Equity

12 Months Ended

Dec. 31, 2022

Stockholders' Equity Note [Abstract]

Equity

Note 11 — Equity

As discussed in Note 3 Basis of Presentation the Company completed a reverse merger of Sysorex and TTM Digital with TTM Digital being the accounting acquirer and reporting entity. In a reverse merger, the capital accounts of the reporting entity (TTM Digital) are restated to reflect the legal capital structure of the legal acquirer (Sysorex). As a result, the share data of the reporting entity has been retroactively restated for all periods presented to the equivalent share values of Sysorex for the capital transaction activity of TTM Digital, as if the reverse merger occurred on January 1, 2020. The share data of the reporting entity has been retroactively stated for all periods presented to the equivalent share values of Sysorex. On September 22, 2022, the Company’s stockholders voted to approve an amendment to the Articles of Incorporation to increase the total number of authorized shares of the Company’s capital stock from 510,000,000 shares, par value $0.00001 per share, to 3,010,000,000 shares, of which 3,000,000,000 shares will be designated as common stock and 10,000,000 shares will be designated as preferred stock, in accordance with the voting results listed below. As of December 31, 2022, 2,484,501,880 shares were issued, 2,484,426,501 shares were outstanding. As of December 31, 2021, 499,560,659 common stock shares were authorized; 145,713,591 shares were issued, and 145,638,212 shares were outstanding. No preferred stock has been designated or issued.

Private Placement Agreement

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

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

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

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

The additional shares and Warrant 3 will be issuable for each 30-day period, or portion thereof, that the registrable securities have not become effective. As of May 31, 2023, the Company is obligated to issue an additional 271 million shares of common stock and warrant 3 to purchase an additional 271 million shares of common stock.

Share Issuance

On February 8, 2022, the Company entered into an Advisory Services Agreement (the “Agreement”) with ViewTrade Securities, Inc. (“Advisor”) whereby the Advisor will assist the Company and provide services that will contribute to the overall growth of the Company. ViewTrade’s owner is a shareholder in the Company. The term of the engagement is six months and may be extended by mutual agreement of the parties. In consideration of the services, the Company paid an Advisory Fee in an amount equal to 6,000,000 restricted common shares (the “Fees) and the Fees shall be deemed fully earned upon execution of the Agreement. As of December 31, 2022, the Company recorded a value of the stock of $240,000, which included $239,940 of additional paid in capital and $60 par value.

Stock Options

On July 30, 2018, the board of directors of the Company’s 2018 Equity Incentive Plan (the “2018 Plan”), which enables the Company to grant stock options, share appreciation rights, restricted stock, restricted stock units, share awards, performance unit awards, and cash awards to associates, directors, consultants, and advisors of the Company and its affiliates, and to improve the ability of the Company to attract, retain, and motivate individuals upon whom the Company’s sustained growth and financial success depend, by providing such persons with an opportunity to acquire or increase their proprietary interest in the Company. The 2018 Plan is to be administered by the Board, which shall have discretion over the awards and grants there under. The aggregate maximum number of shares of common stock for which stock options or awards may be granted pursuant to the 2018 Plan is 80,000, which number will be automatically increased on the first day of each quarter, beginning on January 1, 2019 and for each quarter thereafter, by a number of shares of common stock equal to the least of (i) 10,000 shares,(ii) 10% of the shares of common stock issued and outstanding on that date, or (iii) a lesser number of shares that may be determined by the board. No awards may be issued after July 30, 2028.

Stock options granted under the 2018 Plan may be non-qualified stock options or incentive stock options, within the meaning of Section 422(b) of the Internal Revenue Code of 1986. Each option, or portion thereof, that is not an incentive stock option, shall be considered a non-qualified option. The option price must be at least 100% of the fair market value on the date of the grant and if an Incentive Stock Option is issued to a 10% or greater shareholder the grant must be 110% of the fair market value on the date of the grant.

On July 20, 2021, the Board of Directors of the Company approved an amendment (the “Plan Amendment”) of the Company’s 2018 Equity Incentive Plan (as so amended, the “Plan”) to increase the number of shares of the Company’s common stock reserved for issuance thereunder by 8,000,000 shares. The Plan Amendment became effective immediately.

As of December 31, 2022, the awards outstanding under the equity incentive plan consisted of the employee stock options granted on July 20, 2021, to purchase up to 1,656,000 shares of common stock.

A summary of stock option activity for the year ended December 31, 2022, is as follows:

	Number of Options (in Shares)			Weighted Average Exercise Price
Outstanding, January 1, 2022		1,656,000		$	2.00
Granted		-		$	-
Exercised		-			-
Forfeited or cancelled		(48,500	)		-
Outstanding, December 31, 2022		1,607,500		$	2.00
Exercisable, December 31, 2022		1,607,500		$	2.00

The Company recognized approximately $0.01 million of stock-based compensation for the year ended December 31, 2022.

Warrants

The following table represents the activity related to the Company’s warrants during the year ended December 31, 2022:

	Number of Warrants (in Shares)			Weighted Average Exercise Price
Outstanding, January 1, 2022		5,926,763		$	*
Granted		1,004,576,431			.001
Exercised		(418,931	)		-
Outstanding, December 31, 2022		1,010,084,263		$	-

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

The weighted average contractual term as of December 31, 2022, is 3.6 years.

If at any time after the six month anniversary of the closing date as disclosed in Note 8 Short-term debt, 2021 convertible debenture and warrants, there is no effective registration statement registering the warrant shares granted to the convertible debenture holders and placement agent, then, for each thirty days following the six month anniversary of the their respective closing date or portion of any thirty day period thereafter in which no effective registration statement is available, the amount of warrant shares shall be automatically increased by five percent over the warrant shares available on such dates. As such, the Company is obligated to grant 4,576,731 warrants through December 31, 2022. The Company has recorded on the consolidated balance sheets, accrued liabilities, approximately $0.25 million of accrued registration rights penalties and interest.

In connection with the sale of 500,000,000 shares of common stock to Investors on October 18, 2022, the Company granted an aggregate of 1,000,000,000 warrants to purchase common stock. The warrants issued consisted of warrant 1 to acquire 500,000,000 shares of common stock and warrant 2 to acquire 500,000,000 shares of common stock. The terms of Warrant 1 and Warrant 2 permit the holder to acquire one share of common stock at an exercise price of $0.001 per share, which exercise price will not be subject to adjustment as a result of any forward or reverse split of the common stock. As discussed above in Private Placement Agreement, if the Company does not file a registration statement declared effective by the SEC by the Registration Deadline, Warrant 3 will be issued to each Investor for the right to acquire the number of Additional Shares issued to the Investor for failure to meet the Registration Deadline.

The additional shares and Warrant 3 will be issuable for each 30-day period, or portion thereof, that the registrable securities have not become effective. As of May 31, 2023, the Company is obligated to issue an additional 271 million shares of common stock and warrant 3 to purchase an additional 271 million shares of common stock.

SYSOREX, INC. AND SUBSIDIARIES

Prefunded Warrants

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

	Prefunded Warrants
Outstanding, January 1, 2022		15,361,622
New issuances		-
Exercised		12,361,622
Outstanding, December 31, 2022		3,000,000

Restricted Stock Units

The following table represents the activity related to the Company’s restricted stock awards granted to employees and directors during the twelve months ended December 31, 2022:

	Number of Restricted Stock Shares		Weighted Average Grant Date Fair Value
Outstanding, January 1, 2022		1,100,000	$	0.48
Granted		-		-
Vested		1,100,000		0.40
Unvested, December 31, 2022		-	$	-

The Company recognized approximately $0.1 million of stock-based compensation for the year ended December 31, 2022.

Share Derivative Liabilities

As the amount of common stock on an as converted basis as of December 31, 2022, exceeded our authorized share amount, the Company’s outstanding warrants, stock options and vested but unissued restricted stock shares (“RSUs”) were reclassified to derivative liabilities in the consolidated financial statements. This results in non-cash gains or losses each period during the term of the warrants, stock options, RSU vesting period and convertible debt. The table below summarizes the reclassified share derivative liabilities as of December 31, 2022 (dollars in thousands):

	December 31, 2022
Warrants	$	272
Stock options		1
Total share derivative liability	$	273

Reverse Stock Split

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

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

			Proforma
	As Stated		Effect
Balance Sheet
Common stock:
Shares Issued:
12/31/2022		2,484,501,880		2,484,502
12/31/2021		145,713,591		145,714
Shares Outstanding:
12/31/2022		2,484,426,501		2,484,427
12/31/2021		145,638,212		145,638
Treasury Stock:		75,379		75

		Year Ended December 31,
EPS		2022			2021
Weighted Average Shares
Outstanding – basic and diluted	As stated		843,858,474			139,061,084
	Proforma		843,858			139,061
Net income (loss) per share:
Continuing operations	As stated		(0.010	)		(0.38	)
	Proforma		(10.00	)		(38.00	)
Discontinued Operations	As stated		(0.004	)		0.02
	Proforma		(4.00	)		20.00