Group 1 - Maxim Group downgraded Data Storage Corporation from Buy to Hold due to limited visibility into management's new strategic direction after the sale of its CloudFirst subsidiary [1] - The divestiture of CloudFirst was completed on September 11, generating net proceeds of approximately $24 million, with up to 85% allocated for a tender offer and the remainder for acquisitions and investments in AI-enabled software, GPU technologies, or cybersecurity [2] - The remaining VoIP segment contributes around $1.2 million in annual revenue post-sale [2] Group 2 - Maxim lowered its revenue estimates for 2025 and 2026 to account for the loss of CloudFirst, which had been the primary revenue source for Data Storage Corporation, highlighting uncertainty regarding future acquisitions and business pivot efforts [3]

Core Viewpoint - Data Storage Corporation has completed the sale of its CloudFirst business, generating approximately $40 million in gross proceeds and $24 million in net proceeds, which will be used for strategic investments and acquisitions in technology sectors [1][2][3] Group 1: Transaction Details - The sale of CloudFirst was approved by shareholders on September 10, 2025, and closed on September 11, 2025 [1] - The transaction generated approximately $40 million in gross proceeds, with estimated net proceeds of $24 million after fees, taxes, and adjustments [1][2] Group 2: Future Plans - The company plans to use the proceeds to support targeted acquisitions and investments in digital infrastructure, including AI-enabled software, GPU technologies, and cybersecurity [2] - The company will continue operating its telecommunications subsidiary, Nexxis, Inc., while remaining open to opportunities that offer recurring revenue and long-term shareholder value [2][3] Group 3: Management Commentary - The CEO of Data Storage Corporation stated that the completion of the CloudFirst transaction positions the company to evaluate and execute targeted acquisitions with a disciplined approach [3] - The CloudFirst brand, leadership team, and service model will remain intact under Performive, with no expected changes to client relationships, staffing, or service delivery [3][5] Group 4: Company Focus - Data Storage Corporation focuses on investing in GPU Infrastructure-as-a-Service (IaaS), AI-driven software applications, cybersecurity, and voice/data telecommunications [4] - The company's goal is to build recurring revenue streams while maintaining operational discipline [4]

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for Data Storage Corporation [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in equity, and cash flows, with detailed accounting notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total current assets | $14,761,707 | $15,416,063 | | Total assets | $24,421,146 | $25,280,215 | | Total current liabilities | $2,682,953 | $3,546,149 | | Total liabilities | $3,190,416 | $4,108,250 | | Total stockholders' equity | $21,230,730 | $21,171,965 | - Total assets decreased by approximately **$0.86 million** from December 31, 2024, to June 30, 2025, primarily due to decreases in cash and cash equivalents, accounts receivable, and marketable securities[9](index=9&type=chunk) - Total liabilities decreased by approximately **$0.92 million**, mainly driven by a reduction in accounts payable and accrued expenses and the full repayment of finance leases[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's financial performance over specific periods, reporting sales, gross profit, and net income or loss Condensed Consolidated Statements of Operations Highlights (Three Months Ended June 30) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :------------------------- | :------------ | :------------ | :------------ | :--------- | | Sales | $5,146,922 | $4,910,492 | $236,430 | 4.8% | | Gross profit | $2,536,754 | $2,407,893 | $128,861 | 5.3% | | Loss from operations | $(795,667) | $(388,786) | $(406,881) | 104.6% | | Net income (loss) | $(731,963) | $(246,605) | $(485,358) | 196.8% | | EPS – basic | $(0.10) | $(0.04) | $(0.06) | 150.0% | Condensed Consolidated Statements of Operations Highlights (Six Months Ended June 30) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :------------------------- | :------------ | :------------ | :------------ | :--------- | | Sales | $13,230,678 | $13,146,239 | $84,439 | 0.6% | | Gross profit | $5,396,650 | $5,374,365 | $22,285 | 0.4% | | Loss from operations | $(888,176) | $(174,991) | $(713,185) | 407.6% | | Net income (loss) | $(705,575) | $99,299 | $(804,874) | -810.6% | | EPS – basic | $(0.10) | $0.02 | $(0.12) | -600.0% | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section outlines the changes in the company's equity over a period, reflecting impacts from net income, stock transactions, and other comprehensive income Changes in Stockholders' Equity (Six Months Ended June 30, 2025) | Item | Amount ($) | | :--------------------------------- | :--------- | | Balance January 1, 2025 | 21,171,965 | | Stock options exercised | 38,267 | | Stock-based compensation | 638,844 | | Gain on foreign currency translation | 87,229 | | Net income (loss) | (705,575) | | Balance June 30, 2025 | 21,230,730 | - Total stockholders' equity increased slightly from **$21,171,965** at January 1, 2025, to **$21,230,730** at June 30, 2025, despite a net loss, primarily due to stock-based compensation and a gain on foreign currency translation[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section reports the cash generated and used by the company across operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | | :--------------------------------- | :------------ | :------------ | | Operating activities | $(727,487) | $354,791 | | Investing activities | $272,016 | $(798,381) | | Financing activities | $(13,253) | $(205,154) | | Decrease in cash and cash equivalents | $(458,774) | $(648,744) | | Cash and cash equivalents, end of period | $611,323 | $779,986 | - Net cash used in operating activities significantly increased to **$(727,487)** in 2025 from cash provided of **$354,791** in 2024, primarily due to a net loss and increased working capital related to deferred transaction fees for the divestiture[19](index=19&type=chunk)[144](index=144&type=chunk) - Cash provided by investing activities improved to **$272,016** in 2025 from cash used of **$(798,381)** in 2024, driven by net sales of marketable securities to fund operations and lower capital expenditures[19](index=19&type=chunk)[145](index=145&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, including accounting policies and specific line item breakdowns [Note 1 – Basis of Presentation, Organization and Other Matters](index=10&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation,%20Organization%20and%20Other%20Matters) This note describes the company's business, its organizational structure, and the basis for preparing the interim financial statements - Data Storage Corporation (DSC) provides subscription-based disaster recovery, cloud infrastructure, cybersecurity, and Voice and Data solutions, primarily to healthcare, banking, finance, and government industries[21](index=21&type=chunk)[22](index=22&type=chunk) - DSC expanded internationally by establishing CloudFirst Europe Ltd. in the UK on August 12, 2024 (name changed December 27, 2024), to manage European operations[25](index=25&type=chunk) - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and include normal recurring adjustments[26](index=26&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=10&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods used in preparing the financial statements, including consolidation, revenue recognition, and new accounting standards - The consolidated financial statements include DSC and its subsidiaries: CloudFirst Technologies Corporation, Information Technology Acquisition Corporation, Nexxis Inc., and CloudFirst Europe Ltd[27](index=27&type=chunk) - New accounting standards ASU 2024-03 (Income Statement Expense Disaggregation) and ASU 2025-03 (Business Combinations) are effective for fiscal years beginning after December 15, 2026, and 2027, respectively; DSC is assessing their impact[29](index=29&type=chunk)[30](index=30&type=chunk) - Revenue is disaggregated by major product line (Cloud infrastructure & disaster recovery, Equipment and software, Managed services, Nexxis VoIP services), geography (United States, International), and timing of recognition (point in time vs. over time)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) Revenue Disaggregation by Timing of Recognition (Three & Six Months Ended June 30) | Timing of Revenue Recognition | 3 Months 2025 | 3 Months 2024 | 6 Months 2025 | 6 Months 2024 | | :---------------------------------- | :------------ | :------------ | :------------ | :------------ | | Products transferred at a point in time | $660,104 | $3,943,429 | $4,265,060 | $4,989,406 | | Products and services transferred over time | $4,486,818 | $967,063 | $8,965,618 | $8,156,833 | | Total Sales | $5,146,922 | $4,910,492 | $13,230,678 | $13,146,239 | [Note 3 - Prepaids and other current assets](index=18&type=section&id=Note%203%20-%20Prepaids%20and%20other%20current%20assets) This note details the composition and changes in prepaid expenses and other current assets, including deferred transaction costs Prepaids and Other Current Assets (June 30, 2025 vs. December 31, 2024) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Prepaid marketing & promotion | $169,768 | $47,045 | | Prepaid subscriptions and licenses | $577,473 | $483,170 | | Prepaid maintenance | $162,763 | $191,552 | | Prepaid insurance | $58,363 | $67,373 | | Deferred transaction costs | $838,352 | — | | Other | $106,375 | $70,362 | | Total | $1,913,094 | $859,502 | - Prepaid and other current assets significantly increased by **$1,053,592**, primarily due to **$838,352** in deferred transaction costs related to the potential divestiture of the cloud solutions business[72](index=72&type=chunk)[112](index=112&type=chunk) [Note 4 - Property and Equipment](index=18&type=section&id=Note%204-%20Property%20and%20Equipment) This note provides a breakdown of the company's property and equipment, including data center assets, and related depreciation expenses Property and Equipment, Net (June 30, 2025 vs. December 31, 2024) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Data center equipment | $9,833,486 | $9,368,082 | | Total property and equipment | $10,078,502 | $9,598,963 | | Less: Accumulated depreciation | $(6,740,363) | $(6,159,307) | | Net property and equipment | $3,338,139 | $3,439,656 | - Net property and equipment decreased slightly by **$101,517**, with an increase in data center equipment offset by higher accumulated depreciation[73](index=73&type=chunk) - Depreciation expense for the six months ended June 30, 2025, was **$580,332**, an increase from **$497,003** in the prior year period[73](index=73&type=chunk) [Note 5 - Goodwill and Intangible Assets](index=18&type=section&id=Note%205%20-%20Goodwill%20and%20Intangible%20Assets) This note details the company's goodwill and other intangible assets, their amortization policies, and related expenses Goodwill and Intangible Assets (June 30, 2025) | Asset Type | Gross Amount | Accumulated Amortization | Net Amount | | :--------------------------------------- | :----------- | :----------------------- | :--------- | | Goodwill (Indefinite life) | $4,238,671 | — | $4,238,671 | | Trademarks (Indefinite life) | $514,268 | — | $514,268 | | Customer lists (7 years) | $2,614,099 | $1,834,932 | $779,167 | | ABC acquired contracts (5 years) | $310,000 | $310,000 | — | | SIAS acquired contracts (5 years) | $660,000 | $660,000 | — | | Non-compete agreements (4 years) | $272,147 | $272,147 | — | | Website and digital assets (3 years) | $33,002 | $33,002 | — | | Total Goodwill and Intangible Assets | $8,642,187 | $3,110,081 | $5,532,106 | - Goodwill and trademarks are not subject to amortization, while other intangible assets like customer lists, acquired contracts, non-compete agreements, and website/digital assets are amortized over their estimated useful lives[75](index=75&type=chunk) - Amortization expense for the six months ended June 30, 2025, was **$133,571**, a slight decrease from **$137,507** in the prior year period[76](index=76&type=chunk) [Note 6 - Leases](index=19&type=section&id=Note%206-Leases) This note describes the company's operating and finance lease arrangements, including lease-related expenses and the status of lease obligations - The Company's leases consist of operating leases for office space (e.g., corporate headquarters in Melville, NY, expiring October 30, 2029) and finance leases for equipment[77](index=77&type=chunk)[78](index=78&type=chunk) - All outstanding finance lease obligations were paid in full during the three months ended March 31, 2025, resulting in no material finance leases as of June 30, 2025[81](index=81&type=chunk) Lease-Related Expenses (Three Months Ended June 30, 2025) | Item | Amount ($) | | :-------------------------------------------- | :--------- | | Amortization of finance lease assets | $121,923 | | Interest on finance lease liabilities | $489 | | Amortization of operating lease assets | $37,528 | | Total net lease cost | $159,940 | [Note 7 - Commitments and Contingencies](index=20&type=section&id=Note%207%20-%20Commitments%20and%20Contingencies) This note discloses the company's significant contractual commitments and potential contingent liabilities - The Company has approximately **$690,885** in remaining payments under a licensing agreement for marketing-related materials with a National Football League team, acquired as part of the Flagship acquisition, through 2027[83](index=83&type=chunk) [Note 8 - Stockholders' Equity](index=20&type=section&id=Note%208%20-%20Stockholders'%20Equity) This note details the components of stockholders' equity, including authorized and outstanding shares, stock option, and restricted stock unit activity - The Company has **260,000,000** authorized shares of capital stock, comprising **250,000,000** common shares and **10,000,000** preferred shares[84](index=84&type=chunk) - As of June 30, 2025, **7,230,619** common shares were issued and outstanding, while no preferred shares were issued or outstanding[9](index=9&type=chunk)[97](index=97&type=chunk) Stock Option Activity (Six Months Ended June 30, 2025) | Item | Number of Shares Under Options | Weighted Average Exercise Price ($) | | :------------------------ | :----------------------------- | :---------------------------------- | | Options Outstanding at Jan 1, 2025 | 678,302 | 2.79 | | Options Granted | 52,420 | 4.36 | | Exercised | (17,821) | 2.15 | | Expired/Cancelled | (23,900) | 2.96 | | Options Outstanding at Jun 30, 2025 | 689,001 | 2.91 | - Stock-based compensation expense for options totaled **$294,116** for the six months ended June 30, 2025, an increase from **$214,357** in the prior year[87](index=87&type=chunk) Restricted Stock Unit (RSU) Activity (Six Months Ended June 30, 2025) | Item | Shares | Fair Value ($) | | :--------------------------------- | :----- | :------------- | | Outstanding non-vested at Jan 1, 2025 | 214,375 | 2.79 | | Granted | 125,083 | 3.95 | | Vested | (167,690) | 3.44 | | Forfeited | (796) | 4.88 | | Outstanding non-vested at Jun 30, 2025 | 170,972 | 2.99 | - Stock-based compensation for RSUs totaled **$344,728** for the six months ended June 30, 2025, up from **$164,692** in the prior year[92](index=92&type=chunk) [Note 9 – Litigation](index=23&type=section&id=Note%209%20%E2%80%93%20Litigation) This note discloses the company's involvement in any legal proceedings and their potential financial impact - The Company is not currently involved in any litigation that is believed to have a materially adverse effect on its financial condition or results of operations[99](index=99&type=chunk) [Note 10 – Related Party Transactions](index=23&type=section&id=Note%2010%20%E2%80%93%20Related%20Party%20Transactions) This note details transactions between the company and its related parties, including management and board members - The Company received **$3,257** from Nexxis Capital LLC (owned by CEO and President) for the six months ended June 30, 2025, a significant decrease from **$77,348** in the prior year[100](index=100&type=chunk) - Payments to Eisner & Maglione CPA's LLC (where a Board member is a partner) for accounting and consulting services increased to **$27,739** for the six months ended June 30, 2025, from **$15,083** in the prior year[101](index=101&type=chunk) [Note 11 – Equity Investment](index=23&type=section&id=Note%2011%20%E2%80%93%20Equity%20Investment) This note describes the company's equity investments in other entities and their accounting treatment - On May 21, 2025, DSC invested **$100,000** in TG-17, Inc., a privately held Delaware corporation, for Series CF Preferred Stock, representing less than **20%** equity and no significant influence[102](index=102&type=chunk) - The investment is accounted for at cost using the measurement alternative under ASC 321, with no impairment or remeasurement identified as of June 30, 2025[103](index=103&type=chunk)[104](index=104&type=chunk) [Note 12 – Segment Information](index=23&type=section&id=Note%2012%20%E2%80%93%20Segment%20Information) This note provides financial data for the company's operating segments, allowing for an assessment of their individual performance - The Company operates in three reportable segments: CloudFirst Technologies, CloudFirst Europe Ltd., and Nexxis Inc., with performance evaluated based on operating income or losses[105](index=105&type=chunk) Segment Sales (Three Months Ended June 30, 2025) | Segment | Sales ($) | | :----------------------- | :-------- | | CloudFirst Technologies | 4,815,516 | | CloudFirst Europe Ltd. | — | | Nexxis Inc. | 331,406 | | Corporate | — | | Total Sales | 5,146,922 | Segment Income (Loss) from Operations (Six Months Ended June 30, 2025) | Segment | Income (Loss) from Operations ($) | | :----------------------- | :-------------------------------- | | CloudFirst Technologies | 1,675,376 | | CloudFirst Europe Ltd. | (900,106) | | Nexxis Inc. | (17,426) | | Corporate | (1,646,020) | | Total | (888,176) | [Note 13 – Subsequent Events](index=26&type=section&id=Note%2013%20-%20Subsequent%20Events) This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On July 11, 2025, the Company entered an agreement to sell its cloud solutions business (CloudFirst Technologies and CloudFirst Europe) for approximately **$40 million** in cash, subject to shareholder approval and other adjustments[111](index=111&type=chunk)[112](index=112&type=chunk) - The transaction represents a strategic shift, but as of June 30, 2025, it did not meet held-for-sale classification criteria due to pending shareholder approval[111](index=111&type=chunk)[113](index=113&type=chunk) - The Company recorded **$838,352** in deferred transaction costs related to this potential divestiture as of June 30, 2025[112](index=112&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, and strategic developments, including the impact of the planned cloud solutions business divestiture [Company Overview Summary](index=27&type=section&id=COMPANY%20OVERVIEW%20SUMMARY) This section provides a high-level overview of Data Storage Corporation's business, its core offerings, and competitive advantages - Data Storage Corporation (DSC) is a leading provider of enterprise cloud and business continuity solutions, specializing in fully managed cloud hosting, disaster recovery, cybersecurity, and IT automation services through its subsidiaries: CloudFirst Technologies, CloudFirst Europe, and Nexxis Inc[116](index=116&type=chunk) - CloudFirst focuses on high-performance cloud solutions for IBM i and AIX workloads, a niche not natively supported by major public cloud providers, providing a competitive edge[116](index=116&type=chunk) - DSC maintains a highly recurring revenue base with over **90%** annual subscription renewal rates from over **425** organizations across diverse sectors[116](index=116&type=chunk) - DSC expanded into the UK and European markets in October 2024 via CloudFirst Europe Ltd., investing in operations, personnel, and partner recruitment to support international growth[117](index=117&type=chunk) [Recent Developments](index=28&type=section&id=Recent%20Developments) This section highlights significant recent events, including the planned divestiture of the cloud solutions business and its strategic implications - On July 11, 2025, DSC agreed to sell its cloud solutions business (CloudFirst Technologies and CloudFirst Europe) for approximately **$40 million** in cash, pending shareholder approval[119](index=119&type=chunk)[120](index=120&type=chunk) - The divestiture represents a strategic shift, with continuing operations to consist solely of the Nexxis subsidiary (VoIP, telecommunications, data access), which historically represented only about **5%** of total revenue[119](index=119&type=chunk)[122](index=122&type=chunk) - Post-divestiture, DSC plans to pursue acquisitions in complementary and high-growth technology sectors and grow Nexxis, while evaluating and rationalizing corporate costs[122](index=122&type=chunk) [Results of Operations](index=28&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, detailing revenue, gross profit, and operating expenses for the reported periods [Three Months Ended June 30, 2025, as Compared to June 30, 2024](index=28&type=section&id=Three%20months%20ended%20June%2030,%202025,%20as%20compared%20to%20June%2030,%202024) This section compares the company's financial results for the three months ended June 30, 2025, against the same period in 2024 Sales Performance (Three Months Ended June 30) | Product Line | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :------------ | :------------ | :--------- | | Cloud infrastructure & disaster recovery | $3,358,941 | $3,165,716 | $193,225 | 6.1% | | Equipment and software | $687,321 | $782,303 | $(94,982) | (12.1)% | | Managed services | $738,860 | $642,518 | $96,342 | 15.0% | | Nexxis VoIP services | $323,620 | $275,830 | $47,790 | 17.3% | | Total Sales | $5,146,922 | $4,910,492 | $236,430 | 4.8% | - Total sales increased by **4.8%** due to growth in subscription-based services, particularly Cloud Infrastructure & disaster recovery (**6.1%**) and Nexxis VoIP services (**17.3%**), partially offset by a **12.1%** decrease in equipment and software sales[123](index=123&type=chunk) - Gross profit margin remained stable at **49.3%** (2025) vs. **49.0%** (2024), benefiting from a favorable revenue mix towards higher-margin cloud infrastructure services[124](index=124&type=chunk) Selling, General and Administrative Expenses (Three Months Ended June 30) | Expense Category | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------- | :------------ | :------------ | :------------ | :--------- | | Salaries and director fees | $1,368,479 | $1,111,414 | $257,065 | 23.1% | | Stock based compensation | $412,580 | $207,847 | $204,733 | 98.5% | | Advertising | $308,901 | $249,147 | $59,754 | 24.0% | | Commissions | $382,069 | $298,970 | $83,099 | 27.8% | | Total SG&A Expenses | $3,332,421 | $2,796,679 | $535,742 | 19.2% | - Selling, general and administrative expenses increased by **19.2%**, primarily due to higher salaries and director fees (**23.1%** increase from headcount and merit adjustments) and a significant rise in non-cash stock-based compensation (**98.5%** increase from new equity awards)[125](index=125&type=chunk) - Loss from operations increased to **$(795,667)** from **$(388,786)** in the prior year, mainly due to increased SG&A expenses, including costs for the newly established U.K. entity[126](index=126&type=chunk) - Net loss attributable to common stockholders widened to **$(733,049)** from **$(244,240)**, driven by the increased operating loss and lower other income (due to reduced interest income from marketable securities)[127](index=127&type=chunk) [Six Months Ended June 30, 2025, as Compared to June 30, 2024](index=29&type=section&id=Six%20months%20ended%20June%2030,%202025,%20as%20compared%20to%20June%2030,%202024) This section compares the company's financial results for the six months ended June 30, 2025, against the same period in 2024 Sales Performance (Six Months Ended June 30) | Product Line | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :------------ | :------------ | :--------- | | Cloud Infrastructure & disaster recovery | $6,718,019 | $6,118,611 | $599,408 | 9.8% | | Equipment and software | $4,252,240 | $4,866,950 | $(614,710) | (12.6)% | | Managed services | $1,550,766 | $1,485,925 | $64,841 | 4.4% | | Nexxis VoIP services | $631,436 | $552,297 | $79,139 | 14.3% | | Total Sales | $13,230,678 | $13,146,239 | $84,439 | 0.6% | - Total sales increased marginally by **0.6%**, driven by a **9.8%** increase in cloud infrastructure and disaster recovery services and a **14.3%** increase in Nexxis VoIP services, largely offset by a **12.6%** decrease in equipment and software sales due to non-recurring sales in the prior year[129](index=129&type=chunk) - Gross profit margin remained consistent at **40.8%** for both periods, as the positive impact from higher-margin cloud and VoIP services was offset by lower margins on equipment and software sales[130](index=130&type=chunk) Selling, General and Administrative Expenses (Six Months Ended June 30) | Expense Category | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------- | :------------ | :------------ | :------------ | :--------- | | Salaries and director fees | $2,816,411 | $2,296,477 | $519,934 | 22.6% | | Stock based compensation | $638,844 | $379,172 | $259,672 | 68.5% | | Advertising | $524,142 | $481,387 | $42,755 | 8.9% | | Rent and occupancy | $68,839 | $144,523 | $(75,684) | (52.4)% | | Total SG&A Expenses | $6,284,826 | $5,549,356 | $735,470 | 13.3% | - Selling, general and administrative expenses increased by **13.3%**, primarily due to a **22.6%** rise in salaries and director fees (due to headcount and merit adjustments) and a **68.5%** increase in non-cash stock-based compensation (new awards and accelerated recognition)[131](index=131&type=chunk) - Loss from operations significantly increased to **$(888,176)** from **$(174,991)** in the prior year, mainly due to the substantial increase in SG&A expenses, including ramp-up costs for the U.K. entity[132](index=132&type=chunk) - Net loss attributable to common stockholders was **$(708,971)** compared to net income of **$112,862** in the prior year, driven by the increased operating loss and lower interest income[133](index=133&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section assesses the company's ability to meet its short-term and long-term financial obligations, including cash flow and capital management strategies - The Company plans to sell its CloudFirst and CloudFirst UK segments for approximately **$40 million**, expecting net cash proceeds of about **$24 million** after transaction costs and taxes, which will significantly alter its liquidity[134](index=134&type=chunk)[135](index=135&type=chunk) - Management intends to use a substantial portion of the divestiture proceeds to return capital to shareholders, with the remainder for strategic investments in continuing operations and other corporate purposes[135](index=135&type=chunk) - Working capital decreased by **$629,512** to **$11,240,402** at June 30, 2025, primarily due to decreases in cash, marketable securities, and accounts receivable, partially offset by increased prepaid expenses (including divestiture transaction costs) and lower accounts payable[141](index=141&type=chunk) Cash Flow Summary (Six Months Ended June 30) | Cash Flow Summary | 2025 | 2024 | | :-------------------------------- | :------------ | :------------ | | Cash provided by (used in) operating activities | $(727,487) | $354,791 | | Cash used in investing activities | $272,016 | $(798,381) | | Cash used in financing activities | $(13,253) | $(205,154) | | Decrease in cash | $(458,774) | $(648,744) | | Cash, end of period | $611,323 | $779,986 | - Operating cash flow shifted from a **$354,791** inflow in 2024 to a **$727,487** outflow in 2025, mainly due to the net loss and an increase in working capital from deferred transaction fees[144](index=144&type=chunk) - Investing activities provided **$272,016** in 2025 (vs. **$798,381** used in 2024) due to net sales of marketable securities and reduced capital expenditures[145](index=145&type=chunk) - Financing activities used less cash (**$13,253** in 2025 vs. **$205,154** in 2024) due to lower repayments of finance lease obligations, as all finance leases were paid in full[146](index=146&type=chunk) [Critical Accounting Estimates](index=32&type=section&id=Critical%20Accounting%20Estimates) This section discusses the significant judgments and assumptions management makes in preparing financial statements, which could impact reported results - The preparation of financial statements requires management to make significant estimates and assumptions, which, if actual results differ, could necessitate adjustments in future periods[147](index=147&type=chunk) - Critical accounting estimates and judgments are consistent with those described in the Company's 2024 Annual Report on Form 10-K[147](index=147&type=chunk) [Off-Balance Sheet Arrangements](index=32&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements that could materially affect the company's financial position - The Company does not have any off-balance sheet arrangements, financings, or relationships with unconsolidated entities or special purpose entities[148](index=148&type=chunk) [Non-GAAP Financial Measures (Adjusted EBITDA)](index=33&type=section&id=Non-GAAP%20Financial%20Measures) This section presents Adjusted EBITDA as a non-GAAP measure, reconciling it to GAAP net income and explaining its utility for assessing operating performance - Adjusted EBITDA is presented as a non-GAAP financial measure to supplement GAAP results, defined as net income adjusted for interest, depreciation, amortization, and stock-based compensation[149](index=149&type=chunk) - Management believes Adjusted EBITDA provides insight into operating performance by removing the impact of asset base, disposals, impairments, and non-cash items[149](index=149&type=chunk) Adjusted EBITDA Reconciliation (Three Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------- | :------------ | :------------ | | Income (loss) before income taxes | $(731,963) | $(246,605) | | Depreciation and amortization | $350,521 | $339,522 | | Interest income | $(103,267) | $(152,441) | | Interest expense | $16,236 | $10,260 | | Stock based compensation | $412,579 | $212,857 | | Adjusted EBITDA | $(32,567) | $163,593 | Adjusted EBITDA Reconciliation (Six Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------- | :------------ | :------------ | | Income (loss) before income taxes | $(705,575) | $99,299 | | Depreciation and amortization | $713,899 | $634,509 | | Interest income | $(224,173) | $(295,810) | | Interest expense | $18,245 | $21,520 | | Stock based compensation | $638,844 | $377,511 | | Adjusted EBITDA | $464,567 | $837,029 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Data Storage Corporation is not required to provide quantitative and qualitative disclosures about market risk - The Company is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[153](index=153&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Control%20and%20Procedures) This section details the Company's evaluation of its disclosure controls and procedures and internal control over financial reporting, concluding on their effectiveness and reporting any changes [Evaluation of Disclosure Controls and Procedures](index=34&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures.) This section reports on the effectiveness of the company's disclosure controls and procedures as evaluated by management - As of June 30, 2025, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at a reasonable assurance level[154](index=154&type=chunk)[155](index=155&type=chunk) - Disclosure controls and procedures are designed to ensure timely recording, processing, summarizing, and reporting of information required under the Exchange Act[154](index=154&type=chunk) [Changes in Internal Control Over Financial Reporting](index=35&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting.) This section reports any material changes in the company's internal control over financial reporting during the period - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[156](index=156&type=chunk) [PART II - OTHER INFORMATION](index=35&type=section&id=PART%20II-%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and equity security sales [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the Company is not currently involved in any legal proceedings that would have a material adverse effect on its business, operating results, financial condition, or cash flows - The Company is not a party to any legal proceedings that, if determined adversely, would have a material adverse effect on its business, operating results, financial condition, or cash flows[158](index=158&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors from the Company's 2024 Annual Report, emphasizing new risks related to the planned divestiture of its cloud solutions business, potential inability to sustain profitability, and risks associated with maintaining Nasdaq listing - The Company has not generated significant net income, reporting a net loss of **$708,971** for the six months ended June 30, 2025, and there is no assurance of future profitability[160](index=160&type=chunk) - The pendency of the CloudFirst divestiture may adversely affect DSC's business, financial condition, and results of operations, regardless of completion, due to uncertainties for employees, customers, and management diversion[168](index=168&type=chunk) - Failure to complete the divestiture could have a material adverse impact, as consummation is subject to conditions like shareholder approval and absence of material adverse effects[169](index=169&type=chunk) - The Purchase Agreement limits DSC's ability to pursue alternative acquisition transactions due to non-solicitation provisions and a potential **$1,200,000** termination fee for a 'superior proposal'[171](index=171&type=chunk) - The divestiture may trigger a payment requirement for certain outstanding warrants (July 2021 Warrants), obligating DSC to purchase them at their Black Scholes Value if the divestiture is deemed a Fundamental Transaction[177](index=177&type=chunk) - The Company cannot assure continued compliance with Nasdaq listing requirements, and delisting could lead to reduced liquidity, limited market quotations, and decreased ability to raise financing[162](index=162&type=chunk)[167](index=167&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms that there were no unregistered sales of equity securities or issuer purchases of equity securities during the period ended June 30, 2025 - There were no unregistered sales of the Company's equity securities during the period ended June 30, 2025[178](index=178&type=chunk) - The Company did not make any issuer purchases of equity securities during the period[179](index=179&type=chunk) [Item 3. Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the period ended June 30, 2025 - There were no defaults upon senior securities during the period ended June 30, 2025[180](index=180&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - This item is not applicable to the Company[181](index=181&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) This section reports that no director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[182](index=182&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including articles of incorporation, bylaws, certifications, and XBRL documents - The exhibits include various corporate governance documents such as Articles of Incorporation and Bylaws, along with certifications by the Principal Executive Officer and Principal Financial Officer[183](index=183&type=chunk) - XBRL (eXtensible Business Reporting Language) documents are also filed, including the Instant Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase[183](index=183&type=chunk)

Financial Data and Key Metrics Changes - Total sales for Q2 2025 were $5.1 million, an increase of approximately $236,000 or 4.8% compared to Q2 2024, driven by growth in subscription-based services [6][8] - Total sales for the first half of 2025 were $13.2 million, an increase of approximately $84,000 or 0.6% compared to the first half of 2024, with a significant shift in revenue mix [8][12] - Net loss attributable to common shareholders for Q2 2025 was $733,000 compared to a net loss of $244,000 for Q2 2024 [12] - Cash, cash equivalents, and marketable securities at the end of Q2 2025 were approximately $11.1 million, down from $12.3 million at the end of Q2 2024 [13] Business Line Data and Key Metrics Changes - Cloud infrastructure and disaster recovery revenue increased by approximately $193,000 or 6.1% in Q2 2025 due to new subscription clients and expanded services [6] - Nexus services saw an increase of approximately $48,000 or 17.3% [7] - Equipment and software sales decreased by approximately $95,000 or 12.1% due to non-recurring sales in the prior year [7] Market Data and Key Metrics Changes - The company reported a significant shift in revenue mix, with a $600,000 or 9.8% increase in core cloud infrastructure and disaster recovery services for the first half of 2025 [8] - The company is seeing a three-to-one ratio of ads to existing customers, indicating strong lead generation and customer acquisition [30] Company Strategy and Development Direction - The proposed sale of Cloud First Technologies is a key strategic move, with a potential net amount of $24 million to be returned to shareholders and reinvested in growth [15][16] - The company plans to allocate 15% of cash for acquisitions, innovation, and expansion, regardless of the sale outcome [17][21] - A full rebranding of the company is underway to reflect its new direction, focusing on high-growth markets such as AI and cybersecurity [20][21] Management's Comments on Operating Environment and Future Outlook - Management emphasized the importance of unlocking hidden value through the sale of Cloud First, which has been a cash-generating business [40] - The company is committed to pursuing growth opportunities in AI and other verticals, regardless of the sale outcome [22][24] - Management expressed confidence in the company's ability to transform and adapt to market changes, focusing on delivering shareholder value [49][50] Other Important Information - The proposed transaction is subject to shareholder approval at the annual meeting on September 10, 2025 [22] - The company is exploring strategic partnerships and technology extensions to support its growth agenda [18][19] Q&A Session Summary Question: What will your cash position be roughly following the transaction? - Management indicated that post-transaction cash could be approximately $35 million, including $24 million from the sale and $11 million in cash [27] Question: How is the visibility into the cloud pipeline for the balance of the year? - Management noted a consistent pipeline of around $10 million in opportunities, with a strong ratio of new customer acquisitions [30] Question: Any update on the growth opportunity in Europe? - Management reported that operations in Europe are progressing well, with partnerships established and a growing sales team to support expansion [32][34] Question: What is the rationale behind selling Cloud First, given it represents about 95% of revenue? - Management explained that the sale aims to unlock value that is not being recognized in the public market, allowing for better capital allocation [40][41] Question: What will the company's operations look like post-divestiture? - Post-sale, the company will focus on AI and other growth areas, with a leaner operational structure and plans for strategic investments [43][44]

[Press Release Header & Key Announcements](index=1&type=section&id=EXHIBIT%2099.1%20DTST%20Reports%202025%20Second%20Quarter%20Financial%20Results%20and%20Provides%20Business%20Update) Data Storage Corporation reports strong Q2 2025 financial results, driven by subscription services, and announces a strategic sale and tender offer to return capital to shareholders [Report Title & Date](index=1&type=section&id=Report%20Title%20%26%20Date) Data Storage Corporation announced its financial results for the second quarter and first six months ended June 30, 2025, along with a business update - Data Storage Corporation (Nasdaq: DTST) reported financial results for the three and six months ended June 30, 2025, and provided a business update[1](index=1&type=chunk) [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) Data Storage Corporation reported strong Q2 2025 results with revenue growth driven by subscription-based services, maintaining consistent gross profit margins, and a solid liquidity position, while announcing a proposed strategic sale of CloudFirst Technologies Corporation to return capital to shareholders and refocus on high-growth technology sectors - CEO Chuck Piluso highlighted strong growth in core business, particularly higher-margin, recurring subscription sales[2](index=2&type=chunk) - Proposed **$40 million** sale of CloudFirst Technologies Corporation, with anticipated net proceeds of approximately **$24 million** after fees, taxes, and adjustments[2](index=2&type=chunk) - Board authorized a tender offer to repurchase up to **85%** of outstanding common stock using **85%** of cash on hand (including net proceeds), retaining **15%** for acquisitions, innovation, and expansion into high-growth technology sectors like AI and cybersecurity[2](index=2&type=chunk) - CFO Chris Panagiotakos reported Q2 2025 total sales of **$5.1 million**, up **4.8% YoY**, driven by subscription-based cloud and Nexxis services[3](index=3&type=chunk) - First half 2025 sales totaled **$13.2 million**, reflecting strength in recurring revenue despite declines in non-recurring equipment sales[3](index=3&type=chunk) Q2 2025 Key Financial Metrics | Metric | Q2 2025 (USD) | | :-------------------------- | :------ | | Revenue | $5.1 million | | Gross profit | $2.5 million | | Cash and marketable securities | $11.1 million | [Corporate Information & Investor Resources](index=2&type=section&id=Corporate%20Information%20%26%20Investor%20Resources) This section provides details for the Q2 2025 earnings conference call, an overview of Data Storage Corporation, and a disclaimer regarding the proposed tender offer [Conference Call Information](index=2&type=section&id=Conference%20Call) Management will host a conference call on August 14, 2025, at 11:00 a.m. Eastern Time to discuss the Q2 2025 financial results, with access available via telephone and webcast, including replays - Conference call scheduled for August 14, 2025, at 11:00 a.m. ET[5](index=5&type=chunk) - Access via toll-free telephone (877-407-9219 for U.S.) or webcast (DSC Q2 2025 Earnings Call or www.dtst.com/news-events)[6](index=6&type=chunk) - Webcast replay available until February 14, 2026; telephone replay until August 21, 2025[7](index=7&type=chunk) [About Data Storage Corporation](index=2&type=section&id=About%20Data%20Storage%20Corporation) Data Storage Corporation focuses on providing solutions that ensure business continuity, improve business processes, and enhance efficiency through its subsidiaries, with a strategic goal of building shareholder value - Company focuses on providing solutions for business continuity, process improvement, and efficiency[11](index=11&type=chunk) - Strives to build shareholder value[11](index=11&type=chunk) [Tender Offer Disclaimer](index=2&type=section&id=Tender%20Offer%20Disclaimer) This section clarifies that the press release is not an offer to purchase or sell securities, and the proposed tender offer for common stock has not yet commenced, advising shareholders to carefully review the important tender offer materials that will be filed with the SEC - The press release is neither an offer to purchase nor a solicitation of an offer to sell securities[8](index=8&type=chunk) - The tender offer for shares of Common Stock has not commenced; the Company will file a Schedule TO with the SEC when it begins[8](index=8&type=chunk) - Holders of common stock are urged to read the tender offer documents carefully when they become available[9](index=9&type=chunk) - Tender offer materials will be available for free at www.sec.gov or the Company's investor relations website[10](index=10&type=chunk) [Legal & Forward-Looking Statements](index=3&type=section&id=Legal%20%26%20Forward-Looking%20Statements) The company includes a safe harbor provision for forward-looking statements, outlining inherent risks and disclaiming any obligation to update them, along with investor contact information [Safe Harbor Provision](index=3&type=section&id=Safe%20Harbor%20Provision) This section outlines the company's safe harbor provision for forward-looking statements, emphasizing that such statements are subject to risks and uncertainties that could cause actual results to differ materially, and explicitly states it assumes no obligation to update these statements unless legally required - Press release contains 'forward-looking statements' under the Private Securities Litigation Reform Act of 1995[13](index=13&type=chunk) - Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially[13](index=13&type=chunk) - Company assumes no obligation to update or revise any forward-looking statements, except as required by law[13](index=13&type=chunk) [Contact Information](index=3&type=section&id=Contact) Contact details for investor relations are provided for inquiries regarding Data Storage Corporation - Contact for investor relations: Crescendo Communications, LLC, 212-671-1020, DTST@crescendo-ir.com[14](index=14&type=chunk) [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the company's financial performance and position through condensed balance sheets, statements of operations, and cash flows for Q2 and H1 2025 [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The balance sheet provides a snapshot of the company's financial position at June 30, 2025, compared to December 31, 2024, showing a decrease in total assets and liabilities, while stockholders' equity remained relatively stable Condensed Consolidated Balance Sheet Highlights | Metric | June 30, 2025 (USD) | December 31, 2024 (USD) | Change (USD) | | :-------------------------- | :------------ | :---------------- | :----- | | Total Assets | $24,421,146 | $25,280,215 | -$859,069 | | Total Liabilities | $3,190,416 | $4,108,250 | -$917,834 | | Total Stockholders' Equity | $21,230,730 | $21,171,965 | +$58,765 | | Cash and cash equivalents | $611,323 | $1,070,097 | -$458,774 | | Marketable securities | $10,510,179 | $11,261,006 | -$750,827 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The statements of operations show an increase in sales for both the second quarter and first half of 2025 compared to the prior year, but also a significant increase in selling, general, and administrative expenses, leading to increased operating and net losses Condensed Consolidated Statements of Operations Highlights | Metric | Q2 2025 (USD) | Q2 2024 (USD) | Change (YoY) | H1 2025 (USD) | H1 2024 (USD) | Change (YoY) | | :-------------------------------- | :-------- | :-------- | :----------- | :-------- | :-------- | :----------- | | Sales | $5,146,922 | $4,910,492 | +4.8% | $13,230,678 | $13,146,239 | +0.6% | | Gross profit | $2,536,754 | $2,407,893 | +5.3% | $5,396,650 | $5,374,365 | +0.4% | | Selling, general and administrative | $3,332,421 | $2,796,679 | +19.1% | $6,284,826 | $5,549,356 | +13.3% | | Loss from operations | $(795,667) | $(388,786) | -104.6% | $(888,176) | $(174,991) | -407.6% | | Net income (loss) | $(731,963) | $(246,605) | -196.8% | $(705,575) | $99,299 | N/A (loss from income) | | Basic EPS | $(0.10) | $(0.04) | -150.0% | $(0.10) | $0.02 | N/A (loss from income) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the first six months of 2025, the company experienced a shift to net cash used in operating activities, while investing activities provided cash, primarily due to marketable securities sales, resulting in an overall decrease in cash and cash equivalents during the period Condensed Consolidated Statements of Cash Flows Highlights | Cash Flow Activity | H1 2025 (USD) | H1 2024 (USD) | Change (USD) | | :-------------------------------------- | :-------- | :-------- | :------- | | Net cash (used in) provided by operating activities | $(727,487) | $354,791 | -$1,082,278 | | Net cash provided by (used in) investing activities | $272,016 | $(798,381) | +$1,070,397 | | Net cash used in financing activities | $(13,253) | $(205,154) | +$191,901 | | Decrease in cash and cash equivalents | $(458,774) | $(648,744) | +$189,970 | | Cash and cash equivalents, end of period | $611,323 | $779,986 | -$168,663 | - Stock-based compensation increased significantly from **$379,172** in H1 2024 to **$638,844** in H1 2025[21](index=21&type=chunk) - Investing activities in H1 2025 included **$975,000** from the sale of marketable securities, compared to **$400,000** in H1 2024[21](index=21&type=chunk)

Core Insights - Data Storage Corporation reported strong growth in its core business, particularly in higher-margin, recurring subscription sales, with total sales of $5.1 million in Q2 2025, up 4.8% year-over-year [2][3] - The company proposed a $40 million sale of CloudFirst Technologies Corporation, which would yield approximately $24 million in net proceeds, subject to shareholder approval [2][3] - A tender offer to repurchase up to 85% of outstanding common stock has been authorized, aimed at returning capital to shareholders while retaining funds for future growth initiatives [2][3] Financial Performance - For the second quarter of 2025, total sales reached $5.1 million, reflecting a 4.8% increase from $4.9 million in Q2 2024 [3][15] - Gross profit for the quarter was $2.5 million, maintaining consistent margin levels [3][15] - The company ended the quarter with $11.1 million in cash and marketable securities, indicating a solid liquidity position [3][15] Strategic Initiatives - The proposed sale of CloudFirst is intended to unlock value and allow the company to focus on high-growth sectors such as artificial intelligence and cybersecurity [2][3] - Regardless of the sale's outcome, the company plans to evolve into a technology-driven enterprise and may pursue a corporate rebranding [2][3] - The annual meeting for shareholder approval of the proposed transaction is scheduled for September 10, 2025 [2][3]

About Data Storage Corporation Data Storage Corporation (Nasdaq: DTST), through its subsidiaries, is focused on providing solutions that ensure business continuity, improvement in business processes, and efficiency, while striving to build shareholder value. For more information, please visit www.dtst.com or follow us on X @DataStorageCorp. MELVILLE, N.Y., July 31, 2025 (GLOBE NEWSWIRE) -- Data Storage Corporation (Nasdaq: DTST) ("DSC" and the "Company"), today announced plans to host a conference call at 1 ...

Core Viewpoint - Data Storage Corporation has entered into a definitive agreement to sell its subsidiary, CloudFirst Technologies Corporation, to Performive, aiming to enhance CloudFirst's growth and explore strategic opportunities for shareholder value [1][2][4]. Group 1: Transaction Details - The sale of CloudFirst is subject to customary closing conditions and requires approval from Data Storage Corporation's shareholders at the annual meeting scheduled for September 10, 2025 [1][3]. - CloudFirst will continue to operate under its established brand, with its leadership team and support staff remaining unchanged [2][4]. - The transaction is expected to provide CloudFirst with strategic backing for continued growth in a private setting [4][7]. Group 2: Financial Implications - If approved, Data Storage Corporation plans to use the proceeds from the sale, along with existing cash, to repurchase up to 85% of its outstanding shares through a tender offer [3][7]. - Remaining funds after the tender offer will be allocated towards strategic growth through acquisitions in high-growth sectors such as AI-enabled SaaS, cybersecurity, and healthcare automation [3][7]. Group 3: Management Commentary - The CEO of Data Storage Corporation emphasized the long-term value created by CloudFirst and expressed confidence in the future, highlighting that operations at CloudFirst will remain unchanged during the approval process [4][7]. - The CEO also noted that the public markets have not adequately reflected CloudFirst's value, and the transaction is seen as a way to return value to shareholders while pursuing growth opportunities [4][7].

Financial Performance - Sales for the three months ended March 31, 2025, decreased by approximately 2% to $8,083,756 compared to $8,235,747 for the same period in 2024[109] - For the three months ended March 31, 2025, the total net income was $26,388, with CloudFirst Technologies reporting a net income of $1,077,591[134] - Adjusted EBITDA for the same period was $497,135, with CloudFirst Technologies contributing $1,502,880[134] - For the three months ended March 31, 2024, the total net income was $345,904, with CloudFirst Technologies reporting a net income of $914,372[136] - Adjusted EBITDA for the same period was $680,318, with CloudFirst Technologies contributing $1,273,394[136] Revenue Breakdown - Revenue breakdown for Q1 2025: 44% from equipment and software sales, 42% from cloud infrastructure & disaster recovery services, 10% from managed services, and 4% from Nexxis VoIP services[109] Expenses - Cost of sales for Q1 2025 was $5,223,860, a decrease of $45,415 or 1% compared to $5,269,275 in Q1 2024[112] - Selling, general and administrative expenses increased by $199,728 or 2% to $2,952,405 in Q1 2025, primarily due to higher salaries and professional fees[113] Cash Flow - Cash used in operating activities for Q1 2025 was $1,099,807, compared to $318,624 in Q1 2024, primarily due to a decrease in net income[127] - Net cash provided by investing activities totaled $786,575 in Q1 2025, compared to net cash used of $302,006 in Q1 2024, reflecting a significant increase[128] Working Capital - The Company's working capital increased to $12,440,644 on March 31, 2025, up by $570,730 from $11,869,914 at December 31, 2024[125] Non-GAAP Measures - Non-GAAP adjustments for the three months ended March 31, 2025, included $363,379 for depreciation and amortization and $226,265 for stock-based compensation[134] - Non-GAAP adjustments for the three months ended March 31, 2024, included $295,198 for depreciation and amortization and $171,235 for stock-based compensation[136] - The company emphasizes that Adjusted EBITDA should not be considered in isolation from GAAP results, as it may differ from other companies' measures[132] - The company plans to disclose different non-GAAP financial measures in the future to help investors evaluate its results more meaningfully[132] Strategic Initiatives - The integration of Flagship Solutions into CloudFirst was completed in January 2024, enhancing operational synergies and cross-selling opportunities[107] - Data Storage Corporation expanded into the UK and European markets in October 2024, investing in regional operations and partner recruitment[108] Interest Income - Interest income for the three months ended March 31, 2025, was $(120,906), while for the same period in 2024, it was $(143,369)[134][136] Off-Balance Sheet Arrangements - The company does not have any off-balance sheet arrangements or relationships with unconsolidated entities[131] Recurring Revenue Potential - The Company believes its total contract value of subscription contracts exceeds $10 million, indicating strong recurring revenue potential[123]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $8.1 million, a decrease of approximately 2% compared to $8.2 million in Q1 2024, primarily due to a decrease in one-time equipment sales [16][17] - Gross profit was $2.86 million, maintaining margin stability, while adjusted EBITDA was $497,000, down from $680,000 in the previous year [6][18] - Net income attributable to common shareholders was $24,000, compared to $357,000 in Q1 2024 [18] - Cash and marketable securities at the end of Q1 2025 were approximately $11.1 million, down from $12.3 million at the end of 2024 [18] Business Line Data and Key Metrics Changes - Core cloud infrastructure and disaster recovery services grew by 14% year-over-year, indicating strong performance in these segments [5] Market Data and Key Metrics Changes - The company is expanding its infrastructure footprint and partner ecosystem in the UK, which is expected to enhance its market position [10][12] Company Strategy and Development Direction - The company aims to become a global leader in cloud infrastructure services, focusing on high-margin recurring revenue and expanding its global infrastructure [13][14] - The strategy includes forming strategic partnerships to enhance service delivery and meet client needs in regulated industries [10][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a disconnect between operating fundamentals and current equity valuation, emphasizing the need to unlock shareholder value [12][60] - The company is actively evaluating strategic alternatives to enhance long-term shareholder value [60] Other Important Information - The company remains debt-free, which is viewed as critical for exploring future growth opportunities [7] - The ongoing migration to cloud services is seen as a significant opportunity, with IBM estimating $90 million in annual revenue migration [26] Q&A Session Summary Question: Status of European Expansion - The company has established approximately 10 partnerships in the UK and is training local sales teams to promote their services, with revenue expected to start in Q4 2025 [21][22][24] Question: European Market Shift to Cloud Services - Management noted that security concerns are being overcome, and there is a significant migration to cloud services, positioning the company well in the market [27][28] Question: Financial Reporting and Guidance - The company plans to file its Form 10-Q today, with annual recurring revenue estimated to be over $22 million for the year [36] - The total contract value is over $41 million, with a high renewal rate expected [37][41] Question: Strategic Alternatives and Shareholder Value - Management is considering various strategic alternatives to address the valuation disconnect, including potential share buybacks and other measures to enhance shareholder value [51][60]