ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Interim Financial Statements

Interim Financial Statements

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

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

Principles of Consolidation

Principles of Consolidation

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

Going Concern

Going Concern

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

As shown in the accompanying financial statements, for the three months ended March 31, 2022, the Company recorded a net loss from continuing operations of $2,152,000 and have current liabilities of $3,207,000. As of March 31, 2022, our cash balance was $182,000. These issues raise substantial doubt about the Company’s ability to continue as a going concern.

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

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

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

Covid-19

Covid-19

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

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

Use of Estimates

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

Earnings (Loss) Per Share

The basic and fully diluted shares for the three months ended March 31, 2022 are the same because the inclusion of the potential shares (Class A – 26,909,028, Class E – 1,385,042, Options – 4,379,900, Warrants – 5,800,000) would have had an anti-dilutive effect due to the Company generating a loss for the three months ended March 31, 2022.

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

Property and Equipment

Property and Equipment

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	2-7 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.

Concentration of Credit Risk

Concentration of Credit Risk

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

Recent Accounting Standards

Recent Accounting Standards

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

Restatement

Restatement

In 2022, the Company identified errors in account balances in the Form 10Q filed for the period ended March 31, 2022. 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 period ended March 31, 2022, 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:

	March 31, 2022
	As Reported			Adjustments			As Restated
ASSETS
Current Assets:
Cash and Cash Equivalents	$	184,000		$	(2,000	)		182,000
Prepaid Expenses		46,000			-			46,000
Trading Securities, at Market Value		1,000			(1,000	)		-
Current Assets of Discontinued Operations		14,000			(12,000	)		2,000
Total Current Assets		245,000			(15,000	)		230,000
Other Assets:
Property and Equipment, net		13,000			-			13,000
Other Assets		84,000			(83,000	)		1,000
TOTAL ASSETS	$	342,000		$	(98,000	)	$	244,000
LIABILITIES & STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts Payable and Accrued Liabilities	$	1,872,000		$	(217,000	)		1,655,000
Related Notes Payable, current portion		528,000			-			528,000
Short-Term Convertible Notes Payable		210,000			(1,000	)		209,000
SBA PPP Note Payable, current portion		72,000			(72,000	)		-
Current Liabilities of Discontinued Operations		803,000			12,000			815,000
Total Current Liabilities		3,485,000			(278,000	)		3,207,000
Other Liabilities:
Notes Payable		2,572,000			-			2,572,000
Long-Term Convertible Notes Payable, net		839,000			(565,000	)		274,000
Derivative Liability		380,000			2,520,000			2,900,000
Total Liabilities		7,276,000			1,677,000			8,953,000
Stockholders’ Deficit:
Preferred Stock, Class A, $0.0001 par value, 10,000,000 shares authorized; 107,636 shares issued and outstanding as of March 31, 2022		11			-			11
Preferred Stock, Class E, $0.0001 par value, 10,000,000 shares authorized; 20,000 shares issued and outstanding as of March 31, 2022		2			-			2
Common Stock, $0.0001 par value, 750,000,000 shares authorized; 265,030,082 and outstanding as of March 31, 2022		28,114			(1,611	)		26,503
Common stock to be issued		1,089			894,411			895,500
Additional Paid-In Capital		60,060,421			(603,437	)		59,456,984
Accumulated Deficit		(67,022,521	)		(2,065,479	)		(69,088,000	)
Total Stockholder’s Deficit		(6,934,000	)		(1,775,000	)		(8,709,000	)
TOTAL LIABILITIES AND STOCKHOLDER’S DEFICIT	$	342,000		$	(98,000	)	$	244,000

	For the Three Months Ended March 31, 2022
	As Reported			Adjustment			As Restated
Revenues	$	1,000		$	-		$	1,000
Cost of Goods Sold		-			-			-
Gross Profit		1,000			-			1,000
Expenses:
Labor and Related Expenses		1,259,000			(696,000	)		563,000
Rent		6,000			-			6,000
Depreciation and Amortization		2,000			1,000			3,000
Professional Fees		891,000			(161,000	)		730,000
Other General and Administrative		40,000			(40,000	)		-
Total Operating Expenses		2,198,000			(896,000	)		1,302,000
Operating Loss		(2,197,000	)		896,000			(1,301,000	)
Other Income (Expenses)
Interest Expense		(49,000	)		(1,005,000	)		(1,054,000	)
Other Income		38,000			(38,000	)		-
Amortization of Debt Discounts		(43,000	)		10,000			(33,000	)
Loss on Conversion of Debt		(54,000	)		22,000			(32,000	)
Loss on Settlement		-			(30,000	)		(30,000	)
Loss on Issuance of Common Stock		-			(16,000	)		(16,000	)
Settlement Expense		(282,000	)		184,000			(98,000	)
Change in Value of Derivative		2,075,000			(1,663,000	)		412,000
Total Other Income (Expenses)		1,685,000			(2,536,000	)		(851,000	)
Loss from Continuing Operations		(512,000	)		(1,640,000	)		(2,152,000	)
Loss from Discontinued Operations		(2,000	)		-			(2,000	)
Net Loss	$	(514,000	)	$	(1,640,000	)	$	(2,154,000	)
Basic and diluted loss per common share	$	(0.00	)	$	(0.01	)	$	(0.01	)
Weighted average common shares outstanding		270,939,479			12,384,109			258,555,370

	For the Three Months Ended March 31, 2022
	As Reported			Adjustment			As Restated
Cash Flows From Operating Activities:
Net Loss	$	(514,000	)	$	(1,640,000	)	$	(2,154,000	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Loss on Discontinued Operations		2,000			(1,000	)		1,000
Reclassifications of Derivative Liabilities to Additional Paid-In Capital		167,000			(167,000	)		-
Depreciation and Amortization		3,000			-			3,000
Common Stock Issued and to be issued for Director and Employee Compensation		1,214,000			(696,000	)		518,000
Common Stock Issued and to be issued for Services		569,000			(108,000	)		461,000
Common Stock Issued for Settlement		282,000			(184,000	)		98,000
Common Stock Issued for Conversion of Debt		54,000			(22,000	)		32,000
Amortization of Debt Discounts on Convertible Notes Payable		43,000			1,029,000			1,072,000
Change in Value of Derivative Liability		(2,241,000	)		1,829,000			(412,000	)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Prepaid Expenses		1,000			-			1,000
Increase in Accounts Payable and Accrued Liabilities		56,000			(43,000	)		13,000
Increase in Accrued Interest on Notes Payable Related Party		42,000			(38,000	)		4,000
Increase in Accrued Interest on Notes Payable		4,000			37,000			41,000
Net Cash Used in Operating Activities from Continuing Operations		(321,000	)		(1,000	)		(322,000	)
Net Cash Provided by Operating Activities from Discontinued Operations		-			-			-
Net Cash Used in Operating Activities		(321,000	)		(1,000	)		(322,000	)
Cash Flows From Financing Activities:
Proceeds from Long-Term Convertible Notes		510,000			-			510,000
Funds lent as asset consideration		(40,000	)		40,000			-
Repayment of Notes Payables, current portion		-			(38,000	)		(38,000	)
Net Cash Provided by Financing Activities from Continuing Operations		470,000			2,000			472,000
Net Cash Provided by Financing Activities from Discontinued Operations		-			-			-
Net Cash Provided by Financing Activities		470,000			2,000			472,000
Net Change in Cash		149,000			1,000			150,000
Cash and Cash Equivalents at Beginning of Period		35,000			(3,000	)		32,000
Cash and Cash Equivalents at End of Period	$	184,000		$	(2,000	)	$	182,000