Data Storage Corp
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
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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.
Sep 30, 2024 · Filed Nov 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 2024-06-30; filed 2024-08-14.
0001731122-24-001251
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001731122-24-001803
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 64 previous paragraphs and 75 current paragraphs.
30 unchanged; 21 reworded; 21 added; 10 removed; 3 previous and 3 current paragraphs rearranged.
Tables are not compared: 8 previous and 12 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 (21)
Current 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 operates seven geographically diverse data centers across the U.S. and Canada, supporting its commitment to providing secure and reliable subscription-based services.
Current report
Core Services:
Current report
Client Engagement and Revenue Generation: We engage 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 our revenue, we also generate income from the sale of equipment and software, emphasizing cybersecurity, data storage, and IBM Power systems solutions.
Current 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.
Current report
Our expansion into Europe, with a primary focus on the United Kingdom (UK), is underway. Equipment procurement for our three data center locations has commenced, and we project the platform will be operational and ready for client onboarding by January 2025. Management estimates that the UK and European Union (EU) markets includes more than 50,000 businesses with established trade and operations spanning the USA, UK, and EU, a prospect that bolsters our marketing strategy. The close economic and commercial ties between these countries are expected to enhance our efforts to penetrate the UK and EU markets. CloudFirst Technologies’ wholly owned subsidiary, UK Cloud Host Technologies Ltd., has established an executive presence in London and appointed Colin Freeman as Managing Director to lead the European expansion. Banking facilities are established, and we are actively progressing in our execution phase.
Current report
Our initial expansion outside the USA began with establishing a presence in Canada, where CloudFirst Technologies operates two IBM Power platforms. The trading relationship between the UK, Canada, and the USA presents substantial growth potential. We believe these interconnected markets offer a significant addressable opportunity. Our portfolio of cloud infrastructure services, including cloud hosting, disaster recovery, and cybersecurity, positions Data Storage as a comprehensive, multi-country service provider—one of the few offering such breadth and capability.
Current report
Our CXO (Client Experience Officer) program, announced earlier this year, is driving tangible outcomes by deepening client engagement, enhancing cross-selling opportunities, and exceeding service expectations.
Current report
We maintain our focus and operational stability. While market conditions remain unpredictable, our cash position is solid, and we forecast continued positive EBITDA from our subsidiary operations.
Current report
On July 18, 2024, we entered into an Equity Distribution Agreement (the “Agreement”), with Maxim Group LLC (“Maxim”), pursuant to which we may offer and sell, from time to time, through Maxim, as sales agent or principal, shares of our common stock. Subject to the terms and conditions of the Agreement, Maxim will use commercially reasonable efforts consistent with its normal trading and sales practices, applicable state and federal law, rules and regulations and the rules of the Nasdaq Capital Market to sell shares from time to time based upon our instructions, including any price, time or size limits specified by us. Under the Agreement, Maxim may sell shares by any method deemed to be an “at the market” offering as defined in Rule 415 under the Securities Act of 1933, as amended, or any other method permitted by law, including in privately negotiated transactions. Maxim’s obligations to sell shares under the Agreement are subject to satisfaction of certain conditions, including customary closing conditions for transactions of this nature. We will pay Maxim a commission of 2.5% of the aggregate gross proceeds from each sale of shares and have agreed to provide Maxim with customary indemnification and contribution rights. We also agreed to reimburse Maxim for certain specified expenses of up to $50,000. Sales of shares of common stock under the Agreement will be made pursuant to our registration statement on Form S-3 (File No. 333-280881) (the “Registration Statement”) and a related prospectus supplement (the “ATM Prospectus”), both of which were filed with the SEC on July 18, 2024. The ATM Prospectus relates to the offering of up to $10,600,000 shares of our common stock. The issuance and sale, if any, of common stock under the Agreement is subject to us maintaining an effective registration statement. The Registration Statement was declared effective on July 26, 2024.
Current report
Advertising Expenses. Advertising Expenses decreased due to offsets in expense of our stadium lease.
Current report
On July 18, 2024, we entered into the Agreement with Maxim pursuant to which we may offer and sell, from time to time, through Maxim, as sales agent or principal, shares of our common stock. There can be no guarantee that we will be able to raise capital from sales under the Agreement. To date, we have not made any sales under the Agreement,
Current report
Cash Flows for nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023
Current report
The following table summarizes our cash flows:
Current report
Operating activities
Current report
During the nine months ended September 30, 2024, cash provided by operating activities was $552,590, compared to $2,161,424 during the nine months ended September 30, 2023. The decrease of $1,608,834 is primarily due to the decrease in accounts receivable of $1,897,218, partially offset by the $317,388 increase in adjustments for non-cash items, including depreciation and amortization and stock-based compensation.
Current report
Investing activities
Current report
During the nine months ended September 30, 2024, net cash used in investing activities totaled $1,172,581, compared to $2,767,949 during the nine months ended September 30, 2023. The decrease of $1,595,368 was primarily due to a net decrease in the purchases of marketable securities.
Current report
Financing activities
Current report
During the nine months ended September 30, 2024, net cash used in financing activities totaled $295,021, compared to $686,809 during the nine months ended September 30, 2023. The decrease of $391,788 was primarily due to lower repayments of finance lease obligations to a related party.
Current report
For the Nine Months Ended September 30, 2024
Current report
For the Nine Months Ended September 30, 2023
Removed paragraphs (10)
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
This merger represents a pivotal step in Data Storage Corporation’s strategy to expand its service offerings and enhance its competitive edge in the rapidly evolving cloud services and IT solutions market.
Previous report
Rent and Occupancy. Rent and Occupancy expenses increased due to the addition of new office space in Melville, NY.
Previous report
Commissions Expense. Commissions expense increased due to the timing of payments relating to certain sales streams.
Previous report
For the Six Months Ended June 30, 2024
Previous report
For the Six Months Ended June 30, 2023
Reworded paragraphs (21)
Previous wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto for the year ended December 31, 2023, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed on March 28, 2024 (the “2023 Annual Report”) with the U.S. Securities and Exchange Commission (the “SEC”). This Quarterly Report on Form 10-Q contains forward-looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions, and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations, and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.
Current wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto for the year ended December 31, 2023, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed on March 28, 2024 (the “2023 Annual Report”) with the U.S. Securities and Exchange Commission (the “SEC”). This Quarterly Report on Form 10-Q contains forward-looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions, and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations, and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the SEC.
Previous 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.
Current wording
Data Storage Corporation (“Data Storage,” “we,” “us,” “our” and the “Company”) is headquartered in Melville, New York. Our common stock trades on the Nasdaq Capital Market (“Nasdaq”) under the ticker symbol DTST. We operate through two subsidiaries; CloudFirst Technologies Corporation (“CloudFirst Technologies”), a Delaware corporation, 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
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 wording
In the first half of 2024, we laid a strong foundation for sustained growth. Strategic capital allocation toward professional services, business development, and account management has been pivotal. The January 1st merger of CloudFirst Technologies and Flagship Solutions LLC into a single subsidiary of Data Storage Corporation has positioned us to advance key strategic initiatives effectively.
Previous 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.
Current wording
Data Storage Corporation operates from offices in New York and Texas, equipped with data centers designed to meet client requirements effectively. We also employ remote staff to complement our office teams and manages a robust infrastructure across seven geographically diverse data centers in the United States and Canada, supporting our comprehensive subscription-based solutions.
Previous 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.
Current wording
On May 3, 2024, the Board signed a resolution to amend 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 our voting stock shall constitute a quorum.
Previous wording
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 wording
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 common stock to 2,075,000.
Previous wording
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 wording
Total Sales. For the three months ended September 30, 2024, total sales were $5,808,834, a decrease of $177,791 or 3%, compared to $5,986,625 for the three months ended September 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, primarily offset by an increase in Infrastructure & Disaster Recovery/Cloud Services.. Typically, we generate a higher margin on Infrastructure & Disaster Recovery/Cloud Services than we do on one-time Equipment Sales.
Previous 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.
Current wording
Cost of Sales. For the three months ended September 30, 2024, cost of sales was $3,297,164, a decrease of $359,107 or 10% compared to $3,656,271 for the three months ended September 30, 2023. The decrease was mostly related to the decrease in one-time equipment and managed services related cost of sales.
Previous 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.
Current wording
Selling, general and administrative expenses. For the three months ended September 30, 2024, selling, general and administrative expenses were $2,537,501, an increase of $221,288 or 10%, as compared to $2,316,213 for the three months ended September 30, 2023. The net increase is reflected in the chart below.
Previous 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.
Current wording
Salaries. Salaries increased as a result of an increase in stock-based compensation in addition to an increase in salaries due to annual employee performance reviews.
Previous 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.
Current wording
Other Income (Expense). Other income for the three months ended September 30, 2024, increased $5,759 to $149,356 from $143,597 for the three months ended September 30, 2023. The increase in other income is primarily attributable to the increase in interest income from investment in marketable securities.
Previous 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.
Current wording
Income (loss) before provision for income taxes. Income before provision for income taxes for the three months ended September 30, 2024, was $123,526, as compared to income of $157,738 for the three months ended September 30, 2023.
Previous 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.
Current wording
Total Sales. For the nine months ended September 30, 2024, total sales were $18,955,074, an increase of $184,335 or 1%, compared to $18,770,739 for the nine months ended September 30, 2023. The increase is primarily attributed to the increase of $2,146,623 or 29% in Infrastructure & Disaster Recovery/Cloud Services offset partially by a decrease in one-time equipment sales and managed services during the current period. Typically, we generate a higher margin on Infrastructure & Disaster Recovery/Cloud Services than we do on one-time Equipment Sales.
Previous wording
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 wording
Cost of Sales. For the nine months ended September 30, 2024, cost of sales was $11,069,038, a decrease of $702,848 or 6% compared to $11,771,886 for the nine months ended September 30, 2023. The decrease of 6% was mostly related to a decrease in one-time equipment sales.
Previous wording
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 wording
Selling, general and administrative expenses. For the nine months ended September 30, 2024, selling, general and administrative expenses were $8,086,857, an increase of $1,167,875 or 17%, as compared to $6,918,982 for the nine months ended September 30, 2023. The net increase is reflected in the chart below.
Previous wording
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 wording
Salaries. Salaries increased as a result of an increase in stock-based compensation in addition to an increase in salaries due to annual employee performance reviews.
Previous wording
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 wording
Other Income (Expense). Other income for the nine months ended September 30, 2024, increased $104,678 to $423,646 from $318,968 for the nine months ended September 30, 2023. The increase in other income is primarily attributable to the increase in interest income from investment in marketable securities.
Previous wording
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 wording
Income before provision for income taxes. Income before provision for income taxes for the nine months ended September 30, 2024, was $222,825, as compared to $398,839 for the nine months ended September 30, 2023, a decrease of $176,014.
Previous 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.
Current wording
During the nine months ended September 30, 2024, our cash decreased by $915,012 to $513,718 from $1,428,730 on December 31, 2023. Net cash of $552,590 was provided by our operating activities resulting primarily from the changes in assets and liabilities. Net cash of $1,172,581 was used in investing activities principally related to the purchase of equipment. Net cash of $295,021 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 $11,197,995 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.
Current wording
The Company’s working capital was $11,583,279 on September 30, 2024, increasing by $571,872 from $11,011,407 at December 31, 2023. The increase is primarily attributable to an increase in accounts receivable and other current assets and a decrease in deferred revenue and finance leases. This was offset by a decrease in cash and an increase in accounts payable.
Previous wording
The following table shows our reconciliation of net income to adjusted EBITDA for the six months ended June 30, 2024 and 2023, respectively:
Current wording
The following table shows our reconciliation of net income to adjusted EBITDA for the nine months ended September 30, 2024, and 2023, respectively:
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Software as a Service Expense (SaaS). SaaS decreased due to a decrease in outside professional services.
Current report — wording carried from elsewhere
Nine months ended September 30, 2024 as compared to September 30, 2023
Current report — wording carried from elsewhere
Nine months ended September 30, 2024 as compared to Fiscal Year ended December 31, 2023
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Advertising Expenses. Advertising Expenses increased due to an increase in new marketing campaigns and in person customer events.
Previous report — wording carried elsewhere
Six months ended June 30, 2024 as compared to June 30, 2023
Previous report — wording carried elsewhere
Software as a Service Expense (SaaS). SaaS increased due to a new customer relationship management platform at one of the company’s divisions.