UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number: 001-35384 | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | --- | --- | ...

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]

EXHIBIT 99.1 DTST Reports 2025 Second Quarter Financial Results and Provides Business Update Conference Call to be Held Today at 11:00 am ET MELVILLE, N.Y., August 14, 2025 (GLOBE NEWSWIRE) — Data Storage Corporation (Nasdaq: DTST) (the "Company"), today provided a business update and reported financial results for the three months and six months ended June 30, 2025. "In connection with the proposed transaction if approved by our shareholders and consummated, our Board of Directors has authorized a tender o ...

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]

Financial Data and Key Metrics Changes - Total 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 [17][18] - Gross profit was $2.86 million, maintaining margin stability, while adjusted EBITDA was $497,000, down from $680,000 in Q1 2024 [5][19] - Net income attributable to common shareholders was $24,000, compared to $357,000 in Q1 2024 [19] - Cash and marketable securities at the end of Q1 2025 were approximately $11.1 million, down from $12.3 million at the end of Q4 2024 [19] Business Line Data and Key Metrics Changes - Core cloud infrastructure and disaster recovery services grew 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] - The company is not pursuing commodity cloud workloads but is focused on delivering enterprise-grade solutions [9] 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][61] - The company is actively evaluating strategic alternatives to enhance long-term shareholder value [61] Other Important Information - The company remains debt-free, which is viewed as critical for exploring future growth opportunities [6] - The company has established approximately 10 partnerships in the UK and is training local sales teams to promote its services [22][23] Q&A Session Summary Question: Status of European Expansion - The company has invested in the UK and established a team, with expectations for revenue to start in Q4 2025 [22][24] Question: European Market Shift to Cloud Services - Management noted that there is significant migration to cloud services, with security concerns being addressed [26][28] Question: Financial Reporting and Guidance - The company plans to file its Form 10-Q today and expects annual recurring revenue to be slightly over $22 million for the year [37][38] Question: Strategic Alternatives and Valuation Disconnect - Management is considering various strategic alternatives to address the valuation disconnect and has been encouraged to provide financial guidance [50][56]

Financial Performance - Total revenue for Q1 2025 was $8.1 million, reflecting a 14% year-over-year growth in Cloud Infrastructure and Disaster Recovery services[4] - Adjusted EBITDA for the quarter reached $497,000, demonstrating the company's commitment to operational efficiency and margin discipline[4] - Gross profit totaled $2.86 million, maintaining consistent margin levels compared to previous periods[4] - Net income attributable to common stockholders for Q1 2025 was $24,078, compared to $357,102 in Q1 2024[18] - Net income for the three months ended March 31, 2025, was $26,388, a decrease of 92.4% compared to $345,904 in the same period of 2024[20] - Adjusted EBITDA for the total company was $497,135 for the three months ended March 31, 2025, compared to $680,318 for the same period in 2024, reflecting a decline of 26.9%[22][24] Cash Flow and Assets - Cash and marketable securities amounted to $11.1 million, with no long-term debt reported[4] - Cash used in operating activities was $(1,099,807) for Q1 2025, significantly higher than $(318,624) in Q1 2024, indicating increased cash outflow[20] - Total cash at the end of the period was $705,557, up from $640,742 at the end of Q1 2024, showing a year-over-year increase of 10.5%[20] - The company reported a total asset value of $26.93 million as of March 31, 2025, an increase from $25.28 million at the end of 2024[16] - The company experienced a net decrease in cash of $(364,540) in Q1 2025, compared to a net decrease of $(787,988) in Q1 2024, showing improved cash management[20] Expenditures and Liabilities - Capital expenditures for Q1 2025 were $(67,519), a decrease of 81.2% compared to $(358,637) in Q1 2024, indicating reduced investment in capital assets[20] - The company reported a significant increase in accounts payable and accrued expenses, totaling $1,373,552 in Q1 2025, compared to $2,226,932 in Q1 2024, reflecting a decrease of 38.3%[20] - Cash paid for interest in Q1 2025 was $489, a substantial decrease from $8,855 in Q1 2024, indicating lower interest expenses[20] Operational Highlights - The company experienced a modest decline in total revenue due to reduced equipment sales, aligning with its strategic focus on building a stable high-margin, recurring revenue client base[3] - CloudFirst Technologies continues to operate profitably on a standalone basis, serving as a scalable, recurring revenue engine[3] - The partnership with Pulsant enables the company to extend its IBM Power-based cloud offerings across the U.K. and Europe, enhancing its market presence[3] Depreciation and Credit Quality - The company recorded depreciation and amortization of $363,379 in Q1 2025, an increase of 22.9% from $295,198 in Q1 2024, reflecting higher asset depreciation[20] - The company reported a change in expected credit losses of $(6,995) in Q1 2025, indicating a potential improvement in credit quality compared to no losses reported in Q1 2024[20]

Core Insights - Data Storage Corporation (DSC) reported solid financial performance for Q1 2025, with a focus on strategic growth and international expansion [2][6][7] - The company achieved a 14% year-over-year revenue growth in its core cloud infrastructure and disaster recovery services, despite a slight decline in total revenue due to reduced equipment sales [2][7] - DSC's adjusted EBITDA for the quarter was $497,000, reflecting operational efficiency and a commitment to margin discipline [2][7] Financial Performance - Total revenue for Q1 2025 was $8.1 million, with a gross profit of $2.86 million, maintaining consistent margin levels [7][17] - The company reported a net income of $26,388 for the quarter, a decrease from $345,904 in the same period last year [17][18] - Cash and marketable securities stood at $11.1 million, with no long-term debt, indicating a strong balance sheet [7][19] Strategic Developments - DSC's subsidiary, CloudFirst Technologies, continues to operate profitably and serves as a scalable, recurring revenue engine [2][6] - A strategic partnership with Pulsant, a U.K. edge data center provider, aims to enhance DSC's service offerings across the U.K. and Europe [2][6] - The company completed a major infrastructure upgrade for a client in the food distribution sector, migrating to high-performance IBM processors [2][6] Market Position - DSC is recognized as a leader in the multi-billion-dollar cloud hosting and business continuity market, providing comprehensive migration services to facilitate transitions to cloud infrastructure [8][11] - The company serves a diverse clientele, including Fortune 500 companies, government agencies, and healthcare organizations, highlighting its broad market reach [10][11]

Core Viewpoint - Data Storage Corporation (DSC) is set to host a conference call on May 15, 2025, to discuss its financial results for Q1 2025, which ended on March 31, 2025 [1] Company Overview - Data Storage Corporation is a leading provider of multi-cloud hosting, managed cloud services, disaster recovery, cybersecurity, and IT automation, integrating with major cloud platforms like AWS, Microsoft Azure, and Google Cloud [1][4] - The company offers comprehensive migration services to facilitate secure and efficient data transfer from on-premises systems to the cloud, minimizing downtime and optimizing performance [4] Service and Infrastructure - DSC operates a cloud platform built on IBM Power Cloud infrastructure, delivering high-performance, scalable, and secure cloud solutions with interoperability across its partners [5] - The company utilizes Tier 3 data centers to support its CloudFirst platform deployments across the United States, Canada, and the United Kingdom, serving a diverse clientele including Fortune 500 companies, government agencies, educational institutions, and healthcare organizations [6] Market Position - As a leader in the multi-billion-dollar managed cloud hosting and business continuity market, DSC is recognized for its expertise in cloud infrastructure, IT modernization, and data migration, enabling clients to transition to the cloud with confidence [7]