Note 2 – Summary of Significant Accounting Policies

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its subsidiaries, consisting of (i) Information Technology Acquisition Corporation, a Delaware corporation; and (ii) its majority-owned subsidiary, Nexxis Inc., a Nevada corporation. All intercompany transactions and balances have been eliminated in consolidation.

On September 11, 2025, the Company completed the sale of its Cloud Solutions Business, which consisted of the operations of the Company’s subsidiaries, CloudFirst Technologies Corporation and CloudFirst Europe Ltd. The operating results of these businesses have been reclassified as discontinued operations for all periods presented. 

Segment Reporting

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. In evaluating operating segments, the Company considers: its internal organizational structure; the availability of separate financial information; and the criteria used by the Company’s CODM, its Chief Executive Officer, to evaluate performance. The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. 

Recently Issued and Newly Adopted Accounting Standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires annual disclosure of specific categories in the tax rate reconciliation and provides additional information for reconciling items that meet a quantitative threshold. The new requirements are effective for annual periods beginning after December 15, 2024. The guidance has been applied on a prospective basis with the option to apply the standard retrospectively. The Company adopted ASU 2023-09 for the year ended December 31, 2025 on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, which requires public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the financial statements. Subsequently, in January 2025, the FASB issued ASU 2025-01, which clarified the effective date of ASU 2024-03. The amendments in this pronouncement will be effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently assessing the potential impacts of adoption on its financial statements.

In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. This ASU provides guidance for determining the accounting acquirer in a business combination involving a variable interest entity. The amendments are effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. The Company is currently evaluating the impact of this ASU on its consolidated financial statements but does not expect it to have a material impact upon adoption.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (“Topic 326”), which provides all entities with a practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of current accounts receivable and contract assets. The guidance is effective for annual periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company will adopt ASU 2025-05 effective January 1, 2026. The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which revises the recognition guidance for internal-use software by eliminating the previous model based on software development stages and introducing a principles-based approach. The guidance is effective for annual periods beginning after December 15, 2027 and interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the impact on its consolidated financial statements and related disclosures.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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

Assets and liabilities recognized or disclosed at fair value in the financial statements are categorized based upon the level of judgment associated with the inputs used to measure their respective fair values.

The fair value measurement disclosures are grouped into three levels based on valuation factors:

The Company’s marketable securities are classified as within Level 1 of the fair value hierarchy. Management believes the estimated fair value of these accounts at December 31, 2025, approximates their carrying value as reflected in the balance sheets due to the short-term nature of these instruments.

Level 3 fair value measurements are derived from valuation techniques that include significant inputs that are not based on observable market data. When required, the Company uses discounted and undiscounted cash flow models to determine the fair value of certain assets and liabilities. These models rely on unobservable inputs, which reflect management’s own assumptions about the factors that market participants would use in pricing the asset or liability, and are significant to the overall fair value measurement. During the year ended December 31, 2025, the Company recognized a warrant liability associated with Common Stock Purchase Warrants issued by the Company on July 21, 2021 which were valued using Level 3 inputs (See Note 5).

As of December 31, 2025 and 2024, the Company does not have assets and liabilities valued using Level 2 or Level 3 inputs.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company measures property and equipment at fair value on a non-recurring basis in periods after initial measurement in circumstances when the fair value of such assets are impaired below their recorded cost. As of December 31, 2025 and 2024, there were no material non-financial assets recorded at fair value.

Cash and Cash Equivalents

The Company considers all short-term, highly liquid investments that are readily convertible to known amounts of cash and that are purchased with original maturities of three months or less to be cash equivalents.

Marketable Securities

Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in earnings.

The following table sets forth a summary of the changes in marketable securities:

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, marketable securities and trade accounts receivable. The Company’s cash and marketable securities 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 concentrated in the United States.

The Company’s Nexxis subsidiary had four customers that individually accounted for 25%, 21%, 15%, and 10% of consolidated accounts receivable at December 31, 2025. The Company’s Nexxis Subsidiary had three customers that individually accounted for 18%, 15% and 14% of consolidated accounts receivable at December 31, 2024. No customer accounted for more than 10% of sales for the year ended December 31, 2025. One customer accounted for 16% of sales for the year ended December 31, 2024.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. The allowance is assessed by applying a historical loss-rate methodology in accordance with ASC Topic 326, Financial Instruments— Credit Losses, adjusted as necessary based on the Company's review of accounts receivable, specifically reviewing factors including the age of the balances, customer payment history, creditworthiness, and other factors. Due to the monthly subscription nature of the services and positive collection history, this allowance has not been material.

Property and Equipment

Property and equipment, which consists primarily of office and computer equipment, are recorded at cost and depreciated over their estimated useful lives using the straight-line method. The estimated useful lives for this equipment are generally five to seven years.

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.

Deferred Offering Costs

Costs that are directly associated with equity financings are capitalized until such financings are consummated, at which time such costs are recorded against the gross proceeds or cash payments of the offering, depending on the nature of the financing. Should an in-process equity financing be abandoned, the deferred offering costs are expensed immediately as a charge to operating expenses in the consolidated statements of operations.

Discontinued Operations

The Company reports financial results for discontinued operations separately from continuing operations on the face of the financial statements and for disclosures in the notes. Discontinued operations reporting occurs only when the disposal of a component or a group of components represents a strategic shift that will have a major effect on the Company’s operations and financial results. Refer to Note 3, “Discontinued Operations,” for further information regarding the Company’s discontinued operations.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. As of December 31, 2025, and 2024, the Company had a net deferred tax liability of $312,334 and $39,031, respectively.

The Company’s policy is to recognize, when applicable, interest and penalties on uncertain tax positions as part of income tax expense, and to record unrecognized tax benefits as noncurrent liabilities. Per FASB ASC 740-10, disclosure is not required of an uncertain tax position unless it is considered probable that a claim will be asserted and there is a more-likely-than-not possibility that the outcome will be unfavorable. Using this guidance, as of December 31, 2025, and 2024, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company’s 2025, 2024, 2023, and 2022 Federal and State tax returns remain subject to examination by their respective taxing authorities. None of the Company’s Federal or State tax returns are currently under examination.

Revenue Recognition

The Company’s continuing operations derive all revenue from its Nexxis subsidiary, which provides Voice over Internet Protocol (“VoIP”), Internet access, and data transport services. Revenue is recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

The Company’s contracts are typically monthly subscription agreements. For these contracts, the Company has a single performance obligation: to provide continuous access to its VoIP, Internet, and/or data transport services over the contract term. This performance obligation is satisfied over time because the customer simultaneously receives and consumes the benefits of the services as they are provided.

Revenue is recognized ratably over the applicable monthly service period. The Company’s standard payment terms are monthly, and the transaction price is the fixed monthly subscription fee. Because the billing cycle corresponds directly to the service period, the Company does not have significant contract assets or contract liabilities (deferred revenue) at the end of a reporting period. All revenue from continuing operations is transacted in the United States in U.S. dollars.

In the following table, revenue is disaggregated by major product category:

Leases

The Company determines whether an arrangement contains a lease at the inception of the contract. Right-of-Use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, while lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date, based on the present value of estimated lease payments over the lease term. The lease term includes options to extend the lease when it is reasonably certain that the Company will exercise those options. The Company has elected the practical expedient to exclude leases with terms of 12 months or less from the balance sheet. Lease expense for these short-term leases is recognized on a straight-line basis over the lease term. Variable lease payments that depend on an index or rate are initially measured using the index or rate in effect at the lease commencement date. Other variable payments are recognized in the period in which the obligation is incurred. Following the sales of Cloud Solutions Business on September 11, 2025, the Company has no leases that require the recognition of an ROU asset and lease liability on the Company’s consolidated balance sheets.

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 $18,512 and $31,744 of advertising costs for the years ended December 31, 2025, and 2024, respectively.

Stock-Based Compensation

The Company follows the requirements of FASB ASC 718, 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 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 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 estimated 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 is based on the U.S. Treasury yield curve in effect at the time of valuation for instruments with a similar expected 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.

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.

Earnings per Share

Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) 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 years ended December 31, 2025 and 2024:

The Company reported a loss from continuing operations for the years ended December 31, 2025 and 2024. Therefore, dilutive common shares are not assumed to have been issued since their effect is anti-dilutive for these periods. The following table sets forth the number of potential shares of common stock excluded from net income per share because their effect was antidilutive: