UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One) 

For the fiscal year ended December 31, 2025

For the transition period from _____________to____________________________

Commission File No. 001-35384

DATA STORAGE CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (212) 564-4922

Securities registered under Section 12(b) of the Exchange Act:

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $0.001 per share

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 5(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation ST (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company and an “emerging growth company.” See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued statements. ☒

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to Section 240.10D-1(b). ☒

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒

As of June 30, 2025, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of the Company’s voting and non-voting common equity held by non-affiliates of the Registrant was $14,276,639, based upon the closing sale price of $3.43 per share reported on June 30, 2025.

The number of shares of the registrant’s Common Stock outstanding as of April 13, 2026, was 2,167,138.

Documents incorporated by reference: None.

Data Storage Corporation

Table of Contents

EXPLANATORY NOTE

This Annual Report on Form 10-K (this “Annual Report”) of Data Storage Corporation (the “Company,” “we”, “us,” our”) includes a restatement (the “Restatement”) of the following financial statements (collectively, the “Restated Financial Statements”) as appearing in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2025 (the “Prior Periodic Report”):

In connection with the preparation of this Annual Report, we identified an error in the Prior Periodic Report related to the accounting for the reclassification of our Common Stock Purchase Warrants issued on July 21, 2021 (the “July 2021 Warrants”). On September 11, 2025, the triggering of a cash-settlement provision required these warrants 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 as a component of Gain on sale of discontinued operations, net of tax, rather than as a reduction to Additional Paid-in Capital. Accordingly, as presented in Note 12 to Item 8 of this Annual Report, we have corrected the prior period financial statements to reflect the initial recognition as a debit to equity, with subsequent changes in the fair value of the liability recognized in the consolidated statements of operations.

The Item of this Annual Report that restates information in the Quarterly Report as a result of the Restated Financial Statements is Part II., Item 8., Financial Statements and Supplementary Data.

We have not filed and do not intend to file an amendment to our Quarterly Report.

Compensation Recovery Policy

In connection with rules of the Securities and Exchange Commission (“SEC”) and Nasdaq requiring adoption of a clawback policy applicable to incentive-based compensation for Section 16 officers of listed companies, the Company has adopted a clawback policy. Under such policy, if the Company is required to restate its financial results, the Company will recoup incentive-based compensation previously received by an executive officer that exceeds the amount of incentive-based compensation that otherwise would have been received had it been determined based on the restated amounts in the Restatement. As such, we conducted a clawback analysis in connection with the Restatement as required by the Company’s policies and concluded that recovery of erroneously awarded compensation was not required under the clawback policy as no excess incentive-based compensation was paid to any subject executive officer based on the financial results related to Restated Financial Statements.

Internal Control Considerations

In connection with the restatement of the Restated Periods, management concluded our disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2025, as described in Part II, Item 9A, Controls and Procedures. Management is taking steps to remediate the material weaknesses in our internal control over financial reporting, as described in Part II, Item 9A, Controls and Procedures.

PART I

Forward-Looking Statements

This Annual Report on Form 10-K (this “Annual Report”) contains 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. The forward-looking statements are contained principally in Part I, Item 1. “Business,” Part I, Item 1A. “Risk Factors,” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but are also contained elsewhere in this Annual Report and in some cases you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements.

You should refer to Item 1A. “Risk Factors” section of this Annual Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We do not undertake any obligation to update any forward-looking statements. Unless the context requires otherwise, references to “DSC,” “we,” “us,” “our,” and “Company,” refer to Data Storage Corporation and its subsidiaries.

Summary Risk Factors

Risks Related to the Company’s Business

Risks Related to the Company’s Industry

Risks Related to Intellectual Property

Risks Related to the Company’s Common Stock and Securities

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:

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.

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:

● 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. Compliance with these regulations is critical, as failure to do so could result in legal action, loss of customer trust, and negative impacts on our reputation and operations.

Key Regulatory Frameworks:

Compliance Measures Include:

The regulatory environment for us is marked by rapid changes and requires continuous vigilance to ensure compliance. As privacy regulations evolve, we may need to adjust our services and practices to remain compliant, thereby safeguarding our reputation and facilitating the development of new and innovative services that respect customer privacy.

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:

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.

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:

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. We have no collective bargaining agreements in place and maintain a positive relationship with our employees.

Key aspects of our human capital management include:

Corporate Information

Data Storage Corporation, a Delaware corporation founded in 2001, became a subsidiary of the Company, a Nevada corporation, in 2008. On October 20, 2008, the Company consummated a share exchange transaction with Euro Trend Inc. The Company subsequently changed its name from Euro Trend Inc. to Data Storage Corporation post-acquisition.

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. We own 80% of the telecommunications and data solutions access company. Prior to our sale of the CloudFirst business, Nexxis was positioned to cross sell our client base and provide new opportunities from of our base.

On February 18, 2021, we announced a joint venture agreement with Able-One Systems Inc. (“Able-One”) to provide our portfolio of enterprise-level IBM cloud infrastructure services to customers in Canada, filling a vital need for cloud services in Canada among businesses that run IBM Power Systems on IBM i, AIX and Linux operating systems.

On May 31, 2021, we completed a merger of Flagship Solutions, LLC, a Florida limited liability company providing Hybrid Cloud solutions, managed services and cloud solutions, (“Flagship”) and our wholly-owned subsidiary, Data Storage FL, LLC, a Florida limited liability company. This transaction with an IBM Gold Business Partner was synergetic to the Company’s services and added new solutions. On January 1, 2024, Flagship was consolidated into our wholly-owned subsidiary, CloudFirst Technologies Corporation, a Delaware corporation incorporated in 2001.

The result of these acquisitions, combined with the Company’s business continuity disaster recovery and IBM Power cloud infrastructure solutions, positioned Data Storage Corporation as an industry leader.

On January 27, 2022, we formed Information Technology Acquisition Corporation a special purpose acquisition company for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities.

On August 12, 2024, we formed UK Cloud Host Technologies Ltd., a company formed under the laws of the United Kingdom, for the purpose of establishing an executive presence in London, United Kingdom and managing the business and affairs of the Company within Europe. On December 27, 2024, the name of the entity was changed to CloudFirst Europe Ltd.

On September 11, 2025, we transferred 100% of the outstanding equity interests of CloudFirst Europe Ltd. in connection with the sale of our CloudFirst business, which consisted of the operations of our subsidiaries, CloudFirst Technologies Corporation and CloudFirst Europe Ltd., to the purchaser thereof.

Facilities

Our Nexxis subsidiary leases office space in Melville, New York. The lease commenced on September 11, 2025 on a month-to-month basis. On February 17, 2026, a lease was executed, requiring monthly payments of $1,800, and expiring on December 31, 2026. In connection with the sale of our CloudFirst business, we entered into a sub-sublease agreement, pursuant to which the purchaser of the CloudFirst business assumed our obligations under the lease. We believe that our facilities, including those of Nexxis, are adequate for our current operations and needs, and those of Nexxis.

Available Information

Official filings with the SEC, including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and any amendments, are accessible for free on our website (www.dtst.com) under the Investor Relations section following their SEC submission. The content on our website is not incorporated by reference into this Annual Report or any other SEC filings.

ITEM 1A. RISK FACTORS

Investing in our Common Stock involves a high degree of risk. Investors should carefully consider the risks described below before deciding whether to invest in our securities. If any of the following risks actually occur, our business, financial condition or results of operations could be adversely affected. In such case, the trading price of our Common Stock could decline and you could lose all or part of your investment. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. Our actual results could differ materially from those anticipated in the forward-looking statements made throughout this Annual Report as result of different factors, including the risks we face described below.

Risks Related to the Company’s Business

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 consolidated financial statements, we had net income attributable to common shareholders of $19,204,700 and $523,214 for the years ended December 31, 2025, and 2024, respectively. As of December 31, 2025, we had cash of $3,489,354 (including restricted cash), marketable securities of $39,004,124, and working capital of $41,784,453 (excluding the amounts payable to the purchaser of discontinued operations and income taxes payable), of which $32,203,548 was paid to the stockholders who tendered their shares in the Tender Offer. There can be no assurance that we will continue to generate income in the future or that the income will be significant.

We may need to raise additional capital to acquire companies in complementary and high-growth technology sectors and there can be no assurance that we will be successful in doing so.

We expect our expenses to increase in connection with our anticipated acquisition activities. For the foreseeable future we will have to fund all of our operations and capital expenditures from revenue generated from operations and equity and debt offerings and cash on hand.

We may need to raise additional capital to fund our acquisitions, and we cannot be certain that funding will be available on acceptable terms on a timely basis, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that may impact our ability to conduct our business and also have a dilutive effect on our stockholders. We currently do not have any commitment for funding. Our ability to raise capital through the sale of securities may be limited by the rules of the SEC and Nasdaq that place limits on the number and dollar amount of securities that may be sold. There can be no assurances that we will be able to raise the funds needed, especially in light of the fact that our ability to sell securities registered on our registration statement on Form S-3 will be limited until such time the market value of our voting securities held by non-affiliates is $75 million or more.

Our strategic pivot following the sale of the CloudFirst business, including our plan to deploy a substantial portion of the remaining sale proceeds toward acquiring companies in high-growth sectors such as artificial intelligence and cybersecurity, exposes us to substantial execution, integration, and regulatory and tax-related risks that could adversely affect our business, financial condition, and results of operations.

We have recently completed the sale of our CloudFirst business and intend to use a portion of the remaining sale proceeds to pursue acquisitions in high-growth sectors, including artificial intelligence and cybersecurity. This strategic shift represents a significant change in our operating focus and risk profile and subjects us to a number of uncertainties that could materially adversely affect our business.

Our ability to successfully execute this strategy depends on identifying suitable acquisition targets, completing transactions on acceptable terms, and effectively integrating acquired businesses. Companies operating in artificial intelligence and cybersecurity are often characterized by rapid technological change, intense competition, significant research and development expenditures, evolving regulatory frameworks, and reliance on highly skilled personnel. We may face challenges integrating acquired operations, technologies, and personnel, realizing anticipated synergies, retaining key employees, and aligning differing business models, compliance practices, or corporate cultures. Failure to address these challenges could result in higher-than-expected costs, operational disruptions, or an inability to achieve anticipated strategic or financial benefits.

In addition, our acquisition strategy may expose us to greater sensitivity to changes in U.S. tax laws and regulations, including the One, Big, Beautiful Bill Act and future legislative, regulatory, or interpretive developments. Many artificial intelligence and cybersecurity companies incur significant research and development expenses and may rely on tax attributes, deductions, or incentives in their operating and financial planning. Changes in the timing, availability, or interpretation of tax benefits, as well as uncertainty regarding their application to acquired businesses, could adversely affect the valuation of potential acquisition targets, the accounting treatment of completed acquisitions, our effective tax rate, cash flows, or the expected returns on invested capital. Assumptions about tax treatment that prove incorrect or change over time could result in earnings volatility, the remeasurement or impairment of deferred tax assets, or reduced operating margins.

Further, the redeployment of divestiture proceeds into acquisitions reduces our financial flexibility and increases our exposure to risks associated with capital allocation decisions. If we are unable to complete acquisitions that perform as expected, or if market, regulatory, economic, or tax conditions change, we may be unable to fully replace the revenues, cash flows, or profitability associated with the divested business. Our common stock price could be adversely affected if investors perceive that our post-divestiture strategy, including our focus on acquisitions in high-growth and technology-driven sectors, entails greater risk or uncertainty than our prior business model.

We have identified a material weakness in our internal control over financial reporting, which could adversely affect our ability to report our financial results accurately and in a timely manner.

In connection with the preparation of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, we identified a material weakness in our internal control over financial reporting. The material weakness relates to the design and execution of controls over the accounting and disclosure of significant and unusual transactions, arising from the divestiture of a material portion of our business. Specifically, the deficient controls related to the analysis used in the financial reporting process and related income tax implications of the divestiture. In addition, in connection with the preparation of our consolidated financial statements for the year ended December 31, 2025, management identified an error in the Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 that also related to the accounting and disclosure of the same significant and unusual transactions (the divestiture of a material portion of our business), specifically the accounting for the reclassification of the July 2021 Warrants from equity to a liability. Accordingly, we have corrected the prior period financial statements in a restatement to reflect the initial recognition of the warrant as a debit to equity, with subsequent changes in the fair value of the liability recognized in the consolidated statements of operations. This weakness was identified in connection with the divestiture of a material portion of our business that occurred late in the third quarter of fiscal 2025. The weakness has not yet been remediated.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis. Although we are actively implementing a remediation plan, including enhancing internal review procedures and engaging appropriate internal and external resources, the material weakness has not yet been fully remediated.

If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud, or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a- 15(f) under the Exchange Act. Management plans to fully remediate the identified material weakness in internal controls, however, there can be no assurance that the internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future. In addition, the material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively.

We can give no assurance that additional material weaknesses will not be identified in the future. Our failure to implement and maintain effective internal controls over financial reporting could result in errors in our consolidated financial statements that could result in a restatement of our financial statements and could cause us to fail to meet our reporting obligations, any of which could diminish investor confidence in the Company and cause a decline in the price of our Common Stock.

A shutdown of the U.S. federal government may adversely affect our business.

The current partial shutdown, or a recurring shutdown, of the U.S. federal government may adversely affect our business operations and regulatory compliance. Since February 14, 2026, the U.S. federal government has been operating under a partial shutdown resulting from a lapse in appropriations for the Department of Homeland Security (“DHS”), while other federal agencies remain funded. As a result, certain DHS-related services and activities have been disrupted or delayed, including staffing and operations at agencies such as the Transportation Security Administration and the Federal Emergency Management Agency, and related third-party functions on which we may indirectly rely. More broadly, the shutdown has contributed to market volatility, operational inefficiencies and economic uncertainty, including disruptions to travel and commerce. If the shutdown continues or expands, or if future funding lapses occur, additional federal agency operations or regulatory activities could be suspended or delayed, which could adversely affect our operations, access to capital, business plans and the market price and liquidity of our securities. The duration and ultimate impact of the current shutdown are uncertain and beyond our control.

During shutdowns of the U.S. federal government, while the SEC’s EDGAR system remains operational, the potential unavailability of SEC staff to review filings, issue comments, or declare registration statements effective may delay our ability to complete public offerings, respond to comment letters, or obtain timely regulatory approvals. These delays could impact our access to capital markets, hinder strategic transactions, and create uncertainty around our disclosure obligations. Additionally, the lack of interpretive guidance or exemptive relief during a shutdown may increase legal and compliance risks. There can be no assurance that future shutdowns will not materially affect our operations or financial condition.

There is uncertainty regarding our future business strategy, which could affect our financial condition and prospects.

Following the sale of the CloudFirst business, we have not yet determined our future strategic direction. We may pursue acquisitions, joint ventures, minority investments, or alternative business opportunities, but there is no assurance that any such opportunities will be identified, evaluated, or completed on favorable terms—or at all. In addition, our ability to locate suitable acquisitions is limited to businesses complementary to our current business. Until a new strategy is established, investors have limited visibility regarding our future operations, business model, and long-term prospects. We will rely on our cash on hand of approximately $9.6 million as of April 14, 2026, together with revenue generated by Nexxis, to fund our ongoing corporate functions, evaluate strategic alternatives, and seek acquisition opportunities. These funds may not be sufficient to cover our expenses over an extended period, particularly if the search for a suitable acquisition or strategic alternative is prolonged. We may need to raise additional capital, which may not be available on acceptable terms—or at all—and could result in significant dilution to existing stockholders.

Additionally, if management or significant stockholders have interests in businesses that may be considered as potential acquisition targets, conflicts of interest could arise in evaluating opportunities. These conflicts may lead to acquisitions that are not in the best interests of all stockholders or may expose us to litigation or regulatory scrutiny.

Further, any future acquisition or merger may require stockholder approval, regulatory filings, antitrust review, or other governmental consents. Obtaining these approvals could be costly, time-consuming, and uncertain. Stockholders may not approve a proposed transaction, or regulatory agencies could impose conditions that diminish the value or feasibility of a combination. Failure to complete a strategic transaction could adversely affect our financial condition and prospects.

Our growth may be impacted by acquisitions. We may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully.

Our future growth may depend in part on our ability to acquire and successfully integrate new businesses. Our Board is actively evaluating multiple strategic alternatives for the use of the remaining sale proceeds, which as stated above, include targeted acquisitions in high growth sectors, a reverse merger or a hybrid of the foregoing. We may not be able to identify suitable acquisition candidates, complete acquisitions, or integrate acquisitions successfully. In addition, our ability to locate suitable acquisitions is limited to businesses complementary to our current business. Acquisitions involve significant risks, including difficulties conducting due diligence, negotiating acceptable terms, integrating acquired operations, retaining key employees, and realizing expected synergies. Once acquired, operations may not achieve anticipated levels of revenues or profitability, we may not experience the anticipated strategic benefits thereof and we may experience difficulties in the integration of the operations, technologies, services, and products of the acquired companies and the diversion of management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, and results of operations. Although our management will endeavor to evaluate the risks inherent in any particular transaction, there are no assurances that we will properly ascertain all such risks. Failure to complete an acquisition could also result in continued operating losses, diminished liquidity, or an inability to resume meaningful business operations.

Completing an acquisition in a new industry or market could impair our ability to successfully manage the acquired business.

If we complete an acquisition in an industry or market in which we have limited or no prior operating experience, we may encounter significant challenges that could adversely affect our ability to operate the acquired business successfully. Entering a new industry may require us to navigate unfamiliar regulatory frameworks, licensing requirements, and compliance obligations. Failure to understand or properly implement industry-specific compliance programs could result in fines, penalties, operational delays, or restrictions on our ability to conduct business.

We may also lack the subject-matter expertise necessary to effectively evaluate competitive dynamics, customer behavior, technological standards, and economic drivers within a new market. Assumptions that management makes during its evaluation of a potential acquisition may ultimately prove inaccurate, resulting in unanticipated operating costs, lower-than-expected revenue, or the failure of the acquired business to achieve projected performance. In addition, we may face difficulties identifying, recruiting, and retaining personnel with the specialized skills needed to operate in a new sector. Competition for experienced executives and technical professionals can be intense, and we may be required to offer compensation packages that significantly increase our cost structure.

Operational risks may also arise if we implement systems, controls, or processes that are poorly suited to the requirements of the new industry. We may need to invest substantial resources to upgrade its internal infrastructure, enhance information technology systems, or implement new operational procedures, all of which may be costly and time-consuming. Integration risks—including cultural differences, incompatible processes, and differing risk management frameworks—may be heightened when combining our legacy corporate structure with a business that operates in a regulated or technically complex environment.

Because investors may value us based on expectations about its ability to successfully transition into a new business line, any delay in executing a new business plan or any underperformance of an acquired business may result in significant volatility or a decline in the trading price of our securities. There can be no assurance that we will be able to successfully enter or operate in a new industry or achieve the expected benefits of any acquisition.

Upon exercise of our outstanding options or warrants, we will be obligated to issue a substantial number of additional shares of Common Stock which will dilute its present shareholders.

We are obligated to issue additional shares of Common Stock in connection with any exercise or conversion, as applicable, of our outstanding options, warrants, and shares of our convertible preferred stock. The exercise of warrants or options will cause us to issue additional shares of Common Stock and will dilute the percentage ownership of our shareholders. In addition, we have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other shareholders not participating in such an exchange.

We may be the target of securities class action and derivative lawsuits which could result in substantial costs.

Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into agreements similar to the sale of our CloudFirst business involving a sale of a line of business or other business combinations. In addition, we may be subject to private actions, collective actions, investigations, and various other legal proceedings by shareholders, customers, employees, competitors, government agencies, or others. Even if the lawsuits are without merit, defending against these claims can result in substantial costs, damage to our reputation, and divert significant amounts of management time and resources. If any of these legal proceedings were to be determined adversely to us, or we were to enter into a settlement arrangement, we could be exposed to monetary damages or limits on our ability to operate our business, which could have an adverse effect on our business, liquidity financial condition, and operating results. As of the date of this Annual Report, we are not aware of any securities class action lawsuits or derivative lawsuits having been filed in connection with the sale of our CloudFirst business.

If Nexxis is unable to attract new customers on a cost-effective basis, its revenue and operating results would be adversely affected.

We have historically generated the majority of our revenue from the sale of subscriptions to our infrastructure and disaster recovery/cloud solutions as well as contracted managed services and software and hardware renewals. Following the sale of the CloudFirst business and prior to consummating planned acquisitions and/or entering into other strategic initiatives, all of our revenue has been generated from Nexxis’ customers. If Nexxis is unable to attract new customers on a cost-effective basis, its revenue and operating results, and therefore our revenue and operating results, would be adversely affected. Nexxis uses and periodically adjusts a diverse mix of advertising and marketing programs to promote its solutions. Significant increases in the pricing of one or more of Nexxis’ advertising channels would increase its advertising costs or cause it to choose less expensive and perhaps fewer effective channels. As Nexxis adds to or changes the mix of its advertising and marketing strategies, it may expand into channels with significantly higher costs than its current programs, which could adversely affect its operating results. Nexxis may incur advertising and marketing expenses significantly in advance of the time it anticipates recognizing any revenue generated by such expenses, and it may only at a later date, or never, experience an increase in revenue or brand awareness as a result of such expenditures. Additionally, because Nexxis recognizes revenue from customers over the terms of their subscriptions, a sizeable portion of its revenue for each quarter reflects deferred revenue from subscriptions entered into during previous quarters, and downturns or upturns in subscription sales or renewals may not be reflected in our operating results until later periods. Nexxis has made in the past, and may make, in the future, significant investments to test new advertising, and there can be no assurance that any such investments will lead to the cost-effective acquisition of additional customers. If Nexxis is unable to maintain effective advertising programs, its ability to attract new customers could be adversely affected, its advertising and marketing expenses could increase substantially, and its operating results may suffer.

A portion of Nexxis’ potential customers locate its website through search engines, such as Google, Bing, and Yahoo!. Nexxis’ ability to maintain the number of visitors directed to its website is not entirely within its control. If search engine companies modify their search algorithms in a manner that reduces the prominence of Nexxis’ listing, or if its competitors’ search engine optimization efforts are more successful than Nexxis’, fewer potential customers may click through to its website. In addition, the cost of purchased listings has increased in the past and may increase in the future. A decrease in website traffic or an increase in search costs could adversely affect Nexxis’ customer acquisition efforts and its operating results.

We expect to continue to acquire or invest in other companies, which may divert our management’s attention, result in additional dilution to our stockholders, and consume resources that are necessary to sustain our business.

We expect to continue to acquire complementary solutions, services, technologies, or businesses in the future. We may also enter into relationships with other businesses to expand our portfolio of solutions or our ability to provide our solutions in foreign jurisdictions, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing, or investments in other companies. Negotiating these transactions can be time-consuming, difficult, and expensive, and our ability to complete these transactions may often be subject to conditions or approvals that are beyond our control. Consequently, these transactions, even if a definitive purchase agreement is executed and announced, may not close.

Acquisitions may also disrupt our business, divert our resources, and require significant management attention that would otherwise be available for the development of our business. Moreover, the anticipated benefits of any acquisition, investment, or business relationship may not be realized on a timely basis or at all or we may be exposed to known or unknown liabilities, including litigation against the companies that we may acquire. In connection with any such transaction, we may:

Any of these risks could harm our business and operating results.

Integration of an acquired company’s operations may present challenges.

The integration of an acquired company requires, among other things, coordination of administrative, sales and marketing, accounting and finance functions, and expansion of information and management systems. Integration may prove to be difficult due to the necessity of coordinating geographically separate organizations and integrating personnel with disparate business backgrounds and accustomed to different corporate cultures. We may not be able to retain key employees of an acquired company. Additionally, the process of integrating a new solution or service may require a disproportionate amount of time and attention of our management and financial and other resources. Any difficulties or problems encountered in the integration of a new solution or service could have a material adverse effect on our business.

We intend to continue to acquire businesses that we believe will help achieve our business objectives. As a result, our operating costs will likely continue to grow. The integration of an acquired company may cost more than we anticipate, and it is possible that we will incur significant additional unforeseen costs in connection with such integration, which may negatively impact our earnings.

In addition, we may only be able to conduct limited due diligence on an acquired company’s operations. Our due diligence may not reveal all material issues with a potential target, and we may be unable to adequately evaluate the risks associated with an acquisition or business combination. Although we intend to conduct due diligence that we deem reasonable, we cannot assure investors that our review will uncover all material issues related to a target business. Following an acquisition, we may be subject to liabilities arising from an acquired company’s past or present operations, including liabilities related to data security, encryption and privacy of customer data, and these liabilities may be greater than the warranty and indemnity limitations that we negotiate. Any liability that is greater than these warranty and indemnity limitations could have a negative impact on our financial condition. Undiscovered liabilities, compliance gaps, internal control weaknesses, or adverse business developments may result in the business combination being less successful than expected.

Even if successfully integrated, there can be no assurance that our operating performance after an acquisition will be successful or will fulfill management’s objectives.

To date, a substantial portion of Nexxis’ revenues have come from a limited number of customers, making it dependent on those few customers.

Though Nexxis continues to expand its customer base, Nexxis remains dependent on a limited number of customers for a substantial portion of its revenues. No customer accounted for more than 10% of sales for the year ended December 31, 2025. One customer accounted for 16% of sales for the year ended December 31, 2024. The loss of, or a significant reduction of business from, any of Nexxis’ primary customers could have a material adverse effect on its business, financial condition, and results of operations unless it is able to replace such customers with other primary customers.

Risks Related to the Company’s Industry

Nexxis’ business is subject to an evolving regulatory framework, and changes in the laws and regulations applicable to its interconnected nomadic VoIP, internet access, and data transport services could materially adversely affect its business, financial condition, and results of operations.

Nexxis provides interconnected nomadic VoIP, internet access, and data transport services that are generally classified as information services under the Communications Act. While information services are not subject to the full range of regulations applicable to traditional telecommunications common carriers, Nexxis’ services are nevertheless subject to significant and evolving regulation at the federal, state, and local levels. Regulatory classification decisions, rulemakings, enforcement actions, and judicial developments could result in new or expanded regulatory obligations, increased compliance costs, or operational restrictions that could materially adversely affect its business.

The FCC regulates certain aspects of interconnected nomadic VoIP and broadband internet access services, including requirements related to E911 emergency calling, lawful intercept capabilities under CALEA, number portability, customer disclosures, disability access, and contributions to the USF. Compliance with these requirements requires ongoing investments in systems, processes, and personnel, and failure to comply could result in fines, enforcement actions, or limitations on Nexxis’ ability to offer services.

In addition, the FCC has periodically reconsidered the regulatory classification of broadband internet access services, and future reclassification or the imposition of common-carrier-like obligations could subject Nexxis to additional requirements, such as enhanced consumer protection, service quality, or pricing-related rules. Any such changes could increase Nexxis’ operating costs, reduce its flexibility in managing its network or pricing, or require material changes to Nexxis’ business model.

Nexxis is also subject to USF contribution requirements and FCC regulatory fees, the methodologies and rates of which are subject to change. Any increase in contribution factors, expansion of the contribution base, or changes in reporting or payment requirements could significantly increase Nexxis’ costs. Nexxis’ ability to recover such costs from customers may be limited by competitive pressures, contractual arrangements, or regulatory restrictions.

At the state and local level, public utility commissions and other authorities may impose requirements relating to consumer protection, emergency services, taxation, privacy, and data security. While federal law generally preempts states from regulating information services as telecommunications services, the scope of permissible state regulation continues to evolve, and states may adopt inconsistent or overlapping requirements. Complying with a patchwork of state and local regulations could increase administrative burdens and compliance costs and divert management attention.

Nexxis’ operations also involve the collection, transmission, and processing of customer and network data, subjecting it to privacy, data protection, and cybersecurity laws at the federal and state levels, which are becoming increasingly comprehensive and stringent. Changes in these laws, or Nexxis’ failure to comply with them, could result in enforcement actions, litigation, reputational harm, and increased costs associated with compliance and remediation.

Finally, the communications regulatory environment is subject to political, technological, and policy-driven change, often with limited transition periods. Legislative, regulatory, or judicial actions that expand regulatory oversight of information services, narrow federal preemption, or increase enforcement activity could materially adversely affect Nexxis’ revenues, operating margins, and ability to compete effectively.

If a cyberattack was able to breach Nexxis’ security protocols and disrupt its data protection platform and solutions, any such disruption could increase its expenses, damage its reputation, harm its business and adversely affect our stock price.

Nexxis has implemented various protocols and regularly monitors its systems via security software to reduce any security vulnerabilities. However, there can be no assurance that such protocols will prevent security breaches. In the event of the discovery of a significant security vulnerability, Nexxis would incur additional substantial expenses and its business would be harmed.

The process of developing new technologies is complex and uncertain, and if Nexxis fails to accurately predict customers’ changing needs and emerging technological trends or if Nexxis fails to achieve the benefits expected from its investments, its business could be harmed. Nexxis believes that it must continue to dedicate a significant amount of resources to its research and development efforts to maintain its competitive position and it must commit significant resources to develop new solutions before knowing whether its investments will result in solutions the market will accept. Nexxis’ new solutions or solution enhancements could fail to attain sufficient market acceptance or harm its business for many reasons, including:

In addition, new technologies have the risk of defects that may not be discovered until after the product launches, resulting in adverse publicity, loss of revenue or harm to Nexxis’ business and reputation. Any damage to Nexxis’ reputation or harm to its business could adversely affect our stock price.

Nexxis’ ability to provide services to its customers depends on its customers’ continued high-speed access to the internet and the continued reliability of the internet infrastructure.

Nexxis’ business depends on its customers’ continued high-speed access to the internet, as well as the continued maintenance and development of the internet infrastructure. While Nexxis also provides broadband internet services, many of its clients depend on third-party internet service providers to expand high-speed internet access, to maintain a reliable network with the necessary speed, data capacity, and security, and to develop complementary solutions and services, including high-speed solutions, for providing reliable and timely internet access and services. All of these factors are out of Nexxis’ control. To the extent that the internet continues to experience an increased number of users, frequency of use, or bandwidth requirements, the internet may become congested and be unable to support the demands placed on it, and its performance or reliability may decline. Any internet outages or delays could adversely affect Nexxis’ ability to provide services to its customers.

Currently, internet access is provided by telecommunications companies and internet access service providers that have significant and increasing market power in the broadband and internet access marketplace. In the absence of government regulation, these providers could take measures that affect their customers’ ability to use Nexxis’ products and services, such as attempting to charge their customers more for using Nexxis’ products and services. To the extent that internet service providers implement usage-based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks, Nexxis could incur greater operating expenses and customer acquisition and retention could be negatively impacted. Furthermore, to the extent network operators were to create tiers of internet access service and either charge Nexxis for or prohibit Nexxis’ services from being available to its customers through these tiers, its business could be negatively impacted. Some of these providers also offer products and services that directly compete with Nexxis’ own offerings, which could potentially give them a competitive advantage.

If Nexxis is unable to retain its existing customers, its business, financial condition, and operating results would be adversely affected.

If Nexxis’ efforts to satisfy its existing customers are not successful, it may not be able to retain them, and as a result, its revenue and ability to grow would be adversely affected. Nexxis may not be able to accurately predict future trends in customer renewals. Customers choose not to renew their subscriptions for many reasons, including if customer service issues are not satisfactorily resolved, a desire to reduce discretionary spending, or a perception that they do not use the service sufficiently, that the solution is a poor value, or that competitive services provide a better value or experience. If Nexxis’ retention rate significantly decreases, it may need to increase the rate at which it adds new customers in order to maintain and grow its revenue, which may require it to incur significantly higher advertising and marketing expenses than it currently anticipates, or its revenue may decline. A significant decrease in Nexxis’ retention rate would therefore have an adverse effect on its business, financial condition, and operating results. Nexxis’ estimates of the number of employees it retains, and advertising costs are based to a large extent upon its subscription contracts, which may be terminated by customers typically upon 90 days’ notice prior to the ending term of their contract for services.

Our shift in focus makes it difficult for investors to evaluate our future business prospects. If we are unable to execute our business plan, our future growth and operating results could be adversely affected.

Until the sale of the CloudFirst business, our primary business focus was on providing multi-cloud hosting, fully managed cloud services, disaster recovery, cybersecurity, IT automation, and voice & data solutions. Currently, our focus is the business of Nexxis, which is a telecommunications and data access company. We are seeking to acquire synergetic technology companies that provide leading edge solutions that assist businesses and institutions improve our business processes. We have committed and continue to commit substantial resources to acquisitions and other strategic initiatives. There can be no assurance that we will be able to acquire complementary businesses or generate sufficient revenue from operations to pay our operating expenses. If we are unable to successfully complete acquisitions and/or enter into strategic opportunities our ability to grow our revenue and achieve profitability may be harmed. Investors have no meaningful basis to evaluate our ability to consummate an acquisition.

If Nexxis is unable to sustain market recognition of and loyalty to its brand, or if its reputation were to be harmed, it could lose customers or fail to increase the number of its customers, which could harm its business, financial condition, and operating results.

Given Nexxis’ market focus, maintaining and enhancing its brand is critical to its success. We and Nexxis believe that the importance of brand recognition and loyalty will increase in light of the increasing competition in its markets. Nexxis plans to continue investing substantial resources to promote its brand, but there is no guarantee that its brand development strategies will enhance the recognition of its brand. Some of Nexxis’ existing and potential competitors have well-established brands with greater recognition than it has. If Nexxis’ efforts to promote and maintain its brand are not successful, Nexxis’ operating results (and ours) and its ability to attract and retain customers may be adversely affected. In addition, even if Nexxis’ brand recognition and loyalty increase, it may not result in increased use of its solutions or higher revenue.

Negative reviews, or reviews in which Nexxis’ competitors’ solutions and services are rated more highly than Nexxis’ solutions, could negatively affect Nexxis’ brand and reputation. From time to time, Nexxis’ customers may express dissatisfaction with its solutions, including, among other things, dissatisfaction with its customer support, its billing policies, and the way its solutions operate. If Nexxis does not handle customer complaints effectively, its brand and reputation may suffer, it may lose its customers’ confidence, and they may choose not to renew their subscriptions. In addition, many of Nexxis’ customers participate in online blogs about computers and internet services, including Nexxis’ solutions, and its success depends in part on its ability to generate positive customer feedback through such online channels where consumers seek and share information. If actions that Nexxis takes or changes that it makes to its solutions upset these customers, their blogging could negatively affect its brand and reputation. Complaints or negative publicity about Nexxis’ solutions or billing practices could adversely impact its ability to attract and retain customers and its business, financial condition, and operating results.

Nexxis is subject to governmental regulation and other legal obligations related to privacy, and any actual or perceived failure to comply with such obligations would harm its business.

The Company receives, stores, and processes personal information and other customer data and maintains specific protocols and procedures to help safeguard the privacy of that personal information and customer data. Personal privacy has become a significant issue in the United States and in many other countries where the Company may offer its offering of solutions. The regulatory framework for privacy issues worldwide is currently complex and evolving, and it is likely to remain uncertain for the foreseeable future. There are numerous federal, state, local, and foreign laws regarding privacy and the storing, sharing, use, processing, disclosure and protection of personal information and other customer data, the scope of which are changing, subject to differing interpretations, and may be inconsistent among countries or conflict with other rules. The Company generally seeks to comply with industry standards and is subject to the terms of its privacy policies and privacy-related obligations to third parties. The Company strives to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy and data protection to the extent possible. However, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or the Company’s practices. Any failure or perceived failure by the Company to comply with its privacy policies, its privacy-related obligations to customers or other third parties, its privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer data, may result in governmental enforcement actions, litigation, or public statements against the Company by consumer advocacy groups or others and could cause its customers to lose trust in the Company, which could have an adverse effect on the Company’s reputation and business.

The Company’s customers may also accidentally disclose their passwords or store them on a mobile device that is lost or stolen, creating the perception that its systems are not secure against third-party access. Additionally, if third parties that the Company works with, such as vendors or developers, violate applicable laws or its policies, such violations may also put its customers’ information at risk and could in turn have an adverse effect on its business. Any significant change to applicable laws, regulations, or industry practices regarding the use or disclosure of the Company’s customers’ data, or regarding the manner in which the express or implied consent of customers for the use and disclosure of such data is obtained, could require it to modify its solutions and features, possibly in a material manner, and may limit its ability to develop new services and features that make use of the data that its customers voluntarily share with the Company.

Errors, failures, bugs in or unavailability of Nexxis’ solutions released by it could result in negative publicity, damage to its brand, returns, loss of or delay in market acceptance of its solutions, loss of competitive position, or claims by customers or others.

Nexxis offers solutions that operate in a wide variety of environments, systems, applications, and configurations, that are often installed and used in large-scale computing environments with different operating systems, system management software, and equipment and networking configurations. Nexxis’ customers’ computing environments are often characterized by a wide variety of standard and non-standard configurations that can make pre-release testing for programming or compatibility errors very difficult and time-consuming. In addition, despite testing by Nexxis and others, errors, failures, or bugs may not be found in new solutions or releases until after distribution. In the event Nexxis discovers any software errors, failures or bugs in certain of its solution offerings after their introduction or when new versions are released, it, in some cases, it is possible they could experience delayed or lost revenues as a result of these errors. In addition, Nexxis relies on hardware purchased or leased and software licensed from third parties to offer its solutions, and any defects in, or unavailability of, its third-party software or hardware could cause interruptions to the availability of its solutions.

Errors, failures, bugs in or unavailability of Nexxis’ solutions released by it could result in negative publicity, damage to its brand, returns, loss of or delay in market acceptance of its solutions, loss of competitive position, or claims by customers or others. Many of Nexxis’ end-user customers use its solutions in applications that are critical to their business and may have a greater sensitivity to defects in its solutions than to defects in other, less critical, software solutions. In addition, if an actual or perceived breach of information integrity or availability occurs in one of its end-user customer’s systems, regardless of whether the breach is attributable to its solutions, the market perception of the effectiveness of its solutions could be harmed. Alleviating any of these problems could require significant expenditures of Nexxis’ capital and other resources and could cause interruptions, delays, or cessation of its solution licensing, which could cause it to lose existing or potential customers and could adversely affect its operating results.

The loss of our key personnel, or our failure to attract, integrate, and retain other highly qualified personnel, could harm our business and growth prospects.

We depend on the continued service and performance of our key personnel. Our ability to identify and evaluate acquisition opportunities depends heavily on our management team. Following the sale of the CloudFirst business, we may face challenges retaining key personnel who may seek other employment opportunities due to the absence of ongoing operations or uncertainty regarding our future. Loss of critical personnel could hinder our capacity to execute strategic initiatives or complete an acquisition. The loss of key personnel, including key members of our management team, could disrupt our operations and have an adverse effect on our ability to grow our business.

To execute our growth plan, we must attract and retain highly qualified personnel. Competition for these employees is intense, and we may not be successful in attracting and retaining qualified personnel. We, from time to time in the past, experienced, and expect to continue to experience, difficulty in hiring and retaining highly-skilled employees with appropriate qualifications. New hires require significant training and, in most cases, take significant time before they achieve full productivity. Our failure to successfully integrate these new employees into our company could adversely affect our business. Our planned hires may not become as productive as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals. Many of the companies with which we compete for experienced personnel have greater resources than we have. In addition, in making employment decisions, particularly in the internet and high-technology industries, job candidates often consider the value of the equity that they are to receive in connection with their employment. In addition, employees may be more likely to voluntarily resign if the shares underlying their vested and unvested options, as well as unvested restricted stock units, have significantly depreciated in value resulting in the options they are holding potentially being significantly above the market price of our Common Stock and the value of the restricted stock units decreasing. If we fail to attract new personnel, or fail to retain and motivate our current personnel, our business and growth prospects could be severely harmed.

Declining general economic or business conditions and changes to trade policy, including tariffs and customs regulations, may have a negative impact on our business.

Continuing concerns over U.S. energy costs, geopolitical issues, including those in Eastern Europe, the availability and cost of credit and government stimulus programs in the United States and other countries have contributed to increased volatility and diminished expectations for the global economy. These factors, combined with low business and consumer confidence and high unemployment, precipitated an economic slowdown and recession and stagnant economy for more than a decade. Additionally, political changes in the U.S. and elsewhere in the world have created a level of uncertainty in the markets. If the economic climate does not improve or deteriorate, our business, as well as the financial condition of our suppliers and our third-party payors, could be adversely affected, resulting in a negative impact on our business, financial condition and results of operations.

Changes in U.S. or international social, political, regulatory and economic conditions or in laws and policies governing trade, manufacturing, development and investment in the countries where we currently conduct our business could adversely affect our business, reputation, financial condition and results of operations. Changes or proposed changes in U.S. or other countries’ trade policies may result in restrictions and economic disincentives on international trade. The U.S. government has recently imposed, or is currently considering imposing, tariffs on certain trade partners. Tariffs, economic sanctions and other changes in U.S. trade policy have in the past and could in the future trigger retaliatory actions by affected countries, and certain foreign governments have instituted or are considering imposing retaliatory measures on certain U.S. goods. Further, any emerging protectionist or nationalist trends (whether regulatory- or consumer-driven) either in the United States or in other countries could affect the trade environment. Our business, like many other corporations, would be impacted by changes to the trade policies of the United States and foreign countries (including governmental action related to tariffs, international trade agreements, or economic sanctions). Such changes have the potential to adversely impact the U.S. economy or certain sectors thereof, the global economy, and our industry, and as a result, could have a material adverse effect on its business, financial condition and results of operations.

In addition, the global macroeconomic environment could be negatively affected by, among other things, COVID-19 or other pandemics or epidemics, instability in global economic markets, instability in the global credit markets, supply chain weaknesses, instability in the geopolitical environment as a result of the withdrawal of the United Kingdom from the European Union, the Russian invasion of Ukraine, the war in the Middle East and other political tensions, and foreign governmental debt concerns. Such challenges have caused, and may continue to cause, uncertainty and instability in local economies and in global financial markets.

Risks Related to Intellectual Property

Assertions by a third party that Nexxis’ solutions infringe its intellectual property, whether or not correct, could subject Nexxis, and us, to costly and time-consuming litigation or expensive licenses.

There is frequent litigation in the software and technology industries based on allegations of infringement or other violations of intellectual property rights. Any such claims or litigation may be time-consuming and costly, divert management resources, require Nexxis to change its services, require it to credit or refund subscription fees, or have other adverse effects on its business. Many companies are devoting significant resources to obtaining patents that could affect many aspects of Nexxis’ business. Third parties may claim that Nexxis’ technologies or solutions infringe or otherwise violate their patents or other intellectual property rights.

If Nexxis is forced to defend itself against intellectual property infringement claims, whether they have merit or are determined in its favor, it may face costly litigation, diversion of technical and management personnel, limitations on its ability to use its current websites and technologies, and an inability to market or provide its solutions. As a result of any such claim, Nexxis may have to develop or acquire non-infringing technologies, pay damages, enter into royalty or licensing agreements, cease providing certain services, adjust its marketing and advertising activities, or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to Nexxis, or at all.

Furthermore, Nexxis has licensed proprietary technologies from third parties that it uses in its technologies and business, and it cannot be certain that the owners’ rights in their technologies will not be challenged, invalidated, or circumvented. In addition to the general risks described above associated with intellectual property and other proprietary rights, Nexxis is subject to the additional risk that the seller of such technologies may not have appropriately created, maintained, or enforced their rights in such technology.

Nexxis relies on third-party software to develop and provide its solutions, including server software and licenses from third parties to use patented intellectual property.

Nexxis relies on software licensed from third parties to develop and offer its solutions. In addition, Nexxis may need to obtain future licenses from third parties to use intellectual property associated with the development of its solutions, which might not be available to Nexxis on acceptable terms, or at all. Any loss of the right to use any software required for the development and maintenance of Nexxis’ solutions could result in delays in the provision of its solutions until equivalent technology is either developed by Nexxis, or, if available from others, is identified, obtained, and integrated, which delay could harm its business. Any errors or defects in third-party software could result in errors or a failure of its solutions, which could harm its business.

If we and our subsidiaries are unable to protect our and their domain names, reputation, and brand, our business and operating results, as well as that of our subsidiaries could be adversely affected.

We and our subsidiaries have registered domain names for websites (“URLs”) that are used in connection with our business and theirs, such as www.dtst.com and mynexxis.com. If we and our subsidiaries are unable to maintain our and their rights in these domain names, competitors or other third parties could capitalize on the brand recognition of us and our subsidiaries by using these domain names for their own benefit. In addition, although we and our subsidiaries own these domain names under various global top-level domains such as .com and .net, as well as under various country-specific domains, we and our subsidiaries might not be able to, or may choose not to, acquire or maintain other country-specific versions of these domain names or other potentially similar URLs. Domain names similar to ours and our subsidiaries have already been registered in the U.S. and elsewhere, and competitors or other third parties could capitalize on our and our subsidiaries’ brand recognition by using similar domain names. The regulation of domain names in the U.S. and elsewhere is generally conducted by internet regulatory bodies and is subject to change. If we or our subsidiaries lose the ability to use a domain name in a particular country, we or they may be forced to either incur significant additional expenses to market its solutions within that country, including the development of a new brand and the creation of new promotional materials, or elect not to sell its solutions in that country. Either result could substantially harm the business and operating results of us and our subsidiaries. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars, or modify the requirements for holding domain names. As a result, we or our subsidiaries may not be able to acquire or maintain the domain names that utilize our or their name in all of the countries in which it currently conducts or intends to conduct business. Further, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights varies among jurisdictions and is unclear in some jurisdictions. We and our subsidiaries may be unable to prevent third parties from acquiring and using domain names that infringe, are similar to, or otherwise decrease the value of, the brand or trademarks of us and our subsidiaries. Protecting and enforcing the rights of us and our subsidiaries in these domain names and determining the rights of others may require litigation, which could result in substantial costs, divert management attention, and not be decided favorably to us.

Risks Related to Our Common Stock and Securities

Our stock price has fluctuated in the past and may be volatile in the future, and as a result, investors in our Common Stock could incur substantial losses.

Our stock price has fluctuated in the past, has recently been volatile, and may be volatile in the future. By way of example, on July 16, 2025, the reported low sale price of our Common Stock was $4.23, and the reported high sales price was $5.44. For comparison purposes, on April 8, 2025, the last closing price of our Common Stock was $2.98, while the last closing price on July 16, 2025, was $5.30. We may incur rapid and substantial decreases in our stock price in the foreseeable future that are unrelated to its operating performance or prospects. Following the sale of the CloudFirst business, it may be difficult for investors to assess our value or prospects. Our stock may trade primarily based on speculation about potential acquisitions and may decline significantly if we do not complete a transaction within expected timeframes.

The stock market has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in our Common Stock. The market price for our Common Stock may be influenced by many factors, including the following:

These broad market and industry factors may seriously harm the market price of our Common Stock, regardless of its operating performance. Since the stock price of our Common Stock has fluctuated in the past, has been volatile recently and may be volatile in the future, investors in our Common Stock could incur substantial losses. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects. There can be no guarantee that our stock price will remain at current prices or that future sales of our Common Stock will not be at prices lower than those sold to investors.

Additionally, recently, securities of certain companies have experienced significant and extreme volatility in stock price due to short sellers of shares of common stock, known as a “short squeeze.” These short squeezes have caused extreme volatility in those companies and in the market and have led to the price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company. Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment as the price per share has declined steadily as interest in those stocks has abated. While we have no reason to believe our shares would be the target of a short squeeze, there can be no assurance that it won’t be in the future, and investors may lose a significant portion or all of their investment if they purchase our shares at a rate that is significantly disconnected from its underlying value.

We cannot be assured that we will be able to maintain our listing on the Nasdaq Capital Market.

Our securities are listed on The Nasdaq Capital Market, a national securities exchange. The sale of the CloudFirst business has significantly reduced our operational activities, which may impair our ability to satisfy ongoing listing standards of the Nasdaq Capital Market. We may face delisting risks, reduced liquidity in our securities, and diminished access to capital markets. Additionally, maintaining public company compliance obligations with lower revenue-generating operations could strain our financial resources. We cannot be assured that we will continue to comply with the rules, regulations or requirements governing the listing of our Common Stock on The Nasdaq Capital Market or that our securities will continue to be listed on Nasdaq Capital Market in the future. If Nasdaq should determine at any time that we failed to meet Nasdaq requirements, we may be subject to a delisting action by Nasdaq.

If Nasdaq delists our securities from trading on its exchange at some future date, we could face significant material adverse consequences, including:

Upon exercising our outstanding options or warrants, we will be obligated to issue a substantial number of additional shares of Common Stock which will dilute our present shareholders.

We are obligated to issue additional shares of Common Stock in connection with any exercise or conversion, as applicable, of our outstanding options and warrants. As of December 31, 2025, there were options and warrants outstanding convertible into an aggregate of 1,860,766 shares of Common Stock. The exercise of warrants or options will cause us to issue additional shares of Common Stock and will dilute the percentage ownership of our shareholders. In addition, we have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other shareholders not participating in such an exchange.

Offers or availability for sale of a substantial number of shares of our Common Stock may cause the price of our Common Stock to decline.

Sales of large blocks of our Common Stock could depress the price of our Common Stock. The existence of these shares and shares of Common Stock that may be issuable upon conversion or exercise, as applicable, of outstanding shares of convertible preferred stock, warrants and options create a circumstance commonly referred to as an “overhang” which can act as a depressant to our Common Stock price. The existence of an overhang, whether or not sales have occurred or are occurring, also could make our ability to raise additional financing through the sale of equity or equity-linked securities more difficult in the future at a time and price that we deem reasonable or appropriate. If our existing shareholders and investors seek to convert or exercise such securities or sell a substantial number of shares of its Common Stock, such selling efforts may cause significant declines in the market price of our Common Stock.

We do not expect to declare any Common Stock cash dividends in the foreseeable future.

We do not anticipate declaring any cash dividends to holders of our Common Stock in the foreseeable future. Consequently, common stockholders may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

Because we may issue preferred stock without the approval of our shareholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire us and could depress our stock price.

In general, our Board may issue, without a vote of our shareholders, one or more additional series of preferred stock that has more than one vote per share. Without these restrictions, our Board could issue preferred stock to investors who support us and our management and give effective control of our business to our management. Additionally, the issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and reduced interest in our Common Stock. This could make it more difficult for shareholders to sell their Common Stock. This could also cause the market price of our Common Stock shares to drop significantly, even if our business is performing well.

Provisions of Nevada law could delay or prevent an acquisition of us, even if the acquisition would be beneficial to our stockholders and could make it more difficult for stockholders to change our management.

We are subject to anti-takeover provisions under Nevada law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include: limitations on the ability to engage in any “combination” with an “interested stockholder” (each, as defined in the Nevada Revised Statutes (“NRS”)) for two years from the date the person first becomes an “interested stockholder”; being subject to Sections 78.378 to 78.3793 of the NRS and allowing an “acquiring person” to obtain voting rights in “control shares” without shareholder approval; the ability of the board to issue shares of currently undesignated and unissued preferred stock without prior stockholder approval; limitations on the ability of stockholders to call special meetings; and the ability of the board to amend our amended Bylaws without stockholder approval.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2. PROPERTIES

Our Nexxis subsidiary leases agreement office space located in Melville, NY. The lease commenced on September 11, 2025 on a month-to-month basis. On February 17, 2026, a lease was executed, requiring monthly payments of $1,800, and expiring on December 31, 2026. In connection with the sale of our CloudFirst business, we entered into a sub-sublease agreement, pursuant to which the purchaser of the CloudFirst business assumed our obligations under the lease.

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. The Company is not presently a party to any legal proceedings that, if determined adversely to it, would individually or taken together have a material adverse effect on its business, operating results, financial condition, or cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The Company’s Common Stock trades on The Nasdaq Capital Market under the symbol “DTST.”

Holders of the Company’s Common Stock

As of April 13, 2026, we had 23 shareholders of record of the Company’s Common Stock, one of which was Cede & Co., a nominee for Depository Trust Company (“DTC”). All the shares of the Company’s Common Stock held by brokerage firms, banks and other financial institutions as nominees for beneficial owners are deposited into participant accounts at DTC and are therefore considered to be held or recorded by Cede & Co. as one stockholder.

Dividend Policy

The Company has not declared or paid dividends on Common Stock since its formation and does not anticipate paying dividends in the foreseeable future. The declaration or payment of dividends, if any, in the future, will be at the discretion of the Company’s Board of Directors and will depend on the then- current financial condition, results of operations, capital requirements and other factors deemed relevant by the Board. Each share of Series A Preferred Stock entitles its holder to receive cash dividends at a rate of ten percent (10%) per annum on the original issue price, compounding annually, in preference to holders of Common Stock. Preferred dividends are accrued quarterly. No shares of Series A Preferred Stock are outstanding, and no dividends have been paid to date since May 2021 when all of the then outstanding shares of Series A Preferred Stock were converted into shares of the Company’s Common Stock.

Recent Sales of Unregistered Securities

The Company did not sell any equity securities during the three months ended, or the fiscal year ended, December 31, 2025, that were not registered under the Securities Act, other than as previously disclosed in its filings with the Securities and Exchange Commission (the “SEC”).

Issuer Purchases of Equity Securities

On December 8, 2025, we commenced a fixed-price issuer tender offer to repurchase up to 6,192,990 shares of Common Stock at a per share price of $5.20, representing approximately 83% of our issued and outstanding shares of Common Stock as of December 1, 2025, for a maximum aggregate purchase price of $32,203,548. The Tender Offer expired on January 12, 2026. All shares purchased pursuant to the Tender Offer settled in January 2026.

In accordance with the terms and conditions of the Tender Offer, and based on the final count, on January 15, 2026, we accepted for purchase 5,625,129 shares of Common Stock at a fixed purchase price of $5.20 per share, for an aggregate cost of $29,250,971, excluding fees, excise taxes, and expenses related to the Tender Offer. The shares purchased represent approximately 72.0% of the total number of shares of Common Stock outstanding as of December 8, 2025. Following payment for all tendered shares, we had 2,167,138 shares of Common Stock outstanding. After completing the Tender Offer and all related payments, we retained over $10.0 million in cash.

Other than routine shares withheld to satisfy tax-withholding obligations upon vesting of equity awards, we did not repurchase any other shares during the quarter ended December 31, 2025

On January 14, 2026, our directors and officers tendered the following number of shares of Common Stock beneficially owned by them in connection with the Tender Offer:

Securities Authorized for Issuance Under Equity Compensation Plans

See Part III, Item 12 “Equity Compensation Plan Information” for certain information regarding our equity compensation plans.

ITEM 6. RESERVED

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our plan of operation and results of operations should be read in conjunction with the consolidated financial statements and related notes to the consolidated financial statements included elsewhere in this Annual Report. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include, among others, those listed under “Forward-Looking Statements” and “Risk Factors” and those included elsewhere in this Annual Report.

COMPANY OVERVIEW SUMMARY

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. However, 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 focused on managing, building, expanding or acquiring synergetic technology companies that provide leading edge solutions that assist businesses and institutions improve our business processes. We intend to pursue acquisitions of companies in complementary and high-growth technology sectors.

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.

From this amount, we paid $6,467,590 for selling expenses, estimated taxes on the sale, and other transaction costs. As a result, our Consolidated Statement of Cash Flows for the year ended December 31, 2025, reflects net cash proceeds of $31,600,873 from the sale. The net proceeds, after accounting for all transaction costs and estimated taxes, are reflected in the Gain on sale of discontinued operations on the Consolidated Statements of Operations.

Tender Offer

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, excluding fees, any 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 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.

Our Board is actively evaluating multiple strategic alternatives for the use of the remaining sale proceeds, with the goal of maximizing long-term shareholder value. Some of the uses for such remaining cash include, 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       AI, Enabled Vertical SaaS, GPU 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 proceeds received from consummation of the sale of the CloudFirst business in excess of those used for the Tender Offer. 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.

RESULTS OF OPERATIONS

Year ended December 31, 2025, as compared to December 31, 2024

Sales and Gross Profit

Sales from continuing operations were $1,382,929 for the year ended December 31, 2025, an increase of $163,682, or 13.4%, compared to $1,219,247 in the prior year. 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 year over year, reflecting higher utilization of our services and incremental service adoption. The Company also continued to diversify its customer base during the year. As a result, revenue concentration among our largest customers declined, with the top five customers representing approximately 35.7% of total revenue in 2025 compared to approximately 41.0% in 2024. No customer accounted for more than 10% of sales for the year ended December 31, 2025. One customer accounted for 16% of sales for the year ended December 31, 2024.

Gross profit for the year ended December 31, 2025 was $614,324, an increase of $87,075, or 16.5%, compared to $527,249 in the prior year. Our gross profit margin improved to 44.4% from 43.2% in the prior year, driven by favorable sales mix and operating leverage.

For the year ended December 31, 2025, selling, general and administrative expenses increased $347,658, or 9.1%, to $4,188,026 from $3,840,368 for the year ended December 31, 2024. The increase was primarily driven by a $506,830, or 101.6%, increase in non-cash stock-based compensation primarily related to the accelerated vesting of equity awards in connection with the sale of the CloudFirst business, which triggered a Fundamental Transaction clause in equity award agreements with employees. Salaries and director fees increased $165,943, or 9.8%, attributable to annual merit-based salary adjustments and bonuses. These increases were significantly offset by a $300,932, or 22.8%, decrease in professional fees, primarily related to lower legal and consulting expenses in the current year. We expect expenses to decrease for the year ending December 31, 2026 as compared to the year ended December 31, 2025 because many employees who previously worked for us are now employed by the purchaser of the CloudFirst business and we also anticipate lower legal and accounting costs.

Loss from continuing operations, net of tax. Loss from continuing operations, net of tax was $866,195 for the year ended December 31, 2025, compared to a loss of $2,759,331 in the prior year. The reduced loss was primarily driven by a tax benefit recorded in 2025, partially offset by an increase in non-cash stock-based compensation expense.

Interest Income. Interest income for the year ended December 31, 2025, was $850,371, compared to $592,819 for the year ended December 31, 2024. The 43.4% increase was primarily due to an increase in interest income generated from the investment of the net proceeds from the sale of the CloudFirst business following the sale in September 2025, partially offset by lower average balances of marketable securities held during the first eight months of 2025 as compared to the prior year.

Income from discontinued operations, net of tax. For the year ended December 31, 2025, we recognized a net gain on the sale of discontinued operations of $20,118,681. This gain is net of tax, transaction costs, and the reclassification of the warrant liability to equity. This gain was partially offset by a pre-tax loss from the operations of the CloudFirst business of $69,412 for the period of January 1, 2025 through the sale date of September 11, 2025.

LIQUIDITY AND CAPITAL RESOURCES

The 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 undertake to fund the related 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 reductions in selling, general and administrative expenses, including salaries of officers who are major shareholders.

The Company’s working capital related to continuing operations was $41,784,453 at December 31, 2025, increasing by $29,864,384 from $11,920,069 at December 31, 2024. The increase is primarily attributable to the disposition of the CloudFirst business. The prior year working capital included the assets and liabilities of the business that was subsequently sold, while the working capital at December 31, 2025 reflects only the continuing Nexxis operations and the net proceeds from the sale of the CloudFirst business.

Tender Offer and Resulting Cash Position

On December 8, 2025, we commenced a fixed price tender offer to purchase 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 purchase 5,625,129 shares of Common Stock at $5.20 per share, for an aggregate purchase price of $29.3 million, excluding fees, excise taxes, and expenses. Following payment for the tendered shares, we had 2,167,138 shares outstanding and retained over $10.0 million of cash, which we believe provides sufficient liquidity for ongoing operations and strategic initiatives. As of April 14, 2026, our cash and cash equivalents were approximately $9.6 million.

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 believe our current cash position and 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.

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:

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

Cash Flows for the year ended December 31, 2025, as compared to December 31, 2024

The following table summarizes the Company’s cash flows:

Operating activities

Cash used in operating activities of continuing operations was $1,403,432 for the year ended December 31, 2025, compared to cash provided of $999,861 for the prior year. The cash used in 2025 was primarily driven by the loss from continuing operations of $866,195, which was largely offset by non-cash stock-based compensation of $1,005,830 and other non-cash charges.

Investing activities

Cash provided by investing activities of continuing operations was $7,707,318 for the year ended December 31, 2025, compared to $55,041 for the prior year. The cash provided in 2025 was primarily driven by net proceeds from the sale of the CloudFirst business of $35,566,460, which were almost entirely deployed into marketable securities, as reflected in purchases of $38,918,636 and sales of $11,175,518 during the year.

Financing activities

Cash used in financing activities of continuing operations was $1,296,998 for the year ended December 31, 2025, compared to cash provided of $133,005 for the prior year. The significant cash use in 2025 reflects the aggregate cash payment of $2,049,388 to certain holders of warrants issued in a private placement offering consummated in July 2021 (the “July 2021 Warrants”) following the trigger of the Fundamental Transaction provision in the July 2021 Warrants and the request by such holders that the Company purchase their July 2021 Warrants at the Black Scholes Value (as such term is defined in the July 2021 Warrants), and $205,608 of costs paid in connection with the Tender Offer and other costs, partially offset by $957,997 in proceeds from stock option exercises.

Cash flows from discontinued operations

Cash used in discontinued operations was $2,597,581 for the year ended December 31, 2025, compared to $1,543,949 in the prior year. This represents the net cash flows from the CloudFirst business for the period of January 1, 2025, through the sale date of September 11, 2025, and $3,965,587 of taxes paid in the fourth quarter of 2025 on the gain on the sale.

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 interest and financing fees, 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 associated with its reliance on issuing equity-linked debt securities to fund its working capital.

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 years ended December 31, 2025, and 2024:

CRITICAL ACCOUNTING ESTIMATES

Use of 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 most significant accounting estimates are set forth below.

Estimated Fair Value of Financial Instruments

The Company’s financial instruments include cash, accounts receivable, marketable securities, and accounts payable. Management believes the estimated fair value of these accounts on December 31, 2025, approximate their carrying value as reflected in the balance sheet due to their short-term nature.

Property and Equipment

Property and equipment are recorded at cost and depreciated over their estimated useful lives or the term of the lease using the straight-line method for financial statement purposes. Estimated useful lives in years for depreciation are five to seven years for property and equipment. Additions, betterments and replacements are capitalized, while expenditures for repairs and maintenance are charged to operations when incurred. As units of property are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income.

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.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events and circumstances indicate that the carrying value of an asset might not be recoverable. An impairment loss, measured as the amount by which the carrying value exceeds the fair value, is recognized if the carrying amount exceeds estimated un-discounted future cash flows.

Stock-Based Compensation

The Company follows the requirements of FASB ASC 718, Share-Based Payments with regard to stock-based compensation issued to employees and non-employees. The Company has agreements and arrangements that call for stock to be awarded to the employees and consultants at various times as compensation and periodic bonuses. The expense for this stock-based compensation is equal to the fair value of the stock price on the day the stock was awarded multiplied by the number of shares awarded. The Company has a relatively low forfeiture rate of stock-based compensation, and forfeitures are recognized as they occur.

The valuation methodology used to determine the fair value of the options issued during the period is 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 the 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. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common Stock and does not intend to pay dividends on its Common Stock in the foreseeable future.

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 over a period equal to the expected life of the awards.

Impact of Recently Issued Accounting Standards

In the normal course of business, we evaluate all new accounting standards issued by the FASB, SEC, or other authoritative accounting bodies to determine the potential impact they may have on the Company’s Consolidated Financial Statements. See Note 2 “Summary of Significant Accounting Policies” of the notes to the Company’s consolidated financial statements in Item 8 of this Form 10-K for additional information about these recently issued accounting standards and their potential impact on the Company’s financial condition or results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, this item is not required.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Data Storage Corporation and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Data Storage Corporation and Subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.

/s/ Rosenberg Rich Baker Berman, P.A.

We have served as the Company’s auditor since 2008.

New York, New York

April 14, 2026

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DATA STORAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

The accompanying notes are an integral part of these consolidated Financial Statements.

The accompanying notes are an integral part of these consolidated Financial Statements.

DATA STORAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2025