Attached files

file filename
EX-31.1 - CERTIFICATIONS PURSUANT TO SECTION 302 OF SARBANES OXLEY ACT OF 2002 - Data Storage Corpf10k2009ex31i_datastorage.htm
EX-32.1 - CERTIFICATIONS PURSUANT TO SECTION 906 OF SARBANES OXLEY ACT OF 2002 - Data Storage Corpf10k2009ex32i_datastorage.htm
SECURITIES AND EXCHANGE COMMISSION
 
 
Washington, D.C. 20549
 
 
FORM 10-K

(Mark One)
 
 
x
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2009
 
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________ to ___________
 
 
Commission File No. 333-148167
 
 
DATA STORAGE CORPORATION
(Exact name of registrant as specified in its charter)

 
NEVADA
98-0530147
   
 
401 Franklin Avenue
Garden City, N.Y 11530
   
(212) 564-4922


Securities registered under Section 12(b) of the Exchange Act:
   
Title of each class registered:
Name of each exchange on which registered:
None
OTC.BB
 
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001
(Title of class)
 

 


 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act.
Yes o   No  x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o   No x

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  x  No o
 
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.
Yes oNo x
 
Check if there is no disclosure of delinquent filers in response to Item 405 of S-K (§229.405 of this chapter)   not contained in this form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).Yes o No o

 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer                                                   o                        Accelerated filer                                                     o
Non-accelerated filer                                                     o                         Smaller reporting company                                    x
(Do not check if a smaller reporting company)
 
Revenues for year ended December 31, 2009: $585,285
 
Aggregate market value of the voting common stock held by non-affiliates of the registrant as of December 31, 2009, was $6,832,699
 
Number of shares of the registrant’s common stock outstanding as of April 15, 2010 was: 13,665,399
 
Transitional Small Business Disclosure Format:
 Yes   o No o
 
 

 
 

 

 
 
Table of Contents
 
 

 
 

 

       
SECURITIES AND EXCHANGE COMMISSION
    1  
         
Wshington, D.C. 20549
    1  
         
FORM 10-K
    1  
         
PART I
    7  
         
ITEM 1 DESCRIPTION OF BUSINESS
    7  
         
Corporate History
    7  
         
Overview of Data Storage Corporation & our industry
    7  
         
Description of Data Storage’s Business by Division:
    9  
         
DSC Services
    11  
         
Overview:
    11  
         
Our Strategy:
    11  
         
What We Do:
    11  
         
Features and Benefits:
    11  
         
Equipment Maintenance Services
    11  
         
Overview:
    11  
         
What We Do:
    11  
         
Infrastructure Services
    12  
         
Overview:
    12  
         
Our Strategy:
    12  
         
What We Do:
    12  
         
Benefits of Using DSC:
    12  
         
Industry Certifications and Affiliations:
    12  
         
Data Center Services:
    13  
         
Overview:
    13  
         
Our Strategy:
    13  
         
What We Do:
    13  
         
Benefits of Using DSC:
    13  
         
Security
    13  
         
Overview:
    13  
         
Our Strategy:
    13  
         
What We Do:
    13  
         
Benefits of Using DSC:
    13  
         
Wireless Services
    14  
         
Overview:
    14  
         
Our Strategy:
    14  
         
What We Do:
    14  
         
Vendors:
    14  
         
Benefits of Using DSC:
    14  
         
Professional Services
    14  
         
Overview:
    14  
         
Our Strategy:
    14  
         
What We Do:
    14  

 
 

 


 
 

 

       
Benefits of Using DSC:
    15  
         
Managed Services
    15  
         
Overview:
    15  
         
Our Strategy:
    15  
         
What We Do:
    15  
         
Each program is based upon the following:
    16  
         
Benefits of Using DSC:
    16  
         
Competition
    16  
         
Principal competitors by service sector are:
    16  
         
Typical Client Target
    18  
         
Reasons to Select Our Services
    18  
         
Market Size and Opportunity
    18  
         
Healthcare DPS Product Offering
    19  
         
About the Healthcare Unit
    19  
         
Marketplace Differentiators
    19  
         
Competitive Matrix
    21  
         
Safe Data
    22  
         
Pending the acquisition of Safe data, we have filed this term sheet.
    22  
         
ITEM 1A RISK FACTORS
    22  
         
ITEM 1B. UNRESOLVED STAFF COMMENTS
    22  
         
ITEM 2. DESCRIPTION OF PROPERTY
    22  
         
ITEM 3. LEGAL PROCEEDINGS
    22  
         
ITEM 4. (REMOVED AND RESERVED)
    22  
         
PART II
    23  
         
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
    23  
         
No Public Market for Common Stock
    23  
         
Holders of Our Common Stock
    23  
         
Stock Option Grants
    23  
         
Registration Rights
    23  
         
ITEM 6. SELECTED FINANCIAL DATA
    23  
         
ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
    23  
         
Company Overview
    23  
         
Results of Operation
    24  
         
Critical Accounting Policies
    24  
         
Off Balance Sheet Transactions
    25  
         
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
    26  
         
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
    26  
         
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    39  
         
ITEM 9A. CONTROLS AND PROCEDURES
    39  
         
PART III
    41  
         
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
    41  
         
ITEM 11. EXECUTIVE COMPENSATION
    44  
         
SUMMARY COMPENSATION TABLE
    44  
         
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    46  

 
 

 

   
 
 
       
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    46  
         
PART IV
    48  
         
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
    48  
         
SIGNATURES
    49  
         
DATA STORAGE CORPORATION
    49  

 
 

 




 
PART I
 
 
ITEM 1.       DESCRIPTION OF BUSINESS
 
Overview
 
Corporate History
Euro Trend Inc. was incorporated on March 27, 2007 under the laws of the State of Nevada. On October 20, 2008 we completed a Share Exchange Agreement whereby we acquired all of the outstanding capital stock and ownership interests of Data Storage Corporation. In exchange we issued 13,357,143 shares of our common stock to the Data Storage Shareholders. This transaction was accounted for as a reverse merger for accounting purposes. Accordingly, Data Storage Corporation, the accounting acquirer, is regarded as the predecessor entity.
 
Overview of Data Storage Corporation & our industry
Data Storage Corporation (“Data Storage” or “DSC”). Data Storage provides technical professional services focused on managing customized, powerful, premium solutions for data protection, data management cloud computing including: Storage Infrastructure Design and Management, Business Continuity Planning and Disaster Recovery, Virtualization, Data Archiving, Disk and Transaction Mirroring, and Internet Services..
 
 
Delivering and supporting through its divisions and Joint Venture, professional services providing a broad range of premium solutions in electronic data storage and protection.  Clients look to DSC to ensure disaster recovery and business continuity, strengthen security, and to meet increasing industry compliance, State and Federal regulations. The company markets to business, government, education, and the healthcare industry by leveraging leading technologies such as Virtualization, Cloud Computing, and Electronic Medical Records (EMR).  The company provides hardware, Software-as-a-Service, managed IT services, installation, and maintenance.  To protect and leverage customer investments, DSC provides a range of top-quality professional services and proactive customer support, directly, as well as through authorized partner organizations.
 
 
Data Storage derives revenues from the sale and subscription of solutions that provide businesses, education, government and healthcare protection of critical electronic data. In 2009 revenues consisted primarily of offsite data backup, de-duplication, Continuous data protection, private cloud Disaster Recovery solutions, Electronic Medical Records, protecting information for our clients. We have operations in our datacenter in Westbury, New York and a disaster recovery facility which is located over 1,000 miles away from the primary data center. We deliver our services over a highly intelligent, reliable, redundant and secure fiber optic network, with separate and diverse routes to the Internet. The network and geographical diversity is important to clients seeking storage hosting and Disaster Recovery solutions, ensuring protection of data in the case of a network interruption.
 

NAME (Location)
TYPE OF BREACH
 
# OF RECORDS
 
Harvard Law School
Lost backup tapes
    21,000  
University of Utah
Stolen backup tapes
    1,300,000  
University of Miami
Stolen backup tapes
    2,100,000  
University of Michigan
Stolen backup tapes
    8,585  
Johns Hopkins University
Lost backup tapes
    52,000  
NY Social Security Admin
Lost Data Disk
    969  
Bristol-Myers Squibb
Lost backup tapes
    42,000  
Lost backup tapes
Lost backup tapes
    80,000  

 
Data Storage is in the position today to leverage our infrastructure and leadership team to grow revenue to significant levels by acquisitions of synergetic data protection and cloud storage businesses that provide data backup services, disaster recovery and business continuity solutions, store data for future access  for e-discovery, e – title and electronic medical information. DSC believes opportunities exist to acquire synergistic service providers to enhance our products and services portfolio, expand our management and increase our cash flow.
 
 
 
 
Our aim is to reduce costs through economies of scale while increasing local market share and consolidating efforts during the current economic environment. Over 4,000 service providers exist today, providing DSC with ample acquisition targets. Initial acquisitions will be derived from companies that offer similar services to Data Storage as greater economies of scale can be realized using this strategy improving net income. These acquisitions will become partners of DSC and continue to offer solutions under the DSC brand.
 
We believe that the opportunity exists today to roll up customer bases as well as acquire companies. This strategy will enable Data Storage to create a national presence as the premiere brand.. The roll up of these technical consulting companies and system integrators will also form a powerful distribution channel for both our current and future product service offerings. Acquisition activity including organic growth is forecasted at $6 Million for 2010 and $11 Million for 2011. These revenue outlooks form the base line revenue for each consecutive year since revenue is monthly recurring and normally under agreements that range from 12 months to 36 months.
 
Worldwide Storage-as-a-Service Demand
 
 
 
The marketplace providing professional services that specializing in Disaster Recovery and Business Continuity are segmented into systems integrators that have added data protection services as an additional product line adding to their bundle of services and products, focused on smaller clients. A few very large professional services providers such as IBM and SunGard focus on the enterprise level organizations greater than 1,500 employees, therefore leaving small and medium size organizations under-served for top level professional services for Disaster Recovery solutions under DSC’s professional services umbrella.
 

According to IDC in its recent research study entitled “Storage-as-a-Service: Commercial Opportunities,” demand for online storage services is very strong in small, mid-size, and large firms that are facing budgetary and IT staffing pressures. The study states that these firms are evaluating online storage services and storage capacity for backup/disaster recovery, long term record retention, business continuity and availability.  DSC aims to meet this demand by recommending, implementing, and providing solutions in these areas. In its Worldwide Storage-as-a-Service Market Size and 2008-2012 Forecast, IDC predicts that customers will continue to invest strongly in various forms of online storage services, forecasting this market to pass the $3 billion mark by 2012, with a CAGR greater than 29% from 2007 to 2012.
 
On our Healthcare unit trends in the industry are as follows:  Healthcare DPS, a division of Data Storage, provides data protection technology and services for hospitals, nursing and residential care facilities, physician’s offices, home healthcare service companies, dental offices, alternative healthcare offices, outpatient care centers, ambulatory healthcare service companies, and medical and diagnostic laboratories in the New York metropolitan area. Healthcare DPS assists Healthcare Providers in complying with HIPAA and other federal and local regulations on data protection. With zero tolerance for downtime, larger healthcare organizations require extremely reliable mission-critical data protection services. A host of state and industry regulators are now urging, and in some cases requiring, the development of business continuity and disaster recovery plans to ensure the backup, protection and recovery of data on a long-term basis. Internet Services over Ethernet is rapidly becoming the technology of choice to address these critical data center needs, because of its ability to provide transparent connectivity over the wide area. Data Storage offers an array of services in order to satisfy all of the aforementioned requirements.
 
As outlined in the 2008 HIMSS/HIMSS Analytics Ambulatory Healthcare I.T. Survey, there is no clear leader in the Electronic Medical Records market.  According to BCC Research, software applications (EHR) is the dominating segment of the U.S. healthcare technology market, generating an estimated $3.4 billion, increasing to $7.2 billion in 2014; a CAGR of 16.4%. A June 2008 survey published in the New England Journal of Medicine revealed only four percent of U.S. physicians providing direct patient care have a full EHR system, and only 13 percent have a basic system. Through the 2009 Economic Stimulus Package, the CMS will subsidize the cost of EHR systems by paying physicians $44,000 to $64,000 over five years, beginning in 2011, for deployment and ‘meaningful use’ of certified EHRs. According to a Congressional Budget Office review, the incentive is expected to increase physicians’ use of EHR to 90 percent in the next decade.  Marketing EHR solutions and related services under its Healthcare DPS brand, DSC is well positioned to take advantage of increased state and federal regulations and incentives designed to transform healthcare from today's largely paperbased disparate system to one that is electronic and interconnected.
 
On our E-commerce unit, the company provides low cost online data backup brand DataStor Live.  DataStor Live is powered by cloud computing based platforms and provide service to home users, small-office and home-office workers. IDC projects the market for this type of service to grow to $715 million by 2011, up from $235 million in 2007.  DataStor Live offers a similar service to EMC’s Mozy which was acquired in September 2007 from Berkley Data Systems in a $76M deal.
 
We have created significant momentum since the acquisition share exchange with Data Storage Corporation.
 
 
Description of Data Storage’s Business by Division:
 
 
 

Data Storage Corporation delivers and supports through its various divisions a broad range of premium solutions focusing in electronic data storage and protection.  Clients look to DSC to ensure disaster recovery and business continuity, strengthen security, and to meet increasing industry, State and Federal regulations. The company markets to business, government, education, and the healthcare industry by leveraging leading technologies such as Virtualization, Cloud Computing, and Electronic Medical Records (EMR).  The company provides hardware, Software-as-a-Service, managed IT services, installation, and maintenance.  To protect and leverage customer investments, DSC provides a range of top-quality professional services and proactive customer support, directly, as well as through authorized partner organizations.

 
 

 

DSC Services
 
We offer the following services to our clients.

Overview:
Data Storage Corporation provides data protection and information management solutions using our secure, encrypted, disk-based backup, storage and archiving systems.  We specialize in protecting, managing, backing up and restoring valuable corporate information by automatically getting data stored, safely and securely, off-site.   Our solutions help clients reduce the risks and cost associated with data protection, information recovery, disaster planning and regulatory compliance.  Our company protects and ensures that information assets are secure and restorable on demand.
 
Our Strategy:
Specializing in Off-site Backup and Archiving, DSC can support your environment with protection for all your data across the network as well as keeping it secured safely off-site in two geographically diverse datacenters.  Our enterprise backup solution is integrated and built with all the latest feature sets an organization could ask for.  This provides your organization with the best tools and features for disaster recovery and business continuity.
 
What We Do:
We provide online backup services that transfer your information over the Internet or on a dedicated private circuit to our secure company owned off-site storage location. Our online backup service provides the most advanced data protection solution for small and medium businesses. Our service turns an ordinary server into a powerful and fully automated network backup device.
 
Features and Benefits:
·  
Simple to grow – Simple to manage
 
·  
Reduces operational overhead while freeing up staff to focus on higher priority tasks.
 
·  
Agent-less – No agents to install on any machine (Some limitations apply to MS Exchange, GroupWise, Lotus Notes and MS SharePoint).
 
·  
Backed up data can be archived for long term storage.
 
·  
Always secure with 256-bit AES encryption.
 
·  
Centralized management interface, email or SNMP alerts, extensive logging and reporting for audits and verification.
 
·  
Tape-less – Disk to Disk – No more manual handling of tapes.
 
·  
Continuous Data Protection for email and data files.
 
·  
Customizable retention policies and software parameters.
 
 
Equipment Maintenance Services
 
Overview:
The service employs a HotSpares strategy which essentially means we have live running servers and arrays in facilities:
 
·  
Guaranteed working spare when going on calls (No DOA)
 
·  
Test all components from the field from our suppliers
 
·  
Provides continuing education and troubleshooting in the field
 
Mean time to repair (Call Closure) is less than three (3) hours according to nationwide statistics.  We will provide you with engineering services nationwide for installation, De-Installation and Re-Location Services as well as a multitude of professional services, local to your site (available from 35 offices, covering most major cities in USA).
 

What We Do:
We support the following platforms:
 
·  
IBM Systems and Storage
o  
RS/6000’s including legacy products
o  
pSeries
o  
ISeries
o  
zSeries (Direct)
o  
zSeries, Blades and Netfinity Series
o  
Tape Libraries, SSA & FastT Storage
o  
AIX Operating System Software Telephone support is available. Extended AIX and OS/400 support is available through a partner.
·  
SUN Microsystems Servers and Storage
o  
ALL SPARC and legacy products
o  
ALL SUN Ultra products and Enterprise Servers including the 10K
o  
ALL StorEdge Products, including many StorageTek Products
o  
Solaris Operating System Software Telephone support is available.  Authorized software support and patch downloads are available direct through SUN. Ask us to assist in determining the need.
·  
Hewlett-Packard Servers and Storage
o  
All Digital Equipment Corporation (DEC) legacy products (VAX & Alpha)
o  
All Compaq products (Proliants, Blades and StorageWorks)
o  
All HP 9000 Servers and 3000 Servers
o  
All Integrity Servers and Storage Products
o  
OpenVMS and HP-UX Operating System Software Telephone support is available. MPE Software Support is available as well.
·  
Dell PowerEdge Servers and PowerVault Storage
o  
All Dell Poweredge Products both in and out of warranty
o  
All Dell PowerVault Servers including many NetApp and EMC Products
o  
All Dell PowerConnect Switches
·  
EMC Clariion Storage Arrays
o  
All Clariion Products
o  
Brocade & McData Swtiches
o  
Tier 2 Support Available
 
Infrastructure Services
 
Overview:
Whether you need to upgrade your existing infrastructure, or are adding a new location, our team of skilled expert’s works with you to evaluate the capabilities of your existing infrastructure and makes recommendations for supporting new applications and services to accommodate your future growth. We then design, install and implement a solution handmade for your business.
 
Our Strategy:
Specializing in Low Voltage systems, DSC supports your ongoing need for new technology, transforming your communications system from just cables and connectors to an integrated solution for voice, data, audio and visual communications. Our services include Structure Cabling and Voice-Data-Fiber-CATV­CCTV-Access Control.
 
What We Do:
From premise cabling systems to data centers, overhead paging to concert sound systems, CATV systems to security, our extensive engineering and technical background enables us to provide and unsurpassed level of service.
 
Benefits of Using DSC:
Our commitment to our clients' best interest, and our vendor neutral approach, assure unbiased consultation and full access to world-class technologies. Our highly trained technicians are constantly updated on the latest technology, products and installation practices. Each installation is tested and certified; every detail is documented and labeled according to TIA/EIA 606 standards. Final test results and as-built CAD floor plans are submitted upon project completion.
 
Industry Certifications and Affiliations:
· BICSI
· ANSI
· EIA/TIA 606 Standards
· National Electric Code
· Panduit (PCI)
· Belden
· Leviton
· HubbelGeneral
· Berk-Tek
· Systimax
· Corning
· Commscope
· B-Line
· Amp/Tyco
          Union and Non Union Labor
· CWA (NY, NJ)
· IBEW (NJ)
 

Data Center Services:
 
Overview:
Data Storage Corporation is pleased to bring the finest data center specialists to perform your latest upgrade or build your new installation. Our outstanding cabling services, plug & play, rack and stack, inter-rack cabling and network patching are just part of our thorough approach to assure your critical success.
 
Our Strategy:
The essential elements for a well executed data center include:
 
PDU, CRAC, UPS and Generator Hot/Cold Aisle, High/Low Density Structured Cabling Requirements, "Streets and Avenues" Raised Floor Requirements (Above or Below) Cabinet/Hardware Planning “Room-Ready" Criteria and Implementation.
 
What We Do:
Data Storage Corporation will carefully follow a systematic process for building/upgrading your data center to achieve your desires. For best results, let us do it all:
 
Data Center and Technology Room Design Structured Cabling Design and Analysis Site Selection Analysis and Base Building Design Strategic Planning Point Of Distribution (POD) Installations IT and Construction Project Management.
 
Benefits of Using DSC:
·  
Consistent end-to-end project management.
 
·  
Complete follow through in bid process, from drawings and specifications to negotiations and recommendations.
 
·  
Continual review of master schedule to assure adherence.
 
·  
Vendor-nuetral purchasing of only the best materials.
 
·  
Strict problem/prevention/resolution procedures keep the project on target.
 
 
Security
 
Overview:
There are literally thousands of ways a factory, storefront or other building can have its security and safety compromised. For many business owners and operations executives, security isn't about the problems you see. It's about the problems you don't see. How do you find the right measure of protection? Whether you've had a security failure or are simply concerned about preventing one, DSC can provide the latest technology and attentive service to meet your need.
 
Our Strategy:
A great system is just the beginning of a comprehensive security solution. Careful pre-planning and proper installation are key to getting the best possible results. Data Storage Corporation's team of experienced professionals ensures that every aspect of security protection you need is never overlooked, and that your top-quality components perform to the highest industry standards. Our ever-present support is just a phone call away to assure your continuous peace of mind.
 
What We Do:
·  
Burglar and Fire Alarm Systems
 
·  
Video Surveillance
 
·  
Electronic Access Control
 
·  
Monitoring Services. (Including Web-Hosted)
 
Benefits of Using DSC:
·  
Expert professional design and installation.
 
·  
Custom evaluation to define your exact requirements.
 
·  
Protection available for any size facility.
 
·  
We are licensed and fully comply with state/local codes and insurance requirements.
 
·  
Security review before installation to confirm your level of protection.
 

 
Wireless Services
 
Overview:
Wireless solutions play an important role in the achievements and advancements made by systems users every day. More and more, previously difficult or unworkable situations are accomplished elegantly by properly deployed wireless technology. Expansion and upgrade possibilities for your existing wireless applications are greater than ever. Is a wireless solution really right for you? How do you arrive at the best solution for your growing needs? You can turn to Data Storage Corporation for the most complete answers.
 
Our Strategy:
You need a versatile supplier to assure that the correct strategy, from the many available, is applied to your situation. Some of the most important tasks supported by wireless each require specialized expertise. These include indoor wireless LAN (Wi-Fi), outdoor licensed and unlicensed wireless links, wireless sports and entertainment, video surveillance, voice over wireless LAN, and cellular reinforcement for office buildings, campuses, indoor or outdoor arenas, etc.
 
What We Do:
·  
Point to Point / Point to multipoint Microwave design and deployment
 
·  
802.11X Site Surveys (Indoor/Outdoor)
 
·  
Predictive analysis
 
·  
Cellular reinforcement (Providing additional cellular coverage to weak areas)
 
Vendors:
· Cisco Networks
· Trapeze Networks
· Meru Networks
· Firetide
· Bridgewave
· Cerragon
· Andrew DaS
· Mobile Access

Benefits of Using DSC:
·  
The same level of expertise is assured throughout our nationwide service area.
 
·  
Our vendor-neutral approach frees us to meet your highest expectations.
 
·  
Serving every location from small office to large hotel, office building, convention center or stadium.
 
·  
Our application integration process assures that your system functions will work together smoothly.
 
·  
Our broad understanding enables your system to perform efficiently and economically.
 
 
Professional Services
 
Overview:
You need to get the most out of every dollar you spend. That's why Data Storage Corporation's Technology Division offers you a proven, comprehensive selection of professional services designed to help you fully leverage the value of your investment in Information Systems Performance Management.
 
Our Strategy:
DSC Professional Services include the three most critical areas of service -deployment, performance and best practices. Specific services are available for end to end IT and infrastructure assessments to design build engagements. Our products, and all services, can be easily customized to fit your IT and business needs. Our consultants are experts in many technology disciplines and will provide you with a wealth of knowledge, tools, skills and expertise. This means that your staff can work with the confidence of knowing that their needs are paramount.
 
What We Do:
DSC Professional Services for planning, design, deployment, performance and best practices can help you speed time to value and increase ROJ for your DSC investment:
 
·  
Staffing
 
·  
Gap Analysis
 
·  
Systems Integration and Design
 

·  
Technology Assessments
 
·  
Telecommunications Audits
 
·  
Managed Services
 
·  
Corporation Relocations
 
·  
Technology Deployment
 
·  
Network, Systems and broadband engineering consulting
 
·  
Server farm virtualization analysis, design and implementation
 
Benefits of Using DSC:
·  
Develop a robust road map via DSC’s audit services to increase efficiencies and develop pragmatic action plans to meet any business goal.
 
·  
Accelerate deployment through proven procedures and deep technology expertise.
 
·  
Maximize performance with proactive audit and analysis, backed by fast problem response.
 
·  
Leverage best practices that include DSC’s proprietary processes and intellectual capital gathered from numerous successful engagements.
 
·  
Speed time to value with DSC’s tools, procedures and assistance.
 
·  
Minimize risk by adopting a proactive service management approach.
 
Managed Services
 
Overview:
Plagued by system downtime, viruses, spyware, losses of productivity, and every other excuse for why the computer system you rely upon to run your business is not working consistently and as expected? These distractions are unnecessary and very expensive.
 
Our Strategy:
 
Proactive, Flexible, Affordable, Managed…
 
Data Storage Corporation understands this. We also know that businesses are constantly challenged by the task of managing the demands of growing their business while coping with continuous technology challenges. Our focus is to keep your systems operational and available so that you can focus your efforts on the demands of growing your business, managing costs and increasing revenues. We want to help you realize the productivity gains and ROI you have been expecting from your computer systems. Managed Services from Data Storage Corporation consists of various service level offerings that provide affordable proactive IT management and support to growing businesses. Utilizing our unique framework referred by us as DSC-MS for providing managed IT services, Data Storage Corporation provides a range of proactive services to keep your computer systems up and running and your people and business productive. It's not just about monitoring, that just lets you know something is wrong. It's not just about remote access to your systems to troubleshoot issues.
 
What We Do:
By utilizing technology, daily, weekly and monthly IT tasks can be automated and scheduled to ensure all tasks are completed and reported consistently without fail. As the tasks run, valuable data is gathered to spot trends and patterns which can be used to plan system changes or enhancements. This reduces or eliminates any impact on the business. Proactive managed services eliminate the scenario of calling and waiting for the "computer guy". Potential issues and problems are prevented. Systems and people remain productive and working. In the case where problems do occur, response times can often be within minutes. Consistency is the cornerstone of DSC-MS consistency creates reliability and renders no surprise expenditures or billings. How many times have you received a bill that you couldn't understand or begin to determine if it was justified?
 

Each program is based upon the following:
·  
Site Assessment and Inventory
 
·  
Proactive Service
 
·  
Management and Status Reporting
 
·  
Best Practice Driven
 
·  
Automated and Reliable
 
Benefits of Using DSC:
Our goal is to serve as your technology partner with a focus on providing solutions. By using a consultative approach to evaluate your business and technology needs, we can advise on the best solutions for your current and future needs.
 
·  
Reliability
 
·  
Security
 
·  
Consistency
 
·  
Productivity Gains
 
·  
Cost Management and Control
 
·  
Performance
 
·  
Managed Expansion and Growth
 

 
Data Storage Corporation provides you with a single source of professional expertise and resources you need to streamline system management and support functions at an affordable price.  Data Storage Corporation uses advanced processes, tools and methodologies, to deliver superior services that match your needs.
 
 
Competition
 
Principal competitors by service sector are:
 
Data Protection
 
Commvault- a software company focused primarily on data management. Uses singular architecture based on Common Technology Engine to deliver data movement and expansion to changing business requirements. Commvault offers a team of engineers and consultants for customizing solutions for customers in six continents.
 
Symantec – parent company of Norton is an industry leader in electronic messaging security, offering solutions for instant messaging, anti-spam, anti-virus, legal and content compliance, legal discovery and message archiving.
 
CA (Computer Associates) - offers data protection with a multi-layered solution that combines data backup, security, replication and failover.
 
 
Data De-Duplication
 
Diligent – is an innovator in enterprise-class disk-based data protection solutions. Recently acquired by IBM, it is the inventor of ProtecTIER, de-duplication platform capable of inline de-duplication, eliminating redundant data and amount of physical storage required. 
 
NetApp – is a creator of storage and data management solutions for maximizing cost efficiency, offering single platform for a range of networked environments. Infrastructure solutions include archive and compliance, business continuity, disk to disk backup, storage consolidation and testing & development.
 

Overland Storage– this company offers a complete set of data protection appliances for small and midrange customers, to reduce backup window and simplify data retention. Emphasis is on improving data recovery speed and cost effective methods of disaster recovery.
 
Quantum – global specialist in backup and recovery as well as archiving of data. It was the first to market variable length de-duplication, virtual tape library for open systems and unified disk to disk backup systems.
 
Virtual Tape Library
 
Data Domain - is aimed at reducing or eliminating tape infrastructure with disk and network based data protection. Services include file storage, backup, disaster recovery, long term retention of enterprise data and litigation support as well as regulatory compliance assistance.
 
Falconstor – implements solutions using Continuous Data Protector, virtual tape library and network storage server.  It offers a complete line of energy conscious solutions for various industries using their IPstor storage virtualization platform.
 
Sepaton –  is a provider of VTL solutions for data protection, offering products and services to assist in a wide range of data protection issues such as backup performance, regulatory/corporate compliance, disaster recovery and containment of IT costs.
 
Off-Site Data Vaulting
 
There are many companies providing data vaulting services, from companies purchasing wholesale without a data center or equipment and these that have invested in equipment and software licensees. A smaller segment of companies have developed software that provide for data vaulting some of which only license their software and others that compete with their licensees.
 
Evault – offers online backup and recovery solutions allowing automatic storage of critical data and off-site vaults. It offers a broad range of services including archiving, email compliance, eDiscovery, business continuity planning and disaster recovery testing.
 
Sungard – is a leader in software and processing technology for the financial services, higher education and public sector industries. It is a major provider in information availability solutions, managed IT as well as services for applications and data center outsourcing.
 
Live Vault / Iron Mountain - offers online backup and recovery solutions allowing automatic storage of critical data and off-site vaults. It offers a broad range of services including archiving, email compliance, eDiscovery.
 
Storage Drives
 
IBM – (International Business Machines Corporation) specializes in computer and technology consulting as well as manufacturing and selling computer hardware and software. Infrastructure services include hosting, from mainframe to nanotechnology.
 

 
 

 


Typical Client Target
 
Physician
· < 30 Doctor Practice
 
· Electronic Medical Records
 
· Server
 
· PC’s
 
· Scanner
 
· Managed IT Services
 
· Paper Chart Scanning
 
· Compliance Documentation
 
· VOIP Phone Systems
 
Hospital
· Roadmap to HER
 
· Charge Capture
 
· e-discovery
 
· Off-site Data Vaulting
 
· Storage
 
· Telecommunications
 

Reasons to Select Our Services
Government Incentives
 
·  
$19 billion in Stimulus Package Distributions
 
o  
$44,000 to $64,000 per provider to implement or upgrade EH
 
o  
Penalties for non-use by 2015 (2012 for e-RX)
 
Tax Deductions
 
·  
Section 179 allows full depreciation of hardware and software until 12/31/2009
 
Subsidies
 
·  
Relaxed Stark (Anti-Kickback) Law permits hospitals to subsidize systems for physicians
 
·  
Regional Health Information Organizations offer financial assistance for implementing EHR
 
Market Size and Opportunity
The U.S. market for healthcare IT expected to be worth $4.0 billion in 2009
 
§  
Increasing to $9.0 billion in 2014
 
§  
CAGR of 17.5%
 
Software applications (EHR) segment dominates the market
 
§  
Generates an estimated $3.4 billion in 2009
 
§  
Expected to increase to $7.2 billion in 2014
 
§  
CAGR of 16.4%
 
§  
66% of physicians do not have EHR
 
Dedicated hardware is the second largest segment
 
§  
Worth $636.8 million in 2009
 
§  
Increasing to $1.8 billion in 2014
 
§  
CAGR of 22.9%
 

 
No clear market leader
 
Sources:
 
1.  
2008 HIMSS/HIMSSA Analytics Healthcare IT Survey
 
2.  
BCC Research (2009) – Healthcare Information Technology Wellesly – BCC Research
 

Healthcare DPS Product Offering
 

 

About the Healthcare Unit
Mission
· To provide reliable care quality enhancing solutions
 
· To empower providers to improve profitability
 
· To protect & insure the privacy & security of electronic protected health information
 
Company Overview
· Division of DSC
 
· Health IT solution provider
 
· Serving Group Practices, Nursing Homes, Assisted Living Facilities, and Hospitals the NY Metro area & beyond.
 
Marketplace Differentiators
§  
We are a local company
o  
We service the New York Metro Area
o  
We are headquartered in Garden City (Long Island)
o  
Our support staff is located throughout New York
§  
Our staff is well trained and highly skilled
o  
All employees are Certified HIPAA Professionals
o  
All employees attend ongoing mandatory training sessions
o  
All employees have healthcare experience
§  
We have done the research
o  
Many products are well endorsed and/or certified
§  
CCHIT
  
Bronx County, Texas Medical Institution, Suffolk Academy of Medicine, Queens Medical Society,  State & Federal Agencies and RHIO.


 

 

 
 

 


Competitive Matrix

   
DSC Backup
 
Carbonite
 
Mozy
 
Compression
 
 
Compressed, compresses all data before sending to our data centers, and we only bill on compressed storage.
 
Uncompressed, Carbonite does not compress data, and bills on uncompressed storage.
 
Uncompressed, Mozy does not compress data, and bills on uncompressed storage.
 
Data Centers
 
 
Two Data Centers, Two (2) Tier-IV SAS70 type II data centers, replicating data over a dedicated connection.  The two data centers are on opposite coasts, ensuring that if a natural disaster disables one center, your data is still safe.
 
One Data Center, One Data Center, Only one data center, which does not ensure data replication.
 
One Data Center, replicates internally which creates restoration issues. "Preparing" your data for recovery, can take hours to days.
 
Retention Level
 
 
Customizable, Unlimited, We allow unlimited revisions, data will not be deleted off of our servers unless you specifically delete it (to save from losing data you may need to get back later)
 
30 Day Retention Level, If a file is deleted from your local machine, it will be purged from Carbonite's servers after 30 days.  No unlimited revision rules.
 
30 Day Retention Level, If a file is deleted from your local machine, it will be purged from Mozy's servers after 30 days.  No unlimited revision rules.
 
Exchange Backups
 
 
Backs up Exchange, Uses Microsoft best practices to back up Exchange, both at the Information Store level, and at the Mailbox and Message level.
 
Does not back up Exchange, No functionality or plugin to back up Microsoft Exchange
 
Backs up Exchange, Does not do message level
 
HIPAA Compliance
 
 
YES, Revision rules and retention period allow for the backups to comply with HIPAA compliance specifications
 
NO, Retention level does not allow for HIPAA compliance
 
NO, Retention level does not allow for HIPAA compliance
 
 

 
 

 


 
Safe Data
 
Pending the acquisition of Safe data, we have filed this term sheet.
 
ITEM 1A.     RISK FACTORS
 
Not Applicable
 
 
ITEM 1B.     UNRESOLVED STAFF COMMENTS
 
Not Applicable.
 
 
ITEM 2.       DESCRIPTION OF PROPERTY
 
Our principal office is located at 401 Franklin Avenue, Garden City, NY 11530.  Our telephone number is (212) 564-4922.
 
ITEM 3.       LEGAL PROCEEDINGS
 
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 our company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
 
ITEM 4.       (REMOVED AND RESERVED)
 
 

 
 

 


 
PART II
 
 
ITEM 5.       MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
 No Public Market for Common Stock
 A symbol was assigned for our securities so that our securities may be quoted for trading on the OTCBB under symbol DTST.  Minimal trading occurred through the date of this Report. There can be no assurance that a liquid market for our securities will ever develop. Transfer of our common stock may also be restricted under the securities or blue sky laws of various states and foreign jurisdictions. Consequently, investors may not be able to liquidate their investments and should be prepared to hold the common stock for an indefinite period of time.
 
             
Quarter ended
 
Low Price
   
High Price
 
             
December 31, 2009
 
$
0.25
   
$
1.00
 

 
Holders of Our Common Stock
As April 15, 2010, we had we had 34 record holders of our Common Stock.
 
Stock Option Grants
As of April 15, 2010 we granted options to purchase 2,929,432 shares of common stock.
 
Registration Rights
We have not granted registration rights to the selling shareholders or to any other persons.
 
 
ITEM 6.       SELECTED FINANCIAL DATA
 
Not applicable.
 
 
ITEM 7.       MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
 
Company Overview
Data Storage Corporation (“Data Storage” or “DSC”). Data Storage provides technology professional services focused on managing customized, powerful, premium solutions for data protection, data management including: Storage Infrastructure Design and Management, Business Continuity Planning and Disaster Recovery, Virtualization, Archiving, Disk and Transaction Mirroring, and Internet Services..
 
Delivering and supporting through its divisions and Joint Venture, professional services providing a broad range of premium solutions in electronic data storage and protection.  Clients look to DSC to ensure disaster recovery and business continuity, strengthen security, and to meet increasing industry, State and Federal regulations. The company markets to business, government, education, and the healthcare industry by leveraging leading technologies such as Virtualization, Cloud Computing, and Electronic Medical Records (EMR).  The company provides hardware, Software-as-a-Service, managed IT services, installation, and maintenance.  To protect and leverage customer investments, DSC provides a range of top-quality professional services and proactive customer support, directly, as well as through authorized partner organizations.
 
Data Storage Corporation derives its revenues from the sale of solutions that provide businesses protection of critical electronic data. Primarily, these services consist of email storage and compliance solutions; off site data back up; continuous data protection; data duplication; high availability replication and virtual tape libraries for disaster recovery and business continuity. The Company has Data Centers in Westbury, New York and maintains equipment under a strategic alliance with Broadsmart a VOIP company in Fort Lauderdale, Florida to provide redundant data protection.
 
We service customers from our New York premises which consist of modern offices and a technology suite adapted to meet the needs of a technology based business. Our primary role is to provide, maintain and develop the network hub hardware and software to meet the needs of our customers.
 
Data Storage varies its use of resource, technology and work processes to meet the changing opportunities and challenges presented by the market and the internal customer requirements.
 

Results of Operation
Year ended December 31, 2009 as compared to December 31, 2008
 
 Net sales.  Net sales for the year ended December 31, 2009 were $585,285, a decrease of $44,390, or 7.1%, compared to $629,675 for the year ended December 31, 2008. The decrease in sales for is primarily attributable due to industry wide price compression.
 
 Cost of sales. For the year ended December 31, 2009, cost of sales increased $113,796 to $459,803.  The increase is due to the addition of managed services, the sale of hardware on a resale basis.  The Company's gross margin decreased to 21.4 % for the year ended December 31, 2009 as compared to 45.0% for the year ended December 31, 2008.  Price compression against fixed operating costs on the data backup business combined with the addition of managed services and hardware resale which both carry lower gross margins account for the decrease.
 
 Operating Expenses.  For the year ended December 31, 2009 operating expenses were $1,170,903, an increase of $347,428 as compared to $823,475 for the year ended December 31, 2008. The increase in operating expenses for year ended December 31, 2009 is a result of an increase in salaries expense.  Sales salaries increased $221,176 to $231,536 as compared to $10,360 for the year ended December 31, 2008.  Marketing and administrative salaries increased $108,651 to $113,562 for the year ended December 31, 2009 as Data Storage has entered into additional lines of business.  Professional fees decreased $114,967 to $185,526 for the year ended December 31, 2009.  Professional fees for the year ended December 31, 2008 were higher as a result of the merger of Euro Trend, Inc. and Data Storage Corporation.
 
 Interest Expense.  Interest expense for the year ended December 31, 2009 increased $1,123 to $4,986 from $3,863 for the year ended December 31, 2008. For the years ended December 31, 2009 and December 31, 2008, interest expense was related to a $100,000 line of credit which was opened January 31, 2008.
 
 Net Income (Loss).  Net loss for the year ended December 31, 2009 was ($1,045,421) an increase of $512,256 as compared to net loss of ($537,959) for the year ended December 31, 2008. The increase in is primarily from an increase in salary expenses for the year ended December 31, 2009 
 
Liquidity and Capital Resources
 
The financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business.  The Company has been funded by the CEO and majority shareholder combined with private placements of the company stock. The Company has been successful in raising money as needed.  Further it is the intention of management to continue to raise money through stock issuances and to fund the Company on an as needed basis.  In 2010 we intend to continue to work to increase our presence in the marketplace through both organic growth and acquisition of data storage service provider’s assets.
 
To the extent we are successful in growing our business, identifying potential acquisition targets and negotiating the terms of such acquisition, and the purchase price includes a cash component, we plan to use our working capital and the proceeds of any financing to finance such acquisition costs. Our opinion concerning our liquidity is based on current information. If this information proves to be inaccurate, or if circumstances change, we may not be able to meet our liquidity needs.
 
During the year ended December 31, 2009 the company’s cash decreased to $28,160.  The Company issued 842,185 shares of Common Stock for a price between $0.32 and $0.35 for an aggregate purchase price of $275,000.
 
The Company's working capital was ($169,721) at December 31, 2009, decreasing $208,530, from $38,809 at December 31, 2008. 
 
Critical Accounting Policies
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use if estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
 
Our significant accounting policies are summarized in Note 1 of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.
 

Recently Issued and Newly Adopted Accounting Pronouncements
 
Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.
 
Effective April 1, 2009, the Company adopted FASB ASC 820-10-65, Fair Value Measurements and Disclosures – Overall – Transition and Open Effective Date Information (“ASC 820-10-65”). ASC 820-10-65 provides additional guidance for estimating fair value in accordance with ASC 820-10 when the volume and level of activity for an asset or liability have significantly decreased. ASC 820-10-65 also includes guidance on identifying circumstances that indicate a transaction is not orderly. The adoption of ASC 820-10-65 did not have an impact on the Company’s consolidated results of operations or financial condition.
 
Effective April 1, 2009, the Company adopted FASB ASC 825-10-65, Financial Instruments – Overall – Transition and Open Effective Date Information (“ASC 825-10-65”). ASC 825-10-65 amends ASC 825-10 to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements and also amends ASC 270-10 to require those disclosures in all interim financial statements. The adoption of ASC 825-10-65 did not have a material impact on the Company’s results of operations or financial condition.
 
Effective July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures – Overall,  for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material impact on the Company’s results of operations or financial condition.
 
In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to FASB ASC Topic 605,  Revenue Recognition  ) (“ASU 2009-13”) and ASU 2009-14,  Certain Arrangements That Include Software Elements  , (amendments to FASB ASC Topic 985,  Software  ) (“ASU 2009-14”). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-14 removes tangible products from the scope of software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company does not expect adoption of ASU 2009-13 or ASU 2009-14 to have a material impact on the Company’s results of operations or financial condition. 
 
Off Balance Sheet Transactions
We have no off-balance sheet arrangements.
 
 


 
ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
We do not hold any derivative instruments and do not engage in any hedging activities.
 
 
ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 
 
Index to the Financial Statements
 
Page
 
       
Report of Independent Registered Public Accounting Firm
    10  
         
Consolidated Balance Sheets
    11  
         
Consolidated Statements of Operations
    12  
         
Consolidated Statements of Cash Flows
    13  
         
Consolidated Statements of Stockholders' Equity
    14  
         
Notes to Consolidated Financial Statements
    15-21  

 
   
December 31,
 
   
2009
   
2008
 
ASSETS
           
Current Assets:
           
Cash and cash equivalents
 
$
              28,160
   
$
289,061
 
Accounts receivable (less allowance for doubtful
               
accounts of $26,472 in 200 and $44,800 in 2008)
   
              30,378
     
53,367
 
Deferred compensation
   
            101,160
     
-
 
Prepaid expense
   
              21,103
     
-
 
Total Current Assets
   
            180,801
     
342,428
 
                 
Property and Equipment:
               
Property and equipment
   
         1,221,706
     
1,115,984
 
Less—Accumulated depreciation
   
          (913,383)
     
(793,110
)
Net Property and Equipment
   
            308,323
     
322,874
 
                 
Other Assets:
               
Deferred compensation
   
              28,628
     
-
 
Other assets
   
              11,760
     
13,469
 
Intangible Asset – Customer list
   
            135,931
     
175,528
 
Employee loan
   
              23,000
     
23,000
 
 Total Other Assets
   
            199,319
     
211,997
 
                 
Total Assets
   
            688,443
     
877,299
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
Current Liabilities:
               
Accounts payable
   
              82,698
     
72,037
 
Accrued expenses
   
              21,267
     
10,063
 
Credit line payable
   
              99,970
     
99,970
 
Due to related party
   
              34,718
     
18,000
 
Due to NovaStor, Inc.
   
                      -
     
58,509
 
Dividend payable
   
              75,000
     
25,000
 
Due to officer
           
7,250
 
Deferred revenue
   
              36,869
     
12,790
 
Total Current Liabilities
   
            350,522
     
303,619
 
                 
Deferred rental obligation
   
              28,642
     
-
 
Due to officer
   
            379,025
     
-
 
Total Long Term Liabilities
   
            407,667
     
-
 
  Total Liabilities
   
            758,189
     
303,619
 
Commitments and contingencies
   
 -
     
-
 
                 
Stockholders’ Equity (Deficit):
               
Preferred Stock, $.001 par value; 1,401,786
   
                1,402
     
1,402
 
issued and outstanding in 2009 and 2008
               
Common stock, par value $0.001; 250,000,000 shares authorized;
   
              13,670
     
12,473
 
13,315,399 and 12,473,214  shares issued and outstanding in 2009 and 2008 respectively
               
Additional paid in capital
   
         4,808,558
     
4,352,966
 
Accumulated deficit
   
       (4,893,376)
     
(3,793,161
)
Total Stockholders' Equity (Deficit)
   
            (69,746)
     
573,680
 
                 
Total Liabilities and Stockholders' Equity (Deficit)
 
$
            688,443
   
$
877,299
 
                 
                 
The accompanying notes are an integral part of these consolidated financial statements
               
 

 

DATA STORAGE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
 
           
 
           
             
             
   
Year Ended December 31,
 
   
2009
   
2008
 
             
Sales
  $ 585,285     $ 629,675  
                 
Cost of sales
    459,803       346,007  
                 
Gross Profit
    125,482       283,668  
                 
Selling, general and administrative
    1,170,903       823,475  
                 
Loss from Operations
    (1,045,421 )     (539,807 )
                 
Other Income (Expense)
               
  Interest income
    192       5,711  
  Interest expense
    (4,986 )     (3,863 )
  Total Other (Expense)
    (4,794 )     1,848  
                 
Loss before provision for income taxes
    (1,050,215 )     (537,959 )
                 
Provision for income taxes
    -       -  
                 
Net Loss
    (1,050,215 )     (537,959 )
                 
Preferred Stock Dividend
    (50,000 )     (25,000 )
                 
Net Loss Available to Common Stockholders
  $ (1,100,215 )   $ (562,959 )
                 
Loss per Share – Basic and Diluted
  $ (.08 )   $ (0.01 )
                 
Weighted Average Number of Shares - Basic and Diluted
    12,944,647       4,569,356  
                 
The accompanying notes are an integral part of these consolidated financial statements
               
                 
 
 

 
DATA STORAGE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

 
 
             
 
             
               
               
   
Year Ended December 31,
   
2008
   
2007
Cash Flows from Operating Activities:
             
Net loss
 
$
          (1,050,215)
   
$
           (537,959)
 Adjustments to reconcile net income to net cash used in operating activities:                       
 Depreciation and amortization         131,361             119,789
Allowance for doubtful accounts
   
               (18,058)
     
               43,800
Stock based compensation
   
                 51,902
     
               51,823
Changes in Assets and Liabilities:
             
Accounts receivable
   
                 41,047
     
             (62,282)
Employee loan
   
-
     
               (5,000)
Other assets
   
                   1,708
     
             (13,469)
Accounts payable
   
                 10,661
     
               24,229
Accrued expenses
   
                 11,204
     
                 8,278
Prepaid expenses
   
               (21,103)
     
-
Deferred revenue
   
                 24,079
     
               12,790
Deferred rent
   
                 28,642
     
-
Due to related party
   
                 16,718
     
               18,000
Net Cash Used in Operating Activities
   
             (772,054)
     
           (340,001)
               
Cash Flows from Investing Activities:
             
Cash paid for equipment
   
             (105,722)
     
             (63,868)
Cash paid for customer list
   
               (30,000)
     
           (117,019)
Net Cash Used in Investing Activities
   
             (135,722)
     
           (180,887)
               
Cash Flows from Financing Activities:
             
Advances from credit line
   
-
     
               99,970
Advances from officer
   
               371,775
     
                 7,250
Cash paid in connection with reverse merger
   
-
     
           (635,074)
Options exercised
   
                      100
     
-
Proceeds from the issuance of common stock
   
               275,000
     
          1,300,000
Net Cash Provided by Financing Activities
   
               646,875
     
             772,146
               
Increase in Cash and Cash Equivalents
   
             (260,901)
     
             251,258
               
Cash and Cash Equivalents, Beginning of Year
   
               289,061
     
               37,803
               
Cash and Cash Equivalents, End of Year
 
$
                 28,160
   
$
             289,061
               
               
Supplemental Disclosure of Cash Flow Information:
             
               
Cash paid for interest
 
$
                   4,986
   
$
                 3,863
               
Cash paid for income taxes
 
$
 -
   
$
 -
               
               
Noncash Investing and Financing Activities:
             
               
Accrual of Preferred Stock Dividend
 
$
                 50,000
   
$
               25,000
               
Due to Novastor, Inc. for purchase of customer list
 
$
                        -
   
$
               58,509
               
Conversion of officer debt for common stock
 
$
                        -
   
$
          1,836,097
 
 
 

 

 
DATA STORAGE CORPORATION AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
                                                         
                                                         
               
Additional
             
   
Preferred Stock
   
Common Stock
   
Paid-in
   
Accumulated
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
Total
 
Balance January 1, 2008
   
 -
     
-
     
28,359
     
28
     
1,813,966
     
      (3,230,202)
     
 (1,416,208)
 
                                                         
Preferred stock issued
                                                       
    in private placement
   
       51,465
     
51
     
-
     
-
     
499,949
     
                     -
     
      500,000
 
                                                         
Common stock issued
                                                       
    in private placement
   
 -
     
-
     
92,878
     
93
     
799,907
     
 -
     
      800,000
 
                                                         
Officer Debt Conversion
   
 -
     
-
     
317,690
     
318
     
1,835,779
     
 -
     
   1,836,097
 
                                                         
Effect of reverse merger
                                                       
    and recapitalization
   
  1,350,321
     
1,351
     
12,034,287
     
12,034
     
      (648,458)
     
 -
     
    (635,073)
 
                                                         
Stock based compensation
   
 -
     
-
     
-
     
-
     
51,823
     
 -
     
        51,823
 
                                                         
Net loss
   
 -
     
-
     
-
     
-
     
-
     
         (537,959)
     
    (537,959)
 
                                                         
Preferred Stock Dividend
   
 -
     
-
     
-
     
-
     
-
     
           (25,000)
     
      (25,000)
 
                                                         
                                                         
Balance December 31, 2008
   
  1,401,786
     
       1,402
     
 12,473,214
     
       12,473
     
     4,352,966
     
      (3,793,161)
     
      573,680
 
                                                         
Common stock issued
                                                       
    in private placement
   
 -
     
-
     
842,185
     
842
     
274,158
     
 -
     
      275,000
 
                                                         
                                                         
Stock based compensation
   
 -
     
-
     
-
     
350
     
181,339
     
                     -
     
      181,339
 
                                                         
Stock options exercised
                           
5
     
95
             
             100
 
                                                         
Net loss
   
 -
     
-
     
-
     
-
     
-
     
      (1,050,215)
     
 (1,050,215)
 
                                                         
Preferred Stock Dividend
   
 -
     
-
     
-
     
-
     
-
     
           (50,000)
     
      (50,000)
 
                                                         
                                                         
Balance December 31, 2009
   
  1,401,786
     
       1,402
     
 13,315,399
     
       13,670
     
     4,808,558
     
      (4,893,376)
     
      (70,096)
 

 


 

 
 DATA STORAGE CORPORATION AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
YEARS ENDED DECEMBER 31, 2009 AND 2008
 
 
 
Note 1 Basis of presentation, organization and other matters
 
On October 20, 2008, Euro Trend Inc. ("Euro Trend") acquired all of the outstanding capital stock of Data Storage Corporation (“Data Storage”). Data Storage became a wholly owned subsidiary of Euro Trend. On January 6, 2009 Euro Trend, Inc. filed with the state of Nevada changing its name to Data Storage Corporation. The business of Data Storage was the only business of Euro Trend after the acquisition.
 
Data Storage Corporation was incorporated in Delaware on August 29, 2001. Data Storage Corporation is a provider of data backup services.  The Company specializes in secure disk-to-disk data backup and restoration solutions for disaster recovery, business continuity, and regulatory compliance.
 
Data Storage Corporation derives its revenues from the sale of solutions that provide businesses protection of critical electronic data. Primarily, these services consist of email storage and compliance solutions; off site data back up; continuous data protection; data duplication; high availability replication, virtual tape libraries for disaster recovery and business continuity and equipment sales. The Company has Data Centers in Westbury, New York and maintains equipment under a strategic alliance with Broadsmart a Voip company in Fort Lauderdale, Florida to provide redundant data protection.
 
Liquidity
 
The financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. For the year ended December 31, 2009, the Company has generated revenues of $585,285 but has incurred a net loss of $1,050,215. Its ability to continue as a going concern is dependent upon achieving sales growth, reduction of operation expenses and ability of the Company to obtain the necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due, and upon profitable operations.  The Company has been funded by the CEO and majority shareholder since inception.  It is the intention of Charles Piluso to continue to fund the Company on an as needed basis.
 
Stock Based Compensation
 
The Company follows the requirements of FASB ASC 718-10-10, Share Based Payments with regard to stock-based compensation issued to employees.  The Company has various employment agreements and consulting 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 that was determined by using the most recent private placement price on the day the stock was awarded multiplied by the number of shares awarded.
 
 Recently Issued and Newly Adopted Accounting Pronouncements
 
Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.
 
Effective April 1, 2009, the Company adopted FASB ASC 820-10-65, Fair Value Measurements and Disclosures – Overall – Transition and Open Effective Date Information (“ASC 820-10-65”). ASC 820-10-65 provides additional guidance for estimating fair value in accordance with ASC 820-10 when the volume and level of activity for an asset or liability have significantly decreased. ASC 820-10-65 also includes guidance on identifying circumstances that indicate a transaction is not orderly. The adoption of ASC 820-10-65 did not have an impact on the Company’s consolidated results of operations or financial condition.
 
Effective April 1, 2009, the Company adopted FASB ASC 825-10-65, Financial Instruments – Overall – Transition and Open Effective Date Information (“ASC 825-10-65”). ASC 825-10-65 amends ASC 825-10 to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements and also amends ASC 270-10 to require those disclosures in all interim financial statements. The adoption of ASC 825-10-65 did not have a material impact on the Company’s results of operations or financial condition.
 
Effective April 1, 2009, the Company adopted FASB ASC 855-10, Subsequent Events – Overall (“ASC 855-10”). ASC 855-10 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date – that is, whether that date represents the date the financial statements were issued or were available to be issued. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. Adoption of ASC 855-10 did not have a material impact on the Company’s results of operations or financial condition.
 
Effective July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures – Overall,  for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material impact on the Company’s results of operations or financial condition.
 

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to FASB ASC Topic 605,  Revenue Recognition  ) (“ASU 2009-13”) and ASU 2009-14,  Certain Arrangements That Include Software Elements, (amendments to FASB ASC Topic 985,  Software  ) (“ASU 2009-14”). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-14 removes tangible products from the scope of software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company does not expect adoption of ASU 2009-13 or ASU 2009-14 to have a material impact on the Company’s results of operations or financial condition. 
 
 Note 2 Summary of Significant Accounting Policies
 
 Cash, cash equivalents and short-term investments
 
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.
 
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. The Company performs ongoing credit evaluations and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and other information.
 
The Company provides credit in the normal course of business.  The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts on factors surrounding the credit risk of specific customers, historical trends, and other information. 

For the years ended December 31, 2009 and 2008 the company had two customers that represented approximately 21% and 22% of sales, respectively.
 Accounts Receivable/Allowance for Doubtful Accounts
 
 The Company sells its services to customers on an open credit basis.  Accounts receivable are uncollateralized, non-interest-bearing customer obligations.  Accounts receivables are due within 30 days.  The allowance for doubtful accounts reflects the estimated accounts receivable that will not be collected due to credit losses and allowances. 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.
 
Property and Equipment
 
Property and equipment is 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 5 to 7 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. 
 
Income Taxes                                                                                                     
 
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. At December 31, 2009, the Company had a full valuation allowance against its deferred tax assets.
 
 Estimated Fair Value of Financial Instruments
 
The Company's financial instruments include cash, accounts receivable, accounts payable, line of credit and due to related parties. Management believes the estimated fair value these accounts at December 31, 2009 approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments or the use of market interest rates for debt instruments.
 

  Use of Estimates
 
 The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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.
 
 Revenue Recognition
 
The Company’s revenues consist principally of storage revenues. Storage revenues consist of monthly charges related to the storage of materials or data (generally on a per unit basis).  Sales are generally recorded in the month the service is provided.  For customers who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract.
 
 Advertising Costs
 
The Company expenses the costs associated with advertising as they are incurred.  The Company incurred $30,399 and $32,477 for advertising costs for the years ended December 31, 2009 and 2008, respectively.
 
Net Income (Loss) per Common Share
 
In accordance with FASB ASC 260-10-5 Earnings Per Share, basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) 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 inclusion of the potential common shares to be issued have an anti-dilutive effect on diluted loss per share because under the treasury stock method the average market price of the Company's common stock was less than the exercise prices of the warrants, and therefore they are not included in the calculation. Potentially dilutive securities at December 31, 2009 include 30,204 warrants and 2,929,432 options.
 
 
 
 
Note 3  Property and Equipment
 
Property and equipment, at cost, consist of the following:
 

 
 
 
December 31,
 
   
2009
   
2008
 
   
$
838,912
   
$
766,646
 
Website and software
   
166,933
     
150,208
 
Furniture and fixtures
   
22,837
     
22,837
 
Computer hardware and software
   
81794
     
75,498
 
Data Center
   
111,230
     
100,795
 
     
1,221,706
     
1,115,984
 
Less: Accumulated depreciation
   
913,383
     
793,110
 
Net property and equipment
 
$
308,323
   
$
322,874
 
 

 


 
Depreciation expense for the years ended December 31, 2009 and 2008 was $131,361 and $119,789, respectively.
 
Note 4 Intangible Asset – Customer list
 
Costs incurred in connection with obtaining customer lists have been capitalized and are being amortized using the straight line method over a fifteen year life.  The Company’s intangible assets consisted of the following at December 31, 2009 and 2008:
 
   
2009
   
2008
 
Customer lists
 
$
257,098
   
$
285,607
 
Accumulated amortization
   
(121,167
)
   
(110,079
)
Net Cost
 
$
135,931
   
$
175,528
 
 
 
On September 4, 2009 an agreement was entered into whereby both parties to the NovaStor asset acquisition agreed to reduce the purchase price based upon the results of subsequent customer revenue.  The final purchase price was reduced by $28,509.
 
Amortization expense for the year ended December 31, 2009 and 2008 were $14,186 and $443 respectively
 


 

 
 Amortization of the intangible assets for the next five years are as follows:
 
 Years Ending December 31,
 
Amount
 
2009
  $ 9,859  
2010
  $ 9,859  
2011
  $ 9,859  
2012
  $ 9,859  
2013
  $ 9,859  
 
Note 5 Commitments and Contingencies
 
 Revolving Credit Facility