Data Storage (DTST) risk factors, FY2024 10-K

Risks Related to the Company’s Business

1. 01The Company has not generated a significant amount of net income and it may not be able to sustain profitability in the future
2. 02If the Company is unable to attract new customers to its infrastructure and disaster recovery/cloud subscription services on a cost-effective basis, its revenue and operating results would be adversely affected
3. 03The Company expects to continue to acquire or invest in other companies, which may divert its management’s attention, result in additional dilution to its stockholders, and consume resources that are necessary to sustain its business
4. 04Integration of an acquired company’s operations may present challenges
5. 05The Company may fail to maintain an effective system of internal controls, which may result in material misstatements of its consolidated financial statements or cause it to fail to meet its periodic reporting obligations
6. 06The Company is controlled by three principal stockholders who serve as its executive officers and directors
7. 07To date, a substantial portion of the Company’s revenues have come from a limited number of customers, making it dependent on those few customers

Risks Related to the Company’s Industry

1. 08The market for cloud solutions is highly competitive, and if the Company does not compete effectively, its operating results will be harmed
2. 09If a cyberattack was able to breach the Company’s 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 its stock price
3. 10Any significant disruption in service in the Company’s computer systems, or caused by its third-party storage and system providers, could damage its reputation and result in a loss of customers, which would harm its business, financial condition, and operating results
4. 11Security vulnerabilities, data protection breaches and cyberattacks could disrupt the Company’s data protection platform and solutions, and any such disruption could increase its expenses, damage its reputation, harm its business, and adversely affect its stock price
5. 12The Company’s 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
6. 13If the Company is unable to retain its existing customers, its business, financial condition, and operating results would be adversely affected
7. 14A decline in demand for the Company’s cyber security, disaster recovery, and/or infrastructure solutions, in general, would cause its revenue to decline
8. 15The Company primarily depends upon third-party distribution companies to generate new customers. The Company’s relationships with its partners and distributors may be terminated or may not continue to be beneficial in generating new customers, which could adversely affect its ability to increase its customer base
9. 16If the Company is unable to expand its base of business customers, its future growth and operating results could be adversely affected
10. 17If the Company 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
11. 18The Company 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
12. 19The Company’s solutions are used by customers in the health care industry, and it must comply with numerous federal and state laws related to patient privacy in connection with providing its solutions to these customers
13. 20Errors, failures, bugs in or unavailability of the Company’s 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
14. 21The Company faces many risks associated with its growth and plans to expand, which could harm its business, financial condition, and operating results
15. 2213. Government appropriations of assets
16. 23We may not be able to adequately address these additional risks. If we were unable to do so, our operations might suffer, which may adversely impact our results of operations and financial condition
17. 24The loss of the Company’s key personnel, or its failure to attract, integrate, and retain other highly qualified personnel, could harm its business and growth prospects
18. 25Declining general economic or business conditions and changes to trade policy, including tariff and customs regulations, may have a negative impact on the Company’s business

Risks Related to Intellectual Property

1. 26Assertions by a third party that the Company’s solutions infringe its intellectual property, whether or not correct, could subject the Company to costly and time-consuming litigation or expensive licenses
2. 27The Company relies on third-party software to develop and provide its solutions, including server software and licenses from third parties to use patented intellectual property
3. 28If the Company is unable to protect its domain names, its reputation, brand, customer base, and revenue, as well as its business and operating results, it could be adversely affected

Risks Related to the Company’s Common Stock and Securities

1. 29The Company’s stock price has fluctuated in the past and may be volatile in the future, and as a result, investors in its common stock could incur substantial losses
2. 30The Company cannot be assured that it will be able to maintain its listing on the Nasdaq Capital Market
3. 31On January 18, 2024, Nasdaq notified the Company that due to the passing of Mr. Hoffman, a member of the Company’s Board of Directors and member of the Audit Committee, the Company was no longer compliant with Nasdaq’s audit committee requirements as set forth in Rule 5605(c)(2)(A) of the Nasdaq listing standards
4. 32a limited amount of news and analyst coverage for the Company; and
5. 33Upon exercising the Company’s outstanding options or warrants, it will be obligated to issue a substantial number of additional shares of common stock which will dilute its present shareholders
6. 34Offers or availability for sale of a substantial number of shares of the Company’s common stock may cause the price of its common stock to decline
7. 35Because the Company may issue preferred stock without the approval of its shareholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire the Company and could depress its stock price
8. 36Provisions of Nevada law could delay or prevent an acquisition of DSC, even if the acquisition would be beneficial to its stockholders and could make it more difficult for stockholders to change DSC’s management