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SPYR, INC.

Date Filed : Nov 22, 2021

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UNITEDSTATES

SECURITIESAND EXCHANGE COMMISSION

Washington,D.C. 20549

 

FORM10-Q

 

(MarkOne)

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Forthe quarterly period ended: September 30, 2021

 

or

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

Forthe transition period from __________ to __________

 

Commissionfile number 33-20111

 

SPYR, INC.
(Exact name of registrant as specified in its charter)

 

Nevada   75-2636283

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

8547 E Arapahoe Rd STE J527, Greenwood Village, CO 80112

(Addressof principal executive offices)

 

(303)991-8000

(Registrant’stelephone number)

 

Checkwhether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days ☒ Yes   ☐ No

 

Indicateby check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive DataFile required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes   ☐No

 

Indicateby check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See the definitions of “large accelerated filer,” “accelerated filer” and” smaller reporting company”in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company    

 

Ifan emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complyingwith any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes   ☒No

 

APPLICABLEONLY TO CORPORATE ISSUERS

 

Asof November 22, 2021 there were 223,228,552 shares of the Registrant’s common stock.

 

 

 

 

 

 

TABLEOF CONTENTS

 

Part 1   Financial Information   1
         
Item 1.   Financial Statements (Unaudited)   1
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   19
Item 3.   Quantitative and Qualitative Disclosures About Market Risk   26
Item 4.   Controls and Procedures   27
         
Part II   Other Information   28
         
Item 1.   Legal Proceedings   28
Item 1a.   Risk Factors   29
Item 2.   Unregistered Sale of Equity Securities and Use of Proceeds   29
Item 3.   Defaults of Senior Securities   29
Item 4.   Mine Safety Disclosures   29
Item 5.   Other Information   29
Item 6.   Exhibits   30

 

i

 

 

PARTI - FINANCIAL INFORMATION

 

ITEM 1.FINANCIAL STATEMENTS

 

SPYR,Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

           
   September 30,   December 31, 
   2021   2020 
ASSETS          
Current Assets:          
Cash and Cash Equivalents  $30,000   $510,000 
Other Receivables   -    4,000 
Prepaid Expenses   46,000    49,000 
Inventory   60,000    - 
Trading Securities, at Market Value   2,000    1,000 
Current Assets of Discontinued Operations   14,000    13,000 
Total Current Assets   152,000    577,000 
           
Other Assets:          
Property and Equipment, net   17,000    31,000 
Intangible Assets, net   1,000    3,000 
Operating Lease Right-of-Use Asset   -    28,000 
Other Assets   13,000    13,000 
Non-Current Assets of Discontinued Operations   -    75,000 
TOTAL ASSETS  $183,000   $727,000 
           
LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT)          
Current Liabilities:          
Accounts Payable and Accrued Liabilities  $1,605,000   $1,561,000 
Related Party Short-Term Advances   -    1,184,000 
Related Party Line of Credit   -    1,204,000 
Related Party Notes Payable, current portion   512,000    - 
Short-Term Notes Payable   202,000    - 
SBA PPP Note Payable, current portion   72,000    51,000 
Operating Lease Liability, current portion   -    54,000 
Current Liabilities of Discontinued Operations   803,000    767,000 
Total Current Liabilities   3,194,000    4,821,000 
           
 COMMITMENTS AND CONTINGENCIES   -    - 
           
Long-Term Liabilities:          
Related Party Notes Payable   2,496,000    - 
SBA PPP Note Payable   -    20,000 
Long-Term Convertible Notes Payable, net   27,000    64,000 
Derivative Liability   1,761,000    1,382,000 
Total Liabilities   7,478,000    6,287,000 
           
Stockholders’ Equity (Deficit):          
Preferred Stock, Class A, $0.0001 par value, 10,000,000 shares authorized; 107,636 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively   11    11 
Preferred Stock, Class E, $0.0001 par value, 10,000,000 shares authorized; 20,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively   2    2 
Common Stock, $0.0001 par value, 750,000,000 shares authorized; 223,228,552 and 210,137,631 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively   22,323    21,014 
Additional Paid-In Capital   56,831,664    55,391,973 
Accumulated Deficit   (64,149,000)   (60,973,000)
Total Stockholder’s Equity (Deficit)   (7,295,000)   (5,560,000)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)  $183,000   $727,000 

 

Theaccompanying notes are an integral part of these unaudited consolidated financial statements

 

1

 

 

SPYR,Inc. and Subsidiaries

CondensedConsolidated Statements of Operations

(Unaudited)

                     
   For The
Three Months Ended
   For The
Nine Months Ended
 
   September 30,   September 30, 
   2021   2020   2021   2020 
Revenues  $-   $1,000   $1,000   $4,000 
Related Party Service Revenues   -    -    -    185,000 
Cost of Goods Sold   -    -    (2,000)   - 
Gross Margin   -    1,000    (1,000)   189,000 
                     
Expenses:                    
Labor and Related Expenses   256,000    151,000    1,031,000    487,000 
Rent   5,000    23,000    53,000    88,000 
Depreciation and Amortization   3,000    9,000    10,000    28,000 
Professional Fees   43,000    12,000    606,000    65,000 
Research and Development   -    -    9,000    - 
Other General and Administrative   133,000    29,000    234,000    183,000 
Total Operating Expenses   440,000    224,000    1,943,000    851,000 
                     
Operating Loss   (440,000)   (223,000)   (1,944,000)   (662,000)
                     
Other Income (Expenses)                    
Interest Expense   (185,000)   (70,000)   (529,000)   (180,000)
Gain (Loss) on Disposition of Assets   (1,000)   1,000    4,000    2,000 
Gain on Settlement of Debt   498,000    -    498,000    - 
Loss on Issuance of Convertible Debt   (832,000)   -    (832,000)   - 
Gain on Forgiveness of Debt   73,000    -    73,000    - 
Write-Down of Assets   -    (25,000)   -    (25,000)
SBA EIDL Grant   -    -    -    3,000 
Change in Value of Derivative Liability   (164,000)   -    (336,000)   - 
Unrealized Gain (Loss) on Trading Securities   -    (1,000)   1,000    - 
Total Other Income (Expenses)   (611,000)   (95,000)   (1,121,000)   (200,000)
                     
Loss from Continuing Operations   (1,051,000)   (318,000)   (3,065,000)   (862,000)
Loss from Discontinued Operations   (12,000)   -    (111,000)   - 
Net Loss  $(1,063,000)  $(318,000)  $(3,176,000)  $(862,000)
                     
Basic and diluted loss per common share  $(0.00)  $(0.00)  $(0.01)  $(0.00)
                     
Weighted average common shares outstanding   222,105,801    202,524,370    215,637,527    202,116,518 

 

Theaccompanying notes are an integral part of these unaudited consolidated financial statements

 

2

 

 

SPYR,Inc. and Subsidiaries

CondensedConsolidated Statements of Stockholders’ Equity

ForThe Nine Months Ended September 30, 2021

(Unaudited)

                                              
   Preferred Stock,
Class A
   Preferred Stock,
Class E
   Common Stock   Additional
Paid In
Capital
   Accumulated
Deficit
   Total 
   Shares   Amount   Shares   Amount   Shares   Amount   Amount   Amount   Amount 
Balance, December 31, 2020   107,636   $11    20,000   $2    210,137,631   $21,014   $55,391,973   $(60,973,000)  $(5,560,000)
Fair Value of Restricted Common Stock and Options Issued for Employee and Director Compensation   -    -    -    -    1,400,000    140    214,860    -    215,000 
Fair Value of S-8 Registered Common Stock Issued for Services   -    -    -    -    3,000,000    300    370,700    -    371,000 
Net Loss   -    -    -    -    -    -    -    (1,211,000)   (1,211,000)
Balance, March 31, 2021   107,636   $11    20,000   $2    214,537,631   $21,454   $55,977,533   $(62,184,000)  $(6,185,000)
                                              
Balance, March 31, 2021   107,636   $11    20,000   $2    214,537,631   $21,454   $55,977,533   $(62,184,000)  $(6,185,000)
Fair Value of Restricted Common Stock and Options Issued for Employee and Director Compensation   -    -    -    -    150,000    15    23,985    -    24,000 
Fair Value of Restricted Common Stock Issued for Services   -    -    -    -    1,242,854    124    99,876    -    100,000 
Fair Value of Common Stock Issued for Conversion of Notes Payable   -    -    -    -    3,736,237    374    424,626    -    425,000 
Net Loss   -    -    -    -    -    -    -    (902,000)   (902,000)
Balance, June 30, 2021   107,636   $11    20,000   $2    219,666,722   $21,967   $56,526,020   $(63,086,000)  $(6,538,000)
                                              
Balance, June 30, 2021   107,636   $11    20,000   $2    219,666,722   $21,967   $56,526,020   $(63,086,000)  $(6,538,000)
Fair Value of Common Stock Issued for Conversion of Notes Payable   -    -    -    -    3,561,830    356    305,644    -    306,000 
Net Loss   -    -    -    -    -    -    -    (1,063,000)   (1,063,000)
Balance, September 30, 2021   107,636   $11    20,000   $2    223,228,552   $22,323   $56,831,664   $(64,149,000)  $(7,295,000)

 

Theaccompanying notes are an integral part of these unaudited consolidated financial statements

 

3

 

 

SPYR,Inc. and Subsidiaries

CondensedConsolidated Statements of Stockholders’ Equity

ForThe Nine Months Ended September 30, 2020

(Unaudited)

 

   Preferred Stock,
Class A
   Preferred Stock,
Class E
   Common Stock   Additional
Paid In
Capital
   Accumulated
Deficit
   Total 
   Shares   Amount   Shares   Amount   Shares   Amount   Amount   Amount   Amount 
Balance, December 31, 2019   107,636   $11    20,000   $2    200,880,131   $20,088   $53,509,899   $(57,916,000)  $(4,386,000)
Fair Value of Common Stock issued for Employee Compensation   -    -    -    -    1,250,000    125    24,875    -    25,000 
Net Loss   -    -    -    -    -    -    -    (227,000)   (227,000)
Balance, March 31, 2020   107,636   $11    20,000   $2    202,130,131   $20,213   $53,534,774   $(58,143,000)  $(4,588,000)
                                              
Balance, March 31, 2020   107,636   $11    20,000   $2    202,130,131   $20,213   $53,534,774   $(58,143,000)  $(4,588,000)
Net Loss   -    -    -    -    -    -    -    (317,000)   (317,000)
Balance, June 30, 2020   107,636   $11    20,000   $2    202,130,131   $20,213   $53,534,774   $(58,460,000)  $(4,905,000)
                                              
Balance, June 30, 2020   107,636   $11    20,000   $2    202,130,131   $20,213   $53,534,774   $(58,460,000)  $(4,905,000)
Fair Value of Common Stock Issued for Conversion of Notes Payable   -    -    -    -    1,007,500    101    151,899    -    152,000 
Fair Value of Warrants Issued to settle Convertible Notes Payable   -    -    -    -    -    -    95,000    -    95,000 
Net Loss   -    -    -    -    -    -    -    (318,000)   (318,000)
Balance, September 30, 2020   107,636   $11    20,000   $2    203,137,631   $20,314   $53,781,673   $(58,778,000)  $(4,976,000)

 

Theaccompanying notes are an integral part of these unaudited consolidated financial statements

 

4

 

 

SPYR,Inc. and Subsidiaries

CondensedConsolidated Statements of Cash Flows

(Unaudited)

           
   For The
Nine Months Ended
 
   September 30, 
   2021   2020 
Cash Flows From Operating Activities:        
Net Loss  $(3,176,000)  $(862,000)
           
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:          
Loss on Discontinued Operations   111,000    - 
Depreciation and Amortization   10,000    28,000 
Common Stock Issued for Employee Compensation   239,000    25,000 
Common Stock Issued for Services   471,000    - 
Amortization of Debt Discounts on Convertible Notes Payable   356,000    - 
(Gain) on Disposition of Assets   (4,000)   (2,000)
Loss on Write-Down of Assets   -    25,000 
(Gain) on Settlement of Debt   (498,000)   - 
Loss on Conversion of Debt   832,000    - 
(Gain) on Forgiveness of Debt   (73,000)   - 
SBA EIDL Grant   -    (3,000)
Change in Value of Derivative Liability   336,000    - 
Unrealized (Gain) on Trading Securities   (1,000)    - 
Changes in Operating Assets and Liabilities:          
Decrease in Accounts Receivable   4,000    63,000 
Decrease in Prepaid Expenses   3,000    13,000 
Increase in Inventory   (60,000)   - 
Decrease in Operating Lease Right-of-Use Asset   28,000    29,000 
Increase in Operating Lease Right-of-Use Liability    (54,000   - 
Increase in Accounts Payable and Accrued Liabilities   46,000    456,000 
Increase in Accrued Interest on Notes Payable - Related Party   53,000    - 
Increase in Accrued Interest on Short-Term Advances - Related Party   -    51,000 
Increase in Accrued Interest on Notes Payable   5,000    - 
Increase in Accrued Interest on Line of Credit - Related Party   -    52,000 
Increase in Accrued Interest and Liquidated Damages on Convertible Notes   111,000    46,000 
Net Cash Used in Operating Activities   (1,261,000)   (79,000)
           
 Net Cash Used in Discontinued OperatingActivities    (1,000    - 
           
Cash Flows From Investing Activities:          
Purchase of Property and Equipment   -    (5,000)
Sale of Property and Equipment   10,000    8,000 
Net Cash Provided by Investing Activities   10,000    3,000 
           
Cash Flows From Financing Activities:          
Proceeds from Related Party Notes Payable   501,000    - 
Proceeds from Long-Term Notes Payable   198,000    - 
Proceeds from SBA EIDL Grant   -    3,000 
Proceeds from SBA PPP Note Payable   73,000    71,000 
Net Cash Provided by Financing Activities   772,000    74,000 
           
Net Increase (Decrease) in Cash   (480,000)   (2,000)
Cash and Cash Equivalents at Beginning of Period   510,000    10,000 
Cash and Cash Equivalents at End of Period  $30,000   $8,000 
           
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:          
Warrants Issued to Settle Convertible Notes Payable  $-   $95,000 
FV partial conversion embedded conversion option  $ 220,592   $- 
Common Stock Issued for Debt Conversion  $320,000   $152,000 

 

Theaccompanying notes are an integral part of these unaudited consolidated financial statements

 

5

 

 

SPYR,INC. AND SUBSIDIARIES

NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINEMONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)

 

NOTE1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

InterimFinancial Statements

 

Theaccompanying condensed consolidated financial statements of SPYR, Inc. and subsidiaries (the “Company”) are unaudited. Theseunaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally acceptedin 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 preparedin accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidatedfinancial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC. The condensed consolidated balance sheet asof December 31, 2020 included herein was derived from the audited consolidated financial statements as of that date, but does not includeall disclosures, including notes, required by GAAP.

 

Inthe opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary tofairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, alladjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are notnecessarily indicative of fiscal year-end results.

 

Principlesof Consolidation

 

Theconsolidated financial statements include the accounts of SPYR, Inc. and its wholly owned subsidiaries, Applied Magix, Inc., aNevada corporation, SPYR APPS, LLC, a Nevada Limited Liability Company (discontinued operations, see Note 9), E.A.J.: PHL, AirportInc., a Pennsylvania corporation (discontinued operations, see Note 9), and Branded Foods Concepts, Inc., a Nevada corporation(dissolution pending). Intercompany accounts and transactions have been eliminated.

 

Reclassifications

 

Certainreclassifications have been made in the 2020 financial statements to conform with the 2021 presentation related to the discontinued operationsof SPYR APPS, LLC. See Note 9 Discontinued Operations for additional information.

 

GoingConcern

 

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

 

Asshown in the accompanying financial statements, for the Nine months ended September 30, 2021, the Company recorded a net loss of $3,176,000and utilized cash in operations of $1,260,000. As of September 30, 2021, our cash balance was $30,000, and we had trading securitiesvalued at $2,000. 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 andother forms of financing such as the sale of additional equity and debt securities, capital leases and other credit facilities to conductits ongoing business, and to also conduct strategic business development, marketing analysis, due diligence investigations into possibleacquisitions, and implementation of our Applied Magix business plans generally. The Company also plans to diversify, through acquisitionor otherwise, in other unrelated business areas and is exploring opportunities to do so.

 

6

 

 

SPYR,INC. AND SUBSIDIARIES

NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINEMONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)

 

Historically,we have financed our operations primarily through sales of our common stock and debt financing. The Company will continue to seek additionalcapital through the sale of its common stock, debt financing and through expansion of its existing and new products. If our financinggoals 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.

 

Theability of the Company to continue as a going concern is dependent upon the success of future capital offerings or alternative financingarrangements and expansion of its operations. The accompanying financial statements do not include any adjustments that might be necessaryshould the Company be unable to continue as a going concern. Management is actively pursuing additional sources of financing sufficientto generate enough cash flow to fund its operations through calendar year 2021. However, management cannot make any assurances that suchfinancing will be secured.

 

Useof Estimates

 

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

 

Earnings(Loss) Per Share

 

Thebasic and fully diluted shares for the three months ended September 30, 2021 are the same because the inclusion of the potential shares(Class A – 26,909,028, Class E – 1,385,042, Options – 5,379,900, Warrants – 7,200,000) would have had an anti-dilutiveeffect due to the Company generating a loss for the three months ended September 30, 2021.

 

The basicand fully diluted shares for the three months ended September 30, 2020 arethe same because the inclusion of the potential shares (Class A – 26,909,028, Class E – 803,213,Options – 849,900, Warrants – 9,800,000)would have had an anti-dilutive effect due to the Company generating a loss for the three months ended September 30,2020.

 

The basic and fully diluted shares for the nine monthsended September 30, 2021 are the same because the inclusion of the potential shares (ClassA – 26,909,028, Class E – 1,385,042, Options – 5,379,900, Warrants – 7,200,000) would have had an anti-dilutiveeffect due to the Company generating a loss for the nine months ended September 30,2021.

 

Thebasic and fully diluted shares for the nine months ended September 30, 2020 are the same because the inclusion of the potential shares (ClassA – 26,909,028, Class E – 803,213, Options – 849,900, Warrants – 9,800,000) would have had an anti-dilutiveeffect due to the Company generating a loss for the nine months ended September 30, 2020.

 

ProductResearch and Development Costs

 

Costsincurred for product research and development are expensed as incurred. During the nine months ended September 30, 2021 and 2020, theCompany incurred $9,000 and $0 in product development costs paid to independent third parties.

 

RevenueRecognition

 

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

 

7

 

 

SPYR,INC. AND SUBSIDIARIES

NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINEMONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)

 

Weadopted this new revenue recognition standard along with its related amendments on January 1, 2018 and have updated our accounting policyfor revenue recognition. As expected, at our current level of revenue, the adoption of this new standard did not impact our financialposition or results of operations or operating cash flows.

 

Wedetermine revenue recognition by: (1) identifying the contract, or contracts, with our customer; (2) identifying the performance obligationsin 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.

 

Throughour wholly owned subsidiary Applied Magix we are a registered Apple® developer, and reseller of Apple ecosystem compatibleproducts and accessories with an emphasis on the smart home market. The Company’s products are available for sale through itswebsite at https://appliedmagix.com/shop/, as well as the eBay Marketplace and Amazon Marketplace. Payment is required at time of purchase and the purchase price is a fixed amount.

 

Cashand Cash Equivalents

 

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

 

Inventory

 

TheCompany’s inventory consisting of Magix Drive units and Apple HomeKit compatible products for resale by the Company, isrecorded at the lower of cost (first-in, first-out) or net realizable value. The Company writes down its inventory balances forestimates of excess and obsolete amounts. The Company reduces inventory on hand to its net realizable value on an item-by-item basiswhen the expected realizable value of a specific inventory item falls below its original cost. Management regularly reviews theCompany’s investment in inventories for such declines in value. The write-downs are recognized as a component of cost ofsales. During the nine months ended September 30, 2021 and 2020, the Company recognized inventory write downs of approximately$1,000.As of September 30, 2021, the inventory was valued at $60,000. As of December 31, 2020, the company held no inventory.

 

Stock-BasedCompensation

 

TheCompany periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for servicesand for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritativeguidance provided by the Financial Accounting Standards Board (FASB) whereas the value of the award is measured on the date of grantand recognized over the vesting period.

 

The Company accounts for stock option and warrantgrants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensationis based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the dateat which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generallyare amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirementsby the non-employee, option grants are immediately vested, and the total stock-based compensation charge is recorded in the period ofthe measurement date.

 

Thefair value of the Company’s stock option and warrant grants is estimated using the Black-Scholes Option Pricing model, which usescertain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and futuredividends. Compensation expense is recorded based upon the value derived from the Black-Scholes Option Pricing model and based on actualexperience. The assumptions used in the Black-Scholes Option Pricing model could materially affect compensation expense recorded in futureperiods.

 

8

 

 

SPYR,INC. AND SUBSIDIARIES

NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINEMONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)

 

TheCompany also issues restricted shares of its common stock for share-based compensation programs to employees and non-employees. The Companymeasures the compensation cost with respect to restricted shares to employees based upon the estimated fair value at the date of thegrant 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 datewhich is either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earnthe equity instruments is complete.

 

DerivativeFinancial Instruments

 

TheCompany evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embeddedderivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recordedat 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 instrumentsat inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments shouldbe recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classifiedin the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be requiredwithin 12 months of the balance sheet date. As of September 30, 2021, the Company’s only derivative financial instruments wereembedded conversion features associated with long-term convertible notes payable which contain certain provisions that allow for a variablenumber of shares on conversion.

 

Concentrationof Credit Risk

 

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

 

AdvertisingCosts

 

Advertising,marketing, and promotional costs are expensed as incurred and included in general and administrative expenses. Advertising, marketing,and promotional expense was $118,000 and $0 for the nine months ended September 30, 2021, and 2020, respectively and was reflected aspart of Other General and Administrative Expenses on the accompanying condensed consolidated statements of operations.

 

RecentAccounting Standards

 

InJune 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 financialinstruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. Thisreplaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortizedcost and applies to some off-balance sheet credit exposures. In November 2019, the effective date of this ASU was deferred until fiscalyears beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Companyis in the process of determining the potential impact of adopting this guidance on its consolidated financial statements.

 

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

 

9

 

 

SPYR,INC. AND SUBSIDIARIES

NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINEMONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)

 

NOTE2 – RELATED PARTY TRANSACTIONS

 

OnSeptember 5, 2017, the Company obtained a revolving line of credit (LOC) from Berkshire Capital Management Co., Inc. which is controlledby the Company’s former chairman of the board. The line of credit allows the Company to borrow up to $1,000,000 with interest at6% 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. During 2018 and 2019, the Company hasreceived an additional $1,062,000 in the form of short-term advances (Advances) from Berkshire Capital Management Co., Inc. The lastadvance occurred on September 30, 2019; at which time the Company had borrowed $1,062,000. No further advances are expected from BerkshireCapital Management Co., Inc. The Company has accrued interest on these short-term advances at 6% per annum. On June 17, 2021, the Companyand Berkshire entered into a debt consolidation agreement to consolidate the LOC and Advances into a single balloon note with interestat 6% per annum and an extended due date of December 31, 2025, thereby replacing and otherwise cancelling the LOC and Advances. The June17, 2021 consolidated balance due was approximately $2,454,000. As of September 30, 2021, the consolidated balance due with accrued interestwas approximately $2,496,000.

 

Duringthe three months ended March 31, 2020, the Company, received $185,000 in revenue for professional services rendered to Berkshire CapitalManagement Co., Inc. Subsequent to March 31, 2020, the Company has not and does not anticipate that it will provide any further professionalservices to related parties.

 

OnMay 17, 2021, the Company entered into an agreement to borrow funds from the 481149 Irrevocable Trust, a related party, that controlsall of the currently outstanding preferred stock of the Company and the trustee of which is a member of the Company’s board ofdirectors. Pursuant to the agreement, the Company borrowed approximately $501,000 with interest at 6% per annum, due and payable in fullon May 17, 2022. As of September 30, 2021, the balance due with accrued interest was approximately $512,000.

 

NOTE3 – SHORT TERM NOTES

 

On May 27, 2021, the Company entered into an agreementto borrow funds from a third party pursuant to which, the Company borrowed $85,000 with interest at 8% per annum, due and payable in fullon or before November 27, 2021. On August 11, 2021, the Company entered into an agreement to borrow funds from a third party pursuantto which, the Company borrowed $33,333 with interest at 8% per annum, due and payable in full on or before February 11, 2022.

 

OnAugust 12, 2021, the Company entered into an agreement to borrow funds from a third party pursuant to which, the Company borrowed $40,000with interest at 8% per annum, due and payable in full on or before February 12, 2022. On September 9, 2021, the Company entered intoan agreement to borrow funds from a third party pursuant to which, the Company borrowed $40,000 with interest at 8% per annum, due andpayable in full on or before March 9, 2022. As of September 30, 2021, the balance due with accrued interest was approximately $202,000.

 

NOTE4 – SMALL BUSINESS ADMINISTRATION DEBT

 

OnMay 12, 2020, the Company received a Paycheck Protection Program loan from the U.S. Small Business Administration (SBA) in the approximateamount of $71,000. The loan agreement provides for six months principal and interest deferral. The interest rate is 1%. Under the termsof the loan, up to 100% of the loan may be forgiven conditioned upon meeting certain requirements for the use of funds. As of September 30, 2021, the balance due on this note with accrued interest was $72,000.

 

OnJanuary 21, 2021, the Company received a second Paycheck Protection Program loan from the U.S. Small Business Administration in theapproximate amount of $73,000.The interest rate is 1%. Underthe 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 berepaid in equal monthly payments of principal and interest beginning in May 2022. On February 2, 2021, theCompany submitted its application to the SBA for forgiveness, which was correspondingly confirmed forgiven as of August 20, 2021. Asof September 30, 2021, the balance due on this note was approximately $0.

 

10

 

 

SPYR,INC. AND SUBSIDIARIES

NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINEMONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)

 

NOTE5 – CONVERTIBLE NOTES

 

OnSeptember 30, 2020, the Company entered into a Stock Purchase Agreement with a third-party investor. By virtue of the Stock PurchaseAgreement, in two separate closings, the Company agreed to sell, in each closing, an 8% $500,000 Convertible Promissory Note and Warrantto purchase one million common shares. Each Convertible Promissory Note bears 8% interest and matures five year after issuance. Amountsdue under the Convertible Promissory Note are convertible into the Registrant’s common stock at the lower of $0.25 per share or70% of the average of the three lowest Variable Weighted Average Price (“VWAP”) for the Registrant’s common stock forthe twenty trading days prior to an election to convert. The Warrants are exercisable for five-years at an exercise price of 0.25 pershare or, subject to the Registrant filing a registration statement including the shares of common stock that may be issued upon exerciseof 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 secondclosing. Total proceeds from the issuance of these convertible notes payable was $1,000,000. The Company determined that the conversionfeatures 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 $1,514,000with corresponding debt discounts of $1,000,000 and a loss on issuance of long-term convertible notes payable of $514,000. During Mayand 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 aconversion rate of $0.0324 a share, into 3,561,830 Common Stock shares. On August 6, 2021, the company entered into an Amendment of theexisting convertible debt, of which resulted in the conversionrates changing to 50% of the average of the lowest VWAP, and the interest on the loan was eliminated., as well as, a $455,000 increasein the Derivative Liability portion of the convertible debt, from $1,382,000 to $1,761,000. The company recordedamortization of debt discounts, recognized as interest expense, in the amount of $330,000 and accrued interest of $47,000 during thenine months ended September 30, 2021. On September 30, 2021, the principal balance together with accrued interest is recorded on theCompany’s condensed consolidated balance sheet net of discounts at $27,000.

 

Thefollowing table summarized the Company’s convertible notes payable as of September 30, 2021 and December 31, 2020:

 

          
   September 30,
2021
   December 31,
2020
 
Beginning Balance  $64,000   $550,000 
Proceeds from the issuance of convertible notes, net of issuance discounts   -    - 
Repayments   -    (47,000)
Conversion of notes payable and accrued interest into common stock   (320,000)   (548,000)
Amortization of discounts   330,000    50,000 
Extinguishment of Debt     (108,000)   - 
Liquidated damages   -    (53,000)
Debt settlement costs   -    96,000 
Accrued Interest   61,000    16,000 
Convertible notes payable, net  $27,000   $64,000 
           
Convertible notes, long-term  $740,000   $1,000,000 
Accrued interest and damages, long-term   -    14,000 
Debt discounts, long-term   (713,000)   (950,000)
Long-term convertible notes payable, net  $27,000   $64,000 

 

11

 

 

SPYR,INC. AND SUBSIDIARIES

NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINEMONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)

 

NOTE6 – DERIVATIVE LIABILITY

 

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

 

Thefollowing table represents the Company’s derivative liability activity for the nine months ended September 30, 2021:

 

     
   Nine Months Ended September 30, 
   2021 
Derivative liability balance, December 31, 2020  $1,382,000 
Decrease due to conversion of the underlying note   (412,000)
Increase due to modifications of underlying notes   455,000 
Change in derivative liability during the period   336,000 
Derivative liability balance, September 30, 2021  $1,761,000 

 

Thetable below represents the average assumptions used in valuing the derivative liability on September 30, 2021:

 

     
   Nine Months Ended September 30, 
   2021 
Expected life in years   4.14 
Stock price volatility   195.21%
Risk free interest rate   0.42%
Expected dividends   - 
Forfeiture rate   - 

 

12

 

 

SPYR,INC. AND SUBSIDIARIES

NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINEMONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)

 

NOTE7 – COMMITMENTS AND CONTINGENCIES

 

EquityLine of Credit

 

TheCompany entered into a five-year Equity Line of Credit pursuant to an Equity Purchase Agreement with Brown Stone Capital, LP, dated September30, 2020. Pursuant to the agreement, Brown Stone agreed to invest up to $14,000,000 to purchase the Company’s Common Stock, parvalue $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 afterthe 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 Companyand Brown Stone entered into a Registration Rights Agreement, whereby the Company agreed to provide certain registration rights underthe Securities Act of 1933, as amended, and the rules and regulations thereunder, and applicable state securities laws, with respectto the shares of Common Stock issuable for Brown Stone’s investment pursuant to the Equity Purchase Agreement. On or about September 20, 2021, this agreement was cancelled and replaced with a similar Equity Line of Creditto Ares Capital. As of September30, 2021, no shares have been registered or sold pursuant to this agreement.

 

OperatingLeases

 

TheCompany 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 theminimum basic rent, rent expense also includes approximately $1,000 per month for other items charged by the landlord in connection withrent. 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 extendthe 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 surrenderedthe premises to the landlord and the Company will pay approximately $67,000 over 18 months commencing April 1, 2021. As of September30, 2021, the company had approximately $45,000 in unpaid rent which was reported as part of accounts payable and accrued expenses inthe accompanying condensed consolidated balance sheet as of September 30, 2021.

 

EffectiveMarch 1, 2021, the Company’s wholly owned subsidiary Applied Magix, entered into a 6-month lease for 2 workspace offices locatedat 1230 Rosecrans Ave, Manhattan Beach California. The lease automatically renews on a continuing basis for an additional 6 months unlesscancelled in writing 60 days prior the lease termination date. Under the lease, the Company pays monthly rent of $1,400.

 

Rentexpense for the nine months ended September 30, 2021 and 2020 was $53,000 and $88,000, respectively.

 

LegalProceedings

 

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

 

13

 

 

SPYR,INC. AND SUBSIDIARIES

NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINEMONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)

 

Settlements

 

OnJune 18, 2018, the Company was named as a defendant in a case filed in the United States District Court for the Southern District ofNew 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 allegedthat Mr. Fiore, during 2013 and 2014, while he was the Company’s Chief Executive Officer, Chief Financial Officer and Chairmanof the Board of Directors, engaged in improper conduct on behalf of the defendants named in the case related to the Company’s salesof securities in Plandai Biotechnology, Inc. The Commission alleged that Mr. Fiore and the Company unlawfully benefited through the salesof those securities. The Commission also alleged that from 2013 to 2014, the Company’s primary business was investing and thatit 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 ofthe securities and civil fines related to the Company’s failure to register as an investment company with the Commission.

 

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

 

OnApril 23, 2020, Joseph Fiore/Berkshire Capital Management, Inc. satisfied the Company’s joint and several liability obligationby paying to the Commission the agreed upon sum of Two Million Dollars pursuant to a settlement agreement between Joseph Fiore/BerkshireCapital Management, Inc. and the Company, which settlement agreement was entered into on April 15, 2020. The Company had until April14, 2021 to satisfy its remaining financial obligation to the Commission, an agreed upon civil penalty of Five Hundred Thousand Dollars($500,000). On May 17, 2021, the Company borrowed approximately $501,000 from a related party to pay its principal settlement liabilitywith the Securities and Exchange Commission and has done so (See Note 2 – Related Party Transactions). As of September 30, 2021,the $500,000 together with accrued interest of approximately $1,000 has been paid to the Securities and Exchange Commission in settlementof this obligation.

 

Inelecting to settle with the Commission, the Company neither admitted nor denied liability to any of the Commission’s allegationsin its complaint, and in consideration for the Commission discontinuing its action, the Company, along with the two other defendantsJoseph Fiore and Berkshire Capital Management agreed to be jointly and severally liable for disgorgement of profits and prejudgment interestin 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.[1]

 

Judgments

 

Onor about January 24, 2019, SPYR APPS, LLC entered into an agreement with one of its vendors, Shatter Storm Studios, to whom it owed $84,250for artwork related to the Steven Universe game. Pursuant to the terms of that agreement, SPYR APPS, LLC needed to make payment in theamount 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 ShatterStorm Studios for the amount owed. SPYR APPS, LLC did not make the payment and on January 27, 2020 Shatter Storm Studios initiated CaseNo. 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 September 30, 2021 and December 31, 2020 was approximately $98,000 and $95,000,respectively and is reported as part of current liabilities of discontinued operations.

 

 

 

[1]Inaddition, an injunction was entered against the Company enjoined it from violating the antifraud, market manipulation, beneficial ownershipreporting, and other provisions of the federal securities laws charged in the SEC’s complaint.

 

14

 

 

SPYR,INC. AND SUBSIDIARIES

NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINEMONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)

 

Covid-19

 

OnJanuary 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 includerestrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. Thecoronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financialmarkets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditionswill 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 accounts receivable and paying liabilities and changesin the fair value of assets and liabilities. Our necessity for fund raising activities make it reasonably possible that we are vulnerableto 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 inthe near term as a result of these conditions, including potential credit losses on receivables and investments; impairment losses relatedto intangible assets and other long-lived assets; and contingent obligations.

 

NOTE8 – EQUITY TRANSACTIONS

 

CommonStock:

 

NineMonths Ended September 30, 2021

 

During the nine monthsended September 30, 2021, the Company committed an aggregate of 150,000 shares of restricted common stock to directors with a total fairvalue of $7,000 for services rendered. The shares, once issued, are non-refundable and deemed earned upon issuance. As a result, theCompany accrued the entire $7,000 as of September 30, 2021. The shares agreed upon were valued as of September 30, 2021, based upon closingmarket price of the Company’s common stock.

 

Duringthe nine months ended September 30, 2021, the Company issued an aggregate of 1,550,000 shares of restricted common stock to employeesand directors with a total fair value of $239,000 for services rendered. The shares issued are non-refundable and deemed earned uponissuance. As a result, the Company expensed the entire $239,000 upon issuance. The shares issued were valued at the date earned underthe respective agreement based upon closing market price of the Company’s common stock.

 

Duringthe nine months ended September 30, 2021, the Company issued an aggregate of 3,000,000 shares of registered common stock to third partyservice providers with a total fair value of $371,000. 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 agreementbased upon closing market price of the Company’s common stock.

 

Duringthe nine months ended September 30, 2021, the Company issued an aggregate of 1,242,854 shares of restricted common stock to third partyservice 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 agreementbased upon closing market price of the Company’s common stock.

 

Duringthe year ended December 31, 2020, the Company issued an aggregate of 3,736,237 shares of common stock with a total fair value of $425,000in conversion of notes. As a result, the Company reduced the balance due on the notes and accrued interest by $204,000 and reduced thevalue of the derivative liability by $221,000 upon issuance.

 

NineMonths Ended September 30, 2020

 

Duringthe nine months ended September 30, 2020, the Company issued an aggregate of 1,250,000 shares of restricted common stock to employeeswith a total fair value of $25,000 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. As aresult, the Company expensed the entire $25,000 upon issuance. The shares issued were valued at the date earned under the respectiveagreement based upon closing market price of the Company’s common stock.

 

Duringthe nine months ended September 30, 2020, the Company issued an aggregate of 1,007,500 shares of common stock in conversion of notespayable with a total fair value of $152,000. As a result, the Company reduced the balance due on the notes by $152,000 upon issuance.

 

15

 

 

SPYR,INC. AND SUBSIDIARIES

NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINEMONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)

 

Options:

 

Thefollowing table summarizes common stock options activity:

 

          
       Weighted 
       Average 
       Exercise 
   Options   Price 
December 31, 2020   5,799,900   $0.88 
Granted   -    - 
Exercised   -    - 
Expired   (420,000)   1.00 
Outstanding, September 30, 2021   5,379,900   $0.87 
Exercisable, September 30, 2021   5,379,900   $0.87 

 

Theweighted average exercise prices, remaining lives for options granted, and exercisable as of September 30, 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 
$0.25