Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 20, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Data Storage Corp | |
Entity Central Index Key | 0001419951 | |
Document Type | 10-Q | |
Trading Symbol | DTST | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 128,139,418 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Current Assets: | ||
Cash and cash equivalents | $ 255,395 | $ 228,790 |
Accounts receivable (less allowance for doubtful accounts of $30,000 in 2019 and 2018) | 481,988 | 531,245 |
Prepaid expenses and other current assets | 80,265 | 167,891 |
Operating lease right of use asset | 91,848 | |
Total Current Assets | 909,496 | 927,926 |
Property and Equipment: | ||
Property and equipment | 6,814,165 | 5,293,711 |
Less-Accumulated depreciation | (4,180,810) | (4,005,338) |
Net Property and Equipment | 2,633,355 | 1,288,373 |
Other Assets: | ||
Goodwill | 3,015,700 | 3,015,700 |
Other assets | 65,433 | 65,433 |
Operating lease right of use asset | 248,674 | |
Intangible assets, net | 797,379 | 846,713 |
Total Other Assets | 4,127,186 | 3,927,846 |
Total Assets | 7,670,037 | 6,144,145 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 815,928 | 988,579 |
Dividend payable | 877,763 | 846,685 |
Deferred revenue | 432,390 | 435,406 |
Operating lease liabilities short term | 88,639 | |
Finance leases payable related party | 760,633 | 509,487 |
Note payable | 350,000 | 350,000 |
Total Current Liabilities | 3,325,353 | 3,130,157 |
Deferred rental obligation | 18,890 | |
Operating lease liabilities long term | 257,803 | |
Finance leases payable related party, long term | 2,286,851 | 1,218,703 |
Total Long-Term Liabilities | 2,544,654 | 1,237,593 |
Total Liabilities | 5,870,007 | 4,367,750 |
Stockholders' Equity: | ||
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 128,139,418 shares issued and outstanding in 2019 and 2018, respectively | 128,139 | 128,139 |
Additional paid in capital | 17,412,164 | 17,409,989 |
Accumulated deficit | (15,703,841) | (15,735,624) |
Total Data Storage Corp Stockholders' Equity | 1,837,864 | 1,803,906 |
Non-controlling interest in consolidated subsidiary | (37,834) | (27,511) |
Total Stockholder's Equity | 1,800,030 | 1,776,395 |
Total Liabilities and Stockholders' Equity | $ 7,670,037 | $ 6,144,145 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts related to accounts receivable | $ 30,000 | $ 30,000 |
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 | 128,139,418 | 128,139,418 |
Common stock, outstanding | 128,139,418 | 128,139,418 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Statement [Abstract] | ||
Sales | $ 2,001,281 | $ 1,949,524 |
Cost of Sales | 1,076,543 | 1,175,754 |
Gross Profit | 924,738 | 773,770 |
Selling, General and Administrative | 822,868 | 744,462 |
Income from Operations | 101,870 | 29,308 |
Other Income (Expense) | ||
Interest income | 87 | |
Interest expense | (50,621) | (13,876) |
Bad Debt Recovery | 1,565 | 716 |
Other Expense | (363) | |
Total Other Income (Expense) | (49,332) | (13,160) |
Income before provision for income taxes | 52,538 | 16,148 |
Provision for Income Taxes | ||
Net Income | 52,538 | 16,148 |
Non-controlling interest in consolidated company | 10,323 | 2,117 |
Net Income attributable to Data Storage Corp | 62,861 | 18,265 |
Preferred Stock Dividend | (31,078) | (30,419) |
Net Income (Loss) Available to Common Shareholders | $ 31,783 | $ (12,154) |
Earnings (Loss) per Share - Basic (in dollars per share) | $ 0 | $ 0 |
Earnings (Loss) per Share - Diluted (in dollars per share) | $ .00 | $ .00 |
Weighted Average Number of Shares - Basic | 128,139,418 | 128,139,418 |
Weighted Average Number of Shares - Diluted | 131,939,979 | 128,139,418 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash Flows from Operating Activities: | ||
Net Income | $ 52,538 | $ 16,148 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 224,806 | 160,106 |
Stock-based compensation | 2,175 | 1,026 |
Changes in Assets and Liabilities: | ||
Accounts receivable | 49,257 | (85,417) |
Inventory | (114,091) | |
Other assets | 9,775 | |
Right of use asset | (340,522) | |
Prepaid expenses and other current assets | 87,626 | 16,832 |
Accounts payable and accrued expenses | (172,651) | 141,978 |
Deferred revenue | (3,016) | (48,361) |
Operating lease liabilities | 327,552 | (245) |
Net Cash Provided by Operating Activities | 227,765 | 97,751 |
Cash Flows from Investing Activities: | ||
Capital expenditures | (17,570) | (16,587) |
Net Cash Used in Investing Activities | (17,570) | (16,587) |
Cash Flows from Financing Activities: | ||
Advances from credit line | 155 | |
Proceeds from related party loans | ||
Repayments of capital lease obligations | (183,590) | (39,682) |
Net Cash By Used in Financing Activities | (183,590) | (39,527) |
Increase in Cash and Cash Equivalents | 26,605 | 41,637 |
Cash and Cash Equivalents, Beginning of Period | 228,790 | 105,139 |
Cash and Cash Equivalents, End of Period | 255,395 | 146,776 |
Supplemental Disclosures: | ||
Cash paid for interest | 50,621 | 13,876 |
Cash paid for income taxes | ||
Non-cash investing and financing activities: | ||
Accrual of preferred stock dividend | 31,078 | 30,419 |
Assets acquired by Finance lease | $ 1,502,844 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Total |
Balance at beginning at Dec. 31, 2017 | $ 1,402 | $ 128,139 | $ 17,377,986 | $ (15,924,376) | $ (4,389) | $ 1,578,762 |
Balance at beginning (in shares) at Dec. 31, 2017 | 1,401,786 | 128,139,418 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock-based compensation | 1,026 | 1,026 | ||||
Net Income | 18,265 | (2,117) | 16,148 | |||
Cumulative Adjustment Adoption of ASC | 11,553 | 11,553 | ||||
Preferred stock dividend | (30,419) | (30,419) | ||||
Balance at end at Mar. 31, 2018 | $ 1,402 | $ 128,139 | 17,379,012 | (15,984,558) | (6,506) | 1,607,489 |
Balance at end (in shares) at Mar. 31, 2018 | 1,401,786 | 128,139,418 | ||||
Balance at beginning at Dec. 31, 2018 | $ 1,402 | $ 128,139 | 17,409,989 | (15,735,624) | (27,511) | 1,776,395 |
Balance at beginning (in shares) at Dec. 31, 2018 | 1,401,786 | 128,139,418 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock-based compensation | 2,175 | 2,175 | ||||
Net Income | 62,861 | (10,323) | 52,538 | |||
Preferred stock dividend | (31,078) | (31,078) | ||||
Balance at end at Mar. 31, 2019 | $ 1,402 | $ 128,139 | $ 17,412,164 | $ (15,703,841) | $ (37,834) | $ 1,800,030 |
Balance at end (in shares) at Mar. 31, 2019 | 1,401,786 | 128,139,418 |
Basis of Presentation, Organiza
Basis of Presentation, Organization and Other Matters | 3 Months Ended |
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation, Organization and Other Matters | Note 1 - Basis of Presentation, Organization and Other Matters Data Storage Corporation (“DSC” or the “Company”) provides subscription based, long term agreements for disaster recovery solutions, Infrastructure as a Service (IaaS) and VoIP type solutions. Over 35% of our revenue is derived from equipment sales for cyber security, storage, IBM Power i systems and managed service solutions. Headquartered in Melville, NY with additional offices in Warwick, RI, DSC offers solutions and services to businesses within the healthcare, banking and finance, distribution services, manufacturing, construction, education, and government industries. DSC derives its revenues from subscription services and solutions, managed services, software and maintenance, equipment and onboarding provisioning. DSC maintains infrastructure and storage equipment in several technical centers in New York, New Jersey, Massachusetts and North Carolina. The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or any other interim period or for any other future year. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2018, included in the Company’s 2018 Annual Report on Form 10-K filed with the SEC. The balance sheet as of December 31, 2018 has been derived from audited financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements. Liquidity The Company had net income of $52,538 for the three months ended March 31, 2019. As of March 31, 2019, we had cash of $255,395 and a working capital deficiency of $2,415,587. As a result, these conditions raised substantial doubt regarding our ability to continue as a going concern. During the three months ended March 31, 2019, the Company generated cash from operations of $227,765. Revenue growth coupled with improved gross margins and control of expenses leads management to conclude that it is probable that the Company’s cash resources will be sufficient to meet our cash requirements through May 20, 2020. If necessary, management also determined that it is possible that related party sources of debt financing could be obtained based on management’s history of being able to raise and refinance debt through related parties. As a result of both management’s plans and current favorable trends in improving cash flow, the Company concluded that the initial conditions which raised substantial doubt regarding the ability to continue as a going concern have been alleviated. Therefore, the accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The condensed 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 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 | 3 Months Ended |
Mar. 31, 2019 | |
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, inventory, accounts payable, line of credit and deferred revenue. Management believes the estimated fair value of these accounts at March 31, 2019 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 In February 2016, the FASB issued ASU 2016-02, Leases, Leases On January 1, 2019, the Company adopted the requirements of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The objective of this ASU, along with several related ASUs issued subsequently, is to increase transparency and comparability between organizations that enter into lease agreements. For lessees, the key difference of the new standard from the previous guidance (Topic 840) is the recognition of a right-of-use (ROU) asset and lease liability on the balance sheet. The most significant change is the requirement to recognize ROU assets and lease liabilities for leases classified as operating leases. The standard requires disclosures to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. As part of the transition to the new standard, the Company was required to measure and recognize leases that existed at January 1, 2019 using a modified retrospective approach. For leases existing at the effective date. The Company has elected not to recognize an ROU asset and obligation for leases with an initial term of twelve months or less. The adoption of Topic 842 resulted in the recognition of an operating ROU asset and operating lease liability of $351,699 and $356,689, respectively as of January 1, 2019. In January 2017, the FASB issued ASU 2017-04 Intangibles-Goodwill and Other Simplifying the Accounting for Goodwill Impairment 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 sales 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, 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 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 three months ended March 31, 2019 the Company had two clients that accounted for 21% of revenue. For the three months ended March 31, 2018 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 Company’s balance sheet. Property and Equipment Property and equipment are recorded at cost and depreciated over their estimated useful lives or the term of the lease using the straight-line method for financial statement purposes. Estimated useful lives in years for depreciation are 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, 2019, 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 March 31, 2019 and March 31, 2018, 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 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 as a Service (IaaS) and Disaster Recovery Revenue Subscription services such as Infrastructure as a Service, Platform as a Service and Disaster Recovery, High Availability, Data Vault Services and DRaaS type solutions (cloud) allows clients to centralize and streamline their technical and mission critical digital information and technical environment. Client’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) assist clients to achieve reliable and cost-effective computing and high availability solutions while eliminating or supplementing Capex. 2) Managed Services These services are performed at the inception of a contract. The Company offers professional assistance to its clients during the installation processes. On-boarding and set-up services ensure that the solution or software is installed properly and function as designed to provide clients with the best solutions. In addition, clients that are managed service clients have a requirement for DSC to offer time and material billing. The Company also derives revenues in the area from providing support and management of its software to clients. The managed services include help desk, remote access, annual recovery tests and manufacturer support for equipment and on-gong monitoring of client system performance. 3) Equipment and Software Revenue The Company provides equipment and software and actively participate in collaboration with IBM to provide innovative business solutions to clients. The company is a partner of IBM and the various software solutions provided to clients. Disaggregation of Revenue In the following table, revenue is disaggregated by major product line and timing of revenue recognition: For the Three Months Ended March 31, 2019 2018 Major products/services lines Infrastructure & Disaster Recovery/Cloud Service $ 1,258,602 $ 1,105,205 Professional Service — 57,537 Equipment and Software 278,730 285,891 Managed Service 463,949 299,368 Other — 201,523 Total Revenue $ 2,001,281 $ 1,949,524 Timing of revenue recognition Products transferred at a point in time $ 278,730 $ 343,428 Products and services transferred over time 1,722,551 1,606,096 $ 2,001,281 $ 1,949,524 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) Data 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 clients to access a set of data or receive services for a predetermined period of time. As the client obtains access at a point in time but continues to have access for the remainder of the subscription period, the client is considered to simultaneously receive and consume the benefits provided by the entity’s performance as the entity performs. Accordingly, the related performance obligation is considered to be satisfied ratably over the contract term. As the performance obligation is satisfied evenly across the term of the contract, revenue should be 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 invoices 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 $33,963 and $59,459 for advertising costs for the three months ended March 31, 2019 and 2018, 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 following table sets forth the information needed to compute basic and diluted earnings per share for the three months ended March 31, 2019 and 2018: March 31, 2019 2018 Net Income (Loss) Available to Common Shareholders $ 31,783 $ (12,154 ) Weighted average number of common shares - basic 128,139,418 128,139,418 Dilutive securities Options 3,667,227 — Warrants 133,334 — Weighted average number of common shares - diluted 131,939,979 128,139,418 Earnings (Loss) per share, basic $ 0.00 $ 0.00 Earnings (Loss) per share, diluted $ 0.00 $ 0.00 The following table sets forth the number of potential shares of common stock that have been excluded from diluted net income (loss) per share net income (loss) per share because their effect was anti-dilutive: March 31, 2019 2018 Options 2,098,291 4,993,514 Warrants 133,334 133,334 2,231,625 5,126,848 |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Note 3 - Property and Equipment Property and equipment, at cost, consist of the following : March 31, 2019 December 31, 2018 Storage equipment $ 756,236 $ 756,236 Website and software 533,418 533,418 Furniture and fixtures 25,975 25,975 Leasehold Improvements 16,846 13,104 Computer hardware and software 1,216,206 1,211,658 Data Center Equipment 4,265,484 2,753,320 6,814,165 5,293,711 Less: Accumulated depreciation 4,180,810 4,005,338 Net property and equipment $ 2,633,355 $ 1,288,373 Depreciation expense for the three months ended March 31, 2019 and 2018 was $175,472 and $110,772, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2019 | |
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, 2018 Estimated life in years Gross amount Accumulated Amortization Net Goodwill Indefinite $ 3,015,700 $ — $ 3,015,700 Intangible assets Trademarks Indefinite 294,268 — 294,268 Customer lists 5 - 15 897,274 897,274 — ABC acquired contracts 5 310,000 149,833 160,167 SIAS acquired contracts 5 660,000 319,000 341,000 Non-compete agreements 4 272,147 270,203 1,344 Total intangible assets 2,433,689 1,636,310 797,379 Total Goodwill and Intangible Assets $ 5,449,389 $ 1,636,310 $ 3,813,079 Scheduled amortization over the next three years as follows: For the Twelve Months ending March 31, 2020 $ 147,444 2021 194,000 2022 161,067 Total $ 502,511 Amortization expense for the three months ended March 31, 2019 and 2018 was $49,334 and $49,334, respectively. |
Lease
Lease | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
Lease | Note 5– Leases Operating Leases The Company currently has two leases for office space in Melville, NY, and one lease for office space in Warwick, RI. A lease for office space in Melville, NY was entered into on November 20, 2017 which commenced on April 2, 2018. The term of this lease is for five years and three months and has a fixed rent schedule. A second lease, that was part of the acquisition of ABC in 2016, is also located in Melville and calls for monthly payments of $8,382 with a lease terminating in August 31, 2019. The lease for office space in Warwick, RI calls for monthly payments of $2,324 beginning February 1, 2015 which escalated to $2,460 on February 1, 2017. This lease commenced on February 1, 2015 and continues through January 31, 2019. This lease has been extended until January 31, 2020. The annual base rent shall be $30,348 payable in equal monthly installments of $2,529. Finance Lease Obligations – Related Party In 2018, the Company entered into a new lease agreement with Systems Trading to refinance all leases into one lease. This lease obligation is payable to Systems Trading with bi-monthly installments of $23,475. The lease carries an interest rate of 5%. In 2019, the Company entered into a new lease agreement with Systems Trading. This lease obligation is payable to Systems Trading with monthly installments of $29,592. The lease carries an interest rate of 6.75%. We determine if an arrangement contains a lease at inception. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet, per the election of the practical expedient noted above. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. We recognize lease expense for these leases on a straight-line basis over the lease term. We recognize variable lease payments in the period in which the obligation for those payments is incurred. Variable lease payments that depend on an index or a rate are initially measured using the index or rate at the commencement date, otherwise variable lease payments are recognized in the period incurred. A discount rate of 7% was used in preparation of the ROU asset and operating liabilities. The components of lease expense were as follows: Three Months Ended March 31, 2019 Finance lease: Amortization of assets, included in depreciation and amortization expense $ 75,144 Interest on lease liabilities, included in interest expense 46,036 Operating lease: Amortization of assets, included in total operating expense 16,720 Interest on lease liabilities, included in total operating expense 6,242 Total net lease cost $ 144,142 Supplemental balance sheet information related to leases was as follows Operating Leases Operating lease ROU asset – short term $ 91,848 Operating lease ROU asset – long term 248,674 Total operating lease ROU asset $ 340,522 Current operating lease liabilities 88,639 Noncurrent operating lease liabilities 257,803 Total operating lease liabilities $ 346,442 March 31, 2019 Finance leases: Property and equipment, at cost $ 4,697,872 Accumulated amortization 2,125,876 Property and equipment, net 2,571,996 Current obligations of finance leases, $ 760,633 Finance leases, net of current obligations, 2,286,851 Total finance lease liabilities $ 3,047,484 Supplemental cash flow and other information related to leases was as follows: Three Months Ended March 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows related to operating leases 5,920 Financing cash flows related to finance leases 183,590 Weighted average remaining lease term (in years): Operating leases 4.42 Finance leases 4.47 Weighted average discount rate: Operating leases 7 % Finance leases 6.91 % Long-term obligations under the operating and capital leases at March 31, 2019 mature as follows: For the Twelve months ending March 31, Operating Leases Capital Leases 2020 $ 88,640 $ 918,504 2021 91,299 918,504 2022 94,038 918,504 2023 96,859 402,054 2024 33,093 266,328 Total lease payments 403,929 3,423,894 Less: Amounts representing interest (57,487 ) (376,410) Total lease obligations $ 346,442 $ 3,047,484 As of March 31 2019, we had no additional significant operating or finance leases that had not yet commenced. Disclosures related to periods prior to the adoption of ACS 842: Rent expense for the three months ended March 31, 2018 was $42,337. |
Long Term Debt
Long Term Debt | 3 Months Ended |
Mar. 31, 2019 | |
Long-term Debt, Unclassified [Abstract] | |
Long Term Debt | Note 6- Long Term Debt Note Payable 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 paid all arrears interest over 7 months at $3,910 per month. In addition, the Company agreed to make monthly interest payments at $1,553 per month with the principal balance of $350,000 payable on April 30, 2016. The Company stopped making interest only payments on October 25, 2018. There has been no default notice from the bank. The Company is in the process of negotiating a final settlement. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
Stockholders' Equity | Note 7 - 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 | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 8 – Subsequent Events None |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
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, inventory, accounts payable, line of credit and deferred revenue. Management believes the estimated fair value of these accounts at March 31, 2019 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 In February 2016, the FASB issued ASU 2016-02, Leases, Leases On January 1, 2019, the Company adopted the requirements of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The objective of this ASU, along with several related ASUs issued subsequently, is to increase transparency and comparability between organizations that enter into lease agreements. For lessees, the key difference of the new standard from the previous guidance (Topic 840) is the recognition of a right-of-use (ROU) asset and lease liability on the balance sheet. The most significant change is the requirement to recognize ROU assets and lease liabilities for leases classified as operating leases. The standard requires disclosures to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. As part of the transition to the new standard, the Company was required to measure and recognize leases that existed at January 1, 2019 using a modified retrospective approach. For leases existing at the effective date. The Company has elected not to recognize an ROU asset and obligation for leases with an initial term of twelve months or less. The adoption of Topic 842 resulted in the recognition of an operating ROU asset and operating lease liability of $351,699 and $356,689, respectively as of January 1, 2019. In January 2017, the FASB issued ASU 2017-04 Intangibles-Goodwill and Other Simplifying the Accounting for Goodwill Impairment 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 sales 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, 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 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 three months ended March 31, 2019 the Company had two clients that accounted for 21% of revenue. For the three months ended March 31, 2018 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 Company’s balance sheet. |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost and depreciated over their estimated useful lives or the term of the lease using the straight-line method for financial statement purposes. Estimated useful lives in years for depreciation are 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, 2019, 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 March 31, 2019 and March 31, 2018, 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 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 as a Service (IaaS) and Disaster Recovery Revenue Subscription services such as Infrastructure as a Service, Platform as a Service and Disaster Recovery, High Availability, Data Vault Services and DRaaS type solutions (cloud) allows clients to centralize and streamline their technical and mission critical digital information and technical environment. Client’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) assist clients to achieve reliable and cost-effective computing and high availability solutions while eliminating or supplementing Capex. 2) Managed Services These services are performed at the inception of a contract. The Company offers professional assistance to its clients during the installation processes. On-boarding and set-up services ensure that the solution or software is installed properly and function as designed to provide clients with the best solutions. In addition, clients that are managed service clients have a requirement for DSC to offer time and material billing. The Company also derives revenues in the area from providing support and management of its software to clients. The managed services include help desk, remote access, annual recovery tests and manufacturer support for equipment and on-gong monitoring of client system performance. 3) Equipment and Software Revenue The Company provides equipment and software and actively participate in collaboration with IBM to provide innovative business solutions to clients. The company is a partner of IBM and the various software solutions provided to clients. Disaggregation of Revenue In the following table, revenue is disaggregated by major product line and timing of revenue recognition: For the Three Months Ended March 31, 2019 2018 Major products/services lines Infrastructure & Disaster Recovery/Cloud Service $ 1,258,602 $ 1,105,205 Professional Service — 57,537 Equipment and Software 278,730 285,891 Managed Service 463,949 299,368 Other — 201,523 Total Revenue $ 2,001,281 $ 1,949,524 Timing of revenue recognition Products transferred at a point in time $ 278,730 $ 343,428 Products and services transferred over time 1,722,551 1,606,096 $ 2,001,281 $ 1,949,524 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) Data 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 clients to access a set of data or receive services for a predetermined period of time. As the client obtains access at a point in time but continues to have access for the remainder of the subscription period, the client is considered to simultaneously receive and consume the benefits provided by the entity’s performance as the entity performs. Accordingly, the related performance obligation is considered to be satisfied ratably over the contract term. As the performance obligation is satisfied evenly across the term of the contract, revenue should be 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 invoices 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 $33,963 and $59,459 for advertising costs for the three months ended March 31, 2019 and 2018, 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 following table sets forth the information needed to compute basic and diluted earnings per share for the three months ended March 31, 2019 and 2018: March 31, 2019 2018 Net Income (Loss) Available to Common Shareholders $ 31,783 $ (12,154 ) Weighted average number of common shares - basic 128,139,418 128,139,418 Dilutive securities Options 3,667,227 — Warrants 133,334 — Weighted average number of common shares - diluted 131,939,979 128,139,418 Earnings (Loss) per share, basic $ 0.00 $ 0.00 Earnings (Loss) per share, diluted $ 0.00 $ 0.00 The following table sets forth the number of potential shares of common stock that have been excluded from diluted net income (loss) per share net income (loss) per share because their effect was anti-dilutive: March 31, 2019 2018 Options 2,098,291 4,993,514 Warrants 133,334 133,334 2,231,625 5,126,848 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
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: For the Three Months Ended March 31, 2019 2018 Major products/services lines Infrastructure & Disaster Recovery/Cloud Service $ 1,258,602 $ 1,105,205 Professional Service — 57,537 Equipment and Software 278,730 285,891 Managed Service 463,949 299,368 Other — 201,523 Total Revenue $ 2,001,281 $ 1,949,524 Timing of revenue recognition Products transferred at a point in time $ 278,730 $ 343,428 Products and services transferred over time 1,722,551 1,606,096 $ 2,001,281 $ 1,949,524 |
Schedule of Earnings Per Share, Basic and Diluted | The following table sets forth the information needed to compute basic and diluted earnings per share for the three months ended March 31, 2019 and 2018: March 31, 2019 2018 Net Income (Loss) Available to Common Shareholders $ 31,783 $ (12,154 ) Weighted average number of common shares - basic 128,139,418 128,139,418 Dilutive securities Options 3,667,227 — Warrants 133,334 — Weighted average number of common shares - diluted 131,939,979 128,139,418 Earnings (Loss) per share, basic $ 0.00 $ 0.00 Earnings (Loss) per share, diluted $ 0.00 $ 0.00 |
Schedule of anti-dilutive income (loss) per share | The following table sets forth the number of potential shares of common stock that have been excluded from diluted net income (loss) per share net income (loss) per share because their effect was anti-dilutive: March 31, 2019 2018 Options 2,098,291 4,993,514 Warrants 133,334 133,334 2,231,625 5,126,848 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment, at cost, consist of the following : March 31, 2019 December 31, 2018 Storage equipment $ 756,236 $ 756,236 Website and software 533,418 533,418 Furniture and fixtures 25,975 25,975 Leasehold Improvements 16,846 13,104 Computer hardware and software 1,216,206 1,211,658 Data Center Equipment 4,265,484 2,753,320 6,814,165 5,293,711 Less: Accumulated depreciation 4,180,810 4,005,338 Net property and equipment $ 2,633,355 $ 1,288,373 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill and intangible assets | Goodwill and intangible assets consisted of the following: March 31, 2018 Estimated life in years Gross amount Accumulated Amortization Net Goodwill Indefinite $ 3,015,700 $ — $ 3,015,700 Intangible assets Trademarks Indefinite 294,268 — 294,268 Customer lists 5 - 15 897,274 897,274 — ABC acquired contracts 5 310,000 149,833 160,167 SIAS acquired contracts 5 660,000 319,000 341,000 Non-compete agreements 4 272,147 270,203 1,344 Total intangible assets 2,433,689 1,636,310 797,379 Total Goodwill and Intangible Assets $ 5,449,389 $ 1,636,310 $ 3,813,079 |
Schedule of amortization over the next five years | Scheduled amortization over the next three years as follows: For the Twelve Months ending March 31, 2020 $ 147,444 2021 194,000 2022 161,067 Total $ 502,511 |
Lease (Tables)
Lease (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
Components of lease expense | The components of lease expense were as follows: Three Months Ended March 31, 2019 Finance lease: Amortization of assets, included in depreciation and amortization expense $ 75,144 Interest on lease liabilities, included in interest expense 46,036 Operating lease: Amortization of assets, included in total operating expense 16,720 Interest on lease liabilities, included in total operating expense 6,242 Total net lease cost $ 144,142 |
Supplemental balance sheet information related to leases | Supplemental balance sheet information related to leases was as follows Operating Leases Operating lease ROU asset – short term $ 91,848 Operating lease ROU asset – long term 248,674 Total operating lease ROU asset $ 340,522 Current operating lease liabilities 88,639 Noncurrent operating lease liabilities 257,803 Total operating lease liabilities $ 346,442 March 31, 2019 Finance leases: Property and equipment, at cost $ 4,697,872 Accumulated amortization 2,125,876 Property and equipment, net 2,571,996 Current obligations of finance leases, $ 760,633 Finance leases, net of current obligations, 2,286,851 Total finance lease liabilities $ 3,047,484 |
Supplemental cash flow and other information related to leases | Supplemental cash flow and other information related to leases was as follows: Three Months Ended March 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows related to operating leases 5,920 Financing cash flows related to finance leases 183,590 Weighted average remaining lease term (in years): Operating leases 4.42 Finance leases 4.47 Weighted average discount rate: Operating leases 7 % Finance leases 6.91 % |
Long-term obligations under the operating and capital leases | Long-term obligations under the operating and capital leases at March 31, 2019 mature as follows: For the Twelve months ending March 31, Operating Leases Capital Leases 2020 $ 88,640 $ 918,504 2021 91,299 918,504 2022 94,038 918,504 2023 96,859 402,054 2024 33,093 266,328 Total lease payments 403,929 3,423,894 Less: Amounts representing interest (57,487 ) (376,410) Total lease obligations $ 346,442 $ 3,047,484 |
Basis of Presentation, Organi_2
Basis of Presentation, Organization and Other Matters (Details Narrative) - USD ($) | 3 Months Ended | |||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Net Income | $ 52,538 | $ 16,148 | ||
Cash and cash equivalents | 255,395 | 146,776 | $ 228,790 | $ 105,139 |
Working capital deficiency | (2,415,587) | |||
Net Cash Provided by Operating Activities | $ 227,765 | $ 97,751 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Disaggregation of Revenue [Line Items] | ||
Total Revenue | $ 2,001,281 | $ 1,949,524 |
Products Transferred at a Point in Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenue | 278,730 | 343,428 |
Products and Services Transferred Over Time [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenue | 1,722,551 | 1,606,096 |
Infrastructure & Disaster Recovery/Cloud Service [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenue | 1,258,602 | 1,105,205 |
Professional Service [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenue | 57,537 | |
Equipment and Software [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenue | 278,730 | 285,891 |
Managed Service [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenue | 463,949 | 299,368 |
Other [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenue | $ 201,523 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details1) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Accounting Policies [Abstract] | ||
Net Income (Loss) Available to Common Shareholders | $ 31,783 | $ (12,154) |
Weighted average number of common shares - basic (in shares) | 128,139,418 | 128,139,418 |
Dilutive securities | ||
Options | 3,667,227 | |
Warrants | 133,334 | |
Weighted average number of common shares - diluted (in shares) | 131,939,979 | 128,139,418 |
Earnings (Loss) per share, basic (in dollars per share) | $ 0 | $ 0 |
Earnings (Loss) per share, diluted (in dollars per share) | $ .00 | $ .00 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details 2) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Potentially dilutive securities | $ 2,231,625 | $ 5,126,848 |
Option [Member] | ||
Potentially dilutive securities | 2,098,291 | 4,993,514 |
Warrant [Member] | ||
Potentially dilutive securities | $ 133,334 | $ 133,334 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Jan. 02, 2019 | |
Accounts receivables due | 30 days | ||
Federal statutory tax rate | 21.00% | ||
Advertising costs | $ 33,963 | $ 59,459 | |
Operating ROU asset | 340,522 | $ 351,699 | |
Operating lease liability | $ 346,442 | $ 356,689 | |
Property And Equipment [Member] | Minimum [Member] | |||
Useful lives | P5Y | ||
Property And Equipment [Member] | Maximum [Member] | |||
Useful lives | P7Y | ||
Sales Revenue, Net [Member] | |||
Concentration risk | 0.00% | ||
Sales Revenue, Net [Member] | Two Clients [Member] | |||
Concentration risk | 21.00% |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | $ 6,814,165 | $ 5,293,711 |
Less: Accumulated depreciation | 4,180,810 | 4,005,338 |
Net property and equipment | 2,633,355 | 1,288,373 |
Storage Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | 756,236 | 756,236 |
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 | 25,975 | 25,975 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | 16,846 | 13,104 |
Computer Hardware and Software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | 1,216,206 | 1,211,658 |
Data Center Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | $ 4,265,484 | $ 2,753,320 |
Property and Equipment (Detai_2
Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 175,472 | $ 110,772 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | |
Finite-Lived Intangible Assets [Line Items] | ||
Goodwill, Gross Amount | $ 3,015,700 | |
Goodwill, Accumulated Amortization | ||
Goodwill | 3,015,700 | $ 3,015,700 |
Total Intangible Assets, Gross amount | 2,433,689 | |
Total Intangible Assets, Accumulated Amortization | 1,636,310 | |
Total Intangible Assets, Net amount | 797,379 | $ 846,713 |
Total Goodwill and Intangible Assets, Gross amount | 5,449,389 | |
Total Goodwill and Intangible Assets, Accumulated Amortization | 1,636,310 | |
Total Goodwill and Intangible Assets, Net | 3,813,079 | |
Trademark [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total Intangible Assets, Gross amount | 294,268 | |
Total Intangible Assets, Accumulated Amortization | ||
Total Intangible Assets, Net amount | $ 294,268 | |
Estimated life in years | Indefinite | |
Customer Lists [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total Intangible Assets, Gross amount | $ 897,274 | |
Total Intangible Assets, Accumulated Amortization | 897,274 | |
Total Intangible Assets, Net amount | ||
Customer Lists [Member] | Minimum [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets subject to amortization, Estimated life in years | 5 years | |
Customer Lists [Member] | Maximum [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets subject to amortization, Estimated life in years | 15 years | |
ABC Acquired Contracts [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total Intangible Assets, Gross amount | $ 310,000 | |
Total Intangible Assets, Accumulated Amortization | 149,833 | |
Total Intangible Assets, Net amount | $ 160,167 | |
Intangible assets subject to amortization, Estimated life in years | 5 years | |
SIAS Acquired Contracts [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total Intangible Assets, Gross amount | $ 660,000 | |
Total Intangible Assets, Accumulated Amortization | 319,000 | |
Total Intangible Assets, Net amount | $ 341,000 | |
Intangible assets subject to amortization, Estimated life in years | 5 years | |
Non-compete Agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total Intangible Assets, Gross amount | $ 272,147 | |
Total Intangible Assets, Accumulated Amortization | 270,203 | |
Total Intangible Assets, Net amount | $ 1,344 | |
Intangible assets subject to amortization, Estimated life in years | 4 years | |
Goodwill [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated life in years | Indefinite |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets (Details 1) | Mar. 31, 2019USD ($) |
Scheduled amortization over next five years | |
2020 | $ 147,444 |
2021 | 194,000 |
2022 | 161,067 |
Total | $ 502,511 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 49,334 | $ 49,334 |
Lease (Details)
Lease (Details) | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Finance lease: | |
Amortization of assets, included in depreciation and amortization expense | $ 75,144 |
Interest on lease liabilities, included in interest expense | 46,036 |
Amortization of assets, included in total operating expense | 16,720 |
Interest on lease liabilities, included in total operating expense | 6,242 |
Total net lease cost | $ 144,142 |
Lease (Details 1)
Lease (Details 1) - USD ($) | Mar. 31, 2019 | Jan. 02, 2019 | Dec. 31, 2018 |
Operating Leases | |||
Operating lease ROU asset – short term | $ 91,848 | ||
Operating lease ROU asset – long term | 248,674 | ||
Total operating lease ROU asset | 340,522 | $ 351,699 | |
Current operating lease liabilities | 88,639 | ||
Noncurrent operating lease liabilities | 257,803 | ||
Total operating lease liabilities | 346,442 | $ 356,689 | |
Finance leases: | |||
Property and equipment, at cost | 4,697,872 | ||
Accumulated amortization | 2,125,876 | ||
Property and equipment, net | 2,571,996 | ||
Current obligations of finance leases, | 760,633 | 509,487 | |
Finance leases, net of current obligations, | 2,286,851 | $ 1,218,703 | |
Total finance lease liabilities | $ 3,047,484 |
Lease (Details 2)
Lease (Details 2) | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Leases [Abstract] | |
Operating cash flows related to operating leases | $ 5,920 |
Financing cash flows related to finance leases | $ 183,590 |
Weighted average remaining lease term operating leases (in years) | 4 years 5 months 1 day |
Weighted average remaining lease term finance leases (in years) | 4 years 5 months 20 days |
Lease (Details 3)
Lease (Details 3) - USD ($) | Mar. 31, 2019 | Jan. 02, 2019 |
Summary of minimum obligations under operating lease agreements | ||
2020 | $ 88,640 | |
2021 | 91,299 | |
2022 | 94,038 | |
2023 | 96,859 | |
2024 | 33,093 | |
Total lease payments | 403,929 | |
Less: Amounts representing interest | (57,487) | |
Total operating lease liabilities | 346,442 | $ 356,689 |
Summary of obligations under capital leases | ||
2020 | 918,504 | |
2021 | 918,504 | |
2022 | 918,504 | |
2023 | 402,054 | |
2024 | 266,328 | |
Total obligations under capital leases | 3,423,894 | |
Less: Amounts representing interest | (376,410) | |
Total obligations under capital leases | $ 3,047,484 |
Lease (Details Narrative)
Lease (Details Narrative) - USD ($) | 3 Months Ended | 24 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | Feb. 01, 2017 | |
Operating Leased Assets [Line Items] | |||
Operating leases, rent expense, net | $ 42,337 | ||
Discount rate | 7.00% | ||
Interest rate | 6.75% | 5.00% | |
Fiance leases contingent monthly rental payments | $ 29,592 | $ 23,475 | |
Melville [Member] | |||
Operating Leased Assets [Line Items] | |||
Lease expiration date | Aug. 31, 2019 | ||
Operating leases, rent expense | $ 8,382 | ||
Operating lease, term of contract | 5 years 3 months | ||
Warwick, RI [Member] | |||
Operating Leased Assets [Line Items] | |||
Lease expiration date | Jan. 31, 2020 | ||
Operating leases, rent expense | $ 2,529 | ||
Annual base rent | $ 30,348 | ||
Warwick, RI [Member] | Minimum [Member] | |||
Operating Leased Assets [Line Items] | |||
Lease expiration date | Jan. 31, 2019 | ||
Operating leases, rent expense | $ 2,324 | ||
Warwick, RI [Member] | Maximum [Member] | |||
Operating Leased Assets [Line Items] | |||
Operating leases, rent expense | $ 2,460 |
Long Term Debt - Enterprise Ban
Long Term Debt - Enterprise Bank (Details Narrative) | 3 Months Ended |
Mar. 31, 2019 | |
2010 Incentive Award Plan [Member] | |
Note Payable description | 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 paid all arrears interest over 7 months at $3,910 per month. In addition, the Company agreed to make monthly interest payments at $1,553 per month with the principal balance of $350,000 payable on April 30, 2016. The Company stopped making interest only payments on October 25, 2018. There has been no default notice from the bank. The Company is in the process of negotiating a final settlement. |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - $ / shares | Mar. 31, 2019 | Dec. 31, 2018 |
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) | $ 0.001 | $ 0.001 |