v3.22.1
Cover - shares
3 Months Ended
Mar. 31, 2022
May 16, 2022
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Mar. 31, 2022  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2022  
Current Fiscal Year End Date --12-31  
Entity File Number 33-20111  
Entity Registrant Name SPYR, INC  
Entity Central Index Key 0000829325  
Entity Tax Identification Number 75-2636283  
Entity Incorporation, State or Country Code NV  
Entity Address, Address Line One 6700 Woodlands Parkway  
Entity Address, Address Line Two Ste. 230  
Entity Address, Address Line Three #331  
Entity Address, City or Town The Woodlands  
Entity Address, State or Province TX  
Entity Address, Postal Zip Code 77382  
City Area Code 303  
Local Phone Number 991-8000  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   290,252,374
v3.22.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
Mar. 31, 2022
Dec. 31, 2021
Current Assets:    
Cash and cash equivalents $ 184,000 $ 35,000
Other receivables  
Prepaid expenses 46,000 47,000
Trading securities, at market value 1,000 1,000
Current Assets of discontinued operations 14,000 14,000
Total Current Assets 245,000 97,000
Property and equipment, net 13,000 16,000
Other assets 84,000 46,000
TOTAL ASSETS 342,000 159,000
Current Liabilities:    
Accounts payable and accrued liabilities 1,872,000 1,818,000
Related party notes payable, current portion 528,000 524,000
Short term convertible notes payable, (net of debt discount of $0, as of March 31, 2022 and December 31, 2021, respectively) 210,000 206,000
SBA PPP note payable 72,000 70,000
Current liabilities of discontinued operations 803,000 803,000
Total Current Liabilities 3,485,000 3,421,000
Other Liabilities    
Related party notes payable 2,572,000 2,534,000
Long term convertible notes payable, (net of debt discount of $354,000 and $397,000, as of March 31, 2022 and December 31, 2021, respectively) 839,000 286,000
Derivative Liability 380,000 2,261,000
Total Liabilities 7,276,000 8,862,000
STOCKHOLDERS’ EQUITY (DEFICIT)    
Common stock, $0.0001 par value, 750,000,000 shares authorized 281,143,290 and 252,050,988 shares issued and outstanding as of March 31, 2022 and December 31, 2021 28,114 25,205
Common Stock to be Issued 1,089
Additional paid-in capital 60,060,421 57,779,303
Accumulated deficit (67,022,521) (66,508,521)
Total Stockholders’ Equity (Deficit) (6,933,000) (8,704,000)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) 342,000 159,000
Preferred Class A [Member]    
STOCKHOLDERS’ EQUITY (DEFICIT)    
Preferred stock, value 11 11
Preferred Class E [Member]    
STOCKHOLDERS’ EQUITY (DEFICIT)    
Preferred stock, value $ 2 $ 2
v3.22.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)
Mar. 31, 2022
Dec. 31, 2021
Debt discount, current $ 0 $ 0
Debt discount, noncurrent $ 354,000 $ 397,000
Common stock, par value per share $ 0.0001 $ 0.0001
Common stock, shares authorized 750,000,000 750,000,000
Common stock, shares issued 281,143,290 252,050,988
Common stock, shares outstanding 281,143,290 252,050,988
Preferred Class A [Member]    
Preferred stock, par value per share $ 0.0001 $ 0.0001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 107,636 107,636
Preferred stock, shares outstanding 107,636 107,636
Preferred Class E [Member]    
Preferred stock, shares issued 20,000 20,000
Preferred stock, shares outstanding 20,000 20,000
v3.22.1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2022
Mar. 31, 2021
Income Statement [Abstract]    
Revenues $ 1,000
Cost of Goods Sold
Gross Profit 1,000
Expenses    
Labor and related expenses 1,259,000 489,000
Rent 6,000 28,000
Depreciation and amortization 2,000 3,000
Professional fees 891,000 429,000
Research and development 4,000
Other general and administrative 40,000 45,000
Total Operating Expenses 2,198,000 998,000
Operating Loss (2,197,000) (998,000)
Other Expense    
Interest expense (49,000) (102,000)
Other income 38,000
Amortization of debt discount (43,000)
Loss on conversion of debt (54,000)
Gain on disposition of assets 5,000
Settlement expense (282,000)
Change in value of derivative liability 2,075,000 (104,000)
Unrealized loss on trading securities 1,000
Total Other Expense 1,685,000 (200,000)
Loss from continuing operations (512,000) (1,198,000)
Loss from discontinued operations (2,000) (11,000)
Net Loss $ (514,000) $ (1,209,000)
Net Loss    
Basic and Diluted earnings per share $ (0.00) $ (0.01)
Weighted Average Common Shares    
Basic and Diluted 270,939,479 213,258,187
v3.22.1
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) - USD ($)
Preferred Stock Class A [Member]
Preferred Stock Class E [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Common Stock To Be Issued [Member]
Retained Earnings [Member]
Total
Beginning balance, value at Dec. 31, 2020 $ 11 $ 2 $ 21,014 $ 53,265,157   $ (60,973,000) $ (5,560,000)
Beginning balance, Shares at Dec. 31, 2020 107,636 20,000 210,137,631        
Fair value of common stock issued for employee & director compensation $ 140 214,860   215,000
Fair value of common stock issued for employee & director compensation, shares     1,400,000        
Fair value of registered S-8 common stock issued for services $ 300 370,700   371,000
Fair value of registered S-8 common stock issued for service, Shares     3,000,000        
Net loss   (1,209,000) (1,209,000)
Ending balance, value at Mar. 31, 2021 $ 11 $ 2 $ 21,454 55,977,533   (62,182,000) (6,183,000)
Ending balance, shares at Mar. 31, 2021 107,636 20,000 214,537,631        
Beginning balance, value at Dec. 31, 2021 $ 11 $ 2 $ 25,205 57,779,303 (66,508,521) (8,704,000)
Beginning balance, Shares at Dec. 31, 2021 107,636 20,000 252,050,988      
Fair value of restricted common stock and options issued for employee and director compensation $ 1,202 694,230 695,431
Fair value of restricted common stock and options issued for employee and director compensation, shares     12,015,019        
Fair value of S-8 registered common stock issued for services $ 870 538,530 539,400
Fair value of S-8 registered common stock issued for services, Shares     8,700,000        
Fair value of common stock issued for settlement $ 502 281,474 281,976
Fair value of common stock issued for settlement, shares     5,015,994        
Fair value of common stock issued for conversion of notes payable $ 336 53,359 53,695
Fair value of common stock issued for conversion of notes payable, shares     3,361,289        
Common stock to be issued for services 29,811 $ 189 30,000
Common stock to be issued for services, Shares         1,886,792    
Common stock to be issued for director compensation 516,600 $ 900 517,500
Common stock to be issued for director compensation, shares         9,000,000    
Reclassification of derivative liabilities to additional paid-in capital 166,514 166,514
Net loss (514,000) (514,000)
Ending balance, value at Mar. 31, 2022 $ 11 $ 2 $ 28,114 $ 60,060,421 $ 1,089 $ (67,022,521) $ (6,933,000)
Ending balance, shares at Mar. 31, 2022 107,636 20,000 281,143,290   10,886,792    
v3.22.1
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2022
Mar. 31, 2021
Cash Flows From Operating Activities:    
Net loss $ (514,000) $ (1,209,000)
Adjustments to reconcile net loss to net cash used in operating activities:    
Loss on discontinued operations 2,000 11,000
Reclassification of derivative liabilities to additional paid-in capital 167,000
Depreciation and amortization 3,000 3,000
Common stock issued for director and employee compensation 696,000 215,000
Common stock issued for services 539,000 371,000
Common stock issued for settlement 282,000
Common stock issued for conversion of debt 54,000
Common stock to be issued for services 30,000
Common stock to be issued for director compensation 518,000
Amortization of debt discounts on convertible notes payable 43,000 33,000
Gain on disposition of assets (5,000)
Unrealized gain on trading securities (1,000)
Change in value of derivative liability (2,241,000) 104,000
Changes in operating assets and liabilities:    
Increase (Decrease) in prepaid expenses 1,000 (29,000)
Decrease in other receivables 4,000
Increase in inventory (25,000)
Increase in other assets (1,000)
Increase in accounts payable and accrued liabilities 56,000 119,000
Decrease in operating lease right-of-use liability (16,000)
Increase in accrued interest on notes payable – related party 42,000
Increase in accrued interest on notes payable 4,000
Increase in accrued interest on short-term advances - related party 18,000
Increase in accrued interest on SBA PPP notes payable 1,000
Increase in accrued interest on line of credit – related party (18,000)
Increase in accrued interest and liquidated damages on convertible notes 20,000
Net Cash Used in Operating Activities from Continuing Operations (321,000) (369,000)
Net Cash Used in Operating Activities from Discontinued Operations
Net Cash Used in Operating Activities (321,000) (369,000)
Cash Flows From Investing Activities:    
Sale of property and equipment 8,000
Net Cash Used in Investing Activities 8,000
Cash Flows From Financing Activities:    
Proceeds from long-term convertible notes 510,000
Proceeds from SBA PPP note payable 73,000
Funds lent as asset consideration (40,000)
Net Cash Provided by Financing Activities 470,000 73,000
Net increase (decrease) in Cash 149,000 (288,000)
Cash and cash equivalents at beginning of period 35,000 510,000
Cash and cash equivalents at end of period 184,000 222,000
Supplemental Disclosure of Interest and Income Taxes Paid:    
Interest paid during the year
Income taxes paid during the year
v3.22.1
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Mar. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Interim Financial Statements

 

The accompanying condensed consolidated financial statements of SPYR, Inc. and subsidiaries (the “Company”) are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of SPYR, Inc. and its wholly-owned subsidiaries, SPYR APPS, LLC, a Nevada Limited Liability Company, E.A.J.: PHL, Airport Inc., a Pennsylvania corporation (discontinued operations, see Note 6), and Branded Foods Concepts, Inc., a Nevada corporation. Intercompany accounts and transactions have been eliminated.

 

Going Concern

 

The accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business, however, the issues described below raise substantial doubt about the Company’s ability to do so.

 

As shown in the accompanying financial statements, for the three months ended March 31, 2022, the Company recorded a net loss from continuing operations of $512,000 and have current liabilities of $3,485,000. As of March 31, 2022, our cash balance was $184,000. These issues raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company intends to utilize cash on hand, shareholder loans and other forms of financing such as the sale of additional equity and debt securities, capital leases and other credit facilities to conduct its ongoing business, and to also conduct strategic business development, marketing analysis, due diligence investigations into possible acquisitions, and software development costs and implementation of our business plans generally. The Company also plans to diversify, through acquisition or otherwise, in other unrelated business areas and is exploring opportunities to do so.

 

Historically, we have financed our operations primarily through sales of our common stock and debt financing. The Company will continue to seek additional capital through the sale of its common stock, debt financing and through expansion of its existing and new products. If our financing goals for our products do not materialize as planned and if we are not able to achieve profitable operations at some point in the future, we may have insufficient working capital to maintain our operations as we presently intend to conduct them or to fund our expansion, marketing, and product development plans.

 

The ability of the Company to continue as a going concern is dependent upon the success of future capital offerings or alternative financing arrangements and expansion of its operations. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Management is actively pursuing additional sources of financing sufficient to generate enough cash flow to fund its operations through calendar year 2022. However, management cannot make any assurances that such financing will be secured.

 

Covid-19

 

On January 30, 2020, the World Health Organization declared the coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial effect will be to the company, the Company is anticipating potential reductions in revenue, labor and supply shortages, difficulty meeting debt covenants, delays in collecting receivables and paying liabilities and changes in the fair value of assets and liabilities. Our necessity for fund raising activities make it reasonably possible that we are vulnerable to the risk of a near-term severe impact.

 

Additionally, it is reasonably possible that estimates made in the financial statements have been, or will be, materially and adversely impacted in the near term as a result of these conditions, including potential credit losses on receivables and investments; impairment losses related to long-lived assets; and contingent obligations.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions used by management affected impairment analysis for trading securities, fixed assets, intangible assets, capitalized licensing rights, amounts of potential liabilities, and valuation of issuance of equity securities. Actual results could differ from those estimates.

 

Earnings (Loss) Per Share

 

The basic and fully diluted shares for the three months ended March 31, 2022 are the same because the inclusion of the potential shares (Class A – 26,909,028, Class E – 1,385,042, Options – 4,779,900, Warrants – 7,200,000) would have had an anti-dilutive effect due to the Company generating a loss for the three months ended March 31, 2022.

 

The basic and fully diluted shares for the three months ended March 31, 2021 are the same because the inclusion of the potential shares (Class A – 26,909,028, Class E – 570,190, Options – 5,379,900, Warrants – 8,700,000) would have had an anti-dilutive effect due to the Company generating a loss for the three months ended March 31, 2021.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation or amortization. Depreciation is recorded at the time property and equipment is placed in service using the straight-line method over the estimated useful lives of the related assets, which range from three to ten years. Leasehold improvements are amortized over the shorter of the expected useful lives of the related assets or the lease term. The estimated economic useful lives of the related assets as follows:

 

 
Furniture and fixtures 5-10 years
Equipment 5-7 years
Computer equipment 3 years
Vehicles 5-10 years
Leasehold improvements 5-6 years

 

Maintenance and repairs are charged to operations; betterments are capitalized. The cost of property sold or otherwise disposed of and the accumulated depreciation and amortization thereon are eliminated from the property and related accumulated depreciation and amortization accounts, and any resulting gain or loss is credited or charged to operations.

 

Concentration of Credit Risk

 

The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts, or other foreign hedging arrangements. The Company maintains the majority of its cash balances with financial institutions, in the form of demand deposits. The Company believes that no significant concentration of credit risk exists with respect to these cash balances because of its assessment of the creditworthiness and financial viability of this financial institution.

 

Recent Accounting Standards

 

The recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

v3.22.1
RELATED PARTY TRANSACTIONS
3 Months Ended
Mar. 31, 2022
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 2 – RELATED PARTY TRANSACTIONS

 

On September 5, 2017, the Company obtained a revolving line of credit from Berkshire Capital Management Co., Inc. which is controlled by the Company’s former chairman of the board. The line of credit allows the Company to borrow up to $1,000,000 with interest at 6% per annum. The loan is secured by a first lien on all the assets of the Company and its wholly owned subsidiary SPYR APPS®, LLC. The loan was fully drawn as of February 2018, at which time the Company had borrowed $1,000,000 and accrued interest of approximately $16,000. Repayment on the loan is due December 31, 2021. This not is currently in default.

 

During 2018 and 2019, the Company has received an additional $1,062,000 in the form of short-term advances from Berkshire Capital Management Co., Inc. The last advance occurred on September 30, 2019, at which time the Company had borrowed $1,062,000. No further advances are expected from Berkshire Capital Management Co., Inc. The Company has accrued interest on these short-term advances at 6% per annum. The short-term advances are due upon demand. As of December 31, 2020, the Company has borrowed $1,062,000 and accrued interest of approximately $122,000.

 

On June 17, 2021, the Company consolidated all prior notes payable with Berkshire Capital Management, resulting in a single consolidated note payable of $2,454,000. As of consolidation, $118,000 of interest has accrued, resulting in a net payable at March 31, 2022 of $2,572,000. As of March 31, 2022 there is outstanding $118,000 in interest and $2,454,000 in principal outstanding.

 

On May 17, 2021, the Company entered into an agreement to borrow funds from the 481149 Irrevocable Trust, a related party, that controls all of the currently outstanding preferred stock of the Company, and whose trustee is the Chief Executive Officer of the Company and a member of the board of directors. Pursuant to the agreement, the Company borrowed approximately $501,000 with interest at 6% per annum due and payable on May 17, 2022. As of March 31, 2022, accrued interest is approximately $27,000 and the principal balance $501,000.

 

v3.22.1
SHORT TERM CONVERTIBLE NOTES PAYABLE
3 Months Ended
Mar. 31, 2022
Debt Disclosure [Abstract]  
SHORT TERM CONVERTIBLE NOTES PAYABLE

NOTE 3 – SHORT TERM CONVERTIBLE NOTES PAYABLE

 

On May 27, 2021, the Company issued a promissory note to Ares Capital, Inc. in the amount of $85,000 with 8% interest due and payable upon demand. On December 2, 2021, the note was amended to provide the holder with conversion rights consisting of a conversion price calculated by a 50% discount to the average of the lowest three (3) VWAP’s for the Company’s Common Stock during the twenty (20) Trading Day period ending on the latest complete trading day prior to the Conversion Date.

 

On August 11, 2021, the Company issued a promissory note to Ares Capital, Inc. in the amount of $33,333 with 8% interest due and payable upon demand. On December 2, 2021, the note was amended to provide the holder with conversion rights consisting of a conversion price calculated by a 50% discount to the average of the lowest three (3) VWAP’s for the Company’s Common Stock during the twenty (20) Trading Day period ending on the latest complete trading day prior to the Conversion Date.

 

On August 12, 2021, the Company issued a promissory note to Ares Capital, Inc. in the amount of $40,000 with 8% interest due and payable upon demand. On December 2, 2021, the note was amended to provide the holder with conversion rights consisting of a conversion price calculated by a 50% discount to the average of the lowest three (3) VWAP’s for the Company’s Common Stock during the twenty (20) Trading Day period ending on the latest complete trading day prior to the Conversion Date.

 

On September 9, 2021, the Company issued a promissory note to Ares Capital, Inc. in the amount of $40,000 with 8% interest due and payable upon demand. On December 2, 2021, the note was amended to provide the holder with conversion rights consisting of a conversion price calculated by a 50% discount to the average of the lowest three (3) VWAP’s for the Company’s Common Stock during the twenty (20) Trading Day period ending on the latest complete trading day prior to the Conversion Date.

 

On March 17, 2022, Ares Capital, Inc. converted $21,000 of principal and $1,000 of interest from the May 27, 2021 convertible note into 1,498,289 common shares. As of March 31, 2022, there is approximately $12,000 in interest and $198,000 in principal outstanding.

 

v3.22.1
CONVERTIBLE NOTES PAYABLE
3 Months Ended
Mar. 31, 2022
Debt Disclosure [Abstract]  
CONVERTIBLE NOTES PAYABLE

NOTE 4 – CONVERTIBLE NOTES PAYABLE

 

On April 20, 2018, (modified May 22, 2018) the Company issued a $165,000 (originally $158,000) convertible note with original issue discount (OID) of $15,000 and bearing interest at 8% per annum. The amended maturity date of the note was June 1, 2019 and was convertible on or after October 17, 2018 into the Company’s restricted common stock at $0.20 per share at the holder’s request. The OID is recorded as a discount to the debt agreement. The Company determined the note to contain a beneficial conversion feature valued at $104,000 based on the intrinsic per share value of the conversion feature. This beneficial conversion feature was recorded as a discount to the debt agreement. The noteholder was also granted detachable 3-year warrants to purchase 200,000 shares of the company’s restricted common stock at an exercise price of $0.375 per share, 200,000 shares of the company’s restricted common stock at an exercise price of $0.50 per share, and 100,000 shares of the company’s restricted common stock at an exercise price of $0.625 per share. The warrants were valued at $126,000 using the Black-Scholes pricing model and were recorded as a discount to the debt agreement. The noteholder was also issued 116,000 shares of the company’s restricted common stock valued at $34,000 based upon the closing price of the Company stock on the date of the modified agreement and recorded as a discount to the debt agreement. On May 10, 2019, the Company amended the note to extend the due date to June 1, 2019, provide for a partial conversion of $25,000 of the outstanding principal balance into common shares of the Company at a conversion price of $0.10 per share for a total of 250,000 shares, and waive any prior alleged or actual defaults under the note. On August 25, 2020 the holder converted $101,500 of the outstanding principal balance into common shares of the Company at a conversion price of $0.20 per share for a total of 507,500 shares. On September 30, 2020, the Company amended the note to provide for a conversion of $150,000 of the outstanding principal and interest due into common shares of the Company at a conversion price of $0.125 per share for a total of 1,200,000 shares and amend the warrants by adjusting the exercise price to $0.25 per share. The Company accrued approximately $120,000 in interest, liquidated damages and debt settlement costs for this note through October 22, 2020. On October 22, 2020, the Company completed the issuance of the 1,200,000 shares and the note was considered paid in full.

 

On May 22, 2018, the Company issued a $275,000 convertible note with original issue discount (OID) of $25,000 and bearing a one-time interest charge at 8%. The amended maturity date of the note was December 31, 2019 and was convertible into the Company’s restricted common stock at $0.25 per share at the holder’s request. The OID is recorded as a discount to the debt agreement. The Company determined the note to contain a beneficial conversion feature valued as $40,000 based on the intrinsic per share value of the conversion feature. This beneficial conversion feature was recorded as a discount to the debt agreement. The noteholder was also granted detachable 5-year warrants to purchase 200,000 shares of the company’s restricted common stock at an exercise price of $2.00 per share. The warrants were valued at $45,000 using the Black-Scholes pricing model and were recorded as a discount to the debt agreement. The noteholder was also issued 200,000 shares of the company’s restricted common stock valued at $58,000 based upon the closing price of the Company stock on the date of the agreement and recorded as a discount to the debt agreement. On May 10, 2019, the Company amended the note to extend the due date to September 1, 2019, provide for a partial conversion of $25,000 of the outstanding principal balance into common shares of the Company at a conversion price of $0.10 per share for a total of 250,000 shares, and waive any prior alleged or actual defaults under the note. On October 11, 2019, the Company amended the note to extend the due date to December 31, 2019, provide for a partial conversion of $50,000 of the outstanding principal balance into common shares of the Company at a conversion price of $0.10 per share for a total of 500,000 shares, and waive any prior alleged or actual defaults under the note. On August 25, 2020, the Company amended the note to extend the due date to March 31, 2021, provide for a partial conversion of $50,000 of the outstanding principal balance into common shares of the Company at a conversion price of $0.10 per share for a total of 500,000 shares, and waive any prior alleged or actual defaults under the note. On September 30, 2020, the Company amended the note to provide for a conversion of $150,000 of the outstanding principal balance into common shares of the Company at a conversion price of $0.125 per share for a total of 1,200,000 shares, and amend the warrants by increasing the number of warrant shares to 1,000,000 at an adjusted exercise price to $0.25 per share. The Company accrued approximately $134,000 in interest, liquidated damages and debt settlement costs for this note through October 21, 2020. On October 21, 2020, the Company completed the issuance of the 1,200,000 shares and payment of the $47,000 cash and the note was considered paid in full.

 

On September 30, 2020, the Company entered into a Stock Purchase Agreement with a third-party investor. By virtue of the Stock Purchase Agreement, in two separate closings, the Company agreed to sell, in each closing, an 8% $500,000 Convertible Promissory Note and Warrant to purchase one million common shares. Each Convertible Promissory Note bears 8% interest and matures five year after issuance. Amounts due under the Convertible Promissory Note are convertible into the Registrant’s common stock at the lower of $0.25 per share or 70% of the average of the three lowest Variable Weighted Average Price (“VWAP”) for the Registrant’s common stock for the twenty trading days prior to an election to convert. The Warrants are exercisable for five-years at an exercise price of 0.25 per share or, subject to the Registrant filing a registration statement including the shares of common stock that may be issued upon exercise of the Warrant, in a cashless exercise. The first closing occurred October 5, 2020 upon the receipt by the Company of a check for $500,000. The Company received two payments in the amount of $250,000 each on November 20, 2020 and November 24, 2020 in connection with the second closing. Total proceeds from the issuance of these convertible notes payable was $1,000,000. The Company determined that the conversion features of these notes represented embedded derivatives since the notes are convertible into a variable number of shares upon conversion. The conversion features were valued at $1,514,000 at the time of closing and the Company recognized a derivative liability of $1,514,000 with corresponding debt discounts of $1,000,000 and a loss on issuance of long-term convertible notes payable of $514,000. During May and June of 2021, the Company received conversion notices received from the lender requesting the conversion of approximately $204,000 ($160,000 principal and $44,000 interest) of the notes to 3,736,237 shares of the company’s common stock. On July 29, 2021, a convertible note holder converted $100,000 of principal debt and $15,000 of interest at a conversion rate of $0.0324 a share, into 3,561,830 Common Stock shares. On August 6, 2021, the company entered into an Amendment of the existing convertible debt, of which resulted in the conversion rates changing to 50% of the average of the lowest VWAP, and the interest on the loan was eliminated., as well as, a $455,000 increase in the Derivative Liability portion of the convertible debt, from $1,382,000 to $1,761,000. The company recorded amortization of debt discounts, recognized as interest expense, in the amount of $330,000 and accrued interest of $47,000 during the nine months ended September 30, 2021. As of March 31, 2022, the balance of accrued interest is $61,000 and outstanding principal is $407,000.

 

On November 2, 2021, the Company issued a convertible promissory note to Brown Stone Capital, LP in the amount of $50,000 with 8% interest due on November 2, 2026. The note is convertible into Company common stock at a fixed price of $0.25 (the “Base Conversion Price) and (2) 50% of the average of the three lowest VWAP (as defined below) for the Common Stock (or any replacement security pursuant to Section 1(x)) for a Trading Day (as defined below) on the Trading Market during the 20 Trading Day period immediately prior to the Conversion Date (as defined below), provided that if the VWAP is determined pursuant to Section 1(n) then 50% of such VWAP as so determined. As of March 31, 2022, there is outstanding approximate accrued interest of $2,000 and principal of $50,000.

 

On November 3, 2021, the Company issued a convertible promissory note to Ares Capital, Inc, in the amount $45,000 with 8% interest due on November 2, 2026. The note is convertible into Company common stock at a fixed price of $0.25 (the “Base Conversion Price) and (2) 50% of the average of the three lowest VWAP (as defined below) for the Common Stock (or any replacement security pursuant to Section 1(x)) for a Trading Day (as defined below) on the Trading Market during the 20 Trading Day period immediately prior to the Conversion Date (as defined below), provided that if the VWAP is determined pursuant to Section 1(n) then 50% of such VWAP as so determined. As of March 31, 2022, there is outstanding approximate accrued interest of $1,000 and principal of $23,000

 

On December 3, 2021, the Company issued a convertible promissory note to Brown Stone Capital, LP in the amount of $70,000 with 8% interest due December 3, 2026. The note converts into Company common stock at the lesser price of (1) $0.25 (the “Base Conversion Price) and (2) 50% of the average of the three lowest VWAP (as defined below) for the Common Stock (or any replacement security pursuant to Section 1(w)) for a Trading Day (as defined below) on the Trading Market (as defined below) during the 20 Trading Day period immediately prior to the Conversion Date (as defined below), provided that if the VWAP is determined pursuant to Section 1(m) then 50% of such VWAP as so determined. As of March 31, 2022, there is outstanding approximate accrued interest of $2,000 and principal of $70,000

 

On December 27, 2021, the Company issued a convertible promissory note to Brown Stone Capital, LP in the amount of $50,000 with 8% interests due December 27, 2026. The note converts into Company common stock at the lesser price of (1) $0.25 (the “Base Conversion Price) and (2) 50% of the average of the three lowest VWAP (as defined below) for the Common Stock (or any replacement security pursuant to Section 1(w)) for a Trading Day (as defined below) on the Trading Market (as defined below) during the 20 Trading Day period immediately prior to the Conversion Date (as defined below), provided that if the VWAP is determined pursuant to Section 1(m) then 50% of such VWAP as so determined. As of March 31, 2022, there is outstanding approximate accrued interest of $1,000 and principal of $50,000

 

On January 10, 2022, the Company issued a convertible promissory note to Brown Stone Capital, LP in the amount of $200,000 with 8% interests due January 10, 2027. The note converts into Company common stock at the lesser price of (1) $0.25 (the “Base Conversion Price) and (2) 50% of the average of the three lowest VWAP (as defined below) for the Common Stock (or any replacement security pursuant to Section 1(w)) for a Trading Day (as defined below) on the Trading Market (as defined below) during the 20 Trading Day period immediately prior to the Conversion Date (as defined below), provided that if the VWAP is determined pursuant to Section 1(m) then 50% of such VWAP as so determined. As of March 31, 2022, there is outstanding approximate accrued interest of $4,000 and principal of $200,000

 

On January 19, 2022, Mehdi Safavi converted $32,000 of debt into 1,863,000 common shares.

 

On February 3, 2022, the Company issued a convertible promissory note to Brown Stone Capital, LP in the amount of $50,000 with 8% interests due February 3, 2027. The note converts into Company common stock at the lesser price of (1) $0.25 (the “Base Conversion Price) and (2) 50% of the average of the three lowest VWAP (as defined below) for the Common Stock (or any replacement security pursuant to Section 1(w)) for a Trading Day (as defined below) on the Trading Market (as defined below) during the 20 Trading Day period immediately prior to the Conversion Date (as defined below), provided that if the VWAP is determined pursuant to Section 1(m) then 50% of such VWAP as so determined. As of March 31, 2022, there is outstanding approximate accrued interest of $1,000 and principal of $50,000

 

On February 11, 2022, the Company issued a convertible promissory note to Brown Stone Capital, LP in the amount of $50,000 with 8% interests due February 11, 2027. The note converts into Company common stock at the lesser price of (1) $0.25 (the “Base Conversion Price) and (2) 50% of the average of the three lowest VWAP (as defined below) for the Common Stock (or any replacement security pursuant to Section 1(w)) for a Trading Day (as defined below) on the Trading Market (as defined below) during the 20 Trading Day period immediately prior to the Conversion Date (as defined below), provided that if the VWAP is determined pursuant to Section 1(m) then 50% of such VWAP as so determined. As of March 31, 2022, there is outstanding approximate accrued interest of $1,000 and principal of $50,000

 

On March 24, 2022, the Company issued a convertible promissory note to Brown Stone Capital, LP in the amount of $210,000 with 8% interests due March 24, 2027. The note converts into Company common stock at the lesser price of (1) $0.25 (the “Base Conversion Price) and (2) 50% of the average of the three lowest VWAP (as defined below) for the Common Stock (or any replacement security pursuant to Section 1(w)) for a Trading Day (as defined below) on the Trading Market (as defined below) during the 20 Trading Day period immediately prior to the Conversion Date (as defined below), provided that if the VWAP is determined pursuant to Section 1(m) then 50% of such VWAP as so determined. As of March 31, 2022, there is outstanding approximate accrued interest of $1,000 and principal of $210,000.

 

The following table summarized the Company’s convertible notes payable as of March 31, 2022 and December 31, 2021:

 

          
  

March 31,

2022

  

December 31,

2021

 
Beginning Balance  $492,000   $64,000 
Proceeds from the issuance of convertible notes, net of issuance discounts   510,000    215,000 
Repayments        
Conversion of notes payable into common stock   (54,000)   (548,000)
Amortization of discounts   43,000    1,341,000 
Liquidated damages   54,000    (641,000)
Accrued Interest   4,000    61,000 
Convertible notes payable, net  $1,049,000   $492,000 
           
Convertible notes, short term  $210,000   $8,000 
Accrued interest and damages  $220,000   $61,000 
Debt discounts  $   $(54,000)

 

v3.22.1
PROPERTY AND EQUIPMENT
3 Months Ended
Mar. 31, 2022
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT

NOTE 5 – PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

               
    March 31,
2022
    December 31,
2021
 
Equipment   $ 16,000     $ 16,000  
Furniture & fixtures     17,000       17,000  
Vehicles     10,000       10,000  
Property and Equipment, Gross     43,000       43,000  
Less: accumulated depreciation     (30,000 )     (28,000 )
Property and Equipment, Net   $ 13,000     $ 16,000  

 

Depreciation and amortization expense for the three months ended March 31, 2022 and 2021 was $3,000 and $10,000, respectively.

 

The Company sold certain office equipment for $8,000 which resulted in a gain on disposition of assets of $5,000 for the year ended December 31, 2021.

 

v3.22.1
OTHER ASSETS
3 Months Ended
Mar. 31, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
OTHER ASSETS

NOTE 6 – OTHER ASSETS

 

At March 31, 2022 and December 31, 2021 other assets consisted of $84,000 and $46,000  respectively. The increase of $38,000 is due to the Company’s receipt of a note payable in the amount of $12,000, for which the Company reverted payment in the amount of $50,000, resulting in a $38,000 receivable due to the Company. Other assets generally consist of security deposits for the Denver corporate office and Premier Workspaces.

 

v3.22.1
DERIVATIVE LIABILITY
3 Months Ended
Mar. 31, 2022
Disclosure Derivative Liability Abstract  
DERIVATIVE LIABILITY

NOTE 7 – DERIVATIVE LIABILITY

 

The Company determined that the conversion features of the long-term convertible notes payable represented embedded derivatives since the notes are convertible into a variable number of shares upon conversion. Accordingly, the notes are not considered to be conventional debt and the embedded conversion feature is bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of these derivative instruments is recorded as liabilities on the balance sheet with the corresponding amount recorded as a discount to each note and any excess of the fair value of the derivative component over the face amount of the note recorded as an expense on the date of issuance. Discounts are amortized from the date of issuance to the maturity dates of the notes. Fair value of derivative liabilities is evaluated at the end of each reporting period with any change in value reported in other income or expenses on the statements of operations for the period.

 

The following table represents the Company’s derivative liability activity for the three months ended March 31, 2022:

 

       
    Quarter Ended
March 31,
 
    2022  
Derivative liability balance, December 31, 2021     2,621,000  
Reclassification to Additional Paid-In Capital     (166,000 )
         
Change in derivative liability during the period     (2,075 )
Derivative liability balance, March 31, 2022   $ 380,000  

 

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(Unaudited)

 

The table below represents the average assumptions used in valuing the derivative liability at March 31, 2022: