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Item 8. Financial Statements and Supplementary Data

2025-03-31 compared with 2024-03-28 · 543 added, 581 removed, 591 unchanged (66% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY

Index to the Consolidated Financial Statements

to the Consolidated Financial Statements

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

Consolidated Balance Sheets as of December 31, 2024, and 2023

Consolidated Statements of Operations for the Years Ended December 31, 2023, and 202 2

Consolidated Statements of Income for the Years Ended December 31, 2024, and 2023

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024, and 2023

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024, and 2023

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To the Board of Directors and

Stockholders of Data Storage Corporation and

Stockholders of Data Storage Corporation and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying balance sheets

of Data Storage Corporation and Subsidiaries (the Company) as of December 31, 2023 and 2022, and the related statements of operations,

stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to

as the financial statements).

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

position of the Company as of December 31, 2023 and 2022 and the results of its operations and its cash flows for the years then

ended, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying balance sheets of

Data Storage Corporation and Subsidiaries (the Company) as of December 31, 2024 and 2023, and the related statements of income, comprehensive

income, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the financial

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

as of December 31, 2024 and 2023 and the results of its operations and its cash flows for the years then ended, in conformity with accounting

principles generally accepted in the United States of America.

Basis for Opinion

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of the Company’s management.

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

on our audits.

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

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

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

We conducted our audits in accordance with

the standards of the PCAOB.

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

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

The Company is not required to have,

nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required

to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the

effectiveness of the Company’s internal control over financial reporting.

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

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

required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards

of the PCAOB.

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

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

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

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

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

control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to

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

that respond to those risks.

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

in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made

by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a

reasonable basis for our opinion.

Our audits included performing procedures to assess

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

to those risks.

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

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

the overall presentation of the financial statements.

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

Critical Audit Matters

The critical audit matters communicated below

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

to the audit committee and that:

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

our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any

way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,

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

the Board of Directors and

Critical audit matters

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

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

especially challenging, subjective, or complex judgments.

We determined that there were no critical audit matters .

To the Board of Directors and

Stockholders of Data Storage Corporation and Subsidiaries

The Company’s evaluation of goodwill

for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

The Company uses the discounted

cash flow model to estimate the fair value of each reporting unit, which requires management to make subjective estimates and

assumptions related to forecasts of cash flows such as revenue growth rates and estimates of the weighted average cost of capital

Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment

charge, or both.

Given the significant judgments made by management

to estimate the fair value of the reporting units, performing audit procedures to evaluate the reasonableness of management’s

estimates and assumptions related to the forecasts of cash flows, such as revenue growth rates, and estimates of the weighted average

cost of capital rate, required a high degree of auditor judgment.

How the Critical Matter Was Addressed in

The primary proce dures

we performed to address this critical audit matter included:

determination

appropriateness

reasonableness

determination

/s/ Rosenberg Rich Baker Berman,

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

We have served as the Company’s auditor since 2008.

Rosenberg Rich Baker Berman, P.A.

Somerset, New Jersey

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Current Assets:

Cash and cash equivalents

Accounts receivable (less allowance for credit losses of $ 31,472 and $ 7,915 in 2024 and 2023, respectively)

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Less—Accumulated depreciation

( 5,105,451 )

( 4,956,698 )

Net Property and Equipment

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Finance leases payable related party

Deferred Tax Liability

Total Long-Term Liabilities

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Stockholders’ Equity:

Preferred stock, Series A par value $ .001 ;

Preferred stock, par value $ .001 ;

10,000,000 shares authorized;

shares issued and outstanding in 2023 and 2022

1,401,786 designated as Series A Preferred Stock, par value $ .001 ;

0 shares issued and outstanding on December 31, 2024 and 2023

Common stock, par value $ .001 ;

250,000,000 shares authorized;

6,880,460 and 6,822,127 shares issued and outstanding in 2023 and 2022, respectively

7,045,108 and 6,880,460 shares issued and outstanding on December 31, 2024 and 2023, respectively

Additional paid in capital

Accumulated deficit

( 19,505,803 )

( 19,887,378 )

Total Data Storage Corp Stockholders’ Equity

Accumulated other comprehensive loss

Total Data Storage Corporation Stockholders’ Equity

Non-controlling interest in consolidated subsidiary

Total Stockholder’s Equity

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

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

D ATA STORAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31,

Cost of sales

Impairment of goodwill

Selling, general and administrative

DATA STORAGE CORPORATION AND SUBSIDIARIES

STATEMENTS OF INCOME

Ended December 31,

general and administrative

(loss) from Operations

Other Income (Expense)

Interest income

Interest expense

Impairment of deferred offering costs and financing costs associated with canceled financing efforts

Other expense

Total Other Income (Expense)

Income (Loss) before provision for income taxes

Provision from (Benefit from) income taxes

Net Income (Loss)

Loss in Non-controlling interest in consolidated subsidiary

Net Income (Loss) Attributable to Common Stockholders

Earnings (loss) per Share – Basic

Earnings (loss) per Share – Diluted

Weighted Average Number of Shares – Basic

Weighted Average Number of Shares – Diluted

The accompanying notes are an integral

part of these consolidated Financial Statements.

Income (Expense)

Loss on disposal of equipment

Total Other Income

Income before provision for income taxes

for income taxes

in Non-controlling interest in consolidated subsidiary

Income Attributable to Common Stockholders

per Share – Basic

per Share – Diluted

Average Number of Shares – Basic

Average Number of Shares – Diluted

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

DATA STORAGE CORPORATION AND SUBSIDIARIES

Statements of Comprehensive INCOME

ended December 31,

Other comprehensive income (loss):

Foreign currency translation adjustment

Other comprehensive income (loss)

Comprehensive income available to common shareholders

See accompanying notes to consolidated financial statements.

DATA STORAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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Accumulated Deficit

Accumulated other comprehensive loss

Non-Controlling Interest

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Net Income (Loss)

( 4,356,802 )

( 4,408,863 )

Balance, December 31, 2023

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$ ( 236,948 )

Stock options exercise

Stock options exercised

Stock-based compensation

Other comprehensive loss

Net Income (Loss)

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Cash Flows from Operating Activities:

Net income (loss)

$ ( 4,408,863 )

Adjustments to reconcile net income to net cash provided

by operating activities:

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

Depreciation and amortization

Stock based compensation

Impairment of deferred offering costs and financing costs associated with canceled financing efforts

Impairment of goodwill

Change in expected credit losses

Loss on disposal of equipment

Changes in Assets and Liabilities:

Accounts receivable

( 1,118,469 )

Prepaid expenses and other current assets

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Deferred revenue

Deferred tax liability

Operating lease liability

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Capital expenditures

( 1,545,017 )

Purchase of marketable securities

( 2,307,228 )

( 9,010,968 )

Sale of marketable securities

Net Cash Used in Investing Activities

( 3,852,245 )

( 9,138,225 )

Cash Flows from Financing Activities:

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Repayments of finance lease obligations

Payments for deferred offering costs

Cash received for the exercise of stock options

Net Cash Used in Financing Activities

( 1,374,657 )

Decrease in Cash and Cash Equivalents

( 9,849,081 )

Cash and Cash Equivalents, Beginning of Period

Cash and Cash Equivalents, End of Period

Effect of exchange rates on cash

Decrease in Cash

Cash, Beginning of Year

Cash, End of Year

Supplemental Disclosures:

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Non-cash investing and financing activities:

Assets acquired by finance lease

Assets acquired by operating lease

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

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equipment and onboarding provisioning.

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

Massachusetts, Texas, North Carolina and Canada.

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

Texas, North Carolina and Canada.

On May 31, 2021, the Company completed a merger of

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Flagship is a provider of Hybrid Cloud solutions, managed services and cloud solutions.

On January 27, 2022, we formed Information Technology

On January 1, 2024, Flagship

Solutions, LLC was consolidated into the Company’s wholly-owned subsidiary, CloudFirst Technologies Corporation.

On January 27, 2022, the Company formed Information Technology

Acquisition Corporation a special purpose acquisition company for the purpose of entering into a merger, capital stock exchange,

asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses

On August 12, 2024, the Company established UK Cloud

Host Technologies Ltd., a corporation organized under the laws of the United Kingdom, to establish an executive presence in London and

to manage the Company’s business operations and affairs throughout Europe.

On December 27, 2024, the name of the entity was changed

to CloudFirst Europe Ltd.

Note 2 – Summary of Significant Accounting Policies

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The Consolidated Financial Statements include the

accounts of the Company and its wholly-owned subsidiaries, (i) CloudFirst Technologies Corporation, a Delaware corporation, (ii) Data

Storage FL, LLC, a Florida limited liability company, (iii) Flagship Solutions, LLC, a Florida limited liability company, (iv) Information

Technology Acquisition Corporation, a Delaware Corporation, and (v) its majority-owned subsidiary, Nexxis Inc, a Nevada corporation.

All inter-company transactions and balances have been eliminated in consolidation.

accounts of the Company and its wholly-owned subsidiaries, (i) CloudFirst Technologies Corporation, a Delaware corporation (“CloudFirst

Technologies”), (ii) Information Technology Acquisition Corporation, a Delaware corporation, (iii) its majority-owned subsidiary,

Nexxis Inc, a Nevada corporation and (iv) CloudFirst Europe Ltd..

All inter-company transactions and balances have been eliminated in

consolidation.

Reclassifications

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

the current year’s presentation.

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

stockholders’ equity, net loss or net cash provided by operating activities.

During the year ended December 31, 2023, we adopted

a change in presentation on our consolidated statements of in order to present interest income as a standalone line, the presentation

of which is consistent with our peers.

Prior periods have been revised to reflect this change in presentation.

Certain prior year amounts in the Consolidated Financial

Statements and the notes thereto have been reclassified where necessary to conform to the current year’s presentation.

These reclassifications

did not affect the prior period’s total assets, total liabilities, stockholders’ equity, net income, or net cash provided

by operating activities.

During the year ended December 31, 2024, the Company reclassified disaggregated revenue and had a change in presentation

on its Consolidated Financial Statements in order to present segments in line with how its Chief Operating Decision Maker (“CODM”)

evaluates performance of each segment.

Prior periods have been revised to reflect this change in the presentation.

Recently Issued and Newly Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board

(“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic

Measurement of Credit Losses on Financial Instruments.

The FASB subsequently issued amendments to ASU 2016-13, which have the same

effective date and transition date of January 1, 2023.

These standards replace the existing incurred loss impairment model with an expected

credit loss model and requires a financial asset measure at amortized cost to be presented at the net amount expected to be collected.

The Company determined that this change does not have a material impact to the financial statements or financial statement disclosures.

November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280):

to Reportable Segment Disclosures, which enhances reportable segment disclosure requirements primarily through expanded disclosures around

significant segment expenses.

The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods

within fiscal years beginning after December 15, 2024.

The amendments should be applied retrospectively to all prior periods presented

in the financial statements.

We are currently evaluating the impact of the ASU and expect to include updated segment expense disclosures.

In December 2023, the FASB issued ASU

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which requires disclosure of specific categories meeting a

quantitative threshold within the income tax rate reconciliation, as well as disaggregation of income taxes paid by jurisdiction.

ASU, which can be applied either prospectively or retrospectively, is effective for annual periods beginning after December 15, 2024,

with early adoption permitted.

We are currently evaluating the impact of the ASU and expect to include updated income tax disclosures.

In March 2023, the FASB issued ASU

2023-01, “Leases (Topic 842):

Common Control Arrangements.” The new accounting rules require that leasehold improvements associated

with common control leases be amortized by the lessee over the useful life of the leasehold improvements to the common control group (regardless

of the lease term) as long as the lessee controls the use of the underlying asset (the leased asset) through a lease.

These leases should

also be accounted for as a transfer between entities under common control through an adjustment to equity if, and when, the lessee no

longer controls the use of the underlying asset.

The Company adopted ASU 2023-01 and it did not have a material impact to its Consolidated

Financial statements.

In November 2023, the Financial Accounting Standards Board

(“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which enhances

reportable segment disclosure requirements primarily through expanded disclosures around significant segment expenses.

The amendments

are effective for fiscal years beginning after December 15, 2024.

The amendments should be applied retrospectively to all prior periods

presented in the financial statements.

The Company determined that this change does not have a material impact to the financial statements

or financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

to Income Tax Disclosures, which requires disclosure of specific categories meeting a quantitative threshold within the income tax rate

reconciliation, as well as disaggregation of income taxes paid by jurisdiction.

This ASU, which can be applied either prospectively or

retrospectively, is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently

evaluating the impact of the ASU and expects to include updated income tax disclosures.

On November 2024, the FASB issued Accounting Standards

Update (ASU) No.

2024-03, Income Statement (Topic 220):

Reporting Comprehensive Income - Expense Disaggregation Disclosures,

Disaggregation of Income Statement Expenses , which requires public companies to disclose, in interim and annual reporting periods,

additional information about certain expenses in the financial statements.

The amendments in this pronouncement will be effective for

annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted

and is effective on either a prospective basis or retrospective basis.

The Company is currently assessing the potential impacts of adoption

on its consolidated financial statements and related disclosures.

Use of Estimates

The preparation of financial statements in conformity

with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

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

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

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Management believes the estimated fair value of these accounts on December

31, 2023, approximate their carrying value as reflected in the balance sheet due to the short-term nature.

The carrying values of certain

of the Company’s notes payable and capital lease obligations approximate their fair values based upon a comparison of the interest

31, 2024, approximate their carrying value as reflected in the balance sheet due to their short-term nature.

The carrying values of the

Company’s finance lease obligations and capital lease obligations approximate their fair values based upon a comparison of the interest

rate and terms of such debt given the level of risk to the rates and terms of similar debt currently available to the Company in the marketplace.

The fair value measurement disclosures are grouped

into three levels based on valuation factors:

Level 1 – quoted prices in active markets for identical investments

Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs)

Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments)

The Company’s Level 1 assets and liabilities

include cash, accounts receivable, marketable securities, accounts payable, prepaid, and other current assets.

Management believes the

estimated fair value of these accounts at December 31, 2024, approximates their carrying value as reflected in the balance sheets due

to the short-term nature of these instruments.

The Company’s Level 2 assets and liabilities

include the Company’s finance and operating lease assets and liabilities.

The carrying amounts of these leases approximate their

fair values, based on a comparison of the lease terms and the Company’s incremental borrowing rates with those of similar leases

available in the market.

The Company’s Level 3 assets and liabilities use inputs to determine

the fair value are generally unobservable and typically reflect management’s estimates of assumptions that market participants would

use in pricing the asset or liability.

The fair values are therefore discounted cash flow models.

Unobservable inputs used in the models

are significant to the fair values of the assets and liabilities.

Assets and Liabilities Measured at Fair Value on

a Nonrecurring Basis

Certain assets and liabilities are measured at fair

value on a nonrecurring basis.

Assets and liabilities recognized or disclosed at fair value on the consolidated financial statements on

a nonrecurring basis include items such as property, plant and equipment, operating lease right-of-use assets, goodwill and other intangible

These assets are measured using Level 3 inputs, if determined to be impaired.

Cash and Cash Equivalents

The Company considers all highly liquid investments

with an original maturity, or remaining maturity at the time of purchase, of three months or less, to be cash equivalents.

As of December 31, 2023 and 2022, the Company had cash equivalents of $ 1,428,730

and $ 2,286,722 respectively.

Certain assets and liabilities are measured at fair value on a

nonrecurring basis.

Assets and liabilities recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring

basis include items such as property, plant and equipment, goodwill, and other intangible assets.

Marketable securities that are bought and held principally

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gains and losses recognized in earnings.

The following table sets forth a summary of the changes

in equity investments, at cost that are measured at fair value on a non-recurring basis:

Schedule of changes

in equity investments measured at fair value

For the years ended December 31, 2023, and 2022

As of January 1, 2022

Purchase of equity investments

Unrealized gains

As of December 31, 2022

Purchase of equity investments

Unrealized gains

As of December 31, 2023

The following table sets forth a summary of the changes in equity investments

at cost that are measured at fair value on a non-recurring basis:

Schedule of changes in equity investments measured at fair value

the years ended December 31, 2024, and 2023

of January 1, 2023

of equity investments

December 31, 2023

of equity investments

of December 31, 2024

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments and assets subjecting the Company

to concentration of credit risk consist primarily of cash and cash equivalents, short-term investments and trade accounts receivable.

The Company’s cash and cash equivalents are maintained at major U.S.

Financial instruments and assets subjecting the Company to concentration of credit

risk consist primarily of cash, short-term investments and trade accounts receivable.

The Company’s cash are maintained at major

financial institutions.

Deposits in these institutions may

exceed the amount of insurance provided on such deposits.

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

The Company’s customers are primarily concentrated in the United

As of December 31, 2023, DSC had one customer with

an accounts receivable balance representing 20 % of total accounts receivable.

As of December 31, 2022, the Company had two customers

with an accounts receivable balance representing 23 % and 14 % of total accounts receivable.

For the year ended December 31, 2023, the Company

had two customers that accounted for 12 % and 10 % of revenue.

For the year ended December 31, 2022, the Company had two customers

that accounted for 18 % and 11 % of revenue.

As of December 31, 2024, DSC had two customers with

an accounts receivable balance representing 16 % and 15 % of total accounts receivable.

As of December 31, 2023, the Company had one

customer with an accounts receivable balance representing 20 % of total accounts receivable.

For the year ended December

31, 2024, the Company had two customers that each individually accounted for 12 % of revenue .

For the year ended December 31, 2023, the Company had two customers that accounted for 12 % and 10 % of revenue.

Accounts Receivable/Allowance for Credit Losses

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

receivables are uncollateralized, non-interest-bearing customer obligations.

Accounts receivable are typically due within 30 days.

The allowance for credit losses reflects the estimated accounts receivable that will not be collected due to credit losses.

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

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

Provisions are also made for other accounts receivable not specifically reviewed

based upon historical experience.

Clients invoiced in advance for services are reflected in deferred revenue on the Company's balance

The Company sells its services to customers on an

open credit basis.

Accounts receivable are uncollateralized, non-interest-bearing customer obligations and are typically due within 30

ASC 326 requires the recognition of lifetime estimated credit losses expected to occur for trade accounts receivable.

also requires the Company to pool assets with similar risk characteristics and consider current economic conditions when estimating losses.

During the years ended December 31, 2024, and 2023, the Company recorded $ 45,394 and $ 119,524 , respectively, of expected credit losses.

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

Changes in the allowance for expected credit losses

for trade accounts receivable are presented in the table below:

Schedule of Changes in the allowance for expected credit losses

for trade accounts receivable

Year ended December,

Beginning balance

Ending Balance

Property and Equipment

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over their estimated useful lives or the term of the lease using the straight-line method for financial statement purposes.

useful lives in years for depreciation are five to seven years for property and equipment.

Additions, betterments and replacements

are capitalized, while expenditures for repairs and maintenance are charged to operations when incurred.

As units of property are sold

or retired, the related cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized

Deferred Offering Costs

The Company capitalizes certain legal, professional

accounting and other third-party fees that are directly associated with in-process equity financing as deferred offering costs until such

financings are consummated.

After consummation of the equity financing, these costs are recorded in stockholders’ deficit as a reduction

of additional paid-in capital generated as a result of the offering.

Should the planned equity financing be abandoned, the deferred offering

costs will be expensed immediately as a charge to other income and expenses in the consolidated statement of operations.

In accordance

with this policy, for the years ended December 31, 2023, and 2022, the Company expensed financing costs of $ 0 and $ 127,343 , respectively.

Deferred tax assets and liabilities are recognized

for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities

and their respective tax bases and operating loss and tax credit carry forwards.

Deferred tax assets and liabilities are measured using

enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes

the enactment date.

At December 31, 2023 and December 31, 2022, the Company had a full valuation allowance against its deferred tax assets.

useful lives for property and equipment are five to seven years.

Additions, betterments and replacements are capitalized, while

expenditures for repairs and maintenance are charged to operations when incurred.

As units of property are sold or retired, the related

cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income.

Deferred tax assets and liabilities are recognized for the future tax consequences

attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax

bases and operating loss, and tax credit carry forwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected

to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred

tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

As of December

31, 2024, and 2023, the Company had a net deferred tax liability of $ 39,031 and $ 0 , respectively.

Per FASB ASC 740-10, disclosure is not required of

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

Neither of the Company’s Federal

None of the Company’s Federal

or State tax returns are currently under examination.

Goodwill and Other Intangibles

The Company tests goodwill and other intangible assets for impairment on at

least an annual basis.

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

To determine the

fair value of goodwill and intangible assets, the Company uses many assumptions and estimates using a market participant approach that

directly impacts the results of the testing.

In making these assumptions and estimates, the Company uses industry accepted valuation models

and set criteria that are reviewed and approved by various levels of management.

The Company tests goodwill for impairment on an annual

basis on December 31, or more frequently if events occur or circumstances change indicating that the fair value of the goodwill may be

below its carrying amount.

The Company assesses goodwill for impairment on an

annual basis on December 31, or more frequently if events occur or circumstances change indicating that the fair value of the goodwill

may be below its carrying amount.

The Company has four reporting units.

The Company uses an income-based approach to determine the fair value

of the reporting units.

This approach uses a discounted cash flow methodology and the ability of our reporting units to generate cash

flows as measures of fair value of our reporting units.

the year ended December 31, 2023, and 2022, the Company completed its annual

impairment tests of goodwill.

The Company performed the qualitative assessment as permitted by ASC 350-20 and determined for two of its

reporting units that the fair value of those reporting units was more likely than not greater than their carrying value, including Goodwill

at December 31, 2023.

However, based on this qualitative assessment on December 31, 2022 the Company determined that the carrying value

of the Flagship reporting unit was more likely than not greater than its fair value, including Goodwill.

Based on the completion of the

annual impairment test on December 31, 2022, the Company recorded an impairment charge of $2,322,000 for goodwill for the year ended

December 31, 2022.

The Company uses an income-based approach to determine the fair

value of the reporting units.

This approach uses a discounted cash flow methodology and the ability of the Company’s reporting units

to generate cash flows as measures of fair value of its reporting units.

The Company performs a qualitative analysis of goodwill and other

intangible assets for impairment indicators on at least an annual basis.

If this assessment shows impairment indicators the Company will

perform an impairment test to determine if the carrying value of a reporting unit exceeds its estimated fair value.

For the year ended December

31, 2024, the Company was not required to perform an impairment test of goodwill since the qualitative analysis did not show any impairment

indicators and no triggering events were identified.

To determine the fair value of goodwill and intangible assets, the Company uses many

assumptions and estimates using a market participant approach that directly impacts the testing results.

In making these assumptions and

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

For the year ended December 31, 2023, the Company

was required to complete its annual impairment tests of goodwill since the Company combined two reporting units.

The Company performed

the quantitative assessment and determined that the fair value of the reporting units was more likely than not greater than their carrying

value, including goodwill at December 31, 2023.

Based on the completion of the annual impairment test on December 31, 2023, the Company

did not record an impairment charge.

Revenue Recognition

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Cloud Infrastructure and Disaster Recovery Revenue

Cloud Infrastructure provides clients with the ability to migrate their on-premises

computing and digital storage to DSC’s enterprise-level technical compute and digital storage assets located in Tier 3 data centers.

DSC owns the assets and provides a turnkey solution whereby achieving reliable and cost-effective, multi-tenant IBM Power compute, x86/intel,

flash digital storage, while providing disaster recovery and cyber security while eliminating client capital expenditures.

pays a monthly fee and can increase capacity as required.

Clients can subscribe to an array of disaster recovery solutions without subscribing

to cloud infrastructure.

Product offerings provided directly from DSC are High Availability, Data Vaulting and retention solutions, including

standby servers which allows clients to centralize and streamline their mission-critical digital information and technical environment

while ensuring business continuity if they experience a cyber-attack or natural disaster.

Client’s data is vaulted at two data centers

with the maintenance of retention schedules for corporate governances and regulations all to meet their back to work objective in a disaster.

Cloud Infrastructure provides clients with the ability

to migrate their on-premises computing and digital storage to DSC’s enterprise-level technical compute and digital storage assets

located in Tier 3 data centers.

DSC owns the assets and provides a turnkey solution whereby achieving reliable and cost-effective, multi-tenant

IBM Power compute, x86/Intel, flash digital storage, while providing disaster recovery and cyber security while eliminating client capital

expenditures.

The client pays a monthly fee and can increase capacity as required.

Clients can subscribe to an array of disaster recovery

solutions without subscribing to cloud infrastructure.

Product offerings provided directly from DSC are High Availability, Data Vaulting

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

and technical environment while ensuring business continuity if they experience a cyber-attack or natural disaster.

Client’s data

is vaulted at two data centers with the maintenance of retention schedules for corporate governances and regulations all to meet their

back to work objective in a disaster.

Equipment and Software

The Company provides equipment and software and actively participates in collaboration

with IBM to provide innovative business solutions to clients.

The Company is a partner of IBM and the various software, infrastructure

and hybrid cloud solutions are provided to clients.

Managed Services

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tests and manufacturer support for equipment and on-going monitoring of client system performance.

Equipment and Software

The Company provides equipment and software and actively

participates in collaboration with IBM to provide innovative business solutions to clients.

The Company is a partner of IBM and the various

software, infrastructure and hybrid cloud solutions provided to clients.

Nexxis Voice over Internet and Direct Internet Access

The Company provides VoIP, Internet access and data

transport services to ensure businesses are fully connected to the internet from any location, remote and on premise.

The company provides

Hosted VoIP solutions with equipment options for IP phones and internet speeds of up to 10Gb delivered over fiber optics.

The Company provides Voice over Internet Protocol

(“VoIP”), Internet access and data transport services to ensure businesses are fully connected to the internet from any location,

remote and on premise.

The Company provides Hosted VoIP solutions with equipment options for VoIP phones and internet speeds of up to

10Gb delivered over fiber optics.

Disaggregation of revenue

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International

Infrastructure & Disaster Recovery/Cloud Service

Cloud Infrastructure & Disaster Recovery

Equipment and Software

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Managed Services

Nexxis Services

VoIP Services

Total Revenue

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made for individual accounts based upon specific facts and circumstances including criteria such as their age, amount, and client standing.

Sales are generally recorded in the month the service

For clients who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract.

During the year ended December 31, 2022, the Company recognized $ 146,159 in sales that was recorded as deferred revenue as of December

During the year ended December 31, 2023, the Company recognized $ 277,375 in sales that was recorded as deferred revenue as of

December 31, 2022.

Sales are generally recorded in the month the service is provided.

who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract.

During the years ended December

31, 2024, and 2023, the Company recognized $ 233,360 and $ 277,375 in sales that was recorded as deferred revenue as of December 31, 2023

and 2022, respectively.

Transaction price allocated to the remaining performance

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subscription-based cloud service provides for “capacity on-demand” for IBM Power and X86 Intel server systems.

Subscription-based service, offering continuous internet connection combined with FailSAFE which provides disaster recovery for both a clients’ voice and data environments.

Support and Maintenance :

Subscription based service offers support for clients on their servers, firewalls, desktops or software.

Services are provided 24x7x365 to our clients.

Subscription-based service, offering continuous internet connection combined with FailSAFE

which provides disaster recovery for both clients’ voice and data environments.

Subscription based service offers support for clients on their servers,

firewalls, desktops or software.

Services are provided 24x7x365 to the Company’s clients.

Implementation / Set-Up Fees :

Onboarding and set-up for cloud infrastructure and disaster recovery as well as Cyber Security.

Equipment sales :

Sale of servers and data storage equipment to the client.

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performance obligation is considered to be satisfied at a point in time when the obligation to the client has been fulfilled (i.e., when

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

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

License - Granting SSL Certificates and Other

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is when the control of the product transfers, either at a point in time or over time, depending on the nature of the license.

standard identifies two types of licenses of IP:

(i) a right to access IP;

and, (ii) a right to use IP.

To assist in determining whether

a license provides a right to use or a right to access IP, ASC 606 defines two categories of IP:

standard identifies two types of licenses of intellectual property:

(i) a right to access intellectual property;

and (ii) a right to use

intellectual property.

To assist in determining whether a license provides a right to use or a right to access intellectual property,

ASC 606 defines two categories of intellectual property:

Functional and Symbolic.

The Company’s

license arrangements typically do not require the Company to make its proprietary content available to the client either through a download

or through a direct connection.

Throughout the life of the contract the Company does not continue to provide updates or upgrades to the

license granted.

Based on the guidance, the Company considers its license offerings to be akin to functional IP and recognizes revenue

at the point in time the license is granted and/or renewed for a new period.

The Company’s license arrangements typically do

not require the Company to make its proprietary content available to the client either through a download or through a direct connection.

Throughout the life of the contract the Company does not continue to provide updates or upgrades to the license granted.

guidance, the Company considers its license offerings to be akin to functional intellectual property and recognizes revenue at the point

in time the license is granted and/or renewed for a new period.

Payment Terms

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Significant Judgement

In the instance where contracts have multiple performance

obligations the Company uses judgment to establish a stand-alone price for each performance obligation.

The price for each performance

obligation is determined by reviewing market data for similar services as well as the Company’s historical pricing of each individual

The sum of each performance obligation is calculated to determine the aggregate price for the individual services.

The proportion

of each individual service to the aggregate price is determined.

The ratio is applied to the total contract price in order to allocate

the transaction price to each performance obligation.

In instances where contracts include multiple performance

obligations, the Company exercises judgment in determining the standalone selling price for each obligation.

Standalone prices are established

by evaluating market data for comparable services and considering the Company’s historical pricing practices.

The aggregate standalone

price of all performance obligations is calculated, and each individual obligation’s proportionate share of the total is determined.

This ratio is then applied to the overall contract price to allocate the transaction price among the performance obligations accordingly.

Impairment of Long-Lived Assets

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Advertising Costs

The Company expenses the costs associated with advertising

as they are incurred.

The Company incurred $ 815,674 and $ 966,268 for advertising costs for the year ended December 31, 2023, and 2022,

respectively.

The Company expenses the costs associated with

advertising as they are incurred.

The Company incurred $ 749,257 and $ 815,674 for advertising costs for the year ended December

31, 2024, and 2023, respectively.

Stock-Based Compensation

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The Company has agreements and arrangements

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

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

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

The expense for

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

of shares awarded.

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The valuation methodology used to determine the fair

value of the options issued during the period is the Black-Scholes option-pricing model.

The Black-Scholes model requires the use of a

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

life of the options.

value of options issued during the period is the Black-Scholes option-pricing model.

The Black-Scholes model requires the use of a number

of assumptions including the volatility of the stock price, the average risk-free interest rate, and the weighted average expected life

of the options.

Risk-free interest rates are calculated based on continuously compounded risk-free rates for the appropriate term.

The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common Stock and does not

intend to pay dividends on its Common Stock in the foreseeable future.

dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common Stock and does not intend

to pay dividends on its Common Stock in the foreseeable future.

The expected forfeiture rate is estimated based on management’s

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

Net Income (Loss) Per Common Share

Net Income Per Common Share

Basic income (loss) per share is computed by dividing

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Year Ended December 31,

Net Income (Loss) Available to Common Shareholders

$ ( 4,356,802 )

Net Income Available to Common Shareholders

Weighted average number of common shares - basic

Dilutive securities

Restricted stock award

Weighted average number of common shares - diluted

Earnings (Loss) per share, basic

Earnings (Loss) per share, diluted

Earnings per share, basic

Earnings per share, diluted

The following table sets forth the number of potential

shares of common stock that have been excluded from diluted net income (loss) per share because their effect

was anti-dilutive:

Schedule of anti-dilutive income (loss) per share

Year ended December 31,

shares of common stock that have been excluded from diluted net income per share because their effect was anti-dilutive:

Schedule of anti-dilutive shares

ended December 31,

Note 3 - Prepaids and other current assets

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Accumulated depreciation

( 5,105,451 )

( 4,956,698 )

Net property and equipment

Depreciation expense for the years ended December

2023, and 2022 was $ 1,024,034 and $ 946,989 , respectively.

31, 2024, and 2023 was $ 1,079,160 and $ 1,024,034 , respectively, of which $ 1,067,006 and $ 1,008,429 , respectively, was allocated to

general and administrative expenses and $ 12,154 and $ 15,605 respectively, was allocated to cost of goods sold.

Note 5 - Goodwill and Intangible Assets

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Total Goodwill and Intangible Assets

Scheduled amortization over the next five years are as follows:

Schedule of amortization over the next two years

Scheduled amortization over the next four years are as follows:

Schedule of amortization over the next five years

Twelve months ending December 31,

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The Company currently maintains two leases for office

space located in Melville, NY.

The first lease for office space in Melville, NY commenced

space located in Melville, NY and one lease for office space in Austin, TX.

The lease for office space in Melville, NY commenced

on September 1, 2019.

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

same building.

The term of this lease is for three years and eleven months and runs co-terminus with the Company’s existing

lease in the same building.

The base annual rent is $ 11,856 payable in equal monthly installments of $ 988 .

A second lease for office space in Melville, NY, was

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

The term of this lease is five years and three months at $ 86,268 per

year with an escalation of 3% per year and expires on July 31, 2023.

The lease has since expired.

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

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date of the lease was August 2, 2021.

The monthly rent is approximately $ 4,965 .

The Company leases cages and racks for technical

space in Tier 3 data centers in New York, Massachusetts, and North Carolina.

These leases are month to month.

monthly rent is approximately $ 39,000 .

The Company also leases technical space in Dallas, TX.

The lease term is thirteen months and monthly payments are $ 1,403 .

The lease term expires on July 31, 2023.

On January 1, 2022, the Company entered into a lease

agreement for office space with WeWork in Austin, TX.

The lease term is six months and requires monthly payments of $ 1,470 and expires

on June 30, 2022 .

Subsequent to June 30, 2022, the Company is on a $ 3,073 month-to-month lease with WeWork in Austin, TX.

The monthly rent was approximately $ 4,965 .

The lease has since expired.

On January 1, 2022, the Company entered into a lease agreement for office

space with WeWork in Austin, TX.

On September 3, 2024, the Company amended this agreement and is on an eight-month lease agreement with

payments of a $ 1,056 per month.

January 17, 2024, the Company entered into a lease agreement for office space in Melville, NY.

lease commenced on April 1, 2024, and has a term of sixty-seven months.

The lease requires monthly payments of $ 11,931 and

expires on October

Finance Lease Obligations

On June 1, 2020, the Company entered into a lease

agreement with a finance company to lease technical equipment.

The lease obligation was payable in monthly installments of $ 5,008 .

lease carried an interest rate of 7 % and was a three-year lease.

The term of the lease ended June 1, 2023 .

On June 29, 2020, the Company entered into a

lease agreement for technical equipment with a finance company.

The lease obligation was payable in monthly installments of $ 5,050 .

The lease carried an interest rate of 7 %

and was a three-year lease.

The term of the lease ended June

On July 31, 2020, the Company entered into a lease

agreement for technical equipment with a finance company.

The lease obligation was payable in monthly installments of $ 4,524 .

carried an interest rate of 7 % and was a three-year lease.

The term of the lease ended July 31, 2023 .

On November 1, 2021, the Company entered into a lease

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

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

The term of the lease ends November 1, 2024 .

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

The term of the lease ended on November 1, 2024.

On January 1, 2022, the Company entered into a lease

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The lease obligation is payable in monthly installments of $ 17,718 .

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

The term of the lease ends January 1, 2025 .

carried an interest rate of 5 % and is a three-year lease.

The term of the lease ended January 1, 2025.

On January 1, 2022, the Company entered into a technical

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The lease obligation is payable in monthly installments of $ 2,037 .

The lease carries an interest

The lease carried an interest

rate of 6 % and is a three-year lease.

The term of the lease ends January 1, 2025 .

Finance Lease Obligations – Related Party

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

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

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

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

The term of the lease ended April 16, 2022 .

Systems Trading is owned and operated by Harold Schwartz the president of CloudFirst.

On January 1, 2019, the Company entered into a lease

agreement with Systems Trading.

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

carried an interest rate of 6.75 % and was a five-year lease.

The term of the lease ended December 31, 2023 .

On April 1, 2019, the Company entered into two lease

agreements with Systems Trading to add data center equipment.

The first lease calls for monthly installments of $ 1,328 and expires

on March 1, 2022 .

It carries an interest rate of 7 %.

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

on March 1, 2022 .

It carries an interest rate of 6.7 %.

On January 1, 2020, the Company entered into a lease

agreement with Systems Trading to lease equipment.

The lease obligation was payable to Systems Trading with monthly installments of $ 10,534 .

The lease carried an interest rate of 6 % and was a three-year lease.

The term of the lease ended January 1, 2025.

Finance Lease Obligations – Related Party

On March 4, 2021, the Company entered into a lease

agreement with Systems Trading effective April 1, 2021.

This lease obligation is payable to Systems Trading with monthly installments

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

The lease carries an interest rate of 8 %.

agreement with Systems Trading, Inc.

(“Systems Trading”), a technology leasing company established by Mr.

Schwartz, the Company’s

President where he currently serves as Chief Executive Officer and President, effective April 1, 2021.

This lease obligation is payable

to Systems Trading with monthly installments of $ 1,567 and expired on March 31, 2024 .

The lease carried an interest rate of 8 %.

On January 1, 2022, the Company entered into a lease

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This lease obligation is payable to Systems Trading with monthly installments of

$ 6,667 and expires on February 1, 2025 .

The lease carries an interest rate of 8 %.

The Company determines if an arrangement contains

a lease at inception.

Right of Use “ROU” assets represent the Company’s right to use an underlying asset for the lease

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

ROU assets and liabilities are recognized

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

The Company’s lease term

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

Leases with a term of 12 months

or less are not recorded on the balance sheet, per the election of the practical expedient.

ROU assets and liabilities are recognized

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

The Company recognizes lease

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

The Company recognizes variable lease payments in the period in

which the obligation for those payments is incurred.

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

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

rate of 5 % was used in preparation of the ROU asset and operating liabilities.

$ 6,667 and expired on February 1, 2025 .

The lease carried an interest rate of 8 %.

The Company determines whether an arrangement contains

a lease at the inception of the contract.

Right-of-Use ("ROU") assets represent the Company’s right to use an underlying

asset for the lease term, while lease liabilities represent its obligation to make lease payments arising from the lease.

ROU assets and

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

The lease term includes options to extend the lease when it is reasonably certain that the Company will exercise those options.

The Company has elected the practical expedient to exclude leases with terms of 12 months or less from the balance sheet.

Lease expense

for these short-term leases is recognized on a straight-line basis over the lease term.

Variable lease payments that depend on an index

or rate are initially measured using the index or rate in effect at the lease commencement date.

Other variable payments are recognized

in the period in which the obligation is incurred.

A discount rate of 9 % was used in the preparation of ROU assets and lease liabilities.

The components of lease expense were as follows:

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Accumulated amortization

( 4,493,204 )

Property and equipment, net

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31, 2024, mature as follows:

Schedule of related party and non-related finance

Schedule of long term obligations operating and finance leases

For the Twelve Months Ended December 31,

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Note 7 - Commitments and Contingencies

On May 7, 2024, the Company entered into a master

service agreement with a vendor.

The obligation is payable in monthly installments of $ 51,680 .

The master service agreement ends June

On December 18, 2024, the Company entered into a master

service agreement with a vendor.

The obligation is payable in monthly installments of $ 4,410 .

The master service agreement ends December

On January 1, 2025, the Company entered into a master

service agreement with a vendor.

The obligation is payable in monthly installments of $ 3,846 .

The master service agreement ends December

On January 24, 2025, the Company entered into a master

service agreement with a vendor.

The obligation is payable in monthly installments of $ 3,618 .

The master service agreement ends January

As part of the Flagship acquisition the Company acquired

a licensing agreement for marketing related materials with a National Football League team.

The Company has approximately $ 0.6 million

in payments over the next 3 years.

The Company has approximately $ 821,118 in

payments over the next 3 years.

Note 8 - Stockholders’ Equity

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Stock, par value $0 .001 per share.

On May 1, 2022, the Company issued 125,000 shares

of its Restricted Common Stock to employees in exchange for services at a fair value of $ 400,000 .

On July 18, 2024, the Company entered into an Equity

Distribution Agreement (the “Agreement”), pursuant to which it may offer and sell, from time to time, shares of its common

Sales of shares of common stock under the Agreement will be made pursuant to the Company’s registration statement on Form

S-3 (File No.

333-280881) (the “Registration Statement”) and a related prospectus supplement (the “ATM Prospectus”).

The ATM Prospectus relates to the offering of up to $ 10,600,000 shares of the Company’s common stock.

The issuance and sale,

if any, of common stock under the Agreement is subject to the Company maintaining an effective registration statement.

The Registration

Statement was declared effective on July 26, 2024.

To date, the Company has not made any sales under the Agreement.

During the year ended December 31, 2023, employees

exercised 3,334 options into shares of Common Stock.

exercised 833 stock options into shares of Common Stock.

The Company received $ 1,699 for these options.

During the year ended December 31, 2024, employees

exercised 833 options into shares of Common Stock.

exercised 68,988 stock options into 65,832 shares of Common Stock.

The Company received $ 133,005 for these options.

Common Stock Options

On June 5, 2023,

the Company registered an additional 700,000 shares of common stock under the 2021 Stock Incentive Plan.

A summary of the Company’s options activity

On July 1, 2024, the Company registered an

additional 111,323

and 1,000,000

shares of common stock under the 2010 Stock Incentive Plan and 2021 Stock Incentive Plan, respectively.

A summary of the Company’s stock option activity

and related information follows:

of option activity and related information

Schedule of options activity and related information

Options Outstanding at January 1, 2023

$ 2.00 – 16.00

Options Granted

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Options Outstanding at December 31, 2023

$ 2.00 – 15.76

Options Granted

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Options Outstanding at December 31, 2024

$ 1.48 - 14.00

Options Exercisable at December 31, 2024

$ 1.48 – 14.00

Share-based compensation expense for options totaling

$ 315,815 and $ 282,193 was recognized in our results for the years ended December 31, 2023, and 2022, respectively.

The intrinsic value of outstanding options as of December

31, 2023, and 2022 was $ 391,283 and $ 0 respectively.

Share-based compensation expense recognized for stock

options granted totaled $ 425,029 and $ 315,815 for the years ended December 31, 2024, and 2023, respectively.

The intrinsic value of outstanding stock options as

of December 31, 2024, and 2023 was $ 1,171,313 and $ 391,283 , respectively.

The valuation methodology used to determine the fair

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

The Black-Scholes model requires the use of a

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

life of the options.

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

The Black-Scholes model requires the use of

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

life of stock options.

The risk-free interest rate assumption is based upon

observed interest rates on zero-coupon U.S.

Treasury bonds whose maturity period is appropriate for the term of the options.

Treasury bonds whose maturity period is appropriate for the term of the stock options.

Estimated volatility is a measure of the amount by

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The Company’s calculation

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

of estimated volatility is based on historical stock prices of the Company’s stock over a period equal to the expected life of the

As of December 31, 2024, there was $ 642,873 of total

unrecognized compensation expense related to unvested employee options granted under the Company’s share-based compensation plans

that is expected to be recognized over a weighted average period of approximately 2.1 years.

unrecognized compensation expense related to unvested employee stock options granted under the Company’s share-based compensation

plans that is expected to be recognized over a weighted average period of approximately 1.37 years.

The weighted average fair value of options granted,

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Schedule of weighted average fair value of options granted

Weighted average fair value of options granted

Risk-free interest rate

3.48 % - 4.59 %

average fair value of stock options granted

interest rate

3.84 %- 4.33 %

Expected life (years)

Dividend yield

Share-Based Awards, restricted stock award (“RSAs”)

On March 31, 2022, the Board resolved that the Company

shall issue to Board members an aggregate of 12,500 RSA’s Compensation as a group amount of $ 40,375 .

The shares vest one year after

On June 30, 2022, the Board resolved that the Company

shall issue to Board members an aggregate of 12,500 RSA’s Compensation as a group amount of $ 30,625 .

The shares vest one year after

On September 30, 2022, the Board resolved that the

Company shall issue to Board members an aggregate of 12,500 RSA’s Compensation as a group amount of $ 25,000 .

The shares vest one

year after issuance.

On December 31, 2022, the Board resolved that the Company

shall issue to Board members an aggregate of 12,500 RSA’s Compensation as a group amount of $ 18,500 .

The shares vest one year after

On March 1, 2023, the Company granted certain employees

an aggregate of 73,530 RSA’s.

Compensation as a group amount to $ 130,883 .

The shares vest one third each year for three years after

Compensation as a group amounted to $ 130,883 .

The shares vest one third each year for three years

after issuance.

On March 28, 2023, the Company granted certain employees

an aggregate of 44,942 RSA’s.

Compensation as a group amount to $ 72,357 .

Compensation as a group amounted to $ 72,357 .

The shares vest one third each year for three years after

On March 31, 2023, the Board resolved that the Company

shall issue to Board members an aggregate of 12,500 RSA’s Compensation as a group amount of $ 22,750 .

The shares vest one year after

On March 31, 2023, the Board of Directors resolved

that the Company shall issue to Board members an aggregate of 12,500 RSA’s.

Compensation as a group amounted to $ 22,750 .

vest one year after issuance.

On April 10, 2023, the Company granted certain employees

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The shares vest one third each year for three years after

On June 30, 2023, the Board resolved that the Company

shall issue to Board members an aggregate of 12,500 RSAs Compensation as a group amount of $ 29,125 .

The shares vest one year after issuance.

On September 30, 2023, the Board resolved that the

Company shall issue to Board members an aggregate of 12,500 RSAs Compensation as a group amount of $ 38,875 .

The shares vest one year after

On June 30, 2023, the Board of Directors resolved

that the Company shall issue to Board members an aggregate of 12,500 RSAs.

Compensation as a group amounted to $ 29,125 .

The shares vest

one year after issuance.

On September 30, 2023, the Board of Directors resolved

that the Company shall issue to Board members an aggregate of 12,500 RSAs.

Compensation as a group amounted to $ 38,875 .

The shares vest

one year after issuance.

On October 11, 2023, the Company granted certain employees

an aggregate of 687 RSA’s.

Compensation as a group amount to $ 2,497 .

The shares vest one third each year for three years after issuance.

On December 31, 2023, the Board resolved that the Company

shall issue to Board members an aggregate of 10,000 RSAs Compensation as a group amount of $ 28,751 .

The shares vest one year after issuance.

A summary of the activity related to RSUs for the

year ended December 31, 2023, is presented below:

of non-vested restricted stock units

Restricted Stock Units (RSUs)

RSUs non-vested at January 1, 2022

$ 1.48 - 3.23

RSUs forfeited

RSUs non-vested at December 31, 2022

$ 1.48 – 3.23

$ 1.61 – 3.63

$ 1.48 – 3.23

RSUs forfeited

RSUs non-vested at December 31,

$ 1.48 - 3.23

Stock-based compensation for RSU’s has been

Compensation as a group amounted to $ 2,497 .

The shares vest one third each year for three years after

On December 31, 2023, the Board resolved that the

Company shall issue to Board members an aggregate of 10,000 RSAs Compensation as a group amount of $ 28,751 .

The shares vest one year after

On January 2, 2024, the Company granted certain employees

an aggregate of 70,393 RSAs.

Compensation as a group amounted to $ 156,251 .

The shares vest one third each year for three years

after issuance.

On March 31, 2024, the Board resolved that the Company

shall issue to Board members an aggregate of 14,166 RSAs.

Compensation as a group amounted to $ 81,030 .

The shares vest one year

after issuance.

On April 1, 2024, the Company granted certain employees

an aggregate of 2,660 RSAs.

Compensation as a group amounted to $ 15,002 .

The shares vested on grant.

On June 30, 2024, the Board resolved that the Company

shall issue to Board members an aggregate of 17,500 RSAs.

Compensation as a group amounted to $ 114,800 .

The shares vest one year after

A summary of the activity related to RSAs for the year ended December 31,

2024, is presented below:

Schedule of activity related to RSAs

Restricted Stock Awards (RSAs)

Outstanding non-vested at January 1, 2023

Outstanding non-vested at December 31, 2023

Outstanding non-vested at December 31, 2024

Stock-based compensation for RSA’s has been

recorded in the consolidated statements of operations and totaled $ 369,658 and $ 190,389 for the years ended December 31, 2024, and 2023,

respectively.

As of December 31, 2023, there was $ 289,188 of total

unrecognized compensation expense related to unvested RSUs granted under the Company’s share-based compensation plans that is expected

to be recognized over a weighted average period of approximately 2.1 years.

As of December 31, 2024,

there was $ 333,225 of total unrecognized compensation expense related to unvested RSUs granted under the Company’s share-based compensation

plans that is expected to be recognized over a weighted average period of approximately 1.1 years .

Common Stock Warrants

2 unchanged sentences

Schedule of warrant activity and related information

of warrant activity and related information

Schedule of warrant activity and related information

Under Options

3 unchanged sentences

Warrant Granted

Warrant Expired

Warrant Outstanding at December 31, 2023

7 unchanged sentences

The intrinsic value of outstanding warrants as of

December 31, 2023 and 2022 was $ 0 and $ 3,600 respectively.

December 31, 2024 and 2023 was $ 0 .

Preferred Stock

30 unchanged sentences

Net operating loss carry forwards

Operating Lease – Right of Use Asset

Total deferred tax assets

1 unchanged sentence

Property and equipment

Right of Use Liability

Total deferred tax liabilities

Valuation Allowance

Net deferred tax liabilities

Net deferred taxes

The Company had federal and state net operating

tax loss carry-forwards of $ 7,615,981 and $ 11,720,048 , respectively as of December 31, 2023.

The tax loss carry-forwards are available

to offset future taxable income with the federal and state carry-forwards beginning to expire in 2029.

In 2023 and 2022, net deferred tax assets did not

change due to the full allowance.

The gross amount of the asset is predominantly due to the net operating loss carry-forward.

The realization

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

The combined deferred tax assets represent the amounts

expected to be realized before expiration.

The Company periodically assesses the likelihood that

it will be able to recover its deferred tax assets.

The Company considers all available evidence, both positive and negative, including

historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible

As a result of this analysis of all available evidence, both positive and negative, the Company concluded that it is more likely

than not that its net deferred tax assets will ultimately not be recovered and, accordingly, a valuation allowance was recorded as of

December 31, 2023, and 2022.

tax loss carry-forwards of $ 7,526,435 and $ 11,185,137 , respectively

as of December 31, 2024.

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

beginning to expire in 2029 .

During the tax year, the Company claimed a tax credit

related to the amortization of goodwill for US federal income tax purposes.

However, the tax position underlying the credit may not have

the appropriate economic substance to support the claim under current US federal income tax law.

The Company is recognizing a naked credit

associated with goodwill, where the tax deduction has been claimed based on goodwill that may not be associated with a qualifying transaction

as required under income tax provisions.

As of tax year ended December 31, 2024, management has reviewed the relevant

tax laws and believes that the tax positions taken are reasonable.

Given the potential for challenge by tax authorities, the Company may

be exposed to the risk that the credits taken may not be sustained upon examination, which may result in additional tax liabilities and

The amount of any potential tax adjustments to the credits have not been determined at this time.

A reconciliation of the Company’s effective

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

ended December 31, 2023 and 2022 to the Company’s loss before provision (benefit) for income taxes, is as follows:

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

years ended December 31, 2024 and 2023 to the Company’s loss before provision (benefit) for income taxes, is as follows:

Schedule of expected income tax expense benefit

4 unchanged sentences

Note 10 – Litigation

We are currently not involved in any litigation that we believe could have

a materially adverse effect on our financial condition or results of operations.

There is no action, suit, proceeding, inquiry or investigation

before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive

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

of DSC’s or DSC’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could

have a material adverse effect.

The Company is currently not involved in any litigation

that it believes could have a materially adverse effect on its financial condition or results of operations.

There is no action, suit,

proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending

or, to the knowledge of the executive officers of the Company or any of its subsidiaries, threatened against or affecting DSC, its common

stock, any of its subsidiaries or of DSC’s or DSC’s subsidiaries’ officers or directors in their capacities as such,

in which an adverse decision could have a material adverse effect.

Note 11 – Related Party Transactions

Finance Lease Obligations – Related Party

During the year ended December 31, 2023, the Company

entered into two related party finance lease obligations.

See Note 6 for details.

Nexxis Capital LLC

6 unchanged sentences

Eisner & Maglione CPA’s LLC

Lawrence Maglione is

a partner of Eisner & Maglione CPA’s LLC.

The Company paid his firm $ 34,644 and $ 30,760 for accounting and due diligence services

during the year ended December 31, 2023 and 2022 respectively.

Lawrence Maglione is a partner of Eisner & Maglione

The Company paid his firm $ 31,352 and $ 34,644 for accounting and due diligence services during the year ended December 31, 2024, and 2023, respectively.

Note 12 – Segment Information

We operate in three reportable segments:

Nexxis, Flagship Solutions Group, and CloudFirst.

Our segments were determined based on our internal organizational structure, the manner

in which our operations are managed, and the criteria used by our Chief Operating Decision Maker (CODM) to evaluate performance, which

is generally the segment’s operating income or losses.

Schedule of segment reporting income or losses

The Company operates in three reportable

CloudFirst, CloudFirst Europe and Nexxis.

The Company’s segments were determined based on its internal organizational

structure, the manner in which its operations are managed, and the criteria used by the Company’s CODM’s which is its Chief

Executive Officer and the senior management team, to evaluate performance, which is generally the segment’s operating income or

Operations of:

Products and services provided:

Nexxis is a single-source solution provider that delivers fully-managed cloud-based voice services, data transport, internet access, and SD-WAN solutions focused on business continuity for today’s modern business environment.

Flagship Solutions, LLC

Flagship Solutions Group (FSG) is a managed service provider.

FSG invoices clients primarily for services that assist the clients’ technical teams.

FSG has few technical assets and utilizes the assets or software of other cloud providers, whereby managing 3rd party infrastructure.

FSG periodically sells equipment and software.

CloudFirst Technologies Corporation

1 unchanged sentence

This technology has been developed by CloudFirst.

Clients are invoiced for cloud infrastructure and disaster recovery on the CloudFirst platform.

Clients are invoiced for cloud infrastructure and disaster recovery on the CloudFirst platforms.

Services provided to clients are provided on a subscription basis on long term contracts.

CloudFirst Europe Ltd.

provides services from CloudFirst technological assets deployed in three Tier 3 data centers throughout the United Kingdom.

This technology has been developed by CloudFirst.

Clients are invoiced for cloud infrastructure and disaster recovery on the CloudFirst UK platforms.

Services provided to clients are provided on a subscription basis on long term contracts.

is a single-source solution provider that delivers fully-managed cloud-based voice over internet services, data transport, internet access,

and SD-WAN solutions focused on business continuity for today’s modern business environment.

The following tables present certain financial information

related to our reportable segments and Corporate:

related to the Company’s reportable segments and Corporate:

Schedule of financial information related to reportable segments

1 unchanged sentence

CloudFirst Technologies

Flagship Solutions LLC

CloudFirst Europe Ltd.

Accounts receivable

6 unchanged sentences

Deferred revenue

Deferred tax liability

Total Finance leases payable

4 unchanged sentences

CloudFirst Technologies

Flagship Solutions LLC

Accounts receivable

6 unchanged sentences

Deferred revenue

Total Finance leases payable

Total Finance leases payable related party

Total Operating lease liabilities

Finance leases payable

Finance leases payable related party

Operating lease liabilities

Total liabilities

1 unchanged sentence

CloudFirst Technologies

Flagship Solutions LLC

CloudFirst Europe Ltd.

Cost of sales

4 unchanged sentences

( 3,219,605 )

Interest expense, net

Interest income

Interest expense

Loss on disposal of equipment

Total Other Income (Expense)

4 unchanged sentences

CloudFirst Technologies

Flagship Solutions LLC

CloudFirst Europe Ltd.

Cost of sales

Selling, general and administrative

Impairment of goodwill

Depreciation and amortization

2 unchanged sentences

( 2,639,415 )

( 2,216,842 )

( 4,076,015 )

Interest expense, net

Other expense

Impairment of deferred offering costs

Interest income

Interest expense

Total Other Income (Expense)

2 unchanged sentences

$ ( 2,097,186 )

$ ( 4,408,863 )

Note 13 - Subsequent Events

Subsequent to December 31,

2023, the Company issued 122,089 options

to employees through the 2021 Stock Incentive Plan.

These options vest over three years and have exercise prices ranging from $ 2.93 - $ 3.22 .

Subsequent to December 31, 2023, the Company entered

into a lease agreement for office space in Melville, NY.

The lease term is sixty-seven months and requires monthly payments of $ 11,931 .08 and

expires on October 30, 2029.

The Company has evaluated

events that occurred through March 31, 2025, the date that the financial statements were issued, and determined that there have been no

events that have occurred that would require adjustments to the Company’s disclosures in the financial statements.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data