What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-03-31 compared with 2020-04-14 · 1315 added, 25 removed, 2 unchanged (100% of the section changed)

interruptions, including any interruptions resulting from COVID-19, could significantly disrupt our operations and could have

a material adverse impact on us if the situation continues

Business interruptions, including any interruptions

resulting from COVID-19, could significantly disrupt our operations and could have a material adverse impact on DSC if the situation

Under NYS Executive Order 202.6, “Essential Business,” DSC is an “Essential Business” based

on the following in the Executive order number 2:

Investing in our common stock involves a high degree

You should carefully consider the following risks together with the other information in this Annual Report.

Risks Related to Data Storage’s Business

We have not generated a significant amount of

net income and we may not be able to sustain profitability or positive cash flow in the future.

As reflected in the consolidated

financial statements, we had a net income (loss) available to shareholders of $55,339 and $(54,452) for the years ended December 31, 2020

and 2019, respectively.

As of December 31, 2020, DSC had cash of $893,598 and a working capital deficiency of $2,666,448.

these conditions raised substantial doubt regarding our ability to continue as a going concern.

During the year ended December

31, 2020, we generated cash from operations of $1,110,679 with continued revenue growth.

We have no commitment from sources for additional

capital if needed.

If we are unable to attract new customers to

our infrastructure and disaster recovery/ cloud subscription services on a cost-effective basis, our revenue and operating results would

be adversely affected.

generate the majority of our revenue from the sale of subscriptions to our infrastructure and disaster recovery/cloud solutions.

In order to grow, we must continue to attract a large number of customers, many of whom may have not previously used infrastructure

as a service and cloud disaster recovery backup solutions.

We use and periodically adjust a diverse mix of advertising and marketing

programs to promote our solutions.

Significant increases in the pricing of one or more of our advertising channels would increase

our advertising costs or cause us to choose less expensive and perhaps less effective channels.

As we add to or change the mix

of our advertising and marketing strategies, we may expand into channels with significantly higher costs than our current programs,

which could adversely affect our operating results.

We may incur advertising and marketing expenses significantly in advance of

the time we anticipate recognizing any revenue generated by such expenses, and we may only at a later date, or never, experience

an increase in revenue or brand awareness as a result of such expenditures.

Additionally, because we recognize revenue from customers

over the terms of their subscriptions, a large portion of our revenue for each quarter reflects deferred revenue from subscriptions

entered into during previous quarters, and downturns or upturns in subscription sales or renewals may not be reflected in our

operating results until later periods.

We have made in the past, and may make in the future, significant investments to test new

advertising, and there can be no assurance that any such investments will lead to the cost-effective acquisition of additional

If we are unable to maintain effective advertising programs, our ability to attract new customers could be adversely

affected, our advertising and marketing expenses could increase substantially, and our operating results may suffer.

portion of our potential customers locate our website through search engines, such as Google, Bing, and Yahoo!

Our ability to

maintain the number of visitors directed to our website is not entirely within our control.

If search engine companies modify

their search algorithms in a manner that reduces the prominence of our listing, or if our competitors search engine optimization

efforts are more successful than ours, fewer potential customers may click through to our website.

In addition, the cost of purchased

listings has increased in the past and may increase in the future.

A decrease in website traffic or an increase in search costs

could adversely affect our customer acquisition efforts and our operating results.

expect to continue to acquire or invest in other companies, which may divert our managements attention, result in additional

dilution to our stockholders, and consume resources that are necessary to sustain our business.

In 2016, we acquired the assets

of ABC and the remaining 50% of the assets of SIAS.

As described in this Annual Report, we also intend to consummate the Merger with Flagship

upon satisfaction of the closing conditions to the Merger.

We expect to continue to acquire complementary solutions, services, technologies,

or businesses in the future.

We may also enter into relationships with other businesses to expand our portfolio of solutions or our ability

to provide our solutions in foreign jurisdictions, which could involve preferred or exclusive licenses, additional channels of distribution,

discount pricing, or investments in other companies.

Negotiating these transactions can be time-consuming, difficult and expensive, and

our ability to complete these transactions may often be subject to conditions or approvals that are beyond our control.

Consequently,

these transactions, even if a definitive purchase agreement is executed and announced, may not close.

may also disrupt our business, divert our resources, and require significant management attention that would otherwise be available

for the development of our business.

Moreover, the anticipated benefits of any acquisition, investment, or business relationship

may not be realized on a timely basis or at all or we may be exposed to known or unknown liabilities, including litigation against

the companies that we may acquire.

In connection with any such transaction, we may:

additional equity securities that would dilute our stockholders;

cash that we may need in the future to operate our business;

debt on terms unfavorable to us, that we are unable to repay, or that may place burdensome restrictions on our operations;

large charges or substantial liabilities;

subject to adverse tax consequences or substantial depreciation, deferred compensation, or other acquisition-related accounting

of these risks could harm our business and operating results.

of an acquired companys operations may present challenges.

integration of an acquired company requires, among other things, coordination of administrative, sales and marketing, accounting

and finance functions, and expansion of information and management systems.

Integration may prove to be difficult due to the necessity

of coordinating geographically separate organizations and integrating personnel with disparate business backgrounds and accustomed

to different corporate cultures.

We may not be able to retain key employees of an acquired company.

Additionally, the process

of integrating a new solution or service may require a disproportionate amount of time and attention of our management and financial

and other resources.

Any difficulties or problems encountered in the integration of a new solution or service could have a material

adverse effect on our business.

intend to continue to acquire businesses which we believe will help achieve our business objectives.

As a result, our operating

costs will likely continue to grow.

The integration of an acquired company may cost more than we anticipate, and it is possible

that we will incur significant additional unforeseen costs in connection with such integration, which may negatively impact our

addition, we may only be able to conduct limited due diligence on an acquired companys operations.

Following an acquisition,

we may be subject to liabilities arising from an acquired companys past or present operations, including liabilities related

to data security, encryption and privacy of customer data, and these liabilities may be greater than the warranty and indemnity

limitations that we negotiate.

Any liability that is greater than these warranty and indemnity limitations could have a negative

impact on our financial condition.

if successfully integrated, there can be no assurance that our operating performance after an acquisition will be successful or

will fulfill managements objectives.

have identified weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively

remediated or that additional material weaknesses will not occur in the future.

have identified material weaknesses in our internal control over financial reporting for the year ended December 31, 2020.

weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a

reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely

The material weaknesses identified during managements assessment were (i) a lack of sufficient internal accounting

expertise to provide reasonable assurance that our financial statements and notes thereto are prepared in accordance with generally

accepted accounting principles and (ii) a lack of segregation of duties to ensure adequate review of financial statement preparation.

will be required to expend time and resources to further improve our internal controls over financial reporting, including by

expanding our staff.

However, we cannot assure you that our internal control over financial reporting, as modified, will enable

us to identify or avoid material weaknesses in the future.

have not yet retained sufficient staff or engaged sufficient outside consultants with appropriate experience in GAAP presentation,

especially of complex instruments, to devise and implement effective disclosure controls and procedures, or internal controls.

We will be required to expend time and resources hiring and engaging additional staff and outside consultants with the appropriate

experience to remedy these weaknesses.

We cannot assure you that management will be successful in locating and retaining appropriate

that newly engaged staff or outside consultants will be successful in remedying material weaknesses thus far identified

or identifying material weaknesses in the future;

or that appropriate candidates will be located and retained prior to these deficiencies

resulting in material and adverse effects on our business.

current controls and any new controls that we develop may become inadequate because of changes in conditions in our business,

including increased complexity resulting from our international expansion.

Further, weaknesses in our disclosure controls or our

internal control over financial reporting may be discovered in the future.

Any failure to develop or maintain effective controls,

or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to

meet our reporting obligations and may result in a restatement of our financial statements for prior periods.

Any failure to implement

and maintain effective internal control over financial reporting could also adversely affect the results of management reports

and independent registered public accounting firm audits of our internal control over financial reporting that we will eventually

be required to include in our periodic reports that will be filed with the SEC.

Ineffective disclosure controls and procedures,

and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other

information, which would likely have a negative effect on the market price of our common stock.

We are controlled by three principal stockholders

who serve as our executive officers and directors.

of March 31, 2021, through their aggregate voting power, Messrs.

Piluso, Schwartz and Kempster control 78.53% of our outstanding

common stock, giving them the ability to elect a majority of our directors and to control all other matters requiring the approval

of our stockholders, including the election of all of our directors and the approval of the reverse stock split.

to the economic hardships presented by the COVID-19 pandemic, we obtained a loan from the Paycheck Protection Program (PPP

Loan) from the U.S.

Small Business Administration (SBA) pursuant to the Coronavirus Aid, Relief, and Economic

Security Act (the CARES Act).

We may not be entitled to forgiveness under the PPP Loan which would negatively

impact our cash flow, and our application for the PPP Loan could damage our reputation.

April 30, 2020, the Company received the proceeds of a loan from a banking institution, in the principal amount of $481,977 (the

Loan), pursuant to the Paycheck Protection Program (the PPP) under Division A, Title I of the Coronavirus

Aid, Relief, and Economic Security Act (the CARES Act), which was enacted on March 27, 2020.

The Loan, which was

in the form of a Note dated April 30, 2020, matures on April 30, 2022 and bears interest at a fixed rate of 1.00% per annum, payable

monthly to Signature Bank, as the lender, commencing on November 5, 2020.

the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020, the Company is eligible to

apply for and receive forgiveness for all or a portion of their respective PPP Loan.

Such forgiveness will be determined, subject

to limitations, based on the use of the Loan proceeds for certain permissible purposes as set forth in the PPP, including, but

not limited to, payroll costs (as defined under the PPP) and mortgage interest, rent or utility costs (collectively, Qualifying

Expenses) incurred during the 24 weeks subsequent to funding, and on the maintenance of employee and compensation levels,

as defined, following the funding of the PPP Loan.

The Company used the proceeds of the PPP Loan for Qualifying Expenses.

no assurance is provided that the Company will be able to obtain forgiveness of the PPP Loan in whole or in part.

that are not forgiven incur interest at 1.0% per annum and monthly repayments of principal and interest are deferred for six months

after the date of disbursement.

While the PPP Loan currently has a two-year maturity, the amended law permits the borrower to

request a five-year maturity from its lender.

The Company has applied for forgiveness for the full amount and is waiting for the

approval from the bank and the SBA.

It is possible that the loan may not be forgiven in full, which could have a negative impact

on the Companys cash flow.

order to apply for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the

PPP Loan request necessary to support our ongoing operations.

We made this certification in good faith after analyzing, among

other things, our financial situation and access to alternative forms of capital, and believe that we satisfied all eligibility

criteria for the PPP Loan, and that our receipt of the PPP Loan was consistent with the broad objectives of the CARES Act.

the time that we had made such certification, we could not predict with any certainty whether we would be able to obtain the necessary

financing to support our operations.

The certification described above that we were required to provide in connection with our

application for the PPP Loan did not contain any objective criteria and was subject to interpretation.

However, on April 23, 2020,

the SBA issued guidance stating that it is unlikely that a public company with substantial market value and access to capital

markets will be able to make the required certification in good faith.

The lack of clarity regarding loan eligibility under the

CARES Act has resulted in significant media coverage and controversy with respect to public companies applying for and receiving

If, despite our good-faith belief that we satisfied all eligible requirements for the PPP Loan, we are later determined

to have violated any of the laws or governmental regulations that apply to us in connection with the PPP Loan, such as the False

Claims Act, or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be subject to penalties, including

significant civil, criminal and administrative penalties, and could be required to repay the PPP Loan in its entirety.

our receipt of the PPP Loan may result in adverse publicity and damage to our reputation, and a review or audit by the SBA or

other government entity or claims under the False Claims Act could consume significant financial and management resources.

Risks Related to Our

The market for cloud solutions is highly competitive,

and if we do not compete effectively, our operating results will be harmed.

The market for our services,

is highly competitive, quickly evolving and subject to rapid changes in technology.

We expect to continue to face intense competition

from our existing competitors as well as additional competition from new market entrants in the future as the market for our services

continues to grow.

We compete with cloud backup

and infrastructure providers and providers of traditional hardware-based systems and IBM Power Systems.

Our current and potential competitors

vary by size, service offerings and geographic region.

These competitors may elect to partner with each other or with focused companies

to grow their businesses.

They include:

in-house IT departments of our customers and potential customers;

traditional global infrastructure providers, including, but not limited to, large multi-national providers, such as IBM, Microsoft, Google and AWS

cloud and software service providers and digital systems integrators;

regional managed services providers;

colocation solutions providers, such as Equinix, Rackspace and TierPoint.

Many of these competitors benefit

from significant competitive advantages over both of us, given their desire to enter into this niche marketplace, such as greater name

recognition, longer operating histories, more varied services, and larger marketing budgets, as well as greater financial, technical,

and other resources.

In addition, many of these competitors have established marketing relationships and major distribution agreements

with computer manufacturers, internet service providers, and resellers, giving them access to larger customer bases.

Some of these competitors

may make acquisitions or enter into strategic relationships to offer a more comprehensive service than we do.

As a result, some of these

competitors may be able to:

superior products or services, gain greater market acceptance and expand their service offerings more efficiently or more

to new or emerging technologies and changes in customer requirements more quickly;

their offerings, including hosting services with other services they provide at reduced prices;

their operational structure, obtain better pricing or secure more favorable contractual terms, allowing them to deliver services

and products at a lower cost;

advantage of acquisition, joint venture and other opportunities more readily;

more aggressive pricing policies and devote greater resources to the promotion, marketing and sales of their services, which

could cause us to have to lower prices for certain services to remain competitive in the market;

greater resources to the research and development of their products and services.

addition, demand for our cloud solutions is sensitive to price.

Many factors, including our customer acquisition, advertising

and technology costs, and our current and future competitors pricing and marketing strategies, can significantly affect

our pricing strategies.

Certain of our competitors offer, or may in the future offer, lower-priced or free solutions that compete

with our solutions.

Additionally,

consolidation activity through strategic mergers, acquisitions and joint ventures may result in new competitors that can offer

a broader range of products and services, may have greater scale or a lower cost structure.

To the extent such consolidation results

in the ability of vertically integrated companies to offer more integrated services to customers than we can, customers may prefer

the single-source approach and direct more business to such competitors, thereby impairing our competitive position.

new entrants not currently considered to be competitors may enter the market through acquisitions, partnerships or strategic relationships.

As we look to market and sell our services to potential customers, we must convince their internal stakeholders that our services

are superior to their current solutions.

If we are unable to anticipate or react to these competitive challenges, our competitive

position would weaken, which could adversely affect our business, financial condition and results of operations.

These combinations

may make it more difficult for us to compete effectively and our inability to compete effectively would negatively impact our

operating results.

In addition, there can be no assurance that we will not be forced to engage in price-cutting initiatives, or

to increase our advertising and other expenses to attract and retain customers in response to competitive pressures, either of

which could have a material adverse effect on our revenue and operating results.

If a cyber-attack was able to breach our security

protocols and disrupt our data protection platform and solutions, and any such disruption could increase our expenses, damage our reputation,

harm our business and adversely affect our stock price.

We have implemented various protocols

and are regularly monitor our systems via security software and otherwise to reduce any security vulnerabilities.

We also rely on third-party

providers for a number of critical aspects of our infrastructure cloud and disaster recovery business continuity services, and consequently

we do not maintain direct control over the security or stability of those associated systems.

Furthermore, the firmware, software [and/or

open-source software] that our data protection solutions may utilize could be susceptible to hacking or misuse.

In the event of the discovery

of a significant security vulnerability, we would incur additional substantial expenses and our business would be harmed.

process of developing new technologies is complex and uncertain, and if we fail to accurately predict customers changing

needs and emerging technological trends or if we fail to achieve the benefits expected from our investments, our business could

We believe that we must continue to dedicate a significant amount of resources to our research and development efforts

to maintain our competitive position and we must commit significant resources to developing new solutions before knowing whether

our investments will result in solutions the market will accept.

Our new solutions or solution enhancements could fail to attain

sufficient market acceptance or harm our business for many reasons, including:

in releasing our new solutions or enhancements to the market;

to accurately predict market demand or customer demands;

to protect against new types of attacks or techniques used by hackers;

with software development, design, or marketing that could delay or prevent our development, introduction, or implementation

of new solutions and enhancements;

errors or failures in their design or performance;

publicity about their performance or effectiveness;

or anticipated introduction of competing solutions by our competitors;

business conditions for our customers, causing them to delay IT purchases;

perceived value of our solutions or enhancements relative to their cost;

of regulatory requirements around security or storage.

addition, new technologies have the risk of defects that may not be discovered until after the product launches, resulting in

adverse publicity, loss of revenue or harm to our business and reputation.

significant disruption in service on our websites, in our computer systems, or caused by our third party storage and system providers

could damage our reputation and result in a loss of customers, which would harm our business, financial condition, and operating

brand, reputation, and ability to attract, retain and serve our customers are dependent upon the reliable performance of our websites,

network infrastructure and payment systems, and our customers ability to readily access their stored files.

We have experienced

interruptions in these systems in the past, including server failures that temporarily slowed down our websites performance

and our customers ability to access their stored files, or made our websites and infrastructure inaccessible, and we may

experience interruptions or outages in the future.

addition, while we both operate and maintain elements of our websites and network infrastructure, some elements of this complex

system are operated by third parties that we do not control and that would require significant time to replace.

We expect this

dependence on third parties to increase.

In particular, we utilize IBM and Intel to provide equipment and support.

third-party systems are located in data center facilities operated by third parties.

While these data centers are of the highest

level, Tier 3, there can be no assurance that they will not experience disruptions that will adversely impact our ability to service

our customers.

Our data center leases expire at various times between 2020 and 2023 with rights of extension.

If we are unable

to renew these agreements on commercially reasonable terms, we may be required to transfer that portion of our computing and storage

capacity to new data center facilities, and we may incur significant costs and possible service interruption in connection with

also rely upon third party colocation providers to host our main servers.

If these providers are unable to handle current or higher

volumes of use, experience any interruption in operations or cease operations for any reason or if we are unable to agree on satisfactory

terms for continued hosting relationships, we would be forced to enter into a relationship with other service providers or assume

hosting responsibilities ourselves.

If we are forced to switch data center facilities, which in itself is a competitive industry,

we may not be successful in finding an alternative service provider on acceptable terms or in hosting the computer servers ourselves.

We may also be limited in our remedies against these providers in the event of a failure of service.

Interruptions,

outages and/or failures in our own systems, the third-party systems and facilities on which we rely, or the use of our data center

facilities, whether due to system failures, computer viruses, cybersecurity attacks, physical or electronic break-ins, damage

or interruption from human error, power losses, natural disasters or terrorist attacks, hardware failures, systems failures, telecommunications

failures or other factors, could affect the security or availability of our websites and infrastructure, prevent us from being

able to continuously back up our customers data or our customers from accessing their stored data, and may damage or delete

our customers stored files.

If this were to occur, our reputation could be compromised, and we could be subject to liability

to the customers that were affected.

financial difficulties, such as bankruptcy, faced by our third-party data center operators, our third-party colocation providers,

or any of the service providers with whom we or they contract, may have negative effects on our business, the nature and extent

of which are difficult to predict.

Moreover, if our third-party data center providers or our third-party colocation providers

are unable to keep up with our growing needs for capacity, this could have an adverse effect on our business.

Interruptions in

our services might reduce our revenue, cause us to issue credits or refunds to customers, subject us to potential liability, or

harm our renewal rates.

In addition, prolonged delays or unforeseen difficulties in connection with adding storage capacity or

upgrading our network architecture when required may cause our service quality to suffer.

Problems with the reliability or security

of our systems could harm our reputation, and the cost of remedying these problems could negatively affect our business, financial

condition, and operating results.

vulnerabilities, data protection breaches and cyber-attacks could disrupt our data protection platform and solutions, and any

such disruption could increase our expenses, damage our reputation, harm our business and adversely affect our stock price.

rely on third-party providers for a number of critical aspects of our infrastructure cloud and disaster recovery business continuity

services, and consequently we do not maintain direct control over the security or stability of the associated systems.

the firmware, software and/or open-source software that our data protection solutions may utilize could be susceptible to hacking

In the event of the discovery of a significant security vulnerability, we would incur additional substantial expenses

and our business would be harmed.

customers rely on our solutions for production, replication and storage of digital copies of their files, including financial

records, business information, photos, and other personally meaningful content.

We also store credit card information and other

personal information about our customers.

An actual or perceived breach of our network security and systems or other cybersecurity

related events that cause the loss or public disclosure of, or access by third parties to, our customers stored files could

have serious negative consequences for our business, including possible fines, penalties and damages, reduced demand for our solutions,

an unwillingness of customers to provide us with their credit card or payment information, an unwillingness of our customers to

use our solutions, harm to our reputation and brand, loss of our ability to accept and process customer credit card orders, and

time-consuming and expensive litigation.

If this occurs, our business and operating results could be adversely affected.

parties may be able to circumvent our security by deploying viruses, worms, and other malicious software programs that are designed

to attack or attempt to infiltrate our systems and networks and we may not immediately discover these attacks or attempted infiltrations.

Further, outside parties may attempt to fraudulently induce our employees, consultants, or affiliates to disclose sensitive information

in order to gain access to our information or our customers information.

The techniques used to obtain unauthorized access,

disable or degrade service, or sabotage systems change frequently, often are not recognized until launched against a target, and

may originate from less regulated or remote areas around the world.

As a result, we may be unable to proactively address these

techniques or to implement adequate preventative or reactionary measures.

In addition, employee or consultant error, malfeasance,

or other errors in the storage, use, or transmission of personal information could result in a breach of customer or employee

We maintain insurance coverage to mitigate the potential financial impact of these risks;

however, our insurance may

not cover all such events or may be insufficient to compensate us for the potentially significant losses, including the potential

damage to the future growth of our business, that may result from the breach of customer or employee privacy.

If we or our third-party

providers are unable to successfully prevent breaches of security relating to our solutions or customer private information, it

could result in litigation and potential liability for us, cause damage to our brand and reputation, or otherwise harm our business

and our stock price.

states have enacted laws requiring companies to notify consumers of data security breaches involving their personal data.

mandatory disclosures regarding a security breach often lead to widespread negative publicity, which may cause our customers to

lose confidence in the effectiveness of our data security measures.

Any security breach, whether successful or not, would harm

our reputation and could cause the loss of customers.

Similarly, if a publicized breach of data security at any other cloud backup

service provider or other major consumer website were to occur, there could be a general public loss of confidence in the use

of the internet for cloud backup services or commercial transactions generally.

Any of these events could have material adverse

effects on our business, financial condition, and operating results.

The extent to which the COVID-19 pandemic could

disrupt or adversely impact our future business, financial condition and results of operations is highly uncertain and cannot be predicted.

The COVID-19 pandemic has created

significant worldwide uncertainty, volatility and economic disruption.

While the COVID-19 pandemic has not significantly affected our

business operations to date, no assurance can be given that we will not suffer in the future business interruptions due to the COVID-19

pandemic that could significantly disrupt our operations and could have a material adverse impact on us.

The extent to which COVID-19

will adversely impact our business, financial condition and results of operations is dependent upon numerous factors, many of which are

highly uncertain, rapidly changing and uncontrollable.

These factors include, but are not limited to:

(i) the duration and scope of the

(ii) governmental, business and individual actions that have been and continue to be taken in response to the pandemic, including

travel restrictions, quarantines, social distancing, work-from-home and shelter-in-place orders and shut-downs;

(iii) the impact on U.S.

and global economies and the timing and rate of economic recovery;

(iv) potential adverse effects on the financial markets and access

(v) potential goodwill or other impairment charges;

(vi) increased cybersecurity risks as a result of pervasive remote working

and (vii) our ability to effectively carry out our operations due to any adverse impacts on the health and safety of our employees

and their families.

NYS Executive Order 202.6, Essential Business, DSC is an Essential Business based on the following

in the Executive order number 2:

Essential infrastructure including telecommunications and data centers;

Vendors that provide essential services or products, including logistics and technology support.

Further, all employees, including our specialized

technical staff, are working from home or in a virtual environment.

DSC always maintains the ability for team members to work virtual

and we will continue to stay virtual, until the State and or the Federal government indicate the environment is safe to return

The ongoing coronavirus outbreak which began

in China at the beginning of 2020 has impacted various businesses throughout the world, including travel restrictions and the extended

shutdown of certain businesses in impacted geographic regions.

If the coronavirus outbreak situation should worsen, we may experience

disruptions to our business including, but not limited to equipment, to our workforce, or to our business relationships with other

third parties.

The extent to which the coronavirus impacts our operations or those

of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence,

including the duration of the outbreak, new information that may emerge concerning the severity of the coronavirus and the actions

to contain the coronavirus or treat its impact, among others.

Any such disruptions or losses we incur could have a material adverse

effect on our financial results and our ability to conduct business as expected.

and, number 12:

that provide essential services or products, including logistics and technology support.

Further, as a result of the pandemic,

all employees, including our specialized technical staff, are working remotely or in a virtual environment.

DSC always maintains

the ability for team members to work virtual and we will continue to stay virtual, until the State and or the Federal government

indicate the environment is safe to return to work.

The significant increase in remote working, particularly for an extended period

of time, could exacerbate certain risks to our business, including an increased risk of cybersecurity events and improper dissemination

of personal or confidential information, though we do not believe these circumstances have, or will, materially adversely impact

our internal controls or financial reporting systems.

If the COVID-19 pandemic should worsen, we may experience disruptions to

our business including, but not limited to equipment, to our workforce, or to our business relationships with other third parties.

The extent to which COVID-19 impacts our operations or those of our third-party partners will depend on future developments, which

are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may

emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.

Any such disruptions

or losses we incur could have a material adverse effect on our financial results and our ability to conduct business as expected.

ability to provide services to our customers depends on our customers continued high-speed access to the internet and the

continued reliability of the internet infrastructure.

business depends on our customers continued high-speed access to the internet, as well as the continued maintenance and

development of the internet infrastructure.

While we also provide broadband internet services, many of our clients depend on third-party

internet service providers to expand high-speed internet access, to maintain a reliable network with the necessary speed, data

capacity and security, and to develop complementary solutions and services, including high-speed solutions, for providing reliable

and timely internet access and services.

All of these factors are out of our control.

To the extent that the internet continues

to experience an increased number of users, frequency of use, or bandwidth requirements, the internet may become congested and

be unable to support the demands placed on it, and its performance or reliability may decline.

Any internet outages or delays

could adversely affect our ability to provide services to our customers.

internet access is provided by telecommunications companies and internet access service providers that have significant and increasing

market power in the broadband and internet access marketplace.

In the absence of government regulation, these providers could

take measures that affect their customers ability to use our products and services, such as attempting to charge their

customers more for using our products and services.

To the extent that internet service providers implement usage-based pricing,

including meaningful bandwidth caps, or otherwise try to monetize access to their networks, we could incur greater operating expenses

and customer acquisition and retention could be negatively impacted.

Furthermore, to the extent network operators were to create

tiers of internet access service and either charge us for or prohibit our services from being available to our customers through

these tiers, our business could be negatively impacted.

Some of these providers also offer products and services that directly

compete with our own offerings, which could potentially give them a competitive advantage.

we are unable to retain our existing customers, our business, financial condition and operating results would be adversely affected.

If our efforts to satisfy our

existing customers are not successful, we may not be able to retain them, and as a result, our revenue and ability to grow would be adversely

We may not be able to accurately predict future trends in customer renewals.

Customers choose not to renew their subscriptions

for many reasons, including if customer service issues are not satisfactorily resolved, a desire to reduce discretionary spending, or

a perception that they do not use the service sufficiently, that the solution is a poor value, or that competitive services provide a

better value or experience.

If our approximately 94% retention rate significantly decreases, we may need to increase the rate at which

we add new customers in order to maintain and grow our revenue, which may require us to incur significantly higher advertising and marketing

expenses than we currently anticipate, or our revenue may decline.

A significant decrease in our retention rate would therefore have an

adverse effect on our business, financial condition, and operating results.

Our estimates of the number of employees we retain and advertising

costs are based to a large extent upon our subscription contracts, which may be terminated by customers typically upon 90 days notice

prior to the ending term of their contract for services

decline in demand for our cyber security, disaster recovery and/or infrastructure solutions in general would cause our revenue

derive, and expect to continue to derive, a significant portion of our revenue from subscription services for business continuity,

such as data protection solutions including our disaster recovery backup, replication, archive, and infrastructure as a service

Some of the potential factors that could affect interest in and demand for cloud solutions include:

of our brand and the cloud solutions category generally;

appeal and reliability of our solutions;

price, performance, features, and availability of competing solutions and services;

concern regarding privacy and data security;

ability to maintain high levels of customer satisfaction;

rate of growth in cloud solutions generally.

addition, substantially all of our revenue is currently derived from customers in the U.S.

Consequently, a decrease of interest

in and demand for our solutions in the U.S.

could have a disproportionately greater impact on us than if our geographic mix of

revenue was less concentrated.

depend upon third party distributors to generate new customers.

Our relationships with our partners and distributors may be terminated

or may not continue to be beneficial in generating new customers, which could adversely affect our ability to increase our customer

maintain a network of distributors, which refer customers to us through links on their websites or promotion to their customers.

The number of customers that we are able to add through these relationships is dependent on the marketing efforts of distributors,

over which we have little control.

If we are unable to maintain our relationships, or renew contracts on favorable terms, with

existing partners and distributors or establish new contractual relationships with potential partners and distributors, we may

experience delays and increased costs in adding customers, which could have a material adverse effect on us.

Our distributors

also provide services to other third parties and therefore may not devote their full time and attention to promote our products

and services.

we are unable to expand our base of business customers, our future growth and operating results could be adversely affected.

have committed and continue to commit substantial resources to the expansion and increased marketing of our business solutions.

If we are unable to market and sell our solutions to businesses with competitive pricing and in a cost-effective manner our ability

to grow our revenue and achieve profitability may be harmed.

we are unable to sustain market recognition of and loyalty to our brand, or if our reputation were to be harmed, we could lose

customers or fail to increase the number of our customers, which could harm our business, financial condition and operating results.

our market focus, maintaining and enhancing our brand is critical to our success.

We believe that the importance of brand recognition

and loyalty will increase in light of increasing competition in our markets.

We plan to continue investing substantial resources

to promote our brand, both domestically and internationally, but there is no guarantee that our brand development strategies will

enhance the recognition of our brand.

Some of our existing and potential competitors have well-established brands with greater

recognition than we have.

If our efforts to promote and maintain our brand are not successful, our operating results and our ability

to attract and retain customers may be adversely affected.

In addition, even if our brand recognition and loyalty increases, this

may not result in increased use of our solutions or higher revenue.

solutions, as well as those of our competitors, are regularly reviewed in computer and business publications.

Negative reviews,

or reviews in which our competitors solutions and services are rated more highly than our solutions, could negatively affect

our brand and reputation.

From time-to-time, our customers express dissatisfaction with our solutions, including, among other

things, dissatisfaction with our customer support, our billing policies, and the way our solutions operate.

If we do not handle

customer complaints effectively, our brand and reputation may suffer, we may lose our customers confidence, and they may

choose not to renew their subscriptions.

In addition, many of our customers participate in online blogs about computers and internet

services, including our solutions, and our success depends in part on our ability to generate positive customer feedback through

such online channels where consumers seek and share information.

If actions that we take or changes that we make to our solutions

upset these customers, their blogging could negatively affect our brand and reputation.

Complaints or negative publicity about

our solutions or billing practices could adversely impact our ability to attract and retain customers and our business, financial

condition, and operating results.

We are subject to governmental regulation and

other legal obligations related to privacy, and any actual or perceived failure to comply with such obligations would harm our business.

We receive, store, and process

personal information and other customer data and maintain specific protocols and procedures to help safeguard the privacy of that personal

information and customer data.

Personal privacy has become a significant issue in the United States and in many other countries where

we may offer our offering of solutions.

The regulatory framework for privacy issues worldwide is currently complex and evolving, and it

is likely to remain uncertain for the foreseeable future.

There are numerous federal, state, local, and foreign laws regarding privacy

and the storing, sharing, use, processing, disclosure and protection of personal information and other customer data, the scope of which

are changing, subject to differing interpretations, and may be inconsistent among countries or conflict with other rules.

seek to comply with industry standards and are subject to the terms of our privacy policies and privacy-related obligations to third parties.

We strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy and data

protection to the extent possible.

However, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent

from one jurisdiction to another and may conflict with other rules or our practices.

Any failure or perceived failure by us to comply

with our privacy policies, our privacy-related obligations to customers or other third parties, our privacy-related legal obligations,

or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer

data, may result in governmental enforcement actions, litigation, or public statements against us by consumer advocacy groups or others

and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.

Our customers may

also accidentally disclose their passwords or store them on a mobile device that is lost or stolen, creating the perception that our systems

are not secure against third-party access.

Additionally, if third parties that we work with, such as vendors or developers, violate applicable

laws or our policies, such violations may also put our customers’

information at risk and could in turn have an adverse effect on

our business.

Any significant change to applicable laws, regulations, or industry practices regarding the use or disclosure of our customers’

data, or regarding the manner in which the express or implied consent of customers for the use and disclosure of such data is obtained,

could require us to modify our solutions and features, possibly in a material manner, and may limit our ability to develop new services

and features that make use of the data that our customers voluntarily share with us.

solutions are used by customers in the health care industry and we must comply with numerous federal and state laws related to

patient privacy in connection with providing our solutions to these customers.

solutions are used by customers in the health care industry and we must comply with numerous federal and state laws related to

patient privacy in connection with providing our solutions to these customers.

In particular, the Health Insurance Portability

and Accountability Act of 1996 (HIPAA), and the Health Information Technology for Economic and Clinical Health Act

(HITECH) include privacy standards that protect individual privacy by limiting the uses and disclosures of individually

identifiable health information and implementing data security standards.

Because our solutions may backup individually identifiable

health information for our customers, our customers are mandated by HIPAA to enter into written agreements with us known as business

associate agreements that require us to safeguard individually identifiable health information.

Business associate agreements

typically include:

description of our permitted uses of individually identifiable health information;

covenant not to disclose that information except as permitted under the agreement and to make our subcontractors, if any,

subject to the same restrictions;

that appropriate administrative, physical, and technical safeguards are in place to prevent misuse of that information;

obligation to report to our customers any use or disclosure of that information other than as provided for in the agreement;

prohibition against our use or disclosure of that information if a similar use or disclosure by our customers would violate

the HIPAA standards;

ability of our customers to terminate their subscription to our solution if we breach a material term of the business associate

agreement and are unable to cure the breach;

requirement to return or destroy all individually identifiable health information at the end of the customers subscription;

by the Department of Health and Human Services to our internal practices, books, and records to validate that we are safeguarding

individually identifiable health information.

may not be able to adequately address the business risks created by HIPAA or HITECH implementation or comply with our obligations

under our business associate agreements.

Furthermore, we are unable to predict what changes to HIPAA, HITECH or other laws or

regulations might be made in the future or how those changes could affect our business or the costs of compliance.

us to comply with any of the federal and state standards regarding patient privacy may subject us to penalties, including civil

monetary penalties and, in some circumstances, criminal penalties, which could have an adverse effect on our business, financial

condition, and operating results.

Errors, failures, bugs in or unavailability

of our solutions released by us could result in negative publicity, damage to our brand, returns, loss of or delay in market acceptance

of our solutions, loss of competitive position, or claims by customers or others

We offer solutions that operate

in a wide variety of environments, systems, applications and configurations, that are often installed and used in large-scale computing

environments with different operating systems, system management software, and equipment and networking configurations.

Our customers’

computing environments are often characterized by a wide variety of standard and non-standard configurations that can make pre-release

testing for programming or compatibility errors very difficult and time-consuming.

In addition, despite testing by us and others, errors,

failures, or bugs may not be found in new solutions or releases until after distribution.

In the past, when we have discovered any software

errors, failures or bugs in certain of our solution offerings after their introduction or when new versions are released, we, in some

cases, have experienced delayed or lost revenues as a result of these errors.

In addition, we rely on hardware purchased or leased and

software licensed from third parties to offer our solutions, and any defects in, or unavailability of, our third-party software or hardware

could cause interruptions to the availability of our solutions.

failures, bugs in or unavailability of our solutions released by us could result in negative publicity, damage to our brand, returns,

loss of or delay in market acceptance of our solutions, loss of competitive position, or claims by customers or others.

our end-user customers use our solutions in applications that are critical to their businesses and may have a greater sensitivity

to defects in our solutions than to defects in other, less critical, software solutions.

In addition, if an actual or perceived

breach of information integrity or availability occurs in one of our end-user customers systems, regardless of whether

the breach is attributable to our solutions, the market perception of the effectiveness of our solutions could be harmed.

any of these problems could require significant expenditures of our capital and other resources and could cause interruptions,

delays, or cessation of our solution licensing, which could cause us to lose existing or potential customers and could adversely

affect our operating results.

face many risks associated with our growth and plans to expand, which could harm our business, financial condition, and operating

continue to experience sales growth in our business.

This growth has placed and may continue to place significant demands on our

management and our operational and financial infrastructure.

As our operations grow in size, scope, and complexity, we will need

to improve and upgrade our systems and infrastructure to attract, service and retain an increasing number of customers.

The expansion

of our systems and infrastructure will require us to commit substantial financial, operational, and technical resources in advance

of an increase in the volume of business, with no assurance that the volume of business will increase.

Any such additional capital

investments will increase our cost base.

Continued growth could also strain our ability to maintain reliable service levels for

our customers, develop and improve our operational, financial, and management controls, enhance our reporting systems and procedures,

and recruit, train, and retain highly skilled personnel.

If we fail to achieve the necessary level of efficiency in our organization

as we grow, our business, financial condition, and operating results could be harmed.

have office locations in New York and Rhode Island, and data centers in New York, Massachusetts, North Carolina and Texas.

we are unable to effectively manage a large and geographically dispersed group of employees and contractors or to anticipate our

future growth and personnel needs, our business may be adversely affected.

As we expand our business, we add complexity to our

organization and must expand and adapt our operational infrastructure and effectively coordinate throughout our organization.

As a result, we have incurred and expect to continue to incur additional expense related to our continued growth.

also anticipate that our efforts to expand internationally will entail the marketing and advertising of our services and brand

and the development of localized websites.

We do not have substantial experience in selling our solutions in international markets

or in conforming to the local cultures, standards, or policies necessary to successfully compete in those markets, and we must

invest significant resources in order to do so.

We may not succeed in these efforts or achieve our customer acquisition or other

For some international markets, customer preferences and buying behaviors may be different, and we may use business or

pricing models that are different from our traditional subscription model to provide cloud backup and related services to customers.

Our revenue from new foreign markets may not exceed the costs of establishing, marketing, and maintaining our international solutions,

and therefore may not be profitable on a sustained basis, if at all.

Our intended international expansion will subject

us to risks typically encountered when operating internationally .

We intend to expand internationally

which subjects us to new risks that we have not generally faced in the U.S.

These risks include:

of our solutions, including translation into foreign languages and adaptation for local practices and regulatory requirements;

of experience in other geographic markets;

local competitors;

and burden of complying with, lack of familiarity with, and unexpected changes in foreign legal and regulatory requirements,

including consumer and data privacy laws;

in managing and staffing international operations;

adverse tax consequences, including the complexities of transfer pricing, foreign value added or other tax systems, double

taxation and restrictions, and/or taxes on the repatriation of earnings;

on third parties, including channel partners with whom we do not have extensive experience;

with the Foreign Corrupt Practices Act, economic sanction laws and regulations, export controls, and other U.S.

laws and regulations

regarding international business operations;

financial accounting and reporting burdens and complexities;

social, and economic instability abroad, terrorist attacks, and security concerns in general;

or varied protection for intellectual property rights in some countries.

in international markets also requires significant management attention and financial resources.

The investment and additional

resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability.

software contains encryption technologies, certain types of which are subject to U.S.

and foreign export control regulations and,

in some foreign countries, restrictions on importation and/or use.

Any failure on our part to comply with encryption or other

applicable export control requirements could result in financial penalties or other sanctions under the U.S.

export regulations,

including restrictions on future export activities, which could harm our business and operating results.

Regulatory restrictions

could impair our access to technologies that we seek for improving our solutions and may also limit or reduce the demand for our

solutions outside of the U.S.

The loss of our key personnel, or our failure

to attract, integrate, and retain other highly qualified personnel, could harm our business and growth prospects.

depend on the continued service and performance of our key personnel.

We do not have long-term employment agreements with any

of our executive officers.

In addition, many of our key technologies and systems are custom-made for our business by our personnel.

The loss of key personnel, including key members of our management team, as well as certain of our key marketing, sales, product

development, or technology personnel, could disrupt our operations and have an adverse effect on our ability to grow our business.

In addition, several of our key personnel have only recently been employed by us, and we are still in the process of integrating

these personnel into our operations.

Our failure to successfully integrate these key employees into our business could adversely

affect our business.

execute our growth plan, we must attract and retain highly qualified personnel.

Competition for these employees is intense, and

we may not be successful in attracting and retaining qualified personnel.

We have from time to time in the past experienced, and

we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications.

New hires require significant training and, in most cases, take significant time before they achieve full productivity.

hires and planned hires may not become as productive as we expect, and we may be unable to hire or retain sufficient numbers of

qualified individuals.

Many of the companies with which we compete for experienced personnel have greater resources than we have.

In addition, in making employment decisions, particularly in the internet and high-technology industries, job candidates often

consider the value of the equity that they are to receive in connection with their employment.

In addition, employees may be more

likely to voluntarily exit the Company if the shares underlying their vested and unvested options, as well as unvested restricted

stock units, have significantly depreciated in value resulting in the options they are holding being significantly above the market

price of our common stock and the value of the restricted stock units decreasing.

If we fail to attract new personnel, or fail

to retain and motivate our current personnel, our business and growth prospects could be severely harmed.

Related to Intellectual Property

by a third party that our solutions infringe its intellectual property, whether or not correct, could subject us to costly and

time-consuming litigation or expensive licenses.

is frequent litigation in the software and technology industries based on allegations of infringement or other violations of intellectual

property rights.

Any such claims or litigation may be time-consuming and costly, divert management resources, require us to change

our services, require us to credit or refund subscription fees, or have other adverse effects on our business.

Many companies

are devoting significant resources to obtaining patents that could affect many aspects of our business.

Third parties may claim

that our technologies or solutions infringe or otherwise violate their patents or other intellectual property rights.

we are forced to defend ourselves against intellectual property infringement claims, whether they have merit or are determined

in our favor, we may face costly litigation, diversion of technical and management personnel, limitations on our ability to use

our current websites and technologies, and an inability to market or provide our solutions.

As a result of any such claim, we

may have to develop or acquire non-infringing technologies, pay damages, enter into royalty or licensing agreements, cease providing

certain services, adjust our marketing and advertising activities, or take other actions to resolve the claims.

These actions,

if required, may be costly or unavailable on terms acceptable to us, or at all.

we have licensed proprietary technologies from third parties that we use in our technologies and business, and we cannot be certain

that the owners rights in their technologies will not be challenged, invalidated, or circumvented.

In addition to the general

risks described above associated with intellectual property and other proprietary rights, we are subject to the additional risk

that the seller of such technologies may not have appropriately created, maintained, or enforced their rights in such technology.

We rely on third-party software to develop and

provide our solutions, including server software and licenses from third parties to use patented intellectual property.

We rely on software licensed

from third parties to develop and offer our solutions.

In addition, we may need to obtain future licenses from third parties to use intellectual

property associated with the development of our solutions, which might not be available to us on acceptable terms, or at all.

of the right to use any software required for the development and maintenance of our solutions could result in delays in the provision

of our solutions until equivalent technology is either developed by us, or, if available from others, is identified, obtained, and integrated,

which delay could harm our business.

Any errors or defects in third-party software could result in errors or a failure of our solutions,

which could harm our business.

If we are unable to protect our domain names,

our reputation, brand, customer base, and revenue, as well as our business and operating results, could be adversely affected.

We have registered domain names

for websites (“URLs”) that we use in our business, such as www.datastoragecorp.com.

If we are unable to maintain our rights

in these domain names, our competitors or other third parties could capitalize on our brand recognition by using these domain names for

their own benefit.

In addition, although we own the Company’s domain name under various global top level domains such as .com and

.net, as well as under various country-specific domains, we might not be able to, or may choose not to, acquire or maintain other country-specific

versions of the Company’s domain name or other potentially similar URLs.

Domain names similar to ours have already been registered

and elsewhere, and our competitors or other third parties could capitalize on our brand recognition by using domain names

similar to ours.

The regulation of domain names in the U.S.

and elsewhere is generally conducted by internet regulatory bodies and is

subject to change.

If we lose the ability to use a domain name in a particular country, we may be forced to either incur significant additional

expenses to market our solutions within that country, including the development of a new brand and the creation of new promotional materials,

or elect not to sell our solutions in that country.

Either result could substantially harm our business and operating results.

bodies could establish additional top-level domains, appoint additional domain name registrars, or modify the requirements for holding

domain names.

As a result, we may not be able to acquire or maintain the domain names that utilize the Company’s name in all of

the countries in which we currently conduct or intend to conduct business.

Further, the relationship between regulations governing domain

names and laws protecting trademarks and similar proprietary rights varies among jurisdictions and is unclear in some jurisdictions.

may be unable to prevent third parties from acquiring and using domain names that infringe, are similar to, or otherwise decrease the

value of, our brand or our trademarks.

Protecting and enforcing our rights in our domain names and determining the rights of others may

require litigation, which could result in substantial costs, divert management attention, and not be decided favorably to us.

Risks Related to the Merger

Failure to complete

the Merger could negatively impact the stock price and the future business and financial results of Data Storage.

parties’

respective obligations to complete the Merger, which we intend to effect through the merger of the Merger Sub with and

into Flagship pursuant to the Merger Agreement, with Flagship being the surviving company of such Merger and thereby becoming a wholly-owned

subsidiary of Data Storage, are subject to the satisfaction or waiver of a number of conditions set forth in the Merger Agreement, including

the Company obtaining sufficient financing in order to consummate the Merger, and the listing of the Company’s common stock on Nasdaq.

There can be no assurance that the conditions to completion of the Merger will be satisfied or waived or that the Merger will be completed.

If the Merger is not completed for any reason, the ongoing business of Data Storage may be materially and adversely affected and, without

realizing any of the benefits of having completed the Merger, Data Storage would be subject to a number of risks, including the following:

Data Storage may experience negative reactions from the financial markets, including negative impacts on the trading price of Data Storage common stock, which could affect Data Storage’s ability to secure sufficient financing in the future on attractive terms (or at all) as a standalone company, and from its customers, vendors, regulators and employees;

Data Storage may be required to pay Flagship an amount equal to two times Flagship’s transaction-related expenses incurred in connection with the Merger (up to a cap of $100,000) if Data Storage fails to consummate the Merger by May 31, 2021 under certain circumstances;

Data Storage will be required to pay its transaction-related expenses incurred in connection with the Merger, whether or not the Merger is completed;

the Merger Agreement (as defined herein) places certain restrictions on the operation of Flagship business prior to the closing of the Merger, and such restrictions, the waiver of which is subject to Data Storage’s consent, may prevent Flagship from making certain acquisitions, taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the Merger that Flagship may have otherwise made, taken or pursued if those restrictions were not in place;

matters relating to the Merger (including integration planning) will require substantial commitments of time and resources by Data Storage management and the expenditure of significant funds in the form of transaction-related fees and expenses, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to Data Storage as an independent company.

Data Storage could be subject to litigation related to any failure to complete the Merger or related to any proceeding to specifically

enforce Data Storage’s obligations under the Merger Agreement.

of these risks materialize, they may materially and adversely affect Data Storage business, financial condition, financial results and

common stock prices.

The Merger is subject

to a number of closing conditions and, if these conditions are not satisfied, the Merger Agreement may be terminated in accordance with

its terms and the Merger may not be completed.

In addition, the parties to the Merger Agreement have the right to terminate the Merger

Agreement under other specified circumstances, in which case the Merger would not be completed.

Merger is subject to a number of closing conditions and, if these conditions are not satisfied or waived (to the extent permitted by law),

the Merger will not be completed.

These conditions include, among others:

(i) the absence of certain legal impediments, (ii) obtaining

all governmental authorizations, (iii) the approval of the Merger Agreement and the Merger by Flagship’s equityholders, (v) Data

Storage’s consummating an underwritten public offering, and (vi) Data Storage’s common stock being listed on the Nasdaq.

addition, the obligation of each party to the Merger Agreement to complete the Merger is subject to the accuracy of the other party’s

representations and warranties in the Merger Agreement and the other party’s compliance, in all material respects, with their respective

covenants and agreements in the Merger Agreement.

Although we have applied to list our common stock on the Nasdaq and filed a registration

statement with the SEC to conduct an underwritten public offering, there can be no assurance that the uplisting will be achieved or public

offering will be consummated.

conditions to the closing may not be fulfilled and, accordingly, the Merger may not be completed.

In addition, if the Merger is not completed

by May 31, 2021, Flagship may choose not to proceed with the Merger and require Data Storage to pay Flagship an amount equal to two times

its transaction-related expenses incurred in connection with the Merger (up to a cap of $100,000).

Moreover, the parties to the Merger

Agreement can mutually decide to terminate the Merger Agreement at any time prior to the consummation of the Merger.

In addition, if the

Merger Agreement is terminated, Data Storage may incur substantial transaction-related expenses in connection with termination of the

Merger Agreement and will not realize the anticipated benefits of the Merger.

Merger Agreement requires Data Storage to make a closing cash payment of $5,550,000 to the former Flagship equityholders, and to issue

up to $4,950,000 of Data Storage common stock to the former Flagship equityholders upon completion of and subject to adjustment based

upon the 2020 and 2021 audit of Flagship’s financial statements.

Such post-closing issuance of shares of Data Storage common stock

to the former Flagship equityholders may result in dilution to the Data Storage stockholders.

To the extent that Data

Storage’s cash on hand and profits, if any, are not sufficient to fund such closing cash payment, Data Storage would need to raise

additional capital.

All statements herein concerning future operations of the combined Data Storage-Flagship company are forward-looking

statements and involve risks and Financing may not be available on acceptable terms, in a timely manner or at all.

If Data Storage is

unable to secure financing, the Merger may be delayed or not be completed.

combined Data Storage-Flagship company may need to raise additional capital to fund its operations

the combined Data Storage-Flagship company needs to raise additional capital to fund its operations, it will likely seek to sell

common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding,

or seek other debt financing.

The sale of equity and convertible debt securities may result in dilution to Data Storages

stockholders and certain of those securities may have rights senior to those of the holders of Data Storage common stock.

combined Data Storage-Flagship company raises additional funds through the issuance of preferred stock, convertible debt securities

or other debt financing, these securities or other debt could contain covenants that would restrict its operations, fund raising

capabilities or otherwise.

The source, timing and availability of any future financing will depend principally upon market conditions,

and may not be available when needed, at all, or on terms acceptable to the combined Data Storage-Flagship company.

Lack of necessary

funds may require the combined Data Storage-Flagship company to, among other things delay, scale back or eliminate some or all

of the combined Data Storage-Flagship companys planned actions and could result in Data Storage breaching the terms of

the Merger Agreement relating to the post-closing cash payments to the former Flagship equityholders.

The parties to the

Merger Agreement may not realize the anticipated benefits of the Merger.

Data Storage and Flagship will continue to operate independently until the completion of the Merger, the success of the Merger

will depend, in part, on Data Storages and Flagships ability to realize the anticipated benefits and cost savings

from combining Data Storages and Flagships respective businesses.

The ability of the parties to the Merger Agreement

to realize these anticipated benefits and cost savings is subject to certain risks, including, among others:

parties ability to successfully combine their respective businesses;

risk that the combined businesses of such parties will not perform as expected;

extent to which such parties will be able to realize the expected synergies, which include realizing potential savings from

re-assessing priority assets and aligning investments, eliminating duplication and redundancy, adopting an optimized operating

model between both companies and leveraging scale, and creating value resulting from the combination of Data Storages

and Flagships respective businesses;

possibility that the aggregate consideration being paid for Flagship is greater than the value Data Storage will derive from

possibility that the combined Data Storage-Flagship company will not achieve the free cash flow that such parties have projected;

reduction of cash available for operations and other uses;

assumption of known and unknown liabilities of Flagship;

possibility of costly litigation challenging the Merger.

contained in the Merger Agreement requiring Data Storage to maintain the Flagship business as a stand-alone business separate

from the Data Storage business during Flagships 2021 fiscal year, which relate to the post-closing earnout payments to

be made to the former Flagship equityholders, may limit Data Storages ability to combine and integrate the Data Storage

and Flagship businesses and realize the benefits discussed above.

Data Storage is not able to successfully integrate the Data Storage and Flagship businesses within the anticipated time frame,

or at all, the anticipated cost savings, synergies operational efficiencies and other benefits of the Merger may not be realized

fully or may take longer to realize than expected, and the combined Data Storage-Flagship company may not perform as expected.

Data Storages and Flagships businesses may be more difficult, time-consuming or costly than expected.

Storage and Flagship have operated and, until completion of the Merger will continue to operate, independently, and there can be no assurances

that their businesses can be integrated successfully.

It is possible that the integration process could result in the loss of key employees,

the disruption of either company’s or both companies’

ongoing businesses or unexpected integration issues, such as higher

than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated.

Specifically,

issues that must be addressed in integrating the operations of Data Storage and Flagship in order to realize the anticipated benefits

of the Merger, so the combined business performs as expected include, among others:

the companies separate operational, financial, reporting and corporate functions;

the companies technologies, products and services;

and eliminating redundant and underperforming operations and assets;

the companies operating practices, employee development, compensation and benefit programs, internal controls and other

policies, procedures and processes;

possible differences in corporate cultures and management philosophies;

employee morale and retaining key management and other employees;

and recruiting prospective employees;

consolidating

the companies corporate, administrative and information technology infrastructure;

sales, distribution and marketing efforts;

the movement of certain businesses and positions to different locations;

existing agreements with customers and vendors and avoiding delays in entering into new agreements with prospective customers

geographically dispersed organizations;

potential actions that may be required in connection with obtaining regulatory approvals.

addition, at times, the attention of certain members of each companys management and each companys resources may

be focused on completion of the Merger and the integration of the businesses of the two companies and diverted from day-to-day

business operations, which may disrupt each companys ongoing business and, consequently, the business of the combined company.

There may be significant dilution upon consummation

of the Merger since a portion of the consideration is to be paid in equity of Data Storage, the number of shares of which cannot be determined

at this time .

A portion of the Merger consideration

consist of shares of our common stock having a value $4,950,000, subject to reduction by the amount by which the valuation of Flagship.

In addition, upon consummation of the Merger, it is anticipated that the Series A Preferred Stock will convert into 1,752,233 shares of

common stock.

Storage and Flagship will be subject to business uncertainties and contractual restrictions while the Merger is pending.

about the effect of the Merger on employees, vendors and customers may have an adverse effect on Data Storage or Flagship and

consequently on the combined Data Storage-Flagship company after the closing of the Merger.

These uncertainties may impair Data

Storages and Flagships ability to retain and motivate key personnel and could cause customers and others that deal

with Data Storage and Flagship, as applicable, to defer or decline entering into contracts with Data Storage or Flagship, as applicable,

or making other decisions concerning Data Storage or Flagship, as applicable, or seek to change existing business relationships

with Data Storage or Flagship, as applicable.

In addition, if key employees depart because of uncertainty about their future roles

and the potential complexities of the Merger, Data Storages and Flagships businesses could be harmed.

the Merger Agreement places certain restrictions on the operation of Flagships business prior to the closing of the Merger,

which may delay or prevent Data Storage and Flagship from undertaking certain actions or business opportunities that may arise

prior to the consummation of the Merger, and requires Data Storage to maintain the Flagship business as a stand-alone business

separate from the Data Storage business during Flagships 2021 fiscal year, relating to the post-closing earnout payments

to be made to the former Flagship equityholders, which may limit Data Storages ability to combine and integrate the Data

Storage and Flagship businesses after consummation of the Merger.

parties may terminate or alter existing contracts or relationships with Flagship.

has contracts with customers, vendors and other business partners which may require it to obtain consents from those other parties

in connection with the Merger.

If those consents cannot be obtained, the counterparties to these contracts and other third parties

with which Flagship currently has relationships may have the ability to terminate, reduce the scope of or otherwise materially

adversely alter their relationships with Flagship in anticipation of the Merger, or with the combined Data Storage-Flagship company

following the Merger.

The pursuit of such rights may result in the combined Data Storage-Flagship company suffering a loss of

potential future revenue, incurring liabilities in connection with a breach of such agreements or losing rights that are material

to its business.

Any such --disruptions could limit the combined Data Storage-Flagship companys ability to achieve the

anticipated benefits of the Merger.

The adverse effect of such disruptions could also be exacerbated by a delay in the completion

of the Merger or the termination of the Merger.

Merger is subject to a number of closing conditions and, if these conditions are not satisfied, the Merger Agreement may be terminated

in accordance with its terms and the Merger may not be completed.

In addition, the parties to the Merger Agreement have the right

to terminate the Merger Agreement under other specified circumstances, in which case the Merger would not be completed.

Merger is subject to a number of closing conditions and, if these conditions are not satisfied or waived (to the extent permitted

by law), the Merger will not be completed.

These conditions include, among others:

(i) the absence of certain legal impediments,

(ii) obtaining all governmental authorizations, (iii) the approval of the Merger Agreement and the Merger by Flagships

equityholders, (v) Data Storages receipt of sufficient financing in order to consummate the Merger, and (vi) Data

Storages common stock being listed on the Nasdaq.

In addition, the obligation of each party to the Merger Agreement to

complete the Merger is subject to the accuracy of the other partys representations and warranties in the Merger Agreement

and the other partys compliance, in all material respects, with their respective covenants and agreements in the Merger

conditions to the Closing may not be fulfilled and, accordingly, the Merger may not be completed.

In addition, if the Merger is

not completed by May 31, 2021, Flagship may choose not to proceed with the Merger and require Data Storage to pay Flagship an

amount equal to two times its transaction-related expenses incurred in connection with the Merger (up to a cap of $100,000).

the parties to the Merger Agreement can mutually decide to terminate the Merger Agreement at any time prior to the consummation

of the Merger.

In addition, if the Merger Agreement is terminated, Data Storage may incur substantial transaction-related expenses

in connection with termination of the Merger Agreement and will not realize the anticipated benefits of the Merger.

projections and forecasts concerning the combined Data Storage-Flagship company utilized by Data Storage management in connection

with the Merger may not be realized, which may adversely affect the market price of Data Storage Common Stock following the completion

of the Merger.

of the projections or forecasts concerning the combined Data Storage-Flagship company utilized by Data Storage management in connection

with the Merger were prepared with a view towards public disclosure or compliance with the published guidelines of the SEC, U.S.

generally accepted accounting principles (GAAP) or the guidelines established by the American Institute of Certified

Public Accountants for preparation and presentation of financial forecasts.

These projections and forecasts are inherently based

on various estimates and assumptions that are subject to the judgment of those preparing them.

These projections and forecasts

are also subject to significant economic, competitive, industry and other uncertainties and contingencies, all of which are difficult

or impossible to predict and many of which are beyond the control of Data Storage.

There can be no assurance that the financial

condition of the combined Data Storage-Flagship company, including its cash flows or results of operations, will be consistent

with those set forth in such projections and forecasts, which could have an adverse impact on the market price of Data Storage

Common Stock or the financial position of Data Storage following the Merger.

officers and directors of Data Storage and Flagship may have interests in the Merger that are different from, or in addition to,

the rights of their respective stockholders and equityholders.

officers of Data Storage and Flagship negotiated the terms of the Merger Agreement and Board and the Flagship managers each approved the

Merger Agreement and the Merger and Flagship recommended that each of its equityholders vote in favor of the Merger.

These executive officers,

directors and managers may have interests in the Merger that are different from, or in addition to, those of the Data Storage stockholders

or the Flagship equityholders.

These interests include the continued employment of certain executive officers of Flagship by Data Storage

following the Merger, an executive officer of Flagship joining the Board, and the indemnification of Data Storage and Flagship executive

officers and directors.

We will incur significant

transaction and Merger-related transition costs in connection with the Merger.

Storage and Flagship expect that they will incur significant, non-recurring costs in connection with consummating the Merger and

integrating the operations of the two companies post-closing of the Merger.

Data Storage and/or Flagship may each incur additional

costs to retain key executives and other employees after the Merger, which could materially and adversely affect the combined

Data Storage-Flagship companys cash flow and results of operations.

Data Storage and/or Flagship will also incur significant

fees and expenses relating to financing arrangements and legal (including any fees, expenses and settlement costs that Data Storage

may incur in defending against any potential class action lawsuits and derivative lawsuits in connection with the Merger, if any

such proceedings are brought against it), accounting and other transaction fees and expenses associated with consummating the

Some of these transaction fees and expenses are payable regardless of whether the Merger is completed.

In addition, Data

Storage may be required to pay Flagships transaction fees and expenses (up to a cap of $100,000) if the Merger does not

close by May 31, 2021 under certain circumstances specified in the Merger Agreement.

Though Data Storage will continue to assess

the magnitude of these costs, additional unanticipated costs may be incurred in the Merger and the integration of the businesses

of Data Storage and Flagship.

We may be the target

of securities class action and derivative lawsuits in connection with the Merger, which could result in substantial costs and may delay

or prevent the Merger from being completed.

class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements.

Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time

and resources.

An adverse judgment could result in monetary damages, which could have a negative impact on Data Storages

liquidity and financial condition.

Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion

of the Merger, then that injunction may delay or prevent the Merger from being completed, which may adversely affect Data Storages

or, if the Merger is completed but delayed, the combined Data Storage-Flagship companys business, financial position and

results of operations.

As of the date of this Annual Report, no such lawsuits have been filed in connection with the Merger and

we cannot predict whether any will be filed.

lack of a public market for Flagship equity interests makes it difficult to determine the fair market value of the Flagship equity

interest, and so Data Storage may pay more than the fair market value of the Flagship equity interests.

is a privately-held company and its equity interests are not traded in any public market.

The lack of a public market makes it difficult

to determine Flagship’s fair market value.

Because the percentage of Data Storage’s outstanding common stock to be issued

to Flagship equityholders in connection with the Merger was determined based on negotiations between the parties to the Merger Agreement

and will not change based upon the value of Data Storage’s common stock.

Data Storage may pay more than fair market value for Flagship.

post-Merger market price for shares of Data Storage Common Stock may be affected by factors different from those affecting the

market price for shares of Data Storage Common Stock prior to the Merger.

completion of the Merger, the shares of Data Storage common stock will reflect both the Data Storage and Flagship businesses and

results of operations.

Data Storages and Flagships respective business differ, and accordingly the results of operations

of the combined Data Storage/Flagship company, and the post-Merger market price of Data Storage common stock, will be affected

by factors different from the pre-Merger results of operations of Data Storage and the pre-Merger market price of Data Storage

common stock.

The market price for

our shares of Common Stock may decline as a result of the Merger, including as a result of some Data Storage stockholders adjusting their

market value of Data Storage common stock at the time of consummation of the Merger may vary significantly from the price of Data

Storage common stock on the date the Merger Agreement was executed and the date of this Annual Report.

Following consummation

of the Merger, the market price of Data Storage common stock may decline if, among other things, the operational cost savings

estimates in connection with the integration of Data Storages and Flagships respective businesses are not realized,

or if the costs related to the Merger are greater than expected, or if the financing related to the Merger is on unfavorable terms.

The market price also may decline if the combined Data Storage-Flagship company does not achieve the perceived benefits of the

Merger as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the Merger on the financial

position, results of operations or cash flows of the combined Data Storage-Flagship company is not consistent with the expectations

of financial or industry analysts.

addition, sales of Data Storage common stock by Data Storages stockholders after the completion of the Merger may cause

the market price of Data Storage common stock to decrease.

of these events may make it more difficult for Data Storage to sell equity or equity-related securities, dilute your ownership

interest in Data Storage and have an adverse impact on the price of Data Storage common stock.

Data Storage does not

expect to declare any cash dividends in the foreseeable future.

After the completion of the

Merger, Data Storage does not anticipate declaring any cash dividends to holders of Data Storage common stock in the foreseeable future.

Consequently, investors may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to

realize any future gains on their investment.

Merger may not be accretive, and may be dilutive, to the combined Data Storage-Flagship companys earnings per share, which

may negatively affect the market price of shares of Data Storage common stock.

Storage currently believes that the Merger will result in a number of benefits, including cost savings, operating efficiencies,

and stronger demand for the products and services of the combined Data Storage-Flagship company, and that the Merger will be accretive

to the combined Data Storage-Flagship companys earnings.

This belief is based, in part, on preliminary current estimates

that may materially change.

In addition, future events and conditions, including adverse changes in market conditions, additional

transaction and integration-related costs and other factors such as the failure to realize some or all of the anticipated benefits

of the Merger, could decrease or delay the accretion that is currently anticipated or could result in dilution.

Any dilution of,

or decrease in or delay of any accretion to, the combined Data Storage-Flagship companys earnings per share could cause

the price of shares of Data Storage common stock to decline or grow at a reduced rate.

failure by Flagship to comply with the terms of its outstanding indebtedness following the Merger could result in a default under

the terms of such indebtedness that, if uncured, it could result in a foreclosure action against the pledged assets and legal

action against the Company, as guarantor of that indebtedness.

currently has outstanding approximately $525,000 in principal under its line of credit with Bank United, N.A.

United Indebtedness), as well as approximately $499,900 in principal under its Economic Injury Disaster Loan from the U.S.

Small Business Administration (the EIDL Indebtedness and, together with the Bank United Indebtedness, the Flagship

Indebtedness), both of which will remain outstanding following the Merger.

In addition to pledge of Flagships assets,

the Flagship Indebtedness is currently secured by personal guarantees provided by certain Flagship equityholders who are also

senior executives of Flagship.

In connection with consummation of the Merger, those personal guarantees will be replaced by a

parent guarantee from the Company, resulting in the Flagship Indebtedness effectively becoming an obligation of the Company upon

consummation of the Merger.

If Flagship fails to repay the Flagship Indebtedness or otherwise does not comply with the terms of

the Flagship Indebtedness following consummation of the Merger, the applicable lender could declare a default under the loan documents

for such Flagship Indebtedness, foreclose on the assets pledged to secure such Flagship Indebtedness, and enforce the parent guarantee

of the Flagship Indebtedness provided by the Company.

Any such action would have a serious disruptive effect on the operations

of Flagship and the Company.

Relating to our Common Stock and Securities

stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors

in our common stock could incur substantial losses.

stock price has fluctuated in the past, has recently been volatile and may be volatile in the future.

By way of example, on February

11, 2021, the reported low sale price of our common stock was $0.42, and the reported high sales price was $0.97.

For comparison

purposes, on October 1, 2020, the price of our common stock closed at $0.14 per share while on February 11, 2021, our stock price

closed at $0.76 per share with no discernable announcements or developments by the company or third parties.

We may incur rapid

and substantial decreases in our stock price in the foreseeable future that are unrelated to our operating performance or prospects.

In addition, the recent outbreak of the novel strain of coronavirus (COVID-19) has caused broad stock market and industry fluctuations.

The stock market has experienced extreme volatility that has often been unrelated to the operating performance of particular companies.

As a result of this volatility, investors may experience losses on their investment in our common stock.

The market price for

our common stock may be influenced by many factors, including the following:

reaction to our business strategy;

success of competitive products or technologies;

or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our

in our financial results or those of companies that are perceived to be similar to us;

ability or inability to raise additional capital and the terms on which we raise it;

in the market prices of stocks generally;

public disclosure of the terms of any financing which we consummate in the future;

announcement that we have effected a reverse split of our common stock;

failure to become profitable;

failure to raise working capital;

acquisitions we may consummate, including, but not limited to, the Merger;

announcements

by us or our competitors of significant contracts, new services, acquisitions, commercial relationships, joint ventures or

capital commitments;

of key contracts;

failure to meet financial forecasts we publicly disclose;

volume of our common stock;

of our common stock by us or our stockholders;

economic, industry and market conditions;

events or factors, including those resulting from such events, or the prospect

of such events, including war, terrorism and other international conflicts, public health issues including health epidemics

or pandemics, such as the recent outbreak of the novel coronavirus (COVID-19), and natural disasters such as fire, hurricanes,

earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere,

could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability;

broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance.

Since the stock price of our common stock has fluctuated in the past, has been recently volatile and may be volatile in the future,

investors in our common stock could incur substantial losses.

In the past, following periods of volatility in the market, securities

class-action litigation has often been instituted against companies.

Such litigation, if instituted against us, could result in

substantial costs and diversion of managements attention and resources, which could materially and adversely affect our

business, financial condition, results of operations and growth prospects.

There can be no guarantee that our stock price

will remain at current prices or that future sales of our common stock will not be at prices lower than those sold to investors.

Additionally, recently, securities

of certain companies have experienced significant and extreme volatility in stock price due short sellers of shares of common stock, known

as a “short squeeze.”

These short squeezes have caused extreme volatility in those companies and in the market and have led

to the price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of

Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion

of their original investment as the price per share has declined steadily as interest in those stocks have abated.

While we have no reason

to believe our shares would be the target of a short squeeze, there can be no assurance that we won’t be in the future, and you

may lose a significant portion or all of your investment if you purchase our shares at a rate that is significantly disconnected from

our underlying value.

Even if the Board approves a reverse stock split

of our common stock at a ratio that currently achieves the requisite increase in the market price of our common stock for listing of our

common stock on Nasdaq, we cannot assure you that the market price of our common stock will remain high enough for such reverse split

to have the intended effect of complying with The Nasdaq Capital Market’s minimum bid price requirement;

and if we effect a reverse

stock split, we cannot assure you that we will meet The Nasdaq Capital Market’s minimum requirements or standards .

In the Fall of 2019, we publicly

disclosed that we were seeking to list our common stock on the Nasdaq.

In order to be listed, we must meet certain rules relating to our

stock price which at current levels we do not meet and as a result we anticipate effecting a reverse stock split, at a range of between

a 1-2 and a 1-60 reverse split, to meet the minimum price requirement.

Even if the reverse stock split achieves the requisite increase

in the market price of our common stock to be in compliance with the minimum price of Nasdaq, there can be no assurance that (i) the market

price of our common stock following the reverse stock split will remain at the level required for continuing compliance with that requirement,

or (ii) if we effect a reverse stock split, we will meet Nasdaq’s minimum requirements or standards.

It is not uncommon for the

market price of a company’s common stock to decline in the period following a reverse stock split.

If the market price of our common

stock declines following the effectuation of the reverse stock split, the percentage decline may be greater than would occur in the absence

of a reverse stock split.

In any event, other factors unrelated to the number of shares of our common stock outstanding, such as negative

financial or operational results, could adversely affect the market price of our common stock and jeopardize our ability to meet or maintain

the Nasdaq’s minimum bid price requirement.

we are unable to satisfy these requirements or standards, we would not be able to meet Nasdaqs initial listing standards.

We can provide no assurance that any such action taken by us would allow our common stock to be listed, stabilize the market price

or improve the liquidity of our common stock, prevent our common stock from dropping below the minimum bid price requirement,

or prevent future non-compliance with the listing requirements.

if the reverse stock split increases the market price of our common stock and we meet Nasdaqs initial listing requirements,

there can be no assurance that we will be able to comply with Nasdaqs continued listing standards, a failure of which could

result in a de-listing of our common stock .

common stock is currently quoted on the OTCQB.

We have applied to list our common stock on Nasdaq.

There is no assurance that

our common stock will ever be listed on Nasdaq or that we will be able to comply with such applicable listing standards.

our common stock be listed on Nasdaq, in order to maintain that listing, Nasdaq requires that the trading price of a companys

listed stock on Nasdaq remain above one dollar in order for such stock to remain listed.

If a listed stock trades below one dollar

for more than 30 consecutive trading days, then it is subject to delisting from Nasdaq.

In addition, to maintain a listing on

Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director

independence and independent committee requirements, minimum stockholders equity, and certain corporate governance requirements.

If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect

on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so.

the event of a delisting, we would expect to take actions to restore our compliance with the listing requirements, but we can

provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market

price or improve the liquidity of our common stock, prevent our common stock from dropping below the minimum bid price requirement,

or prevent future non-compliance with the listing requirements.

reverse stock split may decrease the liquidity of the shares of our common stock .

liquidity of the shares of our common stock may be affected adversely by the reverse stock split given the reduced number of shares

that will be outstanding following the reverse stock split, especially if the market price of our common stock does not increase

as a result of the reverse stock split.

In addition, the reverse stock split may increase the number of shareholders who own odd

lots (less than 100 shares) of our common stock, creating the potential for such shareholders to experience an increase in the

cost of selling their shares of common stock and greater difficulty effecting such sales.

the reverse stock split, the resulting market price of our common stock may not attract new investors, including institutional

investors, and may not satisfy the investing requirements of those investors.

Consequently, the trading liquidity of our common

stock may not improve .

we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be

no assurance that the reverse stock split will result in a share price that will attract new investors, including institutional

In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements

of those investors.

As a result, the trading liquidity of our common stock may not necessarily improve.

is no assurance that once listed on Nasdaq we will not continue to experience volatility in our share price .

OTCQB, where our common stock is currently quoted, is an inter-dealer, over-the-counter market that provides significantly less

liquidity than Nasdaq.

Our common stock is thinly traded due to the limited number of shares available for trading on the OTCQB

thus causing large swings in price.

As such, investors and potential investors may find it difficult to obtain accurate stock

price quotations, and holders of our common stock may be unable to resell their securities at or near their original purchase

price or at any price.

If an active market for our common stock develops and continues, our common stock price may nevertheless

If our common stock experiences volatility as it has in the past, investors may not be able to sell their common

stock at or above their original purchase price or at any price.

Sales of substantial amounts of our common stock, or the perception

that such sales might occur, could adversely affect prevailing market prices of our common stock and our common stock price may

decline substantially in a short period of time.

As a result, our shareholders could suffer losses or be unable to liquidate their

No assurance can be given that the price of our common stock will become less volatile when listed on Nasdaq.

If an active public market for our common stock

develops, trading will be limited under the SEC’s penny stock regulations, which will adversely affect the liquidity of our common

The trading price of our common

stock is less than $5.00 per share and, as a result, our common stock is considered a “penny stock,”

and trading in our common

stock is currently subject to the requirements of Rule 15g-9 under the Exchange Act.

Under this rule, broker/dealers who recommend low-priced

securities to persons other than established customers and accredited investors must satisfy special sales practice requirements.

the broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchaser’s written

consent prior to the transaction.

trading price of our common stock is less than $5.00 per share and, as a result, our common stock is considered a penny

stock, and trading in our common stock would be subject to the requirements of Rule 15g-9 under the Exchange Act.

this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors

must satisfy special sales practice requirements.

Generally, the broker/dealer must make an individualized written suitability

determination for the purchaser and receive the purchasers written consent prior to the transaction.

regulations also require additional disclosure in connection with any trades involving a penny stock, including the

delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated

These requirements severely limit the liquidity of securities in the secondary market because few broker or dealers are

likely to undertake these compliance activities.

In addition to the applicability of the penny stock rules, other risks associated

with trading in penny stocks could also be price fluctuations and the lack of a liquid market.

An active and liquid market in

our common stock may never develop due to these factors.

exercise of our outstanding options or warrants and upon conversion of our convertible Series A Preferred Stock, we will be obligated

to issue a substantial number of additional shares of common stock which will dilute our present shareholders .

We are obligated to issue additional

shares of our common stock in connection with our outstanding options, warrants, and shares of our convertible preferred stock.

March 31, 2021, there were options, warrants, and shares of convertible preferred stock outstanding, convertible into 10,191,552 shares

of common stock, respectively.

The exercise, conversion or exchange of warrants or convertible securities, including for other securities,

will cause us to issue additional shares of our common stock and will dilute the percentage ownership of our shareholders.

we have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities

held by other shareholders not participating in such exchange.

or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline .

Sales of large blocks of our

common stock could depress the price of our common stock.

The existence of these shares and shares of common stock issuable upon conversion

of outstanding shares of convertible preferred stock, warrants and options create a circumstance commonly referred to as an “overhang”

which can act as a depressant to our common stock price.

The existence of an overhang, whether or not sales have occurred or are occurring,

also could make our ability to raise additional financing through the sale of equity or equity-linked securities more difficult in the

future at a time and price that we deem reasonable or appropriate.

If our existing shareholders and investors seek to sell a substantial

number of shares of our common stock, such selling efforts may cause significant declines in the market price of our common stock.

We do not expect to

declare any common stock cash dividends in the foreseeable future.

not anticipate declaring any cash dividends to holders of Data Storage common stock in the foreseeable future.

Consequently, common stockholders

may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains

on their investment.

Because we may issue preferred stock without

the approval of our shareholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire us and could

depress our stock price.

In general, our Board may issue,

without a vote of our shareholders, one or more additional series of preferred stock that have more than one vote per share, although

the Company’s ability to designate and issue preferred stock is currently restricted by covenants under our agreements with prior

Without these restrictions, our Board could issue preferred stock to investors who support us and our management and give effective

control of our business to our management.

Additionally, issuance of preferred stock could block an acquisition resulting in both a drop

in our stock price and a decline in interest of our common stock.

This could make it more difficult for shareholders to sell their common

This could also cause the market price of our common stock shares to drop significantly, even if our business is performing well.

of Nevada law could delay or prevent an acquisition of Data Storage, even if the acquisition would be beneficial to its stockholders

and could make it more difficult for stockholders to change Data Storages management.

Storage is subject to anti-takeover provisions under Nevada law, which could delay or prevent a change of control.

Together, these

provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment

of a premium over prevailing market prices for our securities.

These provisions include:

limitations on the ability to engage

in any combination with an interested stockholder (each, as defined in the NRS) for two years from

the date the person first becomes an interested stockholder;

being subject to Sections 78.378 to 78.3793 of the

NRS and allowing an acquiring person to obtain voting rights in control shares without shareholder

the ability of the Board to issue shares of currently undesignated and unissued preferred stock without prior stockholder

limitations on the ability of stockholders to call special meetings;

and the ability of the Board to amend its amended

Bylaws without stockholder approval.

For more information, please see the section entitled Nevada Anti-Takeover Statutes .

UNRESOLVED STAFF COMMENTS

As a smaller reporting company, we are not required to provide disclosure

pursuant to this item.

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors