Document and Entity Information
Document and Entity Information | 6 Months Ended |
Jun. 30, 2018shares | |
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 | Jun. 30, 2018 |
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 | 128,139,418 |
Document Fiscal Period Focus | Q2 |
Document Fiscal Year Focus | 2,018 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash and cash equivalents | $ 81,976 | $ 105,139 |
Accounts receivable (less allowance for doubtful accounts of $90,000 in 2018 and $90,000 in 2017) | 1,013,537 | 406,393 |
Prepaid expenses and other current assets | 101,189 | 120,217 |
Total Current Assets | 1,196,702 | 631,749 |
Property and Equipment: | ||
Property and equipment | 5,262,100 | 5,237,965 |
Less-Accumulated depreciation | (3,822,240) | (3,614,177) |
Net Property and Equipment | 1,439,860 | 1,623,788 |
Other Assets: | ||
Goodwill | 3,015,700 | 3,015,700 |
Employee Loans | 3,000 | 3,000 |
Other assets | 70,491 | 75,356 |
Intangible assets, net | 945,379 | 1,044,046 |
Total Other Assets | 4,034,570 | 4,138,102 |
Total Assets | 6,671,132 | 6,393,639 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 1,503,295 | 1,087,351 |
Dividend payable | 795,608 | 733,673 |
Deferred revenue | 484,180 | 566,731 |
Capital leases payable - related party | 476,544 | 658,476 |
Notes payable - related party | 186,906 | |
Note payable - Enterprise Bank | 350,000 | 350,000 |
Total Current Liabilities | 3,609,627 | 3,583,137 |
Deferred rental obligation | 571 | 1,061 |
Note Payable - related party, long term | 99,915 | |
Capital leases payable - related party, long term | 1,486,943 | 1,130,764 |
Total Long-Term Liabilities | 1,487,514 | 1,231,740 |
Total Liabilities | 5,097,141 | 4,814,877 |
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; 128,139,418 and 128,039,418 shares issued and outstanding in 2018 and 2017, respectively | 128,139 | 128,139 |
Additional paid in capital | 17,380,037 | 17,377,986 |
Accumulated deficit | (15,923,430) | (15,924,376) |
Total Data Storage Corp Stockholders' Equity | 1,586,148 | 1,583,151 |
Non-controlling interest in consolidated subsidiary | (12,157) | (4,389) |
Total Stockholders' Equity | 1,573,991 | 1,578,762 |
Total Liabilities and Stockholders' Equity | $ 6,671,132 | $ 6,393,639 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts related to accounts receivable | $ 90,000 | $ 90,000 |
Preferred stock, par value (in dollars per share) | $ .001 | $ .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 | 128,139,418 | 128,039,418 |
Common stock, outstanding | 128,139,418 | 128,039,418 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||||
Sales | $ 2,750,542 | $ 2,027,285 | $ 4,700,067 | $ 4,351,200 |
Cost of sales | 1,752,948 | 1,215,961 | 2,930,007 | 2,540,019 |
Gross Profit | 997,594 | 811,324 | 1,770,060 | 1,811,181 |
Selling, general and administrative | 974,336 | 744,136 | 1,717,495 | 1,349,202 |
Income from Operations | 23,258 | 67,188 | 52,565 | 461,979 |
Other Income (Expense) | ||||
Other Income | 649 | 716 | 2,211 | |
Interest expense | (26,266) | (38,472) | (40,142) | (65,902) |
Total Other Income (Expense) | (26,266) | (37,823) | (39,426) | (63,691) |
Income (loss) before provision for income taxes | (3,008) | 29,365 | 13,139 | 398,288 |
Provision for income taxes | ||||
Net Income (loss) | (3,008) | 29,365 | 13,139 | 398,288 |
Non-controlling interest in consolidated subsidiary | 5,642 | 7,759 | ||
Net Income attributable to Data Storage Corp | 2,634 | 29,365 | 20,898 | 398,288 |
Preferred Stock Dividends | (31,156) | (28,919) | (51,935) | (57,127) |
Net Income (loss) Attributable to Common Stockholders | $ (28,522) | $ 446 | $ (41,037) | $ 341,161 |
Income (loss) per Share - Basic and Diluted (in dollars per share) | $ 0 | $ 0 | $ 0 | $ 0 |
Weighted Average Number of Shares - Basic and Diluted | 128,139,418 | 128,039,418 | 128,039,418 | 128,039,418 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash Flows from Operating Activities: | ||
Net Income | $ 13,139 | $ 398,288 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 306,730 | 209,266 |
Stock based compensation | 2,051 | 6,205 |
Changes in Assets and Liabilities: | ||
Accounts receivable | (607,143) | 142,278 |
Other assets | 4,864 | 3,600 |
Prepaid expenses and other current assets | 19,028 | 48,095 |
Accounts payable and accrued expenses | 415,946 | (224,877) |
Deferred revenue | (40,579) | (198,166) |
Deferred rent | (490) | (354) |
Net Cash Provided by Operating Activities | 113,546 | 384,335 |
Cash Flows from Investing Activities | ||
Capital expenditures | (24,135) | |
Net Cash Used in Investing Activities | (24,135) | |
Cash Flows from Financing Activities: | ||
Repayments of capital lease obligations | (112,574) | (260,913) |
Net Cash Used in Financing Activities | (112,574) | (456,154) |
Decrease in Cash and Cash Equivalents | (23,163) | (71,819) |
Cash and Cash Equivalents, Beginning of Period | 105,139 | 255,817 |
Cash and Cash Equivalents, End of Period | 81,976 | 183,998 |
Supplemental Disclosures: | ||
Cash paid for interest | 40,142 | 65,902 |
Cash paid for income taxes | ||
Non-cash investing and financing activities: | ||
Accrual of preferred stock dividend | 61,935 | 57,127 |
Assets acquired by capital lease | $ 1,824,996 |
Basis of presentation, organiza
Basis of presentation, organization and other matters | 6 Months Ended |
Jun. 30, 2018 | |
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 Melville, NY, Data Storage Corporation (“DSC” or the “Company”) is a Managed Service Provider that specializes within the IBM community. 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. DSC maintains equipment for cloud storage and cloud computing in our data centers located in New York and Massachusetts. DSC delivers its solutions over highly reliable, redundant and secure fiber optic networks with separate and diverse routes to the Internet. DSC’s 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 Company has concluded that the initial conditions which raised substantial doubt regarding the ability to continue as a going concern have been alleviated. As of June 30, 2018, we had cash of $81,976 and a working capital deficiency of $2,412,925. Included in current liabilities are accrued dividends that the Company is not obligated to pay at this point in time, and the Company is in compliance with its preferred shareholder agreement. Further, capitalized lease obligations for our enterprise level infrastructure in our data centers are related to long term contracts with clients, in which clients are represented in the accounts receivable as a month of billing in the current liabilities, whereas, the entire year of lease payments are recorded for future obligations. Our Enterprise Bank obligation relates to the acquisition of Message Logic of $350,000 is structured so that DSC can be relieved of such obligation without impact. Additionally, deferred revenue, are obligations to perform services for clients, in which these clients have signed long term agreements with cancelation clauses obligating them to pay for such services, even if the client cancels within term. Capital lease obligations are owed to a company owned by the President of DSC. The Company has on previous occasions been able to renegotiate the leases to relieve pressure on its capital position. The Company recognized a net loss available to common shareholders of $41,037 for the six months ended June 30, 2018 and generated cash from operations of $123,546. Revenue growth for the quarter had a higher percentage of equipment and software sales and has a result of the mix of product and services overall margin have been impacted. Equipment and software normally have lower margin than subscription services such as IaaS and disaster recovery. There is no assurance that the conditions that raise substantial doubt regarding the Company’s ability to continue as a going concern will be mitigated by the factors enumerated above. To further alleviate the concern, management has determined that related party capitalized leases can be refinanced. Further, senior management is committed to funding the Company’s operations for growth and expansion for the next 12 months. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein. While we believe in the viability of management’s strategy to generate sufficient revenue, control costs and the ability to raise additional funds if necessary, there can be no assurances to that effect. The Company’s ability to continue as a going concern is dependent upon our continued sales efforts, the ability to further implement the business plan, generate sufficient revenues and to control operating expenses. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2018 | |
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 Principles of Consolidation The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, jointly-owned subsidiaries over which it exercises control and entities for which it has been determined to be the primary beneficiary. Noncontrolling interest amounts relating to the Company’s less-than-wholly owned consolidated subsidiaries are included within the “Noncontrolling interest in consolidated subsidiaries” captions in its Consolidated Balance Sheets and within the “Noncontrolling interests” caption in its Consolidated Statements of Income. All intercompany balances and transactions have been eliminated in consolidation. 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, prepaid expenses and other current assets, accounts payable and accrued expenses and deferred revenue. Management believes the estimated fair value of these accounts at June 30, 2018 approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments. 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 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. Recently Issued and Newly Adopted Accounting Pronouncements During January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities In February 2016, the FASB issued ASU 2016-02, Leases, Leases In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows : Classification of Certain Cash Receipts and Cash Payments, In October 2016, the FASB issued ASU 2016-16, Income Taxes : Intra-Entity Transfers of Assets Other than Inventory In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows In January 2017, the FASB issued ASU No 2017-04 Intangibles-Goodwill and Other Simplifying the Accounting for Goodwill Impairment In July 2017, the FASB issued ASU 2017-11, Earnings Per Share , Distinguishing Liabilities from Equity , and Derivatives and Hedging Effective January 1, 2018, the Company adopted Financial Accounting Standards Board (“FASB”) Topic 606, Revenue from Contacts with Customers (“ASC 606”). The Company changed its revenue recognition policy regarding set-up fees. Beginning January 2018, the company accounts for set-up fees as separate performance obligation. Set-up services are performed one time and accordingly the revenue is recognized at the point in time that the service is performed, and the Company is entitled to the payment. In addition, Management enhanced disclosure regarding revenue recognition, including disclosures of revenue streams, performance obligations, variable consideration and the related judgments and estimates necessary to apply the new standard. ASC 606 was applied using the modified retrospective method. The Company recorded a journal entry as of January 1, 2018 to record the effect of the recognition of the deferred set up fees. Accordingly, comparative periods have not been adjusted and continue to be reported under FASB ASC Topic 605, Revenue Recognition (“ASC” 605). The Company generates revenue by offering Cloud Services, Infrastructure as Service (“IaaS”), Disaster Recovery as a Service, Email Archival and Compliance Solutions as subscription-based services. The Company also sells Equipment and Software to its customer and offers Management and Support Services. Subscription contracts allows for high level of customization of services to meet customers’ needs. In certain instances, combination of customized products and services are determined to be essential to the functionality of the delivered services. In others, customers can benefit from one of these services on its own. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the Company expect to receive in exchange for those goods or services. The Company measure revenue based on the consideration specified in the arrangement, and revenue is recognized when the performance obligations are satisfied. A performance obligation is a promise in a contract to transfer a distinct service or product to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. From subscription-based contracts, the customers continuously receive benefit of these services. With the sale of Equipment or Setup Services, the customers usually receive the benefit at the time the product or service is delivered or provided. Substantially, all of the contracts provide that the Company is compensated for services performed to date. In July 2018, FASB issued ASU 2018-07 Improvement to Nonemployee Share-based Payment Accounting. 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, 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 federal 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 six months ended June 30, 2018 the Company had one customer that accounted for 17% of revenue. At June 30, 2018 the customer also accounted for 53% of accounts receivable. For the six months ended June 30, 2017 the Company 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 Company’s 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 June 30, 2018, 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 June 30, 2018 and December 31, 2017, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company’s 2016, 2015 and 2014 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. Goodwill and Other Intangibles In January 2017, FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other Simplifying the Accounting for Goodwill” (ASU 2017-04”) requires goodwill impairment loss to be measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). The new guidance eliminates Step 2, which an entity used to measure goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. “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 its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination,” the ASU states. “Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.” 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. Revenue Recognition Nature of goods and services 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: 1) Infrastructure and Disaster Recovery Revenue Subscription services such as IaaS/Hosting Disaster Recovery, High Availability, Vault Services, IaaS, Message Logic, and Internet allows customers to centralize and streamline their data protection services. Customer’s data can be backed up, replicated, archived and restored to meet their back to work objective in a disaster. Infrastructure as a Service (IaaS)helps customers to achieve reliable and cost-effective computing and high availability solutions. Message Logic service helps customers to keep message content secure and accessible. Internet services ensure companies have connectivity in the event of outages. 2) Professional Services These services are performed at the inception of a contract for a fixed price. The Company offers professional assistance to its customers during the installation processes. On-boarding and set-up services ensure that the software is installed properly and function as designed to provide customers with the best solutions. In addition, clients that are managed service clients have a requirement for DSC to offer time and material billing. 3) Equipment and Software Revenue The Company sales servers and other hardware and actively participate in collaboration with IBM to provide innovative business solutions to customers. 4) Managed Services To provide the best data protection, the Company manage backup data for customers enabling them to meet compliance regulation and improve recovery time objectives. The Company also derives revenues from providing support and management of its software to customers. The managed service includes help desk, remote access, annual recovery tests and on-gong monitoring of system performance. Disaggregation of revenue In the following table, revenue is disaggregated by major product line and timing of revenue recognition (in thousands of USD). For the Six Months Ended June 30, 2018 2017 Major products/services lines Infrastructure and Disaster Recovery $ 2,268,391 $ 2,363,341 Professional Service 117,841 255,828 Equipment and Software 1,767,804 1,100,544 Managed Service 346,656 427,045 Other 199,375 204,442 Total Revenue $ 4,700,067 $ 4,351,200 Timing of revenue recognition Products transferred at a point in time $ 1,885,645 $ 1,356,372 Products and services transferred over time 2,814,422 2,994,828 $ 4,700,067 $ 4,351,200 Deferred revenue from 2017 of $41,000 has been re-classified as retained earnings. During the second quarter of 2018 a total of $22,555 in onboarding fees related to the company’s cloud-based solutions has been recorded as revenue. The amount of onboarding fees for the second quarter 2018 sales for cloud-based solution for the company’s USA client base is immaterial when compared to second quarter revenue of $4,677,512 resulting in a total revenue including onboarding fees of $4,700,067. Future periods may have material onboarding fees and will be reported according to the revenue recognition standards for comparisons to previous periods. Contract receivables are recorded at the invoiced amount and are uncollateralized, non-interest-bearing customer 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 customer standing. 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. Transaction price allocated to the remaining performance obligations The Company has the following performance obligations: 1) Disaster Recovery (“DR”) 2) Vaulting 3) High Availability (“HA”) 4) Infrastructure as a Service (“IaaS”) 5) Message Logic 6) Internet 7) Support and Maintenance 8) Initial Set-Up Fees 9) Equipment sales 10) License Disaster Recovery with Stand-By Servers, High Availability, Data Vaulting, IaaS, Message Logic, Support and Maintenance, and Internet Subscription services such as the above allows customers to access a set of data or receive services for a predetermined period of time. As the customer obtains access at a point in time but continues to have access for the remainder of the subscription period, the customer 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 recognized on a straight-line basis over the contract term. Initial Set-Up Fees The Company accounts for set-up fees as separate performance obligation. Set-up services are performed one time and accordingly the revenue should be recognized at the point in time that the service is performed, and the Company is entitled to the payment. Equipment sales For the Equipment sales performance obligation, the control of the product transfers at a point in time (i.e., when the goods have been shipped or delivered to the customers 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 customer has been fulfilled (i.e., when the goods have left the shipping facility or delivered to the customer, depending on shipping terms). License In the case of Licensing performance obligation, the control of the product transfers either at point in time or over time depending on the nature of the license. The revenue standard identifies two types of licenses of IP: a right to access IP and 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 customer 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 revenue at the point in time the license is granted and/or renewed for a new period. Payment terms The terms of the contracts are typically ranging from 12 months to 36 months with auto-renew options. The Company invoice customers one month in advance for the services plus any overages or additional services provided. Warranties The Company offers guaranteed service levels and performance and service guarantees on some of its contracts. These warrantees are not sold separately and according to ASC 606-10-50-12(a) are accounted as “assurance warranties”. Significant judgement In the instances that contract have multiple performance obligation, the Company uses judgment to establish stand -alone price for each performance obligation separately. 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 calculated to determine the aggregate price for the individual services. Next the proportion of each individual service to the aggregate price was determined. That ratio was 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 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 $106,109 and $83,751 for advertising costs for the six months ended June 30, 2018 and 2017, 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 June 30, 2018 include 133,334 warrants and 2,017,447 options. |
Property and Equipment
Property and Equipment | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Note 3 - Property and Equipment Property and equipment, at cost, consist of the following : June 30, 2018 December 31, 2017 Storage equipment $ 992,996 $ 992,996 Website and software 533,418 533,418 Furniture and fixtures 14,037 14,037 Telephone System 9.690 — Leasehold Improvements 13,104 11,719 Computer hardware and software 1,207,180 1,194,120 Data Center Equipment 2,491,675 2,491,675 5,262,100 5,237,965 Less: Accumulated depreciation 3,822,240 3,614,177 Net property and equipment $ 1,439,860 $ 1,623,788 Depreciation expense for the six months ended June 30, 2018 and 2017 was $208,063 and $192,282, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 6 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Note 4 - Goodwill and Intangible Assets Goodwill and intangible assets consisted of the following : June 30, 2018 Estimated life in years Gross Amount Accumulated Amortization Goodwill Indefinite $ 3,015,700 N/A Intangible Assets Intangible assets not subject to amortization Trademarks Indefinite 294,268 N/A Intangible assets subject to amortization Customer list 5 - 15 897,274 897,274 ABC Acquired contracts 5 310,000 103,333 SIAS Acquired contracts 5 660,000 220,000 Non-compete agreements 3 - 4 272,147 267,703 Total Intangible Assets 2,433,689 1,488,310 Total Goodwill and Intangible Assets $ 5,449,389 $ 1,488,310 Scheduled amortization over the next three years as follows: For the Twelve Months ending June 30, 2019 $ 197,333 2020 196,778 2021 194,000 2022 63,000 Total $ 651,111 Amortization expense for the six months ended June 30, 2018 and 2017 was $98,667 and $16,984, respectively. |
Capital Lease Obligations - Rel
Capital Lease Obligations - Related Party | 6 Months Ended |
Jun. 30, 2018 | |
Capital Lease Obligations [Abstract] | |
Capital Lease Obligations - Related PArty | Note 5– Capital Lease Obligations – Related Party On January 24, 2017, the Company entered into a lease with Systems Trading Inc. (“Systems Trading”), a company owned by DSC’s president, to refinance old leases and to add newly acquired data center equipment. The lease called for monthly payments of $59,940 and expired on February 1, 2020. It carried an interest rate of 6%. On April 27, 2017, the Company entered into a lease with Systems Trading to add newly-acquired data center equipment. The lease called for monthly payments of $2,300 and expired on May 1, 2020. It carried an interest rate of 4%. On March 7, 2018, the Company entered into a lease with Systems Trading, to refinance old leases and Notes payable – related party referenced above and in Note 7. The lease calls for bi monthly payments of $23,475 and expires on April 6, 2022. It carries an interest rate of 5%. Future minimum lease payments under the capital leases are as follows: As of June 30, 2018 $ 2,159,700 Less amount representing interest (196,213 ) Total obligations under capital leases 1,963,487 Less current portion of obligations under capital leases (476,544 ) Long-term obligations under capital leases $ 1,486,943 Long-term obligations under the capital leases at June 30, 2018 mature as follows: For the Twelve months ending June 30, 2019 $ 563,400 2020 563,400 2021 563,400 2022 469,500 $ 2,159,700 The assets held under the capital leases are included in property and equipment as follows: Equipment $ 3,272,888 Less: accumulated depreciation 1,542,313 $ 1,730,575 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 6 - Commitments and Contingencies Operating Leases The Company currently leases two office spaces in Melville, NY, and one in Warwick, RI. Location one in Melville calls for monthly payments of $8,382 with a lease terminating in August 31, 2019. Location two in Melville calls for monthly payments of monthly payments of $7,189 starting April, 2018, escalating to $8,334. The term of the lease is 5 years and 3 months and will end on July 31, 2023. The lease for office space in Warwick, RI calls for monthly payments of $2,324 beginning February 1, 2015 which escalates to $2,460 on February 1, 2017. This lease commenced on February 1, 2015 and continues through January 31, 2019. Minimum obligations under these lease agreements are as follows: For the Twelve Months Ending June 30, 2019 $ 208,170 2020 107,234 2021 92,665 2022 95,445 2023 89,732 $ 593,246 Rent expense for the six months ended June 30, 2018 and 2017 was $91,163 and $104,703, respectively. |
Long Term Debt
Long Term Debt | 6 Months Ended |
Jun. 30, 2018 | |
Long-term Debt, Unclassified [Abstract] | |
Long Term Debt | Note 7- Long Term Debt Note Payable – Enterprise Bank In connection with its acquisition of Message Logic, LLC, the Company assumed a loan with Enterprise Bank. The loan was due on April 30, 2016. There has been no default notice from Enterprise Bank. Enterprise Bank has requested that we move from an interest only payment to a self-amortized arrangement. The Company has requested that the bank consider all payments made to date as satisfaction of the assumed loan and the bank is in process of a response. Interest only payments have been paid with the last monthly payment made in June 2018. The interest rate on this note was 6.5%. Notes Payable – Related Party On March 7, 2018, the Company entered into a lease with Systems Trading, Inc. (“Systems Trading”), a company owned by DSC’s President, to refinance and consolidate notes payable – related party and existing leases referenced in Note 5. The lease calls for bi-monthly payments of $23,475 and expires on April 6, 2022. It carries an interest rate of 5%. Future minimum payments under these note agreements are reflected in Note 5 above. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | Note 8 - Stockholders’ Equity 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. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 9 – Subsequent Events None – Do we need to mention Broadsmart? |
Summary of Significant Accoun15
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Stock Based Compensation | Stock Based Compensation The Company follows the requirements of FASB ASC 718-10-10, Share-Based Payments |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, jointly-owned subsidiaries over which it exercises control and entities for which it has been determined to be the primary beneficiary. Noncontrolling interest amounts relating to the Company’s less-than-wholly owned consolidated subsidiaries are included within the “Noncontrolling interest in consolidated subsidiaries” captions in its Consolidated Balance Sheets and within the “Noncontrolling interests” caption in its Consolidated Statements of Income. All intercompany balances and transactions have been eliminated in consolidation. |
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, prepaid expenses and other current assets, accounts payable and accrued expenses and deferred revenue. Management believes the estimated fair value of these accounts at June 30, 2018 approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments. 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 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. |
Recently Issued and Newly Adopted Accounting Pronouncements | Recently Issued and Newly Adopted Accounting Pronouncements During January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities In February 2016, the FASB issued ASU 2016-02, Leases, Leases In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows : Classification of Certain Cash Receipts and Cash Payments, In October 2016, the FASB issued ASU 2016-16, Income Taxes : Intra-Entity Transfers of Assets Other than Inventory In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows In January 2017, the FASB issued ASU No 2017-04 Intangibles-Goodwill and Other Simplifying the Accounting for Goodwill Impairment In July 2017, the FASB issued ASU 2017-11, Earnings Per Share , Distinguishing Liabilities from Equity , and Derivatives and Hedging Effective January 1, 2018, the Company adopted Financial Accounting Standards Board (“FASB”) Topic 606, Revenue from Contacts with Customers (“ASC 606”). The Company changed its revenue recognition policy regarding set-up fees. Beginning January 2018, the company accounts for set-up fees as separate performance obligation. Set-up services are performed one time and accordingly the revenue is recognized at the point in time that the service is performed, and the Company is entitled to the payment. In addition, Management enhanced disclosure regarding revenue recognition, including disclosures of revenue streams, performance obligations, variable consideration and the related judgments and estimates necessary to apply the new standard. ASC 606 was applied using the modified retrospective method. The Company recorded a journal entry as of January 1, 2018 to record the effect of the recognition of the deferred set up fees. Accordingly, comparative periods have not been adjusted and continue to be reported under FASB ASC Topic 605, Revenue Recognition (“ASC” 605). The Company generates revenue by offering Cloud Services, Infrastructure as Service (“IaaS”), Disaster Recovery as a Service, Email Archival and Compliance Solutions as subscription-based services. The Company also sells Equipment and Software to its customer and offers Management and Support Services. Subscription contracts allows for high level of customization of services to meet customers’ needs. In certain instances, combination of customized products and services are determined to be essential to the functionality of the delivered services. In others, customers can benefit from one of these services on its own. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the Company expect to receive in exchange for those goods or services. The Company measure revenue based on the consideration specified in the arrangement, and revenue is recognized when the performance obligations are satisfied. A performance obligation is a promise in a contract to transfer a distinct service or product to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. From subscription-based contracts, the customers continuously receive benefit of these services. With the sale of Equipment or Setup Services, the customers usually receive the benefit at the time the product or service is delivered or provided. Substantially, all of the contracts provide that the Company is compensated for services performed to date. In July 2018, FASB issued ASU 2018-07 Improvement to Nonemployee Share-based Payment Accounting. |
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, 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 federal 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 six months ended June 30, 2018 the Company had one customer that accounted for 17% of revenue. At June 30, 2018 the customer also accounted for 53% of accounts receivable. For the six months ended June 30, 2017 the Company 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 Company’s 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 June 30, 2018, 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 June 30, 2018 and December 31, 2017, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company’s 2016, 2015 and 2014 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. |
Goodwill and Other Intangibles | Goodwill and Other Intangibles In January 2017, FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other Simplifying the Accounting for Goodwill” (ASU 2017-04”) requires goodwill impairment loss to be measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). The new guidance eliminates Step 2, which an entity used to measure goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. “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 its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination,” the ASU states. “Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.” 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. |
Revenue Recognition | Revenue Recognition Nature of goods and services 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: 1) Infrastructure and Disaster Recovery Revenue Subscription services such as IaaS/Hosting Disaster Recovery, High Availability, Vault Services, IaaS, Message Logic, and Internet allows customers to centralize and streamline their data protection services. Customer’s data can be backed up, replicated, archived and restored to meet their back to work objective in a disaster. Infrastructure as a Service (IaaS)helps customers to achieve reliable and cost-effective computing and high availability solutions. Message Logic service helps customers to keep message content secure and accessible. Internet services ensure companies have connectivity in the event of outages. 2) Professional Services These services are performed at the inception of a contract for a fixed price. The Company offers professional assistance to its customers during the installation processes. On-boarding and set-up services ensure that the software is installed properly and function as designed to provide customers with the best solutions. In addition, clients that are managed service clients have a requirement for DSC to offer time and material billing. 3) Equipment and Software Revenue The Company sales servers and other hardware and actively participate in collaboration with IBM to provide innovative business solutions to customers. 4) Managed Services To provide the best data protection, the Company manage backup data for customers enabling them to meet compliance regulation and improve recovery time objectives. The Company also derives revenues from providing support and management of its software to customers. The managed service includes help desk, remote access, annual recovery tests and on-gong monitoring of system performance. Disaggregation of revenue In the following table, revenue is disaggregated by major product line and timing of revenue recognition (in thousands of USD). For the Six Months Ended June 30, 2018 2017 Major products/services lines Infrastructure and Disaster Recovery $ 2,268,391 $ 2,363,341 Professional Service 117,841 255,828 Equipment and Software 1,767,804 1,100,544 Managed Service 346,656 427,045 Other 199,375 204,442 Total Revenue $ 4,700,067 $ 4,351,200 Timing of revenue recognition Products transferred at a point in time $ 1,885,645 $ 1,356,372 Products and services transferred over time 2,814,422 2,994,828 $ 4,700,067 $ 4,351,200 Deferred revenue from 2017 of $41,000 has been re-classified as retained earnings. During the second quarter of 2018 a total of $22,555 in onboarding fees related to the company’s cloud-based solutions has been recorded as revenue. The amount of onboarding fees for the second quarter 2018 sales for cloud-based solution for the company’s USA client base is immaterial when compared to second quarter revenue of $4,677,512 resulting in a total revenue including onboarding fees of $4,700,067. Future periods may have material onboarding fees and will be reported according to the revenue recognition standards for comparisons to previous periods. Contract receivables are recorded at the invoiced amount and are uncollateralized, non-interest-bearing customer 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 customer standing. 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. Transaction price allocated to the remaining performance obligations The Company has the following performance obligations: 1) Disaster Recovery (“DR”) 2) Vaulting 3) High Availability (“HA”) 4) Infrastructure as a Service (“IaaS”) 5) Message Logic 6) Internet 7) Support and Maintenance 8) Initial Set-Up Fees 9) Equipment sales 10) License Disaster Recovery with Stand-By Servers, High Availability, Data Vaulting, IaaS, Message Logic, Support and Maintenance, and Internet Subscription services such as the above allows customers to access a set of data or receive services for a predetermined period of time. As the customer obtains access at a point in time but continues to have access for the remainder of the subscription period, the customer 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 recognized on a straight-line basis over the contract term. Initial Set-Up Fees The Company accounts for set-up fees as separate performance obligation. Set-up services are performed one time and accordingly the revenue should be recognized at the point in time that the service is performed, and the Company is entitled to the payment. Equipment sales For the Equipment sales performance obligation, the control of the product transfers at a point in time (i.e., when the goods have been shipped or delivered to the customers 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 customer has been fulfilled (i.e., when the goods have left the shipping facility or delivered to the customer, depending on shipping terms). License In the case of Licensing performance obligation, the control of the product transfers either at point in time or over time depending on the nature of the license. The revenue standard identifies two types of licenses of IP: a right to access IP and 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 customer 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 revenue at the point in time the license is granted and/or renewed for a new period. Payment terms The terms of the contracts are typically ranging from 12 months to 36 months with auto-renew options. The Company invoice customers one month in advance for the services plus any overages or additional services provided. Warranties The Company offers guaranteed service levels and performance and service guarantees on some of its contracts. These warrantees are not sold separately and according to ASC 606-10-50-12(a) are accounted as “assurance warranties”. Significant judgement In the instances that contract have multiple performance obligation, the Company uses judgment to establish stand -alone price for each performance obligation separately. 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 calculated to determine the aggregate price for the individual services. Next the proportion of each individual service to the aggregate price was determined. That ratio was applied to the total contract price in order to allocate the transaction price to each performance obligation. |
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 $106,109 and $83,751 for advertising costs for the six months ended June 30, 2018 and 2017, 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 June 30, 2018 include 133,334 warrants and 2,017,447 options. |
Summary of Significant Accoun16
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Summary Of Significant Accounting Policies | |
Schedule of revenue is disaggregated by major product | In the following table, revenue is disaggregated by major product line and timing of revenue recognition (in thousands of USD). For the Six Months Ended June 30, 2018 2017 Major products/services lines Infrastructure and Disaster Recovery $ 2,268,391 $ 2,363,341 Professional Service 117,841 255,828 Equipment and Software 1,767,804 1,100,544 Managed Service 346,656 427,045 Other 199,375 204,442 Total Revenue $ 4,700,067 $ 4,351,200 Timing of revenue recognition Products transferred at a point in time $ 1,885,645 $ 1,356,372 Products and services transferred over time 2,814,422 2,994,828 $ 4,700,067 $ 4,351,200 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment, at cost, consist of the following : June 30, 2018 December 31, 2017 Storage equipment $ 992,996 $ 992,996 Website and software 533,418 533,418 Furniture and fixtures 14,037 14,037 Telephone System 9.690 — Leasehold Improvements 13,104 11,719 Computer hardware and software 1,207,180 1,194,120 Data Center Equipment 2,491,675 2,491,675 5,262,100 5,237,965 Less: Accumulated depreciation 3,822,240 3,614,177 Net property and equipment $ 1,439,860 $ 1,623,788 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill and intangible assets | Goodwill and intangible assets consisted of the following : June 30, 2018 Estimated life in years Gross Amount Accumulated Amortization Goodwill Indefinite $ 3,015,700 N/A Intangible Assets Intangible assets not subject to amortization Trademarks Indefinite 294,268 N/A Intangible assets subject to amortization Customer list 5 - 15 897,274 897,274 ABC Acquired contracts 5 310,000 103,333 SIAS Acquired contracts 5 660,000 220,000 Non-compete agreements 3 - 4 272,147 267,703 Total Intangible Assets 2,433,689 1,488,310 Total Goodwill and Intangible Assets $ 5,449,389 $ 1,488,310 |
Schedule of amortization over the next three years | Scheduled amortization over the next three years as follows: For the Twelve Months ending June 30, 2019 $ 197,333 2020 196,778 2021 194,000 2022 63,000 Total $ 651,111 |
Capital Lease Obligations - R19
Capital Lease Obligations - Related Party (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Capital Lease Obligations [Abstract] | |
Schedule of future minimum lease payments | Future minimum lease payments under the capital leases are as follows: As of June 30, 2018 $ 2,159,700 Less amount representing interest (196,213 ) Total obligations under capital leases 1,963,487 Less current portion of obligations under capital leases (476,544 ) Long-term obligations under capital leases $ 1,486,943 |
Schedule of long-term obligations under capital leases | Long-term obligations under the capital leases at June 30, 2018 mature as follows: For the Twelve months ending June 30, 2019 $ 563,400 2020 563,400 2021 563,400 2022 469,500 $ 2,159,700 |
Schedule of assets held under the capital leases | The assets held under the capital leases are included in property and equipment as follows: Equipment $ 3,272,888 Less: accumulated depreciation 1,542,313 $ 1,730,575 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of minimum obligations | Minimum obligations under these lease agreements are as follows: For the Twelve Months Ending June 30, 2019 $ 208,170 2020 107,234 2021 92,665 2022 95,445 2023 89,732 $ 593,246 |
Basis of presentation, organi21
Basis of presentation, organization and other matters (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||
Net income attributable to common shareholders | $ (28,522) | $ 446 | $ (41,037) | $ 341,161 | ||
Cash and cash equivalents | 81,976 | $ 183,998 | 81,976 | 183,998 | $ 105,139 | $ 255,817 |
Working capital deficiency | $ 2,412,097 | 2,412,097 | ||||
Business aquisition obligation structured amount | 350,000 | |||||
Net Cash Provided by Operating Activities | $ 113,546 | $ 384,335 |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Disaggregation of Revenue [Line Items] | ||||
Total Revenue | $ 2,750,542 | $ 2,027,285 | $ 4,700,067 | $ 4,351,200 |
Products Transferred at a Point in Time [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenue | 1,885,645 | 1,356,372 | ||
Products and Services Transferred Over Time [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenue | 2,814,422 | 2,994,828 | ||
Infrastructure and Disaster Recovery [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenue | 2,268,391 | 2,363,341 | ||
Professional Service [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenue | 117,841 | 255,828 | ||
Equipment and Software [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenue | 1,767,804 | 1,100,544 | ||
Managed Service [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenue | 346,656 | 427,045 | ||
Other [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenue | $ 199,375 | $ 204,442 |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Details Narrative) | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||
Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)Customer | Jun. 30, 2017USD ($)Customer | Sep. 30, 2017 | |
Number of customers | Customer | 4 | 4 | |||
Accounts receivables due | 30 days | ||||
Federal statutory tax rate | 21.00% | ||||
Advertising costs | $ 106,109 | $ 83,751 | |||
Deferred revenue | $ 41,000 | $ 41,000 | |||
Onboarding fees | 22,555 | ||||
Customer Concentration Risk [Member] | Revenue [Member] | |||||
Concentration risk | 17.00% | ||||
Customer Concentration Risk [Member] | Accounts Receivable [Member] | |||||
Concentration risk | 53.00% | ||||
Warrant [Member] | |||||
Potentially dilutive securities | $ 133,334 | ||||
Stock Option [Member] | |||||
Potentially dilutive securities | $ 2,017,447 | ||||
Property And Equipment [Member] | Minimum [Member] | |||||
Useful lives | P5Y | ||||
Property And Equipment [Member] | Maximum [Member] | |||||
Useful lives | P7Y | ||||
Infrastructure and Disaster Recovery [Member] | |||||
Onboarding fees | $ 4,677,512 | $ 4,700,067 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | $ 5,262,100 | $ 5,237,965 |
Less: Accumulated depreciation | 3,822,240 | 3,614,177 |
Net property and equipment | 1,439,860 | 1,623,788 |
Storage Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | 992,996 | 992,996 |
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 |
Telephone System [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | 9,690 | |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | 13,104 | 11,719 |
Computer Hardware and Software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | 1,207,180 | 1,194,120 |
Data Center Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross property and equipment | $ 2,491,675 | $ 2,491,675 |
Property and Equipment (Detai25
Property and Equipment (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 208,063 | $ 192,282 |
Goodwill and Intangible Asset26
Goodwill and Intangible Assets (Details) | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Goodwill and intangible assets [Abstract] | |
Goodwill, Gross Amount | $ 3,015,700 |
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 | 897,274 |
ABC Acquired contracts, Gross Amount | 310,000 |
ABC Acquired contracts, Accumulated Amortization | 103,333 |
SIAS Acquired contracts, Gross Amount | 660,000 |
SIAS Acquired contracts, Accumulated Amortization | 220,000 |
Non-compete agreements, Gross Amount | 272,147 |
Non-compete agreements, Accumulated Amortization | 267,703 |
Total Intangible Assets, Gross Amount | 2,433,689 |
Total Intangible Assets, Accumulated Amortization | 1,488,310 |
Total Goodwill and Intangible Assets, Gross Amount | 5,449,389 |
Total Goodwill and Intangible Assets, Accumulated Amortization | $ 1,488,310 |
Goodwill, Estimated life in years | Indefinite |
Trademarks, Estimated life in years | Indefinite |
Non-compete Agreements [Member] | Minimum [Member] | |
Intangible assets subject to amortization | |
Intangible assets subject to amortization, Estimated life in years | 3 years |
Non-compete Agreements [Member] | Maximum [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 |
ABC Acquired contracts [Member] | |
Intangible assets subject to amortization | |
Intangible assets subject to amortization, Estimated life in years | 5 years |
SIAS Acquired contracts [Member] | |
Intangible assets subject to amortization | |
Intangible assets subject to amortization, Estimated life in years | 5 years |
Goodwill and Intangible Asset27
Goodwill and Intangible Assets (Details 1) | Jun. 30, 2018USD ($) |
Scheduled amortization over next two years: | |
2,019 | $ 197,333 |
2,020 | 196,778 |
2,021 | 194,000 |
2,022 | 63,000 |
Total | $ 651,111 |
Goodwill and Intangible Asset28
Goodwill and Intangible Assets (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 98,667 | $ 16,984 |
Capital Lease Obligations - R29
Capital Lease Obligations - Related Party (Details) | Jun. 30, 2018USD ($) |
Summary of future minimum lease payments under the capital leases | |
As of June 30, 2018 | $ 2,159,700 |
Less amount representing interest | (196,213) |
Total obligations under capital leases | 1,963,487 |
Less current portion of obligations under capital leases | (476,544) |
Long-term obligations under capital leases | $ 1,486,943 |
Capital Lease Obligations - R30
Capital Lease Obligations - Related Party (Details 1) | Jun. 30, 2018USD ($) |
Summary of obligations under capital leases | |
2,019 | $ 563,400 |
2,020 | 563,400 |
2,021 | 563,400 |
2,022 | 469,500 |
Total obligations under capital leases | $ 2,159,700 |
Capital Lease Obligations - R31
Capital Lease Obligations - Related Party (Details 2) | Jun. 30, 2018USD ($) |
Summary of assets held under capital leases included in property and equipment | |
Equipment | $ 3,272,888 |
Less: accumulated depreciation | 1,450,778 |
Total | $ 1,730,575 |
Capital Lease Obligations - R32
Capital Lease Obligations - Related Party (Details Narrative) - USD ($) | Mar. 07, 2018 | Apr. 27, 2017 | Jan. 24, 2017 | Jun. 30, 2018 |
Capital lease obligation | $ 1,963,487 | |||
Systems Trading, Inc. [Member] | Computer Hardware and Software [Member] | ||||
Interest rates on capitalized leases | 5.00% | 4.00% | 6.00% | |
Capital leases contingent monthly rental payments | $ 23,475 | $ 2,300 | $ 59,940 | |
Description on capital lease obligation | On March 7, 2018, the Company entered into a lease with Systems Trading, Inc. (“Systems Trading”), a company owned by DSC’s President, to refinance old leases and Notes payable – related party referenced above and in Note 7. The lease calls for bi monthly payments of $23,475 and expires on April 6, 2022. It carries an interest rate of 5%. | On April 27, 2017, the Company entered into a lease with Systems Trading to add newly-acquired data center equipment. The lease is for calls for monthly payments of $2.300, and expires on May 1, 2020. It carries an interest rate of 4%. | On January 24, 2017, the Company entered into a lease with Systems Trading to refinance old leases referenced above and to add newly acquired data center equipment. The lease is for calls for monthly payments of $59,940 and expires on February 1, 2020. It carries an interest rate of 6%. |
Commitments and Contingencies33
Commitments and Contingencies (Details) | Jun. 30, 2018USD ($) |
Summary of minimum obligations under operating lease agreements | |
2,019 | $ 208,170 |
2,020 | 107,234 |
2,021 | 92,665 |
2,022 | 95,445 |
2,023 | 89,732 |
Total | $ 593,246 |
Commitments and Contingencies34
Commitments and Contingencies (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Operating Leased Assets [Line Items] | ||
Operating leases, rent expense, net | $ 91,163 | $ 104,703 |
Warwick, RI [Member] | ||
Operating Leased Assets [Line Items] | ||
Description of rental payment | The lease for office space in Warwick, RI calls for monthly payments of $2,324 beginning February 1, 2015 which escalates to $2,460 on February 1, 2017. This lease commenced on February 1, 2015 and continues through January 31, 2019. | |
Lease expiration date | Jan. 31, 2019 | |
Warwick, RI [Member] | Minimum [Member] | ||
Operating Leased Assets [Line Items] | ||
Operating leases, rent expense | $ 2,324 | |
Warwick, RI [Member] | Maximum [Member] | ||
Operating Leased Assets [Line Items] | ||
Operating leases, rent expense | $ 2,460 | |
Melville [Member] | ||
Operating Leased Assets [Line Items] | ||
Description of rental payment | Location one in Melville calls for monthly payments of $8,382 with a lease terminating in August 31, 2019. Location two in Melville calls for monthly payments of monthly payments of $7,189 starting April, 2018, escalating to $8,334. The term of the lease is 5 years and 3 months and will end on July 31, 2023. | |
Lease expiration date | Aug. 31, 2019 | |
Operating leases, rent expense | $ 8,382 | |
Operating lease, term of contract | 5 years |
Long Term Debt - Enterprise Ban
Long Term Debt - Enterprise Bank (Details Narrative) - USD ($) | Mar. 07, 2018 | Dec. 31, 2017 |
Enterprise Bank [Member] | ||
Interest on note | 6.50% | |
Systems Trading [Member] | ||
Interest on note | 5.00% | |
Maturity date of note | Apr. 6, 2022 | |
Debt instrument remapyment | $ 23,475 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - $ / shares | Jun. 30, 2018 | Dec. 31, 2017 |
Equity [Abstract] | ||
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) | $ .001 | $ .001 |