Organization, Consolidation and Presentation of Financial Statements [Abstract]

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.

Going Concern

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.

Earnings (Loss) Per Share

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.

Revenue Recognition

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.

Cash and Cash Equivalents

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.

Intangible Assets

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.

Derivative Financial Instruments

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.

Fair Value of Financial Instruments

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:

Level

1:

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level

2:

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.

Level

3:

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.

Leases

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.

Restatement

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.