Forward-Looking Statements
This Annual Report on Form 10-K (this “Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. The forward-looking statements are contained principally in Part I, Item 1. “Business,” Part I, Item 1A. “Risk Factors,” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but are also contained elsewhere in this Annual Report in some cases you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements.
You should refer to Item 1A. “Risk Factors” section of this Annual Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We do not undertake any obligation to update any forward-looking statements. Unless the context requires otherwise, references to “Data Storage,” “we,” “us,” “our,” and “Company,” refer to Data Storage Corporation and its subsidiaries.
Summary Risk Factors
Risks Related to Data Storage’s Business
| ● | The Company has not generated a significant amount of net income and it may not be able to sustain profitability in the future. |
| ● | If the Company is unable to attract new customers to its infrastructure and disaster recovery/cloud subscription services on a cost-effective basis, its revenue and operating results would be adversely affected. |
| ● | The Company expects to continue to acquire or invest in other companies, which may divert its management’s attention, result in additional dilution to its stockholders, and consume resources that are necessary to sustain its business. |
| ● | Integration of an acquired company’s operations may present challenges. |
| ● | We may not realize the anticipated benefits of the merger with Flagship or successfully integrate our businesses. |
| ● | The Company may fail to maintain an effective system of internal controls, which may result in material misstatements of its consolidated financial statements or cause it to fail to meet its periodic reporting obligations. |
| ● | The Company is controlled by three principal stockholders who serve as its executive officers and directors. |
Risks Related to the Company’s Industry
| ● | The market for cloud solutions is highly competitive, and if the Company does not compete effectively, its operating results will be harmed. |
| ● | If a cyberattack was able to breach the Company’s security protocols and disrupt its data protection platform and solutions and any such disruption could increase its expenses, damage its reputation, harm its business and adversely affect its stock price. |
| ● | Any significant disruption in service, in the Company’s computer systems, or caused by its third-party storage and system providers could damage its reputation and result in a loss of customers, which would harm its business, financial condition, and operating results. |
| ● | The Company’s ability to provide services to its customers depends on its customers’ continued high-speed access to the internet and the continued reliability of the internet infrastructure. |
| ● | If the Company is unable to retain its existing customers, its business, financial condition, and operating results would be adversely affected. |
| ● | A decline in demand for the Company’s cyber security, disaster recovery, and/or infrastructure solutions, in general, would cause its revenue to decline. |
| ● | The Company primarily depends upon third-party distribution companies to generate new customers. The Company’s relationships with its partners and distributors may be terminated or may not continue to be beneficial in generating new customers, which could adversely affect its ability to increase its customer base. |
| ● | If the Company is unable to expand its base of business customers, its future growth and operating results could be adversely affected. |
| ● | If the Company is unable to sustain market recognition of and loyalty to its brand, or if its reputation were to be harmed, it could lose customers or fail to increase the number of its customers, which could harm its business, financial condition, and operating results. |
| ● | The Company is subject to governmental regulation and other legal obligations related to privacy, and any actual or perceived failure to comply with such obligations would harm its business. |
| ● | The Company’s solutions are used by customers in the health care industry, and it must comply with numerous federal and state laws related to patient privacy in connection with providing its solutions to these customers. |
| ● | Errors, failures, bugs in or unavailability of the Company’s solutions released by it could result in negative publicity, damage to its brand, returns, loss of or delay in market acceptance of its solutions, loss of competitive position, or claims by customers or others. |
| ● | The Company faces many risks associated with its growth and plans to expand, which could harm its business, financial condition, and operating results. |
| ● | The Company’s intended international expansion will subject it to risks typically encountered when operating internationally. |
| ● | The loss of the Company’s key personnel, or its failure to attract, integrate, and retain other highly qualified personnel, could harm its business and growth prospects. |
Risks Related to Intellectual Property
| ● | Assertions by a third party that the Company’s solutions infringe its intellectual property, whether correct, could subject the Company to costly and time-consuming litigation or expensive licenses. |
| ● | The Company relies on third-party software to develop and provide its solutions, including server software and licenses from third parties to use patented intellectual property. |
| ● | If the Company is unable to protect its domain names, its reputation, brand, customer base, and revenue, as well as its business and operating results, could be adversely affected. |
Risks Related to the Company’s Common Stock and Securities
| ● | The Company’s stock price has fluctuated in the past and may be volatile in the future, and as a result, investors in its common stock could incur substantial losses. |
| ● | We cannot be assured that we will be able to maintain our listing on the Nasdaq Capital Market. |
| ● | Upon exercise of the Company’s outstanding options or warrants, it will be obligated to issue a substantial number of additional shares of common stock which will dilute its present shareholders. |
| ● | Offers or availability for sale of a substantial number of shares of the Company’s common stock may cause the price of its common stock to decline. |
| ● | The Company does not expect to declare any common stock cash dividends in the foreseeable future. |
| ● | Because the Company may issue preferred stock without the approval of its shareholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire the Company and could depress its stock price. |
| ● | Provisions of Nevada law could delay or prevent an acquisition of Data Storage, even if the acquisition would be beneficial to its stockholders and could make it more difficult for stockholders to change Data Storage’s management. |
