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DecisionPoint Systems Reports Record Third Quarter Revenue of $18.6 Million

Gross Margin Expands to Record 23.4%, 250 Basis Point Improvement Year-Over-Year

IRVINE, CA -- (Marketwire) -- 11/14/12 -- DecisionPoint Systems, Inc. (OTCBB: DPSI), a leading enterprise mobility and RFID systems solutions provider, today reported its financial results for the third quarter ended September 30, 2012.

Highlights of Quarter Ended September 30, 2012

  • Revenue increased to $18.6 million, 12.9% above the $16.4 million for the quarter ended September 30, 2011.
  • Gross margin expanded to 23.4% from 20.9% in the third quarter of 2011, a 250 basis point improvement.
  • Adjusted EBITDA(1) for the third quarter of 2012 was $1.1 million compared to $0.8 million for the quarter ended September 30, 2011.
  • Operating loss was $0.6 million, including $0.5 million of acquisition related expenses, compared to operating income of $0.2 million for the quarter ended September 30, 2011.
  • Net loss attributable to common shareholders was $1.3 million, or $(0.15) per share, after deducting preferred dividends of approximately $249,000, compared to a net income attributable to common shareholders of approximately $55,000, or $0.01 per share, after deducting preferred dividends of approximately $214,000 for the third quarter of 2011.
  • Cash flow from operating activities for the nine months ended September 30, 2012 was $0.7 million compared to $(1.4) million for nine months ended September 30, 2011.
  • The Company completed the acquisition of Illume Mobile Software, a division of MacroSolve, Inc., based in Tulsa, OK, for approximately $1.0 million in cash and stock. Illume Mobile has patent protected domain expertise in developing Enterprise mobile software for Android and Apple (iOS) mobile devices. Illume's operating results are included in the Company's results of operations beginning August 1, 2012.

Management Commentary
"Record revenue and gross margin expansion in the third quarter reflects the growing success of the strategic shift we have made over the past two years to develop our field mobility solutions and professional services and software divisions," said Nicholas Toms, CEO of DecisionPoint. "The three acquisitions that we have completed during that time -- CMAC, Apex and Illume Mobile -- have broadened our software products and professional services capabilities, opened new markets and deepened our relationships with our customers, including our carrier partners. We now offer the full range of mobile solutions to meet the requirements of any enterprise mobility strategy. In addition, higher margin professional software and services revenue has grown to over 35% of total revenue, leading to the improved corporate gross margins.

"An increasingly mobile workforce continues to drive demand for our field mobility solutions. The bundled solutions for enterprise and small business applications that we market together with our wireless carrier partners, Verizon, Sprint and T-Mobile, are gaining traction, adding to the installed user base and increasing recurring revenue to the Company," added Mr. Toms. "And as the retail industry embarks on an overdue technology upgrade of its outdated systems, it is creating opportunities for our tablet-based assisted shopping solution suite for in-store applications that increases productivity and reduces costs. Excluding one-time costs related to the two acquisitions that we completed earlier this year and other restructuring and one-time costs, our third quarter and year to date adjusted EBITDA was $1.1 million and $2.4 million, respectively. As we execute our strategy to build the capabilities of our Professional Services and Software Group and with positive momentum in our field mobility and retail systems divisions, we remain well positioned for continued revenue and adjusted EBITDA growth."

Third Quarter 2012 Results
Revenue was $18.6 million, compared to $16.4 million for quarter ended September 30, 2011 and $17.8 million for the quarter ended June 30, 2012. The 12.9% year-over-year increase was primarily due to increased field mobility solution sales and increased professional services revenue.

Gross profit was $4.3 million, compared to $3.4 million for quarter ended September 30, 2011 and $3.8 million for the second quarter of 2012. Gross profit margin was 23.4%, compared to 20.9% for the same period a year ago and 21.3% for the second quarter of 2012. The increases are due to the higher gross margin from professional services revenue and improved utilization of professional services resources. Additionally, the Company has continued to emphasize cost control and improved efficiencies throughout its operations.

Selling, general and administrative expenses were $5.0 million, compared to $3.3 million for the same period of 2011, and $4.8 million for the second quarter of 2012. The year-over-year increase was primarily due to increased personnel and operating expenses relating to the Illume and Apex acquisitions of $0.6 million as well as Illume and Apex acquisition related costs of $0.5 million.

The operating loss was $0.6 million, compared to operating income of $0.2 million for the quarter ended September 30, 2011, and an operating loss of $1.1 million in the second quarter of 2012.

Net loss attributable to common shareholders was approximately $1.3 million, or $(0.15) per share, after deducting preferred dividends of approximately $249,000, compared to net income attributable to common shareholders of approximately $55,000, or $0.01 per share, after deducting preferred dividends of approximately $214,000 in the quarter ended September 30, 2011. Net loss was approximately $1.5 million or $(0.20) per share, after deducting preferred dividends of approximately $238,000 in the second quarter of 2012.

Nine Month 2012 Year to Date Results
Revenue for the nine months ended September 30, 2012 was $54.1 million, compared to $42.5 million in the year ago period, an increase of 27.5%. Gross profit was $11.9 million for the nine months ended September 30, 2012, compared to $8.4 million for the nine months ended September 30, 2011. The gross profit margin was 21.9%, compared to 19.8% in the same period a year ago. Selling, general and administrative expenses were $13.6 million for the nine months ended September 30, 2012, compared to $10.3 million for the nine months ended September 30, 2011. Net loss attributable to common shareholders was approximately $3.2 million, or $(0.42) per share, after deducting preferred dividends of approximately $710,000, compared to a net loss attributable to common shareholders of approximately $5.5 million, or $(1.00) per share, after deducting preferred dividends of approximately $268,000 in the same period a year ago. Included in the net loss for the first nine months of 2011 was a one-time, non-cash expense for debt extinguishment of $2.7 million.

Forward-Looking Statements
Under the Private Securities Litigation Reform Act of 1995: Except for historical information contained herein, the statements in this news release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause a company's actual results, performance and achievement in the future to differ materially from forecasted results, performance, and achievement. These risks and uncertainties are described in the Company's periodic filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events or changes in the Company's plans or expectation.

About DecisionPoint Systems, Inc.
DecisionPoint Systems, Inc. (OTCBB: DPSI) delivers improved productivity and operational advantages to its clients by helping them move their business decision points closer to their customers. We do this by making enterprise software applications accessible to the front-line worker anytime, anywhere. DecisionPoint utilizes the latest wireless, mobility, and RFID technologies. For more information on DecisionPoint Systems visit www.decisionpt.com/news.php.

Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information, namely earnings before interest, taxes, depreciation and amortization (EBITDA). The Company's management believes that this non-GAAP measure provides investors with a better understanding of how the results relate to the Company's historical performance. The additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. Management believes that these adjusted measures reflect the essential operating activities of the Company. A reconciliation of non-GAAP financial information appears below:

(1) See schedule attached and description of non-GAAP financial measures: Adjusted EBITDA



                             Three Months Ended        Nine Months Ended
                                September 30,            September 30,
                          ------------------------ ------------------------
EBITDA Calculation            2012         2011        2012         2011
                          -----------  ----------- -----------  -----------

Net (loss) income         $(1,014,176) $   268,387 $(2,534,965) $(5,233,377)
Depreciation &
 amortization                 574,567      137,573     991,939      411,248
Interest expense              349,941      230,982     698,158    1,003,597
Income taxes                   63,690       13,450     131,653       21,173
                          -----------  ----------- -----------  -----------

EBITDA                    $   (25,978) $   650,392 $  (713,215) $(3,797,359)
                          ===========  =========== ===========  ===========

One time cash transaction
 expenses in connection
 with the acquisition of
 Apex                         380,000            -   1,943,000            -
One time cash expenses in
 connection with the
 acquisition and
 integration of Illume
 Mobile                       363,000            -     363,000            -
Stock-based and ESOP-
 based compensation
 expense                       44,000      140,360     489,457      502,058
Transition-related costs      317,000            -     317,000            -
Loss on debt
 extinguishment                     -            -           -    2,268,859
                          -----------  ----------- -----------  -----------

Adjusted EBITDA           $ 1,078,022  $   790,752 $ 2,399,242  $(1,026,442)
                          ===========  =========== ===========  ===========

Adjusted EBITDA per share $      0.13  $      0.11 $      0.31  $     (0.19)
                          ===========  =========== ===========  ===========

Weighted average shares
 outstanding - Basic        8,182,103    7,320,328   7,697,635    5,493,530
                          ===========  =========== ===========  ===========




                        DECISIONPOINT SYSTEMS, INC.
                   Condensed Consolidated Balance Sheets

                                            September 30,     December 31,
                                                 2012             2011
                                           ---------------  ---------------
ASSETS                                       (unaudited)
Current assets
  Cash                                     $       392,424  $       365,814
  Accounts receivable, net                      10,675,484       13,916,787
  Other receivable                                       -        1,476,285
  Due from related party                           357,326                -
  Inventory, net                                   897,401          705,757
  Deferred costs                                 3,602,564        3,468,583
  Prepaid expenses and other current
   assets                                          302,071          408,413
                                           ---------------  ---------------
    Total current assets                        16,227,270       20,341,639

  Property and equipment, net                      160,685           98,934
  Intangible assets, net                         6,626,416        2,214,000
  Goodwill                                       8,616,767        5,538,466
  Deferred costs, net of current portion         2,249,960        1,800,320
  Other assets, net                                344,323          175,329
                                           ---------------  ---------------
    Total assets                           $    34,225,421  $    30,168,688
                                           ===============  ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Accounts payable                         $     8,502,486  $     8,947,133
  Accrued expenses and other current
   liabilities                                   2,704,787        2,504,870
  Lines of credit                                4,742,212        4,024,141
  Current portion of debt                        1,847,675        1,000,000
  Due to related parties                            80,721          871,508
  Accrued earn out consideration                 1,201,727                -
  Unearned revenue                               6,368,073        6,756,214
                                           ---------------  ---------------
    Total current liabilities                   25,447,681       24,103,866

Long term liabilities
  Unearned revenue, net of current portion       3,012,324        2,509,190
  Debt, net of current portion and
   discount                                      3,452,031          970,160
  Accrued earn out consideration                   161,754                -
  Deferred tax liabilities                       1,290,621           18,000
  Deferred rent                                     62,091                -
  Interest payable                                  60,000           60,000
                                           ---------------  ---------------
    Total liabilities                           33,486,502       27,661,216
                                           ---------------  ---------------

Commitments and contingencies
                                                         -                -
STOCKHOLDERS' EQUITY
  Cumulative convertible preferred stock,
   $0.001 par value, 10,000,000
   sharesauthorized, 1,816,289 shares
   issued and outstanding,
   includingcumulative and imputed
   preferred dividends of $696,880 and
   $435,563, andwith a liquidation
   preference of $11,109,994 and
   $10,652,275, respectively                     6,580,949        6,319,629
  Common stock, $0.001 par value,
   100,000,000 shares authorized,9,125,075
   issued and 8,971,192 outstanding as of
   September 30, 2012,and 8,182,791 issued
   and 8,028,908 outstanding as of
   December 31, 2011                                 9,125            8,183
  Additional paid-in capital                    15,601,481       14,513,918
  Other comprehensive income                        27,798                -
  Treasury stock, 153,883 shares of common
   stock                                          (204,664)        (204,664)
  Accumulated deficit                          (20,475,451)     (17,230,792)
  Unearned ESOP shares                            (800,319)        (898,802)
                                           ---------------  ---------------
    Total stockholders' equity                     738,919        2,507,472
                                           ---------------  ---------------
      Total liabilities and stockholders'
       equity                              $    34,225,421  $    30,168,688
                                           ===============  ===============




                        DECISIONPOINT SYSTEMS, INC.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive
                                    Loss

                            Three Months Ended         Nine Months Ended
                               September 30,             September 30,
                         ------------------------  ------------------------
                             2012         2011         2012         2011
                         -----------  -----------  -----------  -----------


Net sales                $18,567,021  $16,446,541  $54,144,051  $42,471,307

Cost of sales             14,222,782   13,007,116   42,269,043   34,042,818
                         -----------  -----------  -----------  -----------

Gross profit               4,344,239    3,439,425   11,875,008    8,428,489

Selling, general and
 administrative expense    4,951,913    3,274,994   13,622,674   10,267,641
                         -----------  -----------  -----------  -----------

Operating (loss) income     (607,674)     164,431   (1,747,666)  (1,839,152)
                         -----------  -----------  -----------  -----------

Other expense:
  Interest expense           349,941      230,982      698,158    1,003,597
  Loss on debt
   extinguishment                  -       24,098            -    2,665,157
  Other expense
   (income), net              (7,129)    (372,486)     (42,512)    (295,702)
                         -----------  -----------  -----------  -----------
    Total other expense      342,812     (117,406)     655,646    3,373,052
                         -----------  -----------  -----------  -----------

Net (loss) income before
 income taxes               (950,486)     281,837   (2,403,312)  (5,212,204)

Provision for income
 taxes                        63,690       13,450      131,653       21,173

                         -----------  -----------  -----------  -----------
Net (loss) income         (1,014,176)     268,387   (2,534,965)  (5,233,377)

Cumulative preferred
 stock dividends            (248,750)    (213,898)    (709,699)    (268,098)

                         -----------  -----------  -----------  -----------
Net (loss) income
 attributable to common
 shareholders            $(1,262,926) $    54,489  $(3,244,664) $(5,501,475)
                         ===========  ===========  ===========  ===========

Net (loss) income per
 share -
  Basic                  $     (0.15) $      0.01  $     (0.42) $     (1.00)
                         ===========  ===========  ===========  ===========
  Diluted                $     (0.15) $      0.01  $     (0.42) $     (1.00)
                         ===========  ===========  ===========  ===========

Weighted average shares
 outstanding -
  Basic                    8,182,103    7,320,328    7,697,635    5,493,530
                         ===========  ===========  ===========  ===========
  Diluted                  8,182,103    7,417,555    7,697,635    5,493,530
                         ===========  ===========  ===========  ===========

Comprehensive loss       $(1,240,576) $         -  $(3,216,866) $         -
                         ===========  ===========  ===========  ===========


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