UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

☒   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 20152021

OrOR

☐ Transition Report Pursuant to SectionTRANSITION REPORT UNDER SECTION 13 orOR 15(d) of the Securities Exchange Act ofOF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

DECISIONPOINT SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

8697 Research Drive

Irvine, CA 92618-4204

(Address of principal executive offices) (Zip code)

(949) 465-0065

(Registrant'sRegistrant’s telephone number, including area code)code)

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

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of shares outstanding of common stock,the registrant’s Common Stock, $0.001 par value, $0.001 per share of DecisionPoint Systems, Inc. outstandingwas 13,881,731 as of the close of business on August 14, 2015, were 12,729,563.13, 2021.

DECISIONPOINT SYSTEMS, INC.

TABLE OF CONTENTS

PART II. FINANCIAL INFORMATION

ITEMItem 1. FINANCIAL STATEMENTSFinancial Statements (Unaudited)

DECISIONPOINT SYSTEMS, INC.DecisionPoint Systems, Inc.

Unaudited Condensed Consolidated Balance Sheets

(Inin thousands, except share and per share data)par value)

(Unaudited)

See Accompanying Notes to the Condensed Consolidated Financial Statements.

DECISIONPOINT SYSTEMS, INC.

Unaudited DecisionPoint Systems, Inc.

Condensed Consolidated Statements of OperationsIncome and Comprehensive LossIncome

(Inin thousands, except share and per share data)

(Unaudited)

See accompanying notesAccompanying Notes to unaudited condensed consolidated financial statementsthe Condensed Consolidated Financial Statements.

Unaudited

DecisionPoint Systems, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Six Months Ended June 30, 2021 and 2020

(in thousands)

(Unaudited)

Condensed Consolidated Statements of Cash Flows

(Inin thousands)

(Unaudited)

See Accompanying Notes to the Condensed Consolidated Financial Statements.

See accompanying notes

DecisionPoint Systems, Inc.

Notes to unaudited condensed consolidated financial statementsthe Condensed Consolidated Financial Statements

(Unaudited)

DECISIONPOINT SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - DESCRIPTION OF BUSINESS

Note 1: Description of Business

DecisionPoint Systems, Inc., (“DecisionPoint”which we sometimes refer to as the “Company”, “Company”) through its subsidiaries“we” or “us”, is an enterprise mobility systems integrator that sells, installs, deploys and installsrepairs mobile computing and wireless systems that are used both within a company’s facilities in conjunction with wireless networks and in the field using carrier-based wireless networks.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. The CompanyWe also providesprovide professional services, consulting, staging, kitting, deployment, maintenance, proprietary and third partythird-party software and software customization as an integral part of itsour customized solutions for itsour customers. The suite of software products utilizes the latest technologies with the intent to empower themake complex mobile worker in many areas includingtechnologies easy to use, understand and keep running within all vertical markets such as merchandising, sales and delivery;delivery, field service;service, logistics and transportation;transportation and warehouse management.

OnIn June 30, 2015,2018, we acquired 100% of the Company completed the saleoutstanding stock of Royce Digital Systems, Inc. (“RDS”). RDS provides innovative enterprise print and mobile technologies, deployment services and on-site maintenance.

In December 2020, we acquired 100% of the issued and outstanding share capitalmembership interests of CMAC, Inc.ExtenData Solutions, LLC (“CMAC”ExtenData”). ExtenData is focused on enterprise mobility solutions and recorded a loss on saleprovides software product development, mobile computing, identification and tracking solutions, and wireless tracking solutions. 

Note 2: Basis of $157,000, which is classified as loss on salePresentation and Summary of discontinued operations inSignificant Accounting Policies

Basis of Presentation

We have prepared the accompanying unaudited condensed consolidated financial statements of operationsDecisionPoint Systems, Inc. and comprehensive loss.its subsidiaries on the accrual basis of accounting in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”). The Company’s unauditedaccompanying condensed consolidated financial statements include the accounts of DecisionPoint Systems, Inc. and accompanying notes for currentits wholly owned subsidiaries, DecisionPoint Systems International (“DPSI”), DecisionPoint Systems Group, Inc. (“DPS Group”), RDS and prior periods haveExtenData. ExtenData was acquired on December 4, 2020, and as such, has been restated to present theconsolidated into our financial position and results of operations of CMAC as discontinued operations. In addition, the assetsbeginning December 5, 2020. All intercompany accounts and liabilitiestransactions have been treated and classified as discontinued operationseliminated in the accompanying condensed consolidated balance sheets as of June 30, 2015 and have been restated at December 31, 2014 to provide a comparable presentation, see Note 3.

NOTE 2 - BASIS OF PRESENTATION, LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanyingconsolidation. These unaudited condensed 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 accounting principles generally accepted in the United States of America (“U.S. GAAP”) forGAAP have been omitted from these interim financial informationstatements as permitted by SEC rules and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.regulations. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  Thethese unaudited condensed consolidated financial statements have been prepared onshould be read in conjunction with the same basis as the annualaudited consolidated financial statements. statements and the related notes included in our Special Financial Report on Form SP 15D2 for the years ended December 31, 2020 and 2019.

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all of thenormal and recurring adjustments (consisting of normal recurring accruals and adjustments) necessary to present fairly the consolidated financial position,condition, results of operations and cash flows of the Company at the dates and for the interim periods indicated.presented. The interim results of operations for the periodthree and six months ended June 30, 2015,2021 are not necessarily indicative of results to be expected for the full 2015 fiscal year or any other future interim periods.year.

COVID-19

COVID-19 and the response to the virus have negatively impacted economic activity in many sectors. The accompanying unaudited condensed consolidatedpotential future economic impacts of COVID-19, while uncertain, could materially adversely impact the Company’s results of operations. The financial statements include the accountsrelated impact and duration of the Companypandemic cannot be reasonably estimated at this time.

Operating Segments

Under the Financial Accounting Standards Board Accounting Standards Codification 280-10, 2 or more operating segments may be aggregated into a single operating segment for financial reporting purposes if aggregation is consistent with the objective and its wholly-owned subsidiaries, DecisionPoint Systems Internationalbasic principles, if the segments have similar characteristics, and Apex Systems Integrators, Inc. “Apex”). DecisionPoint Systems Internationalif the segments are similar in each of the following areas: (i) the nature of products and services, (ii) the nature of the production processes, (iii) the type or class of customer for their products and services, and (iv) the methods used to distribute their products or provide their services. We believe each of the Company’s segments meet these criteria as they provide similar products and services to similar customers using similar methods of production and distribution. Because we believe each of the criteria set forth above has one wholly-owned subsidiary, DecisionPoint Systems Group, Inc. (“DPS Group”).  All significant intercompany accountsbeen met and transactions have been eliminatedeach of the Company’s segments has similar characteristics, we aggregate results of operations in consolidation. The Company currently operates in one business1 reportable operating segment.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires managementus to make estimates and assumptions that affect the recordedreported amounts of assets and liabilities at the date of the consolidated financial statements and the reported therein.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. The Company evaluates itsWe evaluate our estimates and assumptions on a regular basis.

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 Company uses historicaltotal 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 variousvariable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement.

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

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

As of June 30, 2021, the total aggregate transaction price allocated to the unsatisfied performance obligations was approximately $9.3 million, of which approximately $6.5 million is expected to be reasonable underrecognized over the circumstances to form the basis for making judgments about carrying valuesnext 12 months. As of assets and liabilities that are not readily apparent from other sources.  Actual results may differ materially from these estimates and assumptions used in preparation of the unaudited condensed consolidated financial statements.

These accompanying unaudited condensed consolidated financial statements have been prepared by management and should be read in conjunction with the audited consolidated financial statements of DecisionPoint Systems, Inc. and notes thereto for the year ended December 31, 2014, included2020, the total aggregate transaction price allocated to the unsatisfied performance obligations was approximately $7.8 million, of which $1.7 million and $3.3 million in performance obligations were satisfied in the Company’s Annual Report on Form 10-K filed with the U.S. Securitiesthree and Exchange Commission (the “SEC”) on March 18, 2015.

DECISIONPOINT SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Liquidity and Going Concern

The accompanying unaudited condensed consolidated financial statements were prepared on a going concern basis in accordance with U.S. GAAP.  The going concern basis of presentation assumes that the Company will continue in operation for the next twelve months and will able to realize its assets and discharge its liabilities and commitments in the normal course of business and does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the Company’s inability to continue as a going concern.  The Company’s history of losses, working capital deficit, capital deficit, minimal liquidity and other factors raise substantial doubt about the Company’s ability to continue as a going concern.  In order for the Company to continue operations beyond the next twelve months and be able to discharge its liabilities and commitments in the normal course of business, the Company must establish sustained positive operating results through increased sales, avoid further unforeseen expenses, improve liquidity and working capital, and potentially raise additional equity or debt capital.  There can be no assurance that the Company will be able to achieve sustainable positive operating results or obtain additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to management.

In the quarter ended June 30, 2015, the Company experienced a decrease in revenue from continuing operations of $3.6 million, or 27.9% compared to the quarter ended June 30, 2014, and a $7.2 million, or 27.2% decrease in revenue for the six months ended June 30, 2015 over2021, respectively.

Hardware, consumables, and software products - We recognize product revenue at the comparable six monthspoint in time when a client takes control of 2014. In the quarter ended June 30, 2015,hardware, consumables and/or software, which typically occurs when title and excluding the impactrisk of goodwill and intangible asset impairment charge of $3.047 million, the Company experienced operating loss from continuing operations of $307,000 comparedhave passed to the operating incomeclient. Our selling terms and conditions reflect that F.O.B ‘dock’ contractual terms establish that control is transferred from continuing operations of $102,000 forus at the quarter ended June 30, 2014, and a $545,000 operating loss from continuing operations forpoint in time when the six months ended June 30, 2015 comparedproduct is shipped to an operating loss from continuing operations of $146,000 for the comparable period in 2014. At June 30, 2015 and December 31, 2014, the Company had a substantial working capital deficit, excluding discontinued operations, totaling $10.0 million and $7.8 million, respectively. Although a portion of this deficit is associated with deferred costs and unearned revenues, the liabilities of the Company that are expected to be satisfied in the foreseeable future in cash far exceed our receivables and other assets that are expected to be satisfied in cash. In addition, as a consequence of the Company’s recent historical results of operations, availability under the credit line has contracted and our overall liquidity has become further constrained. The Company is dependent upon future growth in net sales to meet our liquidity needs and our debt covenants for the next twelve months.customer.

The Company is currently in default on certain obligations as of June 30, 2015. The Company has not made the final payment on the Royal Bank of Canada (“RBC”) Term Loan was originally scheduled to be paid in June 2015. The payment has been rescheduled with RBC for September 2015. Such agreement has not been documented in writing and is based on a verbal agreement with RBC. The Company also did not pay interest due on the BDC, Inc. (“BDC”) Term Loan due for July 2015. BDC has advised the Company on July 30, 2015 that the financing is in arrears on interest and the Company also expects to not pay the August interest payment on this obligation. The failure to pay interest due is a violation of the terms of the financing agreement.

The Company is currently in default on the Apex seller Note as of the date of this filing. The seller of Apex has demanded payment in full including certain monitoring and administrative fees. The Company has accrued $51,000 as of June 30, 2015 for certain fees related to the demand payment. Between April 2015 and June 2015, Apex had been delinquent on its lease obligations to Harvester Properties of Burlington, Inc. In June 2015, Harvester Properties gave notice of termination of the lease agreement. Since that time, Apex has relocated its operations. There is $72,000 relating to these rent obligations including interest and other fees at June 30, 2015.

Due to the technical default with the BDC term loan discussed above, the Company is technically in default due to the subordinated debt provisions of the Amended Silicon Valley Bank (“SVB”) Loan Agreement. The Company has had discussions with SVB regarding this technical default and is working with SVB to cure. A SVB lending officer has verbally indicated they do not intend on exercising legal rights under the Amended SVB Loan Agreement for this default, however, this is not evidenced in writing and thus is not enforceable.

If the Company does not achieve sustained positive operating results and does not raise sufficient additional capital, material adverse events may occur including, but not limited to, (1) a reduction in the nature and scope of the Company’s operations, (2) the Company’s inability to fully implement its current business plan and (3) defaults under the Company’s various loan agreements (for a description of past defaults, see the discussion below). If such events were to occur, they would have material adverse effects on the Company. There can be no assurance that the Company will successfully improve its liquidity position.  The consolidated financial statements do not reflect any adjustments that might be required resultingRevenues from the adverse outcome relating to this uncertainty.

Summary of Significant Accounting Policies

There have been no material changes to the Company's significant accounting policies during the six months ended June 30, 2015.  See Note 2 of the Company's consolidated financial statements included in the Company's 2014 Annual Report on Form 10-K filed with the SEC on March 18, 2015, for a comprehensive description of the Company's significant accounting policies.See Note 3 for the impact on the financial statements of the discontinued operation presentation.

DECISIONPOINT SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Revenue Recognition - Revenues are generated through product sales, warranty and maintenance agreements, software customization, and professional services.  Productlicense sales are recognized whenas a single performance obligation on a gross basis as we are acting as a principal in these transactions at the following criteriapoint the software license is delivered to the customer. Generally, software licenses are met (1) theresold 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 persuasive evidencein effect. In most instances, we determined that the accompanying third-party delivered software assurance is critical or essential to the core functionality of the software license because we do not sell the software license and standard warranty on a standalone basis (which indicates that the customer cannot benefit from the software license and standard warranty on its own), the software license and the standard warranty are not separately identifiable, the software license assurance warranty are inputs of a combined item in the contract, the assurance warranty and software license are highly interdependent and interrelated because the core functionality of the license is dependent on the assurance warranty, and our promise to provide the assurance warranty that is necessary for the software license to continue to provide significant benefit to the customer. As a result, the software license and the accompanying third-party delivered software assurance are recognized as a single performance obligation. We consider several factors to determine whether we are acting as a principal or an arrangement exists; (2) delivery has occurred and title has passedagent, including whether we are the primary obligor to the customer, which generally happens at the point of shipment provided that no significant obligations remain; (3) the price is fixedhave established our own pricing and determinable;have inventory and (4) collectability is reasonably assured.  The Companycredit risks.

Our internally developed software solution generates SaaS revenues from implementation, training and subscription fees. The initial term of the sale of extended warranties on wireless and mobile hardware and systems.  Revenue related to extended warranty and service contractsSaaS agreements is recorded as unearned revenue and isgenerally one year. The subscription fees are recognized over the lifesubscription period. The implementation fees are necessary and integral for the customer to utilize the software. As such, the implementation fees are deferred and amortized over the subscription period.

We also offer third-party SaaS subscriptions to our customers. The third-party subscriptions are recognized on a net basis as we are acting as an agent in these transactions, whereas our internally developed software solution offering is recognized on a gross basis.

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 contract asproduct charged to the Company maintains financialclient, we assume credit risk throughout the term of these contractsfor nonpayment by our customer, and may be liablewe work closely with clients to refund a customer for amounts paid in certain circumstances. Our policy is to classify shipping and handling costs billed to customers and the related expenses as cost of sales.determine their hardware specifications.

The Company also generates revenue fromProfessional services - We provide professional services which include consulting, staging, deployment, installation, repair and customer specified software customizationcustomization. The arrangement with a customer is based on either a fee-for-servicetime and material basis or a fixed fee. For our time and materials service contracts, we recognize revenues as those services are provided and consumed, as this is the best output measure of how the services are transferred to the customer. Fixed fee basis.  Revenue from software customization and professional services that is contracted as fee-for-service iscontracts are recognized in the period in which the services are performed or delivered.  Adjustments to contract price and estimated labor costsdelivered using a proportional service model. Except for installation services that are made periodically, and losses expected to be incurredrecognized over the subscription period as previously described, all other professional services are recognized on contracts in progress are charged to operationsa gross basis in the period such lossesin which the services are determined.  The Company records sales net of sales tax.performed or delivered.

The Company enters into revenueMaintenance services - 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 contain multiple deliverables.  Judgment is requiredwere acquired from us and others. Although these are third-party support agreements for maintenance on the specific hardware and/or software products, our internal help desk and systems engineers assist customers by providing technical assistance on the source of or how to properly identifyfix the accounting unitsproblem. In addition, we provide a turn back feature, deploying replacements as needed while we manage the return and reverse logistics of the multiple deliverable transactions and to determine the manner in which revenue should be allocated among the accounting units. Moreover, judgment is used in interpreting the commercial terms and determining when all criteria of revenue recognition have been met for each deliverable in order for revenue recognition to occur in the appropriate accounting period. In an arrangement with multiple deliverables, the delivered item or items shall be considered a separate unit of accounting if both of the following criteria are met: (i) the delivered item or items have valueproduct back to the customer on a standalone basis; and (ii) if the arrangement includes a general right of return relativeOEM. Revenue related to the delivered item, delivery or performance of the undelivered item or items is considered probable and substantially in the control of the vendor.  A delivered item or items that do not qualify as a separate unit of accounting within the arrangement shall be combined with the other applicable undelivered item(s) within the arrangement and the allocation of arrangement consideration and the recognition of revenue then shall be determined for those combined deliverables as a single unit of accounting. While changes in the allocation of the arrangement consideration between the units of accounting will not affect the amount of total revenue recognized for a particular sales arrangement, any material changes in these allocations could affect the timing of revenue recognition, which could affect the Company’s results of operations. When the Company enters into an arrangement that includes multiple elements, we allocate revenue based on their relative selling prices.  We use a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor specific objective evidence of fair value (“VSOE”), (ii) third party evidence of selling prices (“TPE”) and (iii) best estimate of selling price (“ESP”) as a proxy for VSOE.  When both VSOE and TPE are unavailable, we use ESP.  We determine ESP by considering all relevant factors in establishing the price.

Revenue from software licenses may contain arrangements with multiple deliverables, including post-contract customer support, that are subject to software revenue recognition guidance. The revenue for these arrangements is allocated to the software and non-software deliverable based on the relative selling prices of all components in the arrangement using the criteria above. Post-contract supportservice contracts is recognized ratably over the term of the agreement, generally over one to three years.

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

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 contains multiple elements whereinwith 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 only undelivered element is post-contract customer supportcondensed consolidated balance sheets. As of June 30, 2021 and VSOEDecember 31, 2020, we deferred $147,306 and $136,417, respectively, of related contract acquisition costs. We recorded $7,441 and $52,065 in amortized deferred contract acquisition costs in the fair value of post-contract customer support does not exist, revenue from the entire arrangement is recognized ratably over the support period. Software royalty revenue is recognized in arrears on a quarterly basis, based upon reports received from licensees during the period, unless collectability is not reasonably assured, in which case revenue is recognized when payment is received from the licensee.

Concentration of Credit Risk -Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash, accounts receivable,three and accounts payable.  Beginning January 1, 2013, all of our cash balances were insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per depositor at each financial institution.  This coverage is available at all FDIC member institutions.  The Company uses Silicon Valley Bank, which is an FDIC insured institution.  Based on these facts, collectability of bank balances appears to be adequate.

Historically, a relatively small number of customers have accounted for a significant portion of the Company’s revenue.  The Company had one customer who represented 13% and 16% of the Company’s revenue for the six months ended June 30, 20152021, respectively. We recorded $5,502 and 2014, respectively.  The Company had$18,897 in amortized deferred contract acquisition costs in the three customers, one of which were not the same, who represented 32% and 29% of its revenue for the six months ended June 30, 20152020, respectively.

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

Accounting Standards Adopted

On January 1, 2021, we adopted ASU 2020-10, “Codification Improvements”. This ASU amended a variety of Topics, including presentation and 2014, respectively.disclosures of financial statements, interim reporting, accounting changes and error corrections. The Company’s accounts receivable was concentrated with two customers, which wereadoption of this guidance did not have an impact on our condensed consolidated financial statements.

On January 1, 2021, we adopted ASU 2019-12, “Income Taxes (Topic 740): Simplifying the same, representing 37%Accounting for Income Taxes,”. ASU 2019-12 removed certain exceptions to the general principles in Topic 740 and 36%clarifies and amends existing guidance to improve consistent application. The adoption of gross accounts receivable at June 30, 2015 and 2014, respectively.  Customer mix can shift significantly from year to year, but a concentrationthis guidance did not have an impact on our condensed consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04 (“ASU 2020-04”), Reference Rate Reform (Topic 848): Facilitation of the business with a few large customers is typical in any given year.  A decline in revenues could occur if a customer that has been a significant sourceEffects of revenue in oneReference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and financial reporting periodand accounting exceptions for contracts, hedging accounting and other transactions that reference London Interbank Offered Rate (“LIBOR”) and are expected to be discontinued because of reference rate reform and will not apply to contracts entered into after December 31, 2022. In January 2021, the FASB issued ASU 2021-01, which refines the scope of Topic 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate activities. The new guidance was effective upon issuance, and we can elect to apply the amendments prospectively through December 31, 2022. The adoption of this guidance did not have an impact on our condensed 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. 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 a less significant sourcepermitted. Although management continues to analyze the provisions of revenue inthis ASU, currently, we believe the following period. The lossadoption of a significant customerthis ASU will not significantly impact the Company’s consolidated results of operations and financial position.

There are no other accounting standards that have been issued but not yet adopted that we believe could have a material adverse impact on the Company.our consolidated financial statements.

Note 3: Acquisition

DECISIONPOINT SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)ExtenData Solutions, LLC

TheOn December 4, 2020, the Company has four primary vendors forentered into a Membership Unit Purchase Agreement and concurrently closed upon the six months ended June 30, 2015,acquisition of all of the issued and outstanding membership interests of ExtenData for $5,169,787. The consideration we paid was comprised of cash of $4,419,787 of which $169,787 and $4,250,000 was the same when compared to the similar periodpaid in 2014.  For the six months ended June 30, 2015, the Company had purchases from these four vendors that collectively represented 59% of total purchasesMarch 2021 and 57% of the total outstanding accounts payable at June 30, 2015.  For the six months ended June 30, 2014, the Company had purchases from these four vendors that collectively represented 61% of total purchasesDecember 2020, respectively, and 61% of the total outstanding accounts payable at June 30, 2014.  The same two vendors represented 49% and 47% of the total purchases for the six months ended June 30, 2015 and 2014, respectively.  Loss of this certain vendor could have a material adverse effect on our operations.

The Company’s contracts with these customers and other customers do not include any specific purchase requirements or other requirements outside of the normal course of business.  The majority of 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 ultimatelyearn-out obligation valued at $750,000, subject to the time that the units are installed atfinancial performance of ExtenData during each of the customer locations as per their requirements.  Service contracts are purchased on an annual basis generally and aretwo years following the performance responsibilityclosing of the actual service provider as opposed to the Company. Termination provisions are generally standard clauses based upon non-performance, but a customer can cancel with a certain reasonable notice period anywhere from 30 to 90 days.  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 whatacquisition. The earn-out obligation is being ordered, product specifications, delivery, installation and pricing.

Translation of Foreign Currencies - The Company's functional currency is the U.S. dollar. The financial statements of the Company's foreign subsidiary is measured using the local currency,recorded in this case the Canadian dollar (CDN$), as its functional currency and is translated to U.S. dollars for reporting purposes. Assets and liabilities of the subsidiary are translated at exchange rates as of the balance sheet dates. Revenues and expenses of the subsidiary are translated at the rates of exchange in effect during the year.

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)“Other liabilities” 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:

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observable inputs may result in a reclassification of assets and liabilities within the three levels of the hierarchy outlined above.

Liabilities Measured and Recorded at Fair Value on a Recurring Basis

The Company measures certain liabilities at fair value on a recurring basis such as our contingent consideration related to business combinations and recognizes transfers within the fair value hierarchy at the end of the fiscal quarter in which the change in circumstances that caused the transfer occurred. There have been no transfers between Level 1, 2 or 3 assets or liabilities during the fiscal six months ended June 30, 2015.

The Company is obligated to pay bonus consideration to the former CEO of Apex. Such bonus is considered additional contingent purchase consideration as the Company is obligated to pay the bonus regardless of whether or not the CEO’s employment is retained. The fair value of the bonus was calculated to be approximately CDN$160,000 (US$153,000 at the Closing Date). The Company reassessed the fair value of the contingent consideration liability at December 31, 2014 and determined the amount to be $0. The Company continues to recognize no bonus consideration obligation in 2015.

DECISIONPOINT SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company has classified certain warrants related to the August 2013 issuance and sale of common stock in a private offering as a Level 3 Liability. Assumptions used in the calculation require significant judgment. For prior periods, the Company reassessed the fair value of the warrant liabilities on a quarterly basis using a Monte Carlo option pricing model. For June 30, 2015, the Company assessed the fair value of the warrants using a linear regression model based on observable prices of the known components and their relationship to historical prices. Based on that assessment, the Company recognized a $311,000 decrease and an $84,000 increase to the fair value of the warrants during the three months ended June 30, 2015 and 2014, respectively. The Company recognized a $232,000 and $166,000 decrease to the fair value of the warrants during the six months ended June 30, 2015 and 2014, respectively.

The following table summarizes the financial liabilities measured at fair value on a recurring basiscondensed consolidated balance sheets as of June 30, 20152021 and December 31, 2014 (in thousands):   2020.

Unaudited Pro Forma Information

The following table summarizes changes topresents the fair value of the contingent considerationunaudited pro forma net sales and derivative warrants, which are Level 3 liabilities (in thousands):

Assets Measured and Recorded at Fair Value on a Nonrecurring Basis

The Company's non-financial assets and liabilities, such as goodwill, intangible assets, and other long lived assets resulting from business combinations are measured at fair value usingnet income and market comparable valuation methodologies at the date of acquisition and subsequently re-measured if there are indicators of impairment.  

DECISIONPOINT SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company evaluates goodwill, at a minimum, on an annual basis on December 31 and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. There was no impairment of goodwill as a result of the annual impairment review performed during December 31, 2014. The Company's goodwill impairment analysis is sensitive to changes in key assumptions used in its analysis, such as expected future cash flows, the degree of volatility in equity and debt markets, and its stock price.

For the quarter ended June 30, 2015, the Company concluded there were indicators of potential goodwill impairment for the Company’s Apex business based on changes in the Company’s long-term strategy and outlook for Apex. As a result of identifying indicators of impairment, the Company performed an impairment review of goodwill and intangible assets as of June 30, 2015.

Based on the analysis, the Company recorded an impairment charge to goodwill of $2.1 million and intangible assets of $0.9 million in the second quarter of 2015.  This impairment was reported as part of the continuing operations results for the three and six months ended June 30, 2015. As a result,2020 as if the Company has no goodwill or intangible assets remaining related to the Apex business (see Note 6).

Income Taxes - We account for income taxes in accordance with the Financial Accounting Standards Board (“FASB”) guidance, which requires deferred tax assets and liabilities, be recognized using enacted tax rates to measure the effect of temporary differences between book and tax bases on recorded assets and liabilities. FASB guidance also requires that deferred tax assets be reduced by a valuation allowance, if it is more likely than not some portion or all of the deferred tax assets will not be recognized.

For the three months ended June 30, 2015, the Company recorded a tax expense of $63,000 on pre-tax loss of $3.2 million from continuing operations, compared to an income tax benefit of $51,000 on pre-tax loss of $183,000 from continuing operations for the three months ended June 30, 2014.  For the six months ended June 30, 2015, the Company recorded a tax expense of $35,000 on pre-tax loss of $3.8 million from continuing operations, compared to an income tax benefit of $20,000 on pre-tax loss of $379,000 from continuing operations for the six months ended June 30, 2014.

Recently Issued Accounting Pronouncements–In May 2014, the FASB issued Accounting Standards Update (“ASU”) ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. On July 9, 2015, the FASB voted to delay the effective date of the new revenue standard by one year but to permit entities to choose to adopt the standard as of the original effective date. The new standard will be effective for the CompanyExtenData acquisition had been completed on January 1, 2018. Management is currently evaluating the method of adoption and the potential impact the update may have on its financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” The update requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability instead of being presented as an asset. This guidance is effective for public companies for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those years. For all other entities, this guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. Early adoption is permitted for financial statements that have not been previously issued. The new guidance is to be applied on a retrospective basis, wherein the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance and represents a change in accounting principle. Management is currently evaluating the impact of the adoption of this accounting standard update on its financial statements.

In April 2015, the FASB issued ASU 2015-05, “Intangibles–Goodwill and Other–Internal Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This update provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. This guidance is effective for public companies for fiscal years and interim periods beginning after December 15, 2015. For all other entities, this guidance is effective for annual periods beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. Early adoption is permitted for all entities. The new guidance is to be applied either prospectively to new cloud computing arrangements or retrospectively. Management is currently evaluating the impact of the adoption of this accounting standard update on its financial statements.

NOTE 3 – DISCONTINUED OPERATIONS

As part of the Company’s efforts to evaluate its liquidity and capital resource needs for 2015 and focus on core value-added segments of its business, the Company decided in the second quarter to consider discontinuing the CMAC, Inc. (“CMAC”) business after the recent loss of a significant customer of the business unit. Thereafter, the opportunity arose to sell the business to its former owner, the Company’s former Senior Vice President. On June 30, 2015, the Company completed the sale of 100% of the issued and outstanding share capital of CMAC, Inc. (“CMAC”) and recorded a loss on sale of $157,000, which is classified as loss on sale of discontinued operations in the accompanying condensed consolidated statements of operations and comprehensive loss. The agreement provided for the sale of substantially all of the assets and liabilities of CMAC for $302,000 in cash consideration and $348,000 in liabilities forgiven by the CMAC purchaser. The Company has accounted for this business as discontinued operations and accordingly, the Company’s unaudited condensed consolidated financial statements and accompanying notes for current and prior periods have been restated to present the results of operations of CMAC as discontinued operations. In addition, the assets and liabilities have been treated and classified as discontinued operations in the accompanying condensed consolidated balance sheets as of June 30, 2015 and have been restated at December 31, 2014 to provide a comparable presentation.

DECISIONPOINT SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The loss on sale of CMAC was determined as follows2020 (in thousands):

The carrying amounts of the major classes of CMACNote 4: Intangible Assets

Definitive lived intangible assets and liabilities that are classified as discontinued operations on the accompanying condensed consolidated balance sheets are as follows (in thousands):

DECISIONPOINT SYSTEMS, INC.Amortization expense recognized during the three and six months ended June 30, 2021 was $0.3 million and $0.6 million, respectively. Amortization expense recognized during the three and six months ended June 30, 2020 was $0.2 million and $0.3 million, respectively. Amortization expense is calculated on an accelerated basis.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)Note 5: Net Income Per Share

The reconciliation of the major classes ofBasic net income and expense constituting income (loss) from discontinued operations on the Company’s unaudited condensed consolidated statements of operations and comprehensive loss are as follows (in thousands):

NOTE 4 – LOSS PER COMMON SHARE

Basic loss per common share is computed by dividing the lossnet income available to common shareholdersstockholders by the weighted-average number of common shares outstanding. Diluted lossnet income per share is computedcalculated similarly to basic loss 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. The weighted-average basic and diluted shares for each of the six months ended June 30, 2015 and 2014, exclude approximately 0.3 million and 0.4 million, respectively, of ESOP shares that have not been committed to be released.

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. All potentially

Below is a reconciliation of the fully dilutive securities are anti-dilutive due to the net loss incurred by the Company in the periods presented.

Potential dilutive securities consist of (in thousands):

DECISIONPOINT SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 5 – WARRANT LIABILITY

The Company has determined that certain warrants the Company has issued contain provisions that protect the holders from future issuances of the Company’s Common Stock at prices below such warrants’ then in effect respective exercise prices (see Note 9).  These provisions could result in modification of the warrants then in effect exercise price.  The Company evaluated the guidance ASC 480-10 Distinguishing Liabilities from Equity and ASC 815-40 Contracts in an Entity’s Own Equity.  Pursuant to this guidance, the Company’s management concluded that these instruments do not meet the criteria for classification as equity treatment and must be recorded as a liability as a result of the terms in the warrants that provide for price protection in the event of a future issuance.  The Company recognized these warrants as liabilities at their fair value and re-measures them at fair value on each reporting date. ASC 820 Fair Value Measurementprovides requirements for disclosure of liabilities that are measured at fair value on a recurring basis in periods subsequent to the initial recognition (see Note 2).

The Company uses Level 3 inputs for its valuation methodology for the warrant derivative liabilities. For December 31, 2014, the estimated fair values were determined using a Monte Carlo option pricing model based on various assumptions. For June 30, 2015, the Company assessed the fair value of the warrants using a linear regression model based on observable prices of the known components and their relationship to historical prices. The Company’s derivative liabilities are adjusted to reflect estimated fair value at each period end, with any decrease or increase in the estimated fair value being recorded in other income or expense accordingly, as adjustments to the fair value of derivative liabilities.  Various factors are considered in the pricing models the Company uses to value the warrants, including the Company’s current common stock price, the remaining life of the warrants, the volatility of the Company’s common stock price, and the risk-free interest rate.  In addition, as of the valuation dates, management assessed the probabilities of future financing assumptions in the Monte Carlo valuation models.  Future changes in these factors will have a significant impact on the computed fair value of the warrant liability.  Accordingly, the Company expects future changes in the fair value of the warrants to continue to vary from quarter to quarter.

The Company revalues the warrants as of the end of each reporting period. The estimated fair value of the outstanding warrant liabilities was approximately $286,000 and $519,000, as of June 30, 2015 and December 31, 2014, respectively. The decrease in fair value of the warrant liabilities for the three months ended June 30, 2015 was $311,000 while the increase in fair value of the warrant liabilities for the three months ended June 30, 2014 was $84,000. The decrease in fair value of the warrant liabilities for the six months ended June 30, 2015 was $232,000 while the decrease in the fair value of the warrant liabilities for the six months ended June 30, 2014 was $166,000. The adjustments to the fair value of the warrant liabilities are included in other income in the Company’s unaudited condensed consolidated statements of operations.

The warrant liabilities were valued at the closing dates of the common stock purchase agreement and at December 31, 2014 using a Monte Carlo valuation model and at June 30, 2015 using a linear regression model based on observable prices of the known components and their relationship to historical prices, each with the following assumptions:

NOTE 6 – GOODWILL AND INTANGIBLE ASSETS

The following summarizes the transaction affecting goodwill through June 30, 2015 (in thousands):

DECISIONPOINT SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company tests goodwill and amortizable intangible assets at least annually on December 31 of each fiscal year for possible impairment. In addition to its annual test, the Company regularly evaluates whether events or circumstances have occurred that may indicate a potential impairment of goodwill or amortizable intangible assets.

The process of testing goodwill for impairment involves the determination of the fair value of the applicable reporting units. The test consists of a two-step process. The first step is the comparison of the fair value to the carrying value of the reporting unit to determine if the carrying value exceeds the fair value. The second step measures the amount of an impairment loss, and is only performed if the carrying value exceeds the fair value of the reporting unit. The Company performed its annual impairment testing for its reporting unit as of December 31, 2014, its annual impairment date for fiscal year 2014. On December 31, 2014, the Company concluded based on the first step of the process that there was no impairment of goodwill.

Subsequent to the 2014 annual impairment test, and during the second quarter ended June 30, 2015, the Company concluded there were indicators of potential goodwill impairment for the Company’s Apex business based on changes in the Company’s long-term strategy and outlook for Apex. As a result of identifying indicators of impairment, the Company performed a qualitative impairment review (a valuation was not prepared) of goodwill and intangible assets as of June 30, 2015.

Based on the analysis, the Company recorded an impairment charge to goodwill of $2.1 million and intangible assets of $0.9 million in the second quarter of 2015.  This impairment was reported as part of the continuing operations results for the three and six months ended June 30, 2015. As a result, the Company has no goodwill or intangible assets remaining related to the Apex business. 2021 and 2020 (in thousands, except per share data):

With respect to the sale

Note 6: Line of CMAC, the goodwill that was specifically identified to the CMAC reporting unit was accounted for as part of the net assets sold.Credit

PWBF Line of Credit

The amended and restated credit agreement with Pacific Western Business Finance (“PWBF”) provided a line of credit of $10 million with a maturity date of September 2023. Outstanding amounts incurred interest at the prime rate plus 1.25% with a floor of 4.75% (4.75% at June 30, 2021 and December 31, 2020) and was secured by substantially all of our assets.

As of June 30, 2015 and December 31, 2014, the Company’s intangible assets and accumulated amortization consist of the following (in thousands):

(1) CMAC’s net intangible assets of $631,000 ($2,729,000 gross and $2,098,000 accumulated amortization) were reclassified and reflected as discontinued operations on the condensed consolidated balance sheet at December 31, 2014. Impairment charges of Apex’s net intangible assets of $958,000 ($3,764,000 gross and $2,806,000 accumulated amortization) were recorded in the second quarter of fiscal 2015.

The effect of foreign currency translation on the goodwill and intangible assets for the six months ended June 30, 2015 is approximately ($131,000) and ($86,000).

NOTE 7 – LINES OF CREDIT

SVB Line of Credit - The Company has a $10.0 million revolving line of credit with Silicon Valley Bank (“SVB”) which provides for borrowings based upon eligible accounts receivable, as defined in the Loan Agreement (“SVB Loan Agreement”).  Under the SVB Loan Agreement as amended February 27, 2013, SVB has also provided the Company with term loans as discussed at Note 8.  On February 27, 2015, the Company entered into an agreement to further amend the original SVB Loan Agreement dated December 15, 2006 to extend the maturity date of the revolving credit line provided thereunder to February 28, 2017. The February 27, 2015 amendment provides for interest at prime plus 3.25% in 2015, and provides for further interest rate reductions upon achievement of certain financial thresholds. The SVB Loan Agreement is secured by substantially all the assets of the Company. As of June 30, 2015 and December 31, 2014, the outstanding balance on the line of credit was approximately $2.7 and $5.8 million, respectively, and the interest rate was 6.5%. 

Availability2021, availability under the line of credit was approximately $0.8$6.5 million, as of June 30, 2015. The line of credit allows the Company to cause the issuance of letters of credit on account of the Company towhich is determined from a maximum of the borrowing base as defined in the Loan Agreement.  No letters of credit were outstanding as of June 30, 2015 or December 31, 2014.

DECISIONPOINT SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The February 27, 2015 amendment has certain financial covenant and other non-financial covenants.   The minimum Tangible Net Worth requirement of an $8.6 million deficit, which is to be further reduced by one half of any funds raised through sales of common stock (as only 50% of additional capital raises are given credit in the Tangible Net Worth calculation)calculation on or after February 1, 2015. Should the Company incur losses in a manner consistent with its recent historical financial performance, the Company will violate Tangible Net Worth covenant without additional net capital raises in amounts that are approximately twice the amount of the losses incurred. Due to the technical default with the BDC term loan discussed above, the Company is technically in default due to the subordinated debt provisions of the Amended SVB Loan Agreement. The Company has had discussions with SVB regarding this technical default and is working with SVB to cure. A SVB lending officer has verbally indicated they do not intend on exercising legal rights under the Amended SVB Loan Agreement for this default, however, this is not evidenced in writing and thus is not enforceable.

RBC Line of Credit - The Company is party to a credit agreement, dated June 4, 2012 (the “RBC Credit Agreement”) with Royal Bank of Canada (“RBC”).  Under the RBC Credit Agreement, the revolving demand facility allows for borrowings up to CDN$200,000 based upon eligibleour existing accounts receivable.  Interest is based on the Royal Bank Prime (“RBP”) plus 1.5% and is payable on demand.receivable balance. As of June 30, 2015 and December 31, 2014, the2021, we had no outstanding balance onborrowings under the line of credit, was $42,000 and $58,000, respectively, and the interest rate is 4.35%.  The RBC Credit Agreement is secured by the assetsas of Apex.  The revolving demand facility has certain financial covenants and other non-financial covenants.  The covenants were reset by RBC on August 16, 2013.  The Company was in compliance with the reset covenants at June 30, 2015 and December 31, 2014.  See further discussion regarding this condition at Note 8.2020, we had $1.2 million outstanding under the line of credit.

ForEffective on July 30, 2021, the three months ended June 30, 2015amended and 2014, the Company’s interest expense for the lines ofrestated credit including amortization of deferred financing costs,agreement between us and PWBF was approximately $97,000 and $114,000, respectively.For the six months ended June 30, 2015 and 2014, the Company’s interest expense for the lines ofterminated. The credit including amortization of deferred financing costs,agreement with PWBF was approximately $200,000 and $211,000, respectively.

RBC and SVB are party to a subordination agreement, pursuant to which RBC agreed to subordinate any security interest in assets of the Company grantedterminated in connection with the RBCCompany entering into a new credit facility with MUFG Union Bank, National Association as described below. No pre-payment penalty was paid in connection with the termination of the credit agreement with PWBF.

MUFG Union Bank Line of Credit

On July 30, 2021, we entered into a Loan and Security Agreement (the “Loan Agreement”) with MUFG Union Bank, National Association (the “Bank”). The Loan Agreement provides for a revolving line of credit of up to SVB’s$9.0 million with our obligations being secured by a security interest in assetssubstantially all of our assets. Loans extended to us under the Loan Agreement are scheduled to mature on July 31, 2024.

Interest and Fees