Sysorex, Inc. - Quarter Report: 2023 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-55924

SYSOREX, INC.

(Exact name of registrant as specified in its charter)

Nevada		68-0319458
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

13880 Dulles Corner Lane Suite 120 Herndon, Virginia		20171
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 800-929-3871

Securities registered pursuant to Section 12(b) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 29, 2023, there were 2,484,426,501 shares of the Registrant’s Common Stock, $0.00001 par value per share, issued and outstanding.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 (Unaudited)

TABLE OF CONTENTS

		Page

Special Note Regarding Forward-Looking Statements and Other Information Contained in this Report		ii

PART I - FINANCIAL INFORMATION		1

Item 1.	Financial Statements (Unaudited)	1

	Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited), and December 31, 2022	2

	Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2023, and 2022 (Unaudited)	3

	Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the Three Months ended March 31, 2023, and 2022 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2023, and 2022 (Unaudited)	5

	Notes to The Unaudited Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

PART II - OTHER INFORMATION		33

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Defaults Upon Senior Securities	35

Item 4.	Mine Safety Disclosure	35

Item 5.	Other Information	35

Item 6.	Exhibits	35

Signatures		38

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

AND OTHER INFORMATION CONTAINED IN THIS REPORT

This report contains forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may” or other similar expressions in this report. In particular, these include statements relating to future actions; prospective products, applications, customers and technologies; future performance or results of anticipated products; and projected expenses and financial results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

●

We are currently in default under our convertible debentures. All our assets are encumbered to secure the payment of secured convertible debentures that will require payments if not previously converted to common stock;

●

Our existing and future debt obligations could impair our liquidity and financial condition. We are currently in default under our convertible debentures. If we are unable to meet our debt obligations, the lenders could foreclose on our assets;

●

We do not currently have enough authorized shares of common stock under our Articles of Incorporation, as amended, to meet all of our potential obligations to third parties;

●

Our ability to successfully integrate acquired businesses or new products, or to realize anticipated synergies in connection with mergers and acquisitions;

●

Our ability to address and respond to market conditions and risks in the digital asset industry and increased scrutiny by regulators;

●

General economic conditions and the regulatory environment relating to digital assets;

●

A decline in the popularity or acceptance of the digital asset systems, could adversely affect an investment in us;

●

Our cash position and our history of losses;

●

Our ability to achieve profitability;

●

Customer demand for the products and services we offer;

●

The impact of competitive or alternative services, products, technologies, and pricing;

●

Increased delays in delivery of product due to worldwide strain on supply chain primarily due to labor, raw material, and chip shortages;

●

General economic conditions and events and the impact they may have on us, on our customers, and on our potential customers;

●

A security breach, through cyber-attack, cyber intrusion, insider threats or otherwise, or other significant disruption of our IT networks and related systems;

●

Our ability to obtain adequate financing in the future;

●

Our ability to continue as a going concern;

●

Our ability to complete strategic transactions, which may include acquisitions, mergers, dispositions, joint ventures, or investments;

●

Lawsuits and other claims by third parties;

●

Our success at managing the risks involved in the foregoing items;

●

The Restatement of our financial statements for the Affected Periods and the impact of such Restatement on our future financial statements and other financial measures;

●

The material weaknesses we identified in our internal control over financial reporting, our efforts to remediate such material weaknesses and the timing of remediation;

●

Our common stock is now quoted on OTC Market’s Pink Tier as a result of failing to satisfy the minimum bid price requirement for the OTCQB;

●

Authorized shares will be insufficient to convert debenture holders; and

●

Other factors discussed in this report.

The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements included in this report. You should not place undue reliance on these forward-looking statements.

Unless otherwise stated or the context otherwise requires, the terms “Sysorex,” “we,” “us,” “our,” and the “Company” refer collectively to Sysorex, Inc. and its subsidiaries, TTM Digital Assets & Technologies, Inc. (“TTM Digital”) and Sysorex Government Services, Inc. (“SGS”).

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information which are the accounting principles that are generally accepted in the United States of America and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, the unaudited condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.

The results for the period ended March 31, 2023, are not necessarily indicative of the results of operations for the full year. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes for the years ended December 31, 2022, and 2021 included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on June 13, 2023.

Sysorex, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands of dollars, except number of shares and par value data)

	March 31, 2023			December 31, 2022
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	132		$	29
Accounts receivable, net		2,973			4,052
Prepaid expenses and other current assets		589			638
Assets held for sale		3,863			4,663
Equity investment in Ostendo		1,397			1,397
Total Current Assets		8,954			10,779

Intangible assets, net		1,836			1,979
Operating lease right-of-use asset, net		372			409
Other assets		72			73
Total Assets	$	11,234		$	13,240

Liabilities and Stockholders’ Deficit
Current Liabilities
Accounts payable		5,353			4,236
Accrued liabilities		4,591			4,450
Convertible short-term debt		15,916			15,272
Conversion feature derivative liability		1,405			3,472
Operating lease obligation, current		217			216
Share derivative liability		437			273
Deferred revenue		839			931
Total Current Liabilities		28,758			28,850

Operating lease obligation - noncurrent		225			271

Total Liabilities		28,983			29,121

Commitments and Contingencies

Stockholders’ Deficit
Common stock, par value $0.00001 per share, 3,000,000,000 shares authorized; 2,484,501,880 shares issued as of March 31, 2023, and December 31, 2022, 2,484,426,501 shares outstanding as of March 31, 2023, and December 31, 2022, respectively.		24			24
Treasury stock, at cost, 75,379 shares as of March 31, 2023, and as of December 31, 2022		-			-
Additional paid-in-capital		45,553			45,553
Accumulated Deficit		(63,326	)		(61,458	)
Total Stockholders’ Deficit		(17,749	)		(15,881	)
Total Liabilities and Stockholders’ Deficit	$	11,234		$	13,240

The accompanying notes are an integral part of these unaudited Condensed Consolidated financial statements.

Sysorex, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands of dollars, except number of shares and per share data)

(Unaudited)

	For the Three Months Ended March 31,
	2023			2022
Revenues
Product revenue	$	3,273		$	4,529
Services revenue		816			508
Total Revenues		4,089			5,037

Operating costs and expenses
Product cost		3,035			2,015
Services cost		571			262
Sales and marketing		226			398
General and administrative		2,386			3,568
Impairment of digital assets		-			1,236
Amortization of intangibles		143			143
Total Operating Costs and Expenses		6,361			7,622

Loss from Continuing Operations		(2,272	)		(2,585	)

Other Income (Expense)
Interest expense		(653	)		(974	)
Gain on sale of digital assets		-			1,107
Revaluation of conversion feature derivative liability		2,067			(838	)
Change in fair value of share derivative liability		(164	)		-
Loss on extinguishment of debt		-			(549	)
Other income, net		19			6
Total Other Income (Expense)		1,269			(1,248	)

Loss from continuing operations before income taxes		(1,003	)		(3,833	)

Income tax expense		-			-

Loss from continuing operations		(1,003	)		(3,833	)
(Loss) Gain from discontinued operations		(865	)		800
Net Loss	$	(1,868	)	$	(3,033	)

Net Loss per share - basic and diluted - continuing operations	$	(0.0004	)	$	(0.021	)
Net (Loss) Income per share - basic and diluted - discontinued operations	$	(0.0003	)	$	0.004
Weighted Average Shares Outstanding - basic and diluted		2,487,426,501			174,980,542

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Sysorex, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

For the Three Months Ended March 31, 2023, and 2022

(In thousands of dollars, except share data)

(Unaudited)

	Common Stock				Treasury Stock				Additional Paid-In		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total
Balance – December 31, 2022		2,484,426,501	$	24		75,379	$	-	$	45,553	$	(61,458	)	$	(15,881	)

Net Loss		-		-		-		-		-		(1,868	)		(1,868	)
Balance – March 31, 2023		2,484,426,501	$	24		75,379	$	-	$	45,553	$	(63,326	)	$	(17,749	)

	Common Stock				Treasury Stock				Additional Paid-In			Accumulated
	Shares		Amount		Shares		Amount		Capital			Deficit			Total
Balance – December 31, 2021		145,638,212		1		75,379		-		36,156			(49,265	)		(13,108	)
Convertible debt conversions		72,717,883		-		-		-		2,909			-			2,909
Reclassification of equity contracts liabilities		-		-		-		-		(314	)		-			(314	)
Professional services		6,000,000		-		-		-		240			-			240
Exercise of Pre-funded warrants		12,361,622		-		-		-		-			-			-
Cashless exercise of warrants		220,754		-		-		-		-			-			-
Stock based compensation		500,000		-		-		-		111			-			111
Net Loss		-		-		-		-		-			(3,033	)		(3,033	)
Balance – March 31, 2022		237,438,471	$	1		75,379	$	-	$	39,102		$	(52,298	)	$	(13,195	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Sysorex, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands of dollars)

(Unaudited)

	For the Three Months Ended
	March 31,
	2023			2022
Cash Flows from Operating Activities
Net loss from continuing operations	$	(1,003	)	$	(3,833	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		143			144
Stock-based compensation expense		-			166
Amortization of right of use asset		37			62
Realized gain on sale of digital assets		-			(1,107	)
Loss contingency on debt default		-			549
Change in fair value of debt conversion feature		(2,067	)		838
Change in fair value of share derivative liability		164			-
Gain on settlement of vendor liabilities		-			(1,533	)
Impairment of digital assets		-			1,236
Issuance of shares in exchange for services		-			240
Changes in assets and liabilities:
Prepaid assets and other current assets		50			390
Accounts receivable and other receivables		1,079			1,470
Accounts payable		1,117			(1,554	)
Accrued liabilities and other current liabilities		693			(282	)
Operating lease liability		(45	)		-

Net cash provided by (used in) operating activities- continuing operations		168			(3,214	)
Net cash used in operating activities – discontinued operations		(65	)		(616	)
Net cash provided by (used in) operating activities	$	103		$	(3,830	)

Cash Flows from Investing Activities
Proceeds from sale of digital assets	$	-		$	5,709
Equity investment in Ostendo		-			(1,600	)

Net cash provided by investing activities -continuing operations		-			4,109
Net cash provided by investing activities – discontinued operations		-			-
Net cash provided by investing activities	$	-		$	4,109

Net increase in cash and cash equivalents		103			279

Cash and cash equivalents at beginning of period		29			659
Cash and cash equivalents at end of period	$	132		$	938

Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	-		$	932
Income taxes		-			-

Supplemental disclosure of noncash investing and financing activities:
Conversion of debt to equity	$	-		$	2,909
Reclassification of share derivative to liability		-			314

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SYSOREX, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Nature and description of Business

Description of Business

Sysorex, Inc. through its wholly owned subsidiary, Sysorex Government Services, Inc. (“SGS”), provides information technology solutions primarily to the public sector. These solutions include cybersecurity, professional services, engineering support, IT consulting, enterprise level technology, networking, wireless, help desk and custom IT solutions.

In addition to SGS, the Company has another wholly owned subsidiary, TTM Digital Assets &Technologies, Inc. (“TTM Digital”). TTM Digital is a digital asset technology company that previously operated specialized cryptocurrency mining processors and was previously focused on the Ethereum blockchain ecosystem. As of September 15, 2022, Ethereum switched from a Proof of Work model to a Proof of Stake model and as a result, the Company is no longer mining Ethereum or any other cryptocurrency. TTM Digital no longer holds any Ethereum or other crypto tokens or crypto assets at this time and does not conduct any mining activities and does not have any plans to mine crypto tokens in the future. TTM Digital is currently exploring alternative uses and sales opportunities for its Graphics Processing Units (“GPU”) assets and datacenter located in Lockport, NY. The Company had previously been in discussions with a third party to sell its mining assets and certain associated real property. The Company is headquartered in Virginia.

Note 2 — Going Concern

As of March 31, 2023, the Company had an approximate cash balance of $0.13 million, working capital deficit of approximately $19.8 million, and an accumulated deficit of approximately $63.3 million. In an effort to raise capital, on October 18, 2022, the Company completed a $0.5 million private placement, and subsequent to March 31, 2023, the Company sold investments in certain preferred shares held for approximately $0.18 million to a related party. Despite these efforts to raise capital, the aforementioned factors continue to raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the date of issuance of these unaudited condensed consolidated financial statements. The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern within one year after the date the unaudited condensed consolidated financial statements are issued.

The Company does not believe that its capital resources as of March 31, 2023, its ability to settle a portion of existing convertible debt obligations through issuance of the Company’s shares, availability on the SouthStar facility to finance cash advances to suppliers, purchase orders and invoices, reauthorization of key vendors and credit limitation improvements will be sufficient to fund planned operations during the next twelve months. Additionally, the Company is in default on the aforementioned convertible debt, which was due to be repaid in July 2022, and is accruing related interest, late fees and other penalties. As a result of the above factors, the Company will need additional funds to fulfil its obligations. On September 22, 2022, the shareholders of the Company approved the authorization of 3 billion shares of common stock, however, all of the Company’s authorized shares have been issued or reserved since October 21, 2022, resulting in unfilled conversion notices and an inability to fill potential future conversion notices from convertible debt holders. In order for the Company to fulfil any further conversion obligations, the Company would need to receive approval from the Financial Industry Regulatory Authority (“FINRA”) for a reverse stock-split and obtain shareholder approval for an increase in authorized shares. Existing unfilled conversion notices received in excess of available and authorized shares as of June 29, 2023, total 1,159,494,989. In order to satisfy all possible conversion obligations from existing debtholders as of the date of this report, the Company estimates a share deficit of approximately 43.6 billion shares based on the 3 billion currently authorized. Given these circumstances, it is improbable that the Company will be able to satisfactorily fulfil such obligations, even if the above steps are successfully taken.

The Company continues to explore a number of other possible solutions to its financing needs, including efforts to raise additional capital as needed, through the issuance of equity, equity-linked or debt securities, as well as possible transactions with other companies, strategic partnerships, and other mechanisms for addressing our financial condition. The Company will utilize its current contracts that are not limited to a single branch of government or a specific agency as these contracts can provide the Company with an opportunity to attain new solutions and service type orders. The Company will also utilize SGS’s small business status to partner with prime contractors on larger orders. The Company currently utilizes SouthStar to finance purchase orders and it also can factor its receivables if needed to fund operations. After considering the plans to alleviate substantial doubt, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Note 3 — Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles that are generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of the Company’s operations for the three months ended March 31, 2023, are not necessarily indicative of the results to be expected for the year ending December 31, 2023. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes for the years ended December 31, 2022, and 2021 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on June 13, 2023.

Our significant accounting policies are discussed in Note 4 of the unaudited condensed consolidated financial statements. We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

Discontinued Operations

As discussed in Note 5 – Discontinued Operation, the Company made the decision to divest its mining equipment and the data center of the TTM Digital reporting unit (“TTM Assets”). TTM Assets is currently exploring sales opportunities for its Graphics Processing Unit (GPU) assets and datacenter located in Lockport, NY. As a result of the decision to divest its operating assets of the TTM Digital reporting unit, the Company has determined that the subject assets met the definition of assets held for sale as defined by ASC 205-20 – Presentation of Financial Statements – Discontinued Operations.

In the fall of 2021, the Company made the decision to divest certain mining equipment and the data center of the TTM Digital reporting unit (“TTM Assets”) and commenced discussions with a third party to execute an asset sale. As a result of the decision to divest certain operating assets of the TTM Digital reporting unit, the Company has determined that the subject assets met the definition of assets held for sale as defined by ASC 205-20 – Presentation of Financial Statements – Discontinued Operations. The Company determined the TTM Assets represented discontinued operations as it constituted a disposal of a significant component and a strategic shift that will have a material effect on the Company’s operations and financial results. As a result, the Company reclassified the balances and activities of the TTM Assets from their historical presentation to assets held for sale on the condensed consolidated balance sheets and to gain (loss) from discontinued operations on the condensed consolidated statements of operations for the periods presented.

The following reclassifications were made to the prior year; mining revenue of $0.8 million, mining costs of $0.1 million, and depreciation of $0.5 million from continuing operations were reclassified to discontinued operations. The net effect for the three months ended March 31, 2022, was a $0.2 million change.

Note 4 — Summary of Significant Accounting Policies

Principles of Consolidation

The unaudited condensed consolidated financial statements have been prepared using the accounting records of Sysorex, TTM Digital and SGS. All inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during each of the reporting periods. Actual results could differ from those estimates. The Company’s significant estimates consist of:

●

Revenue recognition

●

Expected useful lives and valuation of assets

●

Fair value of derivative liabilities

Significant Accounting Policies

For a detailed discussion about the Company’s significant accounting policies, see the Company’s December 31, 2022, consolidated financial statements included in its 2022 Annual Report.

Impairment of Long-lived Assets

The Company reviews its long-lived assets, including mining equipment, for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable. The carrying amount is considered not recoverable if the sum of the undiscounted cash flows to be generated from the use and eventual disposition of the asset group is less than the carrying amount of the asset group. If the carrying amount exceeds the undiscounted cash flows, then the carrying amount is compared to the fair value and an impairment loss is recorded for the difference between the fair value and the carrying amount. The Company identified and recorded impairment charges of $0.8 million and $0.0 million, for the three months ended March 31, 2023 and 2022, respectively. As of September 15, 2022, Ethereum switched from a Proof of Work model to a Proof of Stake model, The Company is no longer mining Ethereum or any other cryptocurrency. TTM Digital no longer holds any Ethereum or other crypto tokens or crypto assets at this time and does not conduct any mining activities and does not have any plans to mine crypto tokens in the future. TTM Digital is currently exploring sales opportunities for its Graphics Processing Unit (GPU) assets and datacenter located in Lockport, NY.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized:

●

Identification of the contract, or contracts, with a customer;

●

Identification of the performance obligations in the contract;

●

Determination of the transaction price;

●

Allocation of the transaction price to the performance obligations in the contract; and

●

Recognition of revenue when, or as, the Company satisfies a performance obligation.

Hardware and Software Revenue Recognition

SGS is a primary resale channel for a large group of vendors and suppliers, including original equipment manufacturers (“OEMs”), software publishers and wholesale distributors.

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are established, the contract has commercial substance and collectability of consideration is probable. The Company evaluates the following indicators amongst others when determining whether it is acting as a principal in the transaction and recording revenue on a gross basis: (i) the Company is primarily responsible for fulfilling the promise to provide the specified product or service, (ii) the Company has inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer and (iii) the Company has discretion in establishing the price for the specified good or service. If the terms of a transaction do not indicate the Company is acting as a principal in the transaction, then the Company is acting as an agent in the transaction and the associated revenues are recognized on a net basis.

The Company recognizes revenue once control has passed to the customer. The following indicators are evaluated in determining when control has passed to the customer: (i) the Company has a right to payment for the product or service, (ii) the customer has legal title to the product, (iii) the Company has transferred physical possession of the product to the customer, (iv) the customer has the significant risk and rewards of ownership of the product and (v) the customer has accepted the product. The Company’s products can be delivered to customers in a variety of ways, including (i) as physical product shipped from the Company’s warehouse, (ii) via drop-shipment by the vendor or supplier or (iii) via electronic delivery of keys for software licenses. The Company’s shipping terms typically specify F.O.B. destination.

The Company leverages drop-shipment arrangements with many of its vendors and suppliers to deliver products to its customers without having to physically hold the inventory at its warehouse. The Company is the principal in the transaction and recognizes revenue for drop-shipment arrangements on a gross basis.

The Company may provide integration of products from multiple vendors as a solution it sells to the customer. In this arrangement, the Company provides a direct warranty to the customer with the Company’s own personnel as the customer requires a warranty on the solution and not individual vendor products. This type of warranty is sold integral to the overall solution quoted to the customer. The Company considers these service- type warranties to be performance obligations of the principal from the underlying products that make up a solution and therefore is acting as a principal in the transaction and records revenue on a gross basis over time.

License and Maintenance Services Revenue Recognition

SGS provides a customized design and configuration solution for its customers and in this capacity resells hardware, software and other IT equipment license and maintenance services in exchange for fixed fees. The Company selects the vendors and sells the products and services, including maintenance services, that best fit the customer’s needs. For sales of maintenance services and warranties, the customer obtains control at the point in time that the services to be provided by a third-party vendor are purchased by the customer and therefore the Company’s performance obligation to provide the overall systems solution is satisfied at that time. The Company’s customers generally pay within 30 to 60 days of the receipt of a customer- approved invoice.

For resale of services, including maintenance services, warranties, and extended warranties, the Company is acting as an agent as the primary activity for those services are fulfilled by a third party. While the Company may facilitate and act as a first responder for these services, the third-party service providers perform the primary maintenance and warranty services for the customer. Therefore, the Company is not primarily responsible for performing these services and revenue is recorded on a net basis.

SGS’s professional services include fixed fee contracts. Fixed fees are paid monthly, in phases, or upon acceptance of deliverables. For fixed fee contracts, the Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous service. Anticipated losses are recognized as soon as they become known. For the three months ended March 31, 2023, SGS did not incur any such losses. These amounts are based on known and estimated factors. Revenues from time and material or firm fixed price long-term and short-term contracts are derived principally with various United States government agencies.

Contract Balances

The timing of revenue recognition may differ from the timing of payment by customers. The Company records receivables when revenue is recognized prior to payment and there is an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. The following table details the contract balances presented (in thousands):

Deferred Revenue:

	Balance as of 12/31/2022		Additions		Revenue Amortization		Deletions		Balance as of 3/31/2023

Customer A	$	409	$	118	$	157	$	5	$	365
Customer B		504		-		40		-		464
Various		18						8		10

	$	931	$	118	$	197	$	13	$	839

Accounts Receivable, Net

Account receivables are stated at the amount the Company expects to collect. The Company recognizes an allowance for doubtful accounts to ensure accounts receivables are not overstated due to un-collectability. Bad debt reserves are maintained for various customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. An additional reserve for individual accounts is recorded when the Company becomes aware of a customer’s inability to meet its financial obligation, such as in the case of bankruptcy filings, or deterioration in the customer’s operating results or financial position. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. The Company’s allowance for doubtful accounts was $0.05 million as of March 31, 2023, and December 31, 2022.

Investments in Equity

The Company’s investment in Ostendo include an investment in an equity instrument, accounted for under ASC 321 Investments – Equity Securities, where the Company (1) holds less than 20% ownership in the entity, and (2) does not exercise significant influence. These are recorded at cost and adjusted for observable transactions for same or similar investments of the same issuer (referred to as the measurement alternative) or impairment.

Derivative Liabilities

The Company evaluates its convertible instruments, options, warrants, or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, Derivatives and Hedging. Under the provisions of ASC 815-40, convertible instruments and warrants, which contain terms that protect holders from declines in the stock price (“reset provisions”), are also required to be accounted for in accordance with derivative accounting treatment under ASC 815-10. Additionally, the Company evaluates whether the amount of common stock on a converted basis is in excess of its authorized share total which, if in excess, would result in derivative accounting treatment. The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to a liability at the fair value of the instrument on the reclassification date.

Convertible Debt

The Company’s debt instruments contain a host liability, freestanding warrants, and an embedded conversion feature. The Company uses the guidance under FASB ASC Topic 815 Derivatives and Hedging (“ASC 815”) to determine if the embedded conversion feature must be bifurcated and separately accounted for as a derivative under ASC 815. It also determines whether any embedded conversion features requiring bifurcation and/or freestanding warrants qualify for any scope exceptions contained within ASC 815. Generally, contracts issued or held by a reporting entity that are both (i) indexed to its own stock, and (ii) classified in shareholders equity, would not be considered a derivative for the purposes of applying ASC 815. Any embedded conversion features and/or freestanding warrants that do not meet the scope exception noted above are classified as derivative liabilities, initially measured at fair value, and remeasured at fair value each reporting period with change in fair value recognized in the Condensed Consolidated statements of operations. Any embedded conversion features and/or freestanding warrants that meet the scope exception under ASC 815 are initially recorded at their relative fair value in paid-in-capital and are not remeasured at fair value in future periods.

The host debt instrument is initially recorded at its relative fair value in long-term debt. The host debt instrument is accounted for in accordance with guidance applicable to non-convertible debt under FASB ASC Topic 470 Debt (“ASC 470”) and is accreted to its face value over the term of the debt with accretion expense and periodic interest expense recorded in the unaudited condensed consolidated statements of operations.

Issuance costs are allocated to each instrument in the same proportion as the proceeds that are allocated to each instrument. Issuance costs allocated to the debt hosted instrument are netted against the proceeds allocated to the debt host. Issuance costs allocated to freestanding warrants classified in equity are recorded in paid-in-capital.

Fair Value

The Company follows the accounting guidance under FASB’s ASC 820, Fair Value Measurements, for its fair value measurements of financial assets and liabilities measured at fair value on a recurring basis. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

Level 3 — assets and liabilities whose significant value drivers are unobservable.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.

Certain nonfinancial assets such as property and equipment, land and intangible assets are subject to nonrecurring fair value measurements if they are deemed to be impaired. The impairment models used for nonfinancial assets depend on the type of asset.

For the three months ended March 31, 2023, the Company recorded impairment charges related to assets measured on a non-recurring basis of $0.8 million for graphics processing units disclosed in Note 5 – Discontinued Operations. The Company utilized a market approach as of March 31, 2023, to determine fair value.

For the year ended December 31, 2022, the Company recorded impairment charges related to assets measured on a non-recurring basis of $4.1 million for graphics processing units. The Company utilized a market approach as of December 31, 2022, to determine fair value.

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, accrued liabilities, and accounts payable, are of approximate fair value due to the short-term nature of these instruments.

Held for Sale and Discontinued Operations Classification

The Company classifies a business as held for sale in the period in which management commits to a plan to sell the business, the business is available for immediate sale in its present condition, an active program to complete the plan to sell the business is initiated, the sale of the business within one year is probable and the business is being marketed at a reasonable price in relation to its fair value.

Newly acquired businesses that meet the held-for-sale classification criteria upon acquisition are reported as discontinued operations. Upon a business’ classification as held for sale, net assets are measured for impairment. Goodwill impairment is measured in accordance with the method described in the accounting policy. An impairment loss is recorded for long-lived assets held for sale when the carrying amount of the asset exceeds its fair value less cost to sell. Other assets and liabilities are generally measured for impairment by comparing their carrying values to their respective fair values. A long-lived asset shall not be depreciated or amortized while it is classified as held for sale.

Net Loss per Share

Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus potentially dilutive common shares. Convertible debt, restricted stock, stock options and warrants are excluded from the diluted net loss per share calculation when their impact is antidilutive. The Company reported a net loss for the three months ended March 31, 2023, and as a result, all potentially dilutive common shares are considered antidilutive for this period.

The Company includes potentially issuable shares in the Weighted-average common shares – basic that include warrants and other agreements that are exercisable for little or no consideration without substantive contingencies and others once any contingencies relative to the issuance of the shares is resolved.

Computations of basic and diluted weighted average common shares outstanding were as follows for the periods reported:

	March 31,
	2023		2022

Weighted-average common shares outstanding		2,484,426,501		171,980,542

Weighted-average potential common shares considered outstanding		3,000,000		3,000,000

Weighted-average common shares outstanding – basic		2,487,426,501		174,980,542

Dilutive effect of options, warrants and restricted stock		-		-

Weighted-average common shares outstanding – diluted		2,487,426,501		174,980,542

Options, restricted stock, and warrants and convertible debt excluded from the computation of diluted loss per share because the effect of inclusion would be anti-dilutive		40,351,440,201		138,922,213

Recent Accounting Standards

The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company’s consolidated financial statements properly reflect the change.

In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which was codified with its subsequent amendments as Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments – Credit Losses (“ASC 326”). ASC 326 seeks to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments, including trade receivables, and other commitments to extend credit held by a reporting entity at each reporting date. The amendments require an entity to replace the incurred loss impairment methodology in other GAAP with a methodology that reflects current expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted this standard on January 1, 2023, and the adoption did not have a material impact on the financial statements and related disclosures.

Reclassifications

Certain amounts for the three months ended March 31, 2022, reported on our Form 10-Q condensed consolidated statements of operations have been reclassified for consistency with the current year presentation. Costs associated with the TTM Digital reporting unit were reclassified from the condensed consolidated statement of operations to discontinued operations.

Emerging Growth Company

Sysorex is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). As such, Sysorex is eligible to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not emerging growth companies, including compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended. In addition, Section 107 of the JOBS Act provides that an emerging growth company may take advantage of the extended transition period provided in Section 13(a) of the Securities Exchange Act of 1934, as amended, for complying with new or revised accounting standards, meaning that Sysorex, as an emerging growth company, can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Sysorex has elected to take advantage of this extended transition period, and therefore our financial statements may not be comparable to those of companies that comply with such new or revised accounting standards. Sysorex will remain an emerging growth company until the end of the fiscal year 2023.

Note 5 — Discontinued Operations

In the fall of 2021, the Company made the decision to divest certain mining equipment and the data center of the TTM Digital reporting unit and commenced discussions with a third party to execute an asset sale in the spring of 2022. On March 24, 2022, the Company executed Heads of Terms (“Heads of Terms”) with Ostendo Technologies, Inc. (“Ostendo”). Pursuant to the Heads of Terms, the Company and Ostendo agreed to certain terms related to the Company’s sale of its Ethereum mining assets and certain associated real property (“Assets”) to Ostendo for Ostendo preferred stock. The Company agreed to make a non-refundable deposit of $1,600,000 (“Deposit”) to be credited toward the purchase of an additional 166,667 shares of Ostendo’s preferred stock. The Company has in good faith worked with Ostendo to ensure all closing terms and closing conditions were mutually agreed upon, however, the parties have not entered into definitive transaction agreements and accordingly, it was determined in November 2022 that the transaction will not proceed. In November 2022, the Company received a certificate, dated November 14, 2022, for the shares, and thereafter, the Company received confirmation that the Certificate of Designations for the preferred stock had been filed and accepted by the California Secretary of State on November 14, 2022.

Subsequent to the Ostendo transaction not proceeding, TTM Digital explored alternate long-term uses for its assets and concluded that mining other coins was not a feasible path forward due to the volatility in crypto prices, and repurposing its assets was not a viable path forward as it would require significant upfront investments to its datacenter infrastructure. TTM Digital is currently exploring sales opportunities for its GPU assets and datacenter located in Lockport, NY.

As a result of the decision to divest certain operating assets of the TTM Digital reporting unit, the Company has determined that subject assets met the definition of assets held for sale as defined by ASC 205-20 – Presentation of Financial Statements – Discontinued Operations. The Company determined the TTM Assets represented discontinued operations as it constituted a disposal of a significant component and a strategic shift that will have a material effect on the Company’s operations and financial results. As a result, the Company reclassified the balances and activities of the TTM Assets from their historical presentation to assets held for sale and to loss from discontinued operations on the consolidated statements of operations for the periods presented.

The carrying value of the TTM Digital asset disposal group was $3.9 million and $4.7 million as of March 31, 2023, and December 31, 2022, and the Company recorded approximately $0.8 million and $4.1 million of impairment of fixed assets in its discontinued operations. The following table details the assets and liabilities of the Company’s TTM Assets that were classified as assets held for sale and discontinued operations for the periods presented (in thousands):

	March 31,		December 31,
	2023		2022
Current Assets

Mining facilities, net		1,083		1,083
Mining equipment, net		2,691		3,491
Total Current Assets	$	3,774	$	4,574
Intangible assets, net		89		89
Total Assets associated with discontinued operations	$	3,863	$	4,663

The following table presents the TTM Digital assets statement of operations line items classified as discontinued operations included within loss from discontinued operations for the three-months ended March 31, 2023, and 2022 (in thousands):

	2023			2022
Revenues
Mining income	$	-		$	2,040
Total revenues		-			2,040

Operating costs and expenses
Mining cost		17			527
General and administrative		48			256
Impairment of fixed assets		800			-
Depreciation		-			457
Total operating costs and expenses		865			1,240

Income (Loss) from Operations		(865	)		800

Income (Loss) before taxes and equity method investee		(865	)		800

Provision for income taxes		-			-
Net income (loss) from discontinued operations	$	(865	)	$	800

The following table summarizes the net cash flows from discontinued operations of TTM Digital (in thousands):

	For the Three Months Ended March 31,
	2023			2022
Net cash used in operating activities – discontinued operations		(65	)		(616	)

Note 6 — Intangible Assets

Intangible assets as of March 31, 2023, consist of the following:

	Gross					Net
	Carrying		Accumulated			Carrying
	Amount		Amortization			Amount
Trade name	$	1,060	$	(205	)	$	855
Customer relationships		1,900		(919	)		981
Total intangible assets	$	2,960	$	(1,124	)	$	1,836

Intangible assets as of December 31, 2022, consist of the following:

	Gross					Net
	Carrying		Accumulated			Carrying
	Amount		Amortization			Amount
Trade name	$	1,060	$	(179	)	$	881
Customer relationships		1,900		(802	)		1,098
Total intangible assets	$	2,960	$	(981	)	$	1,979

Calendar Years Ending December 31,	Amount
2023		430
2024		573
2025		266
Thereafter		567
Total	$	1,836

Note 7 — Credit Risk and Concentrations

Financial instruments that subject the Company to credit risk consist principally of trade accounts receivable and cash. The Company performs certain credit evaluation procedures and does not require collateral for financial instruments subject to credit risk. The Company believes that credit risk is limited because the Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk of its customers, establishes an allowance for uncollectible accounts and, consequently, believes that its accounts receivable credit risk exposure beyond such allowances is limited.

The Company maintains cash deposits with financial institutions, which, from time to time, may exceed federally insured limits. The Company has not experienced any losses and believes it is not exposed to any significant credit risk from cash.

The following table sets forth the percentages of sales derived by the Company from those customers that accounted for at least 10% of sales during the three months ended March 31, 2023, and 2022 (in thousands of dollars):

	For the Three Months Ended March 31, 2023					For the Three Months Ended March 31, 2022
	$		%			$		%
Customer A		492		12	%		3,583		72	%
Customer B		2,994		75	%		1,170		24	%
Customer C		477		12	%		-		-

As of March 31, 2023, Customer B and Customer C represented approximately 83% and 16% of total accounts receivable.

As of December 31, 2022, Customer B represented approximately 61% of total accounts receivable.

For the three months ended March 31, 2023, three vendors represented approximately 56%, 16% and 12% of total purchases, respectively. Purchases from these vendors during the three months ended March 31, 2023, were approximately $2.1 million, $0.6 million and $0.4 million, respectively.

For the three months ended March 31, 2022, one vendor represented approximately 82% of total purchases. Purchases from this vendor during the three months ended March 31, 2022, were approximately $3.2 million.

Note 8 — Convertible Short-term debt

Convertible debt as of March 31, 2023, and December 31, 2022, consisted of the following (in thousands):

	March 31,		December 31,
	2023		2022

Convertible Debentures, including interest payable to the Convertible Debenture Holders	$	15,916	$	15,272
Total Short-Term Debt	$	15,916	$	15,272

2021 Convertible Debentures & Warrants

On July 7, 2021, the Company consummated the initial closing of a private placement offering (the “Offering”) pursuant to the terms and conditions of a Securities Purchase Agreement for up to $15.2 million in principal amount (“Original Principal Value”) Convertible Debentures. To manage the administration of the Offering the Company entered into a placement agency agreement with Joseph Gunner & Co. LLC, a U.S. registered broker-dealer (“Placement Agent”). At the initial closing, the Company sold the purchasers (i) 12.5% Original Issue Discount Convertible Debentures (“Debentures”) in an aggregate principal amount of $9,990,000 and (ii) warrants to purchase up to 3.5 million shares of common stock of the Company. The Company received total gross proceeds of $8.9 million taking into account the 12.5% discount before deducting placement agent fees and expenses of approximately $0.9 million. The convertible debt is collateralized by the assets of the Company. The Debentures matured on July 7, 2022, subject to a three-month extension upon mutual agreement of the Company and the holder, as a result, the 2021 convertible debentures are in default.

On August 13, 2021, the company consummated the second closing of the offering pursuant to the same terms and conditions of the Securities Purchase Agreement dated July 7, 2021. At the second closing, the Company sold the purchasers (i) 12.5% Original Issue Discount Senior Secured Convertible Debentures in an aggregate principal amount of $3.4 million and (ii) warrants to purchase up to 1,862,279 shares of common stock of the Company. The Company received a total of $3.5 million in gross proceeds following the second closing taking into account the 12 % discount before deducting placement agent fees and expenses of approximately $0.3 million. The Debentures matured on August 13, 2022, subject to a three-month extension upon mutual agreement of the Company and the holder, as a result, the 2021 convertible debentures are in default.

In conjunction with the Convertible Debentures, the Company entered into a Warrant Purchase Agreement (the “Agreement”) providing investors the right to purchase common stock of Sysorex. The exercise price will be either 1) the Qualified Offering Price, in the event of a Qualified Offering or 2) in the event of no Qualified Offering, the lower of a) $18.00 and b) an amount equal to 80% of the average of VWAP (as defined therein) for the common stock. The term of the warrant is five years. The warrants issued in connection with the debt were equity classified at issuance and were allocated a value of approximately $896,000 on a relative fair value basis.

The Company recorded the debt net of the 12.5% discount, of which totaled $1.5 million, the placement agent fees and expenses of $1.3 million and the debt discounts attributed to the fair value of the warrants and conversion option derivative liability of approximately $0.8 million and $2.1 million, respectively. The Company expensed the entire debt discount and issuance costs as a result of the debenture default, as disclosed below.

Under the conversion terms of the Debentures, the Debenture is convertible, in whole or in part, into shares of Common Stock at the option of the Holder at any time until the Debenture is no longer outstanding. The Holder executes a conversion by delivering to the Company a Notice of Conversion specifying the principal amount to be converted and the date on which the conversion is to be executed. The Conversion Price is set at the lower of (i) $18.00 and (ii) 80% of the average of the VWAP during the 5 Trading Day period immediately prior to the applicable Conversion Date. The number of Conversion Shares to be issued is determined by dividing the outstanding principal amount of the debenture to be converted by the Conversion Price. The Debentures are subject to mandatory conversion (“Mandatory Conversion”) in the event the Company closes a registered public offering of its Common Stock and receives gross proceeds of not less than $40 million and at the completion of which the Company’s securities are traded on a national exchange (“Qualified Offering”). The Company determined that the conversion feature associated with the convertible debentures should be bifurcated and treated as a separate derivative liability. An initial fair value of $2.1 million was assigned to the conversion option, The conversion option is marked to market at the end of each reporting period. The Company recorded a revaluation gain (loss) of approximately $2.1 million and ($0.8) million for the three months ended March 31, 2023, and 2022, for the change in the fair value of the conversion option. As of March 31, 2023 and December 31, 2022, the derivative liability associated with the conversion option was $1.4 million and $3.5 million, respectively.

Debenture Default

The Debentures provide that any monetary judgment filed against the Company for more than $50,000, and if such judgment remains unvacated for a period of 45 calendar days shall constitute an event of default. The debentures also provide that nonpayment of debt constitutes an event of default. The Company defaulted on its principal and interest payments. On December 14, 2021, the Company became aware that a Confession of Judgment (the “Confession of Judgment”) had been entered against the Company in the Superior Court of the State of California, County of Santa Clara by Tech Data on September 24, 2021. The Confession of Judgement was entered for a total sum of $5.9 million, which is comprised of the principal sum of $3.3 million, and prejudgment interest in the sum of $2.6 million. As a result, the Confession of Judgment was deemed to be an event of default under the Debentures although the Company only became aware of the Confession of Judgment on December 14, 2021.

On January 7, 2022, the Company received a notice of default (the “Default Notice”) from the Placement Agent stating that the Company defaulted under the Purchase Agreement as a result of: (i) the Company failing to disclose certain material indebtedness of the Company outstanding as of the date of the Purchase Agreement; and (ii) the filing of a judgment relating to such material indebtedness. Due to such events of default, (i) the Debentures are now deemed to have begun bearing interest at the default interest rate of 18% per annum from the date of the issuance of the Debentures; and (ii) the holders of the Debentures are entitled to receive in satisfaction of the amounts owing under the Debentures an amount equal to 130% of the Original Principal Value of the Debentures (“Default Principal Increase”), in accordance with the terms of the Debentures. In addition, as a result of the events of default, the exercise price for the Warrant is the lower of: (A) $18.00 and (B) an amount equal to fifty percent (50%) of the average of volume-weighted average price for the common stock of the Company over the five (5) trading days preceding the date of the delivery of the applicable exercise notice or (C) the qualified offering price as defined in the Purchase Agreement.

The Company recognized approximately $0.6 million and $1.0 million of interest expense for the three months ended March 31, 2023 and 2022. Included in convertible debt is $3.7 million of interest payable on March 31, 2023, to the Convertible Debenture Holders.

Furnishing of Information: Public Information

As required under the Securities Purchase Agreement, disclosed above, with the convertible debenture holders thereunder, the Company is required to timely file its Annual Report, Form 10K and Quarterly Report Form 10Q under the Securities and Exchange Act of 1934, as amended, and in order to satisfy the provisions of Rule 144(c). As of March 31, 2023, the Company was unable to meet its filing requirements deadlines, therefore, the Company has incurred partial liquidated damages of approximately $0.6 million. Damages will continue to accrue until the date on which the public information requirements of Rule 144(c) have been satisfied.

Convertible Debenture Conversion

There were no conversions of convertible debt for the three-months ended March 31, 2023. All of the Company’s authorized shares have been issued or reserved since October 21, 2022, resulting in unfilled conversion notices and an inability to fill potential future conversion notices from convertible debt holders. The Securities Purchase Agreement permits damages to be awarded to its convertible debtholders when conversions have not been fulfilled. As of March 31, 2023, the Company recorded in the condensed consolidated balance sheets, accrued liabilities approximately $1.1 million of damages for shares the Company was unable to fulfill.

Note 9 — Fair Value Measurement

Fair value measurements are determined based on assumptions that a market participant would use in pricing an asset or a liability. A three-tiered hierarchy distinguishes between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3). The following table presents the placement in the fair value hierarchy measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022:

			Fair value measurement at reporting date using
			Quoted prices in
			active markets		Significant other		Significant
			for identical		observable		unobservable
	Balance		assets (Level 1)		inputs (Level 2)		inputs (Level 3)
As of March 31, 2023:
Recurring fair value measurements (in thousands):
Assets:
Equity investment in Ostendo	$	1,397	$	-	$	-	$	1,397
Derivative liabilities:
Conversion feature derivative liability	$	1,405	$	-	$	-	$	1,405
Share derivative liability		437		-		-		437
Total derivative liabilities		1,842		-		-		1,842
Total recurring fair value measurements	$	1,842	$	-	$	-	$	1,842

As of December 31, 2022: (in thousands)
Recurring fair value measurements
Assets:
Equity investment in Ostendo	$	1,397	$	-	$	-	$	1,397
Derivative liabilities:
Conversion feature derivative liability	$	3,472	$	-	$	-	$	3,472
Common stock derivative liability		273		-		-		273
Total derivative liabilities		3,745		-		-		3,745
Total recurring fair value measurements	$	3,745	$	-	$	-	$	3,745

The conversion feature of the convertible Debentures was separately accounted for at fair value as a derivative liability under guidance in ASC 815 that is remeasured at fair value on a recurring basis using Level 3 inputs. The Company uses a probability weighted expected return model (“PWERM”) valuation technique to measure the fair value of the conversion feature with any changes in the fair value of the conversion feature liability recorded in earnings. Significant inputs to the model include estimated time to conversion events, estimated interest converted at the event, the implied yield, the discount rate for the conversion, and the probability of the conversion events. For the three months ended March 31, 2023, the Company recorded a gain of approximately $2.1 million for the change in fair value of debt conversion feature.

The Company evaluated its equity investment in Ostendo of $1.6 million and recorded an impairment of approximately $0.2 million in 2022. The Company utilized inputs of market data and trends of peer group companies to determine the fair value of the equity investment.

As discussed in Note 10 – Equity below, the Company exceeded its authorized share limit with respect to potentially issuable shares under the equity contracts described with the Share Derivative Liabilities section. The Company estimates the fair value of the Common stock derivative liability based on the fair value of the potentially issuable shares for the warrants, stock options and RSUs vested but unissued. This liability excludes the fair value of the potentially convertible shares for the convertible Debentures which are accounted for through the carrying value of the debt and the separate conversion feature derivative liability.

The Company recorded the common stock derivative liability at fair value as of March 31, 2023, through a transfer from equity to the common stock derivative liability. Changes in the fair value of the liability in future periods will be included in other income (expense) in the consolidated statements of operations.

For the three months ended March 31, 2023, the Company recognized a gain of $2.1 million for the change in fair value of debt conversion feature, and a loss of $0.2 million for change in fair value of the share derivative liability.

Note 10 — Equity

On September 22, 2022, the Company’s stockholders voted to approve an amendment to the Articles of Incorporation to increase the total number of authorized shares of the Company’s capital stock from 510,000,000 shares, par value $0.00001 per share, to 3,010,000,000 shares, of which 3,000,000,000 shares will be designated as common stock and 10,000,000 shares will be designated as preferred stock, in accordance with the voting results listed below. As of March 31, 2023 and December 31, 2022, 2,484,501,880 shares were issued, 2,484,426,501 shares were outstanding. No preferred stock has been designated or issued.

Private Placement Agreement

On October 18, 2022, the Company sold to the Investors an aggregate of 500,000,000 Units, consisting of 500,000,000 shares of common stock, warrant 1s to acquire 500,000,000 shares of common stock, and warrant 2s to acquire 500,000,000 shares of common stock, for total consideration paid to the Company of $500,000. Pursuant to the terms of the SPA, the Company agreed to sell to each Investor a number of Units of securities of the Company (each, a “Unit”), at a purchase price of $0.001 per Unit, with each Unit being comprised of: (i) one share of common stock (each, a “Purchased Share” and collectively, the “Purchased Shares”); (ii) a warrant to acquire one share of common stock at an exercise price of $0.001 per share, which exercise price will not be subject to adjustment as a result of any forward or reverse split of the common stock (each, a “Warrant 1”); and (iii) a warrant to acquire one share of common stock at an exercise price of $0.001 per share, which exercise price will not be subject to adjustment as a result of any forward or reverse split of the common stock (each, a “Warrant 2”). Pursuant to the terms of the SPA, the Company agreed to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days of October 18, 2022 (the “Registration Deadline”). If such registration statement has not become effective by the Registration Deadline, and provided that the Registrable Securities cannot otherwise be sold pursuant to Rule 144 pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the Registration Deadline, then, subject to the provisions of the SPA and the Initial Registration Rights Agreement, the Company agreed to issue to each Investor:

(i)

A number of additional shares of common stock equal to 10% of the Purchased Shares acquired by such Investor on the closing date, with such number of Purchased Shares being adjusted for any forward or reverse splits of the common stock between the closing date and the date of such issuance (the “Additional Shares”); and

(ii)

A new warrant (each, a “Warrant 3”) equal to the number of Additional Shares in the applicable issuance.

The Additional Shares and the Warrant 3 will, if applicable, be issuable to the Investors for each 30-day period, or portion thereof, that the registration statement registering the Registrable Securities has not become effective by the Registration Deadline. The Company’s obligation to issue the Additional Shares and the Warrant 3, if applicable, will not arise until the Company has amended its articles of incorporation, via a reverse split of the common stock, an increase of the number of authorized shares of common stock, or some combination thereof, such that the Company has a number of authorized but unissued shares of equal to (1) the number of Additional Shares that are otherwise to be issued plus (2) the number of shares of common stock that may be issuable pursuant to the Warrant 3.

The Company was unable to have the registration statement become effective by January 16, 2023, 90 days past October 18, 2022. The additional shares and Warrant 3 will be issuable for each 30-day period, or portion thereof, that the registrable securities have not become effective. As of June 29, 2023, the Company is obligated to issue an additional 319 million shares of common stock and warrant 3 to purchase an additional 319 million shares of common stock. For the three months ended March 31, 2023, the Company recorded $0.16 million of penalties as described in the Securities Purchase Agreement, recorded in share derivative liability on the condensed consolidated balance sheets.

Stock Options

A summary of stock option activity for the three months ended March 31, 2023, is as follows:

	Number of Options (in Shares)		Weighted Average Exercise Price
Outstanding, December 31, 2022		1,607,500	$	2.00
Granted		-	$	-
Exercised		-		-
Forfeited or cancelled		-		-
Outstanding, March 31, 2023		1,607,500	$	2.00
Exercisable, March 31, 2023		1,607,500	$	2.00

Warrants

The following table represents the activity related to the Company’s warrants during the three-month ended March 31, 2023:

	Number of Warrants (in Shares)		Weighted Average Exercise Price
Outstanding, December 31, 2022		1,010,084,263	$	.001	*
Granted		-		-
Exercised		-		-
Outstanding, March 31, 2023		1,010,084,263	$	.001

The weighted average contractual term as of March 31, 2023, is 4.5 years.

*	The exercise price will be determined by a 5-day VWAP price calculation on the exercise date.

Prefunded Warrants

In connection with the Company’s merger with TTM Digital in April 2021 three TTM Digital shareholders accepted prefunded warrants aggregating the right to receive 12,361,622 shares of Company stock. The prefunded warrants were converted to common stock of the Company during the quarter ended March 31, 2022. In addition, a Company debt holder agreed to convert certain of the Company obligations to a fully paid right to receive 3,000,000 shares of Company stock. As the rights to receive shares have been fully paid by the holders, the rights to receive the shares are considered to be issued for the purpose of determining Company Basic shares outstanding. The activity for the Prefunded warrants during the three months ended March 31, 2023 is shown in the table below:

	Prefunded Warrants
Outstanding, December 31, 2022		3,000,000
New issuances		-
Exercised		-
Outstanding, March 31, 2023		3,000,000

Restricted Stock Units

The Company’s restricted stock awards granted to employees and directors of 1,100,000 restricted stock units are fully vested.

Share Derivative Liabilities

As the amount of common stock on an as converted basis as of March 31, 2023, exceeded our authorized share amount, the Company’s outstanding warrants, stock options and vested but unissued restricted stock shares (“RSUs”) were reclassified to derivative liabilities in the consolidated financial statements. This results in non-cash gains or losses each period during the term of the warrants, stock options, RSU vesting period and convertible debt. We will report a noncash loss if our common stock price from the first to last day of a period increase. Conversely, we will report a gain if our common stock price decreases. The losses or gains may be substantial. The table below summarizes the reclassified share derivative liabilities as of March 31, 2023 (dollars in thousands):

	March 31,		December 31,
	2023		2022
Warrants	$	436	$	272
Stock options		1		1
Total share derivative liability	$	437	$	273

Reverse Stock Split

On September 22, 2022, the shareholders of Sysorex, Inc. have approved the Reverse Split and have granted to the Board of Director’s the power to determine the final ratio for the Reverse Split. On November 1, 2022, the Board of Director’s determined the ratio for the Reverse Split is to be 1,000 for 1, with one share of Common Stock being issued for each 1,000 shares of Common Stock issued and outstanding, with any fractional shares of Common Stock resulting therefrom being rounded up to the nearest whole share of Common Stock. The company has submitted the reverse stock split plan for review to FINRA on November 4, 2022. The effective date of the reverse stock will be determined after FINRA’s review.

The Company has included below certain data points that are reported in the unaudited financial statements (“as stated”) and have been disclosed herein as if the effect of the reverse stock split (1000 for 1) has been implemented (“proforma effect”).

			Proforma
	As Stated		Effect
Balance Sheet

Common stock:
Shares Issued:
3/31/2023		2,484,501,880		2,484,502
12/31/2022		2,484,501,880		2,484,502
Shares Outstanding:
3/31/2023		2,484,426,501		2,484,427
12/31/2022		2,484,426,501		2,484,427

Treasury Stock:		75,379		75

		Three Months Ended March 31,
EPS		2023			2022
Weighted Average Shares
Outstanding – basic and diluted	As stated		2,487,426,501			174,980,542
	Proforma		2,487,427			174,981

Net income (loss) per share:
Continuing operations	As stated		(0.0004	)		(0.021	)
	Proforma		(0.40	)		(21.0	)

Discontinued Operations	As stated		(0.0003	)		0.004
	Proforma		(0.30	)		4.0

Note 11 — Commitments and Contingencies

Contractual Commitments

Settlement Agreements

On September 5, 2017, prior to the merger and as a result of a spinoff from Sysorex’s previous parent, a computer hardware supplier threatened legal action against the Company and demanded approximately $1.8 million for payment of unpaid invoices. On or about January 29, 2018, the parties executed a settlement agreement resolving the matter. No court action was filed. Subsequently thereafter, the Company defaulted under the terms of the agreement. The liability of approximately $0.7 million has been accrued and includes interest $0.2 million calculated based on a default rate of 8%, which is included as a component of accounts payable and accrued liabilities as of March 31, 2023, in the condensed consolidated balance sheets.

On January 22, 2018, a software vendor filed a motion for entry of default judgment (the “Motion”) against SGS in the Circuit Court of Fairfax County, Virginia. The Motion alleges that SGS failed to respond to a complaint served on November 22, 2017. The Motion requests a default judgment in the amount of $336,000 plus $20,000 in legal fees. On August 10, 2018, the Company and vendor entered into a settlement agreement and the Company is repaying the debt in monthly installments. Subsequently thereafter, the Company defaulted under the terms of the agreement. The liability of approximately $0.1 million has been accrued and includes interest $0.03 million calculated based on a default rate of 6% and is included as a component of accounts payable and accrued liabilities as of March 31, 2023, in the condensed consolidated balance sheets.

Registration Rights Agreement

The Company entered into a Registration Rights Agreement (the “RRA”) dated April 13, 2021. The Company had ninety (90) calendar days following the closing date of its Merger with TTM Digital Assets & Technologies, Inc. on April 14, 2021, to file an initial registration statement covering the Shares. The ninety (90) calendar day filing date was July 13, 2021 (“Filing Deadline”). The Company did not fulfil its obligation to file a registration statement covering the Shares by July 13, 2021, nor any date thereafter up to and including the filing of this Quarterly Report on Form 10-Q and therefore has accounted for an accrued liability in the amount of $0.2 million recorded in the condensed consolidated balance sheets – current liabilities for the three months ended March 31, 2023. The RRA terminated as of October 14, 2021, by its own terms.

Promissory Judgement

The Company entered into a Promissory Judgment Note dated as of August 15, 2018 (the “Note”), with Tech Data Corporation (“Tech Data”), pursuant to which the Company promised to pay the principal sum of $6.8 million to Tech Data. The Note provides that interest shall accrue on the balance of the Note at the rate of 18% per annum. Due to miscommunication with Tech Data, the Company inadvertently failed to pay, when due, some of the installment payments in the aggregate principal amount of $3.3 million as of December 31, 2021, as set forth in the Note and has defaulted under the Note.

Following a negotiation with Tech Data, the Company was able to reduce the Award by in excess of $4.2 million, and on January 13, 2022, the Company and Tech Data entered into a Settlement and Release Agreement (the “Settlement Agreement”). Pursuant to the Settlement Agreement, the Company paid $1,375,000. (the “Settlement Amount”) on January 14, 2022. The Company recognized a gain on settlement of $1.5 million and has recorded in product costs in the consolidated statement of operations. The Award was deemed satisfied in full. Among other things, Tech Data agreed to file an acknowledgment of full satisfaction of judgment attached as an exhibit to the Settlement Agreement, not take any further action against the Company in connection with or relating to the Judgment, and release the Company and its representatives from any and all claims, including the Judgment, which Tech Data may have against the Company based upon any transaction that occurred at any time before the date of the Settlement Agreement.

Convertible Debenture Conversion

There were no conversions of convertible debt for the three-months ended March 31, 2023. All of the Company’s authorized shares have been issued or reserved since October 21, 2022, resulting in unfilled conversion notices and an inability to fill potential future conversion notices from convertible debt holders. The Securities Purchase Agreement allows for damages to be awarded to its convertible debtholders until unfulfilled conversions have been issued. As of March 31, 2023, the Company recorded in the condensed consolidated balance sheets – accrued liabilities, approximately $1.1 million of damages for shares the Company was unable to convert.

Convertible Debenture Litigation

On June 3, 2022, the Company became aware that a Complaint had been entered against the Company in the United States District Court Southern District of New York by ProActive Capital Partners, L.P, a convertible debenture holder. The Complaint is entered for injunctive relief to honor is stock conversion, recover damages, and receive payments due under the Debenture agreement. The convertible debenture principal and interest of approximately $0.3 million is recorded in the condensed consolidated balance sheets – accrued liabilities for the three months ended March 31, 2023. The Company will honor notices of conversion which the Company has received and has not been able to fulfill.

Operating Leases/Right-of-Use Assets and Lease Liability

On December 8, 2021, the Company’s principal executive offices moved to 13880 Dulles Corner Lane, Suite 120, Herndon, Virginia 20171. We lease these premises, which consist of approximately 5,800 square feet, pursuant to a lease that expires on May 31, 2025. The total amount of rent expense under the leases is recognized on a straight-line basis over the term of the leases. The Company has no other operating or financing leases with terms greater than 12 months.

The following is a summary of the activity in the Company’s current and long-term operating lease liabilities for the three months ended March 31, 2023.

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	45
Leased assets surrendered in exchange for termination of operating lease liabilities	$	-

As of March 31, 2023, future minimum operating leases commitments are as follows:

Calendar Years Ending December 31,	Amount
2023	$	161
2024		219
2025		92
Total future lease payments		471
Less: interest expense at incremental borrowing rate		(29	)
Net present value of lease liabilities	$	442

Other assumptions and pertinent information related to the Company’s accounting for operating leases are:

Weighted average remaining lease term:			2.17 years
Weighted average discount rate used to determine present value of operating lease liability:			8	%

Litigation

Certain conditions may exist as of the date the financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements.

If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed. There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. See Contractual Commitments above, for disclosure of the settlement agreement.

On June 3, 2022, the Company became aware that a Complaint had been entered against the Company in the United States District Court Southern District of New York by ProActive Capital Partners, L.P, a convertible debenture holder. The Complaint is entered for injunctive relief to honor is stock conversion, recover damages, and receive payments due under the Debenture agreement. The convertible debenture principal and interest of $0.2 million is recorded in the consolidated balance sheets – accrued liabilities for the period ended March 31, 2023. The notice of conversion to convert its convertible debt to shares of the Company’s stock will be honored.

Note 12 — Related Party Transactions

BK Consulting Group, LLC

On September 24, 2021, the Company entered into a Business Advisory Consulting Agreement (the “Consulting Agreement”) with BK Consulting Group, LLC (“BK Consulting”). The President of BK Consulting, Brian Kantor, is a beneficial owner in the Company as disclosed in the beneficial owner table. The Company paid BK Consulting an upfront flat fee of $300,000 with a service period term from September 24, 2021 through March 23, 2022 for consulting services. In connection with this fee, the Company expensed $160,000 through December 31, 2021 and $140,000 in 2022. In November 2021, the Company entered into the First Amendment to Consulting Agreement (“Amendment 1”) in which the Company agreed to pay BK Consulting an additional $300,000 for consulting services, extending the service period term and additional 3 months to June 23, 2022. The Company recorded $75,000 of this additional fee in 2021, and $225,000 in 2022 over the extended service period. In May 2022, the Company entered into an additional term extension on the initial services provided in the Consulting Agreement (“Amendment 2”) through June 3, 2022, for which an additional $50,000 was paid and expensed for services provided in May 2022. During 2022, the Company expensed in total $415,000 relating to the Consulting Agreement, Amendment 1 and Amendment 2. The Company did not incur any consulting costs for the three months ended March 31, 2023.

ViewTrade Securities, Inc.

On February 8, 2022, the Company entered into an Advisory Services Agreement (the “Agreement”) with ViewTrade Securities, Inc. (“Advisor”) whereby the Advisor will assist the Company and provide services that will contribute to the overall growth of the Company. ViewTrade and its owner Brian Herman are shareholders in the Company. The term of the engagement is six months and may be extended by mutual agreement of the parties. In consideration of the services, the Company paid an Advisory Fee in an amount equal to 6,000,000 restricted common shares (the “Fees) and the Fees shall be deemed fully earned upon execution of the Agreement. The Company did not incur any advisory services costs for the three months ended March 31, 2023.

Bespoke Growth Partners, Inc. (“Bespoke”)

Effective as of April 15, 2021, the Company entered into a consulting agreement with Bespoke. Under the terms of the consulting agreement, the Company incurred an expense of approximately $738,221 and paid a total amount of $975,000 during the year ended December 31, 2021. In addition, in accordance with the terms of the consulting agreement, the Company made an additional payment of $200,000 in January 2022 for consulting services for the period of January 15, 2022, through April 14, 2022. Lastly, the Company may request Bespoke to expand its services.

Effective as of January 13, 2022, the Company entered into a consulting agreement with Bespoke. Under the terms of the consulting agreement, the Company is to pay Bespoke a gross advisory fee of $975,000. On March 23, 2022, the Company paid off the balance owed for this service. No services were provided for the three months ended March 31, 2023.

Ressense LLC

On August 4, 2021, the Company executed a six (6) month business advisory services agreement with Ressense LLC. The services to be provided include potential business activities including acquisition, merger and reverse merger opportunities. As compensation for the performance of services, the Company paid and recorded $25,000 through January 31, 2022. The business advisory services agreement expired January 31, 2022. No services were provided for the three months ended March 31, 2023.

One Percent Investments, Inc.

On June 21, 2022, the Company executed a four (4) month business advisory services agreement with One Percent Investments, Inc. The owner of One Percent is a shareholder in the Company. The services to be provided include potential future merger and/or acquisition activities, strategic alliances, joint ventures, and advisory services in connection with the Company’s desire to up-list to a national stock exchange. As compensation for the performance of services, the Company paid $125,000 for the respective service period. Additional compensation in the amount of $500,000 will be rendered in connection with the up-listing process. The Company recognized $125,000 of expense during the year ended December 31, 2022. The Company did not incur service costs for the three months ended March 31, 2023.

Omniverse, LLC

On April 3, 2023, the Company entered into a Stock Purchase Agreement (the “Agreement”) with Omniverse LLC (“Omniverse”), whereby the Company agreed to sell to Omniverse 136,667 shares of Series C-7b Preferred Stock of Ostendo Technologies, Inc. The owner of Omniverse is a shareholder in the Company. The Agreement requires Omniverse to pay the Company a purchase price consisting of $182,000 and other valuable consideration in the form of consulting services of approximately $1.0 million. The services provided by Omniverse were provided during the three months ended June 30, 2023, and as such the Company will recognize the associated expense during the three month period ended June 30, 2023. The Company retained 30,000 shares of the investment in Ostendo. As of March 31, 2023, the Company has recorded $1.4 million in the condensed consolidated balance sheets as equity investment in Ostendo.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, with the Company’s audited consolidated financial statements and notes for the years ended December 31, 2022 and 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on June 13, 2023 (the “10-K”). In addition to historical information, the discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements due to a number of factors, including but not limited to, risks described in the section entitled “Risk Factors” in the 10-K, as the same may be updated from time to time.

Overview of the Company’s Subsidiaries

Sysorex Government Services

SGS is a provider of information technology solutions from multiple vendors, including hardware products, software, services, including warranty and maintenance support, offered through our dedicated sales force, ecommerce channels, existing federal contracts and service team. Since our founding, we have served our customers by offering products and services from key industry vendors such as Aruba, Cisco, Dell, GETAC, Lenovo, Microsoft, Panasonic, Samsung, Symantec, VMware and others. We provide our customers with comprehensive solutions incorporating leading products and services across a variety of technology practices and platforms such as cyber, cloud, networking, security, and mobility. We utilize our professional services, consulting services and partners to develop and implement these solutions. Our sales and marketing efforts in collaboration with our vendor partners allow us to reach multiple customer public sector segments including federal, state and local governments, as well as educational institutions.

The unaudited condensed consolidated financial statements present the combined results of operations, financial condition, and cash flows of Sysorex and its subsidiaries. These unaudited financial statements were prepared on a combined basis because the operations were under common control. All intercompany accounts and transactions have been eliminated between the combined entities.

TTM Digital

TTM Digital is a digital asset technology company that previously operated specialized cryptocurrency mining processors and was previously focused on the Ethereum blockchain ecosystem. As of September 15, 2022, Ethereum switched from a Proof of Work model to Proof of Stake model and as a result, the Company is no longer mining Ethereum or any other cryptocurrency.

The Company made the decision to divest certain mining equipment and the data center of the TTM Digital reporting unit and commenced discussions with a third party to execute an asset sale in the fall of 2021. On March 24, 2022, the Company executed Heads of Terms (“Heads of Terms”) with Ostendo Technologies, Inc. (“Ostendo”). Pursuant to the Heads of Terms, the Company and Ostendo agreed to certain terms related to the Company’s sale of its Ethereum mining assets and certain associated real property (“Assets”) to Ostendo for Ostendo preferred stock. The Company agreed to make a non-refundable deposit of $1,600,000 (“Deposit”) to be credited toward the purchase of an additional 166,667 shares of Ostendo’s preferred stock. The Company has in good faith worked with Ostendo to ensure all closing terms and closing conditions were mutually agreed upon, however, the parties have not entered into definitive transaction agreements and accordingly, it was determined in November 2022 that the transaction will not proceed. In November 2022, the Company received a certificate, dated November 14, 2022, for the shares, and thereafter, the Company received confirmation that the Certificate of Designations for the preferred stock had been filed and accepted by the California Secretary of State on November 14, 2022.

Discussion of Results of Operations of SGS for the Three Months Ended March 31, 2023

SGS operates on the resale of technology products and associated services related to those products. These products are resold through several contracts with the federal government in SGS’ portfolio of contracts. SGS suppliers include wholesale distributors of major technology products, small niche product suppliers, services from specialized partners, and services from SGS’ own resources.

The lifecycle of an order includes: solicitation of a requirement form the customer, quotation or proposal in response to the solicitation, evaluation of quote or proposal by the customer, awarding an order to SGS based on favorable evaluation, customer order is then entered in as a sales order, the SGS system then issues purchase orders to suppliers, suppliers delivers the goods to the customer and performs any services necessary to complete order obligations, customer provides acceptance, and SGS issues an invoice to the customer. Once a customer accepts the invoice the dollar amount is guaranteed and backed by the U.S. Treasury. Post invoice obligation may include warranty, maintenance, and telephonic support either directly by SGS or through the OEM directly. From acceptance until the period of performance is completed (warranty, maintenance, and/or telephonic support), SGS is responsible for the operability of the delivered goods. Once the period of performance is completed, the customer will contact SGS to complete a contract closeout.

For the three months ended March 31, 2023 and 2022, SGS reported $4.0 million and $5.0 million in revenues. This includes approximately 88% of revenues coming from the Company’s top two customers. For the three months ended March 31, 2023 and 2022, SGS reported product and service costs of $3.6 million and $2.3 million. For the three months ended March 31, 2023 and 2022, SGS reported margins of 12% and 54%, respectively. However, for the three months ended March 31, 2022, a gain on a vendor liability settlement of $1.5 million and a leasing transaction with a margin of $0.7 million was recorded subject to ASC 606, SGS would have reported $4.5 million in product and service costs, resulting in a normalized margin of 10% compared to the three months ended March 31, 2023, margin of 12%. See Note 4 — Summary of Significant Accounting Policies for discussion of the accounting treatment under ASC 606 included in the notes to the financial statements. Based on the two contracts, the Company acted as the agent and is required to record the costs against the related revenues.

For the three months ended March 31, 2023 and 2022, SGS reported reduced costs of $0.1 million in sales and marketing costs, and increased costs of $0.2 million in general and administrative period over the period. Included in general and administrative costs for the three months ended March 31, 2023, the Company recorded approximately $0.7 million of penalties for failure to honor conversion notices requested by certain debtholders. SGS also reported for the three months ended March 31, 2023 and 2022, a revaluation conversion feature gain (loss) of $2.1 million and $(0.8) million, and interest expenses of $0.7 million and $1.0 million, primarily driven by interest on the convertible debt.

For the three months ended March 31, 2022, the Company realized a gain on the sale of digital assets of $1.1 million, an impairment of its digital assets of $1.2 million, and a loss on extinguishment of debt of $0.5 million.

Discussion of Results of Operations of TTM Digital for the three months ended March 31, 2023, and 2022

The activities for TTM Digital revenues and costs for the three months ended March 31, 2023 and 2022, represent discontinued operations.

Ethereum’s transition to proof of stake (“POS”) took place on September 15, 2022, and has had a direct negative impact on the company’s ability to generate revenue. TTM Digital no longer holds any Ethereum or other crypto tokens or crypto assets currently, does not conduct any mining activities, and does not have any plans to mine crypto tokens in the future.

The Company no longer mines Ethereum and as a result did not incur revenue for the three months ended March 31, 2023. In addition, for the three months ended March 31, 2023 and 2022, TTM Digital’s general and administrative costs reported were approximately $0.8 million and $2.4 million. The significant decrease in general and administrative costs is largely attributable to decreased consultant fees, and salaries and wages, due to TTM Digital discontinued operations. During the three months ended March 31, 2023, TTM incurred $0.6 million of damages related to the Company’s inability to timely file certain public information, as outlined in the Securities Purchase Agreement, Article 4, Section 4.3.

For the three months ended March 31, 2022, TTM Digital reported $2.0 million in revenues, ($0.8 million in continuing operations and $1.2 million in discontinued operations). TTM Digital reported $0.5 million in mining costs ($0.1 million in continuing operations and $0.4 million in discontinued operations), $0.03 million in sales and marketing costs (continuing operations), $2.4 million in general and administrative costs (continuing operations), $0.4 million in depreciation costs in continuing operations, $1.2 million of digital asset impairment (continuing operations), $1.1 million in other net income-gain on disposal of digital assets (continuing operations) $2.1 million of revaluation of conversion feature derivative liability, loss on debt extinguishment of $0.5 million, resulting in a net loss from operations of $4.2 million ($4.8 million net loss from continuing operations and $0.6 million net income from discontinued operations).

Liquidity and Capital Resources as of March 31, 2023

Going Concern

The Company does not believe that its capital resources as of March 31, 2023, its ability to settle a portion of existing convertible debt obligations through issuance of the Company’s shares, availability on the SouthStar facility to finance cash advances to suppliers, purchase orders and invoices, reauthorization of key vendors and credit limitation improvements will be sufficient to fund planned operations during the next twelve months. Additionally, the Company is in default on the aforementioned convertible debt, which was due to be repaid in July 2022, and is accruing related interest, late fees and other penalties. As a result of the above factors, the Company will need additional funds to fulfil its obligations. On September 22, 2022, the shareholders of the Company approved the authorization of 3 billion shares of common stock, however, all of the Company’s authorized shares have been issued or reserved since October 21, 2022, resulting in unfilled conversion notices and an inability to fill potential future conversion notices from convertible debt holders. In order for the Company to fulfil any further conversion obligations, the Company would need to receive approval from the Financial Industry Regulatory Authority (“FINRA”) for a reverse stock-split and obtain shareholder approval for an increase in authorized shares. Existing unfilled conversion notices received in excess of available and authorized shares as of June 29, 2023, total 1,159,494,989. In order to satisfy all possible conversion obligations from existing debtholders as of May 30, 2023 to date of this report, the Company estimates a share deficit of approximately 43.6 billion shares based on the 3 billion currently authorized. Given these circumstances, it is improbable that the Company will be able to satisfactorily fulfil such obligations, even if the above steps are successfully taken.

Our capital resources and operating results, continuing and discontinued operations, as of and through March 31, 2023, consist of:

1) An overall working capital deficit of $19.8 million,

2) Cash and cash equivalents of $0.13 million, and

3) Net cash provided by operating activities of $0.1 million.

Liquidity and Capital Resources as of March 31, 2023, Compared to March 31, 2022

The Company’s net cash flow used in operating, investing and financing activities, continuing and discontinued operations for the three-months ended March 31, 2023 and 2022, respectively, and certain balances as of the end of those periods are as follows (in thousands):

	March 31,
(Thousands, except per share data)	2023		2022
Net cash provided by (used in) operating activities	$	103	$	(3,830	)
Net cash provided by investing activities		-		4,109
Net increase in cash	$	103	$	279

	March 31, 2023			December 31, 2022
Cash	$	132		$	29
Working (deficit)	$	(19,804	)	$	(18,071	)

Operating Activities:

Net cash provided by operating activities during the three months ended March 31, 2023, was $103, consisted of the following (in thousands):

The non-cash income and expenses of $1,723 consisted of (in thousands):

$	143		Depreciation expense
	37		Amortization of right of use asset
	(2,067	)	Change in fair value of debt conversion feature
	164		Change in fair value of share derivative liability
$	(1,723	)	Total non-cash income and expenses

The net proceeds of cash due to changes in operating assets and liabilities totaled $2,894 and consisted of the following (in thousands):

$	50		Decrease in assets and other current assets
	1,079		Decrease in accounts receivable and other receivables
	1,117		Increase in accounts payable
	693		Increase in accrued liabilities and other current liabilities
	(45	)	Decrease in operating lease liability
$	2,894		Net use of cash in the changes in operating assets and liabilities

Net cash provided by operating activities during the three-months ended March 31, 2023 was primarily driven by net cash provided by continuing operations of $0.2 million and net cash used in discontinued operations of $(0.1) million.

Net cash provided by continuing operations of $0.2 million was primarily driven by a change in fair value of debt conversion feature of $(2.0) million, prepaid assets and other current assets of $0.05 million, and operating lease liability of $(0.04) million, offset by accounts receivable and other receivables of $1.1 million, accounts payable of $1.1 million, accrued liabilities and other current liabilities of $0.7 million, depreciation and amortization of $0.1 million, and amortization of right of use asset and change in fair value of share derivative liability of $0.2 million.

Net cash used in operating activities was $(3.8) million during the three-months ended March 31, 2022. Cash was consumed from operations by the net loss of $(3.8) million, plus non-cash and one-time items of $0.6 million, $0.2 million in stock-based compensation, loss on debt extinguishment of $0.5 million, change in fair value of debt conversion feature of $0.8 million, non-employee compensation costs of $0.2 million, shares issued in exchange for services, impairment of digital assets of $1.2 million, and depreciation and amortization of $0.1 million, ($1.1) million in a realized gain on sale of digital assets, $(1.5) million in a gain on settlement of vendor liabilities, offset by changes in assets and liabilities of $ (0.02) million. In addition, $(0.6) million was consumed from its discontinued operations.

Investing Activities:

The Company has not engaged in any investing activities for the three-month ended March 31, 2023.

Net cash provided by investing activities for the three-months ended March 31, 2022, was approximately $4.1 million, primarily driven from proceeds from the sale of digital assets of $5.7 million, offset by the equity investment in Ostendo of $1.6 million.

Financing Activities:

The Company did not incur financing activities for the three months ended March 31, 2023 and 2022.

Critical Accounting Policies and Estimates

We consider certain accounting policies related to, Impairment of Long-Lived Assets, Revenue Recognition, Derivative Liabilities, to be critical accounting policies that require the use of significant judgements and estimates relating to matters that are inherently uncertain and may result in materially different results under different assumptions and conditions.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

Recently Issued Accounting Standards

None

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”) and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive officer and principal financial officer, with assistance from other members of management. Our management, with the participation of our principal executive officer and principal financial officer, evaluated our disclosure controls and procedures as of March 31, 2023, and based on this evaluation, our principal executive officer and principal financial officer concluded the disclosure controls and procedures were not effective as of that date due to the same material weaknesses in internal control over financial reporting that were disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on June 13, 2023.

As previously described in Part II, Item 9A of the Form 10-K, we began implementing a remediation plan to address the material weaknesses. The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

There is no material pending legal proceedings as defined by Item 103 of Regulation S-K, to which we are a party or of which any of our property is the subject, other than ordinary routine litigation incidental to the Company’s business.

Sysorex, Inc., a Nevada corporation (the “Company”), entered into a Promissory Judgment Note dated as of August 15, 2018 (the “Note”), with Tech Data Corporation (“Tech Data”), pursuant to which the Company promised to pay the principal sum of $6,849,423.42 to Tech Data. The Note provides that interest shall accrue on the balance of the Note at the rate of 18% per annum. Due to miscommunication with Tech Data, the Company inadvertently failed to pay, when due, some of the installment payments in the aggregate principal amount of $3,341,801.80, as set forth in the Note and has defaulted under the Note.

On December 14, 2021, the Company became aware that a Confession of Judgment (the “Confession of Judgment”) had been entered against the Company in the Superior Court of the State of California, County of Santa Clara by Tech Data on September 24, 2021. The Confession of Judgement is entered for a total sum of $5,942,559.05, which is comprised of the principal sum of $3,341,801.80 and prejudgment interest in the sum of $2,600,757.25. Following a negotiation with Tech Data, the Company was able to reduce the Award by more than $4.2 million, and on January 13, 2022, the Company and Tech Data entered into a Settlement and Release Agreement (the “Settlement Agreement”). Pursuant to the Settlement Agreement, the Company paid $1,375,000 on January 14, 2022. The Company recognized a gain on settlement of $1.5 million. The Award was deemed satisfied in full. Among other things, Tech Data agreed to file an acknowledgment of full satisfaction of judgment attached as an exhibit to the Settlement Agreement, not take any further action against the Company in connection with or relating to the Judgment, and release the Company and its representatives from any and all claims, including the Judgment, which Tech Data may have against the Company based upon any transaction that occurred at any time before the date of the Settlement Agreement.

On June 3, 2022, the Company became aware that a Complaint had been entered against the Company in the United States District Court Southern District of New York by ProActive Capital Partners, L.P, a convertible debenture holder. The Complaint is entered for injunctive relief to honor is stock conversion, recover damages, and receive payments due under the Debenture agreement. The convertible debenture principal and interest of $0.2 million is recorded in the consolidated balance sheets – accrued liabilities for the year ended December 31, 2022. The notice of conversion to convert its convertible debt to shares of the Company’s stock will be honored.

There are no proceedings in which any of the directors, officers, or affiliates of the Company, or any registered or beneficial holder of more than 5% of the Company’s voting securities, is an adverse party or has a material interest adverse to that of the Company.

Item 1A. Risk Factors

As a smaller reporting company, the Company is not required to disclose material changes to the risk factors that were contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, However, the Company is voluntarily providing the risk factors below. Other than as set forth below, as of the filing date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors faced by the Company from those previously disclosed in the 2022 10-K, as updated from time to time.

We encumbered all our assets to secure the payment of indebtedness and accrued interest due on secured convertible debentures required to be repaid by approximately July 2022, subject to certain extensions, if not previously converted.

The Company’s outstanding obligations which encumber the Company’s assets to secure payment of certain secured convertible debt are as follows:

●

$15,915,944 worth of convertible debt on March 31, 2023, which encumber all of the Company’s assets to secure payment, and which are convertible into 43,634,338,259 shares of the Company’s common stock based on an assumed conversion price of $0.00035 per share using a May 30, 2023, 5-day VWAP with a 50% discount.

Because we are in default in repayment, our secured creditor could exercise its remedies, including the execution on all our assets, which would result in the termination of our activities. Unless we generate enough cash, we may not have sufficient funds to pay our debentures and other indebtedness when due. In such an event, we might be required to sell our assets and properties to meet our obligations, or to seek an extension to our debentures, or alternative debt or equity financing. This would also cause our stock price to decline and could make an investment in us worthless and would have a material adverse effect on our investors and the Company.

Even if we are able to cure our default on the debentures, the existence of these secured obligations and the terms of the securities purchase agreement may impair our ability to obtain capital from external sources in certain manners.

All of our assets are encumbered to secure the payment of secured convertible debentures that will require payments if not previously converted to common stock. We are currently in default on these debt obligations. Our debt and financial obligations:

●

could impair our liquidity;

●

could make it more difficult for us to satisfy our other obligations;

●

require us to dedicate cash flow to payments on our debt and financial obligations, which would reduce the availability of our cash flow to fund working capital, capital expenditures and other corporate requirements;

●

impose restrictions on our ability to incur other indebtedness, grant liens on our assets, and could impede us from obtaining additional financing in the future for working capital, capital expenditures, acquisitions and general corporate purposes;

●

could adversely affect our ability to enter into strategic transactions, public or private equity offerings, and similar agreements, or require us to obtain the consent to enter into such transactions;

●

make us more vulnerable in the event of a downturn in our business prospects and could limit our flexibility to plan for, or react to, changes in our industry and markets; and

●

could place us at a competitive disadvantage when compared to our competitors.

We are in default under the secured convertible debentures. Since we have pledged substantially all of our assets to secure our obligations under the secured convertible debentures, the debt default could enable the lenders to foreclose on the assets securing such debt and could significantly diminish the market value and marketability of our common stock and could result in the acceleration of other payment obligations or default under other contracts.

We do not currently have enough authorized shares of common stock under our Articles of Incorporation, as amended, to meet all of our potential obligations to third parties.

Our Articles of Incorporation, as amended, provide for 3,000,000,000 authorized shares of our common stock. As of June 29, 2023, we have 2,484,426,501 shares of common stock issued and outstanding. As of March 31, 2023, holders of our convertible debentures have delivered notices of conversion covering an aggregate of 1,159,494,989 shares of common stock. If we issued the shares that are subject to the notices of conversion that have been delivered, it would result in us issuing more shares than we have authorized. Accordingly, in order to meet all of these obligations, we will need to amend our Articles of Incorporation, as amended, to increase the authorized shares of our common stock. We can give no assurance that we will obtain the requisite affirmative vote of our shareholders to so amend our Articles of Incorporation, as amended, which could materially adversely affect our financial condition and the market for our shares.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On October 18, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”), dated as of October 18, 2022, by and among the Company and each of the each of the investor’s signatories thereto (each an “Investor” and collectively, the “Investors”). Pursuant to the terms of the SPA, the Company agreed to sell to each Investor a number of Units of securities of the Company (each, a “Unit”), at a purchase price of $0.001 per Unit, with each Unit being comprised of: (i) one share of common stock (each, a “Purchased Share” and collectively, the “Purchased Shares”); (ii) a warrant to acquire one share of common stock at an exercise price of $0.001 per share, which exercise price will not be subject to adjustment as a result of any forward or reverse split of the common stock (each, a “Warrant 1”); and (iii) a warrant to acquire one share of common stock at an exercise price of $0.001 per share, which exercise price will not be subject to adjustment as a result of any forward or reverse split of the common stock (each, a “Warrant 2”). The Investors, collectively, subscribed for a total of 500,000,000 Units, consisting of 500,000,000 shares of common stock, warrant 1s to acquire 500,000,000 shares of common stock, and Warrant 2s to acquire 500,000,000 shares of common stock, for total consideration payable to the Company of $500,000.

The above shares have been sold and issued in reliance on the exemption from registration afforded by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

See the Exhibit Index below for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: June 30, 2023	SYSOREX, INC.

	By:	/s/ Vincent Loiacono
		Vincent Loiacono
		Chief Financial Officer
		(Principal Financial Officer)

EXHIBIT INDEX

Exhibit Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Filed or Furnished Herewith

10.1

Settlement and Release Agreement, dated as of January 13, 2022, by and between Sysorex, Inc. and Tech Data Corporation

8-K

000-55924

10.1

January 13, 2022

10.2

Stock Purchase Agreement dated April 3, 2023

8-K

000-55924

10.52

April 7, 2023

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1#

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*

Inline XBRL Instance Document

101.SCH*

Inline XBRL Taxonomy Extension Schema Document

101.CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*

Cover Page Interactive Data File (embedded within the Inline XBRL document)

#	This exhibit is deemed not filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: June 30, 2023	SYSOREX, INC.

	By:	/s/ Vincent Loiacono
		Vincent Loiacono
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)