Business Context and Reporting Period
Data Storage Corporation (Nevada) filed this Form 8-K on October 25, 2016, reporting the completion of significant asset acquisitions and debt conversions. The company operates through a wholly-owned subsidiary and is headquartered in Melville, New York.
Key Financial Metrics and Transactions
- Asset Acquisition: The company purchased tangible assets and service agreements from ABC Services Inc. and ABC Services II Inc. for an aggregate of 64,669,936 shares of common stock.
- Debt Conversion: The company converted $2,678,124.28 in debt owed to three affiliates into 26,781,242 shares of common stock at a conversion price of $0.10 per share.
- Debt Reduction: Specific conversions included $1,802,521.08 from Charles Piluso, $138,822 from John Coghlan, and $736,781.20 from Clifford Stein.
- Liquidity and Cash Flow: The filing text does not provide specific cash flow, liquidity, or revenue figures for the reporting period.
Material Changes and Adjustments
- Share Issuance: A total of 91,451,178 shares were issued in connection with these transactions (64,669,936 for assets and 26,781,242 for debt).
- Revenue Contingency: If audits for the fiscal year ended December 31, 2015, reveal that either ABC entity generated less than $2,000,000 in revenue, the number of shares issued for the asset purchase will be reduced proportionately.
- Conversion Price Adjustment: The $0.10 conversion price for the debt-to-equity swap may be adjusted once within 90 days if the 10-day average closing price exceeds $0.10, capped at a maximum of $0.20 per share.
Outlook, Risks, and Unusual Items
- Financial Statements: Financial statements for the acquired businesses and pro forma financial information are not included in this filing. They are scheduled to be filed via amendment within 71 days.
- Regulatory Exemptions: The shares issued were sold pursuant to exemptions from registration under Section 4(2) and/or Regulation D of the Securities Act of 1933.
- Control Changes: The transactions are noted under Item 5.01 regarding changes in control, though specific ownership percentages post-transaction are not detailed in the text.
Investor Verification Checklist
- Verify the audited 2015 revenue figures for ABC Services Inc. and ABC Services II Inc. to determine if the share count for the asset purchase will be reduced.
- Monitor the stock price over the 90-day period following October 25, 2016, to assess potential adjustments to the conversion price for the affiliate debt.
- Review the upcoming amendment to this 8-K (due within 71 days) for the financial statements of the acquired businesses and pro forma data.
- Confirm the total outstanding share count post-transaction to evaluate dilution impact.