Note 1 - Basis of Presentation, Organization and Other Matters

Data Storage Corporation ("DSC" or the "Company") provides subscription based, long term agreements for disaster recovery solutions, Infrastructure as a Service (IaaS) and VoIP type solutions. Over 35% of our revenue is derived from equipment sales for cyber security, storage, IBM Power i systems and managed service solutions.

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, New Jersey, Massachusetts and North Carolina.

Going Concern Analysis

The Company had a net income (loss) available to shareholders of $146,781 and ($298,620) for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, we had cash of $228,790 and a working capital deficiency of $2,202,231.

As a result, these conditions raised substantial doubt regarding our ability to continue as a going concern. During the year ended December 31, 2018, the Company generated cash from operations of $541,305.

The continued revenue growth coupled with improved gross profit margins on our subscription solutions and control of expenses leads management to conclude that it is probable that the Company’s cash resources along with over 8 million dollars in remaining contract value for monthly subscription solutions will be sufficient to meet our cash requirements for twelve months from the issuance of the consolidated financial statements. Additionally, the year over year trend in EBITDA continues to improve at over 900 thousand dollars for 2018.

Further the company has no capital commitments. The company’s offices have been consolidated and fully staffed and with sufficient room for growth. Our data center equipment and cages have inventory for revenue growth for selected solutions without an increase in technical support or capex, so decided by management. We continue to drive down our cost of goods sold through data center efficiencies, including the 2018 data center consolidation and the renegotiation of vendor agreements.

Additionally, the company’s current liabilities represent accrued dividends, not payable at this point in time. The company’s equipment leases, representing assets in our data centers cages, represents twelve monthly payments, when in fact over 95% of the company client’s accounts receivable pay in under sixty days; the $350,000 in a bank loan for Message Logic software is structured in favor of the company and the ability to return the software and remove the debt without any material impact or legal consequence; and, deferred revenue represents the contracts we invoice in advance, represented by invoicing over 70% of our clients thirty days in advance.

If necessary, management also determined that it is possible that related party sources of debt financing and capitalized leases can be renegotiated based on management’s history of being able to raise and refinance debt through related parties.

As a result of both managements plans and current favorable trends in improving cash flow, the Company concluded that the initial conditions which raised substantial doubt regarding the ability to continue as a going concern have been alleviated. Therefore, the accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As always, any company can and does have client churn, however since 2001 the company has maintained an excellent contract renewal rate and low client churn, which we anticipate will continue.