Exhibit 99.3

Pro Forma Consolidated Condensed Financial Statements (Unaudited)

 
The following unaudited pro forma consolidated condensed financial statements were prepared using the historical financial statements of Data Storage Corporation (“Data Storage”) and Safe Data, LLC. (“Safe Data”). Data Storage acquired the net assets of Safe Data in June 2010. This information should be read in conjunction with, and is qualified in its entirety by, the financial statements and related notes of Data Storage and Safe Data.
 
The accompanying unaudited pro forma consolidated condensed financial statements give pro forma effect to Data Storage’s acquisition of Safe Data’s net assets. Total purchase consideration of $4,505,882 consisted of the assumption of $1.7 million of Safe Data’s indebtedness. The $3,000,000 cash portion of the purchase consideration was financed from the issuance of convertible debt and equity financing by Data Storage.
 
The acquisition will be accounted for under the purchase method of accounting. Accordingly, the amount of the consideration paid is allocated to assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The unaudited pro forma consolidated condensed financial statements reflect the preliminary allocation of the excess of such consideration paid over net assets acquired to goodwill and certain identifiable intangible assets, (customer list and non-compete agreements) with an estimated weighted average life of 5 and 4 years, respectively.
 
The following is a summary of the preliminary purchase price allocation as of June 17, 2010
 
Purchase Price Paid
      
       
Cash paid to sell, less credit threshold adjustment of $70,047
   $ 1,229,952  
Stock issued to seller
     850,000  
Holdback price adjustments
     779,437  
Liabilities assumed
     1,646,493  
      4,505,882  
         
Less: tangible assets acquired
     (1,079,678 )
         
    $ 3,426,204  
Allocation of Purchase Price:
        
         
Intangible assets
   $ 1,280,627  
Goodwill
     2,145,577  
         
Total Purchase price
   $ 3,426,204  
 
 
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The unaudited pro forma consolidated condensed balance sheet as of March 31, 2010 has been prepared as if the acquisition of Safe Data occurred on March 31, 2010. The unaudited pro forma consolidated condensed statements of operations for the three months ended March 31, 2010 and the year ended December 31, 2009 has been prepared as if the Safe Data acquisition had occurred on January 1, 2009.
 
These unaudited pro forma consolidated condensed financial statements are not necessarily indicative of the financial position or results of operations that would have occurred had the transaction been effected on the assumed dates. Additionally, future results may vary significantly from the results reflected in the unaudited pro forma combined statement of operations due to changes in prices, future transactions and other factors. These statements should be read in conjunction with our audited consolidated financial statements and the related notes for the year ended December 31, 2009 included in our 2009 Form 10-K, the current report on Form 10-Q filed on August 23, 2010, and the audited and unaudited financial statements of Safe Data included herein. The pro forma adjustments, as described in the notes to unaudited pro forma consolidated condensed financial statements, are based upon available information and certain assumptions that our management believes are reasonable.


 
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Data Storage Corporation
Proforma Consolidated Condensed Balance Sheet (Unaudited)
March 31, 2010
 
   
Data Storage
     Safe Data    
Pro Forma Adjustments
    
Notes
    
Data Storage and Safe Data
  
ASSETS
                              
Current Assets:
                              
                               
Cash and cash equivalents
   $ 65,386     $ 150     $ 69,897       a, b, c, d     $ 135,433  
Accounts Receivable, net
     87,631       163,090       -               250,721  
Inventory
     6,500       -       -               6,500  
Deferred compensation
     70,535       -       -               70,535  
Prepaid expenses
     11,196       23,426       -               34,622  
Receivable from Member
     -       138,446       (138,446 )     a       -  
Other current assets
     -       16,333                       16,333  
                                         
Total current assets
     241,248       341,445       (68,549 )             514,144  
                                         
Property, plant and equipment, net
     275,712       745,446       -               1,021,158  
Goodwill
     -       -       1,789,877       d       1,789,877  
Intangible assets
     133,481       34,029       1,246,598       a, d       1,414,108  
Other assets
     61,066       11,802       -               72,868  
                                         
Total Assets
   $ $711,507     $ 1,132,722     $ 2,967,926             $ 4,812,155  
                                         
LIABILITIES
                                        
                                         
Current liabilities:
                                        
                                         
Accounts payable and accrued expenses
   $ $117,989     $ 405,058     $ (24,931 )     a     $ 498,116  
Credit line payable
     99,970       350,000       (350,000 )     a       99,970  
Due to related party
     39,218       -       -               39,218  
Dividend payable
     87,500       -       -               87,500  
Deferred revenue
     11,571       55,085       -               66,656  
Leases payable
     -       482,326       -               482,326  
Note payable
     -       15,000       (15,000 )     a       -  
Loans payable
     -       125,000       (125,000 )     a       -  
Convertible Debt
     -               87,363       c       87,363  
Contingent consideration in SafeData acquisition
     -       -       779,437       d       779,437  
                                         
Total current liabilities
     356,248 56       1,432,469       351,869               2,140,586  
                                         
Long term liabilities
     631,015       588,673       (335,000 )      a       884,688  
                                         
Total liabilities
     987,263       2,021,142       16,869               3,025,274  
                                         
COMMITMENTS AND CONTIGENCIES
     -                                  
                                         
STOCKHOLDERS’ EQUITY
                                        
                                         
Preferred Stock
     1,402       -       -               1,402  
Common stock
     13,670       -       3,457       b, d       17,127  
Additional paid-in capital
     4,812,040       -       2,059,180       b, c, d       6,871,220  
Accumulated deficit/Members’ Deficit
     (5,102,868 ))     (888,420 )     888,420       a, d       (5,102,868 )
                                         
Total stockholders’ equity
     (275,756 )     (888,420 )     2,951,057               1,786,881  
                                         
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   $ 711,507     $ 1,132,722     $ 2,967,926             $ 4,812,155  
 
 
See notes to pro forma consolidated condensed financial statements.
 
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Data Storage Corporation
Proforma Consolidated Condensed Statement of Operations(Unaudited)
Three Months Ended March 31, 2010
 
(in thousands, except for per share data)
  
Data Storage
    
Safe Data
    
Pro forma Adjustments
    
Notes
    
Data Storage and Safe Data
  
                               
Net sales
   $ 243,692     $ 742,614       -           $ 986,306  
                                       
Cost of sales
     164,320       359,854       -             524,174  
                                       
Gross profit
     79,372       382,760       -             462,132  
                                       
Operating expenses
     275,007       269,820       26,795       e       571,622  
                                         
Operating (loss) income
     (195,635 )     112,940       (26,795 )             (109,490 )
                                         
Other income
                                        
Interest expense
     1,357       26,407       91,610       f       119,374  
Interest and other income
     -       (2,491 )     -               (2,491 )
Total other expense
     1,357       23,915       91,610               116,883  
                                         
Loss before income tax provision
     (196,992 )     89,024       (118,405 )             (226,373 )
                                         
Income tax provision
     -       -       -       g       -  
                                         
Net loss
   $ (196,992 )   $ 89,024     $ (118,405 )           $ (226,373 )
                                         
Preferred Stock Dividend
     (12,500 )                             (12,500 )
                                         
Net Loss Available to Common
  Shareholders
   $ (209,492 )                           $ (238,873 )
                                         
Loss per share
                                        
                                         
Basic and Diluted
   $ (0.02 )                           $ (0.01 )
                                         
Weighted average number of shares
                                        
                                         
Basic and Diluted
     13,670,399             $ 3,457,000       b,d       17,127,399  

See notes to pro forma consolidated condensed financial statements.
 
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Data Storage Corporation
Proforma Consolidated Condensed Statement of Operations(Unaudited)
Year Ended December 31, 2009


(in thousands, except for per share data)
  
Data Storage
    
Safe Data
    
Pro forma Adjustments
    
Notes
    
Data Storage and Safe Data
  
                               
Net sales
   $ 585,285     $ 2,551,876     $ -           $ 3,137,161  
                                       
Cost of sales
     459,803       1,434,499       -             1,894,302  
                                       
Gross profit
     125,482       1,117,377       -             1,242,859  
                                       
Operating expenses
     1,170,903       1,238,720       107,178       e       2,516,801  
                                         
Operating income (loss)
     (1,045,421 )     (121,343 )     (107,178 )             (1,273,942 )
                                         
Other income
                                        
Interest expense
     4,986       126,658       365,881       f       497,525  
Interest and other income
     (192 )     (9,965 )     -               (10,157 )
Total other expense
     4,794       116,693       365,881               487,368  
                                         
Income (loss) before income tax provision
     (1,050,215 )     (238,036 )     (473,059 )             (1,761,310 )
                                         
Income tax provision
     -       -       -       g       -  
                                         
Net income (loss)
   $ (1,050,215 )   $ (238,036 )   $ (473,059 )           $ (1,761,310 )
                                         
Preferred Stock Dividend
     50,000                               50,000  
                                         
Net Loss Available to Common
  Shareholders
   $ (1,100,215 )                           $ (1,811,310 )
                                         
Loss per share
                                        
Basic and Diluted
   $ (0.08 )           $               $ (0.11 )
                                         
Weighted Average Number of Shares                                        
Basic and Diluted
     12,944,647             $ 3,457,000       b,d       16,401,647  

 
See notes to pro forma consolidated condensed financial statements.
 
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Data Storage Corporation
Footnotes to Unaudited Pro Forma Consolidated Condensed Balance Sheet and Statement of Operations
 
 
(a)
To adjust for assets and liabilities not acquired by Data Storage.
 
 
(b)
To record the sale of 600,000 shares of Data Storage at $0.50 associated with the acquisition of SafeData LLC.
 
 
(c)
To record the proceeds received from the issuance of $1,000,000 convertible debt, net of the value of the warrants and beneficial conversion feature recorded as a debt discount ($912,637), to be amortized to interest expense over the life of the debt.
 
 
(d)
To record the acquisition of the net assets of safe data through the issuance of cash of $1,229,953 common stock of $850,000, contingent consideration of $779,437 and the allocation of the excess purchase price to intangible assets and goodwill.

(e)
To reflect amortization expense of $26,795 and $107,178 for the three months ended March 31, 2010 and the year ended December 31, 2009 for definite lived intangible assets acquired which will be amortized over a period of 5 and 4 years which appropriately reflects the economic benefit of the intangible assets.
 
 
(f)
To reverse interest expense of $10,063and $40,809 for the three months ended March 31, 2010 and the year ended December 31, 2009 on Safe Data, LLC to reflect the cancellation of the credit line which was paid off at acquisition date. To record $101,671 and $406,685 for the three months ended March 31, 2010 and the year ended December 31, 2009 to reflect interest expense associated with the issuance of convertible long term debt by Data Storage.
 
 
(g)
On a consolidated proforma basis, the Company had a net loss of $226,373 for the three months ended March 31, 2010 and net loss of $1,761,310 for the year ended December 31, 2009. The Company has net operating loss carryforwards to offset any income taxes and thus no current provision or benefit for taxes has been recorded.
 
 
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