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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 March 31, 2023

  

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 May 15, 2023, was 6,822,127.

 

 

 

DATA STORAGE CORPORATION

FORM 10-Q

INDEX

  

  Page  
PART I- FINANCIAL INFORMATION  
       
  Item 1 Financial Statements  
       
    Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022 2 
       
    Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited) 3 
       
    Condensed Consolidated Statements of Stockholders’ Equity for three months ended March 31, 2023 and 2022 (unaudited) 4 
       
    Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited) 5 
       
    Notes to Condensed Consolidated Financial Statements 6 
       
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 
       
  Item 3. Quantitative and Qualitative Disclosures About Market Risk 27 
       
  Item 4. Control and Procedures 27 
       
PART II- OTHER INFORMATION 28 
   
  Item 1. Legal Proceedings 28 
       
  Item 1A. Risk Factors 28 
       
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28 
       
  Item 3. Defaults Upon Senior Securities 28 
       
  Item 4. Mine Safety Disclosures 28 
       
  Item 5. Other Information 28 
       
  Item 6. Exhibits 28 

 

1

 

  

DATA STORAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

 

                 
    March 31, 2023   December 31, 2022
    (Unaudited)    
ASSETS                
Current Assets:                
Cash and cash equivalents   $ 1,882,039     $ 2,286,722  
Accounts receivable (less allowance for credit losses of $31,136 and $27,250 in 2023 and 2022, respectively)     3,671,170       3,502,836  
 Marketable securities     9,114,391        9,010,968   
Prepaid expenses and other current assets     878,460       584,666  
Total Current Assets     15,546,060       15,385,192  
                 
Property and Equipment:                
Property and equipment     7,597,462       7,168,488  
Less—Accumulated depreciation     (5,177,980 )     (4,956,698 )
Net Property and Equipment     2,419,482       2,211,790  
                 
Other Assets:                
Goodwill     4,238,671       4,238,671  
Operating lease right-of-use assets     175,842       226,501  
Other assets     65,736       48,437  
Intangible assets, net     1,905,914       1,975,644  
Total Other Assets     6,386,163       6,489,253  
                 
Total Assets   $ 24,351,705     $ 24,086,235  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
Current Liabilities:                
Accounts payable and accrued expenses   $ 3,699,246     $ 3,207,577  
Deferred revenue     309,273       281,060  
Finance leases payable     308,180       359,868  
Finance leases payable related party     454,115       520,623  
Operating lease liabilities short term     143,480       160,657  
Total Current Liabilities     4,914,294       4,529,785  
                 
       Operating lease liabilities     36,733       71,772  
Finance leases payable     192,666       281,242  
Finance leases payable related party     139,285       256,241  
Total Long-Term Liabilities     368,684       609,255  
                 
Total Liabilities     5,282,978       5,139,040  
                 
Commitments and contingencies (Note 6)            
                 
Stockholders’ Equity:                
Preferred stock, Series A par value $.001; 10,000,000 shares authorized; 0 and 0 shares issued and outstanding in 2023 and 2022, respectively            
Common stock, par value $.001; 250,000,000 shares authorized; 6,834,627 and 6,822,127 shares issued and outstanding in 2023 and 2022, respectively     6,835       6,822  
Additional paid in capital     39,068,896       38,982,440  
Accumulated deficit     (19,836,712 )     (19,887,378 )
Total Data Storage Corp Stockholders' Equity     19,239,019       19,101,884  
Non-controlling interest in consolidated subsidiary     (170,292 )     (154,689 )
Total Stockholder’s Equity     19,068,727       18,947,195  
Total Liabilities and Stockholders' Equity   $ 24,351,705     $ 24,086,235  

 

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

 

2

 

 

DATA STORAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

                 
    Three Months Ended March 31,
    2023   2022
         
Sales   $ 6,879,723     $ 8,657,199  
                 
Cost of sales     4,789,978       6,011,289  
                 
Gross Profit     2,089,745       2,645,910  
                 
Selling, general and administrative     2,130,759       2,459,866  
                 
Income (Loss) from Operations     (41,014 )     186,044  
                 
Other Income (Expense)                
Interest income (expense), net     76,077       (42,660 )
Total Other Income (Expense)     76,077       (42,660 )
                 
Income before provision for income taxes     35,063       143,384  
                 
Benefit from income taxes            
                 
Net Income     35,063       143,384  
                 
Non-controlling interest in consolidated subsidiary     15,603       12,626  
                 
Net Income Attributable to Common Stockholders   $ 50,666     $ 156,010  
                 
Earnings per Share – Basic   $ 0.01     $ 0.02  
Earnings per Share – Diluted   $ 0.01     $ 0.02  
Weighted Average Number of Shares - Basic     6,822,127       6,695,966  
Weighted Average Number of Shares - Diluted     6,954,320       6,955,900  

 

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

 

3

 

 

DATA STORAGE CORPORATION AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(Unaudited)

 

                                                                 
    Preferred Stock   Common Stock   Additional Paid-in Capital   Accumulated Deficit   Non-Controlling Interest   Total Stockholders’ Equity
    Shares   Amount   Shares   Amount        
                                 
Balance January 1, 2022         $       6,693,793     $ 6,694     $ 38,241,155     $ (15,530,576 )   $ (102,628 )   $ 22,614,645  
Stock Options Exercise                 3,334       3       6,931                   6,934  
Stock-based compensation                             66,505                   66,505  
Net Income (Loss)                                   156,010       (12,626 )     143,384  
Balance, March 31, 2022         $       6,697,127     $ 6,697     $ 38,314,591     $ (15,374,566 )   $ (115,254 )   $ 22,831,468  
                                                                 
Balance January 1, 2023         $       6,822,127     $ 6,822     $ 38,982,440     $ (19,887,378 )   $ (154,689 )   $ 18,947,195  
Stock-based compensation                 12,500       13       86,456                   86,469  
Net Income (Loss)                                   50,666       (15,603 )     35,063  
Balance, March 31, 2023         $       6,834,627     $ 6,835     $ 39,068,896     $ (19,836,712 )   $ (170,292 )   $ 19,068,727  

 

 

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

 

4

 

 

DATA STORAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Unaudited)

 

                 
    Three Months Ended March 31,
    2023   2022
Cash Flows from Operating Activities:                
Net Income   $ 35,063     $ 143,384  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     288,710       351,338  
Stock based compensation     86,469       66,505  
Changes in Assets and Liabilities:                
Accounts receivable     (168,334 )     (1,140,097 )
Other assets     (17,300 )     25,180  
Prepaid expenses and other current assets     (293,794 )     (719,842 )
Right of use asset     50,659       47,962  
Accounts payable and accrued expenses     491,669       2,991,981  
Deferred revenue     28,213       (74,409 )
Operating lease liability     (52,216 )     (48,179 )
Net Cash Provided by Operating Activities     449,139       1,643,823  
Cash Flows from Investing Activities:                
Capital expenditures     (426,671 )     (25,946 )
Purchase of short-term investments     (103,423 )      
Net Cash Used in Investing Activities     (530,094 )     (25,946 )
Cash Flows from Financing Activities:                
Repayments of finance lease obligations related party     (183,464 )     (274,393 )
Repayments of finance lease obligations     (140,264 )     (65,515 )
Cash received for the exercised of options           6,935  
Net Cash Used in Financing Activities     (323,728 )     (332,973 )
                 
Increase (decrease) in Cash and Cash Equivalents     (404,683 )     1,284,904  
                 
Cash and Cash Equivalents, Beginning of Period     2,286,722       12,135,803  
                 
Cash and Cash Equivalents, End of Period   $ 1,882,039     $ 13,420,707  
Supplemental Disclosures:                
Cash paid for interest   $ 24,863     $ 41,040  
Cash paid for income taxes   $     $  
Non-cash investing and financing activities:                
Assets acquired by finance lease   $     $ 881,308  

 

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

 

5

 

   
DATA STORAGE CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023

(Unaudited)

 

Note 1 – Basis of Presentation, Organization and Other Matters

 

Data Storage Corporation (“DSC” or the “Company”) headquartered in Melville, NY, DSC provides solutions and services to businesses within the healthcare, banking and finance, distribution services, manufacturing, construction, education, and government industries. DSC derives its revenues from subscription services and solutions, managed services, equipment, software and maintenance, and onboarding implementation. DSC maintains infrastructure and storage equipment in seven technical centers in New York, Massachusetts, Texas, Florida, North Carolina and Canada.

 

On May 31, 2021, the Company completed an acquisition of Flagship Solutions, LLC (“Flagship”) (a Florida limited liability company) and the Company’s wholly-owned subsidiary, Data Storage FL, LLC. Flagship is a provider of Hybrid Cloud solutions, managed services and cloud solutions.

 

On January 27, 2022, we 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 or entities.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial statements for interim periods in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The information included in this quarterly report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”). The Company’s accounting policies are described in the “Notes to Consolidated Financial Statements” in the 2022 Form 10-K and are updated, as necessary, in this Form 10-Q. The December 31, 2022 condensed consolidated balance sheet data presented for comparative purposes was derived from the audited financial statements but does not include all disclosures required by U.S. GAAP. The results of operations for the three months ended March 31, 2023, are not necessarily indicative of the operating results for the full year or for any other subsequent interim period. 

Note 2 – Summary of Significant Accounting Policies

 

Principles of Consolidation

 

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.

 

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 of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

 

Estimated Fair Value of Financial Instruments

 

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 our own assumptions in determining the fair value of investments)

The Company’s Level 1 assets/liabilities include cash, accounts receivable, marketable securities, accounts payable, prepaid, and other current assets. Management believes the estimated fair value of these accounts at March 31, 2023 approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments.

The Company’s Level 2 assets/liabilities include certain of the Company’s operating lease right-of-use assets. Their carrying value approximates 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 Company’s Level 3 assets/liabilities include goodwill and intangible assets. Inputs to determine 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 determined using model-based techniques, including discounted cash flow models. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.

Our marketable equity securities are publicly traded stocks measured at fair value using quoted prices for identical assets in active markets and classified as Level 1 within the fair value hierarchy. Marketable equity securities as of March 31, 2023 and December 31, 2022 are $9,114,391 and $9,010,968 respectively.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

 

6

 

 

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 assets. 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.

 

Investments

 

The Company invests in equity securities and reports them in accordance with ASU 2016-01. Equity securities are reported at fair value with unrealized gains and losses, net of the related tax effect, reflected as a gain or loss on the statement of operations. Dividends and interest are recognized when earned.

 

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:

 

         
    For the three months ended March 31, 2023
    Total
As of January 1, 2023   $ 9,010,968  
Purchase of equity investments     103,423  
As of March 31, 2023   $ 9,114,391  

 

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

 

The Company’s customers are primarily concentrated in the United States.

 

As of March 31, 2023, DSC had one customer with an accounts receivable balance representing 61% 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 three months ended March 31, 2023, the Company had one customer that accounted for 33% of revenue. For the three months ended March 31, 2022, the Company had two customers that accounted for 55% of revenue.

 

Accounts Receivable/Allowance for Credit Losses

 

The Company sells its services to customers on an open credit basis. Accounts receivables are uncollateralized, non-interest-bearing customer obligations. Accounts receivables 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. Provisions 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.

 

7

 

 

Property and Equipment

 

Property and equipment are recorded at cost and depreciated over their estimated useful lives or the term of the lease using the straight-line method for financial statement purposes. Estimated 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 in income.

 

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 impact 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 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.

 

Revenue Recognition

 

Nature of goods and services

 

The following is a description of the products and services from which the Company generates revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each:

 

  1) Cloud Infrastructure and Disaster Recovery Revenue

 

Cloud Infrastructure provides clients 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. Data Storage Corporation 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.

 

  2) Managed Services 

 

These services are performed at the inception of a contract. The Company provides professional assistance to its clients during the implementation processes. On-boarding and set-up services ensure that the solution or software is installed properly and function as designed to provide clients with the best solutions. In addition, clients that are managed service clients have a requirement for DSC to offer time and material billing supplementing the client’s staff.

 

8

 

 

The Company also derives both one-time and subscription-based revenue, from providing support, management and renewal of software, hardware, third party maintenance contracts and third-party cloud services to clients. The managed services include help desk, remote access, operating system and software patch management, annual recovery tests and manufacturer support for equipment and on-gong monitoring of client system performance.

 

  3) 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.

 

  4) 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.

 

Disaggregation of revenue

 

In the following table, revenue is disaggregated by major product line, geography, and timing of revenue recognition.

                       
For the Three Months
Ended March 31, 2023

 

    United States   International   Total
Infrastructure & Disaster Recovery/Cloud Service   $ 2,137,317     $ 52,324     $ 2,189,641  
Equipment and Software     3,522,559       —        3,522,559  
Managed Services     858,660       35,107       893,767  
Nexxis VoIP Services     231,772       —        231,772  
Other     41,984       —        41,984  
Total Revenue   $ 6,792,292     $ 87,431     $ 6,879,723  

 

                         
For the Three Months
Ended March 31, 2022

 

   United States  International  Total
Infrastructure & Disaster Recovery/Cloud Service  $1,888,387   $37,463   $1,925,850 
Equipment and Software   5,319,459        5,319,459 
Managed Services   1,149,503    33,307    1,182,810 
Nexxis VoIP Services   194,934        194,934 
Other   34,146        34,146 
Total Revenue  $8,586,429   $70,770   $8,657,199 

 

For the Three Months
Ended March 31,
Timing of revenue recognition  2023  2022
Products transferred at a point in time  $3,564,543   $5,402,996 
Products and services transferred over time   3,315,180    3,254,203 
Total Revenue  $6,879,723   $8,657,199 

 

9

 

 

Contract receivables are recorded at the invoiced amount and are uncollateralized, non-interest-bearing client obligations. Provisions for estimated uncollectible accounts receivable are 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 is provided. For clients who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract.

 

Transaction price allocated to the remaining performance obligations

 

The Company has the following performance obligations:

 

1) Data Vaulting: Subscription-based cloud service that encrypts and transfers data to a secure Tier 3 data center and further replicates the data to a second Tier 3 DSC technical center where it remains encrypted. Ensuring client retention schedules for corporate compliance and disaster recovery. Provides for twenty-four (24) hour or less recovery time and utilizes advanced data reduction, reduplication technology to shorten back-up and restore time.

 

2) High Availability: A managed cloud subscription-based service that provides cost-effective mirroring software replication technology and provides one (1) hour or less recovery time for a client to be back in business.
   
3)

Cloud Infrastructure: Subscription-based cloud service provides for “capacity on-demand” for IBM Power and X86 Intel server systems.

   
4) Internet: Subscription-based service, offering continuous internet connection combined with FailSAFE which provides disaster recovery for both a clients’ voice and data environments.
   
5) Support and Maintenance: Subscription based service offers support for clients on their servers, firewalls, desktops or software. Services are provided 24x7x365 to our clients.
   
6) Implementation / Set-Up Fees: Onboarding and set-up for cloud infrastructure and disaster recovery as well as Cyber Security.
   
7) Equipment sales: Sale of servers and data storage equipment to the client.
   
9) License: Granting SSL certificates and licenses.

 

Disaster Recovery and Business Continuity Solutions

 

Subscription services allow clients to access data or receive services for a predetermined period of time. As the client obtains access at a point in time and continues to have access for the remainder of the subscription period, the client is considered to simultaneously receive and consume the benefits provided by the entity’s performance as the entity performs. Accordingly, the related performance obligation is considered to be satisfied ratably over the contract term. As the performance obligation is satisfied evenly across the term of the contract, revenue is recognized on a straight-line basis over the contract term.

 

Initial Set-Up Fees

 

The Company accounts for set-up fees as a separate performance obligation. Set-up services are performed one-time and accordingly the revenue is recognized at the point in time, and is non-refundable, and the Company is entitled to the payment.

 

10

 

 

Equipment Sales

 

The obligation for the equipment sales is such the control of the product transfer is at a point in time (i.e., when the goods have been shipped or delivered to the client’s location, depending on shipping terms). Noting that the satisfaction of the performance obligation, in this sense, does not occur over time, the 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).

 

License - granting SSL certificates and other licenses

 

Performance obligations as it relates to licensing means that the control of the product transfers, either at a point in time or over time, depending on the nature of the license. The revenue 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: 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.

 

Payment Terms

 

The typical terms of subscription contracts range from 12 to 36 months, with auto-renew options extending the contract for an additional term. The Company invoices clients one month in advance for its services, in addition to any contractual data overages or for additional services.

 

Warranties

 

The Company offers guaranteed service levels and service guarantees on some of its contracts. These warranties are not sold separately and are accounted as “assurance warranties”.

 

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 service. 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.

 

Impairment of Long-Lived Assets

 

The Company reviews its long-lived assets for impairment whenever events and circumstances indicate that the carrying value of an asset might not be recoverable. An impairment loss, measured as the amount by which the carrying value exceeds the fair value is recognized if the carrying amount exceeds estimated un-discounted future cash flows.

 

Advertising Costs

 

The Company expenses the costs associated with advertising as they are incurred. The Company incurred $189,878 and $89,731 for advertising costs for the three months ended March 31, 2023, and 2022, respectively.

 

Stock-Based Compensation

 

The Company follows the requirements of FASB ASC 718-10-10, Share-Based Payments with regards to stock-based compensation issued to employees and non-employees. 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. 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. The Company has a relatively low forfeiture rate of stock-based compensation and forfeitures are recognized as they occur.

 

11

 

 

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. 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. The expected forfeiture rate is estimated based on management’s best assessment.

 

Estimated volatility is a measure of the amount by which DSC’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s calculation of estimated volatility is based on historical stock prices over a period equal to the expected life of the awards.

 

Net Income Per Common Share

 

Basic income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income adjusted for income or loss that would result from the assumed conversion of potential common shares from contracts that may be settled in stock or cash by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.

 

The following table sets forth the information needed to compute basic and diluted earnings per share for the three months ended March 31, 2023, and 2022:

 

                 
    Three Months Ended March 31,
    2023   2022
         
Net Income Available to Common Shareholders   $ 50,666     $ 156,010  
                 
Weighted average number of common shares - basic     6,822,127       6,695,966  
Dilutive securities                
 Options     130,526       256,601  
 Warrants     1,667       3,333  
Weighted average number of common shares - diluted     6,954,320       6,955,900  
                 
Earnings per share, basic   $ 0.01     $ 0.02  
Earnings per share, diluted   $ 0.01     $ 0.02  

 

The following table sets forth the number of potential shares of common stock that have been excluded from diluted net income per share net income per share because their effect was anti-dilutive:

 

           
   Three Months ended  
March 31,
   2023  2022
Options    385,257    37,641 
Warrants    2,415,860    1,384,610 
     2,801,117    1,422,251 

 

12

 

 

Note 3 - Prepaids and other current assets

 

Prepaids and other current assets consist of the following:

 

               
    March 31,   December 31,
    2023   2022
Prepaid Marketing & Promotion   $ 25,273     $ 4,465  
Prepaid Subscriptions and Licenses     664,596       439,088  
Prepaid Maintenance     27,305       45,216  
Prepaid Insurance     89,256       54,564  
Other     72,030       41,333  
Total prepaid and other current assets   $ 878,460     $ 584,666  

 

Note 4- Property and Equipment

 

Property and equipment, at cost, consist of the following:

 

    March 31,   December 31,
    2023   2022
Storage equipment   $ 60,288     $ 60,288  
Furniture and fixtures     20,860       20,860  
Leasehold improvements     20,983       20,983  
Computer hardware and software     100,426       93,062  
Data center equipment     7,394,905       6,973,295  
 Gross Property and equipment     7,597,462       7,168,488  
Less: Accumulated depreciation     (5,177,980 )     (4,956,698 )
Net property and equipment   $ 2,419,482     $ 2,211,790  

 

Depreciation expense for the three months ended March 31, 2023, and 2022 was $218,979 and $281,608, respectively.

 

Note 5 - Goodwill and Intangible Assets

 

Goodwill and intangible assets consisted of the following:

                 
    Estimated life in years   Gross amount   December 31, 2022, Accumulated Amortization   Net
Intangible assets not subject to amortization                                
Goodwill     Indefinite     $ 4,238,671     $     $ 4,238,671  
Trademarks     Indefinite       514,268             514,268  
                                 
Total intangible assets not subject to amortization             4,752,939             4,752,939  
Intangible assets subject to amortization                                
Customer lists     7       2,614,099       1,167,075       1,447,024  
ABC acquired contracts     5       310,000       310,000        
SIAS acquired contracts     5       660,000       660,000        
Non-compete agreements     4       272,147       272,147        
Website and Digital Assets     3       33,002       18,650       14,352  
Total intangible assets subject to amortization             3,889,248       2,427,872       1,461,376  
Total Goodwill and Intangible Assets           $ 8,642,187     $ 2,427,872     $ 6,214,315  

                    
   Estimated life in years  Gross amount  March 31, 2023, Accumulated Amortization  Net
Intangible assets not subject to amortization                    
Goodwill   Indefinite   $4,238,671   $   $4,238,671 
Trademarks   Indefinite    514,268        514,268 
                     
Total intangible assets not subject to amortization        4,752,939        4,752,939 
Intangible assets subject to amortization                    
Customer lists   7    2,614,099    1,233,861    1,380,238 
ABC acquired contracts   5    310,000    310,000     
SIAS acquired contracts   5    660,000    660,000     
Non-compete agreements   4    272,147    272,147     
Website and Digital Assets   3    33,002    21,594    11,408 
Total intangible assets subject to amortization        3,889,248    2,497,602    1,391,646 
Total Goodwill and Intangible Assets       $8,642,187   $2,497,602   $6,144,585 

  

13

 

  

Scheduled amortization over the next five years are as follows: 

 

         
Twelve months ending March 31,    
2024     $ 276,976  
2025       268,717  
2026       267,143  
2027       267,143  
2028       200,357  
Thereafter       111,310  
Total     $ 1,391,646  

 

Amortization expense for the three months ended March 31, 2023, and 2022 was $69,731 and $69,730respectively.

 

Note 6-Leases

 

Operating Leases

 

The Company currently maintains two leases for office space located in Melville, NY.

 

The first 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 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.

 

On July 31, 2021, the Company signed a three-year lease for approximately 2,880 square feet of office space at 980 North Federal Highway, Boca Raton, FL. The commencement date of the lease was August 2, 2021. The monthly rent is approximately $4,820.

 

The Company leases cages and racks for technical space in Tier 3 data centers in New York, Massachusetts, North Carolina and Florida. These leases are month to month. The 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.

 

14

 

 

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 is payable in monthly installments of $5,008. The lease carries an interest rate of 7% and is a three-year lease. The term of the lease ends June 1, 2023.

 

On June 29, 2020, the Company entered into a lease agreement for technical equipment with a finance company. The lease obligation is payable in monthly installments of $5,050. The lease carries an interest rate of 7% and is a three-year lease. The term of the lease ends June 29, 2023.

 

On July 31, 2020, the Company entered into a lease agreement for technical equipment with a finance company. The lease obligation is payable in monthly installments of $4,524. The lease carries an interest rate of 7% and is a three-year lease. The term of the lease ends July 31, 2023.

 

On November 1, 2021, the Company entered into a lease agreement with a finance company for technical equipment. The lease obligation is payable in monthly installments of $3,152. The lease carries an interest rate of 6% and is a three-year lease. The term of the lease ends November 1, 2024.

 

On January 1, 2022, the Company entered into a lease agreement with a finance company for technical equipment. The lease obligation is payable in monthly installments of $17,718. The lease carries an interest rate of 5% and is a three-year lease. The term of the lease ends February 1, 2025.

 

On January 1, 2022, the Company entered into a technical equipment lease with a finance company. The lease obligation is payable in monthly installments of $2,037. The lease carries 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 January 1, 2019, the Company entered into a lease agreement with Systems Trading. This lease obligation is payable to Systems Trading with monthly installments of $29,592. The lease carries an interest rate of 6.75% and is a five-year lease. The term of the lease ends December 31, 2023.

  

On January 1, 2020, the Company entered into a lease agreement with Systems Trading to lease equipment. The lease obligation is payable to Systems Trading with monthly installments of $10,534. The lease carries an interest rate of 6% and is a three-year lease. The term of the lease ends December 31, 2022.

 

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%.

 

On January 1, 2022, the Company entered into a lease agreement with Systems Trading effective January 1, 2022. This lease obligation is payable to Systems Trading with monthly installments of $7,145 and expires on February 1, 2025. The lease carries an interest rate of 8%.

 

On April 1, 2022, the Company entered into a lease agreement with Systems Trading effective May 1, 2022. This lease obligation is payable to Systems Trading with monthly installments of $6,667 and expires on January 1, 2025. The lease carries an interest rate of 8%.

 

15

 

 

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

 

The components of lease expense were as follows:

  

   
    Three Months Ended March 31, 2023
Finance leases:        
Amortization of assets, included in depreciation and amortization expense   $ 171,775  
Interest on lease liabilities, included in interest expense     24,863  
Operating lease:        
Amortization of assets, included in total operating expense     51,912  
Interest on lease liabilities, included in total operating expense     2,456  
Total net lease cost   $ 251,006  
Supplemental balance sheet information related to leases was as follows:        
         
Operating Leases:        
         
Operating lease right-of-use asset   $ 175,842  
         
Current operating lease liabilities   $ 143,480  
Noncurrent operating lease liabilities     36,733  
Total operating lease liabilities   $ 180,213  

 

   March 31, 2023
Finance leases:     
Property and equipment, at cost  $5,521,716 
Accumulated amortization   (3,694,587)
Property and equipment, net  $1,827,129 
      
Current obligations of finance leases  $762,295 
Finance leases, net of current obligations   331,951 
Total finance lease liabilities  $1,094,246 

  

Supplemental cash flow and other information related to leases were as follows:

  

    
   Three Months Ended March 31, 2023
Cash paid for amounts included in the measurement of lease liabilities:     
Operating cash flows related to operating leases  $52,216 
Financing cash flows related to finance leases  $323,728 
      
Weighted average remaining lease term (in years):     
Operating leases   1.10 
Finance leases   1.30 
      
Weighted average discount rate:     
Operating leases   4%
Finance leases   7%

  

Long-term obligations under the operating and finance leases at March 31, 2023, mature as follows:

 

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For the Twelve Months Ended March 31,   Operating Leases  

Finance

Leases

2023   $ 147,587     $ 632,920  
2024     37,020       446,136  
2025           71,765  
Total lease payments     184,607       1,150,821  
Less: Amounts representing interest     (4,394 )     (56,575 )
Total lease obligations     180,213       1,094,246  
Less: long-term obligations     (36,733 )     (331,951 )
 Total current   $ 143,480     $ 762,295  

 

As of March 31, 2023, the Company had no additional significant operating or finance leases that had not yet commenced. Rent expense under all operating leases for the three months ended March 31, 2023, and 2022 was $60,572 and $34,219, respectively.

  

Note 7 - Commitments and Contingencies

 

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 $1.3 million in payments over the next 5 years.

 

Note 8 – Stockholders’ (Deficit)

 

Capital Stock

 

The Company has 260,000,000 authorized shares of capital stock, consisting of 250,000,000 shares of Common Stock, par value $0.001, and 10,000,000 shares of Preferred Stock, par value $0.001 per share.

  

Common Stock Options

 

A summary of the Company’s options activity and related information follows:

  

Schedule of option activity and related information                
    Number of     Weighted   Weighted
    Shares Range of   Average   Average
    Under Option Price   Exercise   Contractual
    Options Per Share   Price   Life
Options Outstanding at January 1, 2023     301,391      $ 1.48 – 15.76     $ 3.46       7.45  
Options Granted     243,605       1.52 1.96       1.77       10.00  
Exercised                        
Expired/Cancelled     (29,213 )   2.16 – 5.80       3.76        
Options Outstanding at March 31, 2023     515,783     $ 1.48 - 14.00     $ 2.65       8.36  
                                 
Options Exercisable at March 31, 2023     166,352      $ 1.48 - 14.00     $ 3.69       5.76  

  

Share-based compensation expense for options totaling $54,433 and $66,505 was recognized in our results for the three months ended March 31, 2023, and 2022, respectively.

 

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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.

 

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.

 

Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. 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.

 

As of March 31, 2023, there was $636,464 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 2.48 years.

 

The weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the three months ended March 31, 2023, and 2022, are set forth in the table below.

   

             
   2023  2022
Weighted average fair value of options granted  $1.77    $3.30   
Risk-free interest rate   3.48% – 4.01%    1.63% – 2.32%  
Volatility   196% – 199%    212% – 214%  
Expected life (years)   10 years     10 years   
Dividend yield  $%   $%  

  

Share-based awards, restricted stock award (“RSAs”)

 

On March 1, 2023, the Company granted certain employees 73,530 RSA’s. Compensation as a group, amounts to $130,883. The shares vest one third each year for three years after issuance.

 

On March 28, 2023, the Company granted certain employees 44,942 RSA’s. Compensation as a group, amounts to $72,357. The shares vest one third each year for three years after issuance.

 

On March 31, 2023, the Board resolved that the Company shall pay each member of the Board compensation as a group amount of $22,750. The shares vest one year after issuance.

 

A summary of the activity related to RSUs for the three months ended March 31, 2023, is presented below:

  

               
    Total   Grant Date
Restricted Stock Units (RSUs)   Shares   Fair Value
RSUs non-vested at January 1, 2023   50,000     $ 1.48 - 3.23  
RSUs granted   130,972     $ 1.61 – 1.82  
RSUs vested     (12,500 )   $ 3.23  
RSUs forfeited         $  
RSUs non-vested March 31, 2023   168,472     $ 1.48 – 2.45  

  

Stock-based compensation for RSU’s has been recorded in the consolidated statements of operations and totaled $52,285 for the three months ended March 31, 2023.

 

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Note 9 – 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.

 

Note 10 – Related Party Transactions

  

Nexxis Capital LLC

 

Charles M. Piluso (Chairman and CEO) and Harold Schwartz (President) collectively own 100% of Nexxis Capital LLC (“Nexxis Capital”). Nexxis Capital was formed to purchase equipment and provide leases to Nexxis Inc.’s customers. The Company received funds of $2,756 and $2,328 during the three months ended March 31, 2023, and 2021 respectively.

 

Note 11 – 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.

  

   
Operations of:   Products and services provided:
Nexxis Inc   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   CloudFirst, provides services from CloudFirst technological assets deployed in six Tier 3 data centers throughout the USA and Canada. This technology has been developed by CloudFirst. Clients are invoiced for cloud infrastructure and disaster recovery on the CloudFirst platform. Services provided to clients are provided on a subscription basis on long term contracts.

  

The following tables present certain financial information related to our reportable segments and Corporate:

  

                                       
As of March 31, 2023
                     
    Nexxis Inc.   Flagship Solutions LLC   CloudFirst Technologies   Corporate   Total
                     
Accounts receivable   $ 60,019     $ 2,895,708     $ 715,443     $     $ 3,671,170  
Prepaid expenses and other current assets     19,503       178,094       505,506       175,357       878,460  
Net Property and Equipment     737       18,533       2,397,542       2,670       2,419,482  
 Intangible assets, net           1,626,646       279,268             1,905,914  
 Goodwill           1,222,971       3,015,700             4,238,671  
 Operating lease right-of-use assets           141,933       33,909             175,842  
All other assets                       11,062,166       11,062,166  
Total Assets   $ 80,259     $ 6,083,885     $ 6,947,368     $ 11,240,193     $ 24,351,705  
                                         
Accounts payable and accrued expenses   $ 46,335     $ 2,332,956     $ 905,137     $ 414,818     $ 3,699,246  
Deferred revenue           155,545       153,728             309,273  
Total Finance leases payable                 500,846             500,846  
Total Finance leases payable related party                 593,400             593,400  
 Total Operating lease liabilities           143,646       36,567             180,213  
Total Liabilities   $ 46,335     $ 2,632,147     $ 2,189,678     $ 414,818     $ 5,282,978  

 

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As of December 31, 2022
                     
    Nexxis Inc.   Flagship Solutions LLC   CloudFirst Technologies   Corporate   Total
                     
Accounts receivable   $ 34,903     $ 1,924,184     $ 1,543,749     $     $ 3,502,836  
Prepaid expenses and other current assets     16,799       213,826       285,306       68,735       584,666  
Net Property and Equipment           19,705       2,192,085             2,211,790  
Intangible assets, net           1,696,376       279,268             1,975,644  
Goodwill           1,222,971       3,015,700             4,238,671  
Operating lease right-of-use assets           167,761       58,740             226,501  
All other assets                       11,346,127       11,346,127  
Total Assets   $ 51,702     $ 5,244,823     $ 7,374,848     $ 11,414,862     $ 24,086,235  
                                         
Accounts payable and accrued expenses   $ 40,091     $ 1,563,408     $ 1,069,278     $ 534,800     $ 3,207,577  
Deferred revenue           165,725       115,335             281,060  
Total Finance leases payable                 641,110             641,110  
Total Finance leases payable related party                 776,864             776,864  
Total Operating lease liabilities           169,469       62,960             232,429  
Total Liabilities   $ 40,091     $ 1,898,602     $ 2,665,547