NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2023
(Unaudited)
Note 1 – Basis
of Presentation, Organization and Other Matters
Data
Storage Corporation (“DSC” or the “Company”) headquartered in Melville, NY, DSC provides solutions and
services to businesses within the healthcare, banking and finance, distribution services, manufacturing, construction, education,
and government industries. DSC derives its revenues from subscription services and solutions, managed services, equipment, software
and maintenance, and onboarding implementation. DSC maintains infrastructure and storage equipment in seven technical centers in New
York, Massachusetts, Texas, Florida, North Carolina and Canada.
On May 31, 2021,
the Company completed an acquisition of Flagship Solutions, LLC (“Flagship”) (a Florida limited liability company) and the
Company’s wholly-owned subsidiary, Data Storage FL, LLC. Flagship is a provider of Hybrid Cloud solutions, managed services and
cloud solutions.
On January
27, 2022, we formed Information Technology Acquisition Corporation a special purpose acquisition company for the purpose
of entering into a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or other
similar business combination with one or more businesses or entities.
In the opinion of management, the accompanying unaudited
condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the Company’s financial statements for interim periods in accordance with accounting principles generally accepted
in the United States (“U.S. GAAP”). The information included in this quarterly report on Form 10-Q should be read in conjunction
with the audited consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2022 (“2022 Form 10-K”). The Company’s accounting policies are described in the “Notes
to Consolidated Financial Statements” in the 2022 Form 10-K and are updated, as necessary, in this Form 10-Q. The December 31,
2022 condensed consolidated balance sheet data presented for comparative purposes was derived from the audited financial statements but
does not include all disclosures required by U.S. GAAP. The results of operations for the three months ended March 31, 2023, are not
necessarily indicative of the operating results for the full year or for any other subsequent interim period.
Note 2 – Summary
of Significant Accounting Policies
Principles
of Consolidation
The Consolidated
Financial statements include the accounts of the Company and its wholly-owned subsidiaries, (i) CloudFirst Technologies Corporation,
a Delaware corporation, (ii) Data Storage FL, LLC, a Florida limited liability company, (iii) Flagship Solutions, LLC, a Florida
limited liability company, (iv) Information Technology Acquisition Corporation, a Delaware Corporation, and (v) its majority-owned
subsidiary, Nexxis Inc, a Nevada corporation. All inter-company transactions and balances have been eliminated in consolidation.
Use
of Estimates
The preparation
of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
Estimated Fair Value of
Financial Instruments
The fair value
measurement disclosures are grouped into three levels based on valuation factors:
● Level
1 – quoted prices in active markets for identical investments
● Level
2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs)
● Level
3 – significant unobservable inputs (including our own assumptions in determining the fair value of investments)
The Company’s
Level 1 assets/liabilities include cash, accounts receivable, marketable securities, accounts payable, prepaid, and other current assets.
Management believes the estimated fair value of these accounts at March 31, 2023 approximate their carrying value as reflected in the
balance sheets due to the short-term nature of these instruments.
The Company’s
Level 2 assets/liabilities include certain of the Company’s operating lease right-of-use assets. Their carrying value approximates
their fair values based upon a comparison of the interest rate and terms of such debt given the level of risk to the rates and terms of
similar debt currently available to the Company in the marketplace.
The Company’s
Level 3 assets/liabilities include goodwill and intangible assets. Inputs to determine fair value are generally unobservable and typically
reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values
are therefore determined using model-based techniques, including discounted cash flow models. Unobservable inputs used in the models are
significant to the fair values of the assets and liabilities.
Our marketable
equity securities are publicly traded stocks measured at fair value using quoted prices for identical assets in active markets and classified
as Level 1 within the fair value hierarchy. Marketable equity securities as of March 31, 2023 and December 31, 2022 are $9,114,391 and
$9,010,968 respectively.
Assets
and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain
assets and liabilities are measured at fair value on a nonrecurring basis. Assets and liabilities recognized or disclosed at fair
value on the consolidated financial statements on a nonrecurring basis include items such as property, plant and equipment, operating
lease right-of-use assets, goodwill and other intangible assets. These assets are measured using Level 3 inputs, if determined
to be impaired.
Cash and Cash Equivalents
The Company
considers all highly liquid investments with an original maturity or remaining maturity at the time of purchase, of three months
or less to be cash equivalents.
Investments
The Company invests in equity securities and reports
them in accordance with ASU 2016-01. Equity securities are reported at fair value with unrealized gains and losses, net of the related
tax effect, reflected as a gain or loss on the statement of operations. Dividends and interest are recognized when earned.
The following
table sets forth a summary of the changes in equity investments, at cost that are measured at fair value on a non-recurring basis:
|
|
|
|
|
|
|
For
the three months ended March 31, 2023 |
|
|
Total |
As
of January 1, 2023 |
|
$ |
9,010,968 |
|
Purchase
of equity investments |
|
|
103,423 |
|
As
of March 31, 2023 |
|
$ |
9,114,391 |
|
Concentration of Credit
Risk and Other Risks and Uncertainties
Financial
instruments and assets subjecting the Company to concentration of credit risk consist primarily of cash and cash equivalents, short-term
investments and trade accounts receivable. The Company’s cash and cash equivalents are maintained at major U.S. financial
institutions. Deposits in these institutions may exceed the amount of insurance provided on such deposits.
The Company’s customers
are primarily concentrated in the United States.
As of
March 31, 2023, DSC had one customer with an accounts receivable balance representing 61% of total accounts receivable. As
of December 31, 2022, the Company had two customers with an accounts receivable balance representing 23% and 14% of total accounts
receivable.
For the
three months ended March 31, 2023, the Company had one customer that accounted for 33% of revenue. For the
three months ended March 31, 2022, the Company had two customers that accounted for 55% of revenue.
Accounts Receivable/Allowance
for Credit Losses
The Company
sells its services to customers on an open credit basis. Accounts receivables are uncollateralized, non-interest-bearing customer
obligations. Accounts receivables are typically due within 30 days. The allowance for credit losses reflects the estimated
accounts receivable that will not be collected due to credit losses. Provisions for estimated uncollectible accounts receivable
are made for individual accounts based upon specific facts and circumstances including criteria such as their age, amount, and
customer standing. Provisions are also made for other accounts receivable not specifically reviewed based upon historical experience.
Property
and Equipment
Property
and equipment are recorded at cost and depreciated over their estimated useful lives or the term of the lease using the straight-line
method for financial statement purposes. Estimated useful lives in years for depreciation are five to seven years for
property and equipment. Additions, betterments and replacements are capitalized, while expenditures for repairs and maintenance
are charged to operations when incurred. As units of property are sold or retired, the related cost and accumulated depreciation
are removed from the accounts, and any resulting gain or loss is recognized in income.
Goodwill
and Other Intangibles
The Company
tests goodwill and other intangible assets for impairment on at least an annual basis. Impairment exists if the carrying value
of a reporting unit exceeds its estimated fair value. To determine the fair value of goodwill and intangible assets, the Company
uses many assumptions and estimates using a market participant approach that directly impact the results of the testing. In making
these assumptions and estimates, the Company uses industry accepted valuation models and set criteria that are reviewed and approved
by various levels of management.
The Company
tests goodwill for impairment on an annual basis on December 31, or more frequently if events occur or circumstances change indicating
that the fair value of the goodwill may be below its carrying amount. The Company has four reporting units. The Company uses an
income-based approach to determine the fair value of the reporting units. This approach uses a discounted cash flow methodology
and the ability of our reporting units to generate cash flows as measures of fair value of our reporting units.
Revenue Recognition
Nature
of goods and services
The following
is a description of the products and services from which the Company generates revenue, as well as the nature, timing of satisfaction
of performance obligations, and significant payment terms for each:
|
1) |
Cloud Infrastructure and Disaster Recovery Revenue |
Cloud
Infrastructure provides clients the ability to migrate their on-premises computing and digital storage to DSC’s enterprise-level
technical compute and digital storage assets located in Tier 3 data centers. Data Storage Corporation owns the assets and provides
a turnkey solution whereby achieving reliable and cost-effective, multi-tenant IBM Power compute, x86/intel, flash digital storage,
while providing disaster recovery and cyber security while eliminating client capital expenditures. The client pays a monthly fee
and can increase capacity as required.
Clients
can subscribe to an array of disaster recovery solutions without subscribing to cloud infrastructure. Product offerings provided
directly from DSC are High Availability, Data Vaulting and retention solutions, including standby servers which allows clients
to centralize and streamline their mission-critical digital information and technical environment while ensuring business continuity
if they experience a cyber-attack or natural disaster Client’s data is vaulted, at two data centers with the maintenance
of retention schedules for corporate governances and regulations all to meet their back to work objective in a disaster.
These
services are performed at the inception of a contract. The Company provides professional assistance to its clients during the implementation
processes. On-boarding and set-up services ensure that the solution or software is installed properly and function as designed
to provide clients with the best solutions. In addition, clients that are managed service clients have a requirement for DSC to
offer time and material billing supplementing the client’s staff.
The Company
also derives both one-time and subscription-based revenue, from providing support, management and renewal of software, hardware,
third party maintenance contracts and third-party cloud services to clients. The managed services include help desk, remote access,
operating system and software patch management, annual recovery tests and manufacturer support for equipment and on-gong monitoring
of client system performance.
|
3) |
Equipment and Software |
The Company
provides equipment and software and actively participates in collaboration with IBM to provide innovative business solutions to clients.
The Company is a partner of IBM and the various software, infrastructure and hybrid cloud solutions provided to clients.
|
4) |
Nexxis Voice over Internet and Direct Internet Access |
The Company
provides VoIP, Internet access and data transport services to ensure businesses are fully connected to the internet from any location,
remote and on premise. The company provides Hosted VoIP solutions with equipment options for IP phones and internet speeds of up
to 10Gb delivered over fiber optics.
Disaggregation
of revenue
In the
following table, revenue is disaggregated by major product line, geography, and timing of revenue recognition.
Schedule of revenue is disaggregated by major product |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
Ended March 31, 2023 |
|
|
United
States |
|
International |
|
Total |
Infrastructure &
Disaster Recovery/Cloud Service |
|
$ |
2,137,317 |
|
|
$ |
52,324 |
|
|
$ |
2,189,641 |
|
Equipment and Software |
|
|
3,522,559 |
|
|
|
— |
|
|
|
3,522,559 |
|
Managed Services |
|
|
858,660 |
|
|
|
35,107 |
|
|
|
893,767 |
|
Nexxis VoIP Services |
|
|
231,772 |
|
|
|
— |
|
|
|
231,772 |
|
Other |
|
|
41,984 |
|
|
|
— |
|
|
|
41,984 |
|
Total Revenue |
|
$ |
6,792,292 |
|
|
$ |
87,431 |
|
|
$ |
6,879,723 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
Ended March 31, 2022 |
| |
United
States | |
International | |
Total |
Infrastructure
& Disaster Recovery/Cloud Service | |
$ | 1,888,387 | | |
$ | 37,463 | | |
$ | 1,925,850 | |
Equipment
and Software | |
| 5,319,459 | | |
| — | | |
| 5,319,459 | |
Managed
Services | |
| 1,149,503 | | |
| 33,307 | | |
| 1,182,810 | |
Nexxis
VoIP Services | |
| 194,934 | | |
| — | | |
| 194,934 | |
Other | |
| 34,146 | | |
| — | | |
| 34,146 | |
Total
Revenue | |
$ | 8,586,429 | | |
$ | 70,770 | | |
$ | 8,657,199 | |
For
the Three Months |
Ended
March 31, |
Timing
of revenue recognition | |
2023 | |
2022 |
Products transferred
at a point in time | |
$ | 3,564,543 | | |
$ | 5,402,996 | |
Products and services transferred
over time | |
| 3,315,180 | | |
| 3,254,203 | |
Total
Revenue | |
$ | 6,879,723 | | |
$ | 8,657,199 | |
Contract
receivables are recorded at the invoiced amount and are uncollateralized, non-interest-bearing client obligations. Provisions for
estimated uncollectible accounts receivable are made for individual accounts based upon specific facts and circumstances including
criteria such as their age, amount, and client standing.
Sales
are generally recorded in the month the service is provided. For clients who are billed on an annual basis, deferred revenue is
recorded and amortized over the life of the contract.
Transaction
price allocated to the remaining performance obligations
The Company
has the following performance obligations:
1) |
Data Vaulting: Subscription-based
cloud service that encrypts and transfers data to a secure Tier 3 data center and further replicates the data to a second
Tier 3 DSC technical center where it remains encrypted. Ensuring client retention schedules for corporate compliance and disaster
recovery. Provides for twenty-four (24) hour or less recovery time and utilizes advanced data reduction, reduplication technology
to shorten back-up and restore time. |
2) |
High Availability:
A managed cloud subscription-based service that provides cost-effective mirroring software replication technology and provides
one (1) hour or less recovery time for a client to be back in business. |
|
|
3) |
Cloud
Infrastructure: Subscription-based cloud service provides for “capacity on-demand”
for IBM Power and X86 Intel server systems. |
|
|
4) |
Internet: Subscription-based
service, offering continuous internet connection combined with FailSAFE which provides disaster recovery for both a clients’
voice and data environments. |
|
|
5) |
Support and Maintenance: Subscription
based service offers support for clients on their servers, firewalls, desktops or software. Services are provided 24x7x365
to our clients. |
|
|
6) |
Implementation / Set-Up Fees:
Onboarding and set-up for cloud infrastructure and disaster recovery as well as Cyber Security. |
|
|
7) |
Equipment sales: Sale of servers
and data storage equipment to the client. |
|
|
9) |
License: Granting SSL certificates
and licenses. |
Disaster
Recovery and Business Continuity Solutions
Subscription
services allow clients to access data or receive services for a predetermined period of time. As the client obtains access at a
point in time and continues to have access for the remainder of the subscription period, the client is considered to simultaneously
receive and consume the benefits provided by the entity’s performance as the entity performs. Accordingly, the related performance
obligation is considered to be satisfied ratably over the contract term. As the performance obligation is satisfied evenly across
the term of the contract, revenue is recognized on a straight-line basis over the contract term.
Initial
Set-Up Fees
The Company
accounts for set-up fees as a separate performance obligation. Set-up services are performed one-time and accordingly the revenue
is recognized at the point in time, and is non-refundable, and the Company is entitled to the payment.
Equipment
Sales
The obligation
for the equipment sales is such the control of the product transfer is at a point in time (i.e., when the goods have been shipped
or delivered to the client’s location, depending on shipping terms). Noting that the satisfaction of the performance obligation,
in this sense, does not occur over time, the performance obligation is considered to be satisfied at a point in time when the obligation
to the client has been fulfilled (i.e., when the goods have left the shipping facility or delivered to the client, depending on
shipping terms).
License
- granting SSL certificates and other licenses
Performance
obligations as it relates to licensing means that the control of the product transfers, either at a point in time or over time, depending
on the nature of the license. The revenue standard identifies two types of licenses of IP: (i) a right to access IP; and (ii) a right
to use IP. To assist in determining whether a license provides a right to use or a right to access IP, ASC 606 defines two categories
of IP: Functional and Symbolic. The Company’s license arrangements typically do not require the Company to make its proprietary
content available to the client either through a download or through a direct connection. Throughout the life of the contract the Company
does not continue to provide updates or upgrades to the license granted. Based on the guidance, the Company considers its license offerings
to be akin to functional IP and recognizes revenue at the point in time the license is granted and/or renewed for a new period.
Payment
Terms
The typical
terms of subscription contracts range from 12 to 36 months, with auto-renew options extending the contract for an additional term.
The Company invoices clients one month in advance for its services, in addition to any contractual data overages or for additional
services.
Warranties
The Company
offers guaranteed service levels and service guarantees on some of its contracts. These warranties are not sold separately and
are accounted as “assurance warranties”.
Significant
Judgement
In the
instance where contracts have multiple performance obligations the Company uses judgment to establish a stand-alone price for each
performance obligation. The price for each performance obligation is determined by reviewing market data for similar services as
well as the Company’s historical pricing of each individual service. The sum of each performance obligation is calculated
to determine the aggregate price for the individual services. The proportion of each individual service to the aggregate price
is determined. The ratio is applied to the total contract price in order to allocate the transaction price to each performance
obligation.
Impairment of Long-Lived
Assets
The Company
reviews its long-lived assets for impairment whenever events and circumstances indicate that the carrying value of an asset might
not be recoverable. An impairment loss, measured as the amount by which the carrying value exceeds the fair value is recognized
if the carrying amount exceeds estimated un-discounted future cash flows.
Advertising Costs
The Company
expenses the costs associated with advertising as they are incurred. The Company incurred $189,878 and $89,731 for advertising
costs for the three months ended March 31, 2023, and 2022, respectively.
Stock-Based Compensation
The Company
follows the requirements of FASB ASC 718-10-10, Share-Based Payments with regards to stock-based compensation
issued to employees and non-employees. The Company has agreements and arrangements that call for stock to be awarded to the employees
and consultants at various times as compensation and periodic bonuses. The expense for this stock-based compensation is equal to
the fair value of the stock price on the day the stock was awarded multiplied by the number of shares awarded. The Company
has a relatively low forfeiture rate of stock-based compensation and forfeitures are recognized as they occur.
The valuation
methodology used to determine the fair value of the options issued during the period is the Black-Scholes option-pricing model.
The Black-Scholes model requires the use of a number of assumptions including the volatility of the stock price, the average risk-free
interest rate, and the weighted average expected life of the options. Risk-free interest rates are calculated based on continuously
compounded risk-free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or
declared any cash dividends on its Common Stock and does not intend to pay dividends on its Common Stock in the foreseeable future.
The expected forfeiture rate is estimated based on management’s best assessment.
Estimated
volatility is a measure of the amount by which DSC’s stock price is expected to fluctuate each year during the expected life
of the award. The Company’s calculation of estimated volatility is based on historical stock prices over a period equal to
the expected life of the awards.
Net
Income Per Common Share
Basic income per share is computed by dividing net
income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed
by dividing net income adjusted for income or loss that would result from the assumed conversion of potential common shares from contracts
that may be settled in stock or cash by the weighted average number of shares of common stock, common stock equivalents and potentially
dilutive securities outstanding during each period.
The following
table sets forth the information needed to compute basic and diluted earnings per share for the three months ended March 31, 2023,
and 2022:
Schedule of Earning per share basic and diluted |
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31, |
|
|
2023 |
|
2022 |
|
|
|
|
|
Net Income Available to Common
Shareholders |
|
$ |
50,666 |
|
|
$ |
156,010 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares - basic |
|
|
6,822,127 |
|
|
|
6,695,966 |
|
Dilutive securities |
|
|
|
|
|
|
|
|
Options |
|
|
130,526 |
|
|
|
256,601 |
|
Warrants |
|
|
1,667 |
|
|
|
3,333 |
|
Weighted average number of common shares - diluted |
|
|
6,954,320 |
|
|
|
6,955,900 |
|
|
|
|
|
|
|
|
|
|
Earnings per share, basic |
|
$ |
0.01 |
|
|
$ |
0.02 |
|
Earnings per share, diluted |
|
$ |
0.01 |
|
|
$ |
0.02 |
|
The following table sets forth the number of potential
shares of common stock that have been excluded from diluted net income per share net income per share because their effect was anti-dilutive:
Schedule of anti-dilutive income (loss) per share | | |
| | | |
| | |
| |
Three Months ended March 31, |
| |
2023 | |
2022 |
Options | | |
| 385,257 | | |
| 37,641 | |
Warrants | | |
| 2,415,860 | | |
| 1,384,610 | |
| | |
| 2,801,117 | | |
| 1,422,251 | |
Note 3 - Prepaids
and other current assets
Prepaids and other current
assets consist of the following:
Schedule of Prepaids and other current assets |
|
|
|
|
|
|
|
|
|
|
March
31, |
|
December
31, |
|
|
2023 |
|
2022 |
Prepaid
Marketing & Promotion |
|
$ |
25,273 |
|
|
$ |
4,465 |
|
Prepaid
Subscriptions and Licenses |
|
|
664,596 |
|
|
|
439,088 |
|
Prepaid
Maintenance |
|
|
27,305 |
|
|
|
45,216 |
|
Prepaid
Insurance |
|
|
89,256 |
|
|
|
54,564 |
|
Other |
|
|
72,030 |
|
|
|
41,333 |
|
Total prepaid and other current assets |
|
$ |
878,460 |
|
|
$ |
584,666 |
|
Note 4- Property and
Equipment
Property and equipment, at
cost, consist of the following:
|
|
March
31, |
|
December
31, |
|
|
2023 |
|
2022 |
Storage equipment |
|
$ |
60,288 |
|
|
$ |
60,288 |
|
Furniture and fixtures |
|
|
20,860 |
|
|
|
20,860 |
|
Leasehold improvements |
|
|
20,983 |
|
|
|
20,983 |
|
Computer hardware and software |
|
|
100,426 |
|
|
|
93,062 |
|
Data center equipment |
|
|
7,394,905 |
|
|
|
6,973,295 |
|
Gross Property
and equipment |
|
|
7,597,462 |
|
|
|
7,168,488 |
|
Less: Accumulated depreciation |
|
|
(5,177,980 |
) |
|
|
(4,956,698 |
) |
Net property and equipment |
|
$ |
2,419,482 |
|
|
$ |
2,211,790 |
|
Depreciation
expense for the three months ended March 31, 2023, and 2022 was $218,979 and $281,608, respectively.
Note 5 - Goodwill
and Intangible Assets
Goodwill and intangible assets
consisted of the following:
Schedule of intangible assets and goodwill |
|
|
|
|
|
|
|
|
|
|
Estimated
life in years |
|
Gross
amount |
|
December
31, 2022, Accumulated Amortization |
|
Net |
Intangible
assets not subject to amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
Indefinite |
|
|
$ |
4,238,671 |
|
|
$ |
— |
|
|
$ |
4,238,671 |
|
Trademarks |
|
|
Indefinite |
|
|
|
514,268 |
|
|
|
— |
|
|
|
514,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
intangible assets not subject to amortization |
|
|
|
|
|
|
4,752,939 |
|
|
|
— |
|
|
|
4,752,939 |
|
Intangible
assets subject to amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
lists |
|
|
7 |
|
|
|
2,614,099 |
|
|
|
1,167,075 |
|
|
|
1,447,024 |
|
ABC
acquired contracts |
|
|
5 |
|
|
|
310,000 |
|
|
|
310,000 |
|
|
|
— |
|
SIAS
acquired contracts |
|
|
5 |
|
|
|
660,000 |
|
|
|
660,000 |
|
|
|
— |
|
Non-compete
agreements |
|
|
4 |
|
|
|
272,147 |
|
|
|
272,147 |
|
|
|
— |
|
Website
and Digital Assets |
|
|
3 |
|
|
|
33,002 |
|
|
|
18,650 |
|
|
|
14,352 |
|
Total
intangible assets subject to amortization |
|
|
|
|
|
|
3,889,248 |
|
|
|
2,427,872 |
|
|
|
1,461,376 |
|
Total
Goodwill and Intangible Assets |
|
|
|
|
|
$ |
8,642,187 |
|
|
$ |
2,427,872 |
|
|
$ |
6,214,315 |
|
| |
| | | |
| | | |
| | | |
| | |
| |
Estimated
life in years | |
Gross
amount | |
March
31, 2023, Accumulated Amortization | |
Net |
Intangible
assets not subject to amortization | |
| | | |
| | | |
| | | |
| | |
Goodwill | |
| Indefinite | | |
$ | 4,238,671 | | |
$ | — | | |
$ | 4,238,671 | |
Trademarks | |
| Indefinite | | |
| 514,268 | | |
| — | | |
| 514,268 | |
| |
| | | |
| | | |
| | | |
| | |
Total
intangible assets not subject to amortization | |
| | | |
| 4,752,939 | | |
| — | | |
| 4,752,939 | |
Intangible
assets subject to amortization | |
| | | |
| | | |
| | | |
| | |
Customer
lists | |
| 7 | | |
| 2,614,099 | | |
| 1,233,861 | | |
| 1,380,238 | |
ABC
acquired contracts | |
| 5 | | |
| 310,000 | | |
| 310,000 | | |
| — | |
SIAS
acquired contracts | |
| 5 | | |
| 660,000 | | |
| 660,000 | | |
| — | |
Non-compete agreements | |
| 4 | | |
| 272,147 | | |
| 272,147 | | |
| — | |
Website
and Digital Assets | |
| 3 | | |
| 33,002 | | |
| 21,594 | | |
| 11,408 | |
Total
intangible assets subject to amortization | |
| | | |
| 3,889,248 | | |
| 2,497,602 | | |
| 1,391,646 | |
Total
Goodwill and Intangible Assets | |
| | | |
$ | 8,642,187 | | |
$ | 2,497,602 | | |
$ | 6,144,585 | |
Scheduled amortization over the
next five years are as follows:
Schedule of amortization over the next two years |
|
|
|
|
|
Twelve
months ending March 31, |
|
|
2024 |
|
|
$ |
276,976 |
|
2025 |
|
|
|
268,717 |
|
2026 |
|
|
|
267,143 |
|
2027 |
|
|
|
267,143 |
|
2028 |
|
|
|
200,357 |
|
Thereafter |
|
|
|
111,310 |
|
Total |
|
|
$ |
1,391,646 |
|
Amortization expense for the three
months ended March 31, 2023, and 2022 was $69,731
and $69,730 respectively.
Note 6-Leases
Operating
Leases
The Company
currently maintains two leases for office space located in Melville, NY.
The first lease
for office space in Melville, NY commenced on September 1, 2019. The term of this lease is for three years and eleven months and runs
co-terminus with our existing lease in the same building. The base annual rent is $11,856 payable in equal monthly installments of
$988.
A second lease
for office space in Melville, NY, was entered into on November 20, 2017, which commenced on April 2, 2018. The term of this lease is five
years and three months at $86,268 per year with an escalation of 3% per year and expires on July 31, 2023.
On July 31,
2021, the Company signed a three-year lease for approximately 2,880 square feet of office space at 980 North Federal Highway,
Boca Raton, FL. The commencement date of the lease was August 2, 2021. The monthly rent is approximately $4,820.
The Company
leases cages and racks for technical space in Tier 3 data centers in New York, Massachusetts, North Carolina and Florida. These leases
are month to month. The monthly rent is approximately $39,000. The Company also leases technical space in Dallas, TX. The lease term is
thirteen months and monthly payments are $1,403. The lease term expires on July 31, 2023.
On January 1,
2022, the Company entered into a lease agreement for office space with WeWork in Austin, TX. The lease term is six months and requires
monthly payments of $1,470 and expires on June 30, 2022. Subsequent to June 30, 2022, the company is on a $3,073 month-to-month
lease with WeWork in Austin, TX.
Finance Lease
Obligations
On June 1, 2020,
the Company entered into a lease agreement with a finance company to lease technical equipment. The lease obligation is payable in
monthly installments of $5,008. The lease carries an interest rate of 7% and is a three-year lease. The term of the lease ends June 1, 2023.
On June 29,
2020, the Company entered into a lease agreement for technical equipment with a finance company. The lease obligation is payable in
monthly installments of $5,050. The lease carries an interest rate of 7% and is a three-year lease. The term of the lease ends June 29, 2023.
On July 31,
2020, the Company entered into a lease agreement for technical equipment with a finance company. The lease obligation is payable in monthly
installments of $4,524. The lease carries an interest rate of 7% and is a three-year lease. The term of the lease ends July 31, 2023.
On
November 1, 2021, the Company entered into a lease agreement with a finance company for technical equipment. The lease obligation is
payable in monthly installments of $3,152.
The lease carries an interest rate of 6% and
is a three-year lease. The term of the lease ends November 1, 2024.
On January
1, 2022, the Company entered into a lease agreement with a finance company for technical equipment. The lease obligation is payable
in monthly installments of $17,718.
The lease carries an interest rate of 5% and
is a three-year lease. The term of the lease ends February 1, 2025.
On January 1,
2022, the Company entered into a technical equipment lease with a finance company. The lease obligation is payable in monthly installments
of $2,037. The lease carries an interest rate of 6% and is a three-year lease. The term of the lease ends January 1, 2025.
Finance Lease Obligations –
Related Party
On January 1,
2019, the Company entered into a lease agreement with Systems Trading. This lease obligation is payable to Systems Trading with monthly
installments of $29,592. The lease carries an interest rate of 6.75% and is a five-year lease. The term of the lease ends December 31, 2023.
On January
1, 2020, the Company entered into a lease agreement with Systems Trading to lease equipment. The lease obligation is payable to
Systems Trading with monthly installments of $10,534.
The lease carries an interest rate of 6% and
is a three-year lease. The term of the lease ends December 31, 2022.
On March 4,
2021, the Company entered into a lease agreement with Systems Trading effective April 1, 2021. This lease obligation is payable to Systems
Trading with monthly installments of $1,567 and expires on March 31, 2024. The lease carries an interest rate of 8%.
On January
1, 2022, the Company entered into a lease agreement with Systems Trading effective January 1, 2022. This lease obligation is payable
to Systems Trading with monthly installments of $7,145 and
expires on February 1,
2025. The lease carries an interest rate of 8%.
On April
1, 2022, the Company entered into a lease agreement with Systems Trading effective May 1, 2022. This lease obligation is payable to
Systems Trading with monthly installments of $6,667 and
expires on January
1, 2025. The lease carries an interest rate of 8%.
The Company
determines if an arrangement contains a lease at inception. Right of Use “ROU” assets represent the Company’s right
to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.
ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the
lease term. The Company’s lease term includes options to extend the lease when it is reasonably certain that it will exercise that
option. Leases with a term of 12 months or less are not recorded on the balance sheet, per the election of the practical expedient. ROU
assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease
term. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company recognizes variable
lease payments in the period in which the obligation for those payments is incurred. Variable lease payments that depend on an index or
a rate are initially measured using the index or rate at the commencement date, otherwise variable lease payments are recognized in the
period incurred. A discount rate of 5% was used in preparation of the ROU asset and operating liabilities.
The
components of lease expense were as follows:
Schedule of components of lease expense |
|
|
|
|
Three
Months Ended March 31, 2023 |
Finance
leases: |
|
|
|
|
Amortization
of assets, included in depreciation and amortization expense |
|
$ |
171,775 |
|
Interest
on lease liabilities, included in interest expense |
|
|
24,863 |
|
Operating
lease: |
|
|
|
|
Amortization
of assets, included in total operating expense |
|
|
51,912 |
|
Interest
on lease liabilities, included in total operating expense |
|
|
2,456 |
|
Total
net lease cost |
|
$ |
251,006 |
|
Supplemental
balance sheet information related to leases was as follows: |
|
|
|
|
|
|
|
|
|
Operating
Leases: |
|
|
|
|
|
|
|
|
|
Operating
lease right-of-use asset |
|
$ |
175,842 |
|
|
|
|
|
|
Current
operating lease liabilities |
|
$ |
143,480 |
|
Noncurrent
operating lease liabilities |
|
|
36,733 |
|
Total
operating lease liabilities |
|
$ |
180,213 |
|
| |
March
31, 2023 |
Finance
leases: | |
| | |
Property
and equipment, at cost | |
$ | 5,521,716 | |
Accumulated
amortization | |
| (3,694,587 | ) |
Property
and equipment, net | |
$ | 1,827,129 | |
| |
| | |
Current
obligations of finance leases | |
$ | 762,295 | |
Finance
leases, net of current obligations | |
| 331,951 | |
Total
finance lease liabilities | |
$ | 1,094,246 | |
Supplemental cash flow and other
information related to leases were as follows:
Schedule of supplemental cash flow and other information related to leases | |
|
| |
Three
Months Ended March 31, 2023 |
Cash
paid for amounts included in the measurement of lease liabilities: | |
| | |
Operating
cash flows related to operating leases | |
$ | 52,216 | |
Financing
cash flows related to finance leases | |
$ | 323,728 | |
| |
| | |
Weighted
average remaining lease term (in years): | |
| | |
Operating
leases | |
| 1.10 | |
Finance
leases | |
| 1.30 | |
| |
| | |
Weighted
average discount rate: | |
| | |
Operating
leases | |
| 4 | % |
Finance
leases | |
| 7 | % |
Long-term obligations under the operating
and finance leases at March 31, 2023, mature as follows:
Schedule of long-term obligations under the operating and finance leases |
|
|
|
|
|
|
|
|
For
the Twelve Months Ended March 31, |
|
Operating
Leases |
|
Finance
Leases |
2023 |
|
$ |
147,587 |
|
|
$ |
632,920 |
|
2024 |
|
|
37,020 |
|
|
|
446,136 |
|
2025 |
|
|
— |
|
|
|
71,765 |
|
Total
lease payments |
|
|
184,607 |
|
|
|
1,150,821 |
|
Less:
Amounts representing interest |
|
|
(4,394 |
) |
|
|
(56,575 |
) |
Total
lease obligations |
|
|
180,213 |
|
|
|
1,094,246 |
|
Less:
long-term obligations |
|
|
(36,733 |
) |
|
|
(331,951 |
) |
Total
current |
|
$ |
143,480 |
|
|
$ |
762,295 |
|
As of March
31, 2023, the Company had no additional significant operating or finance leases that had not yet commenced. Rent expense under all operating
leases for the three months ended March 31, 2023, and 2022 was $60,572 and $34,219, respectively.
Note 7 - Commitments
and Contingencies
As part of the
Flagship acquisition the Company acquired a licensing agreement for marketing related materials with a National Football League
team. The Company has approximately $1.3 million in payments over the next 5 years.
Note
8 – Stockholders’ (Deficit)
Capital Stock
The Company
has 260,000,000 authorized shares of capital stock, consisting of 250,000,000 shares of Common Stock, par
value $0.001, and 10,000,000 shares of Preferred Stock, par value $0.001 per share.
Common Stock
Options
A summary of
the Company’s options activity and related information follows:
Schedule
of option activity and related information |
|
|
|
|
|
|
|
|
|
|
Number
of |
|
|
Weighted |
|
Weighted |
|
|
Shares |
Range
of |
|
Average |
|
Average |
|
|
Under |
Option
Price |
|
Exercise |
|
Contractual |
|
|
Options |
Per
Share |
|
Price |
|
Life |
Options
Outstanding at January 1, 2023 |
|
|
301,391 |
|
|
$ |
1.48 – 15.76 |
|
|
$ |
3.46 |
|
|
|
7.45 |
|
Options
Granted |
|
|
243,605 |
|
|
|
1.52
– 1.96 |
|
|
|
1.77 |
|
|
|
10.00 |
|
Exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Expired/Cancelled |
|
|
(29,213 |
) |
|
|
2.16 – 5.80 |
|
|
|
3.76 |
|
|
|
— |
|
Options
Outstanding at March 31, 2023 |
|
|
515,783 |
|
|
$ |
1.48 - 14.00 |
|
|
$ |
2.65 |
|
|
|
8.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
Exercisable at March 31, 2023 |
|
|
166,352 |
|
|
$ |
1.48
- 14.00 |
|
|
$ |
3.69 |
|
|
|
5.76 |
|
Share-based
compensation expense for options totaling $54,433 and $66,505 was recognized in our results for the three months ended March 31, 2023, and
2022, respectively.
The valuation
methodology used to determine the fair value of the options issued during the year was the Black-Scholes option-pricing model. The Black-Scholes
model requires the use of a number of assumptions including the volatility of the stock price, the average risk-free interest rate, and
the weighted average expected life of the options.
The risk-free
interest rate assumption is based upon observed interest rates on zero-coupon U.S. Treasury bonds whose maturity period is appropriate
for the term of the options.
Estimated volatility
is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the
award. The Company’s calculation of estimated volatility is based on historical stock prices of the Company over a period equal
to the expected life of the awards.
As of March
31, 2023, there was $636,464 of total unrecognized compensation expense related to unvested employee options granted under the Company’s
share-based compensation plans that is expected to be recognized over a weighted average period of approximately 2.48 years.
The weighted
average fair value of options granted, and the assumptions used in the Black-Scholes model during the three months ended March 31, 2023, and
2022, are set forth in the table below.
Schedule of weighted average fair value of options granted | |
| | |
|
| | |
|
| |
2023 | |
2022 |
Weighted
average fair value of options granted | |
$ | 1.77 | |
|
$ | 3.30 | |
|
Risk-free
interest rate | |
| 3.48%
– 4.01 | % |
|
| 1.63%
– 2.32 | % |
|
Volatility | |
| 196%
– 199 | % |
|
| 212%
– 214 | % |
|
Expected
life (years) | |
| 10 years | |
|
| 10 years | |
|
Dividend
yield | |
$ | — | % |
|
$ | — | % |
|
Share-based
awards, restricted stock award (“RSAs”)
On March 1,
2023, the Company granted certain employees 73,530 RSA’s. Compensation as a group, amounts to $130,883. The shares vest one third
each year for three years after issuance.
On March 28,
2023, the Company granted certain employees 44,942 RSA’s. Compensation as a group, amounts to $72,357. The shares vest one third
each year for three years after issuance.
On March
31, 2023, the Board resolved that the Company shall pay each member of the Board compensation as a group amount of $22,750.
The shares vest one year after issuance.
A summary of
the activity related to RSUs for the three months ended March 31, 2023, is presented below:
Schedule of non-vested Restricted stock units |
|
|
|
|
|
|
|
|
|
|
Total |
|
Grant Date |
Restricted Stock Units (RSUs) |
|
Shares |
|
Fair Value |
RSUs non-vested at January 1, 2023 |
|
|
50,000 |
|
|
$ |
1.48 - 3.23 |
|
RSUs granted |
|
|
130,972 |
|
|
$ |
1.61 – 1.82 |
|
RSUs vested |
|
|
(12,500 |
) |
|
$ |
3.23 |
|
RSUs forfeited |
|
|
— |
|
|
$ |
— |
|
RSUs non-vested March 31, 2023 |
|
|
168,472 |
|
|
$ |
1.48 – 2.45 |
|
Stock-based
compensation for RSU’s has been recorded in the consolidated statements of operations and totaled $52,285 for the three months
ended March 31, 2023.
Note 9 – Litigation
We are currently
not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations.
There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against
or affecting DSC, its common stock, any of its subsidiaries or of DSC’s or DSC’s subsidiaries’ officers or directors
in their capacities as such, in which an adverse decision could have a material adverse effect.
Note 10 – Related
Party Transactions
Nexxis Capital
LLC
Charles M. Piluso
(Chairman and CEO) and Harold Schwartz (President) collectively own 100% of Nexxis Capital LLC (“Nexxis Capital”). Nexxis
Capital was formed to purchase equipment and provide leases to Nexxis Inc.’s customers. The Company received funds of $2,756 and
$2,328 during the three months ended March 31, 2023, and 2021 respectively.
Note 11 – Segment
Information
We operate in three reportable
segments: Nexxis, Flagship Solutions Group, and CloudFirst. Our segments were determined based on our internal organizational structure,
the manner in which our operations are managed, and the criteria used by our Chief Operating Decision Maker (CODM) to evaluate performance,
which is generally the segment’s operating income or losses.
Schedule of segment reporting income or losses |
|
|
Operations
of: |
|
Products
and services provided: |
Nexxis Inc |
|
NEXXIS is a single-source solution
provider that delivers fully-managed cloud-based voice services, data transport, internet access, and SD-WAN solutions focused on business
continuity for today’s modern business environment. |
|
|
|
Flagship Solutions, LLC |
|
Flagship Solutions Group (FSG)
is a managed service provider. FSG invoices clients primarily for services that assist the clients’ technical teams. FSG has few
technical assets and utilizes the assets or software of other cloud providers, whereby managing 3rd party infrastructure. FSG periodically
sells equipment and software. |
|
|
|
CloudFirst Technologies Corporation |
|
CloudFirst, provides services
from CloudFirst technological assets deployed in six Tier 3 data centers throughout the USA and Canada. This technology has been developed
by CloudFirst. Clients are invoiced for cloud infrastructure and disaster recovery on the CloudFirst platform. Services provided to clients
are provided on a subscription basis on long term contracts. |
The following
tables present certain financial information related to our reportable segments and Corporate:
Schedule of financial information related to reportable segments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nexxis Inc. |
|
Flagship Solutions
LLC |
|
CloudFirst Technologies |
|
Corporate |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable |
|
$ |
60,019 |
|
|
$ |
2,895,708 |
|
|
$ |
715,443 |
|
|
$ |
— |
|
|
$ |
3,671,170 |
|
Prepaid
expenses and other current assets |
|
|
19,503 |
|
|
|
178,094 |
|
|
|
505,506 |
|
|
|
175,357 |
|
|
|
878,460 |
|
Net
Property and Equipment |
|
|
737 |
|
|
|
18,533 |
|
|
|
2,397,542 |
|
|
|
2,670 |
|
|
|
2,419,482 |
|
Intangible
assets, net |
|
|
— |
|
|
|
1,626,646 |
|
|
|
279,268 |
|
|
|
— |
|
|
|
1,905,914 |
|
Goodwill |
|
|
— |
|
|
|
1,222,971 |
|
|
|
3,015,700 |
|
|
|
— |
|
|
|
4,238,671 |
|
Operating
lease right-of-use assets |
|
|
— |
|
|
|
141,933 |
|
|
|
33,909 |
|
|
|
— |
|
|
|
175,842 |
|
All
other assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,062,166 |
|
|
|
11,062,166 |
|
Total
Assets |
|
$ |
80,259 |
|
|
$ |
6,083,885 |
|
|
$ |
6,947,368 |
|
|
$ |
11,240,193 |
|
|
$ |
24,351,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
$ |
46,335 |
|
|
$ |
2,332,956 |
|
|
$ |
905,137 |
|
|
$ |
414,818 |
|
|
$ |
3,699,246 |
|
Deferred
revenue |
|
|
— |
|
|
|
155,545 |
|
|
|
153,728 |
|
|
|
— |
|
|
|
309,273 |
|
Total
Finance leases payable |
|
|
— |
|
|
|
— |
|
|
|
500,846 |
|
|
|
— |
|
|
|
500,846 |
|
Total
Finance leases payable related party |
|
|
— |
|
|
|
— |
|
|
|
593,400 |
|
|
|
— |
|
|
|
593,400 |
|
Total Operating
lease liabilities |
|
|
— |
|
|
|
143,646 |
|
|
|
36,567 |
|
|
|
— |
|
|
|
180,213 |
|
Total
Liabilities |
|
$ |
46,335 |
|
|
$ |
2,632,147 |
|
|
$ |
2,189,678 |
|
|
$ |
414,818 |
|
|
$ |
5,282,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nexxis
Inc. |
|
Flagship
Solutions LLC |
|
CloudFirst
Technologies |
|
Corporate |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable |
|
$ |
34,903 |
|
|
$ |
1,924,184 |
|
|
$ |
1,543,749 |
|
|
$ |
— |
|
|
$ |
3,502,836 |
|
Prepaid
expenses and other current assets |
|
|
16,799 |
|
|
|
213,826 |
|
|
|
285,306 |
|
|
|
68,735 |
|
|
|
584,666 |
|
Net
Property and Equipment |
|
|
— |
|
|
|
19,705 |
|
|
|
2,192,085 |
|
|
|
— |
|
|
|
2,211,790 |
|
Intangible
assets, net |
|
|
— |
|
|
|
1,696,376 |
|
|
|
279,268 |
|
|
|
— |
|
|
|
1,975,644 |
|
Goodwill |
|
|
— |
|
|
|
1,222,971 |
|
|
|
3,015,700 |
|
|
|
— |
|
|
|
4,238,671 |
|
Operating
lease right-of-use assets |
|
|
— |
|
|
|
167,761 |
|
|
|
58,740 |
|
|
|
— |
|
|
|
226,501 |
|
All
other assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,346,127 |
|
|
|
11,346,127 |
|
Total
Assets |
|
$ |
51,702 |
|
|
$ |
5,244,823 |
|
|
$ |
7,374,848 |
|
|
$ |
11,414,862 |
|
|
$ |
24,086,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
$ |
40,091 |
|
|
$ |
1,563,408 |
|
|
$ |
1,069,278 |
|
|
$ |
534,800 |
|
|
$ |
3,207,577 |
|
Deferred
revenue |
|
|
— |
|
|
|
165,725 |
|
|
|
115,335 |
|
|
|
— |
|
|
|
281,060 |
|
Total
Finance leases payable |
|
|
— |
|
|
|
— |
|
|
|
641,110 |
|
|
|
— |
|
|
|
641,110 |
|
Total
Finance leases payable related party |
|
|
— |
|
|
|
— |
|
|
|
776,864 |
|
|
|
— |
|
|
|
776,864 |
|
Total Operating
lease liabilities |
|
|
— |
|
|
|
169,469 |
|
|
|
62,960 |
|
|
|
— |
|
|
|
232,429 |
|
Total
Liabilities |
|
$ |
40,091 |
|
|
$ |
1,898,602 |
|
|
$ |
2,665,547 |
|
|
$ |
534,800 |
|
|
$ |
5,139,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nexxis Inc. |
|
Flagship Solutions
LLC |
|
CloudFirst Technologies |
|
Corporate |
|
Total |
Sales |
|
$ |
264,796 |
|
|
$ |
3,456,188 |
|
|
$ |
3,158,739 |
|
|
$ |
— |
|
|
$ |
6,879,723 |
|
Cost
of sales |
|
|
178,121 |
|
|
|
2,906,212 |
|
|
|
1,705,645 |
|
|
|
— |
|
|
|
4,789,978 |
|
Gross
Profit |
|
|
86,675 |
|
|
|
549,976 |
|
|
|
1,453,094 |
|
|
|
— |
|
|
|
2,089,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
124,750 |
|
|
|
540,327 |
|
|
|
606,452 |
|
|
|
570,520 |
|
|
|
1,842,049 |
|
Depreciation
and amortization |
|
|
71 |
|
|
|
70,903 |
|
|
|
217,622 |
|
|
|
114 |
|
|
|
288,710 |
|
Total
operating expenses |
|
|
124,821 |
|
|
|
611,230 |
|
|
|
824,074 |
|
|
|
570,634 |
|
|
|
2,130,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations |
|
|
(38,146 |
) |
|
|
(61,254 |
) |
|
|
629,020 |
|
|
|
(570,634 |
) |
|
|
(41,014 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
— |
|
|
|
— |
|
|
|
(27,346 |
) |
|
|
103,423 |
|
|
|
76,077 |
|
Total
Other Income (Expense) |
|
|
— |
|
|
|
— |
|
|
|
(27,346 |
) |
|
|
103,423 |
|
|
|
76,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nexxis Inc. |
|
Flagship Solutions
LLC |
|
CloudFirst Technologies |
|
Corporate |
|
Total |
Sales |
|
$ |
211,924 |
|
|
$ |
6,043,222 |
|
|
$ |
2,402,053 |
|
|
$ |
— |
|
|
$ |
8,657,199 |
|
Cost
of sales |
|
|
139,876 |
|
|
|
4,518,346 |
|
|
|
1,353,067 |
|
|
$ |
— |
|
|
|
6,011,289 |
|
Gross
Profit |
|
|
72,048 |
|
|
|
1,524,876 |
|
|
|
1,048,986 |
|
|
|
— |
|
|
|
2,645,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
97,199 |
|
|
|
1,087,540 |
|
|
|
475,116 |
|
|
$ |
448,673 |
|
|
|
2,108,528 |
|
Depreciation
and amortization |
|
|
— |
|
|
|
70,135 |
|
|
|
281,203 |
|
|
$ |
— |
|
|
|
351,338 |
|
Total
operating expenses |
|
|
97,199 |
|
|
|
1,157,675 |
|
|
|
756,319 |
|
|
|
448,673 |
|
|
|
2,459,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations |
|
|
(25,151 |
) |
|
|
367,201 |
|
|
|
292,667 |
|
|
|
(448,673 |
) |
|
|
186,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
— |
|
|
|
(48 |
) |
|
|
(41,723 |
) |
|
$ |
(889 |
) |
|
|
(42,660 |
) |
Total
Other Income (Expense) |
|
|
— |
|
|
|
(48 |
) |
|
|
(41,723 |
) |
|
|
(889 |
) |
|
|
(42,660 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|