What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-03-31 compared with 2021-03-31 · 890 added, 835 removed, 245 unchanged (88% of the section changed)

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

As a smaller reporting company,

this item is not required

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY

Index to the Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 0089)

Consolidated Balance Sheets as of December 31, 2021 and 2020

3 unchanged sentences

Notes to Consolidated Financial Statements

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.

Report of Independent Registered

Public Accounting Firm

the Board of Directors and

of Data Storage Corporation and Subsidiaries

on the Financial Statements

have audited the accompanying balance sheets of Data Storage Corporation and Subsidiaries (the Company) as of December 31, 2021 and 2020,

and the related statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes

(collectively referred to as the financial statements).

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

the financial position of the Company as of December 31, 2021 and 2020 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.

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

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.

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.

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

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 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.

We believe that our audits

provide a reasonable basis for our opinion.

Audit Matters

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.

described in Note 12 to the consolidated financial statements, the Company accounted for Flagship Solutions LLC acquisition during 2021

as a business combination and allocated the purchase price among the tangible and intangible assets acquired and liabilities assumed.

The acquisition resulted in intangible assets totaling $5,250,340 consisting primarily of customer relationships and goodwill.

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.

The Company utilized a valuation specialist to assist

in the performance of the purchase price allocation.

identified the valuation of intangible assets recorded in connection with the acquisition as a critical audit matter.

The fair value

estimates were based on underlying assumptions about future performance of the acquired business which involves significant estimation

the Critical Matter Was Addressed in the Audit

primary procedures we performed to address this critical audit matter included:

management’s purchase price allocation detailing fair value assigned to the acquired

tangible and intangible assets.

valuation reports prepared by valuation specialists engaged by management to assist in the

purchase price allocations, including determination of fair values assigned to acquired intangible

assets, and examined valuation methods used and qualifications of specialist.

auditor valuation specialist to assist audit engagement team in its review of management

valuation specialist’s reports including review of valuation methods, assumptions and

the completeness and accuracy of the underlying data supporting the significant assumptions

and estimates used in the valuation reports, including historical and projected financial

the clerical accuracy of the models.

Rosenberg Rich Baker Berman, P.A.

have served as the Company’s auditor since 2008.

Somerset, New Jersey

March 31, 2021

STORAGE CORPORATION AND SUBSIDIARIES

BALANCE SHEETS

OF DECEMBER 31,

DATA STORAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

and cash equivalents

receivable (less allowance for credit losses of $50,375 and $30,000 in 2021 and 2020, respectively)

expenses and other current assets

Current Assets

Cash and cash equivalents

Accounts receivable (less allowance for doubtful accounts of $30,000 in 2020 and 2019)

Prepaid expenses and other current assets

Total Current Assets

Property and Equipment:

and Equipment:

and equipment

Less—Accumulated

( 4,657,765 )

( 5,543,822 )

Property and Equipment

Less—Accumulated depreciation

Net Property and Equipment

Other Assets:

Operating lease right-of-use assets

Intangible assets, net

Total Other Assets

LIABILITIES AND STOCKHOLDERS DEFICIT

lease right-of-use assets

AND STOCKHOLDERS’ DEFICIT

payable and accrued expenses

leases payable

leases payable related party

lease liabilities short term

Current Liabilities

Accounts payable and accrued expenses

Dividend payable

Deferred revenue

Line of credit

Finance leases payable

Finance leases payable related party

Operating lease liabilities short term

Total Current Liabilities

Note payable long term

Operating lease liabilities long term

Finance leases payable, long term

Finance leases payable related party, long term

Total Long Term Liabilities

Total Liabilities

Stockholders Equity:

Preferred stock, Series A par value $.001;

10,000,000 shares authorized;

1,401,786 shares issued and outstanding in each year

Common stock, par value $.001;

payable long term

lease liabilities

leases payable

leases payable related party

Long-Term Liabilities

and contingencies (Note 6)

Stockholders’

stock, Series A par value $ .001 ;

shares authorized;

128,539,418 and 128,439,418 shares issued and outstanding in 2020 and 2019, respectively

Additional paid in capital

Accumulated deficit

and 1,401,786

shares issued and outstanding in 2021 and

2020, respectively

stock, par value $ .001 ;

250,000,000 shares

6,693,793 and 3,214,537

shares issued and outstanding in 2021 and 2020, respectively

paid in capital

( 15,530,576 )

( 15,734,737 )

Total Data Storage Corp Stockholders Equity

Non-controlling interest in consolidated subsidiary

Total Stockholders Equity

Total Liabilities and Stockholders Equity

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

STORAGE CORPORATION AND SUBSIDIARIES

STATEMENTS OF OPERATIONS

Data Storage Corp Stockholders’ Equity

Non-controlling

interest in consolidated subsidiary

Stockholder’s Equity

Liabilities and Stockholders’ Equity

The accompanying notes are an integral part of these

consolidated Financial Statements.

DATA STORAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Ended December 31,

Cost of sales

Selling, general and administrative

(Loss) Income from Operations

Other Income (Expense)

general and administrative

from Operations

Income (Expense)

Interest income

Interest expense

Gain on extinguishment of contingent liability

Total Other Income (Expense)

Income before provision for income taxes

Provision for income taxes

Non-controlling interest in consolidated subsidiary

Net Income attributable to Data Storage Corporation

Preferred Stock Dividends

Net Income (Loss) Attributable to Common Stockholders

Earnings (Loss) per Share –

Weighted Average Number of Shares - Basic

Weighted Average Number of Shares - Diluted

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

STORAGE CORPORATION AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

on contingent liability

Loss on disposal of assets

on forgiveness of debt

(loss) before provision for income taxes

Benefit from income taxes

Non-controlling

interest in consolidated subsidiary

Net Income attributable to Data Storage Corp

Stock Dividends

Net Income Attributable to Common Stockholders

per Share – Basic

per Share – Diluted

Average Number of Shares - Basic

Average Number of Shares - Diluted

The accompanying notes are an integral part of these

consolidated Financial Statements.

DATA STORAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2021 AND 2020

Non-Controlling

Stockholders’

January 1, 2020

$ ( 15,790,076 )

options exercise

Income (Loss)

stock dividends

December 31, 2020

( 15,734,737 )

of preferred series to stock

( 1,401,786 )

from issuance of common stock and warrants

options exercise

warrants exercise

Income (Loss)

stock dividends

December 31, 2021

$ ( 15,530,576 )

$ ( 102,628 )

The accompanying notes are an integral part of these

consolidated Financial Statements.

DATA STORAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,

Cash Flows from Operating Activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

Stock based compensation

Gain on extinguishment of contingent liability

Gain on forgiveness of debt

Gain on contingent liability

income taxes, release of valuation allowance

Loss on disposal of assets

Changes in Assets and Liabilities:

4 unchanged sentences

Deferred revenue

Deferred rent

Operating lease liability

Net Cash Provided by Operating Activities

Net Cash Provided by (Used in) Operating Activities

Cash Flows from Investing Activities:

Capital expenditures

Cash acquired in business acquisition

Cash consideration for business acquisition

Net Cash Used in Investing Activities

Cash Flows from Financing Activities:

Repayments of capital lease obligations

Proceeds from issuance of note payable

Proceeds from line of credit

Repayments of finance lease obligations related party

Repayments of finance lease obligations

Proceeds from issuance of common stock and warrants

Cash received for the exercised of Warrants

Cash received for the exercised of options

Advance from Credit Line

Repayment of Credit Line

Net Cash Used in Financing Activities

Repayments of Dividend payable

Repayment of line of credit

Net Cash Provided by (Used) in Financing Activities

Increase in Cash and Cash Equivalents

7 unchanged sentences

Assets acquired by finance lease

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

STORAGE CORPORATION AND SUBSIDIARIES

STATEMENTS OF STOCKHOLDERS EQUITY

THE YEAR ENDED DECEMBER 31, 2020 AND 2019

Preferred Stock

Stockholders

Balance, January 1, 2019

$ (15,735,624 )

Stock Options Issued as Compensation

Common Stock Issued as Compensation

Stock Options Exercise

Preferred Stock

Balance, December 31, 2019

(15,790,076 )

Stock Options Issued as Compensation

Stock Options Exercise

Preferred Stock

Balance, December 31, 2020

(15,734,737 )

accompanying notes are an integral part of these consolidated Financial Statements

STORAGE CORPORATION AND SUBSIDIARIES

The accompanying notes are an integral part of these

consolidated Financial Statements.

DATA STORAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2020 AND 2019

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

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

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.

FOR THE YEAR ENDED DECEMBER 31, 2021

Note 1 - Basis of Presentation, Organization and Other Matters

Data Storage Corporation (the “Company”)

provides subscription-based, long-term agreements for disaster recovery solutions, Infrastructure as a Service (IaaS), Cyber Security

and Voice and Data solutions.

Headquartered in Melville, NY,

the Company offers solutions and services to businesses within the healthcare, banking and finance, distribution services, manufacturing,

construction, education, and government industries.

The Company derives its revenues from subscription services and solutions, managed

services, software and maintenance, equipment and onboarding provisioning.

The Company maintains infrastructure and storage equipment

in several technical centers in New York, Massachusetts, Texas, Florida and North Carolina.

On May 31, 2021, the Company completed

a merger (the “Merger”) under an Agreement and Plan of Merger (the “Merger Agreement”) with Flagship Solutions,

LLC (“Flagship”) (a Florida limited liability company) and the Company’s wholly-owned subsidiary, Data Storage FL, LLC,

a Florida limited liability company, a Florida limited liability company.

Flagship is a provider of IBM solutions, managed services and

cloud solutions.

The Company expects that Flagship’s business will be synergistic with the Company’s existing IBM business

and anticipates meaningful operation efficiency through the integration of the two organizations.

The Company also believes the Merger

will provide the combined entities a comprehensive one-stop provider to cross-sell solutions across each organization’s respective

enterprise, as well as middle-market customers.

Key offerings for the combined companies are expected to include a wide array of multi-cloud

information technology solutions in highly secure, reliable enterprise level cloud services for companies using IBM Power systems, Microsoft

Windows and Linux, including:

Infrastructure as a Service (IaaS), Disaster Recovery of digital information (DRaaS), Cyber Security as

a Service (CSaaS), and Data Analytics as a Service.

Note 2 - Summary of Significant Accounting Policies

Principles of Consolidation

The Consolidated Financial

statements include the accounts of (i) the Company, (ii) its wholly-owned subsidiaries, Data Storage Corporation, a Delaware corporation,

and Data Storage FL, LLC, a Florida limited liability company, (iii) Flagship Solutions, LLC, a Florida limited liability company, and

(iv) its majority-owned subsidiary, Nexxis Inc, a Nevada corporation.

All significant inter-company transactions and balances have been

eliminated in consolidation.

combinations.

2 unchanged sentences

While we use our best estimates and assumptions

to accurately value assets, acquired and liabilities assumed at the acquisition date as well as contingent consideration, where

applicable, our estimates are inherently uncertain and subject to refinement.

As a result, during the measurement period, which

may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the

corresponding offset to goodwill.

Upon the conclusion of the measurement period or final determination of the values of assets

acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in our consolidated statements

of operations.

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.

to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable,

our estimates are inherently uncertain and subject to refinement.

As a result, during the measurement period, which may be up to one year

from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever

comes first, any subsequent adjustments are recognized in our consolidated statements of operations.

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

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

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.

In 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

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 Company’s consolidated financial statements upon the adoption

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 adoption of ASU 2016-16 did not have a material impact on the consolidated

financial statements.

In January 2017, the FASB issued ASU 2017-04

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

Simplifying the Accounting for Goodwill Impairment (“ASU

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

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.

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.

The adoption of ASU 2017-04

did not have a material impact on the consolidated financial statements.

July 2021, the FASB issued ASU No.

2021-05, Lessors—Certain Leases with Variable Lease Payments (Topic 842), Which requires a lessor

to classify a lease with variable lease payments that do not depend on an index or rate (hereafter referred to as “variable payments”)

as an operating lease on the commencement date of the lease if specified criteria are met.

ASU 2021-05 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 Company’s condensed consolidated financial statements upon the adoption of this ASU.

2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from

Contracts with Customers, issued by the Financial Accounting Standards Board.

This ASU requires entities to recognize and measure contract

assets and contract liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers

The update will generally result in the recognition of contract assets and contract liabilities at amounts consistent with

those recorded by the acquiree immediately before the acquisition date rather than at fair value.

The Company expects that there would

be no material impact on the Company’s condensed consolidated financial statements upon the adoption of this ASU.

Use of Estimates

preparation of financial statements in conformity with US 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

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

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

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.

Estimated Fair Value of

Financial Instruments

Company’s financial instruments include cash, accounts receivable, accounts payable, line of credit, notes payable and lease commitments.

Management believes the estimated fair value of these accounts at December 31, 2021 approximates their carrying value as reflected in the

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

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 and Cash Equivalents

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 Company’s 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.

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%

The Company’s customers are

primarily concentrated in the United States.

provides credit in the normal course of business.

The Company maintains allowances for credit losses on factors surrounding the credit

risk of specific customers, historical trends, and other information.

of December 31, 2021, the Company had one customer with an accounts receivable balance representing 16 %

of total accounts receivable.

Receivable/Allowance for Doubtful Accounts

As of December 31, 2020, the Company had one customer with an accounts receivable balance

representing 33 %

of total accounts receivable.

the year ended December 31, 2021, the Company had one customer that accounted for 14 %

For the year ended December 31, 2020, the Company had one customer that accounted for 14 %

Accounts Receivable/Allowance

for Credit Losses

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

Accounts receivable are uncollateralized, non-interest-bearing

customer obligations.

Accounts receivables are uncollateralized, non-interest-bearing customer

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 experience.

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

The allowance for credit losses reflects the estimated accounts

receivable that will not be collected due to credit losses.

Provisions for estimated uncollectible accounts receivable are made for individual

accounts based upon specific facts and circumstances including criteria such as their age, amount, and customer standing.

Provisions are

also made for other accounts receivable not specifically reviewed based upon historical experience.

Clients are invoiced in advance for

services as reflected in deferred revenue on the Company’s balance sheet.

and Equipment

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

method for financial statement purposes.

Estimated useful lives in years for depreciation are 5 five to 7 seven years

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.

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.

During the year ended December 31, 2021, the Company recorded a loss

on disposal of equipment of $ 29,732 .

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

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

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which

those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change

in tax rates is recognized in income in the period that includes the enactment date.

At December 31, 2020 and 2019, the Company

had a full valuation allowance against its deferred tax assets.

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.

tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary

differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized

in income in the period that includes the enactment date.

At December 31, 2021 and December 31, 2020, the Company had a full valuation

allowance against its deferred tax assets.

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, 2021 and

2020, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.

The Company’s 2021, 2020, and 2019 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.

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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

and estimates using a market participant approach that directly impact the results of the testing.

In making these assumptions

and estimates, the Company uses industry accepted valuation models and set criteria that are reviewed and approved by various

levels of management.

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:

Impairment exists

if the carrying value of a reporting unit exceeds its estimated fair value.

To determine the fair value of goodwill and intangible assets,

the Company uses many assumptions and estimates using a market participant approach that directly impact the results of the testing.

making these assumptions and estimates, the Company uses industry-accepted valuation models and set criteria that are reviewed and approved

by various levels of management.

Revenue Recognition

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

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

and DRaaS type solutions (cloud) allows clients to centralize and streamline their technical and mission critical digital information

as a Service (IaaS) provides clients

the ability to migrate compute and store on DSC enterprise-level technical assets in Tier 3 data centers.

The Company provides a turnkey

solution whereby achieving reliable and cost-effective, multi-tenant IBM Power compute, flash storage, disaster recovery and cyber security

while eliminating client capital expenditures .

can subscribe to disaster recovery

solutions without subscribing to IaaS.

Product offerings provided directly from the Company are High Availability, Data Vaulting and DRaaS

type solutions, including standby servers which allow clients to centralize and streamline their mission-critical digital information

and technical environment.

Clients data can be backed up, replicated, archived and restored to meet their back to work

objective in a disaster.

Infrastructure as a Service (IaaS) assist clients to achieve reliable and cost-effective computing and

high availability solutions while eliminating or supplementing Capex.

services are performed at the inception of a contract.

The Company offers professional assistance to its clients during the installation

On-boarding and set-up services ensure that the solution or software is installed properly and function as designed

to provide clients with the best solutions.

In addition, clients that are managed service clients have a requirement for DSC to

offer time and material billing.

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.

Client’s data is vaulted, maintenance of retention schedules for corporate governances and regulations

to meet their back to work objective in a disaster .

Managed Services

services are performed at the inception

of a contract.

The Company provides professional assistance to its clients during the implementation processes.

On-boarding and set-up

services ensure that the solution or software is installed properly and function as designed to provide clients with the best solutions.

In addition, clients that are managed service clients have a requirement for the Company to offer time and material billing .

Company also derives both one-time and subscription-based revenue, from providing support, management and renewal of software, hardware,

third-party maintenance contracts and third-party cloud services to clients.

The managed services include help desk, remote access, operating

system and software patch management, 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

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

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

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

VoIP and Data Services

Company provides VoIP, Internet access and data transport services to ensure businesses maintain connectivity from any location nationwide.

The Company provides, a highly reliable Hosted VoIP solution with equipment options for IP phones and internet speeds of up to 10Gb delivered

over fiber optics, and Cloud-First SD-WAN solutions that improves connectivity to cloud services.

Disaggregation of revenue

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

Schedule of revenue is disaggregated by major product

December 31, 2021

Internationa l

Cloud Infrastructure & Disaster Recovery

Equipment and Software

Managed Services

Professional Fees

Nexxis VoIP Services

Total Revenue

Ended December 31, 2019

United States

Nexxis Services

December 31, 2020

International

Infrastructure & Disaster Recovery/Cloud Service

Equipment and Software

Managed Services

Professional Fees

Nexxis VoIP Services

Total Revenue

Ended December 31,

Timing of revenue recognition

Products transferred at a point in time

Products and services transferred over time

Total Revenue

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.

Infrastructure

& Disaster Recovery/Cloud Service

of revenue recognition

Products transferred at a

point in time

Products and services

transferred over time

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.

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.

For clients who are billed on an 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

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

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

sale of servers to the end user

10) License :

Data Vaulting :

subscription-based service that encrypts and transfers data to secure location further

replicates the data to a second Company technical center where it remains encrypted.

Ensuring retention schedules for corporate compliance.

Provides for twenty-four (24) hour or less recovery time and uses advanced data reduction reduplication technology to shorten restore

High Availability:

A managed subscription-based service that offers cost-effective

mirroring software replication technology and provides one (1) hour or less recovery time.

Infrastructure as a Service:

a cloud subscription-based service offers

“capacity-on-demand” for IBM Power and Intel server systems.

subscription-based service offers continuous internet connection along with FailSAFE providing disaster recovery.

Support and Maintenance :

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

Implementation/Set-Up Fees:

onboarding and set-up IaaS and DRaaS and Cyber

Equipment sales :

sale of servers and data storage equipment to the client.

granting SSL certificates and other licenses.

VoIP services and Direct Internet Access:

subscription-based business

Hosted VoIP, SIP Trunk and Toll-Free solutions.

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.

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

client obtains access at a point in time but continues to have access for the remainder of the subscription period, the client

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As the performance

obligation is satisfied evenly across the term of the contract, revenue should be recognized on a straight-line basis over the

contract term.

obligation is satisfied evenly across the term of the contract, revenue is recognized on a straight-line basis over the contract

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.

revenue is 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

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

License –

granting SSL certificates and other licenses

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Based on the guidance, the Company considers

its license offerings to be akin to functional IP and will recognize revenue at the point in time the license is granted and/or

renewed for a new period.

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

its license offerings to be akin to functional IP and recognizes revenue at the point in time the license is granted and/or renewed

for a new period.

terms of the contracts typically 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

for its services plus any overages or additional services.

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

These warranties are not sold separately

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

the instances that contracts have multiple performance obligations, the Company uses judgment to a establish stand-alone price for

each performance obligation separately.

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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 360-10-35, the Company reviews its 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.

Company expenses the costs associated with advertising as they are incurred.

The Company incurred $ 396,303 and $ 309,003 for

advertising costs for the year ended December 31, 2021 and 2020, respectively.

Stock-Based Compensation

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

to employees and non-employees.

The Company 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.

The valuation

methodology used to determine the fair value of the options issued during the period is 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 assessment.

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

The Company’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.

(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)

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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

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

31, 2021 and 2020:

Net Income (Loss) Available to Common Shareholders

Schedule of Earning per share basic and dilute

the Year Ended December 31,

Net Income Available to Common Shareholders

Weighted average number of common shares – basic

Dilutive securities

Weighted average number of common shares - diluted

Earnings (Loss) per share, basic

Earnings (Loss) per share, diluted

Weighted average number of common shares

Earnings per share, basic

Earnings per share, diluted

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:

Schedule of anti-dilutive income (loss) per share

Year ended December 31,

3 - Property and Equipment

and equipment, at cost, consist of the following:

Schedule of property and equipment

Storage equipment

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Net property and equipment

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

expense for the year ended December 31, 2021 and 2020 was $ 959,974 and $ 838,566 , respectively.

4 - Goodwill and Intangible Assets

and intangible assets consisted of the following:

Schedule of goodwill and intangible assets

December 31, 2021

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Non-compete agreements

Website and Digital Assets

Total intangible assets subject to amortization

Total Goodwill and Intangible Assets

scheduled remaining amortization is as follows:

Years ending December 31,

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.

amortization over the next five years are as follows:

Schedule of amortization over the next two years

Twelve months ending December 31,

expense for the year ended December 31, 2021 and 2020 were $ 324,371 and

$ 194,000 respectively.

During the year ended December 31, 2021, the Company recorded a loss on disposal of assets of $ 15,000 related

to trademarks.

Company currently has two leases for office space located in Melville, NY.

first lease for office space in Melville, NY commenced on September 1, 2019.

The term of this lease is for three years and eleven

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

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

lease for office space in Warwick, RI, called 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 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

The annual base rent was $ 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.

The Company satisfied the terms of the lease and no longer occupies this premise.

July 31, 2021, the Company signed a 3 three-year

lease for approximately 2,880 square feet of office space at 980 North Federal Highway, Boca Raton, FL.

The commencement date of the lease was August

The monthly rent is approximately $ 4,500 .

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

These leases are month to month and the

monthly rent is approximately $ 39,000 .

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

The lease term is 13 months

and requires monthly payments of $ 1,403 and expires on July 31, 2023 .

On January 1, 2022, the Company

entered into a lease agreement for office space with WeWork in Austin, TX.

The lease term is six months and requires monthly payments

and expires on June

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

June 1, 2020, the Company entered into a lease agreement with a finance company to lease equipment.

The lease obligation is

payable in monthly installments of $ 5,008 .

The lease carries an interest rate of 7 %

and is a 3 three-year lease.

The term of the lease ends June

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

June 29, 2020, the Company entered into a lease agreement with a finance company to lease equipment.

The lease obligation is

payable in monthly installments of $ 5,050 .

The lease carries an interest rate of 7 %

and is a 3 three-year lease.

The term of the lease ends June

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

July 31, 2020, the Company entered into a lease agreement with a finance company to lease equipment under a finance lease.

obligation is payable in monthly installments of $ 4,524 .

The lease carries an interest rate of 7 %

and is a 3 three-year lease.

The term of the lease ends July

November 1, 2021, the Company entered into a lease agreement with a finance company to lease equipment under a finance lease.

lease obligation is payable in monthly installments of $ 3,152 .

The lease carries an interest rate of 6 %

and is a 3 three-year lease.

The term of the lease ends September 21, 2024.

Finance Lease

Obligations – Related Party

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

(Systems Trading) to refinance

all leases into one lease.

(“Systems Trading”) to refinance all

equipment 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 lease carries an interest rate of 5 %

and is a 4 four-year lease.

The term of the lease ends April

Systems Trading is owned

and operated by the Companys President, Hal Schwartz.

Systems Trading is owned and operated by the Company’s President, Harold Schwartz.

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

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Trading with monthly installments of $ 29,592 .

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

the lease ends December 31, 2023.

The lease carries an interest rate of 6.75 %

and is a 5 five-year lease.

The term of the lease ends December

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.

lease calls for monthly installments 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 installments of $ 461 and expires on March 1, 2022 .

It carries an interest rate of 6.7 %.

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

January 1, 2020, the Company entered into a new lease agreement with Systems Trading 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 3 three-year lease.

The term of the lease ends January

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:

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 %.

Company determines if an arrangement contains a lease at inception.

Right of Use “ROU” assets represent the Company’s

right to use an underlying asset for the lease term and lease liabilities represent its 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.

The Company’s lease term includes options to extend the lease when it is reasonably

certain that it 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.

ROU assets and liabilities are recognized at the lease commencement date based on the

estimated present value of lease payments over the lease term.

The Company recognizes lease expense for these leases on a straight-line

basis over the lease term.

The Company recognizes variable lease payments in the period in which the obligation for those payments

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 5 % was used in preparation

of the ROU asset and operating liabilities.

The components

of lease expense were as follows:

Schedule Of Components of lease expense

Components of lease expense

December 31, 2021

Finance lease:

Finance leases:

Amortization of assets, included in depreciation and amortization expense

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Total net lease cost

balance sheet information related to leases was as follows

Operating lease ROU asset

Supplemental balance sheet information related to leases was as follows

Operating Leases

Operating lease right-of-use asset

Current operating lease liabilities

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Accumulated amortization

( 2,759,051 )

Property and equipment, net

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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 leases

Financing cash flows related to finance leases

Weighted average remaining lease term (in years):

Supplemental balance sheet information related to leases

Ended December 31, 2021

Cash paid for amounts included in the

measurement of lease liabilities:

Operating cash flows related

to operating leases

Financing cash flows related to finance

Weighted average remaining lease term

Operating leases

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obligations under the operating and finance leases at December 31, 2021 mature as follows:

For the Year ending December 31,

Operating Leases

Finance Leases

Schedule Of Long-term obligations under the operating and Finance leases

the Twelve Months Ended December 30,

Total lease payments

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Total lease obligations

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.

( 1,056,092 )

of December 31, 2021, the Company had no additional significant operating or finance leases that had not yet commenced.

under all operating leases for the year ended December 31, 2021 and 2020 was $ 184,131 and $ 169,716 , respectively.

6 - Commitments and Contingencies

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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.

will adversely impact the Company’s 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

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 shut-downs;

(iii) the impact on U.S.

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

(iv) potential adverse

effects on the financial markets and access to capital;

(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;

(vi) increased

cybersecurity risks as a result of pervasive remote working conditions;

and (vii) the Company’s ability to effectively carry

out its operations due to any adverse impacts on the health and safety of its employees and their families.

NYS Executive Order 202.6, “Essential Business,” Data Storage Corporation is an “Essential Business” based on

the following in the Executive order number 2:

Essential 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.

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.

always maintains the ability for team members to work virtually 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, 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 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.

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 CEO.

As of December 31, 2021, and 2020

the balance was $ 0 and

$ 24 respectively.

During the year ended December 31, 2021, the Company terminated the revolving credit line.

March 24, 2017, Flagship entered into a revolving demand note with a bank for an amount not to exceed $ 750,000 .

The line of credit

may be cancelled by either party at any time for any reason by written notice to the other and is collateralized by all of Flagship’s

assets and the personal guarantee of two members of the Company.

The stated interest rate is adjustable with interest equal to

the Prime Rate plus four percent per annum.

Repayment terms consist of interest only due monthly with all principal and remaining

interest due on demand.

The line of credit balance outstanding as of December 31, 2021, was $ 0 .

During the year ended December

31, 2021, the Company terminated the revolving credit line.

7 – Note payable

On 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.

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.

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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,

During the year ended December 31, 2021, the Company recorded

interest of $6,140.

During the year ended December 31, 2021, the PPP loan and accrued interest were forgiven and the Company recorded

a gain on forgiveness of debt on the Consolidated Statements of Operations.

On June 1, 2021, the Company

assumed the PPP loan of Flagship Solutions, LLC in the amount of $307,300.

During the year ended December 31, 2021, the Company recorded

interest of $3,423.

During the year ended December 31, 2021, the PPP loan and accrued interest were forgiven and the Company recorded

a gain on forgiveness of debt on the Consolidated Statements of Operations.

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

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.

May 13, 2021, the Company entered into an underwritten public offering of an aggregate of 1,600,000 units, each consisting of one share of

the Company’s common stock, par value $ 0.001 per share , together with one warrant

to purchase one share of Common Stock at an exercise

price equal to $ 7.425 per share of Common Stock.

public offering price was $ 6.75 per Unit and the underwriters agreed to purchase 1,600,000 Units at a 7.5 % discount

to the public offering price.

The Company granted the representative a 45-day option to purchase an additional 240,000 shares

of Common Stock and/or an additional 240,000 Warrants, in any combination thereof, to cover over-allotments.

On May 15, 2021,

the representative exercised the over-allotment option to purchase an additional 240,000 Warrants to purchase 240,000 shares of

Common Stock.

The net proceeds from the offering were $ 9.5 million.

On May 14, 2021,

the Company effected a 1-for-40 reverse stock split.

As a result, all share information in the accompanying condensed financial statements

has been adjusted as if the reverse stock split happened on the earliest date presented.

July 21, 2021, the Company entered into a securities purchase agreement with certain accredited institutional investors resulting

in the raise of $ 8,305,000 in gross proceeds to the Company.

Pursuant to the terms of the purchase agreement, the Company

agreed to sell, (i) an aggregate of 1,375,000 shares of the Company’s common stock, par value $0 .001 per

share and (ii) warrants to purchase an aggregate of 1,031,250 shares of the Company’s Common Stock at an exercise

price of $ 6.15 per share, subject to adjustment.

The placement agent was entitled to a cash fee of 6.5 % of the gross proceeds of the Offering and the reimbursement for certain

out-of-pocket expenses up to $ 50,000 .

The net proceeds from the offering

were $7.5 million.

the year ended December 31, 2021, employees exercised 6,592 options via cashless exercise, into 5,060 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:

the year ended December 31, 2021, warrant holders exercised 455,390 warrants into common stock.

The Company received

$ 3,381,271 for these warrants.

Stock Options

A summary of the

Company’s option activity and related information follows:

Schedule of option activity and related information

Under Options

Exercise Price

Outstanding at January 1, 2019

Options Outstanding at January 1, 2020

Options Granted

Expired/Cancelled

Outstanding at December 31, 2019

14.00 – 14.40

Options Outstanding at December 31, 2020

Options Granted

Expire/Cancelled

Outstanding at December 31, 2020

Exercisable at December 31, 2020

Options Outstanding at December 31, 2021

Options Exercisable at December 31, 2021

compensation expense for options totaling $ 171,798 and $ 158,728 was recognized in our results for the year ended December 31,

and 2019, respectively based on awards vested.

2021 and 2020, respectively.

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

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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.

The Company uses the historical volatility of peer entities due to the

lack of sufficient historical data of its stock price.

The Company’s calculation of estimated volatility is based on historical stock prices of the Company over

a period equal to the expected life of the awards.

of December 31, 2021, there was $ 432,296 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

under the Company’s share-based compensation plans that is expected to be recognized over a weighted-average period of approximately 2.66 years.

The weighted average fair value of options granted,

and the assumptions used in the Black-Scholes model during the year ended December 31, 2021 and 2020 are set forth in the table below.

Schedule of weighted average fair value of options granted

Weighted average fair value

of options granted

Risk-free interest rate

Expected life (years)

Dividend yield

Stock Warrant

summary of the Company’s warrant activity and related information follows:

Schedule of warrant activity and related information

Under Options

Exercise Price

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Warrants Granted

Warrants Outstanding at December 31, 2019

Warrants Granted

Warrants Outstanding at December 31, 2020

Warrants Exercisable at December 31, 2020

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.

Warrant Outstanding at December 31, 2020

Warrant Granted

Expired/Cancelled

Warrant Outstanding at December 31, 2021

$ 7.43 - 0.40

Warrant Exercisable at December 31, 2021

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.

No Preferred shares are issued as of December 31, 2021.

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

6 unchanged sentences

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.

9 - Income Taxes

components of deferred taxes are as follows:

Net operating loss carry-forward

share of Series A Preferred Stock, in preference to the holders of all common stock, 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 Company.

On May 18, 2021, the Company converted 1,401,786 shares

of Series A Preferred Stock into 43,806 shares of common stock.

As part of this transaction, the Company also paid $ 1,179,357 the

accrued and unpaid dividends.

Accrued dividends at December 31, 2021 and 2020 were $ 0

and $ 1,115,674 ,

respectively .

Note 9 - Income Taxes

The components of deferred taxes

are as follows:

Schedule of components of deferred taxes

Ended December 31,

Deferred tax assets:

Net operating loss carry

Stock based compensation

Property and equipment

Total deferred tax assets

Deferred tax liabilities:

Total deferred tax liabilities

Valuation Allowance

Net deferred tax asset

Net deferred tax liabilities

Company had federal and state net operating tax loss carry-forwards of $ 5,935,000 and $ 5,605,000 , respectively as of December

1 unchanged sentence

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.

In 2021 and 2020, 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.

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

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not be recovered and, accordingly, a valuation allowance was recorded as of December 31, 2021 and 2020.

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)

A reconciliation of the Company’s effective

income tax rate to the expected income tax rate, computed by applying the federal statutory income tax rate of 21.0% for each of the years

ended December 31, 2021 and 2020 to the Company’s loss before provision (benefit) for income taxes, is as follows:

Schedule of expected income tax expense (benefit)

federal statutory rate

Valuation allowance

Income tax provision

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.

are currently not involved in any litigation that we believe 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 the Company, its common stock, any of its subsidiaries or of Data Storage’s or Data Storage’s

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

11 - Related Party Transactions

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

Lease Obligations – Related Party

the year ended December 31, 2021, the Company entered into one related party finance lease obligations.

See Note 5 for details.

Piluso (Chairman and CEO) and Harold Schwartz (President) collectively own 100% of Nexxis Capital LLC (“Nexxis Capital”).

Nexxis Capital was formed to purchase equipment and provide leases to Nexxis Inc.’s customers.

No lease obligations exist between

the Company and Nexxis Capital.

The Company received funds of $14,209 and $37,954 during the year

ended December 31, 2021 and 2020 respectively.

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

February 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

The Company acquired Flagship on May 31, 2021, and became its wholly-owned subsidiary.

Pursuant 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, was 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 totaling

$110,684, and subject to adjustment as set forth below in connection with a networking capital adjustment totaling $307,300, and the Company

paid the broker fess of $402,727, 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.

In the event 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 at Closing, subject to a cap of $4,950,000.

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 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

with the Closing, Flagship and Mark Wyllie, Flagship’s Chief Executive Officer, entered into an Employment Agreement, which

was 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 the Company.

The Wyllie Employment Agreement provides for:

(i) an annual base

salary of $ 170,000 , (ii) management bonuses comprised of twenty-five percent (25%) of Flagship’s net income available in

free cash flow as determined in accordance with GAAP for each calendar quarter during the term, (iii) an agreement to issue him

stock options of the Company, subject to approval by the Board, commensurate with his position and performance and reflective

of the executive compensation plans that the Company has in place with its other subsidiaries of similar size to Flagship, (iv)

life insurance benefits in the amount of $ 400,000 , and (v) four weeks paid vacation.

In the event Mr.

Wyllie’s employment

is terminated by him for good reason (as defined in the Wyllie Employment Agreement) or by Flagship without cause, he will be

entitled to receive his annual base salary through the expiration of the initial three-year employment term and an amount equal

to his last annual bonus paid, payable quarterly.

Pursuant to the Wyllie Employment Agreement, we have agreed to elect Mr.

to the Board and the board of directors of Flagship to serve so long as he continues to be employed by the Company.

The employment

agreement contains customary non-competition provisions that apply during its term and for a period of two years after the term

In addition, pursuant to the Wyllie Employment Agreement, Mr.

Wyllie will be appointed to serve as a member of the Company’s

Board of Directors and the board of directors of Flagship to serve so long as he continues to be employed by us.

the closing of the transaction, Flagship’s financial statements as of the Closing were consolidated with the Consolidated

Financial Statements of the Company.

These amounts are provisional and may be adjusted during the measurement period.

The following

sets forth the components of the purchase price:

Schedule of Purchase price

Purchase price:

Cash paid to the seller

Total purchase price

Tangible Assets Acquired:

Accounts Receivable

Prepaid Expenses

Website and Digital Assets

Security Deposits

Total Tangible Assets Acquired

Tangible Liabilities Assumed:

Accounts Payable and Accrued Expenses

Deferred Revenue

Deferred Tax Liability

PPP Loan Payable

Total Tangible Liabilities Assumed

Net Tangible Assets Acquired

Excess Purchase Price

The excess purchase

price amounts are provisional and may be adjusted during the one-year measurement period as required by U.S.

The following

table provides a summary of the allocation of the excess purchase price.

Schedule of unaudited pro-forma

Customer Relationships

Assembled Workforce

Excess Purchase Price

The intangible

assets acquired include the trade names, customer relationships, assembled workforce, and goodwill.

The deferred tax liability represents

the tax effected timing differences relating to the acquired intangible assets to the extent they are not offset by acquired deferred

represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisition.

No portion of

the goodwill is deductible for tax purposes.

The following

presents the unaudited pro-forma combined results of operations of the Company with Flagship Solutions as if the entities were

combined on January 1, 2020.

Net income attributable to common shareholders

Net income per share

Weighted average number of shares outstanding

Net loss attributable to common shareholders

Net loss per share

Weighted average number of shares outstanding

13 - Subsequent Events

Subsequent to December 31, 2021, the Company

issued 38,300 options

to employees through the 2021 Stock Incentive Plan.

These options vest over 3 three years and have exercise prices ranging from

Subsequent to December 31, 2021, options

were exercised to obtain 3,334 shares of common stock.

These options were exercised for $ 6,935 .

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