Data Storage Corp
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
DTST$2.63+9.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-15.
0001731122-24-000815
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001731122-24-001251
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 48 previous paragraphs and 64 current paragraphs.
19 unchanged; 18 reworded; 20 added; 11 removed; 0 previous and 7 current paragraphs rearranged.
Tables are not compared: 10 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (20)
Current report
The first half of 2024 has laid the foundation for our ongoing growth. Capital has been allocated for professional fees, business development, and account management. Our efforts, combined with the January 1st merger of CloudFirst Technologies and Flagship Solutions LLC into a single subsidiary of DSC position the company for our strategic initiatives.
Current report
We are currently planning our expansion into Europe, commencing with the United Kingdom, early in 2025. We will be deploying our unique infrastructure platform in two data centers, increasing our addressable market. Management believes the UK marketplace consist with of over 50,000 plus companies that conduct business between the USA and the UK, with over 1.6 million Americans working in the UK. We believe the business opportunities and relationships of these closely tied countries will benefit our marketing efforts to penetrate the United Kingdom’s addressable marketplace.
Current report
Our first step several years ago outside of the USA was establishing a footprint in Canada. CloudFirst has two IBM Power platforms in Canada. The UK and Canada are large trading partners. We consider the addressable markets of the USA, UK, and Canada to be a significant opportunity for our company. Our Cloud Infrastructure offerings of cloud hosting, disaster recovery and cyber security solutions will establish Data Storage, we believe, as one of the few, single source multi-country providers, providing cloud based infrastructure solutions such as Infrastructure-as-a- Service (IaaS) and Disaster Recovery on the IBM Power platform.
Current report
Additionally, evidence indicates that the IBM Power server migration to the cloud is underway, and accelerating, as reflected by the increase in visitors to our website of the past five years. Our web site white paper of ‘Migrating your IBM Power Systems to the Cloud’ has been a popular download. Web searching on IBM Cloud leads the corporate researcher to visit our web sites, and our solutions. IBM Corporation has stated that they expect, based on their trends and research, that ten percent of the addressable marketplace will migrate to the cloud each year. Further indications, based on a well-known survey reflect that only 15% of this addressable marketplace has moved to cloud based solutions.
Current report
Our CXO (Client Experience Officer) program, which was announced in a recent press release, is yielding positive results, fostering client relationships, boosting cross-selling activities, and striving to exceed client expectations.
Current report
We remain focused and stable. Although the future is always uncertain, we are currently in a strong cash position and expect positive EBITDA performance from our subsidiaries as DSC continues to invest in our growth.
Current report
On June 20, 2024, we held our 2024 Annual Meeting of Stockholders (the “2024 Annual Meeting”). At the 2024 Annual Meeting, our stockholders approved an amendment to our 2021 Stock Incentive Plan, as amended and restated (the “Incentive Plan”) to increase the number of shares of common stock that we will have authority to grant under the Incentive Plan by an additional 1,000,000 shares of the common stock to 2,075,000.
Current report
Total Sales. For the three months ended June 30, 2024, total sales were $4,910,492, a decrease of $993,899 or (17)%, compared to $5,904,391 for the three months ended June 30, 2023. The decrease is primarily attributed to lower one-time equipment and software sales during the current period and a decrease in managed services partially offset by increases in all other revenue sources.
Current report
Software as a Service Expense (SaaS). SaaS increased due to a new customer relationship management platform at one of the company’s divisions.
Current report
Advertising Expenses. Advertising Expenses increased due to an increase in new marketing campaigns and in person customer events.
Current report
Commissions Expense. Commissions expense decreased due to the decrease in one-time equipment sales.
Current report
Travel and Entertainment. Travel and Entertainment expenses increased due to international expansion efforts in addition to travel related to domestic customer expansion efforts.
Current report
Rent and Occupancy. Rent and Occupancy expenses increased due to the addition of new office space in Melville, NY.
Current report
Cost of Sales. For the six months ended June 30, 2024, cost of sales was $7,771,874, a decrease of $343,741 or 4% compared to $8,115,615 for the six months ended June 30, 2023. The decrease of 4% was mostly related to a decrease in one-time equipment sales.
Current report
Professional fees. Professional fees increased primarily due to business development consulting fees and an increase in legal and accounting fees related to the filing of certain registration statements.
Current report
Software as a Service Expense (SaaS). SaaS increased due to a new customer relationship management platform at one of the company’s divisions.
Current report
Commissions Expense. Commissions expense increased due to the timing of payments relating to certain sales streams.
Current report
*Travel and Entertainment.*Travel and Entertainment expenses increased due to international expansion in efforts in addition to travel related to domestic customer expansion efforts.
Current report
For the Six Months Ended June 30, 2024
Current report
For the Six Months Ended June 30, 2023
Removed paragraphs (11)
Previous report
Strategic Growth and Infrastructure: In response to a capital raise and Nasdaq uplisting in 2021, we expanded our distribution networks and bolstered our team, focusing on enhancing our sales, marketing, and technological capabilities. Data Storage Corporation operates six geographically diverse data centers across the U.S. and Canada, supporting its commitment to providing secure and reliable subscription-based services.
Previous report
Core Services:
Previous report
Client Engagement and Revenue Generation: The Company engages with clients through direct business development efforts and a broad distribution network, offering solutions that lower barriers to entry for disaster recovery and cloud infrastructure services. While subscription-based services constitute a significant portion of its revenue, Data Storage Corporation also generates income from the sale of equipment and software, emphasizing cybersecurity, data storage, and IBM Power systems solutions.
Previous report
This overview highlights Data Storage Corporation’s strategic approach to leveraging technology and expertise to meet the complex needs of its diverse client base, ensuring business continuity and security in an increasingly digital world.
Previous report
In a strategic move to bolster its offerings and market presence, Data Storage Corporation successfully completed a merger with Flagship Solutions, LLC, a Florida-based provider of IBM solutions, managed services, cyber security, and cloud solutions, on May 31, 2021. This merger, formalized through an Agreement and Plan of Merger with Data Storage FL, LLC, a wholly-owned subsidiary, enhanced operational efficiencies and synergize with Data Storage Corporation’s existing IBM business segment.
Previous report
Key Merger Highlights:
Previous report
On January 12, 2024, the Board appointed Clifford Stein to serve as a director of the Company.
Previous report
On January 16, 2024, we issued a press release regarding the merger of our subsidiaries, Flagship Solutions Group and CloudFirst. We expect that the merger of Flagship Solutions Group and CloudFirst will enable us to continue to streamline operations, grow our technical teams, achieve further economies of scale, enhance resource allocation internally and provide a unified platform to capitalize on the opportunities within the market and increase customer penetration.
Previous report
On March 5, 2024, the Board appointed Nancy M. Stallone, CPA and Uwayne A. Mitchell, Esq. to serve as directors of the Company. Ms. Stallone was appointed to serve as a member of the Audit Committee of the Board and serves as the financial expert.
Previous report
S*oftware as a Service Expense (SaaS).*SaaS increased due to special project related to one of our CRM platforms.
Previous report
*Commissions Expense.*Commissions expenses increased due to the increase in revenue.
Reworded paragraphs (18)
Previous wording
Data Storage Corporation is headquartered in Melville, New York. The Nasdaq ticker symbol is DTST. We operate through two subsidiaries; CloudFirst Technologies Corporation, a Delaware corporation formally referred to as DSC; and Nexxis Inc. These subsidiaries provide solutions and services to a broad range of clients in several industries including healthcare, banking and finance, distribution services, manufacturing, construction, education, and government. The subsidiaries maintain business development teams, as well as independent distribution channels.
Current wording
Data Storage Corporation is headquartered in Melville, New York. Our common stock trades on the Nasdaq under the ticker symbol DTST. We operate through two subsidiaries; CloudFirst Technologies Corporation, a Delaware corporation, formally referred to as DSC, and Nexxis Inc. These subsidiaries provide solutions and services to a broad range of clients in several industries including healthcare, banking and finance, distribution services, manufacturing, construction, education, and government. The subsidiaries maintain business development teams, as well as independent distribution channels.
Previous wording
Data Storage Corporation operates from offices in New York, Florida, and Texas, equipped with technology centers designed to meet client requirements effectively. The Company also employs remote staff to complement its office teams and manages a robust infrastructure across seven geographically diverse data centers in the United States and Canada, supporting its comprehensive subscription-based solutions.
Current wording
Data Storage Corporation operates from offices in New York, Florida, and Texas, equipped with data centers designed to meet client requirements effectively. The Company also employs remote staff to complement its office teams and manages a robust infrastructure across seven geographically diverse data centers in the United States and Canada, supporting its comprehensive subscription-based solutions.
Previous wording
On May 3, 2024, the Board amended our Bylaws to provide that at each meeting of stockholders, except where otherwise provided by law, the presence in person or by proxy of the holders of thirty-three and one-third percent of the outstanding shares of the Company’s voting stock shall constitute a quorum.
Current wording
On May 3, 2024, the Board signed a resolution to amend the Company’s Bylaws to provide that at each meeting of stockholders, except where otherwise provided by law, the presence in person or by proxy of the holders of thirty-three and one-third percent of the outstanding shares of the Company’s voting stock shall constitute a quorum.
Previous wording
Cost of Sales. For the three months ended March 31, 2024, cost of sales was $5,269,275, an increase of $479,297 or 10% compared to $4,789,978 for the three months ended March 31, 2023. The increase of 10% was mostly related to the increase in Infrastructure & Disaster Recovery/Cloud Services and one time Equipment and Software sales.
Current wording
Cost of Sales. For the three months ended June 30, 2024, cost of sales was $2,502,599, a decrease of $823,038 or 25% compared to $3,325,637 for the three months ended June 30, 2023. The decrease of 25% was mostly related to the decrease in one-time equipment related cost of sales.
Previous wording
Selling, general and administrative expenses. For the three months ended March 31, 2024, selling, general and administrative expenses were $2,752,677, an increase of $621,918, or 29%, as compared to $2,130,759 for the three months ended March 31, 2023. The net increase is reflected in the chart below.
Current wording
Selling, general and administrative expenses. For the three months ended June 30, 2024, selling, general and administrative expenses were $2,796,679, an increase of $324,669 or 13%, as compared to $2,472,010 for the three months ended June 30, 2023. The net increase is reflected in the chart below.
Previous wording
Professional fees. Professional fees increased primarily due to an increase in accounting and auditing fees and an increase in consulting fees offset by a decrease in legal fees.
Current wording
Professional Fees. Professional fees increased primarily due to business development consulting fees and an increase in legal and accounting fees related to the filing of certain registration statements.
Previous wording
Other Income (Expense). Other income for the three months ended March 31, 2024, increased $56,032 to $132,109 from $76,077 for the three months ended March 31, 2023. The increase in other income is primarily attributable to the increase in interest income from the marketable securities.
Current wording
Other Income (Expense). Other income for the three months ended June 30, 2024 increased $42,887 to $142,181 from $99,294 for the three months ended June 30, 2023. The increase in other income is primarily attributable to the increase in interest income from investment in marketable securities.
Previous wording
Net Income before provision for income taxes. Net income before provision for income taxes for the three months ended March 31, 2024 was $345,904, as compared to a net income of $35,063 for the three months ended March 31, 2023.
Current wording
Income (loss) before provision for income taxes. Loss before provision for income taxes for the three months ended June 30, 2024 was $(246,605), as compared to income of $206,038 for the three months ended June 30, 2023.
Previous wording
Total Revenue. For the three months ended March 31, 2024, total revenue was $8,235,747, an increase of $1,356,024 or 20% compared to $6,879,723 for the three months ended March 31, 2023. The increase is primarily attributed to an increase in Infrastructure & Disaster Recovery/Cloud Services and one time Equipment and Software Sales.
Current wording
Total Sales. For the six months ended June 30, 2024, total sales were $13,146,239, an increase of $362,125 or 3%, compared to $12,784,114 for the six months ended June 30, 2023. The increase is primarily attributed to the increase of 29% in Infrastructure & Disaster Recovery/Cloud Services offset partially by a decrease in one-time equipment sales and Managed Services during the current period.
Previous wording
*Salaries.*Salaries increased as a result of a result of an increase in headcount as well as an increase in stock based compensation.
Current wording
Salaries. Salaries increased as a result of an increase in stock based compensation, and increase in headcount in addition to an increase in salaries due to annual employee performance reviews.
Previous wording
*Advertising Expenses.*Advertising Expenses increased due to the implementation of new marketing programs in 2024.
Current wording
Advertising Expenses. Advertising Expenses increased due to an increase in new marketing campaigns and in person events.
Previous wording
*All Other Expenses.*Other expenses increased primarily due to an increase of bad debt expense and an increase in sales and use tax expense.
Current wording
All Other Expenses. Other expenses increased primarily due to an increase in sales and use tax expense.
Previous wording
The consolidated financial statements have been prepared using generally accepted accounting principles in the United States of America (“GAAP”) applicable for a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business.
Current wording
The consolidated financial statements have been prepared using generally accepted accounting principles in the United States of America (“GAAP”) applicable for a going concern, which assumes that we will realize our assets and discharge our liabilities in the ordinary course of business.
Previous wording
To the extent the Company is successful in growing its business, identifying potential acquisition targets, and negotiating the terms of such acquisition, the Company plans to use its working capital and the proceeds of financings to finance such acquisition costs.
Current wording
To the extent we are successful in growing our business, identifying potential acquisition targets, and negotiating the terms of such acquisition, and in the event the purchase price includes a cash component, we plan to use our working capital and the proceeds of any financing to finance such acquisition and related costs.
Previous wording
The Company’s opinion concerning its liquidity is based on current information. If this information proves to be inaccurate, or if circumstances change, The Company may not be able to meet its liquidity needs, which will require a renegotiation of related party capital equipment leases, a reduction in advertising and marketing programs, and/or a reduction in salaries for officers that are major shareholders.
Current wording
Our opinion concerning our liquidity is based on current information. If this information proves to be inaccurate, or if circumstances change, we may not be able to meet our liquidity needs, which will likely require a renegotiation of related party capital equipment leases, a reduction in advertising and marketing programs, and/or a reduction in salaries for officers that are major shareholders.
Previous wording
The Company has long-term contracts to supply its subscription-based solutions that are invoiced to clients monthly. The Company believes the total contract value of its subscription contracts with clients based on the actual contracts that it has to date, exceeds $10 million. Further, the Company continues to see an uptick in client interest distribution channel expansion and in sales proposals. In 2024, the Company intends to continue to work to increase its presence in the IBM “Power I” infrastructure cloud and business continuity marketplace in the niche of IBM “Power” and in the disaster recovery global marketplace utilizing its technical expertise, data centers utilization, assets deployed in the data centers, 24 x 365 monitoring and software.
Current wording
We have long-term contracts to supply our subscription-based solutions that are invoiced to clients monthly. We continue to see an uptick in client interest distribution channel expansion and in sales proposals. In 2024, we have and intend to continue to work to increase our presence in the IBM “Power I” infrastructure cloud and business continuity marketplace in the niche of IBM “Power” and in the disaster recovery global marketplace utilizing its technical expertise, data centers utilization, assets deployed in the data centers, 24 x 365 monitoring and software.
Previous wording
During the three months ended March 31, 2024, Data Storage’s cash decreased by $787,988 to $640,742 from $1,428,730 on December 31, 2023. Net cash of $318,624 was used by Data Storage’s operating activities resulting primarily from the changes in assets and liabilities. Net cash of $302,006 was used in investing activities from the purchase of equipment and short-term investments. Net cash of $167,358 was used by financing activities resulting primarily from payments on capital lease obligations.
Current wording
During the six months ended June 30, 2024, our cash decreased by $648,744 to $779,986 from $1,428,730 on December 31, 2023. Net cash of $354,791 was provided by our operating activities resulting primarily from the changes in assets and liabilities. Net cash of $798,381 was used in investing activities principally related to the purchase of equipment. Net cash of $205,154 was used in financing activities primarily related to repayments of finance lease obligations, partially offset by proceeds received from the exercise of stock options.
Previous wording
The Company’s working capital was $11,454,081 on March 31, 2024, increasing by $442,674 from $11,011,407 at December 31, 2023. The increase is primarily attributable to an increase in accounts receivable, prepaid expenses, and other current assets. This was offset by a decrease in cash and an increase in accounts payable, and accrued expenses.
Current wording
The Company’s working capital was $11,197,995 on June 30, 2024, increasing by $186,588 from $11,011,407 at December 31, 2023. The increase is primarily attributable to an increase in accounts receivable and other current assets a decrease in deferred revenue and finance leases. This was offset by a decrease in cash and an increase in accounts payable.
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
Salaries. Salaries increased as a result of an increase in headcount in addition to an increase in salaries due to annual employee performance reviews.
Current report — wording carried from elsewhere
Six months ended June 30, 2024 as compared to June 30, 2023
Current report — wording carried from elsewhere
Selling, general and administrative expenses. For the six months ended June 30, 2024, selling, general and administrative expenses were $5,549,356, an increase of $946,587 or 21%, as compared to $4,602,769 for the six months ended June 30, 2023. The net decrease is reflected in the chart below.
Current report — wording carried from elsewhere
Other Income (Expense). Other income for the six months ended June 30, 2024, increased $98,919 to $274,290 from $175,371 for the six months ended June 30, 2023. The increase in other income is primarily attributable to the increase in interest income from investment in marketable securities.
Current report — wording carried from elsewhere
Income before provision for income taxes. Income before provision for income taxes for the six months ended June 30, 2024, was $99,299, as compared to $241,101 for the six months ended June 30, 2023.
Current report — wording carried from elsewhere
For the Three Months Ended June 30, 2024
Current report — wording carried from elsewhere
The following table shows our reconciliation of net income to adjusted EBITDA for the six months ended June 30, 2024 and 2023, respectively: