Data Storage Corp: Form 10-Q for the period ended Jun 30, 2026

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, 2025, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 14, 2026 (the “2025 Annual Report”). 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.

In some cases, you can identify forward-looking statements by terminology such as ‘may,’ ‘will,’ ‘should,’ ‘could,’ ‘expects,’ ‘plans,’ ‘intends,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘predicts,’ ‘potential,’ or ‘continue’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We are under no duty to update any of the forward-looking statements after the date of this report, except as required by law.

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 strategic investments and are 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 our 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.

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 our cloud solutions business, which consisted of the operations of our subsidiaries, CloudFirst Technologies Corporation and CloudFirst Europe Ltd., including substantially all of the assets held by CloudFirst Technologies Corporation (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 selling expenses, estimated taxes on the sale, and other transaction costs, our net proceeds from the sale were $31,600,873. On May 7, 2026, we finalized the post-closing adjustments with the purchaser of the Cloud Solutions Business, and as a result, we recorded $225,937 in additional consideration.

Recent Developments

ATM Offering

On May 26, 2026, 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, $0.001 par value per share (the “Common Stock”). The terms and conditions of the Agreement are substantially the same as the Equity Distribution Agreement, dated July 18, 2024, by and between the Company and Maxim (the “Original Agreement”).

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 the Company’s instructions, including any price, time or size limits specified by the Company. 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 U.S. 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 the effectiveness of the Registration Statement and other customary closing conditions for transactions of this nature. The Company will pay Maxim a commission of 2.5% of the aggregate gross proceeds from each sale of shares and has agreed to provide Maxim with customary indemnification and contribution rights. The Company also agreed to reimburse Maxim for certain specified expenses in connection with entering into the Agreement in an amount not to exceed $25,000, in addition to $2,500 for Maxim’s legal fees on each Bringdown Date (as such term is defined in the Agreement).

The Company is not obligated to make any sales of Common Stock under the Agreement and no assurance can be given that the Company will sell any shares under the Agreement, or, if it does, as to the price or amount of shares that the Company will sell, or the dates on which any such sales will take place. The Agreement will terminate upon the earlier of: (i) the sale of all shares pursuant to the Agreement, or (ii) termination of the Agreement as provided therein.

Offers and sales of shares of Common Stock by the Company, if any, under the Agreement, will be made through a prospectus, 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 the Company’s shelf registration statement on Form S-3 (File 333-280881), initially filed by the Company with the U.S. Securities and Exchange Commission (the “SEC”) on July 18, 2024 (the “Registration Statement”) 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 the Company’s Common Stock. The Company makes no assurances as to the continued effectiveness of the Registration Statement.

Tender Offer

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, 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 repurchase 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 repurchase 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 repurchase represent approximately 72.0% of the total number of shares of Common Stock outstanding as of December 8, 2025. Following payment for, and our repurchase of, the tendered shares, we had 2,167,138 shares of Common Stock outstanding. Included in the tendered shares were an aggregate of 895,876 shares of Common Stock tendered by our directors and officers.

RESULTS OF OPERATIONS

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., our continuing operations consist solely of our Nexxis subsidiary. The historical operations of the divested business have been reclassified and are presented as “Income from discontinued operations, net of tax” in our Condensed Consolidated Statements of Operations.

Accordingly, the following discussion and analysis of our results of operations focuses on our continuing operations (Nexxis) for the periods presented.

Three months ended June 30, 2026, as compared to June 30, 2025

Sales from continuing operations were $358,530 for the three months ended June 30, 2026, an increase of $30,579, or 9.3%, compared to $327,951 in the prior year period. The increase was primarily attributable to continued growth in our Nexxis voice and data solutions business, driven by the addition of new customers and increased spending from existing customers. Revenue growth during the period reflects continued demand for our voice and data connectivity solutions and expansion of services within our existing customer base.

In addition, revenue generated from existing customers increased during the three months ended June 30, 2026 compared to the three months ended June 30, 2025, reflecting higher utilization of our services and incremental service adoption. The Company also continued to diversify its customer base during the three months ended June 30, 2026.

Gross profit for the three months ended June 30, 2026 was $168,481, an increase of $30,299, or 21.9%, compared to $138,182 in the prior period. Our gross profit margin improved to 47.0% from 42.1% in the prior period, driven by favorable sales mix and operating leverage.

Selling, general and administrative expenses

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For the three months ended June 30, 2026, selling, general and administrative expenses increased $361,607, or 33.2%, to $1,450,551 from $1,088,944 for the three months ended June 30, 2025. The increase was primarily driven by a $328,429, or 99.1%, increase in non-cash stock-based compensation as a result of grants to certain executives and employees during the first quarter of 2026. Professional fees increased $58,252, or 26.2%, attributable to higher fees paid relating to legal and consulting services during the period.

Loss from continuing operations, net of tax. Loss from continuing operations, net of tax was $1,175,376 for the three months ended June 30, 2026, compared to a loss of $847,495 in the prior year period. The higher loss was primarily driven by an increase in non-cash stock-based compensation expense.

Interest income. Interest income for the three months ended June 30, 2026, was $81,415, compared to $103,267 for the three months ended June 30, 2025.

Other (expense) income. Other (expense) income was expense of $38,358 for the three months ended June 30, 2026, which represents the non-cash adjustment related to the change in fair value of equity investment during the period.

(Loss) income from discontinued operations, net of tax. For the three months ended June 30, 2026, the Company recognized a pre-tax loss of $72,493 ($49,684, net of a $22,809 tax benefit) related to the sale of its Cloud Solutions Business. The activity during the three months consisted of incremental taxes and fees incurred during the period directly related to the sale. For the three months ended June 30, 2025, income from the operations of the CloudFirst Business, net of tax, was $115,532.

Six months ended June 30, 2026, as compared to June 30, 2025

Sales from continuing operations were $705,237 for the six months ended June 30, 2026, an increase of $64,542, or 10.1%, compared to $640,695 in the prior year period. The increase was primarily attributable to continued growth in our Nexxis voice and data solutions business, driven by the addition of new customers and increased spending from existing customers. Revenue growth during the period reflects continued demand for our voice and data connectivity solutions and expansion of services within our existing customer base.

In addition, revenue generated from existing customers increased during the six months ended June 30, 2026 compared to the six months ended June 30, 2025, reflecting higher utilization of our services and incremental service adoption. The Company also continued to diversify its customer base during the six months ended June 30, 2026.

Gross profit for the six months ended June 30, 2026 was $354,500, an increase of $75,541, or 27.1%, compared to $278,959 in the prior period. Our gross profit margin improved to 50.3% from 43.5% in the prior period, driven by favorable sales mix and operating leverage.

Selling, general and administrative expenses

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For the six months ended June 30, 2026, selling, general and administrative expenses increased $976,805, or 50.2%, to $2,922,664 from $1,945,859 for the six months ended June 30, 2025. The increase was primarily driven by a $753,237, or 160.9%, increase in non-cash stock-based compensation as a result of grants to certain executives and employees during first quarter of 2026. Professional fees increased $192,985, or 47.6%, attributable to higher fees paid relating to legal and consulting services during the period.

Loss from continuing operations, net of tax. Loss from continuing operations, net of tax was $1,943,634 for the six months ended June 30, 2026, compared to a loss of $1,442,727 in the prior year period. The higher loss was primarily driven by an increase in non-cash stock-based compensation expense.

Interest income. Interest income for the six months ended June 30, 2026, was $199,800, compared to $224,173 for the six months ended June 30, 2025.

Other (expense) income. Other (expense) income was income of $80,857 for the six months ended June 30, 2026, which represents the non-cash adjustments related to the change in fair value of the warrant liability partially offset by the change in fair value of equity investment during the period.

(Loss) income from discontinued operations, net of tax. For the six months ended June 30, 2026, the Company recognized a pre-tax gain of $130,845 ($99,307, net of a $31,538 tax provision) related to the sale of its Cloud Solutions Business. The activity during the three months consisted of incremental taxes and fees incurred during the period directly related to the sale, offset by the final post-closing adjustments of $225,937. For the six months ended June 30, 2025, income from the operations of the CloudFirst Business, net of tax, was $737,152.

LIQUIDITY AND CAPITAL RESOURCES

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) applicable for a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business.

To the extent we are successful in identifying potential acquisition targets and negotiating the terms of such acquisitions, and where the purchase price may include a cash component, we expect to use our working capital and the proceeds of any financing we may engage in to finance such acquisition costs.

Our conclusion concerning our liquidity is based on current information. If this information proves to be inaccurate, or if circumstances change, we may not be able to meet our liquidity needs, which may require a reduction in selling general and administrative expenses, including salaries for officers that are major shareholders.

The Company’s working capital (excluding the amounts payable to the purchaser of the CloudFirst Business included as discontinued operations and excise taxes payable) in the Company’s continuing operations was $10,261,306 on June 30, 2026, decreasing by $31,523,147 from $41,784,453 at December 31, 2025. The decrease was primarily driven by the sale of marketable securities during the period of $30,205,420, which was largely used for the purchase of shares and payment of costs totaling $29,528,957 in connection with the Tender Offer. The marketable securities utilized for the Tender Offer were originally purchased using net proceeds from the sale of the CloudFirst Business in the second half of the year ended December 31, 2025.

Tender Offer and Resulting Cash Position

On December 8, 2025, we commenced a fixed price tender offer to repurchase up to 6,192,990 shares of our Common Stock at a maximum aggregate purchase price of $32.2 million. The Tender Offer expired on January 12, 2026, and on January 15, 2026, we accepted for repurchase 5,625,129 shares of Common Stock at $5.20 per share, for an aggregate purchase price of $29,250,671, excluding fees, excise taxes, and expenses relating to the Tender Offer. Following payment for, and our repurchase of, the tendered shares, we had 2,167,138 shares outstanding and retained over $10.0 million in cash.

Impact on Liquidity, Capital Allocation, and Future Obligations

The Tender Offer significantly reduced our outstanding share count and utilized a substantial portion of our cash resources. However:

• We remained well capitalized following completion of the Tender Offer, with more than $10.0 million in cash and marketable securities and no material near-term debt maturities.
• We did not incur additional indebtedness to fund the Tender Offer.
• We continue to evaluate capital allocation alternatives, including preservation of liquidity for operations.

As of June 30, 2026, we had cash of $1,270,691 (including escrow funds receivable), marketable securities of $9,008,914, and working capital of $10,261,306 (excluding excise taxes payable). We believe our current cash position of approximately $9.0 million (including escrowed funds), as of August 13, 2026, proceeds from the sale of marketable securities, and our expected cash flows from operations will be sufficient to fund working capital needs, capital expenditures, and operating commitments for at least the next 12 months from the date of the filing of this Quarterly Report on Form 10-Q.

Working Capital and Cash Flow Considerations

Our liquidity profile is primarily driven by cash on hand remaining after the Tender Offer, and careful management of operating and capital expenditures. We are actively managing expenses and have reduced corporate spending to align with our smaller portfolio and strategic transition.

Outlook

We expect that our current liquidity, together with anticipated cash flows, will support operational needs. We expect that we may also pursue additional sources of liquidity, including:

• reductions in selling, general and administrative expenses, and
• potential changes in our investment strategy.

We will continue to monitor macroeconomic conditions and capital market trends, including impacts on financing availability.

Cash Flows for the six months ended June 30, 2026, as compared to June 30, 2025

The following table summarizes the Company’s cash flows:

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Operating Activities

Cash used in operating activities of continuing operations was $2,644,827 for the six months ended June 30, 2026, compared to cash provided by operating activities of $224,386 for the prior year period. The cash used in 2026 was primarily driven by the loss from continuing operations, net of tax, of $1,943,634 and cash paid for income taxes of $1,711,787 primarily related to the sale of the CloudFirst Business during the year ended December 31, 2025.

Investing Activities

Cash provided by investing activities of continuing operations was $29,995,210 for the six months ended June 30, 2026, compared to $749,671 for the prior year period. The cash provided in 2026 was driven by marketable securities, as reflected in purchases of $210,210 and sales of $30,205,420, originally purchased using proceeds from the sale of the CloudFirst Business in 2025, during the period.

Financing Activities

Cash used in financing activities of continuing operations was $29,569,046 for the six months ended June 30, 2026, compared to cash provided by financing activities of $38,267 for the prior year period. The significant cash use in 2026 represents our purchase, on January 15, 2026, of 5,625,129 shares of Common Stock in the Tender Offer, 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, using funds from sales of marketable securities. The repurchased shares are now held as treasury stock, as reflected in our unaudited financial statements attached to this Quarterly Report on Form 10-Q.

Cash Flows from Discontinued Operations

Cash used in discontinued operations was $1,481,048 for the six months ended June 30, 2025, which represents the net cash flows from the CloudFirst Business. There was no cash used in discontinued operations for the six months ended June 30, 2026.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities”.

Non-GAAP Financial Measures

Adjusted EBITDA

To supplement the Company’s consolidated financial statements presented in accordance with GAAP and to provide investors with additional information regarding the Company’s financial results, the Company considers, and is including herein, Adjusted EBITDA, a Non-GAAP financial measure. The Company views Adjusted EBITDA as an operating performance measure and, as such, the Company believes that the GAAP financial measure most directly comparable to it is loss from continuing operations, net of tax. The Company defines Adjusted EBITDA as loss from continuing operations, net of tax adjusted for income taxes, interest, depreciation, amortization, stock-based compensation, and other non-cash income and expenses. The Company believes that Adjusted EBITDA provides an important measure of operating performance because it allows management, investors, debt holders and others to evaluate and compare ongoing operating results from period to period by removing the impact of the Company’s asset base, any asset disposals or impairments, stock-based compensation and other non-cash income and expense items.

The Company’s use of Adjusted EBITDA has limitations as an analytical tool, and this measure should not be considered in isolation or as a substitute for an analysis of its results as reported under GAAP, as the excluded items may have significant effects on its operating results and financial condition. Additionally, the Company’s measure of Adjusted EBITDA may differ from other companies’ measure of Adjusted EBITDA. When evaluating the Company’s performance, Adjusted EBITDA should be considered with other financial performance measures, including various cash flow metrics, net income and other GAAP results. In the future, the Company may disclose different non-GAAP financial measures in order to help its investors and others more meaningfully evaluate and compare the Company’s future results of operations to its previously reported results of operations.

The following table shows the Company’s reconciliation of loss from continuing operations, net of tax to Adjusted EBITDA for the three and six months ended June 30, 2026, and 2025:

Critical Accounting Estimates

The preparation of financial statements in conformity with US 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. The Company believes that the accounting estimates employed are appropriate and resulting balances are reasonable; however, due to inherent uncertainties in making estimates, actual results may differ from the original estimates, requiring adjustments to these balances in future periods. There are accounting policies, each of which requires significant judgments and estimates on the part of management, that the Company believes are significant to the presentation of its consolidated financial statements. The critical accounting estimates that affect the consolidated financial statements and the judgments and assumptions used are consistent with those described under Part II, Item 7 of the 2025 Annual Report.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Rule 13a-15(e) under the Exchange Act defines “disclosure controls and procedures” as controls and other procedures of a company that are designed to ensure that the information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to a company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2026.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. As set forth above, our Chief Executive Officer and Chief Financial Officer have concluded, based on the evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, that our disclosure controls and procedures were effective to provide reasonable assurance that the objectives of our disclosure control system were met.

Remediation of Previously Reported Material Weakness

In connection with the preparation of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, management identified a material weakness in our internal control over financial reporting. The material weakness related to the design and operating effectiveness of controls over the accounting and disclosure of significant and unusual transactions—specifically, those arising from the divestiture of a material portion of our business. Our controls were not effectively designed to ensure a complete and accurate technical review of the complex accounting and tax elements associated with this transaction.

This deficiency identified during the third quarter of 2025 resulted in an error related to the income tax implications of the divestiture of the CloudFirst Business. Subsequently, in connection with the preparation of the 2025 Annual Report, we identified an additional error stemming from the same material weakness regarding the treatment of certain warrants impacted by the divestiture. Specifically, on September 11, 2025, the closing of the divestiture of the CloudFirst Business triggered a cash-settlement provision within our Common Stock Purchase Warrants issued by us on July 21, 2021 to institutional investors (the “July 2021 Warrants”), requiring them to be reclassified from equity to a liability at fair value. We determined that the initial recognition of the $2,461,663 warrant liability was incorrectly recorded in the Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 as a component of Gain on sale of discontinued operations, net of tax, rather than as a reduction to Additional Paid-in Capital.

Accordingly, within the 2025 Annual Report, we restated certain financial statements previously included in the Quarterly Report on Form 10-Q for the period ended September 30, 2025, to reflect the initial recognition of the July 2021 warrant liability as a debit to equity, with subsequent changes in fair value of the warrant liability recognized in the consolidated statements of operations.

In 2026, we identified and implemented several steps to remediate these material weaknesses in order to comply with the rules and regulations of the SEC regarding compliance with Section 404(a) of the Sarbanes-Oxley Act. We prepared remediation plans for the material weakness and trained process owners, developed new controls, enhanced existing controls, evaluated process adoption, and monitored such results. These remediation measures included the following:

• Enhancing internal review procedures to ensure that significant and unusual transactions are identified, analyzed, and reviewed with appropriate rigor each quarter, including adding a formalized agenda to a monthly committee meeting, including executives and an external advisor, to review such transactions to ensure proper accounting thereon.
• Engaging appropriate internal and external resources to support the evaluation of complex transactions, including associated accounting and disclosure requirements, where specialized expertise is required.
• Formal preparation and review of a disclosure checklist prior to filing Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

Our management completed its documentation, testing and evaluation of the enhanced control activities and determined that, as of June 30, 2026, these control activities have been appropriately designed and implemented, and have operated effectively for a sufficient period of time to conclude that the previously identified material weakness has been remediated.

Changes in Internal Control over Financial Reporting

Other than as set forth above, there have been no changes in our internal control over financial reporting during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Introduction and Certain Cautionary Statements

As used in this Quarterly Report on Form 10-Q, unless the context requires otherwise, references to the “Company,” “we,” “us,” and “our” refer to Data Storage Corporation and its subsidiaries. The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and schedules included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements for the year ended December 31, 2025 and 2024 and the accompanying notes, which are included in the 2025 Annual Report. This discussion, particularly information with respect to our future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q and the 2025 Annual Report for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act. Statements contained in this Quarterly Report on Form 10-Q may use forward-looking terminology, such as “anticipates,” “believes,” “could,” “would,” “estimates,” “may,” “might,” “plan,” “expect,” “intend,” “should,” “will,” or other variations on these terms or their negatives. All statements other than statements of historical facts are statements that could potentially be forward-looking. We caution that forward-looking statements involve risks and uncertainties, and actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate or prediction is realized. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, those discussed in the section titled “Risk Factors” included under Part II, Item 1A below and those discussed in the section titled “Risk Factors” included under Part I, Item 1A in the 2025 Annual Report. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statement.

Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the objectives and plans of ours will be achieved. Investors are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date on which such statements are made. Any forward-looking statements made by us or on our behalf speak only as of the date they are made, and we do not undertake to update any forward-looking statement that may be made from time to time on our behalf.

We have not generated a significant amount of net income and we may not be able to sustain profitability in the future.

As reflected in the condensed consolidated financial statements, we had a net loss attributable to common stockholders of $1,856,787 for the six months ended June 30, 2026. As of June 30, 2026, we had cash of $1,270,691 (including escrow funds receivable), marketable securities of $9,008,914, and working capital of $10,261,306 (excluding excise taxes payable). There can be no assurance that we will continue to generate income in the future or that the income will be significant.