What changed in this filing

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Item 1A. Risk Factors

2024-03-28 compared with 2023-03-31 · 389 added, 395 removed, 517 unchanged (60% of the section changed)

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generated a significant amount of net income and it may not be able to sustain profitability in the future.

As reflected in the consolidated

financial statements, the Company had a net (loss) income available to shareholders of $(4,356,802) and $204,161 for the years ended December

31, 2022, and 2021, respectively.

As of December 31, 2022, the Company had cash of $2,286,722, marketable securities of $9,010,968, and

working capital of $10,855,407.

If the Company is unable

to attract new customers to its infrastructure and disaster recovery/ cloud subscription services on a cost-effective basis, its revenue

and operating results would be adversely affected.

As reflected in the

consolidated financial statements, the Company had net income attributable to common shareholders of $381,575 for the year ended

December 31, 2023 and a net loss attributable to common shareholders of $4,356,802 for the year ended December 31, 2022.

December 31, 2023, the Company had cash of $1,428,730, marketable securities of $11,318,196, and working capital of $11,011,407.

There can be no assurance that the Company will continue to generate income in the future.

If the Company

is unable to attract new customers to its infrastructure and disaster recovery/cloud subscription services on a cost-effective

basis, its revenue and operating results would be adversely affected.

The Company generates the

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

Having completed the merger

with Flagship, the Company expects to continue to acquire complementary solutions, services, technologies, or businesses in the future.

The Company may also, enter into relationships with other businesses to expand its portfolio of solutions or its ability to provide its

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

pricing, or investments in other companies.

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

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

Consequently, these transactions,

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

Having completed the

merger with Flagship, the Company expects to continue to acquire complementary solutions, services, technologies, or businesses

in the future.

The Company may also enter into relationships with other businesses to expand its portfolio of solutions or its

ability to provide its solutions in foreign jurisdictions, which could involve preferred or exclusive licenses, additional channels

of distribution, discount pricing, or investments in other companies.

Negotiating these transactions can be time-consuming, difficult,

and expensive, and its ability to complete these transactions may often be subject to conditions or approvals that are beyond its

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

Acquisitions may also disrupt

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In connection with any such transaction, the Company may:

issue additional equity

securities that would dilute its stockholders;

use cash that the Company

may need in the future to operate its business;

incur debt on terms unfavorable

to the Company, that it’s unable to repay, or that may place burdensome restrictions on its operations;

incur large charges or

substantial liabilities;

become subject to adverse

tax consequences or substantial depreciation, deferred compensation, or other acquisition-related accounting charges.

issue additional equity securities that would dilute its stockholders;

use cash that the Company may need in the future to operate its business;

incur debt on terms unfavorable to the Company, that it may be unable to repay,

or that may place burdensome restrictions on its operations;

incur large charges or substantial liabilities;

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

Any of these risks could

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there can be no assurance that the Company’s operating performance after an acquisition will be successful or will fulfill management’s

Risks Related to the Merger with Flagship

On May 31, 2021, the Company

completed the Merger.

The Company expects that Flagship’s business will be synergistic with its existing IBM business and anticipates

meaningful operation efficiency and that the Merger will provide 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), and Cyber Security as a Service (CSaaS).

We may not realize the anticipated

benefits of the merger with Flagship or successfully integrate our businesses

On May 31, 2021, the Company completed the Merger.

The Company expects that

Flagship’s business will be synergistic with its existing IBM business and anticipates meaningful operation efficiency and that

the Merger will provide 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 as a Service (DRaaS), and Cyber Security

as a Service (CSaaS).

Since having completed the

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expenditures than anticipated, which could result in the Company’s need to raise additional capital for its operations.

The Company may fail

to maintain an effective system of internal controls, which may result in material misstatements of its consolidated financial statements

or cause it to fail to meet its periodic reporting obligations.

The Company has identified material weaknesses in its internal control

over financial reporting, concluding that its disclosure controls were not effective as of December

31, 2022, based on material weaknesses which ultimately contributed to the Company not designing and maintaining formal controls to analyze,

account for, and disclose complex transactions, including the accounting for certain consideration received from a vendor.

These material

weaknesses resulted in the restatement of the Company’s previously filed quarterly condensed consolidated financial information

for the periods ended June 30, 2022, related to accrued expenses, cost of goods sold, gross profit, loss from operations, net loss,

earnings per share and the related disclosures.

In response to such material weaknesses, management has expended and will continue to expand a substantial amount

of effort and resources for the remediation of material weaknesses in internal control over financial reporting.

In November of 2022,

management and its advisors began evaluating and documenting the design and operating effectiveness of our internal control over financial

reporting, and their work is ongoing.

Company can give no assurance that additional material weaknesses will not be identified in the future.

The Company’s failure to

implement and maintain effective internal control over financial reporting could result in errors in its consolidated financial statements

that could result in a restatement of its financial statements and could cause it to fail to meet its reporting obligations, any of which

could diminish investor confidence in the Company and cause a decline in the price of its common stock.

may fail to maintain an effective system of internal controls, which may result in material misstatements of its consolidated financial

statements or cause it to fail to meet its periodic reporting obligations.

As a public company,

we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls.

Section 404 requires an annual management assessment of the effectiveness of our internal control over financial reporting.

rules governing the standards that must be met for management to assess our internal control over financial reporting are complex

and require significant documentation, testing, and possible remediation.

Company previously identified material weaknesses in its internal control over financial reporting, concluding that its disclosure

controls were not effective, based on material weaknesses which ultimately contributed to the Company not designing and maintaining

formal controls to analyze, account for, and disclose complex transactions, including the accounting for certain consideration

received from a vendor.

These material weaknesses resulted in the restatement of the Company’s previously filed quarterly

condensed consolidated financial information for the period ended June 30, 2022, related to accrued expenses, cost of goods sold,

gross profit, loss from operations, net loss, earnings per share and the related disclosures.

As of March 31, 2023, the material

weaknesses has been remediated.

In response to such material

weaknesses, management has expended and will continue to expand a substantial amount of effort and resources for the remediation of material

weaknesses in internal control over financial reporting.

In November of 2022, management and its advisors began evaluating and documenting

the design and operating effectiveness of our internal control over financial reporting, and their work is ongoing.

The Company can give no assurance

that additional material weaknesses will not be identified in the future.

The Company’s failure to implement and maintain effective

internal control over financial reporting could result in errors in its consolidated financial statements that could result in a restatement

of its financial statements and could cause it to fail to meet its reporting obligations, any of which could diminish investor confidence

in the Company and cause a decline in the price of its common stock.

The Company is controlled

by three principal stockholders who serve as its executive officers and directors.

As of March 31, 2023, through

their aggregate voting power, Messrs.

Piluso, Schwartz and Kempster control approximately 37% of the Company’s outstanding common

stock, giving them the ability to control a significant portion of the votes for the Company’s directors and all other matters requiring

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

Risks Related to the

Company’s Industry

As of March 27, 2024, through their aggregate voting power, Messrs.

Schwartz and Kempster control approximately 37% of the Company’s outstanding common stock, giving them the ability to control a

significant portion of the votes for the Company’s directors and all other matters requiring the approval of its stockholders, including

the election of all its directors and the approval of a reverse stock split.

Risks Related

to the Company’s Industry

The market for cloud

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They include:

in-house IT departments

of its customers and potential customers;

traditional global infrastructure

providers, including, but not limited to, large multi-national providers, such as IBM, Microsoft, Google, and Amazon Web Services

cloud and software service

providers and digital systems integrators;

regional managed services

colocation solutions providers,

such as Equinix, Rackspace and TierPoint.

Many of these competitors

benefit from significant competitive advantages over the Company, given their desire to enter into this niche marketplace, such as greater

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

and other resources.

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

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

Some of these competitors

may make acquisitions or enter into strategic relationships to offer a more comprehensive service than the Company does.

some of these competitors may be able to:

develop superior products

or services, gain greater market acceptance, and expand their service offerings more efficiently or more rapidly;

adapt to new or emerging

technologies and changes in customer requirements more quickly;

bundle their offerings,

including hosting services with other services they provide at reduced prices;

streamline their operational

structure, obtain better pricing, or secure more favorable contractual terms, allowing them to deliver services and products at a

take advantage of acquisition,

joint venture and other opportunities more readily;

adopt more aggressive pricing

policies and devote greater resources to the promotion, marketing and sales of their services, which could cause us to have to lower

prices for certain services to remain competitive in the market;

devote greater resources

to the research and development of their products and services.

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

traditional global infrastructure providers, including, but not limited to, large multi-national providers, such as IBM, Microsoft, Google, and Amazon Web Services (AWS);

cloud and software service providers and digital systems integrators;

regional managed services providers;

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

Many of these competitors benefit from significant competitive advantages over

the Company, given their desire to enter this niche marketplace, such as greater name recognition, longer operating histories, more varied

services, and larger marketing budgets, as well as greater financial, technical, and other resources.

In addition, many of these competitors

have established marketing relationships and major distribution agreements with computer manufacturers, internet service providers, and

resellers, giving them access to larger customer bases.

Some of these competitors may make acquisitions or enter strategic relationships

to offer a more comprehensive service than the Company does.

As a result, some of these competitors may be able to:

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

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

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

streamline their operational structure, obtain better pricing, or secure more favorable contractual terms, allowing them to deliver services and products at a lower cost;

take advantage of acquisition, joint ventures, and other opportunities more readily;

adopt more aggressive pricing policies and devote greater resources to the promotion, marketing, and sales of their services, which could cause us to have to lower prices for certain services to remain competitive in the market;

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

In addition, demand for the

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Additionally, consolidation

activity through strategic mergers, acquisitions and joint ventures may result in new competitors that can offer a broader range of products

and services, may have a greater scale or a lower cost structure.

To the extent such consolidation results in the ability of vertically

integrated companies to offer more integrated services to customers than the Company can, customers may prefer the single-source approach

and direct more business to such competitors, thereby impairing the Company’s competitive position.

Furthermore, new entrants not

currently considered to be competitors may enter the market through acquisitions, partnerships or strategic relationships.

As the Company

looks to market and sell its services to potential customers, the Company must convince its internal stakeholders that the Company’s

services are superior to their current solutions.

If the Company is unable to anticipate or react to these competitive challenges, its

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

These combinations

may make it more difficult for the Company to compete effectively and its inability to compete effectively would negatively impact its

operating results.

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

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

could have a material adverse effect on the Company’s revenue and operating results.

If a cyberattack was

able to breach the Company’s security protocols and disrupt its data protection platform and solutions, and any such disruption

could increase its expenses, damage its reputation, harm its business and adversely affect its stock price.

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

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

To the extent such consolidation results in the ability

of vertically integrated companies to offer more integrated services to customers than the Company can, customers may prefer the

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

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

strategic relationships.

As the Company looks to market and sell its services to potential customers, the Company must convince

its internal stakeholders that the Company’s services are superior to their current solutions.

If the Company is unable to

anticipate or react to these competitive challenges, its competitive position would weaken, which could adversely affect its business,

financial condition, and results of operations.

These combinations may make it more difficult for the Company to compete effectively

and its inability to compete effectively would negatively impact its operating results.

In addition, there can be no assurance

that the Company will not be forced to engage in price-cutting initiatives, or to increase its advertising and other expenses to

attract and retain customers in response to competitive pressures, either of which could have a material adverse effect on the

Company’s revenue and operating results.

If a cyberattack was able to breach the Company’s security protocols

and disrupt its data protection platform and solutions, any such disruption could increase its expenses, damage its reputation, harm its

business and adversely affect its stock price.

The Company has implemented

various protocols and regularly monitors its systems via security software to reduce any security vulnerabilities.

The Company also relies

on third-party providers for a number of critical aspects of its infrastructure cloud and disaster recovery business continuity services,

and consequently, it does not maintain direct control over the security or stability of those associated systems.

Furthermore, the firmware,

software, and/or open-source software that its data protection solutions may utilize could be susceptible to hacking or misuse.

event of the discovery of a significant security vulnerability, the Company would incur additional substantial expenses and its business

would be harmed.

also relies on third-party providers for several critical aspects of its infrastructure cloud and disaster recovery business continuity

services, and consequently, it does not maintain direct control over the security or stability of those associated systems.

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

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

expenses and its business would be harmed.

The process of developing

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market acceptance or harm its business for many reasons, including:

delays in releasing its

new solutions or enhancements to the market;

failure to accurately

predict market demand or customer demands;

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

with software development, design, or marketing that could delay or prevent its development, introduction, or implementation of new

solutions and enhancements;

errors or failures in its design or performance;

publicity about its performance or effectiveness;

or anticipated introduction of competing solutions by its competitors;

business conditions for its customers, causing them to delay information technology purchases;

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

of regulatory requirements around security or storage.

delays in releasing its new solutions or enhancements to the market;

failure to accurately predict market demand or customer demands;

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

difficulties with software development, design, or marketing that could delay or prevent its development, introduction, or implementation of new solutions and enhancements;

defects, errors or failures in its design or performance;

negative publicity about its performance or effectiveness;

introduction or anticipated introduction of competing solutions by its competitors;

poor business conditions for its customers, causing them to delay information technology purchases;

the perceived value of its solutions or enhancements relative to their cost;

easing of regulatory requirements around security or storage.

In addition, new technologies

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or harm to the Company’s business and reputation.

Any significant disruption

in service, in the Company’s computer systems, or caused by its third-party storage and system providers could damage its reputation

and result in a loss of customers, which would harm its business, financial condition, and operating results.

Any significant disruption in service in the Company’s computer systems,

or caused by its third-party storage and system providers, could damage its reputation and result in a loss of customers, which would

harm its business, financial condition, and operating results.

The Company’s reputation,

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the Company’s infrastructure inaccessible, and it may experience interruptions or outages in the future.

In addition, while the Company

both operates and maintains elements of network infrastructure, some elements of this complex system are operated by third parties that

the Company does not control and that would require significant time to replace.

The Company expects this dependence on third parties

In particular, the Company utilizes IBM and Intel to provide equipment and support.

All of these third-party systems are

located in data center facilities operated by third parties.

While these data centers are of the highest level, Tier 3, there can be no

assurance that they will not experience disruptions that will adversely impact the Company’s ability to service its customers.

Company’s data center leases expire at various times between 2021 and 2023 with rights of extension.

If the Company were unable

to renew these agreements on commercially reasonable terms, it may be required to transfer that portion of its computing and storage capacity

to new data center facilities, and it may incur significant costs and possible service interruption in connection with doing so.

In addition, while the Company both operates and maintains elements of network

infrastructure, some elements of this complex system are operated by third parties that the Company does not control and that would require

significant time to replace.

The Company expects this dependence on third parties to increase.

In particular, the Company utilizes IBM

and Intel to provide equipment and support.

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

While these data centers are of the highest level, Tier 3, there can be no assurance that they will not experience disruptions that will

adversely impact the Company’s ability to service its customers.

The Company’s data center leases expire at various times

between 2023 and 2024 with rights of extension.

If the Company were unable to renew these agreements on commercially reasonable terms,

it may be required to transfer that portion of its computing and storage capacity to new data center facilities, and it may incur significant

costs and possible service interruption in connection with doing so.

The Company also relies upon

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could increase its expenses, damage its reputation, harm its business, and adversely affect its stock price.

The Company relies on third-party

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

it does not maintain direct control over the security or stability of the associated systems.

Furthermore, the firmware, software and/or

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

In the event of the discovery

of a significant security vulnerability, the Company would incur additional substantial expenses and its business would be harmed.

The Company relies

on third-party providers for several critical aspects of its infrastructure cloud and disaster recovery business continuity services,

and consequently, it does not maintain direct control over the security or stability of the associated systems.

Furthermore, the

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

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

and its business would be harmed.

The Company’s customers

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

These mandatory disclosures regarding

a security breach often lead to widespread negative publicity, which may cause the Company’s customers to lose confidence in the

effectiveness of its data security measures.

Any security breach, whether successful or not, would harm the Company’s reputation

and could cause the loss of customers.

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

other major consumer website were to occur, there could be a general public loss of confidence in the use of the internet for cloud backup

services or commercial transactions generally.

Any of these events could have material adverse effects on the Company’s business,

financial condition, and operating results.

In addition, the SEC now also requires

disclosure of material data security breaches.

These mandatory disclosures regarding a security breach often lead to widespread negative

publicity, which may cause the Company’s customers to lose confidence in the effectiveness of its data security measures.

breach, whether successful or not, would harm the Company’s reputation and could cause the loss of customers.

Similarly, if a publicized

breach of data security at any other cloud backup service provider or other major consumer website were to occur, there could be a general

public loss of confidence in the use of the internet for cloud backup services or commercial transactions generally.

Any of these events

could have material adverse effects on the Company’s business, financial condition, and operating results.

The Company’s

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compete with the Company’s own offerings, which could potentially give them a competitive advantage.

If the Company is unable

to retain its existing customers, its business, financial condition, and operating results would be adversely affected.

If the Company’s efforts

to satisfy its existing customers are not successful, it may not be able to retain them, and as a result, its revenue and ability to grow

would be adversely affected.

If the Company

is unable to retain its existing customers, its business, financial condition, and operating results would be adversely affected.

If the Company’s

efforts to satisfy its existing customers are not successful, it may not be able to retain them, and as a result, its revenue and

ability to grow would be adversely affected.

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

Customers choose not

to renew their subscriptions for many reasons, including if customer service issues are not satisfactorily resolved, a desire to reduce

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

services provide a better value or experience.

If the Company’s approximate 94% retention rate significantly decreases, it may need

to increase the rate at which it adds new customers in order to maintain and grow its revenue, which may require it to incur significantly

higher advertising and marketing expenses than it currently anticipates, or its revenue may decline.

A significant decrease in the Company’s

retention rate would therefore have an adverse effect on its business, financial condition, and operating results.

The Company’s

estimates of the number of employees it retains and advertising costs are based to a large extent upon its subscription contracts, which

may be terminated by customers typically upon 90 days’ notice prior to the ending term of their contract for services.

A decline in demand

for the Company’s cyber security, disaster recovery, and/or infrastructure solutions, in general, would cause its revenue to decline.

Customers choose not to renew their subscriptions for many reasons, including if customer service issues are not satisfactorily

resolved, a desire to reduce discretionary spending, or a perception that they do not use the service sufficiently, that the solution

is a poor value, or that competitive services provide a better value or experience.

If the Company’s approximate 94% retention

rate significantly decreases, it may need to increase the rate at which it adds new customers in order to maintain and grow its

revenue, which may require it to incur significantly higher advertising and marketing expenses than it currently anticipates, or

its revenue may decline.

A significant decrease in the Company’s retention rate would therefore have an adverse effect on

its business, financial condition, and operating results.

The Company’s estimates of the number of employees it retains,

and advertising costs are based to a large extent upon its subscription contracts, which may be terminated by customers typically

upon 90 days’ notice prior to the ending term of their contract for services.

demand for the Company’s cyber security, disaster recovery, and/or infrastructure solutions, in general, would cause its

revenue to decline.

The Company derives, and

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factors that could affect interest in and demand for cloud solutions include:

of the Company’s brand and the cloud solutions category generally;

appeal and reliability of the Company’s solutions;

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

concern regarding privacy and data security;

Company’s ability to maintain high levels of customer satisfaction;

rate of growth in cloud solutions generally.

awareness of the Company’s brand and the cloud solutions category generally;

the appeal and reliability of the Company’s solutions;

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

public concern regarding privacy and data security;

the Company’s ability to maintain high levels of customer satisfaction;

the rate of growth in cloud solutions generally.

In addition, substantially

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The number of customers

that the Company is able to add through these relationships is dependent on the marketing efforts of distributors, over which it has little

that the Company can add through these relationships is dependent on the marketing efforts of distributors, over which it has little control.

If the Company is unable to maintain its relationships, or renew contracts on favorable terms, with existing partners and distributors

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The Company’s distributors also provide services to other

third parties and therefore may not devote their full time and attention to promote the Company’s products and services.

third parties and therefore may not devote their full time and attention to promoting the Company’s products and services.

If the Company is unable

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increase the number of its customers, which could harm its business, financial condition, and operating results.

Given the Company’s

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

The Company believes that the importance of brand recognition

and loyalty will increase in light of the increasing competition in its markets.

The Company plans to continue investing substantial resources

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

the recognition of its brand.

Some of the Company’s existing and potential competitors have well-established brands with greater

recognition than we have.

If the Company’s efforts to promote and maintain the Company’s brand are not successful, the Company’s

operating results and its ability to attract and retain customers may be adversely affected.

In addition, even if the Company’s

brand recognition and loyalty increase, it may not result in increased use of its solutions or higher revenue.

Given the Company’s market focus, maintaining and enhancing its brand is

critical to its success.

The Company believes that the importance of brand recognition and loyalty will increase in light of the increasing

competition in its markets.

The Company plans to continue investing substantial resources to promote its brand, both domestically and

internationally, but there is no guarantee that its brand development strategies will enhance the recognition of its brand.

Company’s existing and potential competitors have well-established brands with greater recognition than it has.

If the Company’s

efforts to promote and maintain the Company’s brand are not successful, the Company’s operating results and its ability to

attract and retain customers may be adversely affected.

In addition, even if the Company’s brand recognition and loyalty increase,

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

The Company’s solutions,

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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 us, which

or public statements against the Company by consumer advocacy groups or others and could cause its customers to lose trust in the Company, which

could have an adverse effect on the Company’s reputation and business.

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Business associate agreements typically include:

description of the Company’s permitted uses of individually identifiable health information;

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;

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

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

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;

ability of the Company’s customers to terminate their subscription to its solution if we breach a material term of the business

associate agreement and are unable to cure the breach;

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

by the Department of Health and Human Services to the Company’s internal practices, books, and records to validate that we

are safeguarding individually identifiable health information.

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 we are safeguarding individually identifiable health information.

The Company may not be able

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or unavailability of, its third-party software or hardware could cause interruptions to the availability of its solutions.

Errors, failures, bugs

in or unavailability of the Company’s solutions released by it could result in negative publicity, damage to its brand,

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

Many of the Company’s end-user customers use its solutions in applications that are critical to their business and may have a

greater sensitivity to defects in its solutions than to defects in other, less critical, software solutions.

In addition, if an

actual or perceived breach of information integrity or availability occurs in one of its end-user customer’s systems,

regardless of whether the breach is attributable to its solutions, the market perception of the effectiveness of its solutions could

Alleviating any of these problems could require significant expenditures of the Company’s capital and other

resources and could cause interruptions, delays, or cessation of its solution licensing, which could cause it to lose existing or

potential customers and could adversely affect its operating results.

Errors, failures, bugs in

or unavailability of the Company’s solutions released by it could result in negative publicity, damage to its brand, returns, loss

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

Many of the Company’s

end-user customers use its solutions in applications that are critical to their business and may have a greater sensitivity to defects

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

In addition, if an actual or perceived breach of information

integrity or availability occurs in one of its end-user customer’s systems, regardless of whether the breach is attributable to

its solutions, the market perception of the effectiveness of its solutions could be harmed.

Alleviating any of these problems could require

significant expenditures of the Company’s capital and other resources and could cause interruptions, delays, or cessation of its

solution licensing, which could cause it to lose existing or potential customers and could adversely affect its operating results.

The Company faces many

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as it grows, its business, financial condition, and operating results could be harmed.

The Company has office locations

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

If the Company is unable to

effectively manage a large and geographically dispersed group of employees and contractors or to anticipate its future growth and personnel

needs, its business may be adversely affected.

As the Company expands its business, it adds complexity to its organization and must expand

and adapt its operational infrastructure and effectively coordinate throughout its organization.

As a result, the Company has incurred

and expects to continue to incur additional expenses related to its continued growth.

The Company has office

locations in New York, Florida, and Texas, and data centers in New York, Massachusetts, North Carolina, Texas, and Canada.

Company is unable to effectively manage a large and geographically dispersed group of employees and contractors or to anticipate

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

As the Company expands its business, it adds complexity

to its organization and must expand and adapt its operational infrastructure and effectively coordinate throughout its organization.

As a result, the Company has incurred and expects to continue to incur additional expenses related to its continued growth.

The Company also anticipates

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internationally which subjects it to new risks that it has not generally faced in the United States.

These risks include:

These risks in clude:

of the Company’s solutions, including translation into foreign languages and adaptation for local practices and regulatory

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consumer and data privacy laws;

difficulties in managing

and staffing international operations;

in managing and staffing international operations;

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

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integrate these key employees into its business could adversely affect its business.

To execute the Company’s

growth plan, it must attract and retain highly qualified personnel.

Competition for these employees is intense, and the Company may not

be successful in attracting and retaining qualified personnel.

The Company has from time to time in the past experienced, and it expects

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

New hires require

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

The Company’s recent hires

and planned hires may not become as productive as it expects, and it may be unable to hire or retain sufficient numbers of qualified individuals.

Many of the companies with which it competes for experienced personnel have greater resources than it has.

In addition, in making employment

decisions, particularly in the internet and high-technology industries, job candidates often consider the value of the equity that they

are to receive in connection with their employment.

In addition, employees may be more likely to voluntarily exit the Company if the shares

underlying their vested and unvested options, as well as unvested restricted stock units, have significantly depreciated in value resulting

in the options they are holding is significantly above the market price of the Company’s common stock and the value of the restricted

stock units decreasing.

If the Company fails to attract new personnel, or fail to retain and motivate its current personnel, its business

and growth prospects could be severely harmed.

To execute the Company’s growth plan, it must attract and retain highly

qualified personnel.

Competition for these employees is intense, and the Company may not be successful in attracting and retaining qualified

The Company, from time to time in the past, experienced, and it expects to continue to experience, difficulty in hiring and

retaining highly-skilled employees with appropriate qualifications.

New hires require significant training and, in most cases, take significant

time before they achieve full productivity.

The Company’s recent hires and planned hires may not become as productive as it expects,

and it may be unable to hire or retain sufficient numbers of qualified individuals.

Many of the companies with which it competes for experienced

personnel have greater resources than it has.

In addition, in making employment decisions, particularly in the internet and high-technology

industries, job candidates often consider the value of the equity that they are to receive in connection with their employment.

employees may be more likely to voluntarily exit the Company if the shares underlying their vested and unvested options, as well as unvested

restricted stock units, have significantly depreciated in value resulting in the options they are holding potentially being significantly

above the market price of the Company’s common stock and the value of the restricted stock units decreasing.

If the Company fails

to attract new personnel, or fails to retain and motivate its current personnel, its business and growth prospects could be severely harmed.

Risks Related to Intellectual

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acceptable terms, or at all.

Any loss of the right to use any software required for the development and maintenance of the Company solutions

Any loss of the right to use any software required for the development and maintenance of the Company’s solutions

could result in delays in the provision of its solutions until equivalent technology is either developed by the Company, or, if available

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adversely affected.

The Company has registered

domain names for websites (“URLs”) that it uses in its business, such as www.datastoragecorp.com.

If the Company is unable

to maintain its rights in these domain names, its competitors or other third parties could capitalize on the Company’s brand recognition

by using these domain names for their own benefit.

In addition, although the Company owns the Company’s domain name under various

global top-level domains such as .com and .net, as well as under various country-specific domains, it might not be able to, or may choose

not to, acquire or maintain other country-specific versions of the Company’s domain name or other potentially similar URLs.

names similar to the Company have already been registered in the U.S.

and elsewhere, and its competitors or other third parties could

capitalize on its brand recognition by using domain names similar to the Company’s.

The Company has registered domain names for websites (“URLs”) that

it uses in its business, such as www.datastoragecorp.com.

If the Company is unable to maintain its rights in these domain names, its competitors

or other third parties could capitalize on the Company’s brand recognition by using these domain names for their own benefit.

addition, although the Company owns the Company’s domain name under various global top-level domains such as .com and .net, as well

as under various country-specific domains, it might not be able to, or may choose not to, acquire or maintain other country-specific versions

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

Domain names similar to the Company have already been registered

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

similar to the Company’s.

The regulation of domain names in the U.S.

elsewhere is generally conducted by internet regulatory bodies and is subject to change.

If the Company loses the ability to use a domain

name in a particular country, it may be forced to either incur significant additional expenses to market its solutions within that country,

including the development of a new brand and the creation of new promotional materials, or elect not to sell its solutions in that country.

Either result could substantially harm its business and operating results.

Regulatory bodies could establish additional top-level domains,

appoint additional domain name registrars, or modify the requirements for holding domain names.

As a result, the Company may not be able

to acquire or maintain the domain names that utilize the Company’s name in all of the countries in which we currently conduct or

intend to conduct business.

Further, the relationship between regulations governing domain names and laws protecting trademarks and similar

proprietary rights varies among jurisdictions and is unclear in some jurisdictions.

The Company may be unable to prevent third parties

from acquiring and using domain names that infringe, are similar to, or otherwise decrease the value of, its brand or its trademarks.

Protecting and enforcing the Company’s rights in its domain names and determining the rights of others may require litigation, which

could result in substantial costs, divert management attention, and not be decided favorably to the Company.

Risks Relating to the

Company’s Common Stock and Securities

and elsewhere is generally conducted by internet regulatory

bodies and is subject to change.

If the Company loses the ability to use a domain name in a particular country, it may be forced to either

incur significant additional expenses to market its solutions within that country, including the development of a new brand and the creation

of new promotional materials, or elect not to sell its solutions in that country.

Either result could substantially harm its business

and operating results.

Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars, or modify

the requirements for holding domain names.

As a result, the Company may not be able to acquire or maintain the domain names that utilize

the Company’s name in all of the countries in which it currently conducts or intends to conduct business.

Further, the relationship

between regulations governing domain names and laws protecting trademarks and similar proprietary rights varies among jurisdictions and

is unclear in some jurisdictions.

The Company may be unable to prevent third parties from acquiring and using domain names that infringe,

are similar to, or otherwise decrease the value of, its brand or its trademarks.

Protecting and enforcing the Company’s rights in

its domain names and determining the rights of others may require litigation, which could result in substantial costs, divert management

attention, and not be decided favorably to the Company.

Related to the Company’s Common Stock and Securities

The Company’s

stock price has fluctuated in the past and may be volatile in the future, and as a result, investors in its common stock could incur substantial

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

By way of example,

on May 16, 2022, the reported low sale price of the Company’s common stock was $3.10, and the reported high sales price was $3.80.

For comparison purposes, on May 9, 2022, the price of the Company’s common stock closed at $2.14 per share, on May 16, 2022, its

stock price closed at $3.45 per share, and on June 21, 2022, its stock price closed at $2.48 per share with no discernable announcements

or developments by the Company or third parties (other than the filing of the Quarterly Report on Form 10-Q).

The Company may incur rapid

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

addition, the recent COVID-19 pandemic has caused broad stock market and industry fluctuations.

The stock market has experienced extreme

volatility that has often been unrelated to the operating performance of particular companies.

As a result of this volatility, investors

may experience losses on their investment in the Company’s common stock.

The market price for the Company’s common stock may

be influenced by many factors, including the following:

investor reaction to

the Company’s business strategy;

the success of competitive

products or technologies;

stock price has fluctuated in the past and may be volatile in the future, and as a result, investors in its common stock could incur

substantial losses.

The Company’s

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

By way of example, on

September 1, 2023, the reported low sale price of the Company’s common stock was $3.21, and the reported high sales price was

For comparison purposes, on January 12, 2023, the price of the Company’s common stock closed at $1.61 per share, on

October 17, 2023, its stock price closed at $3.49 per share, and on August 11, 2023, its stock price closed at $2.59 per share with

no discernable announcements or developments by the Company or third parties (other than the filing of the Quarterly Report on Form

Company may incur rapid and substantial decreases in its stock price in the foreseeable future that are unrelated to its operating

performance or prospects.

The stock market has experienced extreme volatility that has often been unrelated to the operating

performance of particular companies.

As a result of this volatility, investors may experience losses on their investment in the

Company’s common stock.

The market price for the Company’s common stock may be influenced by many factors, including the

reaction to the Company’s business strategy;

of competitive products or technologies;

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

variations in the Company’s

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

the Company’s ability

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

in the Company’s financial results or those of companies that are perceived to be similar to the Company;

the Company’s

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

in the market prices of stocks generally;

Company’s public disclosure of the terms of any financing which it consummates in the future;

announcement that we have effected a reverse split of the Company’s common stock and treasury stock;

Company’s failure to become profitable;

announcement that the Company has effected a reverse split of the Company’s common stock and treasury stock;

Company’s failure to be profitable;

Company’s failure to raise working capital;

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of key contracts;

the Company’s failure

to meet financial forecasts we publicly disclose;

trading volume of the

Company’s common stock;

sales of the Company’s

common stock by it or its stockholders;

general economic, industry

and market conditions;

events or factors, including those resulting from such events, or the prospect of such events, including war, terrorism and other

international conflicts, public health issues including health epidemics or pandemics, such as the recent outbreak of the COVID-19

pandemic, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions,

whether occurring in the United States or elsewhere, could disrupt the Company’s operations, disrupt the operations of its

suppliers or result in political or economic instability.

These broad market and industry

factors may seriously harm the market price of the Company’s common stock, regardless of its operating performance.

Since the stock

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

stock could incur substantial losses.

In the past, following periods of volatility in the market, securities class-action litigation has

often been instituted against companies.

Such litigation, if instituted against the Company, could result in substantial costs and diversion

of management’s attention and resources, which could materially and adversely affect its business, financial condition, results

of operations and growth prospects.

There can be no guarantee that the Company’s stock price will remain at current prices or that

future sales of its common stock will not be at prices lower than those sold to investors.

Company’s failure to meet financial forecasts it publicly discloses;

trading volume

of the Company’s common stock;

Company’s common stock by it or its stockholders;

general economic,

industry and market conditions;

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

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

such as the COVID-19 pandemic, and natural disasters such as hurricanes, floods, fires, earthquakes, tornadoes or other adverse weather

and climate conditions, whether occurring in the United States or elsewhere, could disrupt the Company’s operations, disrupt the

operations of its suppliers or result in political or economic instability.

These broad market

and industry factors may seriously harm the market price of the Company’s common stock, regardless of its operating performance.

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

investors in its common stock could incur substantial losses.

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

class-action litigation has often been instituted against companies.

Such litigation, if instituted against the Company, could

result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect

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

There can be no guarantee that the Company’s

stock price will remain at current prices or that future sales of its common stock will not be at prices lower than those sold

to investors.

Additionally, recently, securities

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disconnected from its underlying value.

assured that we will be able to maintain our listing on the Nasdaq Capital Market.

Our securities are

listed on The Nasdaq Capital Market, a national securities exchange.

We cannot be assured that we will continue to comply with

the rules, regulations or requirements governing the listing of our common stock on Nasdaq Capital Market or that our securities

will continue to be listed on Nasdaq Capital Market in the future.

If Nasdaq should determine at any time that we fail to meet

Nasdaq requirements, we may be subject to a delisting action by Nasdaq.

On January 18, 2024,

Nasdaq notified the Company that due to the passing of Mr.

Hoffman, the Company no longer complies with Nasdaq’s audit committee

requirements as set forth in Rule 5605(c)(2)(A) of the Nasdaq listing standards.

Nasdaq further notified the Company that, consistent

with Rule 5605(c)(4) of the Nasdaq listing standards, Nasdaq provided the Company a cure period in order to regain compliance until

the earlier of the Company’s next annual meeting of shareholders or December 30, 2024 or, if the next annual meeting of shareholders

is held before June 27, 2024, then the Company must provide evidence of compliance no later than June 27, 2024.

As of March 8,

2024, the Company believes that it has regained compliance with Rule 5605(c)(2)(A) of the Nasdaq listing standards although as

of the date of this Annual Report we did not receive notification from Nasdaq that we regained compliance.

If Nasdaq delists

our securities from trading on its exchange at some future date, we could face significant material adverse consequences, including:

limited availability of market quotations for our securities;

liquidity with respect to our securities;

determination that our common stock is a “penny stock” which will require brokers trading in our common stock

to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market

for our common stock;

limited amount of news and analyst coverage for our company;

decreased ability to issue additional securities or obtain additional financing in the future.

Upon exercise of the

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which will dilute its present shareholders .

The Company is obligated

to issue additional shares of its common stock in connection with any exercise or conversion, as applicable, of its outstanding options,

warrants, and shares of its convertible preferred stock.

As of December 31, 2022, there were options and warrants outstanding into an

aggregate of 2,720,584 shares of common stock.

The exercise of warrants or options will cause the Company to issue additional shares of

its common stock and will dilute the percentage ownership of its shareholders.

In addition, the Company has in the past, and may in the

future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other shareholders not

participating in such exchange.

The Company is obligated to issue additional shares of its common stock in

connection with any exercise or conversion, as applicable, of its outstanding options, warrants, and shares of its convertible preferred

As of December 31, 2023, there were options and warrants outstanding convertible into an aggregate of 3,011,207 shares of common

The exercise of warrants or options will cause the Company to issue additional shares of its common stock and will dilute the percentage

ownership of its shareholders.

In addition, the Company has in the past, and may in the future, exchange outstanding securities for other

securities on terms that are dilutive to the securities held by other shareholders not participating in such an exchange.

Offers or availability

for sale of a substantial number of shares of the Company’s common stock may cause the price of its common stock to decline .

Sales of large blocks of

the Company’s common stock could depress the price of its common stock.

The existence of these shares and shares of common stock

that may be issuable upon conversion or exercise, as applicable, of outstanding shares of convertible preferred stock, warrants and options

create a circumstance commonly referred to as an “overhang” which can act as a depressant to the Company’s common stock

The existence of an overhang, whether or not sales have occurred or are occurring, also could make the Company’s ability

to raise additional financing through the sale of equity or equity-linked securities more difficult in the future at a time and price

that we deem reasonable or appropriate.

If the Company’s existing shareholders and investors seek to convert or exercise such securities

or sell a substantial number of shares of its common stock, such selling efforts may cause significant declines in the market price of

its common stock.

In addition, the shares of the Company’s common stock included in the Units and underlying warrants sold in the

offering will be freely tradable without restriction or further registration under the Securities Act.

As a result, a substantial number

of shares of the Company’s common stock may be sold in the public market following this offering.

If there are significantly more

shares of common stock offered for sale than buyers are willing to purchase, then the market price of the Company’s common stock

may decline to a market price at which buyers are willing to purchase the offered common stock and sellers remain willing to sell its

common stock.

Sales of large blocks of the Company’s common stock could depress the price

of its common stock.

The existence of these shares and shares of common stock that may be issuable upon conversion or exercise, as applicable,

of outstanding shares of convertible preferred stock, warrants and options create a circumstance commonly referred to as an “overhang”

which can act as a depressant to the Company’s common stock price.

The existence of an overhang, whether or not sales have occurred

or are occurring, also could make the Company’s ability to raise additional financing through the sale of equity or equity-linked

securities more difficult in the future at a time and price that the Company deems reasonable or appropriate.

If the Company’s existing

shareholders and investors seek to convert or exercise such securities or sell a substantial number of shares of its common stock, such

selling efforts may cause significant declines in the market price of its common stock.

In addition, the shares of the Company’s

common stock included in the Units and underlying warrants sold in the offering will be freely tradable without restriction or further

registration under the Securities Act.

As a result, a substantial number of shares of the Company’s common stock may be sold in

the public market following this offering.

If there are significantly more shares of common stock offered for sale than buyers are willing

to purchase, then the market price of the Company’s common stock may decline to a market price at which buyers are willing to purchase

the offered common stock and sellers remain willing to sell its common stock.

The Company does not

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it more difficult for stockholders to change Data Storage’s management.

Data Storage Corporation

is subject to anti-takeover provisions under Nevada law, which could delay or prevent a change of control.

Together, these provisions

may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over

prevailing market prices for the Company’s securities.

Storage Corporation is subject to anti-takeover provisions under Nevada law, which could delay or prevent a change of control.

these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment

of a premium over prevailing market prices for the Company’s securities.

These provisions include:

limitations on the ability to engage in any “combination”

with an “interested stockholder” (each, as defined in the NRS) for two years from the date the person first becomes an “interested

stockholder”;

being subject to Sections 78.378 to 78.3793 of the NRS and allowing an “acquiring person” to obtain voting

rights in “control shares” without shareholder approval;

the ability of the Board to issue shares of currently undesignated

and unissued preferred stock without prior stockholder approval;

limitations on the ability to

engage in any “combination” with an “interested stockholder” (each, as defined in the Nevada Revised Statutes

(“NRS”)) for two years from the date the person first becomes an “interested stockholder”;

being subject to Sections

78.378 to 78.3793 of the NRS and allowing an “acquiring person” to obtain voting rights in “control shares” without

shareholder approval;

the ability of the Board to issue shares of currently undesignated and unissued preferred stock without prior stockholder

limitations on the ability of stockholders to call special meetings;

and the ability of the Board to amend its amended Bylaws without stockholder approval.

For more information, please see the section entitled

“ Description of Our Securities That We Are Offering-Nevada Anti-Takeover Statutes .”

UNRESOLVED STAFF COMMENTS

Not Applicable.

and the ability of the Board to amend its amended Bylaws

without stockholder approval.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors