Data Storage Corp

(Unaudited)

Note 1 –Basis of Presentation, Organization and Other Matters

Headquartered in New York, NY, Data Storage Corporation (“DSC” or the “Company”) is focused on strategic investments and is actively evaluating how to build long-term shareholder value. The alternatives under study include: (i) the acquisition of one or more revenue-generating businesses, including potentially by means of a merger in which the Company’s public listing and balance sheet serve as the platform for a combined enterprise; and (ii) the study of new organic initiatives. These initiatives remain under study; no acquisition or merger agreement has been entered into, no transaction or new business initiative has been agreed or approved, and there can be no assurance that any will be completed or pursued.

On July 11, 2025, the Company entered into a definitive agreement to sell its cloud solutions business, which consisted of the operations of the Company’s subsidiaries, CloudFirst Technologies Corporation and CloudFirst Europe Ltd., including substantially all of the assets held by CloudFirst Technologies Corporation (the “Cloud Solutions Business”). The sale was approved by the Company’s shareholders on September 10, 2025, and the transaction officially closed on September 11, 2025.

As described in Note 3, the operating results of the Cloud Solutions Business have been classified as discontinued operations. The Company’s continuing operations consist of the operations of the Company’s Nexxis Inc. (“Nexxis”) subsidiary, which provides voice and data telecommunications solutions. Unless otherwise noted, the following footnotes pertain to the Company’s continuing operations.

These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods presented. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (the “SEC”) on April 14, 2026.

Note 2 –Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, consisting of (i) Information Technology Acquisition Corporation, a Delaware corporation; and (ii) its majority-owned subsidiary, Nexxis Inc., a Nevada corporation. All intercompany transactions and balances have been eliminated in consolidation.

On September 11, 2025, the Company completed the sale of its Cloud Solutions Business, which consisted of the operations of the Company’s subsidiaries, CloudFirst Technologies Corporation and CloudFirst Europe Ltd. The operating results of these businesses have been reclassified as discontinued operations for all periods presented.

Segment Reporting

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. In evaluating operating segments, the Company considers: its internal organizational structure; the availability of separate financial information; and the criteria used by the Company’s CODM, its Chief Executive Officer, to evaluate performance. The Company has determined that it operates in one operating segment and one reportable segment: Nexxis, Inc.

Recently Issued and Newly Adopted Accounting Standards

In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, which requires public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the financial statements. Subsequently, in January 2025, the FASB issued ASU 2025-01, which clarified the effective date of ASU 2024-03. The amendments in this pronouncement will be effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently assessing the potential impacts of adoption on its financial statements.

In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. This ASU provides guidance for determining the accounting acquirer in a business combination involving a variable interest entity. The amendments are effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. The Company is currently evaluating the impact of this ASU on its financial statements but does not expect it to have a material impact upon adoption.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (“Topic 326”), which provides all entities with a practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of current accounts receivable and contract assets. The guidance is effective for annual periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company adopted ASU 2025-05 effective January 1, 2026. The adoption of this guidance did not have a material impact on the Company’s financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which revises the recognition guidance for internal-use software by eliminating the previous model based on software development stages and introducing a principles-based approach. The guidance is effective for annual periods beginning after December 15, 2027 and interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the impact on its financial statements and related disclosures.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

Estimated Fair Value of Financial Instruments

Assets and liabilities recognized or disclosed at fair value in the financial statements are categorized based upon the level of judgment associated with the inputs used to measure their respective fair values.

The fair value measurement disclosures are grouped into three levels based on valuation factors:

The Company’s marketable securities are classified as within Level 1 of the fair value hierarchy. Management believes the estimated fair value of these accounts at June 30, 2026, approximates their carrying value as reflected in the condensed consolidated balance sheets due to the short-term nature of these instruments. Additionally, the Company has an investment in common stock of a public company which is valued using Level 1 inputs (see Note 7).

Level 3 fair value measurements are derived from valuation techniques that include significant inputs that are not based on observable market data. When required, the Company uses discounted and undiscounted cash flow models to determine the fair value of certain assets and liabilities. These models rely on unobservable inputs, which reflect management’s own assumptions about the factors that market participants would use in pricing the asset or liability, and are significant to the overall fair value measurement. During the six months ended June 30, 2026, the Company recognized a warrant liability associated with Common Stock Purchase Warrants issued by the Company on July 21, 2021, which were valued using Level 3 inputs (See Note 5). The warrant liability was fully remeasured and reclassified to equity during the first quarter of 2026 (see Note 5). As of June 30, 2026, the Company had no assets or liabilities measured at fair value using Level 3 inputs.

As of June 30, 2026, the Company does not have assets and liabilities valued using Level 2 inputs.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company measures property and equipment at fair value on a non-recurring basis in periods after initial measurement in circumstances when the fair value of such assets are impaired below their recorded cost. As of June 30, 2026, there were no material non-financial assets recorded at fair value.

Cash and Cash Equivalents

The Company considers all short-term, highly liquid investments that are readily convertible to known amounts of cash and that are purchased with original maturities of three months or less to be cash equivalents.

Marketable Securities

Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in earnings.

The following table sets forth a summary of the changes in marketable securities:

During the six months ended June 30, 2026, the Company utilized $29,528,957 of the proceeds from the sales of marketable securities to repurchase shares of common stock of the Company from its shareholders in connection with the tender offer which closed on January 15, 2026 (see Note 5).

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments and assets subjecting the Company to concentration of credit risk consist primarily of cash, marketable securities and trade accounts receivable. The Company’s cash and marketable securities are maintained at major U.S. financial institutions. Deposits in these institutions may exceed the amount of insurance provided on such deposits.

The Company’s customers are concentrated in the United States.

The Company’s Nexxis subsidiary had two customers that individually accounted for 45% and 12% of consolidated accounts receivable at June 30, 2026. The Company’s Nexxis subsidiary had four customers that individually accounted for 25%,21%,15%, and 10% of consolidated accounts receivable at December 31, 2025.

No customer accounted for more than 10% of sales for the three or six months ended June 30, 2026. For the three and six months ended June 30, 2025, one customer accounted for approximately 10% and 11% of total consolidated sales, respectively.

Treasury Stock

The Company recognizes repurchases of outstanding shares of its common stock at cost. Upon their repurchase, these shares are classified as treasury stock, which is a reduction of stockholders’ equity. Repurchased common shares are held as treasury stock until they are retired or re-issued. Treasury stock is included in shares authorized and issued but excluded from shares outstanding.

Revenue Recognition

The Company’s continuing operations derive all revenue from its Nexxis subsidiary, which provides Voice over Internet Protocol (“VoIP”), Internet access, and data transport services. Revenue is recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

The Company’s contracts are typically monthly subscription agreements. For these contracts, the Company has a single performance obligation: to provide continuous access to its VoIP, Internet, and/or data transport services over the contract term. This performance obligation is satisfied over time because the customer simultaneously receives and consumes the benefits of the services as they are provided.

Revenue is recognized ratably over the applicable monthly service period. The Company’s standard payment terms are monthly, and the transaction price is the fixed monthly subscription fee. Because the billing cycle corresponds directly to the service period, the Company does not have significant contract assets or contract liabilities (deferred revenue) at the end of a reporting period. All revenue from continuing operations is transacted in the United States in U.S. dollars.

In the following table, revenue is disaggregated by major product category:

Advertising Costs

The Company expenses the costs associated with advertising as they are incurred. The Company incurred $2,214 and $4,785 of advertising costs for the three months ended June 30, 2026, and 2025, respectively. The Company incurred $10,562 and $6,518 of advertising costs for the six months ended June 30, 2026, and 2025, respectively.

Earnings per Share

The following table sets forth the information needed to compute basic and diluted earnings per share for the three and six months ended June 30, 2026, and 2025:

The Company reported a loss from continuing operations for the three and six months ended June 30, 2026, and 2025. Therefore, dilutive common shares are not assumed to have been issued since their effect is anti-dilutive for these periods. The following table sets forth the number of potential shares of common stock excluded from net income (loss) per share because their effect was antidilutive:

Note 3 –Discontinued Operations

On September 11, 2025, the Company completed the sale of its Cloud Solutions Business, which consisted of the operations of the Company’s subsidiaries, CloudFirst Technologies Corporation and CloudFirst Europe Ltd., for a base purchase price of $40,000,000. At closing, the proceeds were contractually adjusted for a $1,500,000 escrow deposit and $431,537 in net adjustments for estimated closing date debt and working capital, resulting in total cash received at closing of $38,068,463, which remained subject to post-closing adjustments. On May 7, 2026, the Company and the buyer of the Cloud Solutions Business (the “Buyer”) finalized the post-closing adjustments, and as a result, the Company recorded $225,937 in additional consideration, which was included as a component of Gain on sale of discontinued operations, net of tax during the six months ended June 30, 2026. Additionally, in connection with the settlement, $500,000 was released from escrow to the Company in the second quarter of 2026.

The operating results of these businesses have been reclassified and presented as “Income from discontinued operations, net of tax” on the Condensed Consolidated Statements of Operations for all periods presented as the sale represented a strategic shift that had a major effect on the Company’s operations and financial results. The sale resulted in the removal of the CloudFirst Technologies Corporation and CloudFirst Europe Ltd. reportable segments, and the Company has no significant continuing involvement with the divested businesses.

During the three and six months ended June 30, 2026, the Company recognized a pre-tax loss of $72,493 ($49,684, net of a $22,809 tax benefit) and a pre-tax gain of $130,845 ($99,307, net of a $31,538 tax provision), respectively, related to the sale of its Cloud Solutions Business. The activity during the three and six months consisted of incremental taxes and fees incurred during the period directly related to the sale, with the six-month period offset by the final post-closing adjustments of $225,937.

Operating results for the discontinued operations were as follows:

Note 4 –Balance Sheet Components

Prepaids and other current assets consist of the following:

Other long-term assets consist of the following:

Note 5 –Stockholders’ Equity

Capital Stock

The Company has 260,000,000 authorized shares of capital stock, consisting of 250,000,000 shares of Common Stock, par value $0.001, and 10,000,000 shares of Preferred Stock, par value $0.001 per share.

Stock Incentive Plans

On March 8, 2021, the Company’s Board and stockholders owning in excess of 50% of the Company’s outstanding voting securities approved and adopted the 2021 Stock Incentive Plan (the “2021 Plan”). The 2021 Plan permits the Company to grant stock options, restricted stock units, and other awards at levels determined appropriate by the Company’s Board and/or compensation committee. The 2021 Plan also allows the Company to utilize a broad array of equity incentives and performance cash incentives to secure and retain the services of its employees, directors, and consultants, and to provide long-term incentives that align the interests of its employees, directors and consultants with the interests of the Company’s stockholders. An aggregate of 2,450,000 shares of the Company’s common stock may be issued under the 2021 Plan, subject to equitable adjustment in the event of future stock splits, and other capital changes. As of June 30, 2026, there were 78,691 shares available for future grants under the 2021 Plan.

Additionally, there are 6,250 options outstanding and exercisable under the Data Storage Corporation 2010 Incentive Award Plan (the “2010 Plan”) as of June 30, 2026. The 2010 Plan expired on October 21, 2020, and accordingly, there are no shares available for future grants under the 2010 Plan.

Common Stock Options

A summary of the Company’s stock option activity and related information follows:

On February 13, 2026, the Company granted stock options to purchase up to 250,000 and 125,000 shares of the Company’s common stock to its Chief Executive Officer and Chief Financial Officer, respectively. The stock options will vest one-third on each of May 20, 2027, May 20, 2028, and May 20, 2029.

On April 13, 2026, the Company granted stock options to purchase up to 10,000 shares of the Company’s common stock to an employee. The stock options will vest one-third on each of May 20, 2027, May 20, 2028, and May 20, 2029.

Stock-based compensation expense recognized for stock options granted totaled $67,657 and $99,065 for the three months ended June 30, 2026, and 2025, respectively. Share-based compensation expense recognized for stock options granted totaled $101,399 and $123,284 for the six months ended June 30, 2026, and 2025, respectively. As of June 30, 2026, there was $929,255 of total unrecognized compensation expense related to unvested employee stock options granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately 2.0 years.

The intrinsic value of outstanding stock options as of June 30, 2026, and 2025 was $187,700 and $652,908, respectively.

The valuation methodology used to determine the fair value of stock options issued during the year was the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including the volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of stock options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of valuation for instruments with a similar expected term. Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s calculation of estimated volatility is based on historical stock prices of the Company’s stock over a period equal to the expected life of the awards.

The weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the six months ended June 30, 2026, and 2025, are set forth in the table below:

Share-based awards, Restricted Stock Units (“RSUs”)

A summary of the activity related to share-based awards for the six months ended June 30, 2026, is presented below:

On January 29, 2026, the Company granted its Board members an aggregate of 90,000 RSUs which will vest in full on the date of the Company’s 2026 Annual Meeting of Stockholders.

On January 29, 2026, the Company granted 10,000 RSUs to an employee, which vested in full on May 20, 2026.

On February 9, 2026, the Company granted a discretionary equity award of 160,600 RSUs to its Chief Executive Officer which vested in full on May 20, 2026.

On February 13, 2026, the Company granted 60,000 RSUs to each of its Chief Executive Officer and Chief Financial Officer, for a total of 120,000 RSUs, which will vest one-third on each of May 20, 2027, May 20, 2028, and May 20, 2029.

On April 1, 2026, the Company granted an aggregate of 3,000 RSUs to employees which will vest in full on May 20, 2027.

On April 13, 2026, the Company granted 10,000 RSUs to an employee. The RSUs will vest one-third on each of May 20, 2027, May 20, 2028, and May 20, 2029.

Stock-based compensation for share-based awards has been recorded in the condensed consolidated statements of operations and totaled $592,184 and $232,347 for the three months ended June 30, 2026, and 2025, respectively. Stock-based compensation for share-based awards totaled $1,119,850 and $344,728 for the six months ended June 30, 2026, and 2025, respectively. As of June 30, 2026, there was $633,393 of total unrecognized compensation expense related to unvested RSUs granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately 1.7 years.

Common Stock Warrants

A summary of the Company’s warrant activity and related information follows:

On May 18, 2026, warrants to purchase up to 1,464,610 shares of Common Stock expired unexercised. The intrinsic value of all outstanding warrants as of June 30, 2026, and 2025 was $0.

Description of July 2021 Warrants and Fundamental Transaction

Included in warrants outstanding as of January 1, 2026 were Common Stock Purchase Warrants to purchase up to 172,500 shares of Common Stock issued by the Company on July 21, 2021 to institutional investors (the “July 2021 Warrants”). The outstanding July 2021 Warrants have an exercise price of $6.15 per share, and contain a “Fundamental Transaction” provision, the definition of which, among other actions, states that upon a tender offer or exchange offer (whether by the Company or another Person) being completed pursuant to which holders of the Company’s common stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding shares of the Company’s common stock, holders could elect to receive a cash payment equal to the Black-Scholes Value (as such term is defined in the July 2021 Warrants) of their July 2021 Warrants (the “Put Right”). On January 15, 2026, the Company completed a tender offer in which greater than 50% of the then outstanding shares of common stock were repurchased by the Company. The completion of the tender offer constituted a Fundamental Transaction, which triggered the cash-settlement provision for all outstanding July 2021 Warrants.

As of December 31, 2025, the July 2021 Warrants were classified as equity, since the warrants did not obligate the Company (conditionally or unconditionally) to repurchase the shares underlying the warrants or issue a variable number of shares, were indexed to the Company’s Common Stock, and met the criteria for classification in equity as defined in ASC 815. The triggering of the cash-settlement provision on January 15, 2026, required the outstanding July 2021 Warrants to be reclassified from equity to a liability at their fair value, therefore the Company recognized an initial warrant liability of $300,533, with a corresponding decrease to Additional Paid-in Capital. Effective February 16, 2026, the 30-day period for holders to elect a cash settlement expired, and the holders of the outstanding July 2021 Warrants did not exercise the Put Right. As a result, the Company remeasured the remaining liability balance, recognizing a gain on remeasurement of $150,458 as a component of Other Income for the six months ended June 30, 2026, and the remaining liability of $150,075 was reclassified to Additional Paid-in Capital.

As of June 30, 2026 and December 31, 2025, there was no liability associated with these warrants.

The fair value of the warrant liability is measured using the Black-Scholes-Merton option-pricing model, which requires the use of subjective assumptions. These inputs are considered Level 3 inputs within the fair value hierarchy.

The key assumptions used in the Black-Scholes-Merton model to value the liability were as follows:

Treasury Stock

On December 8, 2025, the Company commenced a tender offer (the “Tender Offer”) to repurchase up to 6,192,990 shares of Common Stock, representing approximately 83% of its issued and outstanding shares as of December 1, 2025, at the maximum aggregate purchase price for shares purchased in the Tender Offer of $32,203,548. The Tender Offer expired on January 12, 2026.

In accordance with the terms and conditions of the Tender Offer, based on the final count, on January 15, 2026, the Company accepted for purchase 5,625,129 shares of Common Stock at a purchase price of $5.20 per share, for an aggregate cost of $29,250,671, excluding fees, excise taxes, and expenses relating to the Tender Offer. The shares accepted for purchase represent approximately 72.0% of the total number of shares of Common Stock outstanding as of December 8, 2025. Following the Company’s purchase of the tendered shares and payment of the cost of such tendered shares and other related expenses, the Company had 2,167,138 shares of Common Stock outstanding. Total expenses related to the Tender Offer were $570,793, including $292,507 related to excise taxes associated with the Tender Offer. As of June 30, 2026, all such expenses were paid with the exception of the excise taxes, which are included as a component of Income taxes payable. The total cost of the repurchased shares of $29,821,464 is recognized as Treasury Stock as of June 30, 2026.

At-The-Market (ATM) Offering

On May 26, 2026, the Company entered into an Amended and Restated Equity Distribution Agreement (the “Amended Agreement”), with Maxim Group LLC (“Maxim”), pursuant to which the Company may offer and sell, from time to time, through Maxim, as sales agent or principal, shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”). The terms and conditions of the Amended Agreement are substantially the same as the Equity Distribution Agreement, dated July 18, 2024, by and between the Company and Maxim. Offers and sales of shares of Common Stock by the Company, if any, under the Amended Agreement, will be made through a prospectus supplement, dated July 26, 2024 and an accompanying base prospectus, dated July 26, 2024, contained therein (the “ATM Prospectus”), which ATM Prospectus forms a part of our shelf registration statement on Form S-3 (File 333-280881), initially filed with the SEC on July 18, 2024 and declared effective by the SEC on July 26, 2024. The ATM Prospectus relates to the offering of up to $10,600,000 of shares of Common Stock. The Company incurred $87,568 of costs associated with the ATM offering program which are included as a component of Other long-term assets as of June 30, 2026.

As of June 30, 2026, there have been no offers or sales of shares of Common Stock by the Company under the ATM.

Note 6 –Income Taxes

The Company’s provision for income taxes is determined using an estimated annual effective tax rate, adjusted for discrete items that arise during the period.

Continuing Operations: For the six months ended June 30, 2026, the Company recorded an income tax benefit of $343,873 on its pre-tax loss from continuing operations of $2,287,507, reflecting an estimated annual effective tax rate of 15.0%. The Company recorded a full valuation allowance against its deferred tax asset of $264,088.

Discontinued Operations: For the six months ended June 30, 2026, the Company recorded a pre-tax gain from discontinued operations of $130,845 and a related tax provision of $31,538. The Company had a tax liability of $292,507 and $1,166,315 recognized as Income taxes payable at June 30, 2026 and December 31, 2025, respectively. As a result of the Company’s tax payments of $1,711,787 made during the six months ended June 30, 2026, the Company had a tax asset of $545,472 recognized as Income taxes receivable at June 30, 2026. Excise taxes payable as of June 30, 2026 includes an accrual of $292,507 for excise taxes associated with the Tender Offer (Note 5). No such payable existed as of December 31, 2025.

The cash paid for income taxes was as follows:

Note 7 –Equity Investment

On May 21, 2025, the Company invested $100,000 in TG-17, Inc. (“TG-17”), a then privately-held Delaware corporation, in exchange for shares of TG-17 Series CF Preferred Stock. The investment represents less than 20% of the outstanding equity of TG-17, and does not convey board representation, control rights, or any significant influence over the investee’s operating or financial policies. In February 2026, TG-17 changed its name to Our Bond, Inc. (“Our Bond”) and became a publicly traded company, listing its common stock on Nasdaq under the ticker symbol “OBAI.” The Company’s shares of Series CF Preferred Stock converted into shares of non-voting common stock prior to Our Bond’s listing on Nasdaq.

Effective upon Our Bond’s listing on the Nasdaq, the fair value of the Company’s investment in Our Bond’s common stock is based on the publicly listed trading price of Our Bond’s common shares, a Level 1 measurement, with unrealized gains or losses recognized as a component of other (expense) income in the statement of operations. As of June 30, 2026, the Company recognized an unrealized loss on its investment of $38,358 and $69,601 as a component of Other (expense) income on the condensed consolidated statement of operations for the three and six months ended June 30, 2026, respectively. The investment is classified as a non-current asset on the Company’s consolidated balance sheets (Note 4).

Note 8 –Commitments and Contingencies

Litigation

The Company is not currently involved in any litigation that it believes could have a materially adverse effect on its financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company or any of its subsidiaries, threatened against or affecting the Company, its Common Stock, any of its subsidiaries or of the Company’s or its subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Note 9 –Related Party Transactions

Nexxis Capital LLC

Charles M. Piluso (Chairman and CEO) and Harold Schwartz (a Director and former President) collectively own 100% of Nexxis Capital LLC (“Nexxis Capital”). Nexxis Capital was formed to purchase equipment and provide leases to Nexxis Inc.’s customers. The Company received funds of $0 from Nexxis Capital during the three and six months ended June 30, 2026. The Company received funds of $0 and $3,257 from Nexxis Capital during the three and six months ended June 30, 2025, respectively. Nexxis Capital was formed to overcome the Nexxis obstacle of supplying financing for Nexxis clients and the relationship was between Nexxis client and Nexxis Capital.

Eisner & Maglione CPAs LLC

Lawrence Maglione, a member of the Board of Directors, is a partner of Eisner & Maglione CPAs LLC. The Company paid his firm $0 and $5,822 for accounting and due diligence services during the three and six months ended June 30, 2026, respectively. The Company paid his firm $21,231 and $27,739 for accounting and due diligence services during the three and six months ended June 30, 2025, respectively. There were no amounts due to Eisner & Maglione CPAs LLC as of June 30, 2026 or December 31, 2025.

Matthew Grover

The Company paid consulting fees of $0 and $7,200 to Matthew Grover, a member of the Board of Directors, during the three and six months ended June 30, 2026, respectively. No such payments were made during the three or six months ended June 30, 2025.

Systems Trading

On January 1, 2022, the Company entered into a lease agreement with Systems Trading, Inc. (“Systems Trading”), a technology leasing company established by Harold Schwartz (a Director and former President), where he currently serves as Chief Executive Officer and President, effective January 1, 2022. This lease obligation was payable to Systems Trading with monthly installments of $7,145 and expired on April 1, 2025. The lease carried an interest rate of 8%.

On April 1, 2022, the Company entered into a lease agreement with Systems Trading effective May 1, 2022. This lease obligation was payable to Systems Trading with monthly installments of $6,667 and expired on February 1, 2025. The lease carried an interest rate of 8%.

Other

In connection with the vesting of equity awards held by Harold Schwartz (a Director and former President), the Company erroneously remitted $47,479 in tax withholding obligations during the fourth quarter of the year ended December 31, 2025, which was later determined to be an overpayment. The balance was repaid to the Company in April 2026.

Note 10 –Segment Information

Following the sale of its Cloud Solutions Business, which consisted of the operations of the Company’s subsidiaries, CloudFirst Technologies Corporation and CloudFirst Europe Ltd., on September 11, 2025 (Note 3), the Company operates in one reportable segment: Nexxis, Inc. The CloudFirst Technologies Corporation and CloudFirst Europe Ltd. reportable segments were removed as a result of the sale of the Cloud Solutions Business.

The Company’s segment was determined based on its internal organizational structure, the manner in which its operations are managed, and the criteria used by the Company’s CODM, which is its Chief Executive Officer, to evaluate performance, which is generally the segment’s operating income or losses.

Nexxis, Inc. is a single-source solution provider that delivers fully-managed cloud-based voice over internet services, data transport, internet access, and SD-WAN solutions focused on business continuity for today’s modern business environment.

The following tables present certain financial information related to the Company’s reportable segment and Corporate:

Total assets by segment are not regularly provided to or reviewed by the CODM for use in assessing performance and allocating resources, and as a result, the Company does not disclose assets by reportable segment.

Note 11 –Subsequent Events

The Company has evaluated events that occurred through the issuance of these financial statements and determined that there have been no events that have occurred that would require adjustments to the Company’s disclosures in the financial statements.