the accounts of DecisionPoint Systems, Inc. and its wholly owned subsidiaries, DecisionPoint Systems International (“DPSI”), DecisionPoint Systems Group, Inc. (“DPS Group”), and Royce Digital Systems, Inc. (“RDS”). RDS was acquired on June 17, 2018 and as such, the operating results of RDS have been consolidated into our consolidated results of operations beginning June 18, 2018. Our operating segments have been aggregated into one reportable segment based on the similar nature of products and services sold and economic characteristics. All our identifiable assets are in the United States and all intercompany transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. We evaluate our estimates and assumptions on a regular basis.

Accounts Receivable

Accounts receivable are stated at net realizable value, and as such, earnings are charged with a provision for doubtful accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine an allowance based on historical write-off experience and specific account information available. Accounts receivable are reflected in the accompanying consolidated balance sheets net of a valuation allowance of $37,000 and $47,500 as of December 31, 2019 and 2018 respectively. When internal collection efforts on accounts have been exhausted, the accounts are written off by reducing the allowance for doubtful accounts and the related customer receivable.

Inventory

Deferred costs

Deferred costs consist primarily of customer-related third-party extended hardware and software maintenance services which we have paid for in advance. The costs are ratably amortized over the life of the contract, generally one to five years.

F-7

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, generally from three to five years. Leasehold improvements are recorded at cost and amortized over the shorter of the lease term or the life of the improvements. Cost incurred for repairs and maintenance are expensed as incurred. Upon retirement or sale, the cost and related accumulated depreciation and amortization of disposed assets are removed from the accounts and any resulting gain or loss is included in other expense, net.

Intangible Assets and Long-lived Assets

We evaluate our intangible and long-lived assets for impairment annually 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. We completed the qualitative assessment for impairment and determined that there was no impairment as of December 31, 2019 and 2018. There can be no assurance, however, that market conditions will not change or demand for our products will continue, which could result in an impairment of intangible and long-lived assets in the future.

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. Refer to Note 3 for further information on our intangible assets.

Goodwill

We completed our annual assessment for goodwill impairment and determined that goodwill was not impaired as of December 31, 2019 and 2018, and no adjustment was required. For the year ended December 31, 2018, we recognized additional goodwill of $1,689,263 related to a business acquisition as further described in Note 3.

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.

Fair Value Measurement

Fair value is the price that would be received from selling an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides a hierarchy for inputs used in measuring fair value that prioritize the use of observable inputs over the use of unobservable inputs, when such observable inputs are available. The three levels of inputs that may be used to measure fair value are as follows:

●

Level 1 - Quoted prices in active markets for identical assets or liabilities.

F-8

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

●

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data.

●

Level 3 - Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions and judgments made by us.

The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses, and line of credit approximate fair value due to the short-term nature of these financial instruments. The carrying amount of our debt approximates its fair value as the credit markets have not materially changed since the original borrowing dates. The estimated fair value of the reporting unit used for the annual goodwill impairment test was derived using stock sales with third parties, as well as quoted market prices (Level 2).

Business Combinations

We utilize the acquisition method of accounting for business combinations and allocates 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; and

●

Estimated liabilities assumed from the target

Revenue Recognition

We adopted Accounting Standards Updated (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” which created Topic 606 with an initial adoption date of January 1, 2018. The adoption of Topic 606 resulted in a cumulative effect adjustment that increased retained earnings by $54,597. This adjustment was associated with the deferral of contract acquisition costs. There was no change in revenues reported using this method as compared to previous guidance.

F-9

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

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. As of December 31, 2019 and December 31, 2018, we had $109,309 and $58,027, respectively, related to deferred contract acquisition costs. We recorded $35,752 and $35,277 in amortized deferred contract acquisition costs in 2019 and 2018, respectively.

F-10

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

The following table summarizes net sales by revenue source (in thousands):

	Year Ended December 31,
	2019		2018
Hardware and software	$	27,184	$	23,231
Consumables		4,806		2,778
Professional services		11,899		9,149
	$	43,889	$	35,158

Concentration of Risk

Financial instruments that potentially subject us to a concentration of credit risk consist primarily of cash and accounts receivable. All our cash balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per depositor at each financial institution. As of December 31, 2019, we had $2,013,000 on deposit in excess of the insurance limits. We have not experienced any such losses in these accounts.

For the year ended December 31, 2019, we had sales from two customers which represented 35% of total revenues. Accounts receivable from these customers at December 31, 2019 accounted for 58% of total accounts receivable. For the year ended December 31, 2018, we had sales from three customers which represented 42% of total revenues. Accounts receivable from these three customers at December 31, 2018 accounted for 50% of total accounts receivable. No other customer comprised more than 10% of revenues or accounts receivable in 2019 or 2018.

For the year ended December 31, 2019, we had purchases from two suppliers that collectively represented 73% of total purchases and 85% of accounts payable at December 31, 2019. For the year ended December 31, 2018, we had purchases from two suppliers that collectively represented 61% of total purchases and 63% of accounts payable at December 31, 2019. Loss of a significant vendor could have a material adverse effect on our operations.

Share-Based Compensation

We account for employee and director 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 employee’s requisite service period (generally the vesting period of the equity grant).

All transactions in which goods or services are the consideration received for the issuance of equity instruments to non-employees are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the estimated fair value of the equity instrument issued is the earlier of the date on which the third-party performance is complete or the date on which it is probable that performance will occur.

Employee and director stock-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, it has been reduced for estimated forfeitures. We account for forfeitures as they occur, rather than estimate expected forfeitures.

Compensation cost for stock awards, which 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.

F-11

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

Income Taxes

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act reduced the corporate tax rate to 21%, effective January 1, 2018. Also, we have elected to treat the tax effect of Global Intangible Low Tax Income (“GILTI”) as a current-period expense when incurred. We do not foresee material changes to our gross liability of uncertain tax positions within the next twelve months.

At December 31, 2019 and December 31, 2018, we had no unrecognized tax benefits that, if recognized, would affect our effective income tax rate over the next 12 months. We recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expense. As of December 31, 2019 and December 31, 2018, we had no accrued interest or penalties.

Accounting Standards Adopted in 2019

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. ASU 2017-01 is effective for us for the year ended December 31, 2019 and interim reporting periods. The effect of the adoption of this guidance did not significantly impact our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This guidance requires an entity to recognize lease liabilities and a right-of-use asset for all leases on the balance sheet and to disclose key information about the entity’s leasing arrangements. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with earlier adoption permitted. In July 2018, the FASB approved an amendment to the new guidance that allows companies the option of using the effective date of the new standard as the initial application (at the beginning of the period in which it is adopted, rather than at the beginning of the earliest comparative period) and to recognize the effects of applying the new ASU as a cumulative effect adjustment to the opening balance sheet or retained earnings. Based on the effective dates, we have adopted the new guidance at the beginning of the first quarter of fiscal 2019 using the new transition election to not restate comparative periods. We have elected the package of practical expedients upon adoption, which permits us to not reassess under the new standard our prior conclusions about lease identification, lease classification, and initial direct costs. In addition, we have elected not to separate lease and non-lease components for all real estate leases and did not elect the hindsight practical expedient.

Lastly, we elected a short-term lease exception policy, permitting it to exclude the recognition requirements of this standard from leases with initial terms of 12 months or less. Upon adoption, we recognized operating lease assets of approximately $644,000 and operating lease liabilities of approximately $654,000 on our consolidated balance sheet, with no significant change to our consolidated statements of operations or cash flows. Refer to Note 12 for further information about our lease.

F-12

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This standard amends Accounting Standards Codification 740, Income Taxes (ASC 740) to provide guidance on accounting for the tax effects of the Tax Act pursuant to Staff Accounting Bulletin No. 118, which allowed companies to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard is effective upon issuance and did not significantly impact our consolidated financial statements.

In September 2018, the FASB issued ASU No. 2018-07, Stock-based Compensation: Improvements to Nonemployee Share-based Payment Accounting, which amends the existing accounting standards for share-based payments to nonemployees. This ASU aligns much of the guidance on measuring and classifying nonemployee awards with that of awards to employees. Under the new guidance, the measurement of nonemployee equity awards is fixed on the grant date. This ASU became effective for us in the first quarter of 2019. Entities will apply the ASU by recognizing a cumulative-effect adjustment to retained earnings as of the beginning of the annual period of adoption. Our adoption of this guidance did not have a material impact on our consolidated financial statements.

Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance was initially effective for us in the first quarter of 2020. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. We believe the adoption of this ASU will not significantly impact the results of operations and financial position.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for us in the first quarter of 2020. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles–Goodwill and Other–Internal-Use Software that requires implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customer in a software licensing arrangement under the internal-use software guidance in ASC Topic 350, Intangibles–Goodwill and Other. This ASU requires a customer to disclose the nature of its hosting arrangements that are service contracts and provide disclosures as if the deferred implementation costs were a separate, major depreciable asset class. ASU 2018-15 is effective for us beginning in the first quarter of 2020. Early adoption is permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for us beginning in the first quarter of 2022. We do not expect this guidance to have a material impact on our consolidated financial statements.

Note 3: Acquisition

On June 17, 2018, we acquired 100% of the outstanding stock of Royce Digital Systems, Inc. (“RDS”), a corporation under the laws of the State of California, from its principal owner for consideration of $5,601,602. The consideration we paid is comprised of cash (including working capital adjustments) of $4,573,079 and an estimated earn-out obligation of $1,050,000 as of the acquisition date. RDS provides innovated enterprise print and mobile technologies, deployment services and on-site maintenance. RDS is located in Southern California.

This transaction was accounted for using the acquisition method pursuant to ASC Topic 805, Business Combinations. Accordingly, goodwill has been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed. The operating results for RDS have been consolidated into our results of operations beginning June 18, 2018.

F-13

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

We may be required to pay up to an undiscounted amount of $2,000,000 in consideration for RDS achieving certain levels of revenues during the first and second 12-month period post acquisition (the “earn-out payment”). The initial fair value of the earn-out payment was calculated to be $1,050,000 as of the date of the acquisition.

The estimated RDS earn-out obligation was $500,000 and $1,110,000 at December 31, 2019 and 2018, respectively. In August 2019, we paid $500,000 related to the RDS’s acquisition first year earn-out payment consideration. An adjustment of $110,000 was recorded in operating expenses in the consolidated statements of income and comprehensive income.

The allocation of the total consideration to the acquired net assets as of the acquisition date for RDS is as follows (in thousands):

Cash	$	384
Accounts receivable		1,282
Inventory		205
Other assets		9
Customer lists and relationships		3,270
Trade name		490
Deferred income tax liabilities		(959	)
Accounts payable		(400	)
Accrued expenses		(208	)
Deferred revenue		(160	)
Total fair value excluding goodwill		3,913
Goodwill		1,689
Total consideration	$	5,602

Intangible Assets

Definitive lived intangible assets related to the RDS acquisition are as follows (in thousands):

	December 31, 2019							December 31, 2018
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Customer lists and relationships	$	3,270	$	(1,104	)	$	2,166	$	3,270	$	(539	)	$	2,731
Trade name		490		(262	)		228		490		(94	)		396
	$	3,760	$	(1,366	)	$	2,394	$	3,760	$	(633	)	$	3,127

The range of useful lives and the weighted-average remaining useful life of amortizable intangible assets at December 31, 2019 is as follows:

	Expected Life	Weighted Average Remaining Useful Life
Customer lists and relationships	7-10 years	7.8 years
Trade name	3 years	1.5 years

F-14

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

The amortization expense of the definite lived intangible assets for the years remaining is as follows:

	Estimated Amortization
	(in thousands)
Year ending December 31,
2020	$	673
2021		534
2022		394
2023		290
2024		204
Thereafter		299
Total	$	2,394

Amortization expense recognized during the years ended December 31, 2019 and 2018 was $732,826 and $632,914. Amortization expense is calculated on an accelerated basis.

Note 4: Net Income Per Share

Basic net income per common share is computed by dividing the net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted net income per share is calculated similarly to basic per share amounts, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

For periods presented in which there is a net loss, potentially dilutive securities are excluded from the computation of fully diluted net loss per share as their effect is anti-dilutive. Below is a reconciliation of the fully dilutive securities effect for the years ended December 31, 2019 and 2018 (in thousands, except per share data):

	2019		2018
Net income attributable to common stockholders	$	890	$	3,975

Weighted average basic shares outstanding		13,415		9,504
Dilutive effect of stock options and restricted stock		1,926		1,824
Weighted average shares for diluted earnings per share		15,341		11,328

Basic income per share	$	0.07	$	0.42
Diluted income per share	$	0.06	$	0.35

Note 5: Property and Equipment

Property and equipment consist of the following at December 31 (in thousands):

	2019			2018
Computer equipment	$	366		$	230
Furniture and fixtures		131			114
Leasehold improvements		98			78
Property and equipment, gross		595			422
Accumulated depreciation		(356	)		(282	)
Property and equipment, net	$	239		$	140

Depreciation and amortization expense related to property and equipment for the years ended December 31, 2019 and 2018, totaled $76,000 and $56,000, respectively.

F-15

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

Note 6: Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following at December 31 (in thousands):

	2019		2018
Salaries and benefits	$	1,002	$	992
Accrued earn out obligation related to acquisition (Note 3)		500		670
Sales tax payable		269		174
Professional fees		149		133
Vendor purchases		140		51
Customer deposits		137		53
Other		25		46
Total accrued expenses and other current liabilities	$	2,222	$	2,119

Note 7: Line of Credit

In August 2016, we entered into a $6.0 million three-year revolving credit facility with Pacific Western Business Finance (“PWBF”) formerly known as CapitalSource Business Financial Group. The line of credit bears interest at the prime rate plus 1.25% (6.00% at December 31, 2019 and 6.75% as of December 31, 2018), and is secured by all our U.S. assets. In June 2018, the credit facility was amended increasing the revolving credit facility to $7.25 million and extending the term to August 2020. At December 31, 2019 and 2018, the outstanding balance on the line of credit was approximately $3.2 million. At December 31, 2019, availability under the line of credit was approximately $2.9 million, which is determined from a borrowing base calculation on our existing accounts receivable balance.

For the years ended December 31, 2019 and 2018, our interest expense on the revolving credit facility, including fees paid to secure lines of credit, totaled approximately $215,000 and $300,000, respectively.

Note 8: Term Debt

Subordinated Promissory Notes

In October 2018, we completed a private placement of subordinated promissory notes in the aggregate principal amount of $1,500,000. The notes carry an interest rate of 12% per annum, are not collateralized, and require quarterly interest payments with a maturity date of April 30, 2021. In connection with these notes, we issued warrants to the placement agent to purchase 52,500 shares of our common stock at an exercise price of $0.70 per share. The fair value of the warrants was $18,000 (See Note 10). In addition, we issued 525,000 shares of our common stock to note holders. The estimated fair value of these shares was $262,500 and such amount has been presented as a debt discount and is being amortized to interest expense through the maturity date of the notes.

In August and September 2019, we paid $1,000,000 in principal amount against the outstanding subordinated promissory notes, leaving a balance of $500,000 as of December 31, 2019. For the years ended December 31, 2019 and December 31, 2018, our interest expense on term debt, including amortization of deferred financing costs, were approximately $240,000 and $116,000, respectively.

PWBF Promissory Notes

In August 2016, we entered into a separate promissory note with PWBF with a principal amount of $500,000. The note carries an annual interest rate of prime rate plus 1.25% (6.00% as of December 31, 2019 and 6.75% as of December 31, 2018) with a maturity date of August 1, 2019. In January 2019, the note was paid in full.

In June 2018, we entered into another promissory note with PWBF with a principal amount of $750,000. The note carries an annual interest rate of prime rate plus 1.25% (6.00% at December 31, 2019 and 6.75% at December 31, 2018) with a maturity date of August 25, 2020. Principal payments are due and payable monthly as follows in 26 consecutive payments each in the amount of $20,834 beginning June 25, 2018; and one payment of $208,333 due on the maturity date of August 25, 2020.

F-16

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

We are required to maintain a financial covenant in accordance with the PWBR promissory note. The financial covenant requires a Fixed Charge Ratio not less than 1.2 to 1.0 as of each month-end, determined on a trailing 12-month basis, with “Fixed Charge Ratio” defined as (a) EBITDA (net income before interest expense, taxes, depreciation and amortization) less cash paid for income taxes, owner distributions, earnout payments and all unfinanced capital expenditures, divided by (b) the aggregate of principal and interest payments, and all other fees, costs and expenses paid or payable to PWBF related to the promissory note.

As of December 31, 2019, we were in compliance with the financial covenant.

The following table sets forth our outstanding term debt as of December 31 (in thousands):

	Maturity Date	2019			2018
Subordinated promissory notes	April 30, 2021	$	500		$	1,500
PWBF promissory note	August 25, 2020		144			604
PWBF promissory note	August 1, 2019		—			178
Less: Unamortized discount			(110	)		(372	)
Total term debt		$	534		$	1,910

Total following table sets forth future principal payments under the term debt described above are as follows (in thousands):

2020	$	144
2021		500
Total minimum payments		644
Unamortized discount and issuance costs		(110	)
Less: Current portion of note payable		(144	)
Note payable, net of current portion	$	390

Debt Discount

Discounts and costs directly related to the issuance of debt are presented against the related debt instrument and amortized over the life of the debt using the effective interest rate method as interest expense.

Total debt discount amortization was $260,000 and $30,000 for the years ended December 31, 2019 and 2018 respectively. Debt discount amortization is included in interest expense in the accompanying consolidated statements of income and comprehensive income.

Note 9: Income Taxes

The provision (benefit) for income taxes for the years ended December 31, 2019 and 2018 is as follows (in thousands):

	2019		2018
Current:
Federal	$	—	$	—
State		45		28
		45		28
Deferred:
Federal		230		(3,223	)
State		35		(688	)
		265		(3,911	)
Total income tax expense (benefit)	$	310	$	(3,883	)

F-17

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

Our deferred tax assets and liabilities are as follows (in thousands):

	2019			2018
Allowance for doubtful accounts	$	10		$	12
Inventory reserve and uniform capitalization		49			27
Accrued expenses and other liabilities		625			621
Deferred revenue		(539	)		(740	)
Other assets		117			114
Property and equipment		(19	)		5
Intangibles		99			119
Goodwill		(36	)		(36	)
Net operating loss carryforwards		2,941			3,390
Total deferred tax assets		3,247			3,512
Valuation allowance		(588	)		(588	)
Net deferred tax assets after valuation allowance	$	2,659		$	2,924

A reconciliation of the United States statutory income tax rate to the effective income tax rate for the years ended December 31, 2019 and 2018 is as follows (in thousands):

	2019			2018
Federal taxes at statutory rate	$	252		$	19
State and local income taxes		76			22
Permanent differences		—			34
Valuation allowance		(33	)		(3,891	)
Change in statutory rate		15			(67	)
Provision for income taxes	$	310		$	(3,883	)
Effective tax rate		25.9	%		>100%

In December 2017, the Tax Act was signed into law. The Act amended the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Tax Act reduced the corporate federal tax rate from a maximum of 35% to a flat 21% rate. The rate reduction took effect on January 1, 2018. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

In 2018, as a result of the reduction in the corporate income tax rate from 34% to 21% under the Tax Act, we revalued our deferred tax assets and liabilities, as well as related valuation allowances.

The Tax Act contains various other rules that may apply to us; for example, 100% bonus depreciation is allowable on certain qualifying assets placed in service after September 27, 2017, the Tax Act denies a deduction for certain entertainment expenditures incurred after December 31, 2017, and net operating losses incurred after this date are subject to certain new limitations. Our current year income tax provision takes these new rules into account to the extent they are applicable.

Our deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.

F-18

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

We have net operating loss carryforwards available in certain jurisdictions to reduce future taxable income. Future tax benefits for net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. This determination is based on the expectation that related operations will be sufficiently profitable or various tax business and other planning strategies will enable us to utilize the net operating loss carryforwards. Our evaluation of the realizability of deferred tax assets considers both positive and negative evidence. The weight given to potential effects of positive and negative evidence is based on the extent to which it can be objectively verified. As of December 31, 2019 and 2018, we recorded a valuation allowance related to the U.S. federal and state temporary items of approximately $0.6 million as it was determined it is more likely than not that we will not be able to fully use the assets to reduce future tax liabilities.

Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code under section 382. The annual limitation may result in the expiration of net operating loss carryforwards before utilization. As of December 31, 2019, we had federal and state net operating loss carryforwards of approximately $12.2 million and $7.4 million, respectively. As of December 31, 2018, we had federal and state net operating loss carryforwards of approximately $14.0 million and $7.1 million, respectively. These loss carryforwards will expire in varying amounts beginning 2025 through 2037.

We continue to remain subject to examination by U.S. federal authority for the years 2017 through 2019 and for various state authorities for the years 2016 through 2019, with few exceptions.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act permits net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Act has also made significant changes to depreciation rules and interest deduction limitation rules, among other provision. We have evaluated the provisions of the CARES Act and we do not expect that the NOL carryback provision or any other tax related provisions of the Act would result in a material benefit to us.

Note 10: Stockholders’ Equity

We are authorized to issue two classes of stock designated as common stock and preferred stock. As of December 31, 2019, we are authorized to issue 60,000,000 total shares of stock. Of this amount, 50,000,000 shares are common stock, each having a par value of $0.001 and 10,000,000 shares are preferred stock, each having a par value of $0.001.

Preferred Stock

At December 31, 2019 and 2018, there were no shares of preferred stock outstanding.

Common Stock

At December 31, 2019 and 2018, there was 13,576,223 and 12,874,973 shares of common stock outstanding, respectively.

In January 2019, we issued 1,250 shares of common stock for proceeds of $1,175 in cash related to the exercise of stock options.

In March 2019, we granted a stock award of 700,000 shares of our common stock to a certain officer. The incremental fair value of the unrestricted stock award was $249,000 and was recorded as part of selling, general and administrative expense on the consolidated statement of income and comprehensive income. We determined the fair value based upon the excess of the fair value of the stock award over the fair value of the cancelled award immediately prior to the grant date of the new award. The unrestricted stock award vested on the grant date.

In June 2018, we completed a private placement offering of our common stock selling an aggregate of 6,336,000 shares of common stock at a price of $0.50 per share for total gross proceeds of $3,168,000, which resulted in net proceeds of $2,661,000. We incurred costs associated with the transaction for accounting, legal and other fees and costs of $507,000. Such stock issuance costs have been deducted from the proceeds received in the consolidated statements of stockholders’ equity.

In October 2018, we issued 525,000 shares of common stock in conjunction with a private placement of subordinated promissory notes (Note 8). The shares were valued at $263,500.

In February 2018, we issued 1,250 shares of common stock for proceeds of $1,175 in cash related to the exercise of stock options.

F-19

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

Warrants

In connection with our common stock private placement offering in June 2018, we issued warrants to the placement agent to purchase 633,600 shares of common stock with an exercise price of $ 0.50 per share pursuant to the placement agent agreement dated April 11, 2018. The fair value of the warrants was $151,000. The fair value of the warrants were estimated using the Black-Scholes model with the following weighted average assumptions: stock price $0.50; expected term 2.5 years, 0% dividend rate, 77.69% of volatility; and a risk-free interest rate of 2.58%.

In October 2018, we issued warrants to the placement agent in connection with the private placement of subordinated notes to purchase 52,500 shares of common stock with an exercise price of $0.70 per share pursuant to the placement agent agreement dated October 11, 2018. The fair value of the warrants was $18,000. The fair value of the warrants were estimated using the Black-Scholes model with the following weighted average assumptions: stock price $0.70; expected term 2.5 years, 0% dividend rate, 79.08% of volatility; and a risk-free interest rate of 2.90%.

The following table summarizes information about our outstanding common stock warrants as of December 31, 2019:

	Date		Strike		Total Warrants Outstanding and		Total Exercise Price		Weighted Average Exercise
	Issued	Expiration	Price		Exercisable		(in thousands)		Price

Common Stock Investor Warrants	Sep-16	Sep-21	$	1.03		461,447	$	475
Placement Agent Warrants - Common Stock	Jun-18	Jun-23		0.50		633,600		317
Placement Agent Warrants - Common Stock	Oct-18	Oct-23		0.70		52,500		37
						1,147,547	$	829	$	0.72

The following table summarizes our warrant activities during the years ended December 31, 2019 and 2018:

	Outstanding Warrants
	Number of Shares			Weighted Average Exercise Price
Outstanding at January 1, 2018		466,595		$	1.99
Granted		686,100			0.52
Exercised		—			—
Forfeited / Cancelled		(5,148	)		88.02
Outstanding at December 31, 2018		1,147,547			0.72
Granted		—			—
Exercised		—			—
Forfeited		—			—
Expired		—			—
Outstanding at December 31, 2019		1,147,547		$	0.72

Note 11: Share-Based Compensation

In September 2016, we amended the 2014 Equity Incentive Plan (the “2014 Plan”) to re-load and permit 1,200,000 shares of our common stock available for issuance under the plan.

Under the 2014 Plan, common stock incentives may be granted to our officers, employees, directors, consultants, and advisors (and prospective directors, officers, managers, employees, consultants and advisors) and our affiliates can acquire and maintain an equity interest in us, or be paid incentive compensation, which may (but need not) be measured by reference to the value of the our common stock.

F-20

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

The 2014 Plan permits us to provide equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock and other stock bonus awards and performance compensation awards.

The 2014 Plan is administered by the Board of Directors, or a committee appointed by the Board of Directors, which determines recipients and the number of shares subject to the awards, the exercise price and the vesting schedule. The term of stock options granted under the 2014 Plan cannot exceed ten years. Options shall not have an exercise price less than 100% of the fair market value of our common stock on the grant date, and generally vest over a period of five years. If the individual possesses more than 10% of the combined voting power of all classes of our stock, the exercise price shall not be less than 110% of the fair market of a share of common stock on the date of grant.

During the year ended December 31, 2019 and 2018, we granted 65,000 and 105,000 stock options under the 2014 Plan.

The following table summarizes stock option activity for the year ended December 31, 2019 and December 31, 2018:

	Stock Options			Grant Date Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
						(in years)		($ in thousands)
Outstanding at January 1, 2018		946,680		$	1.80		2.4
Granted		105,000			0.58
Exercised		(1,250	)		0.94
Forfeited		(36,604	)		0.94
Outstanding at December 31, 2018		1,013,826			0.68
Granted		65,000			0.79
Exercised		(1,250	)		0.94
Forfeited		(300,863	)		0.96
Outstanding at December 31, 2019		776,713		$	0.68		3.1	$	617
Exercisable at December 31,2019		647,882		$	0.71		2.8	$	512

The total proceeds received from the exercise of stock options in 2019 and 2018 was $1,175 and $1,174, respectively.

Share-based compensation cost is measured at the grant date based on the fair value of the award. The fair values of options presented was estimated using the Black-Scholes option-pricing model with the following assumptions:

	2019			2018
Weighted average grant-date fair value per option granted	$	0.79		$	0.31
Expected option term		3.3 years			3.1-3.3 years
Expected volatility factor		98.1	%		77.8 - 79.4	%
Risk-free interest rate		1.6	%		2.7% - 2.8	%
Expected annual dividend yield		—	%		—	%

We estimate expected volatility using historical volatility of common stock of our peer group over a period equal to the expected life of the options. The expected term of the awards represents the period of time that the awards are expected to be outstanding. We considered expectations for the future to estimate employee exercise and post-vest termination behavior. We do not intend to pay common stock dividends in the foreseeable future, and therefore has assumed a dividend yield of zero. The risk-free interest rate is the yield on zero-coupon U.S. Treasury securities for a period that is commensurate with the expected term of the awards.

As of December 31, 2019, there was $89,526 of total unrecognized share-based compensation related to unvested stock options. These costs have a weighted average remaining recognition period of 2.2 years.

F-21

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

Note 12: Commitments and Contingencies

Operating Lease

As of December 31, 2019, we have one operating lease for office space and no financing leases. The impact of ASU No. 2016-02 on our consolidated balance sheet beginning January 1, 2019 was through the recognition of operating lease assets and lease liabilities for operating expenses.

We elected the practical expedient ASU 2018-11, Leases (Topic 842): Targeted Improvements which allows us to apply the transition provision for Topic 842 at our date of adoption. Therefore, we recognized and measured leases existing at January 1, 2019 (inception date). In addition, we elected the optional practical expedient permitted under the transition guidance which allows us to carry forward the historical accounting treatment for existing leases upon adoption. Lastly, we elected a short-term lease exception policy, permitting it to exclude the recognition requirements of this standard from leases with initial terms of 12 months or less. No impact was recorded to the statement of income and comprehensive income or beginning retained earnings for Topic 842.

Beginning January 1, 2019, operating ROU assets and operating lease liabilities are recognized based on the present value of lease payments, including rent increases over the lease term at commencement date. Operating leases in effect prior to January 2019 were recognized at the present value of the remaining payments on the remaining lease term as of January 1, 2019. As the lease did not include an implicit rate of return, we used our incremental borrowing rate based on lease term information available as of the adoption date in determining the present value of lease payments.

We have an operating lease for office and warehouse space of 10,325 square feet in Irvine, California with monthly payments of $14,000 and incremental borrowing rate of 6.0%. As of December 31, 2019, we had 43 months remaining on the lease with a lease liability of $528,000.

The maturity of operating lease liabilities as of December 31, 2019 are as follows (in thousands):


2020	$	167
2021		167
2022		167
2023		84
Total minimum lease payments		585
Less: Interest		(57	)
Present value of operating lease liabilities	$	528

Cash paid for amounts included in the measurement of operating lease liabilities (in thousands)	$	163
Weighted average remaining lease term (in years)		3.5 years
Weighted average interest rate		6.0	%

Employee Benefit Plan

We have a 401(k)-retirement plan. Under the terms of the plan, eligible employees may defer up to 25% of their pre-tax earnings, subject to the Internal Revenue Service annual contribution limit. Additionally, the plan allows for discretionary matching contributions by us. In 2019 and 2018, the matching contributions were 100% of the employee’s contribution up to a maximum of 4% of the employee’s eligible compensation. During the years ended December 31, 2019 and 2018, we contributed $108,000 and $139,000, respectively, to the 401(k) plan.

F-22

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

Contingencies

From time to time, we are subject to the possibility of involvement in litigation incidental to the conduct of our business. When applicable, we record accruals for contingencies when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in our opinion, individually or in the aggregate, no such lawsuits are expected to have a material effect on our consolidated financial position or results of operations.

Note 13: Subsequent Events

On January 30, 2020, the World Health Organization declared the coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including geographical areas in which we operate.

The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our customers, employees and vendors all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may impact our financial condition or results of operations is uncertain.

On April 20, 2020 and May 4, 2020, we received $740,000 and $471,000, respectively, in proceeds from loans from PWBF, which were granted pursuant to the Paycheck Protection Program of the Coronavirus Aid Relief and Economic Security Act.

F-23

DecisionPoint Systems, Inc.

Consolidated Balance Sheets

(in thousands, except per share data)

	March 31,			December 31
	2020			2019
	(unaudited)
ASSETS
Current assets:
Cash	$	3,551		$	2,620
Accounts receivable, net		6,375			8,710
Inventory, net		693			3,825
Deferred costs		2,053			2,201
Prepaid expenses and other current assets		311			268
Total current assets		12,983			17,624
Operating lease assets		482			516
Property and equipment, net		252			239
Deferred costs, net of current portion		1,303			1,258
Deferred tax assets		2,272			2,659
Intangible assets, net		2,226			2,394
Goodwill		6,990			6,990
Other assets, net		19			19
Total assets	$	26,527		$	31,699
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,901		$	10,589
Accrued expenses and other current liabilities		2,464			2,222
Deferred revenue		4,012			3,630
Line of credit		—			3,177
Current portion of debt		83			144
Due to related parties		88			124
Current portion of operating lease liabilities		140			140
Total current liabilities		13,688			20,026
Deferred revenue, net of current portion		2,109			1,979
Long-term debt		411			390
Noncurrent portion of operating lease liabilities		351			388
Total liabilities		16,559			22,783
Commitments and contingencies
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; 13,576 and 13,576 shares issued and outstanding, respectively		14			14
Additional paid-in capital		38,165			38,142
Accumulated deficit		(28,211	)		(29,240	)
Total stockholders’ equity		9,968			8,916
Total liabilities and stockholders’ equity	$	26,527		$	31,699

See Accompanying Notes to the Consolidated Financial Statements

F-24

DecisionPoint Systems, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2020		2019
Net sales:
Product	$	15,095	$	6,086
Service		3,192		2,808
Net sales		18,287		8,894
Cost of sales:
Product		12,074		4,998
Service		1,895		1,788
Cost of sales		13,969		6,786
Gross profit		4,318		2,108
Operating expenses:
Sales and marketing expense		1,644		1,097
General and administrative expenses		1,148		1,215
Total operating expenses		2,792		2,312
Operating income (loss)		1,526		(204	)
Interest expense		99		172
Income (loss) before income taxes		1,427		(376	)
Income tax expense (benefit)		398		(97	)
Net income (loss) and comprehensive income (loss) attributable to common shareholders	$	1,029	$	(279	)
Earnings (Loss) per share attributable to shareholders:
Basic	$	0.08	$	(0.02	)
Diluted	$	0.07	$	(0.02	)
Weighted average common shares outstanding
Basic		13,576		12,930
Diluted		15,642		12,930

See Accompanying Notes to the Consolidated Financial Statements

F-25

DecisionPoint Systems, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands, except per share data)

(Unaudited)

					Additional					Total
	Common Stock				Paid-in		Accumulated			Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2019		13,576	$	14	$	38,142	$	(29,240	)	$	8,916
Net income		—		—		—		1,029			1,029
Share-based compensation expense		—		—		23		—			23
Balance at March 31, 2020		13,576	$	14	$	38,165	$	(28,211	)	$	9,968

					Additional					Total
	Common Stock				Paid-in		Accumulated			Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2018		12,875	$	13	$	37,817	$	(30,131	)	$	7,699
Net loss		—		—		—		(279	)		(279	)
Common stock issued to officer		700		1		—		—			1
Share-based compensation expense		—		—		269		—			269
Exercise of stock options		1		—		1		—			1
Balance at March 31, 2019		13,576	$	14	$	38,087	$	(30,410	)	$	7,691

See Accompanying Notes to the Consolidated Financial Statements

F-26

DecisionPoint Systems, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities
Net income (loss)	$	1,029		$	(279	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		190			201
Amortization of deferred financing costs and note discount		33			53
Share-based compensation expense		23			269
Deferred income taxes, net		387			—
Allowance for doubtful accounts		7			7
Changes in operating assets and liabilities:
Accounts receivable		2,328			2,068
Inventory, net		3,129			(38	)
Deferred costs		103			148
Prepaid expenses and other current assets		(51	)		(163	)
Other assets, net		(1	)		22
Accounts payable		(3,647	)		(1,393	)
Accrued expenses and other current liabilities		240			(168	)
Due to related parties		(36	)		11
Operating lease liabilities		(42	)		—
Deferred revenue		512			41
Net cash provided by operating activities		4,204			779
Cash flows from investing activities
Purchases of property and equipment		(34	)		(14	)
Cash acquired from Royce acquisition		—			21
Net cash (used in) provided by investing activities		(34	)		7
Cash flows from financing activities
Repayment of term debt		(62	)		(240	)
Repayment of line of credit, net		(3,177	)		(1,092	)
Proceeds from exercise of stock options		—			1
Net cash used in financing activities		(3,239	)		(1,331	)
Change in cash and cash equivalents		931			(545	)
Cash and cash equivalents, beginning of year		2,620			2,450
Cash and cash equivalents, end of year	$	3,551		$	1,905
Supplemental disclosures of cash flow information
Cash paid for interest	$	61		$	139

See Accompanying Notes to the Consolidated Financial Statements

F-27

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Note 1: Description of Business

In June 2018, we acquired 100% of the outstanding stock of Royce Digital Systems, Inc. (“RDS”), located in Irvine, California. RDS provides innovative enterprise print and mobile technologies, deployment services and on-site maintenance.

Note 2: Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

We have prepared the accompanying unaudited consolidated financial of DecisionPoint Systems, Inc. and its subsidiaries on the accrual basis of accounting in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”). The accompanying consolidated financial statements include the accounts of DecisionPoint Systems, Inc. and its wholly owned subsidiaries, DecisionPoint Systems International (“DPSI”), DecisionPoint Systems Group, Inc. (“DPS Group”), and Royce Digital Systems, Inc. (“RDS”) and all intercompany accounts and transactions have been eliminated in consolidation. These unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted from these interim financial statements as permitted by SEC rules and regulations. Accordingly, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in this Form S-1 for the years ended December 31, 2019 and 2018.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows for the interim periods presented. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of results to be expected for the full fiscal year.

Use of Estimates

Revenue Recognition

F-28

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

F-29

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

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. As of March 31, 2020 and December 31, 2019, we had $122,703 and $109,309, respectively, related to deferred contract acquisition costs. We recorded $18,167 and $10,423 in amortized deferred contract acquisition costs in the three months ended March 31, 2020 and March 31, 2019, respectively.

The following table summarizes net sales by revenue source (in thousands):

	Three Months Ended March 31,
	2020		2019
	(dollars in thousands)
Hardware and software	$	14,075	$	4,960
Consumables		1,020		1,126
Professional services		3,192		2,808
	$	18,287	$	8,894

Accounting Standards Adopted

We adopted ASU 2018-13, Fair Value Measurement (Topic 820), – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. The adoption of this guidance did not have an impact on our consolidated financial statements.

We adopted ASU No. 2018-15, Intangibles–Goodwill and Other–Internal-Use Software that requires implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customer in a software licensing arrangement under the internal-use software guidance in ASC Topic 350, Intangibles–Goodwill and Other. This ASU requires a customer to disclose the nature of its hosting arrangements that are service contracts and provide disclosures as if the deferred implementation costs were a separate, major depreciable asset class. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU will require the measurement of all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance was initially effective for us in the first quarter of 2020. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which, among other things, defers the effective date of ASU 2016-13 for public filers that are considered smaller reporting companies, as defined by the SEC, to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. We believe the adoption of this ASU will not significantly impact the results of operations and financial position.

F-30

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Note 3: Intangible Assets

Definitive lived intangible assets are as follows (in thousands):

	March 31, 2020							December 31, 2019
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Customer lists and relationships	$	3,270	$	(1,234	)	$	2,036	$	3,270	$	(1,104	)	$	2,166
Trade name		490		(300	)		190		490		(262	)		228
	$	3,760	$	(1,534	)	$	2,226	$	3,760	$	(1,366	)	$	2,394

Amortization expense recognized during the three months ended March 31, 2020 and 2019 was $168,000 and $183,000. Amortization expense is calculated on an accelerated basis.

Note 4: Net Income (Loss) Per Share

Basic net income (loss) per common share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted net income (loss) per share is calculated similarly to basic per share amounts, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

For periods presented in which there is a net loss, potentially dilutive securities are excluded from the computation of fully diluted net loss per share as their effect is anti-dilutive.

Below is a reconciliation of the fully dilutive securities effect for the quarters ended March 31, 2020 and 2019 (in thousands, except per share data):

	2020		2019
Net (loss) income attributable to common stockholders	$	1,029	$	(279	)

Weighted average basic shares outstanding		13,576		12,930
Dilutive effect of stock options and restricted stock		2,066		—
Weighted average shares for diluted earnings per share		15,642		12,930

Basic income (loss) per share	$	0.08	$	(0.02	)
Diluted income (loss) per share	$	0.07	$	(0.02	)

F-31

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Note 5: Debt

The following table sets forth our outstanding debt (in thousands):

			March 31,			December 31,
	Classification	Maturity Date	2020			2019
Subordinated promissory notes	Long-term debt	April 30, 2021	$	500		$	500
PWBF promissory note	Current liability	August 25, 2020		83			144
Line of credit	Current liability	August 2020		—			3,177
Less: Unamortized discount				(89	)		(110	)
Total term debt			$	494		$	3,711

Line of Credit

Our amended and restated credit agreement with Pacific Western Business Finance (“PWBF”), formerly known as CapitalSource Business Financial Group, provides for a $7.25 million line of credit with a maturity date of September 2020. The line of credit bears interest at the prime rate plus 1.25% (4.50% and 6.00% at March 31, 2020 and December 31, 2019, respectively) and is secured by substantially all of our U.S. assets.

As of March 31, 2020, availability under the line of credit was approximately $4.5 million, which is determined from a borrowing base calculation on our existing accounts receivable balance. As of March 31, 2020, we had no outstanding borrowings under the line of credit, and as of December 31, 2019, we had approximately $3.2 million outstanding under the line of credit.

Subordinated Promissory Notes

In October 2018, we completed a private placement of subordinated promissory notes in the aggregate principal amount of $1,500,000. The notes carry an interest rate of 12% per annum, are not collateralized, and require quarterly interest payments with a maturity date of April 30, 2021. In connection with these notes, we issued warrants to the placement agent to purchase 52,500 shares of our common stock at an exercise price of $0.70 per share. The fair value of the warrants was $18,000. In addition, we issued 525,000 shares of our common stock to note holders. The estimated fair value of these shares was $262,500 and such amount has been presented as a debt discount and is being amortized to interest expense through the maturity date of the notes. As of March 31, 2020 and December 31, 2019, the outstanding principal balance of these notes was $500,000.

PWBF Promissory Note

In June 2018, we entered into a promissory note with PWBF with a principal amount of $750,000. The note carries an annual interest rate of prime rate plus 1.25% (4.75% at March 31, 2020 and 6.00% at December 31, 2019, respectively) with a maturity date of August 25, 2020. Principal payments are due and payable in 26 consecutive payments each in the amount of $20,834 beginning June 25, 2018; and one payment of $208,333 due on the maturity date of August 25, 2020.

As of March 31, 2020 and December 31, 2019, we were in compliance with the financial covenant.

For the three months ended March 31, 2020 and March 31, 2019, interest expense on debt, including amortization of deferred financing costs, was approximately $99,000 and $172,000, respectively.

F-32

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Note 6: Warrants

The following table summarizes information about our outstanding common stock warrants as of March 31, 2020:

	Date		Strike		Total Warrants Outstanding and		Total Exercise Price		Weighted Average Exercise
	Issued	Expiration	Price		Exercisable		(in thousands)		Price

Common Stock Investor Warrants	Sep-16	Sep-21	$	1.03		461,447	$	475
Placement Agent Warrants - Common Stock	Jun-18	Jun-23		0.50		633,600		317
Placement Agent Warrants - Common Stock	Oct-18	Oct-23		0.70		52,500		37
						1,147,547	$	829	$	0.72

There were no warrants granted, exercised, forfeited or expired during the three months ended March 31, 2020.

Note 7: Share-Based Compensation

In September 2016, we amended the 2014 Equity Incentive Plan (the “2014 Plan”) to re-load and permit 1,200,000 shares of our common stock available for issuance under the plan.

The 2014 Plan is administered by the Board of Directors, or a committee appointed by the Board of Directors, which determines recipients and the number of shares subject to the awards, the exercise price and the vesting schedule. The term of stock options granted under the 2014 Plan cannot exceed ten years. Options shall not have an exercise price less than 100% of the fair market value of our common stock on the grant date, and generally vest over a period of five years. If the individual possesses more than 10% of the combined voting power of all classes of our stock, the exercise price shall not be less than 110% of the fair market of a share of common stock on the date of grant.

F-33

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

The following table summarizes stock option activity for the three months ended March 31, 2020:

	Stock Options		Grant Date Weighted Average Exercise Price

Outstanding at January 1, 2020		776,713	$	0.68
Granted		140,000		0.79
Outstanding at March 31, 2020		916,713	$	0.70
Exercisable at March 31, 2020		647,882	$	0.71

Share-based compensation cost is measured at the grant date based on the fair value of the award. The fair values of options for the three months ended March 31, 2020 were estimated using the Black-Scholes option-pricing model with the following assumptions:

	Three Month Ended March 31, 2020
Weighted average grant-date fair value per option granted	$	0.79
Expected option term		3.3 years
Expected volatility factor		90.5	%
Risk-free interest rate		1.5	%
Expected annual dividend yield		—	%

There were no stock options granted during the three months ended March 31, 2019.

As of March 31, 2020, there was $89,526 of total unrecognized share-based compensation related to unvested stock options. These costs have a weighted average remaining recognition period of 1.9 years.

Note 8: Contingencies

Litigation

Concentrations

Our top three customers accounted for approximately 67% of consolidated net revenues during the three months ended March 31, 2020. Trade accounts receivable from these customers represented approximately 33% of net consolidated receivables at March 31, 2020. In addition, the we had two customers account for more than 10% of both its consolidated net revenues during the three months ended March 31, 2020 and its net consolidated receivables as of March 31, 2020. While we believe our relationships with such customers are stable, most arrangements are made by purchase order and are terminable at will by either party. A significant decrease or interruption in business from our significant customers could have a material adverse effect on our business, financial condition and results of operations. Financial instruments that potentially expose us to a concentration of credit risk principally consist of accounts receivable. We sell product to a large number of customers in many different geographic regions. To minimize credit risk, we perform ongoing credit evaluations of its customers’ financial condition.

F-34

DecisionPoint Systems, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

COVID-19

Note 9: Subsequent Events

F-35

Shares

DECISIONPOINT SYSTEMS, INC.

Common Stock

Prospectus

, 2020

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, (if any), payable in connection with the registration of the common stock hereunder. All amounts shown are estimates except for the SEC registration fee,

	Amount to Be Paid
SEC registration fee	$	2,780
Accountants’ fees and expenses		20,000
Transfer and registrar fees and expenses		1,000
Printing and engraving expenses		4,000
Legal fees and expenses		35,000
Consulting expenses		30,000
Total	$	92,780

Item 14. Indemnification of Directors and Officers

Article Sixth of our Amended and Restated Certificate of Incorporation provides that, to the fullest extent permitted by law, no director or officer shall be personally liable to the corporation or its shareholders for damages for breach of any duty owed to the corporation or its shareholders. Article Sixth of our Amended and Restated Certificate of Incorporation also provides that, to the fullest extent permitted by the Delaware General Corporation Law we will indemnify our officers and directors from and against any and all expenses, liabilities, or other matters.

Article VI of our Amended and Restated Bylaws further addresses indemnification of our directors and officers and allows us to indemnify our directors in the event they meet certain criteria in terms of acting in good faith and in an official capacity within the scope of their duties, when such conduct leads them to be involved in a legal action.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Securities Act”) may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

Item 15. Recent Sales of Unregistered Securities

The following lists set forth information regarding all securities sold or granted by us within the past three years that were not registered under the Securities Act, and the consideration, if any, received by us for such securities:

(1)

Between April and June 2018, we sold to accredited investors an aggregate of 6,336,000 shares of common stock at a price of $0.50 per share for total gross proceeds of $3,168,000.

(2)

In October 2018, we issued and sold to accredited investors subordinated promissory notes having a total principal balance of $1,500,000 together with a total of 525,000 shares of common stock.

(3)

In March 2019, we granted an executive officer a restricted stock award of 700,000 shares in connection with the negotiation of an employment agreement. Except for restrictions imposed by law the shares are unrestricted.

II-1

Each of the foregoing issuances was made in a transaction not involving a public offering pursuant to an exemption from the registration requirements of the Securities Act in reliance upon Section 4(a)(2) of the Securities Act, or Regulation D promulgated under the Securities Act. Each of the offerees and purchasers of securities was an accredited investor and each recipient of securities in any transaction exempt from registration either received or had adequate access, through employment, business or other relationships, to information about us. In connection with the private placements effected in 2018 we paid registered broker-dealer placement agent fees.

Item 16. Exhibits and Financial Statement Schedules

(a)

Exhibits

The following exhibits are filed as part of this registration statement:

Exhibit Number		Description
3.1		Amended and Restated Certificate of Incorporation of the Company
3.4		Amended and Restated Bylaws of the Company
4.1		Specimen Stock Certificate
4.2		Form of Warrant
4.3		Form of 2016 Securities Purchase Agreement
4.4		Form of 2018 Subscription Agreement
5.1		Opinion of Polsinelli PC*
10.1†		Employment Agreement between DecisionPoint Systems, Inc. and Steve Smith dated April 11, 2016
10.2†		Amended Employment Agreement between DecisionPoint Systems, Inc. and Steven Smith effective March 25, 2019
10.3†		Restricted Stock Agreement between the DecisionPoint Systems, Inc. and Steven Smith dated March 25, 2019
10.4		Loan and Security Agreement between CapitalSource Business Finance Group and DecisionPoint Systems, Inc. dated August 11, 2016
10.5		First Modification to Loan and Security Agreement between CapitalSource Business Finance Group and DecisionPoint Systems, Inc. dated June 18, 2018
10.6		Second Modification to Loan and Security Agreement between CapitalSource Business Finance Group and DecisionPoint Systems, Inc. dated August 4, 2020
10.7**		Amendment #2 to Master Products and Services Agreement effective April 1, 2020 between DecisionPoint Systems, Inc. and Kaiser Foundation Health Plan, Inc.
10.9†		Form of Award Agreement to 2014 Equity Incentive Plan
21.1		Subsidiaries of DecisionPoint Systems, Inc.
23.1		Consent of Haskell & White LLP, an independent registered public accounting firm
23.2*		Consent of Polsinelli PC (included in Exhibit 5.1)
24.1		Power of Attorney (included on the signature page to this registration statement)

To be filed by amendment.

	**	Portions of this Agreement have been omitted.
	†	Indicates management contract or compensatory plan.

(b) Financial Statement Schedules

No financial statement schedules are provided because the information called for is not required or is shown either in the financial statements or the notes thereto.

II-2

Item 17. Undertakings

The undersigned registrant hereby undertakes:

(1)

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i)

To include any prospectus required by section 10(a)(3) of the Securities Act of 1933.

(ii)

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

(iii)

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

(2)

That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3)

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4)

For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

II-3

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Irvine, State of California, on the 13th day of August, 2020.

DECISIONPOINT SYSTEMS, INC.

By:	/s/ Steve Smith
	Name:	Steve Smith
	Title:	Chief Executive Officer (Principal Executive Officer) and Director

By:	/s/ Melinda Wohl
	Name:	Melinda Wohl
	Title:	Vice President Finance and Administration (Principal Financial Officer and Principal Accounting Officer)

POWER OF ATTORNEY AND SIGNATURES

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Steve Smith and Melinda Wohl, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and any and all additional registration statements pursuant to Rule 462(b) of the Securities Act of 1933, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agents full power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Steve Smith		August 13, 2020
Steve Smith	Chief Executive Officer (Principal Executive Officer) and Director

/s/ Stanley P. Jaworski		August 13, 2020
Stanley P. Jaworski	Director

/s/ / Richard Bravman		August 13, 2020
Richard Bravman	Director

/s/ Michael N. Taglich		August 13, 2020
Michael N. Taglich	Director

/s/ John Guttilla		August 13, 2020
John Guttilla	Director

/s/ Robert Schroeder		August 13, 2020
Robert Schroeder	Director

II-4

Exhibit 3.1

Exhibit 3.4

AMENDED AND RESTATED

BYLAWS OF

DECISIONPOINT SYSTEMS, INC.

A DELAWARE CORPORATION

EFFECTIVE AS OF JULY 23, 2020

TABLE OF CONTENTS

		Page
ARTICLE I OFFICES AND RECORDS		1
Section 1.1	Delaware Office	1
Section 1.2	Other Offices	1
Section 1.3	Books and Records	1
ARTICLE II STOCKHOLDERS		1
Section 2.1	Annual Meeting	1
Section 2.2	Special Meeting	1
Section 2.3	Place of Meeting	1
Section 2.4	Notice of Meeting	1
Section 2.5	Quorum and Adjournment	2
Section 2.6	Proxies	2
Section 2.7	Notice of Stockholder Business and Nominations	2
Section 2.8	Procedure for Election of Directors	6
Section 2.9	Inspectors of Elections	6
Section 2.10	Conduct of Meetings	6
Section 2.11	Consent Procedure	7
ARTICLE III BOARD OF DIRECTORS		7
Section 3.1	General Powers	7
Section 3.2	Number, Tenure and Qualifications	7
Section 3.3	Regular Meetings	7
Section 3.4	Special Meetings	7
Section 3.5	Action By Unanimous Consent of Directors	8
Section 3.6	Notice	8
Section 3.7	Conference Telephone Meetings	8
Section 3.8	Quorum	8
Section 3.9	Vacancies	8
Section 3.10	Committees	9
ARTICLE IV OFFICERS		9
Section 4.1	Elected Officers	9
Section 4.2	Election and Term of Office	9
Section 4.3	Chairman of the Board	9
Section 4.4	Chief Executive Officer	9
Section 4.5	President	10
Section 4.6	Secretary	10
Section 4.7	Treasurer	10
Section 4.8	Removal	10
Section 4.9	Vacancies	10
ARTICLE V STOCK CERTIFICATES AND TRANSFERS		11
Section 5.1	Stock Certificates and Transfers	11
ARTICLE VI INDEMNIFICATION		11
Section 6.1	Right to Indemnification	11
Section 6.2	Right to Advancement of Expenses	12
Section 6.3	Right of Indemnitee to Bring Suit	12
Section 6.4	Non-Exclusivity of Rights	12
Section 6.5	Insurance	13
Section 6.6	Amendment of Rights	13
Section 6.7	Indemnification of Employees and Agents of the Corporation	13

ARTICLE VII MISCELLANEOUS PROVISIONS		13
Section 7.1	Fiscal Year	13
Section 7.2	Dividends	13
Section 7.3	Seal	13
Section 7.4	Waiver of Notice	13
Section 7.5	Audits	13
Section 7.6	Resignations	14
Section 7.7	Contracts	14
Section 7.8	Proxies	14
Section 7.9	Fixing Record Date	14
ARTICLE VIII AMENDMENTS		14
Section 8.1	Amendments	14

ARTICLE I

OFFICES AND RECORDS

Section 1.1 Delaware Office. The registered office of the Corporation in the State of Delaware shall be located in the City of Wilmington, County of Kent, or such other city and county in the State of Delaware as deemed advisable by the officers of the Corporation.

Section 1.2 Other Offices. The Corporation may have such other offices, either within or without the State of Delaware, as the Board of Directors may designate or as the business of the Corporation may from time to time require.

Section 1.3 Books and Records. The books and records of the Corporation may be kept at the Corporation’s headquarters in Irvine, California or at such other locations outside the State of Delaware as may from time to time be designated by the Board of Directors.

ARTICLE II

STOCKHOLDERS

Section 2.1 Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held at such date, place and/or time as may be fixed by resolution of the Board of Directors.

Section 2.2 Special Meeting. Special meetings of stockholders of the Corporation may be called by the Chairman of the Board, the Chief Executive Officer, by the Board of Directors acting pursuant to a resolution adopted by a majority of the Whole Board or by the Chairman of the Board or the Chief Executive Officer at the request in writing of stockholders owning at least twenty percent (20%) in amount of the entire capital stock of the Corporation issued and outstanding and entitled to vote. For purposes of these Amended and Restated Bylaws (“Bylaws”), the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.

Section 2.3 Place of Meeting. The Board of Directors may designate the place of meeting for any meeting of the stockholders. If no designation is made by the Board of Directors, the place of meeting shall be the principal office of the Corporation.

Section 2.4 Notice of Meeting. Except as otherwise required by law, written, printed or electronic notice stating the place, day and hour of the meeting and, in the case of a special meeting only, the purposes for which the meeting is called, shall be prepared and delivered by the Corporation not less than ten (10) days nor more than sixty (60) days before the date of the meeting, either personally, by mail, or in the case of stockholders who have consented to such delivery, by electronic transmission (as such term is defined in the Delaware General Corporation Law), to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the U.S. mail with postage thereon prepaid, addressed to the stockholder at his address as it appears on the stock transfer books of the Corporation. Notice given by electronic transmission shall be effective (A) if by facsimile, when faxed to a number where the stockholder has consented to receive notice; (B) if by electronic mail, when mailed electronically to an electronic mail address at which the stockholder has consented to receive such notice; (C) if by posting on an electronic network together with a separate notice of such posting, upon the later to occur of (i) the posting or (ii) the giving of separate notice of the posting; or (D) if by other form of electronic communication, when directed to the stockholder in the manner consented to by the stockholder. Any previously scheduled meeting of the stockholders may be cancelled, adjourned or postponed and by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of stockholders.

Section 2.5 Quorum and Adjournment. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the voting power of the outstanding shares of the Corporation entitled to vote generally in the election of directors, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on by a class or series voting separately as a class or series, the holders of a majority of the voting power of the shares of such class or series shall constitute a quorum for the transaction of such business for the purposes of taking action on such business. In the absence of a quorum, such meeting may be adjourned by the chairman of the meeting or upon the approval of a majority of the voting power present, even if less than a quorum. No notice of the time and place of adjourned meetings need be given provided such adjournment is for less than thirty (30) days and further provided that no new record date is fixed for the adjourned meeting and provided further that the time or place of the adjourned meeting is announced at the meeting at which the adjournment is taken.

Section 2.6 Proxies. At all meetings of stockholders, a stockholder may vote by proxy executed in writing by the stockholder or as may be permitted by law, or by his duly authorized attorney-in-fact. Such proxy must be filed with the Secretary of the Corporation or his representative, or otherwise delivered telephonically or electronically as set forth in the applicable proxy statement, at or before the time of the meeting.

Section 2.7 Notice of Stockholder Business and Nominations.

A. Annual Meetings of Stockholders. (1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only (a) by or at the direction of the Board of Directors or any committee thereof or (b) by any stockholder of the Corporation who was a stockholder of record of the Corporation at the time the notice provided for in this Section 2.7 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.7.

(2) For any nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (b) of paragraph (A)(1) of this Section 2.7, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such proposed business (other than the nominations of persons for election to the Board of Directors) must constitute a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90^th) day, nor earlier than the close of business on the one hundred twentieth (120^th) day, prior to the first anniversary of the preceding year’s annual meeting (provided, however, that if no proxy materials were distributed by the Corporation in connection with the preceding year’s annual meeting, or if the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the one hundred twentieth (120^th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90^th) day prior to such annual meeting or the tenth (10^th) day following the day on which public announcement of the date of such meeting is first made by the Corporation). In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth: (a) as to each person whom the stockholder proposes to nominate for election as a director (i) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder, and (ii) such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the bylaws of the Corporation, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such stockholder and/or such beneficial owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing, including, in the case of a nomination, the nominee, (iv) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder’s notice by, or on behalf of, such stockholder and such beneficial owners, whether or not such instrument or right shall be subject to settlement in underlying shares of capital stock of the Corporation, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to securities of the Corporation, (v) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, (vi) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies or votes from stockholders in support of such proposal or nomination, and (vii) any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder. The foregoing notice requirements of this Section 2.7 shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such other information as the Corporation may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.

(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this Section 2.7 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation at the annual meeting is increased effective after the time period for which nominations would otherwise be due under paragraph (A)(2) of this Section 2.7 and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 2.7 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10^th) day following the day on which such public announcement is first made by the Corporation.

B. Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (1) by or at the direction of the Board of Directors or any committee thereof or (2) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time the notice provided for in this Section 2.7 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 2.7. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph (A)(2) of this Section 2.7 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth (120^th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90^th) day prior to such special meeting or the tenth (10^th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

C. General. (1) Except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, only such persons who are nominated in accordance with the procedures set forth in this Section 2.7 shall be eligible to be elected at an annual or special meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.7. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (a) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 2.7 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies or votes in support of such stockholder’s nominee or proposal in compliance with such stockholder’s representation as required by clause (A)(2)(c)(vi) of this Section 2.7) and (b) if any proposed nomination or business was not made or proposed in compliance with this Section 2.7, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 2.7, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present the nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.7, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.

(2) For purposes of this Section 2.7, “public announcement” shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or other national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

(3) Notwithstanding the foregoing provisions of this Section 2.7, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.7; provided however, that any references in these bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 2.7 (including paragraphs (A)(1)(b) and (B) hereof), and compliance with paragraphs (A)(1)(b) and (B) of this Section 2.7 shall be the exclusive means for a stockholder to make nominations or submit other business (other than, as provided in the penultimate sentence of (A)(2), nominations or other business brought properly under and in compliance with Rule 14a-8 of the Exchange Act, as may be amended from time to time). Nothing in this Section 2.7 shall be deemed to affect any rights of stockholders to request inclusion of proposals or nominations in the Corporation’s proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act.

Section 2.8 Procedure for Election of Directors. Election of directors at all meetings of the stockholders at which directors are to be elected shall be by written ballot, and a plurality of the votes cast thereat shall elect directors. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, all matters other than the election of directors submitted to the stockholders at any meeting shall be decided by a majority of the votes cast affirmatively or negatively.

Section 2.9 Inspectors of Elections. The Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives of the Corporation, to act at the meeting and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act, or if all inspectors or alternates who have been appointed are unable to act, at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by the Delaware General Corporation Law.

Section 2.10 Conduct of Meetings.

A. The Chief Executive Officer shall preside at all meetings of the stockholders. In the absence of the Chief Executive Officer, the Chairman of the Board shall preside at a meeting of the stockholders. In the absence of the Chief Executive Officer or the Chairman of the Board, the President shall preside at a meeting of the stockholders. In the absence of each of the Chief Executive Officer, the Chairman of the Board and the President, the Secretary shall preside at a meeting of the stockholders. In the anticipated absence of all officers designated to preside over the meetings of stockholders, the Board of Directors may designate an individual to preside over a meeting of the stockholders.

B. The chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting.

C. The Board of Directors may, to the extent not prohibited by law, adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may to the extent not prohibited by law include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof and (v) limitations on the time allotted to questions or comments by participants. Unless, and to the extent, determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 2.11 Consent Procedure. Any action to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action to be so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered (by hand or by certified or registered mail, return receipt requested) to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Every written consent shall bear the date of signature of each stockholder who signs the consent, and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by this Section 2.11, written consents signed by a sufficient number of holders to take action are delivered to the Corporation as aforesaid. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to the extent required by applicable law, be given to those stockholders who have not consented in writing, and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation.

ARTICLE III

BOARD OF DIRECTORS

Section 3.1 General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by the Certificate of Incorporation or by these Bylaws, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.

Section 3.2 Number, Tenure and Qualifications. The number of directors shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board or by the stockholders at the annual meeting of the stockholders. Each director shall serve until such director’s successor shall have been duly elected and qualified, or until such director’s prior death, resignation, retirement, disqualification or other removal.

Section 3.3 Regular Meetings. The Board of Directors may, by resolution, provide the time and place for the holding of regular meetings of the Board of Directors.

Section 3.4 Special Meetings. Special meetings of the Board of Directors shall be called at the request of the Chairman of the Board, the Chief Executive Officer or a majority of the Board of Directors. The person or persons authorized to call special meetings of the Board of Directors may fix the place and time of the meetings.

Section 3.5 Action By Unanimous Consent of Directors. The Board of Directors may take action without the necessity of a meeting by unanimous consent of directors. Such consent may be in writing or given by electronic transmission, as such term is defined in the Delaware General Corporation Law.

Section 3.6 Notice. Notice of any meeting shall be given to each director at his business or residence in writing, or by facsimile transmission, telephone communication or electronic transmission (provided, with respect to electronic transmission, that the director has consented to receive the form of transmission at the address to which it is directed). If mailed, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five (5) days before such meeting. If by facsimile transmission or other electronic transmission, such notice shall be transmitted at least twenty-four (24) hours before such meeting. If by telephone, the notice shall be given at least twelve (12) hours prior to the time set for the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting, except for amendments to these Bylaws as provided under Section 8.1 of Article VIII hereof. A meeting may be held at any time without notice if all the directors are present (except as otherwise provided by law) or if those not present waive notice of the meeting in writing or by electronic transmission, either before or after such meeting.

Section 3.7 Conference Telephone Meetings. Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

Section 3.8 Quorum. A whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the directors present may adjourn the meeting from time to time without further notice. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 3.9 Vacancies. Newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall, unless otherwise provided by law or by resolution of the Board of Directors, be filled only by a majority vote of the directors then in office, though less than a quorum (and not by stockholders), and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office to which they have been chosen or until such director’s successor shall have been duly elected and qualified. No decrease in the authorized number of directors shall shorten the term of any incumbent director.

Section 3.10 Committees.

A. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that no committee shall have power or authority in reference to the following matters: (i) approving, adopting or recommending to stockholders any action or matter required by law to be submitted to stockholders for approval or (ii) adopting, amending or repealing any bylaw.

B. Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to these Bylaws.

ARTICLE IV

OFFICERS

Section 4.1 Elected Officers. The elected officers of the Corporation shall be a Chief Executive Officer, a President, a Secretary, a Treasurer, and such other officers as the Board of Directors from time to time may deem proper. The Corporation may also have a Chairman of the Board who shall be chosen from the directors. All officers chosen by the Board of Directors shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article IV. Such officers shall also have powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof.

Section 4.2 Election and Term of Office. The elected officers of the Corporation shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held after each annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Subject to Section 4.7 of these Bylaws, each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he or she shall resign.

Section 4.3 Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board. If the Company does not have a Chairman of the Board, the Lead Independent Director shall preside at all meetings of the Board. If the Company does not have a Lead Independent Director, the Chief Executive Officer shall preside at all meetings of the Board.

Section 4.4 Chief Executive Officer. The Chief Executive Officer shall be the general manager of the Corporation, subject to the control of the Board of Directors, and as such shall, subject to Section 2.10(A) hereof, preside at all meetings of stockholders, shall have general supervision of the affairs of the Corporation, shall sign or countersign or authorize another officer to sign all certificates, contracts, and other instruments of the Corporation as authorized by the Board of Directors, shall make reports to the Board of Directors and stockholders, and shall perform all such other duties as are incident to such office or are properly required by the Board of Directors.

Section 4.5 President. The President shall be the chief operating officer of the corporation and shall be subject to the general supervision, direction, and control of the Chief Executive Officer unless the Board of Directors provides otherwise.

Section 4.6 Secretary. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors and all other notices required by law or by these Bylaws, and in case of his absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chairman of the Board, the Chief Executive Officer, the President or by the Board of Directors, upon whose request the meeting is called as provided in these Bylaws. He or she shall record all the proceedings of the meetings of the Board of Directors, any committees thereof and the stockholders of the Corporation in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President. He or she shall have custody of the seal of the Corporation and shall affix the same to all instruments requiring it, when authorized by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President, and attest to the same.

Section 4.7 Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate receipts and disbursements in books belonging to the Corporation. The Treasurer shall deposit all moneys and other valuables in the name and to the credit of the Corporation in such depositaries as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors the Chairman of the Board, the Chief Executive Officer or the President, taking proper vouchers for such disbursements. The Treasurer shall render to the Chairman of the Board, the Chief Executive Officer, the President and the Board of Directors, whenever requested, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond for the faithful discharge of his duties in such amount and with such surety as the Board of Directors shall prescribe.

Section 4.8 Removal. Any officer elected by the Board of Directors may be removed by the Board of Directors whenever, in their judgment, the best interests of the Corporation would be served thereby. No elected officer shall have any contractual rights against the Corporation for compensation by virtue of such election beyond the date of the election of his successor, his death, his resignation or his removal, whichever event shall first occur, except as otherwise provided in an employment contract or an employee plan.

Section 4.9 Vacancies. A newly created office and a vacancy in any office because of death, resignation, or removal may be filled by the Board of Directors for the unexpired portion of the term at any meeting of the Board of Directors.

ARTICLE V

STOCK CERTIFICATES AND TRANSFERS

Section 5.1 Stock Certificates and Transfers.

A. The shares of stock of the Corporation shall be represented by certificates; provided that the Board of Directors may provide by resolution or resolutions that some or all of any class or series shall be uncertificated shares that may be evidenced by a book-entry system maintained by the registrar of such stock. If shares are represented by certificates, such certificates shall be in the form, other than bearer form, approved by the Board of Directors.

B. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, the Chief Executive Officer or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

ARTICLE VI

INDEMNIFICATION

Section 6.1 Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an “indemnitee”), where the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee’s heirs, executors and administrators; provided, however, that, except as provided in Section 6.3 hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The Corporation is permitted to enter into indemnification agreements with its directors or officers.

Section 6.2 Right to Advancement of Expenses. The right to indemnification conferred in Section 6.1 shall include the right to be paid by the Corporation the expenses incurred in defending any proceeding for which such right to indemnification is applicable in advance of its final disposition (hereinafter an “advancement of expenses”); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise.

Section 6.3 Right of Indemnitee to Bring Suit. The rights to indemnification and to the advancement of expenses conferred in Section 6.1 and Section 6.2, respectively, shall be contract rights. If a claim under Section 6.1 or Section 6.2 is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (A) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (B) in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Section 6.3 or otherwise shall be on the Corporation.

Section 6.4 Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under the Certificate of Incorporation, these Bylaws, or any statute, agreement, vote of stockholders or disinterested directors or otherwise.

Section 6.5 Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

Section 6.6 Amendment of Rights. Any amendment, alteration or repeal of this Article VI that adversely affects any right of an indemnitee or its successors shall be prospective only and shall not limit or eliminate any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal.

Section 6.7 Indemnification of Employees and Agents of the Corporation. The Corporation may, to the extent authorized from time to time by the board of directors, grant rights to indemnification, and to the advancement of expenses, to any employee or agent of the Corporation to the fullest extent of the provisions of this Section with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.

ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.1 Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first (31^st) day of December of each year.

Section 7.2 Dividends. The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares, subject to any terms and conditions provided by law and its Certificate of Incorporation.

Section 7.3 Seal. The corporate seal shall have inscribed the name of the Corporation thereon and shall be in such form as may be approved from time to time by the Board of Directors.

Section 7.4 Waiver of Notice. Whenever any notice is required to be given to any stockholder or director of the Corporation under the provisions of the Delaware General Corporation Law, a waiver thereof in writing, signed by the person or persons entitled to such notice, or a waiver by electronic transmission, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders of the Board of Directors need be specified in any waiver of notice of such meeting.

Section 7.5 Audits. The accounts, books and records of the Corporation shall be audited upon the conclusion of each fiscal year by an independent certified public accountant selected by the Board of Directors, and it shall be the duty of the Board of Directors to cause such audit to be made annually.

Section 7.6 Resignations. Any director or any officer, whether elected or appointed, may resign at any time by serving written notice of such resignation on the Chairman of the Board, the Chief Executive Officer or the Secretary, or by submitting such resignation by electronic transmission (as such term is defined in the Delaware General Corporation Law), and such resignation shall be deemed to be effective as of the close of business on the date said notice is received by the Chairman of the Board, the Chief Executive Officer, or the Secretary or at such later date as is stated therein. No formal action shall be required of the Board of Directors or the stockholders to make any such resignation effective.

Section 7.7 Contracts. Except as otherwise required by law, the Certificate of Incorporation or these Bylaws, any contracts or other instruments may be executed and delivered in the name and on the behalf of the Corporation by such officer or officers of the Corporation as the Board of Directors may from time to time direct. Such authority may be general or confined to specific instances as the Board may determine. The Chairman of the Board, the Chief Executive Officer, the President or any Vice President may execute bonds, contracts, deeds, leases and other instruments to be made or executed for or on behalf of the Corporation. Subject to any restrictions imposed by the Board of Directors or the Chairman of the Board, the Chief Executive Officer, the President or any Vice President of the Corporation may delegate contractual powers to others under his jurisdiction, it being understood, however, that any such delegation of power shall not relieve such officer of responsibility with respect to the exercise of such delegated power.

Section 7.8 Proxies. Unless otherwise provided by resolution adopted by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or any Vice President may from time to time appoint any attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as the holder of stock or other securities in any other corporation or other entity, any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock and other securities of such other corporation or other entity, or to consent in writing, in the name of the Corporation as such holder, to any action by such other corporation or other entity, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal or otherwise, all such written proxies or other instruments as he or she may deem necessary or proper in the premises.

Section 7.9 Fixing Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. The manner of fixing a record date for the determination of stockholders entitled to express consent to corporate action in writing without a meeting shall be as provided for in Article II, Section 2.11.

ARTICLE VIII

AMENDMENTS

Section 8.1 Amendments. These Bylaws may be adopted, amended or repealed at any meeting of the Board of Directors by a resolution adopted by a majority of the Whole Board, provided notice of the proposed change was given in the notice of the meeting in a notice given no less than twenty-four (24) hours prior to the meeting. The stockholders shall also have the power to adopt, amend or repeal these Bylaws, provided that notice of the proposed change was given in the notice of the meeting and provided further that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by the Certificate of Incorporation, the affirmative vote of the holders of at least fifty percent (50%) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of these Bylaws.

Exhibit 4.1

Exhibit 4.2

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUBJECT TO SECTION 7 BELOW, NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.

COMMON STOCK PURCHASE WARRANT

DECISIONPOINT SYSTEMS, INC.

Warrant Shares: ________

THIS CERTIFIES THAT, for value received, ___________(“Holder”) is entitled to subscribe for and purchase up to [***] Common Shares (as hereinafter defined) of DecisionPoint Systems, Inc., a Delaware corporation (the “Company”), at the Exercise Price (as hereinafter defined), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein, the term “Common Shares” shall mean the common stock, par value $0.001 per share, of the Company, and the term “Warrant Shares” shall mean the Common Shares which Holder may acquire pursuant to this Warrant.

1. Exercise Price. The “Exercise Price” shall initially be Fifty Cents ($***) per Common Share, subject to adjustment as provided in Section 4 below.

2. Conditions to Exercise. The purchase right represented by this Warrant may be exercised at any time, or from time to time, in whole or in part during the term commencing on the date hereof and ending at 5:00 P.M. Eastern Standard time on the fifth anniversary of the date of this Warrant (the “Expiration Date”).

3. Method of Exercise or Conversion; Payment; Issuance of Warrant Shares; Issuance of New Warrant.

(a) Cash Exercise. Subject to Section 2 hereof, the purchase right represented by this Warrant may be exercised by the Holder hereof, in whole or in part, by (i) delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant and (ii) (A) payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash by certified or bank check, or wire transfer of immediately available funds or (B) if the provisions of Section 3(b) are applicable, by notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 3(b)). No ink-original Exercise Notice shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Exercise Notice be required. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. In the event of any exercise of the rights represented by this Warrant, the ownership of the Common Shares shall be recorded on the books and records of the Company in the Holder’s name or in the manner as the Holder may so direct. Unless this Warrant has been fully exercised or expired, a new Warrant having terms and conditions substantially identical to this Warrant and representing the portion of the Warrant Shares, if any, with respect to which this Warrant shall not have been exercised, shall also be issued to the Holder hereof within ten (10) days after exercise of this Warrant.

(b) Cashless Exercise. In lieu of exercising this Warrant as specified in Section 3(a), the Holder may from time to time convert this Warrant, in whole or in part, into Warrant Shares by surrender of a duly executed Notice of Exercise in substantially the form attached hereto at the principal office of the Company, in which event the Company shall issue to the Holder the number of Warrant Shares computed using the following formula:

X = Y (A - B)

Where:

X = the number of Warrant Shares to be issued to the Holder under this Section 3(b).

Y = the number of Warrant Shares purchasable under this Warrant (at the date of such calculation).

A = the Fair Market Value of one Common Share (at the date of such calculation).

B = Exercise Price (as adjusted to the date of such calculation).

Prior to the Holder (or it designee) being recorded on the books and records of the Company as the holder of the Warrant Shares, pursuant to this Section 3(b), the Holder shall deliver to the Company the Joinder Agreement.

(i) In the event of an exercise in connection with an initial public offering, the per unit Fair Market Value for the Common Shares shall be the offering price at which the underwriters initially sell Common Shares to the public; or

(ii) The average of the closing bid and asked prices of Common Shares quoted in the Over The Counter Market Summary, the last reported sale price quoted on the Nasdaq Stock Market or on any other exchange on which the Common Shares are listed, whichever is applicable, as published in the Eastern Edition of the Wall Street Journal for the three (3) trading days prior to the date of determination of Fair Market Value; or

(iii) In the event of an exercise in connection with a merger, acquisition or other consolidation in which the Company is not the surviving entity, the per unit Fair Market Value for the Common Shares shall be the value to be received per Common Share by all holders of the Common Shares in such transaction as determined by the Company’s Board of Directors (the “Board”); or

(iv) In any other instance, the per unit Fair Market Value for the Common Shares shall be as determined in the reasonable good faith judgment of the Board.

In the event of 3(c)(iii) or 3(c)(iv) above, the Board shall prepare a certificate, to be signed by an authorized officer of the Company, setting forth in reasonable detail the basis for and method of determination of the per unit Fair Market Value of the Common Shares. The Board will also certify to the Holder that this per share Fair Market Value will be applicable to all holders of the Common Shares. Such certification must be made to the Holder at least twenty (20) business days prior to the proposed effective date of the merger, consolidation, sale or other triggering event.

4. Certain Adjustments.

(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution of capital stock in respect of its Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 4(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(b) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 4(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(c) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person (as defined below), (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 4(c) pursuant to written agreements and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind

(d) Price Adjustments. Whenever the number of Warrant Shares purchasable upon exercise of this Warrant is adjusted pursuant to Sections 4(a), 4(b) or 4(c), the then applicable Exercise Price shall be proportionately adjusted.

(e) Certain Shares Excluded. The number of shares of Common Stock outstanding at any given time for purposes of the adjustments set forth in this Section 4 shall exclude any shares then directly or indirectly held in the treasury of the Company.

(f) Deferral and Cumulation of De Minimis Adjustments. The Company shall not be required to make any adjustment pursuant to this Section 4 if the amount of such adjustment would be less than one percent (1%) of the Exercise Price in effect immediately before the event that would otherwise have given rise to such adjustment. In such case, however, any adjustment that would otherwise have been required to be made shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than one percent (1%) of the Exercise Price in effect immediately before the event giving rise to such next subsequent adjustment. All calculations under this Section 4 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be, but in no event shall the Company be obligated to issue fractional Warrant Shares or fractional portions of any securities upon the exercise of the Warrant.

(g) Duration of Adjustment. Following each computation or readjustment as provided in this Section 5, the new adjusted Exercise Price and number of Warrant Shares purchasable upon exercise of this Warrant shall remain in effect until a further computation or readjustment thereof is required.

5. Notice to Holders.

(a) Notice of Record Date. In case:

(i) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend (other than a cash dividend payable out of earned surplus of the Company) or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right;

(ii) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation with or merger of the Company into another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation; or

(iii) of any voluntary dissolution, liquidation or winding-up of the Company;

then, and in each such case, the Company will mail or cause to be mailed to the Holder hereof at the time outstanding a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any, is to be fixed, as of which the holders of record of Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution or winding-up.

(b) Certificate of Adjustment. Whenever any adjustment shall be made pursuant to Section 4 hereof, the Company shall promptly provide the Holder with prompt written notice, signed and certified by its Chairman, Chief Executive Officer, President or a Vice President, setting forth in reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Exercise Price and number of Warrant Shares purchasable upon exercise of this Warrant after giving effect to such adjustment.

6. Representations and Warranties.

(a) Representations and Warranties by the Company. The Company hereby represents and warrants to the Holder that the statements in the following paragraphs of this Section 6(a) are true and correct (a) as of the date hereof and (b) except where any such representation and warranty relates specifically to an earlier date, as of the date of any exercise of this Warrant.

(i) Company Organization and Authority. The Company (a) is a corporation duly incorporated, validly existing, and in good standing in its jurisdiction of its incorporation, (b) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted; and (c) is qualified as a foreign corporation in all jurisdictions where such qualification is required.

(ii) Corporate Power. The Company has all requisite legal and company power and authority to execute, issue and deliver this Warrant, to issue the Warrant Shares issuable upon exercise or conversion of this Warrant, and to carry out and perform its obligations under this Warrant and any related agreements.

(iii) Authorization; Enforceability. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution, delivery and performance of its obligations under this Warrant and for the authorization, issuance and delivery of this Warrant and the Warrant Shares issuable upon exercise of this Warrant has been taken and this Warrant constitutes the legally binding and valid obligation of the Company enforceable in accordance with its terms.

(iv) Reservation of Shares; Valid Issuance. The Company hereby agrees that at all times there shall be reserved for issuance upon the exercise of this Warrant such number of shares of the Common Stock as shall be required for issuance upon exercise of this Warrant. This Warrant has been validly issued and is free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws. The Company further agrees that all Warrant Shares will be duly authorized and will, upon issuance and payment of the exercise price therefor, be validly issued, fully paid and non-assessable, free from all taxes, liens, charges and encumbrances with respect to the issuance thereof, other than taxes, if any, in respect of any transfer occurring contemporaneously with such issuance and other than transfer restrictions imposed by federal and state securities laws. this Warrant.

(v) No Conflict. The execution, delivery, and performance of this Warrant will not result in (a) any violation of, be in conflict with, or constitute a default under, with or without the passage of time or the giving of notice (1) any provision of the Company’s Certificate of Incorporation or Stockholders Agreement; (2) any provision of any judgment, decree, or order to which the Company is a party, by which it is bound, or to which any of its material assets are subject; (3) any contract, obligation, or commitment to which the Company is a party or by which it is bound; or (4) any statute, rule, or governmental regulation applicable to the Company, or (b) the creation of any lien, charge or encumbrance upon any assets of the Company.

7. Transfer, Division and Combination.

(a) Subject to compliance with any applicable securities laws and the conditions set forth in Sections 2 and 7(e) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written transfer of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the transferee or transferees and in the denomination or denominations specified in such instrument of transfer, and shall issue to the transferor a new Warrant evidencing the portion of this Warrant not so transferred, and this Warrant shall promptly be cancelled. A Warrant, if properly transferred, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

(b) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

(c) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7.

(d) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.

(e) If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act of 1933 (as amended, the “Securities Act”) and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions and reasonably satisfactory to the Company) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance reasonably acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined

8. “Market Stand-Off” Agreement. The Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the Company’s initial public offering and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days from such prospectus date) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock of the Company (whether such shares or any such securities are then owned by the Holder or are thereafter acquired), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of common stock or such other securities, in cash or otherwise. The underwriters in connection with the Company’s initial public offering are intended third party beneficiaries of this Section 8 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to any shares of Company capital stock of the Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period.

9. No Fractional Shares. No fractional unit of any Warrant Share will be issued in connection with any exercise or conversion hereunder, but in lieu of such fractional share, the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect.

10. Charges, Taxes and Expenses. Issuance of certificates for units of Common Shares upon the exercise or conversion of this Warrant shall be made without charge to the Holder for any United States or state of the United States documentary stamp tax or other incidental expense with respect to the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder.

11. No Stockholder Rights Until Exercise. The Holder of this Warrant, as such, shall not be entitled by reason of this Warrant to any rights whatsoever as a stockholder of the Company, including but not limited to voting rights. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

12. Registry of Warrant. The Company shall maintain a registry showing the name and address of the registered Holder of this Warrant. This Warrant may be surrendered for exchange or exercise, in accordance with its terms, at such office or agency of the Company, and the Company and the Holder shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

13. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to it, and, if mutilated, upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant, having terms and conditions substantially identical to this Warrant, in lieu hereof.

14. Miscellaneous.

(a) Issue Date. The provisions of this Warrant shall be construed and shall be given effect in all respect as if it had been issued and delivered by the Company on the date hereof.

(b) Successors. This Warrant shall be binding upon any successors or assigns of the Company.

(c) Headings. The headings used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant.

(d) Saturdays, Sundays, Holidays. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday in the State of Delaware, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday.

15. No Impairment. The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder hereof against impairment.

16. Addresses. Any notice required or permitted hereunder shall be in writing and shall be mailed by overnight courier, registered or certified mail, return receipt requested, and postage prepaid, or otherwise delivered by hand or by messenger, addressed as set forth below, or at such other address as the Company or the Holder hereof shall have furnished to the other party in accordance with the delivery instructions set forth in this Section16.

If to Company:

DecisionPoint Systems, Inc.

8697 Research Drive

Irvine, CA 92618

If to the Holder:

To his, her or their address in the Company’s books and records.

If mailed by registered or certified mail, return receipt requested, and postage prepaid, notice shall be deemed to be given two (2) days after being sent, and if sent by overnight courier, by hand or by messenger, notice shall be deemed to be given when delivered (if on a business day, and if not, on the next business day).

17. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS WARRANT OR THE WARRANT SHARES.

18. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.

[Signature Page Follows]

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

	DECISIONPOINT SYSTEMS, INC.,
	a Delaware corporation

	By:
	Name:
	Title:

[SIGNATURE PAGE TO WARRANT]

NOTICE OF EXERCISE

To:

DecisionPoint Systems, Inc.

_____________________

The undersigned Warrant holder (“Holder”) elects to acquire Common Shares of DecisionPoint Systems, Inc. (the “Company”), pursuant to the terms of the Warrant dated _______ __, 20xx (the “Warrant”).

The Holder exercises its rights under the Warrant as set forth below:

( ) The Holder elects to purchase _____________ Common Shares as provided in Section 3(a) of the Warrant and tenders herewith a check in the amount of $___________ as payment of the purchase price.

( ) The Holder elects to convert the purchase rights into Common Shares as provided in Section 3(b) of the Warrant.

The Holder represents that it is acquiring the aforesaid Common Shares for investment and not with a view to or for resale in connection with distribution and that the Holder has no present intention of distributing or reselling the shares.

Please register the Common Shares on the books and records of the Company in the name of the Holder or in such other name as is specified below:

	Name:

	Address:

	Taxpayer I.D.:

	[NAME OF HOLDER]

	By:

	Name:

	Title:

	Date:

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

_____________________________________________________________________

(name and address of assignee must be printed or typewritten)

the within Warrant, hereby irrevocably constituting and appointing attorney to transfer said Warrant on the books of the Company with full power of substitution in the premises.

	Dated:

	Name of Warrant holder or Assignee:


	(please print)

	Address:


Signature:
	SIGNATURE OF REGISTERED HOLDER

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

Exhibit 4.3

DECISIONPOINT SYSTEMS, INC.

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of March , 2016, by and between DecisionPoint Systems, Inc., a Delaware corporation (the “Company”), and the investors set forth on the signature pages affixed hereto (each, an “Investor” and, collectively, the “Investors”).

WHEREAS, the Investors wish to purchase from the Company, and the Company wishes to sell and issue to the Investors, Senior Unsecured Convertible Promissory Notes (the “Notes”) with a minimum aggregate principal amount of $1,000,000 (the “Minimum Amount”) and a maximum aggregate principal amount of $4,000,000 (the “Maximum Amount”) upon the terms and conditions set forth in this Agreement; and

NOW, THEREFORE, in consideration of the mutual terms, conditions and other agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree to the sale and purchase of the Notes as set forth herein.

1. Definitions.

For purposes of this Agreement, the terms set forth below shall have the corresponding meanings provided below.

“Affiliate” shall mean, with respect to any specified Person (as defined below), (i) if such Person is an individual, the spouse, heirs, executors, or legal representatives of such individual, or any trusts for the benefit of such individual or such individual’s spouse and/or lineal descendants, or (ii) otherwise, another Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified. As used in this definition, “control” shall mean the possession, directly or indirectly, of the sole and unilateral power to cause the direction of the management and policies of a Person, whether through the ownership of voting securities or by contract or other written instrument.

“Business Day” shall mean any day on which banks located in New York City are not required or authorized by law to remain closed.

“Closing” and “Closing Date” as defined in Section 2.2 hereof.

“Common Stock” shall mean the Company’s Common Stock, par value $0.001 per share.

“Company Financial Statements” as defined in Section 4.5(a) hereof.

“Company’s Knowledge” means the actual knowledge of any executive officer (as defined in Rule 405 under the Securities Act) or director of the Company, or the knowledge of any fact or matter which any person would reasonably be expected to become aware of in the course of performing the duties and responsibilities as an executive officer or director of the Company.

“Conversion Shares” means the shares of Common Stock issuable upon conversion of the Notes.

“Escrow Agreement” means the escrow agreement, dated on or about the date of the Private Placement Memorandum, among the Company, the Placement Agent, and Delaware Trust Company.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Liens” means any mortgage, lien, title claim, assignment, encumbrance, security interest, adverse claim, contract of sale, restriction on use or transfer or other defect of title of any kind.

“Material Adverse Effect” means a material adverse effect on (i) the assets, liabilities, results of operations, condition (financial or otherwise), business, or prospects of the Company and its Subsidiaries taken as a whole, (ii) the transactions contemplated hereby or in any of the Transaction Documents or (iii) the ability of the Company to perform its obligations under the Transaction Documents (as defined below).

“Person” shall mean an individual, entity, corporation, partnership, association, limited liability company, limited liability partnership, joint-stock company, trust or unincorporated organization.

“Piggy-Back Registration” as defined in Section 9.2(a) hereof.

“Placement Agent” means Taglich Brothers, Inc.

“Placement Agent Warrants” as defined in Section 10.1(b) hereof.

“Private Placement Memorandum” means the Company’s Private Placement Memorandum dated March 14, 2016 describing the offering of the Transaction Securities, and any amendments or supplements thereto.

“Regulation D” as defined in Section 3.7 hereof.

“Registrable Securities” means the shares of common stock issued and issuable upon exercise of the Notes, together with such other shares of common stock or other securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event.

“Regulation S” as defined in Section 6.1(i)(E) hereof.

“Rule 144” as defined in Section 6.1(i)(C) hereof.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Subsidiaries” shall mean any corporation or other entity or organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any majority equity or other ownership interest or which the Company otherwise controls through contract or otherwise.

“Transaction Documents” shall mean this Agreement, the Private Placement Memorandum, the Note and the Escrow Agreement.

“Transaction Securities” shall mean the Notes and the Conversion Shares.

“Transfer” shall mean any sale, transfer, assignment, conveyance, charge, pledge, mortgage, encumbrance, hypothecation, security interest or other disposition, or to make or effect any of the above.

2. Sale and Purchase of Notes.

2.1. Subscription for Notes by Investors. Subject to the terms and conditions of this Agreement, on the Closing Date (as hereinafter defined) each of the Investors shall severally, and not jointly, purchase, and the Company shall sell and issue to the Investors, the Notes, in the respective amounts set forth on the signature pages attached hereto, in exchange for the respective Subscription Amounts set forth on the signature pages attached hereto.

2.2 Closings. Purchases and sales of the Notes shall be consummated in one or more closings, (each such consummation, if any, a “Closing” occurring on a “Closing Date”). All purchases and sales of Notes must be consummated before the earlier to occur of: (i) March 31, 2016 (the “Termination Date”) and (ii) the Business Day after which the Maximum Amount is subscribed for by investors and accepted by the Company), provided that the Termination Date may be extended by one 30-day period in the sole discretion of the Company and without notice to the Investors. The aggregate amount of purchases and sales of Notes shall not be less than $1,000,000 and shall not exceed $4,000,000. All Closings shall occur within the time periods set forth in the Private Placement Memorandum at the offices of Eaton & Van Winkle LLP, counsel to the Placement Agent, at 3 Park Avenue, 16^th floor, New York, NY 10016, or remotely via the exchange of documents and signatures.

2.3. Closing Deliveries. At each Closing, the Company shall deliver to the Investors, against delivery by each Investor of the Subscription Amount (as provided below), duly issued Notes. At each Closing, each Investor shall deliver or cause to be delivered to the Company the Subscription Amount set forth in its counterpart signature page annexed hereto by paying United States dollars via bank, certified or personal check which has cleared prior to the applicable Closing Date or in immediately available funds, by wire transfer to the following escrow account:

3. Representations, Warranties and Acknowledgments of the Investors.

Each Investor, severally and not jointly, represents and warrants to the Company solely as to such Investor that:

3.1 Authorization. The execution, delivery and performance by such Investor of the Transaction Documents to which such Investor is a party have been duly authorized and will each constitute the valid and legally binding obligation of such Investor, enforceable against such Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

3.2 Purchase Entirely for Own Account. The Transaction Securities to be received by such Investor hereunder will be acquired for such Investor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the Securities Act, without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Transaction Securities in compliance with applicable federal and state securities laws. Such Investor is not a broker-dealer registered with the SEC under the Exchange Act or an entity engaged in a business that would require it to be so registered.

3.3. Investment Experience. Such Investor acknowledges that the purchase of the Transaction Securities is a highly speculative investment and that it can bear the economic risk and complete loss of its investment in the Transaction Securities and has such knowledge and experience in financial or business matters such that it is capable of evaluating the merits and risks of the investment contemplated hereby.

3.4 Disclosure of Information. Such Investor has had an opportunity to receive all information related to the Company and the Transaction Securities requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Transaction Securities. Neither such inquiries nor any other due diligence investigation conducted by such Investor shall modify, amend or affect such Investor’s right to rely on the Company’s representations and warranties contained in this Agreement and the Private Placement Memorandum. Such Investor acknowledges that it has received and reviewed the Private Placement Memorandum and has been advised that the Company’s periodic reports filed with the SEC from March 29, 2012 to January 8, 2016 are available on the website of the SEC, www.sec.gov.

3.5 Restricted Securities. Such Investor understands that the Transaction Securities are characterized as “restricted securities” under the U.S. federal securities laws since they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances.

3.6 Legends. It is understood that, except as provided below, certificates evidencing the Transaction Securities will bear the following or any similar legend:

(a) “The securities represented hereby may not be transferred unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as amended, or (ii) (a) such securities may be sold pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act or qualification under applicable state securities laws and (b) the Company has received an opinion of counsel reasonably satisfactory to it that such transfer may lawfully be made without registration under the Securities Act of 1933 or qualification under applicable state securities laws.”

(b) If required by the authorities of any state in connection with the issuance or sale of the Transaction Securities, the legend required by such state authority.

3.7 Accredited Investor. Such Investor is an accredited investor as defined in Rule 501(a) of Regulation D, as amended, under the Securities Act (“Regulation D”).

3.8 No General Solicitation. Such Investor did not learn of the investment in the Transaction Securities as a result of any general solicitation or general advertising.

3.9 Brokers and Finders. Except as set forth in Section 10.1, no Investor will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, any Subsidiary or any other Investor, for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Investor.

3.10 Organization. If the Investor is an entity, it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the applicable Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. If the Investor is an entity, the execution, delivery and performance by the Investor of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or, if the Investor is not a corporation, such partnership, limited liability company or other applicable like action, on the part of the Investor.

3.11 No Other Representations. Other than the representations and warranties contained in the Transaction Documents, the Investor has not received and is not relying on any representation, warranties or assurances as to the Company, its business or its prospects from the Company or any other person or entity.

4. Representations and Warranties of the Company.

The Company represents, warrants and covenants to the Investors that:

4.1. Organization; Execution, Delivery and Performance.

(a) The Company and each of its Subsidiaries which is actively engaged in business is a corporation or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or organized, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.

(b) (i) The Company has all requisite corporate power and authority to enter into and perform the Transaction Documents and to consummate the transactions contemplated hereby and thereby and to issue the Transaction Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Transaction Securities) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its stockholders, is required, (iii) each of the Transaction Documents has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is a true and official representative with authority to sign each such document and the other documents or certificates executed in connection herewith and bind the Company accordingly, and (iv) each of the Transaction Documents constitutes, and upon execution and delivery thereof by the Company will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and general principles of equity that restrict the availability of equitable or legal remedies.

4.2. Securities Duly Authorized. The Transaction Securities to be issued to each such Investor pursuant to this Agreement, when issued and delivered in accordance with the terms of this Agreement, will be duly and validly issued and will be fully paid and nonassessable and free from all taxes or Liens with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of stockholders of the Company. Subject to the accuracy of the representations and warranties of the Investors party to this Agreement, the offer and issuance by the Company of the Transaction Securities is exempt from registration under the Securities Act.

4.3 No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Transaction Securities) will not: (i) conflict with or result in a violation of any provision of the Company’s Certificate of Incorporation or By-laws each as amended to date or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, except with respect to obtaining the consent of [Silicon Valley Bank]¹ which consents the Company will obtain as a condition to Closing, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected. Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents, each as amended to date. Neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults, terminations, amendments, accelerations or cancellations as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries are not being conducted in violation of any law, rule ordinance or regulation of any governmental entity, except for possible violations which would not, individually or in the aggregate, have a Material Adverse Effect. Except as required under the Securities Act, the Exchange Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement or to issue and sell the Transaction Securities in accordance with the terms hereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.

Please confirm what consents are required.

4.4. Capitalization. As of [_______], 2016, the authorized capital stock of the Company consists of (i) 100,000,000 shares of Common Stock, par value $0.001, of which [_______] shares are issued and outstanding, [_______] shares are reserved for issuance pursuant to stock options granted and [_______] shares are reserved for issuance pursuant to warrants to purchase Common Stock, and (ii) 10,000,000 shares of preferred stock, par value $0.001 per share, of which 500,000 shares are designated as Series A Preferred Stock, of which [_______] are issued and outstanding, 500,000 shares are designated as Series B Preferred Stock, of which [_______] are issued and outstanding, 4,000,000 shares are designated as Series D Preferred Stock and which [_______] are issued and outstanding and 2,000,000 shares will be designated as Series E Preferred Stock, of which [_______] are outstanding. Except as described above and in the Private Placement Memorandum, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the Securities Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders). All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and nonassessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the stockholders of the Company or any Lien imposed through the actions or failure to act of the Company.

4.5. SEC Information.

(a) As of their respective dates, the financial statements of the Company included in the Private Placement Memorandum (“Company Financial Statements”) have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the Company Financial Statements or in the Private Placement Memorandum, the Company has no liabilities, contingent or otherwise, other than: (i) liabilities incurred in the ordinary course of business subsequent to September 30, 2015 (the fiscal period end of the Company’s most recently-filed periodic report), and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements or which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. On January 8, 2016, the Company filed with the SEC a Form 15 to terminate its public reporting obligations under Section 12 of the Exchange Act and suspend its duty to file public reports under Section 15 of the Exchange Act.

(b) The shares of Common Stock are currently quoted on the OTC Pink tier of the OTC Markets Group. Except as set forth in the Private Placement Memorandum, the Company has not received notice (written or oral) from any regulatory body or the OTC Markets Group to the effect that the Company is not in compliance with the continued quotation and maintenance requirements of such exchange. The Company is in compliance with all such quotation and maintenance requirements.

4.6 Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since September 30, 2015, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

4.7 Litigation. Except as set forth in the Private Placement Memorandum, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the Company’s knowledge, threatened against or affecting the Company or any of its Subsidiaries, or their respective businesses, properties or assets or their officers or directors in their capacity as such, that would have a Material Adverse Effect. Except as set forth in the Private Placement Memorandum, the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. Except as set forth in the Private Placement Memorandum or any reports filed with the SEC prior to the date hereof, there has not been, and to the Company’s Knowledge, there is not pending or contemplated, any investigation by the SEC involving the Company, any of its Subsidiaries or any current or former director or executive officer of the Company or any of its Subsidiaries.

4.8 No Material Changes.

(a) Since September 30, 2015, except as set forth in the Private Placement Memorandum, there has not been:

(i) Any material adverse change in the financial condition, operations or business of the Company from that shown on the Company Financial Statements, or any material transaction or commitment effected or entered into by the Company outside of the ordinary course of business;

(ii) Any effect, change or circumstance which has had, or could reasonably be expected to have, a Material Adverse Effect; or

(iii) Any incurrence of any material liability outside of the ordinary course of business.

4.9 No General Solicitation. Neither the Company nor any person participating on the Company’s behalf in the transactions contemplated hereby has conducted any “general solicitation,” as such term is defined in Regulation D promulgated under the Securities Act, with respect to any of the Transaction Securities being offered hereby.

4.10 No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Transaction Securities to the Investors. The issuance of the Transaction Securities to the Investors will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any stockholder approval provisions applicable to the Company or its securities or the Securities Act.

4.11 No Brokers. Except as set forth in Section 10.1 or in the Private Placement Memorandum, the Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

4.12 Internal Controls. Except as set forth in the Private Placement Memorandum, the Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with U.S. generally accepted accounting principles.

4.13 Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Transaction Securities as required under Regulation D and to provide a copy thereof to the Placement Agent promptly after such filing. Provided that the Placement Agent has timely furnished to the Investors all necessary information relating to the Investors necessary to obtain such qualifications, the Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Transaction Securities for sale to the Investors at the applicable Closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Placement Agent on or prior to the Closing Date.

4.14 Disclosure. All disclosure provided to the Investors regarding the Company and its Subsidiaries, their businesses and the transactions contemplated hereby, furnished by or on behalf of the Company or any of its Subsidiaries, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Each press release issued by the Company or any of its Subsidiaries during the twelve (12) months preceding the date of this Agreement did not at the time of release contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, liabilities, results of operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure at or before the date hereof or announcement by the Company but which has not been so publicly disclosed. The Company acknowledges and agrees that no Investor makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.

4.15 Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, original works, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and registrations therefor (“Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted and as presently proposed to be conducted. None of the Company’s or its Subsidiaries’ Intellectual Property Rights have expired, terminated or been abandoned, or are expected to expire, terminate or be abandoned, within two (2) years from the date of this Agreement. The Company has no knowledge of any infringement by the Company or any of its Subsidiaries of Intellectual Property Rights of others. Except as set forth in the Private Placement Memorandum, there is no claim, action or proceeding being made or brought, or to the Company’s Knowledge, being threatened, against the Company or any of its Subsidiaries regarding their Intellectual Property Rights. The Company is not aware of any facts which give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights, except where failure to take such measures would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

4.16 Tax Status. Except for occurrences that would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the Company and each of its Subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company and its Subsidiaries know of no basis for any such claim. The Company is not operated in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

4.17 Acknowledgement Regarding Investors’ Trading Activity. It is understood and acknowledged by the Company that (i) following the public disclosure of the transactions contemplated by the Transaction Documents in accordance with the terms thereof, none of the Investors have been asked by the Company or any of its Subsidiaries to agree, nor has any Investor agreed with the Company or any of its Subsidiaries, to desist from effecting any transactions in or with respect to (including, without limitation, purchasing or selling, long and/or short) any securities of the Company, or “derivative” securities based on securities issued by the Company or to hold any of the Transaction Securities for any specified term; (ii) any Investor, and counterparties in “derivative” transactions to which any such Investor is a party, directly or indirectly, presently may have a “short” position in the Common Stock which was established prior to such Investor’s knowledge of the transactions contemplated by the Transaction Documents; and (iii) each Investor shall not be deemed to have any affiliation with or control over any arm’s length counterparty in any “derivative” transaction. The Company further understands and acknowledges that following the public disclosure of the transactions contemplated by the Transaction Documents, one or more Investors may engage in hedging and/or trading activities at various times during the period that the Transaction Securities are outstanding, and such hedging and/or trading activities, if any, can reduce the value of the existing stockholders’ equity interest in the Company both at and after the time the hedging and/or trading activities are being conducted. The Company acknowledges that such aforementioned hedging and/or trading activities do not constitute a breach of this Agreement or any other Transaction Document or any of the documents executed in connection herewith or therewith.

4.18 Manipulation of Price. Neither the Company nor any of its Subsidiaries has, and, to the Company’s Knowledge, no Person acting on their behalf has, directly or indirectly, (i) taken any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company or any of its Subsidiaries to facilitate the sale or resale of any of the Transaction Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Transaction Securities (other than the Placement Agent), or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company or any of its Subsidiaries (other than the Placement Agent).

4.19 Shell Company Status. The Company is subject to Rule 144(i)(1)(ii) but has ceased to be an issuer subject to Rule 144(i)(1)(i) as of June 21, 2011.

5. [Reserved]

6. Transfer Restrictions.

6.1. Transfer or Resale. Each Investor understands that:

(i) The sale or resale of all or any portion of the Transaction Securities has not been and is not being registered under the Securities Act or any applicable state securities laws, and all or any portion of the Transaction Securities may not be transferred unless:

(A) the Transaction Securities are sold pursuant to an effective Registration Statement under the Securities Act;

(B) the Investor shall have delivered to the Company a customary opinion of counsel that shall be in form, substance and scope reasonably acceptable to the Company, to the effect that the Transaction Securities to be sold or transferred may be sold or transferred lawfully without registration under the Securities Act of 1933 or qualification under applicable state securities laws;

(C) the Transaction Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the Securities Act (or a successor rule) (“Rule 144”)) of the Investor who agrees to sell or otherwise transfer the Transaction Securities only in accordance with this Section 6.1 and who is an Accredited Investor;

(D) the Transaction Securities are sold pursuant to Rule 144; or

(E) the Transaction Securities are sold pursuant to Regulation S under the Securities Act (or a successor rule) (“Regulation S”);

and, in each of (D) and (E), the Investor shall have delivered to the Company a customary opinion of counsel, in form, substance and scope reasonably acceptable to the Company. Notwithstanding the foregoing or anything else contained herein to the contrary, the Transaction Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

6.2 Transfer Agent Instructions. If an Investor provides the Company with a customary opinion of counsel that shall be in form, substance and scope reasonably acceptable to the Company, to the effect that the Transaction Securities to be sold or transferred may be sold or transferred lawfully without registration under the Securities Act of 1933 or qualification under applicable state securities laws, the Company shall permit the transfer and promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend (if permitted by law), in such name and in such denominations as specified by such Investor. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Investors, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 6.2 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Investors shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

7. Conditions to Closing of the Investors.

The obligation of each Investor hereunder to purchase the Notes at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Investor’s sole benefit and may be waived by such Investor at any time in its sole discretion by providing the Company with prior written notice thereof:

7.1 Representations, Warranties and Covenants. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing Date. Such Investor shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Investor in the form reasonably acceptable to such Investor.

7.2 Consents. The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Transaction Securities.

7.3 Delivery by Company. The Company shall have duly executed and delivered to such Investor (A) each of the other Transaction Documents to which such Investor is a party and (B) copies by fax or e-mail of the Notes in the in the principal amount set forth on the signature page hereby being purchased by such Investor at the Closing pursuant to this Agreement.

7.4 Legal Opinion. Such Investor shall have received the opinion of the Company’s counsel (reasonably acceptable to the Placement Agent), dated as of the Closing Date, in the form reasonably acceptable to such Investor, which shall include, without limitation, opinions that the offering of the Transaction Securities is exempt from registration under the Securities Act.

7.5 No Material Adverse Effect. Since the date of first execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result in a Material Adverse Effect.

7.6 No Prohibition. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.

7.7 Other Documents. The Company shall have delivered to such Investor such other documents, instruments or certificates relating to the transactions contemplated by this Agreement as such Investor or its counsel may reasonably request.

8. Conditions to Closing of the Company.

The obligations of the Company to effect the transactions contemplated by this Agreement with each Investor are subject to the fulfillment at or prior to each Closing Date of the conditions listed below.

8.1. Representations and Warranties. The representations and warranties made by such Investor in Section 3 shall be true and correct in all material respects at the time of Closing as if made on and as of such date.

8.2 Delivery by the Investor. The Investor shall have duly executed and delivered to the Company each of the Transaction Documents to which such Investor is a party.

8.3 Corporate Proceedings. All corporate and other proceedings required to be undertaken by such Investor in connection with the transactions contemplated hereby shall have occurred and all documents and instruments incident to such proceedings shall be reasonably satisfactory in substance and form to the Company.

9. Registration Rights.

9.1 Demand Registration.

(a) If at any time after the third anniversary of the Closing, the Company receives a written request from the holders of a majority of the Registrable Securities then outstanding (the “Requesting Holders”) , the Company then the Company shall (i) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Requesting Holders; and (ii) as soon as practicable, [and in any event within ninety (90) days after the date such request is given by the Requesting Holders,] file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Requesting Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other holders of Registrable Securities, as specified by notice given by each such Holder to the Company, and in each case, subject to the limitations of Section 9.1(b), Section 9.1(c) and Section 9.3.

(b) Notwithstanding the foregoing obligations, if the Company furnishes to the Requesting Holders a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such thirty (30) day period other than pursuant to a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

(c) If, pursuant to this Section 9.1, the Requesting Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 9.1(a), and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Requesting Holders, subject only to the reasonable approval of the Company. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Section 9.1(c), if the Company after consultation with the underwriter(s) determines that marketing factors require a limitation on the number of shares to be underwritten, then the Requesting Holders shall so advise all holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such holders of Registrable Securities, including the Requesting Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each holder or in such other proportion as shall mutually be agreed to by all such selling holders.

9.2 Piggyback Registration.

(a) If at any time the Company proposes to file a registration statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for security holders of the Company for their account (or by the Company and by security holders of the Company), other than a registration statement (i) filed in connection with an offering of securities to employees or directors of the Company pursuant to any employee stock option or other benefit plan, (ii) filed on Form S-4 or S-8 or any successor to such forms, (iii) for an exchange offer or offering of securities solely to the Company’s existing security holders, (iv) for a dividend reinvestment plan, or (v) solely in connection with a merger, share capital exchange, asset acquisition, share purchase, reorganization, amalgamation, subsequent liquidation, or other similar business transaction that results in all of the Company’s shareholders having the right to exchange their Common Stock for cash, securities or other property of a non-capital raising bona fide business transaction, then the Company shall (x) give written notice of such proposed filing to the Investor as soon as practicable but in no event less than three (3) business days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, of the offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to include in a registration statement and register the sale of such number of the Registrable Securities as the holder may request in writing within three (3) business days following receipt by Investor of such notice (a “Piggy-Back Registration”), provided, however, the Investor Shares shall only be entitled to one Piggy-Back Registration right, except that the right shall survive as to any shares excluded from a registration pursuant to Section 9.2(b) or Section 9.3. The Company shall use commercially reasonable efforts to include in such registration statement such Registrable Securities that are requested to be included therein within three (3) business days after the receipt by Registrable Securities of any such notice, on the same terms and conditions as any similar securities of the Company. If at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to Investor, and (x) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration, and (y) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities for the same period as the delay in registering such other securities.

(b) Reduction of Offering. If the managing underwriter or underwriters for a Piggy-Back Registration that is to be an underwritten offering advises the Company and the holder in writing that the dollar amount or number of shares of Common Stock which the Company desires to sell, as to which registration has been demanded pursuant to written contractual arrangements with persons other than the holders of the Registrable Securities, together with the Registrable Securities as to which registration has been requested under this section, exceeds the maximum dollar amount or maximum number of securities that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of securities, as applicable, the “Maximum Number of Securities”), then the Company shall include in any such registration:

If the registration is undertaken for the Company’s account: (A) first, the shares of Common Stock that the Company desires to sell; and (B) to the extent of the Maximum Number of Securities, the shares of Common Stock, pro-rata among holders, for the account of any persons, including a holder of Registrable Securities, for which the Company is obligated to register pursuant to contractual piggy-back registration rights such as in this Agreement.

(c) Withdrawal. A holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the Registration Statement. The Company (whether on its own determination or as the result of a withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a registration statement at any time prior to the effectiveness of the registration statement. Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by such holder in connection with such Piggy-Back Registration.

9.3 Limitations on Registration Rights.

The registration rights granted pursuant to this Section shall expire upon the date the Registrable Securities are eligible for sale without registration pursuant to Rule 144.

10. Miscellaneous.

10.1. Compensation of Placement Agent. Each Investor acknowledges that it is aware that the Placement Agent will receive from the Company, in consideration for its services as financial advisor and placement agent in respect of the transactions contemplated hereby:

(a) a placement agent success fee, in each case payable in cash, equal to [ ]% of the gross proceeds of the offering of Transaction Securities to potential or actual Investors sourced by the Placement Agent (“Taglich Investors”); and

(b) warrants, with a five-year term, to purchase shares of the Company’s Common Stock equal to ten (10.0%) percent of the number of shares of Common Stock into which the Notes are convertible sold in the Offering (the “Placement Agent Warrants”). The exercise price of the Placement Agent Warrants will be equal to 110% the conversion price of the Notes.

10.2. Notices. All notices, requests, demands and other communications provided in connection with this Agreement shall be in writing and shall be deemed to have been duly given at the time when hand delivered, delivered by express courier, or sent by facsimile (with receipt confirmed by the sender’s transmitting device) in accordance with the contact information provided below or such other contact information as the parties may have duly provided by notice.

The Company:

DecisionPoint Systems, Inc. 8697

Research, Irvine, CA 92618-

Facsimile: 949-215-9642

Attention: Michael P. Roe

With a copy to:

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas, 11^th Floor

Telephone:212-370-1300

Facsimile: 212-370-7889

Attention: Richard Baumann, Esq.

The Investors:

As per the contact information provided on the signature pages hereof.

Taglich Brothers, Inc.:

Taglich Brothers, Inc.	With a copy to:	Eaton & Van Winkle LLP
275 Madison Avenue, Suite 1618		3 Park Avenue, 16^th floor

New York, NY 10016

Telephone: (212) 661-6886

Facsimile: (212) 661-6824

Attention: Robert C. Schroeder

Vice President, Investment Banking

New York, NY 10016

Telephone: 212-561-3604

Facsimile: 212-779-9928

Attention: Vincent J. McGill, Esq.

10.3 Survival of Representations and Warranties. Each party hereto covenants and agrees that the representations and warranties of such party contained in this Agreement shall survive the Closing. Each Investor shall be responsible only for its own representations, warranties, agreements and covenants hereunder.

10.4 Indemnification.

(a) The Company agrees to indemnify and hold harmless each Investor and its Affiliates and their respective directors, officers, employees and agents from and against any and all losses, claims, damages, liabilities and expenses (including without limitation reasonable attorney fees and disbursements and other expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof) (collectively, “Losses”) to which such Person may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Company under the Transaction Documents, and in each case will reimburse any such Person for all such amounts as they are incurred by such Person.

(b) Promptly after receipt by any Investor (the “Indemnified Person”) of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to this Section 10.4, such Indemnified Person shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all fees and expenses; provided, however, that the failure of any Indemnified Person so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Company and the Indemnified Person shall have mutually agreed to the retention of such counsel; or (ii) in the reasonable judgment of counsel to such Indemnified Person representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Company shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the Company shall indemnify and hold harmless such Indemnified Person from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding.

10.5 Entire Agreement. This Agreement contains the entire agreement between the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter contained herein.

10.6 Underlying Shares. The Company agrees at all times as long as the Notes may be converted, to keep reserved from its authorized and unissued Common Stock, such number of shares of Common Stock as may be issuable upon conversion of the Notes.

10.7. Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and, except for the Placement Agent and other registered broker-dealers, if any, who are specifically agreed to be and acknowledged by each party as third party beneficiaries hereof, is not for the benefit of, nor may any provision hereof be enforced by, any other person.

10.8. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor any Investor shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, but subject to the provisions of Section 6.1 hereof, any Investor may, without the consent of the Company or any other Investor, assign its rights hereunder to any person that purchases Transaction Securities in a private transaction from an Investor or to any of its “affiliates,” as that term is defined under the Exchange Act.

10.9. Binding Effect; Benefits. This Agreement and all the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; nothing in this Agreement, expressed or implied, is intended to confer on any persons other than the parties hereto or their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

10.10. Amendment; Waivers. All modifications, amendments or waivers to this Agreement shall require the written consent of both the Company and the holders of the majority of the then-outstanding Notes; provided, however, that any amendment to Section 10.1 of this Agreement shall require the written consent of both the Company and the Placement Agent.

10.11. Applicable Law; Disputes. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the conflict of law provisions thereof, and the parties hereto irrevocably submit to the exclusive jurisdiction of the United States District Court for the Southern District of New York, or, if jurisdiction in such court is lacking, the Supreme Court of the State of New York, New York County, in respect of any dispute or matter arising out of or connected with this Agreement.

10.12. Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

10.13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. This Agreement may also be executed via facsimile, which shall be deemed an original.

10.14. Independent Nature of Investors. The obligations of each Investor under this Agreement or other transaction document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under this Agreement or any other transaction document. Each Investor shall be responsible only for its own representations, warranties, agreements and covenants hereunder. The decision of each Investor to purchase Notes pursuant to this Agreement has been made by such Investor independently of any other Investor and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company which may have been made or given by any other Investor or by any agent or employee of any other Investor, and no Investor or any of its agents or employees shall have any liability to any other Investor (or any other person) relating to or arising from any such information, materials, statements or opinions. Nothing contained herein or in any other transaction document, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Except as otherwise provided in this Agreement or any other transaction document, each Investor shall be entitled to independently protect and enforce its rights arising out of this Agreement or out of the other transaction documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. Each Investor has been represented by its own separate legal counsel in connection with the transactions contemplated hereby and acknowledge and understand that Eaton & Van Winkle LLP has served as counsel to the Placement Agent only.

[SIGNATURE PAGES IMMEDIATELY FOLLOW]

IN WITNESS WHEREOF, the undersigned Investors and the Company have caused this Securities Purchase Agreement to be duly executed as of the date first above written.

	DECISIONPOINT SYSTEMS INC.

	By:
		Name:
		Title:

	INVESTORS:

	Each of the Investors executing the Signature Page in the form attached hereto as Annex A and delivering the same to the Company or its agents shall be deemed to have executed this Agreement and agreed to the terms hereof.

Annex A

Securities Purchase Agreement

Investor Counterpart Signature Page

The undersigned, desiring to: (i) enter into this Securities Purchase Agreement dated as of_________ __, 2016 (the “Agreement”), with DecisionPoint Systems Inc., a Delaware corporation (the “Company”), in or substantially in the form furnished to the undersigned, and (ii) purchase the Senior Unsecured Convertible Promissory Notes of the Company (the “Notes”), as set forth below, hereby agrees to purchase such Notes from the Company as of the Closing and further agrees to join the Agreement as a party thereto, with all the rights and privileges appertaining thereto, and to be bound in all respects by the terms and conditions thereof. The undersigned specifically acknowledges having read the provisions in the Agreement section entitled “Representations, Warranties and Acknowledgments of the Investors,” and hereby represents that the statements contained therein are complete and accurate with respect to the undersigned as an Investor.

	Name of Investor:

	*If an entity:*

	Print Name of Entity:

	By:	______________________
		Name:
		Title:

	*If an individual:*

	Print Name:
	____________________________________________

	Signature: ______________________

	*If joint individuals:*

	Print Name:
	____________________________________________

	Signature: ______________________

	*All Investors:*

	Address:
	____________________________________________

	Telephone: ______________________

	Fax: ______________________

	Email Address: ______________________

	*Subscription Amount for Notes:*

	$ ________________ (to be completed by Investor)

Exhibit 4.4

DECISIONPOINT SYSTEMS, INC.

_____________________________________

SUBSCRIPTION AGREEMENT

_____________________________________

Up to 6,000,000 Shares of Common Stock
($0.50 per Share)

Maximum Aggregate Offering: $3,000,000
______________________

decisionpoint systems, inc.

DecisionPoint Systems, Inc., a Delaware corporation (the “Company”), is offering (the “Offering”) for sale to persons who qualify as “accredited investors,” as that term is defined under Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”), up to 6,000,000, shares of Company common stock (the “Shares”). Offers and sales of the Shares will be made by Taglich Brothers, Inc., acting as the placement agent (the “Placement Agent”) for the Company. The Shares will be offered on a “best efforts” basis.

The entire purchase price is due and payable upon the execution of this Subscription Agreement and shall be paid by wire transfer according to the instructions provided under “Instruction to Subscribers.” The Company has the right to reject this subscription in whole or in part, for any reason. The Company, its affiliates and their respective officers, managing members and/or employees may purchase the Shares on the same terms and conditions as other investors.

All funds received from investors will be held by the Company in a segregated non-interest bearing account, pending the earlier of completion of the Offering and the termination of the Offering by the Company. Thereafter, at the discretion of the Company, a closing will be held. If the closing has not occurred by 5:00 p.m., Eastern Standard Time, on April 30, 2018 (unless extended for one or more periods not to exceed 30 days in total by the Board of Directors of the Company), or if any subscription for the purchase of the Shares is not accepted by the Company, such subscription funds will be returned to the investor without interest thereon or deduction therefrom.

Subscriptions held in the escrow account may be revoked prior to the closing of the Offering, provided that written notice of revocation is sent by certified or registered mail, return receipt requested, and is received by the Company at least three business days prior to the closing on such subscriptions. In the event of any such revocation, or in the event that the Offering is terminated for any reason without a closing, subscription proceeds will be promptly refunded without interest thereon or deduction therefrom.

Please review this Subscription Agreement, the Confidential Private Placement Memorandum dated April 2, 2018, including all Exhibits and amendments thereto and hereto, (collectively the “Offering Materials”) carefully before you invest.

THE SHARES OFFERED HEREBY HAVE NOT BEEN FILED OR REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”). NEITHER THE COMMISSION NOR ANY OTHER REGULATORY BODY HAS APPROVED OF DISAPPROVED OF THE SHARES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE COMPANY WILL ONLY ACCEPT SUBSCRIPTION AGREEMENTS FROM SUBSCRIBERS THAT IT HAS REASON TO BELIEVE ARE “ACCREDITED INVESTORS,” AS THAT TERM IS DEFINED IN REGULATION D PROMULGATED UNDER THE SECURITIES ACT. THE SHARES OFFERED HEREBY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. SUCH EXEMPTIONS LIMIT THE NUMBER AND TYPES OF INVESTORS TO WHICH THE OFFERING WILL BE MADE AND RESTRICT SUBSEQUENT TRANSFERS OF THE SHARES.

THE SHARES OFFERED HEREBY SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. INVESTORS WILL BE REQUIRED TO REPRESENT THAT THEY ARE FAMILIAR WITH AND UNDERSTAND THE TERMS OF THIS OFFERING.

NO SHARES MAY BE RESOLD OR OTHERWISE DISPOSED OF BY AN INVESTOR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, REGISTRATION UNDER THE APPLICABLE FEDERAL OR STATE SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS MADE WITH SUCH REGISTRATION REQUIREMENTS.

THE OFFEREE, BY ACCEPTING DELIVERY OF THE OFFERING MATERIALS, AGREES TO RETURN THE OFFERING MATERIALS AND ALL ACCOMPANYING OR RELATED DOCUMENTS TO THE COMPANY UPON REQUEST IF THE OFFEREE DOES NOT AGREE TO PURCHASE ANY OF THE SHARES OFFERED HEREBY.

THE OFFERING MATERIALS ARE SUBMITTED IN CONNECTION WITH THE PRIVATE PLACEMENT OF THE SHARES AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED. ANY REPRODUCTION OR DISTRIBUTION OF THE OFFERING MATERIALS IN WHOLE OR IN PART, OR THE DIVULGENCE OF ANY OF THEIR CONTENTS, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY, IS PROHIBITED. ANY PERSON ACTING CONTRARY TO THE FOREGOING RESTRICTIONS MAY CAUSE HIMSELF, HERSELF OR ITSELF, AS WELL AS THE COMPANY, TO BE IN VIOLATION OF FEDERAL OR STATE SECURITIES LAWS.

IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION, OR THE EXAMINATIONS OF THEIR RESPECTIVE ADVISERS, OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING, WITHOUT LIMITATION, THE MERITS AND RISKS INVOLVED. THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

INVESTORS SHOULD RETAIN THEIR OWN PROFESSIONAL ADVISORS TO REVIEW AND EVALUATE THE ECONOMIC, TAX AND OTHER CONSEQUENCES OF AN INVESTMENT IN THE COMPANY.

INSTRUCTIONS TO SUBSCRIBERS

Persons and entities wishing to subscribe for the Shares must complete and sign: (i) the Subscription Agreement (see below), and (ii) the Confidential Purchaser Questionnaire (attached hereto as Exhibit A). You may subscribe by completing the following steps:

1. Subscription Agreement:

Complete and sign page 9, being certain to indicate the aggregate amount of your subscription.

2. Confidential Purchaser Questionnaire:

All subscribers must complete all sections and sign on the last page. The Confidential Purchaser Questionnaire is attached hereto as Exhibit A.

3. Payment.

Payment of your full subscription should be made by wire transfer in accordance with the following instructions:

Completed documents should be returned to the Placement Agent at the following address:

TAGLICH BROTHERS, INC.
790 New York Avenue, Suite 209
Huntington, NY 11743
Attention: Robert Lorenzo

DESCIONPOINT SYSTEMS, INC.
SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT, including the Exhibits attached hereto (this “Agreement”), made effective this ______ day of ____________, 2018 between DescionPoint Systems, Inc., a Delaware corporation (the “Company”), and the subscriber listed on the signature page to this Agreement (“Subscriber”).

WITNESSETH

In consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, the parties agree as follows:

1. Subscription. Subject to the terms and conditions contained in this Agreement, Subscriber hereby subscribes for the number of shares of common stock, par value $0.001 per share on the signature page of this Agreement (“Shares”), at a purchase price of $0.50 per Share, for an aggregate purchase price equal to the amount listed on the signature page hereof (the “Purchase Price”).

2. Delivery of Additional Subscription Documents. Concurrently with the delivery of this Agreement, Subscriber shall deliver (by check or wire transfer) the aggregate amount of the Purchase Price, a fully completed and executed Confidential Purchaser Questionnaire, a copy of which is attached hereto as Exhibit A (the “Purchaser Questionnaire”).

3. Effectiveness of Subscription. This Agreement shall not be binding on the Company until it has been accepted by the Company, which shall be evidenced by the Company countersigning this Agreement and providing Subscriber with a fully executed copy thereof. Upon the Company’s acceptance of this Agreement, the Purchase Price shall be disbursed to the Company and Subscriber shall own the Shares and become a stockholder of the Company. Subscriber acknowledges that the Company reserves the right, in its sole and absolute discretion, to accept or reject this Agreement, in whole or in part, and that the Company need not accept subscriptions for Shares in the order in which they are received.

4. Representations and Warranties of Subscriber. Subscriber hereby represents and warrants to the Company with respect to the purchase of the Shares as follows:

(a) Subscriber represents that Subscriber is an “Accredited Investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act, on the basis reflected in the Purchaser Questionnaire.

(b) Subscriber has carefully read this Agreement, the Purchaser Questionnaire, and the Company’s Confidential Private Placement Memorandum dated April 2, 2018, including all Exhibits and amendments and supplements thereto, (collectively, the “Offering Materials”), all of which Subscriber acknowledges have been provided to Subscriber.

(c) Subscriber has been given the opportunity to ask questions of, and receive answers from, the Company concerning the terms and conditions of this Offering and the Offering Materials, and to obtain such additional written information, to the extent the Company possesses such information or can acquire it without unreasonable effort or expense, necessary to verify the accuracy of the same.

(d) Subscriber fully understands the Offering Materials and has had the opportunity to discuss any questions regarding any of the Offering Materials with its counsel or other advisor. Notwithstanding the foregoing, the only information upon which Subscriber has relied is that set forth in the Offering Materials and Subscriber’s own independent investigation.

(e) Subscriber acknowledges that Subscriber has received no representations or warranties from the Company or its employees or agents in making this investment decision other than as set forth in the Offering Materials.

(f) Subscriber expressly agrees to keep the Offering Materials confidential and agrees not to disclose any information contained therein except to legal counsel and other professional advisors as may be necessary in Subscriber’s evaluation of the investment.

(g) Subscriber understands that a purchase of Shares is a speculative investment involving a high degree of risk. Subscriber is aware that there is no guarantee that Subscriber will realize any gain from this investment, and that Subscriber could lose the total amount of this investment.

(h) Subscriber understands that no federal or state agency has made any finding or determination regarding the fairness of this Offering, or any recommendation or endorsement of this Offering.

(i) Subscriber is purchasing the Shares for Subscriber’s own account, with the intention of holding the Shares, with no present intention of dividing or allowing others to participate in this investment or of reselling or otherwise participating, directly or indirectly, in a distribution of the Shares, and shall not make any sale, transfer or pledge thereof without compliance with registration under the Securities Act of 1933, as amended (the “Securities Act”), and any applicable securities laws of any state or unless an exemption from registration is available under those laws.

(j) Subscriber represents that he or she, if an individual, has adequate means of providing for his or her current needs and personal and family contingencies and has no need for liquidity in this investment in the Shares. Subscriber has no reason to anticipate any material change in his or her personal financial condition for the foreseeable future.

(k) Subscriber is financially able to bear the economic risk of this investment, including the ability to hold the Shares indefinitely or to afford a complete loss of Subscriber’s investment in the Shares.

(l) Subscriber represents that Subscriber’s overall commitment to this investment is not disproportionate to Subscriber’s net worth, and Subscriber’s investment in the Shares will not cause such overall commitment to become excessive.

(m) Subscriber understands that the statutory basis on which the Shares are being sold to Subscriber and others would not be available if Subscriber’s present intention were to hold the Shares for a fixed period or until the occurrence of a certain event. Subscriber realizes that in the view of the Securities and Exchange Commission (the “Commission”), a purchase now with a present intent to resell by reason of a foreseeable specific contingency or any anticipated change in the market value, or in the condition of the Company, or that of the industry in which the business of the Company is engaged or in connection with a contemplated liquidation, or settlement of any loan obtained by Subscriber for the acquisition of the Shares, and for which such Shares may be pledged as security or as donations to religious or charitable institutions for the purpose of securing a deduction on an income tax return, would, in fact, represent a purchase with an intent inconsistent with Subscriber’s representations to the Company and the Commission would then regard such sale as a sale for which the exemption from registration is not available. Subscriber will not pledge, transfer or assign this Agreement.

(n) Subscriber represents that the funds provided for this investment are either separate property of Subscriber, community property over which Subscriber has the right of control or are otherwise funds as to which Subscriber has the sole right of management.

(o) FOR PARTNERSHIPS, CORPORATIONS, LIMITED LIABILITY COMPANIES, TRUSTS, OR OTHER ENTITIES ONLY: If Subscriber is a partnership, corporation, limited liability company, trust or other entity, (i) Subscriber has enclosed with this Agreement appropriate evidence of the authority of the individual executing this Agreement to act on its behalf (e.g., if a trust, a certified copy of the trust agreement; if a corporation, a certified corporate resolution authorizing the signature and a certified copy of the articles of incorporation; if a partnership, a certified copy of the partnership agreement; or if a limited liability company, a certified copy of the operating agreement), (ii) Subscriber represents and warrants that it was not organized or reorganized for the specific purpose of acquiring the Shares, (iii) Subscriber has the full power and authority to execute this Agreement on behalf of such entity and to make the representations and warranties made herein on its behalf, and (iv) this investment in the Company has been affirmatively authorized, if required, by the governing board of such entity and is not prohibited by the governing documents of the entity.

(p) The address shown under Subscriber’s signature at the end of this Agreement is Subscriber’s principal residence if he or she is an individual or its principal business address if a corporation or other entity.

(q) Subscriber has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares and has the capacity to protect Subscriber’s own interests in connection with such investment.

(r) Subscriber acknowledges and understands that the Company has never made distributions on the Shares and does not anticipate making distributions in the foreseeable future.

(s) Subscriber acknowledges that the Company may issue certificates for the securities comprising the Shares. If certificates for the securities comprising the Shares are issued, the certificates will contain legends substantially as follows:

THE SHARES THAT ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER SUCH ACT, OR DECISIONPOINT SYSTEMS, INC. (THE “COMPANY”) RECEIVES AN OPINION OF COUNSEL FOR THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.

(t) Subscriber acknowledges that the Shares must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from such registration is available. Subscriber is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of securities purchased in a private placement subject to the satisfaction of certain conditions, which may include, among other things, the existence of a public market for the securities, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being effected through a “broker’s transaction” or in transactions directly with a “market maker” and the number of securities being sold during any three month period not exceeding specified limitations. Subscriber understands that no public market now exists, and that a market may never exist for any of the securities issued by the Company.

(u) Subscriber acknowledges that the Company seeks to comply with all applicable laws concerning money laundering and related activities. In furtherance of those efforts, Subscriber represents, warrants and agrees that, to the best of Subscriber’s knowledge based upon appropriate diligence and investigation, (i) none of the cash or property that Subscriber has paid, will pay or will contribute to the Company has been or shall be derived from, or related to, any activity that is deemed criminal under United States law, and (ii) no contribution or payment by Subscriber to the Company, to the extent that they are within Subscriber’s control, shall cause the Company to be in violation of the United States Bank Secrecy Act, the United States Money Laundering Control Act of 1986 or the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001. Subscriber agrees to promptly notify the Company if any of these representations cease to be true and accurate regarding Subscriber. Subscriber further agrees to provide to the Company any additional information regarding Subscriber that the Company deems necessary or convenient to ensure compliance with all applicable laws concerning money laundering and similar activities. If at any time it is discovered that any of the foregoing representations is incorrect, or if otherwise required by applicable law or regulation related to money laundering and similar activities, the Company may undertake appropriate actions to ensure compliance with applicable law or regulation, including, but not limited to segregation and/or redemption of Subscriber’s investment in the Company. Subscriber further understands that the Company may release confidential information about Subscriber and, if applicable, any underlying beneficial owners, to proper authorities if the Company, in its sole discretion, determines that it is in the best interests of the Company in light of relevant rules and regulations under the laws set forth above.

(v) Subscriber understands that this Agreement, when executed and delivered by Subscriber, will constitute a valid and legally binding obligation of such Subscriber, enforceable in accordance with its terms.

(w) Subscriber has not incurred, and will not incur, directly or indirectly, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby.

(x) Subscriber expressly acknowledges and agrees that the Company is relying upon Subscriber’s representations contained in this Agreement and the other Offering Materials.

(y) The Purchaser Questionnaire submitted by Subscriber to the Company in connection with its purchase of Shares is accurate and correct as of the date hereof.

(z) Subscriber acknowledges that (i) Subscriber was contacted regarding the sale of the Shares by the Placement Agent (or an authorized agent or representative thereof) and (ii) no Shares were offered or sold to it by means of any form of general solicitation or general advertising.

5. Representations and Warranties of the Company. The Company represents that it has been duly and validly formed and is validly existing and in good standing as a corporation under the laws of the State of Delaware. The Company represents that it has all requisite power and authority, and all necessary authorizations, approvals and orders required as of the date hereof to enter into this Agreement and to be bound by the provisions and conditions hereof or therein. The Company further represents that the securities offered hereby are being offered pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws for nonpublic offerings.

6. Indemnification. Subscriber acknowledges that Subscriber understands the meaning and legal consequences of the representations and warranties that are contained herein and hereby agrees to indemnify, save and hold harmless the Company and its officers, members, employees and counsel, from and against any and all claims or actions arising out of a breach of any representation, warranty or acknowledgment of Subscriber contained in this Agreement or the other Offering Materials. Such indemnification shall be deemed to include not only the specific liabilities or obligations with respect to which such indemnity is provided, but also all reasonable costs, expenses, counsel fees and expenses of settlement relating thereto, whether or not any such liability or obligation shall have been reduced to judgment. In addition, Subscriber’s representations, warranties and indemnification contained herein shall survive Subscriber’s purchase of the Shares hereunder. Subscriber specifically acknowledges that Subscriber has reviewed the risks set forth in the Offering Materials, as well as the financial statements included therein.

7. Piggyback Registration Rights.

(a) If at any time after the issuance of the Shares to Subscriber the Company proposes to register the offer and sale of any shares of its Common Stock under the Securities Act (other than a registration (A) pursuant to a registration statement on Form S-8 (or other registration solely relating to an offering or sale to employees or directors of the Company pursuant to any employee stock plan or other employee benefit arrangement), (B) pursuant to a registration statement on Form S-4 (or similar form that relates to a transaction subject to Rule 145 under the Securities Act or any successor rule thereto), or (C) in connection with any dividend or distribution reinvestment or similar plan), whether for its own account or for the account of one or more stockholders of the Company and the form of registration statement (a “Piggyback Registration Statement”) to be used for any registration of securities of the Company, the Company shall give prompt written notice (in any event no later than 30 days prior to the filing of such registration statement) to the holders the Shares purchased in this Offering (the “Registerable Securities”) pursuant to this Subscription Agreement of its intention to effect such a registration and, shall include in such registration all such Registrable Securities with respect to which the Company has received written requests for inclusion from the holders of such securities within 20 days after the Company’s notice has been given to each such holder. The Company may postpone or withdraw the filing or the effectiveness of a Piggyback Registration at any time in its sole discretion.

(b) Notwithstanding the registration obligations set forth in this section, if at any time the SEC takes the position that the offering of some or all of the Registrable Securities in a registration statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415 under the Securities Act, the Company shall use its commercially reasonable efforts to advocate with the SEC that the offering contemplated by the registration statement is a valid secondary offering and not an offering “by or on behalf of the issuer” as defined in Rule 415. In the event that, despite the Company’s commercially reasonable efforts and compliance with the terms of this section, the SEC refuses to alter its position, the Company shall (A) remove from the registration statement such portion of the Registrable Securities and other securities (“Other Registrable Securities”) that were included in the initial registration statement filing (“Cut-back Shares”) and/or (B) agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the SEC may require to assure the Company’s compliance with the requirements of Rule 415 (collectively, the “SEC Restrictions”). Any cut-back imposed on the Subscriber pursuant to this section shall be allocated among all subscribers in the Offering and the holders of Other Registrable Securities on a ratable basis in proportion to the number of Registrable Securities and Other Registrable Securities held by Subscriber and other persons. From and after the date on which the Buyer is able to effectuate registration of such Cut-back Shares in accordance with any SEC Restriction, all of the provisions of this section shall again be applicable to such Cut-back Shares.

(c) Subscriber shall furnish to the Company or the underwriter(s) (if any) in respect of the offering pursuant to the subject registration statement, as applicable, such information regarding the Subscriber and the distribution proposed by it as the Company may reasonably request in connection with any registration or offering referred to in this section. Subscriber shall cooperate as reasonably requested by the Company in connection with the preparation of the registration statement with respect to such registration, and for so long as the Company is obligated to file and keep effective such registration statement, shall provide to the Company, in writing, for use in the registration statement, all such information regarding the Subscriber and its plan of distribution of any Shares included in such registration statement as may be reasonably necessary to enable the Company to prepare such registration statement, to maintain the currency and effectiveness thereof and otherwise to comply with all applicable requirements of law in connection therewith.

(d) Notwithstanding anything herein to the contrary, as to the Registrable Securities, such securities shall cease to be Registrable Securities and the provisions of this section shall terminate when: (A) a registration statement and/or a Piggyback Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such registration statement and/or Piggyback Registration Statement; (B) such securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Buyer and subsequent public distribution of them shall not require registration under the Securities Act; or (C) such securities shall have ceased to be outstanding.

8. Miscellaneous.

(a) Confidentiality. Subscriber agrees that it will keep confidential and will not disclose or divulge any confidential, proprietary or secret information which Subscriber may obtain from the Company pursuant to financial statements, reports and other materials submitted by the Company to Subscriber pursuant to this Agreement or otherwise, or until such information becomes known, to the public; provided, however, that Subscriber may disclose such information to Subscriber’s attorneys, consultants and other professionals to the extent necessary to obtain their services in connection with Subscriber’s investment in the Company, so long as such consultants or professionals (excluding attorneys and accountants) agree in writing to be bound by the provisions of this Section 7(a).

(b) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware and the undersigned hereby consents to the jurisdiction of the courts of the State of Delaware.

(c) Entire Agreement; Amendment. The parties have not made any representations or warranties with respect to the subject matter hereof not set forth herein, except as set forth in the Purchaser Questionnaire. This Agreement, together with the Purchaser Questionnaire and any other instruments executed simultaneously herewith, constitute the entire agreement between the parties with respect to the subject matter hereof. All understandings and agreements heretofore had between the parties with respect to the subject matter hereof are merged in this Agreement and any such instruments, which alone fully and completely expresses their agreement. This Agreement may not be changed, modified, extended, terminated or discharged orally, but only by an agreement in writing, which is signed by all of the parties to this Agreement.

(d) Notices. Any notice required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective on (i) the date of delivery by facsimile or electronic mail, (ii) the business day after deposit with a nationally recognized courier or overnight service, including Express Mail, for United States deliveries, or (iii) five (5) business days after deposit in the United States mail by registered or certified mail for United States deliveries. All notices not delivered personally or by facsimile or electronic mail will be sent with postage and other charges prepaid and properly addressed to the party to be notified at the address set forth below such party’s signature of this Agreement or at such other address as such party may designate by ten (10) days advance written notice to the other parties hereto.

(e) Delays or Omissions. Except as otherwise specifically provided for hereunder, no party shall be deemed to have waived any of his or her or its rights hereunder or under any other agreement, instrument or document signed by any of them with respect to the subject matter hereof unless such waiver is in writing and signed by the party waiving said right. Except as otherwise specifically provided for hereunder, no delay or omission by any party in exercising any right with respect to the subject matter hereof shall operate as a waiver of such right or of any such other right. A waiver on any one occasion with respect to the subject matter hereof shall not be construed as a bar to, or waiver of, any right or remedy on any future occasion. All rights and remedies with respect to the subject matter hereof, whether evidenced hereby or by any other agreement, instrument or document, will be cumulative, and may be exercised separately or concurrently.

(f) Severability. If any provision of this Agreement is held to be unenforceable under applicable law, then such provision shall be excluded from this Agreement, and the balance of this Agreement shall be interpreted as if such provision was so excluded and shall be enforceable in accordance with its terms.

(g) Titles and Subtitles. The titles of the paragraphs and subparagraphs of this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

(h) Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

(i) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

(j) Survival of Warranties. The representations, warranties, covenants and agreements of the Company and Subscriber contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the closing of the Offering and shall in no way be affected by any investigation made by Subscriber or the Company.

(k) Further Action. The parties agree to execute any and all such other and further instruments and documents, and to take any and all such further actions reasonably required to effectuate this Agreement and the intent and purposes hereof.

ALL SUBSCRIBERS MUST COMPLETE THIS PAGE

IN WITNESS WHEREOF, Subscriber has executed this Agreement on _________________, 2018.

_________ Shares; $0.50 per Share = $_______________

Social Security or Tax Identification Number		Clearly print exact name(s) in which title to Shares is to be held (i.e., if Shares are to be held by a trust, provide the trust name; if to be held by a company, provide the company name, if to be held as Joint Tenants, provide both individuals’ names)
Street Address		(Authorized Signature)


City, State, Zip		Print name of Authorized Signatory (above) and capacity/title in which signed if signed on behalf of an entity (i.e., Trustee; President, Partner)
E-mail Address		Signature of second person (only applicable if Shares are to be held as Joint Tenants or Tenants in Common)


		Print name of above Signatory *(only applicable if Shares are to be held as Joint Tenants or Tenants in Common)*

Accepted this ___ day of ___________, 2018 on behalf of:

	decisionpoint systems, inc.

	By:
		Name:
		Title:

Exhibit A to the DecisionPoint Systems, Inc. Subscription Agreement

Confidential Purchaser Questionnaire

See attached.

CONFIDENTIAL PURCHASER
QUESTIONNAIRE

DECISIONPOINT SYSTEMS, INC.

The purpose of this Confidential Purchaser Questionnaire (this “Questionnaire”) is to acquire certain information that will allow DecisionPoint Systems, Inc., a Delaware corporation (the “Company”), and Taglich Brothers, Inc. (the “Placement Agent”) to determine whether the undersigned’s subscription for shares of common stock, par value $0.001 per share (the “Shares”) may be accepted pursuant to Rule 506(b) of Regulation D (“Regulation D”) of the Securities Act of 1933, as amended (the “Securities Act”). The Shares are being offered without registration under the Securities Act or the securities laws of any state or any other jurisdiction. Under the Securities Act and/or state securities laws, the Company may be required to determine that an individual, an investing entity and/or each individual equity owner of an investing entity meets certain suitability requirements before selling the Shares to such individual or entity.

The undersigned understands that: (i) the Company and the Placement Agent will rely upon the information contained herein; (ii) the purchase and sale of the Shares hereunder will not be registered under the Securities Act or any applicable state law and is being offered in reliance upon certain exemptions therefrom; (iii) this Questionnaire is not an offer to sell or a solicitation of any offer to buy or sell the Shares or any other securities to the undersigned; and (iv) no subscription for Shares will be accepted unless the subscriber therefor is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D (“Accredited Investor”).

Your answers will be kept strictly confidential. However, by signing this Questionnaire, you agree that the Company and/or the Placement Agent may present this Questionnaire to such parties as they deem appropriate if called upon to establish the Company’s entitlement to an exemption under the Securities Act or any applicable state securities laws.

(Questionnaire Begins on following Page.)

PLEASE PROVIDE COMPLETE ANSWERs to all QUESTIONS and execute the signature page.

If the appropriate answer is “NONE” or “NOT APPLICABLE,” so state. Attach additional sheets if necessary to complete your answers to any item.

The undersigned hereby makes the following representations and warranties:

[Print or type your response]

Name in which Shares will be held

Citizenship:

Date of Birth:

Social Security Number:

Name of spouse or additional purchaser (if applicable)

Citizenship:

Date of Birth:

Social Security Number:

If an Entity:

Type of Entity (e.g., corporation, LLC, Partnership, Trust, etc.):

Jurisdiction of Organization:

Tax Identification Number:

Home address or, if other than an individual, principal office address:

Telephone number:

The undersigned hereby represents and warrants to the Company and the Placement Agent that he, she or it is an Accredited Investor because the undersigned is (check each appropriate description):

	_________	a natural person whose individual net worth, or joint net worth with my spouse, at the time of the purchase, exceeds $1,000,000.

		(Net worth for purposes of this Questionnaire means the amount equal to total assets (excluding the value of my principal residence) subtracted by total liabilities (excluding the amount of indebtedness secured by my primary residence up to the fair market value of such primary residence (except that if the amount of indebtedness secured by my primary residence exceeds the amount of such indebtedness 60 days ago, other than as a result of the acquisition of such primary residence, the amount of such excess shall be included in total liabilities)).)

	_________	an unmarried natural person who had individual income exceeding $200,000 in each of the two most recent years, and who reasonably expects to reach the same income level in the current year.

	_________	a married natural person who had a joint income with my spouse exceeding $300,000 in each of the two most recent years and who reasonably expects to reach the same income level in the current year.

	_________	a director, executive officer or general partner of the Company or a director, executive officer of the general partner of the Company.

	_________	a natural person with such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of investing in the Shares (“Sophisticated Person”).

	_________	a trust, not formed for the specific purpose of acquiring the Shares, with total assets exceeding $5,000,000 and whose purchase is directed by a Sophisticated Person.

	_________	an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the Shares, with total assets exceeding $5,000,000.

	_________	a bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity.

	_________	a broker-dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended.

	_________	an insurance company as defined in Section 2(13) of the Securities Act.

	_________	an investment company registered under the Investment Company Act of 1940, as amended (the “ICA”).

	_________	a business development company as defined in Section 2(a)(48) of the ICA.

	_________	a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended.

	_________	a Small Business Investment Company licensed by the Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended.

	_________	a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, which plan has total assets in excess of $5,000,000.

	_________	an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and (i) investment decisions for such plan are made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company or registered investment adviser or (ii) such plan has total assets exceeding $5,000,000 or (iii) if a self-directed plan, investment decisions are made solely by persons that are Accredited Investors.

	_________	an entity in which all of the equity owners are Accredited Investors.

	_________	a revocable trust which may be amended or revoked at any time by the grantors thereof, and all such grantors are Accredited Investors.

Do you have sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of an investment in the Company and are you willing and able to bear the economic risk of an investment in the Company.

Yes _____ No _____

Do you understand the nature of an investment in the Shares and the risks associated with such an investment?

Yes _____ No _____

Do you intend to purchase the Shares solely for your own account, for investment and not with the intent to resell them?

Yes _____ No _____

Are you an entity formed for the purpose of acquiring the Shares?

Yes _____ No _____

Are you an entity whose stockholders, partners, members or other beneficial owners have individual discretion as to their participation or non-participation in particular investments made by you, and one or more of such stockholders, partners, members or other beneficial owners have contributed or will contribute capital to you for the purpose of your acquisition of Shares (i.e., your investors have been permitted to determine whether their capital will form part of the specific capital invested by you in the Shares)?

Yes _____ No _____

The undersigned hereby represents and warrants that the information contained in this Questionnaire is complete, accurate and that he, she or it will notify the Company and the Placement Agent immediately of any material change in any statement made herein occurring before the undersigned’s receipt of the Company’s acceptance of his, her or its Subscription Agreement. In addition, the undersigned agrees to provide such further information as may be requested by the Company or the Placement Agent to verify any of the responses contained herein.

The undersigned hereby agrees to indemnify the Company and the Placement Agent, as well as their respective partners, officers, employees, agents and attorneys (the “Indemnified Parties”) against all losses, claims, demands, liabilities and expenses (including reasonable legal or other expenses) incurred by the Indemnified Parties in connection with defending or investigating any claims or liabilities, whether or not resulting in any liability to which any of the Indemnified Parties may become subject under the Securities Act, under any other statute, at common law or otherwise, insofar as such losses, claims, demands, liabilities and expenses (a) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in this Questionnaire or (b) arise out of or are based upon any breach of any representation, warranty or agreement contained herein.

(Remainder of this page intentionally left blank. Signature page follows.)

IN WITNESS WHEREOF, the undersigned has executed this Suitability Statement as of this ____ day of _______, 2018.


	Exact Name in Which Title is to be Held


	Authorized Signature


	Print Name of Signatory and Capacity in which
	Signed if an Entity


	Signature (if Joint Tenants or Tenants in Common)


	Print Name of above Signatory

Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “Agreement”) is dated and is effective as of April 11, 2016 (the “Effective Date”) by and between DecisionPoint Systems, Inc., a company organized under the laws of the State of Delaware (the “Company”), and Steven Smith (the “Executive”).

WHEREAS, as of the Effective Date, the Company desires to employ the Executive and the Executive desires to accept such employment on the terms and conditions contained herein; and,

NOW, THEREFORE, in consideration of the foregoing premises and mutual covenants and agreements herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Term of Employment. Subject to the provisions of Section 5 of this Agreement, the Executive shall be employed by the Company for a period commencing on the Effective Date and ending on the third-year anniversary of the Effective Date (the “Term”).

2. Position.

(a) Duties. The principal duties of the Executive shall be to serve in the position of Chief Executive Officer and as a member of the board of directors of the Company (the “Board”). As Chief Executive Officer, the Executive shall render full time services to the Company as the principal executive officer of the Company and shall be responsible for all aspects of the business of the Company, all subject to the direction and control of the Board. Responsibilities will include duties as would be consistent and normally associated with Chief Executive Officers in corporations of similar size and nature to the Company, and to render such other services as are reasonably necessary or desirable to protect and advance the best interests of the Company. Executive shall primarily perform his duties from an office location in Nassau County, New York.

(b) Devotion of Time to Company’s Business. The Executive shall use his best efforts, skills and abilities to promote and protect the interests of the Company and devote substantially all of his working time and energies to the business and affairs of the Company. Notwithstanding anything to the contrary contained herein, the Executive (i) may serve on the board(s) of additional companies or organizations and receive compensation for such services rendered and (ii) may engage in charitable, civic, fraternal, professional and trade association activities, provided that in each such case the activities engaged in by the Executive do not materially interfere with his primary obligations to the Company and do not materially reduce the amount of his working time devoted to the business and affairs of the Company.

(c) Company Rules, Policies and Regulations. The Executive shall, at all times, conduct himself in a professional manner and adhere to the standards, ethical obligations, rules, policies, regulations and procedures of the Company which are presently in force or which may be established from time to time by the Company. Executive shall take no intentional action that violates any law, rule or regulation whatsoever while acting in his capacity as employee.

3. Compensation and Benefits.

(a) Base Salary. As of the Effective Date, the Executive shall be paid a base salary in consideration for his services provided to the Company at the rate of $350,000 per annum (the “Base Salary”).

(b) Option Grant. In consideration of the Executive entering into this Agreement, the Executive shall, on the closing date of the equity or convertible financing currently being contemplated by the Company (the “Financing”), be granted a stock option under the Company’s 2014 Equity Incentive Plan the (“Plan) equal to 4.0% of the fully diluted outstanding common shares of the Company (the “Option”). The Option shall vest ratably on the date of grant and at the end of each of the six (6) fiscal quarter ends of the Company after the closing date of the Financing, shall have an exercise price equal to the price per common share assigned in the Financing, and shall be subject to such other terms and conditions as set forth in a separate option grant agreement evidencing the Option. Notwithstanding the foregoing, if the closing date of the Financing date does not occur on or before April 29, 2016, the Option will be granted on May 2, 2016, the exercise price per share shall be no less than the fair market value of a share of common stock (as determined by the Company in accordance with terms of the Plan) on May 2, 2016, and the Option shall vest ratably on the date of grant and at the end of each of the six (6) fiscal quarter ends, of the Company after May 2, 2016. It is the intention of this Agreement that the Executive, through his fully vested Option, will participate in 4% of the appreciation of the value of the Company without being diluted by the Financing or any post-Financing recapitalization currently being contemplated by the Company.

(c) Additional Compensation. The Executive shall receive an annual bonus for each calendar year during the Term (the “Annual Bonus” and, together with the Base Salary, the “Annual Compensation”). For the first year of the Term, the Annual Bonus shall be determined as set forth on Exhibit C attached hereto and made a part hereof. The Annual Bonus for each year of the Term following the first year will be based on achieving gross revenue and EBITDA targets to be mutually agreed upon by the Company and the Executive. The Annual Bonus shall be structured and/or paid in a manner that is either not subject to the requirements of or complies with the requirements of Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (“Code”).

(d) Tax Gross-Up Payment. Upon the occurrence of a Change of Control (as defined below) of the Company, if all or any portion of the payments provided under this Agreement and/or any other payments and benefits that the Executive receives or is entitled to receive from the Company or an affiliate thereof constitutes an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code (each such payment, a “Parachute Payment”), and would result in the imposition on the Executive of an excise tax under Section 4999 of the Code (“Excise Tax”), then in addition to any other benefits to which the Executive is entitled under this Agreement, the Company shall pay the Executive an additional amount in cash (the “Gross-Up Payment”) such that the net amount received by the Executive in connection with the Change of Control, after payment of (i) any Excise Tax and (ii) any Federal, state and local income and employment taxes on the Gross-Up Payment by Executive, shall be equal to the aggregate Parachute Payments payable to the Executive. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay Federal income tax at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state or locality of the Executive’s residence in the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. Any Gross-Up Payment due to the Executive under this Section 3(d) shall be paid to the Executive no later than the end of the year following the year in which the Executive or the Company paid the related taxes.

(e) Withholding. All salaries, bonuses and other benefits payable to the Executive shall be subject to payroll and withholding taxes as may be required by law.

4. Employee Benefits; Business Expenses.

(a) Employee Benefits. During the Term, the Executive and his dependents shall be entitled to participate in the Company’s healthcare plans, welfare benefit plans, fringe benefit plans and any qualified or non-qualified retirement plans as in effect from time to time (collectively, the “Employee Benefits”), on the same basis as those benefits are made available to the other senior executives of the Company, in accordance with the Company policy as in effect from time to time and in accordance with the terms of the applicable plan documents (if any).

(b) Vacation; Perquisites. The Executive shall be entitled to four (4) weeks of paid vacation per employment year. During the Term, the Executive shall be entitled to receive such perquisites as are made available to other senior executives of the Company in accordance with Company policies as in effect from time to time.

(c) Expenses. The Executive shall be entitled to reimbursement for reasonable and necessary business expenses incurred by him in the performance of his duties and responsibilities hereunder, in accordance with the Company’s reimbursement and expenses policies, as in effect from time to time.

5. Termination.

(a) Definitions. For purposes of this Agreement:

“Cause” shall mean (i) the Executive’s gross negligence and/or willful misconduct in the performance of his material duties with respect to the Company, for which the Executive shall have a ten (10) day cure period following written notice thereof from the Company, (ii) the final, non-appealable conviction of the Executive, by a court of competent jurisdiction, of a crime constituting a felony, or (iii) the Executive shall have committed any material act of malfeasance, disloyalty, dishonesty or breach of fiduciary duty against the Company.

“Change of Control” means the consummation of a merger of consolidation of the Company with or into another entity or any other corporate reorganization, if fifty percent (50%) or more of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such merger, consolidation, or other reorganization is owned by persons who were not shareholders of the Company immediately prior to such merger, consolidation, or other reorganization; (ii) a change in ownership or control of the Company after the date hereof, effected through the direct or indirect acquisition by any person or related group of persons of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities; (iii) the sale, transfer or other disposition of all or substantially all of the Company’s assets; or (iv) the liquidation or dissolution of the Company (other than a liquidation or dissolution occurring upon a merger or dissolution thereof).

Notwithstanding the foregoing, a "Change in Control" shall not be deemed to occur if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.

“Date of Termination” shall mean the date the Notice of Termination is given to the respective party; provided, however, that with respect to a termination for Cause by the Company, the Date of Termination shall not occur prior to the expiration of any applicable cure period.

“Disability” shall mean the Executive has become physically or mentally incapacitated and is therefore unable for a period of four (4) consecutive months or more to perform any of the material elements of his duties hereunder. Any question as to whether the Executive has a Disability as to which he (or his legal representative) and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Executive (or his legal representative) and the Company. If the Executive (or his legal representative) and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of whether the Executive has a Disability, as made in writing to the Company and the Executive by such physician(s), shall be final and conclusive for all purposes of this Agreement.

“Good Reason” shall mean one of the following circumstances or conditions, in each case without the consent of the Executive, after which the Executive resigns within six months following the initial existence of the circumstance or condition: (i) any action or inaction that constitutes a material breach by the Company of this Agreement; (ii) a material reduction of the duties, responsibilities or authority of the Executive; (iii) a material diminution in the budget over which the Executive retains authority; (iv) a change in the geographic location at which the Executive must perform his services to a location which is greater than fifty (50) miles from the Executive’s Nassau County, New York location; or (v) a Change of Control, but only if the Executive's resignation occurs within twelve (12) months after the occurrence of such Change of Control; provided, that with respect to (i), above, the Company shall have a thirty (30) day cure period following notice thereof from Executive to the Company provided within ninety (90) days of the Executive becoming aware of the existence of the circumstance or condition.

“Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated, and shall be communicated, in writing, to the other party hereto in accordance with the provisions of Section 10(f) hereof.

(b) By the Company for Cause or by the Executive without Good Reason.

(i) The Term and the Executive’s employment hereunder may be terminated by the Company for Cause, immediately upon the delivery of a Notice of Termination by the Company to the Executive (except where the Executive is entitled to a cure period, in which case such Date of Termination shall be upon the expiration of such cure period if such matter constituting Cause is not cured) and shall terminate automatically upon the Executive’s resignation (other than for Good Reason or due to the Executive’s death or Disability).

(ii) If the Executive’s employment is terminated by the Company for Cause, or if the Executive resigns other than for Good Reason, the Executive shall be entitled to receive:

(A) any earned but unpaid Base Salary and accrued but unused vacation, all vested equity, and any earned but unpaid (pro-rata) Annual Bonus through the Date of Termination;

(B) a (pro-rata) Annual Bonus shall be paid to the Executive no later than March 15 of the year following the calendar year in which the Date of Termination occurred; and

(C) reimbursement for any unreimbursed business expenses incurred by the Executive in accordance with the Company’s policy prior to the Date of Termination (with such reimbursements to be paid promptly after the Executive provides the Company with the necessary documentation of such expenses to the extent required by such policy but in no event later than the end of the second calendar month following the Date of Termination).

Following the Executive’s termination of employment by the Company for Cause or if he resigns other than for Good Reason, except as set forth above or as required by applicable law or the terms of any applicable Company benefit plan, the Executive shall have no further rights to any compensation or any other benefits or perquisites under this Agreement and all unvested options or restricted stock grant awards or any other equity awards shall immediately be cancelled without the need for any action by the Company.

(i) The Term and the Executive’s employment hereunder may be terminated by the Company other than for Cause, immediately upon the delivery of a Notice of Termination by the Company to the Executive, and shall terminate automatically and immediately upon the Executive’s resignation for Good Reason at the end of any applicable cure period if the circumstances giving rise to Good Reason are not cured.

(ii) If the Executive’s employment is terminated by the Company during the Term, other than for Cause, or if the Executive resigns during the Term for Good Reason, the Executive shall receive and the Company shall pay or provide to Executive on the Date of Termination the following:

(A) any earned but unpaid Base Salary and accrued but unused vacation, all vested equity, and any earned but unpaid (pro-rata) Annual Bonus through the Date of Termination, plus an additional amount equal to Base Salary of (1) 18 months for termination during the first year of the Term, or (2) 12 months for termination after the first year of the Term (the “Severance Payment”);

(B) acceleration of any then unvested stock options, restricted stock grants or other equity incentive awards;

(C) a (pro-rata) Annual Bonus shall be paid to the Executive no later than March 15 of the year following the calendar year in which the Date of Termination occurred; and

(D) reimbursement for any unreimbursed business expenses incurred by the Executive in accordance with the Company’s policy prior to the Date of Termination (with such reimbursements to be paid promptly after the Executive provides the Company with the necessary documentation of such expenses to the extent required by such policy but in no event later than the end of the second calendar month following the Date of Termination).

Following the Executive’s termination of employment by the Company other than for Cause or if he resigns for Good Reason, except as set forth above or as required by applicable law, the Executive shall have no further rights to any compensation or any other benefits under this Agreement. Notwithstanding the foregoing, in order to be eligible for any of the Severance Payment under this Section 5(c), the Executive must execute and deliver to the Company a general release in a form and substance reasonably satisfactory to the Company and the Executive. If any of the payments to be made under this Section 5(c) are otherwise subject to Section 409A, they shall be made, or commence to be made, on the first pay period following the date that is thirty (30) days after the Executive’s employment terminates. If none of the payments are otherwise subject to Section 409A, they shall be made on the first business day after the release becomes effective.

(d) Death or Disability. The Executive’s employment hereunder shall terminate upon the Executive’s death and may be terminated by the Company, within ten (10) days after the delivery of a Notice of Termination by the Company to the Executive (or his legal representative) in the event of the Executive’s Disability. Upon termination of the Executive’s employment hereunder for either Disability or death, the Executive (or his estate) shall be entitled to receive the same payments and other items as set forth in clause (ii) of Section 5(b) hereof, except that Executive (in case of Disability) or the estate (in the event of death) shall have the right to exercise any unexercised and vested options for a period of 90 days, and, in addition, to receive payment for accrued but unpaid vacation time, if any. Following the Executive’s termination of employment due to death or Disability, except as set forth herein or as required by applicable law, the Executive (and his estate) shall have no further rights to any compensation or any other benefits under this Agreement.

6. Restrictive Covenants.

(a) Definitions.

(i) “Competitive Activity” means any business activity which competes, directly or indirectly, with the Company Business, or any business activity substantially similar to the Company Business, as constituted, from time to time.

(ii) “Confidential Information” means all confidential or proprietary information of, about, or relating to the Company and the Company Business, including, without limitation, any and all documents received or generated by Executive, existing and potential customer lists, trade secrets (as defined under applicable state law), pricing, financial, corporate, and personnel information, customer data, methods of operation, business plans, techniques, prototypes, sketches, drawings, models, inventions, know-how, processes, apparatus, software programs, computer codes, source codes, equipment, algorithms, source documents, formulae, methods, data, descriptions relating to current, future, and proposed products and services, information concerning research, experimental work, development, specifications, engineering, procurement requirements, purchasing, agents and suppliers, business forecasts, marketing plans and information received from third parties (including customers) that is subject to a duty on Executive’s part to maintain its confidentiality. Confidential Information does not include information that is generally known to the public, provided it is generally known to the public other than as a result of disclosure of such information by Executive in violation of this Agreement; information that was in the possession of Executive prior to the time of disclosure by the Company; and information that Executive properly receives from a third party.

(iii) “Commercial Partner” means each third party person or entity with whom Executive interacts on behalf of the Company during the term of his employment with the Company, whether pursuant to this Agreement or otherwise, including, without limitation, licensors, licensees, contract research organizations, contract manufacturing organizations, contract sales organizations, contract distribution organizations and joint venture partners; provided that, on the date of the termination of Executive’s employment with the Company, Commercial Partner shall mean those third party persons and entities with whom Executive interacted on behalf of the Company during the Lookback Period.

(iv) “Company Business” means the business(es) engaged in by the Company, from time to time during the term of Executive’s employment with the Company, pursuant to this Agreement; provided that, on the date of the termination of Executive’s employment with the Company, the Company Business shall be the business(es) engaged in by the Company during the Lookback Period.

(v) “Former Employee” means any person who has been employed or engaged as an independent contractor by the Company during the Lookback Period.

(vi) “Former Commercial Partner” means each third party person or entity who is not currently a Commercial Partner but was a Commercial Partner during the Lookback Period.

(vii) “Lookback Period” means the one (1) year period immediately preceding the date on which the definition in question is being determined.

(viii) “Prospect” means each person or entity who is not a Commercial Partner, and for whom, at any time during the Lookback Period, the Company, whether through its employees, contractors or vendors, expended directed marketing efforts or undertook other business development efforts which resulted in at least an indication of interest from such person or entity of becoming a Commercial Partner.

(b) Non-Solicitation and Non-Piracy. Provided that the Company is, and remains, in compliance with its obligations under this Agreement, by whatever means and for whatever reason, Executive shall not, directly or indirectly, individually, or jointly with others, for the benefit of Executive or any third party:

(i) For the term of Executive’s employment, whether under this Agreement or otherwise, have any equity or other ownership interest in, or become a director or manager of, or be otherwise associated with, or engaged or employed by, any Commercial Partner, Prospect or Former Commercial Partner or their subsidiary or parent entities or affiliates in any job or career that relates to or concerns any activity substantially similar, in whole or in part, to the Company Business;

(ii) For the term of Executive’s employment, whether under this Agreement or otherwise, and for a period of one (1) year after the cancellation, termination or expiration of Executive’s employment with the Company (the “Restriction Period”), solicit, render services to, or accept business from any Commercial Partner, Prospect or Former Commercial Partner or any of their subsidiary or parent entities or affiliates for any business activity that relates to the Company Business; and

(iii) during the Restriction Period, solicit, hire, compensate or engage as an employee, agent, contractor, shareholder, member, joint venturer or consultant, whether or not for consideration, any of the Company’s employees or otherwise induce any of the Company’s employees, subcontractors or vendors to change their relationship with the Company.

(c) Confidentiality. Executive shall never: (i) disclose any Confidential Information; or (ii) directly or indirectly give or permit any person or entity to have access to any Confidential Information; or (iii) make any use, commercial or otherwise, of any Confidential Information, except, solely as reasonably required to perform Executive’s employment duties with the Company and solely for the benefit of the Company.

(d) Restrictive Covenants Scope. The parties acknowledge that the provisions of this section are necessary and reasonable to protect the legitimate business interest of the Company and any violation of the provisions of this section will result in irreparable injury to the Company, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such violation would not be reasonable or adequate compensation to the Company for such violation. Accordingly, Executive agrees that if the provisions of this section are violated, in addition to any other remedy which may be available in equity or at law, the Company shall be entitled to specific performance and injunctive relief, without the necessity of proving actual damages.

(e) Tolling of Restriction Period. In the event of Executive’s breach of one or more of the provisions of this section, the running of the Restriction Period shall be tolled during the continuation of such breach(es) and recommence only upon Executive’s full and complete compliance with the provisions of this Section 6.

(f) Judicial Modification. In the event a court of competent jurisdiction holds one or more of the provisions of the restrictive covenants invalid as to length of time or geographic scope, then this Section 6 shall be amended to reflect a reasonable length of time and/or reasonable geographic scope.

7. Works for Hire and Intellectual Property. Executive acknowledges and agrees that: (a) all Work Product (as defined below) shall be deemed a work for hire; and (b) he hereby assigns all of his intellectual property and other rights in all Work Product to the Company. All right, title and interest in and to, and the right to pursue protection for, Work Product shall vest solely with the Company. Upon request by the Company, Executive shall use reasonable efforts, at no additional expense, to assist the Company in securing any intellectual property protection for Work Product and shall execute all documents reasonably necessary to effect an assignment as contemplated herein. No license is granted to Executive in, to or under any Work Product or other intellectual property (including, but not limited to, patents, trade secrets, copyrighted materials and trademarks) owned, licensed or otherwise assertable by Executive by express or implied grant, estoppel or otherwise, except for a limited right to use any such intellectual property solely in the performance of Executive’s employment duties and solely for the benefit of the Company. All benefits from the use of any such intellectual property, including Work Product, shall inure solely to the Company. “Work Product” means all tangible or intangible works: (X) (1) created, produced or modified during and in connection with Executive’s employment by the Company; or (2) which are related to, or that can be utilized in, the Company Business; and (Y) that could qualify as the subject matter of a copyright, patent, trade secret or any other form of intellectual property; and shall include, without limitation, all work produced by or for the benefit of the Company, any Company Affiliate, Commercial Partners, Former Commercial Partners and Prospects.

8. Company Property. Executive agrees that all Company Property (as defined below) is the property solely of the Company, and Executive waives and relinquishes any and all interests or property rights he or she may have therein in favor of the Company. Executive shall immediately return all of the Company Property to the Company at the Company’s address for notices or such other location as may be directed by the Company upon: (A) the Company’s request at any time; and (B) upon the termination of Executive’s employment. “Company Property” includes, but is not limited to: (X) records relating to Commercial Partners, Former Commercial Partners, Prospects and Confidential Information in whatever form they exist, and by whomever prepared, including, but not limited to, notes of Executive; (Y) tangible embodiments of or containing Work Product or Confidential Information; and (Z) tangible and intangible property pertaining to the Company Business or arising out of or used by Executive in the performance of his duties for the Company.

9. Independent Covenant. Intentionally omitted.

10. Miscellaneous.

(a) Governing Law; Jurisdiction. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York, without reference to principles of conflicts of laws. Any legal proceedings commenced hereunder shall be brought exclusively in the federal courts or in the state courts in the State of New York. Each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts.

(b) Entire Agreement; Amendments. This Agreement sets forth the entire understanding of the parties concerning the subject matter of this Agreement and incorporates all prior negotiations and understandings. There are no covenants, promises, agreements, conditions or understandings, either oral or written, between them relating to the subject matter of this Agreement other than those set forth herein. The publication, amendment, supplementation or replacement of an employee handbook by the Company shall not be deemed to alter, amend or modify the terms and conditions of this Agreement. No alteration, amendment, change or addition to this Agreement shall be binding upon any party unless in writing and signed by the party to be charged. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.

(c) No Waiver. No waiver of any of the provisions of this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed or be construed as a further, continuing or subsequent waiver of any such provision or as a waiver of any other provision of this Agreement. No failure to exercise and no delay in exercising any right, remedy or power hereunder will preclude any other or further exercise of any other right, remedy or power provided herein or by law or in equity.

(d) Severability. If any term or provisions of this Agreement, or the application thereof to any person or circumstance, shall be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances, other than those as to which it is held invalid, shall both be unaffected thereby and each term or provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law.

(e) Assignment. This Agreement, and all of the Executive’s rights and duties hereunder, shall not be assignable or delegable by the Executive; provided, however, that if the Executive shall die, all amounts then payable to the Executive hereunder shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee or other designee or, if there be no such devisee, legatee or designee, to his estate. The Company and its successors and assigns may, at any time and from time to time, assign its rights and obligations under this Agreement, including, without limitation, the rights arising pursuant to sections 6, 7 and 8, without Executive’s consent to a buyer of all or substantially all of the assets, or a majority of the voting stock, of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such assignee or successor person or entity.

(f) Notices. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or by nationally recognized courier service addressed to the respective addresses set forth below in this Agreement or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

If to the Company:

DecisionPoint Systems, Inc.

8697 Research Drive

Irvine, CA 92618

If to the Executive:

Steven Smith

at the most recent address of the Executive set forth in the personnel records of the Company.

(g) Prior Agreements. This Agreement supersedes all prior agreements and understandings (including oral agreements) between the Executive and the Company regarding the terms and conditions of the Executive’s employment with the Company.

(h) Cooperation. The Executive shall provide his reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during the Executive’s employment hereunder, but only to the extent the Company requests such cooperation with reasonable advance notice to the Executive and in respect of such periods of time as shall not unreasonably interfere with the Executive’s ability to perform his duties with any subsequent employer; provided, however, the Company shall pay any reasonable travel, lodging and related expenses that the Executive may incur in connection with providing all such cooperation, to the extent approved by the Company prior to incurring such expenses.

(i) Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

(j) Survival. Sections 6, 7, 8 and 10 shall survive the termination, cancellation or expiration of this Agreement by whatever means for whatever reason.

(k) Fees and Expenses. In the event the Company shall fail or refuse to make or authorize any payment of any amount otherwise due to the Executive hereunder within the appropriate period of time, then the Company shall reimburse the Executive for all reasonable expenses (including reasonable counsel fees and expenses) incurred by him in enforcing the terms hereof, within five (5) business days after demand accompanied by evidence of fees and expenses incurred. With regard to any dispute pursuant to this Agreement, the Company and Executive agree that the non-prevailing party shall promptly reimburse any and all reasonable attorneys’ fees to the prevailing party in connection therewith. Any reimbursement hereunder shall be paid promptly.

(l) Section 409A.

(i) The parties intend that the payments and benefits provided for in this Agreement either be exempt from Section 409A, or be provided in a manner that complies with Section 409A and any ambiguity herein shall be interpreted so as to be consistent with the intent of this paragraph. In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on the Executive by Section 409A or damages for failing to comply with Section 409A. Notwithstanding anything contained herein to the contrary, all payments and benefits which are payable upon a termination of employment hereunder shall be paid or provided only upon those terminations of employment that constitute a “separation from service” from the Company within the meaning of Section 409A (determined after applying the presumptions set forth in Treas. Reg. Section 1.409A-1(h)(1)). Further, if the Executive is a “specified employee” as such term is defined under Section 409A at the time of a termination of employment and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated recognition of income or additional tax under Section 409A, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in payments or benefits ultimately paid or provided to the Executive) until the date that is at least six (6) months following the Executive’s termination of employment with the Company (or the earliest date permitted under Section 409A, e.g., immediately upon the Executive’s death), whereupon the Company will promptly pay the Executive a lump-sum amount equal to the cumulative amounts that would have otherwise been previously paid to the Executive under this Agreement during the period in which such payments or benefits were deferred. Thereafter, payments will resume in accordance with this Agreement.

(ii) Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided hereunder during any calendar year shall not affect in-kind benefits or reimbursements to be provided in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by the Executive and, if timely submitted, reimbursement payments shall be promptly made to the Executive following such submission, but in no event later than December 31^st of the calendar year following the calendar year in which the expense was incurred. In no event shall the Executive be entitled to any reimbursement payments after December 31^st of the calendar year following the calendar year in which the expense was incurred. This paragraph shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to the Executive.

(iii) Additionally, in the event that following the date hereof the Company or the Executive reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A, the Company and the Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (x) exempt the compensation and benefits payable under this Agreement from Section 409A and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (y) comply with the requirements of Section 409A.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to be effective as of the day and year first above written.

	By:
		Name:
		Title:

	Date:

	EXECUTIVE

Exhibit C

Executive Bonus

For the first year of the Term, Executive will be entitled to earn an Annual Bonus in the minimum amount of 40% of Base Salary, or $140,000, based on achieving gross revenue targets to be mutually agreed upon by the Company and the Executive based on the annual budget, as follows:

Revenue Attainment	Bonus Multiplier	Annual Bonus
0-75% Gross Revenue Attainment		$0
75%-100% Gross Revenue Attainment	(Percentage of gross revenue attainment - 75%) * the Annual Bonus amount, * 4	$0 - $140,000
100% + Gross Revenue Attainment	(Percentage of gross revenue attainment - 100%) * the Annual Bonus amount, * 3	$140,000+

As an example, if 90% of established gross revenue target was attained the annual bonus earned would be $84,000

As an example, if 110% of established gross revenue target was attained the annual bonus earned would be $182,000

Exhibit 10.2

AMENDEND EMPLOYMENT AGREEMENT

This AMENDED EMPLOYMENT AGREEMENT (this "Agreement) is dated and is effective as of March 25 2019 (the "Effective Date") by and between DecisionPoint Systems, Inc., a company organized under the laws of the State of Delaware (the "Company"), and Steven Smith (the '"Executive").

WHEREAS. pursuant to that certain Employment Agreement dated as of April 11, 2016 by and among the Company and the Executive (the "Original Agreement") under which the Executive desires to accept such employment on the terms and conditions contained herein;, and,

WHEREAS, the Company and the Executive(") whereas the Executive desires to amend and extend the Term of Original Agreement; and,

NOW, THEREFORE, in consideration. of the foregoing premises and mumal covenants and agreements herein and for other good and valuable consideration, fue receipt and sufficiency of which are hereby acknowledged, the Company and Executive agree to:

l. Term of Employment. The Company hereby employs Executive, and Executive hereby accepts employment • with the Company for the term of beginning on April 1, 2019, and terminating on March 31> 2022 (the ''Term").

2. Modifications. Sections 3(a) and 3(b) are hereby deleted, and are replaced to read as follows:

Section 3. Compensation and Benefits.

(a) Base Salary. As of the Effective Date, the pxecutive shall be paid a base safary in consideration. for his. services provided to the Company at the rate of $400,000 per annum (the "Base Salary"), increasing to $410,000 per annum on the first anniversary and $420,000 per annum on the second anniversary.

(b) Stock/Option Grant. In consideration of the Executive entering into this Agreement, the Executive shall be granted shares of restricted stock or stock options equal to oot less than 700,,000 of common shares. of the Company. The exact nature of the grnnt will be mutually determined by the Company and the Executive . It is the intention of this Agreement that the Executive, through his folly vested shares or option, will fully participate in the value of ownership of 700,000 shares of common stock. The shares, or options shall vest in. accordance to a vesting schedule mutually agreed upon, however aU such shares or options shall be fully vested upon Change in Control or Termination of the Executive.

Cancellation of Option. In consideration of the grant of 700,000 shares of common stock1 any existing options previously granted to the Executive under the Company's option plan will be cancelled.

Annual Bonus. For the first year of the Term, the Annual Bonus shall be determined as set forth on Exhibit C attached hereto and made a part hereof.

Terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Original Agreement.

[Signature Page Follows]

IN WITNESS WHEREOF. the parties hereto have duly executed this Agreement to be effective as of the day and year first above written.

Exhibit C

Executive Bonus

For the first year of the Term, Executive will be entitled to earn an Annual Bonus io the minimum amount of 40% of Base Salary, or $160,000, based on achieving gross revenue attainment of $46,000,000 and EBITDA attainment of $2,700,000, as follows:

Revenue Attainment	Bonus Multiplier	Annual Bonus
0-75% Gross Revenue Attainment		$0
75%-100% Gross Revenue Attainment	(Percentage of gross revenue attainment - 75%) * the Annual Bonus amount, * 4	$0-$64,000
100%-133% Gross Revenue Attainment	(Percentage of gross revenue attainment - 100%) * the Annual Bonus amount, * 3	$64,000- $128,000

As an example, if 90% ($41,400,000) of established gross revenue target was attained the annual bonus earned would be $38,400.

As an example,. jf 110% ($50,600,000) of established gross revenue target was attained the annual bonus earned would be $83,200.

And;

EBITDA Attainment	Bonus Multiplier	Annual Bonus
0-75% EBITDA Attainment		$0
75%-100% EBITDA Attainment	(Percentage of gross revenue attainment - 75%) * the Annual Bonus amount, * 4	$0-$96,000
100%-133% EBITDA Attainment	(Percentage of gross revenue attainment - 100%) * the Annual Bonus amount, * 3	$96,000- $192,000

As an example, if 90% (2,430,000) of established EBITDA target was attained the annual bonus earned would be $57.600.

As an example, if ]10% ($2,970,000) of established EBITDA target was attained the annual bonus earned would be $124,800.

Exhibit 10.3

DECISIONPOINT SYSTEMS, INC.

UNRESTRICTED AWARDED SHARE AGREEMENT

(Fully Vested)

THIS UNRESTRICTED AWARDED SHARE AGREEMENT (the “Agreement”), made effective March 25, 2019 (the “Effective Date”), between DECISIONPOINT SYSTEMS, INC., a Delaware corporation (the “Company”), and Steven Smith (the “Participant”).

Participant:	Steven Smith

Address:


Number of Awarded Shares:	700,000

Vesting Schedule:	No right of repurchase or forfeiture shall apply to the Awarded Shares, and the Awarded Shares, and the Awarded Shares shall be fully vested in Participant at all times as of the Effective Date.

The Company’s Board of Directors (“Board”) hereby on the Effective Date grants to the Participant an urestricted stock award (this “Award”) of shares (the “Awarded Shares”) of its common stock, par value $0.001 par value per share (the “Common Stock”), effective as of the Effective Date, upon and subject to the terms and conditions set forth in this Agreement. This Award is being made in accordance with the Amended Employment Agreement dated March 25, 2019, by and between Participant and the Company (the “Employment Agreement”).

In consideration of the various covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

1. Award.

(a) This Award shall evidence Participant's ownership of the Awarded Shares. subject to the terms, restrictions, and other conditions of this Agreement and of the Plan. Any term used in this Agreement and not defined shall have the meaning given such term in the Plan.

(b) Participant is entitled to receive a stock certificate (or other evidence of ownership) representing the Awarded Shares.

2. No Purchase Price. Participant shall receive the grant of Awarded Shares as compensation and Participant shall not be required to pay par value (or other monetary consideration) for the grant.

3. Release Schedule; Fully Vested. Except as may be imposed by law or under the Plan, there are no vesting conditions or forfeiture terms applicable to the Awarded Shares, the Awarded Shares are vested in full upon grant, and the Awarded Shares may be referred to in this Agreement as “Unrestricted Awarded Shares”.

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4. Cancellation and Surrender of Prior Awards. Pursuant to Section 3 of the Employment Agreement, as of the Effective Date, Participant hereby waives and relinquishes any and all rights Participant has, or may have, in any stock options or other equity awards granted by the Company to Participant prior to the Effective Date (collectively, the “Prior Awards”), and as of the Effective Date, all Prior Awards are cancelled and terminated and of no further effect. Participant represents and warrants that none of the Prior Awards have been exercised by Participant or conveyed to a third party, and that upon cancellation of the Prior Awards, except for the Unrestricted Awarded Shares, Participant holds no other options, equity awards, or other rights to acquire equity or other ownership in the Company that were granted or made prior to the Effective Date in the form of an award or grant by the Company in consideration for services or other non-cash consideration.

5. Issuance of Stock Certificates for Shares. The stock certificate or certificates representing the Awarded Shares shall be promptly issued or held in book entry form following the execution of this Agreement and shall be delivered to Participant. The Unrestricted Awarded Shares will bear a legend in substantially the form set forth below.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED BY THE HOLDER FOR INVESTMENT PURPOSES. SAID SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS (A) THEY HAVE BEEN REGISTERED UNDER SAID ACT, OR (B) THE COMPANY IS PRESENTED A WRITTEN OPINION SATISFACTORY TO COUNSEL FOR THE COMPANY OR A ‘NO-ACTION’ INTERPRETIVE LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR TRANSFER.

6. Voting Rights and Dividends. Subject to the restrictions and conditions contained in this Agreement and the Plan, Participant shall have the rights of a stockholder with respect to the Awarded Shares, including the right to vote all such Awarded Shares, and to receive all dividends, cash or stock, paid or delivered thereon, and to participate in liquidations, redemptions and stock splits, from and after the date hereof.

7. Tax Obligations and Withholding. Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences resulting from the grant of the Unrestricted Awarded Shares, this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that, except for any withholding or payments required to be made by an employer under FICA that relate to the U.S. Medicare tax, the Participant (and not the Company) shall be responsible for any tax liability that may arise as a result of the Award and the transactions contemplated by this Agreement.

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8. Securities Laws.

In connection with the grant of the Awarded Shares, Participant covenants, represents, and warrants to the Company that:

(a) The Awarded Shares to be acquired by Participant pursuant to this Agreement will be acquired for Participant’s own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act of 1933 (the “Securities Act”), as amended, or any applicable state securities laws, and neither the Awarded Shares nor any other shares of capital stock of the Company issued or issuable directly or indirectly with respect to the Awarded Shares by way of dividend or split or in connection with a combination of securities, recapitalization, merger, consolidation, or other reorganization will be disposed of in contravention of the Securities Act, any applicable state securities laws and any procedures reasonably established by the Board to ensure compliance with the foregoing.

(b) Participant is familiar with the financial affairs of the Company, is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Awarded Shares.

(c) Participant is able to bear the economic risk of his investment in the Awarded Shares for an indefinite period of time because the Awarded Shares have not been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available.

(d) Participant has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Awarded Shares and has had full access to such other information concerning the Company as requested.

(e) This Agreement constitutes the legal, valid, and binding obligation of Participant, enforceable in accordance with its terms, and the execution, delivery, and performance of this Agreement by Participant does not and will not conflict with, violate, or cause a breach of any agreement, contract, or instrument to which Participant is a party or any judgment, order, or decree to which Participant is subject.

9. Conditions to Issuance of Stock Certificates. The Company shall not be required to issue or deliver any certificate or certificates for shares of Unrestricted Awarded Shares pursuant to this Agreement prior to fulfillment of all of the following conditions:

(a) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Board shall, in its sole discretion, deem necessary or advisable; and

(b) The obtaining of any approval or other clearance from any state or federal governmental agency which the Board shall, in its sole discretion, determine to be necessary or advisable; and

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(c) The payment by the Participant of all amounts that, under federal, state or local tax law, the Company (or other employer corporation) is required to withhold upon issuance of Awarded Shares and/or the lapse or removal of any of the restrictions.

10. No Right to Continued Relationship. Nothing in this Agreement or in the Plan shall confer upon a Participant any right to continue in the service of the Company as an employee, director, consultant or any other capacity for any period of time or restrict in any way the rights of the Company or the Participant, to terminate the relationship between the Company and the Participant at any time for any reason whatsoever, with or without cause.

11. Awarded Shares Subject to Plan. Notwithstanding anything in this Agreement to the contrary, the terms of this Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Company’s Secretary.

12. Miscellaneous.

(a) This Agreement may be executed in one or more counterparts, all of which taken together will constitute one and the same instrument.

(b) The terms of this Agreement may only be amended, modified, or waived by a written agreement executed by both of the parties hereto.

(c) This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflict of laws provisions. In any action among any of the parties arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement: (i) each party irrevocably consents to service of process by first class certified mail, return receipt requested, postage prepaid, and (ii) each party irrevocably waives any and all rights to a trial by jury in any legal proceeding arising out of or related to this Agreement or the transactions contemplated hereby. The prevailing party in any litigation in connection with this Agreement may recover attorneys’ fees and litigation costs incurred in prosecuting or defending such litigation from the nonprevailing party.

(d) This Agreement and the Plan constitute the entire agreement between the parties hereto with respect to the Awarded Shares granted herein.

(e) Except as otherwise herein provided, this Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns, and of Participant and Participant’s personal representatives.

[Signature page follows.]

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IN WITNESS WHEREOF, the parties have executed this Agreement on the Effective Date.

DECISIONPOINT SYSTEMS., INC.

	By:
	Its:

PARTICIPANT

	/s/ Steven Smith
	Steven Smith

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Exhibit 10.4

LOAN AND SECURITY AGREEMENT

(Accounts Receivable & Inventory Line of Credit)

This Loan and Security Agreement (Accounts Receivable & Inventory Line of Credit), is entered into as of August 11, 2016, by and between CapitalSource Business Finance Group, a dba ofBFI Business Finance, a California corporation (“Lender”), with its headquarters’ office located at 851 East Hamilton Avenue, 2^nd Floor, Campbell, California 95008 and DecisionPoint Systems, Inc., a(n) Delaware corporation (“DPS, Inc,”), DecisionPoint Systems International, Inc,, a(n) Delaware corporation (“DPS Intl”), DecisionPoint Systems Group, Inc., a(n) Delaware corporation (“DPS Group”), decisionpoint systems CA, Inc,, a(n) California corporntion (“DPS CA”) and decisionpoint systems CT, Inc,, a(n) Connecticut corporation (“DPS CT”) (DPS, Inc., DPS Intl, DPS Group, DPS CA and DPS CT, individually and collectively, the “Borrower”), with its headquarters at its Chief Executive Office as defined herein.

RECITALS

A. Borrower has requested Lender to make loans to Borrower for business purposes.

B. Lender is willing to make such loans to Borrower, on the terms and conditions set forth in this Agreement, and Borrower agrees to make the payments required by this Agreement and to comply with the other tenns and conditions of this Agreement.

AGREEMENT

For good and valuable consideration, receipt of which is hereby acknowledged, the parties agree as set forth below.

1, Definitions and Construction.

I. I. Definitions. As used in this Agreement, the following tenns shall have the following definitions:

“Accounting Period” has the meaning given in Section 9.4 hereof

“Accotmt Debtor” means a person obligated on an Account, Chattel Paper, or General Intangible.

“Accounts” means all currently existing and hereafter arising accounts as defined in the Code, as such definition may be changed from time to time, and shall include, but not be limited to a right to payment of a monetary obligation for property sold or services rendered, and any and all credit insurance, guaranties, or security therefor,

“Addendum” means that certain Addendum A or Addendum B hereto, if applicable,

“Advance(s)” has the meaning given in Section 2.1,l hereof.

“Administrative Fee” has the meaning given in Section 2.2.10 hereof.

“Affiliate” means, when used with respect to any Person, any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person, For purposes of this definition, “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), with respect to any Person, shall mean possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise,

“Agreement” means this Loan and Security Agreement (Accounts Receivable & Inventory Line of Credit) together with all addenda, exhibits and schedules hereto, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated, or replaced,

“Allowable Amount” means the lesser of the Borrowing Base and the Maximum Amount.

“Attorneys’ Fees” has the meaning given in subsections (g) and (h) of the definition of Lender’s Expenses,

“AIR Borrowing Base” has the meaning set forth in the definition of Borrowing Base.

“AIR Line of Credit” means the line of credit against which Advances will be made with reference lo the amount applicable under the AIR Borrowing Base. (The AIR Line of Credit is and shall be secured by all the Collateral.)

“Audit Fees” has the meaning set forth in Section 2.2.12 hereof,

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“Authenticate” has the meaning given in the Code, as such definition may be amended from time to time, which means to sign, execute, or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intention of the authenticating person to identify the person and adopt or accept a record.

“Authorized Officer” means any officer or employee of Borrower as set forth in that certain Signature Authorization of even date herewith, as it may be amended from time to time.

“Bankruptcy Code” means Title 11 of the United States Code, as amended and any successor statute.

“Basic Tenn” has the meaning set forth in Section 6.1 hereof.

“Blocked Account” has the meaning set forth in Section 3.8.2.!(ii) hereof.

“Borrower” has the meaning set forth in the preamble to this Agreement, individually and collectively.

“Borrower’s Books” means all of Borrower’s books and records, including, without limitation, ledgers, records indicating, summarizing, or evidencing Borrower’s properties or assets (including, without limitation, the Collateral) or liabilities, all information relating to Borrower’s business operations or financial condition, and all computer programs, disc or tape files, printouts, runs, or other computer prepared information, and the equipment containing such information.

“Borrowing Base” means the sum of the following:

(a.) eighty-five percent ( 85 %) of the Net Face Amount of Prime Accounts, but in any event not in an aggregate amount in excess of the Maximum Account Advance (the “AIR Borrowing Base”); plus

(b.) ----------n/a---------- percent (----------n/a----------%) of the Current Market Cost of raw materials that constitute Eligible Inventory; plus ----------11/a---------- percent (----------n/a----------%) of the Current Market Cost of finished goods that constitute Eligible Inventory, but in any event not in an aggregate amount in excess of the Maximum Inventory Advance (the “Inventory Borrowing Base”).

“Business Day(s)” means any day that is not a Saturday, Sunday, or other day on which California State or national banks are authorized or required to be closed.

“CERCLA” has the meaning given in the definition ofEnviromnental Laws.

“Chattel Paper” has the meaning given in the Code, as such definition may be amended from time to time, which defines Chattel Paper as a record or records that evidence both (a.) a monetary obligation; and (b.) a Security Interest in (i.) specific goods; (ii.) a Security Interest in specific goods and Software used in the goods; (iii.) a Security Interest in specific goods and license of Software used in the goods; or (iv,) a lease of specific goods and license of Software used in the goods.

“Chief Executive Office” means Borrower’s sole place of business (if it has only one), chief executive office (if it has more than one place of business) or residence (if an individual) which is located at 8697 Research Drive, Irvine, California 92618 .

“Clearance Days” has the meaning given in Section 3.4 hereof “Closing Date” means the date of the initial advance hereunder.

“Code” or “UCC” means the California Uniform Commercial Code, or any successor statute in effect in the state of California, as amended and/or re-numbered from time to time, which is also known as the UCC.

“Collateral” means all of the personal property and Trade Fixh1res now owned or hereafter acquired by Borrower whether now existing or hereafter arising and wherever located, including without limitation: (a.) all Accounts; (b.) all Chattel Paper including without limitation Electronic Chattel Paper; (c.) all Inventory; (d.) all Equipment; (e.) all Trade Fixh1rcs; (f.) all Fixtures; (g.) all Instruments; (h.) all Financial Assets, including without limitation, Investment Property; (i.) all Documents; (i.) all Deposit Accounts; (k.) all Letter of Credit Rights; (I.) all General Intangibles including without limitation copyrights, trademarks, and patents, Payment Intangibles, Software, and all rights in and to domain names in whatever form, and all derivative URLs; (m.) all Supporting Obligations; (n.) any Commercial Tort Claim listed on any schedule provided herewith or hereafter; (o.) all reh1rned or repossessed goods arising from or relating to any Accounts or Chattel Paper; (p.) all certificates of title and certificates of origin or manufacturers statements of origin relating to any of the foregoing, now owned or hereafter acquired; (q.) all property similar to any of the foregoing hereafter acquired by Borrower; (r.) all ledger sheets, files, records, documents, instruments, and other books and records (including without limitation related electronic data processing Software) evidencing an interest in or relating to the above; (s.) all money, cash or cash equivalents; and (t.) to the extent not othenvise included in the foregoing, all proceeds, products, insurance claims, and other rights to payment and all accessions to, replacements for, attachments to, substitutions for, and rents and profits of, and noncash proceeds of, each of the foregoing. Notwithstanding any contrary term of this Agreement, Collateral shall not include any waste or other materials that have been or may be designated as toxic or hazardous.

“Collateral Control Account(s)” has the meaning given in Section 3,8,2.1 hereof.

“Collateral State” has the meaning given in Section 9.15 hereof.

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“Collection Privilege” has the meaning given in Section 3.8.2.3 hereof.

“Commercial Tort Claim” has the meaning given in the Code, as such definition may be amended from time to time, which means a claim arising in tort with respect to which the claimant is an organization or if the claimant is an individual, the claim arose in (a.) the course of the claimant’s business or profession; and (b.) does not include damages arising out of personal injury to or death of an individual.

“Concentration Limit” means the maximum permitted percentage, that the aggregate Accounts of one Account Debtor may constitute of Borrower’s total Accounts, as further described in subsection (u) of the definition of Prime Accounts.

“Contra” has the meaning given in subsection (r.) of the definition of Prime Accounts.

“Cross-Aging Limit” has the meaning given in subsection (v) of the definition of Prime Accounts.

“Cumulative Minimum Annual Interest Payment” has the meaning given in Section 2.2.2 hereof.

“Current Market Cost” means, as determined by Lender in its Sole Discretion, the lower of(a.) the cost of Inventory, computed on a first-in-first-out basis in accordance with GAAP; or (b.) the market vahle of Inventory.

“Daily Balance” means the principal amount of any Obligations owed at the end of a given day, which shall be calculated solely for purposes of calculating interest that no payment made by check or other means, including without limitation wire transfer, ACH transfer, credit card payment or any other means shall be deemed to be made until three (- 3 -) Business Days after receipt by Lender of such payments to allow for clearance thereof, as provided in Section 3.4 hereof; provided however, that all payments when received shall be given provisional credit for purposes of determining availability of Advances under the Agreement.

“Default Rate” has the meaning given in Section 2.2.4 hereof

“Deposits” means the Good Faith Deposit and the Documentation Fee/Legal Deposit as further described in Section 2.2.11 hereof and any other deposit that Lender may require on a case by case basis.

“Deposit Account(s)” has the meaning given in the Code, as such definition may be amended from time to time, including without limitation, a demand, time, savings, passbook, or similar account maintained with a bank or other depository institution.

“Dilution Rate” means the percentage rate at which Borrower’s Prime Accounts are subject to reduction due to credits, reh1rns, and allowances.

“Documentation Fee/Legal Deposit” has the meaning set forth in Section 2.2.11.2 hereof.

“Documents” has the meaning given in the Code, as such definition may be amended from time to time,

“Electronic Chattel Paper” has the meaning given in the Code, as such definition may be amended from time to time, which defines Electronic Chattel Paper as Chattel Paper evidenced by a record or records consisting of information stored in an electronic medium.

“Eligible Inventory” means Inventory that meets all of the following criteria:

(a.) Inventory acceptable to Lender, in its Sole Discretion, for lending purposes;

(b.) Inventory held for sale or lease in the ordinary course of Borrower’s business;

(c,) Inventory located at Borrower’s Chief Executive Office or Other Locations; provided, however, that if any such location is owned by a party other than Borrower, Lender shall have obtained from the owner thereof an agreement relative to Lender’s rights with respect to such Inventory, in form and content satisfactory to Lender;

(d.) Inventory in which Lender has a first priority, perfected Security Interest under the laws of the United States of America or any state of the United States of America;

(e.) Inventory not subject to a Security Interest, lien, or other encumbrance in favor of any other Person, except for Permitted Liens;

(f.) Inventory of good and merchantable quality that is free from defect and that is not slow moving, obsolete, returned, perishable, or manufactured under a license agreement unless the licensor (if other than Borrower) has entered into an agreement in form and content reasonably acceptable to Lender;

(g.) Inventory owned and in the lawful possession of Borrower;

(h.) Inventory which does not consist of packaging and shipping materials; and

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(i.) Inventmy that does not consist of supplies used or consumed in Borrower’s business or work-in process.

General criteria for Eligible Inventory may be established and revised from time to time by Lender in its Sole Discretion. Any Inventory that is not Eligible Inventory shall nevertheless be part of the Collateral.

“Environmental Laws” means all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment, including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals, or industrial, toxic or hazardous substances or wastes or the clean-up or other remediation thereof, including without limitation 42 U.S.C. §9601 (14), of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), as amended by the Superfimd Amendments and Reauthorization Act of 1986 set forth at 42 U.S.C. §9601 et seq. (“SARA”), or the Resource Conservation and Recovery Act of 1976 set forth at 42 U.S.C. §6901 et seq. (“RCRA”) and all successor statutes and amendments thereto.

“EPA” means the United States Environmental Protection Agency.

“Equipment” means all of Borrower’s now owned and hereafter acquired equipment as defined in the Code, as such definition may be amended from time to time, and wherever located, and shall include, but not be limited to, all goods (other than inventory, farm products, or consumer goods) including without limitation machinery, computers and computer hardware and Software (whether owned or licensed), vehicles, tools, furniture, Trade Fixtures (but not including Fixtures unless Real Property Collateral has been pledged to Lender), all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located.

“BRISA” has the meaning given in Section 9.21 hereof.

“Event of Default” means those events described in Section 11 hereof.

“Exhibit” means that certain Exhibit A hereto, if applicable.

“FEIN” has the meaning given in Section 8.1.15 hereof,

“Financial Assets” has the meaning given in the Code, as such definitions may be amended from time to time, which defines Financial Assets as any of the following: (a.) a security; (b.) an obligation of a person or a share, participation, or other interest in a person or in property or an enterprise of a person, that is, or is of a type, dealt in or traded on financial markets or that is recognized in any area in which it is issued or dealt in as a medium for investment; and (c.) any property that is held by a securities intermediary for another person in a securities account that has expressly agreed with the other person that the property is to be treated as a financial asset.

“Fixtures” has the meaning given in the Code, as such definition may be amended from time to time, which defines Fixtures as goods that have become so related to particular real property that a real property interest in them arises under real property law, but shall not include Trade Fixtures.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and pronouncements of the Financial Accounting Standards Board (or any successor authority) that are applicable as of the date of determination.

“General Intangibles” means general intangibles as defined in the Code, as such definition may be amended from time to time, (and shall include, but not be limited to, registered and unregistered patents, trademarks, service marks, copyrights, trade names, domain names and all derivative URL’s, applications for the foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer lists, licenses, whether as licensor or licensee, choses in action and other claims and existing and future leasehold interests in Equipment, Payment Intangibles and Software), all whether arising under the laws of the United States of America or any other country.

“Good Faith Deposit” has the meaning set forth in Section 2.2.11. I hereof.

“Guarantor” means, individually and collectively, •---------11/a•--·· ---·.

“Guaranty” means that (a.) certain General Continuing Guaranty or those certain General Continuing Guaranties signed by Guarantor concurrently with the execution of this Agreement and the Loan Documents and/or the Term Loan Documents, as amended from time to time hereafter; (b.) such additional Guaranties as may be executed by third parties in the future; or (c.) such additional Guaranties as may be signed in favor of Lender hereafter.

“Hazardous Substances” and “Hazardous Wastes” means all or any of the following:

(a.) substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as “hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP toxicity”;

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(b.) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources;

(c.) any flammable substances or explosives or any radioactive materials; and

(d.) asbestos in any fonn or electrical equipment which contains any oil or dielectric fluid containing levels ofpolychlorinated biphenyls in excess offifty (50) parts per million.

“Indebtedness” means all of the following:

(a.) all indebtedness for borrowed money (whether by loan or the issuance and sale of debt securities);

(b.) that portion of obligations with respect to capital leases that is properly classified as a liability on a balance sheet in conformity with GAAP;

(c.) acceptances, bonds, indentures, notes payable, and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money;

(d.) any obligation owed for all or any part of the deferred purchase price of property or services if the purchase price is due more than six (6) months from the date the obligation is incurred or is evidenced by a note or similar written instrument;

(e.) all indebtedness secured by any lien on any property or asset owned or held by Borrower regardless of whether the indebtedness secured thereby shall have been assumed by Borrower or is nomecourse to the credit of Borrower;

(f.) contingent obligations to the extent such obligations are no longer contingent but become absolute and remain unpaid;

(g.) all obligations, contingent or otherwise, relative to the face amount of any letter of credit, letter of credit guaranties, bankers acceptances, interest rate swaps, controlled disbursement accounts, or other financial products;

(h.) any unfunded obligation of Borrower or any of its subsidiaries to a multiemployer plan required to be accrued by GAAP; and

(i.) obligations of Borrower guaranteeing or intended to guarantee (whether guaranteed, endorsed, co- made, discounted, or sold with recourse to Borrower), any indebtedness, lease, dividend, letter of credit, or other obligation of any other Person.

“Indemnified Liabilities” has the meaning set forth in Section 14.3 hereof.

“Indemnified Person” has the meaning set forth in Section 14.3 hereof.

“Insolvency Proceeding” means any case, proceeding, or matter commenced by or against any Person under any provision of the Bankruptcy Code or under any other bankruptcy or insolvency law, including, without limitation, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

“Instrument” has the meaning given in the Code, as such definition may be amended from time to time, which defines an Instrument as a negotiable instrument or any other writing that evidences a right to payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in the ordinary course of business is transferred by delivery with any necessary endorsement or assignment. Instrnment shall include but not be limited to promissory notes.

“Inventory” means all present and future inventory, as defined in the Code, as such definition may be amended from time to time, in which Borrower has any interest and wherever located, and shall include but not be limited to, goods held for sale or lease or to be furnished under a contract of service and all of Borrower’s present and future raw materials, work in process, finished goods, and packing and shipping materials, wherever located, and any documents of title representing any of the above.

“lnventmy Appraisal Fee” has the meaning set forth in Section 2.2.13 hereof.

“Inventmy Borrowing Base” has the meaning set forth in the definition of Borrowing Base.

“Inventory Line of Credit” means the line of credit against which Advances will be made with reference to the amount applicable under U1e Inventory Borrowing Base. (The Inventory Line of Credit is and shall be secured by all the Collateral.)

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“Investment Property” has the meaning given in the Code, as such definition may be amended from time to time, which defines Investment Property as securities, security accounts, commodity contracts, or commodity accounts.

“IRC” means the Internal Revenue Code of 1986, Title 26 of the United States Code, as amended and/or re-numbered, including any successor statute, and the regulations thereunder.

“Lender” has the meaning set forth in the preamble to this Agreement.

“Lender Expenses” includes, without limitation, all of the following:

(a.) reasonable costs or expenses (including without limitation taxes, photocopying, notarization, telecommunication, insurance premiums, and postage) paid by Lender in com1ection with Lender’s transactions with Borrower;

(b.) reasonable costs and expenses required to be paid by Borrower under any of the Loan Documents that are paid or advanced by Lender in connection with Lender’s transactions with Borrower;

(c.) reasonable documentation, filing, recording, publication, appraisal (including periodic Collateral appraisals in accordance with Section 2.2.13) and search fees assessed, paid, or incurred by Lender in connection with Lender’s transactions with Borrower;

(d.) reasonable costs and expenses incurred by Lender in the disbursement of funds to Borrower (by wire transfer or otherwise);

(e.) reasonable charges paid or incurred by Lender in connection with Lender’s transactions with Borrower, resulting from the dishonor of checks in connection with Lender’s transactions with Borrower; costs and expenses paid or incurred by Lender to correct any default or enforce any provision of the Loan Documents, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral or any portion thereof, irrespective of whether a sale is consummated;

(f.) reasonable costs and expenses paid or incurred by Lender in examining Borrower’s Books;

(g.) reasonable legal fees and expenses paid or incurred by Lender in connection with the due diligence, negotiation and preparation of this Agreement, the Loan Documents executed in connection herewith and other documents executed in connection herewith now and in the future (whether for legal services and expenses from outside counsel or from in-house counsel); and

(h.) reasonable costs and expenses of third party claims or any other suit paid or incurred by Lender in enforcing or defending the Loan Documents and adjusting or settling disputes and claims with Account Debtors with respect to Borrower’s Accounts; and Lender’s costs and expenses and reasonable Attorneys’ Fees and expenses (whether for legal services incurred by and expenses from outside counsel and/or from in-house counsel and staff) incurred in advising, structuring, drafting, reviewing, administering, amending, terminating, or enforcing, or in any other way relating to, this Agreement or the other Loan Documents (including reasonable Attorneys’ Fees and expenses incurred in such adjusted or settled disputes and claims, and in connection with a “workout,” a “restructuring,” or an Insolvency Proceeding concerning Borrower or any Guarantor of the Obligations, irrespective of whether suit is brought). The Attorneys’ Fees incurred by Lender in any Insolvency Proceeding shall include, without limitation, those incurred in connection with debtor-in-possession financing, motions for relief from automatic stay, and actions to determine dischargeability, and defending, or concerning the Loan Documents.

“Lender’s Account” has the meaning give in Section 3.8.3 hereof.

“Letter of Credit Rights” has the meaning given in the Code, as such definition may be amended from time to time, which defines Letter of Credit Rights as a right to payment or pe1formance under a letter of credit, whether or not beneficiary has demanded or is at the time entitled to demand payment or performance.

“Line of Credit” means the AIR Line of Credit, the Inventory Line of Credit and any other credit line otherwise provided under this Agreement. (The Line of Credit is and shall be secured by all of the Collateral.)

“Loan Documents” means collectively, this Agreement, the Term Loan Documents, the Guaranty, and all notes, other guarantees, security agreements, subordination agreements, and other agreements, documents and instruments now or at any time hereafter executed and/or delivered by Borrower or any Obligor in cmmection with this Agreement or otherwise, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

“Loan Fee” has the meaning given in Section 2.2.9 hereof.

“Lockbox” has the meaning given in Section 3.8.2.1(iii) hereof

“Lockbox Account” has the meaning given in Section 3.8.2.l(iii) hereof.

“Material Adverse Change” means a material adverse change in any one or more of the following: (a.) Borrower’s, any subsidiary’s, and any Guarantor’s assets, operations, business, or financial condition, taken as a whole; (b.) Borrower’s ability to pay and perform the Obligations when due; (c.) the Collateral in which Lender holds a Security Interest; (d.) the perfection or priority of any such Security Interest (except to the extent due to the failure of Lender to properly file a UCC Financing Statement or continuation statement or amendment); or (e.) Lender’s rights and remedies under any Loan Documents.

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“Maximum Account Advance” means Six Million and 00/100 Dollars ($6,000,000.00 ).

“Maximum Amount” means Six Million and 00/100 Dollars ($6,000,000.00 ).

“Maximum Inventory Advance” means the lesser of--------n/a-------- Dollars ($--------n/a ) or --------11/a-------- percent ( --------11/a--------%) of the aggregate Net Face Amount of Prime Accounts.

“Minimum Monthly Interest Payment” has the meaning given in Section 2.2.3 hereof.

“Net Face Amount” means, with respect to an Account, the gross face amount of such Account less all trade discounts or other deductions to which the Account Debtor is entitled.

“Obligations” means (a.) the due and punctual payment of all amounts due or to become due under this Agreement; (b,) the performance of all obligations of Borrower under the Loan Documents; and (c.) all present and future obligations owing by Borrower to Lender whether or not for the payment of money, whether or not evidenced by any note or other instrument, whether direct or indirect, absolute or contingent, due or to become due, joint or several, primary or secondary, liquidated or unliquidated, secured or unsecured, original or renewed or extended, whether arising before, during or after the commencement of any bankruptcy case in which Borrower is a debtor, (each, an “Insolvency Proceeding”), including but not limited to Lender Expenses and any obligations arising pursuant to letters of credit or acceptance transactions or any other financial acconunodations; and all principal, interest, fees, charges, Lender Expenses, reasonable Attorneys’ Fees, Audit Fees, and accountants’ fees chargeable to Borrower or incurred by Lender in connection with the Loan Documents. Except to the extent otherwise provided, this Agreement does not secure any obligation described above which is secured by a consensual lien on real property.

“ObJigor” means Borrower and all Guarantors.

“Old Lender” means Silicon Valley Bank.

“Org ID” shall have the meaning given in Section 8.1.15 hereof.

“Other Locations” means that or those physical locations, other than Borrower’s Chief Executive Office, including but not limited to additional business offices, warehouses, other storage facilities, both public and non-public, or the like, where Borrower operates its business and/or stores collateral, more specifically set forth below, but excluding sales offices and locations where no collateral is maintained,

66 Main Street, Suite 203, Branford, Connecticut 06405

Kennedy Building 321 S. Boston Avenue, Suite 300, Tulsa, Oklahoma 74103

“Overadvance” means the amount by which the principal balance of any sums advanced plus any applicable reserves exceed the Allowable Amount.

“Payment Intangibles” means a General Intangible under which the Account Debtor’s principal obligation is a monetary obligation.

“Permitted Indebtedness” means all of the following:

(a.) Indebtedness evidenced by this Agreement or the Loan Documents;

(b.) amounts owing under licenses in the ordinary course of Borrower’s business, so long as the licensor has entered into an agreement in favor of Lender in form and content satisfactory to Lender.

(c.) subordinated debt that is subject to a subordination agreement in favor of Lender in form and content reasonably satisfactory to Lender;

(d.) Permitted Purchase Money Indebtedness for Acquisition of Fixed Assets;

(e,) the Indebtedness set forth in the latest fmancial statements of Borrower submitted to Lender on or prior to the Closing Date;

(f.) Indebtedness secured by Permitted Liens; and

(g.) refinancings, renewals, or extensions of the foregoing, provided: (i.) the terms and conditions of such refinancings, renewals, or extensions do not materially impair the prospects of repayment of the Obligations by Borrower; (ii.) the net cash proceeds of such refinancings, renewals, or extensions do not result in an increase in the aggregate principal amount of the Indebtedness so refinanced, renewed, or extended; (iii.) such refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity of the Indebtedness so refmanced, renewed, or extended; and (iv.) that to the extent that the Indebtedness that is refinanced was subordinated in right of payment to the Obligations, then the subordination terms and conditions of the refinancing of the Indebtedness must be at least as favorable to Lender as those applicable to the refinanced Indebtedness;

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“Permitted Liens” means all of the following:

(a.) liens and Security Interests held by Lender or agreed to by Lender in the Term Loan Documents, if any;

(b.) liens for unpaid taxes of Borrower that are either (i.) not yet due and payable; or (ii.) (1.) do not constitute an Event of Default hereunder; and (2.) are the subject of a Permitted Protest;

(c.) liens and Security Interests granted against Equipment disclosed in writing by Borrower to Lender and consented to by Lender in writing;

(d.) liens described in Addendum B thereto, provided they are subject to such subordination agreements as Lender may require;

(e.) purchase money liens or the interests of lessor under capital leases to the extent that such liens or interests secure Permitted Purchase Money Indebtedness for Acquisition of Fixed Assets and so long as such lien attaches only to the asset purchased or acquired and the proceeds thereof;

(f.) with respect to real property, easements, rights of way, reservations, covenants, conditions, restrictions, zoning variances, and other similar encumbrances that do not materially interfere with the use or value of the property subject thereto;

(g.) obligations and duties as lessee under any operating lease existing on the date of this Agreement; and obligations and duties as lessee under any lease existing on the date of this Agreement;

(h.) any liens incurred in connection with the refinancing, renewal, or modification of indebtedness secured by Permitted Liens, provided: (i.) the terms and conditions of such refinancings, renewals, or extensions do not materially impair the prospects of repayment of the Obligations by Borrower; (ii.) the net cash proceeds of such refinancings, renewals, or extensions do not result in an increase in the aggregate principal amount of the Indebtedness so refinanced, renewed, or extended; (iii.) such refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity of the Indebtedness so refinanced, renewed, or extended; and (iv.) that to the extent that the Indebtedness that is refinanced was subordinated in right of payment to the Obligations, then the subordination terms and conditions of the refinancing of the Indebtedness must be at least as favorable to Lender as those applicable to the refinanced Indebtedness;

(i.) liens for unpaid taxes, assessments, or other governmental charges or levies (i.) that are not yet delinquent; or (ii.) do not constitute an Event of Default hereunder and are the subject of Permitted Protests;

G,) judgment liens that do not constitute an Event of Default under this Agreement;

(k) liens on amounts deposited in connection with obtaining Workers’ Compensation Insurance or other unemployment insurance;

(I.) liens on amounts deposited as security for surety or appeal bonds in connection with obtaining such bonds in the ordinary course of business, provided that such deposits have been made with Lender’s prior written consent;

(m.)liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens, and other similar liens arising in the ordinary course of business securing obligations which are not yet overdue or are subject to a Permitted Protest; and

(n.) liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a depository institution.

“Pennitted Protest” shall mean a protest taken by Borrower in good faith with respect to disputed taxes for which a bond has been posted by Borrower in the amount of disputed taxes that have not been paid.

“Permitted Purchase Money Indebtedness for Acquisition of Fixed Assets” means, as of any date of detennination, Purchase Money Indebtedness for Acquisition of Fixed Assets incurred after the date hereof in an aggregate principal amount outstanding at any one time which shall not exceed Fifty thousand and 00/100 Dollars ($50,000.00) without Lender’s prior written consent, which consent shall not be unreasonably withheld.

“Person” means and includes natural persons, corporations, limited partnerships, general partnerships, joint ventures, limited liability companies, limited liability partnerships, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.

“Post Office Box” has the meaning given in Section 3.8.2. l(i) hereof.

“Premises” means all of the locations of Borrower consisting of its Chief Executive Office, any and all other offices or locations and any and all Other Locations.

“Prepayment” has the meaning given in Section 6.3 hereof.

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“Prepayment Fee” means the fee described in Section 6.3 hereof.

“Prime Accounts” means those Accounts of Borrower that meet all of the following criteria:

(a.) are acceptable to Lender in the exercise of its Sole Discretion;

(b.) are creditworthy as determined by Lender in its Sole Discretion based on the facts and circumstances presented, including payment history, tum, PAYDEX rating and other data;

(c.) have been validly assigned as Collateral to Lender, giving Lender a first priority Security Interest therein and in all proceeds thereof;

(d.) as of1he date of determining whether an Account is a “Prime Account” or not, no invoice remains uncollected for more than ninety (90) days from the date of such invoice;

(e,) strictly comply with all Borrower's warranties and representations to Lender;

(f.) have been created by absolute sales of Borrower's merchandise or services;

(g.) are genuine, bona fide and collectible;

(h.) Borrower shall have good, unencumbered and absolute title to such Account free of all third party claims other than Permitted Liens;

(i.) Intentionally Omitted;

(j.) all property giving rise to such Accounts shall have been delivered from Borrower's Premises to, and unconditionally accepted by, each Account Debtor;

(k.) Borrower has performed all things required of Borrower by the terms of all agreements or purchase orders giving rise to such Accounts;

(I.) are due and unconditionally payable on terms of thirty (30) days or less, or on such other terms not exceeding sixty (60) days (if acceptable to Lender in its Sole Discretion) which are expressly set forth on the face of all invoices, copies of which shall be delivered to Lender;

(m.)are not Accounts with respect to which goods are placed on consignment, guaranteed sale, sale or return, sale on approval, or other terms by which the payment by the Account Debtor may be conditional;

(n.) are not Accounts with respect to which the Account Debtor is an officer, employee, partner, joint venturer or agent of Borrower;

(o.) are not Accounts with respect to which the Account Debtor is a resident of a country other than the United States of America;

(p.) are not Accounts with respect to which the Account Debtor is the United States of America or any department, agency or instrumentality of the United States of America and Canada;

(q.) are not Accounts with respect to which the Account Debtor is any state of the United States of America or any city, county, town, municipality or division thereof;

(r.) are not Accounts with respect to which the Account Debtor disputes liability or makes any claim, or has any defense, crossclaim, counterclaim, offset or right of cancellation or return (each a “Contra” and collectively, “Contras”);

(s,) are not Accounts with respect to which any Insolvency Proceeding is filed by or against the Account Debtor, or if an Account Debtor becomes insolvent, fails or goes out of business;

(t.) are not Accounts with respect to which Borrower is or may become liable to the Account Debtor for goods sold or services rendered by the Account Debtor to Borrower;

(u.) are not Accounts which in the aggregate from one Account Debtor and its Affiliates constitute twenty-five percent (25%) (such percentage, the “Concentration Limit”) of total Accounts, but the portion not in excess of the Concentration Limit may be deemed Prime Accounts; and

(v.) are not Accounts from an Account Debtor, whose Accounts that have aged 90 days or more from invoice date comprise more than twenty-five percent (25%) of such Account Debtor's total Accounts (the “Cross- Aging Limit”).

“Prime Floor” has the meaning given in the definition of Prime Rate.

“Prime Rate” means the variable rate of interest announced as the “prime” rate in the Western Edition of the Wall Street Journal which is in effect from time to time; provided that the Prime Rate shall at all times be deemed to be not less than three nnd one-lrnlfpercent (3.50%) per annum (the “Prime Floor”).

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“Purchase Money Indebtedness for Acquisition of Fixed Assets” means debt (other than the Indebtedness, but including capitalized lease obligations), incurred at the time of, or within twenty (20) days after, the acquisition of any fixed asset for the purpose of financing all or any part of the acquisition cost thereof.

“RCRA” has the meaning given in the definition of Environmental Laws.

“Real Properly Collateral” means that or those certain item(s) of real property pledged by Borrower and/or Guarantor respectively, pursuant to this Agreement and the Loan Documents.

“Remittance Reporting” has the meaning given in Section 3.8.2.2 hereof.

“Renewal Term” has the meaning given in Section 6.1 hereof.

“Report of Assigned Accounts” means the fonn with which invoices are transmitted to Lender.

“SARA” has the meaning given in the definition of Environmental Laws.

“Securily Interest(s)” means any present or future lien, charge, mortgage, pledge, assignment, or other encumbrance, or security interest in any asset, whether created or arising voluntarily, involuntarily or by operation oflaw.

“Software” has the meaning given in the Code, which defines Software as a computer program and any supporting information provided in connection with a transaction relating to the program.

“Sole Discretion” means the exercise by Lender of its reasonable (from the perspective of a secured asset based lender) good faith business judgment in light of all of the facts and circumstances existing with respect to the issue then under consideration by Lender.

“Solvent” means that (a.) a Person is able to pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business; and (b.) such Person does not intend to, and does not believe that, it will, incur debts beyond such Person's ability to pay as such debts mature. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that reasonably can be expected to become an actual or matured liability.

“Supporting Obligations” has the meaning given in the Code, as such definition may be amended from time to time, which defines a Supporting Obligation as a letter-of-credit right or secondary obligation that supports the payment or performance of an Account, Chattel Paper, a Document, a General Intangible, an Instrument, or a Financial Asset, including without limitation, Investment Property.

“Term Loan” means, to the extent applicable, any loan that may be extended by Lender to Borrower pursuant to the Term Loan Documents described in Section 26.16 hereof, if applicable.

“Term Loan Documents” means, to the extent applicable, those documents described in Section26,16 hereof, if any, and all amendments and renewals thereof.

“Termination Notice” has the meaning given in Section 6.1 hereof.

“Trade Fixtures” means equipment and furnishings that are used in Borrower's business or operations which become affixed to the Premises, but which can be removed from the Premises without causing undue damage to such Premises.

“UCC” has the meaning given in the definition of Code.

“Voidable Transfer” has the meaning given in Section 26.12 hereof.

1.2. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. When used herein, the term “financial statements” shall include the notes and schedules thereto. Whenever the term “Borrower” is used in respect of a financial covenant or a related definition, it shall be understood to mean Borrower on a consolidated basis unless the context clearly requires otherwise.

1.3. Terms Not Defined. All other terms contained in this Agreement, to the extent not specifically defined herein, shall have the meanings provided in the Code.

1.4. Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term “including” is not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or”. TI1e words “hereof', “herein”, “hereby”, “hereunder”, and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Any section, subsection, clause, schedule, and exhibit references are to this Agreement unless otherwise specified. Any reference in this Agreement or in the Loan Documents to this Agreement or any of the Loan Documents shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, and supplements, thereto and thereof, as applicable.

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1.5. Authenticated Documents. Any reference herein to a “writing”, a “written document”, or an executed document shall also mean an “Authenticated” writing or document or “Authentication” unless Lender shall otherwise require an original writing.

1.6. Addenda· Schedules and Exhibits. All of the addenda, schedules, and exhibits attached to this Agreement shall be deemed to be incorporated herein by reference as though set forth in full herein.

2. Loan and Terms of Payment.

2.1. Revolving Advances Against Accounts and Inventmy.

2.1.1. Advances Not to Exceed Allowable Amount. Subject to the terms and conditions of this Agreement, from the Closing Date until the tennination of this Agreement, Lender shall, from time to time, at the request of Borrower, make advances (each, an “Advance” and collectively, the “Advances”) to Borrower against undrawn borrowing availability under the A/R Line of Credit or the Inventory Line of Credit so long as no Overadvance exists before the requested Advance or would be created by such Advance.

2.1.2. Advances to be Drawn First Against AIR Borrowing Base; Inventory Advances Due Upon Pavment in Full of A/R Advances. Borrower shall draw all available funds under the AIR Borrowing Base under the A/R Line of Credit prior to drawing any available funds under the Inventory Borrowing Base under the Inventory Line of Credit. At such time as amounts advanced against Accounts under the AIR Line of Credit become due, owing, and payable in full pursuant to the terms of this Agreement, amounts advanced against Inventory under the Inventory Line of Credit under this Agreement shall also be due, owing, and payable in foll. Amounts borrowed pursuant to this Section 2.1.2 may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement.

2.1.3. Reduction of Advance Rates; Reserves. Lender may, in its Sole Discretion, from time to time, reduce the Borrowing Base and/or institute reserves against the Borrowing Base to the extent that Lender determines in its Sole Discretion (among other things) that: (a.) the Dilution Rate with respect to the Accounts for any period (based on the ratio of (i.) the aggregate amount of reductions in Accounts other than as a result of payments in cash to (ii.) the aggregate amount of total sales) has increased in any material respect or may be reasonably anticipated to increase in any material respect above historical levels; (b.) the general creditworthiness of (an) Account Debtor(s) has(have) declined; (c.) the number of days of the turnover of the Inventory for any period has increased in any material respect; (d.) the liquidation value of the Eligible Inventory, or any category thereof, has decreased; (e.) cost or count variances exist or are anticipated to exist with respect to Inventory; or (f.) the nature and quality of the Inventory has deteriorated. In determining whether to reduce the Borrowing Base and/or institute reserves against the Borrowing Base, Lender may consider events, conditions, contingencies, or risks that are also considered in determining Prime Accounts or Eligible Inventory.

2.1.4. Borrowing Procedures: Authorization for Advances. Subject to the terms and conditions of this Agreement, each Advance shall be made pursuant to an irrevocable request (an “Advance Request”) by anyone purporting to be an Authorized Officer of Borrower, which Advance Request shall specify the amount of the requested Advance, the requested funding date, and the Borrower bank account into which the Advance shall be made, and which Advance Request shall only be made through Lender’s secure website following the procedures set forth in that certain Client Procedure Outline (a copy of which has been provided to Borrower). An Advance shall only be made on a Business Day, and shall be made pursuant to an Advance Request that is made al any time prior to (but not later than) 11:00 a.m. (Pacific Standard Time) of the requested funding date. Notwithstanding anything to the contrary contained herein, Lender shall not be obligated to make an Advance if, before an Advance is made, an Overadvance exists or as a result of making an Advance, an Overadvance would be created. Notwithstanding any other provision of this Agreement, Lender is irrevocably authorized to make Advances to meet any Obligations including, but not limited to, the payment of interest, with it being agreed that Obligations accruing from time to time will be added by Lender to Borrower’s loan account, unless Lender agrees to other payment arrangements.

2.1.5. Establish Deposit Account: Provide Pledge Agreement and Control Agreement. Borrower agrees to establish and maintain a single designated Deposit Account for the purpose of receiving the proceeds of the Advances requested by Borrower and made by Lender hereunder. Unless otherwise agreed by Lender and Borrower, any Advance requested by Borrower and made by Lender hereunder shall be made to such designated Deposit Account. If requested by Lender, Borrower agrees to provide Lender with (a.) a pledge agreement; and (b.) a control agreement in form and substance reasonably acceptable to Lender, signed by the bank or financial institution at which the Deposit Account is located. If Borrower’s bank or financial institution refuses to or does not cooperate in executing such control agreement, Borrower shall move its account to a financial institution willing to execute a control agreement in form and substance reasonably satisfactory to Lender.

2.2. Interest: Rates, Payments, Fees, and Calculations.

2.2.1. Interest Rates.

2.2.1.1. On Advances Against Accounts. All Advances against Accounts under the AIR Line of Credit hereunder shall bear interest, on the Daily Balance, at a per annum rate of one and one-quarter percent (1.25%) in excess of(i.) the Prime Rate; or (ii.) the Prime Floor, whichever is higher.

2.2.1.2. On Advances Against Inventory. All Advances against Inventory under the Inventory Line of Credit hereunder shall bear interest, on the Daily Balance, at a per annum rnte of ----------n/a---------- percent (----------n/a----------%) in excess of(i.) the Prime Rate; or (ii.) the Prime Floor, whichever is higher.

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2.2.2. Cumulative Minimum Annual Interest Payment. Interest payable under this Agreement, on a cumulative annual basis, shall not be less than ----------n/a---------- Dollars ($----------n/a----------) (the “Cumulative Minimum Annual Interest Payment”).

2.2.3. Minimum Monthly Interest Payment. Interest on the Line of Credit, together with the Administrative Fee payable under this Agreement on a monthly basis, shall be calculated on minimum average borrowings of Five hundred thousand and 00/100 Dollars ( $500,000.00 ) per month (the “Minimum Monthly Interest Payment”).

2.2.4. Default Rate. All Obligations shall bear interest, from and after the occurrence and during the continuance ofan Event of Default, at a rate equal to an additional three percent (3,00%) per annum in excess of the applicable interest rate as set forth in Section 2.2.1 (the “Default Rate”). Lender’s failure to assess interest at the Default Rate as provided hereunder shall not be deemed a waiver by Lender of its right to charge such Default Rate at any time after default. Lender reserves the right to, and Borrower hereby acknowledges that Lender may, recalculate interest at the Default Rate.

2.2.5. Interest Payments. Subject to Section 2.2.4, interest on the Obligations for each calendar month shall accrue at the applicable interest rate as set forth in Section 2.2.1 and shall be payable monthly, in arrears, on the first (I’’) calendar day of each subsequent month, commencing on the first (1st) calendar day of the month following the Closing Date. Any interest not paid when due shall be compounded by becoming a part of the Obligations, and such interest shall thereafter accrue interest at the rate then applicable hereunder.

2.2.6. Calculation of Interest. All interest and fees charged hereunder shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed. Lender shall, for the purpose of the computation of interest due hereunder, add the Clearance Days to any payments by check or other means, including without limitation wire transfer, ACH transfer, credit card payment or any other means, which is acknowledged by the parties to constitute an integral aspect of the pricing of Lender’s facility to Borrower, and shall apply irrespective of the characterization of whether receipts are owned by Borrower or Lender. Should any check not be honored when presented for payment, then Borrower shall be deemed not to have made such payment, and interest shall be recalculated accordingly.

2.2.7. Computation upon Change in Prime Rate. In the event the Prime Rate changes, the applicable interest rate hereunder automatically and immediately shall be increased or decreased by an amount equal to such change in the Prime Rate.

2.2.8. Principal Payments. Commencing on ----------n/a---------- and continuing on the first (1st) day of every month through----------n/a----------, Borrower shall make equal monthly principal payments in the sum of ----------11/a---------· Dollars ($----------11/a----------), which shall be used to pay down Advances against

Inventory.

2.2.9. Loan Fee. Borrower agrees to pay Lender a loan fee equal to (a) one percent (1.00%) of the Maximum Amount at the time of initial funding; and (b) one-half of one percent (0.50%) annually (every twelve (12) months) thereafter while any Obligations remain outstanding to Lender (the “Loan Fee”).

2.2.10. Administrative Fee. While any Obligations remain outstanding to Lender, on or before the first (1st) day of each month, Borrower agrees to pay Lender an administrative fee equal to one-tenth of one percentage point(s) (0.10%) per month of the Daily Balance during the preceding month (the “Administrative Fee”).

2.2.11. Deposits for Lender Expenses. Borrower shall pay to Lender the Lender Expenses incurred by Lender in c01mection with the negotiation and preparation of this Agreement and the Loan Documents. In connection therewith, the following applies with respect to Deposits for such Lender Expenses:

2.2.11.1. Lender has received a deposit in the amount of Five thousand and 00/100 Dollars ( $5,000.00 ) (the “Good Faith Deposit”) to be applied against such Lender Expenses consisting of out-of-pocket costs, document preparation, and legal fees and costs. Any unpaid portion of the Good Faith Deposit shall be due and payable on the Closing Date. In the event that such Lender Expenses are less than the Good Faith Deposit, any such excess amount will be applied to the Loan Fee and then to Administrative Fee, or if the Loan Fee and Administrative Fee have been paid in full, such excess amount shall be refunded to Borrower; and

2.2.11.2. Lender has received an additional documentation fee/legal deposit in the amount of $----------Nia---------- Dollars ( $----------n/a----------) to be applied against Lender Expenses consisting of document preparation and legal fees and costs, (the “Documentation Fee/Legal Deposit”). Any unpaid portion of the Documentation Fee/Legal Deposit shall be due and payable at the initial funding hereof. In the event that such Lender Expenses are less than the Documentation Fee/Legal Deposit, any such excess amount will be applied to the Loan Fee and then to the Administrative Fee, or if the Loan Fee and Administrative Fee have been paid in full, such excess amount shall be refi.mded to Borrower.

2.2.12. Audit Fees. Pursuant to Section 4, Lender shall have the right to conduct audits of the Collateral and Borrower’s Books. In connection therewith, Borrower shall pay to Lender on demand quarterly audit fees of One thousand and 00/100 Dollars ( $1,000.00 ) per day, plus actual out of pocket costs related to each audit (the “Audit Fee”). Upon the occurrence and during the continuance of an Event of Default, Lender may conduct such additional audits as it deems appropriate, also at Borrower’s cost, and not subject to any limitation contained in this Section.

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2.2.13. Inventory Appraisal and Monitoring Fees. While any (a.) funds are available to Borrower under the Inventory Borrowing Base; or (b.) funds that have been advanced under the Maximum Inventory Amount are owing and payable to Lender, Borrower shall pay to Lender on demand any fees incurred in connection with periodic inventory appraisal and monitoring fees (collectively, the “Inventory Appraisal Fee”).

2.2.14. Overadvance Fees. If at any time an Overadvance exists, Borrower shall pay Lender the amount of Lender’s standard Overadvance fees as determined by Lender from time to time. All fees provided for in this Section shall be deemed earned and non-refundable upon payment thereof.

Payment of Advances.

3.1. Delivery to Lender of All Payments. Borrower shall remit to Lender all payments received by Borrower on all Accounts, including, without limitation, all payments on Accounts, Deposits, and proceeds of cash sales, irrespective of whether Borrower has obtained or seeks to obtain an Advance against any Account or any Inventory.

3.2. Required Payments: Overadvances. At any (and each) time that an Overadvance exists, Borrower shall pay to Lender, without demand, the amount of the Overadvance. Borrower shall pay the entire unpaid balance of the Obligations immediately upon (I.) the occurrence of an Event of Default and acceleration of the Obligations by Lender pursuant to Section 12.1. I: or (2.) in the case of termination, as set forth in Section 6.1, whether by notice, lapse of time or otherwise, whichever occurs first.

3.3. Application of Payments· Credit Balance. Payments received shall be applied in the following order: (a.) against any fees set forth in Section 2.2 (and its subsections) and Lender Expenses, if any; (b.) against interest; and (c.) against principal, and with any remaining credit balance consisting of cleared funds, in the absence of an Event of Default, to be remitted on each Business Day to the Deposit Account specified in Section 2.1.5.

3.4. Clearance Days. Payments made by check or any other means, including wire transfer, ACH transfer, or credit card receipts, shall be deemed to be made three(· 3 -) Business Days after receipt by Lender and shall be subject to clearance of funds (the “Clearance Days”).

3.5. Overadvances. Subject to the provisions of Section 3.2, in the event of an Overadvance, if Lender continues in its Sole Discretion to provide Advances hereunder, such event shall not limit, waive or otherwise affect any rights of Lender in that circumstance or on any future occasions and, unless otherwise agreed to by Lender, Overadvances are immediately repayable without demand.

3.6. Payment of Obligations. Notwithstanding anything to the contrary contained in this Agreement, no payment received by Lender shall constitute payment thereof unless and until final payment thereof has been received and such payment has not been rescinded or revoked.

3.7. Statements of Obligations. Lender has provided Borrower with continuous on-line internet access to information and statements regarding its Obligations, including principal, interest, fees and an itemization of all charges and expenses constituting Lender Expenses owing, and such information shall be conclusively presumed to be correct and accurate and constitute an account stated between Borrower and Lender unless, within thirty (30) days following any such information first becoming available to Bo1rnwer, Borrower shall have delivered to Lender by registered or certified mail at its address specified herein, written objection thereto describing the error or errors contained in such applicable information. No statements of obligations will be mailed or otherwise transmitted by Lender to Borrower.

3.8. Notification of Accounts. Lender and Borrower have agreed to the terms set forth below with respect to notification of Accounts.

3.8.1. Right of Lender to Notify Account Debtors. Lender may, at any time, (a.) after the occurrence and during the continuance of an Event of Default; or (b.) as necessary in Lender’s Sole Discretion in light of the facts and circumstances, to prevent prejudice to Lender irrespective of whether an Event of Default has occurred or is continuing, without notice to or the assent of Borrower: (i.) notify any Account Debtor that the underlying Account has been assigned for collateral purposes to Lender by Borrower and that payment thereof is to be made to the order of and directly and solely to Lender; and (ii.) send, or cause to be sent by its designee, written or telephonic requests (which may identify the sender by a pseudonym) for verification of any Account directly to the appropriate Account Debtor or any bailee with respect thereto. At Lender’s request, all invoices and statements sent to any Account Debtor or any bailee shall state that the relevant Account has been for collateral purposes assigned to Lender and that any payments in respect thereof are payable directly and solely to Lender.

3.8.2. Collateral Control.

3.8.2.1. Collateral Control Account(s). Borrower shall direct, at Borrower expense and in the manner requested by Lender from time to time, that remittances and other collections and proceeds of Accounts and other Collateral be: (i) sent directly by Account Debtor(s) or other third parties directly to a post office box (the “Post Office Box”), as set forth in Exhibit A, designated by or in the name of Lender, or in the name of Borrower, but as to which access is limited solely to Lender: (ii) sent directly by Account Debtor(s) and other third parties to a Deposit Account maintained by Borrower as set forth in Exhibit A, provided (I) Lender has received a control agreement, in form and substance acceptable to Lender, which is fully executed by the financial institution where such account is maintained, and (2) such account is a blocked account to which only Lender may have access (the “Blocked Account”): or (iii) sent directly by Account Debtor(s) and other third parties to a lockbox account (the “Lockbox”) maintained in Borrower’s and/or Lender’s name by a financial institution or other party and as set forth in Exhibit A, which Lockbox shall also have an associated Blocked Account (the foregoing Lockbox and any associated Blocked Account, collectively, the “Lockbox Account”), with Lender to receive a lockbox control agreement and/or a blocked account control agreement, each in form and substance acceptable to Lender, and each of which is ft11ly executed by the financial institution or other party maintaining such account(s). (Hereinafter, the Post Office Box, the Blocked Account, and/or the Lockbox Account are referred to as the “Collateral Control Account(s)”.) Borrower hereby grants to Lender a Security Interest in the Collateral Control Account(s), over which Borrower shall have no control and into which remittances and other collections and proceeds of Accounts and other Collateral shall be deposited immediately upon their receipt.

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3.8.2.2. Remittance Reporting. With respect to any Blocked Account or Lockbox Account, Borrower (at its expense) shall cause the provider of such account to deliver duplicate copies to Lender on each Business Day (or Lender shall be provided with on-line access and a password so that it can directly obtain copies) of (i) checks received in such account, (ii) envelopes, remittance papers, and other detail which might be included in the envelope with remittances, and (iii) an account batch listing (or similar reporting) which details the sequence number, dollar amount of checks, deposit total and account number credited for each deposit (all of the foregoing, the “Remittance Reporting”). h1 the event that the provider of such account will not deliver duplicate copies to Lender (or provide on-line access to Lender), Borrower agrees to deliver to Lender copies of the Remittance Reporting on each Business Day. Borrower acknowledges and agrees that notwithstanding anything to the contrary contained in this Agreement, remittances and other collections and proceeds of Accounts and other Collateral made to such account shall not be deemed received by Lender (and the Obligations shall not be credited nor shall Clearance Days commence) until Lender has received the Remittance Reporting.

3.8.2.3. Collection Privilege. Borrower may be provided with the revocable privilege to collect (at Borrower’s expense) directly from Account Debtors and other third parties, remittances and other collection and proceeds of Account and other Collateral, subject to the express conditions set forth in Section 3.8.6, with all such remittances and other collections and proceeds being received by Borrower in trust for Lender and to be immediately delivered to Lender (in their original form as received) in the following manner as Lender shall so direct: (a) by overnight mail, (b) by deposit to the Blocked Account, or (c) in the case of electronic payment, by remittance to Lender’s Account (the foregoing, the “Collection Privilege”). Such Collection Privilege is subject to revocation by Lender at any time without cause and shall be automatically revoked upon the occurrence of an Event of Default. Lender may undertake any and all of those actions delineated in Section 3.8. IO to process such remittances and other collections and proceeds delivered by Borrower to Lender. All such remittances and other collections and proceeds received by Lender shall be applied against the Obligations pursuant to the terms of this Agreement.

3.8.3. Lender’s Account. All payments remitted to Lender in kind (pursuant to Section 3.8.2.3 or through a Collateral Control Account(s), shall be credited to a deposit account owned of Lender, into which remittances from Account Debtor(s) or other obligors of other borrowers of Lender may be credited (the “Lender’s Account”), and applied against the outstanding Obligations pursuant to the terms of this Agreement.

3.8.4. Procedure Regarding Mail Delivered to the Post Office Box. All mail delivered to the Post Office Box shall be opened by Lender, checks contained therein shall be endorsed by Lender, and all such items shall be deposited by Lender into the Lender’s Account.

3.8.5. Electronic Transfers. Borrower shall direct all Account Debtors on Accounts (and other third parties making remittances of proceeds of other Collateral) that make payments by electronic transfer of fonds to remit such funds directly to the Lender’s Account, the Blocked Account, or the Lockbox Account, as Lender shall so direct.

3.8.6. Monies Held in Trust. In fortherance of the Collection Privilege, Borrower and all of its affiliates, subsidiaries, shareholders, directors, employees, or agents, acting as trustee for Lender, shall (i) hold in trust for Lender, as property of Le11der, any remittances and other collections and proceeds of Account and other Collateral which come into Borrower’s possession or control, and (ii) immediately upon receipt thereof, and in their original form as received, remit same, in kind, to Lender in the manner set forth in Section 3.8.2.3, as Lender shall so direct. h1 the event the Collection Privilege is inapplicable, but Borrower or related parties nonetheless receive such remittances despite a contrary agreement with Lender, all of the foregoing terms and conditions shall apply and Borrower shall remit same, in kind, to Lender, as Lender shall so direct, either by overnight delivery, deposit to the Blocked Account or the Lockbox Account, as applicable, or in the case of electronic payment, by remittance to Lender’s Account. In no event shall such remittances be commingled with Borrower’s own funds. Borrower shall continue to remit such remittances to lender until such time as Borrower’s Obligations (other than contingent obligations) have been paid in full.

3.8.7. Authorization. Notwithstanding any other provision of this Agreement, Borrower hereby irrevocably authorizes Lender to transfer into the Lender’s Account any funds in payment of or relating to the Accounts that have been deposited into other deposit accounts with Lender or that Lender has otherwise received.

3.8.8. Lender’s Rfaht to Items in Lender’s Account. Lender shall have a continuing security interest in all of the items contained from time to time in the Lender’s Account and the proceeds thereof.

3.8.9. Lender Has Sole Control Over Lender’s Account. Neither Borrower, nor any Person or entity claiming through Borrower shall have any right in or control over the use of, or any right lo withdraw any amount from the Lender’s Account which shall be under Lender’s sole control. Unless (a.) the instruments so deposited in the Lender’s Account are dishonored; or (b.) Lender shall in its Sole Discretion have remitted the amount thereof to Borrower, Lender shall credit the amount thereof against Borrower’s Obligations.

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3.8.10 Lender Authorization.

3.8.10.1. Borrower hereby irrevocably authorizes Lender and any designee of Lender, at Borrower’s sole expense, to exercise at any time in Lender’s or such designee’s Sole Discretion all or any of the following powers as attorney in fact of Borrower until all of the Obligations (other than contingent obligations) have been paid in full:

3.8.10.1.1. in the ordinary course ofbusiness as a lender, receive, take, endorse, assign, deliver, accept and deposit, in the name of Lender or Borrower, any and all cash, checks, commercial paper, drafts, remittances and other instruments and documents relating to the Collateral or the proceeds thereof (whether checks or other forms of payment are (a.) in the name of Borrower; (b.) any other name under which it now does business or does business in the future; or (c.) in the names of its products now or in the future, and Borrower additionally agrees not to make any protest of any kind against Lender for negotiating such checks or other items described herein);

3.8.10.1.2. after the occurrence and during the continuance of an Event of Default, take or bring, in the name of Lender or Borrower, all steps, actions, suits or proceedings deemed by Lender necessary or desirable to effect collection of or other realization upon the Accounts and other Collateral;

3.8.10.1.3. after the occurrence and during the continuance of an Event of Default, extend the time of payment of, compromise or settle for cash, credit, return of merchandise, and upon any terms or conditions, any and all Accounts or other Collateral which includes a monetary obligation and discharge or release any Account Debtor or other obliger (including filing of any public record releasing any lien granted to Borrower by such Account Debtor), without affecting any of the Obligations;

3.8.10.1.4. execute in the name of Borrower and file against Borrower in favor of Lender financing statements or amendments with respect to the Collateral;

3.8.10.1.5. pay any sums necessary to discharge any lien or encumbrance that is senior to Lender’s Security Interest in the Collateral other than Permitted Liens, which sums shall be included as Obligations hereunder;

3.8.10.1.6. at any time, irrespective of whether an Event of Default has occurred, without notice to or the assent of Borrower, notify any Account Debtor obligated with respect to any Account, that the underlying Account has been assigned for collateral purposes to Lender by Borrower and that payment thereof is to be made to the order of and directly and solely to Lender;

3.8.10.1.7. after the occurrence and during the continuance of an Event of Default, change the address for delivery of mail to Borrower and to receive and open mail addressed to Borrower;

3.8.10.1.8. send requests for verification of Accounts;

3.8.10.1.9. after the occurrence and during the continuance of an Event of Default, to make, settle, and adjust all claims under Borrower’s policies of insurance and make all determinations and decisions with respect to such policies of insurance;

3.8.10.1.10. after the occurrence and during the continuance of an Event of Default, to settle and adjust disputes and claims respecting the Accounts directly with Account Debtors, for amounts and upon terms which Lender determines to be reasonable;

3.8.10.1.11. after the occurrence and during the continuance of an Event of Default and as Lender may reasonably detennine lo be necessary without the occurrence of an Event of Default if Lender has requested and Borrower has refused, Lender may cause to be executed and delivered any documents and releases which Lender reasonably determines to be necessary in order to protect its interest as Lender; and

3.8.10.1.12. after the occurrence and during the continuance of an Event of Default, qualify Borrower to do business in any state if Borrower shall fail to do so following request by Lender.

3.8.10.2. After the occurrence and during the continuance of an Event of Default, Borrower authorizes Lender to accept, indorse and deposit on behalf of Borrower any checks tendered by an Account Debtor “in full payment” of its obligation to Borrower. Borrower shall not assert against Lender any claim arising therefrom, irrespective of whether such action by Lender affects an accord and satisfaction of Borrower’s claims, under §3-311 of the Code, as such section may be amended and/or re-numbered from time to time or otherwise.

3.8.10.3. RELEASE. BORROWER HEREBY RELEASES AND EXCULPATES LENDER, LENDER’S OFFICERS, EMPLOYEES, AGENTS, DESIGNEES, ATTORNEYS, ACCOUNTANTS, AND OTHER REPRESENTATIVES FROM AND AGAINST ANY AND ALL LIABILITY ARISING FROM ANY ACTS UNDER THIS AGREEMENT OR RELAIBD TO THIS AGREEMENT IN ANY MANNER OR IN FURTHERANCE THEREOF, WHETHER OF OMISSION OR COMMISSION, AND WHETHER BASED UPON ANY ERROR OF mDGMENT OR MISTAKE OF LAW OR FACT AND WHETHER BASED UPON ANY LEGAL THEORY, INCLUDING WITHOUT LIMITATION, BREACH OF CONTRACT, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS, EXCEPT FOR LIABILITY DIRECTLY CAUSED BY LENDER’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN NO EVENT SHALL LENDER HAVE ANY LIABILITY TO BORROWER FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.

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3.8.10.4. Further Credit Reports, Borrower acknowledges and agrees that Lender may from time to time at its Sole Discretion run such further credit reports and other reports as it may deem necessary to continue to keep itself apprised regarding the continued financial condition of Borrower during the term of this Agreement and hereby authorizes Lender to run such credit and other reports from time to time as Lender deems appropriate.

4. Audits. Lender shall have the right to conduct audits of Borrower’s Accounts, Inventory, and Borrower’s Books at least quarterly during the term of this Agreement, which audit shall be conducted during reasonable business hours absent the existence of an Event of Default. Lender agrees to give Borrower reasonable advance notice of such audit provided that no Event of Default exists or could reasonably be suspected to exist by Lender. In the event of an actual or potential Event of Default, no advance notice of any audit shall be required. The cost of each audit and any appraisals shall be paid by Borrower, which cost per audit and appraisal shall not exceed the Audit Fee or the Inventory Appraisal Fee set forth in Sections 2.2.12 and 2.2.13, respectively. Lender may charge such Audit Fee and Inventory Appraisal Fee against Borrower’s loan account and add it to the Obligations. In addition, upon the occurrence and during the continuance of an Event of Default, Lender may conduct such additional audits and appraisals as it deems appropriate, also at Borrower’s cost, and not subject to any limitation contained in Sections 2.2.12 and 2.2.13.

4.1. Delivery of Collateral. At such times as Lender may request and each time Borrower makes a request for a Advance hereunder, and in the manner specified by Lender, Borrower shall deliver to Lender or Lender’s representative original invoices, agreements, proofs of rendition of services and delivery of goods and other documents evidencing or relating to the transactions which gave rise to any of the Collateral, together with customer statements, schedules describing the proceeds or statements of account and confirmatory collateral assignments to Lender of the proceeds in form and substance satisfactory to Lender and duly executed by Borrower. Except as provided in Section 10.1, Borrower will promptly notify Lender, in writing, of Borrower’s granting of credits, discounts, allowances, deductions, return authorizations or the like with respect to any Accounts or the proceeds thereof. In no event shall any such schedule or confirmatory collateral assignment (or the absence thereof or omission of any proceeds therefrom) limit or in any way be construed as a waiver, limitation, or modification of the liens or rights of Lender or the warranties, representations, and covenants of Borrower under this Agreement. In addition, in the event that any Collateral, including without limitation proceeds, is evidenced by or consists of Chattel Paper, Documents, Instruments, or Financial Assets, including without limitation, Investment Property, Borrower shall, immediately upon written request therefor from Lender, endorse and assign such Chattel Paper, Documents, Instruments, or Financial Assets, including without limitation, Investment Property over to Lender and deliver actual physical possession of such Chattel Paper, Documents, Instruments, or Financial Assets, including without limitation, Investment Property to Lender with, if applicable, stock powers in blank executed by Borrower.

5. Conditions Precedent to Advances.

5.1. Conditions Precedent to Initial Advance. Any agreement of Lender to make the initial Advance is subject to the fulfillment on or before the Closing Date, to the satisfaction of Lender and its counsel (unless waived by Lender in writing in its Sole Discretion), of each of the conditions set forth below.

5.1.1. Lien in First Position. Lender shall be satisfied that its lien against the Collateral is a first priority perfected Security Interest, subject only to Permitted Liens.

5.1.2. UCC Search. Lender shall have received searches with results reflecting the filing of its financing statements and fixture filings.

5.1.3. Loan Documents Contemplated Hereby. Lender shall have received all of the Loan Documents, duly executed, and each such document shall be in full force and effect

5.1.4. Authorization. Lender shall have received such certificates of authorization, corporate resolution, unanimous written consent, or other writing as Lender deems appropriate under the circumstances, duly executed by the secretary, general partner, managing member, or other appropriate representative of Borrower, authorizing the execution and delivery of this Agreement and the other Loan Documents to which Borrower is a party and authorizing one or more specific officers, general partners, managing members, or other persons to execute and deliver same to Lender.

5.1.5. Bylaws, etc. Lender shall have received copies of Borrower’s By-laws and Articles, Certificate of Incorporation, Articles of Organization, Partnership Agreement, Trust Agreement, or Operating Agreement, all duly certified as appropriate, as amended, modified, or supplemented to the Closing Date, all of which shall accurately reflect the current status of Borrower and Borrower’s officers, directors, and any other requested information.

5.1.6. Certificate from States of Delaware , California and Connecticut. Lender shall have received a certificate of status, corporate or otherwise, with respect to Borrower dated as of a date acceptable to Lender, by the Secretary of States of Delaware, California and Connecticut, which certificate shall indicate that Borrower is in good standing in such state.

5.1.7. Certificates from States Other than Delaware I California and Connecticut. Lender shall have received certificates of status, corporate or otherwise, with respect to Borrower dated as of a date acceptable to Lender, issued by the Secretary of State of the states in which its failure to be duly qualified or licensed would have a Material Adverse Change in the financial condition or properties and assets of Borrower, and shall indicate that Borrower is in good standing.

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5.1.8. Insurance Policies and Endorsements. Lender shall have received certified copies of the policies of insurance, together with the endorsements thereto, as further described in Section 9.12 hereof, as are required hereby, the fonn and substance of which shall be satisfactory to Lender and its counsel.

5.1.9. Certificates of Title. Lender shall have received duly executed certificates of title with respect to that portion of the Collateral that is subject to certificates of title, if any.

5.1.10. Evidence of Payment of Taxes. Lender shall have received satisfactory evidence that all tax returns required to be filed by Borrower have been timely filed and all taxes upon Borrower or its properties, assets, income, and franchises (including real property taxes and payroll taxes) have been paid prior to delinquency, except such taxes that are the subject of a Pennitted Protest.

5.1.11. Subordination Agreements. Lender shall have received subordination agreements in form and content reasonably satisfactory to Lender from all parties that Lender shall require.

5.1.12. Guaranty. (a.) Lender shall have received the duly executed Guaranty from Guarantor, (and if Guarantor is not an individual, a duly executed Security Agreement All-Assets); and (b.) Guarantor shall have executed the Acknowledgment and Agreement by Guarantor set forth at the end of this Agreement.

5.1.13. Payment of All Fees and Lender Expenses. All fees and Lender Expenses required to be paid in connection with this Agreement shall have been paid.

5.1.14. Deed of Trust From Guarantor. Lender shall have received the Deed of Trust for the Real Property Collateral commonly known as •·······••n/a-- ·······, which secures the obligations of Guarantor under the Guaranty and which shall be in ········••nla-••······· (···········11/a-- ·······) priority against such Real Property Collateral.

5.1.15. Bailment Agreements: Waiver and Consents by Real Property Owner(s); Sales of Premises: Changes in Premises/Other Locations. Borrower shall execute and deliver, or cause to be executed and delivered to Lender such commercially reasonable agreements, documents, and instmments in form and substance reasonably acceptable to Lender, as Lender may deem reasonably necessary or desirable to protect its interests in the Collateral at the Premises/Other Locations, including without limitation, UCC-1 Financing Statements, Waivers and Consents by Real Property Owner(s), and/or bailment agreements. In the event that Borrower becomes aware of the pending or potential sale of the Premises, Borrower shall give Lender not less than thirty (30) days’ notice of the sale or potential sale of the Premises by the owner thereof, whether the Premises are owned or leased by Borrower, so that Lender may obtain an executed Waiver and Consent from the new owner prior to title to the Premises having been transferred to the new owner of the Premises. The Inventory and Equipment shall not, at any time now or hereafter, be stored with a bailee, warehouseman, or similar party without Lender’s prior written consent. Additionally, Borrower shall not open any new locations, whether a new Chief Executive Office or other operating facility or any new Other Locations, unless Borrower (a.) gives Lender thirty (30) days’ prior written notice of the intended opening of any such new Chief Executive Office or Other Locations; and (b.) executes and delivers, or causes to be executed and delivered, to Lender such agreements, documents, and instruments in form and substance acceptable to Lender, as Lender may deem reasonably necessary or desirable to protect its interests in the Collateral at such Chief Executive Office or Other Locations, including without limitation, UCC-1 Financing Statements, Waiver and Consents by Real Property Owner(s), and/or bailment agreements.

5.1.16. Pre-Funding Audits. Lender shall have performed a pre-funding audit of Borrower’s Accounts and Inventory, with results satisfactory to Lender.

5.1.17. Key Person Life Insurance. Lender shall have received an assignment of Borrower’s interest in the key person insurance on the life of •····-····II/a------···· in the amount of •··••n/a----· Dollars ($----n/a----).

5.1.18. Assignment of Insurance Claims. Lender shall have received an assignment of Borrower’s claim against its insurance company in the sum of approximately -··•-n/a----· Dollars ($·-·••n/a---·•).

5.1.19. Payment to Old Lender; Termination of Old Lender’s Security Interest. If applicable, Old Lender shall have been paid in full and Old Lender’s Security Interest in any assets of Borrower and all Collateral shall have been terminated.

5.1.20. Control Agreements. Borrower shall execute, or cause to be executed, and Lender shall have received such control agreements, in form and substance satisfactory to Lender and its counsel, regarding Deposit Accounts, Investment Property, or such other Collateral as Lender may reasonably require.

5.1.21. Other Documents and Legal Matters. All other documents in connection with the transactions contemplated by this Agreement shall have been delivered or executed or recorded and shall be in form and substance satisfactory to Lender and its counsel, including without limitation a Report of Assigned Accounts of Invoices and all procedural requirements, whether pursuant to a procedure manual or otherwise, shall have been met. In addition, the resolution and/or completion (as applicable) to Lender’s satisfaction, of all other matters or acts required by Lender in cmmection the transactions contemplated by this Agreement.

5.1.22. Payment of Deposits. All required Deposits shall have been paid to Lender, including the Good Faith Deposit and the Documentation Fee/Legal Deposit.

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5.1.23. Loan Closing. The Closing Date shall occur no later than -------/2016.

5.2. Conditions Precedent to All Advances. The items set forth below shall be conditions precedent to all Advances hereunder and under the Loan Documents.

5.2.1. Representations and Warranties. The representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all respects on and as of the date of any Advance under this Agreement, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date).

5.2.2. No Event of Default. No Event of Default or event that with the giving of notice or passage of time would constitute an Event of Default shall have occurred and be continuing on the date of any Advance under this Agreement, nor shall either result from the making of such Advance.

5.2.3. No Injunction, etc. No irtjunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the making of such Advance shall have been issued and remain in force by any governmental authority against Borrower, Lender, or any Affiliate.

5.2.4. Procedural Requirements. Borrower shall have submitted a Report of Assigned Accounts and followed such other procedures as Lender may require pursuant to a procedure manual or otherwise.

6. Basic Term: Termination· Prepayment Fee.

6.1. Basic Term. This Agreement will be effective upon the Closing Date, will continue in full force and effect for thirty-six (- 36 -) months thereafter (the “Basic Term”), and shall be further automatically ei..iended, for successive periods of twelve (12) months (each, a “Renewal Term”), unless Borrower shall have given the Lender written notice of its intention to terminate (a “Termination Notice”) at least thirty (30) days prior to the end of the Basic Term or any Renewal Term, as applicable, whereupon this Agreement shall terminate as of the date fixed in the Termination Notice. Notwithstanding any contrary provisions herein, Lender reserves the right to terminate this Agreement at its sole discretion upon giving thirty (30) days’ prior written notice to Borrower pursuant to provisions of Section 15 hereof

6.2. Termination: Payments Due upon Termination. Upon the termination of this Agreement whether pursuant to the provisions of Section 6 or due to the occurrence of an Event of Default pursuant to the provisions of Section 11, Borrower shall pay the Obligations to Lender. Upon payment in full in cash of the Obligations (other than contingent obligations), with no further Advances to be made under the Agreement, Lender shall at Borrower’s sole cost and expense, release its lien in the Collateral and all rights therein shall revert to Borrower.

6.3. Prepayment Fee. If the Obligations are prepaid in full on a final basis prior to the end of the Basic Term or any Renewal Term, a “Prepayment” shall be deemed to have occurred. In the event that such Prepayment shall have occurred, Borrower shall pay to Lender a prepayment fee in an amount equal to: (a.) three percent (3.00%) of the Maximum Amount, if such prepayment occurs prior to the first (1st) anniversary of the commencement date of the Basic Tenn; (b.) two percent (2.00%) of the Maximum Amount, if such prepayment occurs after the first (1st) anniversary, but prior to the second (2nd) anniversary of the commencement date of the Basic Term; or (c) one percent (1.00%) of the Maximum Amount, if such prepayment occurs at any time thereafter including during a Renewal Term (as applicable, the “Prepayment Fee”). In addition, Borrower shall also pay any prepayment fees provided for in any other agreements with Lender. The Prepayment Fee provided for in this Section 6.3 and in any other agreements with Lender shall be deemed included in the Obligations. A Prepayment may be deemed to have occurred regardless of whether such payment or other reduction (a.) is voluntary or involuntary; (b,) is occasioned by Lender’s acceleration of the Obligations or demand hereunder; (c.) is made by Borrower or other third party, including Guarantor; (d.) results from Lender’s receipt or collection of proceeds of its Collateral, including insurance proceeds or condemnation awards; (e.) results from Lender’s exercise of its right of setoff; and/or (f) is made during an Insolvency Proceeding, or is made pursuant to any plan or reorganization or liquidation. Notwithstanding the foregoing, there shall be no Prepayment Fee if a Prepayment occurs as a result of Borrower’s repayment of the Obligations in full (on a final basis) from the proceeds of a conventional bank financing provided by Union Bank

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6.4. Acceleration of Other Obligations Upon Termination of this Agreement. Upon termination of this Agreement whether pursuant to Section 6 or due to the occurrence of an Event of Default pursuant to Section 11, the Obligations owed under the Tenn Loan Documents or any other Loan Documents shall be accelerated and shall be due, owing and payable in full at such time, including without limitation, all Lender Expenses.

6.5. Obligations and Rights Upon Tennination. No termination of this Agreement shall relieve or discharge Borrower of any of Borrower’s duties, Obligations, or covenants hereunder, including without limitation the obligation to continue to turn over sales information and invoices, and Lender’s continuing Security Interests in the Collateral shall remain in effect until all Obligations (other than contingent obligations) have been fully and finally discharged and Lender’s agreement to provide Advances hereunder is tem1inated.

7. Creation of Security Interest.

7.1. Grant of Security Interest. In order to secure the payment and perfommnce in full of all of the Obligations, Borrower hereby grants to Lender a continuing Security Interest in the Collateral.

7.2. Express Authority of Lender to Execute and File UCC Financing Statement(s). Notwithstanding any provision hereof, Lender is hereby expressly authorized to execute, if necessary, and file on behalf of Borrower, UCC Financing Statement(s), including but not limited to corrections, amendments, and modifications thereof, including, without limitation, the use of an abbreviated description of Collateral such as “All Assets of the Borrower” on any and all of the foregoing.

7.3. Delivery of Additional Loan Documents, At any time upon the reasonable request of Lender, Borrower shall hereby authorize the preparation and filing by Lender and/or shall execute and deliver to Lender all financing statements, continuation financing statements, control agreements, fixture filings, security agreements, chattel mortgages, pledges, assignments, endorsements of certificates of title, applications for title, affidavits, reports, notices, schedules of Accounts, letters of authority, and all other documents that Lender may reasonably request, in form satisfactory to Lender, to perfect and continue the perfection of Lender’s Security Interests in the Collateral, and in order to fully consummate all of the transactions contemplated hereby and under the Loan Documents.

8. Representations and Warranties and Covenants.

8.1. Borrower’s Representations, Warranties and Covenants. So long as Borrower is indebted to Lender hereunder, Borrower warrants, represents, and agrees that except as disclosed in the Disclosure Schedule attached as Addendum B and consented thereto by Lender, the statements set forth herein are true and correct on the Closing Date and shall remain true and correct after the Closing Date until such time as Borrower notifies Lender to the contrary. Borrower shall immediately advise Lender if it learns that any such representation or warranty is untrue in any material respect.

8.1.1. Borrower Sole Owner of Collateral: Personal Property: First Priority Security Interest. All Collateral is (a.) solely owned by Borrower; (b.) shall remain personal property at all times except to the extent granted in connection with the pledge of Real Properly Collateral; and (c.) all Security Interests against any Collateral given or caused to be given by Borrower to Lender are and will be first priority Security Interests thereon except for Permitted Liens.

8.1.2. No Other Liens. Borrower has good and indefeasible title to the Collateral and the Collateral is free and clear of all liens, encumbrances, Security Interests, and adverse claims or restrictions on transfer or pledge except: (a.) Permitted Liens; (b.) as disclosed in Addendum B: and (c.) all such liens, encumbrances, Security Interests, and adverse claims that have either previously or concurrently herewith, been consented to in writing by Lender.

8.1.3. Condition of Collateral: No Transfer of Collateral. The Collateral (a.) is kept in good condition and repair subject to nonnal wear and tear; (b.) is not subject to waste: and (c.) will not (except for (i.) sales oflnventory in the ordinary course of business; (ii.) the sale of obsolete equipment from time to time in the ordinary course of Borrower’s business in an amount not to exceed the aggregate sum of Twenty-five thousand and 00/100 Dollars ($25,000,00) provided that all proceeds of such sale ofobsolete equipment shall be remitted to Lender; and (iii.) licenses of Borrower’s intellectual property in the ordinary course of Borrower’s business) be sold, transferred, assigned or removed from the Premises/Other Locations without first obtaining Lender’s prior written consent, which consent shall not be unreasonably withheld.

8.1.4. Facts, Figures and Representations True and Correct. All facts, figures, and representations given, or caused to be given, by Borrower to Lender in connection with the value of the Collateral or regarding each Advance or Account or pertaining to anything done under this Agreement shall to the best of Borrower’s knowledge after reasonable inquiry, be true and correct as of the date given and if Borrower subsequently learns that any such facts, figures, or representations are materially or intentionally false, Borrower shall promptly so advise Lender.

8.1.5. Books and Records. Borrower’s Books and records (a.) fully and accurately reflect all of Borrower’s assets and liabilities (absolute and contingent); (b.) are kept in the ordinary course of business; and (c.) are in accordance with GAAP (subject, in the case of internally prepared interim financial statements, to the absence of footnotes and normal recurring year-end adjustments, the effect of which will not, individually or in the aggregate, be materially adverse).

8.1.6. Fair Market Value of Collateral. The fair market value of the Collateral is, and shall at all times be, not less than (a.) the value carried on Borrower’s financial statements (less normal depreciation caused by ordinary wear and tear); and (b.) as represented to Lender by Borrower.

8.1.7. Taxes. All taxes of any governmental or taxing authority due or payable by, or imposed or assessed against Borrower, have been paid and shall be paid in full before delinquency, subject only to Pennitted Protests.

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8.1.8. No Actions. Litigation. etc. Except as disclosed in writing by Borrower to Lender as reflected on the Disclosure Schedule attached hereto as Addendum B: (a.) there are no actions or proceedings pending by or against Borrower, Guarantor, or any other Obligor before any court or administrative agency; (b.) Borrower does not have knowledge or belief of any pending, threatened, or imminent litigation, governmental investigations, or claims, complaints, actions, or prosecutions involving Borrower, Guarantor or any other Obligor; and (c.) neither Borrower, Guarantor, nor any other Obligor remains bound the terms of any settlement agreement, consent decree or the like relating to formerly pending, pending, or threatened actions, proceedings, or prosecutions involving any of such parties, except for (i.) ongoing collection matters in which Borrower is the plaintiff; and (ii.) matters arising after the date hereof that, if decided adversely to Borrower or Guarantor, would not (I.) materially impair the prospect ofrepayment of the Obligations; or (2.) materially impair the value or priority of Lender’s Security Interests in the Collateral.

8.1.9. Legal Power and Authority. Borrower has the legal power and authority to enter into this Agreement and the Loan Documents and to perform and discharge Borrower’s Obligations hereunder and under the Loan Documents. The Persons signing this Agreement and the Loan Documents on behalf of Borrower are authorized to do so.

8.1.10. Payments on Accounts. At such time as Borrower submits any invoice that is being represented to constitute a Prime Account, to the best of Borrower’s knowledge after due inquiry at such time and subject to Borrower’s obligation to advise Lender at such time as it learns to the contrary, every payment falling due on Accounts assigned to Lender will be duly paid and received by Lender on or before ninety (90) days from the date of each invoice.

8.1.11. Prime Accounts. All Accounts against which Borrower seeks Advances from Lender are now Prime Accounts and Borrower shall only seek Advances against Accounts if such Accounts are believed by Borrower to be Prime Accounts as defined above.

8.1.12. Eligible Inventory. All Inventory against which Borrower seeks Advances from Lender is and shall be Eligible Inventory as defined above, and Borrower shall only seek Advances against such Inventory if such Inventory is believed by Borrower to be Eligible Inventory as defined above.

8.1.13. Location of!nventory. Except as pennitted herein, the Inventory is not and shall not be stored with a bailee, warehouseman, or similar party (without Lender’s prior written consent and the execution by the bailee of a bailment agreement in form and content satisfactory to Lender) and is located and shall be located only at the Premises/Other Locations.

8.1.14. Inventory Records. Borrower now keeps, and hereafter at all times shall keep, correct and accurate records itemizing and describing the kind, type, quality, and quantity of the Inventory, and Borrower’s cost therefor.

8.1.15.

8.1.16. Due Organization and Qualification. Borrower is a duly formed, organized, and existing corporation, limited liability company, limited partnership, general partnership, or other legal entity in good standing, qualified, and licensed to do business in the state of its incorporation or formation and in any other state where the failure to be so licensed or qualified could reasonably be expected to have a Material Adverse Change to the business, operations, conditions (financial or otherwise), or finances of Borrower, or on the value of the Collateral to Lender.

8.1.17. Due Authorization- No Conflict. The execution, delivery, and performance of the Loan Documents are within Borrower’s powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in Borrower’s By-laws and Articles, Certificate of Incorporation, Alticles of Organization, Partnership Agreement, Trust Agreement, or Operating Agreement, nor will they constitute an event of default under any material agreement to which Borrower is a party or by which its properties or assets may be bound.

8.1.18. Financial Statements Fairly Represent Borrower’s Financial Condition: No Material Adverse Change in Financial Condition. All financial statements relating to Borrower or any Guarantor of the Obligations that have been delivered by Borrower to Lender have been prepared in accordance with GAAP (subject, in the case of internally prepared interim financial statements, to the absence of footnotes and nonnal recurring year- end adjustments, the effect of which will not, individually or in the aggregate, be materially adverse) and fairly present Borrower’s (or such Guarantor’s, as applicable) financial condition as of the date thereof and Borrower’s (or such Guarantor’s as applicable) results of operations for the period then ended. There has not been a Material Adverse Change in the financial condition of Borrower (or such Guarantor, as applicable) since the date of the latest financial statements submitted to Lender on or before the Closing Date.

8.1.19. Solvency. No transfer of property is being made by Borrower and no Obligation is being incurred by Borrower in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either the present or future creditors of Borrower.

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8.1.20. Environmental Condition. Except as disclosed in writh1g by Borrower to Lender, none of Borrower’s properties or assets has ever been used by Borrower or, to the best of Borrower’s knowledge, by previous owners or operators in the disposal of, or to produce, store, handle, treat, release, or transport, any Hazardous Substances or Hazardous Wastes, None of the Premises of Borrower’s properties or assets has ever been designated or identified in any manner pursuant to any Environmental Laws as a disposal site for Hazardous Substances or Hazardous Wastes, or a candidate for closure pursuant to any Environmental Laws. No lien arising under any Environmental Laws has attached to any revenues or to any real or personal property owned or operated by Borrower. Borrower has not received a summons, citation, notice, or directive from the Environmental Protection Agency or any other federal or state governmental agency concerning any action or omission by Borrower resulting in the releasing or disposing of Hazardous Substances or Hazardous Wastes into the environment. Borrower is not using and neither Borrower nor to the best of Borrower’s knowledge, any prior owner, occupant, or operator of the Premises has used Hazardous Substances or Hazardous Wastes at or upon, or in any way affecting, the Premises in any manner which violates or violated any Environmental Laws if such violation could, individually or in the aggregate, reasonably be expected to have a Material Adverse Change with respect to any of the Premises or property of Borrower or to result in a Material Adverse Change.

8.1.21. Filings and other Actions. Borrower shall timely make all filings and take other actions required under applicable law, including, but not limited to, applicable securities law.

8.2. Reliance by Lender· Cumulative Representations and Warranties. Each warranty and representation contained in this Agreement automatically shall be deemed repeated with each Advance made hereunder or any of the other Loan Documents and shall be conclusively presumed to have been relied on by Lender regardless of any investigation made or information possessed by Lender, The warranties and representations set forth herein shall be cumulative and in addition to any and all other warranties and representations that Borrower now or hereafter shall give, or cause to be given, to Lender.

9. Affinnative Covenants. Borrower covenants and agrees that, so Jong as any ability to obtain Advances hereunder shall be available to Borrower and until fitll and final payment of the Obligations (other than contingent obligations), and unless Lender shall otherwise consent in writing, the following statements shall be trne and Borrower shall do all of the actions set forth below.

9.1. Preserve Good Standing, Borrower shall do all things necessary to preserve its good standing as a corporation under the Jaws of the states where Borrower is authorized to do business, specifically the state(s) of Delaware, California, Connecticut and Oklahoma, and under the laws of Delaware (for DPS Inc, DPS Intl and DPS Group), California (for DPS CA) and Connecticut (for DPS CT), the states of their organization. Further, Borrower shall maintain the states of Delaware (for DPS Inc, DPS Intl and DPS Group), California (for DPS CA) and Connecticut (for DPS CT) as the states in which Borrower is organized or incorporated.

9.2. Preliminary Annual Financial Statements. Borrower shall provide to Lender, as soon as possible after the end of each fiscal year of Borrower, and in any event within sixty (60) days thereafter, preliminary yearend financial statements, including but not limited to, the balance sheet and income statement for such year.

9.3. Reviewed Annual Financial Statements. Borrower shall deliver to Lender, as soon as available, but in any event within one hundred fifty (I50) days after the end of each fiscal year , a balance sheet and profit and loss statement together with a statement of cash flows and applicable notes to the financial statements of Borrower for each such fiscal period, reviewed by independent certified public accountants acceptable to Lender. Such financial statements shall include the accountants’ management letter, if any, and shall be prepared in accordance with GAAP. To the extent the financial statements of Borrower are prepared on a consolidated or combined basis, they shall include consolidating/combining schedules as applicable. Together with the above, Borrower shall also deliver Borrower’s Form 10-Qs, 10-Ks or 8-Ks, if any, as soon as the same become available, and any other report reasonably requested by Lender relating to the Collateral and the financial condition of Borrower and, at Lender’s request, a certificate signed by its chief financial officer to the effect that all reports, statements or computer prepared information of any kind or nature delivered or caused to be delivered to Lender fairly present its financial condition and that there exists on the date of delivery of such certificate to Lender no condition or event which constih1tes an Event of Default.

9.4. Other Financial Statements. No later than forty-five (45) days after the close of each month (each, an “Accounting Period”), Borrower shall provide to Lender Borrower’s balance sheet as of the close of such Accounting Period and its income statement for that portion of the then current fiscal year through the end of such Accounting Period, which upon Lender’s request, shall be certified by Borrower’s chief financial officer as being complete, correct, and fairly representing its financial condition and results of operations. Borrower shall provide such additional financial information as Lender may from time to time reasonably request, either orally or in writing, each in form acceptable to Lender.

9.5. Tax Returns. Upon Lender request, Borrower shall provide to Lender copies of each of Borrower’s federal income tax returns, and any amendments thereto and extensions thereof.

9,6, Inventory Product Activity. If applicable, at Lender’s request, Borrower shall provide to Lender a full, complete, and accurate detailed repmt of all Borrower’s Inventory activity on a ----------11/11---------- basis from Borrower within five (5) Business Days of the end of the prior period and on a ----------n/a---------- basis from any and all public warehouses within ten (IO) Business Days of the end of the prior month.

9.7. Monthly Accounts Payable and Accounts Receivable Aging Reports. Borrower shall provide to Lender on a monthly basis a foll, complete, and accurate i) accounts payable aging reports within fifteen (15) Business Days of the end of the prior month; and ii) accounts receivable aging reports within ten (10) Business Days of the end of the prior month.

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9.8. Financial Reporting from Guarantor. As requested by Lender, Borrower shall cause Guarantor, to provide Lender with a financial statement that fairly presents Guarantor’s financial condition as of the date thereof; with such financial statements to satisfy the requirements of Section 8.1.18 and otherwise be in form acceptable to Lender, together with federal income tax returns (and any amendments thereto and extensions thereof).

9.9. Accounting System. Borrower shall maintain a standard and modern system of accounting in accordance with GAAP with ledger .and account cards or computer tapes, discs, printouts, and records pertaining to the Collateral that contain information as from time to time may be reasonably requested by Lender. Borrower also shall keep proper books of account showing all sales, claims, and allowances on its Inventory.

9.10. Designation of Inventory. Upon Lender’s request, Borrower shall now and from time to time hereafter, but not less frequently than monthly, execute and deliver to Lender a detailed designation of Inventory from Borrower and from all public warehouses, specifying the cost and, if applicable, the market value of Borrower’s raw materials, work in process and finished goods, and further specifying such other information as Lender may reasonably request, with all monthly information due within five (5) days of month end. Borrower shall promptly, in writing, notify Lender if any of Borrower’s Inventory contains any labels, trademarks, trade-names or other identifying characteristics which are the properties of third parties.

9.11. Taxes. All assessments and taxes, whether real, personal, or otherwise, due or payable by, or imposed, levied, or assessed against Borrower or any of its property have been paid subject to Permitted Protests, and shall hereafter be paid in full, before delinquency or before the expiration of any extension period subject to Permitted Protests. Subject to Permitted Protests, Borrower shall make due and timely payment or deposit of all federal, state, and local taxes, assessments, or contributions required of it by law, and will execute and deliver to Lender, oh demand, appropriate certificates and/or payroll and other tax receipts attesting to the payment thereof or deposit with respect thereto. Borrower shall make timely payment or deposit of all payroll and other employment related tax payments and withholding taxes required of it by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request, furnish Lender with proof satisfactory to Lender indicating that Borrower has made such payments or deposits.

9.12. Insurance. Borrower, at its expense, shall keep the Collateral insured against loss or damage by fire, theft, explosion, sprinklers, and all other hazards and risks, and in such amounts, as are ordinarily insured against by other owners in similar businesses. Borrower also shall maintain business interruption, public liability, product liability, and property damage insurance relating to Borrower’s ownership and use of the Collateral, as well as insurance against larceny, embezzlement, and criminal misappropriation. Additionally, Borrower shall maintain Workers’ Compensation Insurance coverage for all employees as required by law.

9.13. Lender as Loss Payee. All such policies of insurance shall be in such form, with such companies, and in such amounts as may be reasonably satisfactory to Lender. All such policies of insurance (except those of public liability and property damage) shall contain a 438BFU lender’s loss payable endorsement or comparable endorsement, or an equivalent endorsement in a form satisfactory to Lender, showing Lender as additional loss payee thereof, and shall contain a waiver of warranties, and shall specify that the insurer must give at least thirty (30) days’ prior written notice to Lender before canceling its policy for any reason. Borrower shall deliver to Lender certified copies of such policies of insurance and evidence of the payment of all premiums therefor. All proceeds payable under any such policy shall be payable to Lender to be applied on account of the Obligations.

9.14. No Setoffs or Counterclaims. All payments hereunder and under the other Loan Documents made by or on behalf of Borrower shall be made without setoff or counterclaim and free and clear of, and without deduction or withholding for or on account of, any federal, state, or local taxes.

9.15. Location of Collateral, Inventory, and Equipment. Borrower shall keep the Collateral, including, but not limited to Inventory and Equipment, only at the Premises and any Other Locations at which any Collateral is stored (assuming bailment agreement(s) in form and content satisfactory to Lender have been signed in favor of Lender) in the following statc(s): California, Connecticnt and Oklahoma (in the singular or the plural, the “Collateral State”); provided, however, that with the prior written consent of Lender, Borrower may change the locations of the Collateral, including Inventory and Equipment after sending written notice to Lender not less than thirty (30) days prior to the date on which the Collateral, including but not limited to Inventory and Equipment is to be moved to such new location, provided (a.) such new location is within the continental United States; and (b.) at the time of giving such written notification, Borrower authorizes (i.) the filing of or provides any financing statements or fixture filings necessary to perfect and continue perfected Lender’s Security Interest in such assets; and (ii.) executes and delivers, or causes to be executed and delivered, to Lender such agreements, documents, and instruments as Lender may deem reasonably necessary or desirable to protect its Security Interest in the Collateral, including but not limited to Inventory and Equipment, at such location, with such agreements, documents, and instruments to be in form and substance satisfactory to Lender.

9.16. Control of Collateral. At the request of Lender, Borrower shall cooperate with Lender in obtaining possession of any Collateral, in those instances in which Lender chooses to perfect its Security Interest in such Collateral by possession in addition to the filing of a financing statement. At the request of Lender, Borrower shall cooperate with Lender in obtaining control with respect to Collateral consisting of Deposit Accounts, Financial Assets, including without limitation, Investment Property, Letter of Credit Rights, and Electronic Chattel Paper.

9.17. Commercial Tort Claim. If Borrower has or should in the future acquire a commercial tort claim, Borrower shall promptly notify Lender in a writing signed by Borrower of the general details thereof and grant to Lender in such writing a Security Interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to Lender.

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9.18. Leases. Borrower shall pay when due all rents and other amounts payable under any leases to which Borrower is a party or by which Borrower’s properties and assets are bound, unless such payments are the subject of a permitted protest being exercised in good faith. To the extent that Borrower fails timely to make payment of such rents and other amotJnts payable when due tJnder its leases, Lender shall be entitled, in its Sole Discretion, and without the necessity of declaring an Event of DefatJlt, to reserve an amount equal to such tJnpaid amounts from the loan available to Borrower.

9.19. Change in Name. Borrower shall give Lender written notice immediately upon forming an intention to change its name, form,jurisdiction of business organization, FEIN, or Org ID, btJt in any event not less than thirty (30) days prior to effecting such change, and Borrower shall not make such change without first inquiring of Lender what actions Lender may require as a result of the contemplated change. Borrower shall take such actions, including, but not limited to, executing such documents as Lender may reasonably require as a result of such change.

9.20. Inspection. Upon reasonable advance notice by Lender to Borrower, Borrower shall permit Lender or any representatives thereof; during usual business hours, to periodically: (a.) have access to all Premises/Other Locations where any Collateral is located for the purposes of inspecting (and removing, if after the occurrence and during the continuance of an Event of Default) any of the Collateral, including Borrower’s Books; and (b.) permit Lender or its designees to inspect, atJdit, make copies of, and make extracts from Borrower’s Books as Lender may request. No such advance notice shall be required after the occurrence and during the continuance of an Event of Default or if Lender reasonably suspects that an Event of Default may have occurred. Borrower hereby irrevocably authorizes all accountants and third parties to disclose and deliver to Lender at Borrower’s expense all financial information, books and records, work papers, management reports and other information in its possession relating to Borrower whether verbally, in writing (by record or authenticated record) or otherwise.

9.21. Employee Retirement Income Security Act. To the extent applicable, Borrower shall comply with all provisions of the Employee Retirement Income Security Act of 1974, and any successor statute, all as amended from time to time (“ERISA”), including regulations promulgated thereunder and interpretations published regarding same.

9.22. Environmental Issues. Borrower shall comply with the affirmative covenants set forth below with respect to environmental issues.

9.22.1. Borrower shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof, a copy of any notice, smmnons, citation, directive, letter or other communications from the EPA or any other governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower’s part in connection with the handling, transporting, transferring, disposal or in the releasing, spilling, leaking, pumping, pouring, emitting, emptying or dumping of Hazardous Substances or Hazardous Wastes into the environment resulting in damage to the environment, fish, shellfish, wildlife, biota and any other natural resource;

9.22.2. Borrower shall furnish to Lender promptly and in any event within thirty (30) days after the receipt thereof, a copy of any notice of or other cotnmunication concerning the filing of a lien upon, against or in connection with Borrower, the Collateral or Borrower’s real property by the EPA or any other governmental agency or instrumentality authorized to file such a lien pursuant to an environmental protection statute in connection with a fund to pay for damages and/or cleanup and/or removal costs arising from the intentional or unintentional action or omission of Borrower resulting from the disposal or in the releasing, spilling, leaking, pumping, pouring, emitting, emptying or dmnping of Hazardous Substances or Hazardous Wastes into the environment;

9.22.3. Borrower shall furnish to Lender promptly and in any event within thirty (30) days after the receipt thereof, a copy of any notice, directive, letter or other communication from the EPA or any other govenunental agency or instn.nnentality acting under the authority of an Environmental Law indicating that all or any portion of the Borrower’s property or assets have been listed and/or that Borrower has been deemed by such agency to be the owner and operator of the facility that has failed to furnish to the EPA or other authorized govermnental agency or instrumentality, all the information required by the RCRA, CERCLA, SARA, or other applicable Environmental Laws; and

9.22.4. Borrower shall furnish to Lender promptly and in no event more than thirty (30) days after the filing thereof with the EPA or other governmental agency or instrumentality authorized as such pursuant to an environmental protection statute, copies of any and all information reports filed with such agency or instmmentality in connection with Borrower’s compliance with RCRA, CERCLA, SARA, or other applicable Environmental Laws.

9.22.5. Compliance with Environmental Laws. Borrower shall require and use all commercially reasonable efforts to ensure compliance by all operators and occupants of the Premises with all applicable Environmental Laws.

9.22.6. Indemnification Regarding Environmental Laws. Borrower hereby agrees to defend, indemnify, save, and hold Lender and its officers, employees, and agents harmless against all obligations, demands, claims, and liabilities claimed or asserted by any other Person arising out of or relating to any breach of the Environmental Laws and any discharges or releases by Borrower or its agents of Hazardous Substances or Hazardous Wastes into the environment from or about the Premises, including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous substances or Hazardous Wastes or the clean-up or other remediation thereof, and all losses (including without limitation reasonable Attorneys’ Fees and legal and other costs and the reasonable estimate of the allocated costs and expenses of in-house legal counsel and staff) in any way suffered, incurred, or paid by Lender as a result of or in any way arising out of, following, or consequential thereto; provided, however, that no such indemnification shall apply with respect to any liability directly arising out of the gross negligence or willful misconduct on the part of Lender or any of its officers, employees and agents in connection with Hazardous Wastes or Hazardous Substances.

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TO COME

9.24. Reaffirmation and Continuing Nature of Representations, Warranties, and Covenants. The foregoing representations, warranties, and covenants shall be of a continuing nature. To the extent that they constitute obligations to indemnify or similar continuing obligations, they shall survive the termination of this Agreement and full payment and performance of the Obligations. Such representations, warranties, and covenants shall also be deemed to have been repeated whenever Borrower makes a request for an Advance.

10. Negative Covenants. Borrower covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment and performance of the Obligations (other than contingent obligations), Borrower will not act or take any of the actions set forth herein, without Lender’s prior written consent.

10.1. Returns: Allowances and Credits. Borrower shall not accept any returns or grant any allowances or credits to Account Debtors without notifying Lender at the time any credit is issued. Such notification may be made by way of the submission by Borrower of its usual reports to Lender in the event of returns, allowances, or credits provided they are (a.) in the ordinary course of Borrower’s business; and (b.) not in material amounts. Lender in its discretion shall have the right to impose a reserve against the AIR Borrowing Base for actual or anticipated reh1rns, allowance, and credits.

10.2. Credit Limit. Borrower shall not borrow any funds from any third party in an amount in excess of Twenty-five thousand and 00/100 Dollars ($25,000.00) without Lender’s prior written consent, which consent shall not be unreasonably denied. The foregoing credit limit shall not include (a.) accounts payable owed by Borrower to its trade debt in the ordinary course of Borrower’s business; (b.) Permitted Indebtedness; or (c.) debt secured by Permitted Liens.

10.3. Indebtedness. Except as permitted by Section 10.2, Borrower shall not create, incur, assume, permit, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness except Permitted Indebtedness. Additionally, Borrower shall not make payment, either interest or principal, on its convertible debt that has been subordinated to Lender, including but not limited to that debt described in Section

9.23 hereof, without Lender’s prior written consent.

10.4. Liens. Borrower shall not create, incur, assume, or permit to exist, directly or indirectly, any lien on or with respect to any of the Collateral or its property or assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom except for Permitted Liens (including 1iens that are replacements of Permitted Liens to the extent that the original Indebtedness is refinanced and provided that the replacement liens secure only those assets or property that secured the original Indebtedness).

10.5. Restrictions on Fundamental Changes. Borrower shall not enter into any change of ownership, acquisition, merger, consolidation, reorganization, or recapitalization, or reclassify its capital stock, or liquidate, wind up, or dissolve itself(or suffer any liquidation or dissolution), or convey, sell, assign, lease, license, transfer, or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of its business, property, or assets, whether now owned or hereafter acquired, or acquire by purchase or otherwise all or substantially all of the properties, assets, stock, or other evidence of beneficial ownership of any Person.

10.6. Extraordinary Transactions and Disposal of Assets. Borrower shall not enter into any transaction not in the ordinary and usual cotJrse of Borrower’s business, including the sale, lease, license, or other disposition of, moving, relocation, or transfer, whether by sale or otherwise, of any of Borrower’s properties or assets (other than sales of Inventory to buyers in the ordinary course of Borrower’s business as currently conducted) except as permitted by this Agreement or the Loan Documents. Nothing herein shall prohibit Borrower from disposing of worthless or obsolete assets from time to time in the ordinary course of Borrower’s business provided that (a.) Borrower shall notify Lender prior to doing so if Borrower is disposing of assets valued at or having a cost greater than Twenty-five thousand and 00/100 Dolla1·s ($25,000,00); (b.) Lender shall receive all of the proceeds from any sale of such worthless or obsolete assets (which proceeds Lender shall apply toward the repayment of the Obligations); and (c.) such assets shall not include Borrower’s customer list or any portion thereof.

10.7, Change Name. Borrower shall not change Borrower’s name, FEIN, business struchJre, or identity, or add any new fictitious name. To that effect, Borrower shall not do business under any name other than DecisionPoint Systems, Inc,, Borrower’s correct legal name, unless Borrower has provided to Lender evidence that it has taken such legal steps required with respect to fictitious or assumed names under the applicable laws of the jurisdictions in which Borrower is located and/or does business. Lender has received acceptable documentation indicating that Borrower will be doing business under the following additional name(s):

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10.8. Guarantee. Borrower shall not guarantee or otherwise become in any way liable with respect to the obligations of any third Person except by endorsement of instmments or items of payment for deposit to the account of Borrower or which are transmitted or turned over to Lender.

10.9. Restructure. Borrower shall not make any change in Borrower’s financial structure, the principal nature of Borrower’s business operations, or the date of the ending of its fiscal year without Lender’s prior written consent, which consent shall not be unreasonably withheld.

10.10. Consignments. Borrower shall not consign any Inventory or sell any Inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale.

10.11. Distributions. Borrower shall not make any distribution or declare or pay any dividends (whether in cash or stock) on, or purchase, acquire, redeem, or retire any of Borrower’s capital stock, of any class, whether now or hereafter outstanding, except as consented to in writing by Lender, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, if Borrower is a Subchapter S corporation or other pass through entity for income tax purposes, Borrower may make distributions to its shareholders or members (as applicable) for their use to pay taxes owed by them as a consequence of the income of Borrower attributed to such shareholders or members (as applicable) as long as no Event of Default has occurred and is continuing.

10.12. Accounting Methods. Borrower shall not modify or change its method of accounting or enter into, modify, or terminate any agreement currently existing, or at any time hereafter entered into with any third party accounting firm or service bureau for the preparation or storage of Borrower’s accounting records without said accounting finn or service bureau agreeing to provide Lender information regarding the Collateral or Borrower’s financial condition. Borrower waives the right to assert a confidential relationship, if any, it may have with any accounting firm or service bureau in connection with any information requested by Lender pursuant to or in accordance with this Agreement, and agrees that Lender may contact directly any such accounting firm or service bureau in order to obtain such information.

10.13. Investments. Borrower shall not directly or indirectly make or acquire any beneficial interest in (including stock, partnership interest, or other securities of), or make any loan, or capital contribution to, any Person without Lender’s prior written consent, which consent shall not be tmreasonably withheld.

10.14, Transactions With Affiliates. Except as disclosed in Addendum B, Borrower shall not directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms, that are fully disclosed to Lender, and that are no less favorable to Borrower than would be obtained in arm’s length transaction with a non-Affiliate.

10.15. Suspension. Borrower shall not suspend or go out of a substantial portion of its business.

10.16. Use of Proceeds. Borrower shall not use the proceeds of the Advances made hereunder for any purpose other than to, on the Closing Date, repay in full the outstanding principal, accrued interest, and accrued fees and/or expenses owing the Old Lender, if there is any sum owing to any Old Lender, and to pay transactional Lender Expenses incurred in connection with this Agreement. Thereafter, Borrower shall use the proceeds of the Advances made hereunder for any purpose consistent with the terms and conditions hereof, for its lawful and pennitted business purpose, but subject to the terms and conditions of this Agreement.

10.17. Change in Location of Chief Executive Office I Other Locations: Collateral and Third Party Control. Borrower covenants and agrees that it will not, without giving thirty (30) days’ prior written notification to Lender, relocate its Chief Executive Office to a new location or add or change any Other Locations. Further, Borrower agrees that at the time of such written notification, Borrower shall provide Lender any financing statements or fixture filings necessary to perfect and continue Lender’s perfected Security Interests in the Collateral and authorize Lender to file same. In addition, Borrower agrees that it will not at any time store the Collateral with any bailee or warehouseman or in a third party owned facility without providing the Lender with a bailment agreement between Lender and bailee or a waiver and consent by landlord, each in form and substance satisfactory to Lender.

10.18. Hazardous Substances or Hazardous Waste. Borrower shall not permit the Premises to be used to generate, manufacture, refine, transport, treat, store, handle, dispose, produce, or process Hazardous Substances or Hazardous Wastes, except in compliance with all applicable Environmental Laws.

10.19. Management If Borrower’s CEO, CFO or Controller should no longer be employed or should die or become disabled such that such officer would not be able to continue to act in its capacity as an officer, (a “Material Management Change”), Borrower shall (a.) so notify Lender within five (5) Business Days of such Material Management Change; and (b.) to(i.) replace such CEO, CFO or Controller with a CEO, CFO or Controller satisfactory to Lender within six (6) weeks of the Material Management Change; and(ii.) so advise Lender, provided, that in the event of conflict between the terms of this Section 10.19 and the terms of any validity agreement, support agreement or any other agreement provided by any such officer, the terms of any such validity, support or other agreement shall govern.

11. Events Of Default. Any one or more of the events set forth below shall constitute an “Event of Default” under this Agreement and the Loan Documents.

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11.1. Failure to Pay: Overadvance, Borrower or any Obligor fails to pay when due and payable or when declared due and payable, any portion of the Obligations whether of principal, interest, (including any interest which, but for the provisions of the Bankruptcy Code, would have accrued on such amounts), fees and charges due Lender, reimbursement of Lender Expenses, or other amounts constituting the Obligations, or an Overadvance occurs.

11.2. Failure to Perform - Material . Borrower or any Obligor fails or neglects to perform, keep, or observe any material term, provision, condition, covenant, or agreement contained in this Agreement, any of the Loan Documents, or in any other present or future agreement between Borrower and Lender.

11.3. Material Adverse Change, A Material Adverse Change has occurred.

11.4. Writ. Any of Borrower’s or any Obliger’s properties or assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any third Person.

11.5. Insolvency Proceeding, An Insolvency Proceeding is commenced by or against Borrower or any Obligor without being dismissed in sixty (60) days; provided, however, that upon the filing of an Insolvency Proceeding by or against Borrower, Lender shall have no obligation to advance funds to Borrower and may seek relief from stay or to prohibit use of ca h collateral or such other protection as Lender deems reasonably necessary under the circumstances without being dismissed in sixty (60) days; provided, however, that Lender may take such immediate actions permitted under the Loan Documents or applicable law that Lender believes are required under the circumstances to prevent or avoid prejudice to Lender, including but not limited to seeking court orders granting relief from the automatic stay or prohibiting the use of cash collateral, and Lender shall not be required to continue to made Advances under the Agreement absent a stipulation on terms and conditions satisfactory to Lender and approved by the bankruptcy court.

11.6. Injunction Against Doing Business, Borrower or any Obligor is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs.

11.7. Notice of Lien or Levy. (a.) A notice of lien, levy, or assessment is filed ofrecord with respect to any of Borrower’s or any Obliger’s properties or assets by the government of the United States, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency; or (b.) any taxes or debts owing at any time hereafter to any one or more of such entities becomes a lien, whether choate or otherwise, upon any of Borrower’s properties or assets and the same is not paid on the payment date thereof.

11.8. Judgment Lien. A judgment or other claim becomes a lien or encumbrance upon any of Borrower or any Obligor’s properties or assets.

11.9. Material Third Party Agreements. Borrower or any Obligor defaults on any material agreement to which Borrower or such Obligor is a party with one or more third Persons resulting in a right by such third Persons, irrespective of whether exercised, to accelerate the maturity of Borrower’s or such Obliger’s obligations thereunder, or any material agreement to which Borrower or any Obligor is a party is cancelled, matures or terminates, and which default, cancellation, maturity or termination would have a material negative effect on Borrower’s or such Obliger’s business in Lender’s reasonable business judgment.

11, I0, Prohibited Payment on Subordination Agreement. Borrower makes any payment on account of Indebtedness that has been subordinated in right of payment to the payment of the Obligations, except to the extent such payment is permitted by the terms of the subordination provisions applicable to such Indebtedness.

11.11. Misstatement or Misrepresentation. Any material or intentional misstatement or misrepresentation exists now or hereafter in any warranty, representation, statement, or report made to Lender by Borrower or any Obligor or any officer, employee, agent, or director of Borrower or any Obligor, or any such warranty or representation is withdrawn.

11.12. Limitation or Termination of Guaranties, Validity Agreements, etc. (a.) The obligation of any Guarantor or other third Person under the Guaranty, any validity agreement, or any of the other Loan Documents is limited or terminated by operation of law or by the Guarantor or other third Person thereunder; (b,) any such Guarantor or other third Person becomes the subject of an Insolvency Proceeding; or (c.) the termination, lapse, or ineffectiveness of any UCC Financing Statement filed in connection with or related to any collateral pledged in support of the Guaranty or any other Loan Documents unless due to the failure of Lender to file a continuation statement, provided, however that it shall be an Event of Default if Borrower fails to cause such Guarantor or third Person to take such steps as Lender may reasonably require to assist Lender in correcting such terminated, lapsed or ineffective UCC Financing Statement.

11.13. Intentionally Omitted.

11.14. Termination, Lapse, or Ineffectiveness of UCC Filing. The termination, lapse of, or ineffectiveness of any UCC Financing Statement filed in connection with or related to any Collateral granted pursuant to this Agreement or any of the other Loan Documents unless due to the failure of Lender to file a continuation statement; provided, however that it shall be an Event of Default if Borrower does not take such steps as Lender may reasonably require to assist Lender in correcting such terminated, lapsed or ineffective UCC Financing Statement.

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11.15. Violation of any Environmental Law. (a.) The failure by Borrower to comply with each, every and all of the requirements of RCRA, CERCLA, SARA, or any other applicable Environmental Law on Borrower’s property; (b,) the receipt by Borrower of a notice from the EPA or any other governmental agency or instrumentality acting under the authority of any Environmental Law, indicating that a lien has been filed against any of the Collateral, or any of Borrower’s other property by the EPA or any other governmental agency or instrumentality in connection with a fund as a result of damage arising from an intentional or unintentional action or omission by Borrower resulting from the disposal, releasing, spilling, leaking, pumping, pouring, emitting, emptying or dumping of Hazardous Substances or Hazardous Wastes into the environment; and (c.) any other event or condition exists which could reasonably be expected, in the good faith opinion of Lender, under applicable Environmental Laws, to have a material adverse effect on the financial or operational condition of Borrower or the value of all or any material part of the Collateral or other property of Borrower.

11.16. Failure to Obtain a Waiver and Consent from Owner or Bailtnent Agreement After Change in Chief Executive Office / Other Locations. If Lender shall not be not provided with a waiver and consent from the owner of the Chief Executive Office or a bailment agreement from the owner or operator of any new Other Location following a change in (a.) the location of Borrower’s Chief Executive Office or Other Locations; or (b.) the ownership of the Chief Executive Office or Other Locations.

11.17. Fraud, Defalcation or Conversion. If Borrower shall have engaged in any fraud, defalcation or conversion.

11.18. Failure to Cure a Breach or Default After Notice. Any breach or default under this Agreement (other than the specific Events of Default above), the Loan Documents or any other present or future agreement between Borrower and Lender shall become an Event of Default if Borrower has not cured said breach or default within the time period specified by Lender in its Sole Discretion in any notice of default, which time period shall depend upon the facts and circumstances then in effect, but which time period (a.) in the case of any such breach or default that may be cured by the payment of money, shall be at least three (3) Business Days from the date of such breach or default, and (b.) for all such other breaches or defaults, shall be at least five (5) Business Days from the date of such breach or default.

12. Lender’s Rights and Remedies Upon Default. Borrower and Lender have agreed to the tenns set forth below with respect to the rights and remedies of Lender upon the occurrence of an Event of Default.

12.1. Rights and Remedies. Upon the occurrence, and during the continuation, of an Event of Default, Lender may, at its election, without notice of its election and without demand, take any one or more of the actions set{orth below, all of which are authorized by Borrower.

12.1.1. Accelerate Obligations. Lender may declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable, without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived by Borrower.

12.1.2. Cease Making Advances. Lender may cease making Advances or extending credit to or for the benefit of Borrower under this Agreement, the Loan Documents, or any other agreement between Borrower and Lender.

12.1.3. Terminate This Agreement. Lender may terminate this Agreement and any of the other Loan Documents as to any future liability or obligation ofLender, but without affecting Lender’s rights and Security Interests in the Collateral and without affecting the Obligations.

12.1.4. Settle or Adjust Disputes. Lender may settle or adjust disputes and claims directly with Account Debtors to the Accounts for amounts and upon tenns which Lender considers advisable, and in such cases, Lender will credit Borrower’s loan account with only the net amounts received by Lender in payment of such disputed Accounts, after deducting all Lender Expenses incurred or expended in connection therewith.

12.1.5. InventOiy. Lender may cause Borrower to hold (a.) all returned Inventory in trust for Lender; (b.) segregate all returned Inventory from all other properly of Borrower or in Borrower’s possession; and (c.) conspicuously label said returned Inventory as being the Collateral of Lender. In addition, Lender may revoke Borrower’s right to sell Inventory free and clear of Lender’s Security Interest therein.

12.1.6. Make Payment; Take Action. Lender may, without notice to or demand upon Borrower, Guarantor, or other guarantor, make such payments and take such actions as Lender considers necessary or reasonable to protect its Security Interests in the Collateral. Borrower agrees to assemble the Collateral if Lender so requires, and to make the Collateral available to Lender as Lender may designate. Borrower authorizes Lender to enter the Premises/Other Locations where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien that in Lender’s detennination appears to conflict with its Security Interests and to pay all expenses incurred in connection therewith. With respect to any of Borrower’s owned Premises, Borrower hereby grants Lender a license to enter into possession of such Premises and to occupy the same, without charge, for up to one hundred twenty (120) days in order to exercise any of Lender’s rights or remedies provided herein or in any of the other Loan Documents, at law, in equity, or otherwise.

12.1.7. Setoff. Lender may, without notice to Borrower (such notice being expressly waived), and without constituting a retention of any Collateral in satisfaction of an Obligation (within the meaning of§§ 9620 and 9621 of the Code, as such sections may be amended and/orre-numbered from time to time), set off and apply to the Obligations any and all (a.) balances and deposits of Borrower held by Lender (including any amounts received in the Lender’s Account); or (b.) the Obligations at any time owing to or for the credit or the account of Borrower held by Lender.

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12.1.8. Hold Monies. Lender may hold, as cash collateral, any and all balances and deposits of Borrower held by Lender, and any amounts received in the Lender’s Account and Collateral Control Account(s), to secure the foll and final repayment of all of the Obligations.

12.1.9. Deal with Collateral. Lender may collect, ship, reclaim, recover, store, finish, maintain, repair, dispose of, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral. Lender is hereby granted a license or other right to use, without charge, Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and Borrower’s rights under all licenses and all franchise agreements shall inure to Lender’s benefit.

12.1.10. Sell Collateral. Lender may sell the Collateral at eithera public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrower’s Premises) as Lender determines is commercially reasonable. It is not necessary that the Collateral be present at any such sale.

12.1.11. Notice of Disposition of Collateral. Lender shall give notice of the disposition of the Collateral as follows:

12.1.l1.1. Lender shall give Borrower and each holder ofa Security Interest in the Collateral which has filed with Lender a written request for notice, a notice in writing of the time and place of public sale, or, if the sale is a private sale or some other disposition other than a public sale is to be made of the Collateral, then the time on or after which the private sale or other disposition is to be made;

12.1.11.2. the notice shall be personally delivered or mailed, postage prepaid, to Borrower at the address set forth herein, giving such notice as may be reasonable under the circumstance of (a.) the date fixed for the sale; or (b.) before the date on or after which the private sale or other disposition is to be made; except that no notice needs to be given prior to the disposition of any portion of the Collateral that is perishable or threatens to decline speedily in value or that is of a type customarily sold on a recognized market. Notice to Persons other than Borrower, Guarantor, or secured creditors reflected in a UCC search claiming an interest in the Collateral shall be sent to such addresses as they have furnished to Lender or as is reflected in such UCC search as the case may be; and

12.1.11.3. if the sale is to be a public sale, Lender shall also give notice of the time and place by publishing a notice one (1) time giving such notice as may be reasonable under the circumstances before the date of the sale in a newspaper of general circulation in the county in which the sale is to be held.

12.1.12. Credit Bid. Lender may credit bid and purchase any and all of the Collateral at any public sale.

12.1.13. Deficiency; Excess. Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately to Lender by Borrower. Any excess will be returned, without interest and subject to the rights of third Persons, by Lender to Borrower.

12.2. Remedies Cumulative. Lender shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any or all Collateral for any credit accommodation from Lender under this Agreement or any other Loan Document and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and remedies of Lender in connection with each of the Loan Documents or as accorded by Lender, may be reasonably exercised at any time by Lender and from time to time after the occurrence and during the continuance of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.

13. Taxes and Lender Expenses.

13.1. Actions to Protect Lender. If Borrower fails to pay any monies (whether taxes, rents, assessments, insurance premiums, or otherwise) due to third Persons, or fails to make any deposits or famish any required proof of payment or deposit, all as required under the tenns of this Agreement (in each case, except for payments subject to Permitted Protests), then, to the extent that Lender determines in its good faith reasonable business judgment that such failure by Borrower could have a Material Adverse Change with respect to Lender’s interests in the Collateral, in its Sole Discretion and without prior notice except as provided in the Loan Documents (except that Lender shall use its best efforts to give two (2) days’ notice to Borrower without incurring any liability for failure to do so), Lender may do any or all of the following: (a.) set up such reserves in Borrower’s loan account and comply with any condition as Lender reasonably deems necessary to protect Lender from the exposure created by such failure; (b.) qualify Borrower in any state to collect Accounts; (c.) obtain and maintain insurance policies of the type described herein; and (d,) take any action with respect to such policies as Lender reasonably deems prudent. Any such amounts paid by Lender shall be at Borrower’s expense and shall constitute Lender Expenses. Any such payments made by Lender shall not constitute an agreement by Lender to make similar payments in the future or a waiver by Lender of any Event of Default under this Agreement. Lender need not inquire as to, or contest the validity of, any such expense, tax, Security Interest, encumbrance, or lien and the receipt of the usual official notice for the payment thereof shall be conclusive evidence that the same was validly due and owing. Such Lender’s Expenses may be charged to Borrower’s account and if not charged or paid prior to such time, shall be charged upon termination.

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13.2. Lender May Obtain Insurance to Protect its Interest Upon Borrower’s Failure to Provide Insurance. Unless Borrower provides Lender with evidence of the insurance coverage as required by this Agreement, Lender may purchase such insurance at Borrower’s expense to protect Lender’s interest. This insurance may, but need not, also protect Borrower’s interest. If any Collateral becomes damaged, the insurance coverage that Lender purchases may not pay any claim Borrower makes or any claim made against Borrower. Borrower may later cancel this coverage after providing evidence that Borrower has obtained property coverage elsewhere.

13.3. Costs of Insurance. Borrower is responsible for the cost of any insurance purchased by Lender, which shall constitute a Lender Expense. The cost of obtaining this insurance may be added to Borrower’s loan balance, If the cost is added to Borrower’s loan balance, interest at the Rate set forth in Section 2.2.1 will apply to this added amount. The effective date of coverage may be the date on which Borrower’s prior coverage lapsed or the date Borrower failed to provide proof of coverage.

13.4. Disclosure Regarding Lender Obtained Insurance. The insurance coverage that Lender purchases may be considerably more expensive than the insurance coverage that Borrower could obtain and may not satisfy any need for property damage coverage or any mandatory liability insurance requirements imposed by applicable law.

14. Waivers: Indemnification.

14.1. Waivers of Demand, Protest, etc. Except as expressly provided in the Agreement or the other Loan Documents, Borrower hereby waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of Accounts, Documents, Instruments, Chattel Paper, and guarantees at any time held by Lender on which Borrower may in any way be liable.

14.2. No Liability of Lender Re: Collateral. Lender shall not in any way or manner be liable or responsible for (a.) the safekeeping of the Collateral; (b.) any loss or damage thereto occurring or arising in any manner or fashion from any cause; or (c,) any diminution in the value thereof: or any act or default of any carrier, warehouseman, bailee, forwarding agency, or other Person. All risk of loss, damage, or destruction of the Collateral shall be borne by Borrower.

14.3. Indemnification. Borrower hereby agrees to indemnify Lender, any Affiliate thereof, and its directors, officers, employees, agents, counsel, and other advisors (each an “Indemnified Person”) against, and hold each of them harmless from, any and all liabilities, obligations, losses, claims, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever, including Attorneys’ Fees, Lender Expenses, the reasonable fees and disbursements of counsel to an Indemnified Person (including allocated costs of internal counsel), which may be imposed on, incurred by, or asserted against any Indemnified Person, in any way relating to or arising out of this Agreement or the transactions contemplated hereby or any action taken or omitted to be taken by it hereunder (the “Indemnified Liabilities”): provided that Borrower shall not be liable to any Indemnified Person for any portion of such Indemnified Liabilities to the extent they are found by a final decision of a court of competent jurisdiction to have resulted from such Indemnified Person’s gross negligence or willful misconduct, with the foregoing indemnity and hold harmless agreement by Borrower in favor of Lender to survive the termination of this Agreement and payment and performance of the Obligations, and continue thereafter. If and to the extent that the foregoing indemnification is for any reason held unenforceable, Borrower agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law.

14.4. No Liability for Failure to Make Advances. Borrower hereby agrees Lender shall not be liable or responsible for any failure to make Advances (a.) if in Lender’s Sole Discretion Lender reasonably believes in light of all of the facts and circumstances that Borrower is not entitled to receive such Advances; (b.) due to any accounting or administrative errors made by Lender provided that such errors are not in bad faith; or (c.) due to any other failure by Lender unless the same arises directly from Lender’s gross negligence or willful misconduct.

14.5. Best Efforts by Lender to Give Notice of Default. Lender agrees to use its best efforts to give Borrower prompt written notice of any default or Event of Default or alleged default by Borrower promptly after I,,ender has made the determination that it intends to exercise its rights and remedies as Lender; provided, however, that there shall be no obligation on the part of Lender to give any notice in the event of any fraud, defalcation, or conversion on the part of Borrower.

15. Notices. Unless otherwise provided in this Agreement or hereinbelow, all notices or demands by any party relating to this Agreement or any of the other Loan Documents shall be in writing and (except for financial statements and other infonnational documents which may be sent by first-class mail, postage prepaid) may be made, and deemed to be given, as follows: a) if delivered in person or by courier (overnight or otherwise), on the date when it is delivered; b) if by facsimile, when received at the correct number (proof of which shall be an original facsimile transmission confinnation slip or equivalent); or c) if sent by certified or registered mail or the equivalent, on the earlier of the date such mail is actually delivered or three (3) days after deposit thereof in the mail, unless the date of achtal delivery or such date 3 days after deposit thereof in the mail (as applicable) is not a Business Day in which case such communication shall be deemed given and effective on the first following Business Day. Any such notice or communication given pursuant to this Agreement or any of the Loan Documents shall be addressed to the intended recipient at its address or number specified as follows:

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	Ifto DPS, Inc.:		DecisionPoint Systems, Inc, 8697 Research Drive, Irvine, California 92618
	Attn:		Steven Smith , CEO
	Telephone No.:		(949) 465-0065
	Facsimile No.:		(949) 465-0065


	Ifto DPS Intl:		DecisionPoint Systems International, Inc, 8697 Research Drive, Irvine, California 92618
	Attn:		Steven Smith, CEO
	Telephone No.:		(949) 465-0065
	Facsimile No.:		(949) 465-0065

	Ifto DPS Group:		DecisionPoint Systems Group, Inc. 8697 Research Drive, Irvine, California 92618
	Attn:		Steven Smith, CEO
	Telephone No.:		(949) 465-0065
	Facsimile No.:		(949) 465-0065

	IftoDPS CA:		decisionpoint systems CA, Inc. 8697 Research Drive, Irvine, California 92618
	Attn:		Steven Smith, CEO
	Telephone No.:		(949) 465-0065
	Facsimile No.:		(949) 465-0065

	IftoDPS CT:		decisionpoint systems CT, Inc, 8697 Research Drive, Irvine, California 92618
	Attn:		Steven Smith, CEO
	Telephone No.:		(949) 465-0065
	Facsimile No,:		(949) 465-0065

	If to Lender:		CapitalSource Business Finance Group, a dba of BFI Business Finance 851 East Hamilton Avenue, 2nd Floor, Campbell, California 95008
	Attn:		David Drogos, Managing Director
	Telephone No.:		(408) 369-4000
	Facsimile No.:		(408) 369-4018 / (408) 369-4056

The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other. Notwithstanding anything to the contrary in the foregoing, Borrower acknowledges and agrees that notices sent by Lender in connection with §§ 9610, 961 I, 9612, 9613, 9614, 9615, 9617, 9618, 9620, 9621, or 9624 of the Code and any other references to the disposition of collateral under the Code, all as such sections may be amended and/or re-numbered from time to time, shall be deemed sent when: (a) delivered in person or by courier (overnight or otherwise), (b) deposited in the mail, or (c) transmitted by facsimile.

16. Choice of Law. This Agreement and all transactions contemplated hereunder and/or evidenced hereby shall be governed by, construed under, and enforced in accordance with the internal laws of the State of California, without giving effect to conflicts of law principles.

17. Venue. The parties hereby agree that (a.) this Agreement is entered into and that Borrower’s performance to Lender occurs at Campbell, California; and (b.) all actions or proceedings arising in connection with this Agreement and/or the Loan Documents shall be tried and litigated only in the State and Federal courts located in the County of Santa Clara, State of California or, at the sole option of Lender, in any other court in which Lender shall initiate legal or equitable proceedings and which has subject matter jurisdiction over the matter in controversy. Each of Borrower and Lender waives, to the extent permitted under applicable law, any right each may have to assert the doctrine of forum non conveniens or to object to venue to the extent any proceeding is brought in accordance with this section.

18. JURY TRIAL WAIVER. BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE 1RANSACTIONS CONTEMPLATED THEREIN, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTIIER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

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WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is 11ot enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure § 638 as such sections may be amended and/or re-numbered from time to time (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure§§ 638 through 645.1, inclusive as such sections may be amended and/or re-numbered from time to time. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent iajunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery that shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and order applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in this section shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

19. Destrnction of Borrower’s Documents. All documents, schedules, invoices, agings, or other papers delivered to Lender, other than Borrower’s Books or Collateral, may be destroyed or otherwise disposed of by Lender four (4) months after they are delivered to or received by Lender, unless Borrower requests, in writing, the return of said documents, schedules, or other papers and makes arrangements, at Borrower’s expense, for their return.

20. Reserved..

21. Third Party Debt. If Borrower owes money to any third party (the “Third Party Debt”) which is also a borrower or other obliger of Lender (the “Third Party Debtor”), Lender may at its option to protect the interests of Lender, advance sums in the amount of the Third Party Debt under the Agreement and pay directly to the Third Party Debtor the amount of the Third Party Debt.

22. Disclaimer for Negligence. Lender shall not be liable for any claims, demands, losses, or damages made, claimed, or suffered by Borrower, except to the extent such claims, demands, losses, or damages are caused directly by Lender’s gross negligence or willful misconduct.

23. Limitation of Damages. Lender shall not be responsible for any lost profits or indirect, special, or consequential damages from Borrower arising from any breach of contract, tort (excluding Lender’s gross negligence or willful misconduct), or any other wrong arising from the establishment, administration, or collection of the Obligations. In no event shall Lender be liable for losses or delays resulting from computer malfunction, interruption of communication facilities, labor difficulties or other causes beyond Lender’s reasonable control or for indirect, special or consequential damages.

24. Multiple Borrowers. If there is more than one Borrower as of the Closing Date or thereafter, the following provisions shall apply:

24.1. Waiver of Subrogation, etc. Each Borrower hereby waives its rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to any Borrower by reason of§§ 2787 to 2855 inclusive, of the California Civil Code.

24.2. Waiver with Respect to Real Property Collateral. Each Borrower hereby waives all rights and defenses it may have if any agreement with Lender is secured by real property. This means, among other things: (a,) Lender may collect from any Borrower without first foreclosing on any real or personal property Collateral pledged by Borrower; and (b,) if Lender forecloses on any Real Property Collateral pledged by any Borrower: (i.) the amount of the debt may be reduced only by the price for which that Collateral is sold at the foreclosure sale, even if the Collateral is worth more than the sale price; and (ii.) Lender may collect from any Borrower even if Lender, by foreclosing on the Real Property Collateral, has destroyed any right any Borrower may have to collect from any other Borrower. This is an unconditional and irrevocable waiver of any rights and defenses any Borrower may have because Borrower’s debt is secured by Real Property Collateral. These rights and defenses include, but are not limited to, any rights or defenses based upon §§ 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.

24.3. Waiver of Rights and Remedies Based on Election of Remedies. Each Borrower hereby waives all rights and defenses arising out of an election of remedies by Lender, even though that election of remedies, such as a nortjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed any Borrower’s rights of subrogation and reimbursement against the principal by the operation of§ 580d of the California Code of Civil Procedure or otherwise, and each Borrower further waives any and all benefits or defenses, if any, arising directly or indirectly under any one or more of§§ 3116, 3118, 3119, 3419, 3605, 9504, 9610, 9611, 9612, 9613, 9614, 9615, 9617, 9618, 9620, 9621, 9624, 9625, or 9627 of the Code.

24.4. Acknowledgment of Joint and Several Liability by Each Borrower, Each Borrower hereby agrees that it is jointly and severally, directly, and primarily liable to Lender for payment and performance in full of all duties, obligations, and liabilities under this Agreement and each other document, instrument, and agreement entered into by any Borrower with or in favor of Lender in connection herewith, and that such liability is independent of the duties, obligations, and liabilities of any other Borrower or any Guarantor of the Obligations, as applicable. Except as specifically otherwise provided, each reference herein to Borrower shall mean each and every Borrower that is a party hereto, individually and collectively,jointly and severally.

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25. Borrower Authorization. Borrower consents to Lender’s use of Borrower’s company names and logos in Lender’s written and oral presentations, including in Lender’s advertising, promotional and marketing materials, client lists, news releases and Web site. In connection with any client references in such written or oral presentations, Borrower consents to the use of individual names and quotations. Borrower’s consents herein shall survive termination of this Agreement until such time that Borrower delivers, and Lender receives, written revocation of such consents.

26. General Provisions.

26.1. Effectiveness. This Agreement shall be binding and deemed effective when executed by Borrower and Lender, with the acknowledgment and agreement portion executed by each Guarantor.

26.2. Successors and Assigns. This Agreement shall be binding on and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided, however, that Borrower may not assign or transfer its interest hereunder without the prior written consent of Lender, and any prohibited assignment shall be void ab initio. Lender reserves the right to sell, assign, transfer, negotiate, or grant participations in all or any part of, or any interest in, Lender’s rights and benefits under each of the Loan Documents executed herewith or hereafter. In connection therewith, Lender may, subject to the requirements of Section 30, disclose all documents and information that Lender now has or may hereafter acquire relating to any credit extended by Lender to Borrower, Borrower or its business, any Obligor or the business of any Obligor, or any Collateral.

26.3. Section Headings. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each section applies equally to this entire Agreement.

26.4. Interpretation. This Agreement, all the Loan Documents, and all agreements relating to the subject matter hereof are the product of negotiation and preparation by and among each party and its respective attorneys, and shall be construed accordingly. The parties waive the provisions of California Civil Code §1654, as such sections may be amended and/or re-numbered from time to time.

26.5. Severability of Provisions. In the event that any one or more of the provisions contained in this Agreement shall be for any reason held to be invalid, illegal or unenforceable in any respect, then such provision shall be ineffective only to the extent of such prohibition or invalidity, and the validity, legality, and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties agree to replace any invalid provision with a valid provision, which most closely approximates the intent and economic effect of the invalid provision.

26.6. Amendments in Writing. Neither this Agreement nor any provisions hereof may be changed, waived, discharged, or terminated, nor may any consent to the departure from the terms hereof be given, orally (even if supported by new consideration), but may only be by an instrument in writing signed by all parties to this Agreement. Any waiver or consent so given shall be effective only in the specific instance and for the specific purpose for which given.

26.7. Waiver or Delay by Lender to Exercise Rights. No failure by Lender to exercise and no delay by Lender in exercising any right, power, or remedy hereunder or under any of the other Loan Documents shall impair any right, power, or remedy which Lender may have, nor shall any such delay be construed to be a waiver of any of such rights, powers, or remedies, or any acquiescence in any breach or default hereunder; nor shall any waiver by Lender of any breach or default by Borrower hereunder be deemed a waiver of any default or breach subsequently occurring. All rights and remedies granted to Lender hereunder shall remain in full force and effect notwithstanding any single or partial exercise of, or any discontinuance of action begun to enforce, any such right or remedy. The rights and remedies specified herein are cumulative and not exclusive of each other or of any rights or remedies which Lender would otherwise have. Any waiver, permit, consent, or approval by Lender of any breach or default hereunder must be in writing and shall be effective only to the extent set forth in such writing and only as to that specific instance.

26.8. Survival. All representations, warranties, and agreements herein contained shall be effective so long as any portion of this Agreement remains executory.

26.9. Continuing Obligations. No termination of this Agreement or any other Loan Document shall relieve or discharge Borrower of its respective duties, obligations and covenants until all of Borrower’s Obligations (other than contingent obligations) under this Agreement and the other Loan Documents, other than contingent obligations, have been fully and finally discharged and paid, and Lender’s continuing Security Interest in the Collateral and the rights and remedies of Lender hereunder, under the other Loan Documents and applicable law and procedures established by Lender in connection with its lending operations from time to time, whether pursuant to a procedure manual or otherwise, shall remain in effect until all such Obligations (other than contingent obligations), other than contingent obligations, have been fully and finally discharged and paid.

26.10. Further Assurances. Borrower shall execute such other and further documents and instruments and take such other actions as Lender may reasonably request to implement the provisions of this Agreement and to perfect and protect the Security Interests and other rights and remedies of Lender contemplated by the Loan Documents or granted hereafter,

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26.11. Counterparts: Telefacsimile Execution. This Agreement and all of the Loan Documents may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures were upon the same instrument. This Agreement and all of the Loan Documents, or a signature page thereto intended to be attached to a copy of this Agreement or any of the Loan Documents, signed and transmitted by facsimile machine, telecopier or other electronic means (including via transmittal of a “pdf’ file) shall be deemed and treated as an original document. The signature of any person thereon, for purposes hereof, is to be considered as an original signature, and the document transmitted is to be considered to have the same binding effect as an original signature on an original document. At the request of any party hereto, any facsimile, telecopy or other electronic document is to be re-executed in original form by the persons who executed the facsimile, telecopy of other electronic document. No party hereto may raise the use of a facsimile machine, telecopier or other electronic means or the fact that any signature was transmitted through the use of a facsimile machine, telecopier or other electronic means as a defense to the enforcement of this Agreement and any of the Loan Documents.

26.12. Revival and Reinstatement of Obligations. If the incurrence or payment of the Obligations by Borrower, any Guarantor, or other Obligor or the transfer by either or both of such parties to Lender of any property of either or both of such parties should for any reason subsequently be declared to be void or voidable under any state or federal law relating to creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, and other voidable or recoverable payments of money or transfers of property (individually or collectively, a “Voidable Transfer”), and if Lender is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that Lender is required or elects to repay or restore, and as to all reasonable costs, expenses, and Attorneys’ Fees of Lender related thereto, the liability of Borrower or such Guarantor automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made.

26.13. Supplementary Tenns. The terms and conditions of the Loan Documents shall supplement the terms hereof, except to the extent otherwise specifically provided herein.

26.14. Integration. This Agreement, together with the Loan Documents, embodies the entire agreement and understanding among and between the parties hereto, and supersedes all prior or contemporaneous agreements and understandings between said parties, verbal or written, express or implied, relating to the subject matter hereof No promises of any kind have been made by Lender or any third party to induce Borrower to execute this Agreement or the Loan Documents. No course of dealing, course of performance or trade usage, and no parol evidence of any nature, shall be used to supplement or modify any terms of this Agreement or the Loan Documents.

26.15. Conflicts With Other Agreements. Unless otherwise expressly stated in the Loan Documents or any other agreement between Lender and Borrower, if a conflict exists between the provisions of this Agreement and the provisions of or the Loan Documents or such other agreement, the provisions of this Agreement shall control.

26.16. Tenn Loan Documents Executed Concurrently Herewith, If Any. Concurrently with the execution of this Agreement or hereafter, Borrower may be executing an Equipment Security Agreement or other applicable security agreement and a Secured Promissory Note (the “Term Loan”) and related documents (collectively, the “Term Loan Documents”).

27. Cross Collateral. Any Collateral pledged to Lender to secure any obligation of Borrower shall also secure any other obligation of Borrower to Lender: provided, however, that any Real Property Collateral pledged to secure any obligation of Borrower shall only secure any other obligation of Borrower if Lender specifically so agrees in writing.

28. Cross-Payment: Right to Reserve. Lender may, in its Sole Discretion, make Advances under one loan to make any payments due from Borrower to Lender under any other loan. Lender may also, in its Sole Discretion, reserve under one loan from Borrower for amounts due under any other loan from Borrower.

29. Cross-Defaults. An Event of Default under this Agreement shall be an Event of Default under each of the Loan Documents, and vice versa.

30. Confidentiality. In handling any proprietary information of Borrower marked or otherwise indicated to Lender as confidential, Lender and all employees and agents of Lender shall exercise the same degree of care to maintain the confidentiality of such proprietary information that Lender exercises with respect to its own proprietary information of the same type, except that disclosure of such proprietary information may be made: (a.) to the subsidiaries or Affiliates of Lender in cotmection with their present or prospective business relations with Borrower; (b.) to prospective transferees or purchasers of any interest in the Advances; (c.) as required by law, regulations, rule or order, subpoena,judicial order, or similar order; (d.) as may be required in connection with the examination, audit or similar investigation of Lender; and (e.) as Lender may determine in connection with the enforcement of any remedies hereunder. Confidential information hereunder shall not include information that either: (i.) is in the public domain or in the knowledge or possession of Lender when disclosed to Lender, or becomes part of the public domain after disclosure to Lender through no fault of Lender; or (ii.) is disclosed to Lender by a third party, provided Lender does not have actual knowledge that such third party is prohibited from disclosing such inforniation. The terms hereof shall remain in effect for a period commencing on the Closing Date and ending on the date that is one (I) year after termination of this Agreement. The terms hereof supersede any and all terms of any other pre-existing confidentiality agreement between Borrower and Lender, with such other confidentiality agreement deemed to have had no force and effect.

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This Agreement is subject to any terms and conditions set forth in Addendum A attached hereto and made a part hereof. There may be disclosures made by Borrower to Lender set forth on Addendum B attached hereto and incorporated by reference herein.

IN WITNESS WHEREOF, the parties hereto have caused this Loan ancl Security Agreement (Accounts Receivable & Inventory Line of Credit) to be executed as of the date first set forth above.

DecisionPoint Systems, Inc, a(n) Delaware corporation

	DecisionPoint Systems, Inc, a(n) Delaware corporation

		/s/ Michael Roe
		Michael Roe

	DecisionPoint Systems International, Inc, a(n) Delaware corporation

		To Come

	By:	Michael Roe
	Title:	CFO

	decisionpoint systems CA, Inc, a(n) California corporntion

	By:
	Title:	CFO

	decisionpoint systems CT, Inc.

	By:	/s/ Michael Roe
	Title:	CFO

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ACKNOWLEDGMENT AND AGREEMENT BY GUARANTOR(S)

The Guarantor or Guarantors hereby acknowledge the tenns and conditions of the foregoing Lonn and Security Agreement (Accounts Receivable & Inventory Linc of Credit) and agree to the terms thereof, and farther agree to be bound by such terms, including, but not limited to, the terms regarding choice oflaw, venue, and the waiver of the right to a jury trial.

	----------n/a---------- a(n) ----------n/a--------- ----------11/a---------- (Guarantor)


	By:	-----------n/a----------
	Title:	-----------n/a-----------


	-----------n/a-----------, Guarantor


	-----------n/a-----------, Guarantor

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Addendum A

Addendum A to Loan and Security Agreement

Pursuant to this Addendum A to Loan and Security Agreement (this “Addendum”), the foregoing Loan and Security Agreement (Accounts Receivable & Inventory Line of Credit) (the “Agreement”) by and between CapitalSource Business Finance Group, a dba of BFI Business Finance (“Lender”) and DccisionPoint Systems, Inc., DecisionPoint Systems International, Inc., DecisionPoint Systems Group, Inc., decisionpoint systems CA Inc,, and decisionpoint systems CT, Inc, (individually and collectively, the “Borrower”) is hereby amended and/or supplemented by the terms and conditions set forth below.

1. Permitted Purchase Money Indebtedness. The following definition as set forth in “Section 1.1 Definitions.” is hereby amended and restated as set forth below:

“ ‘Permitted Purchase Money Indebtedness for Acquisition of Fixed Assets’ means, as of any date of determination, Purchase Money Indebtedness for Acquisition of Fixed Assets incurred after the date hereof in an aggregate principal amount outstanding at any one time which shall not exceed Fifty Thousand Dollars ($50,000) without Lender’s prior written consent, which consent shall not be unreasonably withheld.”

2. Waiver of Prepayment Fee in Certain Circumstances. Lender agrees to waive the Prepayment Fee under Section 6.3 of the Agreement, in the event Borrower wishes to terminate the Agreement because the availability of Advances under the Agreement is not sufficient to meet Borrower’s needs as a result of Borrower not being able to include amounts due in connection with prepaid maintenance contracts as Prime Accounts, and a significant increase in the amounts due in connection with prepaid maintenance contracts occurring after the date hereof. In the event Borrower wishes to terminate the Agreement and obtain a waiver of the Prepayment Fee under this Section 2, Borrower shall give Lender sixty days’ prior written notice oftennination together with a request for a waiver of the Prepayment Fee under this Section 2 and computations showing that Borrower is entitled to such waiver.

3. Subordinated Notes. Borrower represents to Lender, and Lender acknowledges, that Borrower has pr en utstanding Senior Unsecured Convertible Promissory Notes in the total principal amount of $2,879,000, which are subordinated to the Obligations (collectively, the “Subordinated Notes”), and at Bo ower anticipates issuing an additional approximately $ 1,471,000 principal amount of Subordinated Notes after the date hereof. Lender consents to the payment by borrower of current accrued interest on the Subordinated Notes after the date hereof, provided that (i) before, and after giving effect to such payment, no Event of Default and no event which, with notice or lapse of time or both would constitute an Event of Default under the Agreement, has occurred and is continuing, and (ii) no such payments shall be made with respect to a period after the earlier of (A) the date the Subordinated Notes are converted to equity securities of Borrower or (B) December 31, 2016. Borrower agrees to cause all of the Subordinated Notes to be converted to Common Stock of Borrower on or before December 31, 2016.

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Addendum B

Borrower hereby makes the following disclosures to Lender:

Disclosure 1: -----n/a-----

Disclosure 2: -----n/a-----

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Exhibit A

Lender’s Account

Name:	CapitalSource Business Finance Group
Bank:	City National Bank
Address:	555 South Flower Street
	Los Angeles, California 90071

Collateral Control Acco1111t(s)

(one or more of the following Accounts may apply)

Post Office Box

Name:	CapitalSource Business Finance Group
Address:	P.O. Box225
	Santa Clara, California 95052-0225


Blocked Account

Name:	DecisionPoint Systems, Inc.	Name:	DecisionPoint Systems International, Inc.
Bank:	Union Bank	Bank:	Union Bank

Address:		Address:



Name:	DecisionPoint Systems Group, Inc.	Name:	decisionpoint systems CA, Inc.
Bank:	Union Bank	Bank:	Union Bank

Address:		Address:


Name:	DecisionPoint Systems Group, Inc.
Bank:	Union Bank

Address:

Lockbox Account

Name:	DecisionPoint Systems, Inc.	Name:	DecisionPoint Systems International, Inc.
Lockbox Address:		Lockbox Address:


Provided by:	Union Bank	Provided by:	Union Bank

Address:		Address:


Name:	DecisionPoint Systems Group, Inc.	Name:	decisionpoint systems CA, Inc.
Lockbox Address:		Lockbox Address:


Provided by:	Union Bank	Provided by:	Union Battle

Address:		Address:



Name:	decisionpoint systems CT, Inc.
Lockbox Address:


Provided by:	Union Bank
Address:

Page 38 of 38

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Exhibit 10.5

Exhibit 10.6

Exhibit 10.7

CONTRACT NO: PS-17570

Certain confidential information contained in this document, marked by brackets as [***], has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.

AMENDMENT #2 TO MASTER PRODUCTS AND SERVICES AGREEMENT

This Amendment # 2 (“Amendment #2”) to the MASTER PRODUCTS AND SERVICES AGREEMENT, effective as of the 1st day of January 2017, and as previously amended as of the 15^th day of August 2019 (the “Agreement”), is between KAISER FOUNDATION HEALTH PLAN, INC. (“Kaiser”) and DECISIONPOINT SYSTEMS, INC. (“Supplier”), Successor in Interest to ROYCE DIGITAL SYSTEMS, INC.. This Amendment #2 is effective on April 1, 2020 (the “Amendment #2 Effective Date”). Unless otherwise defined in this Amendment #2, capitalized terms used in this Amendment #2 shall have the meanings given to such terms in the Agreement.

WHEREAS, on June 15, 2018 Supplier acquired Royce Digital Systems, Inc.;

WHEREAS, Royce Digital Systems, Inc. became a wholly owned subsidiary of Supplier upon acquisition;

WHEREAS, Royce Digital Systems, Inc. has assigned its obligations under the Agreement to Supplier; and

WHEREAS, the parties also wish to amend various terms of the Agreement.

THEREFORE, the parties agree to amend the Agreement as follows:

Assignment. On the Amendment #2 Effective Date, Royce Digital Systems, Inc. assigned the Agreement to Supplier, which assignment Kaiser hereby consents to. Supplier hereby affirms that as of the Amendment #2 Effective Date it has assumed all of the obligations of Royce Digital Systems, Inc. under the Agreement, as amended, and that the Agreement remains in full force and effect and is a valid and binding obligation of Supplier.

2.	Definitions. The Agreement is amended hereto by adding the following Definitions.

1.14 “Exhibit A” means Exhibit A, Exhibit A-1, Exhibit A-2, and Exhibit A-3, as of Amendment #2 Effective Date.

3.	Pricing. The Agreement is amended by deleting section 3.1 Pricing in its entirety and replacing it with the following:

3.1 Pricing. Exhibit A sets forth the Prices for each Product and Service. Prices must be at least [***] less, on average across all Products and Services, than [***], when available, of such Products and Services. Supplier will conduct an annual audit on pricing and Kaiser will validate Supplier’s audit findings. If Supplier is not compliant to this requirement, Supplier will reimburse Kaiser the difference between the actual average percentage off of [***] and [***] based on the relevant annual spend on the affected Products and Services. For example, if the actual average percentage off of [***] is [***] and the spend on affected Products and Services is $ [***], then Supplier will reimburse Kaiser [***] of $ [***] or $ [***]. Supplier shall not increase Prices during the Term of Agreement. If the Term of Agreement is extended beyond December 31, 2020, any price increases per each calendar year shall be the lesser of [***] and the [***] percentage increase of the Consumer Price Index for All Urban Consumers (“CPI-U”), not seasonally adjusted, for all items in U.S. city average, as published by the U.S. Department of Labor, Washington, DC. In addition to the annual price increases set forth above, Supplier may propose an increase of the price of any affected Product set forth on Exhibit A-3 if there is an increase in Supplier’s acquisition costs on such Products manufactured outside the United States due to new or increased tariffs imposed by the United States Government. Notwithstanding the foregoing, (i) Supplier may propose new pricing only twice during each calendar year; and (ii) Supplier must provide Kaiser with documentation that clearly evidences the amount by which Supplier’s acquisition cost of Product has increased and the specific Harmonized Tariff Schedule (HTS) code(s) impacting the Product. All price increase proposals arising from tariffs must be approved by Kaiser and documented through a contract amendment prior to being effective. Notwithstanding anything to the contrary herein contained, Supplier shall have no obligation to sell or deliver to Kaiser any Product subject to any tariff of which Kaiser had not approved and documented through a contract amendment. If price increases due to tariffs are implemented and the relevant tariffs are removed or decreased subsequently, Kaiser and Supplier will execute a contract amendment to reflect such removal or decrease within 45 days of the relevant tariff’s removal or decrease. Supplier may decrease the prices set forth on Exhibit A upon prior written notice to Kaiser, and this notice must include a proposed amended Exhibit A in electronic format. On a quarterly basis, Supplier shall provide updates, including additions and deletions, to Exhibit A as needed, in writing via electronic mail to Kaiser. The prices under this Agreement must be equal to or better than those offered to any other customer of Supplier that is commercially competitive with Kaiser, subject to Supplier’s terms and conditions of sale. To the extent that Supplier is not in compliance with this Section 3.1, Supplier must refund to each Customer the difference between the Price set forth on Exhibit A that the Customer paid to Supplier and the lower, competitive price in violation of this Section 3.1. Within 30 days of Kaiser’s or any Customer’s determination that Supplier is not in compliance, Supplier must amend this Agreement to provide the more favorable terms.

CONTRACT NO: PS-17570

4.	Invoicing. The Agreement is amended by deleting Section 3.4 of the Agreement, in its entirety and replacing it with the following:

3.4

Invoicing.

3.4.1

General. Supplier is solely responsible for invoicing Customer for Products and Services. Supplier will not Invoice Customer for any fees or expenses not specified in this Agreement or a PO, unless mutually agreed upon in writing between Supplier and Customer. Supplier’s invoices must comply with the Kaiser Permanente Invoice and Accounts Payable Requirements, which are referenced In Exhibit C. At no time will Kaiser pre-pay Supplier for any goods and services under this Agreement.

3.4.2.

Invoice Acceptance Management.

a. Acceptance. All invoice(s) shall be subject to acceptance. Kaiser will verify that the fees detailed in the preliminary invoices satisfy the criteria for acceptance mutually agreed to by Kaiser and Supplier for such purchases as set forth in the Agreement (“Acceptance”). When Kaiser reasonably determines that the invoices meet the Acceptance criteria, then Kaiser shall Accept the invoice and the Supplier can submit the invoices for payment in accordance with wholly incorporated, Kaiser requirements http://supplier.kp.org/formsreqs/index.html.

b. Supplier acknowledges and agrees that if an invoice fails to set forth of fees, then the process below shall iterate until Kaiser has accepted the invoice. Only a written letter of Acceptance from the designated Kaiser representative shall constitute Acceptance by Kaiser.

c. All invoices from Supplier shall be submitted electronically to the designated Kaiser representative for acceptance. Kaiser will use commercially reasonable efforts to provide approval or revision instructions to Supplier within fifteen (15) business days of invoice submission to Kaiser. The Kaiser representative shall determine if the invoice meets the Acceptance criteria, and such determination shall not be unreasonably withheld or delayed. Kaiser’s notification of its acceptance shall come from the Kaiser representative and may be given via e-mail. The acceptance process set forth in this Section 3.4.2 will iterate until Kaiser has accepted the invoice. Kaiser and Supplier will collaborate to resolve any open concerns until “Acceptance” can be attained.

5.	Payment. The Agreement is amended by deleting 3.5.2, Payment, in its entirety and replacing it with the following.

3.5.2 Supplier will not invoice Kaiser for any fees or expenses without prior Acceptance. Supplier shall submit detailed invoices for which Kaiser has provided Acceptance by the 15th of the month following the delivery of the related goods and/or services.

CONTRACT NO: PS-17570

Offset of Overpayment. Kaiser and Supplier have reviewed past invoices and jointly agreed that Kaiser has made overpayments in the amount of [***] (the “Overpayment”) during the period commencing on January 1, 2017 and culminating on December 31, 2019. Supplier has agreed to issue Kaiser purchase credits to offset the amounts due and owing by Kaiser to Supplier, as reflected on invoices issued by Supplier pursuant to the invoicing provisions of the Agreement, during the period between March 1, 2020 and June 30, 2020 in the total of amount of the Overpayment.

7.	Exhibit A. The Agreement is amended by deleting Exhibit A, Service and Product Pricing, [*] Hardware and Maintenance Schedule, in its entirety and replacing it with Exhibit A, [] PRICING,* hereto attached.

8.	Exhibit A-1. The Agreement is amended by deleting Exhibit A-1, Service and Product Pricing, Specialty Printer Hardware and Maintenance Schedule, in its entirety and replacing it with Exhibit A-1, [***] PRICING, hereto attached.

9.	Exhibit A-3. The Agreement is amended by adding Exhibit A-3, ADDITIONAL PRODUCTS PRICING, hereto attached.

10.

Exhibit B. The Agreement is amended by deleting Exhibit B, Products and Services Description, in its entirety and replacing it with Exhibit B hereto attached.

11.

Exhibit B-1. The Agreement is amended by deleting Exhibit B-1, [***] Services Description, in its entirety and replacing it with Exhibit B-1 hereto attached.

12.

Exhibit C. The Agreement is amended by deleting Exhibit C – Additional Requirements for Vendors and Contractors, in its entirety and replacing it with Exhibit C hereto attached.

13.

Notices. The Agreement is amended by replacing the address and contact person for Supplier notices to the following:

DecisionPoint Systems, Inc.

8697 Research Drive

Irvine, CA 92618

Attn: Steve Smith, CEO

14.

Principles of Construction. Whenever the terms or conditions of the Agreement and this Amendment #2 are in conflict, the terms of this Amendment #2 control. Except as specifically modified by the terms of this Amendment #2, all of the Agreement remains in full force and effect. This Amendment #2 may be executed in any number of counterparts, each of which is an original, but all counterparts of which constitute the same instrument.

CONTRACT NO: PS-17570

15.

Execution. Authorized representatives of the parties have executed this Amendment #2 as of the Amendment #2 Effective Date specified above.

KAISER FOUNDATION HEALTH PLAN, INC.

DECISIONPOINT SYSTEMS, INC., Successor in Interest to ROYCE DIGITAL SYSTEMS, INC.

By:

/s/ Kelvin A. Phillips

By:

/s/ Steven Smith

Printed Name:

Kelvin A. Phillips

Printed Name:

Steven Smith

Title:

Sourcing Director

Title:

Chief Executive Officer

Date:

04/01/2020

Date:

04/01/2020

Address and Contact Person for Notices:	Address and Contact Person for Notices:
VP of Sourcing	Steve Smith, CEO
Kaiser Foundation Health Plan, Inc.	DecisionPoint Systems, Inc.
1800 Harrison Street, Suite 1800	8697 Research Drive
Oakland, CA 94612	Irvine, CA 92618

CONTRACT NO: PS-17570

EXHIBIT A

[***] PRICING

CONTRACT NO: PS-17570

EXHIBIT A-1

[***] PRICING

CONTRACT NO: PS-17570

EXHIBIT A-3
PRODUCTS PRICING

CONTRACT NO: PS-17570

EXHIBIT B

PRODUCTS AND SERVICES DESCRIPTION

[***]

CONTRACT NO: PS-17570

Exhibit B-1

[***] SERVICES DESCRIPTION

CONTRACT NO: PS-17570

EXHIBIT C
ADDITIONAL REQUIREMENTS
FOR VENDORS, CONTRACTORS AND SUPPLIERS

Exhibit 10.9

DECISIONPOINT SYSTEMS, INC.
2014 AMENDED EQUITY INCENTIVE PLAN

Option Award Agreement

This Award Agreement evidences the grant of an option pursuant to the provisions of the DecisionPoint Systems, Inc. 2014 Amended Equity Incentive Plan (the “Plan”) to the individual whose name appears below (the “Participant”), covering the specific number of Common Shares set forth below, and on the following express terms and conditions (capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Plan):

Name of Participant:

Number of Common Shares that Option Covers:

Exercise Price per Share: $

Date of Grant of this Option:

Vesting:

Method of Exercise: At any time when the Participant wishes to exercise this option, in whole or in part, the Participant shall submit to the Company a written or electronic notice of exercise in accordance with Section 7(d) of the Plan, accompanied by payment of the Exercise Price in cash, check, or Common Shares valued at Fair Market Value on the date of exercise, together with (if deemed necessary by the Committee at the time of exercise) an amount sufficient to satisfy any withholding tax obligation of the Company that arises in connection with such exercise.

Expiration of Option:

Type of Option:

The Participant hereby acknowledges receipt of a copy of the Plan document, agrees that this Option Award is subject to these terms and provisions in all respects, agrees that the terms of this option grant are confidential, and agrees that any disclosure of its terms by him to anyone other than his spouse, attorney, or financial advisor (who are made aware of its confidentiality) may be grounds for its forfeiture.

DECISIONPOINT SYSTEMS, INC.

Agreed to and Accepted by:

By:
	Steven Smith, CEO

Serial ID:

Exhibit 21.1

Subsidiaries of DecisionPoint Systems, Inc.

Name	State of Incorp-oration	Ownership	Status
DecisionPoint Systems International, Inc.	DE	100% by DecisionPoint Systems, Inc.	Active
DecisionPoint Systems Group, Inc.	DE	100% by Decision Point International, Inc.	Active
DecisionPoint Systems CA, Inc.	CA	100% by DecisionPoint Systems Group, Inc.	Active
DecisionPoint Systems CT, Inc.	CT	100% by DecisionPoint Systems Group, Inc.	Active
Royce Digital Systems, Inc.	CA	100% by DecisionPoint Systems Group, Inc.	Active

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

DecisionPoint Systems, Inc.

We consent to the use in this Registration Statement on Form S-1 of our report dated May 28, 2020, relating to the consolidated financial statements of DecisionPoint Systems, Inc. as of December 31, 2019 and 2018, and for the years ended December 31, 2019 and 2018, appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading “Experts” in such Prospectus.

/s/ Haskell & White LLP

HASKELL & WHITE LLP

Irvine, California

August 13, 2020