Document and Entity Information
Document and Entity Information | 3 Months Ended |
Mar. 31, 2016shares | |
Document And Entity Information | |
Entity Registrant Name | Data Storage Corp |
Entity Central Index Key | 1,419,951 |
Document Type | 10-Q |
Trading Symbol | DTST |
Document Period End Date | Mar. 31, 2016 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity a Well-known Seasoned Issuer | No |
Entity a Voluntary Filer | No |
Entity's Reporting Status Current | Yes |
Entity Filer Category | Smaller Reporting Company |
Entity Common Stock, Shares Outstanding | 36,588,240 |
Document Fiscal Period Focus | Q1 |
Document Fiscal Year Focus | 2,016 |
CONSOLIDATED BALANCE SHEETS (UN
CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Current Assets: | ||
Cash and cash equivalents | $ 79,940 | $ 67,045 |
Accounts receivable (less allowance for doubtful accounts of $15,000 in 2016 and $15,000 in 2015) | 103,998 | 118,619 |
Prepaid expenses and other current assets | 201,809 | 231,443 |
Total Current Assets | 385,747 | 417,107 |
Property and Equipment: | ||
Property and equipment | 3,375,958 | 3,375,958 |
Less - Accumulated depreciation | (3,128,199) | (3,064,492) |
Net Property and Equipment | 247,759 | 311,466 |
Other Assets: | ||
Goodwill | 2,201,828 | 2,201,828 |
Employee loans | 85,800 | 85,800 |
Other assets | 8,160 | 6,060 |
Intangible assets, net | 342,774 | 350,433 |
Investment in joint venture - at equity | 11,030 | 20,117 |
Total Other Assets | 2,649,592 | 2,664,238 |
Total Assets | 3,283,098 | 3,392,811 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 1,176,777 | 1,051,349 |
Revolving credit facility | 99,292 | 99,292 |
Dividend payable | 538,607 | 513,073 |
Deferred revenue | 393,108 | 436,563 |
Leases payable | 245,549 | 241,983 |
Note payable - bank | 350,000 | 350,000 |
Convertible debt - related parties net of discount | 901,924 | 901,924 |
Total Current Liabilities | 3,705,257 | 3,594,184 |
Deferred rental obligation | 1,414 | 1,251 |
Note Payable - related party | 12,000 | 12,000 |
Leases payable long-term | 283,841 | 346,583 |
Convertible debt - related parties | 1,189,439 | 1,189,439 |
Total Long Term Liabilities | 1,486,694 | 1,549,273 |
Total Liabilities | 5,191,951 | 5,143,457 |
Stockholders' Deficit: | ||
Preferred Stock, $.001 par value; 10,000,000 shares authorized; 1,401,786 shares issued and outstanding in each period | 1,402 | 1,402 |
Common stock, par value $0.001; 250,000,000 shares authorized; 36,588,240 shares issued and outstanding in each period | 36,588 | 36,588 |
Additional paid in capital | 12,817,472 | 12,805,332 |
Accumulated deficit | (14,764,315) | (14,593,968) |
Total Stockholders' (Deficit) Equity | (1,908,853) | (1,750,646) |
Total Liabilities and Stockholders' (Deficit) | $ 3,283,098 | $ 3,392,811 |
CONSOLIDATED BALANCE SHEETS (U3
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts related to accounts receivable | $ 15,000 | $ 15,000 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized | 10,000,000 | 10,000,000 |
Preferred stock, issued | 1,401,786 | 1,401,786 |
Preferred stock, outstanding | 1,401,786 | 1,401,786 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized | 250,000,000 | 250,000,000 |
Common stock, issued | 36,588,240 | 36,588,240 |
Common stock, outstanding | 36,588,240 | 36,588,240 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Income Statement [Abstract] | ||
Sales | $ 984,620 | $ 958,133 |
Cost of sales | 616,316 | 578,897 |
Gross Profit | 368,304 | 379,236 |
Selling, general and administrative | 438,110 | 527,866 |
Loss from Operations | (69,806) | (148,630) |
Other Income (Expense) | ||
Interest income | 1 | |
Bad Debt Recovery | 1,508 | |
Net income (loss) in equity method investment | (9,087) | 51,500 |
Interest expense | (67,428) | (73,972) |
Total Other Income (Expense) | (75,007) | (22,471) |
Loss before provision for income taxes | $ (144,813) | $ (171,101) |
Provision for income taxes | ||
Net Loss | $ (144,813) | $ (171,101) |
Preferred Stock Dividend | (25,534) | (23,114) |
Net Loss Attributable to Common Shareholders | $ (170,347) | $ (194,215) |
Loss per Share - Basic and Diluted (in dollars per share) | $ 0 | $ (0.01) |
Weighted Average Number of Shares - Basic and Diluted (in shares) | 36,588,240 | 36,125,845 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (144,813) | $ (171,101) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 71,366 | 152,368 |
Net (gain) loss on equity method investment | 9,087 | (51,500) |
Non cash interest expense | 52,299 | 51,567 |
Stock based compensation | 12,140 | 24,628 |
Changes in Assets and Liabilities: | ||
Accounts receivable | 14,621 | (22,976) |
Other assets | (2,100) | 1,200 |
Prepaid expenses and other current assets | $ 5,955 | 31,193 |
Employee loan | (12,000) | |
Accounts payable and accrued expenses | $ 96,808 | (90,482) |
Deferred revenue | (43,455) | (7,788) |
Deferred rent | 163 | 164 |
Net Cash Provided by(Used in) Operating Activities | $ 72,071 | (94,727) |
Cash Flows from Financing Activities: | ||
Issuance of convertible debt | 80,000 | |
Repayments of capital lease obligations | $ (59,176) | (53,905) |
Net Cash Provided by (Used in) Financing Activities | (59,176) | 26,095 |
Increase (Decrease) in Cash and Cash Equivalents | 12,895 | (68,632) |
Cash and Cash Equivalents, Beginning of Period | 67,045 | 110,448 |
Cash and Cash Equivalents, End of Period | 79,940 | 41,816 |
Cash paid for interest | $ 15,131 | $ 34,135 |
Cash paid for income taxes | ||
Non cash investing and financing activities: | ||
Accrual of preferred stock dividend | $ 25,234 | $ 23,114 |
Conversion of due to related party to convertible debt | 245,601 | |
Conversion of due to officer to convertible debt | $ 1,065,762 |
Basis of presentation, organiza
Basis of presentation, organization and other matters | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation, organization and other matters | Note 1 - Basis of presentation, organization and other matters Headquartered in Garden City, N.Y., Data Storage Corporation (DSC or the Company) offers its solutions and services to businesses within the healthcare, banking and finance, distribution services, manufacturing, construction, education, and government sectors. DSC derives revenues from long term subscription services and professional services related to the implementation of subscription services that provide businesses in the education, government and healthcare industries protection of critical computerized data. In 2009, the Companys revenues consisted primarily of offsite data backup, de-duplication, continuous data protection and Cloud Disaster Recovery solutions and protecting information for our clients. In 2010, DSC expanded its solutions based on the asset acquisition of SafeData. In 2012, DSC continued to assimilate organizations, expanded its technology as well as its technical group and positioned the new organization for growth. In October 2012, DSC purchased the software and assets of Message Logic. DSC maintains equipment for cloud storage and cloud computing in our data centers in Massachusetts, Rhode Island, and New York. DSC delivers its solutions over highly reliable, redundant and secure fiber optic networks with separate and diverse routes to the Internet. DSCs network and geographical diversity is important to clients seeking storage hosting and disaster recovery solutions, ensuring protection of data and continuity of business in the case of a network interruption. Liquidity The financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. For the three months ended March 31, 2016, the Company has generated revenues of $984,620 but has incurred a net loss attributable to common shareholders of $170,347. Its ability to continue as a going concern is dependent upon achieving sales growth, reduction of operation expenses and ability of the Company to obtain the necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due, and upon profitable operations. The Company has been funded by the Mr. Charles M. Piluso, the Companys Chief Executive Officer (CEO) and largest shareholder since inception as well as several Directors. It is the intention of Mr. Piluso to continue to fund the Company on an as needed basis. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies Stock Based Compensation The Company follows the requirements of FASB ASC 718-10-10, Share-Based Payments Recently Issued and Newly Adopted Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB voted to delay the effective date of ASU 2014-09 by one year to the first quarter of 2018 to provide companies sufficient time to implement the standards. Early adoption will be permitted, but not before the first quarter of 2017. Adoption can occur using one of two prescribed transition methods. In March and April 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) and ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing which provide supplemental adoption guidance and clarification to ASC 2014-09. ASU 2016-08 and ASU 2016-10 must be adopted concurrently with the adoption of ASU 2014-09. The Company is currently evaluating the impact of these new standards. In June 2014, FASB issued Accounting Standards Update (ASU) No. 2014-12 Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition under Accounting Standards Codification (ASC) 718, Compensation - Stock Compensation. As a result, the target is not reflected in the estimation of the awards grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods. Early adoption is permitted. Management has reviewed the ASU and believes that they currently account for these awards in a manner consistent with the new guidance; therefore there is no anticipation of any effect to the consolidated financial statements. On August 2014, FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concerns (Subtopic 205-40): Disclosures of Uncertainties about an Entitys Ability to continue as a Going Concern. The amendments require management to assess an entitys ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of managements plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of managements plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our financial position or results of operations. In April 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-05, Customers Accounting for Fees Paid in a Cloud Computing Arrangement. This ASU provides clarification on whether a cloud computing arrangement includes a software license. If a software license is included, the customer should account for the license consistent with its accounting of other software licenses. If a software license is not included, the arrangement should be accounted for as a service contract. This ASU is effective for annual reporting periods beginning after December 15, 2015, and interim periods within those years. Adoption of ASU 2015-05 did not have a material impact on our financial position or results of operations. During February 2016, the FASB issued ASU No. 2016-02, Leases (ASU 2016-02). The standard requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of the new standard. In March 2016, FASB issued ASU No. 2016-09, Improvements to Employee Share-based Payment Accounting (ASU 2016-09). ASU 2016-09 simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the standard and the impact on its consolidated financial statements and footnote disclosures. We have reviewed all FASB issued Accounting Standards Update (ASU) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporations reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration. Management does not believe there would have been a material effect on the accompanying consolidated financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiary, Data Storage Corporation, a Delaware Corporation. All significant inter-company transactions and balances have been eliminated in consolidation. Equity Investments Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. The Companys share of its equity method investees earnings or losses is included in other income in the accompanying Consolidated Statements of Operations. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. 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. Management believes the estimated fair value of these accounts at March 31, 2016 approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments or the use of market interest rates for debt instruments. The carrying values of certain of the Companys 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 and Short-Term Investments 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. 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 three months ended March 31, 2016 and 2015 DSC did not have any customer concentrations. Accounts Receivable/Allowance for Doubtful Accounts The Company sells its services to customers on an open credit basis. Accounts receivable are uncollateralized, non-interest-bearing customer obligations. Accounts receivables are due within 30 days. The allowance for doubtful accounts reflects the estimated accounts receivable that will not be collected due to credit losses and allowances. 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 Companys balance sheet. Property and Equipment Property and equipment is 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 5 to 7 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. 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 March 31, 2016, the Company had a full valuation allowance against its deferred tax assets. Goodwill and Other Intangibles In accordance with GAAP, the Company tests goodwill and other intangible assets for impairment on at least an annual basis. Goodwill impairment exists if the net book 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 an 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 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. In September 2011, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2011-08, "Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment", to allow entities to use a qualitative approach to test goodwill for impairment. ASU 2011-08 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. The Company adopted ASU 2011-08 in fiscal 2013 and thus performed a qualitative assessment. This adoption did not have a material impact on the Company's condensed consolidated financial statements. Revenue Recognition The Companys revenues consist principally of cloud storage and cloud computing revenues, SaaS and IaaS. Storage revenues consist of monthly charges related to the storage of materials or data (generally on a per unit basis). Sales are generally recorded in the month the service is provided. For customers who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract. Set up fees charged in connection with storage contracts are deferred and recognized on a straight line basis over the life of the contract. Impairment of Long-Lived Assets In accordance with FASB ASC 360-10-35, we review our 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 future cash flows. Advertising Costs The Company expenses the costs associated with advertising as they are incurred. The Company incurred $35,969 and $7,929 for advertising costs for the years ended March 31, 2016 and 2015, respectively. Net Income (Loss) Per Common Share In accordance with FASB ASC 260-10-5 Earnings Per Share, 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 inclusion of the potential common shares to be issued have an anti-dilutive effect on diluted loss per share and therefore they are not included in the calculation. Potentially dilutive securities at March 31, 2016 include 7,104,802 options and 133,334 warrants. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Note 3 - Property and Equipment Property and equipment, at cost, consist of the following : March 31, 2016 December 31, 2015 Storage equipment $ 2,075,639 $ 2,075,639 Website and software 533,418 533,418 Furniture and fixtures 14,037 14,037 Computer hardware and software 86,184 86,184 Data Center Equipment 666,680 666,680 3,375,958 3,375,958 Less: Accumulated depreciation 3,128,199 3,064,492 Net property and equipment $ 247,759 $ 311,466 Depreciation expense for the three months ended March 31, 2016 and 2015 was $63,707 and $107,505, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Note 4 - Goodwill and Intangible Assets Goodwill and intangible assets consisted of the following : March 31, 2016 Estimated life in years Gross amount Accumulated Amortization Goodwill Indefinite $ 2,201,828 N/A Intangible Assets Intangible assets not subject to amortization Trademarks Indefinite 294,268 N/A Intangible assets subject to amortization Customer list 5 - 15 897,274 848,768 Non-compete agreements 4 262,147 262,147 Total Intangible Assets 1,453,689 1,110,915 Total Goodwill and Intangible Assets $ 3,655,517 $ 1,110,915 Scheduled amortization over the next two years as follows: For The Twelve Months ending March 31, 2017 22,976 2018 25,530 Total $ 48,506 Amortization expense for the three months ended March 31, 2016 and 2015 was $7,659 and $44,863 respectively. |
Investment in At Equity
Investment in At Equity | 3 Months Ended |
Mar. 31, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Investment in At Equity | Note 5 Investment in At Equity The Company has a 50% non-controlling ownership interest in Secure Infrastructure & Services, LLC who provides infrastructure-as-a-Service (IaaS) for IBM iSeries and AIX v7 systems, Power HA services and network infrastructure hardware and services as needed to support the IaaS and PowerHA implementation and ongoing needs for customers and services sold under the Company. ASC 810 requires the Company to evaluate non-consolidated entities periodically and as circumstances change to determine if an implied controlling interest exists. During Fiscal 2013, the Company evaluated this equity investment and concluded that this is a variable interest entity and the Company is not the primary beneficiary. Secure Infrastructure & Services, LLC's fiscal year end is December 31. The following presents unaudited summary financial information for Secure Infrastructure & Services, LLC. Such summary financial information has been provided herein based upon the individual significance of this unconsolidated equity investment to the consolidated financial information of the Company. March 31, 2016 Current assets $ 276,220 Non-current assets $ 42,678 Current liabilities $ 348,770 Members' equity $ (29,872 ) The equity balance carried on the Company's balance sheet amounts to $11,030 as of March 31, 2016. Three Months Ended March 31, 2015 Net sales $ 418,924 Gross profit $ 93,386 Operating expenses $ 117,310 Net income(loss) $ (18,174 ) The Company's share of the net loss from Secure Infrastructure & Services, LLC for the three months ended March 31, 2016 was $9,087. |
Capital Lease Obligations
Capital Lease Obligations | 3 Months Ended |
Mar. 31, 2016 | |
Capital Lease Obligations [Abstract] | |
Capital Lease Obligations | Note 6 Capital Lease Obligations The company entered into a new lease agreement with Systems Trading, Inc. on May 1, 2014 to refinance all outstanding leases into one capital lease. This lease obligation is payable to Systems Trading, Inc. with monthly installments of $21,826 from June 1, 2014 through May 1, 2018. This lease is secured with the computer equipment and has been capitalized. Pursuant to Accounting Standards Codification (ASC) 470-50-40, Debt Modifications and Extinguishments-Derecognition, the Company determined that modification accounting applied to the refinancing. The new capital lease obligation has an effective interest rate of 7.22%. On July 10, 2015 the Company entered into a lease with Systems Trading, Inc. The lease is for $14,443, calls for monthly payments of $420 and expires on August 1, 2018. It carries an interest rate of 3%. On November 1, 2015, the Company added to the existing lease with Systems Trading. The lease addendum totaled $7,998, calls for monthly payments of $258 and expires on August 1, 2018. It carries no interest. Future minimum lease payments under the capital leases are as follows: As of March 31, 2016 $ 564,411 Less amount representing interest (35,021 ) Total obligations under capital leases 529,390 Less current portion of obligations under capital leases (245,549 ) Long-term obligations under capital leases $ 283,841 Long-term obligations under capital leases at March 31, 2016 mature as follows: For the twelve months ending March 31, 2017 $ 245.549 2018 260,354 2019 23,487 $ 529,390 The assets held under the capital leases are included in property and equipment as follows: Equipment $ 1,361,995 Less: accumulated depreciation (1,053,319 ) $ 308,676 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 7 - Commitments and Contingencies Revolving Credit Facility On January 31, 2008 the Company entered into a revolving credit line with a bank. The credit facility provides for $100,000 at prime plus .5%, 3.75% at March 31, 2016, and is secured by all assets of the Company and personally guaranteed by the Companys principal shareholder. As of March 31, 2016, the Company owed $99,292 under this agreement. Operating Leases The Company currently leases office space in Garden City, NY, and Warwick, RI. The lease for office space in Garden City, NY calls for escalating monthly payments ranging from $6,056 to $6,617 plus a portion of the operating expenses through June 2014. This lease was renewed for an additional year through June 30, 2016 at the rate of $6,617 per month. The lease for office space in Warwick, RI calls for monthly payments of $2,324 beginning February 1, 2014 which escalates to $2,460 on February 1 st Minimum obligations under these lease agreements are as follows: For the twelve months ending March 31, 2017 $ 48,478 2018 29,520 2019 24,600 $ 102,598 Rent expense for the three months ended March 31, 2016 and March 31, 2015 was $34,943 and $27,570 respectively. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 8 - Related Party Transactions In 2014, the Company paid a monthly rent expense for a data center in NY of $1,500, to a partnership owned by Mr. Piluso. For the year ended December 31, 2014, the rent expense was $13,500. The Company stopped using this facility in December 2014. The Company owed $245,601 to this related party at December 31, 2014. In 2015, the Company converted this to convertible debt (see Note 9). The Companys CEO, from time to time, advances money to fund the Company. These advances bear no interest and have no stated terms of repayment. As of December 31, 2014 the Company owed Mr. Piluso $1,065,762 for such advances. In February 2015, the Company converted the $1,065,762 to convertible debt (see Note 9). |
Related Party Debt
Related Party Debt | 3 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Related Party Debt | Note 9 Related Party Debt Convertible Debt - Related Party On January 31, 2012, the Company issued a $500,000 convertible promissory note to a director of the company in consideration of a loan in the amount of $500,000. The note is convertible into shares of the Companys common stock at $0.85 per share and carries interest at 10% per annum. Interest is payable quarterly through the maturity date of January 31, 2015. DSC has accrued interest on this note totaling $208,322 and is in arrears on its interest payments. On May 13, 2015, the maturity date of the note was extended to May 6, 2016. On February 28, 2013 the Company issued a $100,000 convertible promissory note to a director of the company in consideration of a loan in the amount of $100,000. The note is convertible into shares of the Companys common stock at $0.15 per share and carries interest at 10% per annum. Interest is payable quarterly through the notes maturity date of February 28, 2014. The Company issued 66,667 warrants valued at of $17,851 which was recorded as a discount to the convertible promissory note. In 2014, the Company defaulted on this note and is subject to additional interest of 5% per annum as well as additional 10% warrants for each year that it remains in default. DSC has accrued interest on this note totaling $33,130. On May 13, 2015, the maturity date of the note was extended to May 6, 2016. On August 9, 2013, the Company issued a $100,000 convertible promissory note to the CEO of the Company in consideration of a loan in the amount of $100,000. The convertible promissory note is convertible into shares of common stock of the Company at $0.15 and carries interest at 10% per annum. Interest is payable quarterly through the notes maturity date of April 30, 2014. The Company issued 66,667 warrants valued at $17,851 in connection with this note, which was recorded as a discount to the convertible promissory notes based on its relative fair value with an offset to additional paid in capital. In 2014, the Company defaulted on this note and is subject to additional interest of 5% per annum as well as the additional 10% warrants for each year in default. DSC has accrued interest on this note totaling $28,719. On May 13, 2015, the maturity date was extended to May 6, 2016. Effective January 1, 2015, the Company issued a $1,189,439 convertible promissory note to the Companys CEO. This note was issued to convert debt that is owed to the CEO and to 875 Merrick LLC. The note carries interest at 10% per annum. Interest shall accrue and be payable in arrears on December 31, 2017. The note and all accrued and unpaid interest is convertible into shares of the Companys common stock at $0.85 per share. DSC has accrued interest on this note totaling $148,517. Effective January 1, 2015, the Company issued a $121,924 convertible promissory note to the Companys CEO. This note was issued to convert debt that is owed to the CEO and to 875 Merrick LLC. The note carries interest of 10% per annum. Interest shall accrue and be payable in arrears on December 31, 2016. The note and all accrued and unpaid interest is convertible into shares the Companys common stock at $0.15 per share. DSC has accrued interest on this note totaling $15,224. On February 19, 2015 the Company issued an $80,000 convertible promissory note to the Companys CEO in consideration of an $80,000 loan. The note carries interest at 10% per annum. Interest shall accrue and be payable in arrears on February 18, 2016. The note and all accrued and unpaid interest is convertible into shares of the Companys common stock at $0.15 per share. DSC has accrued interest on this note totaling $10,416. Note Payable Related Party On October 7, 2015 the Company issued a $12,000 promissory note to the Companys CEO in consideration of a $12,000 loan. The note carries interest at 10% per annum. Interest shall accrue and be payable in arrears on October 6, 2017. DSC has accrued interest on this note totaling $578. |
Note Payable - bank
Note Payable - bank | 3 Months Ended |
Mar. 31, 2016 | |
Notes Payable [Abstract] | |
Note Payable - bank | Note 10 Note Payable - bank In connection with the 2012 acquisition of Message Logic, LLC, the Company acquired software subject to a UCC filing in the amount of $350,000 plus accrued interest. On September 5, 2014 the Company entered into an agreement whereby the Company will pay all arrears interest over 7 months at $3,910 per month. In addition, the Company has agreed to make monthly interest payments at $1,553 per month with the principal balance of $350,000 payable on April 30, 2016. |
Stockholders' (Deficit)
Stockholders' (Deficit) | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
Stockholders' (Deficit) | Note 11 - Stockholders (Deficit) Capital Stock The Company has 260,000,000 shares of capital stock authorized, consisting of 250,000,000 shares of Common Stock, par value $0.001, 10,000,000 shares of Preferred Stock, par value $0.001 per share Common Stock Options 2008 Equity Incentive Plan In October 2008, the Companys board of directors (the Board) adopted, the 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. Awards may be granted pursuant to the 2008 Plan for 10 years from the date the Board approved the 2008 Plan. Any grant under the 2008 Plan may be repriced, replaced or regranted at the discretion of the Board. 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, 2011, including 5 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, 2012. There are 2,140,429 options outstanding under this plan as of March 31, 2016. 2010 Incentive Award Plan The Company has reserved 2,000,000 shares of common stock for issuance under the terms of the Data Storage Corporation 2010 Incentive Award Plan (the 2010 Plan). The 2010 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 2010 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 2010 Plan for 10 years from the Effective Date. From time to time, we may issue Incentive Awards pursuant to the 2010 Plan. Each of the awards will be evidenced by and issued under a written agreement. On April 23, 2012, the Board of Directors of the Company amended and restated the Data Storage Corporation 2010 Plan. The 2010 Plan, as amended and restated, has been renamed the Amended and Restated Data Storage Corporation Incentive Award Plan. The new plan provides for flexibility in vesting periods and includes a limit of $100,000 per employee per year for incentive stock options There are 4,964,373 options outstanding under this plan as of March 31, 2016. There were 35,627 shares available for future grants under the plans. A summary of the Company's option 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, 2015 6,854,802 $ 0.02 - 0.85 $ 0.26 Options Granted 250,000 0.35 0.35 Options Exercised - - - Options Expired - - - Options Outstanding at March 31, 2016 7,104,802 $ 0.02 - 0.85 $ 0.28 Options Exercisable at March 31, 2016 5,609,608 0.02 - 0.85 $ 0.27 Share-based compensation expense for options totaling $12,140 and $24,628 was recognized in our results for the three months ended March 31, 2016 and 2015, respectively is based on awards vested. 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 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 U.S. Treasury bonds whose maturity period is appropriate for the term of the Warrants and is calculated by using the average daily historical stock prices through the day preceding the grant date. Estimated volatility is a measure of the amount by which the Companys stock price is expected to fluctuate each year during the expected life of the award. The Companys estimated volatility is an average of the historical volatility of peer entities whose stock prices were publicly available. The Companys calculation of estimated volatility is based on historical stock prices of these peer entities 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 March 31, 2016, there was $48,830 of total unrecognized compensation expense related to unvested employee options granted under the Companys share based compensation plans that is expected to be recognized over a weighted average period of approximately 1.25 years. Common Stock Warrants 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, 2015 133,334 $ 0.01-0.02 $ 0.01 Warrants Granted - - - Warrants Exercised - - - Warrants Cancelled - - - Warrants Outstanding at March 31, 2016 133,334 0.01 - 0.02 0.01 Warrants Exercisable at March 31, 2016 133,334 0.01 - 0.02 0.01 |
Litigation
Litigation | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Litigation | Note 12 - Litigation The Company was previously named as a defendant in a lawsuit filed in New York State Supreme Court, Nassau County, by Richard Rebetti, the Companys former Chief Operating Officer. In the lawsuit, Rebetti v. Data Storage Corp. and Charles M. Piluso, Rebetti asserted claims for unpaid wages in the amount of $67,392 plus statutory damages and counsel fees. This litigation has been settled in accordance with a confidential agreement and a stipulation of discontinuance has been filed. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 14 - Subsequent Events None. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Stock Based Compensation | Stock Based Compensation The Company follows the requirements of FASB ASC 718-10-10, Share-Based Payments |
Recently Issued and Newly Adopted Accounting Pronouncements | Recently Issued and Newly Adopted Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB voted to delay the effective date of ASU 2014-09 by one year to the first quarter of 2018 to provide companies sufficient time to implement the standards. Early adoption will be permitted, but not before the first quarter of 2017. Adoption can occur using one of two prescribed transition methods. In March and April 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) and ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing which provide supplemental adoption guidance and clarification to ASC 2014-09. ASU 2016-08 and ASU 2016-10 must be adopted concurrently with the adoption of ASU 2014-09. The Company is currently evaluating the impact of these new standards. In June 2014, FASB issued Accounting Standards Update (ASU) No. 2014-12 Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition under Accounting Standards Codification (ASC) 718, Compensation - Stock Compensation. As a result, the target is not reflected in the estimation of the awards grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods. Early adoption is permitted. Management has reviewed the ASU and believes that they currently account for these awards in a manner consistent with the new guidance; therefore there is no anticipation of any effect to the consolidated financial statements. On August 2014, FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concerns (Subtopic 205-40): Disclosures of Uncertainties about an Entitys Ability to continue as a Going Concern. The amendments require management to assess an entitys ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of managements plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of managements plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our financial position or results of operations. In April 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-05, Customers Accounting for Fees Paid in a Cloud Computing Arrangement. This ASU provides clarification on whether a cloud computing arrangement includes a software license. If a software license is included, the customer should account for the license consistent with its accounting of other software licenses. If a software license is not included, the arrangement should be accounted for as a service contract. This ASU is effective for annual reporting periods beginning after December 15, 2015, and interim periods within those years. Adoption of ASU 2015-05 did not have a material impact on our financial position or results of operations. During February 2016, the FASB issued ASU No. 2016-02, Leases (ASU 2016-02). The standard requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of the new standard. In March 2016, FASB issued ASU No. 2016-09, Improvements to Employee Share-based Payment Accounting (ASU 2016-09). ASU 2016-09 simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the standard and the impact on its consolidated financial statements and footnote disclosures. We have reviewed all FASB issued Accounting Standards Update (ASU) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporations reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration. Management does not believe there would have been a material effect on the accompanying consolidated financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiary, Data Storage Corporation, a Delaware Corporation. All significant inter-company transactions and balances have been eliminated in consolidation. |
Equity Investments | Equity Investments Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. The Companys share of its equity method investees earnings or losses is included in other income in the accompanying Consolidated Statements of Operations. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. |
Estimated Fair Value of Financial Instruments | 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. Management believes the estimated fair value of these accounts at March 31, 2016 approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments or the use of market interest rates for debt instruments. The carrying values of certain of the Companys 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 and Short-Term Investments | Cash, Cash Equivalents and Short-Term Investments 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. |
Concentration of Credit Risk and Other Risks and Uncertainties | 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 three months ended March 31, 2016 and 2015 DSC did not have any customer concentrations. |
Accounts Receivable/Allowance for Doubtful Accounts | Accounts Receivable/Allowance for Doubtful Accounts The Company sells its services to customers on an open credit basis. Accounts receivable are uncollateralized, non-interest-bearing customer obligations. Accounts receivables are due within 30 days. The allowance for doubtful accounts reflects the estimated accounts receivable that will not be collected due to credit losses and allowances. 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 Companys balance sheet. |
Property and Equipment | Property and Equipment Property and equipment is 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 5 to 7 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. |
Income Taxes | 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 March 31, 2016, the Company had a full valuation allowance against its deferred tax assets. |
Goodwill and Other Intangibles | Goodwill and Other Intangibles In accordance with GAAP, the Company tests goodwill and other intangible assets for impairment on at least an annual basis. Goodwill impairment exists if the net book 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 an 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 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. In September 2011, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2011-08, "Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment", to allow entities to use a qualitative approach to test goodwill for impairment. ASU 2011-08 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. The Company adopted ASU 2011-08 in fiscal 2013 and thus performed a qualitative assessment. This adoption did not have a material impact on the Company's condensed consolidated financial statements. |
Revenue Recognition | Revenue Recognition The Companys revenues consist principally of cloud storage and cloud computing revenues, SaaS and IaaS. Storage revenues consist of monthly charges related to the storage of materials or data (generally on a per unit basis). Sales are generally recorded in the month the service is provided. For customers who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract. Set up fees charged in connection with storage contracts are deferred and recognized on a straight line basis over the life of the contract. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets In accordance with FASB ASC 360-10-35, we review our 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 future cash flows. |
Advertising Costs | Advertising Costs The Company expenses the costs associated with advertising as they are incurred. The Company incurred $35,969 and $7,929 for advertising costs for the years ended March 31, 2016 and 2015, respectively. |
Net Income (Loss) Per Common Share | Net Income (Loss) Per Common Share In accordance with FASB ASC 260-10-5 Earnings Per Share, 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 inclusion of the potential common shares to be issued have an anti-dilutive effect on diluted loss per share and therefore they are not included in the calculation. Potentially dilutive securities at March 31, 2016 include 7,104,802 options and 133,334 warrants. |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment, at cost, consist of the following : March 31, 2016 December 31, 2015 Storage equipment $ 2,075,639 $ 2,075,639 Website and software 533,418 533,418 Furniture and fixtures 14,037 14,037 Computer hardware and software 86,184 86,184 Data Center Equipment 666,680 666,680 3,375,958 3,375,958 Less: Accumulated depreciation 3,128,199 3,064,492 Net property and equipment $ 247,759 $ 311,466 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill and intangible assets | Goodwill and intangible assets consisted of the following : March 31, 2016 Estimated life in years Gross amount Accumulated Amortization Goodwill Indefinite $ 2,201,828 N/A Intangible Assets Intangible assets not subject to amortization Trademarks Indefinite 294,268 N/A Intangible assets subject to amortization Customer list 5 - 15 897,274 848,768 Non-compete agreements 4 262,147 262,147 Total Intangible Assets 1,453,689 1,110,915 Total Goodwill and Intangible Assets $ 3,655,517 $ 1,110,915 |
Schedule of amortization over the next five years | Scheduled amortization over the next two years as follows: For The Twelve Months ending March 31, 2017 22,976 2018 25,530 Total $ 48,506 |
Investment in At Equity (Tables
Investment in At Equity (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Schedule of financial information | The following presents unaudited summary financial information for Secure Infrastructure & Services, LLC. March 31, 2016 Current assets $ 276,220 Non-current assets $ 42,678 Current liabilities $ 348,770 Members' equity $ (29,872 ) |
Schedule of net income loss | The equity balance carried on the Company's balance sheet amounts to $11,030 as of March 31, 2016. Three Months Ended March 31, 2015 Net sales $ 418,924 Gross profit $ 93,386 Operating expenses $ 117,310 Net income(loss) $ (18,174 ) |
Capital Lease Obligations (Tabl
Capital Lease Obligations (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Capital Lease Obligations [Abstract] | |
Schedule of future minimum lease payments | Future minimum lease payments under the capital leases are as follows: As of March 31, 2016 $ 564,411 Less amount representing interest (35,021 ) Total obligations under capital leases 529,390 Less current portion of obligations under capital leases (245,549 ) Long-term obligations under capital leases $ 283,841 |
Schedule of long-term obligations under capital leases | Long-term obligations under capital leases at March 31, 2016 mature as follows: For the twelve months ending March 31, 2017 $ 245.549 2018 260,354 2019 23,487 $ 529,390 |
Schedule of assets held under the capital leases | The assets held under the capital leases are included in property and equipment as follows: Equipment $ 1,361,995 Less: accumulated depreciation (1,053,319 ) $ 308,676 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of minimum obligations | Minimum obligations under these lease agreements are as follows: For the twelve months ending March 31, 2017 $ 48,478 2018 29,520 2019 24,600 $ 102,598 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
Schedule of option activity and related information | A summary of the Company's option 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, 2015 6,854,802 $ 0.02 - 0.85 $ 0.26 Options Granted 250,000 - - Options Exercised - - - Options Expired - - - Options Outstanding at March 31, 2016 7,104,802 $ 0.02 - 0.85 $ 0.28 Options Exercisable at March 31, 2016 5,609,608 0.02 - 0.85 $ 0.27 |
Schedule of warrant activity and related information | A summary of the Company's option 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, 2015 6,854,802 $ 0.02 - 0.85 $ 0.26 Options Granted 250,000 0.35 0.35 Options Exercised - - - Options Expired - - - Options Outstanding at March 31, 2016 7,104,802 $ 0.02 - 0.85 $ 0.28 Options Exercisable at March 31, 2016 5,609,608 0.02 - 0.85 $ 0.27 |
Basis of presentation, organi26
Basis of presentation, organization and other matters (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Revenues | $ 984,620 | |
Net loss attributable to common shareholders | $ (170,347) | $ (194,215) |
Summary of Significant Accoun27
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Accounts receivables due | 30 days | |
Advertising costs | $ 35,969 | $ 7,929 |
Property And Equipment [Member] | Minimum [Member] | ||
Useful lives | P5Y | |
Property And Equipment [Member] | Maximum [Member] | ||
Useful lives | P7Y | |
Warrant [Member] | ||
Potentially dilutive securities | $ 133,334 | |
Option [Member] | ||
Potentially dilutive securities | $ 7,104,802 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 63,707 | $ 107,505 |
Property and Equipment (Detai29
Property and Equipment (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | $ 3,375,958 | $ 3,375,958 |
Less: Accumulated depreciation | 3,128,199 | 3,064,492 |
Net property and equipment | 247,759 | 311,466 |
Storage Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | 2,075,639 | 2,075,639 |
Website And Software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | 533,418 | 533,418 |
Furniture And Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | 14,037 | 14,037 |
Computer Hardware And Software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | 86,184 | 86,184 |
Data Center Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | $ 666,680 | $ 666,680 |
Goodwill and Intangible Asset30
Goodwill and Intangible Assets (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 7,659 | $ 44,863 |
Goodwill and Intangible Asset31
Goodwill and Intangible Assets (Details) | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Goodwill and intangible assets [Abstract] | |
Goodwill, Gross amount | $ 2,201,828 |
Goodwill, Accumulated Amortization | |
Intangible assets not subject to amortization | |
Trademarks, Gross amount | $ 294,268 |
Trademarks, Accumulated Amortization | |
Intangible assets subject to amortization | |
Customer list, Gross amount | $ 897,274 |
Customer lists, Accumulated Amortization | 848,768 |
Non-compete agreements, Gross amount | 262,147 |
Non-compete agreements, Accumulated Amortization | 262,147 |
Total Intangible Assets, Gross amount | 1,453,689 |
Total Intangible Assets, Accumulated Amortization | 1,110,915 |
Total Goodwill and Intangible Assets, Gross amount | 3,655,517 |
Total Goodwill and Intangible Assets, Accumulated Amortization | $ 1,110,915 |
Goodwill, Estimated life in years | Indefinite |
Trademarks, Estimated life in years | Indefinite |
Non-compete Agreements [Member] | |
Intangible assets subject to amortization | |
Intangible assets subject to amortization, Estimated life in years | 4 years |
Customer Lists [Member] | Minimum [Member] | |
Intangible assets subject to amortization | |
Intangible assets subject to amortization, Estimated life in years | 5 years |
Customer Lists [Member] | Maximum [Member] | |
Intangible assets subject to amortization | |
Intangible assets subject to amortization, Estimated life in years | 15 years |
Goodwill and Intangible Asset32
Goodwill and Intangible Assets (Details 1) | Mar. 31, 2016USD ($) |
Scheduled amortization over next five years | |
2,017 | $ 22,976 |
2,018 | 25,530 |
Total | $ 48,506 |
Investment in At Equity (Detail
Investment in At Equity (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | |
Related Party Transaction [Line Items] | ||
Investment in joint venture | $ 11,030 | $ 20,117 |
Secure Infrastructure And Services [Member] | ||
Related Party Transaction [Line Items] | ||
Non-controlling ownership interest | 50.00% | |
Investment in joint venture | $ 11,030 | |
Income from joint venture | $ 9,087 |
Investment in At Equity (Deta34
Investment in At Equity (Details) - Secure Infrastructure And Services [Member] | Mar. 31, 2016USD ($) |
Related Party Transaction [Line Items] | |
Current assets | $ 276,220 |
Non-current assets | 42,678 |
Current liabilities | 348,770 |
Members' equity | $ (29,872) |
Investment in At Equity (Deta35
Investment in At Equity (Details 1) - Secure Infrastructure And Services [Member] | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Related Party Transaction [Line Items] | |
Net sales | $ 418,924 |
Gross profit | 93,386 |
Operating expenses | 117,310 |
Net income(loss) | $ (18,174) |
Capital Lease Obligations (Deta
Capital Lease Obligations (Details Narrative) - Systems Trading, Inc. [Member] - Computer Hardware And Software [Member] - USD ($) | Nov. 01, 2015 | Jul. 10, 2015 | May. 01, 2014 |
Capital lease obligation | $ 7,998 | $ 14,443 | |
Interest rates on capitalized leases | 3.00% | 7.22% | |
Capital leases contingent monthly rental payments | $ 258 | $ 420 | $ 21,826 |
Description on capital lease obligation | On July 10, 2015 the Company entered into a lease with Systems Trading, Inc. The lease is for $14,443, calls for monthly payments of $420 and expires on August 1, 2018. It carries an interest rate of 3%. | The company entered into a new lease agreement with Systems Trading, Inc. on May 1, 2014 to refinance all outstanding leases into one capital lease. This lease obligation is payable to Systems Trading, Inc. with monthly installments of $21,826 from June 1, 2014 through May 1, 2018. This lease is secured with the computer equipment and has been capitalized. |
Capital Lease Obligations (De37
Capital Lease Obligations (Details) | Mar. 31, 2016USD ($) |
Summary of future minimum lease payments under the capital leases | |
As of March 31, 2016 | $ 564,411 |
Less amount representing interest | (35,021) |
Total obligations under capital leases | 529,390 |
Less current portion of obligations under capital leases | (245,549) |
Long-term obligations under capital leases | $ 283,841 |
Capital Lease Obligations (De38
Capital Lease Obligations (Details 1) | Mar. 31, 2016USD ($) |
Summary of obligations under capital leases | |
2,017 | $ 245,549 |
2,018 | 260,354 |
2,019 | 23,487 |
Total obligations under capital leases | $ 529,390 |
Capital Lease Obligations (De39
Capital Lease Obligations (Details 2) | Mar. 31, 2016USD ($) |
Summary of assets held under capital leases included in property and equipment | |
Equipment | $ 1,361,995 |
Less: accumulated depreciation | (1,053,319) |
Total | $ 308,676 |
Commitments and Contingencies40
Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2014 | |
Total debt amount available under revolving credit facility | $ 100,000 | ||
Total debt amount available under revolving credit facility | 99,292 | ||
Operating leases, rent expense | $ 13,500 | ||
Operating leases, rent expense, net | $ 34,943 | $ 27,570 | |
Waltham, MA [Member] | |||
Lease expiration date | Jan. 31, 2019 | ||
Garden City [Member] | |||
Description of rental payment | The lease for office space in Garden City, NY calls for escalating monthly payments ranging from $6,056 to $6,617 plus a portion of the operating expenses through June 2014. This lease was renewed for an additional year through June 30, 2016 at the rate of $6,617 per month.The lease for office space in Warwick, RI calls for monthly payments of $2,324 beginning February 1, 2014 which escalates to $2,460 on February 1 st | ||
Minimum [Member] | |||
Interest rate on debt under revolving credit facility excluding prime rate | 0.50% | ||
Minimum [Member] | Garden City [Member] | |||
Operating leases, rent expense | $ 6,056 | ||
Minimum [Member] | Warwick, RI [Member] | |||
Operating leases, rent expense | $ 2,324 | ||
Maximum [Member] | |||
Interest rate on debt under revolving credit facility excluding prime rate | 3.75% | ||
Maximum [Member] | Garden City [Member] | |||
Operating leases, rent expense | $ 6,617 | ||
Maximum [Member] | Warwick, RI [Member] | |||
Operating leases, rent expense | $ 2,460 |
Commitments and Contingencies41
Commitments and Contingencies (Details) | Mar. 31, 2016USD ($) |
Summary of minimum obligations under operating lease agreements | |
2,017 | $ 48,478 |
2,018 | 29,520 |
2,019 | 24,600 |
Total | $ 102,598 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |
Feb. 28, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2014 | |
Related Party Transaction [Line Items] | ||||
Rent expenses per month | $ 13,500 | |||
Amount owed under agreement | $ 245,601 | |||
Conversion of due to officer to convertible debt | $ 1,065,762 | $ 1,065,762 | ||
Mr. Piluso [Member] | ||||
Related Party Transaction [Line Items] | ||||
Rent expenses per month | $ 1,500 | |||
Amount owed under agreement | $ 1,065,762 |
Related Party Debt (Details Nar
Related Party Debt (Details Narrative) - USD ($) | Oct. 07, 2015 | Feb. 19, 2015 | Jan. 02, 2015 | Aug. 09, 2013 | Feb. 28, 2013 | Jan. 31, 2012 | Dec. 31, 2014 |
Director [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Convertible notes payable issue | $ 100,000 | $ 500,000 | |||||
Consideration on convertible notes payable issued | $ 100,000 | $ 500,000 | |||||
Conversion price (in dollars per share) | $ 0.15 | $ 0.85 | |||||
Interest rate on note | 10.00% | 10.00% | |||||
Note maturity date | May 6, 2016 | May 6, 2016 | |||||
Accrued interest on note | $ 33,130 | $ 208,322 | |||||
Warrants issued | 66,667 | ||||||
Warrants value recorded as a discount | $ 17,851 | ||||||
Addtional interest of warrant note | 10.00% | ||||||
Addtional interest of note | 5.00% | ||||||
Mr. Piluso [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Convertible notes payable issue | $ 80,000 | $ 1,189,439 | $ 100,000 | ||||
Consideration on convertible notes payable issued | $ 80,000 | $ 100,000 | |||||
Conversion price (in dollars per share) | $ 0.15 | $ 0.85 | $ 0.15 | ||||
Interest rate on note | 10.00% | 10.00% | 10.00% | ||||
Note maturity date | May 6, 2016 | ||||||
Accrued interest on note | $ 10,416 | $ 148,517 | $ 28,719 | ||||
Warrants issued | 66,667 | ||||||
Warrants value recorded as a discount | $ 17,851 | ||||||
Addtional interest of warrant note | 10.00% | ||||||
Addtional interest of note | 5.00% | ||||||
Chief Executive Officer [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Convertible notes payable issue | $ 12,000 | $ 121,924 | |||||
Consideration on convertible notes payable issued | $ 12,000 | ||||||
Conversion price (in dollars per share) | $ 0.15 | ||||||
Interest rate on note | 10.00% | 10.00% | |||||
Accrued interest on note | $ 578 | $ 15,224 |
Note Payable - bank (Details Na
Note Payable - bank (Details Narrative) - Message Logic, LLC [Member] - USD ($) | Sep. 05, 2014 | Mar. 31, 2016 |
Acquired amount of software | $ 350,000 | |
Arrear interest payable per month | $ 3,910 | |
Period of arrear interest | 7 months | |
Monthly interest payments | $ 1,553 | |
Note payable - Enterprise Bank | $ 350,000 | |
Maturity date | Apr. 30, 2016 |
Stockholders' Deficit (Details
Stockholders' Deficit (Details Narrative) - USD ($) | Apr. 23, 2013 | Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2011 | Dec. 31, 2015 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Capital stock authorized | 260,000,000 | ||||
Common stock, authorized | 250,000,000 | 250,000,000 | |||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | |||
Preferred stock, authorized | 10,000,000 | 10,000,000 | |||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | |||
Share-based compensation expense for options | $ 12,140 | $ 24,628 | |||
Total unrecognized compensation expense | $ 48,830 | ||||
Weighted average period expected to recognized compensation expense (in years) | 1 year 3 months | ||||
2008 Equity Incentive Plan [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Maximum term of stock option from the date of grant | 10 years | 5 years | |||
Options outstanding | 2,140,429 | ||||
2010 Incentive Award Plan [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Maximum term of stock option from the date of grant | 10 years | ||||
Options outstanding | 4,964,373 | ||||
Reserved shares of common stock for issuance | 2,000,000 | ||||
Amended And Restated DSC Incentive Award Plan [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shares available for future grants | 35,627 | ||||
Amount of annual contribution per employee | $ 100,000 |
Stockholders' Deficit (Details)
Stockholders' Deficit (Details) | 3 Months Ended |
Mar. 31, 2016$ / sharesshares | |
Option [Member] | |
Summary of option/warrant activity | |
Outstanding, beginning | shares | 6,854,802 |
Granted | shares | 250,000 |
Exercised | shares | |
Expired | shares | |
Outstanding, ending | shares | 7,104,802 |
Exercisable, ending | shares | 5,609,608 |
Range of option/warrant price per share, Granted | $ 0.35 |
Weighted Average Exercise Price Outstanding, beginning | 0.26 |
Weighted Average Exercise Price, Granted | $ 0.35 |
Weighted Average Exercise Price, Exercised | |
Weighted Average Exercise Price, Cancelled/Expired | |
Weighted Average Exercise Price Outstanding, ending | $ 0.28 |
Weighted Average Exercise Price Exercisable, ending | 0.27 |
Option [Member] | Minimum [Member] | |
Summary of option/warrant activity | |
Range of option/warrant price per share, outstanding, beginning | $ 0.02 |
Range of option/warrant price per share, Granted | |
Range of option/warrant price per share, outstanding, ending | $ 0.02 |
Range of option/warrant price per share, Exercisable ending | 0.02 |
Option [Member] | Maximum [Member] | |
Summary of option/warrant activity | |
Range of option/warrant price per share, outstanding, beginning | $ 0.85 |
Range of option/warrant price per share, Granted | |
Range of option/warrant price per share, outstanding, ending | $ 0.85 |
Range of option/warrant price per share, Exercisable ending | $ 0.85 |
Warrant [Member] | |
Summary of option/warrant activity | |
Outstanding, beginning | shares | 133,334 |
Granted | shares | |
Exercised | shares | |
Cancelled | shares | |
Outstanding, ending | shares | 133,334 |
Exercisable, ending | shares | 133,334 |
Weighted Average Exercise Price Outstanding, beginning | $ 0.01 |
Weighted Average Exercise Price, Granted | |
Weighted Average Exercise Price, Exercised | |
Weighted Average Exercise Price, Cancelled/Expired | |
Weighted Average Exercise Price Outstanding, ending | $ 0.01 |
Weighted Average Exercise Price Exercisable, ending | 0.01 |
Warrant [Member] | Minimum [Member] | |
Summary of option/warrant activity | |
Range of option/warrant price per share, outstanding, beginning | $ 0.01 |
Range of option/warrant price per share, Granted | |
Range of option/warrant price per share, outstanding, ending | $ 0.01 |
Range of option/warrant price per share, Exercisable ending | 0.01 |
Warrant [Member] | Maximum [Member] | |
Summary of option/warrant activity | |
Range of option/warrant price per share, outstanding, beginning | $ 0.02 |
Range of option/warrant price per share, Granted | |
Range of option/warrant price per share, outstanding, ending | $ 0.02 |
Range of option/warrant price per share, Exercisable ending | $ 0.02 |
Litigation (Details Narrative)
Litigation (Details Narrative) | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Litigation Details Narrative | |
Unpaid wages | $ 67,392 |