DecisionPoint Systems Reports Results For Fourth Quarter And Year Ended December 31, 2014

DECISIONPOINT SYSTEMS, INC.

Unaudited Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)

December 31,

2014

2013

ASSETS

Current assets 

Cash 

$      1,616

$         641

Accounts receivable, net

11,497

10,504

Due from related party

-

188

Inventory, net

2,035

1,533

Deferred costs

3,177

3,809

Deferred tax assets

13

49

Prepaid expenses and other current assets

89

188

Total current assets 

18,427

16,912

Property and equipment, net

145

136

Other assets, net

124

165

Deferred costs, net of current portion

1,314

1,807

Goodwill

8,202

8,395

Intangible assets, net

2,045

3,907

Total assets

$    30,257

$    31,322

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities 

Accounts payable

$    10,000

$      9,774

Accrued expenses and other current liabilities

2,755

2,804

Lines of credit

5,811

3,883

Current portion of debt

813

1,474

Due to related parties

73

77

Accrued earn out consideration

-

319

Unearned revenue

6,918

7,481

Total current liabilities 

26,370

25,812

Long term liabilities

Unearned revenue, net of current portion

2,015

2,481

Debt, net of current portion and discount

1,580

1,961

Accrued earn out consideration, net of current portion

-

149

Deferred tax liabilities

460

740

Warrant liability

519

803

Other long term liabilities

226

249

Total liabilities 

31,170

32,195

Commitments and contingencies

-

-

STOCKHOLDERS' DEFICIT

 Cumulative Convertible Preferred stock, $0.001 par value, 10,000,000 shares

authorized, 1,547,845 and 1,514,155 shares issued and outstanding, including cumulative and imputed preferred dividends of $2,295 and $1,956, and with a liquidation preference of $13,640 and $13,232 at December 31, 2014 and 2013, respectively

12,822

12,193

Common stock, $0.001 par value, 100,000,000 shares authorized,

12,883,446 issued and 12,729,563 outstanding as of December 31, 2014, and December 31, 2013

13

13

Additional paid-in capital

17,252

17,231

Treasury stock, 153,883 shares of common stock

(205)

(205)

Accumulated deficit

(30,292)

(29,475)

Unearned ESOP shares

(484)

(629)

Accumulated other comprehensive income

(19)

(1)

Total stockholders' deficit

(913)

(873)

Total liabilities and stockholders' deficit

$    30,257

$    31,322

DECISIONPOINT SYSTEMS, INC.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss(In thousands, except share and per share data)

Three Months Ended December 31,

Years ended December 31,

2014

2013

2014

2013

Net sales 

$        17,181

$        14,625

$        64,546

$          60,692

Cost of sales 

13,383

11,749

50,372

47,965

Gross profit 

3,798

2,876

14,174

12,727

Selling, general and administrative expense

3,170

4,357

13,331

18,338

Adjustment to acquisition earn-out and bonus obligations

(86)

-

(86)

(820)

Operating income (loss)

714

(1,481)

929

(4,791)

Other expense (income):

Interest expense

209

236

867

959

Fair market value adjustment of warrant liability

(30)

(130)

(284)

(296)

Other income, net

31

(21)

19

(37)

            Total other expense

210

85

602

626

Income (loss) before income taxes

504

(1,566)

327

(5,417)

Provision (benefit) for income taxes

(716)

267

(197)

(199)

Net income (loss)

1,220

(1,833)

524

(5,218)

Common stock deemed dividend

-

(263)

-

(263)

Cumulative and imputed Series A and B

   preferred stock dividends

(27)

(27)

(108)

(108)

Accrued paid-in-kind dividends

   on Series D and Series E preferred stock

-

(289)

-

(289)

Cash and Imputed dividends on Series D preferred stock

(312)

-

(1,233)

(580)

Imputed contingent beneficial converion

   on Series D preferred stock

-

(1,343)

-

(1,343)

Net income(loss) attributable to common shareholders

$             881

$        (3,755)

$           (817)

$          (7,801)

Net income (loss) per share -

Basic

$            0.07

$          (0.32)

$          (0.07)

$            (0.80)

Diluted

$            0.03

$          (0.32)

$          (0.07)

$            (0.80)

Weighted-average shares outstanding -

Basic

12,397,511

11,834,999

12,356,270

9,802,810

Diluted

31,422,108

11,834,999

12,356,270

9,802,810

DECISIONPOINT SYSTEMS, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)

December 31,

2014

2013

Cash flows from operating activities:

Net income (loss)

$       524

$     (5,218)

Adjustments to reconcile net income (loss) to net cashprovided by (used in) operating activities:

Depreciation and amortization

1,754

1,967

Amortization of deferred financing costs and note discount

153

181

Employee and Director stock-based compensation

119

76

Adjustment to acquisition related earn-out and bonus obligations

(86)

(820)

Change in fair value of warrants

(284)

(296)

Loss on disposal of property and equipment

5

13

ESOP compensation expense

47

138

Allowance for doubtful accounts

(46)

142

Deferred taxes, net

(197)

(271)

Changes in operating assets and liabilities, net of assets and liabilities acquired:

Accounts receivable, net

(976)

1,615

Due from related parties

181

-

Inventory, net

(502)

(723)

Deferred costs

1,123

462

Prepaid expenses and other current assets

106

126

Other assets, net

11

(18)

Accounts payable

314

(1,296)

Accrued expenses and other current liabilities

6

(103)

Due to related parties

(84)

76

Unearned revenue

(983)

(284)

Net cash (used in) provided by operating activities

1,185

(4,233)

Cash flows from investing activities

Capital expenditures

(63)

(45)

Net cash used in investing activities

(63)

(45)

Cash flows from financing activities

(Repayments) borrowings from lines of credit, net

1,931

459

Proceeds from the issuance of term debt

-

1,000

Repayment of debt

(1,153)

(2,082)

Issuance of convertible series E preferred stock

-

4,090

Paid financing costs associated with convertible preferred stock offering

-

(597)

Dividends paid

(748)

(423)

Paid financing costs

(100)

(119)

Payments for contingent acquisition liability

(84)

-

Common stock issued in private placement, net of costs

-

403

Warrants classified as a liability in connection with common stock private placement

-

1,099

Net cash provided by (used in) financing activities

(154)

3,830

Effect on cash of foreign currency translation

7

(14)

Net increase (decrease) in cash 

975

(462)

Cash at beginning of year

641

1,103

Cash at end of year

$    1,616

$         641

Supplemental disclosure of cash flow information:

Interest paid

$       803

$      1,019

Income taxes paid

89

258

Supplemental disclosure of non-cash financing activities:

Accrued and imputed dividends on preferred stock

$       340

$         265

Imputed dividends as contingent beneficial converion on series D preferred stock

-

1,343

Accrued PIK dividends on series D and Series E preferred stock

-

289

Warrants issued in connection with common stock private placement

-

1,099

Warrants issued in connection with convertible series E preferred stock

-

278

Settlement of earn-out obligation with convertible note payable

291

-

Payment of accrued dividends through issuance of PIK shares

289

-

Three months ended December 31,

Year ended December 31,

2014

2013

2014

2013

EBITDA Calculation:

Net loss

$   1,220

$  (1,833)

$      524

$  (5,218)

Depreciation and amortization

423

470

1,754

1,967

Interest expense

209

236

867

959

Income tax provision (benefit)

(716)

267

(197)

(199)

EBITDA

$   1,136

$     (860)

$   2,948

$  (2,491)

Adjusted EBITDA Calculation:

EBITDA

1,136

(860)

2,948

(2,491)

Stock compensation

30

45

119

76

ESOP compensation

10

59

47

138

Deferred taxes

(188)

(266)

(197)

(271)

Fair market value adjustment of warrant liability

(30)

(130)

(284)

(296)

Adjustment to earn-out obligations

(86)

-

(86)

(820)

Restructuring costs

-

430

142

430

Capital raising costs

-

270

-

1,570

Adjusted EBITDA

$      872

$     (452)

$   2,689

$  (1,664)