What changed in Data Storage Corp's 10-K — 2024 vs 2025

ITEM 1. BUSINESS Overview Data Storage Corporation (“Data Storage,” “we,” “us,” “our” and the “Company”) has been a leading provider of multi-cloud hosting, fully managed cloud services, disaster recovery, cybersecurity, IT automation, and voice & data solutions for more than twenty years.

Following the sale of our cloud solutions business on September 11, 2025, which consisted of the operations of our subsidiaries, CloudFirst Technologies Corporation and CloudFirst Europe Ltd., there has been a strategic shift in our operations. We continue to operate our subsidiary, Nexxis Inc. (“Nexxis”), a telecommunications and data solutions access company.

We are currently focused on managing, building, expanding or acquiring synergetic technology companies that provide leading edge solutions that assist businesses and institutions improve their business processes. We are pursuing acquisitions of companies in complementary and high-growth technology sectors.

Nexxis is a provider of fully managed business voice, internet, data transport, and SD-WAN communication solutions engineered for enterprise-grade reliability, cloud performance, and simplified operations. It delivers integrated technology services designed to support modern, cloud-centric work environments with continuous uptime, superior quality of service, and a single point of management for complex connectivity needs.

Nexxis operates nationwide, serving businesses across multiple verticals including healthcare, professional services, financial services, manufacturing, and distributed enterprise environments. Nexxis positions itself as a cloud-first communications provider delivering high-availability voice and data services with a simplified operational model. Nexxis differentiates itself through integrated voice and internet architecture, proactive monitoring, enterprise-grade performance, and a white-glove customer experience.

The solutions offered by Nexxis are particularly well-suited for distributed enterprises, hybrid workforces, cloud-dependent organizations, and businesses requiring high uptime and performance guarantees. The unified service agreement offered by Nexxis to its customers provides fully managed, integrated connectivity services that combine advanced voice communications with high-performance internet and WAN infrastructure.

Nexxis’ business model emphasizes operational simplicity, performance optimization, and vendor consolidation. Key value drivers include: ● Fully Managed 24×7 monitoring and support; ● Multi-carrier redundancy and intelligent SD-WAN routing; ● Single invoice and unified service management; ● Reduced downtime and improved business continuity; and ● Lower total cost of ownership compared to legacy multi-vendor environments.

Sale of CloudFirst Business On September 11, 2025, we closed the sale of the CloudFirst business, for which we received $38,068,463 in cash. This amount was based on a contractual base purchase price of $40,000,000, adjusted at closing for a $1,500,000 escrow deposit and $431,537 in net adjustments for estimated closing date debt and working capital.

After taking into account the selling expenses, estimated taxes on the sale, and other transaction costs, our net proceeds from the sale were approximately $31.6 million.

Recent Developments As part of our strategy to return value to our shareholders following the sale of the CloudFirst business, our Board of Directors (the “Board”) determined to engage in a tender offer (the “Tender Offer”) to repurchase from our shareholders up to 85% of our outstanding shares of common stock, par value $0.001 per share (“Common Stock”), using 85% of our cash on hand on the date of commencement of the Tender Offer, inclusive of the net sale proceeds received in connection with the sale of the CloudFirst business, net of certain expenses and taxes.

On December 8, 2025, we commenced the Tender Offer to purchase up to 6,192,990 shares of Common Stock, representing approximately 83% of our 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, we accepted for purchase 5,625,129 shares of Common Stock at a purchase price of $5.20 per share, for an aggregate cost of $29,250,971.

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 payment for the tendered shares, we had 2,167,138 shares of Common Stock outstanding. After completing the Tender Offer and related payments, we retained over $10.0 million in cash.

Included in the tendered shares were an aggregate of 895,876 shares of Common Stock tendered by our directors and officers. 8 Strategy and Competitive Position With the completion of the Tender Offer, we have streamlined our capital structure, while maintaining a strong balance sheet and liquidity to support future strategic initiatives, with the goal of maximizing long-term shareholder value.

The Board is actively evaluating strategic opportunities that support our growth plan, centered on thoughtful consolidation across technology-enabled services.

Our strategy prioritizes businesses with recurring revenue, high margins, established customer bases, and clear paths to scale—particularly in areas such as GPU type environments, AI-driven software applications, cybersecurity, and telecommunications, including, without limitation: ● Targeted Acquisitions in High-Growth Sectors – We intend to leverage our management’s expertise in technology and pursue acquisitions of companies in complementary and high-growth technology sectors which may include the following: o Artificial Intelligence (AI), Enabled Vertical Software-as-a-Service (SaaS), GPU Infrastructure-as-a-Service (IaaS) o Cybersecurity solutions and related applications and services, such as SOC. o Investments in companies in various sectors ● Sale or Merger of the Company – Our Board may evaluate potential strategic interest in the public company itself, including a full sale, reverse merger, or other business combination with a third party that may benefit from our public listing, cash position, 250 million shares authorized and clean capital structure; and/or ● A Hybrid of the Above Strategies – We may pursue a combination of the above strategies for the remaining sale proceeds beyond those intended to be used for the Tender Offer.

The Board has not made a final determination regarding the use of our current cash on hand. Any such actions will be subject to further review, market conditions, and, where required, shareholder approval. We are committed to maximizing shareholder value while maintaining flexibility to pursue the most advantageous path forward.

Government Regulation We operate through our Nexxis subsidiary, within a complex and evolving regulatory landscape, governed by a multitude of federal, state, local, and international privacy laws. These laws regulate tour handling of personal and customer data, reflecting the growing importance of privacy in the digital age.

Nexxis Regulatory Framework Nexxis provides interconnected nomadic Voice over Internet Protocol (“VoIP”) services, internet access services, and data transport services.

These offerings are generally classified as “information services” under the Communications Act of 1934, as amended (the “Communications Act”), rather than “telecommunications services.” As a result, Nexxis’ services are subject to a different and generally less comprehensive regulatory framework than that applicable to traditional common carrier telecommunications providers.

However, information services remain subject to an evolving regulatory landscape at the federal, state, and local levels, and certain aspects of Nexxis’ operations are regulated notwithstanding its status as an information services provider. Federal Communications Commission Regulation The Federal Communications Commission (“FCC”) regulates certain aspects of interconnected nomadic VoIP and broadband internet access services.

While the FCC has historically classified interconnected nomadic VoIP as an information service, it has imposed a number of service-specific regulatory obligations, including requirements relating to: ● Enhanced 911 (“E911”) services, including the provision of emergency calling capabilities and customer notice requirements; ● Communications Assistance for Law Enforcement Act (“CALEA”) compliance, which requires covered providers to assist law enforcement agencies in executing lawful electronic surveillance; ● Number portability, access to numbering resources, and participation in numbering databases where applicable; ● Disability access requirements under the Twenty-First Century Communications and Video Accessibility Act (“CVAA”); ● Customer proprietary network information (“CPNI”) protections, to the extent applicable; and ● Truth-in-billing and consumer disclosure obligations, including transparency relating to rates, fees, and service limitations.

In addition, broadband internet access services may be subject to FCC transparency rules and other limited obligations applicable to information services.

The regulatory classification of broadband internet access services has been subject to periodic reassessment by the FCC, and reclassification or the adoption of additional rules could result in expanded regulatory requirements, including potential common-carrier-like obligations. 10 Universal Service and Regulatory Fees Although information services providers are not generally treated as common carriers, interconnected VoIP providers are required to contribute to the Universal Service Fund (“USF”), which supports programs designed to promote access to telecommunications services, including high-cost, low-income, schools and libraries, and rural healthcare programs.

Nexxis is also subject to FCC regulatory fee obligations and reporting requirements associated with these contributions. Changes in contribution methodologies, assessment bases, or contribution rates could increase Nexxis’ costs of operations.

State and Local Regulation State public utility commissions and local authorities may assert jurisdiction over certain aspects of interconnected VoIP, internet access, and data transport services, particularly with respect to consumer protection, emergency services, taxation, and public safety requirements.

While federal law generally preempts state regulation that treats information services as traditional telecommunications services, states continue to adopt and enforce laws governing: ● Emergency communications and 911-related obligations; ● Service quality and consumer complaint processes; ● Privacy and data security requirements; and ● State and local taxes, fees, and surcharges applicable to communications services.

The scope of permissible state regulation in this area continues to develop, and inconsistent state requirements could increase compliance complexity and costs. Privacy, Data Security, and Cybersecurity Nexxis’ operations involve the collection, processing, and transmission of customer and network data.

As a result, Nexxis is subject to federal, state, and local laws and regulations governing privacy, data security, and cybersecurity, including laws addressing the protection of personally identifiable information, data breach notification, and network security. These requirements are expanding and evolving, particularly at the state level, and may impose additional compliance, monitoring, and reporting obligations.

Lawful Intercept and Public Safety Requirements In addition to CALEA obligations, Nexxis must comply with other federal and state laws designed to support public safety and national security, including requirements to cooperate with lawful intercept requests and to maintain the technical capability to support such requests. Compliance with these obligations may require investments in network design, systems, and personnel.

Regulatory Uncertainty The regulatory framework applicable to interconnected nomadic VoIP, internet access, and data transport services continues to evolve as technology advances and policy priorities change. Legislative, regulatory, or judicial actions could result in the reclassification of Nexxis’ services, the imposition of new obligations, or increased enforcement activity.

Compliance with these changes could require additional expenditures, operational modifications, or changes to Nexxis’ business model. Human Capital Resources We attribute our success to the skill and dedication of our workforce, consisting of seven full-time employees as of March 31, 2026.

In June 2010, we purchased SafeData, LLC, bringing the added solutions for IBM Power Systems disaster recovery and business continuity; in October 2012, we purchased the software and assets of Message Logic LLC, an email archival and compliance software.

In November 2012, we formed a joint venture with ABC Services, Inc. and formed Secure Infrastructure and Services LLC (“SIAS”), the first multi-tenant IBM Hosting for IBM Power hosting; In October 2016 we purchased 50% of SIAS and 100% of ABC Services, Inc. On October 19, 2017, we formed a new division, Nexxis, to provide VOIP services.