What changed in this filing

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Item 1. Business

2024-03-28 compared with 2023-03-31 · 196 added, 355 removed, 7 unchanged (99% of the section changed)

The Industry and Opportunity

Data Storage Corporation provides Cloud Managed Services

and technologies across multiple platforms.

The Company’s technical assets are in geographically diverse, Tier 3 compliant data

centers throughout the USA and Canada.

Hybrid and Multi-Cloud have become mainstream technological

offerings of the Cloud infrastructure managed services industry as companies have moved away from legacy, on-premises technology solutions.

This approach has grown more complex, as companies utilize disparate technical environments, including on-premises equipment and software,

multi-clouds interfacing with Software as a Service providers, Amazon AWS and others while focusing on the remote employee or a contractor

for higher levels of security, driving growth in managed cloud services.

Cloud Managed Service Providers assist businesses

in achieving their desired security levels, technical cloud infrastructure and financial objectives while optimizing the value of these

technologies and cloud resources through multi-cloud management, ensuring business continuity, governance, and operational efficiencies.

One subset of this five hundred-billion-dollar industry

and a highly-focused segment of the Company is the IBM Power server;

of which AWS, Google and Microsoft are not competitors.

estimated that businesses in USA and Canada are operating over one million virtual IBM Power servers, known as LPAR’s.

to the most recent information received from IBM, the typical industries utilizing IBM Power servers are finance, retail, healthcare,

government, and distribution organizations.

The Company, through its CloudFirst subsidiary, is

a leader in providing IBM Power cloud infrastructure, disaster recovery and the creation of these unique offerings for over 15 years.

The opportunity for the Company, in the IBM Power

server portfolio segment is capturing a share of this annual recurring revenue marketplace that is currently under migration to cloud

infrastructure.

The Company believes businesses

are increasingly under pressure to improve the efficiency of their information and storage systems accelerating the migration from self-managed

technical equipment and solutions to fully managed multi-cloud technologies to reduce cost, protect capital, ensure disaster recovery,

protect the custom applications developed for these systems, and compete effectively.

These trends create an opportunity for cloud technology

service providers.

The Company’s market

opportunity is derived from the demand for fully managed cloud and cybersecurity services across all major operating systems.

CloudFirst’s addressable

market is approximately $36 billion in the United States and Canada with limited competition today.

Our Flagship subsidiary provides

business continuity and infrastructure solutions combining on-premises equipment and software with its value-added managed services to

business customers.

Flagship maintains strong partner relationships with some of the largest IT Manufactures such as the IBM Corporation

in supplying the technology behind the highly technical designs built for business customers.

Flagship’s vision is to expand its

multi-cloud infrastructure solutions with more managed services, highlighted by its expanding Cyber Security offerings to capture more

of the marketplace outside of the CloudFirst sales and marketing programs.

Our Nexxis subsidiary is

a voice and data solution provider that utilizes major nationwide carriers and providers.

The subsidiary provides a suite of communications

services including Hosted VoIP, Internet Access, Data Transport, and SD-WAN.

The Nexxis complete voice and data solution combines elements

of these services into a fully managed option that delivers high reliability and is engineered to further enhance business continuity.

Nexxis’s goal is to provide a higher level of technology yet simplify management and combine cost savings for our clients wherever

According to Fortune Business

Insights, the Cloud Managed Services industry in North America was $16.3 billion in 2019 and has been growing at a rate of 13.8% CAGR

bringing us to $24 billion by the end of 2022.

Disaster Recovery is projected to be a $3.6 billion in the US by the end of 2022 which

is 35% of the $10.3 billion globally based on Grandview Research Disaster Recovery Solutions Market Size report.

Cyber Security, specifically

the MDR segment, is an established market recognized by buyers .

Gartner observed a 35% growth in end users’ inquiries on

the topic in the last year.

Gartner estimates that by 2025, the MDR market will reach $2.15 billion in revenue, up from $1.03 billion

in 2021, for a compound annual growth rate (CAGR) of 20.2%.

The Company’s VOIP solutions fit well into this steadily growing segment

which is expected to reach $90 billion worldwide in 2022 with a CAGR of 3.1% with $17 billion in the US according to Globe Newswire Market

Analysis and Insights:

Global VoIP Market.

Company Overview

Data Storage Corporation, is headquartered in Melville,

DTST operates through three subsidiaries;

DSC, a Delaware corporation now referred to as CloudFirst Technologies Corporation;

Flagship Solutions, LLC;

and Nexxis Inc.

These subsidiaries provide solutions and services to a broad range of clients in several industries

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

The subsidiaries

maintain business development teams, as well as independent distribution channels.

The Company typically provides long-term subscription-based

disaster recovery, and cloud infrastructure, cyber security, third party cloud management, managed services, dedicated internet access

and UCaaS / VoIP services.

During 2022, based on the

May 2021 capital raise and the up list to Nasdaq, the Company has accelerated organic growth strategies by adding distribution, marketing,

and technical personnel.

Management continues to be focused on building the Company’s sales and marketing strategy and expanding

its technology assets throughout its data center network.

The Company believes businesses

are increasingly under pressure to improve the reliability and efficiency of their information and storage systems accelerating the migration

from self-managed technical equipment and solutions to fully managed multi-cloud technologies to reduce cost and compete effectively.

Further, in today’s environment, capital preservation is an encouragement to move from a capital-intensive, on-premises technology,

to a pay as you grow, CapEx to OpEx model.

These trends create an opportunity for Cloud Technology Service providers.

The Company’s market

opportunity is derived from the demand for fully managed cloud and cybersecurity services across all major operating systems.

CloudFirst alone has an addressable

market estimated at $36 billion in annual recurring revenue in the United States and Canada with limited competition.

The Company has designed

and built its solutions and services to support demand for cloud-based IBM Power System that support client critical workloads and custom

in-house developed applications, manage hybrid cloud deployments and continue to provide solutions that keep data and workloads protected

from disasters and security attacks.

Company’s business offices are located in New York, Florida and Texas.

The New York and Florida offices include a technology center

and labs adapted to meet the technical requirements of the Company’s clients.

The Company maintains its own infrastructure, storage,

and networking equipment required to provide subscription solutions in seven geographically diverse data centers located in New York,

Massachusetts, Texas, Florida and North Carolina, and in Canada, Toronto, and Barrie, serving clients in the United States and Canada.

The Company’s disaster

recovery and business continuity solutions allow clients to quickly recover from system outages, human and natural disasters, and cyber

security attacks, such as Ransomware.

The Company’s managed cloud services begin with migration to the cloud and provide ongoing

system support and management that enables its clients to run their software applications and technical workloads in a multi-cloud environment.

The Company’s cyber security offerings include comprehensive consultation and a suite of data security, disaster recovery, and remote

monitoring services and technologies that are incorporated into the Company’s cloud solutions or are delivered as a standalone managed

security offering covering the client site endpoint devices, users, servers, and equipment.

The Company’s

solution architects, and business development teams work with organizations identifying and solving critical business problems.

Company carefully plans and manages the migration and configuration process, continuing the relationship and advising its clients

long after the services have been implemented.

Reflecting on client satisfaction, the Company’s renewal rate on client

subscription solutions is approximately 94% after their initial contract term expired.

Data Storage Corporation (“DSC,”

“Data Storage” or the “Company”), based in Melville, New York, leverages its expertise through its three

subsidiaries:

CloudFirst Technologies Corporation (formerly DSC), Flagship Solutions, LLC, and Nexxis Inc.

Catering to diverse

sectors such as healthcare, banking, manufacturing, and government, DSC delivers a suite of IT services, including disaster recovery,

cloud infrastructure, cybersecurity, managed services and dedicated internet access and UCaaS / Voice over Internet Protocol (VoIP)

The Company’s approach involves long-term subscription models, robust business development, and expansive distribution

In 2023, following a capital infusion and its

Nasdaq listing in May 2021, DSC embarked on a growth trajectory, enhancing its distribution, marketing capabilities, and technological

infrastructure.

This strategic expansion is aimed at reinforcing the Company’s position in the evolving IT landscape, where

there’s a marked shift towards multi-cloud technologies and cybersecurity solutions.

Market Opportunity and Strategic Focus

Recognizing the urgent need for reliable and

efficient IT solutions, DSC is tapping into the growing demand for managed cloud and cybersecurity services.

With CloudFirst Technologies

positioned in a $36 billion annual recurring revenue market in the U.S.

and Canada, the Company is at the forefront of addressing

critical IT challenges with limited competition.

DSC’s offerings are designed to support a spectrum

of needs from cloud-based IBM Power System deployments for critical workloads to comprehensive disaster recovery and cybersecurity protections.

The focus is on hybrid cloud deployments, ensuring data and workloads remain secure against various threats.

Operational Footprint

DSC operates from key locations in New York,

Florida, and Texas, with technology centers and labs designed to meet sophisticated client requirements.

The Company boasts a network

of six geographically diverse data centers across the U.S.

and Canada, ensuring resilient and scalable IT solutions.

Solutions and Services

The Company’s core offerings include

disaster recovery and business continuity, managed cloud services, and a comprehensive suite of cybersecurity solutions.

cloud migration to ongoing management, DSC ensures seamless operation of client applications and workloads in a multi-cloud environment.

The Company’s success is underscored by a client subscription renewal rate.

Growth and Innovation

Driven by a commitment to innovation and client

satisfaction, DSC continues to refine its service offerings and expand its market reach.

The Company’s strategic growth is

supported by a team of solution architects and business development professionals dedicated to solving complex business challenges

and fostering long-term client relationships.

Through a blend of organic growth strategies and targeted expansion efforts, DSC

is poised to capitalize on the opportunities presented by the dynamic IT landscape.

Growth Strategies and Core Services

Growth Strategies

The Company will continue to drive revenues by expanding

distribution channels while expanding digital and direct marketing programs.

The Company will accelerate building upon its social and

digital lead generation programs.

Further, the Company will continue to seek synergetic acquisitions that expand distribution, leading

a technology trend, add to its existing technical staff and create economies of scale improving gross profit margins.

The Company increases revenue

and drives growth by developing and managing collaborative solutions as well as joint marketing initiatives.

The Company has a diverse

community of distribution partners, ranging from IBM Business Partners, Software Vendors, IT resellers, Managed Service Providers, application

support providers, consultants, and other cloud infrastructure providers.

The Company believes there

is a significant need for its solutions on a global basis and, accordingly, the opportunity for it to grow its business through international

expansion as these markets increase their use of multi-cloud solutions.

The Company’s Core

The Company provides an array of multi-cloud information technology solutions in highly secure, enterprise-level cloud services

for companies using IBM Power Systems, Microsoft Windows, and Linux.

Specifically, the Company’s support services cover:

Data Storage Corporation aims to enhance revenue streams

and market presence by:

● Broadening distribution channels and bolstering digital and direct marketing efforts.

● Leveraging social and digital platforms for lead generation.

● Pursuing synergistic acquisitions to expand distribution, innovate technology trends, augment the technical

team, and achieve economies of scale to improve gross profit margins.

● Fostering a diverse network of distribution partners, including IBM Business Partners, Software Vendors,

IT Resellers, Managed Service Providers, and other cloud infrastructure providers, to create collaborative solutions and marketing initiatives.

● Targeting global expansion to tap into the increasing demand for multi-cloud solutions worldwide.

Core Services

Data Storage Corporation provides a comprehensive

suite of multi-cloud IT solutions, ensuring high security and enterprise-level services for clients using IBM Power Systems, Microsoft

Windows, and Linux.

Key service areas include:

● Cyber Security Solutions:

ezSecurity™ offers

a suite of comprehensive cyber security solutions that can be utilized on systems at the client’s location or on systems hosted

in the Company.

These solutions include fully managed endpoint (PCs and other user devices) security with active threat mitigation,

system security assessments, risk analysis, and applications to ensure continuous security.

ezSecurity™ contains a specialized

offering for protecting and auditing IBM systems including a package designed to protect IBM systems against Ransomware attacks.

Data Protection and

Recovery Solutions:

ezVault™ solution

is at the core of the Company’s data protection services and allows its clients to have their data protected and stored offsite

with unlimited data retention in a secure location that uses encrypted, enterprise-grade storage which allows for remote recovery

from system outages, human and natural disasters, and cyber security attacks like Ransomware and viruses allowing restoration of

data from a known good point in time prior to an attack.

ezRecovery™ provides

standby systems, networking, and storage in the Company’s cloud infrastructure that allows for faster recovery from client

backups stored using ezVault™ at the same cloud based hosted location.

ezAvailability™

solution offers reliable real-time data replication for mission-critical applications with Recovery Time Objective under fifteen

minutes and near-zero Recovery Point Objective, with optional, fully managed replication services.

The Company’s ezAvailability™

service consists of a full-time enterprise system, storage, and network resources, allowing quick and easily switched production

workloads to the Company’s cloud when needed.

The Company’s ezAvailability™ services are backed by a Service-Level

Agreement (“SLA”) to help assure performance, availability, and access.

ezMirror™ solution

provides replication services that mirror the clients’ data at the storage level and allows for similar near-zero Recovery

Point Objective as ezAvailability with less application management and Recovery Time Objective under 1 hour.

Cloud Hosted Production

ezHost™ solution provides managed cloud services

that removes the burden off system management from its clients and ensures that their software applications and IT workloads are running

ezHost™ provides full-time, scalable compute, storage, and network infrastructure resources to run clients’ workloads

on the Company’s enterprise-class infrastructure.

ezHost™ replaces the cost of support, maintenance, system administration,

space, electrical power, and cooling of the typical hardware on-premises systems with a predictable monthly expense.

The Company’s

ezHost services are backed by an SLA governing performance, availability, and access.

ezSecurity™, offering comprehensive security solutions for endpoint

security, system assessments, risk analysis, and IBM system protection, including Ransomware defense.

● Data Protection and Recovery Solutions:

ezVault™ for offsite data protection, ezRecovery™

for fast data recovery, ezAvailability™ for real-time data replication with minimal recovery objectives, and ezMirror™ for

data mirroring at the storage level.

● Cloud Hosted Production Systems:

ezHost™ delivers managed cloud services, providing scalable

resources for smooth operation of client workloads with predictable costs.

● Voice & Data Solutions:

Nexxis, our voice and data division, specializes in stand-alone and fully-managed VoIP, Internet Access, and Data Transport solutions

that satisfy the requirements of the traditional corporate and modern remote workforce.

Nexxis dedicated internet access services with

speeds of up to 10 Gbps and data transport circuits are typically delivered over fiber-optic networks while shared internet access is

typically delivered via fiber, coaxial, and wireless networks to help businesses stay fully connected from any location.

SD-WAN options

provide the ability for multi-site companies to prioritize their data traffic from site to site while FailSAFE, a Cloud-first SD-WAN solution,

can be used by a single location to gain industry-leading connectivity to cloud services and the internet.

Nexxis Hosted VoIP with Unified

Communications is a full-featured cloud-based PBX solution with built-in redundancy that provides business continuity and includes the

option to integrate with Microsoft Teams.

Corporate History

On October 20, 2008, the Company consummated a share

exchange transaction with Euro Trend Inc.

The Company subsequently changed its name from Euro Trend Inc.

to Data Storage Corporation.

Data Storage Corporation acquired the assets of SafeData,

LLC in June 2010, and the assets of Message Logic LLC, (“Message Logic”) in October 2012.

In November 2012, the Company entered into an agreement

with an IBM partner, ABC Services, Inc.

to provide an IBM Power cloud infrastructure offering, marketed under the name Secure Infrastructure

& Services LLC (“SIAS”), a New York limited liability company.

In October 2016, the Company purchased the assets

of ABC Services, Inc., which included the remaining 50% of the SIAS company.

On June 1, 2021, the Company merged its Florida company

with Flagship Solutions, LLC.

This transaction with an IBM Gold Business Partner was synergetic to the Company’s services and added

new solutions.

The result of these acquisitions, combined with the

Company’s business continuity disaster recovery and IBM Power cloud infrastructure solutions, positions Data Storage Corporation

Nexxis specializes in VoIP, Internet Access, and Data Transport solutions,

including dedicated internet services, SD-WAN options, and a cloud-based PBX solution integrated with Microsoft Teams for business continuity.

These strategies and services position Data Storage

Corporation for sustained growth by meeting the evolving needs of its clients and capitalizing on market opportunities.

Corporate History Summary

Data Storage Corporation, a Delaware corporation,

founded in 2001, became a subsidiary of Data Storage Corporation, a Nevada Corporation (“Data Storage Corporation Nevada”),

Data Storage Corporation Nevada, initially known as Euro Trend Inc., was founded on October 20, 2008, marking its start

with a share exchange transaction.

The Company underwent a name change to its current identity post-acquisition.

Key Milestones:

Acquired SafeData, LLC, expanding its disaster recovery and data protection services.

● October 2012:

Acquired Message Logic LLC, enhancing its data management and analytics capabilities.

● November 2012:

Partnered with ABC Services, Inc.

to launch Secure Infrastructure & Services

LLC (SIAS), offering for the first time IBM Power multi-tenant cloud infrastructure services.

● October 2016:

Completed the acquisition of the remaining shares of ABC Services, Inc., fully integrating

the SIAS offerings.

● June 1, 2021:

Merged with Flagship Solutions, LLC, an IBM Gold Business Partner, further expanding

its service offerings and solidifying its market leadership in business continuity, disaster recovery, and IBM Power cloud infrastructure

These strategic acquisitions and partnerships have

established Data Storage Corporation as a key player in cloud infrastructure and disaster recovery sectors, offering a comprehensive suite

of solutions to meet the evolving needs of its clients.

Competitive Landscape and Corporate Developments

Competitive Landscape

The markets for the Company’s products and services

are competitive.

However, competition is limited, in the CloudFirst subsidiary for this $36 billion marketplace, compared to the limitless

competitors, competing against Amazon Web Services (AWS), Google, and Microsoft today which hold an estimated 51% of the marketplace for

X86 cloud infrastructure and X86 disaster recovery platforms.

Today, the IBM Power community, based on a recent IBM user survey, only

15% of the IBM Power server community utilizes the cloud.

Other Company services and solutions, outside of the IBM Power user community

face many competitors for cyber security, however, these solutions and services are typically provided by the Company to their existing

clients and distribution companies.

These markets are characterized by frequent product

introductions and rapid technological advances.

The Company’s financial condition and operating results can be adversely affected

by these and other industry-wide downward pressures on gross margins.

Principal competitive factors important to the Company include price,

product features, relative price and performance, product quality and reliability, strong third-party software, marketing and distribution

capability, service and support and corporate reputation.

The Company is focused on expanding its market opportunities

globally related to disaster recovery and cloud infrastructure, primarily focused on the IBM community.

These markets are highly competitive

and include several large, well-funded and experienced participants.

The Company’s future financial condition and

operating results depend on the Company’s ability to continue to provide a high-quality solution as well as increase distribution

of the solutions in each of the markets in which it competes.

Flagship Solutions,

On February 4, 2021, we entered into an Agreement

and Plan of Merger (the “Merger Agreement”) with Data Storage FL, LLC, a Florida limited liability company and our wholly-owned

subsidiary (the “Merger Sub”), Flagship Solutions, LLC (“Flagship”), a Florida limited liability company, and

the owners (collectively, the “Equity holders”) 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), we acquired

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, our wholly-owned subsidiary.

The closing of the Merger (the “Closing”) was completed

on June 1, 2021.

Flagship is a provider of IBM equipment and solutions, managed services and cloud solutions that include cloud-based

server monitoring and management, 24×7 help desk support, and data center infrastructure management.

Concurrently with the Closing, Flagship and Mark Wyllie,

Flagship’s Chief Executive Officer, entered into an Employment Agreement (the “Wyllie Employment Agreement”), which

became 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 contains customary salary, bonus, employee benefits, severance

and restrictive covenant provisions.

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

Wyllie was appointed to serve as a

member of the Board during the term of his employment thereunder.

Wyllie, as of November 11, 2021, became an Officer of the Company.

Wyllie resigned from all positions he held with

Flagship and the Company on October 28, 2022.

Thomas Kempster has been appointed President of Flagship Solutions Group.

The foregoing information has been filed as an exhibit

to the 2021 Annual Report.

Readers should review those agreements for a complete understanding of the terms and conditions associated

with this transaction.

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 to Signature Bank, as the

lender, commencing on November 5, 2020.

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

lease payments and utility payments.

Management used the entire Loan amount for qualifying expenses.

Under the terms of the PPP, certain

amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

The Company received forgiveness

for the full amount during the year ended December 31, 2021.

Government Regulation

The Company is subject to various federal, state,

local and international laws with respect to its receipt, storage and processing of personal information and other customer data.

The Company receives, stores, and processes personal

information and other customer data.

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

where the Company may provide its offering of solutions.

The regulatory framework for privacy issues worldwide is currently complex and

evolving, and it is likely to remain uncertain for the foreseeable future.

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

regarding privacy and the storing, sharing, use, processing, disclosure, and protection of personal information and other customer data,

the scope of which are changing, subject to differing interpretations, and may be inconsistent among countries or conflict with other

The Company generally seeks to comply with industry standards and is subject to the terms of its privacy policies and privacy-related

obligations to third parties.

The Company strives to comply with all applicable laws, policies, legal obligations, and industry codes

of conduct relating to privacy and data protection to the extent possible.

Any failure or perceived failure by the Company to comply with

its privacy policies, its privacy-related obligations to customers or other third parties, its privacy-related legal obligations, or any

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

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

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

Any significant

change to applicable laws, regulations, or industry practices regarding the use or disclosure of the Company’s customer’s

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

could require the Company to modify its solutions and features, possibly in a material manner, and may limit its ability to develop new

services and features that make use of the data that its customers voluntarily share with the Company.

The Company’s solutions are used by customers

in the health care industry, and the Company must comply with numerous federal and state laws related to patient privacy in connection

with providing its solutions to these customers.

In particular, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”),

and the Health Information Technology for Economic and Clinical Health Act (“HITECH”) include privacy standards that protect

individual privacy by limiting the uses and disclosures of individually identifiable health information and implementing data security

Because the Company’s solutions may backup individually identifiable health information for its customers, its customers

are mandated by HIPAA to enter into written agreements with the Company known as business associate agreements that require it to safeguard

individually identifiable health information.

Business associate agreements typically include:

a description of the Company’s

permitted uses of individually identifiable health information;

a covenant not to disclose

that information except as permitted under the agreement and to make the Company’s subcontractors, if any, subject to the same

restrictions;

assurances that appropriate

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

an obligation to report

to the Company’s customers any use or disclosure of that information other than as provided for in the agreement;

a prohibition against the

Company’s use or disclosure of that information if a similar use or disclosure by its customers would violate the HIPAA standards;

the ability of the Company’s

customers to terminate their subscription to its solution if the Company breaches a material term of the business associate agreement

and are unable to cure the breach;

the requirement to return

or destroy all individually identifiable health information at the end of the customer’s subscription;

access by the Department

of Health and Human Services to the Company’s internal practices, books, and records to validate that the Company is safeguarding

individually identifiable health information.

Human Capital Resources

We believe that our success depends upon our ability

to attract, develop and retain key personnel.

As of March 31, 2023, we employed 45 full-time employees, of which six are executive management,

seven are administration and finance, nine are sales staff, several of which are dedicated to support our network of distribution partners,

two are marketing staff and twenty-one were part of our technical team.

The Company also maintains a group of independent contractors

to provide service support and installations on a as needed basis.

None of our employees are covered by collective bargaining agreements,

and management considers relations with our employees to be in good standing.

Although we continually seek to add additional talent to

our work force, management believes that it has sufficient human capital to operate its business successfully.

The Company’s compensation

programs are designed to align the compensation of its employees with its performance and to provide the proper incentives to attract,

retain and motivate employees to achieve superior results.

The structure of the Company’s compensation programs balances incentive

earnings for both short-term and long-term performance.

The health and safety of the Company’s employees

is its highest priority, and this is consistent with its operating philosophy.

Data Storage Corporation operates in a competitive

market dominated by giants like Amazon Web Services (AWS), Google, and Microsoft, which control approximately 51% of the X86 cloud

infrastructure and disaster recovery platforms.

Despite the fierce competition, the Company finds a niche market within the IBM

Power community, where an estimated 15% have transitioned to cloud solutions, offering significant growth opportunities.

The Company’s

cybersecurity solutions, while facing numerous competitors, are distinctively tailored for existing clients and distribution networks.

Key competitive factors include pricing, product

features, performance, quality, reliability, software partnerships, marketing and distribution capabilities, and the Company’s

Data Storage Corporation focuses on expanding its market reach globally, especially within the disaster recovery and

cloud infrastructure sectors, primarily catering to the IBM end user community.

For the fiscal year ended December 31, 2023, approximately

22% of our revenue was derived from two customers.

Corporate Developments

Solutions, LLC Merger:

On June 1, 2021, the Company

finalized the merger with

Flagship Solutions, LLC,

enhancing its offerings in

IBM equipment, managed services,

and cloud solutions.

strategic move bolsters the

Company’s position

in server monitoring, management,

and data center infrastructure

Post-merger, Mark Wyllie

was appointed as CEO of Flagship

Solutions, LLC, with an agreement

guaranteeing his obligations

by Data Storage Corporation.

Thomas Kempster succeeded

Mark Wyllie as President

of Flagship Solutions Group

following Mark Wyllie’s

resignation on October 28,

These developments highlight Data Storage Corporation’s

strategic efforts to strengthen its market position, expand its service offerings, and navigate through competitive and financial challenges

successfully.

Government Regulation Summary

Data Storage Corporation operates within a

complex and evolving regulatory landscape, governed by a multitude of federal, state, local, and international privacy laws.

laws regulate the Company’s handling of personal and customer data, reflecting the growing importance of privacy in the digital

Compliance with these regulations is critical, as failure to do so could result in legal action, loss of customer trust, and

negative impacts on the Company’s reputation and operations.

Key Regulatory Frameworks:

● General Compliance:

The Company is committed to adhering to industry standards and the various

privacy policies and obligations it holds towards third parties.

This includes compliance with laws and regulations related to the protection

and handling of personal information and customer data.

● Healthcare Sector Compliance:

Particularly significant is the Company’s compliance with health-related

privacy laws such as the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Health Information Technology for

Economic and Clinical Health Act (HITECH).

These regulations mandate strict controls over the handling of health information to protect

patient privacy.

● Business Associate Agreements (BAAs):

For healthcare clients, the Company enters into BAAs that

outline the permissible uses of health information, ensure the protection of this data through appropriate safeguards, and require notification

of any unauthorized use or disclosure.

Compliance Measures Include:

● Ensuring that the use or disclosure of personal health information aligns with the restrictions and permissions

defined in BAAs.

● Implementing robust administrative, physical, and technical safeguards to protect personal information.

● Obligating the Company to report any unauthorized information use or disclosure to the client.

● Permitting termination of the service by clients if the Company breaches BAA terms and cannot rectify

● Mandating the return or destruction of all personal health information upon the termination of a client’s

subscription.

The regulatory environment for Data Storage

Corporation is marked by rapid changes and requires continuous vigilance to ensure compliance.

As privacy regulations evolve, the

Company may need to adjust its services and practices to remain compliant, thereby safeguarding its reputation and facilitating

the development of new and innovative services that respect customer privacy.

Human Capital Resources Summary

Data Storage Corporation attributes its success

to the skill and dedication of its workforce, consisting of 51 full-time and one part-time employees as of March 27, 2024.

team is diverse, with roles across executive management, administration, finance, sales, marketing, and a robust technical team,

complemented by independent contractors for service support and installations as needed.

The Company has no collective bargaining

agreements in place and maintains a positive relationship with its employees.

Key aspects of our human capital management include:

The workforce includes six

in executive management,

six in administration and

finance, nine in sales, four

in marketing, and twenty-seven

in technical roles.

● Compensation Strategy:

Compensation programs are performance-aligned to incentivize both short-term

and long-term achievements, aiming to attract, retain, and motivate talent.

● Health and Safety:

Employee health and safety are paramount, underscoring the Company’s commitment

to its staff and operational philosophy.

Corporate Information

The primary mailing address for the Company is 48

South Service Road, Suite 203, Melville, NY 11747.

Office Location:

The Company is based

at 48 South Service Road, Suite 203, Melville, NY 11747.

Available Information:

The Company’s corporate

website address is www.dtst.com .

All filings the Company makes with the Securities and Exchange

Commission (“SEC”), including its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its Current Reports on Form

8-K, its proxy statements and any amendments thereto filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange

Act of 1934, as amended, are available for free in the Investor Relations section of the Company’s website as soon as reasonably

practicable after they are filed with or furnished to the SEC.

The reference to the Company’s website address does not constitute

inclusion or incorporation by reference of the information contained on the Company’s website in this Form 10-K or other filings

with the SEC, and the information contained on the Company’s website is not part of this document.

Official filings

with the SEC, including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements,

and any amendments, are accessible for free on the Company’s website (www.dtst.com) under the Investor Relations section

following their SEC submission.

The content on the Company’s website is not incorporated by reference into this Annual Report

or any other SEC filings.

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 1. Business