UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 001-35384

DATA STORAGE CORPORATION

(Exact name of registrant as specified in its charter)

Nevada		98-0530147
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

48 South Service Road Melville, NY		11747
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 564-4922

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	DTST	The Nasdaq Capital Market

Warrants to purchase shares of Common Stock, par value $0.001 per share	DTSTW	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company filer. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐	Accelerated Filer ☐
Non-Accelerated Filer ☒	Smaller Reporting Company ☒
	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of August 12, 2021, was 6,690,311.

DATA STORAGE CORPORATION

FORM 10-Q

INDEX

			Page
PART I— FINANCIAL INFORMATION

	Item 1	Financial Statements

		Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020	1

		Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (unaudited)	3

		Condensed Consolidated Statements of Stockholders’ Equity for three and six months ended June 30, 2021 and 2020 (unaudited)	5

		Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)	7

		Notes to Condensed Consolidated Financial Statements	9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

	Item 4.	Control and Procedures	38

PART II— OTHER INFORMATION

	Item 1.	Legal Proceedings	39

	Item 1A.	Risk Factors	39

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

	Item 3.	Defaults Upon Senior Securities	40

	Item 4.	Mine Safety Disclosures	40

	Item 5.	Other Information	40

	Item 6.	Exhibits	41

DATA STORAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	June 30, 2021			December 31, 2020

ASSETS
Current Assets:
Cash and cash equivalents	$	3,076,120		$	893,598
Accounts receivable (less allowance for doubtful accounts of $59,067 and $30,000 in 2021 and 2020, respectively)		1,558,716			554,587
Prepaid expenses and other current assets		392,489			239,472
Total Current Assets		5,027,325			1,687,657

Property and Equipment:
Property and equipment		6,327,875			7,845,423
Less—Accumulated depreciation		(4,177,560	)		(5,543,822	)
Net Property and Equipment		2,150,315			2,301,601

Other Assets:
Goodwill		13,216,040			3,015,700
Operating lease right-of-use assets		198,549			241,911
Other assets		72,153			49,310
Intangible assets, net		391,662			455,935
Total Other Assets		13,878,404			3,762,856

Total Assets	$	21,056,044		$	7,752,114

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable and accrued expenses	$	1,547,763		$	979,552
Dividend payable		—			1,115,674
Deferred revenue		431,047			461,893
Line of credit		—			24
Finance leases payable		174,110			168,139
Finance leases payable related party		973,245			1,149,403
Operating lease liabilities short term		106,102			104,549
Contingent Consideration		4,950,000			—
Note payable		481,977			374,871
Total Current Liabilities		8,664,244			4,354,105

Note payable long term		—			107,106
Operating lease liabilities long term		102,407			147,525
Finance leases payable, long term		167,694			247,677
Finance leases payable related party, long term		597,408			974,743
Total Long Term Liabilities		867,509			1,477,051

Total Liabilities		9,531,753			5,831,156

Stockholders’ Equity:
Preferred stock, Series A par value $.001; 10,000,000 shares authorized; 0 and 1,401,786 shares issued and outstanding in 2021 and 2020, respectively		—			1,402
Common stock, par value $.001; 250,000,000 shares authorized; 4,862,352 and 3,213,486 shares issued and outstanding in 2021 and 2020, respectively		4,862			3,213
Additional paid in capital		27,276,653			17,745,785
Accumulated deficit		(15,657,208	)		(15,734,737	)
Total Data Storage Corp Stockholders’ Equity		11,624,307			2,015,663
Non-controlling interest in consolidated subsidiary		(100,016	)		(94,705	)
Total Stockholder’s Equity		11,524,291			1,920,958
Total Liabilities and Stockholders’ Equity	$	21,056,044		$	7,752,114

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

DATA STORAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020

Sales	$	3,528,249		$	2,005,625		$	6,102,940		$	4,104,335

Cost of sales		2,021,324			1,140,421			3,442,223			2,356,538

Gross Profit		1,506,925			865,204			2,660,717			1,747,797

Selling, general and administrative		1,602,311			988,266			2,720,718			1,864,892

Income (loss) from Operations		(95,386	)		(123,062	)		(60,001	)		(117,095	)

Other Income (Expense)
Interest income		2			—			4			20
Interest expense		(46,623	)		(43,679	)		(81,670	)		(90,139	)
Gain on contingent liability		—			350,000			—			350,000
Loss on disposal of equipment		(29,732	)		—			(29,732	)		—
Gain on forgiveness of debt		307,300			—			307,300			—
Total Other Income (Expense)		230,947			306,321			195,902			259,881

Income before provision for income taxes		135,561			183,259			135,901			142,786

Provision for income taxes		—			—			—			—

Net Income		135,561			183,259			135,901			142,786

Non-controlling interest in consolidated subsidiary		3,552			7,487			5,311			13,550

Net Income attributable to Data Storage Corp		139,113			190,746			141,212			156,336

Preferred Stock Dividends		(24,800	)		(35,041	)		(63,683	)		(69,227	)

Net Income Attributable to Common Stockholders	$	114,313	$	155,705	$	77,529	$	87,109

Earnings per Share – Basic	$	0.03	$	0.05	$	0.02	$	0.03
Earnings per Share – Diluted	$	0.03	$	0.05	$	0.02	$	0.03
Weighted Average Number of Shares - Basic		3,981,402		3,213,485		3,607,909		3,212,822
Weighted Average Number of Shares - Diluted		4,118,989		3,357,589		3,611,242		3,356,926

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

DATA STORAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED June 30, 2021 AND 2020


	Preferred Stock						Common Stock				Additional Paid-in			Accumulated			Non-Controlling			Total Stockholders’
	Shares			Amount			Shares		Amount		Capital			Deficit			Interest			Equity

Balance January 1, 2021		1,401,786		$	1,402			3,213,486	$	3,213	$	17,745,785		$	(15,734,737	)	$	(94,705	)	$	1,920,958
Conversion of preferred series to stock		(1,401,786	)		(1,402	)		43,806		44		1,358			—			—			—
Proceeds from issuance of common stock and warrants		—			—			1,600,000		1,600		9,453,294			—			—			9,454,894
Stock Options Exercise		—						5,060		5		(5	)		—			—			—
Stock-based compensation		—						—		—		76,221			—			—			76,221
Net Income (Loss)		—			—			—		—		—			141,212			(5,311	)		135,901
Preferred Stock Dividend		—			—			—		—		—			(63,683	)		—			(63,683	)
Balance, June 30, 2021		—		$	—			4,862,352	$	4,862	$	27,276,653		$	(15,657,208	)	$	(100,016	)	$	11,524,291

Balance January 1, 2020		35,045		$	35			3,210,985	$	3,211	$	17,583,026		$	(15,790,076	)	$	(68,048	)	$	1,728,148
Stock-based compensation		—			—			—		—		74,386			—			—			74,386
Common Stock Issued as Compensation		—			—			—		—		—			—			—			—
Stock Options Exercise		—			—			2,500	$	3		5,397			—			—			5,400
Net Income (Loss)		—			—			—		—		—			156,336			(13,550	)		142,786
Preferred Stock Dividend		—			—			—		—		—			(69,227	)		—			(69,227	)
Balance, June 30, 2020		35,045		$	35			3,213,485	$	3,214	$	17,662,809		$	(15,702,967	)	$	(81,598	)	$	1,881,493

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

DATA STORAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2020 AND 2021

(Unaudited)

	Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Non-Controlling			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Interest			Equity

Balance April 1, 2020		35,045	$	35		3,213,485	$	3,214	$	17,621,471	$	(15,858,672	)	$	(74,111	)	$	1,691,937
Stock-based compensation		—		—		—		—		41,338		—			—			41,338
Net Income (Loss)

SEC Form 10-Q filed by Data Storage Corporation