A full range of information technology development and implementation professional services, from enterprise architecture design to custom application development. Our experienced IT professionals help meet evolving business needs by optimizing IT resources, application performance, and business processes. Our services span many emerging and hybrid enterprise technologies, and we offer a comprehensive suite of network performance, secure wireless access and cybersecurity products and services from leading manufacturers that improve overall network performance and business operations. Our professional services are focusedWe have material weaknesses in the following areas:

These products and services allow Sysorex to offer turnkey solutions, including delivery of insights from the data, when requested by customers. For the nine months ended September 30, 2018, approximately 42%, or $1.2 million, of our total revenues were derived from product sales and 58%, or $1.7 million, of our total revenues were derived from service sales. For the nine months ended September 30, 2017, approximately 82%, or $30.7 million, of our total revenues were derived from product sales and 18%, or $6.7 million, of our total revenues were derived from service sales. In 2016, approximately 76%, or $36.6 million, of our total revenues were derived from product solutions sales and 24%, or $11.6 million, of our total revenues were derived from professional services sales. In 2017, approximately 72%, or $29.5 million, of our total revenues were derived from product solutions sales and28%, or $11.6 million, of our total revenues were derived from professional services sales. Now with all industry trends showing an increase in spending and our supplier credit issues improving we are poised to regain previous clients and new clients as spending increases and companies want to work closely with trusted providers.

Competition

We face substantial competition from other national, multi-regional, regional and local value-added resellers and IT service providers, some of which may have greater financial and other resources than we do or that may have more fully developed business relationships with clients or prospective clients than we do. Many of our competitors compete principally on the basis of price and may have lower costs or accept lower selling prices than we do and, therefore, we may need to reduce our prices. In addition, manufacturers may choose to market their products directly to end-users, rather than through IT solutions providers such as us, and this could adversely affect our business, financial condition and results of operations.

The U.S. government systems integration business is intensely competitive and subject to rapid change. We compete with a large number of systems integrators, hardware and software manufacturers, and other large and diverse companies attempting to enter or expand their presence in the U.S. government market. Many of the existing and potential competitors have greater financial, operating and technological resources than we have. The competitive environment may require us to make changes in our pricing, services or marketing. The competitive bidding process involves substantial costs and a number of risks, including significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us, or that may be awarded, but for which we do not receive meaningful revenues. Accordingly, our success depends on our ability to develop services and products that address changing needs and to provide people and technology needed to deliver these services and products. In the government services sector our competition includes large systems integrators and defense contractors as well as small businesses such as 8a, women-owned, veteran disabled, Alaskan native, etc. Some of these competitors include global defense and IT service companies including IBM Global Services, LogicaCMG, CSC, ATOS Origins, Northrop Grumman, Raytheon IT Services and SAIC.

This complex landscape of domestic and multi-national services companies creates a challenging environment. To remain competitive, we must consistently provide superior service, technology and performance on a cost-effective basis to our customers. While we believe that, due to the functionality of our products, we can successfully compete in all of these markets, at this time we do not represent a significant presence in any of these markets.

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, which we refer to as the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable, in general, to public companies that are not emerging growth companies. These provisions include:

We may take advantage of these exemptions as an emerging growth company until the earlier of (i) the last day of the fiscal year following the fifth anniversary of the first sale of our common equity securities in a public offering, (ii) we have more than $1.07 billion in annual revenues as of the end of a fiscal year, (iii) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission (the “SEC” or the “Commission”), or (iv) the date on which we issue more than $1.0 billion of non-convertible debt over a three-year-period.

The JOBS Act permits an emerging growth company to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use such extended transition period.

Corporate Information

The Company was originally incorporated in California on January 3, 1994 under the name Lilien Systems. In connection with a reorganization of Inpixon effective as of January 1, 2016, Lilien Systems acquired 100% of the issued and outstanding capital stock of Sysorex Government and changed its name to Sysorex USA. On February, 27, 2017, the Company’s name was changed to Inpixon USA. On July 26, 2018, solely for the purpose of reincorporating the Company into the State of Nevada, Inpixon formed a wholly owned subsidiary in the State of Nevada named “Sysorex, Inc.” which was merged with the Company and resulted in the Company being reincorporated in the state of Nevada under the name “Sysorex, Inc.” The address of our principal executive offices is 13880 Dulles Corner Lane, Suite 175, Herndon, Virginia 20171 and our telephone number at that location is (800) 929-3871.

Our Internet website is www.sysorexinc.com. The information contained on, or that may be obtained from, our website is not a part of this registration statement. We have included our website address in this registration statement solely as an inactive textual reference.

The Offering

The following summary contains basic information about the offering and the securities we are offering and is not intended to be complete. It does not contain all the information that is important to you. For a more complete understanding of the securities we are offering, please refer to the sections of this prospectus titled “Description of Securities” and “Description of Securities We Are Offering.”

Unless otherwise indicated, all information in this prospectus:

RISK FACTORS

Investing in our securities involves a high degree of risk. Prospective investors should carefully consider the risks described below, together with all of the other information included in this prospectus, before purchasing our securities. There are numerous and varied risks that may prevent us from achieving our goals. If any of these risks actually occurs, our business, financial condition or results of operations may be materially adversely affected. In such case, the trading price of our common stock could decline and investors in our securities could lose all or part of their investment.

Risks Related to Sysorex’sOur Business

We have a history of operating losses and our auditors have indicated that there is a substantial doubt about our ability to continue as a going concern.

As of December 31, 2021, the Company had an approximate cash balance of $0.6 million, working capital deficiencydeficit of approximately $21.5 million, and there is no assurancean accumulated deficit of approximately $49.3 million. As of September 30, 2022, the Company had an approximate cash balance of $0.1 million, a working capital deficit of approximately $21.6 million, and an accumulated deficit of approximately $60.4 million. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months following the issuance of our financial statements. The accompanying 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 consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that wemight be necessary should the Company be unable to continue as a going concern within one year after the date the consolidated financial statements are issued.

The Company does not believe that its capital resources as of September 30, 2022, its ability to settle convertible debt obligations through issuance of the Company’s shares, availability on the SouthStar facility to finance purchase orders and invoices, reauthorization of key vendors and credit limitation improvements will be ablesufficient to achieve profitability orfund planned operations during the next twelve months. As a result, the Company will need additional funds to support its obligations.

The Company will still require additional funds to support its obligations for the next twelve months. The Company is exploring a number of possible solutions to its financing needs, including efforts to raise additional financing.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.

We have a historyOur capital resources and operating results, as of operating losses and through December 31, 2021, consist of the following (i) an overall working capital deficiency. We have incurred recurring net lossesdeficit of approximately$21.5 million, (ii) Cash and cash equivalents of $0.6 million, of (iii) Net cash used in operating activities of $(8.5) million, (iv) Net cash provided by investing activities of $2.2 million, and $16.9 million for(v) Net cash provided by financing activities of $6.9 million. Our capital resources and operating results, as of and through September 30, 2022, consist of the fiscal years ended 2016 and 2017, respectively and net lossesfollowing (i) an overall working capital deficit of approximately $13.9$21.6 million, (ii) Cash and cash equivalents of $0.1 million, of (iii) Net cash used in operating activities of $(6.9) million, (iv) Net cash provided by investing activities of $6.4 million, and $5.4 million for(v) Net cash provided in financing activities of $0 million.

We have material weaknesses in our internal control over financial reporting.

Section 404 of the nine months ended September 30, 2017Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting. Our management assessed the effectiveness of our disclosure controls and 2018, respectively. We had a working capital deficiency of approximately $13.6 million and $26.1 millionprocedures as of December 31, 20162021 and concluded that we had material weaknesses in our internal control over financial reporting and therefore, our disclosure controls and procedures may not be effective in providing material information required to be included in any future periodic SEC filings on a timely basis and to ensure that information required to be disclosed in any future periodic SEC filings is accumulated and communicated to our management to allow timely decisions regarding required disclosure about our internal control over financial reporting. See “Item 9A: Controls and Procedures.” More specifically, our internal control over financial reporting was not effective due to the following material weaknesses:

Although management has implemented, and continues to implement, actions to remediate the underlying causes of the control deficiencies that gave rise the material weaknesses, we cannot provide any assurance that the remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts.

On May 17, 2022, subsequent to the evaluation as of December 31, 2017, respectively. Our continuation is dependent2021, management, in agreement with the audit committee of the Company’s Board of Directors, determined that the previously issued financial statements for the Affected Periods (as hereinafter defined) should no longer be relied upon attaining and maintaining profitable operations and raising additional capital as needed, but there can be no assurance that we will be ablerequired restatement. We then filed Amendment No. 1 to raise any further financing.

Our ability to generate positive cash flow from operations is dependent upon sustaining certain cost reductions and generating sufficient revenues. In that regard, our revenues have declined by approximately 15.2%Form 10-K for the year ended December 31, 20172021 (the “Amendment No. 1”) on May 23, 2022 to restate the Company’s previously issued consolidated financial statements and financial information as comparedof and for the fiscal year ended December 31, 2021, as well as to provide restated interim financial information as of September 30, 2021 and for the three and nine months then ended (collectively, the “Affected Periods”), contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, with the Securities and Exchange Commission (the “SEC”) on April 14, 2022 (the “Original Form 10-K”) and in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 (the “Form 10-Q”). On June 1, 2022 we filed Amendment No. 2 to our Form 10-K because Amendment No. 1 contained a typographical error on the date of the audit report of Friedman LLP (“Friedman”). Although Friedman’s audit report was dated April 14, 2022, except for the effects of the restatement discussed in Note 1A, Note 12, Note 13, and Note 19 to the same periodconsolidated financial statements, as to which the date is May 23, 2022, the copy of Friedman’s audit report that was included in Amendment No. 1 incorrectly included a date of April 13, 2022 (instead of April 14, 2022). Amendment No. 2 on Form 10-K (“Amendment No. 2”) was filed to correct the typographical error regarding the date on Friedman’s audit report, such that the date of Friedman’s audit report is April 14, 2022, except for the prior fiscaleffects of the restatement discussed in Note 1A, Note 12, Note 13, and Note 19 to the consolidated financial statements, as to which the date is May 23, 2022.

As discussed in Note 1A, “Restatement of Consolidated Financial Statements,” of the notes to the accompanying consolidated financial statements as of and for the year ended December 31, 2021 included in Amendment No.1 and Amendment No. 2, the correction of certain errors, as discussed in Amendment No.1 and Amendment No. 2, from previously reported information for the year ended December 31, 2021, has resulted in an increase in net loss of $8.4 million, primarily as a result of a $6.3 million in expense related to the revaluation on the derivative conversion liability, an increase in interest expense of $0.9 million, and an increase in the loss contingency on debt default of $1.2 million.

If we fail to comply with the rules under the Sarbanes-Oxley Act related to disclosure controls and procedures in the future, or, if we continue to have material weaknesses or other deficiencies in our credit limitations with vendorsinternal control and suppliers limitingaccounting procedures and disclosure controls and procedures, our abilitystock price could decline significantly and raising capital could be more difficult. If additional material weaknesses or significant deficiencies are discovered or if we otherwise fail to process orders. Revenues continuedaddress the adequacy of our internal control over financial reporting and disclosure controls and procedures, our business may be harmed. Moreover, effective internal controls are necessary for us to decline for the nine months ended September 30, 2018 as a result of credit limitationsproduce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the resulting adoption of the new ASC 606 revenue recognition policy beginning in January 2018. Inpixon has funded our operations primarily with proceeds from public and private offerings of its common stock and secured and unsecured debt instruments. Our history of operating losses, the amounttrading price of our debtsecurities could drop significantly.

The ongoing coronavirus outbreak, and the potential for significant judgmentsmeasures taken in response thereto, could continue to be rendered against us may impair our ability to raise capital on terms that we consider reasonable and at the levels that we will require over the coming months. We cannot provide any assurances that we will be able to secure additional funding from public or private offerings or debt financings on terms acceptable to us, if at all. If we are unable to obtain the requisite amount of financing needed to fund our planned operations, it would have a material adverse effect on our business, results of operations, and financial condition.

Our business is highly susceptible to changes in economic conditions. Our products and services are directly tied to the production and sale of goods and, more generally, to the North American economy. The COVID-19 pandemic has adversely impacted economic activity and conditions worldwide and created significant volatility and disruption to financial markets. Efforts to control the spread of COVID-19 have led governments and other authorities to impose restrictions which have resulted in business closures and disrupted supply chains worldwide. As a result, transportation, and supply chain companies such as ours have experienced slowdowns and reduced demand and could continue to negatively impact our business.

Furthermore, quarantines, shelter in place orders, labor shortages due to illness and otherwise, business and facility closures or other disruptions to our operations, or our customers’ operations, have also adversely impacted demand for our services and our ability to continue as a going concern, and we may have to curtail, or even to cease, certain operations. If additional funds are raised through the issuance of equity securities or convertible debt securities, it will be dilutiveprovide services to our stockholderscustomers.

We are a holding company whose subsidiaries are given a certain degree of independence, and could result in a decrease in our stock price.

Our level of indebtedness could materially andfailure to integrate our subsidiaries may adversely affect our financial position, including reducing funds available forcondition.

We have given our subsidiary companies and their executives a certain degree of independence in decision-making. On the one hand, this independence may increase the sense of ownership at all levels; on the other business purposeshand, it has also increased the difficulty of the integration of operation and reducingmanagement, which has resulted in increased difficulty of management integration. In the event we are not able to successfully manage our operational flexibility,subsidiaries, this will result in operating difficulties and have a negative impact on our business.

We are a relatively small company with limited staff and a limited accounting department. Our limited staff and resources may affect our internal controls over financial reporting. Our failure to implement measures that will ensure adequate controls over our financial and other reporting processes could cause us to fail to meet our financial and other reporting obligations.

While we may have future capital needscontinue to evaluate and improve our internal controls, we are a relatively small company with limited staff, particularly with a limited accounting department. The Company currently relies on the part-time services of third-party consultants to help us with our financial accounting, our reporting obligations, and our controls over financial processes and reporting.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be ableprevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process.

Due to obtain additional financing on acceptable terms.

In connection withour current staffing limitations, we cannot be certain that the Spin-off,measures we entered into a new revolving credit facility to be provided by financial institutions to replace the revolving credit facility we currently have available. Although it is anticipated that our debt agreements will restrict the amount of our indebtedness, we may incur additional indebtednessimplement in the future to refinancewill ensure that we design, undertake, and maintain adequate controls over our existing indebtedness, to finance newly-acquired assets or for other purposes. Our governing documents do not contain any limitations on the amount of debt we may incurfinancial processes and we do not have a formal policy limiting the amount of debt we may incur in the future. Subject to the restrictions set forth in our debt agreements, our board of directors may establish and change our leverage policy at any time without stockholder approval.reporting. Any significant additional indebtedness could require a substantial portion of our cash flow to make interest and principal payments due on our indebtedness. Greater demands on our cash resources may reduce funds available tofailure by us to pay dividends, make capital expenditureshire and acquisitions, or carry out other aspects of our business strategy. Increased indebtedness can also limit our ability to adjust rapidly to changing market conditions, make us more vulnerable to general adverse economic and industry conditions and create competitive disadvantages for us compared to other companies with relatively lower debt levels. Increased future debt service obligations may limit our operational flexibility, including our ability to acquire assets, finance or refinance our assets, contribute assets to joint ventures or sell assets as needed.

Moreover, our ability to obtain additional financing and satisfy our financial obligations under our indebtedness outstanding from time to time will depend upon our future operating performance, which is subject to then prevailing general economic and credit market conditions, including interest rate levels and the availability of credit generally,retain experienced accounting and financial business and other factors, many of which are beyond our control. A worsening of credit market conditions could materially and adversely affect our ability to obtain financing on favorable terms, if at all.

We may be unable to obtain additional financingreporting personnel, implement required new or financing on favorable terms or our operating cash flow may be insufficient to satisfy our financial obligations under our indebtedness outstanding from time to time, if any. Among other things, the absence of an investment grade credit ratingimproved controls, or any credit rating downgradedifficulties we encounter in their implementation, could increase our financing costs and could limit our access to financing sources. If financing is not available when needed, or is available on unfavorable terms, we may be unable to complete acquisitions or otherwise take advantage of business opportunities or respond to competitive pressures, any of which could materially and adversely affect our business, financial condition and results of operations.

The lender of our revolving credit facility is not and will not be obligated to make a loan under the credit facility and we may not be able to draw funds on the credit facility at the sole discretion of the lender which could have material adverse effect on our liquidity and financial condition.

We depend on our vendors to provide us with financing on our purchases of inventory and services. In 2016 and 2017, we did experience credit limitations imposed by vendors, which resulted in a significant disruption to our operation and access to merchandise. We use a revolving credit facility to finance invoices and purchase orders received to pre-pay vendors/suppliers to ensure shipment on our behalf to the end customer and will be dependent on our revolving credit facility in order to improve our credit limitations with our vendors, however, our lender is not and will not be obligated to make a loan under the credit facility and we may not be able to draw funds on the credit facility at the sole discretion of the lender which could have material adverse effect on our liquidity and financial condition.

Covenants in the credit facility we expect to enter into may limit our operational flexibility, and a covenant breach or default could materially and adversely affect our business, financial position or results of operations.

The agreements governing our indebtedness are expected to contain customary covenants, which may limit our operational flexibility. The notes are expected to have terms customary for revolving credit facilities of this type, including covenants relating to debt incurrence, liens, restricted payments, asset sales, transactions with affiliates, and mergers or sales of all or substantially all of our assets, and customary provisions regarding optional events of default. The credit agreement is expected to contain customary covenants that, among other things, restrict, subject to certain exceptions, our ability to grant liens on assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations and pay certain dividends and other restricted payments. We also anticipate that the credit agreement will contain customary events of default that may require us to comply with specified financial maintenance covenants. Breaches of certain covenants may result in defaults and cross-defaults under certain of our other indebtedness, even if we satisfy our payment obligations to the respective obligee. We may not be able to comply with these covenants in the future which could result in the declaration of an event of default and cause us to be unablefail to borrow undermeet our credit facilities or result in the acceleration of the maturity of indebtedness outstanding under the such credit facilities, which would require us to pay all amounts outstanding. In addition, if the maturity of any indebtedness we incur is accelerated, we may not have sufficient funds available for repayment or we may not have the ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us or at all. Our failure to repay such indebtedness could result in the foreclosing on all or a portion of our assets and force us to curtail, or even to cease, our operations.reporting obligations.

Adverse judgments or settlements in legal proceedings could materially harm our business, financial condition, operating results and cash flows.

We are currently subject to pending claims and settlement amounts for non-payment by certain vendors in an aggregate amount of approximately $11.9$0.7 million including interest as of December 15, 2018,31, 2021, which is approximately 213%2.7% of our total assets. We may also be a party to other claims that arise from time to time in the ordinary course of our business, which may include those related to, for example, contracts, sub-contracts, protection of confidential information or trade secrets, adversary proceedings arising from customer bankruptcies, employment of our workforce and immigration requirements or compliance with any of a wide array of state and federal statutes, rules and regulations that pertain to different aspects of our business. We may also be required to initiate expensive litigation or other proceedings to protect our business interests. There is a risk that we will not be successful or otherwise be able to satisfactorily resolve any pending or future litigation. In addition, litigation and other legal claims are subject to inherent uncertainties and management’s view of currently pending legal matters may change in the future. Those uncertainties include, but are not limited to, litigation costs and attorneys’ fees, unpredictable judicial or jury decisions and the differing laws and judicial proclivities regarding damage awards among the states in which we operate. Unexpected outcomes in such legal proceedings, or changes in management’s evaluation or predictions of the likely outcomes of such proceedings (possibly resulting in changes in established reserves), could have a material adverse effect on our business, financial condition, results of operations and cash flows. Due to recurring losses and net capital deficiency, our current financial status may increase our default and litigation risks and may make us more financially vulnerable in the face of pending or threatened litigation.

Future issuances of our common stock pursuant to various existing instruments including, but not limited to the existing convertible debentures and right to shares letter agreements could result in additional significant dilution of the percentage ownership of our shareholders and could cause the price of our common stock to decline.

In the future, the Company will have an obligation to issue its common stock pursuant to various securities instruments entitling their holders to receive shares of the Company’s common stock, including but not limited to rights to shares letter agreements and convertible debentures. Although such instruments typically provide for the limitation of the percentage of the common stock of the respective beneficial owners, the holders of such instruments are expected to obtain shares of common stock from time-to-time or, in some instances, to direct the Company to issue the shares of common stock to designated third parties. As a result, our shareholders may be materially diluted, and the price of our common stock may decline.

All our assets are encumbered to secure the payment of secured convertible debentures that will require payments if not previously converted to Common Stock.

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 of 2022, subject to certain extensions, if not previously converted. In the event of 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 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. If full repayment, conversion, sale, extension, or refinancing is not obtained or consummated, we could default in our obligations.

Even if we are not in default of the debentures, the existence of these secured obligations and the terms of securities purchase agreement may impair our ability to obtain capital from external sources in a certain manner.

Our business depends on experiencedexisting and skilled personnel,future debt obligations could impair our liquidity and financial condition, and if we are unable to attractmeet our debt obligations, the lenders could foreclose on our assets.

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. Our debt and integrate skilled personnel,financial obligations:

Should we fail to make pay our obligations or fail to comply with any covenants contained in any related agreements, we could be in default regarding that indebtedness. Since we have pledged substantially all of our assets to secure our obligations under the secured convertible debentures, a 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.

As further described in the financial statements included herein, we believe we are currently in default under the terms of our secured convertible notes.

The Company has a number of convertible notes issued at this time that are currently in default.

As of September 30, 2022, $15,985,489 worth of the Company’s convertible promissory notes, including interest accrued thereon, are past due and in default. As of September 30, 2022, $13,650,573 of the principal amount of the notes in default encumber all our assets which secure the payment of this indebtedness. In the event of default in repayment of the secured notes, our secured creditor could exercise its remedies, including the execution on all our assets, which would result in the termination of our activities. These notes being in default, and our inability to pay these obligations will beresult in a loss of investor confidence, and more difficult for us to managegenerally impact our business, operating results, and complete contracts.

The successfinancial condition. We do not plan to use any of our business depends on the skillproceeds of our personnel. Accordingly, it is criticalthis offering that we maintain,may receive from the non-cash exercise of the warrants held by the selling security holders to repay these loans and continue to build, a highly experienced management teamdate the loan holders have not exercised their default rights under these convertible promissory notes.

We are dependent upon our executive officers and specialized workforce, including those who create software programs,directors and sales professionals. Competition for personnel, particularly those with expertise in government consulting and a security clearance, is high, and identifying candidates with the appropriate qualifications can be costly and difficult. We may not be able to hire the necessary personnel to implement our business strategy given our anticipated hiring needs, or we may need to provide higher compensation or more training to our personnel than we currently anticipate. In addition,their departure could adversely affect our ability to recruit, hireoperate.

Our operations are dependent upon a relatively small group of individuals and, indirectly deploy former employees of the U.S. government is subject to complex lawsin particular, our executive officers and regulations, which may serve as an impediment to our ability to attract such former employees.

Our business is labor intensive anddirectors. We believe that our success depends on our ability to attract, retain, train and motivate highly skilled employees. The increase in demand for consulting, technology integration and managed services has further increased the need for employees with specialized skills or significant experience in these areas. Our ability to expand our operations will be highly dependent on our ability to attract a sufficient number of highly skilled employees and to retain our employees. We may not be successful in attracting and retaining enough employees to achieve our desired expansion or staffing plans. Furthermore, the industry turnover rates for these types of employees are high and we may not be successful in retaining, training or motivating our employees. Any inability to attract, retain, train and motivate employees could impair our ability to adequately manage and complete existing projects and to accept new client engagements. Such inability may also force us to increase our hiring of independent contractors, which may increase our costs and reduce our profitability on client engagements. We must also devote substantial managerial and financial resources to monitoring and managing our workforce. Our future success will depend on our ability to manage the levels and related costscontinued service of our workforce.

In the event we are unable to attract, hire and retain the requisite personnel and subcontractors, we may experience delays in completing contracts in accordance with project schedules and budgets, which may have an adverse effect on our financial results, harm our reputation and cause us to curtail our pursuit of new contracts. Further, any increase in demand for personnel may result in higher costs, causing us to exceed the budget on a contract, which in turn may have an adverse effect on our business, financial condition and operating results and harm our relationships with our customers.

Insurance and contractual protections may not always cover lost revenue, increased expenses or liquidated damages payments, which could adversely affect our financial results.

Although we maintain insurance and intend to obtain warranties from suppliers, obligate subcontractors to meet certain performance levels and attempt, where feasible, to pass risks we cannot control to our customers, the proceeds of such insurance or the warranties, performance guarantees or risk sharing arrangements may not be adequate to cover lost revenue, increased expenses or liquidated damages payments that may be required in the future.

The loss of our Chief Executive Officer or other key personnel may adversely affect our operations.

Our success depends to a significant extent upon the operation, experience, and continued services of certain of our officers, including our Chief Executive Officer, as well as other key personnel. While our Chief Executive Officer is employed under an employment contract, there is no assurance we will be able to retain his services. The loss of our Chief Executive Officer or other key personnel could have an adverse effect on us. If our Chief Executive Officer or other executive officers were to leave we would face substantial difficulty in hiring qualified successors and could experience a loss in productivity while any successor obtains the necessary training and experience. Furthermore, wedirectors. We do not maintain “key person” lifehave key-man insurance on the liveslife of any of our directors or executive officer and their death or incapacity would have a material adverse effect on us.officers. The competition for qualified personnel is intense, and theunexpected loss of services of certain key personnel could adversely affect our business.

Internal system or service failures could disrupt our business and impair our ability to effectively provide our services and products to our customers, which could damage our reputation and adversely affect our revenues and profitability.

Any system or service disruptions on our hosted Cloud infrastructure or disruptions caused by ongoing projects to improve our information technology systems and the delivery of services if not anticipated and appropriately mitigated, could have a material adverse effect on our business including, among other things, an adverse effect on our ability to bill our customers for work performed on our contracts, collect the amounts that have been billed and produce accurate financial statements in a timely manner. We are also subject to systems failures, including network, software or hardware failures, whether caused by us, third-party service providers, cyber security threats, natural disasters, power shortages, terrorist attacks or other events, which could cause loss of data and interruptions or delays in our business, cause us to incur remediation costs, subject us to claims and damage our reputation. In addition, the failure or disruption of our communications or utilities could cause us to interrupt or suspend our operations or otherwise adversely affect our business. Our property and business interruption insurance may be inadequate to compensate us for all losses that may occur as a result of any system or operational failure or disruption and, as a result, our future results could be adversely affected.

Customer systems failures could damage our reputation and adversely affect our revenues and profitability.

Many of the systems and networks that we develop, install and maintain for our customers on premise or host on our infrastructure involve managing and protecting personal information and information relating to national security and other sensitive government functions. While we have programs designed to comply with relevant privacy and security laws and restrictions, if a system or network that we develop, install or maintain were to fail or experience a security breach or service interruption, whether caused by us, third-party service providers, cyber security threats or other events, we may experience loss of revenue, remediation costs or face claims for damages or contract termination. Any such event could cause serious harm to our reputation and prevent us from having access to or being eligible for further work on such systems and networks. Our errors and omissions liability insurance may be inadequate to compensate us for all of the damages that we may incur and, as a result, our future results could be adversely affected.

Our financial performance could be adversely affected by decreases in spending on technology products and services by our government customers.

Our sales to our government customers are impacted by government spending policies, budget priorities and revenue levels. Although our sales to federal, state and local government are diversified across multiple agencies and departments, they collectively accounted for approximately 40.1% and 14.4% of 2017 and 2016 net sales, respectively. An adverse change in government spending policies (including budget cuts at the federal level), budget priorities or revenue levels could cause our public sector customers to reduce their purchases or to terminate or not renew their contracts with us, which could adversely affect our business, results of operations or cash flows.

Our business could be adversely affected by the loss of certain vendor partner relationships and the availability of their products.

We purchase products for resale from vendor partners, which include OEMs, software publishers, and wholesale distributors. For the year ended December 31, 2017, approximately 81% of our revenue was from purchases from vendor partners. We are authorized by vendor partners to sell all or some of their products via direct marketing activities. Our authorization with each vendor partner is subject to specific terms and conditions regarding such things as sales channel restrictions, product return privileges, price protection policies and purchase discounts. In the event we were to lose one of our significant vendor partners, our business could be adversely affected.

We have entered into, and expect to continue to enter into, joint venture, teaming and other arrangements, and these activities involve risks and uncertainties. A failure of any such relationship could have a material adverse effect on our business and results of operations.

We have entered into, and expect to continue to enter into, joint venture, teaming and other arrangements. These activities involve risks and uncertainties, including the risk of the joint venture or applicable entity failing to satisfy its obligations, which may result in certain liabilities to us for guarantees and other commitments, the uncertainty created by challenges in achieving strategic objectives and expected benefits of the business arrangement, the risk of conflicts arising between us and our partners and the difficulty of managing and resolving such conflicts, and the difficulty of managing or otherwise monitoring such business arrangements. A failure of our business relationships could have a material adverse effect on our business and results of operations.

Our business and operations expose us to numerous legal and regulatory requirements and any violation of these requirements could harm our business.

We are subject to numerous federal, state and foreign legal requirements on matters as diverse as data privacy and protection, employment and labor relations, immigration, taxation, anticorruption, import/export controls, trade restrictions, internal control and disclosure control obligations, securities regulation and anti-competition. Compliance with diverse and changing legal requirements is costly, time-consuming and requires significant resources. We are also focused on expanding our business in certain identified growth areas, such as health information technology, energy and environment, which are highly regulated and may expose us to increased compliance risk. Violations of one or more of these diverse legalour directors or executive officers could have a detrimental effect on us.

We are an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

We are an “emerging growth company” within the meaning of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor internal controls attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the conductrequirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our business couldCommon Stock held by non-affiliates exceeds $700 million. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result in significant finesof our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and other damages, criminal sanctions against usthe trading prices of our securities may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or our officers, prohibitions on doing business and damagerevised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are required to our reputation. Violations of these regulations or contractual obligations related to regulatory compliance in connectioncomply with the performancenew or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of customer contracts could also resultthe extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in liability for significant monetary damages, fines and/or criminal prosecution, unfavorable publicityaccounting standards used.

Compliance obligations under the Sarbanes-Oxley Act may require substantial financial and other reputational damage, restrictionsmanagement resources.

Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our abilitysystem of internal controls. As long as we remain an emerging growth company, we will not be required to compete for certain work and allegations bycomply with the independent registered public accounting firm attestation requirement on our customers that we have not performed our contractual obligations.internal control over financial reporting. 

We rely on being able to license technology from third parties, however, we cannot assure you that these licenses will always be available to us. An inability to license technology could materially and adversely affect our business.

We rely on a variety of technology that we license from third parties. There can be no assurance that these third party technology licenses will continue to be available to us on commercially reasonable terms, if at all. Thefew major customers, the loss of or inability to maintain or obtain upgrades to any of these technology licenses could result in delays in completing software enhancements and new development until equivalent technology could be identified, licensed or developed and integrated. Any such delays could materially and adversely affect our business.

The growth of our business is dependent on increasing sales to our existing clients and obtaining new clients, which, if unsuccessful, could limit our financial performance.

Our ability to increase revenues from existing clients by identifying additional opportunities to sell more of our products and services and our ability to obtain new clients depends on a number of factors, including our ability to offer high quality products and services at competitive prices, the strength of our competitors and the capabilities of our sales and marketing departments. If we are not able to continue to increase sales of our products and services to existing clients or to obtain new clients in the future, we may not be able to increase our revenues and could suffer a decrease in revenues as well.

Our business depends on the continued growth of the market for IT products and services, which is uncertain.

The storage and computing and professional services segments of our business include IT products and services solutions that are designed to address the growing markets for on and off-premises services (including migrations, consolidations, Cloud computing and disaster recovery), technology integration services (including storage and data protection services and the implementation of virtualization solutions) and managed services (including operational support and client support). These markets are continuously changing. Competing technologies and services, reductions in technology refreshes or reductions in corporate spending may reduce the demand for our products and services.

Our competitiveness depends significantly on our ability to keep pace with the rapid changes in IT. Failure by us to anticipate and meet our clients’ technological needs could adversely affect our competitiveness and growth prospects.

We operate and compete in an industry characterized by rapid technological innovation, changing client needs, evolving industry standards and frequent introductions of new products, product enhancements, services and distribution methods. Our success depends on our ability to develop expertise with these new products, product enhancements, services and distribution methods and to implement IT solutions that anticipate and respond to rapid changes in technology, the IT industry, and client needs. The introduction of new products, product enhancements and distribution methods could decrease demand for our current products or render them obsolete. Sales of products and services can be dependent on demand for specific product categories, and any change in demand for, or supply of such products, could have a material adverse effect on our net sales if we fail to adapt to such changes in a timely manner.

We operate in a highly competitive market and we may be required to reduce the prices for some of our products and services to remain competitive, which could adversely affect our results of operations.

Our industry is developing rapidly and related technology trends are constantly evolving. In this environment, we face significant price competition from our competitors. We may be unable to offset the effect of declining average sales prices through increased sales volumes and/or reductions in our costs. Furthermore, we may be forced to reduce the prices of the products and services we sell in response to offerings made by our competitors. Finally, we may not be able to maintain the level of bargaining power that we have enjoyed in the past when negotiating the prices of our services.

We face substantial competition from other national, multi-regional, regional and local value-added resellers and IT service providers, some of which may have greater financial and other resources than we do or that may have more fully developed business relationships with clients or prospective clients than we do. Many of our competitors compete principally on the basis of price and may have lower costs or accept lower selling prices than we do and, therefore, we may need to reduce our prices. In addition, manufacturers may choose to market their products directly to end-users, rather than through IT solutions providers such as us, and this could adversely affect our business, financial condition and results of operations.

Our profitability is dependent onFor the rates we are able to charge for our products and services. The rates we are able to charge for our products and services are affected by a number of factors, including:

If we are not able to maintain favorable pricing for our products and services, our results of operations could be adversely affected.

Sales of our IT products and services are subject to quarterly and seasonal variations that may cause significant fluctuations in our operating results, therefore period-to-period comparisons of our operating results may not be reliable predictors of future performance.

The timing of our revenues can be difficult to predict. Our sales efforts involve educating our clients about the use and benefit of the products we sell and our services and solutions, including their technical capabilities and potential cost savings to an organization. Clients typically undertake a significant evaluation process that has in the past resulted in a lengthy sales cycle, which typically lasts several months, and may last a year or longer. We spend substantial time, effort and money on our sales efforts without any assurance that our efforts will produce any sales during a given period.

In addition, many of our clients spend a substantial portion of their IT budgets in the second half of the year. Other factors that may cause our quarterly operating results to fluctuate include changes in general economic conditions and the impact of unforeseen events. We believe that our revenues will continue to be affected in the future by cyclical trends. As a result, you may not be able to rely on period-to-period comparisons of our operating results as an indication of our future performance.

A delay in the completion of our clients’ budget processes could delay purchases of our products and services and have an adverse effect on our business, operating results and financial condition.

We rely on our clients to purchase products and services from us to maintain and increase our earnings, however, client purchases are frequently subject to budget constraints, multiple approvals and unplanned administrative, processing and other delays. If sales expected from a specific client are not realized when anticipated or at all, our results could fall short of public expectations and our business, operating results and financial condition could be materially adversely affected.

The profit margins from our IT products and services depend, in part, on the volume of products and services sold. A failure to achieve increases in our profit margins in the future could have a material adverse effect on our financial condition and results of operations.

Given the significant levels of competition that characterize the IT reseller market, it is unlikely that we will be able to increase gross profit margins through increases in sales of IT products alone. Any increase in gross profit margins from this operating sector in the future will depend, in part, on the growth of our higher margin businesses such as IT consulting and professional services. In addition, low margins increase the sensitivity of our results of operations to increases in costs of financing. Any failure by us to maintain or increase our gross profit margins could have a material adverse effect on our financial condition and results of operations.

Any failures or interruptions in our services or systems could damage our reputation and substantially harm our business and results of operations.

Our success depends in part on our ability to provide reliable remote services, technology integration and managed services to our clients. The operations of our IT products and services are susceptible to damage or interruption from human error, fire, flood, power loss, telecommunications failure, terrorist attacks and similar events. We could also experience failures or interruptions of our systems and services, or other problems in connection with our operations, as a result of:

Any interruptions in our systems or services could damage our reputation and substantially harm our business and results of operations. While we maintain disaster recovery plans and insurance with coverage we believe to be adequate, claims may exceed insurance coverage limits, may not be covered by insurance or insurance may not continue to be available on commercially reasonable terms.

Some of our services and solutions involve storing and replicating mission-critical data for our clients and are highly technical in nature. If client data is lost or corrupted, our reputation and business could be harmed.

Our IT data center and technology integration services solutions include storing and replicating mission-critical data for our clients. The process of storing and replicating that data within their data centers or at our facilities is highly technical and complex. If any data is lost or corrupted in connection with the use of our products and services, our reputation could be seriously harmed and market acceptance of our IT solutions could suffer. In addition, our solutions have contained, and may in the future contain, undetected errors, defects or security vulnerabilities. Some errors in our solutions may only be discovered after a solution has been in use by clients. Any errors, defects or security vulnerabilities discovered in our solutions after use by clients could result in loss of revenues, loss of clients, increased service and warranty cost and diversion of attention of our management and technical personnel, any of which could significantly harm our business. In addition, we could face claims for product liability, tort or breach of warranty. Defending a lawsuit, regardless of its merit, is costly and may divert management’s attention and adversely affect the market’s perception of us and our service offerings and solutions.

We do not have long-term recurring revenue generating contracts with our clients that utilize our IT products and services, and such clients may cease providing new purchase orders at any time or reduce the amount of purchases they make. Any such action may result in a decline of revenues we receive from our IT products and services and harm our results of operations.

Our operations depend upon our relationships with our clients. Revenues from our IT products and services are typically driven by purchase orders received every month. The majority of revenues from our IT products and services come from one time purchase orders that do not guarantee any future recurring revenues. During the fiscal year ended December 31, 2017, approximately 45% of such revenues are recurring2021, our sales to federal, state and based on contracts that range from 1-5 years for warranty and maintenance support. The Company’s performance obligation is to work with customers to identify the computer maintenance and warranty services that best suit the customer’s needs and sell them those products and services however the maintenance is provided to the customer by the manufacturer. For these contracts the customer is invoiced one time and pays up front for the full term of the warranty and maintenance contract. Prior to January 1, 2018 when the new Accounting Standards Codification (“ASC”) 606 revenue recognition standards were applied, revenue from these contracts was determined ratably over the contract period with the unearned revenue recorded as deferred revenue and amortized over the contract period. Clients with these types of contracts may cease providing new purchase orders at any time, and may elect not to renew such contracts. If clients cease providing us with new purchase orders, diminish the services purchased from us, cancel executed purchase orders or delay future purchase orders, revenues received from the sale of our IT products and services would be negatively impacted, which could have a material adverse effect on our business and results of operations. There is no guarantee that we will be able to retain or generate future revenue from our existing clients or develop relationships with new clients.

We rely on a limited number of key customers, the importance of which may vary dramatically from year to year, and a loss of one or more of these key customers may adversely affect our operating results.

Our top three customerslocal governments accounted for approximately 24.7%100% of our SGS net sales. Our past customers have included, among others, federal and 39.8%international government agencies and state and local governments. Although SGS has had many customers, two customers, generated approximately 71% of ourSGS’s gross revenue during the yearsyear ended December 31, 2017 and 2016, respectively.2021. One customer accounted for 24%44% of ourSGS’s gross revenue in 2016 and 4% in 2017,2021; however, this customer may or may not continue to be a significant contributor to revenue in 2018.the future. We plan to continue to focus our efforts on existing and potential government customers. SGS revenues for the three months ended September 30, 2022, and 2021, was approximately $3.5 million and $1.9 million, respectively. This includes approximately 71% of sales coming from the Company’s top two customers. The loss of a significant amount of business from one of our major customers would materially and adversely affect our results of operations until such time, if ever, as we are able to replace the lost business. Significant clients or projects in any one period may not continue to be significant clients or projects in other periods. To the extent that we are dependent on any single customer, we are subject to the risks faced by that customer to the extent that such risks impede the customer’s ability to stay in business and make timely payments to us.

Consolidation in the industries that we serve or from which we purchase could adversely affect our business.results of operations.

Some ofSGS product and service costs for the clients we serve may seek to achieve economiesyear ended December 31, 2021 and three months ended September 30, 2022, and 2021, was approximately $6.9 million, $3.0 million and $1.5 million, respectively. This includes approximately 72% of scale by combining with or acquiring other companies. If two or more of our current clients combine their operations, it may decrease the amount of work that we perform for these clients. If one of our current clients merges or consolidates with a company that relies on another provider for its consulting, systems integration and technology, or outsourcing services, we may lose work from that client or lose the opportunity to gain additional work. If two or more of our suppliers merge or consolidate operations, the increased market power of the larger company could also increase our product costs and place competitive pressures on us. Any of these possible results of industry consolidation could adversely affect our business.

The loss of any key manufacturer or distributor relationships, or related industry certifications, could have an adverse effect on our business.

As part of our end-to-end IT solutions, we are authorized resellers offor the products and services of leading IT manufacturers and distributors. In many cases, we have achievedthree months ended September 30, 2022, from the highest level of relationship the manufacturer or distributor offers. In addition, our employees hold certifications issued by these manufacturers and by industry associations relating to the configuration, installation and servicing of these products. We differentiate ourselves from our competitors by the range of manufacturers and distributors we represent, the relationship level we have achieved with these manufacturers and distributors and the scope of the manufacturer and industry certifications our employees hold. There can be no assurance that we will be able to retain these relationships with our manufacturers and distributors, that we will be able to retain the employees holding these manufacturer and industry certifications, or that our employees will maintain their manufacturer or industry certifications.Company’s top two vendors. The loss of any of these relationships or certificationsvendors could have a material adverse effectmaterially and adversely affect our results of operations until such time, if ever, as we are able to replace the lost vendors. Significant vendors in any one period may not continue to be significant vendors in other periods. To the extent that we are dependent on our business.any single vendor, we are subject to the risks faced by that vendor to the extent that such risks impede the vendor’s ability to stay in business and make timely payments to us.

Risks Related to Acquired Cryptocurrency Mining Business

The recent transition of Ethereum to proof-of-stake validation caused us to cease mining Ethereum.

Proof-of-stake is an alternative method in validating cryptocurrency transactions. Now that Ethereum has transitioned to proof-of-stake, our data mining assets can no longer mine Ethereum as of September 15, 2022, and as such, all revenues from mining operations have ceased.

We may experience a reductionbe classified as an inadvertent investment company.

We are not engaged in the incentive programs offeredbusiness of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being engaged in those activities. Under the Investment Company Act of 1940, as amended (the “Investment Company Act”), however, a company may be deemed an investment company under section 3(a)(1)(C) of the Investment Company Act if the value of its investment securities is more than 40% of its total assets (exclusive of government securities and cash items) on a consolidated basis.

We commenced operations of digital asset mining, the output of which is cryptocurrencies. We cannot guarantee that such cryptocurrencies or digital assets we will mine are deemed as commodities and not as securities. If the digital assets held by us exceed 40% of our total assets, exclusive of cash, we inadvertently become an investment company. An inadvertent investment company can avoid being classified as an investment company if it can rely on one of the exclusions under the Investment Company Act. One such exclusion, Rule 3a-2 under the Investment Company Act, allows an inadvertent investment company a grace period of one year from the earlier of: (a) the date on which an issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis, and (b) the date on which an issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of government securities and cash items) on an unconsolidated basis. We expect to establish policies that we would work to keep the investment securities held by us at less than 40% of our total assets, which may include acquiring assets with our cash, liquidating our investment securities, or seeking a no-action letter from the Commission if we are unable to acquire sufficient assets or liquidate sufficient investment securities in a timely manner.

As Rule 3a-2 is available to a company no more than once every three years, and assuming no other exclusion were available to us, bywe would have to keep within the 40% limit for at least three years after we cease being an inadvertent investment company. This may limit our vendors. Any such reductionability to make certain investments or enter into joint ventures that could otherwise have a material adverse effectpositive impact on our earnings. In any event, we do not intend to become an investment company engaged in the business results of investing and trading securities.

Classification as an investment company under the Investment Company Act requires registration with the Commission. If an investment company fails to register, it would have to stop doing almost all business, and its contracts would become voidable. Registration is time-consuming and restrictive and would require a restructuring of our operations, and financial condition.we would be very constrained in the kind of business we could do as a registered investment company. Further, we would become subject to substantial regulation concerning management, operations, transactions with affiliated persons, and portfolio composition, and would need to file reports under the Investment Company Act regime. The cost of such compliance would result in our incurring substantial additional expenses, and the failure to register if required would have a materially adverse impact on our operations.

Changes in laws, regulations, or requirements applicable to our software and services could impose increased costs on us, delay or prevent our introduction of new products and services or impair the function or value of our existing products and services.

Our digital assets mining operations may become subject to increasing regulatory requirements, and as these requirements proliferate, we may be required to change or adapt our operations to comply with them.

For example, the adoption of new money transmitter (“MT”) or money services business (“MSB”) statutes in jurisdictions or changes in regulators’ interpretation of existing state and federal money transmitter or money services business statutes or regulations, could subject us to registration or licensing, or limit business activities, cause us to enter relationships with one or more third parties for payment services until we are appropriately licensed. The activities of TTM Digital may cause it to be deemed a MSB under the regulations promulgated by FinCEN under the authority of the U.S. Bank Secrecy Act, TTM Digital may be required to comply with FinCEN regulations, including those that would mandate TTM Digital to implement anti-money laundering programs, make certain reports to FinCEN and maintain certain records.

Compliance and classifications are dependent on federal and state regulatory actions and our business activities. We receive paymentsdo not believe that we are a money transmitter, because our activities do not cause us to hold, possess or control payment funds on behalf of a consumer or merchant. If we were deemed to be a money transmitter, we would be subject to significant additional regulation. This could increase our costs in operating our business. In addition, a regulator could act against us if it views our payment solution platform as a violation of existing law. Any of these outcomes would negatively affect the market price for our shares and credits from vendors,could cause us to cease operations in the certain U.S. States. 

Subsequently, on March 9, 2022, the President of the United States issues an executive order outlining a government-wide approach to reviewing six key policy priorities. This includes: protecting US consumers, investors and businesses; protecting US and global financial stability and mitigating economywide financial risks; mitigating money laundering, other illicit finance activity and national security risks; reinforcing US leadership in the global financial system, and technological and economic competitiveness; promoting equitable access to safe and affordable financial services; and Supporting technological advances that promote responsible development and use of digital assets. Unlike China, which has banned all cryptocurrency activities that ultimately pushed more mining investments to the United States, eventual regulation of the cryptocurrency industry may potentially disrupt or temporarily stop mining activities until we conform with new regulatory requirements.

Additionally, we are not licensed to conduct a virtual currency business in New York and do not intend to become licensed in any other state that may require licensing in the future. We have taken the position that the New York State Department of Financial Services (“NYSDFS”) BitLicense Regulatory Framework (23 NYCRR 200.2(q)) does not apply to our business. It is possible, however, that the NYSDFS could disagree with our position. If we were deemed to be conducting an unlicensed virtual currency business in New York, we could be subject to significant additional regulation and/or regulatory consequences. There are a number of states that review the adaptation that the Conference of State Bank Supervisors has proposed a model form of state-level “virtual currency” regulation. There are at least thirty-one states that have pending legislation in the 2021 legislative session regarding blockchain and cryptocurrency.

The recent New York Senate Bill 6486C seeks to establish a moratorium on consolidated operations that use proof-of-work authentication methods to validate blockchain transactions; provides that such operations will be subject to a full generic environmental impact statement review. Although the majority of our mining activity is operating using hydroelectric power, New York Senate Bill 6486C may require TTM Digital to halt mining until an environmental impact assessment is completed.

It may be illegal now, or in the future, to acquire, own, hold, sell or use digital assets in one or more countries, and ownership of, holding, or trading in our securities may also be considered illegal and subject to sanction.

Although currently digital assets are not regulated or are lightly regulated in most countries, including consideration pursuantthe United States, one or more countries such as China, India, and Russia may take regulatory actions in the future that severely restricts the right to volume sales incentive programsacquire, own, hold, sell, or use digital assets or to exchange digital assets for fiat currency. Such an action may also result in the restriction of ownership, holding, or trading in our securities. Such restrictions may adversely affect an investment in us. For example, the Bank of England, in June of 2021, issued a paper for comments in which it explains that stablecoins should have the same regulations as fiat currencies.

The price of our existing mining assets are dictated by the volatile market for such assets to determine a fair market price of such assets.

Our current mining assets can no longer mine Ethereum as of September 15, 2022. Pricing related to mining assets are determined by the cryptocurrency they are able to mine. As a result, the price of our assets may have decreased. The Company may have a lower value on our mining assets based on market volatility if the Company’s attempts to sell its mining assets.

However, the Company is exploring other utilizations for its mining assets, not limited to, such as using them for cloud computing, datacenter hosting, simulation & modeling, virtual reality, artificial intelligence, and marketing development funding programs. These programsgaming. There is no expectation that using the mining assets for such applications will be profitable, which may have a negative impact on the trading price of our securities, which may have a materially adverse impact on investors’ investment in our Company.

Our mining operations, including the facilities in which our miners are usuallyoperated, may experience damages, including damages that are not covered by insurance.

Our current mining operation is, and any future mines we establish will be, subject to a variety of finite termsrisks relating to physical condition and operation, including, but not limited to:

For example, our mine could be rendered inoperable, temporarily or permanently, as a result of a fire or other natural disaster or by a terrorist or other attack on the mine. The security and other measures we take to protect against these risks may not be renewedsufficient. Additionally, our mine could be materially adversely affected by a power outage or mayloss of access to the electrical grid or loss by the grid of cost-effective sources of electrical power generating capacity. Given the power requirement, it would not be changedfeasible to run miners on backup power generators in the event of a way that has an adverse effect on us. Vendor funding is used to offset, among other things, inventory costs,power outage. Our insurance covers the replacement cost of goods sold, marketing costs and other operating expenses. Certainany lost or damaged miners but does not cover any interruption of our mining activities; therefore, our insurance, therefore, may not be adequate to cover the losses we suffer as a result of any of these funds are based onevents. In the event of an uninsured loss, including a loss in excess of insured limits, at any of the mines in our volume of net sales or purchases, growth rate of net sales or purchases and marketing programs. If we donetwork, such mines may not grow our net sales or if we are not in compliance with the terms of these programs, there could be a material negative effect on the amount of incentives offered or paid to us by vendors. No assurance can be given that we will continue to receive such incentives or that we will be able to collect outstanding amounts relating to these incentivesadequately repaired in a timely manner or at all. Any sizeable reduction in,all and we may lose some or all of the discontinuance of, or a significant delay in receiving or the inabilityfuture revenues anticipated to collectbe derived from such incentives, particularly related to incentive programs with one of our largest partners, Hewlett-Packard Company, could have a material adverse effectmines. The potential impact on our business resultsis currently magnified because we are only operating a single mine.

Risks Relating to Restatement of operationsOur Consolidated Financial Statements

We have had to restate our previously issued consolidated financial statements. As previously disclosed, and as disclosed in the Amendments to our Form 10-K for the year ended December 31, 2021, we have identified a material weakness in our internal control over financial condition.reporting. If we are unable to react timely to any fundamental changes in the programs of vendors, including the elimination of funding for some of the activities for which we have been compensated in the past, such changes would have a material adverse effect on our business, results of operationsdevelop and maintain effective internal control over financial condition.

We may need additional cash financing and any failure to obtain cash financing could limit our ability to grow our business and develop or enhance our service offerings to respond to market demand or competitive challenges.

We expect that we will need to raise funds in order to continue our operations and implement our plans to grow our business. However, if we decide to seek additional capital, we may be unable to obtain financing on terms that are acceptable to us or at all. If we are unable to raise the required cash, our ability to grow our business and develop or enhance our service offerings to respond to market demand or competitive challenges could be limited.

We rely on inventory financing and vendor credit arrangements for our daily working capital and certain operational functions, the loss of which could have a material adverse effect on our future results.

We rely on inventory financing and vendor financing arrangements for daily working capital and to fund equipment purchases for our technology sales business. The loss of any of our inventory financing or vendor credit financing arrangements, a reduction in the amount of credit granted to us by our vendors, or a change in any of the material terms of these arrangements could increase our need for, and the cost of, working capital and have a material adverse effect on our future results. These credit arrangements are discretionary on the part of our creditors and require the performance of certain operational covenants. There can be no assurance that we will continue to meet those covenants and failure to do so may limit availability of, or cause us to lose, such financing. There can be no assurance that such financing will continue to be available to us in the future on acceptable terms.

If we cannot collect our receivables or if payment is delayed, our business may be adversely affected by our inability to generate cash flow, provide working capital or continue our business operations.

Our business depends on our ability to successfully obtain payment from our clients of the amounts they owe us for products received from us and any work performed by us. The timely collection of our receivables allows us to generate cash flow, provide working capital and continue our business operations. Our clients may fail to pay or delay the payment of invoices for a number of reasons, including financial difficulties resulting from macroeconomic conditions or lack of an approved budget. An extended delay or default in payment relating to a significant account will have a material and adverse effect on the aging schedule and turnover days of our accounts receivable. If we are unable to timely collect our receivables from our clients for any reason, our business and financial condition could be adversely affected.

We depend on the U.S. government for a substantial portion of our business and government budget impasses together with changes in government defense spending could have adverse consequences on our financial position, results of operations and business.

A substantial portion of our revenues from our operations have been from and will continue to be from sales and services rendered directly or indirectly to the U.S. government. Consequently, our revenues are highly dependent on the government’s demand for computer systems and related services. Our revenues from the U.S. government largely result from contracts awarded to us under various U.S. government programs, primarily defense-related programs with the Department of Defense (DoD), as well as a broad range of programs with Bureau of Prisons, National Institutes of Health (NIH), National Aeronautics and Space Administration (NASA), the intelligence community and other departments and agencies. Cost cutting, including through consolidation and elimination of duplicative organizations and insurance, has become a major initiative for the government. The funding of our programs is subject to the overall U.S. government budget and appropriation decisions and processes which are driven by numerous factors, including geo-political events and macroeconomic conditions.

The Budget Control Act of 2011 enacted 10-year discretionary spending caps which are expected to generate over $1 trillion in savings for the U.S. government, a substantial portion of which comes from DoD baseline spending reductions. In addition, the Budget Control Act of 2011 provides for additional automatic spending cuts (referred to as “sequestration”) totaling $1.2 trillion over nine years which were implemented beginning in the U.S. government fiscal year ending September 30, 2013 (GFY13). These reduction targets will further reduce DoD and other federal agency budgets. Although the Office of Management and Budget has provided guidance to agencies on implementing sequestration cuts, there remains much uncertainty about how exactly sequestration cuts will be implemented and the impact those cuts will have on contractors supporting the government. We are not able to predict the impact of future budget cuts if any, including sequestration, on our Company or our financial results. However, we expect that concerns related to the national debt may impact DoD spending levels and that implementation of the automatic spending cuts without change will reduce, delay or cancel funding for certain of our contracts — particularly those with unobligated balances — and programs and could adversely impact our operations, financial results and growth prospects.

A significant reduction in defense spending could have long-term consequences for our size and structure. In addition, reduction in government priorities and requirements could impact the funding, or the timing of funding, of our programs, which could negatively impact our results of operations and financial condition. In addition, we are involved in U.S. government programs which are classified by the U.S. government and our ability to discuss these programs, including any risks and disputes and claims associated with and our performance under such programs, could be limited due to applicable security restrictions.

The U.S. government systems integration business is intensely competitive andreporting, we may not be able to win government bids when competing against much larger companies,accurately report our financial results in a timely manner, which could reducemay adversely affect investor confidence in us and may adversely affect our revenues.business, financial condition and results of operations.

Large computer systems integration contracts awarded byOn May 17, 2022, subsequent to the U.S. government are fewevaluation as of December 31, 2021, management, in numberagreement with the audit committee of the Company’s Board of Directors, determined that the previously issued financial statements for the Affected Periods (as hereinafter defined) should no longer be relied upon and are awarded throughrequired restatement. We then filed Amendment No. 1 to our Form 10-K for the year ended December 31, 2021 (the “Amendment No. 1”) on May 23, 2022 to restate the Company’s previously issued consolidated financial statements and financial information as of and for the fiscal year ended December 31, 2021, as well as to provide restated interim financial information as of September 30, 2021 and for the three and nine months then ended (collectively, the “Affected Periods”), contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, with the Securities and Exchange Commission (the “SEC”) on April 14, 2022 (the “Original Form 10-K”) and in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 (the “Form 10-Q”). On June 1, 2022 we filed Amendment No. 2 to our Form 10-K because Amendment No. 1 contained a formal competitive bidding process, including indefinite delivery/indefinite quantity (IDIQ), GSA Schedule and other multi-award contracts. Bids are awardedtypographical error on the basisdate of price, compliancethe audit report of Friedman LLP (“Friedman”). Although Friedman’s audit report was dated April 14, 2022, except for the effects of the restatement discussed in Note 1A, Note 12, Note 13, and Note 19 to the consolidated financial statements, as to which the date is May 23, 2022, the copy of Friedman’s audit report that was included in Amendment No. 1 incorrectly included a date of April 13, 2022 (instead of April 14, 2022). Amendment No. 2 on Form 10-K (“Amendment No. 2”) was filed to correct the typographical error regarding the date on Friedman’s audit report, such that the date of Friedman’s audit report is April 14, 2022, except for the effects of the restatement discussed in Note 1A, Note 12, Note 13, and Note 19 to the consolidated financial statements, as to which the date is May 23, 2022.

As discussed in Note 1A, “Restatement of Consolidated Financial Statements,” of the notes to the accompanying consolidated financial statements as of and for the year ended December 31, 2021 included in Amendment No.1 and Amendment No. 2, the correction of certain errors, as discussed in Amendment No.1 and Amendment No. 2, from previously reported information for the year ended December 31, 2021, has resulted in an increase in net loss of $8.4 million, primarily as a result of a $6.3 million in expense related to the revaluation on the derivative conversion liability, an increase in interest expense of $0.9 million, and an increase in the loss contingency on debt default of $1.2 million. 

As previously disclosed in the Company’s Current Report on Form 8-K filed on May 17, 2022 with technical bidding specifications, technical expertisethe SEC, on May 17, 2022, the Company’s management determined that its prior conclusion that the “conversion feature” of the Company’s 12.5% senior secured convertible debentures (the “Debentures”) qualified for equity classification and, therefore, qualified for the application of the guidance in some cases, demonstratedthe Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Update (ASU) 2020-06 was incorrect. Management has determined that the conversion feature was a liability classified derivative under the FASB’s Accounting Standards Codification (ASC) 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity from the inception requiring recognition at fair value for each reporting period.

The Company’s management, abilityin agreement with the audit committee of the Company’s Board of Directors, have determined that the previously issued financial statements for the Affected Periods should no longer be relied upon due to performthis error and require restatement. Amendment No. 1 and Amendment No. 2 (i) reflect the contract. There canchanges discussed above for the Affected Periods, (ii) restates the Company’s consolidated financial statements as and for the year ended December 31, 2021, and (iii) provides restated unaudited financial information as of September 30, 2021, and for the three and nine months then ended. The error does not impact the Company’s consolidated financial statements for the quarters ended March 31, 2021, or June 30, 2021.

As a result of the factors described above, the Company has included in Amendment No.1 and Amendment No. 2 the restated consolidated financial statements as of and for the year ended December 31, 2021, and restated financial information as of September 30, 2021, and for the three and nine months then ended, to restate the following items:

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Effective internal control over financial reporting is necessary for us to provide reliable financial reporting and prevent fraud. We continue to evaluate steps to remediate the material weaknesses. These remediation measures may be time consuming and costly and there is no assurance that wethese initiatives will win and/or fulfill additional contracts. Moreover,ultimately have the award of these contracts is subject to protest procedures and there can be no assurance that we will prevail in any ensuing legal protest. Theintended effects.

Any failure to secure a significant dollar volume of U.S. government contracts in the future would adversely affect Sysorex Government, our subsidiary.

The U.S. government systems integration business is intensely competitive and subject to rapid change. Sysorex competes with a large number of systems integrators, hardware and software manufacturers, and other large and diverse companies attempting to enter or expand their presence in the U.S. government market. Many of the existing and potential competitors have greatermaintain effective internal control over financial operating and technological resources than we have. The competitive environment may require us to make changes in our pricing, services or marketing. The competitive bidding process involves substantial costs and a number of risks, including significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us, or that may be awarded, but for which we do not receive meaningful revenues. Accordingly, our success depends on our ability to develop services and products that address changing needs and to provide people and technology needed to deliver these services and products. To remain competitive, we must consistently provide superior service, technology and performance on a cost-effective basis to our customers. Our response to competition could cause us to expend significant financial and other resources, disrupt our operations and strain relationships with partners, any of which could harm our business and/or financial condition.

Sysorex Government’s financial performance is dependent on our ability to perform on our U.S. government contracts, which are subject to termination for convenience, which could harm our results of operations and financial condition.

Sysorex Government’s financial performance is dependent on our performance under our U.S. government contracts. Government customers have the right to cancel any contract at their convenience. An unanticipated termination of, or reduced purchases under, one of our major contracts whether due to lack of funding, for convenience or otherwise, or the occurrence of delays, cost overruns and product failuresreporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the SEC or other regulatory authorities. In either case, there could be a material adverse affect on our business, financial condition and results of operations andoperations. Ineffective internal control over financial condition. If one ofreporting could also cause investors to lose confidence in our contracts were terminated for convenience, we would generally be entitled to payments for our allowable costs and would receive some allowance for profit on the work performed. If one of our contracts were terminated for default, we would generally be entitled to payments for our work that has been accepted by the government. A termination arising out of our defaultreported financial information which could expose us to liability and have a negative effect on the trading price of our stock.

We can give no assurance that the measures we are taking and plan to take in the future will remediate the material weaknesses identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls, and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.

We may face litigation and other risks as a result of the Restatement and material weakness in our internal control over financial reporting.

As a result of the Restatement and the identified material weaknesses, and other matters that may in the future be raised by the SEC, we face the potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the Restatement and/or the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Registration Statement, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could adversely affect our business, financial condition and results of operations.

Risk Factors Relating to Our Common Stock

Trading on the OTC Markets is volatile and sporadic, which could depress the market price of our common stock and make it difficult for you to resell your common stock.

Our common stock is quoted on the OTCQB tier of the OTC Markets Group, Inc. (“OTC Markets”). Trading in securities quoted on the OTC Markets is often thin and characterized by wide fluctuations in trading prices, due to many factors, some of which may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Markets is not a stock exchange, and trading of securities on the OTC Markets is often more sporadic than the trading of securities listed on a quotation system like Nasdaq Capital Market or a stock exchange like the NYSE American. These factors may result in your having difficulty reselling any shares of our common stock.

The market price of our common stock is likely to be highly volatile because of several factors, including a limited public float.

The market price of our common stock has been volatile in the past and the market price of our common stock is likely to be highly volatile in the future. You may not be able to resell shares of our common stock following periods of volatility because of the market’s adverse reaction to volatility.

Other factors that could cause such volatility may include, among other things:

Any of these factors could have a significant and adverse impact on the market price of our common stock. In addition, the stock market in general has at times experienced extreme volatility and rapid decline that has often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock, regardless of our actual operating performance.

Our common stock is currently a “penny stock” under SEC rules. It may be more difficult to resell securities classified as “penny stock.”

Our common stock is currently a “penny stock” under applicable SEC rules (generally defined as non-exchange traded stock with a per-share price below $5.00). If our common stock becomes listed on the Nasdaq Capital Market, it will not be considered “penny stock,” however, if we are unable to maintain that listing and our common stock is no longer listed on the Nasdaq Capital Market, unless we maintain a per-share price above $5.00, our common stock will become “penny stock.” These rules impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” For example, broker-dealers must determine the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements showing the market value of each penny stock held in the customer’s account, provide a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.

Legal remedies available to an investor in “penny stocks” may include the following:

These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.

Many brokerage firms will discourage or refrain from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many individual investors will not invest in penny stocks due, among other reasons, to the increased financial risk generally associated with these investments.

For these reasons, penny stocks may have a limited market and, consequently, limited liquidity. We can give no assurance at what time, if ever, our common stock will not be classified as a “penny stock” in the future.

If the benefits of any proposed acquisition do not meet the expectations of investors, stockholders or financial analysts, the market price of our common stock may decline.

If the benefits of any proposed acquisition do not meet the expectations of investors or securities analysts, the market price of our common stock prior to the closing of the proposed acquisition may decline. The market values of our common stock at the time of the proposed acquisition may vary significantly from their prices on the date the acquisition target was identified.

In addition, broad market and industry factors may materially harm the market price of our common stock irrespective of our operating performance. The stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain future contractsadditional financing in the future.

Changes in accounting principles and orders. Furthermore,guidance, or their interpretation, could result in unfavorable accounting charges or effects, including changes to our previously filed financial statements, which could cause our stock price to decline.

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles and guidance. A change in these principles or guidance, or in their interpretations, may have a significant effect on contracts for whichour reported results and retroactively affect previously reported results.

Being a public company results in additional expenses, diverts management’s attention and could also adversely affect our ability to attract and retain qualified directors.

As a public reporting company, we are subject to the reporting requirements of the Exchange Act. These requirements generate significant accounting, legal and financial compliance costs and make some activities more difficult, time consuming or costly and may place significant strain on our personnel and resources. The Exchange Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to establish the requisite disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight are required.

As a subcontractorresult, management’s attention may be diverted from other business concerns, which could have an adverse and not the prime contractor, the U.S. government could terminate the prime contract for convenience or otherwise, irrespective ofeven material effect on our performance as a subcontractor. The termination or cancellation of U.S. government contracts, no matter what the reason, could harm ourbusiness, financial condition and results of operations and financial condition.

Our failure to comply with a variety of complex procurementoperations. These rules and regulations could result in our being liable for penalties, including termination of our U.S. government contracts, disqualification from bidding on future U.S. government contractsmay also make it more difficult and suspension or debarment from U.S. government contracting that could adversely affect our financial condition.

We must comply with laws and regulations relating to the formation, administration and performance of U.S. government contracts, which affect how we do business with our customers and may impose added costs on our business. U.S. government contracts generally are subject to: (i) the Federal Acquisition Regulation (FAR), which sets forth policies, procedures and requirements for the acquisition of goods and services by the U.S. government; (ii) department-specific regulations that implement or supplement FAR, such as the DoD’s Defense Federal Acquisition Regulation Supplement (DFARS); and (iii) other applicable laws and regulations. We are also subject to the Truth in Negotiations Act, which requires certification and disclosure of cost and pricing data in connection with certain contract negotiations; the Procurement Integrity Act, which regulates access to competitor bid and proposal information and government source selection information, and our ability to provide compensation to certain former government officials; the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S. government for payment or approval; and the U.S. Government Cost Accounting Standards, which impose accounting requirements that govern our right to reimbursement under certain cost-based U.S. government contracts. These regulations impose a broad range of requirements, many of which are unique to government contracting, including various procurement, import and export, security, contract pricing and cost, contract termination and adjustment, and audit requirements. A contractor’s failure to comply with these regulations and requirements could result in reductions to the value of contracts, contract modifications or termination, and the assessment of penalties and fines and lead to suspension or debarment, for cause, from government contracting or subcontracting for a period of time. In addition, government contractors are also subject to routine audits and investigations by U.S. government agencies such as the Defense Contract Audit Agency (DCAA) and Defense Contract Management Agency (DCMA). These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards. The DCAA also reviews the adequacy of and a contractor’s compliance with its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. During the term of any suspension or debarment by any U.S. government agency, contractors can be prohibited from competing for or being awarded contracts by U.S. government agencies. The termination of any of our significant government contracts or the imposition of fines, damages, suspensions or debarment would adversely affect the Company’s business and financial condition.

The U.S. government may adopt new contract rules and regulations or revise its procurement practices in a manner adverse to us at any time.

Our industry has experienced, and we expect it will continue to experience, significant changes to business practices as a result of an increased focus on affordability, efficiencies, and recovery of costs, among other items. U.S. government agencies may face restrictions or pressure regarding the type and amount of services that they may obtain from private contractors. Legislation, regulations and initiatives dealing with procurement reform, mitigation of potential conflicts of interest and environmental responsibility or sustainability, as well as any resulting shifts in the buying practices of U.S. government agencies, such as increased usage of fixed price contracts, multiple award contracts and small business set-aside contracts, could have adverse effects on government contractors, including us. Any of these changes could impair our ability to obtain new contracts or renew our existing contracts when those contracts expire and are subject to a renewed bidding process. Any new contracting requirements or procurement methods could be costly or administratively difficultexpensive for us to implementobtain director and could adversely affect our future revenues, profitability and prospects.

We may incur cost overruns as a result of fixed priced government contracts, which would have a negative impact on our operations.

Most of our U.S. government contracts are multi-award, multi-year IDIQ task order based contracts, which generally provide for fixed price schedules for products and services, have no pre-set delivery schedules, have very low minimum purchase requirements, are typically competed over among multiple awardees and force us to carry the burden of any cost overruns. Due to their nature, fixed-priced contracts inherently have more risk than cost reimbursable contracts.officer liability insurance. If we are unable to control costs or if our initial cost estimates are incorrect, we can lose money on these contracts. In addition, some of our contracts have provisions relating to cost controlsobtain appropriate director and audit rights, and if we fail to meet the terms specified in those contracts, we may not realize their full benefits. Lower earnings caused by cost overruns and cost controls would have a negative impact on our results of operations. The U.S. government has the right to enter into contracts with other suppliers, which may be competitive with our IDIQ contracts. We also perform fixed priced contracts under which we agree to provide specific quantities of products and services over time for a fixed price. Since the price competition to win both IDIQ and fixed price contracts is intense and the costs of future contract performance cannot be predicted with certainty, there can be no assurance as to the profits, if any, that we will realize over the term of such contracts.

Misconduct of employees, subcontractors, agents and business partners could cause us to lose existing contracts or customers and adversely affectofficer insurance, our ability to obtain new contractsrecruit and customersretain qualified officers and could have a significant adverse impact on our business and reputation.

Misconduct could include fraud or other improper activities such as falsifying time or other records and violations of laws, including the Anti-Kickback Act. Other examples could include the failure to comply with our policies and procedures or with federal, state or local government procurement regulations, regulations regarding the use and safeguarding of classified or other protected information, legislation regarding the pricing of labor and other costs in government contracts, laws and regulations relating to environmental, health or safety matters, bribery of foreign government officials, import-export control, lobbying or similar activities, and any other applicable laws or regulations. Any data loss or information security lapses resulting in the compromise of personal information or the improper use or disclosure of sensitive or classified information could result in claims, remediation costs, regulatory sanctions against us, loss of current and future contracts and serious harm to our reputation. Although we have implemented policies, procedures and controls to prevent and detect these activities, these precautionsdirectors, especially those directors who may not prevent all misconduct, and as a result, we could face unknown risks or losses. Our failure to comply with applicable laws or regulations or misconduct by any of our employees, subcontractors, agents or business partners could damage our reputation and subject us to fines and penalties, restitution or other damages, loss of security clearance, loss of current and future customer contracts and suspension or debarment from contracting with federal, state or local government agencies, any of which would adversely affect our business, reputation and our future results.

We may fail to obtain and maintain necessary security clearances, which may adversely affect our ability to perform on certain U.S. government contracts and depress our potential revenues.

Many U.S. government programs require contractors to have security clearances. Depending on the level of required clearance, security clearances can be difficult and time-consuming to obtain. If we or our employees are unable to obtain or retain necessary security clearances, we may not be able to win new business, and our existing clients could terminate their contracts with us or decide not to renew them. To the extent we are not able to obtain and maintain facility security clearances or engage employees with the required security clearances for a particular contract, we may not be able to bid on or win new contracts, or effectively rebid on expiring contracts, or we could lose existing contracts, any of which may adversely affect our operating results and inhibit the execution of our growth strategy.

Our future revenues and growth prospectsdeemed independent, could be adversely affected by our dependence on other contractors.

If other contractors with whom we have contractual relationships either as a prime contractor or subcontractor eliminate or reduce their work with us, or if the U.S. government terminates or reduces these other contractors’ programs, does not award them new contracts or refuses to pay under a contract our financial and business condition may be adversely affected. Companies that do not have access to U.S. government contracts may perform services as our subcontractor and that exposure could enhance such companies’ prospect of securing a future position as a prime U.S. government contractor which could increase competition for future contracts and impair our ability to perform on contracts.

We may have disputes with our subcontractors arising from, among other things, the quality and timeliness of work performed by the subcontractor, customer concerns about the subcontractor, our failure to extend existing task orders or issue new task orders under a subcontract, our hiring of a subcontractor’s personnel or the subcontractor’s failure to comply with applicable law. If any of our subcontractors fail to timely meet their contractual obligations or have regulatory compliance, financial or other problems, our ability to fulfill our obligations as a prime contractor or higher tier subcontractor may be jeopardized. Significant losses could arise in future periods and subcontractor performance deficiencies could result in our termination for default. A termination for default could eliminate a revenue source, expose us to liability and have an adverse effect on our ability to compete for future contracts and task orders, especially if the customer is an agency of the U.S. government.

As a U.S. defense contractor we are vulnerable to security threats and other disruptions that could negatively impact our business.

As a U.S. defense contractor, we face certain security threats, including threats to our information technology infrastructure, attempts to gain access to our proprietary or classified information, and threats to physical security. These types of events could disrupt our operations, require significant management attention and resources, and could negatively impact our reputation among our customers and the public, which could have a negative impact on our financial condition, results of operations and liquidity. We are continuously exposed to cyber-attacks and other security threats, including physical break-ins. Any electronic or physical break-in or other security breach or compromise may jeopardize security of information stored or transmitted through our information technology systems and networks. This could lead to disruptions in mission-critical systems, unauthorized release of confidential or otherwise protected information and corruption of data. Although we have implemented policies, procedures and controls to protect against, detect and mitigate these threats, we face advanced and persistent attacks on our information systems and attempts by others to gain unauthorized access to our information technology systems are becoming more sophisticated. These attempts include covertly introducing malware to our computers and networks and impersonating authorized users, among others, and may be perpetrated by well-funded organized crime or state sponsored efforts. We seek to detect and investigate all security incidents and to prevent their occurrence or recurrence. We continue to invest in and improve our threat protection, detection and mitigation policies, procedures and controls. In addition, we work with other companies in the industry and government participants on increased awareness and enhanced protections against cyber security threats. However, because of the evolving nature and sophistication of these security threats, which can be difficult to detect, there can be no assurance that our policies, procedures and controls have or will detect or prevent any of these threats and we cannot predict the full impact of any such past or future incident. We may experience similar security threats to the information and technology systems that we develop, install or maintain under customer contracts. Although we work cooperatively with our customers and other business partners to seek to minimize the impacts of cyber and other security threats, we must rely on the safeguards put in place by those entities. Any remedial costs or other liabilities related to cyber or other security threats may not be fully insured or indemnified by other means. Occurrence of any of these security threats could expose us to claims, contract terminations and damages and could adversely affect our reputation, ability to work on sensitive U.S. government contracts, business operations and financial results.

Difficult conditions in the global capital markets and the economy generally may materially adversely affect our business and results of operations, and we do not expect these conditions to improve in the near future.

Our results of operations are materially affected by conditions in the global capital markets and the economy generally, both in the U.S. and elsewhere around the world. Sustained uncertainty about global economic conditions, concerns about future U.S. government budget impasses or a prolonged tightening of credit markets could cause our customers and potential customers to postpone or reduce spending on technology products or services or put downward pressure on prices, which could have an adverse effect on our business, results of operations or cash flows. Concerns over inflation, energy costs, geopolitical issues and the availability of credit in the U.S. have contributed to increased volatility and diminished expectations for the economy and the markets going forward. These events and market upheavals may have an adverse effect on our business. In the event of extreme prolonged market events, such as global economic recession, could result in significant losses for us.

impacted.

Risks Related to Sysorex’s Common Stock

We are an “emerging growth company” as definedand our election to delay adoption of new or revised accounting standards applicable to public companies may result in the Jumpstart Our Business Startups Actour financial statements not being comparable to those of 2012,some other public companies. As a result of this and we cannot be certain if theother reduced disclosure requirements applicable to emerging growth companies, will make our common stocksecurities may be less attractive to investors.

We areAs a public reporting company with less than $1,235,000,000 in revenue during our last fiscal year, we qualify as an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012, or under the JOBS Act. For as long as we continue to be anAn emerging growth company we may take advantage of exemptions from variouscertain reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to other public companies that are not emerging growth companies, including (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), (2) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (3) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.companies. In addition,particular, as an emerging growth company we are onlywe:

We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under §107 of the JOBS Act.

Certain of these reduced reporting requirements and exemptions were already available to us due to the fact that we also qualify as a “smaller reporting company” under SEC rules. For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding management’s assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or Chief Executive Officer pay ratio disclosure; and may present only two years of audited financial statements and two yearsrelated MD&A disclosure.

Under the JOBS Act, we may take advantage of selected financial data in this registration statement We could be an emerging growth companythe above-described reduced reporting requirements and exemptions for up to five years although circumstances could cause usafter our initial sale of common equity pursuant to losea registration statement declared effective under the Securities Act or such earlier time that status earlier, includingwe no longer meet the definition of an emerging growth company. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company” if thewe have more than $1,235,000,000 in annual revenues, have more than $700 million in market value of our common stockCommon Stock held by non-affiliates, exceeds $700.0 million as of any June 30 before that time or if we have total annual gross revenue of $1.07 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31 or, if we issue more than $1.0 billion in principal amount of non-convertible debt during anyover a three-year period before that time,period. Further, under current SEC rules we would ceasewill continue to be an emerging growth company immediately. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantagefor so long as we have a public float (i.e., the market value of manycommon equity held by non-affiliates) of less than $250 million as of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirementslast business day of Section 404 of the Sarbanes-Oxley Act, not being required to provide selected financial data in the registration statements and periodic reports that we file with the SEC, and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. most recently completed second fiscal quarter.

We cannot predict if investors will find our common stocksecurities less attractive because we may relydue to our reliance on these exemptions.

If some investors findwe fail to maintain effective internal control over financial reporting, the price of our common stock less attractivesecurities may be adversely affected.

Our internal control over financial reporting has weaknesses and conditions that require correction or remediation. For the year ended December 31, 2021 and the quarter ended September 30, 2022, we identified a material weakness in our assessment of the effectiveness of disclosure controls and procedures. Our internal control over financial reporting was not effective due to the following material weaknesses:

Although management has implemented, and continues to implement, actions to remediate the underlying causes of the control deficiencies that gave rise the material weaknesses, we cannot provide any assurance that the remediation efforts will be successful or that our internal control over financial reporting will be effective as a result there may be a less active trading market forof these efforts. See “Risk Factors—Risks Related to Restatement of Our Consolidated Financial Statements.”

If we fail to comply with the rules under the Sarbanes-Oxley Act related to disclosure controls and procedures in the future, or, if we continue to have material weaknesses or other deficiencies in our common stockinternal control and accounting procedures and disclosure controls and procedures, our stock price could decline significantly and raising capital could be more difficult. If additional material weaknesses or significant deficiencies are discovered or if we otherwise fail to address the adequacy of our internal control over financial reporting and disclosure controls and procedures, our business may be more volatile.harmed. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our securities could drop significantly.

OurWe are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act and if we fail to continue to comply, our business could be harmed, and the price of our securities could decline.

Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act require an annual assessment of internal control over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting firmfirm. The standards that must be met for management to assess the internal control over financial reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards. We expect to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis. It is difficult for us to predict how long it will nottake or costly it will be required to formally attest tocomplete the assessment of the effectiveness of our internal control over financial reporting until the later of our second annual report or the first annual report requiredfor each year and to be filed with the SEC following the date we are no longer an “emerging growth company” as defined in the JOBS Act. We cannot assure you that there will not be material weaknesses or significantremediate any deficiencies in our internal controls in the future.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected to take advantage of this extended transition period, and therefore, ourcontrol over financial statementsreporting. As a result, we may not be comparableable to thosecomplete the assessment and remediation process on a timely basis. In the event that our Chief Executive Officer or Chief Financial Officer determines that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how regulators will react or how the market prices of companiesour securities will be affected; however, we believe that comply with such newthere is a risk that investor confidence and the market value of our securities may be negatively affected.

Shares eligible for future sale may adversely affect the market.

From time to time, certain of our stockholders may be eligible to sell all or revised accounting standards.some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations. In general, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months, subject only to the current public information requirement. Affiliates may sell after six months, subject to the Rule 144 volume, manner of sale (for equity securities), current public information, and notice requirements. Of the approximately 2,484,426,501 shares of our common stock outstanding as of November 16, 2022, approximately 1,933,270,220 shares are tradable without restriction. Given the limited trading of our common stock, resale of even a small number of shares of our common stock pursuant to Rule 144 or an effective registration statement may adversely affect the market price of our common stock.

We have never paid dividends on our common stock and have no plans to do not intendso in the future.

Holders of shares of our common stock are entitled to payreceive such dividends as may be declared by our board of directors. To date, we have paid no cash dividends toon our stockholders.

We do not intend to pay cash dividends to ourshares of common stockholders as a public company. We currently intend to retain any future earnings for funding growthstock and therefore,we do not expect to pay any cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, to provide funds for operations of our business. Therefore, any return investors in our common stock may have will be in the form of appreciation, if any, in the market value of their shares of common stock. See “Dividend Policy.”

We will indemnify and hold harmless our officers and directors to the maximum extent permitted by Nevada law.

Our bylaws provide that we will indemnify and hold harmless our officers and directors against claims arising from our activities, to the maximum extent permitted by Nevada law. If we were called upon to perform under our indemnification agreement, then the portion of our assets expended for such purpose would reduce the amount otherwise available for our business.

In the event our board of directors effects a reverse stock split within the reverse stock split range, the proposed reverse stock splitThe planned Reverse Stock Split may decrease the liquidity of the shares of our common stock.

Prior toOn June 15, 2022, the Spin-off, our boardCompany’s Board of directors and our sole stockholder, Inpixon,Directors approved an amendment to our Articles of Incorporation to effect a reverse stock split of ourthe Company’s outstanding shares of common stock, par value $0.00001 per share, at a ratio between 1-for-5of no less than 1-for-500 and 1-for-100,no more than 1-for-1,000, with such ratio to be determined at the sole discretion of the Board of Directors. On September 22, 2022, the Company held its 2022 virtual annual meeting of stockholders, at which may be abandoned or implement by our boardthe Company’s stockholders voted in favor of, directors within 12 months of July 30, 2018, and at a specific ratio determined solely by our board of directors. In the event our board of directors effectsamong other matters, to effect a reverse stock split withinof the Company’s outstanding shares of common stock, par value $0.00001 per share, at a ratio of no less than 1-for-500 and no more than 1-for-1,000, with such ratio to be determined at the sole discretion of the Board of Directors. On November 1, 2022, the Company’ Board of Directors approved an Articles of Amendment to the Company’s Articles of Incorporation to effect a 1 for 1,000 reverse stock split range,(“Reverse Stock Split”) of the Company’s common stock. The current status of the Reverse Stock Split is that the Company has notified the Financial Industry Regulatory Authority (FINRA) of the Reverse Stock Split, which will not be effective until FINRA processes it, and at such time we’ll file the Articles of Amendment with the State of Nevada to effectuate the Reverse Stock Split. The liquidity of the shares of our common stock may be affected adversely by the proposed reverse stock splitplanned Reverse Stock Split given the reduced number of shares that will be outstanding following the proposed reverse stock split, especially if the market price of our common stock does not increase as a result of the proposed reverse stock split.Reverse Stock Split. In addition, the proposed reverse stock splitplanned Reverse Stock Split may increasehave increased the number of stockholdersshareholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholdersshareholders to experience an increase in the cost of selling their shares and greater difficulty effectingaffecting such sales.

In the event our boardWe have been notified of directors effects a reverse stock split within the reverse stock split range, following such proposed reverse stock split, the resulting market price ofNon-Compliance with OTCQB Bid Price Standards, and our common stock may not attract new investors, including institutional investors,be able to continue to trade on the OTCQB.

In order to be in compliance with OTCQB Standards, among other things, the Company must maintain a minimum closing bid price of $0.01 per share on at least one of the prior 30 consecutive calendar days. On October 13, 2022, the Company was contacted by OTC Markets Group, Inc. (“OTC Markets”), as the bid price of the Company’s common stock, quoted on the OTCQB under the symbol “SYSX,” closed below $0.001 on October 12, 2022. OTC Markets notified the Company that in the event that the Company’s closing bid price falls below $0.001 at any time for five consecutive trading days, the Company will be removed from OTCQB as per Section 4.1(b) of the OTCQB Standards. On October 28, 2022, the Company was notified by OTC Markets that that the Company’s bid price had closed below $0.01 for more than 30 consecutive calendar days and mayno longer meets the Standards for Continued Eligibility for OTCQB (the “OTCQB Standards”). Pursuant to Section 4.1 of the OTCQB Standards, the Company was granted a cure period of 90 calendar days, during which the minimum closing bid price for the Company’s common stock must be $0.01 or greater for 10 consecutive trading days in order to continue trading on the OTCQB marketplace. If this requirement is not satisfymet by January 26, 2023, the investing requirementsCompany will be removed from the OTCQB marketplace. In addition, pursuant to the OTCQB Standards, in the event that the Company’s closing bid price falls below $0.001 at any time for five consecutive trading days, the Company will be immediately removed from OTCQB. On October 31, 2022, OTC Markets notified the Company that the bid price for the Company’s common stock closed below $0.001 on October 28, 2022. The bid price for the Company’s common stock closed below $0.001 on October 31, 2022, as well as November 10, 2022, November 11, 2022, November 15, 2022and November 16, 2022. Again, in the event that the Company’s closing bid price falls below $0.001 at any time for five consecutive trading days, the Company will be immediately removed from OTCQB.

We do not currently have enough authorized shares of those investors. Consequently, the trading liquiditycommon 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 November 16, 2022, we have 2,484,426,501 shares of common stock may not improve.

Although we believe that a higher market priceissued and outstanding. As of November 11, 2022, holders of our convertible debentures have delivered notices of conversion covering an aggregate of 617,635,347 shares of common stock may help generate greater or broader investor interest, there can be no assurancestock. If we issued the shares that the proposed reverse stock split will result in a share price that will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve.

Indemnification of our officers and directors may cause us to use corporate resources to the detriment of our stockholders.

Our articles of incorporation eliminate the personal liability of our directors for monetary damages arising from a breach of their fiduciary duty as directors to the fullest extent permitted by Nevada law. This limitation does not affect the availability of equitable remedies, such as injunctive relief or rescission. Our articles of incorporation require us to indemnify our directors and officers to the fullest extent permitted by Nevada law, including in circumstances in which indemnification is otherwise discretionary under Nevada law.

Under Nevada law, we may indemnify our directors or officers or other persons who were, are or are threatened to be made a named defendant or respondent in a proceeding because the person is or was our director, officer, employee or agent, if we determine that the person:

These persons may be indemnified against expenses, including attorneys’ fees, judgments, fines, excise taxes and amounts paid in settlement, actually and reasonably incurred by the person in connection with the proceeding. If the person is found liable to the corporation, no indemnification will be made unless the court in which the action was brought determines that the person is fairly and reasonably entitled to indemnity in an amount that the court will establish.

The obligations associated with being a public company require significant resources and management attention, which may divert resources and attention from our business operations.

We are subject to the reporting requirementsnotices of the Securities Exchange Actconversion that have been delivered, it would result in us issuing more shares than what we have authorized. Accordingly, in order to meet all of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley Act. The Exchange Act requires us to file annual, quarterly and current reports, proxy statements, and other information. The Sarbanes-Oxley Act requires, among other things, thatsuch obligations, we establish and maintain effective internal controls and procedures for financial reporting. Our Chief Executive Officer and Chief Financial Officer are required to certify that our disclosure controls and procedures are effective in ensuring that material information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. We will need to hire or retainamend our Articles of Incorporation, as amended, to increase the services of financial reporting, internal controls experts and other financial personnel or consultants in order to establish and maintain appropriate internal controls and reporting procedures. As a result, we will incur significant legal, accounting and other expenses. Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management’s attention from improving our business, results of operations and financial condition.

Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting. In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify deficiencies. This may preclude us from keeping our filings with the SEC current and interfere with the ability of investors to trade our securities.

If we fail to establish and maintain an effective system of internal controls, we may not be able to report our financial results accurately or prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading priceauthorized shares of our common stock.

Effective internal controls are necessary for us We can give no assurance that we will obtain the requisite affirmative vote of our shareholders to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manageso amend our businessArticles of Incorporation, as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. Notwithstanding our diligence, certain internal controls deficiencies may not be detected. As a result, any internal control deficiencies mayamended, which could materially adversely affect our financial condition results of operations and access to capital.

Public company compliance may make it more difficult to attract and retain officers and directors.

The Sarbanes-Oxley Act and rules implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, these rules and regulations increase our compliance costs and make certain activities more time consuming and costly. As a public company, these rules and regulations may make it more difficult and expensive for us to maintain our director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers, and to maintain insurance at reasonable rates, or at all.

Our stock price may be volatile.

The market price of our common stock is highly volatile and fluctuates widely in price in response to various factors, many of which are beyond our control, including the following:

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of the companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

Our shares of common stock are thinly traded, and the price may not reflect our value. There can be no assurance that there will be an active market for our shares of our common stock in the future.shares.

Our shares of common stock are thinly traded and the price per share may not reflect our actual or perceived value. There can be no assurance that there will be an active market for our shares of common stock in the future. The market liquidity is dependent on the perception of our operating business, among other things. We plan to take certain steps including utilizing investor awareness campaigns, investor relations firms, press releases, road shows and conferences to increase awareness of our business. Any steps that we might take to bring us to the awareness of investors may require that we compensate consultants with cash and/or equity securities. There can be no assurance that there will be any awareness generated or the results of any efforts will result in any impact on our trading volume. Consequently, investors may not be able to liquidate their investment or to liquidate it at a price that reflects the value of the business. If an active market should develop, the price may be highly volatile. If there is a relatively low per-share price for our common stock, many brokerage firms or clearing firms may not be willing to effect transactions in our common stock or accept our shares for deposit in an account. Many lending institutions will not permit the use of low priced shares of common stock as collateral for any loans.

There may be future sales or other dilution

USE OF PROCEEDS

All of our equity, which may adversely affect the market priceshares of our common stock.

We are generally not restricted from issuing additional common stock, including any securities that are convertible into or exchangeable for, or that representCommon Stock offered by the rightSelling Securityholders pursuant to receive, common stock. The market price of our common stock could decline as a result of sales of common stock or securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or the perception that such sales could occur.

We cannot assure you that the common stock will become liquid or that itthis prospectus will be listed on a securities exchange.

sold by the Selling Security holders for their respective accounts. We cannot assure you that we will ever be able to meet the initial listing standards ofnot receive any stock exchange, or that we will be able to maintain any such listing. Until the common stock is listed on an exchange, we expect that it would be eligible to be quoted on the OTC Markets (including the OTCQB), another over-the-counter quotation system, or in the “pink sheets.” In those venues, however, an investor may find it difficult to obtain accurate quotations as to the market value of the common stock. In addition, if we failedproceeds from these sales. We will receive up to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling the common stock, which may further affect its liquidity. This would also make it more difficult for us to raise additional capital.

Our common stock is considered a “penny stock” so long as it trades below $5.00 per share. This can adversely affect its liquidity.

Our common stock is considered a “penny stock” and will continue to be considered a penny stock so long as it trades below $5.00 per share and as such, trading in our common stock will be subject to the requirements of Rule 15g-9 under the Exchange Act. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. The broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchaser’s written consent prior to the transaction.

SEC regulations also require additional disclosure in connection with any trades involving a “penny stock,” including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities. In addition, few broker or dealers are likely to undertake these compliance activities. Other risks associated with trading in penny stocks could also be price fluctuations and the lack of a liquid market.

Risks Associated with this Offering

You will experience immediate dilution in the book value per share of common stock as a result of this offering.

Investors in this offering will experience immediate dilution in their net tangible book value per share to the extent of the difference between the purchase price per share of common stock and the “adjusted” net tangible book value per share after giving effect to the offering. Our net tangible book value as of September 30, 2018 was approximately $(15.7 million), or $(0.54) per share of our common stock based on 29,208,310 shares outstanding. Assuming that we issue an aggregate of Class A Units at a price of $       per Class A Unit, the last reported sale price of our common stock on the OTCQB Market on         , 2019, and        Class B Units at a price of $1,000 per Unit, and assuming the conversion of all the shares of Series 1 Preferred sold in the offering, after deducting placement agent fees and estimated offering expenses payable by us, our net tangible book value as of September 30, 2018 would have been approximately ($       ) million, or ($       ) per share of our common stock. This calculation excludes the proceeds, if any,$500,000.00 from the exercise of the Series 1 Warrants, issued in this offering. This amount represents an increase in net tangible book value of $       per share to our existing stockholders and an immediate dilution in net tangible book value of $      per share to investors in this offering. If outstanding options and warrants to purchase our common stock are exercised, you will experience additional dilution. See the section entitled “Dilution” below.

Our management might not use the proceeds of this offering effectively.

Our management has broad discretion over the use of proceeds of this offering. In addition, our management has not designated a specific use for a substantial portion of the proceeds of this offering. Accordingly, it is possible that our management may allocate the proceeds in ways that do not improve our operating results. In addition, cash proceeds received in the offering may be temporarily used to purchase short-term, low-risk investments, and such investments might not be invested to yield a favorable rate of return.

There is no established public market for the Series 1 Preferred or the Series 1 Warrants to purchase shares of our common stock being offered by us in this offering.

There is no established public trading market for the Series 1 Preferred or the Series 1 Warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list either the Series 1 Preferred or the Series 1 Warrants on any national securities exchange or other nationally recognized trading system, including the OTCQB marketplace of the OTC Markets. Without an active market, the liquidity of the Series 1 Preferred and the Series 1 Warrants will be limited.

The Series 1 Warrants may not have any value.

The Series 1 Warrants issued in this offering will be immediately exercisable and expire on the fifth anniversary of the date of issuance. The Series 1 Warrants will have an initial exercise price per share equal to $       , which is        % of the public offering price of the Class A Units. In the event that our common stock price does not exceedassuming the exercise pricein full of the Series 1 Warrants during the period when the Series 1 Warrants are exercisable, the Series 1 Warrants may not have any value.

Holders of our Series 1 Warrants will have no rights as a common stockholder until they acquire our common stock.

Until you acquire shares of our common stock upon exercise of your Series 1 Warrants, you will have no rights with respect to our common stock. Upon exercise of your Series 1 Warrants, you will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.

USE OF PROCEEDS

We expect to receive net proceeds from the sale of Class A Units and Class B Units that we are offering to be approximately $      million, assuming a public offering price of $      per Class A Unit, the last reported sale price of our common stock on the OTCQB Market on         , 2019, and $       per Class B Unit, after deduction of placement agent fees and estimated expenses payable by us, as described in the section below titled “Plan of Distribution.” Assuming all of the Series 1 Warrants issued in this offering were exercised in full at the exercise price of $      per share, which is       % of the public offering price of the Class A Units, we estimate that we would receive additional net proceeds of approximately $       million.for cash. We cannot predict when or if the Series 1 Warrants will be exercised, however, and it is possible that the Series 1 Warrants may expire and never be exercised.

Assuming          Class A Units are sold in the offering and no Class B Units are sold in this offering, each $1.00 increase (decrease) in the assumed public offering price of $           per Class A Unit would increase (decrease) the net proceeds to us from this offering, after deducting the placement agent fees and estimated offering expenses payable by us, by approximately $           million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. 

We may also increase or decrease the number of Class A Units we are offering. Assuming          Class A Units are sold in the offering and no Class B Units are sold in this offering, an increase (decrease) of 100,000 in the number of Class A Units we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the placement agent fees and estimated offering expenses payable by us, by approximately $           million, assuming the public offering price stays the same. An increase of 100,000 in the number of Class A Units we are offering, together with a $1.00 increase in the assumed public offering price of $           per Class A Unit, would increase the net proceeds to us from this offering, after deducting the placement agent fees and estimated offering expenses payable by us, by approximately $           million. A decrease of 100,000 in the number of Class A Units we are offering, together with a $1.00 decrease in the assumed public offering price of $           per share, would decrease the net proceeds to us from this offering, after deducting the placement agent fees and estimated offering expenses payable by us, by approximately $           million. We do not expect that a change in the offering price or the number of shares by these amounts would have a material effect on our intended uses of the net proceeds from this offering, although it may impact the amount of time prior to which we may need to seek additional capital. 

We intend to use the net proceeds from this public offeringthe exercise of the Warrants for working capital and general corporate purposes (including research and development and sales and marketing). General corporate purposes may include capital expenditures and trade payables. We will continue to invest in research and development to drive our business growth in securing, digitizing and optimizing premises with indoor positioning analytics for businesses and governments.

The amounts and timing of our actual expenditures will depend on numerous factors. We may find it necessary or advisable to use portions of the net proceeds for other purposes, and we will have broad discretion in the application and allocation of the net proceeds from this offering. Additionally, we may use a portion of the net proceeds of this offering to finance acquisitions of, or investments in, competitive and complementary businesses, products or services as a part of our growth strategy. However, we currently have no commitments with respect to any such acquisitions or investments.

Pending use of the net proceeds from this offering, we may invest the net proceeds in short-term, interest-bearing, investment-grade securities. We cannot predict whether the proceeds invested will yield a favorable return.

purposes.

Sysorex does not currently expect to pay dividends on its capital stock. The payment of any dividends in the future, and the timing and amount thereof, is within the discretion of Sysorex’s board of directors. The board’s decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in any debt instrument, industry practice, legal requirements, regulatory constraints and other factors that the board deems relevant. Our ability to pay dividends will depend on our ongoing ability to generate cash from operations. We cannot guarantee that Sysorex will pay a dividend in the future or continue to pay any dividends if we began paying dividends.

CAPITALIZATION

CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2018: 2022 on an actual basis. The numbers presented in this table are in thousands of dollars, except number of shares and par value data.

YouThis table should be read this information togetherin conjunction with the sections titledinformation contained in this prospectus, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included herein, and our consolidated financial statements and the related notes included herein. 

The number of shares of our common stock to be outstanding upon completion of this offering is based on 29,208,310 shares of common stock outstanding as of September 30, 2018, assuming that only Class A Units are purchasedthereto appearing elsewhere in this offering and excludes as of that date:

To the extent we sell any Class B Units in this offering, the same aggregate number of common stock equivalents resulting from this offering would be convertible under the Series 1 Preferred issued as part of the Class B Units. 

Assuming          Class A Units are sold in the offering and no Class B Units are sold in this offering, each increase (decrease) of 100,000 Class A Units to be purchased at $           per unit (which was the last reported bid price of our common stock on the OTCQB on          , 2019) would increase (or decrease) additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $           million, assuming the offering price remains at $           and after deducting placement agent fees and estimated offering expenses payable by us. 

Assuming          Class A Units are sold in the offering and no Class B Units are sold in this offering, a $1.00 increase (decrease) in the assumed public offering price of $           per Class A Unit (which was the last reported bid price of our common stock on the OTCQB on          , 2019) would result in an incremental increase (decrease) in each of our additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $           million, assuming that the number of Class A Units sold by us as set forth on the cover page of this prospect remains the same and after deducting the placement agent and estimated offering expenses payable by us. 

prospectus.

DILUTION

DETERMINATION OF OFFERING PRICE

Resale of Common Stock by Selling Securityholders

Our net tangible book value represents the amount of our total tangible assets less total liabilities. We calculate the net tangible book value per share by dividing the net tangible book value by the number of outstanding shares of our common stock. As of September 30, 2018, our historical net tangible book value was $(15.7) million, or approximately $(0.54) per share of our total outstanding common stock, based on the shares of our outstanding common stock immediately prior to the completion of this offering. As of September 30, 2018, after giving effect to the sale of shares of common stock offered by us at an assumed public offering price of $         per share, the last reported sale price of our common stock on the OTCQB Market on         , 2019, and after deducting estimated placement agent fees and offering expenses payable by us, our pro forma net tangible book value as of September 30, 2018 would have been approximately $        , or $         per share of our total outstanding common stock. This represents an immediate dilution of $         per share to new investors purchasing shares of our common stock in this offering.

The following table illustrates the per share dilution to investors purchasing securities in the offering:

The amounts above are based on 29,208,310 shares of common stock outstanding as of September 30, 2018, which excludes as of that date:

To the extent that any of our outstanding options or warrants, including the Series 1 Warrants issued in this offering, are exercised, we grant additional options under our equity incentive plan or issue additional warrants or preferred stock, or we issue additional shares of common stock in the future, there may be further dilution to new investors.

An investor that acquires additional shares of common stock through the exercise of the Series 1 Warrants offered hereby may experience additional dilution depending on our net tangible book value at the time of exercise. Assuming that we issue an aggregate of       Class A Units and no Class B Units, that the Series 1 Warrants have an exercise price of $      per share, which is       % of the public offering price of the Class A Units, and that all such Series 1 Warrants are exercised, our net tangible book value as of September 30, 2018 would have been approximately ($     ) million, or ($     ) per share of our common stock. This amount represents an increase in net tangible book value of $      per share to our existing stockholders and a dilution in net tangible book value of $     per share to new investors exercising such Series 1 Warrants. 

MARKET PRICE OF OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

On December 19, 2018, the closing bid price for our common stock as reported on the OTCQB was $0.0268 per share. There was no trading of our common stock on the OTCQB or any other market, exchange or quotation system before September 4, 2018. Although our common stockCommon Stock is quoted on the OTCQB thereunder the symbol “SYSX.” The shares registered for resale in this prospectus being offered by the Selling Securityholders will be sold at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale or at negotiated prices.

Issuance of Shares of Common Stock Underlying Warrants

The price of the shares of Common Stock underlying the Warrants is a limited trading market fordetermined by reference to the exercise price of the Warrants, such that each Warrant entitles the holder to purchase one share of our common stock. BecauseCommon Stock at an exercise price of $0.001 per share.

DIVIDEND POLICY

We have not paid any cash dividends on our common stock is thinly traded,and do not currently anticipate paying cash dividends in the foreseeable future. The agreements into which we may enter in the future, including indebtedness, may impose limitations on our ability to pay dividends or make other distributions on our capital stock. Payment of future dividends on our common stock, if any, reported sale prices may notwill be a true market-based valuationat the discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements and surplus, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. We intend to retain future earnings, if any, for reinvestment in the development and expansion of our business.

MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock is currently quoted on the OTCQB tier of the OTC Market Group, Inc. under the symbol “SYSX.” The Company began trading on the OTC Markets under the symbol “SYSX” on September 4, 2018. The OTC Market is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current “bids” and “asks,” as well as volume information.

The following table sets forth the range of high and low closing bid prices per share offor our common stock since commencement of quotation. Thefor each quarterly period during the years ended December 31, 2020, and 2021 and to date, as reported by the OTC Markets. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

Holders The closing price of our common stock on the OTCQB on November 16, 2022, was $0.0009.

Non-Compliance with OTCQB Bid Price Standards

In order to be in compliance with OTCQB Standards, among other things, the Company must maintain a minimum closing bid price of $0.01 per share on at least one of the prior 30 consecutive calendar days. On October 13, 2022, the Company was contacted by OTC Markets Group, Inc. (“OTC Markets”), as the bid price of the Company’s common stock, quoted on the OTCQB under the symbol “SYSX,” closed below $0.001 on October 12, 2022. OTC Markets notified the Company that in the event that the Company’s closing bid price falls below $0.001 at any time for five consecutive trading days, the Company will be removed from OTCQB as per Section 4.1(b) of the OTCQB Standards. On October 28, 2022, the Company was notified by OTC Markets that that the Company’s bid price had closed below $0.01 for more than 30 consecutive calendar days and no longer meets the Standards for Continued Eligibility for OTCQB (the “OTCQB Standards”). Pursuant to Section 4.1 of the OTCQB Standards, the Company was granted a cure period of 90 calendar days, during which the minimum closing bid price for the Company’s common stock must be $0.01 or greater for 10 consecutive trading days in order to continue trading on the OTCQB marketplace. If this requirement is not met by January 26, 2023, the Company will be removed from the OTCQB marketplace. In addition, pursuant to the OTCQB Standards, in the event that the Company’s closing bid price falls below $0.001 at any time for five consecutive trading days, the Company will be immediately removed from OTCQB. On October 31, 2022, OTC Markets notified the Company that the bid price for the Company’s common stock closed below $0.001 on October 28, 2022. The bid price for the Company’s common stock closed below $0.001 on October 31, 2022, as well as November 10, 2022, November 11, 2022, November 15, 2022 and November 16, 2022. Again, in the event that the Company’s closing bid price falls below $0.001 at any time for five consecutive trading days, the Company will be immediately removed from OTCQB.

Holders of Common Stock

As of December 19, 2018, we had 197 registered November 16, 2022, there were approximately 218 record holders of record of our common stock. A substantially greaterThe number of record holders does not include beneficial owners of common stock held in the names of banks, brokers, nominees or other fiduciaries.

Dividends

We have not paid any cash dividends on our common stock and do not currently anticipate paying cash dividends in the foreseeable future. We intend to retain future earnings, if any, for reinvestment in the development and expansion of our business.

Historical Common Equity Transactions

The following is a summary of transactions by us since November 17, 2019 involving registered and unregistered issuances and redemption of our common stock are “street name” or beneficial holders, whose shares of record are held through banks, brokers, other financial institutions and registered clearing agencies.equity securities.

PLAN OF DISTRIBUTION

         (referred to herein as the placement agent) has agreed to act as our exclusive placement agent in connection with this offering of our securities pursuant to this prospectus. The placement agent has agreed to be our placement agents on a reasonable best efforts basis, in connection with the issuance and sale by us of the securities being offered in this prospectus. The terms of this offering were subject to market conditions and negotiations between us, the placement agent and prospective investors. The placement agent does not have any commitment to purchase any of our securities, and the placement agent will have no authority to bind us by virtue of its agreement to act as placement agent. Further, the placement agent does not guarantee that it will be able to raise new capital in any prospective offering. The placement agent may engage sub-agents or selected dealers to assist with the offering. 

Only certain institutional investors purchasing the securities offered hereby will execute a securities purchase agreement with us, providing such investors with certain representations, warranties and covenants from us, which representations, warranties and covenants will not be available to other investors who will not execute a securities purchase agreement in connection with the purchase of the securities offered pursuant to this prospectus. Therefore, those investors shall rely solely on this prospectus in connection with the purchase of securities in the offering.

We will deliver the securities being issued to the investors upon receipt of investor funds for the purchase of the securities offered pursuant to this prospectus. We expect to deliver the securities being offered pursuant to this prospectus on or about      , 2019.

We have agreed to pay the placement agent a total cash fee equal to 7.0% of the gross proceeds of this offering. We have also agreed to reimburse the placement agent up to $       for its expenses.

We estimate the total offering expenses of this offering that will be payable by us, excluding the placement agent’s fees and expenses, will be approximately $         .

Following the closing of a financing in whichOn January 22, 2021, the Company raises gross proceeds of at least $10 million from investors introduced by the placement agent, for a period of 12 months following such closing, we will grant the placement agent the right to act as sole managing underwriter and book runner, or sole placement agent for future equity, equity-linked or debt (excluding commercial bank debt) during such 12 month period.

If any investors introduced to us by the placement agent participate in a financing within 12 months after this offering pursuant to which we sell securities to such investors, we have agreed to pay a fee of 7.0% of the gross proceeds of such sales to the placement agent.