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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 5(d) of the Act. Yes ☐No☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

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

~~As of June 30, 2019, the last business day of the Registrant’s most recently completed second fiscal quarter, the market value of our common stock held by non-affiliates was $1,300,208.~~

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of S-K (§229.405) is contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.☐

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 ST (§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, ~~an accelerated filer,~~ a non-accelerated filer, or a smaller reporting ~~company.~~company and an “emerging growth company”. See the definitions of “large accelerated filer,” “accelerated filer” ~~and~~ “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

As of June 30, 2022, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of the Company’s voting and non-voting common equity held by non-affiliates of the Registrant was $9,671,434.

The number of shares of the registrant’s common stock outstanding as of ~~April 14, 2020~~March 30, 2023, was ~~128,539,418.~~6,822,127.

~~OVERVIEW OF THE INDUSTRY & DATA STORAGE CORPORATION:~~This Annual Report on Form 10-K (this “Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. The forward-looking statements are contained principally in Part I, Item 1. “Business,” Part I, Item 1A. “Risk Factors,” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but are also contained elsewhere in this Annual Report in some cases you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements.

~~Our Industry:~~You should refer to Item 1A. “Risk Factors” section of this Annual Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We do not undertake any obligation to update any forward-looking statements. Unless the context requires otherwise, references to “Data Storage,” “we,” “us,” “our,” and “Company,” refer to Data Storage Corporation and its subsidiaries.

Data Storage Corporation ~~(“DSC” or~~provides Cloud Managed Services and technologies across multiple platforms. The Company’s technical assets are in geographically diverse, Tier 3 compliant data centers throughout the ~~“Company) provides Disaster Recovery, Infrastructure~~USA and Canada.

Hybrid and Multi-Cloud have become mainstream technological offerings of the Cloud infrastructure managed services industry as companies have moved away from legacy, on-premises technology solutions. This approach has grown more complex, as companies utilize disparate technical environments, including on-premises equipment and software, multi-clouds interfacing with Software as a Service ~~(IaaS), IT Managed Services~~providers, Amazon AWS and ~~Voice over Internet Protocol (VoIP) type solutions. DSC is positioned to leverage~~others while focusing on the remote employee or a contractor for higher levels of security, driving growth in ~~our industry. The following will provide a background on our industry and trends for the solutions the Company provides.~~managed cloud services.

Cloud Managed Service Providers assist businesses in achieving their desired security levels, technical cloud infrastructure and financial objectives while optimizing the value of these technologies and cloud resources through multi-cloud management, ensuring business continuity, governance, and operational efficiencies.

One subset of this five hundred-billion-dollar industry and a highly-focused segment of the Company is the IBM Power server; of which AWS, Google and Microsoft are not competitors. It’s estimated that businesses in USA and Canada are operating over one million virtual IBM Power servers, known as LPAR’s. According to the most recent information received from IBM, the typical industries utilizing IBM Power servers are finance, retail, healthcare, government, and distribution organizations.

The Company, through its CloudFirst subsidiary, is a ~~study by Grand View Research, Inc., the global~~leader in providing IBM Power cloud infrastructure, disaster recovery and the creation of these unique offerings for over 15 years.

The opportunity for the Company, in the IBM Power server portfolio segment is capturing a share of this annual recurring revenue marketplace that is currently under migration to cloud infrastructure.

The Company believes businesses are increasingly under pressure to improve the efficiency of their information and storage systems accelerating the migration from self-managed technical equipment and solutions to fully managed multi-cloud technologies to reduce cost, protect capital, ensure disaster recovery, protect the custom applications developed for these systems, and compete effectively. These trends create an opportunity for cloud technology service providers.

The Company’s market ~~size~~ opportunity is derived from the demand for fully managed cloud and cybersecurity services across all major operating systems.

CloudFirst’s addressable market is approximately $36 billion in the United States and Canada with limited competition today.

Our Flagship subsidiary provides business continuity and infrastructure solutions combining on-premises equipment and software with its value-added managed services to business customers. Flagship maintains strong partner relationships with some of the largest IT Manufactures such as the IBM Corporation in supplying the technology behind the highly technical designs built for business customers. Flagship’s vision is to expand its multi-cloud infrastructure solutions with more managed services, highlighted by its expanding Cyber Security offerings to capture more of the marketplace outside of the CloudFirst sales and marketing programs.

Our Nexxis subsidiary is a voice and data solution provider that utilizes major nationwide carriers and providers. The subsidiary provides a suite of communications services including Hosted VoIP, Internet Access, Data Transport, and SD-WAN. The Nexxis complete voice and data solution combines elements of these services into a fully managed option that delivers high reliability and is engineered to further enhance business continuity. Nexxis’s goal is to provide a higher level of technology yet simplify management and combine cost savings for our clients wherever possible.

According to Fortune Business Insights, the Cloud Managed Services industry in North America was $16.3 billion in 2019 and has been growing at a rate of 13.8% CAGR bringing us to $24 billion by the end of 2022. Disaster Recovery is projected to be a $3.6 billion in the US by the end of 2022 which is 35% of the $10.3 billion globally based on Grandview Research Disaster Recovery Solutions Market Size report. Cyber Security, specifically the MDR segment, is an established market recognized by buyers. Gartner observed a 35% growth in end users’ inquiries on the topic in the last year. Gartner estimates that by 2025, the MDR market will reach $2.15 billion in revenue, up from $1.03 billion in 2021, for a compound annual growth rate (CAGR) of 20.2%. The Company’s VOIP solutions fit well into this steadily growing segment which is expected to reach ~~US$ 26.23~~$90 billion ~~by 2025, registering~~worldwide in 2022 with a ~~strong compound annual growth rate (“CAGR”)~~CAGR of ~~36.5% during~~3.1% with $17 billion in the ~~forecast period. The global disaster recovery solutions market has been experiencing a significant increase in demand due~~US according to ~~infrastructure failure, cyberattacks, natural disasters,~~Globe Newswire Market Analysis and ~~other internal and external threats. These unanticipated events cause disruption in business operations, resulting in massive revenue losses.~~Insights: Global VoIP Market.

Over the past few years, many companies are reconsidering their plans for backup and recovery solutions due to the increasing occurrences of planned, manmade disasters. For instance, malicious attacks such as WannaCry and Locky ransomware in 2017 led to the loss of thousands of encrypted files and systems. Government and private sectors incurred considerable financial losses owing to these attacks.

Businesses are increasingly incorporating disaster recovery (DR) solutions in their business continuity strategies, making DR plans a critical part of Information Technology (“IT”) priorities. Moreover, increasing awareness about the benefits of implementing such solutions and the growing adoption of cloud-based solutions are increasing the demand of disaster recovery solutions among Small to Medium Enterprises (“SME”) businesses.

The global infrastructure as a service (IaaS) industry value is expected to exceed US $60 billion by 2024 with an estimated growth rate of over 25% for the forecast period. IaaS is a form of cloud computing system dependent on significant physical resources, such as network connections, bandwidth, load balancers, and servers, which are present as a virtual service offered by the cloud service providers (CSP). An increasing amount of financial and business information and other critical data in various IT sectors are expected to increase the demand of IaaS in many organizations.

The need to reduce cost in IT infrastructure management, and to focus more on their primary operations has been the key objective of various companies. The technological innovations have led to growing mobility, ease of access, sophisticated working environment, and digitalization development in numerous business verticals. Ease of deployment, flexibility, and scalability of services can also be acknowledged as the key factors steering the market growth.

The IT and telecommunications sector are expected to witness significant growth rate due to the increasing demand of cloud-based services in the industry. This industry is considered to be the primary vertical generating enormous personal, financial and healthcare information. Customer-based organizations in the banking, financial services and insurance (“BFSI”) sector create large volumes of confidential business and financial data which look at security and storage convenience for business continuity.Company Overview

~~More and more companies~~are adopting the system of Bring Your Own Device (BYOD), as result the demand for VoIP services is also growing. Moreover, along with updating their services, VoIP service providers are also introducing new features in VoIP services to attract users at both individual and corporate level. New market avenues are likely to open with an increase in international calling.

~~The telecommunications industry is changing rapidly providing opportunity for growth and innovation in the VoIP industry.~~

According to a report issued by Persistence Market Research, the global VoIP services market is likely to witness substantial growth during 2017-2024. The global market for VoIP services is also estimated to reach US$ 194.5 Billion revenue towards the end of 2024.

Corporation, is headquartered in Melville, New York. DTST operates through three subsidiaries; DSC, ~~provides subscription-based, long-term agreements for disaster recovery, Infrastructure~~a Delaware corporation now referred to as CloudFirst Technologies Corporation; Flagship Solutions, LLC; and Nexxis Inc. These subsidiaries provide solutions and services to a Service (IaaS) and VoIP type solutions. In addition, DSC provides managed services, software and maintenance, equipment and onboarding provisioning. Services and goods are provided to businesses within thebroad range of clients in several industries including healthcare, banking and finance, distribution services, manufacturing, construction, education, and ~~government industries. About 25%~~government. The subsidiaries maintain business development teams, as well as independent distribution channels.

The Company typically provides long-term subscription-based disaster recovery, and cloud infrastructure, cyber security, third party cloud management, managed services, dedicated internet access and UCaaS / VoIP services.

During 2022, based on the May 2021 capital raise and the up list to Nasdaq, the Company has accelerated organic growth strategies by adding distribution, marketing, and technical personnel. Management continues to be focused on building the Company’s sales and marketing strategy and expanding its technology assets throughout its data center network.

The Company believes businesses are increasingly under pressure to improve the reliability and efficiency of ~~our revenue~~their information and storage systems accelerating the migration from self-managed technical equipment and solutions to fully managed multi-cloud technologies to reduce cost and compete effectively. Further, in today’s environment, capital preservation is an encouragement to move from a capital-intensive, on-premises technology, to a pay as you grow, CapEx to OpEx model. These trends create an opportunity for Cloud Technology Service providers.

The Company’s market opportunity is derived from ~~equipment~~the demand for fully managed cloud and ~~software sales~~cybersecurity services across all major operating systems.

CloudFirst alone has an addressable market estimated at $36 billion in annual recurring revenue in the United States and Canada with limited competition.

The Company has designed and built its solutions and services to support demand for ~~cyber security, storage,~~cloud-based IBM Power ~~i systems~~System that support client critical workloads and ~~managed service solutions.~~custom in-house developed applications, manage hybrid cloud deployments and continue to provide solutions that keep data and workloads protected from disasters and security attacks.

The Company’s business offices are located in New York, Florida and Texas. The New York and Florida offices include a technology center and labs adapted to ~~protect our client’s data, ensuring business continuity, assisting in their compliance~~meet the technical requirements of the Company’s clients. The Company maintains its own infrastructure, storage, and ~~providing better control over their digital information.~~

~~DSC provides solutions through its business development team and contracted distribution channels. DSC’s contracted, approved distributors have the ability~~networking equipment required to provide ~~Disaster Recovery, Hybrid Cloud, IBM and Intel IaaS cloud-based~~subscription solutions ~~without the distributor investing~~ in ~~infrastructure,~~seven geographically diverse data centers and telecommunications services. The distributor is fully supported by DSC’s specialized technical staff. The Company’s programs lower the distributors barrier of entry to migrate their client’s equipment premise infrastructure to DSC’s cloud based solutions to their client base.

~~DSC is a 19-year veteran~~located in cloud storage and cloud computing providing disaster recovery, business continuity and compliance solutions that assist organizations in protecting their data, minimizing downtime while ensuring regulatory compliance. Serving the business continuity market, DSC’s clients save time and money, gain more control and better access to data and enable a high level of security for their data. Solutions include: Infrastructure as a Service specializing in IBM Power; data backup recovery and restore, high availability data replication; continuous data protection; data de-duplication; and, virtualized system recovery. DSC has forged significant relationships with leading organizations creating valuable partnerships.

Our IBM Power and Intel IaaS Cloud ensures enterprise level equipment and support, focusing on iSeries, AIX, Power, AS400 and our high-processing power cloud for Intel. Our Disaster Recovery services for both Intel and IBM has a guaranteed back-to-work window. DSC is a one-stop source for managed services from VoIP to providing the client with equipment and software, monitoring, help desk and a full array of business continuity solutions.

~~Headquartered in Melville, NY, with an additional office location in Warwick, RI, DSC maintains its enterprise infrastructure in several data center facilities located within~~ New York, Massachusetts, Texas, Florida and North Carolina, and ~~has recently expanded into Texas.~~in Canada, Toronto, and Barrie, serving clients in the United States and Canada.

The core support services provided by DSC’s operations division is staffed by highly trained personnel to maintain service-level agreements and to support clients twenty-four hours a day, 365 days a year. DSC provides ongoing education to its staff for maintaining technical skills and certifications.

DSC derives its revenues from long-term subscriptions, and professional services contracts related to the implementation of solutions that provide protection of critical data and equipment. In 2009, DSC’s revenues consisted primarily of data vaulting, de-duplication, continuous data protection and cloud disaster recovery solutions, and protecting information for our clients.

~~In 2010, we expanded our solutions based on the asset acquisition of SafeData, a provider of~~Company’s disaster recovery and business continuity ~~for IBM’s mid-range~~solutions allow clients to quickly recover from system outages, human and natural disasters, and cyber security attacks, such as Ransomware. The Company’s managed cloud services begin with migration to the cloud and provide ongoing system support and management that enables its clients to run their software applications and technical workloads in a multi-cloud environment. The Company’s cyber security offerings include comprehensive consultation and a suite of data security, disaster recovery, and remote monitoring services and technologies that are incorporated into the Company’s cloud solutions or are delivered as a standalone managed security offering covering the client site endpoint devices, users, servers, ~~Power i. The Safe Data acquisition provided the ability to provide a solution to a specialized IBM community with limited competition~~ and higher average revenue per client. October 2012, we purchased the software and assets of Message Logic, an email archival and compliance software. The Message Logic acquisition strategy was based on the increased requirements for compliance and storage of emails and e-discovery type data.equipment.

~~In October 2016, DSC purchased~~The Company’s solution architects, and business development teams work with organizations identifying and solving critical business problems. The Company carefully plans and manages the ~~assets of ABC Services, Inc.~~migration and ~~ABC Services II, Inc. (collectively, “ABC”) , including~~configuration process, continuing the ~~remaining 50% of Secure Infrastructure~~relationship and ~~Services, LLC,~~advising its clients long after the ~~IBM Power Cloud. ABC has an excellent reputation that spans 25 years and~~services have been implemented. Reflecting on client satisfaction, the Company’s renewal rate on client subscription solutions is ~~a Premium Partner of IBM providing equipment, licensing, provisioning and managed services to~~approximately 94% after their ~~clients. ABC also provides high-level cyber security as part of their solutions portfolio.~~initial contract term expired.

On October 19, 2017, DSC formed a new division, Nexxis Inc. (“Nexxis”), to provide VOIP and carrier services for bandwidth connection between the client and our data centers. DSC owns 80% of Nexxis, which is positioned to cross-sell our client base and provide new opportunities. We believe there is an opportunity to increase our clients’ bandwidth for improved access to our cloud solutions, while at the same timeGrowth Strategies

The Company will continue to ~~target new clients as businesses move to new telecommunications technologies for voice~~drive revenues by expanding distribution channels while expanding digital and ~~data.~~

~~DSC delivers~~direct marketing programs. The Company will accelerate building upon its ~~solutions over a highly reliable, redundant~~social and ~~secure fiber optic networks with separate and diverse routes to~~digital lead generation programs. Further, the ~~internet from our data centers.~~

~~DSC is positioned to leverage its infrastructure, data centers, equipment capacity and leadership team to grow revenue and create value.~~

~~Positioned for organic growth, DSC~~Company will continue ~~our strategy of growth through synergistic acquisitions. DSC believes opportunities exist~~ to ~~acquire service providers~~seek synergetic acquisitions that expand distribution, leading a technology trend, add to its existing technical staff and ~~intellectual property to enhance our solution portfolio, increase our distribution channels, expand our management and increase our cash flow.~~

~~Our acquisition strategy objective is to reduce costs through~~create economies of scale ~~while increasing market share and consolidating efforts.~~improving gross profit margins.

The Company increases revenue and drives growth by developing and managing collaborative solutions as well as ~~through our strategy to acquire synergistic service~~joint marketing initiatives. The Company has a diverse community of distribution partners, ranging from IBM Business Partners, Software Vendors, IT resellers, Managed Service Providers, application support providers, ~~we can create significant value.~~consultants, and other cloud infrastructure providers.

The ~~roll-up of these synergistic technical companies and system integrators would also form~~Company believes there is a ~~powerful distribution channel~~significant need for ~~both our current and future service offerings. We believe that if we achieve our acquisition strategy this would enable DSC to create~~its solutions on a global ~~presence~~basis and, ~~a recognizable premiere brand.~~

accordingly, the opportunity for it to grow its business through international expansion as these markets increase their use of multi-cloud solutions.

~~DESCRIPTION OF SERVICES AND SOLUTIONS~~The Company’s Core Services: The Company provides an array of multi-cloud information technology solutions in highly secure, enterprise-level cloud services for companies using IBM Power Systems, Microsoft Windows, and Linux. Specifically, the Company’s support services cover:

~~Data Storage Corporation offers a variety of data protection services designed to meet its clients’ requirements and budgets.~~

ezVault Consists of Cloud backup services which eliminate the cost and challenges of tape handling, tape management and file retrieval and restore. All backups are encrypted and replicated to a second data center to ensure that data is always safe and available. The vault size automatically scales with data growth, and retention needs are never a concern. With our high-speed enterprise storage, deduplication, and compression, backup and restore times are reduced. Our ezVault services are backed by a clear and well-defined SLA, guaranteeing performance, availability and access. ezVault is most typically combined with ezRecovery (as described below) to provide Disaster Recovery as a Service (DRaaS).

ezRecovery Consists of ezVault backup services combined with our managed standby compute, storage and network infrastructure resources. Vaulted applications, data and user access are quickly and easily restored to standby systems, saving clients’ money and reducing the recovery time. Our recovery services are backed by a clear and well-defined SLA guaranteeing performance, availability and access with Recovery Point Objective’s (RPO’s) and Recovery Time Objective’s (RTO’s) as short as eight hours.

ezAvailability provides reliable, high availability and business continuity for mission critical applications with RPO under a minute and RTO typically under 15 minutes, with optional, fully managed real-time replication services. Our ezAvailability service consist of a full-time enterprise system, storage and network resources, allowing quick and easily-switched production workloads to our cloud when needed. Our ezAvailability services are backed by a clear and well-defined SLA guaranteeing performance, availability and access.

~~ezMirror is a SAN-based replication solution combined with our ezRecovery standby systems to provide easy to manage and cost-effective Business Continuity and Disaster Recovery (DR) option.~~

~~Our cloud hosting solution, ezHost~~running smoothly. ezHost™ provides full-time, scalable compute, storage, and network infrastructure resources ~~needed~~ to run clients’ ~~mission critical~~ workloads on ~~our enterprise class~~the Company’s enterprise-class infrastructure. ~~ezHost removes the burden of the typical hardware lifecycle management of on-premise systems by replacing~~ezHost™ replaces the cost of support, maintenance, system administration, space, electrical power, and cooling of the typical hardware on-premises systems with a predictable monthly expense. ~~Our~~The Company’s ezHost services are backed by ~~a clear and well-defined~~an SLA ~~guaranteeing~~governing performance, availability, and access.

DSC has developed several comprehensive Cyber Security offerings that can be utilized on premise at a client’s location or on systems hosted in the cloud. These offerings include fully managed endpoint security with active threat mitigation, system security assessments, risk analysis and applications to ensure continuous security and auditing for IBM systems.

DSC helps organizations manage risk, increase performance and improve agility. Our Tier 3 data centers are part of a nationwide network with a shared commitment to Redundancy, Security and Compliance. Each of DSC’s data centers is a safe, secure facility audited under SSAE-16 SOC 1 Type II, SOC 2 Type II, PCI-DSS1, GLBA and HIPAA standards annually.

~~Each Client has a dedicated network segment and all traffic, in and out, must pass through a firewall policy.~~

Nexxis, our ~~new~~ voice and data division, ~~is leading~~specializes in stand-alone and fully-managed VoIP, Internet Access, and Data Transport solutions that satisfy the ~~way~~requirements of the traditional corporate and modern remote workforce. Nexxis dedicated internet access services with ~~advanced voice~~speeds of up to 10 Gbps and data transport circuits are typically delivered over fiber-optic networks while shared internet access is typically delivered via fiber, coaxial, and wireless networks to help businesses stay fully connected from any location. SD-WAN options provide the ability for multi-site companies to prioritize their data traffic from site to site while FailSAFE, a Cloud-first SD-WAN solution, can be used by a single location to gain industry-leading connectivity to cloud services and the internet. Nexxis Hosted VoIP with Unified Communications is a full-featured cloud-based PBX solution with built-in redundancy that ~~propel business’ forward~~provides business continuity and includes the option to integrate with unparalleled performance, speed and continuity to keep vital information moving in the right direction. Faster than traditional phone systems — and infinitely smarter — Nexxis’ voice and data solutions add functionality and improve efficiency, while keeping your costs down.Microsoft Teams.

On October 20, 2008, the Company consummated a share exchange transaction with Euro Trend Inc. The Company subsequently changed its name from Euro Trend Inc. to Data Storage Corporation.

Data Storage Corporation acquired the assets of SafeData, LLC in June 2010, and the assets of Message Logic LLC, (“Message Logic”) in October 2012.

In November 2012, the Company entered into an agreement with an IBM partner, ABC Services, Inc. to provide an IBM Power cloud infrastructure offering, marketed under the name Secure Infrastructure & Services LLC (“SIAS”), a New York limited liability company.

In October 2016, the Company purchased the assets of ABC Services, Inc., which included the remaining 50% of the SIAS company.

On June 1, 2021, the Company merged its Florida company with Flagship Solutions, LLC. This transaction with an IBM Gold Business Partner was synergetic to the Company’s services and added new solutions.

The result of these acquisitions, combined with the Company’s business continuity disaster recovery and IBM Power cloud infrastructure solutions, positions Data Storage Corporation as a leader.

The markets for the Company’s products and services are ~~competitive~~competitive. However, competition is limited, in the CloudFirst subsidiary for this $36 billion marketplace, compared to the limitless competitors, competing against Amazon Web Services (AWS), Google, and Microsoft today which hold an estimated 51% of the marketplace for X86 cloud infrastructure and X86 disaster recovery platforms. Today, the IBM Power community, based on a recent IBM user survey, only 15% of the IBM Power server community utilizes the cloud. Other Company services and solutions, outside of the IBM Power user community face many competitors for cyber security, however, these solutions and services are typically provided by the Company ~~is confronted by aggressive competition.~~ to their existing clients and distribution companies.

These markets are characterized by frequent product introductions and rapid technological advances. The Company’s financial condition and operating results can be adversely affected by these and other industry-wide downward pressures on gross margins. Principal competitive factors important to the Company include price, product features, relative price and performance, product quality and reliability, a strong third-party software, marketing and distribution capability, service and support and corporate reputation.

The Company is focused on expanding its market opportunities globally related to disaster recovery and cloud infrastructure, ~~as a service and platform as a service,~~ primarily focused on the IBM community. These markets are highly competitive and include several large, well-funded and experienced participants.

The Company’s future financial condition and operating results depend on the Company’s ability to continue to provide a high-quality solution as well as increase distribution of the solutions in each of the markets in which it competes.

The Company believes it offers superior 365x24x7 enterprise level service and solutions for the SME marketplace and value-added reseller community with guaranteed uptime and service level agreements which sets the company apart from many of their competitors.Flagship Solutions, LLC.

On ~~October 20, 2008, DSC consummated a share exchange transaction~~February 4, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Data Storage ~~Corporation,~~FL, LLC, a ~~Delaware corporation,~~Florida limited liability company and ~~DSC subsequently changed its name from Euro Trend Inc.~~our wholly-owned subsidiary (the “Merger Sub”), Flagship Solutions, LLC (“Flagship”), a Florida limited liability company, and the owners (collectively, the “Equity holders”) of all of the issued and outstanding limited liability company membership interests in Flagship (collectively, the “Equity Interests”), pursuant to ~~Data Storage Corporation.~~which, upon the Closing (as defined below), we acquired Flagship through the merger of Merger Sub with and into Flagship (the “Merger”), with Flagship being the surviving company in the Merger and becoming, as a result, our wholly-owned subsidiary. The closing of the Merger (the “Closing”) was completed on June 1, 2021. Flagship is a provider of IBM equipment and solutions, managed services and cloud solutions that include cloud-based server monitoring and management, 24×7 help desk support, and data center infrastructure management.

Concurrently with the Closing, Flagship and Mark Wyllie, Flagship’s Chief Executive Officer, entered into an Employment Agreement (the “Wyllie Employment Agreement”), which became effective upon consummation of the Closing, pursuant to which Mr. Wyllie will continue to serve as Chief Executive Officer of Flagship following the Closing on the terms and conditions set forth therein. Flagship’s obligations under the Wyllie Employment Agreement will also be guaranteed by the Company. The Wyllie Employment Agreement contains customary salary, bonus, employee benefits, severance and restrictive covenant provisions. In addition, pursuant to the Wyllie Employment Agreement, Mr. Wyllie was appointed to serve as a member of the Board during the term of his employment thereunder. Mr. Wyllie, as of November 11, 2021, became an Officer of the Company.

~~DSC acquired the assets of SafeData, LLC in June 2010,~~Mr. Wyllie resigned from all positions he held with Flagship and the ~~assets~~Company on October 28, 2022. Thomas Kempster has been appointed President of ~~Message Logic LLC, (“Message Logic”) in October 2012.~~Flagship Solutions Group.

~~In December 2012, DSC was accepted as an IBM Service provider for cloud solutions.~~

~~In October 2016, DSC purchased the assets of ABC which included the remaining 50% of the Secure Infrastructure and Services venture.~~

~~On October 19, 2017 DSC formed a new division, Nexxis Inc., to provide VOIP and carrier services.~~

The foregoing information has been filed as an exhibit to the 2021 Annual Report. Readers should review those agreements for a complete understanding of the terms and conditions associated with this transaction.

On April 30, 2020, the Company was granted a loan from a banking institution, in the principal amount of $481,977 (the “Loan”), pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The Loan, which was in the form of a Note dated April 30, 2020, matures on April 30, 2022, and bears interest at a fixed rate of 1.00% per annum, payable monthly to Signature Bank, as the lender, commencing on November 5, 2020. Funds from the loan may only be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments. Management used the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. The Company received forgiveness for the full amount during the year ended December 31, 2021.

The Company is subject to various federal, state, local and international laws with respect to its receipt, storage and processing of personal information and other customer data.

The Company receives, stores, and processes personal information and other customer data. Personal privacy has become a significant issue in the United States and in many other countries where the Company may provide its offering of solutions. The regulatory framework for privacy issues worldwide is currently complex and evolving, and it is likely to remain uncertain for the foreseeable future. There are numerous federal, state, local, and foreign laws regarding privacy and the storing, sharing, use, processing, disclosure, and protection of personal information and other customer data, the scope of which are changing, subject to differing interpretations, and may be inconsistent among countries or conflict with other rules. The Company generally seeks to comply with industry standards and is subject to the terms of its privacy policies and privacy-related obligations to third parties. The Company strives to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy and data protection to the extent possible. Any failure or perceived failure by the Company to comply with its privacy policies, its privacy-related obligations to customers or other third parties, its privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer data, may result in governmental enforcement actions, litigation, or public statements against the Company by consumer advocacy groups or others and could cause its customers to lose trust in it, which could have an adverse effect on its reputation and business. Any significant change to applicable laws, regulations, or industry practices regarding the use or disclosure of the Company’s customer’s data, or regarding the manner in which the express or implied consent of customers for the use and disclosure of such data is obtained, could require the Company to modify its solutions and features, possibly in a material manner, and may limit its ability to develop new services and features that make use of the data that its customers voluntarily share with the Company.

The Company’s solutions are used by customers in the health care industry, and the Company must comply with numerous federal and state laws related to patient privacy in connection with providing its solutions to these ~~acquisitions~~customers. In particular, the Health Insurance Portability and ~~strategic alliances, combined~~Accountability Act of 1996 (“HIPAA”), and the Health Information Technology for Economic and Clinical Health Act (“HITECH”) include privacy standards that protect individual privacy by limiting the uses and disclosures of individually identifiable health information and implementing data security standards. Because the Company’s solutions may backup individually identifiable health information for its customers, its customers are mandated by HIPAA to enter into written agreements with ~~DSC’s legacy disaster recovery~~the Company known as business associate agreements that require it to safeguard individually identifiable health information. Business associate agreements typically include:

We believe that our success depends upon our ability to attract, develop and retain key personnel. As of March 31, 2023, we employed 45 full-time employees, of which six are executive management, seven are administration and finance, nine are sales staff, several of which are dedicated to support our network of distribution partners, two are marketing staff and twenty-one were part of our technical team. The Company also maintains a group of independent contractors to provide service support and installations on a as needed basis. None of our employees are covered by collective bargaining agreements, and management considers relations with our employees to be in good standing. Although we continually seek to add additional talent to our work force, management believes that it has sufficient human capital to operate its business ~~continuity solutions, positions DSC~~successfully.

The Company’s compensation programs are designed to align the compensation of its employees with its performance and to provide the proper incentives to attract, retain and motivate employees to achieve superior results. The structure of the Company’s compensation programs balances incentive earnings for both short-term and long-term performance.

The health and safety of the Company’s employees is its highest priority, and this is consistent with its operating philosophy.

The primary mailing address for the Company is 48 South Service Road, Suite 203, Melville, NY 11747.

The Company’s corporate website address is www.dtst.com. All filings the Company makes with the Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its Current Reports on Form 8-K, its proxy statements and any amendments thereto filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as ~~a potential leader~~amended, are available for free in ~~business~~the Investor Relations section of the Company’s website as soon as reasonably practicable after they are filed with or furnished to ~~business disaster recovery as a service, infrastructure as a service~~the SEC. The reference to the Company’s website address does not constitute inclusion or incorporation by reference of the information contained on the ~~IBM Power i mid-range servers, email compliance~~Company’s website in this Form 10-K or other filings with ~~Software as a Service (SaaS). DSC will continue to provide our solutions~~the SEC, and ~~our planned industry consolidations.~~ the information contained on the Company’s website is not part of this document.

~~ITEM 1A.~~ ~~RISK FACTORS~~Investing in the Company’s common stock involves a high degree of risk. You should carefully consider the following risks together with the other information in this Annual Report.

Risks Related to Data Storage’s Business ~~interruptions, including any interruptions resulting from COVID-19, could significantly disrupt our operations and could have a material adverse impact on us if the situation continues~~

~~Business interruptions, including any interruptions resulting from COVID-19, could significantly disrupt our operations~~The Company has not generated a significant amount of net income and ~~could have a material adverse impact on DSC if the situation continues. Under NYS Executive Order 202.6, “Essential Business,” DSC is an “Essential Business” based on the following~~it may not be able to sustain profitability in the Executive order number 2: Essential infrastructure including telecommunications and data centers; and, number 12: Vendors that provide essential services or products, including logistics and technology support.future.

~~Further, all employees, including~~As reflected in the consolidated financial statements, the Company had a net (loss) income available to shareholders of $(4,356,802) and $204,161 for the years ended December 31, 2022, and 2021, respectively. As of December 31, 2022, the Company had cash of $2,286,722, marketable securities of $9,010,968, and working capital of $10,855,407.

If the Company is unable to attract new customers to its infrastructure and disaster recovery/ cloud subscription services on a cost-effective basis, its revenue and operating results would be adversely affected.

The Company generates the majority of its revenue from the sale of subscriptions to its infrastructure and disaster recovery/cloud solutions as well as contracted managed services and software and hardware renewals. In order to grow, the Company must continue to reach the many businesses in need of our ~~specialized technical staff, are working~~unique services, many of whom may have not previously used infrastructure as a service and cloud disaster recovery backup solutions. The Company uses and periodically adjusts a diverse mix of advertising and marketing programs to promote its solutions. Significant increases in the pricing of one or more of the Company’s advertising channels would increase its advertising costs or cause it to choose less expensive and perhaps fewer effective channels. As the Company adds to or changes the mix of its advertising and marketing strategies, it may expand into channels with significantly higher costs than its current programs, which could adversely affect its operating results. The Company may incur advertising and marketing expenses significantly in advance of the time it anticipates recognizing any revenue generated by such expenses, and it may only at a later date, or never, experience an increase in revenue or brand awareness as a result of such expenditures. Additionally, because the Company recognizes revenue from ~~home~~customers over the terms of their subscriptions, a large portion of its revenue for each quarter reflects deferred revenue from subscriptions entered into during previous quarters, and downturns or upturns in subscription sales or renewals may not be reflected in the Company’s operating results until later periods. It has made in the past, and may make in the future, significant investments to test new advertising, and there can be no assurance that any such investments will lead to the cost-effective acquisition of additional customers. If the Company is unable to maintain effective advertising programs, its ability to attract new customers could be adversely affected, its advertising and marketing expenses could increase substantially, and its operating results may suffer.

A portion of the Company’s potential customers locate its website through search engines, such as Google, Bing, and Yahoo!. The Company’s ability to maintain the number of visitors directed to its website is not entirely within its control. If search engine companies modify their search algorithms in a ~~virtual environment. DSC always maintains~~manner that reduces the ~~ability for team members~~prominence of the Company’s listing, or if its competitors’ search engine optimization efforts are more successful than the Company’s, fewer potential customers may click through to ~~work virtual~~its website. In addition, the cost of purchased listings has increased in the past and ~~we will~~may increase in the future. A decrease in website traffic or an increase in search costs could adversely affect the Company’s customer acquisition efforts and its operating results.

The Company expects to continue to ~~stay virtual, until~~acquire or invest in other companies, which may divert its management’s attention, result in additional dilution to its stockholders, and consume resources that are necessary to sustain its business.

Having completed the ~~State~~merger with Flagship, the Company expects to continue to acquire complementary solutions, services, technologies, or businesses in the future. The Company may also, enter into relationships with other businesses to expand its portfolio of solutions or its ability to provide its solutions in foreign jurisdictions, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing, or investments in other companies. Negotiating these transactions can be time-consuming, difficult and expensive, and its ability to complete these transactions may often be subject to conditions or approvals that are beyond its control. Consequently, these transactions, even if a definitive purchase agreement is executed and announced, may not close.

Acquisitions may also disrupt the Company’s business, divert its resources, and require significant management attention that would otherwise be available for the development of its business. Moreover, the anticipated benefits of any acquisition, investment, or business relationship may not be realized on a timely basis or at all or the ~~Federal government indicate~~Company may be exposed to known or unknown liabilities, including litigation against the ~~environment is safe to return to work.~~companies that it may acquire. In connection with any such transaction, the Company may:

The ~~ongoing coronavirus outbreak which began in China at~~integration of an acquired company requires, among other things, coordination of administrative, sales and marketing, accounting and finance functions, and expansion of information and management systems. Integration may prove to be difficult due to the ~~beginning~~necessity of ~~2020 has impacted various businesses throughout~~coordinating geographically separate organizations and integrating personnel with disparate business backgrounds and accustomed to different corporate cultures. The Company may not be able to retain key employees of an acquired company. Additionally, the ~~world, including travel restrictions~~process of integrating a new solution or service may require a disproportionate amount of time and the extended shutdown of certain businesses in impacted geographic regions. If the coronavirus outbreak situation should worsen, we may experience disruptions to our business including, but not limited to equipment, to our workforce, or to our business relationships with other third parties.

The extent to which the coronavirus impacts our operations or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the durationattention of the ~~outbreak,~~Company’s management and financial and other resources. Any difficulties or problems encountered in the integration of a new ~~information that may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus~~solution or ~~treat its impact, among others. Any such disruptions or losses we incur~~service could have a material adverse effect on the Company’s business.

The Company intends to continue to acquire businesses that it believes will help achieve its business objectives. As a result, the Company’s operating costs will likely continue to grow. The integration of an acquired company may cost more than the Company anticipates, and it is possible that the Company will incur significant additional unforeseen costs in connection with such integration, which may negatively impact its earnings.

In addition, the Company may only be able to conduct limited due diligence on an acquired company’s operations. Following an acquisition, the Company may be subject to liabilities arising from an acquired company’s past or present operations, including liabilities related to data security, encryption and privacy of customer data, and these liabilities may be greater than the warranty and indemnity limitations that the Company negotiates. Any liability that is greater than these warranty and indemnity limitations could have a negative impact on the Company’s financial condition.

Even if successfully integrated, there can be no assurance that the Company’s operating performance after an acquisition will be successful or will fulfill management’s objectives.

On May 31, 2021, the Company completed the Merger. The Company expects that Flagship’s business will be synergistic with its existing IBM business and anticipates meaningful operation efficiency and that the Merger will provide a comprehensive one-stop provider to cross-sell solutions across each organization’s respective enterprise, as well as middle-market customers. Key offerings for the combined companies are expected to include a wide array of multi-cloud information technology solutions in highly secure, reliable enterprise level cloud services for companies using IBM Power systems, Microsoft Windows and Linux, including Infrastructure as a Service (IaaS), Disaster Recovery of digital information (DRaaS), and Cyber Security as a Service (CSaaS).

Since having completed the merger, however, the Company still faces risks and unknowns associated with the Merger. Ultimately, the Company may not realize the anticipated benefits of the merger with Flagship and integrating and operating Data Storage’s and Flagship’s business may be more difficult, time-consuming, or costly than expected. Additionally, integrating and operating the Flagship business could result in higher capital expenditures than anticipated, which could result in the Company’s need to raise additional capital for its operations.

The Company may fail to maintain an effective system of internal controls, which may result in material misstatements of its consolidated financial statements or cause it to fail to meet its periodic reporting obligations.

The Company has identified material weaknesses in its internal control over financial reporting, concluding that its disclosure controls were not effective as of December 31, 2022, based on material weaknesses which ultimately contributed to the Company not designing and maintaining formal controls to analyze, account for, and disclose complex transactions, including the accounting for certain consideration received from a vendor. These material weaknesses resulted in the restatement of the Company’s previously filed quarterly condensed consolidated financial information for the periods ended June 30, 2022, related to accrued expenses, cost of goods sold, gross profit, loss from operations, net loss, earnings per share and the related disclosures.

In response to such material weaknesses, management has expended and will continue to expand a substantial amount of effort and resources for the remediation of material weaknesses in internal control over financial reporting. In November of 2022, management and its advisors began evaluating and documenting the design and operating effectiveness of our internal control over financial reporting, and their work is ongoing.

The Company can give no assurance that additional material weaknesses will not be identified in the future. The Company’s failure to implement and maintain effective internal control over financial reporting could result in errors in its consolidated financial statements that could result in a restatement of its financial statements and could cause it to fail to meet its reporting obligations, any of which could diminish investor confidence in the Company and cause a decline in the price of its common stock.

The Company is controlled by three principal stockholders who serve as its executive officers and directors.

As of March 31, 2023, through their aggregate voting power, Messrs. Piluso, Schwartz and Kempster control approximately 37% of the Company’s outstanding common stock, giving them the ability to control a significant portion of the votes for the Company’s directors and all other matters requiring the approval of its stockholders, including the election of all of its directors and the approval of a reverse stock split.

The market for cloud solutions is highly competitive, and if the Company does not compete effectively, its operating results will be harmed.

The market for the Company’s services is highly competitive, quickly evolving and subject to rapid changes in technology. The Company expects to continue to face intense competition from its existing competitors as well as additional competition from new market entrants in the future as the market for its services continues to grow.

The Company competes with cloud backup and infrastructure providers and providers of traditional hardware-based systems and IBM Power Systems. Its current and potential competitors vary by size, service offerings, and geographic region. These competitors may elect to partner with each other or with focused companies to grow their businesses. They include:

Many of these competitors benefit from significant competitive advantages over the Company, given their desire to enter into this niche marketplace, such as greater name recognition, longer operating histories, more varied services, and larger marketing budgets, as well as greater financial, technical, and other resources. In addition, many of these competitors have established marketing relationships and major distribution agreements with computer manufacturers, internet service providers, and resellers, giving them access to larger customer bases. Some of these competitors may make acquisitions or enter into strategic relationships to offer a more comprehensive service than the Company does. As a result, some of these competitors may be able to:

In addition, demand for the Company’s cloud solutions is sensitive to price. Many factors, including the Company’s customer acquisition, advertising and technology costs, and its current and future competitors’ pricing and marketing strategies, can significantly affect its pricing strategies. Certain of the Company’s competitors offer, or may in the future offer, lower-priced or free solutions that compete with its solutions.

Additionally, consolidation activity through strategic mergers, acquisitions and joint ventures may result in new competitors that can offer a broader range of products and services, may have a greater scale or a lower cost structure. To the extent such consolidation results in the ability of vertically integrated companies to offer more integrated services to customers than the Company can, customers may prefer the single-source approach and direct more business to such competitors, thereby impairing the Company’s competitive position. Furthermore, new entrants not currently considered to be competitors may enter the market through acquisitions, partnerships or strategic relationships. As the Company looks to market and sell its services to potential customers, the Company must convince its internal stakeholders that the Company’s services are superior to their current solutions. If the Company is unable to anticipate or react to these competitive challenges, its competitive position would weaken, which could adversely affect its business, financial condition and results of operations. These combinations may make it more difficult for the Company to compete effectively and its inability to compete effectively would negatively impact its operating results. In addition, there can be no assurance that the Company will not be forced to engage in price-cutting initiatives, or to increase its advertising and other expenses to attract and retain customers in response to competitive pressures, either of which could have a material adverse effect on the Company’s revenue and operating results.

If a cyberattack was able to breach the Company’s security protocols and disrupt its data protection platform and solutions, and any such disruption could increase its expenses, damage its reputation, harm its business and adversely affect its stock price.

The Company has implemented various protocols and regularly monitors its systems via security software to reduce any security vulnerabilities. The Company also relies on third-party providers for a number of critical aspects of its infrastructure cloud and disaster recovery business continuity services, and consequently, it does not maintain direct control over the security or stability of those associated systems. Furthermore, the firmware, software, and/or open-source software that its data protection solutions may utilize could be susceptible to hacking or misuse. In the event of the discovery of a significant security vulnerability, the Company would incur additional substantial expenses and its business would be harmed.

The process of developing new technologies is complex and uncertain, and if the Company fails to accurately predict customers’ changing needs and emerging technological trends or if the Company fails to achieve the benefits expected from its investments, its business could be harmed. The Company believes that it must continue to dedicate a significant amount of resources to its research and development efforts to maintain its competitive position and it must commit significant resources to develop new solutions before knowing whether its investments will result in solutions the market will accept. The Company’s new solutions or solution enhancements could fail to attain sufficient market acceptance or harm its business for many reasons, including:

In addition, new technologies have the risk of defects that may not be discovered until after the product launches, resulting in adverse publicity, loss of revenue or harm to the Company’s business and reputation.

Any significant disruption in service, in the Company’s computer systems, or caused by its third-party storage and system providers could damage its reputation and result in a loss of customers, which would harm its business, financial condition, and operating results.

The Company’s reputation, and ability to attract, retain and serve its customers is dependent upon the reliable performance of its network infrastructure and payment systems, and its customers’ ability to readily access their stored files. The Company has experienced interruptions in these systems in the past, including server failures that temporarily slowed down its customers’ ability to access their stored files, or made the Company’s infrastructure inaccessible, and it may experience interruptions or outages in the future.

In addition, while the Company both operates and maintains elements of network infrastructure, some elements of this complex system are operated by third parties that the Company does not control and that would require significant time to replace. The Company expects this dependence on third parties to increase. In particular, the Company utilizes IBM and Intel to provide equipment and support. All of these third-party systems are located in data center facilities operated by third parties. While these data centers are of the highest level, Tier 3, there can be no assurance that they will not experience disruptions that will adversely impact the Company’s ability to service its customers. The Company’s data center leases expire at various times between 2021 and 2023 with rights of extension. If the Company were unable to renew these agreements on commercially reasonable terms, it may be required to transfer that portion of its computing and storage capacity to new data center facilities, and it may incur significant costs and possible service interruption in connection with doing so.

The Company also relies upon third-party colocation providers to host its main servers. If these providers are unable to handle current or higher volumes of use, experience any interruption in operations or cease operations for any reason or if the Company is unable to agree on satisfactory terms for continued hosting relationships, the Company would be forced to enter into a relationship with other service providers or assume hosting responsibilities itself. If the Company is forced to switch data center facilities, which in itself is a competitive industry, it may not be successful in finding an alternative service provider on acceptable terms or in hosting the computer servers itself. The Company may also be limited in its remedies against these providers in the event of a failure of service.

Interruptions, outages and/or failures in the Company’s own systems, the third-party systems and facilities on which we rely, or the use of its data center facilities, whether due to system failures, computer viruses, cybersecurity attacks, physical or electronic break-ins, damage or interruption from human error, power losses, natural disasters or terrorist attacks, hardware failures, systems failures, telecommunications failures or other factors, could affect the security or availability of infrastructure, prevent the Company from being able to continuously back up its customers’ data or its customers from accessing their stored data, and may damage or delete its customers’ stored files. If this were to occur, the Company’s reputation could be compromised, and it could be subject to liability to the customers that were affected.

Any financial difficulties, such as bankruptcy, faced by the Company’s third-party data center operators, its third-party colocation providers, or any of the service providers with whom the Company or they contract, may have negative effects on its business, the nature and extent of which are difficult to predict. Moreover, if its third-party data center providers or its third-party colocation providers are unable to keep up with the Company’s growing needs for capacity, this could have an adverse effect on the Company’s business. Interruptions in the Company’s services might reduce its revenue, cause it to issue credits or refunds to customers, subject it to potential liability, or harm its renewal rates. In addition, prolonged delays or unforeseen difficulties in connection with adding storage capacity or upgrading its network architecture when required may cause the Company’s service quality to suffer. Problems with the reliability or security of the Company’s systems could harm its reputation, and the cost of remedying these problems could negatively affect the Company’s business, financial condition, and operating results.

Security vulnerabilities, data protection breaches and cyberattacks could disrupt the Company’s data protection platform and solutions, and any such disruption could increase its expenses, damage its reputation, harm its business, and adversely affect its stock price.

The Company relies on third-party providers for a number of critical aspects of its infrastructure cloud and disaster recovery business continuity services, and consequently, it does not maintain direct control over the security or stability of the associated systems. Furthermore, the firmware, software and/or open-source software that its data protection solutions may utilize could be susceptible to hacking or misuse. In the event of the discovery of a significant security vulnerability, the Company would incur additional substantial expenses and its business would be harmed.

The Company’s customers rely on its solutions for production, replication, and storage of digital copies of their files, including financial records, business information, photos, and other personally meaningful content. The Company also stores credit card information and other personal information about its customers. An actual or perceived breach of the Company’s network security and systems or other cybersecurity related events that cause the loss or public disclosure of, or access by third parties to, its customers’ stored files could have serious negative consequences for its business, including possible fines, penalties and damages, reduced demand for its solutions, an unwillingness of customers to provide the Company with their credit card or payment information, an unwillingness of its customers to use its solutions, harm to its reputation and brand, loss of its ability to accept and process customer credit card orders, and time-consuming and expensive litigation. If this occurs, the Company’s business and operating results could be adversely affected. Third parties may be able to circumvent the Company’s security by deploying viruses, worms, and other malicious software programs that are designed to attack or attempt to infiltrate its systems and networks and it may not immediately discover these attacks or attempted infiltrations. Further, outside parties may attempt to fraudulently induce the Company’s employees, consultants, or affiliates to disclose sensitive information in order to gain access to its information or its customers’ information. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, often are not recognized until launched against a target, and may originate from less regulated or remote areas around the world. As a result, the Company may be unable to proactively address these techniques or to implement adequate preventative or reactionary measures. In addition, employee or consultant error, malfeasance, or other errors in the storage, use, or transmission of personal information could result in a breach of customer or employee privacy. The Company maintains insurance coverage to mitigate the potential financial impact of these risks; however, its insurance may not cover all such events or may be insufficient to compensate it for the potentially significant losses, including the potential damage to the future growth of its business, that may result from the breach of customer or employee privacy. If the Company or its third-party providers are unable to successfully prevent breaches of security relating to its solutions or customer private information, it could result in litigation and potential liability for the Company, cause damage to its brand and reputation, or otherwise harm its business and its stock price.

Many states have enacted laws requiring companies to notify consumers of data security breaches involving their personal data. These mandatory disclosures regarding a security breach often lead to widespread negative publicity, which may cause the Company’s customers to lose confidence in the effectiveness of its data security measures. Any security breach, whether successful or not, would harm the Company’s reputation and could cause the loss of customers. Similarly, if a publicized breach of data security at any other cloud backup service provider or other major consumer website were to occur, there could be a general public loss of confidence in the use of the internet for cloud backup services or commercial transactions generally. Any of these events could have material adverse effects on the Company’s business, financial condition, and operating results.

The Company’s ability to provide services to its customers depends on its customers’ continued high-speed access to the internet and the continued reliability of the internet infrastructure.

The Company’s business depends on its customers’ continued high-speed access to the internet, as well as the continued maintenance and development of the internet infrastructure. While the Company also provides broadband internet services, many of its clients depend on third-party internet service providers to expand high-speed internet access, to maintain a reliable network with the necessary speed, data capacity, and security, and to develop complementary solutions and services, including high-speed solutions, for providing reliable and timely internet access and services. All of these factors are out of the Company’s control. To the extent that the internet continues to experience an increased number of users, frequency of use, or bandwidth requirements, the internet may become congested and be unable to support the demands placed on it, and its performance or reliability may decline. Any internet outages or delays could adversely affect the Company’s ability to provide services to its customers.

Currently, internet access is provided by telecommunications companies and internet access service providers that have significant and increasing market power in the broadband and internet access marketplace. In the absence of government regulation, these providers could take measures that affect their customers’ ability to use the Company’s products and services, such as attempting to charge their customers more for using the Company’s products and services. To the extent that internet service providers implement usage-based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks, the Company could incur greater operating expenses and customer acquisition and retention could be negatively impacted. Furthermore, to the extent network operators were to create tiers of internet access service and either charge the Company for or prohibit the Company’s services from being available to its customers through these tiers, its business could be negatively impacted. Some of these providers also offer products and services that directly compete with the Company’s own offerings, which could potentially give them a competitive advantage.

If the Company is unable to retain its existing customers, its business, financial condition, and operating results would be adversely affected.

If the Company’s efforts to satisfy its existing customers are not successful, it may not be able to retain them, and as a result, its revenue and ability to grow would be adversely affected. The Company may not be able to accurately predict future trends in customer renewals. Customers choose not to renew their subscriptions for many reasons, including if customer service issues are not satisfactorily resolved, a desire to reduce discretionary spending, or a perception that they do not use the service sufficiently, that the solution is a poor value, or that competitive services provide a better value or experience. If the Company’s approximate 94% retention rate significantly decreases, it may need to increase the rate at which it adds new customers in order to maintain and grow its revenue, which may require it to incur significantly higher advertising and marketing expenses than it currently anticipates, or its revenue may decline. A significant decrease in the Company’s retention rate would therefore have an adverse effect on its business, financial condition, and operating results. The Company’s estimates of the number of employees it retains and advertising costs are based to a large extent upon its subscription contracts, which may be terminated by customers typically upon 90 days’ notice prior to the ending term of their contract for services.

A decline in demand for the Company’s cyber security, disaster recovery, and/or infrastructure solutions, in general, would cause its revenue to decline.

The Company derives, and expects to continue to derive, a significant portion of its revenue from subscription services for business continuity, such as data protection solutions including its disaster recovery backup, replication, archive, and infrastructure as a service offering. Some of the potential factors that could affect interest in and demand for cloud solutions include:

In addition, substantially all of the Company’s revenue is currently derived from customers in the U.S. Consequently, a decrease of interest in and demand for the Company’s solutions in the U.S. could have a disproportionately greater impact on it than if its geographic mix of revenue was less concentrated.

The Company primarily depends upon third-party distribution companies to generate new customers. The Company’s relationships with its partners and distributors may be terminated or may not continue to be beneficial in generating new customers, which could adversely affect its ability to increase its customer base.

The Company maintains a network of distributors, which refer customers to it through links on their websites or promotion to their customers. The number of customers that the Company is able to add through these relationships is dependent on the marketing efforts of distributors, over which it has little control. If the Company is unable to maintain its relationships, or renew contracts on favorable terms, with existing partners and distributors or establish new contractual relationships with potential partners and distributors, it may experience delays and increased costs in adding customers, which could have a material adverse effect on the Company. The Company’s distributors also provide services to other third parties and therefore may not devote their full time and attention to promote the Company’s products and services.

If the Company is unable to expand its base of business customers, its future growth and operating results could be adversely affected.

The Company has committed and continues to commit substantial resources to the expansion and increased marketing of its business solutions. If the Company is unable to market and sell its solutions to businesses with competitive pricing and in a cost-effective manner its ability to grow its revenue and achieve profitability may be harmed.

If the Company is unable to sustain market recognition of and loyalty to its brand, or if its reputation were to be harmed, it could lose customers or fail to increase the number of its customers, which could harm its business, financial condition, and operating results.

Given the Company’s market focus, maintaining and enhancing its brand is critical to its success. The Company believes that the importance of brand recognition and loyalty will increase in light of the increasing competition in its markets. The Company plans to continue investing substantial resources to promote its brand, both domestically and internationally, but there is no guarantee that its brand development strategies will enhance the recognition of its brand. Some of the Company’s existing and potential competitors have well-established brands with greater recognition than we have. If the Company’s efforts to promote and maintain the Company’s brand are not successful, the Company’s operating results and ~~our~~its ability to attract and retain customers may be adversely affected. In addition, even if the Company’s brand recognition and loyalty increase, it may not result in increased use of its solutions or higher revenue.

The Company’s solutions, as well as those of its competitors, are regularly reviewed in computer and business publications. Negative reviews, or reviews in which the Company’s competitors’ solutions and services are rated more highly than its solutions, could negatively affect its brand and reputation. From time to time, the Company’s customers express dissatisfaction with its solutions, including, among other things, dissatisfaction with its customer support, its billing policies, and the way its solutions operate. If the Company does not handle customer complaints effectively, its brand and reputation may suffer, it may lose its customers’ confidence, and they may choose not to renew their subscriptions. In addition, many of the Company’s customers participate in online blogs about computers and internet services, including the Company’s solutions, and its success depends in part on its ability to generate positive customer feedback through such online channels where consumers seek and share information. If actions that the Company takes or changes that it makes to its solutions upset these customers, their blogging could negatively affect its brand and reputation. Complaints or negative publicity about the Company’s solutions or billing practices could adversely impact its ability to attract and retain customers and its business, financial condition, and operating results.

The Company is subject to governmental regulation and other legal obligations related to privacy, and any actual or perceived failure to comply with such obligations would harm its business.

The Company receives, stores, and processes personal information and other customer data and maintains specific protocols and procedures to help safeguard the privacy of that personal information and customer data. Personal privacy has become a significant issue in the United States and in many other countries where the Company may offer its offering of solutions. The regulatory framework for privacy issues worldwide is currently complex and evolving, and it is likely to remain uncertain for the foreseeable future. There are numerous federal, state, local, and foreign laws regarding privacy and the storing, sharing, use, processing, disclosure and protection of personal information and other customer data, the scope of which are changing, subject to differing interpretations, and may be inconsistent among countries or conflict with other rules. The Company generally seeks to comply with industry standards and is subject to the terms of its privacy policies and privacy-related obligations to third parties. The Company strives to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy and data protection to the extent possible. However, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or the Company’s practices. Any failure or perceived failure by the Company to comply with its privacy policies, its privacy-related obligations to customers or other third parties, its privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer data, may result in governmental enforcement actions, litigation, or public statements against the Company by consumer advocacy groups or others and could cause its customers to lose trust in us, which could have an adverse effect on the Company’s reputation and business.

The Company’s customers may also accidentally disclose their passwords or store them on a mobile device that is lost or stolen, creating the perception that its systems are not secure against third-party access. Additionally, if third parties that the Company works with, such as vendors or developers, violate applicable laws or its policies, such violations may also put its customers’ information at risk and could in turn have an adverse effect on its business. Any significant change to applicable laws, regulations, or industry practices regarding the use or disclosure of the Company’s customers’ data, or regarding the manner in which the express or implied consent of customers for the use and disclosure of such data is obtained, could require it to modify its solutions and features, possibly in a material manner, and may limit its ability to develop new services and features that make use of the data that its customers voluntarily share with the Company.

The Company’s solutions are used by customers in the health care industry, and it must comply with numerous federal and state laws related to patient privacy in connection with providing its solutions to these customers. In particular, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and the Health Information Technology for Economic and Clinical Health Act (“HITECH”) include privacy standards that protect individual privacy by limiting the uses and disclosures of individually identifiable health information and implementing data security standards. Because the Company’s solutions may backup individually identifiable health information for its customers, its customers are mandated by HIPAA to enter into written agreements with us known as business associate agreements that require the Company to safeguard individually identifiable health information. Business associate agreements typically include:

The Company may not be able to adequately address the business risks created by HIPAA or HITECH implementation or comply with its obligations under its business associate agreements. Furthermore, the Company is unable to predict what changes to HIPAA, HITECH or other laws or regulations might be made in the future or how those changes could affect its business or the costs of compliance. Failure by the Company to comply with any of the federal and state standards regarding patient privacy may subject the Company to penalties, including civil monetary penalties and, in some circumstances, criminal penalties, which could have an adverse effect on its business, financial condition, and operating results.

The Company offers solutions that operate in a wide variety of environments, systems, applications, and configurations, that are often installed and used in large-scale computing environments with different operating systems, system management software, and equipment and networking configurations. The Company’s customers’ computing environments are often characterized by a wide variety of standard and non-standard configurations that can make pre-release testing for programming or compatibility errors very difficult and time-consuming. In addition, despite testing by the Company and others, errors, failures, or bugs may not be found in new solutions or releases until after distribution. In the past, when the Company has discovered any software errors, failures or bugs in certain of its solution offerings after their introduction or when new versions are released, it, in some cases, has experienced delayed or lost revenues as ~~expected.~~a result of these errors. In addition, the Company relies on hardware purchased or leased and software licensed from third parties to offer its solutions, and any defects in, or unavailability of, its third-party software or hardware could cause interruptions to the availability of its solutions.

Errors, failures, bugs in or unavailability of the Company’s solutions released by it could result in negative publicity, damage to its brand, returns, loss of or delay in market acceptance of its solutions, loss of competitive position, or claims by customers or others. Many of the Company’s end-user customers use its solutions in applications that are critical to their business and may have a greater sensitivity to defects in its solutions than to defects in other, less critical, software solutions. In addition, if an actual or perceived breach of information integrity or availability occurs in one of its end-user customer’s systems, regardless of whether the breach is attributable to its solutions, the market perception of the effectiveness of its solutions could be harmed. Alleviating any of these problems could require significant expenditures of the Company’s capital and other resources and could cause interruptions, delays, or cessation of its solution licensing, which could cause it to lose existing or potential customers and could adversely affect its operating results.

The Company faces many risks associated with its growth and plans to expand, which could harm its business, financial condition, and operating results.

The Company continues to experience sales growth in its business. This growth has placed, and may continue to place, significant demands on its management and its operational and financial infrastructure. As the Company’s operations grow in size, scope, and complexity, it will need to improve and upgrade its systems and infrastructure to attract, service, and retain an increasing number of customers. The expansion of its systems and infrastructure will require the Company to commit substantial financial, operational, and technical resources in advance of an increase in the volume of business, with no assurance that the volume of business will increase. Any such additional capital investments will increase the Company’s cost base. Continued growth could also strain the Company’s ability to maintain reliable service levels for its customers, develop and improve its operational, financial, and management controls, enhance its reporting systems and procedures, and recruit, train, and retain highly skilled personnel. If the Company fails to achieve the necessary level of efficiency in its organization as it grows, its business, financial condition, and operating results could be harmed.

The Company has office locations in New York and Florida, and data centers in New York, Massachusetts, North Carolina, Florida, and Texas. If the Company is unable to effectively manage a large and geographically dispersed group of employees and contractors or to anticipate its future growth and personnel needs, its business may be adversely affected. As the Company expands its business, it adds complexity to its organization and must expand and adapt its operational infrastructure and effectively coordinate throughout its organization. As a result, the Company has incurred and expects to continue to incur additional expenses related to its continued growth.

The Company also anticipates that its efforts to expand internationally will entail the marketing and advertising of its services and brand and the development of localized websites. The Company does not have substantial experience in selling its solutions in international markets or in conforming to the local cultures, standards, or policies necessary to successfully compete in those markets, and it must invest significant resources in order to do so. The Company may not succeed in these efforts or achieve its customer acquisition or other goals. For some international markets, customer preferences and buying behaviors may be different, and the Company may use business or pricing models that are different from its traditional subscription model to provide cloud backup and related services to customers. The Company’s revenue from new foreign markets may not exceed the costs of establishing, marketing, and maintaining its international solutions, and therefore may not be profitable on a sustained basis, if at all.

The Company’s intended international expansion will subject it to risks typically encountered when operating internationally.

The Company intends to expand internationally which subjects it to new risks that it has not generally faced in the United States. These risks include:

Operating in international markets also requires significant management attention and financial resources. The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability.

The Company’s software contains encryption technologies, certain types of which are subject to U.S. and foreign export control regulations and, in some foreign countries, restrictions on importation and/or use. Any failure on the Company’s part to comply with encryption or other applicable export control requirements could result in financial penalties or other sanctions under the U.S. export regulations, including restrictions on future export activities, which could harm its business and operating results. Regulatory restrictions could impair the Company’s access to technologies that it seeks for improving its solutions and may also limit or reduce the demand for its solutions outside of the U.S.

The loss of the Company’s key personnel, or its failure to attract, integrate, and retain other highly qualified personnel, could harm its business and growth prospects.

The Company depends on the continued service and performance of its key personnel. In addition, many of the Company’s key technologies and systems are custom-made for its business by its personnel. The loss of key personnel, including key members of the Company’s management team, as well as certain of its key marketing, sales, product development, or technology personnel, could disrupt its operations and have an adverse effect on its ability to grow its business. In addition, several of the Company’s key personnel have only recently been employed by it, and the Company is still in the process of integrating these personnel into its operations. The Company’s failure to successfully integrate these key employees into its business could adversely affect its business.

To execute the Company’s growth plan, it must attract and retain highly qualified personnel. Competition for these employees is intense, and the Company may not be successful in attracting and retaining qualified personnel. The Company has from time to time in the past experienced, and it expects to continue to experience, difficulty in hiring and retaining highly-skilled employees with appropriate qualifications. New hires require significant training and, in most cases, take significant time before they achieve full productivity. The Company’s recent hires and planned hires may not become as productive as it expects, and it may be unable to hire or retain sufficient numbers of qualified individuals. Many of the companies with which it competes for experienced personnel have greater resources than it has. In addition, in making employment decisions, particularly in the internet and high-technology industries, job candidates often consider the value of the equity that they are to receive in connection with their employment. In addition, employees may be more likely to voluntarily exit the Company if the shares underlying their vested and unvested options, as well as unvested restricted stock units, have significantly depreciated in value resulting in the options they are holding is significantly above the market price of the Company’s common stock and the value of the restricted stock units decreasing. If the Company fails to attract new personnel, or fail to retain and motivate its current personnel, its business and growth prospects could be severely harmed.

Assertions by a third party that the Company’s solutions infringe its intellectual property, whether correct, could subject the Company to costly and time-consuming litigation or expensive licenses.

There is frequent litigation in the software and technology industries based on allegations of infringement or other violations of intellectual property rights. Any such claims or litigation may be time-consuming and costly, divert management resources, require the Company to change its services, require it to credit or refund subscription fees, or have other adverse effects on its business. Many companies are devoting significant resources to obtaining patents that could affect many aspects of the Company’s business. Third parties may claim that the Company’s technologies or solutions infringe or otherwise violate their patents or other intellectual property rights.

If the Company is forced to defend itself against intellectual property infringement claims, whether they have merit or are determined in its favor, it may face costly litigation, diversion of technical and management personnel, limitations on its ability to use its current websites and technologies, and an inability to market or provide its solutions. As a result of any such claim, the Company may have to develop or acquire non-infringing technologies, pay damages, enter into royalty or licensing agreements, cease providing certain services, adjust its marketing and advertising activities, or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to the Company, or at all.

Furthermore, the Company has licensed proprietary technologies from third parties that it uses in its technologies and business, and it cannot be certain that the owners’ rights in their technologies will not be challenged, invalidated, or circumvented. In addition to the general risks described above associated with intellectual property and other proprietary rights, the Company is subject to the additional risk that the seller of such technologies may not have appropriately created, maintained, or enforced their rights in such technology.

The Company relies on third-party software to develop and provide its solutions, including server software and licenses from third parties to use patented intellectual property.

The Company relies on software licensed from third parties to develop and offer its solutions. In addition, the Company may need to obtain future licenses from third parties to use intellectual property associated with the development of its solutions, which might not be available to the Company on acceptable terms, or at all. Any loss of the right to use any software required for the development and maintenance of the Company solutions could result in delays in the provision of its solutions until equivalent technology is either developed by the Company, or, if available from others, is identified, obtained, and integrated, which delay could harm its business. Any errors or defects in third-party software could result in errors or a failure of its solutions, which could harm its business.

If the Company is unable to protect its domain names, its reputation, brand, customer base, and revenue, as well as its business and operating results, could be adversely affected.

The Company has registered domain names for websites (“URLs”) that it uses in its business, such as www.datastoragecorp.com. If the Company is unable to maintain its rights in these domain names, its competitors or other third parties could capitalize on the Company’s brand recognition by using these domain names for their own benefit. In addition, although the Company owns the Company’s domain name under various global top-level domains such as .com and .net, as well as under various country-specific domains, it might not be able to, or may choose not to, acquire or maintain other country-specific versions of the Company’s domain name or other potentially similar URLs. Domain names similar to the Company have already been registered in the U.S. and elsewhere, and its competitors or other third parties could capitalize on its brand recognition by using domain names similar to the Company’s. The regulation of domain names in the U.S. and elsewhere is generally conducted by internet regulatory bodies and is subject to change. If the Company loses the ability to use a domain name in a particular country, it may be forced to either incur significant additional expenses to market its solutions within that country, including the development of a new brand and the creation of new promotional materials, or elect not to sell its solutions in that country. Either result could substantially harm its business and operating results. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars, or modify the requirements for holding domain names. As a result, the Company may not be able to acquire or maintain the domain names that utilize the Company’s name in all of the countries in which we currently conduct or intend to conduct business. Further, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights varies among jurisdictions and is unclear in some jurisdictions. The Company may be unable to prevent third parties from acquiring and using domain names that infringe, are similar to, or otherwise decrease the value of, its brand or its trademarks. Protecting and enforcing the Company’s rights in its domain names and determining the rights of others may require litigation, which could result in substantial costs, divert management attention, and not be decided favorably to the Company.

The Company’s stock price has fluctuated in the past and may be volatile in the future, and as a result, investors in its common stock could incur substantial losses.

The Company’s stock price has fluctuated in the past, has recently been volatile, and may be volatile in the future. By way of example, on May 16, 2022, the reported low sale price of the Company’s common stock was $3.10, and the reported high sales price was $3.80. For comparison purposes, on May 9, 2022, the price of the Company’s common stock closed at $2.14 per share, on May 16, 2022, its stock price closed at $3.45 per share, and on June 21, 2022, its stock price closed at $2.48 per share with no discernable announcements or developments by the Company or third parties (other than the filing of the Quarterly Report on Form 10-Q). The Company may incur rapid and substantial decreases in its stock price in the foreseeable future that are unrelated to its operating performance or prospects. In addition, the recent COVID-19 pandemic has caused broad stock market and industry fluctuations. The stock market has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in the Company’s common stock. The market price for the Company’s common stock may be influenced by many factors, including the following:

These broad market and industry factors may seriously harm the market price of the Company’s common stock, regardless of its operating performance. Since the stock price of its common stock has fluctuated in the past, has been recently volatile and may be volatile in the future, investors in its common stock could incur substantial losses. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against the Company, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect its business, financial condition, results of operations and growth prospects. There can be no guarantee that the Company’s stock price will remain at current prices or that future sales of its common stock will not be at prices lower than those sold to investors.

Additionally, recently, securities of certain companies have experienced significant and extreme volatility in stock price due to short sellers of shares of common stock, known as a “short squeeze.” These short squeezes have caused extreme volatility in those companies and in the market and have led to the price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company. Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment as the price per share has declined steadily as interest in those stocks has abated. While the Company has no reason to believe its shares would be the target of a short squeeze, there can be no assurance that it won’t be in the future, and you may lose a significant portion or all of your investment if you purchase the Company’s shares at a rate that is significantly disconnected from its underlying value.

Upon exercise of the Company’s outstanding options or warrants, it will be obligated to issue a substantial number of additional shares of common stock which will dilute its present shareholders.

The Company is obligated to issue additional shares of its common stock in connection with any exercise or conversion, as applicable, of its outstanding options, warrants, and shares of its convertible preferred stock. As of December 31, 2022, there were options and warrants outstanding into an aggregate of 2,720,584 shares of common stock. The exercise of warrants or options will cause the Company to issue additional shares of its common stock and will dilute the percentage ownership of its shareholders. In addition, the Company has in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other shareholders not participating in such exchange.

Offers or availability for sale of a substantial number of shares of the Company’s common stock may cause the price of its common stock to decline.

Sales of large blocks of the Company’s common stock could depress the price of its common stock. The existence of these shares and shares of common stock that may be issuable upon conversion or exercise, as applicable, of outstanding shares of convertible preferred stock, warrants and options create a circumstance commonly referred to as an “overhang” which can act as a depressant to the Company’s common stock price. The existence of an overhang, whether or not sales have occurred or are occurring, also could make the Company’s ability to raise additional financing through the sale of equity or equity-linked securities more difficult in the future at a time and price that we deem reasonable or appropriate. If the Company’s existing shareholders and investors seek to convert or exercise such securities or sell a substantial number of shares of its common stock, such selling efforts may cause significant declines in the market price of its common stock. In addition, the shares of the Company’s common stock included in the Units and underlying warrants sold in the offering will be freely tradable without restriction or further registration under the Securities Act. As a result, a substantial number of shares of the Company’s common stock may be sold in the public market following this offering. If there are significantly more shares of common stock offered for sale than buyers are willing to purchase, then the market price of the Company’s common stock may decline to a market price at which buyers are willing to purchase the offered common stock and sellers remain willing to sell its common stock.

The Company does not expect to declare any common stock cash dividends in the foreseeable future.

The Company does not anticipate declaring any cash dividends to holders of Data Storage common stock in the foreseeable future. Consequently, common stockholders may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

Because the Company may issue preferred stock without the approval of its shareholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire the Company and could depress its stock price.

In general, the Company’s Board may issue, without a vote of its shareholders, one or more additional series of preferred stock that has more than one vote per share. Without these restrictions, the Company’s Board could issue preferred stock to investors who support it and its management and give effective control of its business to its management. Additionally, the issuance of preferred stock could block an acquisition resulting in both a drop in the Company’s stock price and a decline in interest of its common stock. This could make it more difficult for shareholders to sell their common stock. This could also cause the market price of the Company’s common stock shares to drop significantly, even if its business is performing well.

Provisions of Nevada law could delay or prevent an acquisition of Data Storage, even if the acquisition would be beneficial to its stockholders and could make it more difficult for stockholders to change Data Storage’s management.

Data Storage Corporation is subject to anti-takeover provisions under Nevada law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for the Company’s securities. These provisions include: limitations on the ability to engage in any “combination” with an “interested stockholder” (each, as defined in the NRS) for two years from the date the person first becomes an “interested stockholder”; being subject to Sections 78.378 to 78.3793 of the NRS and allowing an “acquiring person” to obtain voting rights in “control shares” without shareholder approval; the ability of the Board to issue shares of currently undesignated and unissued preferred stock without prior stockholder approval; limitations on the ability of stockholders to call special meetings; and the ability of the Board to amend its amended Bylaws without stockholder approval. For more information, please see the section entitled “Description of Our Securities That We Are Offering-Nevada Anti-Takeover Statutes.”

~~As a smaller reporting company, we are not required to provide disclosure pursuant to this item.~~Not Applicable.

~~Our~~The Company currently has three leases for office space, with two offices located in Melville, NY, and one office in Boca Raton, FL. The Company’s principal offices are located at 48 South Service Road, Suite 203, Melville, NY 11747. We also maintain offices located at ~~535 Centerville Road, Warwick, RI 02886, and~~980 North Federal Highway, Suite 302, Boca Raton, FL 33432. The Company’s data centers are in New York, Massachusetts, ~~and~~ North Carolina, Florida, and Texas. ~~Our corporate telephone number is (212) 564-4922. We believe our~~The Company believes that its current offices and facilities are adequate for the near future.

From 2016 until August 31, 2019, we leased office space in Melville, NY for monthly payments of $8,382. Upon termination of the lease in August 2019, we entered into a new lease for a technology lab in a smaller space commencing on September 1, 2019. The term of this lease is for three years and 11 months and runs co-terminus with the Company’s existing lease in the same building. The base annual rent is $11,856 payable in equal monthly installments of $988.

A second lease for office space in Melville, NY, was entered into on November 20, 2017, which commenced on April 2, 2018. The term of this lease is five years and three months at $86,268 per year with an escalation of 3% per year with an ending date of July 31, 2023.

On July 31, 2021, the Company signed a three-year lease for approximately 2,880 square feet of office space at 980 North Federal Highway, Suite 302, Boca Raton, Florida. The commencement date of the lease is August 1, 2021. The monthly rent is approximately $4,820.

The lease for office space in Warwick, RI, called for monthly payments of $2,324 beginning February 1, 2015, which escalated to $2,460 on February 1, 2017. This lease commenced on February 1, 2015, and originally expired on January 31, 2019. We extended this lease until January 31, 2020, and this lease was further extended until January 31, 2021. The annual base rent was $31,176 payable in equal monthly installments of $2,598. We have satisfied the terms of the lease and no longer occupy this premise.

The Company leases technical space in New York, Massachusetts, North Carolina, and Florida. These leases are month to month and the monthly rent is approximately $43,650.

In 2020, the Company entered into a new technical space lease agreement in Dallas, TX. The lease term is 13 months and requires monthly payments of $1,403 and expires on July 31, 2023.

~~We are currently not~~From time to time, the Company may become involved in ~~any litigation that we believe could have a materially adverse effect on our financial condition~~legal proceedings or ~~results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or,~~be subject to claims arising in the ~~knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting DSC, its common stock, any~~ordinary course of its ~~subsidiaries~~business. The Company is not presently a party to any legal proceedings that, if determined adversely to it, would individually or ~~of DSC’s or DSC’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could~~taken together have a material adverse ~~effect.~~effect on its business, operating results, financial condition, or cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

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

~~A symbol was assigned for our securities so that our securities may be quoted for trading~~The Company’s common stock trades on ~~OTC Markets~~The NASDAQ Capital Market under the symbol “DTST”. Minimal trading occurred through the date of this Annual Report based on a limited float. There can be no assurance that a liquid market for our securities will ever develop. Transfer of our common stock may also be restricted under the securities or blue-sky laws of various states and foreign jurisdictions. Consequently, investors may not be able to liquidate their investments and should be prepared to hold the common stock for period of time.

As of ~~December 31, 2019,~~March 30, 2023, we had 4033 shareholders of record of ~~our~~the Company’s common ~~stock.~~stock, one of which was Cede & Co., a nominee for Depository Trust Company (“DTC”). All the shares of the Company’s common stock held by brokerage firms, banks and other financial institutions as nominees for beneficial owners are deposited into participant accounts at DTC and are therefore considered to be held or recorded by Cede & Co. as one stockholder.

~~DSC~~The Company has not declared or paid dividends on common stock since its formation and dodoes not anticipate paying dividends in the foreseeable future. The declaration or payment of dividends, if any, in the future, will be at the discretion of ~~DSC’s~~Data Storage’s Board of Directors (the “Board of Directors” or the “Board”) and will depend on the ~~then~~then- current financial condition, results of operations, capital requirements and other factors deemed relevant by the Board. ~~There are no contractual restrictions~~Each share of Series A Preferred Stock entitles its holder to receive cash dividends at a rate of ten percent (10%) per annum on ~~our ability~~the original issue price, compounding annually, in preference to ~~declare or pay dividends.~~holders of common stock. Preferred dividends are accrued quarterly. No Preferred shares are outstanding and no dividends have been paid to ~~date.~~

~~EQUITY COMPENSATION PLAN INFORMATION~~Recent Sales of Unregistered Securities

The Company did not sell any equity securities during the fiscal year ended December 31, 2022, that were not registered under the Securities Act, other than as previously disclosed in its filings with the SEC.

There were no issuer purchases of equity securities during the year ended December 31, 2022.

See ~~“Executive~~Part II-Item 12 under the heading “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters-Equity Compensation ~~“2008 Equity Incentive Plan” and “2010 Incentive Award Plan”~~Plan Information” of this Annual Report on ~~page 43~~Form 10-K for ~~DSC’s~~ equity compensation plan information.

During the past fiscal year, we issued stock options to several officers, directors and employees for the purchase of an aggregate amount 2,852,537 shares of common stock in reliance on an exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.

~~Not applicable.~~As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

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

The following discussion of our plan of operation and results of operations should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include, among others, those listed under “Forward-Looking Statements” and “Risk Factors” and those included elsewhere in this report.

Data Storage Corporation, (“DSC” or the “Company”) provides subscription based, long term agreements for disaster recovery solutions, Infrastructure as a Service (IaaS) and VoIP and carrier type solutions. Over 23.8% of our revenue is derived from equipment sales for cyber security, storage, IBM Power i systems and managed service solutions.

Our mission is to protect our client’s data, ensuring business continuity, assisting in their compliance requirements and providing better control over their digital information. The Company’s October 2016 acquisition of the assets of ABC Services, Inc. and ABC Services II, Inc. (collectively, “ABC”), and its acquisition of the remaining 50% of the assets of Secure Infrastructure and Services LLC, supports the Company’s acquisition strategy. These acquisitions accelerated our strategy into cloud based managed services, expanded cyber security solutions and our hybrid cloud solutions with the ability to provide equipment and expanded technical support.

The Company provides its solutions through its business development team and contracted distribution channels. DSC’s contracted, approved distributors have the ability to provide Recovery and Hybrid Cloud solutions, IBM and Intel IaaS cloud-based solutions without the distributor investing in infrastructure, data centers and telecommunications services as well as specialized technical staff whereby lowering their barrier of entry for them to provide these solutions to their client base.

DSC is a 19-year veteran in cloud storage and cloud computing providing disaster recovery, business continuity and compliance solutions that assist organizations in protecting their data, minimizing downtime while ensuring regulatory compliance. Serving the business continuity market, DSC’s clients save time and money, gain more control and better access to data and enable a high level of security for their data. Solutions include: Infrastructure as a Service specializing in IBM Power; data backup recovery and restore, high availability data replication; email archival and compliance; and eDiscovery; continuous data protection; data de- duplication; and, virtualized system recovery. DSC has forged significant relationships with leading organizations creating valuable partnerships.

Our IBM Power and Intel IaaS Cloud ensures enterprise level equipment and support, focusing on iSeries, AIX, Power, AS400 and our high-processing power for Intel. Our Disaster Recovery services for both Intel and IBM has a guaranteed back-to-work window. DSC is a one-stop source for managed services from VoIP to providing the client with equipment and software, monitoring, help desk and a full array of business continuity solutions.

The Company provides its solutions through its business development team and contracted distribution channels. DSC’s contracted approved distributors have the ability to provide our Recovery and IaaS solutions without capital investment thereby lowering their barrier of entry in providing these cloud solutions to their client base.

~~Headquartered~~headquartered in Melville, ~~NY,~~New York, together with ~~additional offices in Warwick, RI,~~its three subsidiaries, DSC ~~offers~~now CloudFirst Technologies, Flagship Solutions LLC and Nexxis, Inc. provides solutions and services to ~~businesses within the~~a broad range of clients in several industries, including healthcare, banking and finance, distribution services, manufacturing, construction, education, and ~~government industries.~~government. The subsidiaries maintain business development teams, as well as independent distribution companies. As an example, the Company’s distribution channel of companies provides long-term subscription-based disaster recovery and cloud infrastructure without investing in the infrastructure, data centers, telecommunications or specialized technical staff, which substantially lowers their barrier of entry in providing these solutions to their client base. The distribution company has typically provided equipment and software. However, a client’s awareness in 2022 of the ability to migrate to an IBM Power cloud infrastructure and disaster recovery affords the distributor the ability to maintain the client and create an annuity year after year. To further support that awareness, over 90,000 visitors arrived at the Company’s websites in 2022.

~~DSC derives~~During 2021, based on the May capital raise and the up list to Nasdaq, the Company added distribution, business development representatives, marketing, and technical personnel. Management continues to be focused on building the Company’s sales and marketing strategy and expanding its ~~revenues from~~technology assets throughout its data center network.

The Company’s business offices are in New York and Florida. The offices include a technology center and lab, adapted to meet the technical requirements of the Company’s clients. The Company maintains its own infrastructure, storage, and networking equipment required to provide subscription ~~services and~~ solutions ~~managed services, software and maintenance, equipment and onboarding provisioning. DSC maintains infrastructure and storage equipment~~ in ~~several technical~~seven geographically diverse data centers located in New York, Massachusetts, Texas, Florida and North ~~Carolina.~~Carolina, and in Canada, Toronto, and Barrie, serving clients in the United States and Canada.

~~DSC~~The Company’s Business Continuity Solutions allow clients to quickly recover from system outages, human and natural disasters, and cyber security attacks, such as Ransomware. The Company’s Managed Cloud Services starts with migration to the cloud and provides ongoing system support and management that enables its clients to run their software applications and technical workloads in a multi-cloud environment. The Company’s Cyber Security offerings include comprehensive consultation and a suite of data security, disaster recovery, and remote monitoring services and technologies that can be incorporated into the Company’s cloud solutions or be delivered as a standalone managed security offering covering the client site endpoint devices, users, servers, and equipment.

Solution architects and the Company’s business development teams work with organizations identifying and solving critical business problems. The Company carefully plans and manages the migration and configuration process, continuing the relationship and advising its clients long after the services have been implemented. As of this filing the Company provides our clients subscription-based, long-term agreements for cloud disaster recovery, cloud infrastructure, telecommunications solutions, and high processing on-site computing power and software solutions. While a significant portion of our revenue has been subscription-based, we also generate revenue from the sale of equipment and software for cybersecurity, data storage, IBM Power systems equipment and managed service solutions.

On May 31, 2021, the Company completed a merger (the “Merger”) under an Agreement and Plan of Merger (the “Merger Agreement”) with Flagship Solutions, LLC (“Flagship”) (a Florida limited liability company) and the Company’s wholly-owned subsidiary, Data Storage FL, LLC, a Florida limited liability company. Flagship is a provider of IBM solutions, managed services, cyber security and cloud solutions. The Company expects that Flagship’s business will be synergistic with the Company’s existing IBM business and anticipates meaningful operation efficiency of the two organizations. The Company also believes the Merger will provide the combined entities a comprehensive one-stop provider to cross-sell solutions across each organization’s respective enterprise, as well as middle-market customers. Key offerings for the combined companies are expected to include a wide array of multi-cloud information technology solutions in highly secure, reliable enterprise level cloud services for companies using IBM Power systems, Microsoft Windows and Linux, including: Infrastructure as a Service (IaaS), Disaster Recovery of digital information (DRaaS), and Cyber Security as a Service (CSaaS).

Flagship focuses on the IBM user community with solutions and services such as, equipment, software, cyber security, and managed cloud solutions globally. The Company expects that Flagship’s business will be synergistic with the Company’s existing IBM user community focus and anticipates meaningful operation efficiency through the integration the organizations. The Company also believes the Merger will also provide the combined entities a comprehensive one-stop provider to cross-sell solutions across each organization’s respective enterprise, as well as middle-market customers. Key offerings for the combined companies are expected to include a wide array of multi-cloud information technology solutions in highly secure, reliable enterprise level cloud services for companies using IBM Power systems, Microsoft Windows and Linux, including: cloud Infrastructure as a Service, Disaster Recovery of digital information, and Cyber Security as a Service. The Company intends to continue its ~~staffed technical~~strategy of growth through synergistic acquisitions.

The Company’s offices are in New York and ~~Rhode Island,~~Florida including technology centers, which ~~consist of modern offices and a technology suite~~are adapted to meet the ~~needs~~requirements of ~~a technology-based business.~~

~~DSC varies~~ its ~~use of resources, technology and work processes~~clients. In addition to ~~meet~~office staffing, the ~~changing opportunities and challenges presented by the market and the internal customer requirements.~~Company employs additional remote staff. The Company ~~supports clients twenty-four hours a day, 365 days a year.~~

maintains its infrastructure, storage and networking equipment required to provide our subscription solutions in seven geographically diverse data centers located in New York, Massachusetts, Texas, Florida, North Carolina and Canada.

Sales for the year ended December 31, 2022, increased by approximately 60% to $23,870,837 as compared to sales for the year ended December 31, 2021, or $14,876,227. The ~~reduction in Equipment and Software revenue in 2019 over 2018~~Company derives its sales from five types of services that we provide: infrastructure & disaster recovery / cloud services which is attributed to long term Company clients that refresh equipment based on a cycle and upgrade to new equipment. Software renewals and hardware maintenance continue to renew each year and are typically a constant revenue stream, unless the ~~Company migrates these clients to~~largest source of our Infrastructure as a Service solution, IaaS. This marketing migration program from on-premise equipment to our IBM Power Infrastructure as a Service will impact the period revenue and profit, however gross profit margins are higher on IaaS services, and long-term contract value improves. Changes in Managed Services and Other categories carry higher margins and are supportedsales, followed by our technical staff and are labor based services. Profit margins on these Managed Services and our Other category services carry higher than our average margin. Managed Services and Other classes of solutions and services are primarily based on fulfilling client projects requirements and client help desk support. Many clients utilize multiple services and solutions from the Company. While equipment and software sales, ~~decreased,~~managed services, professional fees, and Nexxis, VOIP and internet access services. The cloud infrastructure & disaster ~~recovery~~recovery/cloud services are subscription-based. We also provide equipment and ~~infrastructure as a service increased by $820,977 under new long-term contracts~~software and actively participate in collaboration with IBM to provide ~~these~~innovative business solutions to clients. The professional services ~~increasing our Company contract value.~~ are providing the client cloud infrastructure and or Disaster Recovery implementation services as well as time and materials billing. Substantially all of the Company’s sales were to customers in the United States, with less than 2% of its sales to international customers.

The following chart details the changes in ~~our operations~~the Company’s sales for the years ended December 31, ~~2019~~2022, and ~~2018,~~2021, respectively.

Cost of Sales.For the year ended December 31, ~~2019,~~2022, cost of sales was ~~$4,746,031, a decrease~~$15,787,544, an increase of ~~$681,959~~$7,328,427 or ~~13%~~87% compared to ~~$5,427,990~~$8,459,117 for the year ended December 31, ~~2018.~~2021. The ~~decrease is attributable~~increase of $7,328,427 was mostly related to the ~~decrease~~increase in ~~equipment~~overall sales and ~~software cost.~~

~~Operating Expenses.~~Impairment of goodwill . During the year ended December 31, 2022, the Company recorded an Impairment of goodwill of $2,322,000 regarding its Flagship segment.

Selling, general and administrative expenses. For the year ended December 31, ~~2019, operating~~2022, selling, general and administrative expenses were ~~$3,531,053,~~$9,837,308, an increase of ~~$407,001,~~$2,653,126, or ~~13%~~37%, as compared to ~~$3,124,052~~$7,184,182 for the year ended December 31, ~~2018.~~2021. The net ~~increase~~ [increase/decrease]is reflected in the chart below.

Salaries. Salaries increased as a result of the increased staff due to the Flagship merger, the hiring of our Chief Financial Officer and the increase in stock-based compensation.

Professional fees. Professional fees increased primarily due to ~~hiring~~ a ~~consultant as an employee within the finance department causing a decrease in professional fees from the prior year and increase in salaries in the current year.~~

~~Officer's Salaries~~~~increased by $87,346 based on a change to senior management compensation as approved by the Board.~~

~~Software as a Service Expense (SaaS)~~~~increased by~~$87,643. This is attributed to the expanding data gathering so management can make more informed decisions. Some of these services were previously done by consultants and have contributed to the deceased in professional fees.

~~Advertising Expenses~~ ~~increased primarily due to additional marketing campaigns for Nexxis.~~

~~Professional fees~~ ~~decreased primarily due to the company hiring a consultant as an employee and relying less on consultants for accounting services.~~

~~Commissions~~ ~~related to employee and outside contractor (channel partner) primarily increased due to~~new investor relations firm, an increase in ~~Nexxis’s sales.~~legal fees, and an increase in fees associated with being on NASDAQ.

~~All Other~~Advertising Expenses. Advertising Expenses increased primarily due to the ~~reduction~~Flagship merger and the company sponsoring American mixed martial arts events.

Commissions Expense. Commissions expenses increased due to the Flagship merger and the sales associated with Flagship.

Travel And Entertainment. Travel And Entertainment increased primarily due to the Flagship mergerand the lifting of Covid-19 restrictions.

Rent and Occupancy. Rent and Occupancy increased primarily due to the ~~allowance for doubtful accounts of $60,000~~Flagship merger and the WeWork in ~~2018.~~Austin, TX that started in January 2022.

Other Income (Expense).Interest expense for the year ended December 31, 2019 increased $78,663 to $177,451 from $98,788 for the year ended December 31, 2018. The increase is a result of the Company purchasing new equipment under operating lease agreements. This equipment is located in our data centers.

~~Net Income (Loss).~~~~Net~~ Other income for the year ended December 31, ~~2019 was $29,323, as compared~~2022, decreased $960,210 to ~~a net income of $236,671~~$(332,848) from $627,362 for the year ended December 31, ~~2018.~~

2021. The decrease in other income is primarily attributable to the increase in interest expense, the increase in impairment of deferred offering costs, and the decrease from the gain on forgiveness of debt from the PPP loan.

(Net Loss) before provision for income taxes.Net loss before provision for income taxes for the year ended December 31, 2022, was $4,408,863, as compared to a net loss of $139,710 for the year ended December 31, 2021.

The consolidated financial statements have been prepared using generally accepted accounting principles in the United States of America (“GAAP”) applicable for a going concern, which assumes that ~~DSC~~the Company will realize its assets and discharge its liabilities in the ordinary course of business. In 2020, we intend to continue to work to increase our presence in the cloud and business continuity marketplace specializing in IBM Power i and disaster recovery / business continuity marketplace utilizing our technical expertise, software and our capacity in our data centers.

To the extent ~~we are~~the Company is successful in growing ~~our~~its business, identifying potential acquisition targets, and negotiating the terms of such acquisition, and the purchase price ~~includes~~may include a cash component, ~~we plan~~the Company plans to use ~~our~~its working capital and the proceeds of any financing to finance such acquisition costs. ~~Our~~

The Company’s opinion concerning ~~our~~its liquidity is based on current information. If this information proves to be inaccurate, or if circumstances change, weThe Company may not be able to meet ~~our~~its liquidity needs, which will require a renegotiation of related party capital equipment leases, a reduction in advertising and / marketing programs, and/or a reduction in salaries for officers that are major ~~shareholders, such as senior management, entering into financing or stock purchase arrangements.~~shareholders.

The Company has long-term contracts to supply its subscription-based solutions that are invoiced to clients monthly. The Company believes its total contract value of its subscription contracts with clients based on the actual contracts that it has to date, exceeds $10 million. Further, the Company continues to see an uptick in client interest distribution channel expansion and in sales proposals. In 2023, the Company intends to continue to work to increase its presence in the IBM “Power I” infrastructure cloud and business continuity marketplace in the niche of IBM “Power” and in the disaster recovery global marketplace utilizing its technical expertise, data centers utilization, assets deployed in the data centers, 24 x 365 monitoring and software.

During the year ended December 31, ~~2019, DSC’s~~2022, Data Storage’s cash ~~increased $97,771~~decreased $9,849,081 to ~~$326,561~~$2,286,722 from ~~$228,790~~$12,135,803 December 31, ~~2018.~~2021. Net cash of ~~$799,666~~$663,801 was provided by ~~DSC’s~~Data Storage’s operating activities resulting primarily from ~~depreciation expense of $896,697.~~changes in assets and liabilities. Net cash of ~~$661,540~~$9,138,225 was used in investing activities from the purchase of short-term investments and capital expenditures. Net cash of $1,374,657 was used in financing activities resulting ~~from~~primarily in payments on ~~capital~~finance lease ~~obligations.~~obligations and payments for deferred offering costs. This was offset by the cash received for the exercised options.

~~DSC’s~~The Company’s working capital ~~deficit~~ was ~~$2,571,583~~$10,855,407 on December 31, 2022, decreasing by $1,229,408 from $12,084,815 at December 31, ~~2019, increasing by $369,352 from $2,202,231 at December 31, 2018.~~2021. The ~~increase~~decrease is primarily attributable to ~~an increase of dividend~~a decrease in cash, deferred revenue, and leases payable ~~line of credit,~~ related ~~party financing notes and operating leases in the amount of $624,000. The increase in short term liabilities~~party. This was offset by an increase in short-term investments, accounts receivables, prepaids and other current assets, accounts payable, and leases payable.

The Company does not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities”.

To supplement our consolidated financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we consider and are including herein Adjusted EBITDA, a Non-GAAP financial measure. We view Adjusted EBITDA as an operating performance measure and, as such, we believe that the GAAP financial measure most directly comparable to it is net income (loss). We define Adjusted EBITDA as net income adjusted for interest and financing fees, depreciation, amortization, stock-based compensation, and other non-cash income and expenses. We believe that Adjusted EBITDA provides us an important measure of operating performance because it allows management, investors, debt holders and others to evaluate and compare ongoing operating results from period to period by removing the impact of our asset base, any asset disposals or impairments, stock-based compensation and other non-cash income and expense items associated with our reliance on issuing equity-linked debt securities to fund our working capital.

Our use of Adjusted EBITDA has limitations as an analytical tool, and this measure should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP, as the excluded items may have significant effects on our operating results and financial condition. Additionally, our measure of Adjusted EBITDA may differ from other companies’ measure of Adjusted EBITDA. When evaluating our performance, Adjusted EBITDA should be considered with other financial performance measures, including various cash flow metrics, net income and other GAAP results. In the future, we may disclose different non-GAAP financial measures in order to help our investors and others more meaningfully evaluate and compare our future results of operations to our previously reported results of operations.

The following table shows our reconciliation of net income to adjusted EBITDA for the year ended December 31, 2022, and 2021, respectively:

We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

The Company’s financial instruments include cash, accounts receivable, accounts payable and, lease commitments. Management believes the estimated fair value of ~~$258,000.~~

~~Share Based Compensation~~these accounts on December 31 ,2022, approximate their carrying value as reflected in the balance sheet due to the short-term nature. The carrying values of certain of the Company’s notes payable and capital lease obligations approximate their fair values based upon a comparison of the interest rate and terms of such debt given the level of risk to the rates and terms of similar debt currently available to the Company in the marketplace.

Property and equipment are recorded at cost and depreciated over their estimated useful lives or the term of the lease using the straight-line method for financial statement purposes. Estimated useful lives in years for depreciation are five to seven years for property and equipment. Additions, betterments and replacements are capitalized, while expenditures for repairs and maintenance are charged to operations when incurred. As units of property are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income.

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders’ deficit as a reduction of additional paid-in capital generated as a result of the offering. Should the planned equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to other income and expenses in the consolidated statement of operations. In accordance with this policy, for the years ended December 31, 2022, and 2021, the Company expensed financing costs of $127,343 and $0, respectively.

The Company tests goodwill and other intangible assets for impairment on at least an annual basis. Impairment exists if the carrying value of a reporting unit exceeds its estimated fair value. To determine the fair value of goodwill and intangible assets, the Company uses many assumptions and estimates using a market participant approach that directly impact the results of the testing. In making these assumptions and estimates, the Company uses industry accepted valuation models and set criteria that are reviewed and approved by various levels of management.

The Company tests goodwill for impairment on an annual basis on December 31, or more frequently if events occur or circumstances change indicating that the fair value of the goodwill may be below its carrying amount. The Company has four reporting units. The Company uses an income-based approach to determine the fair value of the reporting units. This approach uses a discounted cash flow methodology and the ability of our reporting units to generate cash flows as measures of fair value of our reporting units.

During the year ended December 31, 2022, and 2021, the Company completed its annual impairment tests of goodwill. The Company performed the qualitative assessment as permitted by ASC 350-20 and determined for three of its reporting units that the fair value of those reporting units was more likely than not greater than their carrying value, including Goodwill. However, based on this qualitative assessment, the Company determined that the carrying value of the Flagship reporting units was more likely than not greater than its carrying value, including Goodwill. Based on the completion of the annual impairment test, the Company recorded an impairment charge of $2,322,000 and $0 for goodwill for the years ended December 31, 2022, and 2021, respectively.

The following is a description of the products and services from which the Company generates revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each:

Cloud Infrastructure provides clients the ability to migrate their on-premise computing and digital storage to DSC’s enterprise-level technical compute and digital storage assets located in Tier 3 data centers. Data Storage Corporation owns the assets and provides a turnkey solution whereby achieving reliable and cost-effective, multi-tenant IBM Power compute, x86/intel, flash digital storage, while providing disaster recovery and cyber security while eliminating client capital expenditures. The client pays a monthly fee and can increase capacity as required.

Clients can subscribe to an array of disaster recovery solutions without subscribing to cloud infrastructure. Product offerings provided directly from DSC are High Availability, Data Vaulting and retention solutions, including standby servers which allows clients to centralize and streamline their mission-critical digital information and technical environment while ensuring business continuity if they experience a cyber-attack or natural disaster Client’s data is vaulted, at two data centers with the maintenance of retention schedules for corporate governances and regulations all to meet their back to work objective in a disaster.

These services are performed at the inception of a contract. The Company provides professional assistance to its clients during the implementation processes. On-boarding and set-up services ensure that the solution or software is installed properly and function as designed to provide clients with the best solutions. In addition, clients that are managed service clients have a requirement for DSC to offer time and material billing supplementing the client’s staff.

The Company also derives both one-time and subscription-based revenue, from providing support, management and renewal of software, hardware, third party maintenance contracts and third-party cloud services to clients. The managed services include help desk, remote access, operating system and software patch management, annual recovery tests and manufacturer support for equipment and on-gong monitoring of client system performance.

The Company provides equipment and software and actively participates in collaboration with IBM to provide innovative business solutions to clients. The Company is a partner of IBM and the various software, infrastructure and hybrid cloud solutions provided to clients.

The Company provides VoIP, Internet access and data transport services to ensure businesses are fully connected to the internet from any location, remote and on premise. The company provides Hosted VoIP solutions with equipment options for IP phones and internet speeds of up to 10Gb delivered over fiber optics.

The Company reviews its long-lived assets for impairment whenever events and circumstances indicate that the carrying value of an asset might not be recoverable. An impairment loss, measured as the amount by which the carrying value exceeds the fair value is recognized if the carrying amount exceeds estimated un-discounted future cash flows.

The Company follows the requirements of FASB ASC 718-10-10,~~Share Based~~Share-Based Paymentswith regards to stock-based compensation issued to ~~employees. DSC~~employees and non-employees. The Company has agreements and arrangements that call for stock to be awarded to the employees and consultants at various times as compensation and periodic bonuses. The expense for this stock-based compensation is equal to the fair value of the stock price on the day the stock was awarded multiplied by the number of shares awarded.

The Company has a relatively low forfeiture rate of stock-based compensation and forfeitures are recognized as they occur.

The valuation methodology used to determine the fair value of the options issued during the ~~year was~~period is the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including the volatility of the stock price, the average ~~risk- free~~risk-free interest rate, and the weighted average expected life of the options. ~~Risk–free~~Risk-free interest rates are calculated based on continuously compounded ~~risk–free~~risk-free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common ~~stock~~Stock and does not intend to pay dividends on its Common ~~stock~~Stock in the foreseeable future. The expected forfeiture rate is estimated based on management’s best ~~estimate.~~assessment.

Estimated volatility is a measure of the amount by which DSC’s stock price is expected to fluctuate each year during the expected life of the award. ~~DSC’s~~The Company’s calculation of estimated volatility is based on historical stock prices ~~of entities~~ over a period equal to the expected life of the awards. ~~DSC uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.~~

~~DSC does not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities”.~~

DSC’s financial statements and related public financial information are based on the application of GAAP. GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 2 of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

In ~~May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,~~~~“Revenue from Contracts with Customers”~~ (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In addition, this guidance requires new or expanded disclosures related to the judgments made by companies when following this framework and additional quantitative disclosures regarding contract balances and remaining performance obligations. ASU 2014-09 may be applied using either a full retrospective approach, under which all years included in the financial statements will be presented under the revised guidance, or a modified retrospective approach, under which financial statements will be prepared under the revised guidance for the year of adoption, but not for prior years. Under the latter method, entities will recognize a cumulative catch-up adjustment to the opening balance of retained earnings at the effective date for contracts that still require performance by the entity.

ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. The Company developed an implementation plan to adopt this new guidance, which included an assessment of the impact of the new guidance on our financial position and results of operations. On January 1, 2018, the Company adopted the new accounting standard ASC 606,~~Revenue from Contracts with Customers~~ ~~and for all open contracts and related amendments as of January 1, 2018 using the modified retrospective method.~~

~~In February~~June 2016, the FASB issued ASU ~~2016-02,~~~~Leases,~~~~(“ASC 842”)~~No. 2016-13, Financial Instruments – Credit Losses (Topic 326), ~~which supersedes FASB ASC 840,~~~~Leases~~Measurement of Credit Losses on Financial Instruments (“ASU-2016-13”). ASU 2016-13 affects loans, debt securities, trade receivables, and ~~provides principles~~any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use (“ROU”) asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The standardfinancial assets. ASU 2016-13 is effective for ~~annual and interim periods~~the fiscal year beginning after December 15, ~~2018, with early adoption permitted upon issuance.~~2022, including interim periods within that fiscal year. The Company ~~adopted the standard effective January 1, 2019 and recognized operating lease liabilities of $319,236 with corresponding ROU assets of the same amount based~~expects that there would be no material impact on the ~~present value~~Company’s consolidated financial statements upon the adoption of ~~the remaining rental payments of our office locations.~~this ASU.

In ~~October 2016,~~November 2021, the FASB issued ASU ~~2016-16, “Income Taxes~~No. 2021-08, Business Combinations (Topic ~~740)~~805): ~~Intra-Entity Transfers of~~Accounting for Contract Assets ~~Other than Inventory”, which eliminates~~and Contract Liabilities from Contracts with Customers, issued by the ~~exception that prohibits~~Financial Accounting Standards Board. This ASU requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The update will generally result in the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.

In January 2017, the FASB issued ASU 2017-04 Intangibles-Goodwill and Other (“ASC 350”): Simplifying the Accounting for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of itscontract assets and contract liabilities ~~(including unrecognized assets and liabilities) following~~at amounts consistent with those recorded by the ~~procedure that would be required in determining~~acquiree immediately before the acquisition date rather than at fair value of assets acquired and liabilities assumed in a business combination. Instead, under ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 is effective for annual or any interim goodwill impairment tests for fiscal years beginning after December 15, 2019 and an entity should apply the amendments of ASU 2017-04 on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial statements.

~~In July 2017, the FASB issued ASU 2017-11,~~~~Earnings Per Share~~~~(“ASC 260”)~~~~, Distinguishing Liabilities from Equity~~~~(“ASC 480”)~~~~, and Derivatives and Hedging~~ (“ASC 815”). ASU 2017-11 is intended to simplify the accounting for financial instruments with characteristics of liabilities and equity. Among the issues addressed are: (i) determining whether an instrument (or embedded feature) is indexed to an entity’s own stock; (ii) distinguishing liabilities from equity for mandatorily redeemable financial instruments of certain nonpublic entities; and (iii) identifying mandatorily redeemable non-controlling interests. ASU 2017-11 is effective for the Company on January 1, 2019.value. The adoption of ASU ~~2011-11~~2021-08 did not have a material impact on ~~its~~the consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements for fair value measurements. We do not believe the updated guidance, which is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This guidance requires companies to apply the internal-use software guidance in Accounting Standards Codification (“ASC”) 350-40 to implementation costs incurred in a hosting arrangement that is a service contract to determine whether to capitalize certain implementation costs or expense them as incurred. We do not believe the new guidance, which is effective for fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

On January 1, 2019, the Company adopted the requirements of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The objective of this ASU, along with several related ASUs issued subsequently, is to increase transparency and comparability between organizations that enter into lease agreements. For lessees, the key difference of the new standard from the previous guidance (Topic 840) is the recognition of a right-of-use (ROU) asset and lease liability on the balance sheet. The most significant change is the requirement to recognize ROU assets and lease liabilities for leases classified as operating leases. The standard requires disclosures to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. As part of the transition to the new standard, the Company was required to measure and recognize leases that existed at January 1, 2019 using a modified retrospective approach for leases existing at the effective date. The Company has elected not to recognize a ROU asset and obligation for leases with an initial term of twelve months or less. The adoption of Topic 842 resulted in the recognition of an operating ROU asset and operating lease liability of $351,699 and $356,689, respectively as of January 1, 2019.

~~Interest Rate Sensitivity~~As a smaller reporting company, this item is not required.

Interest due on the Company’s loans is based upon the applicable stated fixed contractual rate with the lender. Interest earned on DSC bank accounts is linked to the applicable base interest rate. For the years ended December 31, 2019 and 2018, DSC had interest expense, net of interest income, of $177,201and $98,689 respectively. DSC believes that its results of operations are not materially affected by changes in interest rates.

DSC’s exposure to market risk is confined to its cash and cash equivalents, all of which have maturities of less than three months and bear and pay interest in U.S. dollars. We do not believe interest rate changes would have a material impact on us.

~~DSC does not hold any derivative instruments and does not engage in any hedging activities.~~

We have audited the accompanying ~~consolidated~~ balance sheets of Data Storage Corporation and ~~Subsidiary~~Subsidiaries (the Company) as of December 31, ~~2019~~2022 and ~~2018,~~2021, and the related ~~consolidated~~ statements of operations, stockholders’ equity (deficit),and cash flows for ~~each of~~ the years ~~in the two year period~~then ended, ~~December 31, 2019,~~ and the related notes (collectively referred to as the ~~consolidated~~ financial statements). In our opinion, the ~~consolidated~~ financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2019~~2022 and ~~2018,~~2021 and the results of its operations and its cash flows for ~~each of~~ the years ~~in the two year period~~then ended, ~~December 31, 2019,~~ in conformity with accounting principles generally accepted in the United States of America.

These ~~consolidated~~ financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s ~~consolidated~~ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the ~~consolidated~~ financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the ~~consolidated~~ financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the ~~consolidated~~ financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

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

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The Company uses the discounted cash flow model to estimate the fair value of each reporting unit, which requires management to make subjective estimates and assumptions related to forecasts of cash flows such as revenue growth rates and estimates of the weighted average cost of capital rate. Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both. Management determined that the carrying value of its Flagship reporting unit exceeded the fair value as of the measurement date and as a result, an impairment of $2.3 million was recognized in the fourth quarter.

Given the significant judgments made by management to estimate the fair value of the Flagship reporting unit, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the forecasts of cash flows, such as revenue growth rates, and estimates of the weighted average cost of capital rate, required a high degree of auditor judgment.

The primary procedures we performed to address this critical audit matter included:

~~The accompanying notes are an integral part of these consolidated Financial Statements.~~

F-6

DATA STORAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

~~DATA STORAGE CORPORATION AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~


	Year Ended December 31,
	2022			2021
Cash Flows from Operating Activities:
Net (loss) income	$	(4,408,863	)	$	259,921
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,225,911			1,284,345
Stock based compensation		734,479			171,798
Gain on forgiveness of debt		—			(798,840	)
Impairment of deferred offering costs and financing costs associated with canceled financing efforts		127,343			—
Impairment of goodwill		2,322,000			—
Loss on disposal of equipment		—			44,732
Deferred income taxes, release of valuation allowance		—			(399,631	)
Changes in Assets and Liabilities:
Accounts receivable		(1,118,469	)		(440,517	)
Other assets		54,788			(6,417	)
Prepaid expenses and other current assets		(48,265	)		(169,355	)
Right of use asset		195,817			(180,407	)
Accounts payable and accrued expenses		1,864,188			(142,233	)
Deferred revenue		(85,799	)		(163,770	)
Operating lease liability		(199,329	)		179,684
Net Cash Provided by (Used in) Operating Activities		663,801			(360,690	)
Cash Flows from Investing Activities:
Investor deposit		—			(25,000	)
Capital expenditures		(127,257	)		(455,835	)
Purchase of marketable securities		(9,010,968	)		-
Cash acquired in business acquisition		—			212,068
Cash consideration for business acquisition		—			(6,149,343	)
Net Cash Used in Investing Activities		(9,138,225	)		(6,418,110	)
Cash Flows from Financing Activities:
Proceeds from line of credit		—			50,000
Repayments of finance lease obligations related party		(867,741	)		(968,420	)
Repayments of finance lease obligations		(386,509	)		(156,845	)
Payments for deferred offering costs		(127,343	)		—
Proceeds from issuance of common stock and warrants		—			16,944,380
Cash received for the exercise of Warrants		—			3,381,271
Cash received for the exercise of options		6,934			—
Repayments of Dividend payable		—			(1,179,357	)
Repayment of line of credit		—			(50,024	)
Net Cash (Used in) Provided by Financing Activities		(1,374,657	)		18,021,005

Increase (decrease) in Cash and Cash Equivalents		(9,849,081	)		11,242,205

Cash and Cash Equivalents, Beginning of Period		12,135,803			893,598

Cash and Cash Equivalents, End of Period	$	2,286,722		$	12,135,803
Supplemental Disclosures:
Cash paid for interest	$	127,871		$	116,682
Cash paid for income taxes	$	—		$	—
Non-cash investing and financing activities:
Accrual of preferred stock dividend	$	—		$	63,683
Assets acquired by finance lease	$	1,094,051		$	164,754

2019 2018

Sales $ 8,483,608 $ 8,887,402

Cost of sales 4,746,031 5,427,990

Gross Profit 3,737,577 3,459,412

Selling, general and administrative 3,531,053 3,124,052

Income from Operations 206,524 335,360

Other Income (Expense)
Interest income 250 99
Interest expense (177,451 ) (98,788 )
Total Other Income (Expense) (177,201 ) (98,689 )

Income before provision for income taxes 29,323 236,671

Provision for income taxes — —

Net Income 29,323 236,671

Non-controlling interest in consolidated subsidiary 40,537 23,122

Net Income attributable to Data Storage Corp 69,860 259,793

Preferred Stock Dividends (124,312 ) (113,012 )

Net Income (Loss) Attributable to Common Stockholders $ (54,452 ) $ 146,781

Earning (Loss) per Share – Basic $ 0.00 $ 0.00
Earning (Loss) per Share – Diluted $ 0.00 $ 0.00
Weighted Average Number of Shares - Basic 128,156,678 128,139,418
Weighted Average Number of Shares - Diluted 128,156,678 131,939,979

~~The accompanying notes are an integral part of these consolidated Financial Statements.~~

The accompanying notes are an integral part of these consolidated Financial Statements.

F-7

~~DATA STORAGE CORPORATION AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

Twelve Months Ended December 31,
2019 2018
Cash Flows from Operating Activities:
Net Income $ 29,323 $ 236,671
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 896,697 602,532
Stock based compensation 41,340 32,003 
Changes in Assets and Liabilities: —   —
Accounts receivable (160,191 ) (124,852 )
Other assets —  9,923
Prepaid expenses and other current assets 87,163 (47,674 )
Employee loan —  3,000
Right of use asset (324,267 ) — 
Accounts payable and accrued expenses (81,862 ) (98,774 )
Deferred revenue (2,464 ) (89,353 )
Deferred rent (18,890 ) 17,829
Operating lease liability 332,817 —
Net Cash Provided by Operating Activities 799,666 541,305
Cash Flows from Investing Activities:
               Capital expenditures (40,355 ) (69,783 )
Net Cash Used in Investing Activities (40,355 ) (69,783 )
Cash Flows from Financing Activities:
Repayments of capital lease obligations (741,940 ) (347,871 )
Cash received for the exercised of options 5,400 — 
Advance from Credit Line 75,000 — 
Net Cash Used in Financing Activities (661,540 ) (347,871 )
Increase in Cash and Cash Equivalents 97,771 123,651
Cash and Cash Equivalents, Beginning of Year 228,790 105,139
Cash and Cash Equivalents, End of Year $ 326,561 $ 228,790
Supplemental Disclosures:
Cash paid for interest $ 177,451 $ 98,788
Cash paid for income taxes $ —   $ 5,604
Non-cash investing and financing activities:
Accrual of preferred stock dividend $ 124,312 $ 113,012
Assets acquired by finance lease $ 1,560,021 $ —

~~The accompanying notes are an integral part of these consolidated Financial Statements.~~

DATA STORAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~OF STOCKHOLDERS’ EQUITY~~

FOR THE YEAR ENDED DECEMBER 31, ~~2018 AND 2019~~ 2022

Preferred Stock Common Stock Additional Paid-in Accumulated Non-Controlling
Total Stockholders’
Equity/
Shares Amount Shares Amount Capital Deficit Interest (Deficit)

Balance, January 1, 2018 1,401,786 $ 1,402 128,139,418 $ 128,139 $ 17,377,986 $ (15,924,376 ) $ (4,389 ) $ 1,578,762

Stock-based Compensation —   —   —   —   32,003 —   —   32,003
Net Income —   —   —   —   259,793 (23,122 ) 236,671
Cum Adj Adoption of ASC606 —   —   —   —   —   41,971 —   41,971
Preferred Stock —   —   —   —   —   (113,012 ) —   (113,012 )
Balance, December 31, 2018 1,401,786 1,402 128,139,418 128,139 17,409,989 (15,735,624 ) (27,511 ) 1,776,395
Stock Options Issued as Compensation —   —   —   —   15,342 —   —   15,342
Common Stock Issued as Compensation —   —   200,000 200 25,800 —   —   26,000
Stock Options Exercise 100,000 100 5,300 —   —   5,400
Net Income —   —   —   —   —   69,860 (40,537 ) 29,323
Preferred Stock —   —   —   —   —   (124,312 ) —   (124,312 )

Balance, December 31, 2019 1,401,786 $ 1,402 128,439,418 $ 128,439 $ 17,456,431 $ (15,790,076 ) $ (68,048 ) $ 1,728,148

~~The accompanying notes are an integral part of these consolidated Financial Statements~~

~~DATA STORAGE CORPORATION AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~YEARS ENDED DECEMBER 31, 2019 AND 2018~~

Note 1 - –Basis of Presentation, Organization and Other Matters

Data Storage Corporation ~~("DSC"~~(“DSC” or the ~~"Company"~~“Company”) provides subscription based, long term agreements for disaster recovery solutions, ~~Infrastructure as a Service (IaaS)~~cloud infrastructure, Cyber Security and ~~VoIP type~~Voice and Data solutions.

Headquartered in Melville, NY, ~~with additional offices in Warwick, RI,~~ DSC offers solutions and services to businesses within the healthcare, banking and finance, distribution services, manufacturing, construction, education, and government industries.

DSC derives its revenues from subscription services and solutions, managed services, software and maintenance, equipment and onboarding provisioning. DSC maintains infrastructure and storage equipment in ~~several~~seven technical centers in New York, ~~New Jersey,~~ Massachusetts, Texas, Florida, North Carolina and ~~North Carolina.~~Canada.

~~Going Concern Analysis~~

~~Under ASU 2014-15 Presentation of Financial Statements-Going Concern (Subtopic 205-40) (“ASC 205-40”),~~On May 31, 2021, the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effectscompleted a merger of ~~plans that have not been fully implemented as of the date the financial statements are issued. Management has assessed~~Flagship Solutions, LLC (“Flagship”) (a Florida limited liability company) and the Company’s ~~ability to continue as~~wholly-owned subsidiary, Data Storage FL, LLC. Flagship is a ~~going concern in accordance with the requirement~~provider of ~~ASC 205-40.~~Hybrid Cloud solutions, managed services and cloud solutions.

~~As reflected in the consolidated financial statements, the Company had~~

On January 27, 2022, we formed Information Technology Acquisition Corporation a ~~net income (loss) available to shareholders of $(54,452) and $146,781~~special purpose acquisition company for the ~~years ended December 31, 2019 and 2018, respectively. As~~purpose of ~~December 31, 2019, DSC had cash of $326,561 and~~entering into a ~~working~~merger, capital ~~deficiency of $2,571,583. As a result, these conditions raised substantial doubt regarding our ability to continue as a going concern.~~

~~During the year ended December 31, 2019, the Company generated cash from operations of $799,666~~stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with continued revenue growth of subscription solutions as well as improved gross profit margins. Further, the company has no capital expenditure commitments and the company’s offices have been consolidated and fully staffed and with sufficient room for growth.one or more businesses or entities.

If necessary, management also determined that it is probable that related party sources of debt financing and capitalized leases can be renegotiated based on management’s history of being able to raise and refinance debt through related parties.

As a result of the current favorable trends of improving cash flow, the Company concluded that the initial conditions which raised substantial doubt regarding the ability to continue as a going concern has been mitigated.

Note 2 - –Summary of Significant Accounting Policies

Principles of Consolidation

The ~~consolidated financial~~Consolidated Financial statements include the accounts of ~~(i)~~ the Company ~~(ii)~~and its wholly-owned ~~subsidiary, Data Storage~~subsidiaries, (i) CloudFirst Technologies Corporation, a Delaware corporation, (ii) Data Storage FL, LLC, a Florida limited liability company, (iii) Flagship Solutions, LLC, a Florida limited liability company, (iv) Information Technology Acquisition Corporation, a Delaware Corporation, and ~~(iii)~~(v) its majority-owned subsidiary, Nexxis Inc, a Nevada ~~corpoartion.~~corporation. All ~~significant~~ inter-company transactions and balances have been eliminated in consolidation.

Business combinations.

We account for business combinations under the acquisition method of accounting, which requires us to recognize separately from goodwill, the assets acquired, and the liabilities assumed at their acquisition date fair values. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in our consolidated statements of operations.

Accounting for business combinations requires our management to make significant estimates and assumptions, especially at the acquisition date including our estimates for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition contingencies, and contingent consideration, where applicable. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Critical estimates in valuing certain of the intangible assets we have acquired include future expected cash flows from product sales, customer contracts and acquired technologies, and estimated cash flows from the projects when completed and discount rates. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

F-8

Reclassifications

Certain prior period amounts in the consolidated financial statements thereto have been reclassified where necessary to conform to the current year’s presentation. These reclassifications did not affect the prior period’s total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities. During the year ended December 31, 2022, we adopted a change in presentation on our consolidated statements of operations in order to present technician salaries in cost of sales, the presentation of which is consistent with our peers. Prior periods have been revised to reflect this change in presentation.

Recently Issued and Newly Adopted Accounting Pronouncements

~~In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other - Internal~~ Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This guidance requires companies to apply the internal-use software guidance in Accounting Standards Codification (“ASC”) 350-40 to implementation costs incurred in a hosting arrangement that is a service contract to determine whether to capitalize certain implementation costs or expense them as incurred. We do not believe the new guidance, which is effective for fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.of Estimates

~~Use of Estimates~~

The preparation of financial statements in conformity with ~~U.S. generally accepted accounting principles~~US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

~~Reclassifications~~

Certain prior year amounts in the consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current year presentation. These reclassifications did not affect the prior period total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities.

Estimated Fair Value of Financial Instruments

The Company’s financial instruments include cash, accounts receivable, accounts payable ~~line of credit~~ and ~~due to related parties.~~lease commitments. Management believes the estimated fair value of these accounts aton December 31 ~~2019~~,2022, approximate their carrying value as reflected in the balance ~~sheets~~sheet due to the short-term ~~nature of these instruments or the use of market interest rates for debt instruments.~~nature. The carrying values of certain of the Company’s notes payable and capital lease obligations approximate their fair values based upon a comparison of the interest rate and terms of such debt given the level of risk to the rates and terms of similar debt currently available to the Company in the marketplace.

~~Cash, Cash Equivalents~~Assets and ~~Short-Term Investments~~Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. Assets and liabilities recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring basis include items such as property, plant and equipment, operating lease right-of-use assets, goodwill and other intangible assets. These assets are measured using Level 3 inputs, if determined to be impaired.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity or remaining maturity at the time of purchase, of three months or less to be cash equivalents.

Investments

Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in earnings.

The following table sets forth a summary of the changes in equity investments, at cost that are measured at fair value on a non-recurring basis:

Schedule of changes in equity investments measured at fair value
	For the year ended December 31, 2022
	Total
As of January 1, 2022	$	—
Purchase of equity investments		9,010,968
Unrealized gains		—
As of December 31, 2022	$	9,010,968

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments and assets subjecting the Company to concentration of credit risk consist primarily of cash and cash equivalents, short-term investments and trade accounts receivable. The Company’s cash and cash equivalents are maintained at major U.S. financial institutions. Deposits in these institutions may exceed the amount of insurance provided on such deposits.

The Company’s customers are primarily concentrated in the United States.

The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts on factors surrounding the credit risk of specific customers, historical trends, and other information.

~~For the year ended~~

F-9

As of December ~~31, 2019,~~30, 2022, DSC had ~~three~~two customers with an accounts receivable balance representing ~~38%~~23% and 14% of total accounts receivable. ~~For the year ended~~As of December 31, ~~2018, DSC~~2021, the Company had one customer with an accounts receivable balance representing ~~11%~~16% of total accounts receivable.

For the year ended December 31, 2022, the Company had two customers that accounted for 18% and 11% of revenue. For the year ended December 31, 2021, the Company had one customer that accounted for 14% of revenue.

Accounts Receivable/Allowance for ~~Doubtful Accounts~~Credit Losses

The Company sells its services to customers on an open credit basis. Accounts ~~receivable~~receivables are uncollateralized, non-interest-bearing customer obligations. Accounts receivables are typically due within 30 days. The allowance for ~~doubtful accounts~~credit losses reflects the estimated accounts receivable that will not be collected due to credit ~~losses and allowances.~~losses. Provisions for estimated uncollectible accounts receivable are made for individual accounts based upon specific facts and circumstances including criteria such as their age, amount, and customer standing. Provisions are also made for other accounts receivable not specifically reviewed based upon historical experience. Clients are invoiced in advance for services as reflected in deferred revenue on the Company’s balance sheet.

Property and Equipment

~~Property and Equipment~~

Property and equipment isare recorded at cost and depreciated over their estimated useful lives or the term of the lease using the straight-line method for financial statement purposes. Estimated useful lives in years for depreciation are 5five to 7seven years for property and equipment. Additions, betterments and replacements are capitalized, while expenditures for repairs and maintenance are charged to operations when incurred. As units of property are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income.

Deferred Offering Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financing as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders’ deficit as a reduction of additional paid-in capital generated as a result of the offering. Should the planned equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to other income and expenses in the consolidated statement of operations. In accordance with this policy, for the years ended December 31, 2022, and 2021, the Company expensed financing costs of $127,343 and $0, respectively.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At December 31, ~~2019~~2022, and ~~2018,~~December 31, 2021, the Company had a full valuation allowance against its deferred tax assets.

In December 2017, the 2017 Tax Cuts and Jobs Act (Tax Act) was enacted into law and the new legislation contains several key tax provisions that affected us, including a reduction of the corporate income tax rate to 21% effective January 1, 2018, among others. We are required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, re-measuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets and liabilities.

Per FASB ASC 740-10, disclosure is not required of an uncertain tax position unless it is considered probable that a claim will be asserted and there is a more-likely-than-not possibility that the outcome will be unfavorable. Using this guidance, as of December 31, ~~2019~~2022, and ~~2018,~~2021, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company’s ~~2018, 2017~~2022, 2021, 2020, and ~~2016~~2019 Federal and State tax returns remain subject to examination by their respective taxing authorities. Neither of the Company’s Federal or State tax returns are currently under examination.

F-10

Goodwill and Other Intangibles

~~In accordance with GAAP, the~~The Company tests goodwill and other intangible assets for impairment on at least an annual basis. ~~Goodwill impairment~~Impairment exists if the ~~net book~~carrying value of a reporting unit exceeds its estimated fair value. The impairment testing is performed in two steps: (i) the Company determines impairment by comparing the fair value of a reporting unit with its carrying value, and (ii) if there is impairment, the Company measures the amount of impairment loss by comparing the implied fair value of goodwill with the carrying amount of that goodwill. To determine the fair value of ~~these~~goodwill and intangible assets, the Company uses many assumptions and estimates using a market participant approach that directly impact the results of the testing. In making these assumptions and estimates, the Company uses industry accepted valuation models and set criteria that are reviewed and approved by various levels of management.

Revenue Recognition

~~Revenue Recognition~~

Nature of goods and services

Cloud Infrastructure ~~as a Service (IaaS)~~ and Disaster Recovery Revenue

~~Subscription services such~~Cloud Infrastructure provides clients the ability to migrate their on-premises computing and digital storage to DSC’s enterprise-level technical compute and digital storage assets located in Tier 3 data centers. Data Storage Corporation owns the assets and provides a turnkey solution whereby achieving reliable and cost-effective, multi-tenant IBM Power compute, x86/intel, flash digital storage, while providing disaster recovery and cyber security while eliminating client capital expenditures. The client pays a monthly fee and can increase capacity as ~~Infrastructure as a Service, Platform as a Service and Disaster Recovery,~~required.

Clients can subscribe to an array of disaster recovery solutions without subscribing to cloud infrastructure. Product offerings provided directly from DSC are High Availability, Data ~~Vault Services~~Vaulting and ~~DRaaS type~~retention solutions, ~~(cloud)~~including standby servers which allows clients to centralize and streamline their ~~technical and mission critical~~mission-critical digital information and technical ~~environment.~~environment while ensuring business continuity if they experience a cyber-attack or natural disaster Client’s data ~~can be backed up, replicated, archived~~is vaulted, at two data centers with the maintenance of retention schedules for corporate governances and ~~restored~~regulations all to meet their back to work objective in a disaster. ~~Infrastructure as a Service (IaaS) assist clients to achieve reliable and cost-effective computing and high availability solutions while eliminating or supplementing Capex.~~

Managed Services

These services are performed at the inception of a contract. The Company ~~offers~~provides professional assistance to its clients during the ~~installation~~implementation processes. On-boarding and set-up services ensure that the solution or software is installed properly and function as designed to provide clients with the best solutions. In addition, clients that are managed service clients have a requirement for DSC to offer time and material ~~billing.~~billing supplementing the client’s staff.

F-11

The Company also derives ~~revenues in the area~~both one-time and subscription-based revenue, from providing support, management and ~~management~~renewal of ~~its~~ software, hardware, third party maintenance contracts and third-party cloud services to clients. The managed services include help desk, remote access, operating system and software patch management, annual recovery tests and manufacturer support for equipment and on-gong monitoring of client system performance.

Equipment and Software ~~Revenue~~

The Company provides equipment and software and actively participate in collaboration with IBM to provide innovative business solutions to clients. The ~~company~~Company is a partner of IBM and the various software, infrastructure and hybrid cloud solutions provided to clients.

Nexxis Voice over Internet and Direct Internet Access

Disaggregation of revenue

In the following table, revenue is disaggregated by major product line, geography, and timing of revenue ~~recognition (in thousands of USD).~~recognition.

For the Year
Ended December 31, 2019
Schedule of revenue is disaggregated by major product
For the Years							For the Years
Ended December 31, 2022							Ended December 31, 2022
	United States		International		Total			United States		International		Total
Infrastructure & Disaster Recovery/Cloud Service	$	5,223,868	$	213,816	$	5,437,684		$	8,116,523	$	183,855	$	8,300,378
Equipment and Software		1,784,658		—		1,784,658			6,194,634		—		6,194,634
Managed Services		365,767		—		365,767			8,323,329		122,126		8,445,455
Professional Fees		411,475		—		411,475
Nexxis VoIP Services		484,024		—		484,024			799,675		—		799,675
Other									130,695		—		130,695
Total Revenue	$	8,269,792	$	213,816	$	8,483,608		$	23,564,856	$	305,981	$	23,870,837

For the Year	For the Year							For the Year
Ended December 31, 2018
Ended December 31, 2021								Ended December 31, 2021
		United States		International		Total			United States		International		Total
Infrastructure & Disaster Recovery/Cloud Service		$	4,530,722	$	85,985	$	4,616,707
Cloud Infrastructure & Disaster Recovery									$	7,105,892	$	97,354	$	7,203,246
Equipment and Software			3,221,704		—		3,221,704			2,080,463		—		2,080,463
Managed Services			603,716		—		603,716			4,661,777		—		4,661,777
Professional Fees			315,658		—		315,658
Nexxis VoIP Services			129,617		—		129,617
Nexxis Services										772,344		—		772,344
Other										158,397		—		158,397
Total Revenue		$	8,801,417	$	85,985	$	8,887,402		$	14,778,873	$	97,354	$	14,876,227

For the Year
For the Years						For the Years
Ended December 31,	Ended December 31,					Ended December 31,
Timing of revenue recognition		2019		2018			2022		2021
Products transferred at a point in time		$	2,196,133	$	3,537,362		$	6,325,328	$	2,694,923
Products and services transferred over time			6,287,475		5,350,040			17,545,509		12,181,304
Total Revenue		$	8,483,608	$	8,887,402		$	23,870,837	$	14,876,227

Contract receivables are recorded at the invoiced amount and are uncollateralized, non-interest-bearing client obligations. Provisions for estimated uncollectible accounts receivable are made for individual accounts based upon specific facts and circumstances including criteria such as their age, amount, and client standing.

Sales are generally recorded in the month the service is provided. For clients who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract.

Transaction price allocated to the remaining performance obligations

F-12

The Company has the following performance obligations:

~~Disaster Recovery (“DR”)~~Data Vaulting: ~~subscription-based~~Subscription-based cloud service that ~~instantly encrypted~~encrypts and transfers data to a secure ~~location~~Tier 3 data center and further replicates the data to a second Tier 3 DSC ~~data~~technical center where it remains encrypted. Ensuring client retention schedules for corporate compliance and disaster recovery. Provides 10for twenty-four (24) hour or less recovery time

~~Data Vaulting: subscription-based cloud backup solution that uses~~ and utilizes advanced data reduction, reduplication technology to shorten back-up and restore ~~time~~time.

High Availability ~~(“HA”)~~: A managed cloud subscription-based service ~~which offers~~that provides cost-effective mirroring software replication technology and provides one (1) hour or less recovery time for a client to be back in business.


4)3)	Cloud Infrastructure ~~as a Service (“IaaS”)~~: subscription-based cloud service ~~offers~~provides for “capacity on-demand” for IBM Power and X86 Intel server ~~systems~~systems.


5)4)	~~Message Logic~~Internet: ~~subscription-based~~Subscription-based service, ~~offers cost effective email archiving, data analytics, compliance monitoring and retrieval of email messages which cannot be deleted~~

~~Internet: subscription-based service offers~~offering continuous internet connection ~~in the event of outages~~combined with FailSAFE which provides disaster recovery for both a clients’ voice and data environments.


7)5)	Support and Maintenance: ~~subscription-based~~Subscription based service offers support for clients on their servers, firewalls, desktops or ~~software and ad hoc support and help desk~~software. Services are provided 24x7x365 to our clients.


8)6)	~~Initial~~Implementation / Set-Up Fees: ~~on boarding~~Onboarding and set-up ~~services~~for cloud infrastructure and disaster recovery as well as Cyber Security.


9)7)	Equipment sales: ~~sale~~Sale of servers and data storage equipment to the ~~end user~~client.


~~10)~~9)	License: ~~granting~~Granting SSL certificates and ~~other licenses~~licenses.

Disaster Recovery ~~with Stand-By Servers, High Availability, Data Vaulting, IaaS, Message Logic, Support~~ and ~~Maintenance, and Internet~~Business Continuity Solutions

Subscription services ~~such as the above allows~~allow clients to access ~~a set of~~ data or receive services for a predetermined period of time. As the client obtains access at a point in time ~~but~~and continues to have access for the remainder of the subscription period, the client is considered to simultaneously receive and consume the benefits provided by the entity’s performance as the entity performs. Accordingly, the related performance obligation is considered to be satisfied ratably over the contract term. As the performance obligation is satisfied evenly across the term of the contract, revenue ~~should be~~is recognized on a straight-line basis over the contract term.

Initial Set-Up Fees

The Company accounts for set-up fees as a separate performance obligation. Set-up services are performed ~~one time~~one-time and accordingly the revenue ~~should be~~is recognized at the point in time, ~~that the service~~and is ~~performed,~~non-refundable, and the Company is entitled to the payment.

Equipment ~~sales~~Sales

~~For~~The obligation for the ~~Equipment~~equipment sales ~~performance obligation,~~is such the control of the product ~~transfers~~transfer is at a point in time (i.e., when the goods have been shipped or delivered to the client’s location, depending on shipping terms). Noting that the satisfaction of the performance obligation, in this sense, does not occur over time, ~~as defined within ASC 606-10-25-27 through 29,~~ the performance obligation is considered to be satisfied at a point in time ~~(ASC 606-10-25-30)~~ when the obligation to the client has been fulfilled (i.e., when the goods have left the shipping facility or delivered to the client, depending on shipping terms).

F-13

License –- granting SSL certificates and other licenses

~~In the case of Licensing performance obligation,~~Performance obligations as it relates to licensing is that the control of the product transfers, either at a point in time or over time, depending on the nature of the license. The revenue standard identifies two types of licenses of IP: (i) a right to access IPIP; and, (ii) a right to use IP. To assist in determining whether a license provides a right to use or a right to access IP, ASC 606 defines two categories of IP: Functional and Symbolic. The Company’s license arrangements typically do not require the Company to make its proprietary content available to the client either through a download or through a direct connection. Throughout the life of the contract the Company does not continue to provide updates or upgrades to the license granted. Based on the guidance, the Company considers its license offerings to be akin to functional IP and ~~will recognize~~recognizes revenue at the point in time the license is granted and/or renewed for a new period.

Payment ~~terms~~Terms

The typical terms of ~~the~~subscription contracts ~~typical~~ range from 12 to 36 months, with auto-renew ~~options.~~options extending the contract for an additional term. The Company invoices clients one month in advance for its services, ~~plus~~in addition to any contractual data overages or for additional ~~services provided.~~services.

Warranties

The Company offers guaranteed service levels ~~and performance~~ and service guarantees on some of its contracts. These ~~warrantees~~warranties are not sold separately and ~~according to ASC 606-10-50-12(a)~~ are accounted as “assurance warranties”.

Significant ~~judgement~~Judgement

In the ~~instances that contract~~instance where contracts have multiple performance ~~obligation,~~obligations the Company uses judgment to establish a stand-alone price for each performance ~~obligation separately.~~obligation. The price for each performance obligation is determined by reviewing market data for similar services as well as the Company’s historical pricing of each individual service. The sum of each performance obligation ~~was~~is calculated to determine the aggregate price for the individual services. ~~Next the~~The proportion of each individual service to the aggregate price ~~was~~is determined. ~~That~~The ratio ~~was~~is applied to the total contract price in order to allocate the transaction price to each performance obligation.

Impairment of Long-Lived Assets

~~In accordance with FASB ASC 360-10-35, we review our~~The Company reviews its long-lived assets for impairment whenever events and circumstances indicate that the carrying value of an asset might not be recoverable. An impairment loss, measured as the amount by which the carrying value exceeds the fair value is recognized if the carrying amount exceeds estimated ~~undiscounted~~un-discounted future cash flows.

Advertising Costs

The Company expenses the costs associated with advertising as they are incurred. The Company incurred ~~a net impact of $259,920~~$966,268 and ~~$216,784~~$396,303 for advertising costs for the ~~years~~year ended December 31, ~~2019~~2022, and ~~2018,~~2021, respectively.

~~Stock Based~~Stock-Based Compensation

~~DSC~~

F-14

Estimated volatility is a measure of the amount by which DSC’s stock price is expected to fluctuate each year during the expected life of the award. ~~DSC’s~~The Company’s calculation of estimated volatility is based on historical stock prices ~~of these entities~~ over a period equal to the expected life of the awards. ~~DSC uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.~~

Net Income (Loss) Per Common Share

~~In accordance with FASB ASC 260-10-5 Earnings Per Share, basic~~Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) adjusted for income or loss that would result from the assumed conversion of potential common shares from contracts that may be settled in stock or cash by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.

The following table sets forth the information needed to compute basic and diluted earnings per share for the years ended December 31, ~~2019~~2022, and ~~2018:~~2021:

Schedule of Earning per share basic and diluted
						Year Ended December 31,
	December 31,					2022			2021
	2019			2018
Net Income (Loss) Available to Common Shareholders	$	(54,452	)	$	146,781	$	(4,356,802	)	$	204,161

Weighted average number of common shares - basic		128,156,678			128,139,418		6,775,140			5,075,716
Dilutive securities
Options		—			3,667,227		—			229,826
Warrants		—			133,334		—			1,034,583
Weighted average number of common shares - diluted		128,156,678			131,939,979		6,775,140			6,340,125

Earnings (Loss) per share, basic	$	0.00		$	0.00	$	(0.64	)	$	0.04
Earnings (Loss) per share, diluted	$	0.00		$	0.00	$	(0.64	)	$	0.03

The following table sets forth the number of potential shares of common stock that have been excluded from diluted net income (loss) per share net income (loss) per share because their effect was anti-dilutive:

December 31,
2019 2018
Options 8,425,824 2,098,292
Warrants 133,334 —
8,559,158 2,098,292

Schedule of anti-dilutive income (loss) per share
	Year ended December 31,
	2022		2021
Options		301,391		37,641
Warrants		2,419,193		1,384,610
		2,720,584		1,422,251

F-15

Note 3 - Prepaids and other current assets

Prepaids and other current assets consist of the following:

Schedule of Prepaids and other current assets
	December 31,		December 31,
	2022		2021
Prepaid Marketing & Promotion	$	4,465	$	—
Prepaid Subscriptions and license		439,088		409,985
Prepaid Maintenance		45,216		80,227
Prepaid Insurance		54,564		—
Other		41,333		46,189
Total prepaids and other current assets	$	584,666	$	536,401

Note 4- Property and Equipment

~~Note 3 - Property and Equipment~~

Property and equipment, at cost, consist of the following:

Property and equipment
	December 31,				December 31,			December 31,
	2019		2018		2022			2021
Storage equipment	$	756,236	$	756,236	$	60,288		$	476,887
Website and software		533,417		533,418
Furniture and fixtures		27,131		25,975		20,860			19,491
Leasehold improvements		16,846		13,104		20,983			20,983
Computer hardware and software		1,218,464		1,211,658		93,062			317,729
Data center equipment		4,341,993		2,753,320		6,973,295			5,760,146
		6,894,087		5,293,711
Gross Property and equipment						7,168,488			6,595,236
Less: Accumulated depreciation		4,705,256		4,005,338		(4,956,698	)		(4,657,765	)
Net property and equipment	$	2,188,831	$	1,288,373	$	2,211,790		$	1,937,471

Depreciation expense for the ~~years~~year ended December 31, ~~2019~~ 2022, and ~~2018~~2021 was ~~$699,918~~$946,989 and ~~$405,199,~~$959,974, respectively.

Note 45 - Goodwill and Intangible Assets

Goodwill and intangible assets consisted of the following:

			December 31, 2019
Schedule of intangible assets and goodwill
	Estimated life in years		Gross amount		Accumulated Amortization		Net		Estimated life in years		Gross amount		December 31, 2022, Accumulated Amortization		Net
Intangible assets not subject to amortization
Goodwill		Indefinite	$	3,015,700	$	—	$	3,015,700		Indefinite	$	4,238,671	$	—	$	4,238,671
Trademarks		Indefinite		294,268		—		294,268		Indefinite		514,268		—		514,268

Total intangible assets not subject to amortization				3,309,968		—		3,309,968				4,752,939		—		4,752,939
Intangible assets subject to amortization
Customer lists		5 - 15		897,274		897,274		—		7		2,614,099		1,167,075		1,447,024
ABC acquired contracts		5		310,000		196,334		113,666		5		310,000		310,000		—
SIAS acquired contracts		5		660,000		418,000		242,000		5		660,000		660,000		—
Non-compete agreements		4		272,147		272,147		-		4		272,147		272,147		—
Website and Digital Assets										3		33,002		18,650		14,352
Total intangible assets subject to amortization				2,139,421		1,783,755		355,666				3,889,248		2,427,872		1,461,376
Total Goodwill and Intangible Assets			$	5,449,389	$	1,783,755	$	3,665,634			$	8,642,187	$	2,427,872	$	6,214,315

~~Scheduled amortization over the next two years as follows:~~

Years ending December 31,
2020 $ 194,000
2021 161,666
Total $ 355,666

~~Amortization expense for the years ended December 31, 2019 and 2018 were $196,779 and $197,333 respectively.~~

F-16

Scheduled amortization over the next five years are as follows:

	Schedule of amortization over the next two years
Twelve months ending December 31,
	2023	$	277,560
	2024		271,078
	2025		267,143
	2026		267,143
	2027		267,143
	Thereafter		111,309
	Total	$	1,461,376

Amortization expense for the year ended December 31, 2022, and 2021 was $278,922 and $324,371 respectively.

Note ~~5 –Leases~~6-Leases

Operating Leases

The Company currently ~~has three~~maintains two leases for office space ~~with two offices~~ located in Melville, ~~NY, and one office in Warwick, RI.~~NY.

The first lease for office space in Melville, NY was assumed as part of the Company’s acquisition of ABC in 2016, and called for monthly payments of $8,382 and expiring August 31, 2019. Upon termination of the lease in August 2019, the Company entered into a new lease for a technology lab in a smaller space commencingcommenced on September 1, 2019. The term of this lease is for three years and 11eleven months and runs co-terminus with our existing lease in the same building. The base annual rent is ~~$10,764~~ $11,856 payable in equal monthly installments of ~~$897.~~$988.

A second lease for office space in Melville, NY, was entered into on November 20, 2017, which commenced on April 2, 2018. The term of this lease is five years and three months at ~~$86,268~~$86,268 per year with an escalation of 3% per year ~~with an ending~~and expires on July 31, 2023.

On July 31, 2021, the Company signed a three-year lease for approximately 2,880 square feet of office space at 980 North Federal Highway, Boca Raton, FL. The commencement date of ~~July 31, 2023.~~the lease was August 2, 2021. The monthly rent is approximately $4,820.

The Company leases ~~rack~~cages and racks for technical space in Tier 3 data centers in New York, Massachusetts, North Carolina and ~~North Carolina.~~Florida. These leases are month to ~~month and the~~month. The monthly rent is approximately ~~$25,000.~~

~~Subsequent to December 31, 2019, the~~$39,000. The Company ~~entered into a new rack~~also leases technical space ~~lease agreement~~ in Dallas, TX. The lease term is 13thirteen months and monthly payments are $1,403. The lease term expires on July 31, 2023.

On January 1, 2022, the Company entered into a lease agreement for office space with WeWork in Austin, TX. The lease term is six months and requires monthly payments of ~~$1,905.~~$1,470 and expires on June 30, 2022. Subsequent to June 30, 2022, the company is on a $3,073month-to-month lease with WeWork in Austin, TX.

The lease for office space in Warwick, RI, calls for monthly payments of $2,324 beginning February 1, 2015 which escalated to $2,460 on February 1, 2017. This lease commenced on February 1, 2015 and expired on January 31, 2019. The Company extended this lease until January 31, 2020. The annual base rent shall be $30,348 payable in equal monthly installments of $2,529.

F-17

Finance Lease Obligations ~~– Related Party~~

On ~~April~~June 1, ~~2018,~~2020, the Company entered into a lease agreement with ~~Systems Trading Inc. (“Systems Trading”)~~a finance company to ~~refinance all leases into one lease. This~~lease technical equipment. The lease obligation is payable ~~to Systems Trading with bi-monthly~~in monthly installments of ~~$23,475.~~$5,008. The lease carries an interest rate of 5%7% and is a ~~four -year~~three-year lease. The term of the lease ends ~~April 16, 2022. Systems Trading is owned and operated by the Company’s President, Hal Schwartz.~~June 1, 2023.

On June 29, 2020, the Company entered into a lease agreement for technical equipment with a finance company. The lease obligation is payable in monthly installments of $5,050. The lease carries an interest rate of 7% and is a three-year lease. The term of the lease ends June 29, 2023.

On July 31, 2020, the Company entered into a lease agreement for technical equipment with a finance company. The lease obligation is payable in monthly installments of $4,524. The lease carries an interest rate of 7% and is a three-year lease. The term of the lease ends July 31, 2023.

On November 1, 2021, the Company entered into a lease agreement with a finance company for technical equipment. The lease obligation is payable in monthly installments of $3,152. The lease carries an interest rate of 6% and is a three-year lease. The term of the lease ends September 21, 2024.

On January 1, 2022, the Company entered into a lease agreement with a finance company for technical equipment. The lease obligation is payable in monthly installments of $17,718. The lease carries an interest rate of 5% and is a three-year lease. The term of the lease ends January 1, 2025.

On January 1, 2022, the Company entered into a technical equipment lease with a finance company. The lease obligation is payable in monthly installments of $2,037. The lease carries an interest rate of 6% and is a three-year lease. The term of the lease ends January 1, 2025.

Finance Lease Obligations – Related Party

On April 1, 2018, the Company entered into a lease agreement with Systems Trading Inc. (“Systems Trading”) to refinance all equipment leases into one lease. This lease obligation is payable to Systems Trading with bi-monthly installments of $23,475. The lease carries an interest rate of 5% and is a four-year lease. The term of the lease ends April 16, 2022. Systems Trading is owned and operated by Harold Schwartz the president of CloudFirst.

On January 1, 2019, the Company entered into a lease agreement with Systems Trading. This lease obligation is payable to Systems Trading with monthly installments of ~~$29,592.~~$29,592. The lease carries an interest rate of ~~6.75%~~6.75% and is a five-year lease. The term of the lease ends December 31, ~~2023.~~2023.

On April 1, 2019, the Company entered into two lease agreements with Systems Trading to add ~~new~~ data center equipment. The first lease calls for monthly ~~payments~~installments of ~~$1,328~~$1,328 and expires on March 1, ~~2022.~~2022. It carries an interest rate of 7%7%. The second lease calls for monthly ~~payments~~installments of ~~$461~~$461 and expires on March 1, ~~2022.~~2022. It carries an interest rate of ~~6.7%~~6.7%.

On January 1, 2020, the Company entered into a ~~new~~ lease agreement with Systems Trading ~~Inc.~~ to lease equipment. The lease obligation is payable to Systems Trading with monthly installments of ~~$10,534.~~$10,534. The lease carries an interest rate of 6%6% and is a three-year lease. The term of the lease ends January 1, ~~2023.~~2023.

~~We determine~~On March 4, 2021, the Company entered into a lease agreement with Systems Trading effective April 1, 2021. This lease obligation is payable to Systems Trading with monthly installments of $1,567 and expires on March 31, 2024. The lease carries an interest rate of 8%.

On January 1, 2022, the Company entered into a lease agreement with Systems Trading effective January 1, 2022. This lease obligation is payable to Systems Trading with monthly installments of $7,145 and expires on April 1, 2025. The lease carries an interest rate of 8%.

On April 1, 2022, the Company entered into a lease agreement with Systems Trading effective May 1, 2022. This lease obligation is payable to Systems Trading with monthly installments of $6,667 and expires on February 1, 2025. The lease carries an interest rate of 8%.

F-18

The Company determines if an arrangement contains a lease at inception. ~~ROU~~Right of Use “ROU” assets represent ~~our~~the Company’s right to use an underlying asset for the lease term and lease liabilities represent ~~our~~its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. ~~Our~~The Company’s lease term includes options to extend the lease when it is reasonably certain that weit will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet, per the election of the practical ~~expedient noted above.~~expedient. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. ~~We recognize~~The Company recognizes lease expense for these leases on a straight-line basis over the lease term. ~~We recognize~~The Company recognizes variable lease payments in the period in which the obligation for those payments is incurred. Variable lease payments that depend on an index or a rate are initially measured using the index or rate at the commencement date, otherwise variable lease payments are recognized in the period incurred. A discount rate of 7%5% was used in preparation of the ROU asset and operating liabilities.

The components of lease expense were as follows:

Year Ended
December 31, 2019
Finance lease:
Amortization of assets, included in depreciation and amortization expense $ 674,040
Interest on lease liabilities, included in interest expense 174,322
Operating lease:
Amortization of assets, included in total operating expense 69,428
Interest on lease liabilities, included in total operating expense 24,168
Total net lease cost $ 941,958

~~Supplemental balance sheet information related to leases was as follows~~

~~Operating Leases~~

Operating lease ROU asset	$	324,267
Schedule of components of lease expense
			Year Ended December 31, 2022
Finance leases:
Amortization of assets, included in depreciation and amortization expense			$	672,511
Interest on lease liabilities, included in interest expense				127,871
Operating lease:
Amortization of assets, included in total operating expense				200,417
Interest on lease liabilities, included in total operating expense				16,643
Total net lease cost			$	1,017,442
Supplemental balance sheet information related to leases was as follows:

Operating Leases:

Operating lease right-of-use asset			$	226,501

Current operating lease liabilities		101,505	$	160,657
Noncurrent operating lease liabilities		231,312		71,772
Total operating lease liabilities	$	332,817	$	232,429

	December 31, 2022
Finance leases:
Property and equipment, at cost	$	5,521,716
Accumulated amortization		(3,431,562	)
Property and equipment, net	$	2,090,154

Current obligations of finance leases	$	880,491
Finance leases, net of current obligations		537,483
Total finance lease liabilities	$	1,417,974

December 31, 2019
Finance leases:
Property and equipment, at cost $ 3,596,400
Accumulated amortization (1,524,552 )
Property and equipment, net 2,071,848

Current obligations of finance leases $ 833,148
Finance leases, net of current obligations, 1,713,122
Total finance lease liabilities $ 2,546,270

Supplemental cash flow and other information related to leases ~~was~~were as follows:

Schedule of supplemental cash flow and other information related to leases
	Year Ended December 31, 2019			Year Ended December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases	$	8,550		$	199,329
Financing cash flows related to finance leases	$	741,940		$	1,254,249

Weighted average remaining lease term (in years):
Operating leases		8.12			1.28
Finance leases		2.71			1.30

Weighted average discount rate:
Operating leases		7.00	%		5	%
Finance leases		6.00	%		7	%

F-19

Long-term obligations under the operating and finance leases at December 31, ~~2019~~2022, mature as follows:

For the Year ending December 31,	Operating Leases			Finance Leases
2020	$	101,505		$	939,972
2021		104,549			939,972
2022		107,718			571,498
Schedule of long-term obligations under the operating and finance leases
For the Twelve Months Ended December 31,							Operating Leases			Finance Leases
2023		64,284			355,104		$	175,296		$	946,217
2024		—			—			63,983			504,942
2025								—			52,009
Total lease payments		378,055			2,806,546			239,279			1,503,168
Less: Amounts representing interest		(45,239	)		(260,276	)		(6,850	)		(85,194	)
Total lease obligations		332,817			2,546,270			232,429			1,417,974
Less: Current		(101,505	)		(833,148	)
	$	231,312		$	1,713,122
Less: long-term obligations								(71,772	)		(537,483	)
Total current							$	160,657		$	880,491

As of December 31, ~~2019, we~~2022, the Company had no additional significant operating or finance leases that had not yet commenced. Rent expense under all operating leases for the ~~twelve months~~year ended December 31, ~~2019~~2022, and ~~2018~~2021 was ~~$228,881~~ $212,948 and ~~$251,814,~~$184,131, respectively.

Note 67 - Commitments and Contingencies

~~Revolving Credit Facility~~

As part of the Flagship acquisition the Company acquired a licensing agreement for marketing related materials with a National Football League team. The Company has approximately $1.3 million in payments over the next 5 years.

F-20

Note 8 – Note Payable

On ~~January 31, 2008,~~April 30, 2020, the Company ~~entered into~~was granted a ~~revolving credit line with~~loan from a ~~bank. The credit facility provides for $100,000 at prime plus 0.5% and is secured by all assets~~banking institution, in the principal amount of $481,977 (the “Loan”), pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the ~~Company~~Coronavirus Aid, Relief, and ~~personally guaranteed by~~Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The Loan, which was in the ~~Company’s principal shareholder. As~~form of a Note dated April 30, 2020, matures on April 30, 2022, and bears interest at a fixed rate of 1.00% per annum, payable monthly commencing on November 5, 2020. Funds from the loan may only be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments. Management used the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. During the year ended December 31, ~~2019, and 2018 the balance was $75,000 and $0 respectively.~~

~~Note 7 – Long Term Debt~~

~~Note Payable~~

~~In connection with the 2012 acquisition of Message Logic, LLC,~~2021, the Company ~~acquired software subject to~~recorded interest of $6,140. During the year ended December 31, 2021, the PPP loan and accrued interest were forgiven and the Company recorded a ~~UCC filing~~gain on forgiveness of debt on the Consolidated Statements of Operations.

On June 1, 2021, the Company assumed the PPP loan of Flagship Solutions, LLC in the amount of ~~$350,000 plus accrued interest. On September 5, 2014~~$307,300. During the year ended December 31, 2021, the Company ~~entered into an agreement whereby~~recorded interest of $3,423. During the year ended December 31, 2021, the PPP loan and accrued interest were forgiven and the Company ~~paid all arrears interest over 7 months at $3,910 per month. In addition,~~recorded a gain on forgiveness of debt on the ~~Company agreed to make monthly interest payments at $1,553 per month with the principal balance~~Consolidated Statements of $350,000 payable on April 30, 2016. The Company stopped making interest only payments on October 25, 2018. There has been no default notice from the bank. The Company is in the process of negotiating a final settlement.Operations.

Note 9 - Stockholders’ (Deficit)

~~Note 8 - Stockholders’ (Deficit)~~

Capital Stock

The Company has 260,000,000 authorized shares of capital stock, consisting of 250,000,000 shares of ~~common stock,~~ Common Stock, par value ~~$0.001,~~$0.001, and 10,000,000 shares of Preferred Stock, par value ~~$0.001~~$0.001 per share.

On May 13, 2021, the Company entered into an underwritten public offering of an aggregate of 1,600,000 units, each consisting of one share of the Company’s Common Stock, par value $0.001 per share, together with one warrant to purchase one share of Common Stock at an exercise price equal to $7.425 per share of Common Stock.

The public offering price was $6.75 per Unit and the underwriters agreed to purchase 1,600,000 Units at a 7.5% discount to the public offering price. The Company granted the representative a 45-day option to purchase an additional 240,000 shares of Common Stock and/or an additional 240,000 Warrants, in any combination thereof, to cover over-allotments. On May 15, 2021, the representative exercised the over-allotment option to purchase an additional 240,000 Warrants to purchase 240,000 shares of Common Stock. The net proceeds from the offering were $9.5 million.

F-21

On May 14, 2021, the Company effected a 1-for-40 reverse stock split. As a result, all share information in the accompanying financial statements has been adjusted as if the reverse stock split happened on the earliest date presented.

On July 21, 2021, the Company entered into a securities purchase agreement with certain accredited institutional investors resulting in the raise of $8,305,000 in gross proceeds to the Company. Pursuant to the terms of the purchase agreement, the Company agreed to sell, (i) an aggregate of 1,375,000 shares of the Company’s Common Stock, par value $0.001 per share and (ii) Warrants to purchase an aggregate of 1,031,250 shares of the Company’s Common Stock at an exercise price of $6.15 per share, subject to adjustment.

The placement agent was entitled to a cash fee of 6.5% of the gross proceeds of the Offering and the reimbursement for certain out-of-pocket expenses up to $50,000. The net proceeds from the offering were $7.5 million.

During the year ended December 31, ~~2019,~~2021, employees exercised 6,592 options via cashless exercise, into 5,060 shares of common stock.

During the year ended December 31, 2021, warrant holders exercised 455,390Warrants into Common Stock. The Company received $3,381,271 for these Warrants.

On May 1, 2022, the Company issued ~~to its Chief Technology Officer 200,000~~125,000 shares of ~~common stock as compensation with~~its Restricted Common Stock to employees in exchange for services at a ~~total~~fair value of ~~$26,000.~~$400,000.

During the year ended December 31, 2022, employees exercised 3,334 options into shares of Common Stock. The Company received $6,934 for these options.

Common Stock Options

~~2008 Equity Incentive Plan~~

In October 2008, the Company adopted, the Euro Trend, Inc. 2008 Equity Incentive Plan (the “2008 Plan). Under the 2008 Plan, we may grant options (including incentive stock options) to purchase our common stock or restricted stock awards to our employees, consultants or non-employee directors. The 2008 Plan is administered by the Board of Directors. Awards may be granted pursuant to the 2008 Plan for 10 years from the effective date of the 2008 Plan. Any grant under the 2008 Plan may be repriced, replaced or regranted at the discretion of the Board of Directors. From time to time, we may issue awards pursuant to the 2008 Plan.

The material terms of options granted under the 2008 Plan (all of which have been nonqualified stock options) are consistent with the terms described in the footnotes to the “Outstanding Equity Awards at Fiscal Year-End December 31, 2017” table below, including five-year graded vesting schedules and exercise prices equal to the fair market value of our common stock on the date of grant. Stock grants made under the 2008 Plan have not been subject to vesting requirements. The 2008 Plan was terminated with respect to the issuance of new awards as of February 3, 2013. There are 369,839 options outstanding under the 2008 Plan as of December 31, 2019.

~~2010 Incentive Award Plan~~

On August 12, 2010, the Company adopted the Data Storage Corporation 2010 Incentive Award Plan (the “2010 Plan”) with 2,000,000 shares of common stock available for issuance under the terms of the 2010 Plan. On April 23, 2012, the Company amended and restated the 2010 Plan to change the name of the 2010 Plan to the “Amended and Restated Data Storage Corporation Incentive Award Plan” (the “Plan”). On September 25, 2013, by written consent in lieu of a meeting by the stockholders owning a majority of the outstanding shares of Common Stock of the Company and by unanimous written consent of the Board of Directors in lieu of a meeting, the Plan was amended and restated to reserve 5,000,000 shares of common stock available for issuance under the terms of the Plan. On June 20, 2017, by written consent in lieu of a meeting by the stockholders owning a majority of the outstanding shares of Common Stock of the Company and by unanimous written consent of the Board of Directors in lieu of a meeting, the Plan was amended and restated to reserve 8,000,000 shares of common stock available for issuance under the terms of the Plan. On July 1, 2019, by written consent in lieu of a meeting by the stockholders owning a majority of the outstanding shares of Common Stock of the Company and by unanimous written consent of the Board of Directors in lieu of a meeting, the Plan was amended and restated to reserve 10,000,000 shares of common stock available for issuance under the terms of the Plan The Plan is intended to promote the interests of the Company by attracting and retaining exceptional employees, consultants, directors, officers and independent contractors (collectively referred to as the “Participants”) and enabling such Participants to participate in the long-term growth and financial success of the Company. Under the Plan, the Company may grant stock options, which are intended to qualify as “incentive stock options” under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, stock appreciation rights and restricted stock awards, which are restricted shares of common stock (collectively referred to as “Incentive Awards”). Incentive Awards may be granted pursuant to the Plan for 10 years from the Effective Date. From time to time, we may issue Incentive Awards pursuant to the Plan. Each of the awards will be evidenced by and issued under a written agreement. There are 8,055,985 options outstanding under the Plan as of December 31, 2019.

If an incentive award granted under the Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for future awards under the Plan. The number of shares subject to the Plan, and the number of shares and terms of any Incentive Award may be adjusted in the event of any change in our outstanding common stock by reason of any stock dividend, spin-off, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares, or similar transaction.

~~There are 1,944,015 shares available for future grants under the plans.~~

A summary of the Company’s ~~option~~options activity and related information follows:

Number of
Shares
Under Options Range of
Option Price
Per Share Weighted
Average
Exercise Price
Options Outstanding at January 1, 2018 5,052,148 $ 0.02 – 0.85 $ 0.28
Options Granted 1,022,004 0.35 – 0.65 0.37
Expired/Cancelled (308,633 ) 0.02 – 0.14 0.27
Options Outstanding at December 31, 2018 5,765,519 $ 0.02 – 0.65 $ 0.26
Options Granted 2,852,537 0.05 0.05
Exercised (100,000 ) 0.05 0.05
Expire/Cancelled (92,232 ) 0.05 0.05
Options Outstanding at December 31, 2019 8,425,824 $ 0.05 – 0.65 $ 0.17

Options Exercisable at December 31, 2019 4,599,199 $ 0.05 – 0.65 $ 0.21

Schedule of option activity and related information
	Number of					Weighted		Weighted
	Shares			Range of		Average		Average
	Under			Option Price		Exercise		Contractual
	Options			Per Share		Price		Life
Options Outstanding at January 1, 2020		207,748		$	2.00 - 15.76	$	5.20		6.6
Options Granted		82,157			3.03 - 5.80		4.50		10
Exercised		(6,592	)		2.00		2.00		—
Expired/Cancelled		(15,846	)		3.00 - 14.00		5.89		—
Options Outstanding at December 31, 2021		267,467		$	2.00 - 16.00	$	5.19		6.94
Options Granted		117,343			1.48 - 5.87		2.72		10
Exercised		(3,334	)		2.00 - 2.16		2.08		—
Expired/Cancelled		(80,085	)		2.00 - 16.00		7.49		—
Options Outstanding at December 31, 2022		301,391		$	2.00 - 15.76	$	3.46		7.45

Options Exercisable at December 31, 2022		166,945		$	2.00 - 15.76	$	3.71		5.98

Share-based compensation expense for options totaling ~~$15,340~~$282,193 and ~~$32,003~~$171,798 was recognized in our results for the ~~year~~years ended December 31, ~~2019~~ 2022, and ~~2018, respectively based on awards vested.~~2021, respectively.

F-22

The valuation methodology used to determine the fair value of the options issued during the year was the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including the volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options.

The risk-free interest rate assumption is based upon observed interest rates on ~~zero coupon~~zero-coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options.

Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s calculation of estimated volatility is based on historical stock prices of ~~these peer entities~~the Company over a period equal to the expected life of the awards. ~~The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.~~

As of December 31, ~~2019,~~2022, there was ~~$378,360~~$335,272 of total unrecognized compensation expense related to unvested employee options granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately ~~3 year.~~2.03 years.

The weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the ~~year~~years ended December 31, ~~2019~~2022, and 2021, are set forth in the table below.

Schedule of weighted average fair value of options granted
	2021			2020
Weighted average fair value of options granted	$	2.72		$	5.35
Risk-free interest rate		1.63% – 3.83	%		1.31% – 1.62	%
Volatility		199% – 214	%		217% – 219	%
Expected life (years)		10 years			10 years
Dividend yield	$	—	%	$	—	%

Share-based awards, restricted stock award (“RSAs”)

2019 2018
Weighted average fair value of options granted $ 0.05 $ 0.05
Risk-free interest rate 1.79 % 2.86 %
Volatility 225 % 85 %
Expected life (years) 10 10
Dividend yield 0.00 % 0.00 %

On March 31, 2022, the Board resolved that, the Company shall pay each member of the Board, compensation as a group amount to $40,375. The shares vest one year after issuance.

On June 30, 2022, the Board resolved that, the Company shall pay each member of the Board, compensation as a group amount to $30,625. The shares vest one year after issuance.

On September 30, 2022, the Board resolved that, the Company shall pay each member of the Board, compensation as a group amount to $25,000. The shares vest one year after issuance.

On December 31, 2022, the Board resolved that, the Company shall pay each member of the Board, compensation as a group amount to $18,500. The shares vest one year after issuance.

A summary of the activity related to RSUs for the year ended December 31, 2022, is presented below:

Schedule of non-vested Restricted stock units
	Total		Grant Date
Restricted Stock Units (RSUs)	Shares		Fair Value
RSUs non-vested at January 1, 2022		—	$	—
RSUs granted		50,000	$	1.48 - 3.23
RSUs vested		—	$	—
RSUs forfeited		—	$	—
RSUs non-vested December 31, 2022		50,000	$	1.48 - 3.23

Stock-based compensation for RSU’s has been recorded in the consolidated statements of operations and totaled $52,285 for the year ended December 31, 2022.

F-23

Common Stock ~~Warrants~~Warrant

A summary of the Company’s warrant activity and related information follows:

Number of
Shares Under
Warrants Range of
Warrants
Price
Per Share Weighted
Average
Exercise Price
Warrants Outstanding at January 1, 2018 133,334 $ 0.01 $ 0.01
Warrants Granted — — —
Warrants Outstanding at December 31, 2018 133,334 $ 0.01 $ 0.01
Warrants Granted — — —
Warrants Outstanding at December 31, 2019 133,334 $ 0.01 $ 0.01
Warrants Exercisable at December 31, 2019 133,334 $ 0.01 $ 0.01

Schedule of warrant activity and related information
								Weighted
	Number of			Range of		Weighted		Average
	Shares			Option Price		Average		Contractual
	Under Options			Per Share		Exercise Price		Life
Warrant Outstanding at January 1, 2021		3,333		$	0.40	$	0.40		3.50
Warrant Granted		2,871,250			7.43 - 6.67		6.97		—
Exercised		(455,390	)		7.43		7.43		—
Expired/Cancelled		—			—		—		—
Warrant Outstanding at December 31, 2021		2,419,193		$	7.43 - 0.40	$	6.87		4.67
Warrant Granted		—			—		—		—
Warrant Outstanding at December 31, 2022		2,419,193		$	7.43 - 0.40	$	6.87		3.67

Warrant Exercisable at December 31, 2022		2,419,193		$	7.43 - 0.40	$	6.87		3.67

Preferred Stock

Liquidation preference

~~Liquidation preference~~

Upon any liquidation, dissolution, or winding up of the Corporation, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any Common Stock, the holders of Series A Preferred Stock shall be entitled to be paid out of the assets of the Corporation legally available for distribution to stockholders, for each share of Series A Preferred Stock held by such holder, an amount per share of Series A Preferred Stock equal to the Original Issue Price for such share of Series A Preferred Stock plus all accrued and unpaid dividends on such share of Series A Preferred Stock as of the date of the Liquidation Event. No Preferred shares are issued as of December 31, 2021.

Conversion

~~Conversion~~

The number of shares of Common Stock to which a share of Series A Preferred Stock may be converted shall be the product obtained by dividing the Original Issue Price of such share of Series A Preferred Stock by the then-effective Conversion Price (as defined herein) for such share of Series A Preferred Stock. The Conversion Price for the Series A Preferred Stock shall initially be equal to $0.02 and shall be adjusted from time to time.

Voting

Each holder of shares of Series A Preferred Stock shall be entitled to the number of votes, upon any meeting of the stockholders of the Corporation (or action taken by written consent in lieu of any such meeting) equal to the number of shares of Class B Common Stock into which such shares of Series A Preferred Stock could be converted.

Dividends

~~Dividends~~

Each share of Series A Preferred Stock, in preference to the holders of all ~~Common Stock (as defined below),~~common stock, shall entitle its holder to receive, but only out of funds that are legally available therefore, cash dividends at the rate of ten percent ~~(10%~~(10%) per annum from the Original Issue Date on the Original Issue Price for such share of Series A Preferred Stock, compounding annually unless paid by the ~~Corporation.~~Company. On May 18, 2021, the Company converted 1,401,786 shares of Series A Preferred Stock into 43,806 shares of common stock. As part of this transaction, the Company also paid $1,179,357 the accrued and unpaid dividends. Accrued dividends at December 31, ~~2019 and 2018~~ 2021, were ~~$970,997 and $846,685, respectively.~~$0.

F-24

Note 910 - Income Taxes

~~Due to losses, the Company did not have current income tax expense.~~

The components of deferred taxes are as follows:

~~Deferred Tax Assets:~~

2019 2018

Net operating loss carry-forward $ 1,419,000 $ 1,369,024

Less: valuation allowance (1,419,000 ) (1,369,024 )

Net deferred tax asset $ — $ —


	Year Ended December 31,
	2022			2021
Deferred tax assets:
Net operating loss carry forwards		2,368,000			1,752,000
Other		163,000			316,000
Total deferred tax assets		2,531,000			2,068,000
Deferred tax liabilities:
Property and equipment		(211,000)			—
Intangibles		(1,180,000	)		(91,000	)
Other		(63,000	)		(308,000	)
Total deferred tax liabilities		(1,454,000	)		(399,000	)

Valuation Allowance		(1,077,000	)		(1,669,000	)

Net deferred tax liabilities		—			—

The Company had federal and state net operating tax loss carry-forwards of ~~$5,128,000~~$7,841,000 and ~~$4,670,000,~~$7,511,000, respectively as of December 31, ~~2019.~~2022. The tax loss carry-forwards are available to offset future taxable income with the federal and state carry-forwards beginning to expire in 2028.

In ~~2019~~2022 and ~~2018,~~2021, net deferred tax assets did not change due to the full allowance. The gross amount of the asset is ~~entirely~~predominantly due to the net operating loss ~~carry forward.~~carry-forward. The realization of the tax benefits is subject to the sufficiency of taxable income in future years. The combined deferred tax assets represent the amounts expected to be realized before expiration.

The Company periodically assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible profits. As a result of this analysis of all available evidence, both positive and negative, the Company concluded that it is more likely than not that its net deferred tax assets will ultimately not be recovered and, accordingly, a valuation allowance was recorded as of December 31, ~~2019~~2022, and ~~2018.~~2021.

~~The difference between~~A reconciliation of the Company’s effective income tax rate to the expected income tax ~~expense (benefit) and the actual tax expense (benefit)~~rate, computed by ~~using~~applying the ~~Federal~~federal statutory income tax rate of ~~21%~~21.0% for each of the years ended December 31, 2022, and 2021 to the Company’s loss before provision (benefit) for income taxes, is as follows:

Year Ended December 31,
2019 2018
Expected income tax benefit (loss) at statutory rate of 21% $ 22,000 $ 44,303
State and local tax benefit, net of federal 7,500 14,979
Change in valuation account (29,500 ) (59,282 )
Income tax expense (benefit) $ — $ —

Schedule of expected income tax expense (benefit)
	2022			2021
U.S. Federal Statutory Rate		21.0	%		21.0	%
State Taxes		7.1	%		7.1	%

Valuation allowance		(28.1	)%		(12.2	)%
Income tax provision		—	%		(12.9)	%

Note ~~10 -~~ 11 – Litigation

We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting DSC, its common stock, any of its subsidiaries or of DSC’s or DSC’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

F-25

Note 1112 – Related Party Transactions

Finance Lease Obligations – Related Party

During the ~~years~~year ended December 31, ~~2019 and 2018~~2022, the Company entered into ~~three different~~two related party finance lease obligations. See Note 56 for details.

Nexxis Capital LLC

~~Nexxis Capital~~

Charles M. Piluso (Chairman and CEO) and Harold Schwartz (President) collectively own 100% of Nexxis Capital LLC (“Nexxis Capital”). Nexxis Capital was formed to purchase equipment and provide leases to Nexxis Inc.’s customers.

The Company received funds of ~~$12,794~~$39,172 and $14,209 during the ~~year-ended~~year ended December 31, ~~2019.~~ 2022, and 2021 respectively.

Note 13 – Merger

Flagship Solutions, LLC

On February 4, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Data Storage FL, LLC, a Florida limited liability company and the Company’s wholly-owned subsidiary (the “Merger Sub”), Flagship Solutions, LLC (“Flagship”), a Florida limited liability company, and the owners (collectively, the “Equity holders”) of all of the issued and outstanding limited liability company membership interests in Flagship (collectively, the “Equity Interests”). The Company acquired Flagship on May 31, 2021, and became its wholly-owned subsidiary. The purchase price was $5.5 million.

In addition, the cash merger consideration paid by the Company to the Equity holders at Closing shall be adjusted, on a dollar-for-dollar basis, by the amount by which Flagship’s net working capital at Closing is more or is less than the target working capital amount specified in the Merger Agreement.

Concurrently with the Closing, Flagship and Mark Wyllie, Flagship’s Chief Executive Officer, entered into an Employment Agreement, which was effective upon consummation of the Closing, pursuant to which Mr. Wyllie will continue to serve as Chief Executive Officer of Flagship following the Closing on the terms and conditions set forth therein. Flagship’s obligations under the Wyllie Employment Agreement will also be guaranteed by the Company. The Wyllie Employment Agreement provides for: (i) an annual base salary of $170,000, (ii) management bonuses comprised of twenty-five percent (25%) of Flagship’s net income available in free cash flow as determined in accordance with GAAP for each calendar quarter during the term, (iii) an agreement to issue him stock options of the Company, subject to approval by the Board, commensurate with his position and performance and reflective of the executive compensation plans that the Company has in place with its other subsidiaries of similar size to Flagship, (iv) life insurance benefits in the amount of $400,000, and (v) four weeks paid vacation. In the event Mr. Wyllie’s employment is terminated by him for good reason (as defined in the Wyllie Employment Agreement) or by Flagship without cause, he will be entitled to receive his annual base salary through the expiration of the initial three-year employment term and an amount equal to his last annual bonus paid, payable quarterly. Pursuant to the Wyllie Employment Agreement, we agreed to elect Mr. Wyllie to the Board and the board of directors of Flagship to serve so long as he continues to be employed by the Company. The employment agreement contains customary non-competition provisions that apply during its term and for a period of two years after the term expires. In addition, pursuant to the Wyllie Employment Agreement, Mr. Wyllie was appointed to serve as a member of the Company’s Board of Directors and the board of directors of Flagship to serve so long as he continues to be employed by us. On October 28, 2022, Mark Wyllie resigned from his position as Chief Executive Officer of Flagship. Additionally, in connection with the resignation, Mr. Wyllie will no longer serve as the Executive Vice President of the Company or a member of the Company’s Board of Directors.

Following the closing of the transaction, Flagship’s financial statements as of the Closing were consolidated with the Consolidated Financial Statements of the Company.

F-26

The following sets forth the components of the purchase price:

Schedule of purchase price
Purchase price:
Cash paid to the seller	$	6,149,343
Total purchase price		6,149,343

Tangible Assets Acquired:
Cash		212,068
Accounts Receivable		1,389,263
Prepaid Expenses		127,574
Fixed Assets		4,986
Website and Digital Assets		33,002
Security Deposits		22,500
Total Tangible Assets Acquired		1,789,393

Tangible Liabilities Assumed:
Accounts Payable and Accrued Expenses		514,354
Deferred Revenue		68,736
Deferred Tax Liability		399,631
PPP Loan Payable		307,300
Total Tangible Liabilities Assumed		1,290,021

Net Tangible Assets Acquired		499,372

Excess Purchase Price	$	5,649,971

The following table shows the allocation of the excess purchase price.

Summary of the allocation of the excess purchase price
Customer Relationships	$	1,870,000
Trade Names		235,000
Assembled Workforce		287,000
Goodwill		3,257,971
Excess Purchase Price	$	5,649,971

The intangible assets acquired include the trade names, customer relationships, assembled workforce, and goodwill. The deferred tax liability represents the tax affected timing differences relating to the acquired intangible assets to the extent they are not offset by acquired deferred tax assets.

The goodwill represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisition. No portion of the goodwill is deductible for tax purposes.

The following presents the unaudited pro-forma combined results of operations of the Company with Flagship Solutions as if the entities were combined on January 1, 2021.

Schedule of unaudited pro-forma
	December 31, 2021
Revenues	$	23,051,759
Net income attributable to common shareholders	$	1,526,938
Net income per share	$	0.30
Weighted average number of shares outstanding		5,075,716

F-27

Note 14 – Segment Information

We operate in three reportable segments: Nexxis, Flagship Solutions Group, and CloudFirst. Our segments were determined based on our internal organizational structure, the manner in which our operations are managed, and the criteria used by our Chief Operating Decision Maker (CODM) to evaluate performance, which is generally the segment’s operating income or losses.

Schedule of segment reporting income or losses
Operations of:		Products and services provided:
Nexxis Inc		NEXXIS is a single-source solution provider that delivers fully-managed cloud-based voice services, data transport, internet access, and SD-WAN solutions focused on business continuity for today’s modern business environment.

Flagship Solutions, LLC		Flagship Solutions Group (FSG) is a managed service provider. FSG invoices clients primarily for services that assist the clients’ technical teams. FSG has few technical assets and utilizes the assets or software of other cloud providers, whereby managing 3rd party infrastructure. FSG periodically sells equipment and software.

CloudFirst Technologies Corporation		CloudFirst, provides services from CloudFirst technological assets deployed in six Tier 3 data centers throughout the USA and Canada. This technology has been developed by CloudFirst. Clients are invoiced for cloud infrastructure and disaster recovery on the CloudFirst platform. Services provided to clients are provided on a subscription basis on long term contracts.

The following tables present certain financial information related to our reportable segments and Corporate:

Schedule of financial information related to reportable segments
As of December 31, 2022

	Nexxis Inc.		Flagship Solutions LLC		CloudFirst Technologies		Corporate		Total

Accounts receivable	$	34,903	$	1,924,184	$	1,543,749	$	—	$	3,502,836
Prepaid expenses and other current assets		16,799		213,826		285,306		68,735		584,666
Net Property and Equipment		—		19,705		2,192,085		—		2,211,790
Intangible assets, net		—		1,696,376		279,268		—		1,975,644
Goodwill		—		1,222,971		3,015,700		—		4,238,671
Operating lease right-of-use assets		—		167,761		58,740		—		226,501
All other assets		—		—		—		11,346,127		11,346,127
Total Assets	$	51,702	$	5,244,823	$	7,374,848	$	11,414,862	$	24,086,235

Accounts payable and accrued expenses	$	40,091	$	1,563,408	$	1,069,278	$	534,800	$	3,207,577
Deferred revenue		—		165,725		115,335		—		281,060
Total Finance leases payable		—		—		641,110		—		641,110
Total Finance leases payable related party		—		—		776,864		—		776,864
Total Operating lease liabilities		—		169,469		62,960		—		232,429
Total Liabilities	$	40,091	$	1,898,602	$	2,665,547	$	534,800	$	5,139,040

F-28


As of December 31, 2021

	Nexxis Inc.		Flagship Solutions LLC		CloudFirst Technologies		Corporate		Total

Accounts receivable	$	19,094	$	1,437,840	$	927,433	$	—	$	2,384,367
Prepaid expenses and other current assets		6,117		330,777		198,860		647		536,401
Net Property and Equipment		—		6,036		1,931,435		—		1,937,471
Intangible assets, net		—		1,975,298		279,268		—		2,254,566
Goodwill		—		3,544,971		3,015,700		—		6,560,671
Operating lease right-of-use assets		—		268,698		153,620		—		422,318
All other assets		—		—		—		12,239,029		12,239,029
Total Assets	$	25,211	$	7,563,620	$	6,506,316	$	12,239,676	$	26,334,823

Accounts payable and accrued expenses	$	49,291	$	274,387	$	812,192	$	207,521	$	1,343,391
Deferred revenue		—		—		366,859		—		366,859
Total Finance leases payable		—		—		373,723		—		373,723
Total Finance leases payable related party		—		—		1,204,447		—		1,204,447
Total Operating lease liabilities		—		269,407		162,351		—		431,758
Total Liabilities	$	49,291	$	543,794	$	2,919,572	$	207,521	$	3,720,178


For the year ended December 31, 2022

	Nexxis Inc.			Flagship Solutions LLC			CloudFirst Technologies			Corporate			Total
Sales	$	931,341		$	11,395,770		$	11,543,726		$	—		$	23,870,837
Cost of sales		600,410			9,041,684			6,145,450			—			15,787,544
Gross Profit		330,931			2,354,086			5,398,276			—			8,083,293

Selling, general and administrative		403,370			3,599,572			2,391,613			2,216,842			8,611,397
Impairment of goodwill					2,322,000			—			—			2,322,000
Depreciation and amortization		—			282,684			943,227			—			1,225,911
Total operating expenses		403,370			6,204,256			3,334,840			2,216,842			12,159,308

Loss from Operations		(72,439	)		(3,850,170	)		2,063,436			(2,216,842	)		(4,076,015	)

Interest expense, net		—			(319	)		(138,365	)		8,597			(130,087	)
Other expense		—			(75,418)			—			—			(75,418)
Impairment of deferred offering costs		—			—			—			(127,343	)		(127,343	)
Total Other Income (Expense)		—			(75,737	)		(138,365	)		(118,746	)		(332,848	)

Income (Loss) before provision for income taxes	$	(72,439	)	$	(3,925,907	)	$	1,925,071		$	(2,335,588	)	$	(4,408,863	)

F-29


For the year ended December 31, 2021

	Nexxis Inc.			Flagship Solutions LLC			CloudFirst Technologies			Corporate			Total
Sales	$	817,175		$	3,853,473		$	10,205,579		$	—		$	14,876,227
Cost of sales		527,159			2,334,331			5,597,627			—			8,459,117
Gross Profit		290,016			1,519,142			4,607,952			—			6,417,110

Selling, general and administrative		329,628			1,965,727			2,763,880			840,602			5,899,837
Depreciation and amortization		—			168,011.00			1,116,334.00			—			1,284,345
Total operating expenses		329,628			2,133,738			3,880,214			840,602			7,184,182

Loss from Operations		(39,612	)		(614,596	)		727,738			(840,602	)		(767,072	)

Interest expense, net		—			(3,423	)		(123,323	)		—			(126,746	)
All other expenses		—			310,723			443,385			—			754,108
Total Other Income (Expense)		—			307,300			320,062			—			627,362

Income (Loss) before provision for income taxes	$	(39,612	)	$	(307,296	)	$	1,047,800		$	(840,602	)	$	(139,710	)

Note 1215 - Subsequent Events

~~On February 7, 2020,~~Subsequent to December 31, 2022, the Company issued 132,354 options ~~were exercised~~ to ~~obtain 100,000 shares of common stock.~~employees through the 2021 Stock Incentive Plan. These options ~~were exercised at $0.054.~~vest over three years and have exercise prices ranging from $1.61 – $1.96.

~~On February 10, 2020, Harold Schwartz resigned as Treasurer of~~Subsequent to December 31, 2022, the Company issued 132,354 restricted stock units to employees through the 2021 Stock Incentive Plan. These RSUs vest over three years and Charles M. Piluso was appointed as the Company’s Treasurer. In addition, on February 10, 2020, Thomas Kempster resigned as Secretary of the Company and was appointed as Executive Vice President of the Company, and Wendy Schmittzeh was appointed as the Company’s Secretary.do not have an expiration date.

There is no understanding or arrangement between Mrs. Schmittzeh and any other person pursuant to which she was appointed as Secretary. Mrs. Schmittzeh does not have any family relationship with any director, executive officer or person nominated or chosen by us to become a director or an executive officer. Since January 1, 2019, Mrs. Schmittzeh has not had a direct or indirect material interest in any transaction or proposed transaction, in which the Company was or is a proposed participant exceeding $120,000.

F-30

Wendy Schmittzeh is a veteran management professional with over 30 years of corporate experience. From 2011 through the present, Mrs. Schmittzeh has served as Manager of Administration for the Company. While serving in her management role, Ms. Schmittzeh has been instrumental in numerous operational aspects of the Company’s business, including mergers and acquisitions transactions, accounting, corporate administration, office management, human resources, corporate office relocations, facilities management and high-level executive support. Ms. Schmittzeh received an Associate’s Degree in Secretarial Arts from Katharine Gibbs College in 1991. Ms. Schmittzeh currently serves as a Vestry member at St. Ann’s Episcopal Church, and has held several board positions on the Suffolk County Bicycle Riders Association.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and ~~Procedures~~Procedures.

As of the end of the period covered by this ~~Annual~~ Report, under the supervision and with the participation of DSC’s management, including its principal executive ~~officer and principal financial~~ officer, DSC conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based ~~on this~~upon that evaluation, ~~DSC’s principal executive officer~~our Chief Executive Officer and ~~principal financial officers have~~Chief Financial Officer concluded that ~~DSC’s~~our disclosure controls ~~and procedures are~~were not effective to ensure that information required to be disclosed by DSC in the reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s (the “SEC”) rulesas of December 31, 2022, based on the material ~~weakness described~~weaknesses identified below.

~~Management’s Report on~~Material Weaknesses in Internal Control ~~Over~~over Financial Reporting

DSC’s management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. DSC’s internal control over financial reporting is designed to provide reasonable assurance to DSC’s management and Board of Directors regarding the preparation and fair presentation of published financial statements in accordance with United States’ generally accepted accounting principles (“GAAP”), including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of DSC, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures are being made only in accordance with authorizations of DSC’s management and directors and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of DSC’s assets that could have a material effect on the financial statements.

Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 1992. Management’s assessment included an evaluation of the design of DSC’s internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting. Based on this evaluation, management has determined that as of December 31, 2019, there were material weaknesses in our internal control over financial reporting. The material weaknesses identified during management’s assessment were (i) a lack of sufficient internal accounting expertise to provide reasonable assurance that our financial statements and notes thereto are prepared in accordance with GAAP and (ii) a lack of segregation of duties to ensure adequate review of financial statement preparation. In light of these material weaknesses, management has concluded that, as of December 31, 2019, DSC did not maintain effective internal control over financial reporting. As defined by the Public Company Accounting Oversight Board Auditing Standard No. 5, aA material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of ~~the~~our annual or interim financial statements will not be prevented or ~~detected.~~ detected on a timely basis. This material weakness contributed to the Company not designing and maintaining formal controls to analyze, account for, and disclose complex transactions, including the accounting for certain consideration received from a vendor. These material weaknesses resulted in the restatement of the Company’s previously filed quarterly condensed consolidated financial information for the periods ended June 30, 2022, related to accrued expenses, cost of goods sold, gross profit, loss from operations, net loss, earnings per share and the related disclosures.

Remediation Plan for the Material Weaknesses

In ~~order~~response to ~~ensure~~ the aforementioned material weaknesses, management has expended and will continue to expand a substantial amount of effort and resources for the remediation of material weaknesses in internal control over financial reporting. In November of 2022, management and its advisors began evaluating and documenting the design and operating effectiveness of ~~DSC’s disclosure controls in the future, DSC intends on adding financial staff resources to~~ our ~~accounting and finance department.~~

~~Because of its inherent limitations,~~ internal control over financial reporting, ~~may not prevent or detect misstatements. Therefore, even those systems determined~~and their work is ongoing. Our plan also includes advisors looking over all material agreements monthly to determine accounting treatment for complex transactions. The material weaknesses will be ~~effective can provide only reasonable assurance with respect to financial statement preparation~~considered remediated once management completes the design and ~~presentation.~~

This Annual Report does not include an attestation report of DSC’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by DSC’s registered public accounting firm pursuant to rulesimplementation of the ~~SEC~~measures described above and the controls operate for a sufficient period of time, and management has concluded, through testing, that ~~permit DSC to provide only management’s report in this Annual Report.~~these controls are effective.

Changes in Internal Control over Financial Reporting

~~There have been no significant~~As described above, there were changes in ~~DSC’s~~our internal control over financial reporting during the ~~most recently completed fiscal quarter~~year ended December 31, ~~2018 that~~2022, which have materially affected, or isare reasonably likely to materially affect, ~~DSC’s~~our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth the names, ages, and positions of ~~DSC’s~~the Company’s executive officers and ~~directors as of the December 31, 2019.~~directors. Executive officers are elected annually by ~~DSC’s~~its Board of Directors. Each executive officer holds his office until he resigns, is removed by the Board, or his successor is elected and qualified. Each director holds his office until his successor is elected and qualified or his earlier resignation or removal.

Name	Age	Position
Charles M. Piluso	6669	Chairman of the Board, Chief Executive Officer
Chris H. Panagiotakos	50	Chief Financial Officer
Harold J. Schwartz	5358	Director, ~~Treasurer,~~ President
Thomas C. Kempster	5156	Director, ~~Corporate Secretary,~~Executive Vice President ~~of Technical Operations~~
John Argen	6468	Director
Joseph B. Hoffman	6166	Director
Lawrence A. Maglione, Jr.	5761	Director
~~Cliff Stein~~Matthew Grover	6155	Director
~~John Coghlan~~Todd A. Correll	6355	Director
~~Matthew Grover~~	51	~~Director~~
~~Todd Correll~~	52	~~Director~~

Charles M. Piluso, ~~President~~Chairman of the Board and, Chief Executive Officer.

Mr. Piluso is ~~DSC’s~~Data Storage’s Chief Executive ~~Officer, Chief Financial~~ Officer and Chairman of the Board. He has served as Chief Executive Officer since 2008, Treasurer since 2020, and Chairman of the Board since 2008. Prior to founding ~~DSC~~Data Storage in 2001, Mr. Piluso founded North American Telecommunication Corporation a facilities-based Competitive Local Exchange Carrier licensed by the Public Service Commission in ten states, serving as the company’s Chairman and President from 1997 to 2000. Between 1990 and 1997, Mr. Piluso served as Chairman & Founder of International Telecommunications Corporation (“ITC”), a facilities-based international carrier licensed by the Federal Communications Commission. ITC participated in a consolidation strategy that went public in 1997 for ~~800 million dollars.~~$800 million. Mr. Piluso holds a bachelor’s degree, a Master of Arts in Political Science and Public Administration and a ~~Masters~~Master of Business Administration all from St. John’s University. He was an Instructor Professor at St. John’s University, College of Business from 1986 through 1988. From 2001 to 2013, served on the Board of Trustees of Molloy College. Mr. Piluso served on the Board of Governors at St. John’s University from 2001 to 2016 and Governor Emeritus; and is currently serving on the Board of Advisors for the Nassau County Police Department Foundation.

We believe that Mr. Piluso is qualified to serve as a member of our Board due to his technical expertise and management experience of technology and communications companies.

Chris H. Panagiotakos, Chief Financial Officer

Mr. Panagiotakos has served as our Chief Financial Officer since May 18, 2021. Mr. Panagiotakos served as the Vice President, Corporate Controller of Cinedigm Corp. (CIDM: Nasdaq Global Market) from April 2017 until March 2021, where he was responsible for the company’s accounting function, oversight of the company’s external audit, compliance and controls in addition to staff training and development. Prior to becoming Vice President, Corporate Controller of Cinedigm Corp, he served as their Corporate Assistant Controller from October 2013 to April 2017. From September 2004 to October 2013, Mr. Panagiotakos served in various capacities in the accounting department at Young Broadcasting Inc., including as Controller of one its divisions and Assistant Corporate Controller. Mr. Panagiotakos has over 24 years in public company accounting experience, and he brings a broad range of experience related to public company accounting matters. Mr. Panagiotakos holds a Bachelor of Business Administration in Accounting from Bernard M. Baruch College, a Masters of Business Administration from Texas A&M University-Commerce, and is a Certified Public Accountant.

Harold J. ~~Schwartz.~~Schwartz, President and Director

Mr. Schwartz is ~~DSC’s~~CloudFirst’s President ~~and Treasurer~~ and serves as a Director. He has served as President and Director since December 2016 and served as Treasurer from 2016 to 2020. Since 1995, Mr. Schwartz has served as vice president of ABC Services, Inc., which he co-founded, where he was responsible for the strategic direction of the company, operations, business development and sales. Over the past two decades, Mr. Schwartz has honed his expertise in IBM business systems, business continuity and helping organizations increase IT performance while reducing costs. In addition, Mr. Schwartz is the founder of Systems Trading, Inc., a technology leasing company established in 1997, where Mr. Schwartz serves as the company’s CEO and president. Prior to founding these two businesses, Mr. Schwartz was with CAC Leasing for six years, where he started a lease asset sales division in 1991. This division was established shortly after Mr. Schwartz earned his bachelor’s degree in business from California State University in San Bernardino. Since 2010, Mr. Schwartz has served on the Board of Advisors for Data Storage Corporation.

We believe that Mr. Schwartz is qualified to serve as a member of our Board due to his proven ability to strengthen and improve the operations of the companies he has been a part of his experience in sales and business development and his knowledge of the industry.

Thomas C. Kempster, Executive Vice President and Director.

Mr. Kempster is ~~DSC’s~~Flagship Solution Group’s President, Data Storage’s Executive Vice President and has served as Director since 2016. Prior to his current position, Mr. Kempster served as the President of ~~Technical Operations~~Service Delivery until 2021 and ~~Secretary and serves as a Director.~~was directly responsible for the foundation of the Company’s highly rated customer service which is exists today. Prior to ~~DCS’s acquisition of ABC,~~Data Storage Corporation Mr. Kempster founded ABC Services in 1994 and ~~developed~~served as founder and president until 2016. ABC ~~into one of New York’s oldest~~Services was an IBM Gold partner and ~~most trusted solutions providers specializing~~provided managed services, equipment, software and specialized in IBM power environments since 1994. As President, Tom was the company’s visionary and is responsible for developing strategic partnerships with many industry leaders such as IBM, Microsoft, and VMware to build a successful solution-driven business.Power systems. In 2012 ABC Services launched a joint venture with ~~the help of its strategic partnerships works with organizations across the United States~~Data Storage Corporation to provide cloud infrastructure on IBM Power systems. The joint venture was Secure Infrastructure and ~~continues~~Services, (SIAS). In 2016, ABC Services was acquired by Data Storage Corporation.

We believe that Mr. Kempster is qualified to ~~expand its reach. Tom began his career in 1985~~serve as a computer technician at Systems Configuration Services (SCS) where he was trained on IBM System 3x hardware and software operating systems. In 1989, he was hired by Diversified Data Corp. as their general manager to assistmember of our Board because of his practical experience in ~~building~~ a ~~Technical Division to support IBM-specific sales. Tom spearheaded the service division into a successful and profitable entity within 36 months. He then joined CAC Leasing where~~broad range of competencies including his ~~business development experiences further inspired his vision to form ABC Services.~~industry experience.

John ~~Argen.~~Argen, Director

Mr. Argen has been a Director since ~~2008.~~January 12, 2006. Mr. Argen ishas been a Business Consultant and Developer specializing in the information technology, telecommunications, and construction ~~industries.~~industries since 2003. He is a seasoned professional that brings 30 years of experience and entrepreneurial success from working with small business owners to Fortune 500 firms. From 1992 to 2003, Mr. Argen was the CEO and founder of DCC Systems, a privately held nationwide Technology Design / Build Construction Development and Consulting Solutions firm. Mr. Argen built DCC Systems from the ground up, re-engineering the firm several times to meet the needs of its clientele and enabled DCC Systems to produce gross revenues exceeding ~~100~~$100 million dollars in 2000. Mr. Argen has been a guest speaker at numerous corporate seminars and industry shows. He has been featured on NBC’s “Business Now” which accredited his Technology Construction Management methodology as an innovative process for implementing high tech projects on time and within budget. Prior to DCC Systems Mr. Argen held senior management positions for 15 years at ITT/Metromedia ~~(15 years)~~ and was VP of Engineering& Operations at DataNet, a Wilcox & Gibbs company ~~(2 years).~~for 2 years. Throughout his corporate tenure, he has worked in Operations, Marketing, Systems Engineering, Telecommunications and Information Technology. ~~In a career that spans 30 years he has had full responsibility for technology related and construction projects worth over a billion dollars.~~ Mr. Argen graduated Pace University with a BPS in Finance. His commitment to continued education is reflected in his completion to over 2000 hours of corporate sponsored courses. Mr. Argen also holds a Federal Communication Commission (FCC) Radio Telephone 1st Class License.

We believe that Mr. Argen is qualified to serve as a member of our Board because of his practical experience in managing the growth of companies, including technology and communication companies, and his general knowledge and experience of the industry.

Joseph B. ~~Hoffman.~~Hoffman, Director

Mr. Hoffman has been a Director since ~~2008.~~August 29, 2001. Mr. Hoffman ishas been a partner at Kelley Drye & Warren LLP in the firm’s Washington, D.C. ~~office.~~office since June 1999. His commercial practice focuses on real estate and corporate transactions cutting across a wide range of industries. Mr. Hoffman’s real estate practice involves developers, borrowers, lenders, buyers, sellers, landlords and tenants. Mr. Hoffman’s corporate experience includes the purchase and sale of assets and companies as well as venture capital, equipment leasing and institutional financing transactions. Mr. Hoffman represents telecommunications companies, real estate developers, lenders, venture capital funds, emerging growth companies, thoroughbred horse industry interests and high net-worth individuals. Mr. Hoffman received his ~~Bachelors’~~Bachelor of Science,cum laude, from the University of Maryland and his Juris Doctor degree, with honors, from the George Washington University Law School.

We believe that Mr. Hoffman is qualified to serve as a member of our Board because of his legal knowledge, leadership experience and general industry familiarity.

Lawrence A. ~~Maglione.~~Maglione, Jr., Director

Mr. Maglione has been a Director since ~~2008.~~August 29, 2001. Mr. Maglione ishas been a partner in the accounting firm Eisner & Maglione CPAs, ~~LLC.~~LLC since January 2007. Mr. Maglione, a co-founder of DSC, LLC, is a financial management veteran with more than 30 years of experience. Prior to joining ~~DSC, LLC~~the Company in 1991, Mr. Maglione was a co-founder of North American Telecommunications Corporation (“NATC”), a local phone service provider which provides local and long-distance telephone services and data connectivity to small and medium sized ~~businesses. At North American Telecommunications Corporation~~businesses, where Mr. Maglione ~~was~~served as NATC’s Chief Financial Officer and Executive Vice President ~~and~~from September 1997 through January 2001 where he was responsible for all finance, legal and ~~administration. During his tenure (September 1997-January 2001) Mr. Maglione successfully raised over $100 million in debt and equity funding for North American Telecommunications Corporation.~~administration functions. Prior to ~~North American Telecommunications Corporation~~NATC, Mr. Maglione spent over 14 years in public accounting, and he brings a broad range of experience related to companies in the technology, retail services and manufacturing industries. Mr. Maglione holds a Bachelor of Science degree in Accountancy from Hofstra University, a Master of Science in Taxation from LIU Post, and is a Certified Public Accountant. Mr. Maglione is a member of the New York State Society of CPAs. ~~He holds a Bachelor of Science degree in Accountancy; a Master of Science in Taxation and is a Certified Public Accountant.~~

~~Cliff Stein.~~We believe that Mr. ~~Stein has been a Director since 2010. Mr. Stein founded Savitar in 1988 as a real estate advisory company providing assistance~~Maglione is qualified to beleaguered lenders and financial institutions on their nonperforming real estate assets. Mr. Stein has acted as an expert witness in countless litigation matters involving real estate transactions and has been appointed as a Receiver, Examiner, and Trustee in State and Federal Courts. Mr. Stein is an attorney and a member of the Florida Bar Association since 1982. He received his Juris Doctor Degree from the University of Miami. He was graduated with honors by American University with Bachelor of Science Degrees in finance and accounting. From September 1982 through 1984, he served as a law clerk to the Honorable Joseph A. Gassen, U.S. Bankruptcy Judge for the Southern District of Florida. In 1988, Mr. Stein formed Savitar Realty Advisors, as a real estate advisory and management organization, whose clients were primarily financial institutions and government agencies. Savitar (or Cliff Stein) has been appointed Receiver, Examiner, or Trustee in numerous foreclosures or bankruptcies and has been retained as advisor to financial institutions in connection with their troubled assets or their intended acquisition of portfolios of troubled assets. Mr. Stein currently serves as Chairman and Chief Executive Officer of Savitar. Mr. Stein servedserve as a member of ~~the~~our Board because of ~~Directors of Cenvill Development, formerly~~his practical accounting knowledge, leadership experience and general industry familiarity.

Todd A. Correll, Director

Mr. Correll has served as a ~~$500 million, publicly-traded real estate concern, having been appointed to the Board by the FDIC to represent its interest as the single-largest shareholder. Mr. Stein~~Director form August 2014 until September 6, 2017 and then was ~~appointed in 1993 by the Governor of Florida~~reappointed to serve as a ~~Commissioner~~Director on ~~the Florida Real Estate Commission, which appointment was subsequently ratified by the Florida Senate. In January 1996,~~November 5, 2019, and Mr. ~~Stein was elected to be the Chairman of the Commission. Mr. Stein recently concluded his second and final term.~~

~~John Coghlan.~~~~Mr. Coghlan has been~~Correll previously served as a Director since 2011. Mr. Coghlan was a managing director with Lehman Brothers Bank, a global investment bank based in New York City, for 27 years. He served in numerous management capacities in the firm’s fixed income and prime brokerage divisions. Mr. Coghlan was a member of both the firm’s fixed income and equity division’s management committees. From September of 2008from 2014 to July 2010 Mr. Coghlan worked in the prime broker division at Barclays Capital. Mr. Coghlan is a past chairperson of the Bond Market Association’s funding division. Mr. Coghlan is a former board member of Lehman Brothers bank and is currently a board member of Molloy College. He has also served on the boards of the Dorothy Rodbell Cohen foundation for Sarcoma Research, the Friends of Mercy Hospital, and the Rockville Centre 911 Fund. Mr. Coghlan received an undergraduate degree from Massachusetts College of Liberal Arts in 1978 as well as an Honorary Doctor of Laws in 2002. He also has an EdM from Harvard University.

~~Todd A. Correll~~.2017. Mr. Correll has served as a financial and operations executive consultant and board member for SACo, a leading online retail ~~operation, from 2017 through the present, which has grown from a pre-revenue startup operation in 2017 start to generate $50 million in annual revenue.~~operation. From 2001 through 2017, Mr. Correll founded and served as CEO of Broadsmart Florida, Inc. (“Broadsmart”), a facility-based VoIP carrier. Under Mr. Correll’s leadership as its CEO, Broadsmart grew from a local phone company to a nationwide carrier delivering IP based dial tone, broadband and ancillary services from small to large companies in every U.S. state, including establishing a strategic business relationship with IBM which allowed Broadsmart to migrate one of the country’s largest auto supply chains with over 4,000 locations and more than 28,000 phone lines to the Broadsmart platform.services. Broadsmart was acquired by Magic Jack in 2016 for $42 million, and Mr. Correll continued to serve as its CEO until 2017. Mr. Correll ~~received a bachelor’s degree in Business from~~attended Syracuse University. Mr. Correll holds a ~~private pilot's~~pilot’s license as well as a USCG Captains license.

We believe that Mr. Correll is qualified to serve as a member of our Board because of his practical experience with the Company and his executive experience at telecommunications and technology companies.

~~Matt~~Matthew Grover,Director.

Mr. Grover ishas served as a Director since November 5, 2019. Since January 2019, Mr. Grover has served as the Executive Vice President of Business Services at Altice USA (NYSE: ATUS), which is one of the largest broadband communications and video services providers in the United States, delivering broadband, pay television, mobile, proprietary content and advertising services to approximately 4.9 million residential and business customers across 21 states through its Optimum and Suddenlink brands. The company operates ~~a4,~~ an advanced advertising and data business, which provides audience-based, multiscreen advertising solutions to local, regional and national businesses and advertising clients. Altice USA also offers hyper-local, national, international and business news through its News 12, Cheddar and i24NEWS networks. Mr. Grover began his 19-year Altice USA career in 2001 when he joined Altice USA’s Lightpath division as Director of Sales Planning. Since then, he has held various positions with increasing responsibilities. In 2010 Mr. Grover assumed the position of Vice President and General Manager of Optimum West Commercial Services, overseeing sales and sales operations in the Rocky Mountain States of Montana, Wyoming, Colorado, and Utah, until it was sold to Charter Communications in August 2013. From 2013 to 2018, he was Senior Vice President of Commercial Sales, Product, and Marketing. ~~And in~~In early 2019, he was promoted to EVP of Business Services. Prior to joining Altice USA, Mr. Grover held various management positions over the course of nearly ten years, including Vice President of Sales at North American Telecom, Global Account Manager at AT&T in Los Angeles, CA, and District Sales Manager at AT&T in New York, NY. He serves as an Advisory Board Member of Data Storage Corporation and is a member of the Board of Trustees at Molloy College in Rockville Centre, NY. Mr. Grover attained his BA in Economics from Stony Brook University and earned his MBA from the University of Southern California.

We believe that Mr. Grover is qualified to serve as a member of our Board because of his practical experience in a broad range of competencies including his public company experience.

Committees of the Board of Directors

The Board of Directors has a standing Audit Committee, Compensation Committee, and Nominating & Corporate Governance Committee. The following table shows the directors who are currently members or Chairman of each of these committees.

Board Members	Audit Committee	Compensation Committee	Nominating & Corporate Governance Committee
John Argen	Chair	---	Member
Todd A. Correll	---	Member	---
Matthew Grover	Member	Member	---
Joseph B. Hoffman	Member	Chair	Member
Thomas C. Kempster	---	---	---
Lawrence A. Maglione, Jr.	---	---	Chair
Charles M. Piluso	---	---	---
Harold J. Schwartz	---	---	---

Composition of our Board of Directors

Our board of directors currently consists of nine members. Our directors hold office until their successors have been elected and qualified or until the earlier of their death, resignation, or removal. There are no family relationships among any of our directors or executive officers.

Director Independence

With the exception of Charles M. Piluso, Harold J. Schwartz and Thomas C. Kempster, our Board has determined that all of our present directors and our former directors are independent, in accordance with the Listing Rules of the Nasdaq (the “Nasdaq Listing Rules”). Our Board has determined that, under the Nasdaq Listing Rules, Charles M. Piluso, Harold J. Schwartz and Thomas C. Kempster are not independent directors because they are employees of the Company or its subsidiaries.

Our Board has determined that: John Argen (Chair), Joseph B. Hoffman, and Matthew Grover are independent under the Nasdaq Listing Rules’ independence standards for the members of our Board’s audit committee (the “Audit Committee”); Joseph B. Hoffman (Chair), Todd A. Correll, and Matthew Grover are independent under the Nasdaq Listing Rules independence standards for the members of our Board compensation committee (the “Compensation Committee”); and Lawrence A. Maglione, Jr. (Chair), Joseph B. Hoffman and John Argen are independent under the Nasdaq Listing Rules’ independence standards for the members of our Board’s Nominating & Corporate Governance committee (the “Nominating & Corporate Governance Committee”).

Term of Office

Our directors are ~~appointed~~elected for a one-year ~~term~~terms to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our ~~board of directors~~Board and hold office until removed by the board.

Audit Committee

The Company has an Audit Committee consisting of non-executive directors each of whom the Board has determined is an independent director pursuant to the Nasdaq Listing Rules. The Audit Committee members are: John Argen (Chair), Matthew Grover and Joseph B. Hoffman. The Board has determined that Joseph B. Hoffman is an “Audit Committee Financial Expert” as defined by SEC rules and regulations. The Audit Committee operates pursuant to a written charter adopted by the Board, which is available on our website at www.dtst.com. The charter describes in more detail the nature and scope of responsibilities of the Audit Committee.

~~During~~Compensation Committee

The Company has a Compensation Committee consisting of non-executive directors each of whom the ~~fiscal year ended December 31, 2019,~~Board has determined is an independent director pursuant to the Nasdaq Listing Rules. The Compensation Committee members are Joseph B. Hoffman (Chair), Todd A. Correll and Matthew Grover. The Compensation Committee operates pursuant to a written charter adopted by the board of directors, which is available on our website at www.dtst.com. The charter describes in more detail the nature and scope of responsibilities of the Compensation Committee.

Nominating & Corporate Governance Committee

The Company ~~had~~has a Nominating & Corporate Governance Committee consisting of non-executive directors, each of whom the Board has determined is an ~~audit~~independent director pursuant to the Nasdaq Listing Rules. The Nominating & Corporate Governance Committee members include Lawrence A. Maglione, Jr. (Chair), John Argen and Joseph B.Hoffman. The Nominating & Corporate Governance Committee operates pursuant to a written charter adopted by the board of directors, which is available on our website at www.dtst.com. The charter describes in more detail the nature and scope of responsibilities of the Nominating & Corporate Governance Committee.

The Company does not have a formal diversity policy. However, the Nominating & Corporate Governance Committee evaluates each individual in the context of the Board of Directors as a whole, with the objective of recommending individuals that can best perpetuate the success of our business and represent stockholder interests through the exercise of sound business judgment and diversity of experience in various areas. We believe our current directors possess diverse professional experiences, skills, and backgrounds, in addition to, among other characteristics, high standards of personal and professional ethics, proven records of success in their respective fields, and valuable knowledge of our business and industry.

Merger and Acquisition Committee

The Company has a merger and acquisition committee (the “M&A Committee”) consisting of non-executive directors. The ~~audit committee~~Merger and Acquisition Committee members ~~include:~~are Lawrence A. Maglione, Jr.(Chair), John Coghlan, Cliff Stein, Thomas Kempster and Harold Schwartz. Although the Board of Directors does have an audit committee comprised of independent directors, the audit committee does not have an audit committee financial expert at this time. DSC believes that the financial experience and combined skill set of the members of our audit committee are sophisticated enough for performance of the duties of the audit committee financial expert. In addition, DSC’s securities are not listed on a national exchange securities and are not subject to the special corporate governance requirements of any such exchanges. However, DSC does intend to search for a qualified individual to fill the role of the audit committee financial expert.

Argen, Todd A. Correll.

Family Relationships

One ~~part-time~~full-time employee ~~reporting to our controller,~~ is the ~~wife of the~~son and direct report to John Camello, President of ~~Technical Operations and there is no direct report relationship.~~Nexxis Inc.

~~Compliance with Section 16(A)~~Code of ~~the Exchange Act.~~Ethics

Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC and are required to furnish copies to the Company. Several officers and directors are currently behind their Section 16(a) filings. They are working to make sure the filings are completed in the near future.

~~Code of Ethics~~

~~DSC~~The Company has adopted a Code of Ethics applicable to its ~~Chief Executive Officer~~Directors, Officers and ~~Chief Financial Officer. This~~Employees. A copy of our Code of Ethics is ~~incorporated~~available on our website at www.dtst.com.

Stockholder Communications to the Board

Stockholders who are interested in communicating directly with members of the Board, or the Board as a group, may do so by ~~reference~~writing directly to ~~DSC’s Form 10-K filed on March 31, 2009.~~the individual Board member c/o Secretary, Data Storage Corporation, 48 South Service Road, Melville, New York 11747. The Company’s Secretary will forward communications directly to the appropriate Board member. If the correspondence is not addressed to the particular member, the communication will be forwarded to a Board member to bring to the attention of the Board. The Company’s Secretary will review all communications before forwarding them to the appropriate Board member.

ITEM 11. EXECUTIVE COMPENSATION

Compensation of Executive Officers

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by the Company during the fiscal ~~year~~years ended December 31, ~~2019,~~2022, and December 31, 2021, in all capacities for the accounts of our executive officers, including the Chief Executive ~~Officer (CEO).~~

Summary Compensation Table

Name &
Principal
Position Year Salary Bonus Stock
Awards Option
Awards (1) Non-Equity
Incentive Plan
Compensation All Other
Compensation Total
Charles M. Piluso, Chief Executive Officer, and Chairman of the Board 2019 $ 66,000 — — $ — — — $ 66,000

Harold Schwartz - President 2019 $ 66,000 — — $ — — — $ 66,000

Tom Kempster – President of Operations 2019 $ 118,917 — — $ — — — $ 118,917

~~(1)~~

The amounts shown in these columns represent the aggregate grant date fair value of common stock and option awards computed in accordance with FASB ASC Topic 718. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Share Based Compensation” on page 27 for a discussion of the assumptions made in the valuation of stock and option awards.

~~Employment Agreements~~Officer.

~~The~~Summary Compensation Table

											Non-Equity
Name & Principal							Stock		Option		Incentive Plan		All Other
Position	Year		Salary		Bonus		Awards		Awards		Compensation		Compensation		Total
Charles M. Piluso, Chief Executive Officer,		2022	$	171,717	$	150,000		—	$	—		—		—	$	321,717
Treasurer and Chairman of the Board		2021	$	187,065		—		—		—		—		—	$	187,065

Chris H. Panagiotakos,		2022	$	205,961	$	52,646		—	$	—		—		—	$	258,607
Chief Financial Officer		2021	$	117,769	$	29,167		—		—		—		—	$	146,936

Harold J. Schwartz – President		2022	$	171,717	$	150,000		—	$	—		—		—	$	321,717
		2021	$	190,747		—		—		—		—		—	$	190,747

Tom C. Kempster – Executive Vice President, Strategic Development		2022	$	174,808	$	25,000		—	$	—		—		—	$	199,808
		2021	$	209,301		—		—		—		—		—	$	209,301

Mark A. Wyllie – Executive Vice President		2022	$	150,210	$	73,125	$	320,000	$	—		—		—	$	543,335
		2021	$	92,083		—		—		—		—		—	$	92,083

Employment Agreements

Executive Employment Agreements

Mr. Piluso Employment Agreement

On March 28, 2023, the Company ~~has~~entered into an employment agreement ~~in place~~(the “Piluso Employment Agreement”) with ~~John Camello, President~~Mr. Charles M. Piluso, the Company’s Chief Executive Officer. The Piluso Employment Agreement is for an initial term of ~~Nexxis Inc.~~

~~2008 Equity Incentive Plan~~

~~In October 2008,~~three years, and it will be automatically renewed for consecutive one-year terms at the ~~Company adopted,~~end of the Euro Trend, Inc. 2008 Equity Incentive Plan (the “2008 Plan). Under the 2008 Plan, we may grant options (including incentive stock options) to purchase our common stock or restricted stock awards to our employees, consultants or non-employee directors.initial term. The ~~2008 Plan is administered by the Board of Directors. Awards~~Piluso Employment Agreement may be ~~granted pursuant~~terminated with or without cause. Mr. Piluso will receive an annual base salary of $225,000 in 2023, $235,000 in 2024 and $260,000 in 2025 and shall be eligible to ~~the 2008 Plan~~earn a performance bonus ranging from $75,000 to $300,000. Mr. Piluso shall also be entitled to an equity award for 10 years from the effective date of the 2008 Plan. Any grant under the 2008 Plan may be repriced, replaced or regranted at the discretion of the Board of Directors. From time to time, we may issue awards pursuant to the 2008 Plan.

The material terms of options granted under the 2008 Plan (all of which have been nonqualified stock options) are consistent with the terms described in the footnotes to the “Outstanding Equity Awards at Fiscal Year-End December 31, 2017” table below, including five-year graded vesting schedules and exercise prices equal to the fair marketa total value of ~~our common~~$100,000 per annum, which shall be equally split between RSUs and stock ~~on the date of grant. Stock grants made under the 2008 Plan have not been subject to vesting requirements. The 2008 Plan was terminated with respect to the issuance of new awards~~options, as ~~of February 3, 2013. There are 369,839 options outstanding under the 2008 Plan~~well as ~~of December 31, 2018.~~

75,000 performance share units.

Upon termination of Mr. Piluso without cause, or as a result of Mr. Piluso’s resignation for Good Reason (as such term is defined in the Piluso Employment Agreement) the Company shall pay or provide to Mr. Piluso severance pay equal to his base salary for the remainder of the employment term and all stock options or other similar equity compensation granted by the Company and then held by Mr. Piluso shall be accelerated and become fully vested and exercisable as of the date of Mr. Piluso’s termination.

As a full-time employee of the Company, Mr. Piluso will be eligible to participate in the Company’s benefit programs.

Mr. Panagiotakos Employment Agreement

On March 28, 2023, the Company entered into an employment agreement (the “Panagiotakos Employment Agreement”) with Mr. Chris H. Panagiotakos, the Company’s Chief Financial Officer. The Panagiotakos Employment Agreement is for an initial term of three years, and it will be automatically renewed for consecutive one-year terms at the end of the initial term. The Panagiotakos Employment Agreement may be terminated with or without cause. Mr. Panagiotakos will receive an annual base salary of $215,000 in 2023, $225,000 in 2024 and $242,500 in 2025 and shall be eligible to earn a performance bonus of 25% of his base salary. Mr. Panagiotakos shall also be entitled to an equity award for a total value equal to 25% of his base salary per annum, which shall be equally split between RSUs and stock options, a financial achievement bonus of $45,000 and a long-term incentive bonus of stock options and RSUs equal to 25% of his base salary.

Upon termination of Mr. Panagiotakos without cause, or as a result of Mr. Panagiotakos’ resignation for Good Reason (as such term is defined in the Panagiotakos Employment Agreement) the Company shall pay or provide to Mr. Panagiotakos severance pay equal to his base salary for the remainder of the employment term and all stock options or other similar equity compensation granted by the Company and then held by Mr. Panagiotakos shall be accelerated and become fully vested and exercisable as of the date of Mr. Panagiotakos’ termination.

As a full-time employee of the Company, Mr. Panagiotakos will be eligible to participate in the Company’s benefit programs.

2010 Incentive Award Plan

On August 12, 2010, the Company adopted the Data Storage Corporation 2010 Incentive Award Plan (the “2010 Plan”) ~~with~~that provided for 2,000,000 shares of common stock ~~available~~reserved for issuance under the terms of the 2010 ~~Plan.~~Plan; which was amended on September 25, 2013, to increase the number of shares of common stock reserved for issuance under the Plan to 5,000,000 shares of common stock; which was further amended on June 20, 2017 to increase the number of shares of common stock reserved for issuance under the Plan to 8,000,000 shares of common stock; and further amended on July 1, 2019, to increase the number of shares of common stock reserved for issuance under the Plan to 10,000,000 shares of common stock. On April 23, 2012, the Company amended and restated the 2010 Plan to change the name ~~of the 2010 Plan~~ to the “Amended and Restated Data Storage Corporation Incentive Award Plan” (the “Plan”). On September 25, 2013, by written consent in lieu of a meeting by the stockholders owning a majority of the outstanding shares of Common Stock of the Company and by unanimous written consent of the Board of Directors in lieu of a meeting, theThe Plan was amended and restated to reserve 5,000,000 shares of common stock available for issuance under the terms of the Plan. On June 20, 2017, by written consent in lieu of a meeting by the stockholders owning a majority of the outstanding shares of Common Stock of the Company and by unanimous written consent of the Board of Directors in lieu of a meeting, the Plan was amended and restated to reserve 8,000,000 shares of common stock available for issuance under the terms of the Plan. On July 1, 2019, by written consent in lieu of a meeting by the stockholders owning a majority of the outstanding shares of Common Stock of the Company and by unanimous written consent of the Board of Directors in lieu of a meeting, the Plan was amended and restated to reserve 10,000,000 shares of common stock available for issuance under the terms of the Plan The Plan is intended to promote the interests of the Company by attracting and retaining exceptional employees, consultants, directors, officers and independent contractors (collectively referred to as the “Participants”) and enabling such Participants to participate in the long-term growth and financial success of the Company. Under the Plan, the Company ~~may~~had the right to grant stock options, which are intended to qualify as “incentive stock options” under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, stock appreciation rights and restricted stock awards, which ~~are~~were restricted shares of common stock (collectively referred to as “Incentive Awards”). Incentive Awards ~~may be~~were granted pursuant to the Plan for 10 years from the Effective Date. ~~From time to time, we may issue Incentive Awards pursuant to the Plan. Each of the awards will be evidenced by and issued under a written agreement.~~ There are ~~8,055,985~~8,305,985 options outstanding under the Plan as of December 31, ~~2019.~~

~~If an incentive award granted under the~~2020. The 2010 Plan ~~expires, terminates, is unexercised or is forfeited, or if any~~expired on October 21, 2020, and accordingly, there are no shares ~~are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become~~ available for future grants.

On March 8, 2021, our Board and stockholders owning in excess of 50% of our outstanding voting securities approved and adopted the 2021 Stock Incentive Plan (the “2021 Plan”). Pursuant to the terms of the 2021 Plan we can grant stock options, restricted stock unit awards and other awards at levels determined appropriate by our Board and/or compensation committee. The 2021 Plan also allows us to utilize a broad array of equity incentives and performance cash incentives in order to secure and retain the services of our employees, directors, and consultants, and to provide long-term incentives that align the interests of our employees, directors and consultants with the interests of our stockholders. An aggregate of 15,000,000 shares of our common stock may be issued under the ~~Plan. The number of shares~~2021 Plan, subject to ~~the Plan, and the number of shares and terms of any Incentive Award may be adjusted~~equitable adjustment in the event of ~~any change in our outstanding common~~future stock by reason of any stock dividend, spin-off, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares, or similar transaction.splits, and other capital changes.

Outstanding Equity Awards at Fiscal Year-End December 31, 2019
Option Awards
Name Option
Approval Date Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable(1) Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (2) Option
Exercise
Price
($)
Option
Expiration
Date

Charles M. Piluso
(4) 12/15/2009 250,000 0 0.360 12/14/2020
(5) 12/31/2009 13,888 0 0.360 12/30/2020
(5) 12/16/2010 14,286 0 0.360 12/15/2020
(3) 6/18/2012 548,780 0 0.394 6/17/2022
(3) 6/18/2012 357,143 0 0.394 6/17/2022
(5) 12/11/2012 33,333 0 0.150 12/10/2022
(5) 12/13/2013 33,333 0 0.150 12/12/2023
(5) 12/22/2015 66,666 0 0.350 12/21/2025
(5) 12/14/2017 44,444 22,222 0.050 12/14/2027
(5) 12/11/2019 0 100,000 0.060 12/10/2023

Harold J. Schwartz
(6) 11/3/2011 1,490 0 0.850 11/2/2021
(6) 6/18/2012 2,538 0 0.394 6/17/2022
(6) 12/11/2012 16,666 0 0.150 12/10/2022
(6) 12/13/2013 16,666 0 0.150 12/12/2023
(5) 12/22/2015 33,333 0 0.350 12/21/2025
(5) 12/14/2017 44,444 22,222 0.050 12/13/2027
(5) 12/11/2019 0 100,000 0.060 12/10/2023

Thomas C. Kempster
(5) 12/14/2017 44,444 22,222 0.050 12/13/207
(5) 12/11/2019 0 100,000 0.060 12/10/2023

Outstanding Equity Awards at Fiscal Year-End December 31, 2022

Option Awards
		Option Approval	Number of Securities Underlying Unexercised Options (#)		Number of Securities Underlying Unexercised		Option Exercise Price		Option Expiration
Name		Date	Exercisable (1)		Options (2) Unexercisable		($)		Date
	Charles M. Piluso
	(3)(6)	6/18/2012		13,720		0		15.76	6/17/2022
	(3)(6)	6/18/2012		8,929		0		15.76	6/17/2022
	(4)	12/13/2013		834		0		6.00	12/12/2023
	(4)	12/22/2015		1,667		0		14.00	12/21/2025
	(4)	12/14/2017		1,667		0		2.00	12/14/2027
	(4)(7)	12/11/2019		2,500		0		2.40	12/10/2029

	Harold J. Schwartz
	(5)(6)	12/11/2012		417		0		6.00	12/10/2022
	(5)	12/13/2013		417		0		6.00	12/12/2023
	(4)	12/22/2015		834		0		14.00	12/21/2025
	(4)	12/14/2017		1,667		0		2.00	12/13/2027
	(4)(7)	12/11/2019		2,500		0		2.40	12/10/2023


	Thomas C. Kempster
	(4)	12/14/2017		1,667		0		2.00	12/13/2027
	(4)(7)	12/11/2019		2,500		0		2.40	12/10/2023

(1)

~~(1)~~

Vested options under the Plan.

(2)

~~(2)~~

Unvested options under the Plan.

(3)

~~(3)~~

On March 23, 2011 (the “Stock Grant Date”), Mr. Piluso was issued a stock grant of ~~571,429~~14,286 shares of common stock at $0.35 per share (the “Stock Grant”). Mr. Piluso received the Stock Grant in lieu of his annual compensation for 2010. The Stock Grant was fully vested on the Stock Grant Date. The Stock Grant was issued to Mr. Piluso pursuant to the 2008 Plan. ~~The Stock Grant was fully vested on the Stock Grant Date.~~ On June 18, 2012, the Stock Grant issuance was rescinded and replaced with a stock option to acquire ~~548,780~~13,720 shares of common stock at an exercise price of ~~$0.39~~$15.60 per share. In addition, on June 18, 2012, Mr. Piluso received a stock option to acquire ~~357,143~~8,929 shares of common stock at an exercise price of ~~$0.39~~$15.60 per share.

(4)

~~(4)~~

On December 15, 2009 (the “Option Issuance Date”), Mr. Piluso was issued a stock option to acquire 250,000 shares of common stock at an exercise price of $0.36 per share (the “Stock Option”). The Stock Option was issued to Mr. Piluso in lieu of his annual compensation for 2009. The Stock Option was fully vested on the Option Issuance Date and has an expiration date of December 14, 2019. These options were extended for one year based on the resolution from the December 11, 2019 board meeting. The Stock Options was issued to Mr. Piluso pursuant to the 2008 Plan.

~~(5)~~

The stock options were issued in consideration for services provided as a member of the ~~Board of Directors.~~Board.

(5)

~~(6)~~

The stock options were issued in consideration for services provided as a member of the Board of Advisors.

(6)	These option awards vested 100% three months from the grant date.

(7)	These option awards vested/vest 33.33% on each of the one- year, two- year and three- year anniversary following the grant date.

Compensation of Directors

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the ~~named~~Company’s directors ~~paid by the Company~~ during the fiscal year ended December 31, ~~2019.~~

2022. During the year ended December 31, 2022, no compensation was paid to any Company director.

Director Name Fees earned or paid in cash Stock awards Option awards (1)(2) Non-equity incentive plan Non-qualified deferred All other compensation Total
Charles M. Piluso —   —   $ 13,000 (3) —   —   —   $ 13,000
Harold Schwartz —   —   $ 13,000 (4) —   —   —   $ 13,000
Tom Kempster —   —   $ 13,000 (5) —   —   —   $ 13,000
Lawrence Maglione —   —   $  13,000 (6) —   —   —   $ 13,000
John F. Coghlan —   —   $ 13,000 (7) —   —   —   $ 13,000
John Argen —   —   $ 13,000 (8) —   —   —   $ 13,000
Joseph B. Hoffman —   —   $ 13,000 (9) —   —   —   $ 13,000
Clifford Stein —   —   $ 13,000 (10) —   —   —   $ 13,000
Matthew Grover —   ��   $   3,250 (11) —   —   —   $ 3,250
Todd Correll —   —   $   3,250 (12) —   —   —   $ 3,250

Director Name	Fees earned or paid in cash		Stock awards		Option awards (1)		Non-equity incentive plan		Non- qualified deferred compensation earnings		All other compensation		Total
Charles M. Piluso		—		—	$	0		—		—		—	$	0
Harold J. Schwartz		—		—	$	0		—		—		—	$	0
Thomas C. Kempster		—		—	$	0		—		—		—	$	0
Lawrence A. Maglione, Jr.	$	6,000	$	23,000	$	0		—		—		—	$	0
John Argen	$	6,000	$	23,000	$	0		—		—		—	$	0
Joseph B. Hoffman	$	6,000	$	23,000	$	0		—		—		—	$	0
Matthew Grover	$	6,000	$	23,000	$	0		—		—		—	$	0
Todd A. Correll	$	6,000	$	23,000	$	0		—		—		—	$	0

(1)

The ~~stock options were issued in consideration for services provided as a member of the Board of Directors.~~

~~(2)~~

~~The amounts shown in these columns represent~~table below shows the aggregate ~~grant date fair value~~number of ~~common stock and~~ option awards ~~computed in accordance with FASB ASC Topic 718. See “Management’s Discussion~~outstanding at fiscal year-end for each of our current non-employee directors and ~~Analysis of Financial Condition and Results of Operations—Share Based Compensation” on page 14 for a discussion of~~former non-employee directors who served as directors during the ~~assumptions made in the valuation of stock and option awards.~~year ended December 31, 2022.

Name	~~(3)~~	OnNumber of Shares Subject to Outstanding Options as of December 11, 2019 Mr. Piluso was issued stock option to acquire 100,000 shares of common stock at an exercise price of $0.054. 33,333 of the options will vest on December 11, 2020; 33,333 of the options will vest on December 11, 2021 and the remaining 33,334 will vest on December 11, 2022. 31, 2022

John Argen	~~(4)~~	On December 11, 2019 Mr. Schwartz was issued stock option to acquire 100,000 shares of common stock at an exercise price of $0.054. 33,333 of the options will vest on December 11, 2020; 33,333 of the options will vest on December 11, 2021 and the remaining 33,334 will vest on December 11, 2022.
		13,333
Todd A. Correll	~~(5)~~	On December 11, 2019 Mr. Kempster was issued stock option to acquire 100,000 shares of common stock at an exercise price of $0.054. 33,333 of the options will vest on December 11, 2020; 33,333 of the options will vest on December 11, 2021 and the remaining 33,334 will vest on December 11, 2022.
		10,625
Matthew Grover	~~(6)~~	On December 11, 2019 Mr. Maglione was issued stock option to acquire 100,000 shares of common stock at an exercise price of $0.054. 33,333 of the options will vest on December 11, 2020; 33,333 of the options will vest on December 11, 2021 and the remaining 33,334 will vest on December 11, 2022.

~~(7)~~

On December 11, 2019 Mr. Coghlan was issued stock option to acquire 100,000 shares of common stock at an exercise price of $0.054. 33,333 of the options will vest on December 11, 2020; 33,333 of the options will vest on December 11, 2021 and the remaining 33,334 will vest on December 11, 2022.

	~~(8)~~	On December 11, 2019 Mr. Argen was issued stock option to acquire 100,000 shares of common stock at an exercise price of $0.054. 33,333 of the options will vest on December 11, 2020; 33,333 of the options will vest on December 11, 2021 and the remaining 33,334 will vest on December 11, 2022.
		10,625
Joseph B. Hoffman	~~(9)~~	On December 11, 2019 Mr. Hoffman was issued stock option to acquire 100,000 shares of common stock at an exercise price of $0.054. 33,333 of the options will vest on December 11, 2020; 33,333 of the options will vest on December 11, 2021 and the remaining 33,334 will vest on December 11, 2022.

~~(10)~~

On December 11, 2019 Mr. Stein was issued stock option to acquire 100,000 shares of common stock at an exercise price of $0.054. 33,333 of the options will vest on December 11, 2020; 33,333 of the options will vest on December 11, 2021 and the remaining 33,334 will vest on December 11, 2022.16,667

Lawrence A. Maglione, Jr.

~~(11)~~

On December 11, 2019 Mr. Grover was issued stock option to acquire 25,000 shares of common stock at an exercise price of $0.054. 8,333 of the options will vest on December 11, 2020; 8,333 of the options will vest on December 11, 2021 and the remaining 8,334 will vest on December 11, 2022.

~~(12)~~

On December 11, 2019 Mr. Correll was issued stock option to acquire 25,000 shares of common stock at an exercise price of $0.054. 8,333 of the options will vest on December 11, 2020; 8,333 of the options will vest on December 11, 2021 and the remaining 8,334 will vest on December 11, 2022.

4416,667

~~Securities Authorized for Issuance Under Equity Compensation Plans~~

The Company has two share-based equity compensation plans, the 2008 Equity Incentive Plan (the”2008 Plan”) and the Amended and Restated Data Storage Corporation Incentive Award Plan (the “Plan”). Descriptions of these plans are presented above.

~~As of the end of 2019 we had the following securities authorized for issuance under our equity compensation plans:~~

Number of
securities to be
issued upon
exercise of
outstanding
options and
warrants Weighted-average
exercise price of
outstanding options,
warrants and rights Number of
securities
remaining
available for
future issuance
under
equity
compensation
plans (excluding
securities reflected
in
column (a)
Plan Category (a) (b) (c)

Equity compensation plans approved by security holders 8,425,824 (1) $ 0.17 1,944,015

Total 8,425,824 $ 0.17 1,944,015

~~(1)~~

As of the end of fiscal year 2019, we had 8,425,824 shares of our common stock issuable upon the exercise of outstanding options granted pursuant to the 2008 Plan and the 2010 Plan. As of end of fiscal year, 2019, there were warrants outstanding to purchase 133,334 shares of common stock at a weighted average exercise price of $0.001, none of which were granted pursuant to the 2008 Plan or the 2010 Plan.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information, as of March 30, ~~2020,~~2023, with respect to the beneficial ownership of the outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of the Company’s executive officers and directors; and (iii) the Company’s directors and executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned. The address for each person is 48 South Service Road, Suite 203, Melville, New York 11747.

Name and Address of Beneficial Owner (1)(2) Number of Shares Percent of Class (3)

Charles M. Piluso (4) (15) 35,855,487 28.41 %
John Coghlan (7) (15) 6,262,495 4.87 %
Harold J. Schwartz (6) (15) 32,572,327 25.37 %
Cliff Stein (5) (15) 11,027,219 8.58 %
Thomas C. Kempster (11) (15) (12) 32,391,634 25.26 %
Lawrence Maglione, Jr. (8) (15) 361,344 *
John Argen (9) (15) 328,172 *
Joseph Hoffman (10) (15) 328,172 *
Matthew Grover (13) (15) — *
Todd Correll (14) (15) — *

All Executive Officers and Directors as a group (14) 120,126,851 92.49 %

~~______________~~

* Less than 1%

Name of Beneficial Owner	Shares Beneficially Owned (1)		Percentage Ownership
Charles M. Piluso and affiliated entities (2)		890,964		13.04	%
Chris H. Panagiotakos		—		*
Harold J. Schwartz (3)		821,296		12.03	%
Thomas C. Kempster (4)		802,545		11.76	%
Lawrence A. Maglione, Jr. (5)		18,330		*
John Argen (6)		10,000		*
Joseph B. Hoffman (7)		10,000		*
Matthew Grover (8)		3,958		*
Todd A. Correll (9)		4,583		*
All Executive Officers and Directors as a group (9 persons)		2,561,676		37.71	%

~~(1)~~*

~~The address for each person is 48 South Service Road, Melville, New York 11747.~~Less than 1%

~~(2)~~(1)

~~Under~~The securities “beneficially owned” by a person are determined in accordance with the ~~rules~~definition of “beneficial ownership” set forth in the regulations of the SEC aand accordingly, may include securities owned by or for, among others, the spouse, children or certain other relatives of such person, ~~is deemed to be~~as well as other securities over which the ~~beneficial owner of a security if such~~ person has or shares ~~the~~voting or investment power ~~to vote~~ or ~~direct~~securities which the ~~voting of such security or the power to dispose or direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities if that~~ person has the right to acquire ~~beneficial ownership~~ within 60 ~~days of . Unless otherwise indicated by footnote, the named entities or individuals have sole voting and investment power with respect to the~~days.

(2)	Includes 882,627 shares of common stock, ~~beneficially owned.~~

~~(3)~~

~~Based upon 128,3139,418~~6,670 shares of common stock ~~issued~~underlying stock options, and outstanding as of April 1, 2020 and options that can be acquired within 60 days of April 1, 2020. Unless otherwise indicated in the footnotes to the above table and subject to community property laws where applicable, we believe that each shareholder named in the above table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned.

~~(4)~~

~~Includes (i) 13,625,634~~1,667 shares of common stock ~~held individually, (ii) 3,269,863 shares of common~~underlying stock held by Piluso Family Associates, (iii) 9,204,614 shares of common stock held by The Bella Vita 2012 Trusts, (iv) 9,204,614 shares of common stock held by The Lasata 2012 Trusts, (v) options to acquire 1,484,095warrants.

(3)

Includes 815,876 shares of common stock and ~~(vi) a common stock purchase warrant exercisable for 66,667 shares of common stock. Mr. Piluso is the co-manager and has shared voting control over the~~5,420 shares of common stock ~~of the Company held by Piluso Family Associates, LLC. Mr. Piluso and his wife are the trustees of the trusts.~~underlying stock options.

~~(5)~~(4)

Includes ~~(i) 10,717,301~~798,376 shares of common stock and ~~(ii) 309,918~~4,169 shares of common stock ~~issuable upon exercise of~~underlying stock options.

~~(6)~~
(5)	Includes ~~(i) 32,334,968~~830 shares of common stock and ~~(ii) 237,359~~7,500 shares of common stock ~~issuable upon exercise of~~underlying stock ~~options.~~options and 2,500 RSUs

~~(7)~~
(6)	Includes ~~(i) 5,862,330 shares of common stock held individually, (ii) options to acquire 333,499~~3,334 shares of common stock and ~~(iii) a common stock purchase warrant exercisable for 66,667 shares of common stock.~~

~~(8)~~

~~Includes (i) 33,172~~4,166 shares of common stock ~~held individually~~underlying stock options and ~~(ii) options to acquire 328,172 shares of common stock.~~2,500 RSUs

~~(9)~~
(7)	Includes ~~options to acquire 328,172 shares of common stock.~~

~~(10)~~

~~Includes options to acquire 228,172 shares of common stock.~~

~~(11)~~		~~Includes (i) 32,334,968~~7,500 shares of common stock underlying stock options and ~~(ii) 166,666~~2,500 RSUs

(8)	Includes 1,458 shares of common stock ~~issuable upon exercise of~~underlying stock ~~options.~~options and 2,500 RSUs

~~(12)~~(9)

~~Mr. Kempster made open market sales of an aggregate of 20,000~~Includes 625 shares of common stock, ~~between January~~1,458 shares of common stock underlying stock options and ~~February 2019.~~2,500 RSUs

Securities Authorized for Issuance Under Equity Compensation Plans

As of December 31, 2022, we had awards outstanding under our Amended and Restated Data Storage Corporation Incentive Award Plan:

	Number of securities to be issued upon exercise of outstanding options and warrants			Weighted- average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
Plan Category	(a)			(b)		(c)

Equity compensation plans approved by security holders		301,391	(1)	$	3.46		125,500
Equity compensation plans not approved by stockholders		N/A			N/A
Total		301,391		$	3.46		125,500

~~(13)~~

(1)

~~Includes~~ During the year ended December 31, 2022, we had awards outstanding under the 2010 Plan. As of the end of fiscal year 2022, we had 185,309 shares of our common stock issuable upon the exercise of outstanding options granted pursuant to ~~acquire 25,000~~the 2010 Plan. The securities available under the Plan for issuance and issuable pursuant to exercises of outstanding options may be adjusted in the event of a change in outstanding stock by reason of stock dividend, stock splits, reverse stock splits, etc. As of end of fiscal year 2022, there were warrants outstanding to purchase 3,333 shares of common ~~stock.~~

~~(14)~~

~~Includes~~stock at a weighted average exercise price of $0.40, none of which were granted pursuant to the 2008 Plan or the 2010 Plan. The 2010 Plan expired on October 21, 2020. On March 8, 2021, our Board and stockholders owning in excess of majority of our outstanding voting securities approved and adopted the 2021 Stock Incentive Plan (the “2021 Plan”). Pursuant to the terms of the 2021 Plan we can grant stock options, restricted stock unit awards, and other awards at levels determined appropriate by our Board and/or compensation committee. The 2021 Plan also allows us to ~~acquire 25,000~~utilize a broad array of equity incentives and performance cash incentives in order to secure and retain the services of our employees, directors and consultants, and to provide long-term incentives that align the interests of our employees, directors, and consultants with the interests of our stockholders. An aggregate of 375,000 shares of our common ~~stock.~~stock may be issued under the 2021 Plan, subject to equitable adjustment in the event of future stock splits, and other capital changes.

~~(15)~~

~~Officer and/or director of the Company.~~

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The Board of Directors has determined, after considering all the relevant facts and circumstances, that during the fiscal year ended December 31, ~~2019~~2022, each of Messrs. Argen, Hoffman, ~~Coghlan, Stein,~~ Correll, Maglione, and Grover were independent directors, as ~~“independence”~~that term is defined in the federal securities laws and the Nasdaq Marketplace Rules.

On April 1, 2018, the Company entered into an equipment lease agreement with Systems Trading Inc. (“Systems Trading”), a company for which Mr. Harold J. Schwartz, our President and Director, serves as the Chief Executive Officer and President (“Systems Trading”) to refinance all leases into one lease. This lease obligation is payable to Systems Trading with bi-monthly installments of $23,475. The lease carries an interest rate of 5% and is a four-year lease. The term of the lease ends April 16, 2022. Systems Trading is owned and operated by the Company’s President, Harold Schwartz.

On January 1, 2019, the Company entered into an equipment agreement with Systems Trading. This lease obligation is payable to Systems Trading with monthly installments of $29,592. The lease carries an interest rate of 6.75% and is a five-year lease. The term of the lease ends December 31, 2023.

On April 1, 2019, the Company entered into two equipment lease agreements with Systems Trading to add new data center equipment. The first lease calls for monthly payments of $1,328 and expires on March 1, 2022. It carries an interest rate of 7%. The second lease calls for monthly payments of $461 and expires on March 1, 2022. It carries an interest rate of 6.7%.

On January 1, 2020, the Company entered into a new equipment lease agreement with Systems Trading Inc. to lease equipment. The lease obligation is payable to Systems Trading with monthly installments of $10,534. The lease carries an interest rate of 6% and is a three-year lease. The term of the lease ends January 1, 2023.

On March 4, 2021, the Company entered into a new equipment lease agreement with Systems Trading effective April 1, 2021. This lease obligation is payable to Systems Trading with monthly installments of $1,566.82 and expires on March 31, 2024. The lease carries an interest rate of 8%.

The Company received funds of $39,172 and $37,954 during the years ended December 31, 2022, and 2021, respectively from Nexxis Capital LLC, a company owned by Charles Piluso and Harold Schwartz. Nexxis Capital LLC was formed to purchase equipment and provide equipment leases to the Company’s customers.

Except as disclosed herein and under the section titled “Executive Compensation,” there were no related party transactions during the two years ended December 31, 2022, or the current year.

On December 11, 2019, we issued to (i) each of Messrs. Piluso, Schwartz and Kempster options to purchase 100,000 shares of common stock having an exercise price of $.60 per share, vesting over three years on the one, two and three year anniversary of the grant date and terminating on December 10, 2029; (ii) each of Messrs. Kempster, Argen, Hoffman, and Maglione options to purchase 100,000 shares of common stock having an exercise price of $.54 per share, vesting over three years on the one, two and three year anniversary of the grant date and terminating on December 10, 2029; and (iii) each of Messrs. Correll and Grover options to purchase 25,000 shares of common stock having an exercise price of $.54 per share, vesting over three years on the one, two and three year anniversary of the grant date and terminating on December 10, 2029.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

~~DSC's fiscal years ended December 31, 2019 and 2018 was~~The following table sets forth the aggregate audit-related fees including expenses billed ~~approximately $70,500 and $69,500 for professional services rendered for the audit and review of its financial statements.~~

~~Audit Related Fees~~

~~For audit related services~~to us for the years ended December 31, ~~2019~~2022, and ~~2018 will be billed approximately $0~~2021 by Rosenberg Rich Baker Berman & Company P.A.

	December 31,		December 31,
	2022		2021
Audit Fees and Expenses (1)	$	146,750	$	200,792
Tax Fees		—		—

(1)	Audit fees and expenses were for professional services rendered for the audit and reviews of the consolidated financial statements of the Company, professional services rendered for issuance of consents and assistance with review of documents filed with the SEC.

The Audit Committee has adopted procedures for pre-approving all audit and ~~$0 respectively.~~non-audit services provided by the independent registered public accounting firm, including the fees and terms of such services. These procedures include reviewing detailed back-up documentation for audit and permitted non-audit services. The documentation includes a description of, and a budgeted amount for, particular categories of non-audit services that are recurring in nature and therefore anticipated at the time that the budget is submitted. Audit Committee approval is required to exceed the pre-approved amount for a particular category of non-audit services and to engage the independent registered public accounting firm for any non-audit services not included in those pre-approved amounts. For both types of pre-approval, the Audit Committee considers whether such services are consistent with the rules on auditor independence promulgated by the SEC and the PCAOB. The Audit Committee also considers whether the independent registered public accounting firm is best positioned to provide the most effective and efficient service, based on such reasons as the auditor’s familiarity with our business, people, culture, accounting systems, risk profile, and whether the services enhance our ability to manage or control risks, and improve audit quality. The Audit Committee may form and delegate pre-approval authority to subcommittees consisting of one or more members of the Audit Committee, and such subcommittees must report any pre-approval decisions to the Audit Committee at its next scheduled meeting. All of the services provided by the independent registered public accounting firm were pre-approved by the Audit Committee.

~~Tax Fees~~

For DSC’s fiscal years ended December 31, 2019 and 2018, it was billed approximately $7,500 and $7,500 respectively for professional services rendered for tax compliance, tax advice, and tax planning.

~~All Other Fees~~

~~DSC incurred other fees related to services rendered by its principal accountant for the fiscal years ended December 31, 2019 and 2018 and will be billed approximately $0 and $0.~~

Our audit committee pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the entire audit committee ~~either~~ before ~~or after~~ the respective services were rendered.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

~~a) Documents filed as part of this Annual Report~~

~~1. Consolidated Financial Statements~~

2.Item 15. Exhibits and Financial Statement Schedules

~~3. Exhibits~~

(a)(1)	The following financial statements are included in this Annual Report for the fiscal years ended December 31, 2022, and 2021:

	1.	Report of Independent Registered Public Accounting Firm

	2.	Consolidated Balance Sheets as of December 31, 2022, and 2021.

	3.	Consolidated Statements of Operations for the years ended December 31, 2022, and 2021.

	4.	Consolidated Statements of Cash Flows for the years ended December 31, 2022, and 2021.

	5.	Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022, and 2021.

	6.	Notes to Consolidated Financial Statements.

(a)(2)	All financial statement schedules have been omitted as the required information is either inapplicable or included in the Consolidated Financial Statements or related notes.

(a)(3)	The exhibits set forth in the accompanying exhibit index below are either filed as part of this report or are incorporated herein by reference:

~~The exhibits listed in the following table have been filed with, or incorporated by reference into, this Report. The exhibits listed in the following table have been filed with this report.~~

EXHIBIT INDEX

~~Exhibits~~

Exhibit
No.

Description

~~3.1~~

3.1

Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form SB-2 (File No. 333-148167) filed on December ~~17, 2007 (the “SB-2”))~~19, 2007).

~~3.2~~
3.2		Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Form 8-K (File No. 333-148167) filed on October 24, 2008).

~~3.3~~
3.3		Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit ~~3.1.1~~3.1 on Form 8-K (File No. 333-148167) filed on January 6,9, 2009).

~~3.4~~
3.4		Bylaws (incorporated by reference to Exhibit 3.2 to the ~~SB-2)~~to the Registrant’s Registration Statement on Form SB-2 (File No. 333-148167) filed on December 19, 2007).

~~3.5~~
3.5		Amended Bylaws (incorporated by reference to Exhibit 3.2 to Form 8-K (File No. 333-148167) filed on October 24, 2008).

3.6		Form of Certificate of Amendment to the Articles of Incorporation (incorporated by reference to Appendix A to the Information Statement on Schedule 14C (File No. 001-35384) filed with the Securities and Exchange Commission on March 8, 2021).

3.7		Form of Certificate of Correction to the Certificate of Amendment to the Articles of Incorporation dated October 7, 2008 (incorporated by reference to Appendix C to the Information Statement on Schedule 14C (File No. 001-35384) filed with the Securities and Exchange Commission on March 8, 2021).

3.8		Form of Certificate of Validation and Ratification of the Certificate of Correction to the Certificate of Amendment to the Articles of Incorporation dated October 7, 2008 (incorporated by reference to Appendix C to the Information Statement on Schedule 14C (File No. 001-35384) filed with the Securities and Exchange Commission on March 8, 2021).

3.9		Form of Certificate of Correction to the Certificate of Amendment to the Articles of Incorporation dated October 16, 2008 (incorporated by reference to Appendix D to the Information Statement on Schedule 14C (File No. 001-35384) filed with the Securities and Exchange Commission on March 8, 2021).

3.10		Form of Certificate of Validation and Ratification of the Certificate of Correction to the Certificate of Amendment to the Articles of Incorporation dated October 16, 2008 (incorporated by reference to Appendix D to the Information Statement on Schedule 14C (File No. 001-35384) filed with the Securities and Exchange Commission on March 8, 2021).

3.11		Form of Certificate of Correction to the Certificate of Amendment to the Articles of Incorporation dated January 6, 2009 (incorporated by reference to Appendix E to the Information Statement on Schedule 14C (File No. 001-35384) filed with the Securities and Exchange Commission on March 8, 2021).

3.12		Form of Certificate of Validation and Ratification of the Certificate of Correction to the Certificate of Amendment to the Articles of Incorporation dated January 6, 2009 (incorporated by reference to Appendix E to the Information Statement on Schedule 14C (File No. 001-35384) filed with the Securities and Exchange Commission on March 8, 2021).

~~4.1~~3.13		Form of Certificate of Correction to the Certificate of Amendment to the Articles of Incorporation dated June 24, 2009 (incorporated by reference to Appendix F to the Information Statement on Schedule 14C (File No. 001-35384) filed with the Securities and Exchange Commission on March 8, 2021).

3.14		Form of Certificate of Validation and Ratification of the Certificate of Correction to the Certificate of Amendment to the Articles of Incorporation dated June 24, 2009 (incorporated by reference to Appendix F to the Information Statement on Schedule 14C (File No. 001-35384) filed with the Securities and Exchange Commission on March 8, 2021).

3.15		Certificate of Designations, Preferences and Rights of Series A Preferred Stock of Data Storage Corporation (incorporated by reference to Appendix F to the Information Statement on Schedule 14C (File No. 001-35384) filed with the Securities and Exchange Commission on March 8, 2021).

4.1		Share Exchange Agreement, dated October 20, 2008, by and among Euro Trend Inc., Data Storage Corporation and the shareholders of Data Storage Corporation named on the signature page thereto (incorporated by reference to Exhibit 10.1 to Form 8-K (File No. 333-148167) filed on October 24, 2008).

4.2

Share Exchange Agreement, dated October 20, 2008, by and among, Euro Trend Inc., Data Storage Corporation and the shareholders of Data Storage Corporation named on the signature page thereto (incorporated by reference to Exhibit 10.1 to Form 8-K/A (File No. 333-148167) filed on June 29, 2009).

~~4.3~~

Registration Rights Agreement, dated November 29, 2011, by and between Data Storage Corporation and Southridge Partners II, LP (incorporated herein by reference to Exhibit 10.2 to Form 8-K filed on December 2, 2011).

~~4.4~~4.3

Equity Purchase Agreement, dated November 29, 2011, by and between Data Storage Corporation and Southridge Partners II, LP (incorporated herein by reference to Exhibit 10.2 to Form 8-K filed on December 2, 2011).

~~4.5~~

~~Convertible Promissory Note, dated February 28, 2013, by and between the Company and John F. Coghlan. (incorporated herein by reference to Exhibit 4.1 to Form 10-Q filed on May 20, 2013)~~

~~4.6~~

~~Warrant to Purchase Common Stock, dated February 28, 2013, by and between the Company and John F. Coghlan (incorporated herein by reference to Exhibit 4.2 to Form 10-Q filed on May 20, 2013)~~

~~4.7~~

~~Securities Purchase Agreement, dated February 28, 2013, by and between the Company and John F. Coghlan. (incorporated herein by reference to Exhibit 10.1 to Form 10-Q filed on May 20, 2013)~~

~~4.8~~

Securities Purchase Agreement between Charles M. Piluso and the Company dated as of August 9, 2013 (incorporated by reference to Exhibit 2.3 of Schedule 13D/A No. 1 filed by Charles M. Piluso on August 14, 2013 (File No. 005- 84248)).

~~4.9~~

~~10% Convertible Promissory Note due April 30, 2015 (incorporated by reference to Exhibit 2.4 of Schedule 13D/A No. 1 filed by Charles M. Piluso on August 14, 2013 (File No. 005-84248)).~~

~~4.10~~

~~Warrant to Purchase Common Stock dated as of August 9, 2013 (incorporated by reference to Exhibit 2.5 of Schedule 13D/A No. 1 filed by Charles M. Piluso on August 14, 2013 (File No. 005-84248)).~~

~~10.1~~

Asset Purchase Agreement dated November 10, 2008, by and between Novastor Corporation as Seller and Data Storage Corporation as Purchaser (incorporated by reference to Exhibit 10.1 to Form 8-K filed on November 12, 2008).

~~10.2~~

Joint Venture – Strategic Alliance Agreement, dated March 2, 2010, by and between Data Storage Corporation and United Telecomp, LLC (incorporated by reference to Exhibit 10.1 to Form 8-K filed on March 3, 2010).

~~10.3~~

Term Sheet for Acquisition by Data Storage Corporation of 80% of the Equity of e-ternity Business Continuity Consultants, Inc., dated May 16, 2013 (incorporated by reference to Exhibit 99.1 to Form 8-K, filed on May 30, 2013).

~~10.4~~

~~Term Sheet for Acquisition by Data Storage Corporation of Message Logic, Inc., dated August 31, 2013 (incorporated by reference to Exhibit 99.1 to Form 8-K filed on September 4, 2013).~~

~~10.5~~

~~Asset Purchase Agreement, dated June 17, 2010, between SafeData, LLC and Data Storage Corporation (incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 23, 2010).~~

~~10.6~~

~~Asset Purchase Agreement, dated October 31, 2013, by and between Data Storage Corporation and Message Logic, Inc. (incorporated by reference to Exhibit 2.1 to Form 8-K filed on January 30, 2013).~~

~~10.7~~

~~Stock Purchase Agreement, dated October 31, 2013, by and between Data Storage Corporation and Zojax Group, LLC (incorporated by reference to Exhibit 10. 1 to Form 8-K filed on November 7, 2013).~~

~~10.8~~

~~Form of Employment Agreement between Peter Briggs and Data Storage Corporation (incorporated by reference to Exhibit 10.2 to Form 8-K filed on June 23, 2010).~~

~~10.9~~

Data Storage Corporation 2010 Incentive Award Plan (incorporated by reference to Exhibit 10.1 on Form S-8/A (File No. 333-169042) filed on October 25, 2010).

~~10.10~~
4.4		Amended and Restated Data Storage Corporation 2010 Incentive Award Plan (incorporated by reference to Exhibit 10.1 to Form 8-K (File No. 001-35384) filed on April 26, ~~2013)~~2012).

~~10.11~~4.5		~~Stock Purchase Agreement, dated as of March 1, 2011, by and between~~ Data Storage Corporation 2021 Stock Incentive Plan (incorporated by reference to Appendix B to the Information Statement on Schedule 14C (File No. 001-35384) filed with the Securities and ~~John F. Coghlan~~Exchange Commission on March 8, 2021).

4.6		Representative’s Warrant dated May 18, 2021 (incorporated by reference to Exhibit ~~10.1~~4.1 to Form 8-K (File No. 001-35384) filed on ~~March 7, 2011)~~May 18, 2021).

~~10.12~~
4.7		Form of Common Stock ~~Purchase Agreement, dated September 7, 2013, by and between Data Storage Corporation and John F. Coghlan~~Warrant (incorporated by reference to Exhibit ~~2.1~~4.2 to Form 8-K (File No. 001-35384) filed on ~~September 13, 2013)~~May 18, 2021).

~~10.13~~
4.8		~~Stock Purchase~~Warrant Agency Agreement, dated ~~September 7, 2013,~~May 18, 2021, by and between ~~Data Storage Corporation~~the Company and ~~Clifford Stein~~VStock Transfer LLC (incorporated by reference to Exhibit ~~2.2~~4.3 to Form 8-K (File No. 001-35384) filed on ~~September 13, 2013)~~May 18, 2021).

~~10.14~~
4.9		~~Stock Purchase Agreement, dated September 18, 2013, by and between Data Storage Corporation and Jan Burman~~Form of Warrant (incorporated by reference to Exhibit ~~2.1~~4.1 to Form 8-K (File No. 001-35384) filed on ~~September 21, 2013)~~July 20, 2021).

~~10.15~~

~~Stock Purchase Agreement, dated September 18, 2013, by and between Data Storage Corporation and Charles M. Piluso (incorporated by reference to Exhibit 2.2 to Form 8-K filed on September 21, 2013).~~

~~10.16~~4.10*

Stock Purchase Agreement, dated September 18, 2013, by and between Data Storage Corporation and Piluso Family Associates (incorporated by reference to Exhibit 2.3 to Form 8-K filed on September 21, 2013).Description of Securities

~~10.17~~
10.1		Asset Purchase Agreement by and between ABC Services Inc., ~~and Data Storage Corporation Inc.~~ and Data Storage Corporation as of October 25, 2016 (incorporated by reference to Exhibit 10.1 to Form 8K filed on October 31, 2016).

~~10.17~~
10.2		Asset Purchase Agreement by and between ABC Services II Inc., ~~and Data Storage Corporation Inc.~~ and Data Storage Corporation as of October 25, 2016 (incorporated by reference to Exhibit 10.2 to Form 8K ~~filed on October 31, 2016)~~

~~10.19~~

~~Conversion Agreement by and between Data Storage Corporation and Charles M. Piluso dated October 25, 2016 (incorporated by reference to Exhibit 10.3 to Form 8K filed on October 31, 2016)~~

~~10.20~~

~~Conversion Agreement by and between Data Storage Corporation and John F. Coghlan dated October 25, 2016 (incorporated by reference to Exhibit 10.4 to Form 8K filed on October 31, 2016)~~

~~10.21~~	~~Conversion Agreement by and between Data Storage Corporation and Clifford Stein dated October 25, 2016 (incorporated by reference to Exhibit 10.5 to Form 8K~~(File No. 001-35384) filed on October 31, 2016).
~~10.22~~
10.3		Form of ~~Stockholder Agreement by and between Data Storage Corporation, Nexxis Inc., and John Camello dated November 13, 2018 (incorporated by reference to Exhibit 10.22 to Form 10Q filed November 19, 2018).~~
~~10.23~~	~~Form of Employment~~Stockholders Agreement by and between Data Storage Corporation, Nexxis Inc., and John Camello dated November 13, 2017 (incorporated by reference to Exhibit 10.23 to Form 10Q (File No. 001-35384) filled November 19, 2018).
~~10.24~~
10.4		Form of ~~Stock Purchase~~Employment Agreement between Data Storage Corporation, Nexxis Inc., and John Camello dated November 13, 2017 (incorporated by reference to Exhibit 10.23 to Form 10-Q (File No. 001-35384) filed November 19, 2018).

10.5		Buyout Lease Agreement between Data Storage Corporation and Systems Trading, Inc. dated March 15, 2018.

10.6		FMV Lease Agreement between Data Storage Corporation and Systems Trading, Inc. dated September 14, 2018.

10.7		Buyout Lease Agreement DSC003 between Data Storage Corporation and Systems Trading, Inc. dated December 18, 2018.

10.8		Buyout Lease Agreement DSC004 between Data Storage Corporation and Systems Trading, Inc. dated December 18, 2018.

10.9		Addendum 1 to Lease DSC003 between Data Storage Corporation and Systems Trading, Inc. dated March 20, 2019.

10.10		Addendum 1 to Lease DSC004 between Data Storage Corporation and Systems Trading, Inc. dated March 20, 2019.

10.11		Buyout Lease Agreement DSC006 between Data Storage Corporation and Systems Trading, Inc. dated November 12, 2019.

10.12		Agreement and Plan of Merger by and between Data Storage Corporation and ~~Broadsmart Florida, Inc.~~Flagship Solutions, LLC dated ~~November 5, 2018~~February 4, 2021 (incorporated by reference to Exhibit 10.1 to Form 8-K (File No. 001-35384) filed on February 10, 2021).
~~10.25~~
10.13		~~Form~~Amendment, dated February 12, 2021, to the Agreement and Plan of ~~Agreement to Unwind and Mutual Release~~Merger by and between Data Storage Corporation, Data Storage FL, LLC, Flagship Solutions, LLC, and ~~Broadsmart Florida, Inc.~~the owners of Equity Interests (as defined therein) dated

	14	~~Code of Ethics~~ February 4, 2021 (incorporated by reference to Exhibit ~~14.1~~10.2 to the Current Report on Form 8-K (File No. 001-35384) filed on February 16, 2021).

10.14		Buyout Lease Agreement DSC007 between Data Storage Corporation and Systems Trading, Inc. dated March 4, 2021.

10.15		Employment Agreement with Mark Wyllie (incorporated by reference to Exhibit 10.2 to Form ~~10-K~~8-K (File No. 001-35384) filed on June 3, 2021).

10.16		Offer Letter entered into between Data Storage Corporation and Chris H. Panagiotakos (incorporated herein by reference to Exhibit 10.14 to the Company’s Registration Statement on Form S-1 as filed with the Securities and Exchange Commission on April 28, 2021 (File Number 333-253056)).

10.17		Form of Securities Purchase Agreement dated July 19, 2021 between Data Storage Corporation and certain purchasers (incorporated by reference to Exhibit 10.1 to Form 8-K (File No. 001-35384) filed on July 20, 2021).

10.18		Form of Placement Agency Agreement dated July 19, 2021 between Data Storage Corporation and Maxim Group LLC (incorporated by reference to Exhibit 10.2 to Form 8-K (File No. 001-35384) filed on July 20, 2021).

10.19		Form of Employment Agreement between Data Storage Corporation and Charles M. Piluso dated March ~~31, 2009)~~28, 2023 (incorporated by reference to Exhibit 10.1 to Form 8-K (File No. 001-[*]) filed March 29, 2023).

21
10.20		Form of Employment Agreement between Data Storage Corporation and Chris H. Panagiotakos dated March 28, 2023 (incorporated by reference to Exhibit 10.2 to Form 8-K (File No. 001-[*]) filed March 29, 2023).

21.1		List of Subsidiaries of Data Storage Corporation (incorporated by reference to Exhibit 2121.1 to the Registration Statement on Form S-1 (File No. 333-179396) filed on February 6, ~~2013)~~2012).

~~31.1~~
23.1*		Consent of Rosenberg Rich Baker Berman P.A., Independent Registered Accounting Firm

31.1*		Certification of ~~President, Chief~~Principal Executive Officer ~~Chief~~Pursuant to Exchange Act Rule 13a-14(a), As adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Principal Financial Officer ~~Chairman~~Pursuant to Exchange Act Rule 13a-14(a), As adopted Pursuant to Section 302 of the ~~Board~~Sarbanes-Oxley Act of ~~Directors Pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Exchange Act.~~2002

~~32.1~~
32.1*		Certification of ~~President, Chief~~Principal Executive Officer ~~Chief Financial Officer, Chairman of the Board of Directors~~pursuant to 18 U.S.C. Section 1350, As adopted Pursuant to Section 906 of the Sarbanes-Oxley Act 2002

32.2*		Certification of ~~2002.~~Principal Financial Officer pursuant to 18 U.S.C. Section 1350, As adopted Pursuant to Section 906 of the Sarbanes-Oxley Act 2002

49*

Filed herewith

# Indicates management contract or compensatory plan.

Item16 Form 10-K Summary

Not applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

Signature	~~DATA STORAGE CORPORATION~~	Title	Date

	~~By:~~	~~/s/~~~~Charles M. Piluso~~
		~~Chief Executive Officer~~
		~~Chief Financial Officer~~
		~~Principal Executive Officer~~
		~~Principal Financial Officer~~
		~~Principal Accounting Officer~~

~~Dated~~~~April 14, 2020~~

~~POWER OF ATTORNEY~~

Know all persons by these presents that each individual whose signature appears below constitutes and appoints Charles M. Piluso, our Chief Executive Officer as a true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments to this Report together with all schedules and exhibits thereto, (ii) act on, sign and file with the Securities and Exchange Commission any and all exhibits to this Report and any and all exhibits and schedules thereto, (iii) act on, sign and file any and all such certificates, notices, communications, reports, instruments, agreements and other documents as may be necessary or appropriate in connection therewith and (iv) take any and all such actions which may be necessary or appropriate in connection therewith, granting unto such agent, proxy and attorney-in-fact, full power and authority to do and perform each and every act and thing necessary or appropriate to be done, as fully for all intents and purposes as he might or could do in person, and hereby approving, ratifying and confirming all that such agent, proxy and attorney-in-fact, or any of his or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

~~Signature~~	~~Title~~	~~Date~~

/s/ Charles M. Piluso	Chief Executive Officer ~~Chief~~	~~April 14, 2020~~ March 31, 2023
Charles M. Piluso	(Principal Executive Officer)

/s/ Chris H. Panagiotakos	Chief Financial Officer ~~Principal Executive Officer,~~ ~~Principal~~(Principal Financial Officer	March 31, 2023
Chris H. Panagiotakos	and Principal Accounting ~~Officer~~ Officer)

~~/s/ John Argen~~	~~Director~~	~~April 14, 2020~~
~~John Argen~~
~~/s/ Joseph B. Hoffman~~	~~Director~~	~~April 14, 2020~~
~~Joseph B. Hoffman~~
~~/s/ Lawrence A. Maglione Jr.~~	~~Director~~	~~April 14 2020~~
~~Lawrence A. Maglione Jr.~~
~~/s/ John Coghlan~~	~~Director~~	~~April 14, 2020~~
~~John Coghlan~~
~~/s/ Cliff Stein~~	~~Director~~	~~April 14, 2020~~
~~Cliff Stein~~

/s/ Harold J. Schwartz	President, Director	~~April 14, 2020~~March 31, 2023
Harold J. Schwartz

~~/s/~~ Thomas C. Kempster	Executive Vice President of Strategic Development, Director	~~April 14, 2020~~March 31, 2023
Thomas C. Kempster

John Argen	Director	March 31, 2023
John Argen

Joseph B. Hoffman	Director	March 31, 2023
Joseph Hoffman

Lawrence A. Maglione, Jr.	Director	March 31, 2023
Lawrence Maglione

Matthew Grover	Director	March 31, 2023
Matthew Grover

Todd A. Correll	Director	March 31, 2023
Todd Correll

Nevada		98-0530147
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

48 South Service Road Melville ~~N.Y.~~ , NY		11747
(Address of principal executive offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	DTST	The Nasdaq Capital Market

Warrants to purchase shares of Common Stock, par value $0.001 per share	DTSTW	The Nasdaq Capital Market

Large accelerated filer ☐	☐	Accelerated filer	☐
Non-accelerated filer ☒	☐ ~~Do not check if a smaller reporting company~~	Smaller reporting company☒
	☒Emerging growth company ☐

PART I	31

ITEM 1. DESCRIPTION OF BUSINESS	31

ITEM 1A. RISK FACTORS	108

ITEM 1B. UNRESOLVED STAFF COMMENTS	1025

ITEM 2. DESCRIPTION OF PROPERTY	1025

ITEM 3. LEGAL PROCEEDINGS	1025

ITEM 4. MINE SAFETY DISCLOSURES	1025

PART II	1125

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	1125

ITEM 6. SELECTED FINANCIAL DATA	1126

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	1226

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	1632

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	17F-1

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	3833

ITEM 9A. CONTROLS AND PROCEDURES	3833

ITEM 9B. OTHER INFORMATION	3933

PART III	3933

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	3933

ITEM 11. EXECUTIVE COMPENSATION	4239

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	4642

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION, AND DIRECTOR INDEPENDENCE	4744

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	4745

PART IV	4746

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES	46

47ITEM 16. FORM 10-K SUMMARY	50

	•	~~Save While Active~~ ~~– Backups can be scheduled to run at any time with little to no impact on production applications.~~

	•	~~Scalable~~ – ezVault automatically scales to meet your backup storage requirements. The pay as you grow model eliminates the need to forecast future backup capacity and purchase additional storage that may go unused for several years.

●	~~Standby Systems~~ezVault™ ~~– Preconfigured~~solution is at the core of the Company’s data protection services and allows its clients to have their data protected and stored offsite with unlimited data retention in a secure location that uses encrypted, enterprise-grade storage which allows for remote recovery from system outages, human and natural disasters, and cyber security attacks like Ransomware and viruses allowing restoration of data from a known good point in time prior to an attack.

●	ezRecovery™ provides standby systems, ~~capable~~networking, and storage in the Company’s cloud infrastructure that allows for faster recovery from client backups stored using ezVault™ at the same cloud based hosted location.

●	ezAvailability™ solution offers reliable real-time data replication for mission-critical applications with Recovery Time Objective under fifteen minutes and near-zero Recovery Point Objective, with optional, fully managed replication services. The Company’s ezAvailability™ service consists of ~~running full~~a full-time enterprise system, storage, and network resources, allowing quick and easily switched production workloads into the ~~event of~~Company’s cloud when needed. The Company’s ezAvailability™ services are backed by a ~~disaster.~~Service-Level Agreement (“SLA”) to help assure performance, availability, and access.

●	•	~~No Licensing~~ezMirror™ ~~– Reduces cost; we provide temporary OS licensing in~~solution provides replication services that mirror the ~~event of system recovery.~~clients’ data at the storage level and allows for similar near-zero Recovery Point Objective as ezAvailability with less application management and Recovery Time Objective under 1 hour.

	•	~~Clientsecurity provides AV, Malware, Ransomware and behavioral analysis for Windows, Mac and Linux Desktops, Laptops and iOS/Android Mobile devices.~~

	•	~~Serversecurity provides AV, Malware, Ransomware and behavioral analysis for Windows and Linux Servers.~~

	•	~~IBM i Security Assessments~~is a free offering that performs a thorough analysis of an IBM i system reviewed by our expert staff. We deliver a detailed report of finding and recommendations to ensure systems meet your desired compliance and security standards.

	•	~~IBM i Security Modulesinclude software solutions that are installed on the system to ensure the continuous compliance of systems security standards.~~

	•	~~Managed firewallprovides firewall configuration changes, quarterly configuration review and firewall patching.~~

Quarterly ended	Low Price		High Price
March 31, 2018	$	0.09	$	0.10
June 30, 2018	$	0.11	$	0.16
September 30, 2018	$	0.16	$	0.17
December 31, 2018	$	0.14	$	0.16
March 29, 2019	$	0.17	$	0.17
June 28, 2019	$	0.17	$	0.18
September 30, 2019	$	0.10	$	0.12
December 31, 2019	$	0.11	$	0.13

Revenue	For the Year
	Ended December 31,
	2019		2018		$ Change			% Change
Infrastructure & Disaster Recovery/Cloud Service	$	5,437,684	$	4,616,707	$	820,977			18	%
Equipment and Software		1,784,658		3,221,704		(1,437,046	)		(45	)%
Managed Services		365,767		603,716		(237,949	)		(39	)%
Professional Fees		411,475		315,658		95,817			30	%
Nexxis VoIP Services		484,024		129,617		354,407			273	%
Total Revenue	$	8,483,608	$	8,887,402	$	(403,794	)		(5	)%

Operating Expenses	For the Year
	Ended December 31,
	2019		2018		$ Change			% Change
Increase in Salaries	$	825,647	$	702,697	$	122,950			17	%
Increase in Officer's Salaries		540,906		453,560		87,346			19	%
Decrease in Professional Fees		309,036		465,187		(156,151	)		(34	)%
Increase in Software as a Service Expense		102,874		15,231		87,643			575	%
Increase in Advertising Expenses		259,920		216,784		43,136			20	%
Increase in Commissions Expense		890,867		740,803		150,064			20	%
Increase in all Other Expenses		601,802		529,790		72,013			14	%
Total Expenses	$	3,531,053	$	3,124,052	$	407,001			13	%

Selling, general and administrative expenses	For the Year
	Ended December 31,
	2022		2021		$ Change			% Change
Increase in Salaries	$	5,199,513	$	3,768,804	$	1,430,709			38	%
Increase in Professional Fees		927,441		804,755		122,686			15	%
Increase in Software as a Service Expense		230,725		228,119		2,606			1	%
Increase in Advertising Expenses		966,248		541,788		424,460			78	%
Increase in Commissions Expense		1,301,949		968,415		333,534			34	%
Decrease in Amortization and Depreciation Expense		294,477		342,516		(48,039	)		(14	)%
Increase in Travel and Entertainment Expense		280,763		127,676		153,087			120	%
Increase in Rent and Occupancy Expense		219,545		130,835		88,710			68	%
Increase in Insurance Expense		111,294		75,270		36,024			48	%
Increase in all other Expenses		305,353		196,004		109,349			56	%
Total Expenses	$	9,837,308	$	7,184,182	$	2,653,126			37	%

	For the Year Ended
	December 31,			December 31,
	2022			2021

Net (Loss) Income	$	(4,408,863	)	$	259,921

Non-GAAP adjustments:
Depreciation and amortization		1,225,911			1,284,345
Benefit from income taxes		—			(399,631	)
Flagship acquisition costs		770			135,512
Interest income and expense		130,087			126,746
Impairment of goodwill		2,322,000			—
Loss on disposal of assets		—			44,732
Gain on forgiveness of debt		—			(798,840	)
Stock-based compensation		734,479			171,798

Adjusted EBITDA	$	4,384		$	824,583

2)	High Availability: A managed cloud subscription-based service that provides cost-effective mirroring software replication technology and provides one (1) hour or less recovery time for a client to be back in business.

3)	Cloud Infrastructure: subscription-based cloud service provides for “capacity on-demand” for IBM Power and X86 Intel server systems.

4)	Internet: Subscription-based service, offering continuous internet connection combined with FailSAFE which provides disaster recovery for both a clients’ voice and data environments.

5)	Support and Maintenance: Subscription based service offers support for clients on their servers, firewalls, desktops or software. Services are provided 24x7x365 to our clients.

6)	Implementation / Set-Up Fees: Onboarding and set-up for cloud infrastructure and disaster recovery as well as Cyber Security.

7)	Equipment sales: Sale of servers and data storage equipment to the client.

9)	License: Granting SSL certificates and licenses.

Index to the Consolidated Financial Statements	Page

Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 0089)	18 F-2

Consolidated Balance Sheets as of December 31, ~~2019~~2022, and ~~2018~~2021	19 F-4

Consolidated Statements of Operations for the Years Ended December 31, ~~2019~~2022, and ~~2018~~2021	20 F-5

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022 , and 2021	F-6

Consolidated Statements of Cash Flows for the Years Ended December 31, ~~2019~~2022, and ~~2018~~2021	21 F-7

~~Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2019 and 2018~~	22

Notes to Consolidated Financial Statements	23 F-8

~~/s/ Rosenberg Rich Baker Berman, P.A.~~	●	Obtaining valuation reports prepared by valuation specialists engaged by management to assist in the determination of fair value of goodwill.

	●	Examining the completeness and accuracy of the underlying data supporting the significant assumptions and estimates used in the valuation reports, including historical and projected financial information.

~~We have served as~~	●	Utilizing personnel with specialized skills and knowledge in valuation to assist in: (i) evaluating the ~~Company’s auditor since 2008.~~

~~Somerset, New Jersey~~

~~April 14, 2020~~
	appropriateness of the valuation models, and (ii) assessing the reasonableness of the assumptions used in the determination of fair values.

DATA STORAGE CORPORATION AND SUBSIDIARIES
18	CONSOLIDATED BALANCE SHEETS


	December 31, 2022			December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	2,286,722		$	12,135,803
Accounts receivable (less allowance for credit losses of $27,250 and $30,000 in 2022 and 2021, respectively)		3,502,836			2,384,367
Marketable securities		9,010,968			-
Prepaid expenses and other current assets		584,666			536,401
Total Current Assets		15,385,192			15,056,571

Property and Equipment:
Property and equipment		7,168,488			6,595,236
Less—Accumulated depreciation		(4,956,698	)		(4,657,765	)
Net Property and Equipment		2,211,790			1,937,471

Other Assets:
Goodwill		4,238,671			6,560,671
Operating lease right-of-use assets		226,501			422,318
Other assets		48,437			103,226
Intangible assets, net		1,975,644			2,254,566
Total Other Assets		6,489,253			9,340,781

Total Assets	$	24,086,235		$	26,334,823

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable and accrued expenses	$	3,207,577		$	1,343,391
Deferred revenue		281,060			366,859
Finance leases payable		359,868			216,299
Finance leases payable related party		520,623			839,793
Operating lease liabilities short term		160,657			205,414
Total Current Liabilities		4,529,785			2,971,756

Operating lease liabilities		71,772			226,344
Finance leases payable		281,242			157,424
Finance leases payable related party		256,241			364,654
Total Long-Term Liabilities		609,255			748,422

Total Liabilities		5,139,040			3,720,178

Commitments and contingencies (Note 7)		—			—

Stockholders’ Equity:
Preferred stock, Series A par value $.001; 10,000,000 shares authorized; 0 and 0 shares issued and outstanding in 2022 and 2021, respectively		—			—
Common stock, par value $.001; 250,000,000 shares authorized; 6,822,127 and 6,693,793 shares issued and outstanding in 2022 and 2021, respectively		6,822			6,694
Additional paid in capital		38,982,440			38,241,155
Accumulated deficit		(19,887,378	)		(15,530,576	)
Total Data Storage Corp Stockholders’ Equity		19,101,884			22,717,273
Non-controlling interest in consolidated subsidiary		(154,689	)		(102,628	)
Total Stockholder’s Equity		18,947,195			22,614,645
Total Liabilities and Stockholders’ Equity	$	24,086,235		$	26,334,823


	Preferred Stock						Common Stock				Additional Paid-in Capital			Accumulated Deficit			Non-Controlling Interest			Total Stockholders’ Equity

	Shares			Amount			Shares		Amount

Balance January 1, 2021		1,401,786		$	1,402			3,214,537	$	3,215	$	17,745,783		$	(15,734,737	)	$	(94,705	)	$	1,920,958
Conversion of preferred series to stock		(1,401,786	)		(1,402	)		43,806		44		1,358			—			—			—
Proceeds from issuance of common stock and warrants		—			—			2,975,000		2,975		16,941,405			—			—			16,944,380
Stock Options Exercise		—			—			5,060		5		(5	)		—			—			—
Stock warrants exercise		—			—			455,390		455		3,380,816			—			—			3,381,271
Stock-based compensation		—			—			—		—		171,798			—			—			171,798
Net Income (Loss)		—			—			—		—		—			267,844			(7,923	)		259,921
Preferred stock dividends		—			—			—		—		—			(63,683	)		—			(63,683	)
Balance, December 31, 2021		—		$	—			6,693,793	$	6,694	$	38,241,155		$	(15,530,576	)	$	(102,628	)	$	22,614,645
Stock options exercise		—			—			3,334		3		6,931			—			—			6,934
Stock-based compensation		—			—			125,000		125		734,354			—			—			734,479
Net (Loss)		—			—			—		—		—			(4,356,802	)		(52,061	)		(4,408,863	)
Balance, December 31, 2022		—		$	—			6,822,127	$	6,822	$	38,982,440		$	(19,887,378	)	$	(154,689	)	$	18,947,195

	Twelve Months Ended December 31,
	2019			2018
Cash Flows from Operating Activities:
Net Income	$	29,323		$	236,671
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		896,697			602,532
Stock based compensation		41,340			32,003
Changes in Assets and Liabilities:		—			—
Accounts receivable		(160,191	)		(124,852	)
Other assets		—			9,923
Prepaid expenses and other current assets		87,163			(47,674	)
Employee loan		—			3,000
Right of use asset		(324,267	)		—
Accounts payable and accrued expenses		(81,862	)		(98,774	)
Deferred revenue		(2,464	)		(89,353	)
Deferred rent		(18,890	)		17,829
Operating lease liability		332,817			—
Net Cash Provided by Operating Activities		799,666			541,305
Cash Flows from Investing Activities:
Capital expenditures		(40,355	)		(69,783	)
Net Cash Used in Investing Activities		(40,355	)		(69,783	)
Cash Flows from Financing Activities:
Repayments of capital lease obligations		(741,940	)		(347,871	)
Cash received for the exercised of options		5,400			—
Advance from Credit Line		75,000			—
Net Cash Used in Financing Activities		(661,540	)		(347,871	)
Increase in Cash and Cash Equivalents		97,771			123,651
Cash and Cash Equivalents, Beginning of Year		228,790			105,139
Cash and Cash Equivalents, End of Year	$	326,561		$	228,790
Supplemental Disclosures:
Cash paid for interest	$	177,451		$	98,788
Cash paid for income taxes	$	—		$	5,604
Non-cash investing and financing activities:
Accrual of preferred stock dividend	$	124,312		$	113,012
Assets acquired by finance lease	$	1,560,021		$	—



	Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Non-Controlling			Total Stockholders’ Equity/
	Shares		Amount		Shares		Amount		Capital		Deficit			Interest			(Deficit)

Balance, January 1, 2018		1,401,786	$	1,402		128,139,418	$	128,139	$	17,377,986	$	(15,924,376	)	$	(4,389	)	$	1,578,762

Stock-based Compensation		—		—		—		—		32,003		—			—			32,003
Net Income		—		—		—		—				259,793			(23,122	)		236,671
Cum Adj Adoption of ASC606		—		—		—		—		—		41,971			—			41,971
Preferred Stock		—		—		—		—		—		(113,012	)		—			(113,012	)
Balance, December 31, 2018		1,401,786		1,402		128,139,418		128,139		17,409,989		(15,735,624	)		(27,511	)		1,776,395
Stock Options Issued as Compensation		—		—		—		—		15,342		—			—			15,342
Common Stock Issued as Compensation		—		—		200,000		200		25,800		—			—			26,000
Stock Options Exercise						100,000		100		5,300		—			—			5,400
Net Income		—		—		—		—		—		69,860			(40,537	)		29,323
Preferred Stock		—		—		—		—		—		(124,312	)		—			(124,312	)

Balance, December 31, 2019		1,401,786	$	1,402		128,439,418	$	128,439	$	17,456,431	$	(15,790,076	)	$	(68,048	)	$	1,728,148

Years ending December 31,
2020	$	194,000
2021		161,666
Total	$	355,666

	Year Ended December 31, 2019
Finance lease:
Amortization of assets, included in depreciation and amortization expense	$	674,040
Interest on lease liabilities, included in interest expense		174,322
Operating lease:
Amortization of assets, included in total operating expense		69,428
Interest on lease liabilities, included in total operating expense		24,168
Total net lease cost	$	941,958

	Number of Shares Under Options			Range of Option Price Per Share		Weighted Average Exercise Price
Options Outstanding at January 1, 2018		5,052,148		$	0.02 – 0.85	$	0.28
Options Granted		1,022,004			0.35 – 0.65		0.37
Expired/Cancelled		(308,633	)		0.02 – 0.14		0.27
Options Outstanding at December 31, 2018		5,765,519		$	0.02 – 0.65	$	0.26
Options Granted		2,852,537			0.05		0.05
Exercised		(100,000	)		0.05		0.05
Expire/Cancelled		(92,232	)		0.05		0.05
Options Outstanding at December 31, 2019		8,425,824		$	0.05 – 0.65	$	0.17

Options Exercisable at December 31, 2019		4,599,199		$	0.05 – 0.65	$	0.21

	Number of Shares Under Warrants		Range of Warrants Price Per Share		Weighted Average Exercise Price
Warrants Outstanding at January 1, 2018		133,334	$	0.01	$	0.01
Warrants Granted		—		—		—
Warrants Outstanding at December 31, 2018		133,334	$	0.01	$	0.01
Warrants Granted		—		—		—
Warrants Outstanding at December 31, 2019		133,334	$	0.01	$	0.01
Warrants Exercisable at December 31, 2019		133,334	$	0.01	$	0.01

	2019			2018

Net operating loss carry-forward	$	1,419,000		$	1,369,024

Less: valuation allowance		(1,419,000	)		(1,369,024	)

Net deferred tax asset	$	—		$	—

*Summary Compensation Table*

Name & Principal Position	Year		Salary		Bonus		Stock Awards		Option Awards (1)		Non-Equity Incentive Plan Compensation		All Other Compensation		Total
Charles M. Piluso, Chief Executive Officer, and Chairman of the Board		2019	$	66,000		—		—	$	—		—		—	$	66,000

Harold Schwartz - President		2019	$	66,000		—		—	$	—		—		—	$	66,000

Tom Kempster – President of Operations		2019	$	118,917		—		—	$	—		—		—	$	118,917

Outstanding Equity Awards at Fiscal Year-End December 31, 2019
	Option Awards
Name		Option Approval Date		Number of Securities Underlying Unexercised Options (#) Exercisable(1)		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (2)		Option Exercise Price ($)		Option Expiration Date
Charles M. Piluso
(4)			12/15/2009		250,000		0		0.360	12/14/2020
(5)			12/31/2009		13,888		0		0.360	12/30/2020
(5)			12/16/2010		14,286		0		0.360	12/15/2020
(3)			6/18/2012		548,780		0		0.394	6/17/2022
(3)			6/18/2012		357,143		0		0.394	6/17/2022
(5)			12/11/2012		33,333		0		0.150	12/10/2022
(5)			12/13/2013		33,333		0		0.150	12/12/2023
(5)			12/22/2015		66,666		0		0.350	12/21/2025
(5)			12/14/2017		44,444		22,222		0.050	12/14/2027
(5)			12/11/2019		0		100,000		0.060	12/10/2023

Harold J. Schwartz
(6)			11/3/2011		1,490		0		0.850	11/2/2021
(6)			6/18/2012		2,538		0		0.394	6/17/2022
(6)			12/11/2012		16,666		0		0.150	12/10/2022
(6)			12/13/2013		16,666		0		0.150	12/12/2023
(5)			12/22/2015		33,333		0		0.350	12/21/2025
(5)			12/14/2017		44,444		22,222		0.050	12/13/2027
(5)			12/11/2019		0		100,000		0.060	12/10/2023

Thomas C. Kempster
(5)			12/14/2017		44,444		22,222		0.050	12/13/207
(5)			12/11/2019		0		100,000		0.060	12/10/2023

Director Name	Fees earned or paid in cash		Stock awards		Option awards (1)(2)			Non-equity incentive plan		Non-qualified deferred		All other compensation		Total
Charles M. Piluso		—		—	$	13,000	(3)		—		—		—	$	13,000
Harold Schwartz		—		—	$	13,000	(4)		—		—		—	$	13,000
Tom Kempster		—		—	$	13,000	(5)		—		—		—	$	13,000
Lawrence Maglione		—		—	$	13,000	(6)		—		—		—	$	13,000
John F. Coghlan		—		—	$	13,000	(7)		—		—		—	$	13,000
John Argen		—		—	$	13,000	(8)		—		—		—	$	13,000
Joseph B. Hoffman		—		—	$	13,000	(9)		—		—		—	$	13,000
Clifford Stein		—		—	$	13,000	(10)		—		—		—	$	13,000
Matthew Grover		—		��	$	3,250	(11)		—		—		—	$	3,250
Todd Correll		—		—	$	3,250	(12)		—		—		—	$	3,250


	Number of securities to be issued upon exercise of outstanding options and warrants			Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
Plan Category		(a)			(b)		(c)

Equity compensation plans approved by security holders		8,425,824	(1)	$	0.17		1,944,015

Total		8,425,824		$	0.17		1,944,015

Name and Address of Beneficial Owner (1)(2)	Number of Shares		Percent of Class (3)

Charles M. Piluso (4) (15)		35,855,487		28.41	%
John Coghlan (7) (15)		6,262,495		4.87	%
Harold J. Schwartz (6) (15)		32,572,327		25.37	%
Cliff Stein (5) (15)		11,027,219		8.58	%
Thomas C. Kempster (11) (15) (12)		32,391,634		25.26	%
Lawrence Maglione, Jr. (8) (15)		361,344		*
John Argen (9) (15)		328,172		*
Joseph Hoffman (10) (15)		328,172		*
Matthew Grover (13) (15)		—		*
Todd Correll (14) (15)		—		*

All Executive Officers and Directors as a group (14)		120,126,851		92.49	%