v3.22.2.2
Cover
 12 Months Ended
Dec. 31, 2021
USD ($)
shares
Cover [Abstract]  
Document Type 10-K/A
Amendment Flag true
Amendment Description SPYR, Inc., referred to in this report as �SPYR,� the �Company,� �we,� �us,� and �our,� is filing this Amendment No. 1 on Form 10-K/A (the �Amendment�) to its Annual Report on Form 10-K for the Year ended December 31, 2021, originally filed on April 15, 2022 (the �Original Report�). This Amendment amends and restates Items 7 and 8 Part I and Item 15 of Part II of the Original Report. In Item 8, this Amendment includes our restated consolidated balance sheet, consolidated statement of operations and consolidated statement of cash flows for the year ended December 31, 2021 to correct the errors discussed below.   Management identified multiple errors in its financial statements which related to the following. The corrections have the effect of:   1.Stock-based compensation accounting for shares to be issued for services rendered to the Company during the year ended December 31, 2021;     2.Stock-based compensation accounting for shares to certain consultants that were cancelled.     3.A write down of accounts receivable related to the Company�s discontinued operations, and classifying cash accounts as discontinued operations     4.Certain vendor invoices not recognized in the correct accounting period.     5.The fair value estimate as of December 31, 2021 of the derivative liability related to its convertible note agreements.      6.The Company's Form 10-K failed to include the audit report and consent from the Company's previous audit firm Haynie & Co. for the year ended December 31, 2020.   This Amendment amends and restates Item 7 of Part I, which includes our revised discussion of operating results to reflect the impact of the corrections discussed above.   In addition, the Exhibits index in Item 15 of Part II of the Original Report is hereby amended and restated in its entirety, and new certifications of the Company�s principal executive officer and principal financial officer required under Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, dated as of the filing of this Amendment, are filed and furnished, as applicable, as exhibits to this Amendment.   Except as described above, no other changes have been made to the Original Report. This Amendment continues to speak as of the date of the Original Report and does not reflect events occurring after the filing of the Original Report.
Document Annual Report true
Document Transition Report false
Document Period End Date Dec. 31, 2021
Document Fiscal Period Focus FY
Document Fiscal Year Focus 2021
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 Well-known Seasoned Issuer No
Entity Voluntary Filers No
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 Public Float | $ $ 7,658,511
Entity Common Stock, Shares Outstanding | shares 245,050,988
Documents Incorporated by Reference [Text Block] None
ICFR Auditor Attestation Flag false
Auditor Name L&L CPAS, PA
Auditor Location Plantation, FL
Auditor Firm ID 454
v3.22.2.2
Consolidated Balance Sheets - USD ($)
Dec. 31, 2021
Dec. 31, 2020
Current Assets:    
Cash and Cash Equivalents $ 32,000 $ 510,000
Other Receivables 4,000
Prepaid Expenses 47,000 49,000
Trading Securities, at Market Value 1,000
Current Assets of Discontinued Operations 3,000 13,000
Total Current Assets 82,000 577,000
Non-Current Assets:    
Property and Equipment, net 16,000 31,000
Intangible Assets, net 3,000
Operating Lease Right-of-Use Asset 28,000
Other Assets 1,000 13,000
Non-Current Assets of Discontinued Operations 75,000
TOTAL ASSETS 99,000 727,000
Current Liabilities:    
Accounts Payable and Accrued Liabilities 1,825,000 1,061,000
Settlement Liability 500,000
Short-Term Advances 1,184,000
Line of Credit 1,204,000
Related Party Notes Payable, current portion 524,000
Notes Payable, current portion 38,000
Short-Term Convertible Notes Payable, net of discount 206,000
SBA PPP Note Payable, current portion 51,000
Operating Lease Liability, current portion 54,000
Current Liabilities of Discontinued Operations 815,000 767,000
Total Current Liabilities 3,408,000 4,821,000
Other Liabilities:    
Notes Payable 2,534,000
SBA PPP Note Payable 20,000
Long-Term Convertible Notes Payable, net of discount 286,000 64,000
Derivative Liability 1,907,000 1,382,000
Total Liabilities 8,135,000 6,287,000
Stockholders� Deficit:    
Common Stock, $0.0001 par value, 750,000,000 shares authorized; 245,050,988 and 210,137,631 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively 24,505 21,014
 Common stock to be issued 425,097
Additional Paid-In Capital 58,448,385 55,391,973
Accumulated Deficit (66,934,000) (60,973,000)
Total Stockholder�s Deficit (8,036,000) (5,560,000)
TOTAL LIABILITIES AND STOCKHOLDER�S DEFICIT 99,000 727,000
Preferred Class A [Member]    
Stockholders� Deficit:    
Preferred stock, value 11 11
Preferred Class E [Member]    
Stockholders� Deficit:    
Preferred stock, value $ 2 $ 2
v3.22.2.2
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2021
Dec. 31, 2020
Common stock, par value per share $ 0.0001 $ 0.0001
Common stock, shares authorized 750,000,000 750,000,000
Common stock, shares issued 245,050,988 210,137,631
Common Stock, Shares, Outstanding 245,050,988 210,137,631
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, par value per share $ 0.0001 $ 0.0001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 20,000 20,000
Preferred Stock, Shares Outstanding 20,000 20,000
v3.22.2.2
Consolidated Statements Of Operations - USD ($)
 12 Months Ended
Dec. 31, 2021
Dec. 31, 2020
Income Statement [Abstract]    
Revenues $ 2,000
Related Party Service Revenues 185,000
Cost of Goods Sold (61,000)
Gross Profit (Loss) (59,000) 185,000
Expenses:    
Labor and Related Expenses 2,020,000 2,030,000
Rent 73,000 113,000
Depreciation and Amortization 13,000 38,000
Professional Fees 332,000 101,000
Research and Development 9,000 14,000
Other General and Administrative 409,000 210,000
Total Operating Expenses 2,856,000 2,506,000
Operating Loss (2,915,000) (2,321,000)
Other Income (Expenses)    
Interest Expense (1,139,000) (247,000)
Gain (Loss) on Disposition of Assets 5,000 (11,000)
Gain on Forgiveness of Debt 145,000
Loss on Debt Modification (335,000)
Bargain Purchase Gain on Acquisition of Subsidiary 11,000
SBA EIDL Grant 3,000
Loss on Issuance of Long-Term Convertible Notes Payable (514,000)
Change in Value of Derivative Liability (1,586,000) 132,000
Impairment on Trading Securities (1,000)
Total Other Income (Expenses) (2,911,000) (626,000)
Loss from Continuing Operations (5,826,000) (2,947,000)
Loss from Discontinued Operations (135,000) (110,000)
Net Loss $ (5,961,000) $ (3,057,000)
Basic and diluted loss per common share $ (0.03) $ (0.01)
Weighted average common shares outstanding 221,315,426 203,839,473
v3.22.2.2
Consolidated Statements of Stockholders' Deficit - USD ($)
Preferred Stock Class A [Member]
Preferred Stock Class E [Member]
Common Stock [Member]
Common Stock To Be Issued [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Beginning balance, value at Dec. 31, 2018 $ 11 $ 2 $ 19,830 $ 53,265,157 $ (55,951,000) $ (2,666,000)
Shares, Outstanding, Beginning Balance at Dec. 31, 2018 107,636 20,000 198,305,131        
Fair Value of Common Stock Issued for Employee Compensation $ 155 142,845 143,000
Fair Value of Common Stock Issued for Employee Compensation, shares     1,550,000        
Fair Value of Common Stock and Warrants Issued for Services $ 3 1,997 2,000
Stock Issued During Period, Shares, Issued for Services     25,000        
Fair Value of Common Stock Issued for Conversion of Notes Payable $ 100 99,900 100,000
Fair Value of Common Stock Issued for Conversion of Notes Payable, shares     1,000,000        
Net Loss (1,965,000) (1,965,000)
Balance, December 31, 2021 � As Restated at Dec. 31, 2019 $ 11 $ 2 $ 20,088 53,509,899 (57,916,000) (4,386,000)
Shares, Outstanding, Ending Balance at Dec. 31, 2019 107,636 20,000 200,880,131        
Fair Value of Common Stock and Options Issued for Employee and Director Compensation $ 585 1,334,415 1,335,000
Stock Issued During Period, Shares, New Issues     5,850,000        
Fair Value of Common Stock and Warrants Issued for Conversion of Notes Payable $ 341 547,659 548,000
Fair value of common stock and warrants issued for conversion of notes payable, shares     3,407,500        
Fair Value of Common Stock and Warrants Issued for Services            
Net Loss (3,057,000) (3,057,000)
Balance, December 31, 2021 � As Restated at Dec. 31, 2020 $ 11 $ 2 $ 21,014 55,391,973 (60,973,000) (5,560,000)
Shares, Outstanding, Ending Balance at Dec. 31, 2020 107,636 20,000 210,137,631        
Fair Value of Restricted Common Stock and Options Issued for Employee and Director Compensation $ 155 238,845 239,000
Fair Value of Restricted Common Stock and Options Issued for Employee and Director Compensation, shares     1,550,000        
Fair Value of S-8 Registered Common Stock Issued for Services $ 300 371,000 371,300
Fair Value of S-8 Registered Common Stock Issued for Services, shares     3,000,000        
Fair Value of Restricted Common Stock Issued for Services $ 124 425,097 99,876 525,097
Fair Value of Restricted Common Stock Issued for Services, shares     1,242,854        
Fair Value of Common Stock and Warrants Issued for Services             425,097
Fair Value of Common Stock Issued for Conversion of Notes Payable $ 2,912 1,242,680 1,245,592
Fair Value of Common Stock Issued for Conversion of Notes Payable, shares     29,120,503        
Extinguishment of derivative liability from conversion of notes payable 1,104,011 1,104,011
Net Loss (5,961,000) (5,961,000)
Balance, December 31, 2021 � As Restated at Dec. 31, 2021 $ 11 $ 2 $ 24,505 $ 425,097 $ 58,448,385 $ (66,934,000) $ (8,036,000)
Shares, Outstanding, Ending Balance at Dec. 31, 2021 107,636 20,000 245,050,988        
v3.22.2.2
Consolidated Statements of Cash Flows - USD ($)
 12 Months Ended
Dec. 31, 2021
Dec. 31, 2020
Cash Flows From Operating Activities:    
Net Loss $ (5,961,000) $ (3,057,000)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:    
Loss on Discontinued Operations 135,000 110,000
Depreciation and Amortization 13,000 38,000
Common Stock Issued for Employee Compensation 239,000 1,335,000
Common Stock Issued for Services 896,000
Amortization of Debt Discounts on Convertible Notes Payable 553,000 50,000
Impairment on trading securities 1,000
Loss (Gain) on Disposition of Assets (5,000) 11,000
Bargain Purchase Gain on Acquisition of Subsidiary (11,000)
Loss on Debt Modification 335,000
Gain on Forgiveness of Debt (145,000)
SBA EIDL Grant (3,000)
Loss on Issuance of Long-Term Convertible Notes Payable 514,000
Change in Value of Derivative Liability 1,586,000 (132,000)
Changes in Operating Assets and Liabilities:    
Decrease in Receivable from Related Parties 50,000
Increase in Other Receivables and Other Assets 16,000 (4,000)
(Increase) Decrease in Prepaid Expenses 2,000 (34,000)
Decrease in Operating Lease Right-of-Use Asset 28,000 14,000
Decrease in Operating Lease Right-of-Use Liability (54,000)
Increase in Accounts Payable and Accrued Liabilities 802,000 420,000
Increase in Accrued Interest on Related Party Notes Payable 24,000
Increase in Accrued Interest on Short-Term Advances 69,000
Increase in Accrued Interest on Notes Payable 209,000
Increase in Accrued Interest on Line of Credit 70,000
Increase in Accrued Interest and Liquidated Damages on Convertible Notes 352,000 59,000
Net Cash Used in Operating Activities from Continuing Operations (974,000) (501,000)
Net Cash Provided by (Used in) Operating Activities from Discontinued Operations (20,000)
Net Cash Used in Operating Activities (974,000) (521,000)
Cash Flows From Investing Activities:    
Purchase of Property and Equipment (15,000)
Sale of Property and Equipment 10,000 9,000
Net Cash Provided by (Used in) Investing Activities 10,000 (6,000)
Cash Flows From Financing Activities:    
Proceeds from Long-Term Convertible Notes 215,000 1,000,000
Proceeds from Short-Term Convertible Notes Payable 198,000
Proceeds from SBA EIDL Grant 3,000
Proceeds from SBA PPP Note Payable 73,000 71,000
Payments on Short-Term Convertible Notes Payable (47,000)
Net Cash Provided by Financing Activities 486,000 1,027,000
Net Change in Cash (478,000) 500,000
Cash and Cash Equivalents at Beginning of Period 510,000 10,000
Cash and Cash Equivalents at End of Period 32,000 510,000
Supplemental Disclosure of Interest and Income Taxes Paid:    
Interest Paid during the Period 1,000
Income Taxes Paid during the Period
Supplemental Disclosure of Non-Cash Investing and Financing Activities:    
Debt Discounts on Long-Term Convertible Notes Payable 1,000,000
Warrants Issued for Debt Settlement 220,592 96,000
Extinguishment of derivative liability from conversion of notes payable 1,104,011
Common stock to be issued for services 425,097
Common Stock Issued for Debt Conversion 1,245,592 452,000
Notes Payable issued to Settle Accounts Payable $ 38,000
v3.22.2.2
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 12 Months Ended
Dec. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 � ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

This summary of accounting policies for SPYR, Inc. and subsidiaries (the �Company�) is presented to assist in understanding the Company�s financial statements. The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the consolidated financial statements.

 

Organization

 

The Company was incorporated as Conceptualistics, Inc. on January 6, 1988 in Delaware. Subsequent to its incorporation, the Company changed its name to Eat at Joe�s, Ltd. In February 2015, the Company changed its name to SPYR, Inc. and adopted a new ticker symbol �SPYR� effective March 12, 2015.

 

Nature of Business

 

The primary focus of SPYR, Inc. (the �Company�) is to act as a holding company and develop a portfolio of profitable subsidiaries, not limited by any particular industry or business.

 

Through our wholly owned subsidiary Applied Magix we are a registered Apple� developer, and reseller of Apple ecosystem compatible products and accessories with an emphasis on the smart home market. As such, we are in the global �Internet of Things� (IoT) market, and more specifically, the segment of the market related to the development, manufacture and sale of devices and accessories specifically built on Apple�s HomeKit� framework. These products work within the Apple� HomeKit� ecosystem and are exclusive to the Apple market and its consumers. Apple� HomeKit� is a system that lets users control smart home devices, so long as they are compatible with the HomeKit� ecosystem, giving users control over smart thermostat, lights, locks and more in multiple rooms, creating comfortable environments and remote control of other connected devices.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of SPYR, Inc. and its wholly owned subsidiaries, Applied Magix, a Nevada corporation, SPYR APPS, LLC, a Nevada Limited Liability Company (discontinued operations, see Note 12), E.A.J.: PHL, Airport Inc., a Pennsylvania corporation (discontinued operations, see Note 12). 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 year ended December 31, 2021, the Company recorded a net loss of $5,961,000 and utilized cash in operations of $974,000. As of December 31, 2021, our cash balance was $32,000 and we had prepaid expenses of $47,000. At December 31, 2021, the Company had a working capital deficit of $3,326,000. 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 implementation of our Applied Magix 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 2021. However, management cannot make any assurances that such financing will be secured.

 

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 Company�s computation of earnings (loss) per share (EPS) includes basic and diluted EPS. Basic EPS is calculated by dividing the Company�s net income (loss) available to common stockholders by the weighted average number of common shares during the period. Diluted EPS reflects the potential dilution, using the treasury stock method that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the net income (loss) of the Company. In computing diluted EPS, the treasury stock method assumes that outstanding options and warrants are exercised, and the proceeds are used to purchase common stock at the average market price during the period. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest.

 

The basic and fully diluted shares for the year ended December 31, 2021 are the same because the inclusion of the potential shares (Class A � 26,909,028, Class E � 1,385,042, Options � 4,779,900 and Warrants � 7,200,000) would have had an anti-dilutive effect due to the Company generating a loss for the year ended December 31, 2021.

 

The basic and fully diluted shares for the year ended December 31, 2020 are the same because the inclusion of the potential shares (Class A � 26,909,028, Class E � 1,200,480, Options � 5,799,900 and Warrants � 11,100,000) would have had an anti-dilutive effect due to the Company generating a loss for the year ended December 31, 2020.

 

Product Research and Development Costs

 

Costs incurred for product research and development are expensed as incurred. During the years ended December 31, 2021 and 2020, the Company incurred $9,000 and $14,000 respectively, in product development costs paid to independent third parties.

 

Revenue Recognition

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance under prior U.S. GAAP and replaced it with a principles-based approach for determining revenue recognition. The core principle of the standard is the recognition of revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

 

We adopted this new revenue recognition standard along with is related amendments on January 1, 2018 and have updated our accounting policy for revenue recognition. As expected, at our current level of revenue, the adoption of this new standard did not impact our financial position or results of operations or operating cash flows.

 

We determine revenue recognition by: (1) identifying the contract, or contracts, with our customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to performance obligations in the contract; and (5) recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services. The Company�s only revenue stream is currently from transactions as a registered reseller of Apple� ecosystem compatible products, accessories and related applications with an emphasis on the smart home market. The Company has had minimal sales to date. The Company�s revenue is recognized at a point in time when the sale of the product is completed. There is no significant financing component from the Company�s sales.

 

Income Taxes

 

The Company accounts for income taxes under the provisions of ASC 740 �Accounting for Income Taxes,� which requires a company to first determine whether it is more likely than not (which is defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more likely than not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.

 

Deferred income taxes are recognized for the tax consequences related to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax purposes at each year end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recognized when, based on the weight of all available evidence, it is considered more likely than not that all, or some portion, of the deferred tax assets will not be realized. The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and cause a change in management�s judgment about the recoverability of deferred tax assets, the impact of the change on the valuation is reflected in current income. Income tax expense is the sum of current income tax plus the change in deferred tax assets and liabilities.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.

 

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 3-7 years
Computer equipment 1-3 years
Vehicles 5 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.

 

Intangible Assets

 

The Company accounts for its intangible assets in accordance with the authoritative guidance issued by the ASC Topic 350 � Goodwill and Other. Intangibles are valued at their fair market value and are amortized taking into account the character of the acquired intangible asset and the expected period of benefit. The Company evaluates non-amortizing intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated undiscounted future cash flows.

The cost of internally developing, maintaining and restoring intangible assets that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as a whole, are recognized as an expense when incurred.

 

An intangible asset with a definite useful life is amortized; an intangible asset with an indefinite useful life is not amortized until its useful life is determined to be no longer indefinite. The remaining useful lives of intangible assets not being amortized are evaluated at least annually to determine whether events and circumstances continue to support an indefinite useful life.

 

During the year ended December 31, 2021, the Company recorded amortization expense of $3,000. As of December 31, 2021, the intangible asset balance was fully amortized. As of December 31, 2020, net intangible assets amounted to $3,000 which consist of website development costs There were no indications of impairment based on management�s assessment of these assets as of December 31, 2021. Factors we consider important that could trigger an impairment review include significant underperformance relative to historical or projected future operating results, significant changes in the manner of the use of our assets or the strategy for our overall business, and significant negative industry or economic trends. If current economic conditions worsen causing decreased revenues and increased costs, we may have to record impairment to our intangible assets.

 

Stock-Based Compensation

 

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board (FASB) whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested, and the total stock-based compensation charge is recorded in the period of the measurement date.

 

The fair value of the Company�s stock option and warrant grants is estimated using the Black-Scholes Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes Option Pricing model could materially affect compensation expense recorded in future periods.

 

The Company also issues restricted shares of its common stock for share-based compensation programs to employees and non-employees. The Company measures the compensation cost with respect to restricted shares to employees based upon the estimated fair value at the date of the grant and is recognized as expense over the period which an employee is required to provide services in exchange for the award. For non-employees, the Company measures the compensation cost with respect to restricted shares based upon the estimated fair value at measurement date which is either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete.

 

Derivative Financial Instruments

 

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses the Black-Scholes Option Pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of December 31, 2021, the Company�s only derivative financial instruments were embedded conversion features associated with long-term convertible notes payable which contain certain provisions that allow for a variable number of shares on conversion.

 

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.

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (�Paragraph 820-10-35-37�) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

 

The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

  Level1:Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
  Level2:Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
  Level3:Pricing inputs that are generally observable inputs and not corroborated by market data.

 

The carrying amount of the Company�s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses, short-term advances, line of credit and convertible notes payable approximate their fair value because of the short maturity of those instruments.

 

The Company�s trading securities and money market funds are measured at fair value using level 3 fair values and derivative liability is a level 3 fair value.

 

Advertising Costs

 

Advertising, marketing and promotional costs are expensed as incurred and included in general and administrative expenses.

 

Advertising, marketing and promotional expense was $123,000 and $8,000 for the years ended December 31, 2021, and 2020, respectively and was reflected as part of Other General and Administrative Expenses on the accompanying consolidated statements of operations.

 

Leases

 

In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, �Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company adopted ASU 2016-02 on January 1, 2019. See Note 9 �Operating Leases� for additional required disclosures.

 

Recent Accounting Standards 

 

In June 2016, the FASB issued Accounting Standards Update (�ASU�) 2016-13, �Financial Instruments � Credit Losses.� This ASU sets forth a current expected credit loss model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. In November 2019, the effective date of this ASU was deferred until fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company is in the process of determining the potential impact of adopting this guidance on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, �Debt � Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging � Contracts in Entity�s Own Equity (Subtopic 815 � 40)� (�ASU 2020-06�). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity�s own equity. The ASU is part of the FASB�s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU�s amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the potential impact of ASU 2020-06 on its financial statements.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Restatement

 

In 2022, the Company identified errors in account balances in the Form 10K filed for the year ended December 31, 2021. The following accounts were deemed to contain errors: cash, trading securities, at market value, current assets of discontinued operations, other assets, accounts payable, note payable, derivative liability, common stock, common stock to be issued, additional paid in capital, operating expenses, gain on forgiveness of debt and loss on change in derivative liabilities. The errors primarily resulted from incorrect recognition of stock-based compensation previously awarded, certain share awards not yet issued and not recognized during the year ended December 31, 2021, incorrect estimates used in the fair value of derivative liability and certain adjustments to discontinued operations.

 

The tables below summarize previously reported amounts and the restated presentation of the balance sheet, statement of operations and statement of cash flows for the affected period:

 

Schedule of restated presentation               
   December 31, 2021 
   As Reported   Adjustments   As Restated 
             
ASSETS               
Current Assets:               
Cash and Cash Equivalents  $35,000   $(3,000)   32,000 
Prepaid Expenses   47,000    -    47,000 
Trading Securities, at Market Value   1,000    (1,000)   - 
Current Assets of Discontinued Operations   14,000    (11,000)   3,000 
Total Current Assets   97,000    (15,000)   82,000 
                
Other Assets:               
Property and Equipment, net   16,000    -    16,000 
Other Assets   46,000    (45,000)   1,000 
TOTAL ASSETS  $159,000   $(60,000)  $99,000 
                
LIABILITIES & STOCKHOLDERS� DEFICIT               
Current Liabilities:               
Accounts Payable and Accrued Liabilities  $1,818,000   $7,000    1,825,000 
Related Party Notes Payable, current portion   524,000    -    524,000 
Notes Payable, current portion   -    38,000    38,000 
Short-Term Convertible Notes Payable   206,000    -    206,000 
SBA PPP Note Payable, current portion   70,000    (70,000)   - 
Current Liabilities of Discontinued Operations   803,000    12,000    815,000 
Total Current Liabilities   3,421,000    (13,000)   3,408,000 
                
Other Liabilities:               
Notes Payable   2,534,000    -    2,534,000 
Long-Term Convertible Notes Payable, net   286,000    -    286,000 
Derivative Liability   2,621,000    (714,000)   1,907,000 
Total Liabilities   8,862,000    (727,000)   8,135,000 
                
Stockholders� Deficit:               
Preferred Stock, Class A, $0.0001 par value, 10,000,000 shares authorized; 107,636 shares issued and outstanding as of December 31, 2021   11    -    11 
Preferred Stock, Class E, $0.0001 par value, 10,000,000 shares authorized; 20,000 shares issued and outstanding as of December 31, 2021   2    -    2 
Common Stock, $0.0001 par value, 750,000,000 shares authorized; 245,050,988 and outstanding as of December 31, 2021 and outstanding as of December 31, 2021   25,205    (700)   24,505 
Common stock to be issued   -    425,097    425,097 
Additional Paid-In Capital   57,779,303    (669,082)   58,448,385 
Accumulated Deficit   (66,508,521)   (425,479)    (66,934,000)
                
Total Stockholder�s Deficit   (8,704,000)   667,000    (8,036,000)
TOTAL LIABILITIES AND STOCKHOLDER�S DEFICIT  $159,000   $(60,000)  $99,000 

 

 

             
   For the Year Ended December 31, 2021 
   As Reported   Adjustment   As Restated 
             
Revenues  $2,000   $-   $2,000 
Cost of Goods Sold   (1,000)   (60,000)    (61,000)
Gross Profit   1,000     (60,000)    (59,000) 
                
Expenses:               
Labor and Related Expenses   1,672,000    348,000    2,020,000 
Rent   61,000    12,000    73,000 
Depreciation and Amortization   13,000    -    13,000 
Professional Fees   733,000    (401,000)   332,000 
Research and Development   9,000    -    9,000 
Impairment of inventory   60,000    (60,000)   - 
Other General and Administrative   286,000    123,000    409,000 
Total Operating Expenses   2,834,000    12,000    2,856,000 
                
Operating Loss   (2,833,000)   (82,000)   (2,915,000)
                
Other Income (Expenses)               
Interest Expense   (1,139,000)   -    (1,139,000)
Gain (Loss) on Disposition of Assets   5,000    -    5,000 
Loss on Debt Modification   (335,000)   -    (335,000)

Gain on Forgiveness of Debt

   73,000    72,000    145,000 

Change in Value of Derivative Liability

   (1,196,000)   

(390,000

)   (1,586,000)
Impairment of Trading Securities   -    (1,000)    (1,000) 
Unrealized Loss on Trading Securities   1,000    

(1,000

)    - 
Total Other Income (Expenses)   (2,591,000)   (320,000)    (2,911,000)
                
Loss from Continuing Operations   (5,424,000)   (402,000)    (5,826,000)
Loss from Discontinued Operations   (110,000)   (25,000)   (135,000)
Net Loss  $(5,534,000)  $(427,000)   $(5,961,000)
                
Basic and diluted loss per common share  $(0.02)  $0.01   $(0.03)
                
Weighted average common shares outstanding   222,792,139    (1,476,713)    221,315,426 

 

 

             
   For the Year Ended December 31, 2021 
   As Reported   Adjustment   As Restated 
             
Cash Flows From Operating Activities:               
Net Loss  $(5,534,000)  $(427,000)   $(5,961,000)
                
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:               
Loss on Discontinued Operations   110,000    25,000    135,000 
Adjustment to Deficit for Intercompany Elimination   (1,000)   1,000    
Depreciation and Amortization   13,000    -    13,000 
Common Stock Issued for Employee Compensation   239,000    -    239,000 
Common Stock Issued for Services   905,000    (9,000)   896,000 
Amortization of Debt Discounts on Convertible Notes Payable   377,000    

176,000

    553,000 
Loss (Gain) on Disposition of Assets   (5,000)   -    (5,000)
Write Off of Trading Securities   -    1,000    1,000 
Loss on Debt Modification   334,000    

1,000

    335,000 
Gain on Forgiveness of Debt   (73,000)   (72,000)   (145,000)
Change in Value of Derivative Liability   1,196,000    390,000   1,586,000 
                
Changes in Operating Assets and Liabilities:             
Increase in Other Receivables and Other Assets   (29,000)   45,000    16,000 
(Increase) Decrease in Prepaid Expenses   2,000    -    2,000 
Decrease in Operating Lease Right-of-Use Asset   28,000    -    28,000 
Decrease in Operating Lease Right-of-Use Liability   (54,000)   -    (54,000)
Increase in Accounts Payable and Accrued Liabilities   257,000    545,000    802,000 
Increase in Accrued Interest on Related Party Notes Payable  99,000    (75,000)    24,000 
Increase in Accrued Interest on Notes Payable   6,000    -    209,000 
Increase in Accrued Interest and Liquidated Damages on Convertible Notes   642,000    (290,000)   352,000 
Net Cash Used in Operating Activities from Continuing Operations   (1,488,000)   514,000    (974,000)
Net Cash Provided by Operating Activities from Discontinued Operations   -    -    - 
Net Cash Used in Operating Activities   (1,488,000)   514,000    (974,000)
                
Cash Flows From Financing Activities:               
  Proceeds from Long-Term Convertible Notes   -    215,000    215,000 
  Proceeds from Related Party Notes Payable   505,000    (505,000)   - 
  Proceeds from Long-Term Notes Payable   425,000    (425,000)   - 
  Proceeds from Short-Term Convertible Notes   -    198,000    198,000 
  Proceeds from SBA PPP Note Payable   73,000    -    73,000 
Net Cash Provided by Financing Activities   1,003,000    (517,000)   486,000 
                
Net Decrease in Cash   (475,000)   (3,000)   (478,000)
                
Cash and Cash Equivalents at Beginning of Period   510,000    -    510,000 
                
Cash and Cash Equivalents at End of Period  $35,000   $(3,000)  $32,000 

 

  

The Company accounts for stock-based compensation for employees and directors in accordance with Accounting Standards Codification 718, Compensation (�ASC 718�) as issued by the FASB. ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations based on their fair values. Under the provisions of ASC 718, stock-based compensation costs are measured at the grant date, based on the fair value of the award, and are recognized as an expense over the employee�s requisite service period (generally the vesting period of the equity grant). The fair value of the Company�s common stock options are estimated using the Black Scholes option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life. The Company expenses stock-based compensation by using the straight-line method. In accordance with ASC 718 and, excess tax benefits realized from the exercise of stock-based awards are classified as cash flows from operating activities. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) are recognized as income tax expense or benefit in the condensed consolidated statements of operations. The Company accounts for stock-based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in Accounting Standards Update (�ASU�) 2018-07.

 

In February 2016, the FASB issued ASU 2016-02, �Leases� Topic 842, which amends the guidance in former ASC Topic 840, Leases. The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use assets and lease liabilities on the balance sheet for all leases longer than 12 months. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. For lessees, leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Company adopted the new lease guidance effective January 1, 2019. The Company is not a party to any leases and therefore is not showing any asset or liability related to leases in the current period or prior periods. 

 

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832). The amendments within the update require certain disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. The amendments will require disclosure of information about the nature of the transactions and the related accounting policy used to account for the transactions, information regarding the line items within the consolidated financial statements that are affected by the transactions, and significant terms and conditions of the transactions. The amendments in the update will be effective for financial statements issued for annual periods beginning after December 15, 2021, with early adoption permitted. The Company does not believe the adoption of this ASU will have a material impact on the Company�s consolidated financial statements or results of options.

 

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

 

Other 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.
v3.22.2.2
TRADING SECURITIES
 12 Months Ended
Dec. 31, 2021
Investments, Debt and Equity Securities [Abstract]  
TRADING SECURITIES

NOTE 2 � TRADING SECURITIES

 

Investments in securities are summarized as follows:

 

                                   
   Fair Value at Beginning of       Proceeds from  

Write off

   Contributed   Unrealized   Fair Value at 
Year  Year   Purchases   Sale   of Securities   Capital   Loss   December 31, 
2021  $1,000   $                -   $       -   $ (1,000)   $       -   $-   $- 
2020  $1,000   $-   $-   $-   $-   $       -  $1,000 

 

The following table discloses the assets measured at fair value on a recurring basis and the methods used to determine fair value:

 

                
       Fair Value Measurements at Reporting Date Using 
       Quoted Prices   Significant
Other		   Significant 
   Fair Value at   in Active   Observable   Unobservable 
   December 31,   Markets   Inputs   Inputs 
   2021   (Level 1)   (Level 2)   (Level 3) 
Trading securities  $-   $-   $      -   $       - 
Money market funds   1,000    1,000    -    - 
Total  $1,000   $1,000   $-   $- 

 

       Fair Value Measurements at Reporting Date Using 
       Quoted Prices   Significant Other   Significant 
   Fair Value at   in Active   Observable   Unobservable 
   December 31,   Markets   Inputs   Inputs 
   2020   (Level 1)   (Level 2)   (Level 3) 
Trading securities  $1,000   $1,000   $      -   $       - 
Money market funds   1,000    1,000    -    - 
Total  $2,000   $2,000   $-   $- 

 

Generally, for all trading securities and available-for-sale securities, fair value is determined by reference to quoted market prices (level 1).

 
v3.22.2.2
PREPAID EXPENSES
 12 Months Ended
Dec. 31, 2021
Disclosure Prepaid Expenses Abstract  
PREPAID EXPENSES

NOTE 3 � PREPAID EXPENSES

 

At December 31, 2021, prepaid expenses were $47,000 as compared to $49,000 at December 31, 2020. Prepaid expenses consist of a down payment on the Magix Button device development of $33,000 and a retainer for future video production of $10,000, account set up costs from Teledirect of $2,000, $1,000 of prepaid insurance costs, and $1,000 of prepaid product costs for Applied Magix.
v3.22.2.2
PROPERTY AND EQUIPMENT
 12 Months Ended
Dec. 31, 2021
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT

NOTE 4 � PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

 Schedule of Property and Equipment  December 31,
2021		   December 31,
2020		 
         
Computer Equipment  $16,000   $22,000 
Furniture & fixtures   17,000    33,000 
Vehicles   10,000    10,000 
 Property and Equipment, Gross   43,000    65,000 
Less: accumulated depreciation   (27,000)   (34,000)
Property and Equipment, Net  $16,000   $31,000 

 

Depreciation and amortization expense for the years ended December 31, 2021 and 2020 was $10,000 and $38,000, respectively.

 

The Company sold certain office equipment for $10,000 which resulted in a gain on disposition of assets of $5,000 for the year ended December 31, 2021. The Company sold office equipment for a total of $9,000 for the year ended December 31, 2020, which resulted in a corresponding loss of $11,000.

 
v3.22.2.2
INTANGIBLE ASSETS AND OTHER ASSETS
 12 Months Ended
Dec. 31, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
INTANGIBLE ASSETS AND OTHER ASSETS

NOTE 5 � INTANGIBLE ASSETS AND OTHER ASSETS

 

Intangible assets at December 31, 2021 and December 31, 2020 consisted of the following:

 

             
   Useful
Life (yr)		  December 31,
2021		   December 31,
2020		 
Domain Names  7  $21,000   $21,000 
Less: accumulated amortization      (21,000)   (18,000)
      $-   $3,000 

  

At December 31, 2021 and 2020, other assets consisted of $1,000 and $13,000, respectively, which consist of security deposits for the Denver corporate office and Premier Workspaces.

 
v3.22.2.2
RELATED PARTY ADVANCES AND LINE OF CREDIT
 12 Months Ended
Dec. 31, 2021
Related Party Transactions [Abstract]  
RELATED PARTY ADVANCES AND LINE OF CREDIT

NOTE 6 � RELATED PARTY ADVANCES AND LINE OF CREDIT

 

Related Party Advances and Line of Credit consisted of the following:

 

         
   December 31,
2021		   December 31,
2020		 
         
Related Party Notes Payable, current portion  $501,000   $       - 
Short Term Advances   -    1,062,000 
Line of credit   -    1,000,000 
Accrued interest   19,000    

326,000

 
Other   4,000      
Current portion  $524,000   $2,388,000 

 

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. As of December 31, 2020, the Company has borrowed $1,000,000 and accrued interest of approximately $204,000.

 

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.

 

During the year ended December 31, 2020, no professional services were rendered to this Limited Liability Company and no revenue was received therefrom.

 

During the period from January 1 through March 31, 2020, the Company, received $185,000 in revenue for professional services rendered to Berkshire Capital Management Co., Inc. During the period April 1, 2020 through December 31, 2021, no professional services were rendered to Berkshire Capital Management Co., Inc. and no revenue was received therefrom.

 

On May 17, 2021, the Company entered into an agreement to borrow funds from the 481149 Irrevocable Trust 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 December 31, 2021, the balance due with accrued interest is approximately $524,000.

 

The amounts shown as related party in December 31, 2020 are no longer considered a related party as of December 31, 2021, in accordance with FASB ASC 850.

 
v3.22.2.2
NOTES PAYABLE
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
NOTES PAYABLE

NOTE 7 � NOTES PAYABLE

 

Notes Payable consisted of the following:

 

          
December 31, 2021 December 31, 2020
Notes Payable, long-term $2,454,000   - 
Accrued interest  80,000   - 
Long-term portion $2,534,000  $        - 

 

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, $80,000 of interest has accrued, resulting in a net payable at December 31, 2021 of $2,534,000.

 

On December 16, 2021, the Company issued a promissory note to Grupo Rueda in the amount of $38,000 with 8% interest per annum and matures on December 16, 2022, in exchange for settlement of accounts payable on behalf of the Company. As of December 31, 2021, the notes payable was recorded as notes payable, current portion on the balance sheet.

 
v3.22.2.2
INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 8 � INCOME TAXES

 

The Company did not provide for any Federal and State income tax for the years ended December 31, 2021 and 2020 due to the Company�s net losses.

 

A reconciliation of the provision for income taxes computed using the US statutory federal income tax rate is as follows:

 

          
   December 31, 
   2021   2020 
Tax provision at US statutory federal income tax rate  $1,016,000   $96,000 
State income tax, net of federal benefit   220,000    - 
Change in valuation allowances   (1,236,000)   (96,000)
Provision for Income Taxes  $-   $- 

 

The significant components of the Company�s deferred tax assets were:

 

          
   December 31, 
   2021   2020 
Deferred Tax Assets:          
Net operating loss carry forward  $5,765,000   $4,969,000 
Capital loss carry over   163,000    163,000 
Accrued expenses   205,000    151,000 
Depreciation and other   (3,000)   (3,000)
 Gross Deferred Tax Asset   6,130,000    5,280,000 
Less valuation allowance   (6,130,000)   (5,280,000)
Net Deferred Tax Asset  $-   $- 

 

Deferred tax assets and liabilities reflect the effects of tax losses, credits and the future income tax effects of temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

As of December 31, 2021, the Company recorded a valuation allowance of $6,130,000 for its deferred tax assets. The Company believes that such assets did not meet the more likely than not criteria to be recoverable through projected future profitable operations in the foreseeable future.

Effective January 1, 2007, the Company adopted FASB guidance that addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The FASB also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2021 and 2020, the Company does not have a liability for unrecognized tax benefits.

 

The Company�s net operating loss carry forward for income tax purposes as of December 31, 2021 was approximately $24,312,000, of which $18,300,000 and may be offset against future taxable income through 2038 and $6,012,000 can be carried forward indefinitely. Utilization of the Company�s net operating losses may be subject to substantial annual limitation if the Company experiences a 50% change in ownership, as provided by the Internal Revenue Code and similar state provisions. Such an ownership change would substantially increase the possibility of net operating losses expiring before complete utilization.

 

In December 2017, new tax known as Tax Cut and Jobs Act of 2017 was enacted. The new tax law includes significant changes to the U.S. corporate tax systems including a rate reduction from 35% to 21% beginning in January of 2018, a change in the treatment of foreign earnings going forward, a deemed repatriation transition tax, and changes to allow net operating losses to be carried forward indefinitely. In addition, net operating losses arising after December 31, 2017 will be limited to the lesser of the available net operating loss or 80% of the pre-net operating loss taxable income.

 

Uncertain Tax Positions

 

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. In many cases the Company�s uncertain tax positions are related to tax years that remain subject to examination by relevant tax authorities. The Company is generally no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years before 2017. However, as of December 31, 2021, the years subsequent to 2017 remain open and could be subject to examination by tax authorities including the U.S. Internal Revenue Service and major state and local tax jurisdictions in the United States.

 

Interest costs related to unrecognized tax benefits are classified as �Interest expense, net� in the accompanying consolidated statements of operations. Penalties, if any, would be recognized as a component of �General and administrative expenses.�

 

As of December 31, 2021, the Company had no liability for unrecognized tax benefits and no accrual for the payment of related interest and penalties, nor did the Company recognize any interest or penalties expense related to unrecognized tax benefits during the years ended December 31, 2021 or 2020.

 
v3.22.2.2
SMALL BUSINESS ADMINISTRATION DEBT
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
SMALL BUSINESS ADMINISTRATION DEBT

NOTE 9 � SMALL BUSINESS ADMINISTRATION DEBT

 

On May 12, 2020 the Company received a Paycheck Protection Program loan from the U.S. Small Business Administration (�SBA�) in the approximate amount of $70,000. The loan agreement provides for six months principal and interest deferral. The interest rate is 1%. Under the terms of the loan, up to 100% of the loan may be forgiven conditioned upon meeting certain requirements for the use of funds. Any amount not forgiven must be repaid in eighteen monthly consecutive principal and interest payments. During the year ended December 31, 2021, the Company was notified that the outstanding principal and accrued interest for the PPP Loan was forgiven in full by the SBA. As of December 31, 2021, the balance due on this note was approximately $0.

 

On January 21, 2021, the Company received a second Paycheck Protection Program loan from the U.S. Small Business Administration in the approximate amount of $73,000. At December 31, 2021, the balance due on the note was $0, as the loan was confirmed as forgiven on August 20, 2021.

 
v3.22.2.2
SHORT TERM CONVERTIBLE NOTES PAYABLE
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
SHORT TERM CONVERTIBLE NOTES PAYABLE

NOTE 10 � 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.

 
v3.22.2.2
CONVERTIBLE NOTES
 12 Months Ended
Dec. 31, 2021
Convertible Notes  
CONVERTIBLE NOTES

NOTE 11 � CONVERTIBLE NOTES  

 

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. On December 31, 2021, the principal balance together with accrued interest is recorded on the Company�s condensed consolidated balance sheet net of discounts at $27,000.

 

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.

 

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.

 

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.

 

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.

 

The following table summarized the Company�s convertible notes payable as of December 31, 2021 and December 31, 2020:

 

Summary of Convertible Notes          
   December 31,
2021		   December 31,
2020		 
Beginning Balance  $64,000   $550,000 
Proceeds from the issuance of convertible notes   413,000    - 
Repayments   -    (47,000)
Conversion of notes payable into common stock   (559,000)   (548,000)
Amortization of Debt Discounts   553,000    50,000 
Liquidated damages   351,000    (53,000)
New debt discount   (43,000)   -  
Debt settlement costs   -     96,000 
Accrued Interest   63,000    16,000 
Convertible notes payable, net  $492,000   $64,000 
Principal balance  $198,000   $- 
Accrued interest and damages, short term   8,000    - 
Debt discounts, short term   -    - 
Short-term convertible notes payable, net  $206,000   $- 
Convertible notes, long-term principal  $670,000   $1,000,000 
Accrued interest and damages, long-term   56,000    14,000 
Debt discounts, long-term   (440,000)   (950,000) 
Long-term convertible notes payable, net  $286,000   $64,000 

 
v3.22.2.2
DERIVATIVE LIABILITY
 12 Months Ended
Dec. 31, 2021
Disclosure Derivative Liability Abstract  
DERIVATIVE LIABILITY

NOTE 12 � 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 year ended December 31, 2021:

 

  Year Ended 
December 31,		   Year Ended 
December 31,		 
   2021   2020 
Derivative liability balance, December 31, 2020   1,382,000   $- 
Issuance of derivative liability during the period   43,000    1,514,000 
Increase due to Modification of Note   455,000    - 
Reclassification to Additional Paid-In Capital   (1,104,000)   - 
           
Change in derivative liability during the period   1,131,000    (132,000)
Derivative liability balance, December 31, 2021  $1,907,000   $1,382,000 

 

The table below represents the average assumptions used in valuing the derivative liability at December 31, 2021:

 

  Year Ended
December 31,		   Year Ended
December 31,		 
   2021   2020 
Expected life in years   3.89    4.76-4.90 
Stock price volatility   182.99% - 198.39%   180.45% - 182.99%
Risk free interest rate   0.42%   0.17%
Expected dividends   -    -  
Forfeiture rate   -    -  

 
v3.22.2.2
COMMITMENTS AND CONTINGENCIES
 12 Months Ended
Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 13 � COMMITMENTS AND CONTINGENCIES

 

Equity Line of Credit

 

The Company entered into a five-year Equity Line of Credit pursuant to an Equity Purchase Agreement with Brown Stone Capital, LP, dated September 30, 2020. Pursuant to the agreement, Brown Stone agreed to invest up to $14,000,000 to purchase the Company�s Common Stock, par value $0.0001 per share. The purchase price of the common shares is the lesser of the Fixed price or Market price. The Fixed price is $0.50 per share in years 1 and 2, after the effectiveness of a registration statement, and $1.00 per share in years 3, 4 and 5 after the effectiveness of this registration statement. The Market price is 70% of the three lowest Variable Weighted Average Price (�VWAP�) for the Company�s common stock during the 10-trading day period immediately prior to the conversion date. In addition, the Company and Brown Stone entered into a Registration Rights Agreement, whereby the Company agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, and applicable state securities laws, with respect to the shares of Common Stock issuable for Brown Stone�s investment pursuant to the Equity Purchase Agreement. As of December 31, 2021, no shares have been sold pursuant to this agreement.

 

Operating Leases

 

The Company leased approximately 5,169 square feet at 4643 South Ulster Street, Denver, Colorado pursuant to an amended lease dated May 21, 2015. Under the lease, the Company paid annual base rent on an escalating scale ranging from $143,000 to $152,000. In addition to the minimum basic rent, rent expense also includes approximately $1,000 per month for other items charged by the landlord in connection with rent. On May 1, 2020 and July 29, 2020, the Company entered into amended lease agreements with its landlord. Under the terms of the amendments, the landlord agreed to waive rent, certain rent adjustments and parking for the period April 1, 2020 through August 31, 2020 and extend the term of the lease by five months. The lease term date, which was December 31, 2020, was changed to May 31, 2021. On April 1, 2021, the Company entered into a lease termination and payment agreement with the landlord, pursuant to which the Company vacated and surrendered the premises to the landlord and the Company will pay approximately $67,000 over 18 months commencing April 1, 2021. As of November 1, 2021, the company was delinquent in its monthly payments and has not made payments to date pursuant to the settlement agreement had approximately $42,000 in unpaid rent which was reported as part of accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet as of December 31, 2021.

 

Rent expense for the years ended December 31, 2021 and 2020 was $61,000 and $113,000, respectively. In addition to the minimum basic rent, rent expense also includes approximately $1,000 per month for other items charged by the landlord in connection with rent.

 

Settlement Payable

 

During the year ended December 31, 2020, the Company accrued a contingent liability for anticipated litigation and legal settlement liabilities, which has been reported as part of settlement liability on the accompanying consolidated balance sheet and litigation settlement costs on the accompanying consolidated statements of operations in the amount of $500,000, which was expensed in the year ended December 31, 2019 and settled during the year ended December 31, 2021.

 

Legal Proceedings

 

We are involved in certain legal proceedings that arise from time to time in the ordinary course of our business. Except for income tax contingencies, we record accruals for contingencies to the extent that our management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. Information about material legal proceedings follows:

 

Settlements

 

On June 18, 2018 the Company was named as a defendant in a case filed in the United States District Court for the Southern District of New York: Securities and Exchange Commission vs. Joseph A. Fiore, Berkshire Capital Management Co., Inc., and Eat at Joe�s, Ltd. n/k/a SPYR, Inc.(�Defendants�). Joseph A. Fiore was the Chairman of our Board of Directors and is a significant shareholder. Mr. Fiore resigned from his positions as Chairman of the Board and as a Director of the Company effective August 1, 2018. The suit alleged that Mr. Fiore, during 2013 and 2014, while he was the Company�s Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors, engaged in improper conduct on behalf of the defendants named in the case related to the Company�s sales of securities in Plandai Biotechnology, Inc. The Commission alleged that Mr. Fiore and the Company unlawfully benefited through the sales of those securities. The Commission also alleged that from 2013 to 2014, the Company�s primary business was investing and that it failed to register as an investment company, resulting in an alleged violation of Section 7(a) of the Investment Company Act of 1940. The suit sought to disgorge Joseph A. Fiore, Berkshire Capital Management Co., Inc., and the Company of alleged profits on the sale of the securities and civil fines related to the Company�s failure to register as an investment company with the Commission.

 

Pursuant to a settlement agreement among the parties, on April 14, 2020, final judgment was entered in the case: Securities and Exchange Commission vs. Joseph A. Fiore, Berkshire Capital Management, Inc. and Eat at Joes, Inc., n/k/a SPYR, Inc., case number 7:18-cv-05474-KMK filed in the U.S. District Court for the Southern District of New York.

 

On April 23, 2020, Joseph Fiore/Berkshire Capital Management, Inc. satisfied the Company�s joint and several liability obligation by paying to the Commission the agreed upon sum of Two Million Dollars pursuant to a settlement agreement between Joseph Fiore/Berkshire Capital Management, Inc. and the Company, which settlement agreement was entered into on April 15, 2020. The Company has until April 14, 2021 to satisfy its remaining financial obligation to the Commission, an agreed upon civil penalty of $500,000. The $500,000 liability is reported as part of accounts payable and accrued liabilities on the accompanying condensed consolidated balance sheets as of December 31, 2020.

 

In electing to settle with the Commission, the Company neither admitted nor denied liability to any of the Commission�s allegations in its complaint, and in consideration for the Commission discontinuing its action, the Company, along with the two other defendants Joseph Fiore and Berkshire Capital Management agreed to be jointly and severally liable for disgorgement of profits and prejudgment interest in the amount of two million dollars, and to each be solely liable to pay a civil penalty in the amount of five hundred thousand dollars.2

 

Judgments

 

On or about January 24, 2019, SPYR APPS, LLC entered into an agreement with one of its vendors, Shatter Storm Studios, to whom it owed $84,250 for artwork related to the Steven Universe game. Pursuant to the terms of that agreement, SPYR APPS, LLC needed to make payment in the amount of $85,000 to cover the principal owed and attorneys� fees together plus 6% interest in that amount by December 1, 2019. Should SPYR APPS, LLC not make the required payment on or before December 1, 2019, it consented to entry of judgment in favor of Shatter Storm Studios for the amount owed. SPYR APPS, LLC did not make the payment and on January 27, 2020 Shatter Storm Studios initiated Case No. 1:200cv-00217 in the U.S. District Court for the District of Colorado seeking entry of the consent judgment against SPYR APPS, LLC. The judgment was not contested by SPYR APPS, LLC and judgment in the amount of $85,000 plus post judgment interest at the rate of 6% was entered on March 17, 2020. The balance due as of December 31, 2020 was approximately $95,000, which includes accrued interest and attorneys� fees, has been reported as part of current liabilities of discontinued operations.

 

 

 
2In addition, an injunction was entered against the Company enjoined it from violating the antifraud, market manipulation, beneficial ownership reporting, and other provisions of the federal securities laws charged in the SEC�s complaint.

 

Employment Agreements

 

Pursuant to employment agreements entered in December 2014 and October 2015, the Company agreed to compensate three officers with an initial base salary in the aggregate of $450,000 per year with rolling five-year terms until terminated. In addition, as part of the employment agreements, the Company also agreed to grant these officers an aggregate of 1.55 million shares of restricted common stock at the beginning of each employment year. On September 17, 2021, Barry D. Loveless resigned as Chief Financial Officer. On December 31, 2021, the Company and James R. Thompson and Jennifer D. Duettra agreed to terminate their positions as Chief Executive Officer, President, General Counsel and Vice-President and Assistant General Counsel, respectively.

 

Pursuant to employment agreements entered in October 2020, the Company agreed to compensate the two former owners of Applied Magix with an initial base salary in the aggregate of $300,000 for one year. In addition, as part of the employment agreements, the Company also agreed to grant these officers an aggregate of 2 million shares of restricted common stock as a signing bonus and 5 million options to purchase shares of restricted common stock.

 

On December 31, 2021, the Company terminated its employment agreements with James R. Thompson and Jennifer D. Duettra.

 

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.

 
v3.22.2.2
EQUITY TRANSACTIONS
 12 Months Ended
Dec. 31, 2021
Equity [Abstract]  
EQUITY TRANSACTIONS

NOTE 14 � EQUITY TRANSACTIONS

 

Common Stock:

 

Year Ended December 31, 2020

 

During the year ended December 31, the Company issued an aggregate of 5,850,000 shares of restricted common stock to employees and directors with a total fair value of $1,335,000 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $1,335,000 upon issuance. The shares issued were valued at the date earned under the respective agreement based upon closing market price of the Company�s common stock.

 

During the year ended December 31, 2020, the Company issued an aggregate of 3,407,500 shares of common stock in conversion of notes payable with a total fair value of $548,000. As a result, the Company reduced the balance due on the notes by $548,000 upon issuance.

Year Ended December 31, 2021

 

During the year ended December 31, 2021 the Company awarded an aggregate of 9,115,019 shares of restricted common stock to employees and directors with a total fair value of $425,097 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. As of December 31, 2021, the shares have not been issued. As a result, the Company expensed the entire $425,097 and recorded common stock to be issued. The shares issued were valued at the date earned under the respective agreement based upon closing market price of the Company�s common stock.

 

During the year ended December 31, 2021, the Company issued an aggregate of 1,550,000 shares of restricted common stock to employees and directors with a total fair value of $239,000 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $239,000 upon issuance. The shares issued were valued at the date earned under the respective agreement based upon closing market price of the Company�s common stock.

 

During the year ended December 31, 2021, the Company issued an aggregate of 3,000,000 shares of registered common stock to third party service providers with a total fair value of $371,300. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $371,000 upon issuance. The shares issued were valued at the date earned under the respective agreement based upon closing market price of the Company�s common stock.

 

During the year ended December 31, 2021, the Company issued an aggregate of 1,242,854 shares of restricted common stock to third party service providers with a total fair value of $100,000. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $100,000 upon issuance. The shares issued were valued at the date earned under the respective agreement based upon closing market price of the Company�s common stock.

 

During the year ended December 31, 2021, the Company issued an aggregate of 29,120,503 shares of common stock with a total fair value of $1,245,592 in conversion of notes.

 

Options:

 

The following table summarizes common stock options activity:

 

 Summary of Common Stock Options Activity      Weighted 
       Average 
       Exercise 
   Options   Price 
Outstanding, January 1, 2020   9,299,900   $0.57 
Granted   5,000,000   $0.99 
Exercised   -    - 
Expired   (8,500,000)   4.76 
Outstanding, December 31, 2020   5,799,900   $0.88 
Granted   -    - 
Exercised   -    - 
Expired   (1,420,000)   0.24 
Outstanding, December 31, 2021   4,379,900   $0.88 
Exercisable, December 31, 2020   5,799,900   $0.88 
Exercisable, December 31, 2021   4,379,900   $0.82 

 

The weighted average grant date fair value of options granted during the years ended December 31, 2020, was $0.99. There were no options granted during the year ended December 31, 2021.

 

During the year ended December 31, 2021, the Company granted no stock options to employees. During the year ended December 31, 2020, the Company granted stock options to purchase a total of 5,000,000 shares of the Company�s restricted common stock. The options are fully vested, exercisable at prices ranging from $0.25 to $1.50 per share and will expire over 2.5 years. The fair values of the options are recorded at their grant dates computed using the Black-Scholes Option Pricing Model. During the year ended December 31, 2020, the Company recognized $561,000 in compensation expense on the issuance of these options.

 

The weighted average exercise prices, remaining lives for options granted, and exercisable as of December 31, 2021, were as follows:  

 

                           
    Outstanding Options   Exercisable Options 
Options           Weighted       Weighted 
Exercise Price       Life   Average Exercise       Average Exercise 
Per Share   Shares   (Years)   Price   Shares   Price 
$0.50    880,000    0.30   $0.50    880,000   $0.50 
$1.00    2,099,900    0.80   $1.00    2,099,900   $1.00 
$1.50    1,400,000    1.30   $1.50    1,400,000   $1.50 
      4,379,900        $0.88    4,379,900   $0.82 

 

On December 31, 2020, the Company�s closing stock price was $0.08 per share. As all outstanding options had an exercise price greater than $0.08 per share, there was no intrinsic value of the options outstanding as of December 31, 2020.

 

Warrants:

 

The following table summarizes common stock warrants activity:

 

       Weighted 
       Average 
       Exercise 
   Warrants   Price 
Outstanding, January 1, 2020   9,000,000   $0.46 
Granted   2,800,000    0.25 
Exercised   -    - 
Expired   (700,000)   0.08 
Outstanding, December 31, 2020   11,100,000   $0.46 
           
Granted   -    0.25 
Exercised   -    - 
Expired   (3,900,000)   0.08 
Outstanding, December 31, 2021   7,200,000   $0.39 
           
Exercisable, December 31, 2020   11,100,000   $0.39 
Exercisable, December 31, 2021   7,200,000   $0.39 

 

In April 2018, in combination with a 12-month convertible promissory note, as amended, the Company granted warrants to purchase a total of 500,000 shares of restricted common stock with an exercise price of $0.25 and will expire April 20, 2021. The warrants are fully vested and exercisable upon grant. The proceeds of the note were allocated between the note and the warrants based on the relative fair values which resulted in proceeds of $61,000 allocated to the warrants and recorded as paid in capital and debt discount. The debt discount was amortized over the life of the note as interest expense. During the year ended December 31, 2020, pursuant to a debt settlement agreement, the Company amended the exercise price of the warrants and recorded $9,000 in debt settlement costs, recognized as interest expense.

 

In May 2018, in combination with an 8-month convertible promissory note, as amended, the Company granted warrants to purchase a total of 1,200,000 shares of restricted common stock with an exercise price of $0.25 and will expire May 22, 2023. The warrants are fully vested and exercisable upon grant. The proceeds of the note were allocated between the note and the warrants based on the relative fair values which resulted in proceeds of $32,000 allocated to the warrants and recorded as paid in capital and debt discount. The debt discount will be amortized over the life of the note as interest expense. During the year ended December 31, 2020, pursuant to a debt settlement agreement, the Company increased the number of warrants amended the exercise price of the warrants and recorded $87,000 in debt settlement costs, recognized as interest expense.

 

In October 2019, pursuant to advisory services agreement, the Company granted warrants to purchase a total of 100,000 shares of restricted common stock with an exercise price of $0.50 and expiration date of October 30, 2020. The warrants are fully vested and exercisable upon grant. Total fair value of the options at grant date amounted to $1,000 computed using the Black-Scholes Option Pricing Model and was fully recognized on the date of grant.

 

In October and November 2020, in combination with a 5-year convertible promissory note, the Company granted warrants to purchase a total of 2,000,000 shares of restricted common stock with an exercise price of $0.25 and will expire on various dates between October 5, 2025 and November 24, 2025. The warrants are fully vested and exercisable upon grant. The proceeds of the note were allocated between the note, the warrants, and the derivative liability which resulted in proceeds of $0 allocated to the warrants.

 

The weighted average exercise prices, remaining lives for warrants granted, and exercisable as of December 31, 2021, were as follows:

 

         
    Outstanding and Exercisable Warrants 
Warrants         
Exercise Price       Life 
Per Share   Shares   (Years) 
$0.25    3,500,000    3.9 
$0.40    1,200,000    0.03 
$0.50    2,700,000    1.53 
$0.75    1,250,000    1.53 
$1.00    1,250,000    0.41 
      7,200,000      

 

At December 31, 2021, the Company�s closing stock price was $0.05 per share. As all outstanding warrants had an exercise price greater than $0.05 per share, there was no intrinsic value of the options outstanding at December 31, 2021.

 

The table below represents the average assumptions used in valuing the stock options and warrants granted in fiscal 2020:

 

  Year Ended
December 31,		 
   2020 
Expected life in years   1.00 � 5.00 
Stock price volatility   177% - 246%
Risk free interest rate   0.12% - 0.22%
Expected dividends   - 
Forfeiture rate   - 

 

The table below represents the average assumptions used in valuing the stock options and warrants granted in fiscal 2021:

 

   Year Ended
December 31,		 
   2021 
Expected life in years   1.00 � 5.00 
Stock price volatility   177% - 246%
Risk free interest rate   0.12% - 0.22%
Expected dividends   - 
Forfeiture rate   - 

 

The assumptions used in the Black Scholes models referred to above are based upon the following data: (1) the contractual life of the underlying non-employee options is the expected life. The expected life of the employee option is estimated by considering the contractual term of the option, the vesting period of the option, the employees� expected exercise behavior and the post-vesting employee turnover rate. (2) The expected stock price volatility was based upon the Company�s historical stock price over the expected term of the option. (3) The risk-free interest rate is based on published U.S. Treasury Department interest rates for the expected terms of the underlying options. (4) The expected dividend yield was based on the fact that the Company has not paid dividends to common shareholders in the past and does not expect to pay dividends to common shareholders in the future. (5) The expected forfeiture rate is based on historical forfeiture activity and assumptions regarding future forfeitures based on the composition of current grantees.