Data Storage sends letter to shareholders regarding new subsidiary

Data Storage (DTST) provided a letter to shareholders from its chairman and CEO, Chuck Piluso, unveiling the company’s strategy targeting AI continuity infrastructure through the establishment of a new wholly owned subsidiary, Sovereign AI Solutions. SaiS is being developed as an AI continuity control plane for regulated industries designed to support recovery, validation, and compliance for sovereign AI and AI Factory environments across sectors such as healthcare, financial services, and insurance. The letter said, “The past year was one of deliberate transformation. In fiscal year 2025, we completed the $40 million sale of our cloud solutions business -a transaction that validated the value we built over two decades and gave us the financial foundation to pursue something far larger. Thereafter, using a portion of the proceeds from such sale, we completed a tender offer of our common stock resulting in our payment of $29.3 million upon our repurchase of outstanding shares of common stock from our shareholders that reduced the number of our shares outstanding by approximately 72%, to roughly 2.17 million shares. Today, Data Storage Corporation carries no long-term debt, holds substantial working capital, and is focused on capitalizing on a critical market gap. This decision was not reactive-it was strategic. The CloudFirst sale funded our pivot, and the intervening months were spent in evaluation: adding strategic advisors to our team and assessing market structure, regulatory trajectory, competitive dynamics, and technology feasibility. Industries are rapidly moving beyond AI for analytics and document creation and toward using it to run critical business processes. We’ve seen this evolution before with CPUs, where business continuity became essential, driving the need for geo-diverse data centers and regulatory requirements not just for security, but for full recovery in the same state. Our findings reinforce the same pattern emerging today: AI is being embedded in mission-critical workflows across healthcare, financial services, and insurance… In response, we are establishing a wholly owned subsidiary of DTST focused on developing a proprietary platform and are at the first stage of a purpose-built AI Continuity Control Plane for regulated enterprises. The intention, and client requirement, will be to serve as the resilience, recovery, and compliance layer for their AI systems: detecting behavioral anomalies, executing validated recovery sequences, and producing the audit-ready documentation that regulators in healthcare, financial services, and insurance increasingly require. This proprietary framework is intended to define recovery objectives in behavioral terms-model outputs, inference consistency, and compliance posture-rather than restoring hardware or GPU availability. We believe this approach is materially differentiated, delivers significant ROI, reduces client CapEx, and offers a more defensible solution than anything currently available. Although pre-revenue and still in the development stage, we are focused on advancing this new platform. Our go-to-market strategy will target regulated enterprises, with an economic model built around mission-critical, compliance-driven, high-margin, recurring revenue. We expect to provide further commercial updates throughout the year, as we work to advance the platform toward its first client engagements. Our continuing operations include Nexxis Inc., our telecom, direct internet access, and SD-WAN business, which provides a stable revenue base. The overall DTST financial position is strong: no long-term debt, disciplined capital deployment, and a management team with a demonstrated track record of building and monetizing technology infrastructure businesses. At the same time, we are approaching this opportunity with strategic flexibility. While our primary focus remains on advancing SaiS and establishing an early leadership position in AI continuity infrastructure supporting regulated industries, we will continue to evaluate complementary opportunities that may enhance shareholder value. This includes remaining attentive to potential partnerships, strategic investments, and M&A opportunities that could accelerate our capabilities, expand our market reach, or further strengthen our competitive position as this market evolves.”