Data Storage (DTST) FY2025 10-K Risk Factors: 10 New, 14 Dropped

What the changes say

Divestiture of the CloudFirst business leaves the company seeking new strategic directions and potential acquisitions using $9.6 million in cash.

What changed since the prior 10-K

New

NewRisks Related to the Company’s Business
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 anticipate funding acquisition expenses through capital raises and cash, noting limitations under SEC Form S-3 if non-affiliate market value drops below $75 million.
NewRisks Related to the Company’s Business
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
We identified a material weakness in internal controls related to the accounting, tax implications, and warrant reclassification of the CloudFirst divestiture.
NewRisks Related to the Company’s Business
A shutdown of the U.S. federal government may adversely affect our business
The partial U.S. federal government shutdown affecting the Department of Homeland Security since February 14, 2026, could disrupt operations and capital access.
NewRisks Related to the Company’s Business
There is uncertainty regarding our future business strategy, which could affect our financial condition and prospects
With CloudFirst sold, we rely on $9.6 million in cash as of April 14, 2026, and Nexxis revenue while searching for an undetermined business strategy.
NewRisks Related to the Company’s Business
Our growth may be impacted by acquisitions. We may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully
Our growth depends on identifying and integrating complementary acquisitions, reverse mergers, or hybrid strategies using remaining sale proceeds.
NewRisks Related to the Company’s Business
Completing an acquisition in a new industry or market could impair our ability to successfully manage the acquired business
Entering new industries through acquisitions could introduce unfamiliar regulatory frameworks, licensing requirements, and compliance obligations where we lack expertise.
NewRisks Related to the Company’s Business
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
Exercising outstanding options, warrants, and convertible preferred stock will obligate us to issue substantial additional shares, diluting current shareholders.
NewRisks Related to the Company’s Business
We may be the target of securities class action and derivative lawsuits which could result in substantial costs
We face potential securities class action and derivative lawsuits stemming from transactions like the sale of the CloudFirst business.
NewRisks 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 is subject to evolving FCC and local regulations regarding VoIP and internet services, including E911, CALEA, and USF contributions.
NewRisks Related to the Company’s Industry
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
Our operational focus has shifted entirely to Nexxis and acquiring technology companies, leaving investors with no meaningful basis to evaluate future prospects.

Dropped

DroppedRisks Related to the Company’s Business
The 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
DroppedRisks Related to the Company’s Business
The Company is controlled by three principal stockholders who serve as its executive officers and directors
DroppedRisks Related to the Company’s Industry
The market for cloud solutions is highly competitive, and if the Company does not compete effectively, its operating results will be harmed
DroppedRisks Related to the Company’s Industry
Any 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
DroppedRisks Related to the Company’s Industry
Security 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
Maintaining an effective system of internal controls under Section 404.
DroppedRisks Related to the Company’s Industry
A decline in demand for the Company’s cyber security, disaster recovery, and/or infrastructure solutions, in general, would cause its revenue to decline
Control of the company by three principal executive officers and directors holding 36%.
DroppedRisks Related to the Company’s Industry
The 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
DroppedRisks Related to the Company’s Industry
If the Company is unable to expand its base of business customers, its future growth and operating results could be adversely affected
Competition in the highly competitive cloud solutions market.
DroppedRisks Related to the Company’s Industry
The 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
DroppedRisks Related to the Company’s Industry
The Company faces many risks associated with its growth and plans to expand, which could harm its business, financial condition, and operating results
Disruptions in computer systems or third-party storage providers.
DroppedRisks Related to the Company’s Industry
13. Government appropriations of assets
Security vulnerabilities, data breaches, and cyberattacks on the cloud platform.
DroppedRisks Related to the Company’s Industry
We 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
DroppedRisks Related to the Company’s Common Stock and Securities
On 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
DroppedRisks Related to the Company’s Common Stock and Securities
a limited amount of news and analyst coverage for the Company; and
Decline in demand for cybersecurity and disaster recovery solutions.

Reworded

88% rewrittenRisks 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
Updated net income figures for 2025 at $19,204,700, marketable securities at $39,004,124, and noted $32,203,548 paid out from a Tender Offer.
Was: The Company has not generated a significant amount of net income and it may not be able to sustain profitability in the future
83% rewrittenRisks Related to Our Common Stock and Securities
We cannot be assured that we will be able to maintain our listing on the Nasdaq Capital Market
Added specific threats that the CloudFirst sale reduced operations, impairing Nasdaq listing standards, increasing delisting risks, and reducing liquidity.
Was: The Company cannot be assured that it will be able to maintain its listing on the Nasdaq Capital Market
70% rewrittenRisks Related to the Company’s Industry
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
Updated to state that management's ability to evaluate acquisitions is critical following the CloudFirst sale and retention challenges.
Was: The 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
64% rewrittenRisks Related to the Company’s Business
To date, a substantial portion of Nexxis’ revenues have come from a limited number of customers, making it dependent on those few customers
Updated customer concentration for Nexxis, noting no customer exceeded 10% of sales in 2025, while one customer represented 16% in 2024.
Was: To date, a substantial portion of the Company’s revenues have come from a limited number of customers, making it dependent on those few customers
64% rewrittenRisks Related to Our Common Stock and Securities
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
Changed references from 'Company' to 'we' and updated stock price depression and reduced interest risks regarding preferred stock issuance.
Was: Because 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
63% rewrittenRisks Related to Our Common Stock and Securities
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
Updated the number of shares issuable upon conversion of options and warrants from 3,174,162 as of Dec 31, 2024, to 1,860,766 as of Dec 31, 2025.
Was: Upon 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
59% rewrittenRisks Related to Intellectual Property
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
Updated domain names to specific URLs including www.dtst.com and www.mynexxis.com for subsidiaries.
Was: If 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
56% rewrittenRisks Related to Our Common Stock and Securities
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
Changed references from 'Company' to 'we' regarding common stock overhang and its depressive effect on the stock price.
Was: Offers 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
56% rewrittenRisks Related to the Company’s Business
Integration of an acquired company’s operations may present challenges
54% rewrittenRisks Related to the Company’s Business
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
Was: The 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
54% rewrittenRisks Related to the Company’s Industry
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
Was: If 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
51% rewrittenRisks 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
Was: The 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
46% rewrittenRisks Related to the Company’s Business
If Nexxis is unable to attract new customers on a cost-effective basis, its revenue and operating results would be adversely affected
Was: If 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
39% rewrittenRisks Related to the Company’s Industry
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
Was: If 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
32% rewrittenRisks Related to Intellectual Property
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
Was: The 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
28% rewrittenRisks Related to the Company’s Industry
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
Was: The 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
27% rewrittenRisks 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
Was: Assertions 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
26% rewrittenRisks Related to the Company’s Industry
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
Was: Errors, 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
22% rewrittenRisks Related to the Company’s Industry
If Nexxis is unable to retain its existing customers, its business, financial condition, and operating results would be adversely affected
Was: If the Company is unable to retain its existing customers, its business, financial condition, and operating results would be adversely affected

All 32 risk factors

Headings as the filing states them, in filing order.

Risks Related to the Company’s Business

01We have not generated a significant amount of net income and we may not be able to sustain profitability in the future88% rewritten
02We 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 handNew
03We 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 mannerNew
04A shutdown of the U.S. federal government may adversely affect our businessNew
05There is uncertainty regarding our future business strategy, which could affect our financial condition and prospectsNew
06Our growth may be impacted by acquisitions. We may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfullyNew
07Completing an acquisition in a new industry or market could impair our ability to successfully manage the acquired businessNew
08Upon 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 shareholdersNew
09We may be the target of securities class action and derivative lawsuits which could result in substantial costsNew
10If Nexxis is unable to attract new customers on a cost-effective basis, its revenue and operating results would be adversely affected46% rewritten
11We 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 business54% rewritten
12Integration of an acquired company’s operations may present challenges56% rewritten
13To date, a substantial portion of Nexxis’ revenues have come from a limited number of customers, making it dependent on those few customers64% rewritten

Risks Related to the Company’s Industry

14Nexxis’ 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 operationsNew
15If 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 price39% rewritten
16Nexxis’ 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 infrastructure28% rewritten
17If Nexxis is unable to retain its existing customers, its business, financial condition, and operating results would be adversely affected22% rewritten
18Our 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 affectedNew
19If 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 results54% rewritten
20Nexxis 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
21Errors, 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 others26% rewritten
22The loss of our key personnel, or our failure to attract, integrate, and retain other highly qualified personnel, could harm our business and growth prospects70% rewritten
23Declining general economic or business conditions and changes to trade policy, including tariffs and customs regulations, may have a negative impact on our business

Risks Related to Intellectual Property

24Assertions 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 licenses27% rewritten
25Nexxis relies on third-party software to develop and provide its solutions, including server software and licenses from third parties to use patented intellectual property32% rewritten
26If 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 affected59% rewritten

Risks Related to Our Common Stock and Securities

27Our 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 losses51% rewritten
28We cannot be assured that we will be able to maintain our listing on the Nasdaq Capital Market83% rewritten
29Upon 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 63% rewritten
30Offers or availability for sale of a substantial number of shares of our Common Stock may cause the price of our Common Stock to decline 56% rewritten
31Because 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 price64% rewritten
32Provisions 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

Other Data Storage 10-Ks

FY2024 10-K risk factors
36 risks
The company faces heavy concentration risk with two customers accounting for 24 percent of revenue.
Filed Mar 31, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.