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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2021-03-31 compared with 2020-04-14 · 811 added, 787 removed, 269 unchanged (86% of the section changed)

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

Interest Rate Sensitivity

Interest due on the Company’s loans is

based upon the applicable stated fixed contractual rate with the lender.

Interest earned on DSC bank accounts is linked to the

applicable base interest rate.

For the years ended December 31, 2019 and 2018, DSC had interest expense, net of interest income,

of $177,201and $98,689 respectively.

DSC believes that its results of operations are not materially affected by changes in interest

DSC’s exposure to market risk is confined

to its cash and cash equivalents, all of which have maturities of less than three months and bear and pay interest in U.S.

We do not believe interest rate changes would have a material impact on us.

DSC does not hold any derivative instruments and does not engage

in any hedging activities.

CONSOLIDATED FINANCIAL STATEMENTS

AND SUPPLEMENTARY DATA.

Index to the Consolidated Financial Statements

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

a smaller reporting company this item is not required

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

to the Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

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Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

the Board of Directors and

Stockholders of Data Storage Corporation and Subsidiary

on the Financial Statements

have audited the accompanying consolidated balance sheets of Data Storage Corporation and Subsidiary (the Company) as of December

31 2019 and 2018, and the related consolidated statements of operations, stockholders’

(deficit),and cash flows for each

of the years in the two year period ended December 31, 2019, and the related notes (collectively referred to as the consolidated

financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial

position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the

years in the two year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United

States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an

opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered

with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to

the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and

Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether

due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over

financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting,

but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Data Storage Corporation and

Opinion on the Financial Statements

We have audited the accompanying balance sheets

of Data Storage Corporation and Subsidiaries (the Company) as of December 31, 2020 and 2019, and the related statements of income, stockholders’

equity, and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements).

opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020

and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally

accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws

and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance

with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were

we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal

control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis,

evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the

accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the

financial statements.

Our audits included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that

respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as

evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Rosenberg Rich Baker Berman, P.A.

have served as the Company’s auditor since 2008.

Critical Audit Matters

The critical audit matters communicated below are

matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the

audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially

challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the

financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions

on the critical audit matters or on the accounts or disclosures to which they relate.

As described in Notes 2 and 4 to the consolidated

financial statements, the Company’s goodwill at December 31, 2020 was $3,015,700, which arose as a result of the purchase price

of business acquisitions exceeding the estimated fair value of identified tangible and intangible assets acquired.

The Company’s intangible assets at December 31, 2020, were $455,935 which principally consist of trademarks and customer relationships.

Goodwill and intangible assets are tested for impairment

· Goodwill is tested for impairment at least annually

at the reporting unit level or more frequently when events occur, or circumstances change.

The evaluation requires a comparison of the

estimated fair value of the asset to the carrying value of the asset.

The fair value is estimated based upon discounted future cash flow

If the carrying value of the asset exceeds its fair value, an impairment charge is recorded.

· Intangible assets are tested for

impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

If impairment

indicators exist, the undiscounted future cash flows associated with the expected service potential of the asset are compared to the carrying

value of the asset.

If the projection of undiscounted cash flows is less than the carrying value of a intangible asset, an

impairment charge would be recorded.

The Company utilized a valuation consultant to perform

an impairment test on both goodwill and intangible assets.

There was no impairment loss identified during 2020 as a result

The determination of the future cash flows of the goodwill and intangible assets requires management to make significant

estimates and assumptions related to forecasts of future revenues, operating margins and discount rates.

As disclosed by management, changes

in these assumptions could have a significant impact on either the future cash flows and therefore, on the amount of any impairment charge.

The determination of an impairment indicator on goodwill and intangible assets requires management judgments and involves

significant assumptions.

We identified the impairment assessment of goodwill

and intangible assets as a critical audit matter.

Auditing management’s judgments regarding the evaluation of impairment indicators,

forecasts of future revenue and operating margin, and the discount rate to be applied involve a high degree of subjectivity.

How the Critical Matter Was Addressed in the Audit

The primary audit procedures we performed to address

this critical audit matter included:

· Reviewing management’s evaluation of relevant

events and circumstances to determine whether it is more likely than not that the fair value of the Company is less than its carrying

value, and then corroborate that analysis with external information and evidence obtained in other areas of the audit.

· Utilizing a firm employed valuation specialist

with the skills and knowledge to assist in:

(i) evaluating the appropriateness of the valuation techniques used in management’s

discounted cash flow model, (ii) evaluating the significant assumptions used by management including comparing with third party market

data, (iii) performing a retrospective review of forecasts to historical operating results and evaluating whether the assumptions used

were reasonable considering current information as well as future expectations as well as using additional evidence obtained in other

areas of the audit, (iv) performing recalculations of the methods utilized by management.

· Testing completeness and accuracy of the data

used in the impairment analysis.

/s/ Rosenberg Rich Baker Berman & Company, P.A.

We have served as the Company’s auditor since

Somerset, New Jersey

March 31, 2021

STORAGE CORPORATION AND SUBSIDIARIES

BALANCE SHEETS

OF DECEMBER 31,

Current Assets:

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Line of credit

Finance leases payable

Finance leases payable related party

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Total Current Liabilities

Deferred Rental obligation

Note payable long term

Operating lease liabilities long term

Finance leases payable, long term

Finance leases payable related party, long term

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Total Liabilities

Stockholders’

Stockholders Equity:

Preferred stock, Series A par value $.001;

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Non-controlling interest in consolidated subsidiary

Total Stockholder’s Equity

Total Stockholders Equity

Total Liabilities and Stockholders Equity

The accompanying

notes are an integral part of these consolidated Financial Statements.

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

STORAGE CORPORATION AND SUBSIDIARIES

STATEMENTS OF OPERATIONS

ENDED DECEMBER 31,

Cost of sales

Selling, general and administrative

Income from Operations

(Loss) Income from Operations

Other Income (Expense)

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Interest expense

Other Income (Expense)

Gain on extinguishment of contingent liability

Total Other Income (Expense)

Income before provision for income taxes

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Non-controlling interest in consolidated subsidiary

Net Income attributable to Data Storage Corp

Net Income attributable to Data Storage Corporation

Preferred Stock Dividends

Net Income (Loss) Attributable

to Common Stockholders

Earning (Loss) per Share –

Net Income (Loss) Attributable to Common Stockholders

Earnings (Loss) per Share –

Weighted Average Number of Shares - Basic

Weighted Average Number of Shares - Diluted

The accompanying

notes are an integral part of these consolidated Financial Statements.

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

STORAGE CORPORATION AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

Twelve Months Ended December 31,

Years Ended December 31,

Cash Flows from Operating Activities:

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Stock based compensation

Gain on extinguishment of contingent liability

Changes in Assets and Liabilities:

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Prepaid expenses and other current assets

Employee loan

Right of use asset

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Repayments of capital lease obligations

Proceeds from issuance of note payable

Repayments of finance lease obligations related party

Repayments of finance lease obligations

Cash received for the exercised of options

Advance from Credit Line

Repayment of Credit Line

Net Cash Used in Financing Activities

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Assets acquired by finance lease

The accompanying

notes are an integral part of these consolidated Financial Statements.

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

STORAGE CORPORATION AND SUBSIDIARIES

STATEMENTS OF STOCKHOLDERS EQUITY

ENDED DECEMBER 31, 2018 AND 2019

Non-Controlling

Stockholders’

January 1, 2018

THE YEAR ENDED DECEMBER 31, 2020 AND 2019

Preferred Stock

Stockholders

Balance, January 1, 2019

$ (15,735,624 )

Adj Adoption of ASC606

December 31, 2018

Stock Options Issued as Compensation

Common Stock Issued as Compensation

Stock Options Exercise

Preferred Stock

Balance, December 31, 2019

(15,790,076 )

Options Issued as Compensation

Stock Issued as Compensation

Stock Options Issued as Compensation

Stock Options Exercise

December 31, 2019

Preferred Stock

Balance, December 31, 2020

(15,734,737 )

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YEARS ENDED DECEMBER 31, 2020 AND 2019

Note 1 - Basis of Presentation, Organization and Other Matters

Data Storage Corporation

("DSC"

or the "Company") provides subscription based, long term agreements for disaster recovery solutions,

Infrastructure as a Service (IaaS) and VoIP type solutions.

Headquartered in Melville,

NY, with additional offices in Warwick, RI, DSC offers solutions and services to businesses within the healthcare, banking and

finance, distribution services, manufacturing, construction, education, and government industries.

DSC derives its revenues

from subscription services and solutions, managed services, software and maintenance, equipment and onboarding provisioning.

maintains infrastructure and storage equipment in several technical centers in New York, New Jersey, Massachusetts and North Carolina.

1 - Basis of Presentation, Organization and Other Matters

Storage Corporation (DSC or the Company) provides subscription based, long term agreements for disaster

recovery solutions, Infrastructure as a Service (IaaS) and VoIP type solutions.

Headquartered

in Melville, NY, with additional offices in Warwick, RI, DSC offers solutions and services to businesses within the

healthcare, banking and finance, distribution services, manufacturing, construction, education, and government industries.

DSC derives its revenues from subscription services and solutions, managed services, software and maintenance, equipment and

onboarding provisioning.

DSC maintains infrastructure and storage equipment in several technical centers in New York, New

Jersey, Massachusetts, North Carolina and Texas.

Concern Analysis

Under ASU 2014-15 Presentation

of Financial Statements-Going Concern (Subtopic 205-40) (“ASC 205-40”), the Company has the responsibility to evaluate

whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become

due within one year after the date that the financial statements are issued.

As required by ASC 205-40, this evaluation shall initially

not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial

statements are issued.

Management has assessed the Company’s ability to continue as a going concern in accordance with the

requirement of ASC 205-40.

As reflected in the consolidated

financial statements, the Company had a net income (loss) available to shareholders of $(54,452) and $146,781 for the years ended

December 31, 2019 and 2018, respectively.

As of December 31, 2019, DSC had cash of $326,561 and a working capital deficiency of

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

During the year ended

December 31, 2019, the Company generated cash from operations of $799,666 with continued revenue growth of subscription solutions

as well as improved gross profit margins.

Further, the company has no capital expenditure commitments and the company’s offices

have been consolidated and fully staffed and with sufficient room for growth.

If necessary, management

also determined that it is probable that related party sources of debt financing and capitalized leases can be renegotiated based

on management’s history of being able to raise and refinance debt through related parties.

As a result of the current

favorable trends of improving cash flow, the Company concluded that the initial conditions which raised substantial doubt regarding

the ability to continue as a going concern has been mitigated.

Note 2 - Summary of Significant

Accounting Policies

ASU 2014-15 Presentation of Financial Statements-Going Concern (Subtopic 205-40) (ASC 205-40), the Company has the

responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial

obligations as they become due within one year after the date that the financial statements are issued.

As required by ASC 205-40,

this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully

implemented as of the date the financial statements are issued.

Management has assessed the Companys ability to continue

as a going concern in accordance with the requirement of ASC 205-40.

reflected in the consolidated financial statements, the Company had a net income (loss) available to common stockholders 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.

As a result, these conditions

raised substantial doubt regarding our ability to continue as a going concern, which as described below we have concluded has been alleviated.

the year ended December 31, 2020, the Company generated cash from operations of $1,110,679 with continued revenue growth.

the Company has no capital expenditure commitments and the Companys offices have been consolidated and fully staffed and

with sufficient room for growth.

necessary, management also determined that it is probable that related party sources of debt financing and capitalized leases

can be renegotiated based on managements history of being able to raise and refinance debt through related parties.

a result of the current favorable trends of improving cash flow, the Company concluded that the initial conditions which raised

substantial doubt regarding the ability to continue as a going concern has been alleviated.

2 - Summary of Significant Accounting Policies

of Consolidation

The consolidated financial statements include

the accounts of (i) the Company, (ii) its wholly-owned subsidiary, Data Storage Corporation, a Delaware corporation, and (iii)

its majority-owned subsidiary, Nexxis Inc, a Nevada corpoartion.

All significant inter-company transactions and balances have been

eliminated in consolidation.

consolidated financial statements include the accounts of (i) the Company, (ii) its wholly-owned subsidiary, Data Storage Corporation,

a Delaware corporation, and (iii) its majority-owned subsidiary, Nexxis Inc, a Nevada corporation.

All significant inter-company

transactions and balances have been eliminated in consolidation.

combinations.

We account for

business combinations under the acquisition method of accounting, which requires us to recognize separately from goodwill, the

assets acquired, and the liabilities assumed at their acquisition date fair values.

account for business combinations under the acquisition method of accounting, which requires us to recognize separately from goodwill,

the assets acquired, and the liabilities assumed at their acquisition date fair values.

While we use our best estimates and assumptions

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of operations.

Accounting for

business combinations requires our management to make significant estimates and assumptions, especially at the acquisition date

including our estimates for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition contingencies,

and contingent consideration, where applicable.

Although we believe the assumptions and estimates we have made in the past have

been reasonable and appropriate, they are based in part on historical experience and information obtained from the management

of the acquired companies and are inherently uncertain.

Critical estimates in valuing certain of the intangible assets we have

acquired include future expected cash flows from product sales, customer contracts and acquired technologies, and estimated cash

flows from the projects when completed and discount rates.

Unanticipated events and circumstances may occur that may affect the

accuracy or validity of such assumptions, estimates or actual results.

for business combinations requires our management to make significant estimates and assumptions, especially at the acquisition

date including our estimates for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition

contingencies, and contingent consideration, where applicable.

Although we believe the assumptions and estimates we have made

in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from

the management of the acquired companies and are inherently uncertain.

Critical estimates in valuing certain of the intangible

assets we have acquired include future expected cash flows from product sales, customer contracts and acquired technologies, and

estimated cash flows from the projects when completed and discount rates.

Unanticipated events and circumstances may occur that

may affect the accuracy or validity of such assumptions, estimates or actual results.

Issued and Newly Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with

Customers”

(“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S.

The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in

an amount that reflects the consideration to which an entity expects to be entitled for those goods or services.

ASU 2014-09 defines

a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue

recognition process than are required under existing U.S.

In addition, this guidance requires new or expanded disclosures

related to the judgments made by companies when following this framework and additional quantitative disclosures regarding contract

balances and remaining performance obligations.

ASU 2014-09 may be applied using either a full retrospective approach, under which

all years included in the financial statements will be presented under the revised guidance, or a modified retrospective approach,

under which financial statements will be prepared under the revised guidance for the year of adoption, but not for prior years.

Under the latter method, entities will recognize a cumulative catch-up adjustment to the opening balance of retained earnings at

the effective date for contracts that still require performance by the entity.

ASU 2014-09 is effective for annual reporting

periods beginning after December 15, 2017, including interim periods within those annual reporting periods.

The Company developed

an implementation plan to adopt this new guidance, which included an assessment of the impact of the new guidance on our financial

position and results of operations.

On January 1, 2018, the Company adopted the new accounting standard ASC 606, Revenue from

Contracts with Customers and for all open contracts and related amendments as of January 1, 2018 using the modified retrospective

In February 2016, the FASB issued ASU 2016-02,

Leases, (“ASC 842”), which supersedes FASB ASC 840, Leases and provides principles for the recognition,

measurement, presentation and disclosure of leases for both lessees and lessors.

The new standard requires lessees to apply a dual

approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively

a financed purchase by the lessee.

This classification will determine whether lease expense is recognized based on an effective

interest method or on a straight-line basis over the term of the lease.

A lessee is also required to record a right-of-use (“ROU”)

asset and a lease liability for all leases with a term of greater than twelve months regardless of classification.

a term of twelve months or less will be accounted for similar to existing guidance for operating leases.

The standard is effective

for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance.

The Company adopted

the standard effective January 1, 2019 and recognized operating lease liabilities of $319,236 with corresponding ROU assets of

the same amount based on the present value of the remaining rental payments of our office locations.

In October 2016, the FASB issued ASU 2016-16,

“Income Taxes (Topic 740):

Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that

prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory

until the asset has been sold to an outside party.

The updated guidance is effective for annual periods beginning after December

15, 2019, including interim periods within those fiscal years.

Early adoption of the update is permitted.

The Company is currently

evaluating the impact of the new standard.

In January 2017, the FASB issued ASU 2017-04

Intangibles-Goodwill and Other (“ASC 350”):

Simplifying the Accounting for Goodwill Impairment (“ASU 2017-04”).

ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test.

the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment

testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be

required in determining the fair value of assets acquired and liabilities assumed in a business combination.

Instead, under ASU

2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit

with its carrying amount.

An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the

reporting unit’s fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to that

reporting unit.

Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount

of the reporting unit when measuring the goodwill impairment loss, if applicable.

ASU 2017-04 is effective for annual or any interim

goodwill impairment tests for fiscal years beginning after December 15, 2019 and an entity should apply the amendments of ASU 2017-04

on a prospective basis.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates

after January 1, 2017.

The Company does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial

In July 2017, the FASB issued ASU 2017-11,

Earnings Per Share (“ASC 260”) , Distinguishing Liabilities from Equity (“ASC 480”) , and

Derivatives and Hedging (“ASC 815”).

ASU 2017-11 is intended to simplify the accounting for financial instruments

with characteristics of liabilities and equity.

Among the issues addressed are:

(i) determining whether an instrument (or embedded

feature) is indexed to an entity’s own stock;

(ii) distinguishing liabilities from equity for mandatorily redeemable financial

instruments of certain nonpublic entities;

and (iii) identifying mandatorily redeemable non-controlling interests.

is effective for the Company on January 1, 2019.

The adoption of ASU 2011-11 did not have a material impact on its consolidated

financial statements.

In August 2018, the FASB

issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820).

The updated guidance improves the disclosure requirements

for fair value measurements.

We do not believe the updated guidance, which is effective for fiscal years and interim periods within

those fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15,

Intangibles-Goodwill and Other - Internal Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs

Incurred in a Cloud Computing Arrangement That is a Service Contract.

This guidance requires companies to apply the internal-use

software guidance in Accounting Standards Codification (“ASC”) 350-40 to implementation costs incurred in a hosting

arrangement that is a service contract to determine whether to capitalize certain implementation costs or expense them as incurred.

We do not believe the new guidance, which is effective for fiscal years beginning after December 15, 2019, will have a material

impact on our consolidated financial statements.

On January 1, 2019, the Company adopted the

requirements of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842).

The objective of this ASU, along with

several related ASUs issued subsequently, is to increase transparency and comparability between organizations that enter into lease

For lessees, the key difference of the new standard from the previous guidance (Topic 840) is the recognition of a

right-of-use (ROU) asset and lease liability on the balance sheet.

The most significant change is the requirement to recognize

ROU assets and lease liabilities for leases classified as operating leases.

The standard requires disclosures to meet the objective

of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

of the transition to the new standard, the Company was required to measure and recognize leases that existed at January 1, 2019

using a modified retrospective approach for leases existing at the effective date.

The Company has elected not to recognize a ROU

asset and obligation for leases with an initial term of twelve months or less.

The adoption of Topic 842 resulted in the recognition

of an operating ROU asset and operating lease liability of $351,699 and $356,689, respectively as of January 1, 2019.

Use of Estimates

The preparation

of financial statements in conformity with U.S.

generally accepted accounting principles requires management to make estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities

at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Actual results

could differ from these estimates.

June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on

Financial Instruments (ASU-2016-13).

ASU 2016-13 affects loans, debt securities, trade receivables, and any other

financial assets that have the contractual right to receive cash.

The ASU requires an entity to recognize expected credit losses

rather than incurred losses for financial assets.

ASU 2016-13 is effective for the fiscal year beginning after December 15, 2022,

including interim periods within that fiscal year.

The Company expects that there would be no material impact on the Companys

consolidated financial statements upon the adoption of this ASU.

October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740):

Intra-Entity Transfers of Assets Other than Inventory,

which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers

of assets other than inventory until the asset has been sold to an outside party.

The updated guidance is effective for annual

periods beginning after December 15, 2019, including interim periods within those fiscal years.

Early adoption of the update is

The adoption of ASU 2016-16 did not have a material impact on the consolidated financial statements.

January 2017, the FASB issued ASU 2017-04 Intangibles-Goodwill and Other (ASC 350):

Simplifying the Accounting for

Goodwill Impairment (ASU 2017-04).

ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating

Step 2 from the goodwill impairment test.

In computing the implied fair value of goodwill under Step 2, an entity had to perform

procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets

and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities

assumed in a business combination.

Instead, under ASU 2017-04, an entity should perform its annual or interim goodwill impairment

test by comparing the fair value of a reporting unit with its carrying amount.

An entity should recognize an impairment charge

for the amount by which the carrying amount exceeds the reporting units fair value;

however, the loss recognized should

not exceed the total amount of goodwill allocated to that reporting unit.

Additionally, an entity should consider income tax effects

from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if

ASU 2017-04 is effective for annual or any interim goodwill impairment tests for fiscal years beginning after December

15, 2019 and an entity should apply the amendments of ASU 2017-04 on a prospective basis.

Early adoption is permitted for interim

or annual goodwill impairment tests performed on testing dates after January 1, 2017.

The adoption of ASU 2017-04 did not have

a material impact on the consolidated financial statements.

August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820).

The updated guidance improves

the disclosure requirements for fair value measurements.

The updated guidance was adopted on January 1, 2020 and did not have

a material impact on the consolidated financial statements.

August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other - Internal Use Software (Subtopic 350-40):

Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.

This guidance requires

companies to apply the internal-use software guidance in Accounting Standards Codification (ASC) 350-40 to implementation

costs incurred in a hosting arrangement that is a service contract to determine whether to capitalize certain implementation costs

or expense them as incurred.

The new guidance, is effective for fiscal years beginning after December 15, 2019.

The adoption of

ASU 2018-15 did not have a material impact on the consolidated financial statements.

preparation of financial statements in conformity with generally accepted accounting principles in the United States of America

(GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities

and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue

and expenses during the reporting period.

Actual results could differ from these estimates.

Reclassifications

Certain prior

year amounts in the consolidated financial statements and the notes thereto have been reclassified where necessary to conform

prior year amounts in the consolidated financial statements and the notes thereto have been reclassified where necessary to conform

to the current year presentation.

These reclassifications did not affect the prior period total assets, total liabilities, stockholders’

These reclassifications did not affect the prior period total assets, total liabilities, stockholders

deficit, net loss or net cash used in operating activities.

Fair Value of Financial Instruments

The Company’s

financial instruments include cash, accounts receivable, accounts payable, line of credit and due to related parties.

believes the estimated fair value of these accounts at December 31, 2019 approximate their carrying value as reflected in the

balance sheets due to the short-term nature of these instruments or the use of market interest rates for debt instruments.

carrying values of certain of the Company’s notes payable and capital lease obligations approximate their fair values based

upon a comparison of the interest rate and terms of such debt given the level of risk to the rates and terms of similar debt currently

available to the Company in the marketplace.

Cash, Cash Equivalents and Short-Term

considers all highly liquid investments with an original maturity or remaining maturity at the time of purchase, of three months

or less to be cash equivalents.

Concentration of Credit Risk and

Other Risks and Uncertainties

Financial instruments

and assets subjecting the Company to concentration of credit risk consist primarily of cash and cash equivalents, short-term investments

and trade accounts receivable.

Value Measurements

fair value measurement disclosures are grouped into three levels based on valuation factors:

quoted prices in active markets for identical investments

other significant observable inputs (including quoted prices for similar investments and market corroborated inputs)

significant unobservable inputs (including our own assumptions in determining the fair value of investments)

Companys Level 1 assets/liabilities include cash, accounts receivable, accounts payable, prepaid and other current assets,

line of credit and due to related parties.

Management believes the estimated fair value of these accounts at December 31, 2020

approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments or the use

of market interest rates for debt instruments.

Companys Level 2 assets/liabilities include the Companys notes payable and capital lease obligations.

Their carrying

value approximates their fair values based upon a comparison of the interest rate and terms of such debt given the level of risk

to the rates and terms of similar debt currently available to the Company in the marketplace.

The Company’s Level 3 assets/liabilities

include goodwill and intangible assets, when they are recorded at fair value due to an impairment charge.

As such, the Company measures

goodwill and intangible assets on a non-recurring basis.

Inputs to determine fair value are generally unobservable and typically reflect

management’s estimates of assumptions that market participants would use in pricing the asset or liability.

The fair values are

therefore determined using model-based techniques, including option pricing models and discounted cash flow models.

Unobservable inputs

used in the models are significant to the fair values of the assets and liabilities.

Cash Equivalents and Short-Term Investments

Company considers all highly liquid investments with an original maturity or remaining maturity at the time of purchase, of three

months or less to be cash equivalents.

Concentration

of Credit Risk and Other Risks and Uncertainties

instruments and assets subjecting the Company to concentration of credit risk consist primarily of cash and cash equivalents,

short-term investments and trade accounts receivable.

The Companys cash and cash equivalents are maintained at major U.S.

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Deposits in these institutions may exceed the amount of insurance provided on such deposits.

The Company’s customers are

primarily concentrated in the United States.

provides credit in the normal course of business.

The Company performs ongoing credit evaluations of its customers and maintains

allowances for doubtful accounts on factors surrounding the credit risk of specific customers, historical trends, and other information.

ended December 31, 2019, DSC had three customers with an accounts receivable balance representing 38% of total accounts receivable.

For the year ended December 31, 2018, DSC had one customer with an accounts receivable balance representing 11% of total accounts

Accounts Receivable/Allowance

for Doubtful Accounts

sells its services to customers on an open credit basis.

Accounts receivable are uncollateralized, non-interest-bearing customer

Companys customers are primarily concentrated in the United States.

Company provides credit in the normal course of business.

The Company performs ongoing credit evaluations of its customers and

maintains allowances for doubtful accounts on factors surrounding the credit risk of specific customers, historical trends, and

other information.

the year ended December 31, 2020, DSC had three customers with an accounts receivable balance representing 45% of total accounts

For the year ended December 31, 2019, DSC had three customers with an accounts receivable balance representing 38%

of total accounts receivable.

Receivable/Allowance for Doubtful Accounts

Company sells its services to customers on an open credit basis.

Accounts receivable are uncollateralized, non-interest-bearing

customer obligations.

Accounts receivables are typically due within 30 days.

The allowance for doubtful accounts reflects the estimated

accounts receivable that will not be collected due to credit losses and allowances.

Provisions for estimated uncollectible accounts

receivable are made for individual accounts based upon specific facts and circumstances including criteria such as their age,

amount, and customer standing.

Provisions are also made for other accounts receivable not specifically reviewed based upon historical

Clients are invoiced in advance for services as reflected in deferred revenue on the Company’s balance sheet.

The allowance for doubtful accounts reflects the

estimated accounts receivable that will not be collected due to credit losses and allowances.

Provisions for estimated uncollectible

accounts receivable are made for individual accounts based upon specific facts and circumstances including criteria such as their

age, amount, and customer standing.

Provisions are also made for other accounts receivable not specifically reviewed based upon

historical experience.

Clients are invoiced in advance for services as reflected in deferred revenue on the Companys balance

and Equipment

equipment is recorded at cost and depreciated over their estimated useful lives or the term of the lease using the straight-line

method for financial statement purposes.

Estimated useful lives in years for depreciation are 5 to 7 years for property and equipment.

Additions, betterments and replacements are capitalized, while expenditures for repairs and maintenance are charged to operations

when incurred.

As units of property are sold or retired, the related cost and accumulated depreciation are removed from the accounts,

and any resulting gain or loss is recognized in income.

assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement

and equipment is recorded at cost and depreciated over their estimated useful lives or the remaining term of the lease using the

straight-line method for financial statement purposes.

Estimated useful lives in years for depreciation are 5 to 7 years for property

and equipment.

Additions, betterments and replacements are capitalized, while expenditures for repairs and maintenance are charged

to operations when incurred.

As units of property are sold or retired, the related cost and accumulated depreciation are removed

from the accounts, and any resulting gain or loss is recognized in income.

tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement

carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards.

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had a full valuation allowance against its deferred tax assets.

2017, the 2017 Tax Cuts and Jobs Act (Tax Act) was enacted into law and the new legislation contains several key tax provisions

that affected us, including a reduction of the corporate income tax rate to 21% effective January 1, 2018, among others.

required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, re-measuring

deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets and liabilities.

Per FASB ASC 740-10, disclosure is not required

of an uncertain tax position unless it is considered probable that a claim will be asserted and there is a more-likely-than-not

possibility that the outcome will be unfavorable.

Using this guidance, as of December 31, 2019 and 2018, the Company has no uncertain

tax positions that qualify for either recognition or disclosure in the financial statements.

The Company’s 2018, 2017 and

2016 Federal and State tax returns remain subject to examination by their respective taxing authorities.

Neither of the Company’s

Federal or State tax returns are currently under examination.

FASB ASC 740-10, disclosure is not required of an uncertain tax position unless it is considered probable that a claim will be

asserted and there is a more-likely-than-not possibility that the outcome will be unfavorable.

Using this guidance, as of December

31, 2020 and 2019, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial

The Companys 2019, 2018, 2017 and 2016 Federal and State tax returns remain subject to examination by their

respective taxing authorities.

Neither of the Companys Federal or State tax returns are currently under examination.

and Other Intangibles

In accordance

with GAAP, the Company tests goodwill and other intangible assets for impairment on at least an annual basis.

Goodwill impairment

exists if the net book value of a reporting unit exceeds its estimated fair value.

The impairment testing is performed in two

(i) the Company determines impairment by comparing the fair value of a reporting unit with its carrying value, and (ii)

if there is impairment, the Company measures the amount of impairment loss by comparing the implied fair value of goodwill with

the carrying amount of that goodwill.

accordance with GAAP, the Company tests goodwill and other intangible assets for impairment on at least an annual basis.

impairment exists if the net book value of a reporting unit exceeds its estimated fair value.

The impairment testing is performed

in two steps:

(i) the Company determines impairment by comparing the fair value of a reporting unit with its carrying value, and

(ii) if there is impairment, the Company measures the amount of impairment loss by comparing the implied fair value of goodwill

with the carrying amount of that goodwill.

To determine the fair value of these intangible assets, the Company uses many assumptions

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levels of management.

Revenue Recognition

goods and services

The following

is a description of the products and services from which the Company generates revenue, as well as the nature, timing of satisfaction

of performance obligations, and significant payment terms for each:

Infrastructure as a Service (IaaS) and Disaster Recovery

of goods and services

following is a description of the products and services from which the Company generates revenue, as well as the nature, timing

of satisfaction of performance obligations, and significant payment terms for each:

Infrastructure

as a Service (IaaS) and Disaster Recovery Revenue

services such as Infrastructure as a Service, Platform as a Service and Disaster Recovery, High Availability, Data Vault Services

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high availability solutions while eliminating or supplementing Capex.

Managed Services

These services

are performed at the inception of a contract.

services are performed at the inception of a contract.

The Company offers professional assistance to its clients during the installation

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offer time and material billing.

also derives revenues in the area from providing support and management of its software to clients.

The managed services include

help desk, remote access, annual recovery tests and manufacturer support for equipment and on-gong monitoring of client system

Equipment and Software Revenue

provides equipment and software and actively participate in collaboration with IBM to provide innovative business solutions to

Company also derives revenues in the area from providing support and management of its software to clients.

The managed services

include help desk, remote access, annual recovery tests and manufacturer support for equipment and on-gong monitoring of client

system performance.

and Software Revenue

Company provides equipment and software and actively participate in collaboration with IBM to provide innovative business solutions

The Company is a partner of IBM and the various software solutions provided to clients.

Disaggregation

In the following

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

December 31, 2019

the following table, revenue is disaggregated by major product line, geography, and timing of revenue recognition.

Ended December 31, 2020

United States

International

Infrastructure

& Disaster Recovery/Cloud Service

Infrastructure & Disaster Recovery/Cloud Service

Equipment and Software

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Professional Fees

VoIP Services

December 31, 2018

Nexxis VoIP Services

Total Revenue

Ended December 31, 2019

United States

International

Infrastructure

& Disaster Recovery/Cloud Service

Infrastructure & Disaster Recovery/Cloud Service

Equipment and Software

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Professional Fees

VoIP Services

Nexxis VoIP Services

Total Revenue

Ended December 31,

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Total Revenue

Contract receivables

are recorded at the invoiced amount and are uncollateralized, non-interest-bearing client obligations.

Provisions for estimated

uncollectible accounts receivable are made for individual accounts based upon specific facts and circumstances including criteria

such as their age, amount, and client standing.

Sales are generally

recorded in the month the service is provided.

For clients who are billed on an annual basis, deferred revenue is recorded and

amortized over the life of the contract.

Transaction price allocated to the remaining

performance obligations

The Company has the following performance obligations:

Disaster Recovery (“DR”) :

subscription-based service that instantly encrypted and transfers data to secure location further replicates the data to a second DSC data center where it remains encrypted.

Provides 10 hour or less recovery time

Data Vaulting :

receivables are recorded at the invoiced amount and are uncollateralized, non-interest-bearing client obligations.

for estimated uncollectible accounts receivable are made for individual accounts based upon specific facts and circumstances including

criteria such as their age, amount, and client standing.

are generally recorded in the month the service is provided.

For clients who are billed on a quarterly or annual basis, deferred

revenue is recorded and amortized over the life of the contract.

price allocated to the remaining performance obligations

Company has the following performance obligations:

Recovery as a Service (DRaaS) :

subscription-based service that instantly encrypts and transfers data to secure

location further replicates the data to a second DSC data center where it remains encrypted.

Provides 10 hour or less recovery

subscription-based cloud backup solution that uses advanced data reduction technology to shorten restore time

High Availability (“HA”) :

subscription-based service which offers cost-effective mirroring replication technology and provides one (1) hour or less recovery time

Infrastructure as a Service (“IaaS”) :

subscription-based service offers “capacity on-demand”

for IBM Power and Intel server systems

Message Logic :

subscription-based service offers cost effective email archiving, data analytics, compliance monitoring and retrieval of email messages which cannot be deleted

Availability (HA) :

subscription-based service which offers cost-effective mirroring replication technology and

provides one (1) hour or less recovery time

4) Infrastructure

as a Service (IaaS) :

subscription-based service offers capacity on-demand for IBM Power and Intel

server systems

subscription-based service offers cost effective email archiving, data analytics, compliance monitoring and retrieval

of email messages which cannot be deleted

6) Internet :

subscription-based service offers continuous internet connection in the event of outages

Support and Maintenance :

subscription-based service offers support for servers, firewalls, desktops or software and ad hoc support and help desk

Initial Set-Up Fees :

and Maintenance :

subscription-based service offers support for servers, firewalls, desktops or software and ad hoc support

and help desk

Set-Up Fees :

on boarding and set-up services

Equipment sales :

sale of servers to the end user

10) License :

granting SSL certificates and other licenses

Disaster Recovery with Stand-By Servers,

High Availability, Data Vaulting, IaaS, Message Logic, Support and Maintenance, and Internet

Recovery with Stand-By Servers, High Availability, Data Vaulting, IaaS, Message Logic, Support and Maintenance, and Internet

services such as the above allows clients to access a set of data or receive services for a predetermined period of time.

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contract term.

accounts for set-up fees as separate performance obligation.

Set-up services are performed one time and accordingly the revenue

should be recognized at the point in time that the service is performed, and the Company is entitled to the payment.

For the Equipment

sales performance obligation, the control of the product transfers at a point in time (i.e., when the goods have been shipped

or delivered to the client’s location, depending on shipping terms).

Noting that the satisfaction of the performance obligation,

in this sense, does not occur over time as defined within ASC 606-10-25-27 through 29, the performance obligation is considered

to be satisfied at a point in time (ASC 606-10-25-30) when the obligation to the client has been fulfilled (i.e., when the goods

have left the shipping facility or delivered to the client, depending on shipping terms).

Company accounts for set-up fees as separate performance obligation.

Set-up services are performed one time and accordingly the

revenue should be recognized at the point in time that the service is performed, and the Company is entitled to the payment.

the Equipment sales performance obligation, the control of the product transfers at a point in time (i.e., when the goods have

been shipped or delivered to the clients location, depending on shipping terms).

Noting that the satisfaction of the performance

obligation, in this sense, does not occur over time as defined within ASC 606-10-25-27 through 29, the performance obligation

is considered to be satisfied at a point in time (ASC 606-10-25-30) when the obligation to the client has been fulfilled (i.e.,

when the goods have left the shipping facility or delivered to the client, depending on shipping terms).

License –

granting SSL certificates

and other licenses

of Licensing performance obligation, the control of the product transfers either at point in time or over time depending on the

nature of the license.

granting SSL certificates and other licenses

the case of Licensing performance obligation, the control of the product transfers either at point in time or over time depending

on the nature of the license.

The revenue standard identifies two types of licenses of IP:

a right to access IP and a right to use IP.

To assist in determining whether a license provides a right to use or a right to access IP, ASC 606 defines two categories of

a right to access IP and a right to

To assist in determining whether a license provides a right to use or a right to access IP, ASC 606 defines two categories

Functional and Symbolic.

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renewed for a new period.

Payment terms

The terms of the contracts typical range from

12 to 36 months with auto-renew options.

The Company invoices clients one month in advance for its services plus any overages or

additional services provided.

offers guaranteed service levels and performance and service guarantees on some of its contracts.

These warrantees are not sold

separately and according to ASC 606-10-50-12(a) are accounted as “assurance warranties”.

In the instances that contract have multiple

performance obligation, the Company uses judgment to establish stand-alone price for each performance obligation separately.

price for each performance obligation is determined by reviewing market data for similar services as well as the Company’s

historical pricing of each individual service.

The sum of each performance obligation was calculated to determine the aggregate

price for the individual services.

Next the proportion of each individual service to the aggregate price was determined.

was applied to the total contract price in order to allocate the transaction price to each performance obligation.

Impairment of Long-Lived Assets

In accordance

with FASB ASC 360-10-35, we review our long-lived assets for impairment whenever events and circumstances indicate that the carrying

value of an asset might not be recoverable.

An impairment loss, measured as the amount by which the carrying value exceeds the

fair value, is recognized if the carrying amount exceeds estimated undiscounted future cash flows.

Advertising Costs

The Company expenses the costs associated with

advertising as they are incurred.

The Company incurred a net impact of $259,920 and $216,784 for advertising costs for the years

ended December 31, 2019 and 2018, respectively.

Stock Based Compensation

DSC follows the requirements of FASB ASC 718-10-10,

Share Based Payments with regards to stock-based compensation issued to employees.

DSC has agreements and arrangements that

call for stock to be awarded to the employees and consultants at various times as compensation and periodic bonuses.

for this stock-based compensation is equal to the fair value of the stock price on the day the stock was awarded multiplied by

the number of shares awarded.

The valuation methodology used to determine

the fair value of the options issued during the year was the Black-Scholes option-pricing model.

The Black-Scholes model requires

the use of a number of assumptions including volatility of the stock price, the average risk- free interest rate, and the weighted

average expected life of the options.

Risk–free interest rates are calculated based on continuously compounded risk–free

rates for the appropriate term.

The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends

on its Common stock and does not intend to pay dividends on its Common stock in the foreseeable future.

The expected forfeiture

rate is estimated based on management’s best estimate.

Estimated volatility is a measure of the amount

by which DSC’s stock price is expected to fluctuate each year during the expected life of the award.

DSC’s calculation

of estimated volatility is based on historical stock prices of these entities over a period equal to the expected life of the awards.

DSC uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.

Net Income (Loss) Per Common Share

In accordance

with FASB ASC 260-10-5 Earnings Per Share, basic income (loss) per share is computed by dividing net income (loss) by the weighted

average number of shares of common stock outstanding during the period.

Diluted earnings per share is computed by dividing net

income (loss) adjusted for income or loss that would result from the assumed conversion of potential common shares from contracts

that may be settled in stock or cash by the weighted average number of shares of common stock, common stock equivalents and potentially

dilutive securities outstanding during each period.

The following

table sets forth the information needed to compute basic and diluted earnings per share for the years ended December 31, 2019

(Loss) Available to Common Shareholders

terms of the contracts typical range from 12 to 36 months with auto-renew options.

The Company invoices clients one month in advance

for its services plus any overages or additional services provided.

Company offers guaranteed service levels and performance and service guarantees on some of its contracts.

These warrantees are

not sold separately and according to ASC 606-10-50-12(a) are accounted as assurance warranties.

the instances that contract have multiple performance obligation, the Company uses judgment to establish stand-alone price for

each performance obligation separately.

The price for each performance obligation is determined by reviewing market data for similar

services as well as the Companys historical pricing of each individual service.

The sum of each performance obligation

was calculated to determine the aggregate price for the individual services.

Next the proportion of each individual service to

the aggregate price was determined.

That ratio was applied to the total contract price in order to allocate the transaction price

to each performance obligation.

of Long-Lived Assets

accordance with FASB ASC 360-10-35, we review our long-lived assets for impairment whenever events and circumstances indicate

that the carrying value of an asset might not be recoverable.

An impairment loss, measured as the amount by which the carrying

value exceeds the fair value, is recognized if the carrying amount exceeds estimated undiscounted future cash flows.

The Company expenses the costs

associated with advertising as they are incurred.

The Company incurred a net impact of $309,003 and $259,920 for advertising costs for

the years ended December 31, 2020 and 2019, respectively.

Based Compensation

follows the requirements of FASB ASC 718-10-10, Share Based Payments with regards to stock-based compensation issued to

DSC has agreements and arrangements that call for stock to be awarded to the employees and consultants at various times

as compensation and periodic bonuses.

The expense for this stock-based compensation is equal to the fair value of the stock price

on the day the stock was awarded multiplied by the number of shares awarded.

valuation methodology used to determine the fair value of the options issued during the year was the Black-Scholes option-pricing

The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average

risk- free interest rate, and the weighted average expected life of the options.

Risk–free interest rates are calculated

based on continuously compounded risk–free rates for the appropriate term.

The dividend yield is assumed to be zero as the

Company has never paid or declared any cash dividends on its Common stock and does not intend to pay dividends on its Common stock

in the foreseeable future.

The expected forfeiture rate is estimated based on managements best estimate.

volatility is a measure of the amount by which DSCs stock price is expected to fluctuate each year during the expected

life of the award.

DSCs calculation of estimated volatility is based on historical stock prices of these entities over

a period equal to the expected life of the awards.

DSC uses the historical volatility of peer entities due to the lack of sufficient

historical data of its stock price.

Income (Loss) Per Common Share

accordance with FASB ASC 260-10-5 Earnings Per Share, basic income (loss) per share is computed by dividing net income (loss)

by the weighted average number of shares of common stock outstanding during the period.

Diluted earnings per share is computed

by dividing net income (loss) adjusted for income or loss that would result from the assumed conversion of potential common shares

from contracts that may be settled in stock or cash by the weighted average number of shares of common stock, common stock equivalents

and potentially dilutive securities outstanding during each period.

following table sets forth the information needed to compute basic and diluted earnings per share for the years ended December

31, 2020 and 2019:

Net Income (Loss) Available to Common Shareholders

Weighted average number of common shares - basic

Dilutive securities

Weighted average number of common shares

Weighted average number of common shares - diluted

Earnings (Loss) per share, basic

Earnings (Loss) per share, diluted

The following

table sets forth the number of potential shares of common stock that have been excluded from diluted net income (loss) per share

net income (loss) per share because their effect was anti-dilutive:

Note 3 - Property and Equipment

Property and equipment, at cost,

consist of the following:

following table sets forth the number of potential shares of common stock that have been excluded from diluted net income (loss)

per share net income (loss) per share because their effect was anti-dilutive:

3 - Property and Equipment

and equipment, at cost, consist of the following:

Storage equipment

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Computer hardware and software

center equipment

Data center equipment

Accumulated depreciation

property and equipment

Depreciation expense for the years

ended December 31, 2019 and 2018 was $699,918 and $405,199, respectively.

Note 4 - Goodwill and Intangible

Goodwill and intangible assets consisted

of the following:

Net property and equipment

expense for the years ended December 31, 2020 and 2019 was $838,566 and $699,918, respectively.

4 - Goodwill and Intangible Assets

and intangible assets consisted of the following:

December 31, 2020

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Intangible assets not subject to amortization

Total intangible

assets not subject to amortization

Total intangible assets not subject to amortization

Intangible assets subject to amortization

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Total Goodwill and Intangible Assets

Scheduled amortization over the next

two years as follows:

scheduled remaining amortization is as follows:

Years ending December 31,

Amortization expense for the years

ended December 31, 2019 and 2018 were $196,779 and $197,333 respectively.

Note 5 –Leases

Operating Leases

The Company currently has three leases for

office space, with two offices located in Melville, NY, and one office in Warwick, RI.

The first lease for office space in Melville,

NY, was assumed as part of the Company’s acquisition of ABC in 2016, and called for monthly payments of $8,382 and expiring

August 31, 2019.

Upon termination of the lease in August 2019, the Company entered into a new lease for a technology lab in a smaller

space commencing on September 1, 2019.

The term of this lease is for three years and 11 months and runs co-terminus with our existing

lease in the same building.

The base annual rent is $10,764 payable in equal monthly installments of $897.

A second lease for office space in Melville,

NY, was entered into on November 20, 2017, which commenced on April 2, 2018.

The term of this lease is five years and three months

at $86,268 per year with an escalation of 3% per year with an ending date of July 31, 2023.

The Company leases

rack space in New York, Massachusetts and North Carolina.

leases are month to month and the monthly rent is approximately $25,000.

Subsequent to

December 31, 2019, the Company entered into a new

rack space lease agreement in Dallas, TX.

The lease term is 13 months and requires monthly payments of $1,905.

The lease for office space in Warwick, RI,

calls for monthly payments of $2,324 beginning February 1, 2015 which escalated to $2,460 on February 1, 2017.

This lease commenced

on February 1, 2015 and expired on January 31, 2019.

The Company extended this lease until January 31, 2020.

The annual base rent

shall be $30,348 payable in equal monthly installments of $2,529.

Finance Lease Obligations –

expense for the years ended December 31, 2020 and 2019 were $194,000 and $196,779 respectively.

5 –Leases

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

first lease for office space in Melville, NY, was assumed as part of the Companys acquisition of ABC in 2016 and called

for monthly payments of $8,382 and expiring August 31, 2019.

Upon termination of the lease in August 2019, the Company entered

into a new lease for a technology lab in a smaller space commencing on September 1, 2019.

The term of this lease is for three

years and 11 months and runs co-terminus with our existing lease in the same building.

The base annual rent is $10,764 payable

in equal monthly installments of $897.

second lease for office space in Melville, NY, was entered into on November 20, 2017, which commenced on April 2, 2018.

of this lease is five years and three months at $86,268 per year with an escalation of 3% per year with an ending date of July

lease for office space in Warwick, RI, calls for monthly payments of $2,324 beginning February 1, 2015 which escalated to $2,460

on February 1, 2017.

This lease commenced on February 1, 2015 and expired on January 31, 2019.

The Company extended this lease

until January 31, 2020.

This lease was further extended until January 31, 2021.

The annual base rent shall be $31,176 payable

in equal monthly installments of $2,598.

We have satisfied the terms of the lease and no longer occupy this premise.

Company leases rack space in New York, Massachusetts and North Carolina.

These leases are month to month and the monthly

rent is approximately $25,000.

2020 the Company entered into a new rack space lease agreement in Dallas, TX.

The lease term is 13 months and requires

monthly payments of $1,905.

Lease Obligations

June 1, 2020, the Company entered into a lease agreement with Arrow Capital Solutions, Inc.

to lease equipment.

The lease obligation

is payable to Arrow Capital Solutions with monthly installments of $5,008.

The lease carries an interest rate of 7% and is a three-year

The term of the lease ends June 1, 2023.

June 29, 2020, the Company entered into a lease agreement with Arrow Capital Solutions, Inc.

to lease equipment.

The lease obligation

is payable to Arrow Capital Solutions with monthly installments of $5,050.

The lease carries an interest rate of 7% and is a three-year

The term of the lease ends June 29, 2023.

July 31, 2020, the Company entered into a lease agreement with Arrow Capital Solutions, Inc.

to lease equipment under a finance

The lease obligation is payable to Arrow Capital Solutions with monthly installments of $4,524.

The lease carries an interest

rate of 7% and is a three-year lease.

Lease Obligations –

Related Party

On April 1, 2018, the Company entered into

a lease agreement with Systems Trading Inc.

(“Systems Trading”) to refinance all leases into one lease.

obligation is payable to Systems Trading with bi-monthly installments of $23,475.

The lease carries an interest rate of 5% and

is a four -year lease.

April 1, 2018, the Company entered into a lease agreement with Systems Trading Inc.

(Systems Trading) to refinance

all leases into one lease.

This lease obligation is payable to Systems Trading with bi-monthly installments of $23,475.

carries an interest rate of 5% and is a four -year lease.

The term of the lease ends April 16, 2022.

Systems Trading is owned and operated by the Company’s

President, Hal Schwartz.

On January 1, 2019, the Company entered into

a lease agreement with Systems Trading.

This lease obligation is payable to Systems Trading with monthly installments of $29,592.

Systems Trading is owned

and operated by the Companys President, Hal Schwartz.

January 1, 2019, the Company entered into a lease agreement with Systems Trading.

This lease obligation is payable to Systems

Trading with monthly installments of $29,592.

The lease carries an interest rate of 6.75% and is a five-year lease.

The term of the lease ends December 31, 2023.

On April 1, 2019, the Company entered into

two lease agreements with Systems Trading to add new data center equipment.

The first lease calls for monthly payments of $1,328

and expires on March 1, 2022.

the lease ends December 31, 2023.

April 1, 2019, the Company entered into two lease agreements with Systems Trading to add new data center equipment.

lease calls for monthly payments of $1,328 and expires on March 1, 2022.

It carries an interest rate of 7%.

The second lease calls for monthly payments of $461 and expires

on March 1, 2022.

The second lease calls

for monthly payments of $461 and expires on March 1, 2022.

It carries an interest rate of 6.7%.

On January 1, 2020, the Company entered into

a new lease agreement with Systems Trading Inc.

January 1, 2020, the Company entered into a new lease agreement with Systems Trading Inc.

to lease equipment.

The lease obligation is payable to Systems Trading with monthly

installments of $10,534.

The lease carries an interest rate of 6% and is a three-year lease.

The lease obligation

is payable to Systems Trading with monthly installments of $10,534.

The lease carries an interest rate of 6% and is a three-year

The term of the lease ends January 1, 2023.

We determine if an arrangement contains a lease

at inception.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our

obligation to make lease payments arising from the lease.

ROU assets and liabilities are recognized at the lease commencement date

based on the estimated present value of lease payments over the lease term.

Our lease term includes options to extend the lease

when it is reasonably certain that we will exercise that option.

Leases with a term of 12 months or less are not recorded on the

balance sheet, per the election of the practical expedient noted above.

ROU assets and liabilities are recognized at the lease

commencement date based on the estimated present value of lease payments over the lease term.

We recognize lease expense for these

leases on a straight-line basis over the lease term.

We recognize variable lease payments in the period in which the obligation

for those payments is incurred.

Variable lease payments that depend on an index or a rate are initially measured using the index

or rate at the commencement date, otherwise variable lease payments are recognized in the period incurred.

A discount rate of 7%

was used in preparation of the ROU asset and operating liabilities.

The components of lease expense were

determine if an arrangement contains a lease at inception.

ROU assets represent our right to use an underlying asset for the lease

term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and liabilities

are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

lease term includes options to extend the lease when it is reasonably certain that we will exercise that option.

Leases with a

term of 12 months or less are not recorded on the balance sheet, per the election of the practical expedient noted above.

assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over

the lease term.

We recognize lease expense for these leases on a straight-line basis over the lease term.

We recognize variable

lease payments in the period in which the obligation for those payments is incurred.

Variable lease payments that depend on an

index or a rate are initially measured using the index or rate at the commencement date, otherwise variable lease payments are

recognized in the period incurred.

A discount rate of 7% was used in preparation of the ROU asset and operating liabilities.

components of lease expense were as follows:

December 31, 2020

Finance lease:

Amortization of

assets, included in depreciation and amortization expense

Interest on lease liabilities,

included in interest expense

Amortization of assets, included in depreciation and amortization expense

Interest on lease liabilities, included in interest expense

Operating lease:

Amortization of assets, included

in total operating expense

on lease liabilities, included in total operating expense

Amortization of assets, included in total operating expense

Interest on lease liabilities, included in total operating expense

Total net lease cost

Supplemental balance sheet information

related to leases was as follows

Operating Leases

lease ROU asset

balance sheet information related to leases was as follows

Operating lease ROU asset

Current operating lease liabilities

Noncurrent operating lease

operating lease liabilities

Noncurrent operating lease liabilities

Total operating lease liabilities

December 31, 2020

Finance leases:

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Accumulated amortization

Property and equipment,

Property and equipment, net

Current obligations of finance leases

Finance leases, net of current

Finance leases, net of current obligations

Total finance lease liabilities

Supplemental cash flow and other

information related to leases was as follows:

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

December 31, 2020

Cash paid for amounts included in the measurement

of lease liabilities:

Operating cash flows related to operating

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows related to operating leases

Financing cash flows related to finance leases

5 unchanged sentences

Finance leases

Long-term obligations under the operating

and finance leases at December 31, 2019 mature as follows:

obligations under the operating and finance leases at December 31, 2020 mature as follows:

For the Year ending December 31,

4 unchanged sentences

Total lease obligations

As of December 31, 2019, we had no additional

significant operating or finance leases that had not yet commenced.

Rent expense under all operating leases for the twelve months

ended December 31, 2019 and 2018 was $228,881 and $251,814, respectively.

Note 6 - Commitments and Contingencies

Revolving Credit Facility

On January 31, 2008, the Company entered into

a revolving credit line with a bank.

The credit facility provides for $100,000 at prime plus 0.5% and is secured by all assets

of the Company and personally guaranteed by the Company’s principal shareholder.

As of December 31, 2019, and 2018 the balance

was $75,000 and $0 respectively.

Note 7 –

of December 31, 2020, we had no additional significant operating or finance leases that had not yet commenced.

Rent expense under all

operating leases for the years ended December 31, 2020 and

2019 were $169,716 and $251,814, respectively.

6 - Commitments and Contingencies

COVID-19 pandemic has created significant worldwide uncertainty, volatility and economic disruption.

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 pandemic;

(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

(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 to capital;

(v) potential goodwill or other impairment charges;

(vi) increased cybersecurity

risks as a result of pervasive remote working conditions;

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.

Under NYS Executive Order 202.6,

“Essential Business,”

DSC is an “Essential Business”

based on the following in the Executive order number 2:

infrastructure including telecommunications and data centers;

and, number 12:

Vendors that provide essential services or products, including

logistics and technology support.

Further, as a result of the pandemic, all employees, including the Company’s specialized technical

staff, are working remotely or in a virtual environment.

DSC always maintains the ability for team members to work virtual and the Company

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 the Company’s business,

including an increased risk of cybersecurity events and improper dissemination of personal or confidential information, though the Company

does not believe these circumstances have, or will, materially adversely impact its internal controls or financial reporting systems.

If the COVID-19 pandemic should worsen, the Company may experience disruptions to our business including, but not limited to equipment,

to its workforce, or to its business relationships with other third parties.

The extent to which COVID-19 impacts the Company’s

operations or those of its 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

the Company’s financial results and our ability to conduct business as expected.

Credit Facility

January 31, 2008, the Company entered into a revolving credit line with a bank.

The credit facility provides for $100,000 at prime

plus 0.5% and is secured by all assets of the Company and personally guaranteed by the Companys principal shareholder.

As of December 31, 2020, and 2019 the balance was $24 and $75,000, respectively.

Long Term Debt

In connection with the 2012 acquisition of

Message Logic, LLC, the Company acquired software subject to a UCC filing in the amount of $350,000 plus accrued interest.

5, 2014 the Company entered into an agreement whereby the Company paid all arrears interest over 7 months at $3,910 per month.

In addition, the Company agreed to make monthly interest payments at $1,553 per month with the principal balance of $350,000 payable

on April 30, 2016.

The Company stopped making interest only payments on October 25, 2018.

There has been no default notice from

The Company is in the process of negotiating a final settlement.

Note 8 - Stockholders’

Capital Stock

The Company has 260,000,000 authorized shares

of capital stock, consisting of 250,000,000 shares of common stock, par value $0.001, and 10,000,000 shares of Preferred Stock,

par value $0.001 per share.

During the year ended December 31, 2019, the

Company issued to its Chief Technology Officer 200,000 shares of common stock as compensation with a total value of $26,000.

Common Stock Options

Incentive Plan

In October 2008,

the Company adopted, the Euro Trend, Inc.

2008 Equity Incentive Plan (the “2008 Plan).

Under the 2008 Plan, we may grant

options (including incentive stock options) to purchase our common stock or restricted stock awards to our employees, consultants

or non-employee directors.

The 2008 Plan is administered by the Board of Directors.

Awards may be granted pursuant to the 2008

Plan for 10 years from the effective date of the 2008 Plan.

Any grant under the 2008 Plan may be repriced, replaced or regranted

at the discretion of the Board of Directors.

From time to time, we may issue awards pursuant to the 2008 Plan.

terms of options granted under the 2008 Plan (all of which have been nonqualified stock options) are consistent with the terms

described in the footnotes to the “Outstanding Equity Awards at Fiscal Year-End December 31, 2017” table below, including

five-year graded vesting schedules and exercise prices equal to the fair market value of our common stock on the date of grant.

Stock grants made under the 2008 Plan have not been subject to vesting requirements.

The 2008 Plan was terminated with respect

to the issuance of new awards as of February 3, 2013.

There are 369,839 options outstanding under the 2008 Plan as of December

2010 Incentive

On August 12,

2010, the Company adopted the Data Storage Corporation 2010 Incentive Award Plan (the “2010 Plan”) with 2,000,000

shares of common stock available for issuance under the terms of the 2010 Plan.

On April 23, 2012, the Company amended and restated

the 2010 Plan to change the name of the 2010 Plan to the “Amended and Restated Data Storage Corporation Incentive Award

Plan” (the “Plan”).

On September 25, 2013, by written consent in lieu of a meeting by the stockholders owning

a majority of the outstanding shares of Common Stock of the Company and by unanimous written consent of the Board of Directors

in lieu of a meeting, the Plan was amended and restated to reserve 5,000,000 shares of common stock available for issuance under

the terms of the Plan.

On June 20, 2017, by written consent in lieu of a meeting by the stockholders owning a majority of the

outstanding shares of Common Stock of the Company and by unanimous written consent of the Board of Directors in lieu of a meeting,

the Plan was amended and restated to reserve 8,000,000 shares of common stock available for issuance under the terms of the Plan.

On July 1, 2019, by written consent in lieu of a meeting by the stockholders owning a majority of the outstanding shares of Common

Stock of the Company and by unanimous written consent of the Board of Directors in lieu of a meeting, the Plan was amended and

restated to reserve 10,000,000 shares of common stock available for issuance under the terms of the Plan The Plan is intended

to promote the interests of the Company by attracting and retaining exceptional employees, consultants, directors, officers and

independent contractors (collectively referred to as the “Participants”) and enabling such Participants to participate

in the long-term growth and financial success of the Company.

Under the Plan, the Company may grant stock options, which are intended

to qualify as “incentive stock options” under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified

stock options, stock appreciation rights and restricted stock awards, which are restricted shares of common stock (collectively

referred to as “Incentive Awards”).

Incentive Awards may be granted pursuant to the Plan for 10 years from the Effective

From time to time, we may issue Incentive Awards pursuant to the Plan.

Each of the awards will be evidenced by and issued

under a written agreement.

There are 8,055,985 options outstanding under the Plan as of December 31, 2019.

If an incentive

award granted under the Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection

with an incentive award, the shares subject to such award and the surrendered shares will become available for future awards under

The number of shares subject to the Plan, and the number of shares and terms of any Incentive Award may be adjusted

in the event of any change in our outstanding common stock by reason of any stock dividend, spin-off, stock split, reverse stock

split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares, or

similar transaction.

There are 1,944,015 shares available

for future grants under the plans.

the Company’s option activity and related information follows:

In connection with the Company’s

October 2012 acquisition of certain assets (the “ML Assets”) of Message Logic, Inc.

(“Message Logic”), the Company

maintained ownership of the ML Assets subject to a security interest in the ML Assets held by a third party banking institution (the “Bank”)

in connection with a secured loan made by the Bank to Message Logic in June 2012 in the amount of $350,000 (the “ML Loan”).

The Bank filed a UCC-1 Financing Statement with the Secretary of State of Delaware perfecting its interest in the ML Assets (the “UCC-1

Filing”).

On September 5, 2014, the Company entered into an agreement with Message Logic and the Bank pursuant to which the Company

paid to the Bank the outstanding interest amount due on the ML Loan over seven months at $3,910 per month.

In addition, the Company agreed

to continue to make monthly interest-only payments to the Bank at $1,553 per month.

The Company recorded a contingent liability as part

of its option to pay off the ML Loan, terminate the UCC-1 Filing and own the ML Assets free of all liens and encumbrances.

stopped making interest-only payments on October 25, 2018.

During 2020, the Company made a strategic decision to cease utilizing the ML

Assets in its operations and advised the Bank of such information.

In connection with this and as a result, the Company recorded a gain

on extinguishment of contingent liability in the amount of $350,000 on the consolidated statements of operations.

April 30, 2020, the Company was granted a loan from a banking institution, in the principal amount of $481,977 (the “Loan”),

pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic

Security Act (the “CARES Act”), which was enacted on March 27, 2020.

The Loan, which was in the form of a Note dated April

30, 2020, matures on April 30, 2022 and bears interest at a fixed rate of 1.00% per annum, payable monthly commencing on November 5, 2020.

Funds from the loan may only be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments.

Management used the entire Loan amount for qualifying expenses.

Under the terms of the PPP, certain amounts of the Loan may be forgiven

if they are used for qualifying expenses as described in the CARES Act.

The company has not yet applied for the loan forgiveness.

As of December 31, 2020, if not forgiven, remaining scheduled principal

payments due on notes payable are as follows:

Year ending December 31,

8 - Stockholders (Deficit)

Company has 260,000,000 authorized shares of capital stock, consisting of 250,000,000 shares of common stock, par value $0.001,

and 10,000,000 shares of Preferred Stock, par value $0.001 per share.

Stock Options

Incentive Award Plan

August 12, 2010, the Company adopted the Data Storage Corporation 2010 Incentive Award Plan (the “2010 Plan”) that provided

for 2,000,000 shares of common stock reserved for issuance under the terms of the 2010 Plan;

which was amended on September 25, 2013 to

increase the number of shares of common stock reserved for issuance under the Plan to 5,000,000 shares of common stock;

which was further

amended on June 20, 2017 to increase the number of shares of common stock reserved for issuance under the Plan to 8,000,000 shares

of common stock;

and further amended on July 1, 2019 to increase the number of shares of common stock reserved for issuance under the

Plan to 10,000,000 shares of common stock.

On April 23, 2012, the Company amended and restated the 2010 Plan to change the name

to the “Amended and Restated Data Storage Corporation Incentive Award Plan”

(the “Plan”).

The Plan was intended

to promote the interests of the Company by attracting and retaining exceptional employees, consultants, directors, officers and independent

contractors (collectively referred to as the “Participants”) and enabling such Participants to participate in the long-term

growth and financial success of the Company.

Under the Plan, the Company had the right to grant stock options, which are intended to qualify

as “incentive stock options”

under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options,

stock appreciation rights and restricted stock awards, which were restricted shares of common stock (collectively referred to as “Incentive

Awards”).

Incentive Awards were granted pursuant to the Plan for 10 years from the Effective Date.

There are 8,305,985 options outstanding

under the Plan as of December 31, 2020.

The 2010 Plan expired on October 21, 2020 and accordingly, there are no shares available for future

an incentive award granted under the Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered

to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available

for future awards under the Plan.

The number of shares subject to the Plan, and the number of shares and terms of any Incentive

Award may be adjusted in the event of any change in our outstanding common stock by reason of any stock dividend, spin-off, stock

split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange

of shares, or similar transaction.

summary of the Companys option activity and related information follows:

Under Options

Exercise Price

Options Outstanding at January

Outstanding at January 1, 2019

Expired/Cancelled

Options Outstanding

at December 31, 2018

Options Granted

Outstanding at December 31, 2019

Expire/Cancelled

Options Outstanding

at December 31, 2019

Options Exercisable

at December 31, 2019

Outstanding at December 31, 2020

Exercisable at December 31, 2020

compensation expense for options totaling $158,728 and $15,342 was recognized in our results for the year ended December 31, 2020

6 unchanged sentences

is appropriate for the term of the options.

Estimated volatility

is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life

of the award.

The Company’s calculation of estimated volatility is based on historical stock prices of these peer entities

volatility is a measure of the amount by which the Companys stock price is expected to fluctuate each year during the expected

life of the award.

The Companys calculation of estimated volatility is based on historical stock prices of these peer entities

over a period equal to the expected life of the awards.

1 unchanged sentence

lack of sufficient historical data of its stock price.

As of December

31, 2019, there was $378,360 of total unrecognized compensation expense related to unvested employee options granted under the

Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately

average fair value of options granted, and the assumptions used in the Black-Scholes model during the year ended December 31,

2019 are set forth in the table below.

Weighted average fair value of options granted

Risk-free interest rate

Expected life (years)

Dividend yield

of December 31, 2020, there was $264,111 of total unrecognized compensation expense related to unvested employee options granted

under the Companys share-based compensation plans that is expected to be recognized over a weighted average period of approximately

weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the year ended December

31, 2020 and 2019 are set forth in the table below.

average fair value of options granted

interest rate

Common Stock Warrants

the Company’s warrant activity and related information follows:

summary of the Companys warrant activity and related information follows:

Exercise Price

Warrants Outstanding at January 1, 2019

Warrants Granted

Warrants Outstanding at December 31, 2019

Warrants Granted

Warrants Outstanding at December 31, 2020

Warrants Exercisable at December 31, 2020

Preferred Stock

Liquidation preference

Upon any liquidation,

dissolution, or winding up of the Corporation, whether voluntary or involuntary, before any distribution or payment shall be made

to the holders of any Common Stock, the holders of Series A Preferred Stock shall be entitled to be paid out of the assets of

the Corporation legally available for distribution to stockholders, for each share of Series A Preferred Stock held by such holder,

an amount per share of Series A Preferred Stock equal to the Original Issue Price for such share of Series A Preferred Stock plus

all accrued and unpaid dividends on such share of Series A Preferred Stock as of the date of the Liquidation Event.

The number of

shares of Common Stock to which a share of Series A Preferred Stock may be converted shall be the product obtained by dividing

the Original Issue Price of such share of Series A Preferred Stock by the then-effective Conversion Price (as defined herein)

for such share of Series A Preferred Stock.

The Conversion Price for the Series A Preferred Stock shall initially be equal to

$0.02 and shall be adjusted from time to time.

of shares of Series A Preferred Stock shall be entitled to the number of votes, upon any meeting of the stockholders of the Corporation

(or action taken by written consent in lieu of any such meeting) equal to the number of shares of Class B Common Stock into which

such shares of Series A Preferred Stock could be converted.

Each share of

Series A Preferred Stock, in preference to the holders of all Common Stock (as defined below), shall entitle its holder to receive,

but only out of funds that are legally available therefore, cash dividends at the rate of ten percent (10%) per annum from the

Original Issue Date on the Original Issue Price for such share of Series A Preferred Stock, compounding annually unless paid by

the Corporation.

any liquidation, dissolution, or winding up of the Corporation, whether voluntary or involuntary, before any distribution or payment

shall be made to the holders of any Common Stock, the holders of Series A Preferred Stock shall be entitled to be paid out of

the assets of the Corporation legally available for distribution to stockholders, for each share of Series A Preferred Stock held

by such holder, an amount per share of Series A Preferred Stock equal to the Original Issue Price for such share of Series A Preferred

Stock plus all accrued and unpaid dividends on such share of Series A Preferred Stock as of the date of the Liquidation Event.

number of shares of Common Stock to which a share of Series A Preferred Stock may be converted shall be the product obtained by

dividing the Original Issue Price of such share of Series A Preferred Stock by the then-effective Conversion Price (as defined

herein) for such share of Series A Preferred Stock.

The Conversion Price for the Series A Preferred Stock shall initially be equal

to $0.02 and shall be adjusted from time to time.

holder of shares of Series A Preferred Stock shall be entitled to the number of votes, upon any meeting of the stockholders of

the Corporation (or action taken by written consent in lieu of any such meeting) equal to the number of shares of Class B Common

Stock into which such shares of Series A Preferred Stock could be converted.

share of Series A Preferred Stock, in preference to the holders of all Common Stock (as defined below), shall entitle its holder

to receive, but only out of funds that are legally available therefore, cash dividends at the rate of ten percent (10%) per annum

from the Original Issue Date on the Original Issue Price for such share of Series A Preferred Stock, compounding annually unless

paid by the Corporation.

Accrued dividends at December 31, 2020 and 2019 were $1,115,674 and $970,997, respectively.

Due to losses,

the Company did not have current income tax expense.

The components of deferred taxes

are as follows:

Deferred Tax Assets:

Net operating loss

carry-forward

9 - Income Taxes

components of deferred taxes are as follows:

Net operating loss carry-forward

valuation allowance

deferred tax asset

had federal and state net operating tax loss carry-forwards of $5,128,000 and $4,670,000, respectively as of December 31, 2019.

The tax loss carry-forwards are available to offset future taxable income with the federal and state carry-forwards beginning

to expire in 2028.

2018, net deferred tax assets did not change due to the full allowance.

The gross amount of the asset is entirely due to the net

operating loss carry forward.

The realization of the tax benefits is subject to the sufficiency of taxable income in future years.

Net deferred tax asset

Company had federal and state net operating tax loss carry-forwards of $4,725,000 and $4,325,000, respectively as of December

The tax loss carry-forwards are available to offset future taxable income with the federal and state carry-forwards

beginning to expire in 2028.

2020 and 2019, net deferred tax assets did not change due to the full allowance.

The gross amount of the asset is entirely due

to the net operating loss carry forward.

The realization of the tax benefits is subject to the sufficiency of taxable income in

future years.

The combined deferred tax assets represent the amounts expected to be realized before expiration.

periodically assesses the likelihood that it will be able to recover its deferred tax assets.

The Company considers all available

evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates

of future taxable income and ongoing prudent and feasible profits.

As a result of this analysis of all available evidence, both

positive and negative, the Company concluded that it is more likely than not that its net deferred tax assets will ultimately

Company periodically assesses the likelihood that it will be able to recover its deferred tax assets.

The Company considers all

available evidence, both positive and negative, including historical levels of income, expectations and risks associated with

estimates of future taxable income and ongoing prudent and feasible profits.

As a result of this analysis of all available evidence,

both positive and negative, the Company concluded that it is more likely than not that its net deferred tax assets will ultimately

not be recovered and, accordingly, a valuation allowance was recorded as of December 31, 2020 and 2019.

The difference between the expected

income tax expense (benefit) and the actual tax expense (benefit) computed by using the Federal statutory rate of 21% is as follows:

Ended December 31,

Expected income tax benefit (loss)

at statutory rate of 21%

State and local tax benefit, net of federal

difference between the expected income tax expense (benefit) and the actual tax expense (benefit) computed by using the Federal

statutory rate of 21% is as follows:

Year Ended December 31,

Expected income tax benefit (loss) at statutory rate of 21%

State and local tax benefit (loss), net of federal

Change in valuation account

Income tax expense (benefit)

Note 10 - Litigation

We are currently

not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of

There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency,

self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries,

threatened against or affecting DSC, its common stock, any of its subsidiaries or of DSC’s or DSC’s subsidiaries’

officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

10 - Litigation

Company currently is not involved in any litigation that it believes could have a materially adverse effect on our financial condition

or results of operations.

There is no action, suit, proceeding, inquiry or investigation before or by any court, public board,

government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company

or any of our subsidiaries, threatened against or affecting DSC, its common stock, any of its subsidiaries or of DSCs or

DSCs subsidiaries officers or directors in their capacities as such, in which an adverse decision could have a material

adverse effect.

Related Party Transactions

Finance Lease

Obligations – Related Party

During the years

ended December 31, 2019 and 2018 the Company entered into three different related party finance lease obligations.

Nexxis Capital

Charles Piluso and Harold Schwartz collectively

own 100% of Nexxis Capital LLC (“Nexxis Capital”).

Nexxis Capital was formed to purchase equipment and provide leases

to Nexxis Inc.’s customers.

The Company received funds of $12,794 during

the year-ended December 31, 2019.

Note 12 - Subsequent Events

On February 7, 2020, options were exercised

to obtain 100,000 shares of common stock.

These options were exercised at $0.054.

On February 10, 2020, Harold Schwartz resigned

as Treasurer of the Company and Charles M.

Piluso was appointed as the Company’s Treasurer.

In addition, on February 10,

2020, Thomas Kempster resigned as Secretary of the Company and was appointed as Executive Vice President of the Company, and Wendy

Schmittzeh was appointed as the Company’s Secretary.

There is no understanding or arrangement between

Schmittzeh and any other person pursuant to which she was appointed as Secretary.

Schmittzeh does not have any family

relationship with any director, executive officer or person nominated or chosen by us to become a director or an executive officer.

Since January 1, 2019, Mrs.

Schmittzeh has not had a direct or indirect material interest in any transaction or proposed transaction,

in which the Company was or is a proposed participant exceeding $120,000.

Wendy Schmittzeh is a veteran management professional

with over 30 years of corporate experience.

From 2011 through the present, Mrs.

Schmittzeh has served as Manager of Administration

for the Company.

While serving in her management role, Ms.

Schmittzeh has been instrumental in numerous operational aspects of

the Company’s business, including mergers and acquisitions transactions, accounting, corporate administration, office management,

human resources, corporate office relocations, facilities management and high-level executive support.

Schmittzeh received

an Associate’s Degree in Secretarial Arts from Katharine Gibbs College in 1991.

Schmittzeh currently serves as a Vestry

member at St.

Ann’s Episcopal Church, and has held several board positions on the Suffolk County Bicycle Riders Association.

Lease Obligations –

Related Party

the years ended December 31, 2020 and 2019 the Company entered into three different related party finance lease obligations.

Note 5 for details.

Piluso and Harold Schwartz collectively own 100% of Nexxis Capital LLC (Nexxis Capital).

Nexxis Capital was formed

to purchase equipment and provide leases to Nexxis Inc.s customers.

Company received funds of $37,954 and $12,794 during the years ended December 31, 2020 and 2019, respectively.

12 - Subsequent Events

On January 31, 2021, the term

of the lease for the Company’s location in Rhode Island expired.

Employees from that location are now working remotely from their

Solutions, LLC

4, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Data Storage FL, LLC, a Florida

limited liability company and the Company’s wholly-owned subsidiary (the “Merger Sub”), Flagship Solutions, LLC (“Flagship”),

a Florida limited liability company, and the owners (collectively, the “Equityholders”) of all of the issued and outstanding

limited liability company membership interests in Flagship (collectively, the “Equity Interests”), pursuant to which, upon

the Closing (as defined below), the Company will acquire Flagship through the merger of Merger Sub with and into Flagship (the “Merger”),

with Flagship being the surviving company in the Merger and becoming as a result its wholly-owned subsidiary.

The closing of the Merger

(the “Closing”) is expected to take place on or before May 31, 2021 (the “Outside Closing Date”).

to the Merger, all of the Equity Interests that are issued and outstanding immediately prior to the effectiveness of the filing of the

Articles of Merger by Flagship and Merger Sub with the Secretary of State of the State of Florida, will be converted into the right to

receive an aggregate amount equal to up to $10,500,000, consisting of $5,550,000, payable in cash, subject to reduction by the amount

of any excluded liabilities assumed by the Company at Closing and subject to adjustment as set forth below in connection with a net working

capital adjustment, and up to $4,950,000, payable in shares of the Company’s common stock, subject to reduction by the amount by

which the valuation of Flagship (the “Flagship Valuation”), as calculated based on Flagship’s unaudited pro forma 2018

financial statements and audited 2019 and 2020 financial statements (the “2020 Audit”), is less than $10,500,000.

that the Flagship Valuation, as calculated based on the 2020 Audit, is less than $10,500,000, then, within fifteen (15) days after completion

of the audit of Flagship’s financial statements for its 2019, 2020 and 2021 fiscal years (the “2021 Audit”), the Company

has agreed to pay the Equityholders, in shares of the Company’s common stock, the amount by which the Flagship Valuation, as calculated

based on the 2021 Audit, exceeds the sum of $5,550,000 and the value of the shares merger consideration paid by us to the Equityholders

In addition, the cash merger consideration paid by the Company to the Equityholders at Closing shall be adjusted, on a dollar-for-dollar

basis, by the amount by which Flagship’s estimated net working capital at Closing is more or is less than the target working capital

amount specified in the Merger Agreement.

have agreed to indemnify each other for any losses that may be incurred by them as a result of their breach of any of their representations,

warranties and covenants contained in the Merger Agreement.

The Company’s indemnification obligations are capped at 20% of the aggregate

merger consideration paid to the Equityholders for any breach of our representations and warranties contained in the Merger Agreement,

other than the representations and warranties set forth under Section 4.1 (Existence;

Good Standing;

Enforceability), Section

4.2 (No Conflict) and Section 4.4 (Brokers) (herein, “Fundamental Representations”).

The Company’s indemnification obligations

in respect of any breach by the Company of the Fundamental Representations or in the event of our willful or intentional breach of the

Merger Agreement (or acts of fraud), are not capped.

with the Closing, Flagship and Mark Wyllie, Flagship’s Chief Executive Officer, will enter into an Employment Agreement (the “Wyllie

Employment Agreement”), which will become effective upon consummation of the Closing, pursuant to which Mr.

Wyllie will continue

to serve as Chief Executive Officer of Flagship following the Closing on the terms and conditions set forth therein.

Flagship’s

obligations under the Wyllie Employment Agreement will also be guaranteed by us.

The Wyllie Employment Agreement will contain customary

salary, bonus, employee benefits, severance and restrictive covenant provisions.

In addition, pursuant to the Wyllie Employment Agreement,

Wyllie will be appointed to serve as a member of the Board during the term of his employment thereunder.

Agreement further provides that it may be terminated by Flagship and the Equityholders (a “Flagship Termination”) in the event

we have not consummated an underwritten public offering of our securities or listed our shares of common stock on national securities

exchange such as the Nasdaq, by the Outside Closing Date, as long as such failure was not due to the breach of, or non-compliance with,

the Merger Agreement by the Company or any of the Equityholders.

In the event of a Flagship Termination, the Company will be required

to pay Flagship and the Equityholders an amount equal to two (2) times their reasonable, documented, out-of-pocket attorneys’

accountants’

transaction fees and expenses incurred prior to such Flagship Termination in connection with the Merger, up to a maximum

aggregate amount of $100,000.

On March 4, 2021, the Company

entered into a new lease agreement with Systems Trading effective April 1, 2021.

This lease obligation is payable to Systems Trading

with monthly installments of $1,567 and expires on March 31, 2024.

The lease carries an interest rate of 8%.

On March 8, 2021 ,

the Board approved and adopted the 2021 Stock Incentive Plan (the “2021 Plan”), and the Consenting Stockholders subsequently

approved the 2021 Plan, by written consent dated March 8, 2021.

An aggregate of 15,000,000 shares may be issued under this plan.

March 8, 2021 , the Board approved and stockholders owning in excess of 50% of the Company’s

voting power approved an amendment to the Company’s articles of incorporation to effect a

reverse stock split at a ratio of between 1:2 and 1:60, to be determined in the sole discretion of the Board at a future date.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 7A. Quantitative and Qualitative Disclosures About Market Risk