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MarketScreener Homepage  >  Equities  >  OTC Bulletin Board - Other OTC  >  Data Storage Corporation    DTST

DATA STORAGE CORPORATION

(DTST)
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DATA STORAGE : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (form 10-Q)

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05/20/2020 | 03:02pm EDT
This Quarterly Report on Form 10-Q contains forward looking statements,
including without limitation, statements related to our plans, strategies,
objectives, expectations, intentions and adequacy of resources. Investors are
cautioned that such forward-looking statements involve risks and uncertainties
including without limitation the following: (i) our plans, strategies,
objectives, expectations and intentions are subject to change at any time at our
discretion? (ii) our plans and results of operations will be affected by our
ability to manage growth? and (iii) other risks and uncertainties indicated from
time to time in our filings with the Securities and Exchange Commission.



In some cases, you can identify forward-looking statements by terminology such
as 'may,' 'will,' 'should,' 'could,' 'expects,' 'plans,' 'intends,'
'anticipates,' 'believes,' 'estimates,' 'predicts,'
'potential,' or 'continue' or the negative of such terms or other comparable
terminology. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, or achievements. Moreover, neither we nor any
other person assumes responsibility for the accuracy and completeness of such
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. We are under
no duty to update any of the forward-looking statements after the date of this
report.



COMPANY OVERVIEW



Data Storage Corporation ("DSC" or the "Company") provides subscription based,
long term agreements for disaster recovery solutions, Infrastructure as a
Service (IaaS) and VoIP and carrier type solutions. Approximately 16% of our
revenue is derived from equipment sales for cyber security, storage, IBM Power i
systems and managed service solutions.



Our mission is to protect our client's data, ensuring business continuity,
assisting in their compliance requirements and providing better control over
their digital information. The Company's October 2016 acquisition of the assets
of ABC Services, Inc. and ABC Services II, Inc. (collectively, "ABC"), and its
acquisition of the remaining 50% of the assets of Secure Infrastructure and
Services LLC, supports the Company's acquisition strategy. These acquisitions
accelerated our strategy into cloud based managed services, expanded cyber
security solutions and our hybrid cloud solutions with the ability to provide
equipment and expanded technical support.



The Company provides its solutions through its business development team and
contracted distribution channels. DSC's contracted, approved distributors have
the ability to provide Recovery and Hybrid Cloud solutions, IBM and Intel IaaS
cloud-based solutions without the distributor investing in infrastructure, data
centers and telecommunications services as well as specialized technical staff
whereby lowering their barrier of entry for them to provide these solutions
to
their client base.



DSC is a 19-year veteran in cloud storage and cloud computing providing disaster
recovery, business continuity and compliance solutions that assist organizations
in protecting their data, minimizing downtime while ensuring regulatory
compliance. Serving the business continuity market, DSC's clients save time and
money, gain more control and better access to data and enable a high level of
security for their data. Solutions include: Infrastructure as a Service
specializing in IBM Power; data backup recovery and restore, high availability
data replication; email archival and compliance; and eDiscovery; continuous data
protection; data de- duplication; and, virtualized system recovery. DSC has
forged significant relationships with leading organizations creating valuable
partnerships.



Our IBM Power and Intel IaaS Cloud ensures enterprise level equipment and
support, focusing on iSeries, AIX, Power, AS400 and our high-processing power
for Intel. Our Disaster Recovery services for both Intel and IBM has a
guaranteed back-to-work window. DSC is a one-stop source for managed services
from VoIP to providing the client with equipment and software, monitoring, help
desk and a full array of business continuity solutions.



The Company provides its solutions through its business development team and
contracted distribution channels. DSC's contracted approved distributors have
the ability to provide our Recovery and IaaS solutions without capital
investment thereby lowering their barrier of entry in providing these cloud
solutions to their client base.



Headquartered in Melville, NY, with additional offices in Warwick, RI, DSC offers 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, software and maintenance, equipment and onboarding provisioning. DSC
maintains infrastructure and storage equipment in several technical centers in
New York, Massachusetts and North Carolina.



DSC services clients from its staffed technical offices in New York and Rhode
Island, which consist of modern offices and a technology suite adapted to meet
the needs of a technology-based business.



DSC varies its use of resources, technology and work processes to meet the
changing opportunities and challenges presented by the market and the internal
customer requirements. The Company supports clients twenty-four hours a day, 365
days a year.



  16






RESULTS OF OPERATIONS

Three months ended March 31, 2020 as compared to March 31, 2019




Total Revenue For the three months ended March 31, 2020 increase by $97,429. The
increase is primarily attributed to three existing customers which increased
their services for Infrastructure & Disaster Recovery/Cloud Service.
Additionally, the Nexxis division increased its customer base which generated
additional revenue. This was offset by a decrease in equipment and software
for
the quarter.



Revenue                                      For the Three Months
                                                Ended March 31,
                                             2020             2019          $ Change        % Change
Infrastructure & Disaster
Recovery/Cloud Service                  $  1,393,720     $  1,267,047     $  126,673              10 %
Equipment and Software                       328,733          428,511        (99,778 )           (23 )%
Managed Services                             220,475          213,925          6,550               3 %
Nexxis VoIP Services                         153,197           90,703         62,494              69 %
Other                                          2,585            1,095          1,490             136 %
Total Revenue                           $  2,098,710     $  2,001,281     $   97,429               5 %



Cost of Sales. For the three months ended March 31, 2020, cost of sales was
$1,216,117, an increase of $139,574 or 13% compared to $1,076,543 for the three
months ended March 31, 2019. The increase is primarily attributable to expenses
associated with the data centers for infrastructure and disaster recovery cloud
services.



Operating Expenses. For the three months ended March 31, 2020, operating
expenses were $876,626, an increase of $53,758, or 7%, as compared to $822,868
for the three months ended March 31, 2019. The net increase is reflected in
the
chart below.



Operating Expenses                       For the Three Months
                                            Ended March 31,
                                          2020            2019          $ Change        % Change
Increase in Salaries                 $    442,732     $  366,071     $    76,661              21 %
Decrease in Professional Fees              46,342         76,117         (29,775 )           (39 )%
Increase in Software as a Service
Expense                                    34,768          1,995          32,773           1,643 %
Increase in Advertising Expenses           65,380         33,963          31,417              93 %
Decrease in Commissions Expense           185,868        186,971          (1,103 )            (1 )%
Decrease in T&E                             9,784         24,265         (14,481 )           (60 )%
Decrease in all other Expenses             91,752        133,486          (41,74 )           (31 )%
Total Expenses                       $    876,626     $  822,868     $    53,758               7 %



Salaries increased by $76,661 due to increases in administrative and finance
salaries with an addition of two full-time employees. The company also awarded a
stock based compensation of options valued at $33,050 to a current employee

Software as a Service Expense (SaaS) increased by $32,773. This is attributed to the expanding data gathering so management can make more informed decisions.

Advertising Expensesincreased primarily due to additional marketing campaigns for both Data Storage Corporation and their subsidiary Nexxis.

Professional feesdecreased primarily due to the company hiring a consultant as an employee and relying less on consultants for accounting services.


All Other Expenses decreased primarily due to the reduction of training expenses
in the amount of approximately $12,700, rent expense in the amount of
approximately $7,400 due to the company downsizing in office space, bad debt
recovery of about approximately $10,000 and office supplies in the amount of
approximately $4,700.



Other Income (Expense). Interest income (expense) for the three months ended
March 31, 2020 increased $2,892 to $46,440 from $49,332 for the three months
ended March 31, 2019.


Net Income (Loss). Net loss for the three months ended March 31, 2020 was $40,473, as compared to a net income of $52,538 for the three months ended March 31, 2019.



  17





LIQUIDITY AND CAPITAL RESOURCES




The consolidated financial statements have been prepared using generally
accepted accounting principles in the United States of America ("GAAP")
applicable for a going concern, which assumes that DSC will realize its assets
and discharge its liabilities in the ordinary course of business. In 2020, we
intend to continue to work to increase our presence in the cloud and business
continuity marketplace specializing in IBM Power i and disaster recovery /
business continuity marketplace utilizing our technical expertise, software and
our capacity in our data centers.



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, which will require a renegotiation of related party capital
equipment leases and / or major shareholders, such as senior management,
entering into financing or stock purchase arrangements.



During the three months ended March 31, 2020, DSC's cash increased $1,621 to
$328,182 from $326,561 March 31, 2019. Net cash of $ 297,720 was provided by
DSC's operating activities resulting primarily from the changes in assets and
liabilities. Net cash of $56,812 was used in investing activities resulting from
payments on capital expenditures. Net cash of $239,287 was used in financing
activities resulting primarily from payments on capital lease obligations.



DSC's working capital deficit was $2,763,533 at March 31, 2020, increasing by
$191,950 from $2,571,583 at December 31, 2019. The increase is primarily
attributable to an increase of accounts payable, dividend payable and, related
party financing notes in the amount of $329,078. The increase in short term
liabilities was offset by an increase in accounts receivable and prepaid
expenses of $175,178.



Off-Balance Sheet Arrangements

DSC does not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities".

18

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2019 8,48 M - -
Net income 2019 0,07 M - -
Net Debt 2019 2,98 M - -
P/E ratio 2019 -290x
Yield 2019 -
Capitalization 14,5 M 14,5 M -
EV / Sales 2018 2,23x
EV / Sales 2019 2,21x
Nbr of Employees 12
Free-Float 9,21%
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Income Statement Evolution
Managers
NameTitle
Charles M. Piluso Chairman, Chief Executive & Financial Officer, CAO
Harold J. Schwartz President, Treasurer & Director
Chuck Paolillo Chief Technology Officer
Lawrence A. Maglione Director
John Argen Independent Director
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