Data Storage Corp
For the period ended Jun 30, 2025. Filed Aug 14, 2025.
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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.
Jun 30, 2025 · Filed Aug 14, 2025
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 2025-03-31; filed 2025-05-15.
0001731122-25-000763
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-14.
0001731122-25-001132
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 46 previous paragraphs and 55 current paragraphs.
22 unchanged; 6 reworded; 27 added; 18 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 9 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 (27)
Current report
Recent Developments
Current report
On July 11, 2025, the Company entered into a unit purchase agreement (the “Purchase Agreement”) pursuant to which it agreed to sell its cloud solutions business (the “Business”), which consists of the operations of its CloudFirst Technologies Corporation and CloudFirst Europe Ltd. subsidiaries (the “Divestiture”). The Divestiture represents a strategic shift in the Company’s operations, assuming the Company’s shareholders approve the Divestiture at the Company’s annual meeting of shareholders currently scheduled for September 10, 2025 (the “2025 Annual Meeting”), and thereafter that the Divestiture is consummated.
Current report
Pursuant to the Purchase Agreement, the assets of the Business will be contributed to a new wholly-owned subsidiary, DTST Sub, LLC (“NewCo”), and the purchaser will acquire all of the outstanding units of NewCo for a purchase price of approximately $40 million in cash, subject to certain adjustments. The closing of the Divestiture is subject to customary closing conditions, including that the Company’s shareholders approve the Divestiture at the 2025 Annual Meeting (the “Shareholder Approval”).
Current report
As of June 30, 2025, the Divestiture did not meet all the criteria for held-for-sale classification under ASC 360, primarily because the required Shareholder Approval had not yet been obtained. Accordingly, the assets and liabilities of the Business remain classified as held and used within their respective line items on the Condensed Consolidated Financial Statements for all periods presented.
Current report
In light of a negotiated non-compete provision in the Purchase Agreement, if the transactions contemplated by the Purchase Agreement are consummated, DSC will not pursue opportunities that overlap with the cloud infrastructure or managed services sectors involving the Business. Following the planned sale of our cloud solutions business, assuming Shareholder Approval is obtained and the Divestiture is consummated, our continuing operations will consist of our Nexxis subsidiary, which provides VoIP, telecommunications and data access. The Business to be divested has historically constituted the significant majority of the Company’s consolidated operations. For the six months ended June 30, 2025, the Business represented approximately 95% of the Company’s total revenue and was the primary driver of its gross profit and operating cash flow. Following consummation of the Divestiture, the Company’s continuing operations will be substantially smaller. As a result, management will be required to evaluate and implement a revised strategic plan and potentially rationalize ongoing corporate costs to align its expense structure with the size and scope of the remaining business. Following the Divestiture, DSC intends to pursue acquisitions of companies in complementary and high-growth technology sectors, in addition to the growth of Nexxis.
Current report
Sales and Gross Profit
Current report
Total Sales. For the three months ended June 30, 2025, total sales increased by $236,430, or 4.8%, compared to the three months ended June 30, 2024. The increase was primarily driven by continued growth in our subscription-based services. Cloud Infrastructure & disaster recovery revenue increased by $193,225 or 6.1%, due to the addition of new subscription clients and expanded services for existing clients. Nexxis VoIP services also contributed significantly, with an increase of $47,790 or 17.3%, reflecting successful sales initiatives. This growth was partially offset by a decrease in equipment and software sales of $94,982, or 12.1%, which is primarily attributable to, non-recurring equipment sales in the prior year period and a strategic shift towards subscription services.
Current report
Cost of Sales and Gross Profit. Cost of sales for the three months ended June 30, 2025, increased by $107,569, or 4.3%, from the prior year period. This increase was consistent with the overall growth in sales and also reflects our investment in the newly established U.K. entity, which is contributing to higher cost of sales as operations ramp up. Gross profit margin remained stable at 49.3% for the three months ended June 30, 2025, compared to 49.0% in the prior year period. The slight margin improvement was due to a favorable revenue mix, with a higher proportion of sales coming from higher-margin cloud infrastructure services.
Current report
Selling, general and administrative expenses
Current report
Selling, general and administrative expenses. For the three months ended June 30, 2025, selling, general and administrative expenses increased $535,742, or 19.2%, as compared to the three months ended June 30, 2024. The increase was primarily driven by a $257,065, or 23.1%, increase in salaries and director fees and a $204,733, or 98.5%, increase in non-cash stock-based compensation. The increase in salaries is attributable to an increase in headcount to support our growth initiatives in the UK and in the US, and annual merit-based salary adjustments. The increase in stock-based compensation reflects new equity awards granted to the Board and to key employees and directors in the current period. Also contributing was an increase in commissions associated with increased revenues. These increases were partially offset by lower professional fees and occupancy costs compared to the prior period when we were in the process of transitioning our principal office location.
Current report
Loss from operations. Loss from operations was $795,667 for the three months ended June 30, 2025, compared to a loss of $388,786 in the prior year period. The increased loss was primarily due to the growth in selling, general and administrative expenses, including costs related to our investment in the newly established U.K. entity, which is incurring expenses as operations ramp up..
Current report
Other Income (Expense) and Net Loss. Total other income was $63,704 for the three months ended June 30, 2025, compared to $142,181 in the prior year period. The decrease was primarily due to lower interest income, which resulted from lower average balances of marketable securities during the period. As a result of the increased loss from operations and lower other income, net loss attributable to common stockholders was $733,049 for the three months ended June 30, 2025, compared to a net loss of $244,240 for the same period in 2024.
Current report
Six months ended June 30, 2025, as compared to June 30, 2024
Current report
Sales and Gross Profit
Current report
Total Sales. For the six months ended June 30, 2025, total sales increased $84,439, or 0.6%, compared to the six months ended June 30, 2024. The relative stability in total sales was the result of a significant shift in our revenue mix. Growth was primarily driven by a $599,408, or 9.8%, increase in our core cloud infrastructure and disaster recovery services and $79,139, or 14.3%, increase in Nexxis VoIP services. This growth was largely offset by a $614,710, or 12.6%, decrease in equipment and software sales, which is primarily attributable to large, non-recurring equipment sales in the prior year period.
Current report
Cost of Sales and Gross Profit. Cost of sales for the six months ended June 30, 2025, increased by $62,154, or 0.8%, from the prior year period. Gross profit margin remained consistent at 40.8% for both periods. The favorable impact from a revenue mix shift towards our higher margin cloud and VoIP services was offset by lower gross margins on equipment and software sales during the current period compared to the prior year.
Current report
Selling, general and administrative expenses
Current report
Selling, general and administrative expenses. For the six months ended June 30, 2025, selling, general and administrative expenses increased $735,470, or 13.3%, as compared to the six months ended June 30, 2024. The increase was primarily driven by a $519,934, or 22.6%, increase in salaries and director fees and a $259,672, or 68.5%, increase in non-cash stock-based compensation. The rise in salaries is attributable to an increase in headcount to support our growth initiatives in the UK and in the US, and annual merit-based salary adjustments. The increase in stock-based compensation reflects new equity awards granted in 2025, many of which have shorter vesting periods than prior year grants, resulting in accelerated expense recognition. and the full period effect of awards granted in 2024. These increases were partially offset by a $75,684, or 52.4%, decrease in rent and occupancy expense compared to the prior period when we were in the process of transitioning our principal office location.
Current report
Loss from operations. Loss from operations was $888,176 for the six months ended June 30, 2025, compared to a loss of $174,991 in the prior year period. The increased loss was primarily due to the increase in selling, general and administrative expenses, including costs related to our investment in the newly established U.K. entity, which is incurring expenses as operations ramp up.
Current report
Other Income (Expense) and Net Loss. Total other income was $182,601 for the six months ended June 30, 2025, compared to $274,290 in the prior year period. The decrease was primarily due to lower interest income, which resulted from lower average balances of marketable securities during the current period. As a result of the significant increase in loss from operations, net loss attributable to common stockholders was $708,971 for the six months ended June 30, 2025, compared to net income of $112,862 for the same period in 2024.
Current report
Sale of CloudFirst Businesses
Current report
Subsequent to the end of the quarter ended June 30, 2025, on July 11, 2025, the Company entered into a definitive agreement to sell its cloud solutions business (the “Divestiture”), which consists of its CloudFirst and CloudFirst UK segments, for a purchase price of $40 million. The closing of the Divestiture is subject to Shareholder Approval, for which a vote is expected to be held in the third quarter of 2025 at the 2025 Annual Meeting, as well as other customary conditions.
Current report
If the Shareholder Approval is obtained and the Divestiture is consummated, the Company expects to receive net cash proceeds of approximately $24 million, which includes transaction costs, and estimated taxes, but will be adjusted pursuant to closing adjustments, including working capital adjustment. This significant influx of cash would fundamentally alter the Company’s liquidity and capital resources. Management intends to use a substantial portion of the net proceeds to return capital to shareholders, with the remainder available for strategic investments in our continuing operations and other corporate purposes. We believe that our current cash and marketable securities, combined with the anticipated proceeds from the sale, will be more than sufficient to fund our operations and strategic initiatives for the foreseeable future.
Current report
Overview of Liquidity and Cash Flows
Current report
The change in cash used in operating activities for the six months ended June 30, 2025, compared to the same period in 2024 was primarily driven by the net loss for the 2025 period of $705,575, compared to net income of $99,299 in the prior year period. Although the net loss was offset by $1.4 million of non-cash items, such as depreciation and amortization ($0.7) million and stock-based compensation ($0.6) million, an increase in working capital negatively impacted the company’s cash flows from operations. The increase in working capital was primarily related to expenses totaling $838,252 for deferred transaction fees related to the Divestiture.
Current report
The change in cash flows from investing activities was primarily due to net sales of marketable securities of $750,827 during the current period to fund operations, compared to net purchases in the prior year. This was partially offset by capital expenditures of $478,811 in the six months ended June 30, 2025, compared to $902,574 for the six-month ended June 30, 2024. The decrease in year over year capital spending reflects a higher pace of building-out cloud infrastructure in the prior year.
Current report
Cash used in financing activities for the six months ended June 30, 2025, represents $51,000 of payments made under finance lease agreements, primarily for leased capital equipment. For the six months ended June 30, 2025, finance lease payments were offset by $38,249 of proceeds from stock option exercises. Cash used in financing activities was lower than the same period in the prior year due to lower repayments of finance lease obligations, as all finance leases were paid in full during the first quarter of 2025.
Removed paragraphs (18)
Previous report
Sales
Previous report
Sales for the three months ended March 31, 2025, decreased by approximately 2% to $8,083,756 as compared to sales for the three months ended March 31, 2024, of $8,235,747. The Company derives its sales from four types of services that it provides: cloud infrastructure & disaster recovery/cloud services which is the largest source of its sales, followed by managed services, equipment and software sales, and Nexxis, VoIP and internet access services. The cloud infrastructure & disaster recovery/cloud services are subscription-based. The Company also provides equipment and software and actively participates in collaboration with IBM to provide innovative business solutions to clients. The professional services are providing the client cloud infrastructure and or Disaster Recovery implementation services as well as time and materials billing. Substantially all of the Company’s sales were to customers in the United States, with 3% of its sales to international customers. During the three months ended March 31, 2025, the Company derived approximately 44% of revenue from equipment and software sales, 42% of revenue from infrastructure & disaster recovery/cloud services, 10% of revenue from managed services, 4% of revenue from Nexxis VoIP services. During the three months ended March 31, 2024, the Company derived approximately 50% of our revenue from equipment and software sales, 36% of its revenue from infrastructure & disaster recovery/cloud services, 10% of revenue from Managed Services, and 3% of revenue from Nexxis VoIP services.
Previous report
The following chart details the changes in the Company’s sales for the three months ended March 31, 2025, and 2024, respectively.
Previous report
Expenses
Previous report
Cost of sales. For the three months ended March 31, 2025, cost of sales was $5,223,860, a decrease of $45,415, or 1%, compared to $5,269,275 for the three months ended March 31, 2024. The decrease of $45,415 was mostly related to the decrease in one-time equipment and software sales.
Previous report
Selling, general and administrative expenses. For the three months ended March 31, 2025, selling, general and administrative expenses were $2,952,405, an increase of $199,728, or 2%, as compared to $2,752,677 for the three months ended March 31, 2024. The increase is reflected in the chart below and was primarily related to an increase in professional fees, stock based compensation, software and salaries and director fees, offset by a decrease in rent and occupancy expenses, all other expenses and commissions.
Previous report
*Salaries and Director Fees.*Salaries and director fees increased as a result of an increase in headcount which resulted from the Company’s international expansion efforts, an increase in the number of Board Members and an increase due to annual employee performance reviews.
Previous report
*Stock Based Compensation.*Stock Based Compensation increased primarily due to an increase in the number of RSUs granted and higher fair value per share for both RSUs and stock options.
Previous report
*Professional Fees.*Professional fees increased primarily due to business development consulting fees which resulted from the Company’s international expansion efforts, an increase in recruiting fees, and an increase in investor relation fees.
Previous report
*Software as a Service Expense (SaaS).*SaaS increased due to new projects for improvement initiatives for one of the Company’s customer relationship management systems.
Previous report
*Advertising Expenses.*Advertising expense decreased due to the Company’s strategy to offset stadium expense by re-selling the suite for certain events.
Previous report
*Commissions Expense.*Commissions expense decreased due to lower one-time equipment sales.
Previous report
*Rent and Occupancy Expense.*Rent and occupancy expense decreased due to the non-renewal of office space in Boca Raton, FL.
Previous report
*All Other Expenses.*All other expenses decreased as a result of a sales tax audit matter in 2024 which was settled and paid in early 2025.
Previous report
Income before provision for income taxes. Income before provision for income taxes for the three months ended March 31, 2025, and 2024 was $26,388, and $345,904 respectively, primarily attributable to the items discussed above.
Previous report
For the three months ended March 31, 2025, cash used in operating activities was $1,099,807, compared to $318, 624 for the three months ended March 31, 2024. The increase is primarily due to a decrease in net income and changes in accounts payable and accrued expenses. This was offset by an increase to non-cash expenses.
Previous report
During the three months ended March 31, 2025, net cash provided by investing activities totaled $786,575, compared to net cash used in investing activities of $302,006 during the three months ended March 31, 2024. The increase of $1,088,581 was primarily due to a net increase in sales of marketable securities offset by a decrease in capital expenditures.
Previous report
During the three months ended March 31, 2025, net cash used in financing activities totaled $51,520, compared to $167,358 during the three months ended March 31, 2024. The decrease in cash used in financing activities of $115,838 was primarily due to lower finance lease obligation payments.
Reworded paragraphs (6)
Previous wording
Data Storage Corporation (“DSC”, the “Company”, “we”, “us” or ‘our”) is a leading provider of enterprise cloud and business continuity solutions, specializing in fully managed cloud hosting, disaster recovery, cybersecurity, and IT automation services. DSC leverages its expertise through its three subsidiaries: CloudFirst Technologies Corporation (“CloudFirst”), CloudFirst Europe Ltd. (“CloudFirst Europe”) and Nexxis Inc. (“Nexxis”). Through its CloudFirst platform – built on IBM Power Systems infrastructure – DSC delivers high-performance cloud solutions tailored for IBM i and AIX workloads This niche focus on IBM Power environments distinguishes CloudFirst in the market: none of the major public cloud providers (AWS, Microsoft Azure, or Google Cloud) natively support IBM i/AIX workload, giving DSC a distinct competitive edge in serving clients with these mission-critical systems. The Company leverages long-term subscription contracts for its cloud and disaster-recovery services, yielding a highly recurring revenue base and strong customer retention (historically over 90% annual subscription renewal rates) DSC’s client base exceeds 425 organizations across diverse sectors – including government, healthcare, education, manufacturing, and Fortune 500 enterprises – reflecting broad market demand for its multi-cloud hosting and business continuity solutions. In recent years, DSC has undertaken strategic expansions (organically and via acquisitions) to reinforce its position as an emerging growth leader in the multi-billion-dollar cloud hosting and business continuity market. Notably, the integration of Flagship Solutions, LLC (“Flagship”) (our wholly-owned subsidiary that was originally in acquired 2021) into CloudFirst was completed in January 2024, unlocking operational synergies and enabling cross-selling of the full CloudFirst suite to Flagship’s established customer base. This integration, combined with enhanced distribution and marketing capabilities post-2021 Nasdaq uplisting, has bolstered DSC’s growth trajectory and technical expertise.
Current wording
Data Storage Corporation (“DSC,” the “Company,” “we,” “us” or “our”) is a leading provider of enterprise cloud and business continuity solutions, specializing in fully managed cloud hosting, disaster recovery, cybersecurity, and IT automation services. DSC leverages its expertise through its three subsidiaries: CloudFirst Technologies Corporation (“CloudFirst”), CloudFirst Europe Ltd. (“CloudFirst Europe”) and Nexxis Inc. (“Nexxis”). Through its CloudFirst platform – built on IBM Power Systems infrastructure – DSC delivers high-performance cloud solutions tailored for IBM i and AIX workloads This niche focus on IBM Power environments distinguishes CloudFirst in the market: none of the major public cloud providers (AWS, Microsoft Azure, or Google Cloud) natively support IBM i/AIX workload, giving DSC a distinct competitive edge in serving clients with these mission-critical systems. The Company leverages long-term subscription contracts for its cloud and disaster-recovery services, yielding a highly recurring revenue base and strong customer retention (historically over 90% annual subscription renewal rates) DSC’s client base exceeds 425 organizations across diverse sectors – including government, healthcare, education, manufacturing, and Fortune 500 enterprises – reflecting broad market demand for its multi-cloud hosting and business continuity solutions. In recent years, DSC has undertaken strategic expansions (organically and via acquisitions) to reinforce its position as an emerging growth leader in the multi-billion-dollar cloud hosting and business continuity market. Notably, the integration of Flagship Solutions, LLC (“Flagship”) (our wholly-owned subsidiary that was originally acquired in 2021) into CloudFirst was completed in January 2024, unlocking operational synergies and enabling cross-selling of the full CloudFirst suite to Flagship’s established customer base. This integration, combined with enhanced distribution and marketing capabilities post-2021 Nasdaq uplisting, has bolstered DSC’s growth trajectory and technical expertise.
Previous wording
Data Storage Corporation through its subsidiary CloudFirst expanded into the UK and European markets in October 2024 as part of its international growth strategy. This investment included consulting, accounting, and legal expenses to establish operations, as well as the strategic hiring of a regional director and sales personnel. Additionally, the Company initiated partner recruitment and invested in partner enablement through targeted training and sales support programs, laying the foundation for sustainable growth and expanded market presence in the region.
Current wording
DSC, through its subsidiary CloudFirst, expanded into the UK and European markets in October 2024 as part of DSC’s international growth strategy. This investment included consulting, accounting, and legal expenses to establish operations, as well as the strategic hiring of a regional director and sales personnel. Additionally, the Company initiated partner recruitment and invested in partner enablement through targeted training and sales support programs, laying the foundation for sustainable growth and expanded market presence in the region.
Previous wording
On July 18, 2024, the Company entered into the Agreement with Maxim, discussed in Note 8 to the financial statements above, pursuant to which the Company may offer and sell, from time to time, through Maxim, as sales agent or principal, shares of its common stock. There can be no guarantee that the Company will be able to raise capital from sales under the Agreement. To date, the Company has not made any sales under the Agreement.
Current wording
On July 18, 2024, the Company entered into the Agreement with Maxim, discussed in Note 8 to the condensed consolidated financial statements, pursuant to which the Company may offer and sell, from time to time, through Maxim, as sales agent or principal, shares of its common stock. There can be no guarantee that the Company will be able to raise capital from sales under the Agreement. To date, the Company has not made any sales under the Agreement.
Previous wording
The Company’s working capital was $12,440,644 on March 31, 2025, increasing by $570,730 from $11,869,914 at December 31, 2024. The increase is primarily attributable to an increase in accounts receivable which was offset, in part, by an increase in accounts payable and a decrease in cash and marketable securities.
Current wording
The Company’s working capital was $11,240,402 on June 30, 2025, decreasing by $629,512 from $11,869,914 at December 31, 2024. The decrease is primarily attributable to a decrease in the Company’s cash, marketable securities and accounts receivable, which was offset, in part, by an increase in prepaid expenses and other current assets and lower accounts payable and accrued expenses.
Previous wording
Cash Flows for the three months ended March 31, 2025, as compared to March 31, 2024
Current wording
Cash Flows for the six months ended June 30, 2025, as compared to June 30, 2024
Previous wording
The following table shows the Company’s reconciliation of net income (loss) to adjusted EBITDA for the months ended March 31, 2025, and 2024:
Current wording
The following tables show our reconciliation of income (loss) before income taxes to adjusted EBITDA for the three and six months ended June 30, 2025, and 2024: