Data Storage Corporation (NASDAQ:DTST), a provider of computer processing and data preparation services, announced today that it has entered into a Material Definitive Agreement with Maxim (NASDAQ:MXIM) Group LLC. This Equity Distribution Agreement, dated July 18, 2024, enables Data Storage Corp to offer and sell its common stock through Maxim, acting as a sales agent or potentially as a principal.
Under the terms of the agreement, Maxim will endeavor to sell the shares as per Data Storage Corp's instructions, which may include limits on price, timing, or size of the sales. The transactions will be conducted in accordance with federal law, state law, and Nasdaq Capital Market rules, and could occur on the market or through private transactions.
Maxim is entitled to a commission of 2.5% of the gross proceeds from each share sold. Additionally, Data Storage Corp has agreed to indemnify Maxim against certain liabilities and will reimburse up to $50,000 for expenses incurred in the offering.
The company has not committed to selling any shares under this agreement and there is no guarantee as to the number of shares that may be sold, nor the prices or dates of any potential sales. The agreement is set to terminate after 12 months, upon the sale of all shares under the agreement, or under certain other conditions specified in the agreement.
The potential sales will be conducted pursuant to the company’s existing shelf registration statement on Form S-3 and a related prospectus supplement, both filed with the SEC on the date of the agreement. The prospectus supplement covers the offering of up to $10.6 million worth of common stock.
In other recent news, Data Storage Corporation reported a strong first quarter in 2024, with revenue rising 20% to $8.2 million and profitability achieved. The company has expanded its contract with a multinational telecommunications company and secured a new deal with a major US insurance company. It is actively pursuing mergers and acquisitions and has opened a new office in London, while also relocating its headquarters to Melville, New York. Despite this, CEO Charles Piluso acknowledged the difficulties in finding suitable partners for mergers and acquisitions.
Data Storage Corporation ended the quarter with $11.9 million in cash and marketable securities, carrying no long-term debt. The company's pipeline has a contract value of around $10.8 million, with annual recurring revenue estimated between $17 million and $18 million. The international expansion, including the London office, aims to generate revenue from the UK in the fourth quarter.
Despite these advancements, the company's cash and marketable securities decreased from the previous quarter, and it faces challenges in predicting margins and finding suitable M&A targets. However, the company's strong business development and preference for maintaining 80% subscription revenue have been highlighted. These are the latest developments for Data Storage Corporation.
InvestingPro Insights
In light of Data Storage Corporation's recent announcement regarding the Equity Distribution Agreement with Maxim Group LLC, several metrics and InvestingPro Tips provide a deeper understanding of the company's financial position. With a Market Cap of roughly $41.56 million USD and a strong Revenue Growth of 19.71% in Q1 2023, the company shows promising signs of expansion. Additionally, the Gross Profit Margin stands at a healthy 39.72%, indicating efficient operations and cost management.
InvestingPro Tips suggest that Data Storage Corporation holds more cash than debt on its balance sheet and is expected to see net income growth this year. These factors, combined with a P/E Ratio of 59 and a PEG Ratio of 0.54, suggest that the company is trading at a valuation that is potentially attractive relative to near-term earnings growth. Moreover, with analysts predicting profitability this year and a significant price uptick of 105.58% over the last six months, investors may find the company's stock to be an interesting opportunity.
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