Washington,
D.C. 20549
FORM
10-K
[x]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
fiscal year ended December 31,
2008
[]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Commission
File No. 000-53126
DATA STORAGE CONSULTING
SERVICES, INC.
(Exact
Name of Small Business Issuer as specified in its charter)
Colorado
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20-8096131
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(State
or other jurisdiction
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(IRS
Employer File Number)
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of
incorporation)
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13990
Braun Road
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Golden, Colorado
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80401
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(Address
of principal executive offices)
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(zip
code)
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(303)
883-9334
(Registrant's
telephone number, including area code)
Securities
to be Registered Pursuant to Section 12(b) of the Act: None
Securities
to be Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.0.001 per
share par value
Check
whether issuer is not required to file reports pursuant to Section 13 or 15(d)
of the Exchange Act [ ]
Indicate
by check mark if registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes [] No [X].
Indicate
by check mark if registrant is not required to file reports pursuant to Section
13 or 15(d) of the Exchange Act. Yes
[] 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: [ ]
Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K.
[X]
Indicate
by check mark whether the registrant is a large accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of “large
accelerated filer,” “accelerated filer,” and “small reporting company” in Rule
12b-2 of the Exchange Act.
Large
accelerated filer [] |
Accelerated filer
[] |
Non-accelerated
filer [] (Do not check if a smaller reporting
company) |
Smaller
reporting company [X] |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act): Yes [] No
[X].
The
number of shares outstanding of the Registrant's common stock, as of the latest
practicable date: April 1, 2009, was 8,929,000.
FORM
10-K
Data
Storage Consulting Services, Inc.
INDEX
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PART
I
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Item
1. Business
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3
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Item
1A. Risk Factors
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8
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Item
2. Property
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13
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Item
3. Legal Proceedings
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13
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Item
4. Submission of Matters to a Vote of Security Holders
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13
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PART
II
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Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
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13
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Item
6. Selected Financial Data
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15
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Item
7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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15
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Item
7A. Quantitative and Qualitative Disclosures About Market
Risk
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17
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Item
8. Financial Statements and Supplementary Data
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18
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Item
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
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29
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Item
9A(T). Controls and Procedures
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29
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Item
9B. Other Information
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30
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PART
III
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Item
10. Directors, Executive Officers and Corporate Governance
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30
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Item
11. Executive Compensation
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32
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Item
12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
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32
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Item
13. Certain Relationships and Related Transactions, and Director
Independence
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33
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Item
14. Principal Accountant Fees and Services
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33
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Item
15. Exhibits Financial Statement Schedules
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34
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Financial
Statements pages
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18
- 28
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Signatures
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35
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For purposes of this document, unless
otherwise indicated or the context otherwise requires, all references herein to
“Data Storage Consulting Services” “we,” “us,” and “our,” refer to Data Storage
Consulting Services, Inc., a Colorado corporation.
Forward-Looking
Statements
The
following discussion contains forward-looking statements regarding us, our
business, prospects and results of operations that are subject to certain risks
and uncertainties posed by many factors and events that could cause our actual
business, prospects and results of operations to differ materially from those
that may be anticipated by such forward-looking statements. Factors that may
affect such forward-looking statements include, without limitation: our ability
to successfully develop new products and services for new markets; the impact of
competition on our revenues, changes in law or regulatory requirements that
adversely affect or preclude clients from using us for certain applications;
delays our introduction of new products or services; and our failure to keep
pace with our competitors.
When used
in this discussion, words such as "believes", "anticipates", "expects",
"intends" and similar expressions are intended to identify forward-looking
statements, but are not the exclusive means of identifying forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this report. We
undertake no obligation to revise any forward-looking statements in order to
reflect events or circumstances that may subsequently arise. Readers are urged
to carefully review and consider the various disclosures made by us in this
report and other reports filed with the Securities and Exchange Commission that
attempt to advise interested parties of the risks and factors that may affect
our business.
PART
I
Item
1. DESCRIPTION OF BUSINESS.
General
Data
Storage Consulting Services, Inc. sells data storage protection and
consulting services to small and medium businesses. We were incorporated in
the State of Colorado on December 12, 2006. We currently operate exclusively in
Colorado We market and sell our products and services to directly to business
end users. We have a limited history of operations. Our auditors have expressed
doubts about our ability to continue as a going concern.
On March
7, 2008, we closed our registered public offering. We sold a total of 404,000
common shares at a price of $.25 per share, for a total of
$101,000.
Our
headquarters are located at 13990 Braun Road, Golden, CO 80401. Our phone number
at our headquarters is (303)883-9334. Our fiscal year end is December
31.
We sell
data storage protection and consulting services to small and medium
businesses. We believe that most small and medium businesses do not
protect their data assets adequately and cannot afford to use the current
offerings of the major storage vendors in the market today. Further,
as a result of increasing compliance requirements, such as Sarbanes-Oxley, many
small and medium businesses previously unwilling to entertain discussions about
data storage are open to the concept. The problem of data loss has
the effect of shuttering the majority of small companies that are affected
within 5 years of the event. During the 9/11 terrorist attacks that
brought down the Trade Centers, over 200 small and medium businesses had to
close their doors, in large part, because they did not having a proper data
storage protection practice in place. We believe that this problem represents
approximately a $200 million opportunity for data storage protection services
for small and medium business in the Denver Colorado area
alone.
Network
storage systems are secondary, high-speed computer networks dedicated to data
storage and backup functions. Demand for data storage is the result of the
growth of data-intensive applications, from areas such as document imaging,
pharmaceutical development, electronic banking, satellite imagery manipulation
and scientific research, to applications as common as email. In addition to our
potential clients’ fundamental need to store increasing quantities of data, the
ability to access that data rapidly (referred to as “availability”) also drives
infrastructure requirements, as today’s businesses depend on rapid response
times in many functions, both for internal operations and to enable
responsiveness to customers and vendors. Moreover, regulatory and geopolitical
developments over the past several years have converged with general business
requirements to cause businesses to recognize the need for effective data
archiving and the corresponding need for rapid recovery of that data in the
event of disaster or other failure. Consolidating data storage in networks at
centralized data centers is one way to address each of these requirements by
increasing the accessibility of data to multiple end-users, maintaining
effective archives of that data and at the same time offering potential for
lower costs through increased utilization and more efficient
management.
Networked
storage systems have become accepted solutions for data storage, and are
increasingly adopted because they address many of the storage-related challenges
arising in today’s open systems networks, including:
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·
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The
generally higher cost of direct-attached storage environments due to
inefficient storage utilization and high maintenance costs in those
environments;
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The
isolation and resulting performance inefficiencies of direct-attached
storage environments that result from restrictive server-to-storage
connectivity and incompatible storage
protocols;
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The
often greater complexity of upgrading server and storage capacities in
direct-attached environments; and
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The
generally greater complexity of providing comprehensive data security,
protection and disaster recovery functionalities in direct-attached
environments.
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By
centralizing data storage functions, storage networks create a reservoir of
storage resources that can be shared both locally and over long distances,
thereby increasing resource utilization and allowing the data to be shared,
managed and accessed by diverse end-users. Because the personnel and other costs
of managing a computer infrastructure are sometimes greater than the hardware
and software costs, this increased manageability also provides opportunities for
cost savings over traditional direct-attached storage.
Data
backup and disaster recovery systems are natural adjuncts to data storage
systems. We design and implement these in both networked and direct-attached
environments, depending on the client’s requirements. These systems create
repositories for maintaining additional electronic copies of an organization’s
data, which can guard against both small-scale failures, such as the malfunction
of a single computer, and large-scale disasters, such as the destruction of an
entire data center. There now exists a variety of technologies for building such
backup and disaster recovery systems, including both tape and disk
systems.
The
Solution
Unlike
existing methods which may be too costly for most small or medium business
budgets, and if purchased, too disruptive to the operation of those businesses,
our approach is to assist the businesses by providing the data protection as an
integrated service rather than a capital expenditure. For our
clients, this means that they do not have to employ data storage protection
specialists in their IT departments, nor do they have to come up with the
capital expenditure to afford a typical solution. We are able to do
this because we believe that we have a depth of expertise in the enterprise data
protection industry. Our patent pending storage system will be
combined with our service department to provide the data protection that will
allow our clients to focus on building their business, instead of worrying about
their most important asset, data.
These are
the services we plan to provide to our clients:
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1.
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Assessment of Data Storage
policies and procedures
including:
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b.
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Near-Line Disk
Storage
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c.
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Off-Line Storage: Tape or
Optical
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2.
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Discovery of critical data assets
and their value to the existence of these
companies.
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3.
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Identification of financial value
of data based on companies’ internal policies and
procedures.
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4.
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Discovery of regulatory
requirements for industry specific data
assets.
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5.
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Design and implementation of data
storage solution to accommodate the needs of the business using the data
protection appliance.
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6.
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Design and implementation of
Disaster Recovery and Business Continuance
plan.
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It is
critical to the success of any infrastructure design to have the maximum amount
of information available to the design consultant. The gathering of this data by
out consultants will be done through a process that includes: personnel
interviews, system discovery using software collection methodology, manual
review and inventory of technology assets, regulatory agency investigation, and
review of internal financial practice. Once this information is gathered and
documented in the final assessment deliverable will include:
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1.
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Financial Impact
review
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4.
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Implementation
Schedule
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The
Product:
We have a
patent pending storage appliance which is an integrated hardware and software
product.
Software
Features:
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5.
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Smart Folders
Capabilities
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Hardware
Features;
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3.
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Fully available via/MS Cluster
software
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5.
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SAN/NAS/ISCSI
connectivity
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Organization
We are
comprised of one corporation with no subsidiaries.
Operations
Our goal
is to develop clients who will sign annual contracts that will enable us to
manage their data storage using one of two methods:
Outsource:
A client would have their entire data storage infrastructure managed using our
storage product. This will be accomplished by placing the product with the
client and then contracting for a specific set of services provided by us. The
extent of the services will be identified by our initial assessment. The
clients’ data would be stored at a third party Storage Services Provider from
whom we plan to contract. We have not identified a specific Storage Services
Provider at this point, but we consider such Providers to be readily available.
The revenue derived from this type of arrangement would be an annual contract,
the cost of which will be determined by the amount of data and the services
needed.
In-house:
The client would contract with us to manage their entire data storage
infrastructure at their location. This would include the purchase and
implementation of the proposed product from us and an annual agreement with us
for a storage consultant to monitor the client’s data.
We
believe that utilizing our existing personal and business relationships will be
essential to our overall success. Our plan is to concentrate our sales and
marketing efforts in the Denver Metropolitan area. With the proceeds of the
minimum offering, we plan to operate our storage consulting business only in the
Denver metro area. With the maximum proceeds, we plan to expand the geographical
coverage of our business to include the entire Western United
States.
Markets
We market
through our direct sales organization as well as the numerous technology
outsourcing companies in the storage management market. The directors and
officers of the company have extensive personal and business in this
area. We believe that through word of mouth advertising and personal
contacts we believe we can develop a client base that will provide initial
revenue opportunity for the business.
We see
three potential revenue streams available to us:
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1.
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Consulting Services: Consulting
services would offer a one time revenue opportunity to us. This service
would be offered at a cost based on the size of the client’s data storage
environment and number of computer
seats.
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2.
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Support Services: Support
services would offer recurring revenue. The revenue derived from this type
of arrangement would be an annual contract the cost of which will be
determined by the amount of data and the services needed by the client.
These contracts would typically be negotiated on a 1, 3 or 5 year
term.
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3.
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Appliance Sales: The cost of the
appliance will be based on the amount of storage and the services
provided.
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Raw
Materials
The use
of raw materials is not a material factor in our operations at the present
time.
Customers
and Competition
The
existing Data Storage Consulting space is extremely competitive. The market for
data storage is served by many manufacturers, value added resellers, storage
solution providers and storage service providers, and is generally highly
competitive. Major computer system firms all offer storage systems along with
their server, workstation and desktop computer systems. To some extent, our
products and services compete with those systems. We also face direct
competition from manufacturers specializing in storage technology products. Some
of these manufacturers are EMC/EMC Software Group, Hitachi Data Systems, Sun
Microsystems, and Network Appliance. Some product companies address the market
with a direct sales model, some employ a channel partner-only strategy, while
most use a hybrid strategy that includes both. As noted in “RISK FACTORS,” many
or all of these manufacturers have greater financial and other resources than we
have. With companies like these focused on this growing segment of technology
the opportunity to participate in Fortune 5000 accounts in not a realistic
objective. However we believe that small and medium sized companies are
currently growing at a higher percentage than the largest organizations. We
plant to focus our energy on these accounts and believe this space will provide
the necessary client base and revenues to make this an extremely successful and
profitable opportunity.
A number
of these competitors would also be key technology suppliers of ours. Those that
are not would provide competition in our accounts and markets. In some cases, in
large legacy accounts of technology partners, we will face competition directly
from those suppliers. A large number of private company value-added resellers
(“VARs”) serve as sales and distribution outlets for the manufacturers listed
above, and although many of these offer only component sales and distribution,
we sometimes compete with these companies at the client-user level. We also plan
to face competition from other resellers offering the same or similar equipment
from the same technology partners. In general, these competitors are regional.
We expect to compete with companies that characterize themselves as storage
solution providers, in whole or in part, such as GTSI, MTI, Cranel and
Datalink.
The
methods of competition vary widely between accounts and between individual sales
opportunities, but in general include a blend of product performance, service
and price. We seek to provide a high level of expertise and service to our
clients rather than merely reselling products at the lowest possible cost. We
believe that a reasonable number, though clearly not all, customers for these
types of products would place value on the engineering expertise and service
that we provide during and after the sales process, and accordingly will
purchase from us, as a full solution provider, rather than from a low-cost
component reseller.
Backlog
At
December 31, 2008, we had no backlogs.
Employees
At this
time we have no full time employees. Plan to hire two full time Storage
Consultants. We will also have two of the board members join the
organization on a part time basis to initiate the growth from a sales and
marketing prospective.
While Mr.
Ross Bernstein, Mr. Hanson and Mr. Hartman have had extensive business start up,
consulting and sale of data storage solutions experience, as we expand, we
intend to hire additional employees. However, we have no present plans to do so.
We may hire part-time help as needed from time-to-time for specific projects. We
do not pay salaries to our officers. However, we reimburse them for any
out-of-pocket expenses they incur on our behalf. In addition, in the future, we
may approve the payment of salaries for our management, but currently, no such
plans have been approved. We do not currently pay for vacation, holidays or
provide major medical coverage. None of our officers or directors is a party to
any employment agreement. However, we may adopt such plans in the
future.
Proprietary
Information
We
own no proprietary information.
Government
Regulation
We are
not subject to any material government or industry regulation regarding our
planned activities.
Research
and Development
We have
never spent any amount in research and development activities.
Environmental
Compliance
We
believe that we are not subject to any material costs for compliance with any
environmental laws.
How
to Obtain Our SEC Filings
We file
annual, quarterly, and special reports, proxy statements, and other information
with the Securities Exchange Commission (SEC). Reports, proxy statements and
other information filed with the SEC can be inspected and copied at the public
reference facilities of the SEC at 100 F Street N.E., Washington, DC 20549. Such
material may also be accessed electronically by means of the SEC's website at
www.sec.gov.
Our
investor relations department can be contacted at our principal executive office
located at our principal office, 13990 Braun Road, Golden, CO
80401. Our telephone number is (303) 883-9334.
Item
1A. RISK FACTORS.
You
should carefully consider the risks and uncertainties described below
and the other information in this document before deciding to invest in
shares of our common stock.
The
occurrence of any of the following risks could materially and
adversely affect our business, financial condition and operating result. In
this case, the trading price of our common stock could decline and you
might lose all or part of your investment.
RISKS
ASSOCIATED WITH OUR COMPANY:
We
have a limited operating history.
We
began operations in December, 2006. Since the inception of our current business
operations, we have been engaged in organizational activities, including
developing a strategic operating plan, developing processing technology, and
raising private capital. We have no production facilities. Accordingly, we have
no relevant operating history upon which an evaluation of our performance and
future prospects can be made.
We
have had a history of losses. We have negative stockholders’s equity at December
31, 2008.
We have had no income for the fiscal
year ended December 31, 2007 or 2008. We have a history of net
losses. We incurred a net loss of $100 for the fiscal year
ended December 31, 2007 and a net loss of $66,354 for the fiscal year ended
December 31, 2008. We incurred a net loss of $74,926 from
inception through December 31, 2008. At December 31, 2008, we reported
a negative stockholders’ equity of $1,589. We may to continue to incur net
losses for the foreseeable future as we continue to further develop our
business. Our ability to generate and sustain significant additional revenues or
achieve profitability will depend upon the factors discussed elsewhere in this
“Risk Factors” section. We cannot assure you that we will achieve or sustain
profitability or that our operating losses will not increase in the future. If
we do achieve profitability, we cannot be certain that we can sustain or
increase profitability on a quarterly or annual basis in the
future.
Because
we had incurred continuing operating losses, our accountants have expressed
doubts about our ability to continue as a going concern.
For the
fiscal year ended December 31, 2008, our accountants have expressed doubt about
our ability to continue as a going concern as a result of our continued net
losses. Our ability to achieve and maintain profitability and positive cash flow
is dependent upon:
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·
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our
ability to locate clients who will purchase our products and use our
services and products; and
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·
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our
ability to generate significant
revenues.
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Based
upon current plans, we expect to incur operating losses in future periods
because we will be incurring expenses and not generating sufficient revenues. We
expect approximately $30,000 in operating costs over the next twelve months. We
cannot guarantee that we will be successful in generating sufficient revenues or
other funds in the future to cover these operating costs. Failure to generate
sufficient revenues will cause us to go out of business.
Our
limited operating history makes it difficult for us to evaluate our future
business prospects and make decisions based on those estimates of our future
performance.
The
concept for our business model was developed in 2006. We have operated as a
corporation but have a limited operating history, based upon no revenues and a
lack of profitability. These factors make it difficult to evaluate our business
on the basis of historical operations. As a consequence, our past results may
not be indicative of future results. Although this is true for any business, it
is particularly true for us because of our limited operating history. Reliance
on historical results may hinder our ability to anticipate and timely adapt to
increases or decreases in sales, revenues or expenses. For example, if we
overestimate our future sales for a particular period or periods based on our
historical growth rate, we may increase our overhead and other operating
expenses to a greater degree than we would have if we correctly anticipated the
lower sales level for that period and reduced our controllable expenses
accordingly. If we make poor budgetary decisions as a result of unreliable
historical data, we could be continue to incur losses, which may result in a
decline in our stock price.
We
have no experience as a public company.
We have
never operated as a public company. We have no experience in complying with the
various rules and regulations which are required of a public company. As a
result, we may not be able to operate successfully as a public company, even if
our operations are successful. We plan to comply with all of the various rules
and regulations which are required of a public company. However, if we cannot
operate successfully as a public company, your investment may be materially
adversely affected. Our inability to operate as a public company could be the
basis of your losing your entire investment in us.
We
are implementing a strategy to grow and expand our business, which is expensive
and may not generate increases in our revenues.
We intend
to expand our business, and we plan to incur expenses associated with our growth
and expansion. Although we recently raised funds through private offerings to
implement our growth strategy, these funds may not be adequate to offset all of
the expenses we incur in expanding our business. We will need to generate
greater revenues to offset expenses associated with our growth, and we may be
unsuccessful in achieving greater revenues, despite our attempts to grow our
business. If our growth strategies do not result in increased revenues, we may
have to abandon our plans for further growth or may even reduce the current size
of our operations.
We
may need to raise additional funds, and these funds may not be available when we
need them.
Based on
our current plans, we have adjusted our operating expenses so that cash
generated from operations and from working capital financing is expected to be
sufficient for the foreseeable future to fund our operations at our currently
forecasted levels. This has not always been the case, since we have had a
history of losses. To try to operate at a break-even level based upon our
current level of anticipated business activity, we believe that we must generate
approximately $30,000 in revenue per year. However, if our forecasts are
inaccurate, we will need to raise additional funds. On the other hand, we may
choose to scale back our operations to operate at break-even with a smaller
level of business activity, while adjusting our overhead to meet the revenue
from current operations. In addition, we expect that we will need to raise
additional funds if we decide to pursue more rapid expansion, the development of
new or enhanced services and products, appropriate responses to competitive
pressures, or the acquisition of complementary businesses or technologies, or if
we must respond to unanticipated events that require us to make additional
investments. . We cannot assure that additional financing will be available when
needed on favorable terms, or at all. If these funds are not available when we
need them, then we may need to change our business strategy and reduce our rate
of growth.
We
must effectively manage the growth of our operations, or we may outgrow our
current infrastructure.
As of
December 31, 2008, we had one employee, our President. If we experience rapid
growth of our operations, we could see a backlog of client orders. We can
resolve these capacity issues by hiring additional personnel and upgrading our
infrastructure. However, we cannot guarantee that sufficient additional
personnel will be available or that we will find suitable technology to aid our
growth. In any case, we will continue pursuing additional sales growth for our
company. Expanding our infrastructure will be expensive, and will require us to
train our workforce, and improve our financial and managerial controls to keep
pace with the growth of our operations.
Because
we are small and do not have much capital, we must limit our operations. A
company in our industry with limited operations has a smaller opportunity to be
successful.
Because
we are small and do not have much capital, we must limit our operations. We must
limit our operations to providing a limited range of products and services as
the only area in which we operate. Because we may have to limit our operations,
we may not generate sufficient sales to make a profit. If we do not make a
profit, we may have to suspend or cease operations.
Because
our current officers and directors are involved with other businesses, some of
which are in the same industry, the manner in which we operate may create the
possibility of a conflict of interest.
All of
our officers and directors are also involved with other businesses, some of
which are other businesses in the same industry. Messrs. Hanson, and Hartman are
involved in other businesses in the same industry. Messrs. Ross and Neil
Bernstein are involved in other business activities not related to the same
industry but which require their time and attention. All of these
other arrangements could create conflict of interest with respect to our
operations. Each of our officers and directors is aware of their
responsibilities with respect to corporate opportunities and plans to operate
our Company in such a manner as to minimize the effect of any conflict of
interest. Each officer and director has agreed to contract with the Company on
the same or better terms and conditions than each would with unaffiliated third
parties. Each of these officers and directors will use their best judgments to
resolve all potential conflicts. We cannot guarantee that any potential
conflicts can be avoided.
Our
success will be dependent upon our management.
Our
success will be dependent upon the decision making of our directors and
executive officers. These individuals intend to commit as much time as necessary
to our business, but this commitment is no assurance of success. The loss of any
or all of these individuals, particularly Messrs. Ross and Neil Bernstein, could
have a material, adverse impact on our operations. We have no written employment
agreements with any officers and directors, including Messrs. Ross and Neil
Bernstein. We have not obtained key man life insurance on the lives of any of
these individuals.
There
are risks associated with introducing new products. If we are not successful
with those product introductions, we will not realize on our investment in
developing those products.
We will
continue to evaluate opportunities to develop product solutions, and when we
choose to develop such products we will incur expenses in those development
efforts. Market acceptance of new products may be slow or less than we expect.
Our products also may not perform in a manner that is required by the market, or
our competitors may be more effective in reaching the market segments we are
targeting with these products. Slow market acceptance of these products will
delay or eliminate our ability to recover our investment in these products.
During any period that we unsuccessfully seek to market these products, we will
also incur marketing costs without corresponding revenue.
Our
ability to grow our business depends on relationships with others. We have no
established relationships at this time. We may never develop such
relationships. Further, if we were to lose those relationships, we could lose
our ability to sell certain of our products.
Most of
our revenue and a majority of our gross profit is expected to come from selling
integrated solutions, consisting of combinations of hardware and software
products produced by others. While our relationships will change from time to
time, we must rely upon technology partners to augment and enhance the products
we plan to sell. At the present time, we do not have any technology partners and
cannot guarantee we will ever develop any such partners. If we do develop such
partners, we risk that a given technology partner will change its marketing
strategy and de-emphasize its use of marketing partners such as us. Our ability
to generate revenue from reselling its products would diminish and
our operations and results of operations would be materially and adversely
affected.
We
are a relatively small company with limited resources compared to some of our
current and potential competitors, which may hinder our ability to compete
effectively.
Some of
our current and potential competitors have longer operating histories,
significantly greater resources, broader name recognition, and a larger
installed base of clients than we have. As a result, these competitors may have
greater credibility with our existing and potential clients. They also may be
able to adopt more aggressive pricing policies and devote greater resources to
the development, promotion and sale of their products than we can to ours, which
would allow them to respond more quickly than us to new or emerging technologies
or changes in client requirements. In addition, some of our current and
potential competitors have already established supplier or joint development
relationships with decision makers at our potential clients.
We
may be unable to hire and retain key personnel.
Our
future success depends on our ability to attract qualified storage technology
and geospatial imagery personnel. We may be unable to attract these necessary
personnel. If we fail to attract or retain skilled employees, or if a key
employee fails to perform in his or her current position, we may be unable to
generate sufficient revenue to offset our operating costs.
We
may need to substantially invest in marketing efforts in order to grow our
business, which will be expensive.
In order
to grow our business, we will need to develop and maintain widespread
recognition and acceptance of our company, our business model, our services and
our products. We have not presented our service and product offering to the
potential market. We plan to rely primarily on word of mouth from our existing
contacts we develop personally through industry events to promote and market
ourselves. In order to successfully grow our company, we may need to
significantly increase our financial commitment to creating awareness and
acceptance of our company among retailers, which would be expensive. To date,
marketing and advertising expenses have been negligible. If we fail to
successfully market and promote our business, we could lose potential clients to
our competitors, or our growth efforts may be ineffective. If we incur
significant expenses promoting and marketing ourselves, it could delay or
completely forestall our profitability.
Our
business is not diversified, which could result in significant fluctuations in
our operating results.
All of
our business is involved in the marketing of selling integrated data storage
solutions, and, accordingly, is dependent upon trends in the sector. Downturns
in the integrated data storage solutions sector could have a material adverse
effect on our business. A downturn in the integrated data storage solutions
sector may reduce our stock price, even if our business is
successful.
Our
directors have the ability to significantly influence any matters to be decided
by the stockholders, which may prevent or delay a change in control of our
company.
The
current members of our Board of Directors beneficially own, in the aggregate,
approximately 90% of our common stock, on a fully diluted basis. As a result, if
they choose to vote in concert, our directors are collectively able to
significantly influence the outcome of any corporate matters submitted to our
stockholders for approval, including any transaction that might cause a change
in control, such as a merger or acquisition. It is unlikely that stockholders in
favor of a matter, which is opposed by the Board of Directors, would be able to
obtain the number of votes necessary to overrule the vote of the Board of
Directors. Further, the control by the directors means that they may make
decisions for us with which you may disagree or that you may feel is not in our
best interests.
RISKS
ASSOCIATED WITH OUR STOCK:
Buying
low-priced penny stocks is very risky and speculative.
The
shares are defined as a penny stock under the Securities and Exchange Act of
1934, and rules of the Commission. The Exchange Act and such penny stock rules
generally impose additional sales practice and disclosure requirements on
broker-dealers who sell our securities to persons other than certain accredited
investors who are, generally, institutions with assets in excess of $5,000,000
or individuals with net worth in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 jointly with spouse, or in transactions not recommended by
the broker-dealer. For transactions covered by the penny stock rules, a
broker-dealer must make a suitability determination for each purchaser and
receive the purchaser's written agreement prior to the sale. In addition, the
broker-dealer must make certain mandated disclosures in penny stock
transactions, including the actual sale or purchase price and actual bid and
offer quotations, the compensation to be received by the broker-dealer and
certain associated persons, and deliver certain disclosures required by the
Commission. Consequently, the penny stock rules may affect the ability of
broker-dealers to make a market in or trade our common stock and may also affect
your ability to resell any shares you may purchase in this offering in the
public markets.
Our common stock currently has a
limited trading market and there is no guarantee an active trading
market will ever develop for our securities.
There is
presently a limited trading market for our common stock. We currently are listed
in the Over-the-Counter Bulletin Board but there is no active trading market. If
no market is ever developed for our common stock, it will be difficult for you
to sell any shares you purchase in this offering. In such a case, you may find
that you are unable to achieve any benefit from your investment or liquidate
your shares without considerable delay, if at all. In addition, if we fail to
have our common stock quoted on a public trading market, your common stock will
not have a quantifiable value and it may be difficult, if not impossible, to
ever resell your shares, resulting in an inability to realize any value from
your investment.
The
over-the-counter market for stock such as ours has had extreme price and volume
fluctuations.
The
securities of companies such as ours have historically experienced extreme price
and volume fluctuations during certain periods. These broad market fluctuations
and other factors, such as new product developments and trends in the our
industry and in the investment markets generally, as well as economic conditions
and quarterly variations in our operational results, may have a negative effect
on the market price of our common stock.
Most
of our common stock is restricted but could become eligible for resale under
Rule 144; this could cause the market price of our common stock to drop
significantly, even if our business is doing well.
Of our
total outstanding shares, 8,525,000, or approximately 96%, are restricted from
immediate resale but may be sold into the market subject to volume and manner of
sale limitations under Rule 144 beginning in December, 2007. This could cause
the market price of our common stock to drop significantly, even if our business
is doing well. We have outstanding 8,929,000 shares at April 1, 2009. This
includes the common shares we sold in our recent public offering, which may be
resold in the public market immediately.
As
restrictions on resale end, the market price of our stock could drop
significantly if the holders of restricted shares sell them or are perceived by
the market as intending to sell them.
We
do not expect to pay dividends on common stock.
We have
not paid any cash dividends with respect to our common stock, and it is unlikely
that we will pay any dividends on our common stock in the foreseeable future.
Earnings, if any, that we may realize will be retained in the business for
further development and expansion.
ITEM
2. DESCRIPTION OF PROPERTY.
We
currently own various items of office equipment. We rent office space from our
President, Mr. Ross Bernstein under a verbal month to month lease for which we
pay no rent per month. This office space is located at 13990 Braun
Road, Golden, CO 80401. We currently carry no inventory and have no
other property. With the proceeds of this offering, we do not plan to acquire
inventory.
ITEM
3. LEGAL PROCEEDINGS.
We are
not a party to any material legal proceedings, nor is our property the subject
of any material legal proceeding.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
We held
no shareholders meeting in the fourth quarter of our fiscal year.
PART
II
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Holders
As of
April 1, 2009, there were sixty record holders of our common stock and there
were 8,929,000 shares of our common stock outstanding.
.
Market
Information
Our shares of common stock are quoted on the Over-the-Counter Bulletin
Board under the trading symbol DTAS.OB. The shares became trading in October,
2008 but there is no extensive history of trading. The quotations reflect
interdealer prices, without retail mark-up, mark-down or commission, and may not
represent actual transactions.
The
Securities Enforcement and Penny Stock Reform Act of 1990
The
Securities and Exchange Commission has also adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks. Penny
stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system).
A
purchaser is purchasing penny stock which limits the ability to sell the stock.
All of our shares constitute penny stock under the Securities and Exchange Act.
The shares will remain penny stocks for the foreseeable future. The
classification of penny stock makes it more difficult for a broker-dealer to
sell the stock into a secondary market, which makes it more difficult for a
purchaser to liquidate his/her investment. Any broker-dealer engaged by the
purchaser for the purpose of selling his or her shares in us will be subject to
Rules 15g-1 through 15g-10 of the Securities and Exchange Act. Rather than
creating a need to comply with those rules, some broker-dealers will refuse to
attempt to sell penny stock.
The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from those rules, to deliver a standardized risk disclosure
document prepared by the Commission, which:
· contains a description of the nature
and level of risk in the market for penny stocks in both public offerings and
secondary trading;
· contains a description of the broker's
or dealer's duties to the customer and of the rights and remedies available to
the customer with respect to a violation to such duties or other requirements of
the Securities Act of 1934, as amended;
· contains a brief, clear, narrative
description of a dealer market, including "bid" and "ask" prices for penny
stocks and the significance of the spread between the bid and ask
price;
· contains a toll-free telephone number
for inquiries on disciplinary actions;
· defines significant terms in the
disclosure document or in the conduct of trading penny stocks;
and
· contains such other information and is
in such form (including language, type, size and format) as the Securities and
Exchange Commission shall require by rule or
regulation;
The
broker-dealer also must provide, prior to effecting any transaction in a penny
stock, to the customer:
·
the bid and offer quotations for
the penny stock;
·
the compensation of the
broker-dealer and its salesperson in the transaction;
·
the number of shares to which
such bid and ask prices apply, or other comparable information relating to the
depth and liquidity of the market for such stock; and
·
monthly account statements
showing the market value of each penny stock held in the customer's
account.
In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements will have the effect of reducing the trading
activity in the secondary market for our stock because it will be subject to
these penny stock rules. Therefore, stockholders may have difficulty selling
their securities.
Equity
Compensation Plan Information
We have
no outstanding stock options or other equity compensation plans.
Stock
Transfer Agent
The
stock transfer agent for our securities is Corporate Stock Transfer of Denver,
Colorado. Their address is 3200 Cherry Creek Drive South, Suite 430,
Denver, Colorado 80209. Their phone number is (303)282-4800.
Dividend
Policy
We
have not previously declared or paid any dividends on our common stock and do
not anticipate declaring any dividends in the foreseeable future. The payment of
dividends on our common stock is within the discretion of our board of
directors. We intend to retain any earnings for use in our operations and the
expansion of our business. Payment of dividends in the future will depend on our
future earnings, future capital needs and our operating and financial condition,
among other factors that our board of directors may deem relevant. We are not
under any contractual restriction as to our present or future ability to pay
dividends.
ITEM
6. SELECTED FINANCIAL DATA
A smaller
reporting company is not required to provide the information in this
Item.
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This
Management’s Discussion and Analysis or Plan of Operation contains
forward-looking statements that involve future events, our future performance
and our expected future operations and actions. In some cases, you can identify
forward-looking statements by the use of words such as “may”, “will”, “should”,
“anticipate”, “believe”, “expect”, “plan”, “future”, “intend”, “could”,
“estimate”, “predict”, “hope”, “potential”, “continue”, or the negative of these
terms or other similar expressions. These forward-looking statements are only
our predictions and involve numerous assumptions, risks and uncertainties. Our
actual results or actions may differ materially from these forward-looking
statements for many reasons, including, but not limited to, the matters
discussed in this report under the caption “Risk Factors”. We urge you not to
place undue reliance on these forward-looking statements, which speak only as of
the date of this document. We undertake no obligation to publicly update any
forward looking-statements, whether as a result of new information, future
events or otherwise.
The
following discussion of our financial condition and results of operations should
be read in conjunction with our financial statements and the related notes
included in this report.
Results
of Operations
From our
inception on December 12, 2006 through December 31, 2008, we generated no
revenue. As a result we have no operating history upon which to evaluate our
business. In addition, we have a history of losses. We had a net loss of
$74,904 for this period.
Our
accountants have expressed doubt about our ability to continue as a going
concern as a result of our continued net losses. Our ability to achieve and
maintain profitability and positive cash flow is dependent upon our ability to
locate clients who will purchase our products and use our services and our
ability to generate revenues.
Operating
expenses, which includes depreciation and general and administrative expenses
for the fiscal year ended December 31, 2008 was $66,376. Operating
expenses for the fiscal year ended December 31, 2007 was $100. Our operating
expenses from inception (December 12, 2006) through the fiscal year ended
December 31, 2008 were $74,926. The major components of operating expenses to
date include professional fees.
We plan
to make every effort to keep operating expenses constant as product sales and
consulting services develop. We do not plan to carry any inventory. Therefore,
each additional sale or service and correspondingly the gross profit of such
sale or service should have minimal offsetting operating expenses. Thus,
additional sales could become profit at a higher return on sales rate as a
result of not needing to expand operating expenses at the same
pace.
We had a net loss of $66,354 for the
fiscal year ended December 31, 2008. For the fiscal year ended December 31,
2007, we had a net loss of $100. From inception (December 12, 2006) through
December 31, 2008, we had a net loss of $74,904.
Based
upon our current plans, we plan to adjust our operating expenses so that cash
generated from operations and from working capital will be sufficient for the
foreseeable future to fund our operations at our currently forecasted levels. To
try to operate at a break-even level based upon our current level of anticipated
business activity, we believe that we must generate approximately $36,000 in
revenue per year. However, if our forecasts are inaccurate, we will need to
raise additional funds. On the other hand, we may choose to scale back our
operations to operate at break-even with a smaller level of business activity,
while adjusting our overhead to meet the revenue from current operations. In
addition, we expect that we will need to raise additional funds if we decide to
pursue more rapid expansion, the development of new or enhanced services and
products, appropriate responses to competitive pressures, or the acquisition of
complementary businesses or technologies, or if we must respond to unanticipated
events that require us to make additional investments. We cannot assure that
additional financing will be available when needed on favorable terms, or at
all.
We expect
to incur operating losses in future periods because we will be incurring
expenses and not generating sufficient revenues. We expect approximately $36,000
in operating costs over the next twelve months. We cannot guarantee that we will
be successful in generating sufficient revenues or other funds in the future to
cover these operating costs. Failure to generate sufficient revenues or
additional financing when needed could cause us to go out of
business.
Liquidity
and Capital Resources
As of
December 31, 2008, we had cash or cash equivalents of $16.
Net cash
used for operating activities was $67,049 for the fiscal year ended December 31,
2008, compared to net cash provided by operating activities of $2,200
for the fiscal year ended December 31, 2007.
Cash
flows used by investing activities were $34,070 for the fiscal year ended
December 31, 2008 and $10,465 for the fiscal year ended December 31, 2007. All
consisted of deferred offering costs.
Cash
flows provided by financing activities accounted for $101,000 for the fiscal
year ended December 31, 2008 for $7,500 for the fiscal year ended December 31,
2007. These cash flows were all related to sales of stock. In March, 2008,
we closed our registered public offering. We sold a total of 404,000 common
shares at a price of $.25 per share, for a total of $101,000.
Over the
next twelve months our capital costs will be approximately $10,000 to $12,000
primarily to develop operations. We plan to buy office equipment to be used in
our operations.
We
believe that the offering will provide sufficient capital in the short term for
our current level of operations. This is because we believe that we can attract
sufficient product sales and services within our present organizational
structure and resources to become profitable in our operations. Additional
resources will be needed to expand into additional locations, which we have no
plans to do at this time.
Otherwise,
we do not anticipate needing to raise additional capital resources in the next
twelve months.
Until the
offering is complete and the current operations become cash flow positive, our
officers and directors will fund the operations to continue the business. This
includes the situation in which the minimum offering is not sold. At this time
we have no other resources on which to get cash if needed without their
assistance.
Our
principle source of liquidity will be our operations. We expect variation in
revenues to account for the difference between a profit and a loss. Also
business activity is closely tied to the economy of Denver and the U.S. economy.
A slow down in purchases of technology could have a negative impact to our
business. In any case, we try to operate with minimal overhead. Our primary
activity will be to seek to develop clients and, consequently, our sales. If we
succeed in expanding our client base and generating sufficient sales, we will
become profitable. We cannot guarantee that this will ever occur. Our plan is to
build our company in any manner which will be successful.
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements with any party.
Critical
Accounting Policies
Our
discussion and analysis of results of operations and financial condition are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these consolidated financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. We evaluate our estimates on an ongoing basis, including those
related to provisions for uncollectible accounts receivable, inventories,
valuation of intangible assets and contingencies and litigation. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
The
accounting policies that we follow are set forth in Note 2 to our financial
statements as included in this document. These accounting policies conform to
accounting principles generally accepted in the United States, and have been
consistently applied in the preparation of the financial
statements.
Recently
Issued Accounting Pronouncements
In
December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 123R "Share Based Payment." This
statement is a revision of SFAS No. 123, "Accounting for Stock-Based
Compensation" and supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees, and its related implementation guidance. SFAS No. 123R addresses all
forms of share based payment ("SBP") awards including shares issued under
employee stock purchase plans, stock options, restricted stock and stock
appreciation rights. Under SFAS No. 123R, SBP awards result in a cost that will
be measured at fair value on the awards' grant date, based on the estimated
number of awards that are expected to vest. This statement is effective for
public entities that file as small business issuers, as of the beginning of the
first interim or annual reporting period that begins after December 15, 2005. We
adopted this pronouncement during the first quarter of 2005.
In
December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets -
An Amendment of APB Opinion No. 29. The amendments made by SFAS No. 153 are
based on the principle that exchanges of non-monetary assets should be measured
based on the fair value of the assets exchanged. Further, the amendments
eliminate the narrow exception for non-monetary exchanges of similar productive
assets and replace it with a broader exception for exchanges of non-monetary
assets that do not have "commercial substance." SFAS No. 153 is effective for
non-monetary asset exchanges occurring in fiscal periods beginning after June
15, 2005. The adoption of SFAS No. 153 on its effective date did not have a
material effect on our consolidated financial statements.
In March
2005, the FASB issued Financial Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations - an Interpretation of FASB Statement
No. 143", which specifies the accounting treatment for obligations associated
with the sale or disposal of an asset when there are legal requirements
attendant to such a disposition. We adopted this pronouncement in 2005, as
required, but there was no impact as there are no legal obligations associated
with the future sale or disposal of any assets.
In May
2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections —
A Replacement of APB Opinion No. 20 and SFAS Statement No. 3". SFAS No. 154
changes the requirements for the accounting and reporting of a change in
accounting principle by requiring retrospective application to prior periods'
financial statements of the change in accounting principle, unless it is
impracticable to do so. SFAS No. 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005. We
do not expect the adoption of SFAS No. 154 to have any impact on our
consolidated financial statements.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
A smaller
reporting company is not required to provide the information in this
Item.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
DATA
STORAGE CONSULTING SERVICES, INC.
(A
Development Stage Company)
FINANCIAL
STATEMENTS
December
31, 2007 & 2008
DATA
STORAGE CONSULTING SERVICES, INC.
(A
Development Stage Company)
Financial
Statements
TABLE
OF CONTENTS
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Page
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REPORT
OF INDEPENDENT REGISTERED
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PUBLIC
ACCOUNTING FIRM
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FINANCIAL
STATEMENTS
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Balance
sheets
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Statements
of operations
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Statements
of stockholders' equity
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Statements
of cash flows
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Notes
to financial statements
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Certified
Public Accountant
2851
South Parker Road
Suite
720
Aurora,
Colorado 80014
Phone
(303) 306-1967
Fax (303)
306-1944
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors
Data
Storage Consulting Services, Inc.
Englewood,
Colorado
I have
audited the accompanying balance sheets of Data Storage Consulting Services,
Inc. as of December 31, 2007 and 2008, and the related statements of operations,
stockholders' equity and cash flows for the years then ended and for the period
from December 12, 2006 (inception of the development stage) through December 31,
2008. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I
conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Data Storage Consulting Services,
Inc. as of December 31, 2007 and 2008, and the related statements of operations,
stockholders' equity and cash flows for the years then ended and for the period
from December 12, 2006 (inception of the development stage) through December 31,
2008 in conformity with accounting principles generally accepted in the United
States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements the Company has suffered recurring losses from operations that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Aurora,
Colorado
|
/s/ Ronald R.
Chadwick, P.C.
|
April
30, 2009
|
RONALD
R. CHADWICK, P.C.
|