SPYR, Inc. (Form: S-1, Received: 08/31/2018 16:26:25)

As filed with the Securities and Exchange Commission on August 31, 2018

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

SPYR ^® , INC.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

7372
(Primary Standard Industrial Classification Code Number)

75-2636283

(I.R.S. Employer Identification Number)

__________________________________________________________

4643 South Ulster Street, Ste. 1510

Regency Plaza

Denver CO. 80237
Telephone: (303) 991-8000
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)

__________________________________________________________

Registered Agents, Inc.

401 Ryland Street, Ste. 200-A

Reno, NV 89502
Telephone: (775) 401-6800
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Tad Mailander, Esq.

945 4 ^th Avenue, Ste. 311

San Diego, CA 92101

Telephone: (619) 239-9034

Approximate date of commencement of proposed sale to the public
From time to time after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]

Calculation of Registration Fee

Title of each class of securities to be registered	Amount to be Registered ⁽¹⁾	Proposed Maximum Offering Price per Share	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee
Shares of Common Stock underlying warrants, par value $0.0001 per share	1,700,000 ⁽²⁾	$2.00	$3,400,000	423.30
Shares of Common Stock underlying convertible notes, par value $0.0001 per share	1,188,000 ⁽³⁾	$0.25	$297,000	36.98
Shares of Common Stock underlying warrants granted in stock purchase agreement, par value $0.0001 per share.	700,000 ⁽⁴⁾	$0.50	$350,000	43.58
Shares of Common Stock underlying warrants granted in consulting agreement, par value $0.0001 per share.	1,200,000 ⁽⁵⁾	$0.40	$480,000	59.76
Shares of Common Stock issued in litigation settlement agreement, par value $0.0001 per share.	3,500,000 ⁽⁶⁾	$0.30	$1,050,000	130.73
Shares of Common Stock underlying warrants granted in litigation settlement agreement, par value $0.0001 per share.	3,500,000 ⁽⁷⁾	$0.75	$2,625,000	326.81
Total	11,788,000		8,202,000	1,021.15


(1)	An indeterminate number of additional shares of common stock shall be issuable pursuant to Rule 416 under the Securities Act of 1933 to prevent dilution resulting from stock splits, stock dividends or similar transactions and in such an event the number of shares registered shall automatically be increased to cover the additional shares in accordance with Rule 416.

(2)	Consists of 500,000 shares of common stock issuable to First Fire Global Opportunity Funds under the warrant agreement dated April 20, 2018; 200,000 shares of common stock issuable to Collier Investments, LLC under the warrant agreement dated May 22, 2018; 1,000,000 shares of common stock issuable to William D. Moreland under the warrant agreement dated May 30, 2018.

(3)	Consists of shares of common stock issuable to Collier Investments, LLC under a convertible note dated May 22, 2018.

(4)	Consists of 700,000 warrant shares of common stock issuable to Richard Goldfarb, under a warrant agreement granted in an underlying stock purchase agreement dated March 19, 2018.

(5)	Consists of 1,200,000 warrant shares of common stock issuable to Calan Investments, LLC dba Kreloff Capital Partners under a consulting agreement dated January 12, 2018.
(6)	Consists of 3,500,000 shares of common stock issuable to Zakeni Limited under a litigation settlement agreement dated July 12, 2018.
(7)	Consists of 3,500,000 warrant shares of common stock issuable to Zakeni Limited under a litigation settlement agreement dated July 12, 2018.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this Prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, Dated August , 2018

Preliminary Prospectus

SPYR ^® , INC.

Shares of Common Stock

This prospectus relates to the offer and sale of shares of our common stock, par value $0.0001, of SPYR®, Inc., a Nevada corporation. The selling stockholders identified in this prospectus may sell up to 11,788,000 shares of our common stock issued pursuant to warrant agreements, convertible notes, warrants underlying stock purchase agreements and consulting agreements. All shares registered in accordance with this registration statement are being registered solely pursuant to the agreements noted above.

We will pay the expenses incurred in registering the shares, including legal and accounting fees. See Part II.

Our Common Stock is quoted by the OTC Markets under the symbol “SPYR”. On August 31, 2018, the closing price of our Common Stock was $0.219 per share.

Investing in our Common Stock involves risks. See the heading “Risk Factors” commencing on page 8 of this Prospectus for a discussion of these risks, as well as in any Prospectus supplement related to these specific offerings.

We may amend or supplement this Prospectus from time to time by filing amendments or supplements as required. You should read the entire Prospectus and any amendments or supplements carefully before you make your investment decision.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus is August 31, 2018

Table of Contents

		Page Number
About this Prospectus		5
Prospectus Summary		6
Risk Factors		8
Risks Related to Financial Position and Results of Operations		9
Risks Related to Our Business		10
Risks Related to Our Common Stock		12
Forward Looking Statements		14
Use of Proceeds		14
Dilution		14
Plan of Distribution		16
Description of Securities		17
Experts and Counsel		19
Interests of Named Experts and Counsel		19
Information with Respect to Our Company		20
Description of Business		20
Description of Property		22
Legal Proceedings		23
Market Price of and Dividends on Our Common Equity and Related Stockholder Matters		23
Financial Statements		24
Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Directors and Executive Officers		36
Executive Compensation		39
Security Ownership of Certain Beneficial Owners and Management		40
Certain Relationships and Related Transactions		41
Where You Can Find More Information		42

ABOUT THIS PROSPECTUS

You should rely only on the information that we have provided in this Prospectus and any applicable Prospectus supplement. We have not authorized anyone to provide you with different information. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this Prospectus and any applicable Prospectus supplement. You must not rely on any unauthorized information or representation. This Prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information in this Prospectus and any applicable Prospectus supplement is accurate only as of the date on the front of the document, regardless of the time of delivery of this Prospectus, any applicable Prospectus supplement, or any sale of a security.

When we refer to SPYR ^® , Inc. we use the terms “SPYR ^® ,” “the Company,” “us,” “we” and “our.”

PROSPECTUS SUMMARY

This summary highlights information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. You should read the entire prospectus carefully before making an investment in our common stock. You should carefully consider, among other things, our financial statements and the related notes and the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

The Offering

The selling stockholders identified in this prospectus may offer and sell an aggregate of up to 11,788,000 shares of our common stock under warrant agreements, warrants underlying stock purchase agreements, convertible promissory notes, warrants underlying consulting agreements, shares issued in litigation settlement agreement, and warrants underlying litigation settlement agreement. All shares registered in accordance with this registration statement are being registered solely pursuant to the noted agreements which are filed as exhibits to this registration statement. We will not receive any proceeds from the sale of shares of our common stock by the selling stockholders.

You should rely only on the information contained or incorporated by reference in this prospectus or any prospectus supplement. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any prospectus supplement, as well as information we have previously filed with the SEC is accurate as of the date of those documents only. Our business, financial condition, results of operations and prospects may have changed since those dates.

Our Company

SPYR ^® , Inc. acts as a holding company to develop a portfolio of profitable subsidiaries, not limited by any particular industry or business. On March 24, 2015, the Company organized its wholly owned subsidiary SPYR APPS ^® , LLC, a Nevada Limited Liability Company, to engage in the development and publication of electronic games that are downloaded for free by users of mobile devices such as cellular telephones and tablets, including those using Apple’s iOS and Google’s Android mobile operating systems.

Our Business and Strategy

Our current strategy is to publish and market games developed by third-party developers with the potential to develop our own games, either by contracting with third-party developers or by building or acquiring an in-house development team and to acquire revenue-producing games or companies. As of the date of this prospectus, we have not built or acquired an in-house development team, but are currently in the process of negotiating multiple acquisitions in the mobile games space that would include a development team. We intend to generate revenues from the games based upon users paying for additional features and levels of game play, and from the sale of advertising in our games. Our games use the “free to play” model, which allows users to download the games onto their devices and play them at no cost. “Free to play” is a business model that has existed in videogames (and other industries) for quite some time but one that has, in the last 2-3 years, been adopted by a large number of game developers and publishers both big and small. The “free to play” model allows us to offer games that have zero cost barriers preventing players from trying our games. Players that choose to not continue with the game nonetheless still become marketing channels to their friends, who may become a critical mass of players who do choose to pay for optional aspects of the games, including customization, faster game progress, additional content and more effective competition against other players. There are no limitations on potential purchases, thus catering to the financial capabilities/preferences of all players. We monetize the games by offering features and opportunities within the games that allow players to spend money to unlock new game levels, items and features.

Our Games

Contracting with a third-party developer, we released three games: “Plucky,” “Plucky Rush” and Rune Guardian in April, May and December 2015, respectively. They are available for free download on mobile devices in the Apple App Store and Google Play Store.

We entered into our second publishing and marketing agreement on December 17, 2015 with Spectacle Games Publishing (“Spectacle Games”), for its “Massively Multiplayer Online Role Playing Game,” “Pocket Starships,” which is available in the Apple App Store, the Google Play Store and the Amazon App Store for free download, and can also be played in a web browser, via hundreds of web portals around the world or on Facebook’s “Game Room” and VK.com.

Pocket Starships is a space warfare themed game that is available to be played regardless of what operating system the player uses, whether that is an Apple iOS device such as an iPhone or iPad, a Google Android device, including phones and tablets from a variety of hardware manufacturers using the Android operating system, or an Amazon Fire OS device such as a Kindle. Pocket Starships is also available to play on the Internet in any web browser at www.pocketstarships.com. Pocket Starships’ software engine allows players worldwide to play against each other in real time and in the same game “universe,” regardless of what platform is used. Thus, players can play Pocket Starships in the same game universe regardless of whether they are playing in a web browser at their desk or using an iPhone on the other side of the planet.. Pocket Starships’ game play is hardware and software agnostic, so regardless of device all users have the same game experience.

In June 2016, we obtained an exclusive option to purchase all assets pertaining to Pocket Starships (the “Option”) in consideration for 3,750,000 cash-based options, exercisable as follows: (a) 500,000 shares at $1.00 per share, expiring on December 31, 2017; (b) 750,000 shares at $2.50 per share, expiring on December 31, 2018; and (c) 2,500,000 shares at $5.00 per share, expiring on December 31, 2019. Under the Option, had the Company decided to exercise the Option, it would have purchased the assets for a cash payment of $5,000,000 plus $10,000,000 worth of shares of the Company’s common stock, valued at the time of closing of the purchase. The exclusive Option was exercisable by us at any time, in our sole discretion, through December 31, 2020.

On October 23, 2017, we restructured and exercised the Option by entering into a definitive agreement pursuant to which SPYR ^® acquired all of the game related assets of Pocket Starships in a cashless transaction, including the publishing agreement with Spectacle. The original terms of the Option were terminated. As a result, SPYR ^® acquired rights to retain 100% of the revenue generated from the game and will be the sole owner of all of the assets related to the game. The acquisition included, among other assets, all Pocket Starships related intellectual property, the userbase, artwork, software, internet domains, game store accounts (such as App Store, Play Store, Amazon, and Facebook Gameroom), web portal accounts (Facebook, VK.com, Kongregate, etc.) and internet domains (www.pocketstarships.com). Under the terms of the agreement, the game's owner received 8,000,000 restricted shares of SPYR ^® stock (subject to resale gating provisions) and 8,000,000 three-year cash-based options exercisable at $0.50 per share.

During 2017, we signed an agreement with CBS Consumer Products that will allow the incorporation of intellectual property (IP) from various Star Trek television series into future Pocket Starships updates and expansions. Our Pocket Starships development team is already working on expansions of Pocket Starships to include the Star Trek IP, which we expect will be released during the 4th quarter 2018. In Pocket Starships, players can build and pilot several ships and forge alliances on their quest for galactic domination. Players can perform or initiate various activities ranging from fighting pirates to participating in Faction Alerts. With the release of the expansion, those playing Pocket Starships will be able to explore new sectors and engage in exciting battles with the Borg and will be able to staff their ships with their favorite Star Trek characters from the Star Trek TV series franchise – including The Next Generation, Deep Space Nine, and Voyager, through a trading card expansion.

During July 2017, the Company entered into an agreement with Reset Studios, LLC for the development of at least two new idle tapper games to be published by SPYR ^® , the first of which, Steven Universe: Tap Together, features characters and storylines from Cartoon Network’s Steven Universe . The Company has secured the necessary license to use the Steven Universe IP in the game through a license agreement with Cartoon Network. The game allows players to play as a team of their favorite Steven Universe characters to battle increasingly difficult enemies in order to unlock new characters and rewards. By performing simple actions such as tapping the screen, players can progress in the game even when they’re not actively playing. Steven Universe: Tap Together was launched globally on the Google Play Store on August 2, 2018 and on the IOS App Store on August 9, 2018.

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 may also decide to diversify, through acquisition or otherwise, in other unrelated business areas if opportunities present themselves.

We are a publicly listed company quoted on the OTC Market under the symbol “SPYR.”

Where You Can Find Us

The principal offices of our company are located at 4643 South Ulster Street, Regency Plaza, Suite 1510, Denver, Colorado 80237. Our telephone number is (303) 991-8000.

Summary of Financial Data

The following information represents selected audited financial information for our company for the years ended December 31, 2017 and selected unaudited financial information for our company for the six-month period ended June 30, 2018. The summarized financial information presented below is derived from and should be read in conjunction with our audited and unaudited financial statements, as applicable, including the notes to those financial statements which are included elsewhere in this prospectus along with the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations beginning on page (+) of this prospectus.

Statements of Operations Data	Six Month Period Ended June 30, 2018 (Unaudited)			Year Ended December 31, 2017
Revenue	$	27,000		$	128,000
Net operating expenses	$	(5,020,000	)	$	(10,372,000	)
Loss from continuing operations	$	(4,993,000	)	$	(15,643,000	)
Basic and diluted loss per share	$	(0.03	)	$	(0.09	)

Balance Sheets Data	As of June 30, 2018			As of December 31, 2017
Cash and Cash Equivalents	$	168,000		$	86,000
Total Current Assets	$	231,000		$	173,000
Total Current Liabilities	$	3,844,000		$	2,533,000
Total Stockholders’ Deficit	$	(2,775,000	)	$	(2,262,000	)
Accumulated Deficit	$	(53,857,000	)	$	(48,842,000	)

RISK FACTORS

An investment in our company involves a high degree of risk. In addition to the other information included in this prospectus, you should carefully consider the following risk factors described in this prospectus and the risk factors that may be described in any applicable prospectus supplement and the documents incorporated by reference in this prospectus. You should consider these matters in conjunction with the other information included or incorporated by reference in this prospectus. The risks and uncertainties described in this prospectus, any applicable prospectus supplement and the documents incorporated by reference herein are not the only ones facing us. Additional risks and uncertainties that we do not presently know about, or that we currently believe are not material, may also adversely affect our business. Our business, results of operations or financial condition could be seriously harmed, and the trading price of our common stock may decline due to any of these or other risks.

This prospectus contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this prospectus and include statements regarding the intent, belief or current expectations of our management, directors or officers primarily with respect to our future operating performance. Prospective purchasers of our securities are cautioned that these forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements due to various factors. The accompanying information contained in this prospectus, including the information set forth below, identifies important factors that could cause these differences. See “Special Note Regarding Forward-Looking Statements” on page 14.

RISKS RELATED TO OUR FINANCIAL POSITION AND RESULTS OF OPERATIONS

We Have Historically Lost Money and Losses May Continue in the Future.

No assurances can be given we will be successful in reaching or maintaining profitable operations. Historically, we have relied upon the sales of our common stock, financing, and proceeds from the sales of marketable securities held for sale to generate funds to finance our activities. We currently have limited cash on hand to conduct the ongoing development of our digital advertising and publishing efforts, including mobile application and game development, and for exploring opportunities and new acquisitions. Our digital development and publishing efforts are in their developmental stages and are insufficient as of the date of this prospectus to generate sufficient revenues to finance our future operations. The existence of available financing or opportunities for sales of our common stock on acceptable terms is uncertain. We cannot assure you that sufficient financing, whether from external sources or related parties, will be available if needed, or on favorable terms. Further, the sale of our common stock to raise capital may cause significant dilution to our existing shareholders. The value of our marketable securities held for sale fluctuates from day to day instantaneously. You should not rely upon the prospective value of any of our marketable securities held for sale as a basis for an investment decision in our Company, since any value assigned to them is subject to material changes based on the inter-day trading values of those securities and are an unreliable basis for evaluating our revenue and funding for our future operations.

We have a history of operating losses and expect to incur losses for the foreseeable future. We may never generate significant revenues or achieve profitability.

We have historically lost money. The operating loss for the fiscal year December 31, 2017 was $(10,244,000), and for the six months ended June 30, 2018 was $(4,993,000), and future losses are likely to occur. We are continuing to implement a new business model focused on our Electronic Games Publishing and Development business. We have generated limited revenues to date from this segment. For the year ended December 31, 2017, our revenues from our Electronic Games operations was $128,000, and for the six months ended June 30, 2018, our revenues from our Electronic Games operations was $27,000. As of the date of this Prospectus, we have published seven mobile games, but we have not yet realized significant revenue from those games. There is no guarantee that revenue from our games segment will continue or develop and grow in amounts sufficient to fund operations.

We have a new and evolving business model.

Our Company and its prospects should be examined in light of the risks and difficulties frequently encountered by new and development stage companies in new and rapidly evolving markets. These risks include, among other things, the speed at which we can develop, publish and market our games; the growth of our games business, including our recently published games for mobile devices, each having limited market acceptance, and our ability to and to derive significant game play and advertising revenues from these ventures.

In early 2015, we changed our business model to focus on becoming a developer and publisher of “free-to-play” games for smartphones, tablets and other next-generation platforms. Free-to-play games are games that a player can download and play for free, but which allow players to access a variety of additional content and features for a fee, and to engage with various advertisements and offers that generate revenues for us. We launched our first free-to-play games – Plucky and Plucky Rush -- in the first and second fiscal quarters of 2015, and in 2016 launched Retro Shot, Rune Guardian, and Pocket Starships. We launched Home Makeover on May 30, 2017 and we launched Steven Universe: Tap Together on August 2, 2018. Although we recently retained persons with industry experience we believe will significantly advance our business, our operating history under this business model is relatively short. Regardless, our efforts to develop successful free-to-play games may prove unsuccessful or, even if successful, may take more time than we anticipate to achieve significant revenues because, among other reasons:

• Many well-funded public and private companies have released, or plan to release, free-to-play games, and this competition may make it more difficult for us to differentiate our games and derive significant revenues from them;

• Free-to-play games, including those delivered as a service, have a relatively limited history, and it is unclear how popular this style of game will become or remain or its revenue potential;

• Our free-to-play strategy assumes that a large number of players will download our games because they are free and that we will then be able to effectively monetize the games; however, players may not widely download our games for a variety of reasons, including poor consumer reviews or other negative publicity, ineffective or insufficient marketing efforts, lack of sufficient features;

• Even if our games are widely downloaded, we may fail to retain users or optimize the monetization of these games for a variety of reasons, including poor game design or quality, lack of community features, gameplay issues such as game unavailability, long load times or an unexpected termination of the game due to technical issues, or our failure to effectively respond and adapt to changing user preferences through game updates; and,

• We may have difficulty hiring the additional monetization, operations, technology, user experience and product management personnel that we require to support our continued the expansion of our digital publishing and advertising company.

We have a history of losses, our accountants expressed doubts about our ability to continue as a going concern and we require additional capital to execute our business plan.

As of the date of this prospectus, we have not yet achieved profitable operations. We have accumulated losses, a working capital deficiency and we expect to incur further losses in the implementation of our current business plan, all of which, according to our accountants, casts substantial doubt about our ability to continue as a going concern. We will require additional funds through the receipt of conventional sources of capital or through future sales of our Shares, until such time as our revenues are sufficient to meet our cost structure, and ultimately achieve profitable operations. These actions will result in dilution of the ownership interests of existing stockholders and may further dilute our book value, and that dilution may be material.

RISKS RELATED TO OUR BUSINESS

If we are unable to successfully develop and market our games or features, or our games do not perform as expected, our business and financial condition will be adversely affected.

With the release of any new game or any new features to an existing game, we are subject to the risks generally associated with new product or feature introductions and applications, including lack of market acceptance, delays in development and implementation, and failure of new games or features to perform as expected. In order to introduce and market new or enhanced games or features successfully with minimal disruption in customer purchasing patterns and user experiences, we must manage the transition from existing games in the market. There can be no assurance that we will successfully develop and market, on a timely basis, games, game enhancements or features that respond to technological advances by others, that our new games will adequately address the changing needs of the market or that we will successfully manage transitions. Further, failure to generate sufficient cash from operations or financing activities to develop or obtain improved games and technologies could have a material adverse effect on our results of operations and financial condition.

We distribute our games primarily on Apple's iOS and Google's Android platforms, and if the Apple App Store or the Google Play Store were unavailable for any prolonged period of time, our business will suffer.

We distribute our games primarily on Apple’s iOS and Google’s Android platforms. We are subject to each of Apple’s and Google’s standard terms and conditions for application developers, which govern the promotion, distribution and operation of applications on their respective storefronts. Each of Apple and Google has broad discretion to change its standard terms and conditions. In addition, these standard terms and conditions can be vague and subject to changing interpretations by Apple or Google. Any change to these standard terms and conditions, or in Apple's or Google's interpretation of these standard terms and conditions, could materially harm our games business, and we may not receive any advance warning of such change. In addition, each of Apple and Google have the right to prohibit a developer from distributing its applications on its storefront if the developer violates its standard terms and conditions. In the event that either Apple or Google ever determines that we are in violation of its standard terms and conditions, including by a new interpretation, and prohibits us from distributing our games on its storefront, it would materially harm our business and could cause our stock price to significantly decline. We also rely on the continued function of the Apple App Store and the Google Play Store, as we distribute our games through these two digital storefronts. There have been occasions in the past when these digital storefronts were unavailable for short periods of time. In the event that either the Apple App Store or the Google Play Store is unavailable for a prolonged period of time, it could have a material adverse effect on our revenues and operating results.

If we are unable to hire additional qualified personnel, our ability to grow our business may be harmed.

Over time we will need to hire additional qualified personnel with expertise in such areas as digital production, software development, artists, financial matters and sales and marketing. We compete for qualified individuals with numerous other

digital media and software development companies. Competition for such individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attracting and retaining qualified personnel will be critical to our success.

We rely on key members of management, and the loss of their services could adversely affect our success and development.

Our success depends on the expertise and continued service of certain other key executives and technical personnel. These individuals are a significant factor in our growth and ability to meet our business objectives in the digital game development and publishing spaces. Additionally, our success is highly dependent upon the efforts of our executive officers and our directors. It may be difficult to find a sufficiently qualified individual to replace key executives in the event of death, disability or resignation, resulting in our being unable to satisfactorily execute our business. The loss of one or more of our executive officers and directors could slow the growth of our business, or it may cease to operate at all, which may result in the total loss of an investor’s investment.

Compensation may be paid to our executive officers, directors and employees regardless of our profitability, which may limit our ability to finance our business and adversely affect our business.

Our executive officers are receiving compensation, and other current and future employees of our company may be entitled to receive compensation, payments and reimbursements regardless of whether we operate at a profit or a loss. Such obligations may negatively affect our cash flow and our ability to finance our digital publishing and advertising initiatives, which could cause our business to fail.

Because of pressures from competitors with more resources, we may fail to implement our business strategy profitably.

The digital games, publishing and advertising business is highly fragmented, extremely competitive, and subject to rapid change. By its nature, the business risks associated therewith are numerous and significant. The market for customers is intensely competitive and such competition is expected to continue to increase. We believe that our ability to compete depends upon many factors within and beyond our control, including the timing and market acceptance of new games, and enhancements to our existing games developed and published by us. We are a new and development stage digital game development and publishing company that distributes digital games for mobile media technology. Larger and more established companies, with significantly greater resources, are active in our market with similar technologies, and may be in better competitive positions than we are.

We may be unable to compete with larger or more established companies.

We face a large and growing number of competitors in the digital publishing and game entertainment industries. Many of these competitors have substantially greater financial, technical and marketing resources, larger customer bases, longer operating histories, greater name recognition, and more established relationships in these industries than we do. As a result, certain of these competitors may be in better positions to compete with us for customers and audiences. We cannot be sure that we will be able to compete successfully with existing or new competitors.

If we do not continue to develop and offer compelling content and games and attract new consumers or maintain the engagement of our existing users, our advertising revenues could be adversely affected.

In order to attract consumers and maintain or increase engagement with our games, we believe we must offer compelling content. Acquiring, developing and offering new content, as well as new functionality, features and enhanced performance of our existing content and games, may require significant investment and time to develop. In addition, consumer tastes are difficult to predict and subject to rapid change. If we are unable to develop sufficient games that are attractive and relevant to our users, we may not be able to maintain or increase our existing users’ engagement on or attract new consumers to our games and as a result our search rankings, traffic and usage metrics, and advertising revenues may be adversely affected.

If our Games do not achieve market acceptance, we may not have sufficient financial resources to fund our operations or further development.

While we believe that a viable market exists for our games, there is no assurance that our games will prove to be an attractive alternative to conventional or competitive games in the markets that we have identified. If a viable market for our games cannot be created for our business or our games do not achieve market acceptance, we may need to commit greater resources than are currently available to develop commercially viable and competitive games. There can be no assurance that we would have sufficient financial resources to fund such development or that such development would be successful. In addition, if our games do not generate sufficient revenues, or we are unable to raise additional capital, we may be unable to fund our operations. Our ability to raise additional funds will depend on financial, economic and other factors, many of which are beyond our control. There can be no assurance that, when required, sufficient funds will be available to us on satisfactory terms.

Our business will suffer if the Internet or network systems fail or become unavailable.

A reduction in the performance, reliability and availability of Internet infrastructure would harm our ability to distribute our games to our users, as well as our reputation and ability to attract and retain users and content providers. Systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, Internet breakdown, earthquake and similar events. Systems could also be subject to viruses, break-ins, sabotage, acts of terrorism, acts of vandalism, hacking, cyber-terrorism and similar misconduct. We might not carry adequate business interruption insurance to compensate us for losses that may occur from a system outage. Any system error or failure that causes interruption in availability of games, or an increase in response time, could result in a loss of potential customers or content providers, which could have a material adverse effect on our business, financial condition and results of operations. If we suffer sustained or repeated interruptions, our games could be less attractive to our users and our business would be materially harmed.

We may be unable to protect our intellectual property rights from third-party claims and litigation, which could be expensive, divert management's attention, and harm our business.

Our success is dependent in part on obtaining, maintaining and enforcing our proprietary rights and our ability to avoid infringing on the proprietary rights of others. We seek protection for those inventions and technologies for which we believe such protection is suitable and is likely to provide a competitive advantage to us. Because patent applications in the United States are maintained in secrecy until either the patent application is published or a patent is issued, we may not be aware of third-party patents, patent applications and other intellectual property relevant to our games that may block our use of our intellectual property or may be used in third-party games that compete with our games and processes. In the event a competitor or other party successfully challenges our games, processes, patents or licenses, or claims that we have infringed upon their intellectual property, we could incur substantial litigation costs defending against such claims, be required to pay royalties, license fees or other damages or be barred from using the intellectual property at issue, any of which could have a material adverse effect on our business, operating results and financial condition.

We also rely substantially on trade secrets, proprietary technology, nondisclosure and other contractual agreements, and technical measures to protect our technology, application, design, and manufacturing know-how, and work actively to foster continuing technological innovation to maintain and protect our competitive position. We cannot assure you that steps taken by us to protect our intellectual property and other contractual agreements for our business will be adequate, that our competitors will not independently develop or patent substantially equivalent or superior technologies or be able to design around patents that we may receive, or that our intellectual property will not be misappropriated.

In addition, we may use open source software in our games and will continue to use open source software in the future. From time to time, we may be subject to claims brought against companies that incorporate open source software into their games or services, claiming ownership of, or demanding release of, the source code, the open source software and/or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open source license. These claims could also result in litigation, require us to purchase a costly license, or require us to devote additional research and development resources to changing our games or services, any of which would have a negative effect on our business and results of operations.

RISKS RELATED TO OUR COMMON STOCK

Our Common Stock May Be Affected By Limited Trading Volume and May Fluctuate Significantly

There has been a limited public market for our common stock and there can be no assurance that an active trading market for our common stock will develop or, if developed, be maintained. As a result, this could adversely affect our shareholders' ability to sell our common stock in short time periods, or possibly at all. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations that could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. Substantial fluctuations in our stock price could significantly reduce the price of our stock.

There is no Assurance of Continued Public Trading Market, and Being a Low-Priced Security May Affect the Market Value of Our Stock

To date, there has been only a limited public market for our common stock. Our common stock is currently quoted on the OTC Pink Sheets. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the market value of our stock. Our stock is subject to the low-priced security or so called "penny stock" rules that impose additional sales practice requirements on broker-dealers who sell such securities. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure in connection with any trades involving a stock defined as a penny stock (generally, according to recent regulations adopted by the SEC, any equity security that has a market price of less than $5.00 per share, subject to certain exceptions that we no longer meet). For example, brokers/dealers selling such securities must, prior to effecting the transaction, provide their customers with a document that discloses the risks of investing in such securities. Included in this document are the following:

	-	the bid and offer price quotes in and for the "penny stock," and the number of shares to which the quoted prices apply,
	-	the brokerage firm's compensation for the trade, and,
	-	the compensation received by the brokerage firm's sales person for the trade.

In addition, the brokerage firm must send the investor:

	-	a monthly account statement that gives an estimate of the value of each "penny stock" in the investor's account, and,
	-	a written statement of the investor's financial situation and investment goals.

If the person purchasing the securities is someone other than an accredited investor or an established customer of the broker/dealer, the broker/dealer must also approve the potential customer's account by obtaining information concerning the customer's financial situation, investment experience and investment objectives. The broker/dealer must also make a determination whether the transaction is suitable for the customer and whether the customer has sufficient knowledge and experience in financial matters to be reasonably expected to be capable of evaluating the risk of transactions in such securities. Accordingly, the Commission's rules may limit the number of potential purchasers of the shares of our common stock.

Resale restrictions on transferring "penny stocks" are sometimes imposed by some states, which may make transaction in our stock more difficult and may reduce the value of the investment. Various state securities laws pose restrictions on transferring "penny stocks" and as a result, investors in our common stock may have the ability to sell their shares of our common stock impaired.

There can be no assurance we will have market makers in our stock.

If the number of market makers in our stock should decline, the liquidity of our common stock could be impaired, not only in the number of shares of common stock which could be bought and sold, but also through possible delays in the timing of transactions, and lower prices for the common stock than might otherwise prevail. Furthermore, the lack of market makers could result in persons being unable to buy or sell shares of the common stock on any secondary market.

As an issuer of “penny stock,” the protection provided by the federal securities laws relating to forward looking statements does not apply to us.

Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, the Company will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by the Company contained a material misstatement of fact or was misleading in any material respect because of the Company’s failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.

We do not intend to pay cash dividends on our common stock in the foreseeable future.

Any payment of cash dividends will depend upon our financial condition, results of operations, capital requirements and other factors and will be at the discretion of our board of directors. We do not anticipate paying cash dividends on our common stock in the foreseeable future. Furthermore, we may incur additional indebtedness that may severely restrict or prohibit the payment of dividends.

Nevada Law and Our Charter May Inhibit a Takeover of Our Company That Stockholders May Consider Favorable

Provisions of Nevada law, such as its business combination statute, may have the effect of delaying, deferring or preventing a change in control of our company. As a result, these provisions could limit the price some investors might be willing to pay in the future for shares of our common stock.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements in this prospectus and in the documents incorporated by reference in this prospectus contain forward-looking statements that involve risks and uncertainties. We use words such as “may,” “assumes,” “forecasts,” “positions,” “predicts,” “strategy,” “will,” “expects,” “estimates,” “anticipates,” “believes,” “projects,” “intends,” “plans,” “budgets,” “potential,” “continue” and variations thereof, and other statements contained in this prospectus, regarding matters that are not historical facts and are forward-looking statements. Because these statements involve risks and uncertainties, as well as certain assumptions, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to those risks identified under “Risk Factors” and from time to time in our other filings with the SEC. The information in this prospectus or any prospectus supplement speaks only as of the date of that document and the information incorporated herein by reference speaks only as of the date of the document incorporated by reference. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

Forward-looking statements include our plans and objectives for future operations, including plans and objectives relating to our games and our future economic performance. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, future business decisions, and the time and money required to successfully complete development and commercialization of our technologies, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of those assumptions could prove inaccurate and, therefore, we cannot assure you that the results contemplated in any of the forward-looking statements contained herein will be realized. Based on the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of any such statement should not be regarded as a representation by us or any other person that our objectives or plans will be achieved.

USE OF PROCEEDS

We will not receive any proceeds from the sale of shares of our common stock by the selling stockholders. Any proceeds from the exercise of warrants will be used for working capital and other general corporate purposes, including but not limited to funding for additional game development, game marketing and user acquisition costs, hiring additional personnel, and the costs of operating as a public company. We will pay for expenses of this offering, except that the selling stockholders will pay any broker discounts or commissions or equivalent expenses and expenses related to the sale of their shares.

DILUTION

The discretionary sale of up to 11,788,000 shares of our common stock by the selling stockholders in accordance with the respective warrant agreements, stock purchase agreements, convertible notes and consulting agreements will have a dilutive impact on our stockholders. As a result, our net loss per share could increase in future periods and the market price of our common stock could decline. If our stock price decreases during the pricing period, then our existing stockholders would experience greater dilution.

THE OFFERING

Consulting Agreement with Calan Investments, LLC dba Kreloff Capital Partners.

On January 12, 2018, the Company entered into a consulting agreement with Calan Investments, LLC (“Calan”) dba Kreloff Capital Partners, who agreed to provide consulting services to the Company for a 12 month term expiring on January 12, 2019. The consulting agreement provided that in exchange for services, the Company granted Calan the right to purchase 1,200,000 shares of its common stock at an exercise price of $0.40 per share. The warrant expires January 11, 2021.

Stock Purchase Agreement with Underlying Warrant with Richard Goldfarb.

On March 19, 2018, the Company entered into a stock purchase agreement with an underlying warrant with Richard Goldfarb (“Goldfarb”), granting Goldfarb the right to purchase up to 700,000 warrant shares of its common stock at an exercise price of $0.50 per share. The warrant expires on March 18, 2023.

Warrant Agreements with First Fire Global Opportunity Funds.

On April 20, 2018, the Company entered into three warrant agreements with First Fire Global Opportunity Funds, LLC (“First Fire”), a Delaware limited liability company. The first warrant agreement granted First Fire the right to purchase 200,000 shares of the Company’s common stock at an exercise price of $0.375 per share, expiring on April 20, 2021. The second warrant agreement granted First Fire the right to purchase up to 200,000 shares of the Company’s common stock at an exercise price of $0.50 per share, expiring on April 20, 2021. The third warrant agreement granted First Fire the right to purchase up to 100,000 shares of the Company’s common stock at an exercise price of $0.625 per share, expiring on April 20, 2021. All three warrant agreements were issued in connection with a convertible promissory note between the Company and First Fire dated April 20, 2018, wherein the Company borrowed from First Fire $157,895, less a $7,895 original issue discount, bearing 8% interest.

Convertible Note and Warrant Agreement with Collier Investments, LLC.

On May 22, 2018, the Company entered into Convertible Note and Common Stock Purchase Warrant agreements with Collier Investments, LLC (“Collier”). The note grants Collier the right to convert the unpaid balance on the note at $0.25 per share up to 1,188,000 shares of common stock and the warrant agreement grants Collier the right to purchase up to 200,000 shares of common stock at an exercise price of $2.00 per share, expiring on May 22, 2023. The warrant agreement was issued in connection with a convertible promissory note between Collier and the Company dated May 22, 2018, in the principal sum of $275,000, less a $25,000 original issue discount, bearing a one-time interest charge of 8%.

Warrant Agreement with William D. Moreland.

On May 30, 2018, the Company entered into a warrant agreement with William D. Moreland (“Moreland”), granting Moreland the right to purchase up to 1,000,000 shares of common stock in the following amounts and exercise prices: 500,000 common shares at an exercise price of $0.50; 250,000 common shares at an exercise price of $0.75; and, 250,000 shares at $1.00 per share. The warrants expire on May 29, 2021.

Litigation Settlement Agreement with Zakeni Limited.

On July 12, 2018, the Company entered into a litigation settlement agreement with Zakeni Limited. The settlement agreement provided that Company issue Zakeni 3,500,000 shares of its common stock, the right to purchase 1,000,000 shares of its common stock at an exercise price of $0.25 per share, the right to purchase 1,500,000 shares of its common stock at an exercise price of $0.50 per share, and the right to purchase 1,000,000 shares of its common stock at an exercise price of $0.75 per share. The warrants expire July 11, 2023.

Selling Stockholders

The selling stockholders may sell, from time to time, any or all of shares of our common stock to be registered under the warrants, convertible notes, stock purchase agreements and/or consulting agreements.

The following table sets forth certain information regarding the beneficial ownership of shares of common stock by the selling stockholders as of August 31, 2018 and the number of shares of our common stock being offered pursuant to this prospectus. We believe that the selling stockholders has sole voting and investment powers over its shares.

The selling stockholders have not had any position or office, or other material relationship with us or any of our affiliates over the past three years.

To our knowledge, none of the selling stockholders are broker-dealers or affiliates of a broker-dealer. We may require the selling stockholders to suspend the sales of the shares of our common stock being offered pursuant to this prospectus upon the occurrence of any event that makes any statement in this prospectus or the related registration statement untrue in any material respect or that requires the changing of statements in those documents in order to make statements in those documents not misleading.

Name of Selling Stockholder	Shares Owned by the Selling Stockholder before the Registration ⁽¹⁾		Total Shares Offered in the Registration		Number of Shares to Be Owned by Selling Stockholder After the Registration and Percent of Total Issued and Outstanding Shares ⁽¹⁾
					# of Shares ⁽³⁾	% of Class ^(2),(3)
Collier Investments, LLC		1,588,000		1,388,000	1,588,000	1%
First Fire Global Opportunity Fund, LLC ⁽⁴⁾		1,356,874		500,000	1,356,874	1%
William D. Moreland		5,000,000		1,000,000	5,000,000	3%
Richard Goldfarb		1,400,000		700,000	1,400,000	1%
Calan Investments, LLC		1,800,000		1,200,000	1,800,000	1%
Zakeni Limited		7,000,000		7,000,000	7,000,000	4%

⁽¹⁾	Beneficial ownership is determined in accordance with Securities and Exchange Commission rules and generally includes voting or investment power with respect to shares of common stock. Shares of common stock subject to warrants currently exercisable, or exercisable within 60 days, are counted as outstanding for computing the percentage of the person holding such options or warrants, but are not counted as outstanding for computing the percentage of any other person.

⁽²⁾	We have assumed that the selling warrant holders will exercise all of the warrants in this offering, and that Collier Investments, LLC will convert its existing debt into common shares.

⁽³⁾	Based on 198,145,066 shares of our common stock issued and outstanding as of August 31, 2018. Shares of our common stock being offered pursuant to this prospectus by a selling stockholder are counted as outstanding for computing the percentage of the selling stockholder.

PLAN OF DISTRIBUTION

The selling stockholders may, from time to time, after electing to convert warrants or other conversion rights, sell any or all of shares of our common stock covered hereby on the OTC Markets, or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. A selling stockholder may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices, at prevailing market prices at the time of sale, at varying prices or at negotiated prices. A selling stockholder may use any one or more of the following methods when selling securities:

	●	ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

	●	block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

	●	purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

	●	an exchange distribution in accordance with the rules of the applicable exchange;

	●	privately negotiated transactions;

	●	in transactions through broker-dealers that agree with the selling stockholder to sell a specified number of such securities at a stipulated price per security;

	●	through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

	●	a combination of any such methods of sale; or

	●	any other method permitted pursuant to applicable law.

The selling stockholders may also sell securities under Rule 144 under the Securities Act of 1933, if available, rather than under this prospectus.

Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

DESCRIPTION OF SECURITIES

Capital Stock

We are authorized to issue 750,000,000 shares of Common Stock, $0.0001 par value, and 10,000,000 preferred shares, $0.0001 par value.

Common Stock

As of August 31, 2018, 198,145,066 shares of Common Stock are issued and outstanding.

The holders of our Common Stock have equal ratable rights to dividends from funds legally available if and when declared by our board of directors and are entitled to share ratably in all of our assets available for distribution to holders of Common Stock upon liquidation, dissolution or winding up of our affairs. Our Common Stock does not provide the right to a preemptive, subscription or conversion rights and there is no redemption or sinking fund provisions or rights. Our Common Stock holders are entitled to one non-cumulative vote per share on all matters on which stockholders may vote.

All shares of Common Stock now outstanding are fully paid for and non-assessable. We refer you to our certificate of incorporation, bylaws and the applicable statutes of the state of Nevada for a more complete description of the rights and liabilities of holders of our securities. All material terms of our Common Stock have been addressed in this section.

Holders of shares of our Common Stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors.

Preferred Stock

As of August 31, 2018, we have two series of preferred stock issued and outstanding:

107,636 shares of Series “A” Convertible Preferred Stock (convertible to 26,909,028 common shares), par value $0.0001. In our discretion, we will determine when and if dividends will be paid on the Class “A” Convertible Preferred Stock, and whether it will be paid in cash, shares of Common Stock, or a combination of both. All Class “A” Preferred Stockholders shall be treated the same with respect to the payment of dividends. In the event the Company elects to pay a portion or all of the dividends on the Class “A” Preferred Stock by issuing shares of the Company's Common Stock, the shares of common stock issued as dividends will be restricted, unregistered shares, and will be subject to the same transfer restrictions that apply to the shares of Class “A” Preferred Stock. The dividend is payable as may be determined by the Board of Directors, out of funds legally available therefor. The Class “A” Convertible Preferred Stock will have priority as to dividends over the Common Stock. The holders of the Class “A” Preferred Stock shall vote for the election of directors, and shall have full voting rights, except that each Class “A” Preferred share shall entitle the holder to exercise ten thousand (10,000) votes for each one (1) Class “A” Preferred Share held. The Class “A” Convertible Preferred Shares are not redeemable; and,

20,000 shares of Series “E” Convertible preferred stock, par value $0.0001. The Series “E” Convertible preferred stock pays no dividends and is convertible to common stock based upon proceeds received upon issuance of the shares, divided by the average closing bid price for the Company’s common stock for the 5 trading days prior to the conversion date, and is adjustable to prevent dilution. At August 31, 2018, the 20,000 Class “E” preferred shares were convertible to 500,000 common shares, and convertible at the option of the Company at par value only after repayment of any shareholder loans from Joseph Fiore, our former Chairman of the Board, and subject to the holder’s option to convert. Owners of Series “E” Convertible preferred stock are entitled to vote 1,000 votes per share of Series “E” Convertible Preferred Shares, and are entitled to liquidation preference at par value. Owners of Series “E” Convertible preferred shares are senior to all other shares of preferred or common shares issued past, present and future.

Dividends

We have not paid any cash dividends to our shareholders of our Common or Preferred Stock. The declaration of any future cash dividends is at the discretion of our Board and depends upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations. Dividend rights of both our common and preferred shareholders will entitle them to the same dividend that other shareholders of the same class receive.

Warrants

At its discretion, the Company may periodically issue stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs.

The following table summarizes common stock warrants activity:

			Weighted
			Average
			Exercise
	Warrants		Price
Outstanding, December 31, 2017		1,700,000	$	1.06
Granted		7,100,000		0.55
Exercised		—		—
Forfeited		—		—
Outstanding, August 31, 2018		8,800,000	$	0.65
Exercisable, August 31, 2018		8,800,000	$	0.65

The weighted average exercise prices, remaining lives for warrants granted, and exercisable as of August 31, 2018, were as follows:

	Outstanding and Exercisable Warrants
Warrants
Exercise Price		Life
Per Share	Shares	(Years)
$0.01	600,000	2.34
$0.25	1,000,000	4.86
$0.375	200,000	2.64
$0.40	1,200,000	2.37
$0.50	3,000,000	0.16 – 4.86
$0.625	100,000	2.64
$0.75	1,250,000	2.75-4.86
$1.00	250,000	2.75
$1.50	500,000	0.33
$2.00	700,000	0.33 – 4.73
	8,800,000

Options

The following table summarizes common stock options activity:

			Weighted
			Average
			Exercise
	Options		Price
December 31, 2017		13,320,000	$	1.74
Granted		420,000		1.00
Exercised		—		—
Forfeited		—		—
Outstanding, August 31, 2018		13,740,000	$	1.72
Exercisable, August 31, 2018		13,065,000	$	1.60

The weighted average exercise prices, remaining lives for options granted, and exercisable as of August 31, 2018 were as follows:


	Outstanding Options			Exercisable Options
Options			Weighted		Weighted
Exercise Price		Life	Average Exercise		Average Exercise
Per Share	Shares	(Years)	Price	Shares	Price
$0.50	8,000,000	2.00	$0.50	8,000,000	$0.50
$1.00	1,490,000	1.15 – 3.44	$1.00	1,280,000	$1.00
$2.50	1,250,000	.33	$2.50	1,250,000	$2.50
$5.00	3,000,000	1.33	$5.00	2,500,000	$5.00
	13,740,000		$1.72	13,030,000	$1.60

The following table summarizes options granted with vesting terms activity:

				Weighted
				Average
		Number of		Grant Date
		Shares		Fair Value
Non-vested, December 31, 2017		70,000	$	1.00
	Granted	420,000		1.00
	Vested	(280,000)		1.00
	Forfeited	-		-
Non-vested, August 31, 2018		210,000	$	1.00

EXPERTS AND COUNSEL

The financial statements of our company included in this Prospectus for the fiscal years ended December 31, 2016 and December 31, 2017 have been audited by Haynie & Company, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.

Mailander Law Office, Inc. will render a legal opinion as to the validity of the shares of the Common Stock to be registered hereby.

INTERESTS OF NAMED EXPERTS AND COUNSEL

No expert named in the registration statement of which this Prospectus forms a part as having prepared or certified any part thereof (or is named as having prepared or certified a report or valuation for use in connection with such registration statement) or counsel named in this Prospectus as having given an opinion upon the validity of the securities being offered pursuant to this Prospectus or upon other legal matters in connection with the registration or offering such securities was employed for such purpose on a contingency basis. Also at the time of such preparation, certification or opinion or at any time thereafter, through the date of effectiveness of such registration statement or that part of such registration statement to which such preparation, certification or opinion relates, no such person had, or is to receive, in connection with the offering, a substantial

interest, direct or indirect, in our company or any of its parents or subsidiaries. Nor was any such person connected with our company or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.

INFORMATION WITH RESPECT TO OUR COMPANY

DESCRIPTION OF BUSINESS

General Development of the Business

We were incorporated under the name Conceptualistics, Inc., on January 6, 1988 in Delaware. We have never filed for bankruptcy or been the subject of a receivership.

On December 16, 2014, we amended our articles of incorporation and changed our domicile to Nevada. On February 26, 2015, we amended our articles of incorporation to change our name to SPYR ^® , Inc. Our name change reflected a new direction for our Company. We fundamentally changed our primary business to focus on our electronic games publishing and development business. We are currently operating as a holding company.

Internet and Electronic Games Initiatives

On March 24, 2015, we formed a wholly owned subsidiary, SPYR APPS ^® , LLC (“SPYR APPS ^® ”) to implement our electronic games publishing and development initiatives. SPYR APPS ^® is engaged in the publishing of electronic games that are downloaded for free by users of mobile devices such as cellular telephones and tablets, including those using Apple’s iOS and Google’s Android mobile operating systems. Our current strategy is to publish and market games developed by third-party developers with the potential to develop our own games, either by contracting with third-party developers or by building or acquiring an in-house development team, and to generate revenues from them based upon users paying for additional features and levels of game play, and from the sale of advertising in our games. We currently have no in-house development capability. Contracting with a third-party developer, we released three games: “Plucky” and “Plucky Rush” in April and May 2015, and “Rune Guardian” in December 2015. Our developed games use the “free to play” model, which allows users to download the games onto their devices and play them at no cost. “Free to play” is a business model that has existed in videogames (and other industries) for quite some time but one that has, in the last 2-3 years, been adopted by a large number of games developers and publishers both big and small. “Free to play” gives you a way of leveraging the availability of low cost (in the case of games hosted by social networks including Facebook, or otherwise hosted in ‘the cloud’), or even free digital distribution (as is the case of Apple’s iOS and Google’s Android markets). The “free to play” model allows us to offer games that have zero cost barriers preventing players from trying our games. Players that choose to not continue with the game nonetheless still becomes a marketing channel to their friends, who may become a critical mass of players who do choose to pay for optional aspects of the games, including customization, faster game progress, additional content and more effective competition against other players. There are no limits on potential purchases, thus catering to the financial capabilities/preferences of all players.

We monetize the games by offering features and opportunities within the games that allow players to spend money to unlock new game levels and features. Our games are available for download for use on the Apple and Google mobile operating systems that are common to mobile phones, media players and tablet devices manufactured by companies including Apple, Samsung and others. We also intend to market and generate revenues from advertising space in our games.

We entered into our first publication and marketing agreement on October 21, 2015 with Superplus Games Oy for the publication of “Retro Shot.” “Retro Shot” was fully launched in February of 2016 and is available for free download on mobile devices in the Apple App Store and Google Play Store. On December 17, 2015, we entered into our second publishing and marketing agreement with Spectacle Games Publishing, for its “Massively Multiplayer Online Role Playing Game” “Pocket Starships.” “Pocket Starships” is a space warfare themed game that is free to play, and available for download on hardware wide array of devices including most mobile phones, tablets and computers, and is available to play regardless of what operating system the player uses, whether that is an Apple iOS device such as an iPhone or iPad, a Google Android device, including phones and tablets from a variety of hardware manufacturers using the Android operating system, or an Amazon Fire OS device such as a Kindle, on a PC in a web browser or on Facebook’s “Game Room” or on VK.com. “Pocket Starships” is also available to play on the Internet at www.pocketstarships.com. “Pocket Starships’” software engine allows players worldwide to play against each other in real time and in the same game “universe,” regardless of what platform is used. Thus, players can play “Pocket Starships” regardless of whether they are playing in a web browser at their desk, or using an iPhone on the other side of the planet. “Pocket Starships” game play is hardware and software agnostic, so regardless of device all users have the same game experience. We believe these attributes set “Pocket Starships” apart from every other game.

We also believe that the true cross-platform and real-time engine of “Pocket Starships” positions the game to take advantage of the excitement generated by “esports” tournaments. “esports,” also known as “electronic sports,” pits teams of professional digital game players against each other in organized, multiplayer video game competitions. The most common video game genres associated with eSports are real-time strategy, fighting, first-person shooter, and multiplayer online battle arena games. Tournaments such as The International, the League of Legends World Championship, the Battle.net World Championship Series, the Evolution Championship Series, and the Intel Extreme Masters, provide both live broadcasts of the competition, and prize money and salaries to competitors. We recently have been releasing a series of software enhancements that will allow users to engage in “player vs. player” battles and other enhancements that will enable “Pocket Starships” to participate in eSports tournaments.

During 2017, we signed an agreement with CBS Consumer Products that will allow the incorporation of intellectual property (IP) from various Star Trek television series into future Pocket Starships updates and expansions. Our Pocket Starships development team is already working on expansions of Pocket Starships to include the Star Trek IP, which we expect will be released toward the end of 2018. In Pocket Starships, players can build and pilot several ships and forge alliances on their quest for galactic domination. Players can perform or initiate various activities ranging from fighting pirates to participating in Faction Alerts. With the release of the expansion those playing Pocket Starships will be able to explore new sectors and engage in exciting battles with the Borg and will be able to staff their ships with their favorite Star Trek characters from the Star Trek TV series franchise – including The Next Generation, Deep Space Nine, and Voyager, through a trading card expansion.

During July 2017, the Company entered into an agreement with Reset Studios, LLC for the development of at least two new idle tapper games to be published by SPYR ^® , the first of which, Steven Universe: Tap Together, features characters and storylines from Cartoon Network’s Steven Universe . The Company has secured the necessary license to use the Steven Universe IP in the game through a license agreement with Cartoon Network. The game allows players to play as a team of their favorite Steven Universe characters to battle increasingly difficult enemies in order to unlock new characters and rewards. By performing simple actions such as tapping the screen, players can progress in the game even when they’re not actively playing. Steven Universe: Tap Together was launched globally on the Google Play Store on August 2, 2018 and on the IOS App Store on August 9, 2018.

Business Overview

Our primary operation is the development of our electronic games publishing and development business through our wholly owned subsidiary, SPYR, APPS ^® , LLC. Our operations include entering into contracts with third party developers to create games we own and market ourselves; and, entering into contracts with third party developers to market and publish electronic

games used on mobile devices such as telephones, tablets, PCs and console gaming systems, including those using Apple’s iOS and Google’s Android mobile operating systems.

Sales and Marketing

Our electronic game assets are distributed for download on Apple’s iOS and Google’s Play Stores. For players of Pocket Starships, the game may be accessed via any web browser connected to the Internet, through hundreds of online portals worldwide, on Facebook.com, VK.com or through Amazon’s App Store.

Research and Development

We do not currently develop electronic games. However, from time to time we enter into third party agreements with game developers to create games that we own as our own intellectual property including: Plucky, Plucky Rush and Retro Shot. We currently do not have any contracts for the development of games that would add to our intellectual properties. As a component of our electronic games marketing and publishing business we contract with third party developers to market and publish third party games. Currently, we have contracts to market and publish Pocket Starships and Steven Universe Tap Together, both of which are developed by third parties.

Intellectual Property

We currently own four electronic games, Pocket Starships, Plucky, Plucky Rush and Rune Guardian. We also have a publication and marketing agreement with Superplus Games Oy for the publication of the game “Retro Shot, licenses to use Steven Universe IP in Steven Universe: Tap together, a game published by the Company and owned and developed by Reset Studios and to use Star Trek IP in Pocket Starships.

Competition

The mobile game market is highly competitive and rapidly changing. Our ability to compete depends upon many factors within and outside our control, including the timely development and introduction of the mobile games we publish and market, and the related enhancements, functionality, performance, reliability, customer service and support and marketing efforts. Due to the relatively low barriers to entry in the mobile game market, we expect additional competition from other emerging companies. Many of our existing and potential competitors are substantially larger than us and have significantly greater financial, technical and marketing resources that will compete for available users, developers, talent and third-party games. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the publishing and promotion of their mobile games. There can be no assurance that we will be able to compete successfully against current or future competitors or that competitive pressure will not have a material adverse effect on our business, operating results and financial condition. See “Risk Factors” in this prospectus.

Employees

As of August 31, 2018, the Company had 4 employees and 1 leased employees, none of whom is represented by a labor union.

DESCRIPTION OF PROPERTY

Our Offices

All administrative activities of the Company are conducted from the Company’s headquarters located at 4643 South Ulster Street, Suite 1510, Denver, Colorado 80237.

The Company leases approximately 5,169 square feet at 4643 South Ulster Street, Denver, Colorado pursuant to an amended lease dated May 21, 2015. The lease expires December 31, 2020. Under the lease, the Company pays annual base rent on an escalating scale ranging from $143,000 to $152,000.

Beginning October 17, 2016, we began leasing shared office for one employee in Redmond, Washington on a month to month basis at a cost of $225 per month per desk, increasing to $275 per month starting in December 2016 and $325 per month starting in July 2018.

We believe that our existing office facilities are adequate for our needs. Should we require additional space at that time, or prior thereto, we believe that such space can be secured on commercially reasonable terms.

LEGAL PROCEEDINGS

On October 14, 2015, the Company was named as a defendant in a case filed in the United States District Court for the District of Delaware case: Zakeni Limited v. SPYR, Inc., f/k/a Eat at Joe’s., Ltd. The suit relates to the Company’s issuance of two convertible debentures in the aggregate principal amount of $1,500,000 in 1998. On July 12, 2018, the court approved a Joint Motion for Order Approving Settlement Agreement. Pursuant to the settlement, the Company will issue 3,500,000 common shares valued at $1,050,000, warrants to purchase 1,000,000 common shares at $0.25 per share valued at $276,000, warrants to purchase 1,500,000 common shares at $0.50 per share valued at $398,000, and warrants to purchase 1,000,000 common shares at $0.75 per share valued at $259,000. The total value of the settlement, $1,983,000 has been recorded as litigation settlement liability on the accompanying consolidated balance sheets as of June 30, 2018 and December 31, 2017.

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

The Company vehemently denies any wrongdoing. The allegations demonstrate a fundamental misunderstanding of existing precedent and a mischaracterization of the facts and transactions at issue, which were not violative of any securities laws, rules or regulations. The Company will answer these allegations in court.

The Company is being represented by Alex Spiro, Esq., a partner with the firm of Quinn Emmanuel, Urquhart & Sullivan, LLP and Marc S. Gottlieb, Esq., a partner with the firm of Ortoli Rosenstadt LLP.

MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

The Company’s Common Stock is traded on OTC Markets under the symbol “SPYR.” The following table presents the high and low bid quotations for the Common Stock as reported by the NASD for each quarter during the last two years. Such prices reflect inter-dealer quotations without adjustments for retail markup, markdown or commission, and do not necessarily represent actual transactions.


	High	Low
2018
First Quarter	$0.50	$0.25
Second Quarter	$0.40	$0.17
Third Quarter	$0.33	$0.13
2017
First Quarter	$1.06	$0.46
Second Quarter	$0.70	$0.40
Third Quarter	$0.57	$0.10
Fourth Quarter	$0.40	$0.18
2016
First Quarter	$0.22	$0.13
Second Quarter	$0.46	$0.12
Third Quarter	$0.71	$0.22
Fourth Quarter	$0.67	$0.41

On August 31, 2018, the closing price of our Common Stock as reported by the OTC Markets Group was $0.219 per share.

DIVIDENDS

The Company has never declared or paid any cash dividends. It is the present policy of the Company to retain earnings to finance the growth and development of the business and, therefore, the Company does not anticipate paying dividends on its Common Stock in the foreseeable future.

Transfer Agent

Signature Stock Transfer Company, located at 14673 Midway Road Ste. 220, Addison TX 75001, and telephone number of (972) 612-4120 is the registrar and transfer agent for our Common Stock.

Approximate Number of Equity Security Holders

As of August 31, 2018, there were 194 direct holders of record of our Common Stock. Because shares of the Company’s Common Stock are held by depositaries, brokers and other nominees, the number of beneficial holders of the Company’s shares is substantially larger than the number of stockholders of record.

The number of shareholders of record of the Company’s Common Stock as of August 31, 2018 was approximately 2,040.

FINANCIAL STATEMENTS

Index to Consolidated Financial Statements		Page
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheets as of December 31, 2017 and 2016		F-2
Consolidated Statements of Operations for the years ended December 31, 2017 and 2016		F-3
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2017 and 2016		F-4
Consolidated Statements of Cash Flows, for the years ended December 31, 2017 and 2016		F-5
Notes to Consolidated Financial Statements		F-7

Index to Condensed Consolidated Financial Statements (Unaudited)		Page
Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017		F-33
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017		F-34
Condensed Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2018		F-35
Condensed Consolidated Statements of Cash Flows, for the six months ended June 30, 2018 and 2017		F-36
Notes to Condensed Consolidated Financial Statements		F-38

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of SPYR, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of SPYR, Inc. (the Company) as of December 31, 2017 and 2016, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years ended December 31, 2017 and 2016, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years ended December 31, 2017 and 2016, in conformity with accounting principles generally accepted in the United States of America.

Consideration of the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses since inception, has negative cash flows from operations, and has negative working capital. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion.

/s/ Haynie & Company

Haynie & Company

Littleton, Colorado

August 14, 2018

We have served as the Company’s auditor since 2018.

F- 1

SPYR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

		December 31, 2017			December 31, 2016
ASSETS		(Restated)			(Restated)
Current Assets:
Cash and cash equivalents	$	86,000		$	3,204,000
Accounts receivable, net		4,000			31,000
Other receivable		—			200,000
Prepaid expenses		35,000			25,000
Trading securities, at market value		48,000			59,000
Current assets of discontinued operations		—			50,000
Total Current Assets		173,000			3,569,000

Property and equipment, net		134,000			181,000
Capitalized gaming assets and licensing rights, net		743,000			40,000
Intangible assets, net		12,000			18,000
Other assets		16,000			6,000
Non-current assets of discontinued operations		—			46,000
TOTAL ASSETS	$	1,078,000		$	3,860,000

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Current Liabilities:
Accounts payable and accrued liabilities	$	528,000		$	116,000
Litigation settlement liability		1,983,000			1,983,000
Current liabilities of discontinued operations		22,000			60,000
Total Current Liabilities		2,533,000			2,159,000

Non-current related party line of credit		807,000			—
Total Liabilities		3,340,000			2,159,000

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock, $0.0001 par value, 10,000,000 shares authorized
107,636 Class A shares issued and outstanding
as of December 31, 2017 and 2016		11			11
20,000 Class E shares issued and outstanding
as of December 31, 2017 and 2016		2			2
Common Stock, $0.0001 par value, 750,000,000 shares authorized
181,128,950 and 157,637,026 shares issued and outstanding
as of December 31, 2017 and 2016		18,112			15,763
Additional paid-in capital		46,561,875			34,752,224
Accumulated deficit		(48,842,000	)		(33,067,000	)
Total Stockholders’ Equity (Deficit)		(2,262,000	)		1,701,000
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	1,078,000		$	3,860,000

The accompanying notes are an integral part of these consolidated financial statements.

F- 2

SPYR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Years Ended December 31,
	2017			2016
	(Restated)			(Restated)

Revenues	$	128,000		$	139,000

Expenses
Labor and related expenses		2,358,000			1,467,000
Rent		186,000			146,000
Depreciation and amortization		105,000			98,000
Professional fees		5,555,000			3,292,000
Research and development		1,666,000			1,151,000
Other general and administrative		502,000			740,000
Cost of acquisition option		—			472,000
Total Operating Expenses		10,372,000			7,366,000
Operating Loss		(10,244,000	)		(7,227,000	)

Other Income (Expense)
Interest and dividend income		4,000			18,000
Interest Expense		(11,000	)		—
Loss on write-down of assets		(5,381,000	)		—
Litigation settlement costs		—			(1,983,000	)
Unrealized gain (loss) on trading securities		(11,000	)		(57,000	)
Loss on sale of marketable securities		—			(95,000	)
Total Other Expense		(5,399,000	)		(2,117,000	)

Loss from continuing operations		(15,643,000	)		(9,344,000	)

Loss on discontinued operations		(132,000	)		(29,000	)

Net Loss	$	(15,775,000	)	$	(9,373,000	)


Per Share Amounts
Loss from continuing operations
Basic and Diluted earnings per share	$	(0.09	)	$	(0.06	)

Loss on discontinued operations
Basic and Diluted earnings per share	$	—		$	—

Net Loss
Basic and Diluted earnings per share	$	(0.09	)	$	(0.06	)

Weighted Average Common Shares
Basic and Diluted		166,443,807			154,092,844

The accompanying notes are an integral part of these consolidated financial statements.

F- 3

SPYR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2017 AND 2016


	Preferred Stock														Additional
	Class A				Class E				Common Stock						Paid-in		Accumulated
	Shares		Amount		Shares		Amount		Shares			Amount			Capital		Deficit			Total
Balance at December 31, 2015		107,636	$	11		20,000	$	2		151,508,127		$	15,151		$	31,269,836	$	(23,694,000	)	$	7,591,000
Common stock issued for cash		—		—		—		—		100,000			10			14,990		—			15,000
Fair value of common stock issued for employee compensation		—		—		—		—		1,843,987			184			412,816		—			413,000
Fair value of common stock issued for services		—		—		—		—		4,509,912			451			1,950,549		—			1,951,000
Fair value of options granted for services		—		—		—		—		—			—			199,000		—			199,000
Vesting of shares of common stock issued for services		—		—		—		—		—			—			273,000		—			273,000
Fair value of options granted for acquisition option		—		—		—		—		—			—			472,000		—			472,000
Common stock cancelled upon employee resignation		—		—		—		—		(325,000	)		(33	)		33		—			—
Contributed capital from sale of trading securities to related party		—		—		—		—		—			—			160,000		—			160,000
Net loss (Restated)		—		—		—		—		—			—			—		(9,373,000	)		(9,373,000	)
Balance at December 31, 2016		107,636	$	11		20,000	$	2		157,637,026		$	15,763		$	34,752,224	$	(33,067,000	)	$	1,701,000
Common stock issued for cash		—		—		—		—		750,000			75			299,925		—			300,000
Compensation expense recorded upon sale of common stock		—		—		—		—		—			—			210,000		—			210,000
Fair value of common stock issued for employee compensation		—		—		—		—		2,050,000			205			1,108,795		—			1,109,000
Fair value of common stock and warrants issued for services		—		—		—		—		12,691,924			1,269			3,756,731		—			3,758,000
Fair value of common stock issued for game acquisition		—		—		—		—		8,000,000			800			3,199,200		—			3,200,000
Fair value of options granted for game acquisition		—		—		—		—		—			—			2,452,000		—			2,452,000
Vesting of options and warrants granted for services		—		—		—		—		—			—			737,000		—			737,000
Vesting of shares of common stock issued for services		—		—		—		—		—			—			46,000		—			46,000
Net loss (Restated)		—		—		—		—		—			—			—		(15,775,000	)		(15,775,000	)
Balance at December 31, 2017 (Restated)		107,636	$	11		20,000	$	2		181,128,950		$	18,112		$	46,561,875	$	(48,842,000	)	$	(2,262,000	)

The accompanying notes are an integral part of these consolidated financial statements.

F- 4

SPYR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Years Ended December 31,
	2017			2016
Cash Flows From Operating Activities:	(Restated)			(Restated)
Net loss for the period	$	(15,775,000	)	$	(9,373,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on discontinued operations		132,000			29,000
Loss on write-down of assets		5,381,000			—
Depreciation and amortization		105,000			98,000
Common stock issued for employee compensation		1,109,000			413,000
Common stock issued for professional fees		3,758,000			1,951,000
Compensation expense recorded upon sale of common stock		210,000			—
Fair value of options granted for services		—			199,000
Vesting of options and warrants granted for services		737,000			273,000
Vesting of shares of common stock issued for services		46,000			—
Fair value of options granted for acquisition option		—			472,000
Litigation settlement costs		—			1,983,000
Unrealized loss on trading securities		11,000			57,000
Loss on sale of trading securities		—			95,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivables		27,000			(25,000	)
(Increase) decrease in other receivables		100,000			(200,000	)
(Increase) decrease in prepaid expenses		(10,000	)		7,000
Increase in other assets		(10,000	)		—
Increase (decrease) in accounts payable and accrued liabilities		152,000			33,000
Increase in accrued interest on note payable - related party		7,000			—
Decrease in related party accounts payable		—			(7,000	)
Net Cash Used in Operating Activities from Continuing Operations		(4,020,000	)		(3,995,000	)
Net Cash Used in Operating Activities from Discontinued Operations		(98,000	)		66,000
Net Cash Used in Operating Activities		(4,118,000	)		(3,929,000	)

Cash Flows From Investing Activities:
Purchase of licensing rights		(100,000	)		(10,000	)
Purchases of trading securities		—			(510,000	)
Proceeds from sale of trading securities		—			783,000
Purchase of property and equipment		—			(49,000	)
Net Cash (Used in) Provided by Investing Activities		(100,000	)		214,000

Cash Flows From Financing Activities:
Proceeds from line of credit - related party		800,000			—
Proceeds from sale of common stock		300,000			15,000
Net Cash Provided by Financing Activities		1,100,000			15,000

Net decrease in Cash		(3,118,000	)		(3,700,000	)
Cash and cash equivalents at beginning of period		3,204,000			6,904,000
Cash and cash equivalents at end of period	$	86,000		$	3,204,000

The accompanying notes are an integral part of these consolidated financial statements.

F- 5

SPYR, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Years Ended December 31,
	2017		2016
Supplemental Disclosure of Interest and Income Taxes Paid:
Interest paid during the year	$	—	$	—
Income taxes paid during the year	$	—	$	—

Supplemental Disclosure of Non-cash Investing and Financing Activities:
Contributed capital from sale of trading securities	$	—	$	160,000
Common stock issued and options granted for game acquisition	$	5,652,000	$	—
Reclassification of other assets to capitalized licensing rights	$	100,000	$	—


The accompanying notes are an integral part of these consolidated financial statements.

F- 6

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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 subsidiaries, SPYR APPS, LLC and SPYR APPS, Oy, we operate our mobile games and applications business. The focus of the SPYR APPS subsidiaries is the development and publication of our own mobile games as well as the publication of games developed by third-party developers. As of October 5, 2016, SPYR APPS, Oy ceased business activities and completed the dissolution process on October 18, 2017.

Through our other wholly owned subsidiary, E.A.J.: PHL Airport, Inc., we owned and operated the restaurant “Eat at Joe’s®,” which was located in the Philadelphia International Airport since 1997. Our lease in the Philadelphia Airport expired in April 2017. Concurrent with expiration of the lease the restaurant closed. Pursuant to current accounting guidelines, the assets and liabilities of EAJ as well as the results of its operations were presented in these financial statements as discontinued operations.

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 9), and Branded Foods Concepts, Inc., a Nevada corporation. Intercompany accounts and transactions have been eliminated.

Going Concern

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

As shown in the accompanying financial statements, for the year ended December 31, 2017, the Company recorded a net loss from continuing operations of $15,643,000 and utilized cash in continuing operations of $4,020,000. As of December 31, 2017, our cash balance was $86,000 and we had trading securities of $48,000. In addition, the Company’s restaurant, Eat at Joes closed in April 2017, concurrent with the expiration of the lease. These issues raise substantial doubt about the Company’s ability to continue as a going concern.

The Company plans to expand its mobile games and application development and publishing activities, such as Pocket Starships, through acquisition and/or development of its own intellectual property and publishing agreements with developers.

Historically, we have financed our operations primarily through private sales of our trading securities or through sales of our common stock. If our sales goals for our products do not materialize as planned, we believe that the Company can reduce its operating and product development costs that would allow us to maintain sufficient cash levels to continue operations. However, 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 2018. However, management cannot make any assurances that such financing will be secured.

F- 7

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

Use of Estimates

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

Earnings (Loss) Per Share

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

The basic and fully diluted shares for the year ended December 31, 2017 are the same because the inclusion of the potential shares (Class A – 26,909,028, Class E – 415,559, Options – 13,320,000, Warrants – 1,700,000) would have had an anti-dilutive effect due to the Company generating a loss for the year ended December 31, 2017.

The basic and fully diluted shares for the year ended December 31, 2016 are the same because the inclusion of the potential shares (Non-vested Common – 20,333, Class A – 26,909,028, Class E – 161,108, Options – 12,900,000 and Warrants – 200,000) would have had an anti-dilutive effect due to the Company generating a loss for the year ended December 31, 2016.

Capitalized Gaming Assets and Licensing Rights

Capitalized gaming assets and licensing rights represent costs to acquire trademarks, copyrights, software, technology, music or other intellectual property or proprietary rights in the development of our products. Depending upon the agreement with the rights holder, we may obtain the right to use the intellectual property in multiple products over a number of years, or alternatively, for a single product.

Significant management judgments and estimates are utilized in assessing the recoverability of capitalized costs. In evaluating the recoverability of capitalized costs, the assessment of expected product performance utilizes forecasted sales amounts and estimates of additional costs to be incurred. If revised forecasted or actual product sales are less than the originally forecasted amounts utilized in the initial recoverability analysis, the net realizable value may be lower than originally estimated in any given quarter, which could result in an impairment charge. Material differences may result in the amount and timing of expenses for any period if management makes different judgments or utilizes different estimates in evaluating these qualitative factors.

On October 23, 2017, the Company completed the acquisition of all assets that refer, relate or pertain to the real—time cross-platform MMO game commonly known and referred to as “Pocket Starships,” including but not limited to all intellectual property, know how, “urls,” websites, game engines, game store accounts, prior versions, company names and trade names, business plans, ﬁnancial reports, financial data, employee data, customer lists, forecasts, strategies, and all other business information; manufacturing or other technical or scientific know-how, speciﬁcations, technical drawings, drawings, artwork, music, diagrams, schematics, technology, processes, and any other trade secrets, discoveries, ideas, concepts, know-how, techniques, materials, formulae, compositions, information, data, results, plans, surveys and/or reports of a technical nature; and software programs (including all forms of code), software documentation, software development kits, game design documents, and formulae related to the current, future and proposed products and services, including any additions, enhancements or modifications to the foregoing or derivatives thereof after the date hereof.

F- 8

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

As consideration for the acquisition, the Company issued eight million shares of the Company’s restricted common stock valued at $3,200,000, options to purchase up to eight million shares of the Company’s restricted common stock valued at $2,452,000, and assumed liabilities of $210,000 for a total purchase price of $5,862,000. The options are fully vested, exercisable at a price per share of $0.50 and will expire starting August 31, 2020. The acquisition of “Pocket Starships” was reported as part of capitalized gaming assets and licensing rights valued at $481,000 based upon discounted cash flows. The difference between purchase price and the capitalized value was recorded as loss on write down on assets of $5,381,000. The Company will amortize the capitalized cost on a straight-line basis over an estimated life of seven to ten years.

Further, the options previously issued pursuant to a purchase option agreement dated June 25, 2016, which provided for the option to purchase up to three million, seven hundred and fifty thousand shares of Registrant’s common stock, are fully vested and remain in effect in accordance with the terms of the purchase option agreement.

During 2017, the Company capitalized $175,000 pursuant to a licensing agreement for the non-exclusive, limited right to incorporate certain intellectual property (IP) from various STAR TREK television series in to future updates to and expansions of the Pocket Starships game. The Company estimates that the IP will have an estimated life of 1.6 years, which approximates the term of the license. In addition, we also acquired the game titled Battlewack: Idle Lords for $100,000, pursuant to settlement with the game owner and developer. Battlewack: Idle Lords requires additional development before it can be released.

In a prior period, the Company capitalized $50,000 as a result of the acquisition of licensing rights of one gaming application. The Company estimates that the gaming application will have an estimated life of five years, which approximates the term of the license.

During the year ended December 31, 2017, the Company recorded amortization expense of $52,000. As of December, 2017 and December 31, 2016, the accumulated amortization was $52,000 and $10,000, respectively and the unamortized capitalized gaming assets and licensing rights amounted to $743,000 and $40,000 respectively.

The expected annual amortization expense related to capitalized gaming assets and licensing rights as of December 31, 2017, is as follows:

2018	$	69,000
2019		69,000
2020		69,000
2021		69,000
2022		69,000
Thereafter		123,000
Total	$	468,000

Software Development Costs

Costs incurred for software development are expensed as incurred. During the years ended December 31, 2017 and 2016, the Company incurred $1,666,000 and $1,151,000 in software development costs paid to independent gaming software developers.

Revenue Recognition

Through our wholly owned subsidiary SPYR APPS, LLC, we develop, publish and co-publish mobile games, and then generate revenue through those games by way of advertising and in-app purchases. We recognize revenue when the sale is completed.

Though our wholly owned subsidiary E.A.J.: PHL, Airport, Inc. (discontinued operations, see Note 9) we generated revenue from the sale of food and beverage products through our restaurant. Revenue from the restaurant was recognized upon sale to a customer and receipt of payment.

The Company recognizes revenue using four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured, which is typically after receipt of payment and delivery.

F- 9

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

Income Taxes

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

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

Cash and Cash Equivalents

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

Property and Equipment

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

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

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

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.

F- 10

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

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, 2017, the Company recorded amortization expense of $6,000. As of December 31, 2017, total intangible assets amounted to $20,000 which consist of website development costs. There were no indications of impairment based on management’s assessment of these assets at December 31, 2017. Factors we consider important that could trigger an impairment review include significant underperformance relative to historical or projected future operating results, significant changes in the manner of the use of our assets or the strategy for our overall business, and significant negative industry or economic trends. If current economic conditions worsen causing decreased revenues and increased costs, we may have to record impairment to our intangible assets.

Stock-Based Compensation

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

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

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

Concentration of Credit Risk

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

Fair Value of Financial Instruments

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

F- 11

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

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, other receivable, prepaid expenses, and accounts payable and accrued expenses approximate their fair value because of the short maturity of those instruments.

The Company’s trading securities are measured at fair value using level 1 fair values.

Advertising Costs

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

Advertising, marketing and promotional expense was $195,000 and $350,000 for the years ended December 31, 2017, and 2016, respectively and was reflected as part of Other General and Administrative Expenses on the accompanying consolidated statements of operations.

Reclassifications

In presenting the Company’s consolidated statement of operations for the year ended December 31, 2016, certain costs and expenses paid to third party developers in the amount of $735,000, that were previously reflected as other general and administrative expenses, have been reclassified and reported as part of research and development.

Recent Accounting Standards

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 will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principles-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Our revenue is recognized at the time of sale and we do not expect that the adoption of ASU 2014-09 will have any significant impact on our operating cash flows.

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 is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures.

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.

F- 12

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

NOTE 2 - TRADING SECURITIES

Trading securities are purchased with the intent of selling them in the short term. Trading securities are recorded at market value and the difference between market value and cost of the securities is recorded as an unrealized gain or loss in the statement of operations. Gains from the sales of such marketable securities will be utilized to fund payment of obligations and to provide working capital for operations and to finance future growth, including, but not limited to: conducting our ongoing business, conducting strategic business development, marketing analysis, due diligence investigations into possible acquisitions, and research and development and implementation of the Company’s business plans generally.

The Company’s securities investments that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Trading securities are recorded at fair value based on quoted market price (level 1) on the balance sheet in current assets, with the change in fair value during the period included in earnings.

Investments in securities are summarized as follows:

		Fair Value at				Proceeds			Loss on			Contributed		Unrealized			Fair Value at
Year		Beginning of Year		Purchases		from Sale			Sale			Capital		Loss			December 31, 2017
	2017	$	59,000	$	—	$	—		$	—		$	—	$	(11,000	)	$	48,000
	2016	$	324,000	$	510,000	$	(783,000	)	$	(95,000	)	$	160,000	$	(57,000	)	$	59,000

Realized gains and losses are determined on the basis of specific identification. During the years ended December 31, 2017 and 2016, sales proceeds and gross realized gains and losses on securities classified as available-for-sale securities and trading securities were:

	December 31, 2017		December 31, 2016

Sales proceeds	$	—	$	783,000
Gross realized (losses)	$	—	$	(95,000	)
Gross realized gains		—		—
Gain (loss) on sale of trading securities	$	—	$	(95,000	)

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

		Fair Value Measurements at Reporting Date Using
		Quoted Prices	Significant	Significant
		in Active	Other	Unobservable
	Fair Value at	Markets	Observable Inputs	Inputs
	December 31, 2017	(Level 1)	(Level 2)	(Level 3)
Trading securities	$ 48,000	$ 48,000	$ -	$ -
Money market funds	36,000	36,000	-	-
Total	$ 84,000	$ 84,000	$ -	$ -

F- 13

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

		Fair Value Measurements at Reporting Date Using
		Quoted Prices	Significant	Significant
		in Active	Other	Unobservable
	Fair Value at	Markets	Observable Inputs	Inputs
	December 31, 2016	(Level 1)	(Level 2)	(Level 3)
Trading securities	$ 59,000	$ 59,000	$ -	$ -
Money market funds	36,000	36,000	-	-
Total	$ 95,000	$ 95,000	$ -	$ -

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

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	December 31, 2017			December 31, 2016

Equipment	$	28,000		$	28,000
Furniture & fixtures		114,000			114,000
Leasehold improvements		107,000			107,000
		249,000			249,000
Less: accumulated depreciation and amortization		(115,000	)		(68,000	)
Property and Equipment, Net	$	134,000		$	181,000

Depreciation and amortization expense for the years ended December 31, 2017 and 2016 was $105,000 and $98,000, respectively.

NOTE 4 - RELATED PARTY TRANSACTIONS

On October 3, 2016, the Company sold trading securities valued at $340,000 to Berkshire Capital Management Co., Inc. (“Berkshire”) for $500,000. Berkshire is controlled by Joseph Fiore, majority shareholder and former chairman of the board of directors of the Company. The Company reported the $160,000 difference between the value of the trading securities and cash sale price as contributed capital.

On September 5, 2017, the Company obtained a revolving line of credit from Berkshire Capital Management Co., Inc. The line of credit allows the Company to borrow up to $1,000,000 with interest at 6% per annum. The loan is secured by a first lien on all the assets of the Company and its wholly owned subsidiary SPYR APPS, LLC. Repayment on the loan is due February 28, 2019. As of December 31, 2017, we have borrowed $800,000.

F- 14

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

NOTE 5 - INCOME TAXES

The Company did not provide any Federal and State income tax for the years ended December 31, 2017 and 2016 due to the Company’s net losses.

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

	December 31,
	2017			2016
Tax provision at US statutory federal income tax rate	$	(690,000	)	$	(2,320,000	)
State income tax, net of federal benefit		—			—
Change in valuation allowances		690,000			2,320,000
Provision for Income Taxes	$	—		$	—

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

	December 31,
	2017			2016
Deferred Tax Assets:
Net operating loss carry forward	$	4,926,000		$	3,746,000
Unrealized losses on marketable securities		2,000			251,000
Stock based compensation		—			197,000
Depreciation and other		(13,000	)		31,000
		4,915,000			4,225,000
Less valuation allowance		(4,915,000	)		(4,225,000	)
Net Deferred Tax Asset	$	—		$	—

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

As of December 31, 2017, the Company recorded a valuation allowance of $4,915,000 for its deferred tax assets. The Company believes that such assets did not meet the more likely than not criteria to be recoverable through projected future profitable operations in the foreseeable future.

Effective January 1, 2007, the Company adopted FASB guidance that addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The FASB also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2017 and 2016, the Company does not have a liability for unrecognized tax benefits.

The Company’s net operating loss carry forward for income tax purposes as of December 31, 2017 was approximately $18,700,000 and may be offset against future taxable income through 2037. Utilization of the Company’s net operating losses may be subject to substantial annual limitation if the Company experiences a 50% change in ownership, as provided by the Internal Revenue Code and similar state provisions. Such an ownership change would substantially increase the possibility of net operating losses expiring before complete utilization.

F- 15

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

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

In accordance with ASC 740, the impact of a change in tax law is recorded in the period of enactment. During the fourth quarter of 2017, the Company recorded a non-cash, change in its net deferred tax balances of approximately $2,429,000 related to the tax rate change. The Company estimates that its deemed repatriation liability will not be material due to its limited international operations.

Uncertain Tax Positions

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. In many cases the Company’s uncertain tax positions are related to tax years that remain subject to examination by relevant tax authorities. The Company is generally no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years before 2014. However, as of December 31, 2017, the years subsequent to 2013 remain open and could be subject to examination by tax authorities including the U.S. Internal Revenue Service and major state and local tax jurisdictions in the United States.

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

As of December 31, 2017, the Company had no liability for unrecognized tax benefits and no accrual for the payment of related interest and penalties, nor did the Company recognized any interest or penalties expense related to unrecognized tax benefits during the years ended December 31, 2016 or 2015.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Rent

The Company leases approximately 5,169 square feet at 4643 South Ulster Street, Denver, Colorado pursuant to an amended lease dated May 21, 2015 and expiring on December 31, 2020. Under the lease, the Company pays annual base rent on an escalating scale ranging from $142,000 to $152,000.

The Company’s wholly owned subsidiary leases office shared office space in Berlin Germany pursuant to a lease dated June 29, 2018 and expiring on March 31, 2018. Under the lease, the Company pays monthly base rent of $4,248 (3,570 Euros).

The minimum future lease payments under these leases for the next five years are:

Year Ended December 31,		Amount
	2018	$	161,000
	2019		150,000
	2020		152,000
	2021		—
	2022		—
	Thereafter		—
	Total Five Year Minimum Lease Payments	$	463,000

Rent expense for the years ended December 31, 2017 and 2016 was $186,000 and $146,000, respectively. In addition to the minimum basic rent, rent expense also includes approximately $200 per month for other items charged by the landlord in connection with rent.

F- 16

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

Legal Proceedings

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

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

The Company is being represented by Alex Spiro, Esq., a partner with the firm of Quinn Emmanuel, Urquhart & Sullivan, LLP and Marc S. Gottlieb, Esq., a partner with the firm of Ortoli Rosenstadt LLP.

Employment Agreements

Pursuant to employment agreements entered in December 2014 and October 2015, the Company agreed to compensate three officers with a base salary in the aggregate of $450,000 per year through 2020. In addition, as part of the employment agreement, the Company also agreed to grant these officers an aggregate of 1.55 million shares of common stock at the beginning of each employment year.

Game Development Agreements

The Company is party to various game development agreements. Payments are contingent upon the developer(s) meeting specified milestones and game performance. Pursuant to these agreements, the Company has agreed to pay up to $843,000 during the period from January 2018 through January 2019.

Common Stock To Be Issued

The Company is party to various third-party service agreements to be paid through the issuance of the company’s restricted common stock. Contingent upon the third parties providing the agreed upon services, the Company will issue up to 4,570,000 restricted common shares at various intervals during the period from January 2018 through February 2019. The shares will be recorded at fair value on the date earned under the respective agreements.

F- 17

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

NOTE 7 – EQUITY TRANSACTIONS

Common Stock:

Year Ended December 31, 2016:

During the year ended December 31, 2016, the Company issued an aggregate of 100,000 shares of restricted common stock to consultants for cash of $15,000.

During the year ended December 31, 2016, the Company issued an aggregate of 1,843,987 shares of common stock to employees with a total fair value of $413,000 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $413,000 upon issuance. The shares issued were valued at the date of the respective agreements.

During the year ended December 31, 2016, the Company issued an aggregate of 4,509,912 shares of restricted common stock to consultants with a total fair value of $1,951,000. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $1,951,000 upon issuance. The shares issued were valued at the date of the respective agreements.

In April 2016, the Company cancelled a total of 325,000 shares of common stock issued to an employee pursuant to a settlement and termination agreement. Pursuant to current accounting guidelines, no further accounting was necessary for the cancellation of the 325,000 shares of common stock other than to remove the par value amounting to $33.00.

Year Ended December 31, 2017:

During the year ended December 31, 2017, the Company issued an aggregate of 750,000 shares of restricted common stock to an existing shareholder and former officer/employee for cash of $300,000. The common shares had a fair value of $510,000 at the date of sale, and as a result, the Company reflected an additional expense of $210,000 to account the difference between the sale price and the fair market value of common shares sold.

During the year ended December 31, 2017, the Company issued an aggregate of 2,050,000 shares of restricted common stock to employees with a total fair value of $1,109,000 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $1,109,000 upon issuance. The shares issued were valued at the date earned under the respective agreements.

During year ended December 31, 2017, the Company issued an aggregate of 12,691,924 shares of restricted common stock to consultants with a total fair value of $3,758,000. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $3,758,000 upon issuance. The shares issued were valued at the date earned under the respective agreements.

During year ended December 31, 2017, the Company issued an aggregate of 8,000,000 shares of restricted common stock to third parties with a total fair value of $3,320,000. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $3,320,000 upon issuance. The shares issued were valued at the date earned under the respective agreements. (See Note 1 “Capitalized Gaming Assets and Licensing Rights”)

F- 18

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

Common Stock with Vesting Terms:

The following table summarizes common stock with vesting terms activity:

				Weighted
				Average
		Number of		Grant Date
		Shares		Fair Value
Non-vested, December 31, 2015		329,167	$	0.47
	Granted	—		—
	Vested	(308,334)		0.47
	Forfeited	—		—
Non-vested, December 31, 2016		20,833	$	0.47
	Granted	—		—
	Vested	(20,833)		0.47
	Forfeited	—		—
Non-vested, December 31, 2017		—	$	—

During 2015, the Company granted and issued 600,000 shares of its restricted common stock to employees and third-party service providers. The 600,000 shares were forfeitable and deemed earned upon completion of service over a period of twelve to twenty-four months. The Company recognized the fair value of these shares as they vested. As of December 31, 2016, 579,167 of these shares had vested and 20,833 common shares were unvested. During the year ended December 31, 2017, the remaining 20,833 of these shares vested and as a result, the Company recognized compensation cost of $46,000. As of December 31, 2017, there were no unvested shares and no unearned compensation costs to be recorded.

When calculating basic net income (loss) per share, these shares are included in weighted average common shares outstanding from the time they vest. When calculating diluted net income per share, these shares, if dilutive, are included in weighted average common shares outstanding as of their grant date.

Options:

The following table summarizes common stock options activity:

				Weighted
				Average
				Exercise
	Options			Price
December 31, 2015		—		$	—
Granted		12,900,000			2.94
Exercised		—			—
Forfeited		—			—
Outstanding, December 31, 2016		12,900,000		$	2.94

Granted		8,920,000			0.55
Exercised		—			—
Forfeited		(8,500,000	)		3.88
Outstanding, December 31, 2017		13,320,000		$	1.74

Exercisable, December 31, 2016		4,400,000		$	2.83
Exercisable, December 31, 2017		12,250,000		$	1.58

The weighted average grant date fair value of options granted during the years ended December 31, 2017 and 2016, was $0.55 and $2.83 respectively.

F- 19

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

In June 2016, the Company granted options to purchase 3.75 million shares of restricted common stock valued at $472,000 pursuant to the planned acquisition of Pocket Starships (See Note 1 “Capitalized Gaming Assets and Licensing Rights”). The stock options are fully vested, exercisable at a price per share of $1.00, $2.50, and $5.00 and stated to expire December 31, 2017 through December 31, 2019. During the year ended December 31, 2016, the Company recognized compensation expense of $472,000. On December 31, 2017, options to purchase 500,000 shares of restricted common stock expired, with the remaining 3.25 million expiring December 31, 2018 through December 31, 2019.

In August 2016, the Company granted an employee options to purchase a total of 7.5 million shares of common stock with an exercise price per share of $1.00, $2.50 and $5.00. The options are fully vested upon grant but are only exercisable in three tranches starting in January 2017, 2018 and 2019. Total fair value of the options at grant date amounted to $201,000 computed using the Black-Scholes Option Pricing Model. The Company determined the appropriate treatment is to recognize the fair value of the options over the service period, which would be when the options are fully exercisable. The first tranche of 1 million shares became exercisable on January 1, 2017 with a fair value of the options at grant date of $28,000 computed using the Black-Scholes Option Pricing Model. During the year ended December 31, 2016, the Company recognized compensation expense of $28,000. Subsequent to December 31, 2016, the employment agreement was terminated, all options cancelled, and no further compensation expense for these options will be recognized.

In October 2016, the Company granted an employee options to purchase a total of 1.5 million shares of restricted common stock with an exercise price per share of $1.00, $2.50 and $5.00 and will expire starting December 31, 2017 through December 31, 2019. The options are fully vested upon grant but are only exercisable in three tranches starting in October 2016 and January 2018 and 2019. Total fair value of the options at grant date amounted to $145,000 computed using the Black-Scholes Option Pricing Model. The Company determined the appropriate treatment is to recognize the fair value of the options over the service period, which would be when the options are fully exercisable. During the year ended December 31, 2016, the Company recognized compensation expense of $62,000. During the year ended December 31, 2017, the Company recognized compensation expense of $60,000. On December 31, 2017, options to purchase 500,000 shares of restricted common stock at $0.50 per share expired. As of December 31, 2017, future unamortized costs amounted to approximately $22,000.

In October 2016, the Company signed an investor relations consulting agreement with a third party granting options to purchase 50,000 shares of restricted common stock per month beginning October 24, 2016 through October 24, 2017 with an exercise price of $1.00 per share that will expire 36 months from date of grant. The options are granted monthly and fully vested and exercisable upon grant. As of December 31, 2016, 150,000 options were granted. Total fair value of the options at their respective grant dates amounted to $59,000 computed using the Black-Scholes Option Pricing Model. During the year ended December 31, 2016, the Company fully recognized the $59,000 compensation expense. As of December 31, 2017, 500,000 options were granted. Total fair value of the options at their respective grant dates amounted to $177,000 computed using the Black-Scholes Option Pricing Model. During the year ended December 31, 2017, the Company fully recognized the $177,000 compensation expense.

During the year ended December 31, 2017, the Company granted stock options to consultants to purchase a total of 420,000 shares of common stock. A total of 350,000 options vested during 2017 while the remaining 70,000 options will vest through February 2018 at a rate of 35,000 shares per month. The options are exercisable at $1.00 per share and will expire over 4 years. The fair values of the options are recorded at their respective grant dates computed using the Black-Scholes Option Pricing Model. During the year ended December 31, 2017, the Company recognized $210,000 in compensation expense based upon the vesting of outstanding options. As of December 31, 2017, the unamortized compensation expense for unvested options was $42,000 which will be recognized during 2018.

F- 20

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

During year ended December 31, 2017, the Company granted stock options purchase up to eight million shares of the Company’s restricted common stock to third parties valued at $2,452,000. The options are fully vested, exercisable at a price per share of $0.50 and will expire starting August 31, 2020. The fair values of the options were computed using the Black-Scholes Option Pricing Model, and recorded at the date of grant. (See Note 1 “Capitalized Gaming Assets and Licensing Rights”)

The weighted average exercise prices, remaining lives for options granted, and exercisable as of December 31, 2017 were as follows:


	Outstanding Options			Exercisable Options
Options			Weighted		Weighted
Exercise Price		Life	Average Exercise		Average Exercise
Per Share	Shares	(Years)	Price	Shares	Price
$0.50	8,000,000	2.67	$0.50	8,000,000	$0.50
$1.00	1,070,000	1.81 – 3.10	$1.00	1,000,000	$1.00
$2.50	1,250,000	1	$2.50	750,000	$2.50
$5.00	3,000,000	2	$5.00	2,500,000	$5.00
	13,320,000		$3.97	12,250,000	$1.58

At December 31, 2017, the Company’s closing stock price was $0.265 per share. As all outstanding options had an exercise price greater than $0.265 per share, there was no intrinsic value of the options outstanding at December 31, 2017.

The following table summarizes options granted with vesting terms activity:

				Weighted
				Average
		Number of		Grant Date
		Shares		Fair Value
Non-vested, December 31, 2015		—	$	—
	Granted	—		—
	Vested	—		—
	Forfeited	—		—
Non-vested, December 31, 2016		—	$	—
	Granted	420,000		1.00
	Vested	(350,000)		1.00
	Forfeited	—		—
Non-vested, December 31, 2017		70,000	$	1.00

Warrants:

The following table summarizes common stock warrants activity:

				Weighted
				Average
				Exercise
	Warrants			Price
December 31, 2015		—		$	—
Granted		200,000			0.50
Exercised		—			—
Forfeited		—			—
Outstanding, December 31, 2016		200,000		$	0.50

Granted		1,700,000			1.06
Exercised		—			—
Forfeited		(200,000	)		050
Outstanding, December 31, 2017		1,700,000		$	1.06

Exercisable, December 31, 2016		200,000		$	0.50
Exercisable, December 31, 2017		1,700,000		$	1.06

F- 21

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

In October and November 2016, pursuant to advisory services agreement, the Company granted warrants to purchase a total of 200,000 shares of restricted common stock with an exercise price of $0.50 and will expire 12 months after date of grant. The options are fully vested and exercisable upon grant. Total fair value of the options at grant date amounted to $50,000 computed using the Black-Scholes Option Pricing Model and was fully recognized on the date of grant.

In March 2017, pursuant to an employee separation agreement, the Company granted warrants to purchase a total of 1,000,000 shares of restricted common stock with an exercise price of $1.50 and $2.00 which will expire December 31, 2018. The warrants are fully vested and exercisable upon grant. Total fair value of the warrants at grant date amounted to $290,000 computed using the Black-Scholes Option Pricing Model and was fully recognized on the date of grant.

In October 2017, pursuant to advisory services agreement, the Company granted warrants to purchase a total of 100,000 shares of restricted common stock with an exercise price of $0.50 and will expire 12 months after date of grant. The options are fully vested and exercisable upon grant. Total fair value of the options at grant date amounted to $20,000 computed using the Black-Scholes Option Pricing Model and was fully recognized on the date of grant.

In October 2017, pursuant to a services agreement, the Company granted warrants to purchase a total of 600,000 shares of restricted common stock with an exercise price of $0.01 and will expire December 31, 2020. The options are fully vested and exercisable upon grant. Total fair value of the options at grant date amounted to $188,000 computed using the Black-Scholes Option Pricing Model and was fully recognized on the date of grant.

The weighted average exercise prices, remaining lives for warrants granted, and exercisable as of December 31, 2017, were as follows:

	Outstanding and Exercisable Warrants
Warrants
Exercise Price		Life
Per Share	Shares	(Years)
$0.01	600,000	3.00
$0.50	100,000	0.83
$1.50	500,000	1.00
$2.00	500,000	1.00
	1,700,000

At December 31, 2017, the Company’s closing stock price was $0.265 per share. As all outstanding warrants had an exercise price greater than $0.265 per share, there was no intrinsic value of the warrants outstanding at December 31, 2017.

F- 22

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

The table below represents the average assumptions used in valuing the stock options and warrants granted in fiscal 2016:

			Year Ended December 31,
			2016
Expected life in years			0.61 – 3.0
Stock price volatility			132% - 159%
Risk free interest rate			0.56 % - 1.54%
Expected dividends			—
Forfeiture rate			—

The table below represents the average assumptions used in valuing the stock options and warrants granted in fiscal 2017:

			Year Ended December 31,
			2017
Expected life in years			1.00 – 3.19
Stock price volatility			127% - 157%
Risk free interest rate			1.26 % - 1.70%
Expected dividends			—
Forfeiture rate			—

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

NOTE 8 - PREFERRED STOCK

The Class A Preferred Stock carries the following rights and preferences;

Dividends

The Company shall, in its discretion, determine when and if dividends will be paid on the Class A Preferred Shares, and whether it will be paid in cash, shares of Common Stock, or a combination of both. All Class A Preferred Stockholders shall be treated the same with respect to the payment of dividends. In the event the Company elects to pay a portion or all of the dividends on the Class A Preferred Stock by issuing shares of the Company's Common Stock, the shares of common stock issued as dividends will be restricted, unregistered shares, and will be subject to the same transfer restrictions that apply to the shares of Class A Preferred Stock. The dividend is payable as may be determined by the Board of Directors, out of funds legally available therefor. The Class A Preferred Stock will have priority as to dividends over the Common Stock.

Voting Rights

The holders of the Class A Preferred Stock shall vote for the election of directors, and shall have full voting rights, except that each Class A Preferred share shall entitle the holder to exercise ten thousand (10,000) votes for each one (1) Class A Preferred Share held.

Redemptive Rights

The Class A Preferred Stock shall not be redeemable.

Conversion Rights

The holders of the Class A Preferred Stock will be entitled at any time to convert their shares of Class A Preferred Stock into shares of the Company's Common Stock at the rate of one (1) share of Class A Preferred Stock be converted into common shares of the Company at an agreed price of forty cents ($0.40) per share (the "Conversion Price"), which, based upon the recorded fair value of the Class A Preferred Stock, results in a conversion ratio of 1 share of Class A Preferred Stock to approximately 250 shares of common stock. No fractional shares will be issued.

The Conversion Ratio of the Class A Preferred Stock shall be adjusted in certain circumstances, including the payment of a stock dividend on shares of the Common Stock and combinations and subdivisions of the Common Stock.

In the case of any share exchange, capital reorganization, consolidation, merger or reclassification, whereby the Common Stock is converted into other securities or property, the Company will make appropriate provisions so that the holder of each share of Class A Preferred Stock then outstanding, will have the right thereafter to convert such share of Class A Preferred Stock into the kind and amount of shares of stock and other securities and property receivable upon such consolidation, merger, share exchange, capital reorganization or reclassification by a holder of the number of shares of Common Stock into which such shares of Class A Preferred Stock might have been converted immediately prior to such consolidation, merger, share exchange, capital reorganization or reclassification. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, the Conversion Ratio shall be proportionately increased in the case of subdivision of shares. If the shares of Common Stock are combined, consolidated or reverse split into a smaller number of shares of Common Stock, the Conversion Ratio shall be proportionally decreased. The kind and type of Common Shares issuable upon conversion of the Class A Preferred Stock both before and after combination, consolidation or reverse split of the Common Shares shall be the same.

F- 23

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

The same transfer restrictions imposed on the Class A Preferred Stock shall be applicable to the Common Stock into which the Class A Preferred Stock is converted, although for purposes of Rule 144 as presently in effect, the holding period requirement may be met by adding together the period in which the Class A Preferred Stock is held and the period in which the Common Stock into which the Class A Preferred Stock is converted, is held.

Other Provisions

The shares of Class A Preferred Stock to be issued and any Common Shares into which it is converted, shall be duly and validly issued, fully paid and non-assessable. The holders of the Class A Preferred Stock shall not have pre-emptive rights with respect to any shares of capital stock of the Company or any other securities of the Company convertible into Common Stock or rights or options to purchase any such shares.

The Class E Convertible Preferred Stock carries the following rights and preferences;

*	No dividends.
*	Convertible to common stock based upon proceeds received upon issuance of the shares, divided by the average closing bid price for the Company’s common stock for the 5 trading days prior to the conversion date, and is adjustable to prevent dilution. At December 31, 2017, the 20,000 Class E preferred shares were convertible to 415,559 common shares.
*	Convertible at the Option of the Company at par value only after repayment of the shareholder loans from Joseph Fiore and subject to the holder’s option to convert.
*	Entitled to vote 1,000 votes per share of Series E Convertible Preferred Shares.
*	Entitled to liquidation preference at par value.
*	Is senior to all other share of preferred or common shares issued past, present and future.

NOTE 9 – DISCONTINUED OPERATIONS

Restaurant

Through our other wholly owned subsidiary, E.A.J.: PHL Airport, Inc., we owned and operated the restaurant “Eat at Joe’s®,” which was located in the Philadelphia International Airport since 1997. Our lease in the Philadelphia Airport expired in April 2017. Concurrent with expiration of the lease the restaurant closed. Pursuant to current accounting guidelines, the restaurant segment is reported as discontinued operations.

The following table summarizes the assets and liabilities of our discontinued restaurant segment's discontinued operations as of December 31, 2017 and December 31, 2016:

	December 31, 2017		December 31, 2016
Assets:
Accounts receivable, net	$	—	$	13,000
Inventory		—		12,000
Prepaid expenses		—		25,000
Property and equipment, net		—		30,000
Other assets		—		16,000
Total Assets	$	—	$	96,000

Liabilities:
Accounts payable and accrued liabilities	$	22,000	$	60,000
Total Liabilities	$	22,000	$	60,000

F- 24

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

The following table summarizes the results of operations of our discontinued restaurant for the years ended December 31, 2017 and 2016 and is included in the consolidated statements of operations as discontinued operations:

	For the Year Ended December 31,
	2017			2016

Revenues	$	420,000		$	1,413,000
Cost of sales		133,000			421,000
Gross Margin		287,000			992,000
Expenses
Labor and related expenses		177,000			471,000
Rent		77,000			278,000
Depreciation and amortization		20,000			68,000
Professional fees		33,000			2,000
Other general and administrative		102,000			198,000
Total Operating Expenses		409,000			1,017,000
Operating Income (Loss)		(122,000	)		(25,000	)
Other Income (Expense)
Loss on disposal of assets		(10,000	)		—
Income (Loss) on discontinued operations	$	(132,000	)	$	(25,000	)

Other

During the year ended December 31, 2016, the Company incurred additional expenses of $4,000 related to the winding-up of its former subsidiary Franklin Networks, Inc. The following table provides additional detail of these losses which are reflected as a loss on discontinued operations.

	December 31, 2016
Revenues	$	—
General and administrative		4,000
Loss from discontinued operations	$	(4,000	)

F- 25

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

NOTE 10 – RESTATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 AND 2016

On July 12, 2018, the court approved a Joint Motion for Order Approving Settlement Agreement in the Zakeni Limited v. SPYR, Inc. case. Pursuant to the settlement, the Company will issue to Zakeni Limited 3,500,000 common shares, warrants to purchase 1,000,000 common shares at $0.25 per share, warrants to purchase 1,500,000 common shares at $0.50 per share, and warrants to purchase 1,000,000 common shares at $0.75 per share. The shares and warrants were valued at the date the court signed the settlement agreement. The total value of the settlements, $1,983,000 has been recorded as litigation settlement liability on the accompanying consolidated balance sheets as of December 31, 2017 and 2016, with a corresponding charge to litigation settlement costs on the consolidated statement of operations for the year ended December 31, 2016.

Analysis of the restated December 31, 2016 and 2017 balance sheets and results of operations for the year then ended is as follows.

1 – The Company recorded a litigation settlement liability on the 2016 and 2017 consolidated balance sheet in the amount of $1,983,000 (fair value of the 3,500,000 shares and 3,500,000 warrants).

2 – The Company recorded litigation settlement costs on the 2016 consolidated statement of operations in the amount of $1,983,000 (fair value of the 3,500,000 shares and 3,500,000 warrants).

3 – The Company recorded a reduction in accounts payable and accrued liabilities on the 2017 consolidated balance sheet in the amount of $350,000 (Pre-settlement estimated legal and trial costs).

4 – The Company recorded a reduction in professional fees on the 2017 consolidated statement of operations in the amount of $350,000 to remove the pre-settlement estimated legal and trial costs.

F- 26

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

	December 31, 2016
ASSETS		As Reported			Adjustment				As Restated
Current Assets:
Cash and cash equivalents	$	3,204,000		$	—			$	3,204,000
Accounts receivable, net		31,000			—				31,000
Other receivable		200,000			—				200,000
Prepaid expenses		25,000			—				25,000
Trading securities, at market value		59,000			—				59,000
Current assets of discontinued operations		50,000			—				50,000
Total Current Assets		3,569,000			—				3,569,000

Property and equipment, net		181,000			—				181,000
Capitalized gaming assets and licensing rights, net		40,000			—				40,000
Intangible assets, net		18,000			—				18,000
Other assets		6,000			—				6,000
Non-current assets of discontinued operations		46,000			—				46,000
TOTAL ASSETS	$	3,860,000		$	—			$	3,860,000

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Accounts payable and accrued liabilities	$	116,000		$	—			$	116,000
Litigation Settlement Liability		—			1,983,000		1		1,983,000
Current liabilities of discontinued operations		60,000			—				60,000
Total Current Liabilities		176,000			1,983,000				2,159,000

Total Liabilities		176,000			1,983,000				2,159,000

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY
Preferred stock, $0.0001 par value, 10,000,000 shares authorized
107,636 Class A shares issued and outstanding
as of December 31, 2017 and 2016		11			—				11
20,000 Class E shares issued and outstanding
as of December 31, 2017 and 2016		2			—				2
Common Stock, $0.0001 par value, 750,000,000 shares authorized
181,128,950 and 157,637,026 shares issued and outstanding
as of December 31, 2017 and 2016		15,763			—				15,763
Additional paid-in capital		34,752,224			—				34,752,224
Accumulated deficit		(31,084,000	)		(1,983,000	)			(33,067,000	)
Total Stockholders’ Equity		3,684,000			(1,983,000	)			1,701,000
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,860,000		$	—			$	3,860,000

F- 27

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

	December 31, 2016
		As Reported			Adjustment				As Restated
Revenues	$	139,000		$	—			$	139,000

Expenses
Labor and related expenses		1,467,000			—				1,467,000
Rent		146,000			—				146,000
Depreciation and amortization		98,000			—				98,000
Professional fees		3,292,000			—				3,292,000
Research and development		1,151,000			—				1,151,000
Other general and administrative		740,000			—				740,000
Cost of acquisition option		472,000			—				472,000
Total Operating Expenses		7,366,000			—				7,366,000
Operating Loss		(7,227,000	)		—				(7,227,000	)

Other Income (Expense)
Interest and dividend income		18,000			—				18,000
Litigation settlement costs		—			(1,983,000	)	2		(1,983,000	)
Unrealized gain (loss) on trading securities		(57,000	)		—				(57,000	)
Loss on sale of marketable securities		(95,000	)		—				(95,000	)
Total Other Expense		(134,000	)		(1,983,000	)			(2,117,000	)

Loss from continuing operations		(7,361,000	)		(1,983,000	)			(9,344,000	)

Loss on discontinued operations		(29,000	)		—				(29,000	)

Net Loss	$	(7,390,000	)	$	(1,983,000	)		$	(9,373,000	)


Per Share Amounts
Loss from continuing operations
Basic and Diluted earnings per share	$	(0.05	)	$	(0.01	)		$	(0.06	)

Loss on discontinued operations
Basic and Diluted earnings per share	$	—		$	—			$	—

Net Loss
Basic and Diluted earnings per share	$	(0.05	)	$	(0.01	)		$	(0.06	)

Weighted Average Common Shares
Basic and Diluted		154,092,844			—				154,092,844

F- 28

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

	December 31, 2017
ASSETS		As Reported			Adjustment				As Restated
Current Assets:
Cash and cash equivalents	$	86,000		$	—			$	86,000
Accounts receivable, net		4,000			—				4,000
Prepaid expenses		35,000			—				35,000
Trading securities, at market value		48,000			—				48,000
Total Current Assets		173,000			—				173,000

Property and equipment, net		134,000			—				134,000
Capitalized gaming assets and licensing rights, net		743,000			—				743,000
Intangible assets, net		12,000			—				12,000
Other assets		16,000			—				16,000
TOTAL ASSETS	$	1,078,000		$	—			$	1,078,000

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Accounts payable and accrued liabilities	$	878,000		$	(350,000	)	3	$	528,000
Litigation Settlement Liability		—			1,983,000		1		1,983,000
Current liabilities of discontinued operations		22,000			—				22,000
Total Current Liabilities		900,000			1,633,000				2,533,000

Non-current related party line of credit		807,000			—				807,000
Total Liabilities		1,707,000			1,633,000				3,340,000

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY
Preferred stock, $0.0001 par value, 10,000,000 shares authorized
107,636 Class A shares issued and outstanding
as of December 31, 2017 and 2016		11			—				11
20,000 Class E shares issued and outstanding
as of December 31, 2017 and 2016		2			—				2
Common Stock, $0.0001 par value, 750,000,000 shares authorized
181,128,950 and 157,637,026 shares issued and outstanding
as of December 31, 2017 and 2016		18,112			—				18,112
Additional paid-in capital		46,561,875			—				46,561,875
Accumulated deficit		(47,209,000	)		(1,633,000	)			(48,842,000	)
Total Stockholders’ Equity		(629,000	)		(1,633,000	)			(2,262,000	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,078,000		$	—			$	1,078,000

F- 29

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

	December 31, 2017
		As Reported			Adjustment				As Restated
Revenues	$	128,000		$	—			$	128,000

Expenses
Labor and related expenses		2,358,000			—				2,358,000
Rent		186,000			—				186,000
Depreciation and amortization		105,000			—				105,000
Professional fees		5,905,000			(350,000	)	4		5,555,000
Research and development		1,666,000			—				1,666,000
Other general and administrative		502,000			—				502,000
Total Operating Expenses		10,722,000			(350,000	)			10,372,000
Operating Loss		(10,594,000	)		350,000				(10,244,000	)

Other Income (Expense)
Interest and dividend income		4,000			—				4,000
Interest Expense		(11,000	)		—				(11,000	)
Loss on write-down of assets		(5,381,000	)		—				(5,381,000	)
Unrealized gain (loss) on trading securities		(11,000	)		—				(11,000	)
Total Other Expense		(5,399,000	)		—				(5,399,000	)

Loss from continuing operations		(15,993,000	)		350,000				(15,643,000	)

Loss on discontinued operations		(132,000	)		—				(132,000	)

Net Loss	$	(16,125,000	)	$	350,000			$	(15,775,000	)


Per Share Amounts
Loss from continuing operations
Basic and Diluted earnings per share	$	(0.10	)	$	0.01			$	(0.09	)

Loss on discontinued operations
Basic and Diluted earnings per share	$	—		$	—			$	—

Net Loss
Basic and Diluted earnings per share	$	(0.10	)	$	0.01			$	(0.09	)

Weighted Average Common Shares
Basic and Diluted		166,443,807			—				166,443,807

F- 30

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDING DECEMBER 31, 2017 AND 2016

NOTE 11 - SUBSEQUENT EVENTS

During period from January through August 14, 2018, the Company issued 6.7 million shares of common stock for cash of $905,000 pursuant to various private placement agreements.

During period from January through August 14, 2018, the Company issued 5.9 million shares of common stock pursuant to various third-party service agreements.

On February 1, 2018, the Company issued 1.25 million shares of common stock with a fair value of $625,000 pursuant to existing employment and consulting agreements.

On April 20, 2018, the Company signed a convertible promissory note with a third-party lender for up to $475,000 (net of original issue discount of $25,000). The note is for 12 months with interest at 8% per annum on the unpaid principal amount. The note holder has the right, at any time on or after 181 calendar days after the date of the note, to convert all or any portion of the outstanding principal and interest into the Company’s restricted common stock at $0.20 per share. On April 26, 2018 the Company borrowed $150,000 on this note.

On May 22, 2018, the Company signed a convertible promissory note with a third-party lender for up to $250,000 (net of original issue discount of $25,000). The note is for 8 months with a one-time interest charge of 8% on the issuance date outstanding balance. The note holder has the right, at any time on or after the issuance date, to convert all or any portion of the outstanding principal and interest into the Company’s restricted common stock at $0.25 per share. On May 22, 2018 the Company borrowed $250,000 on this note.

On May 23, 2018, the Company cancelled an aggregate of 625,000 shares of restricted common stock on termination of a third-party service agreement with a total fair value on the date of termination of $207,000. The Company recorded a gain on cancellation of $113,000 for the portion of shares (375,000) issued during 2017 and reversed expenses of $94,000 for the portion of shares (250,000) issued during 2018. The shares issued were valued at the termination date of the agreement based upon closing market price of the Company’s common stock.

On July 12, 2018, the court approved a Joint Motion for Order Approving Settlement Agreement. Pursuant to the settlement, the Company will issue 3,500,000 common shares valued at $1,050,000, warrants to purchase 1,000,000 common shares at $0.25 per share valued at $276,000, warrants to purchase 1,500,000 common shares at $0.50 per share valued at $398,000, and warrants to purchase 1,000,000 common shares at $0.75 per share valued at $259,000. The total value of the settlement, $1,983,000 has been recorded as litigation settlement liability on the accompanying consolidated balance sheets as of December 31, 2017 and 2016, with a corresponding charge to litigation settlement costs on the consolidated statement of operations for the year ended December 31, 2016.

F- 31

Index to Condensed Consolidated Financial Statements (Unaudited)		Page
Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017		F-33
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017		F-34
Condensed Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2018		F-35
Condensed Consolidated Statements of Cash Flows, for the six months ended June 30, 2018 and 2017		F-36
Notes to Condensed Consolidated Financial Statements		F-38

F- 32

SPYR, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

		June 30, 2018			December 31, 2017
ASSETS					(Restated)
Current Assets:
Cash and cash equivalents	$	168,000		$	86,000
Accounts receivable, net		18,000			4,000
Prepaid expenses		26,000			35,000
Trading securities, at market value		19,000			48,000
Total Current Assets		231,000			173,000

Property and equipment, net		113,000			134,000
Capitalized gaming assets and licensing rights, net		709,000			743,000
Intangible assets, net		10,000			12,000
Other assets		6,000			16,000
TOTAL ASSETS	$	1,069,000		$	1,078,000

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Current Liabilities:
Accounts payable and accrued liabilities	$	552,000		$	528,000
Related party short-term advances		55,000			—
Related party line of credit		1,036,000			—
Convertible note payable, net		196,000
Litigation settlement liability		1,983,000			1,983,000
Current liabilities of discontinued operations		22,000			22,000
Total Current Liabilities		3,844,000			2,533,000

Non-current related party line of credit		—			807,000
Total Liabilities		3,844,000			3,340,000
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock, $0.0001 par value, 10,000,000 shares authorized
107,636 Class A shares issued and outstanding
as of June 30, 2018 and December 31, 2017		11			11
20,000 Class E shares issued and outstanding
as of June 30, 2018 and December 31, 2017		2			2
Common Stock, $0.0001 par value, 750,000,000 shares authorized
194,041,732 and 181,128,950 shares issued and outstanding
as of June 30, 2018 and December 31, 2017		19,404			18,112
Additional paid-in capital		51,062,583			46,561,875
Accumulated deficit		(53,857,000	)		(48,842,000	)
Total Stockholders’ Equity ( Deficit)		(2,775,000	)		(2,262,000	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	1,069,000		$	1,078,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

F- 33

SPYR, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		For the Three Months Ended June 30,						For the Six Months Ended June 30,
		2018			2017			2018			2017

Revenues	$	21,000		$	32,000		$	27,000		$	84,000

Expenses
Labor and related expenses		235,000			308,000			1,121,000			1,678,000
Rent		39,000			49,000			88,000			87,000
Depreciation and amortization		28,000			30,000			57,000			45,000
Professional fees		518,000			1,300,000			3,074,000			2,892,000
Research and development		154,000			152,000			453,000			265,000
Other general and administrative		122,000			369,000			227,000			703,000
Total Operating Expenses		1,096,000			2,208,000			5,020,000			5,670,000
Operating Loss		(1,075,000	)		(2,176,000	)		(4,993,000	)		(5,586,000	)

Other Income (Expense)
Interest and dividend income		—			1,000			—			4,000
Interest Expense		(84,000	)		—			(104,000	)		—
Gain on cancellation of shares		113,000			—			113,000			—
Unrealized loss on trading securities		(18,000	)		(12,000	)		(29,000	)		(27,000	)
Total Other Expense		11,000			(11,000	)		(20,000	)		(23,000	)

Loss from continuing operations		(1,064,000	)		(2,187,000	)		(5,013,000	)		(5,609,000	)

Loss on discontinued operations		—			(69,000	)		(2,000	)		(104,000	)

Net Loss	$	(1,064,000	)	$	(2,256,000	)	$	(5,015,000	)	$	(5,713,000	)


Per Share Amounts
Loss from continuing operations
Basic and Diluted earnings per share	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	(0.04	)

Loss on discontinued operations
Basic and Diluted earnings per share	$	—		$	—		$	—		$	—

Net Loss
Basic and Diluted earnings per share	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	(0.04	)

Weighted Average Common Shares
Basic and Diluted		192,569,065			160,846,474			189,479,590			160,321,114

The accompanying notes are an integral part of these condensed consolidated financial statements.

F- 34

SPYR, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2018
(Unaudited)

	Preferred Stock														Additional
	Class A				Class E				Common Stock						Paid-in			Accumulated
	Shares		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Total
Balance at December 31, 2017 (Restated)		107,636	$	11		20,000	$	2		181,128,950		$	18,112		$	46,561,875		$	(48,842,000	)	$	(2,262,000	)
Common stock issued to related party for cash		—		—		—		—		500,000			50			49,950			—			50,000
Common stock issued for cash		—		—		—		—		6,200,000			620			854,380			—			855,000
Fair value of common stock issued for employee compensation		—		—		—		—		1,250,000			125			624,875			—			625,000
Fair value of common stock, options and warrants issued for services		—		—		—		—		5,587,782			559			2,112,441			—			2,113,000
Vesting of options and warrants granted for services		—		—		—		—		—			—			709,000			—			709,000
Common stock cancelled on termination of service agreement		—		—		—		—		(625,000	)		(62	)		(112,938	)		—			(113,000	)
Debt discount on convertible notes payable		—		—		—		—		—			—			263,000			—			263,000
Net loss		—		—		—		—		—			—			—			(5,015,000	)		(5,015,000	)
Balance at June 30, 2018		107,636	$	11		20,000	$	2		194,041,732		$	19,404		$	51,062,583		$	(53,857,000	)	$	(2,775,000	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

F- 35

SPYR, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	For the Six Months Ended June 30,
	2018			2017
Cash Flows From Operating Activities:
Net loss for the period	$	(5,015,000	)	$	(5,713,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on discontinued operations		2,000			104,000
Depreciation and amortization		57,000			45,000
Common stock issued for employee compensation		625,000			847,000
Common stock, options and warrants issued for services		2,113,000			1,909,000
Vesting of options and warrants granted for services		709,000			537,000
Gain on cancellation of common stock		(113,000	)		—
Vesting of shares of common stock issued for services		—			46,000
Debt discount on convertible notes payable		53,000			—
Unrealized loss on trading securities		29,000			27,000
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivables		(14,000	)		10,000
Decrease in other receivables		—			100,000
Decrease (increase) in prepaid expenses		9,000			(44,000	)
Decrease in other assets		10,000			—
Increase in accounts payable and accrued liabilities		24,000			21,000
Increase in accrued interest on line of credit - related party		29,000			—
Increase in accrued interest on convertible notes payable		6,000			—
Net Cash Used in Operating Activities from Continuing Operations		(1,476,000	)		(2,111,000	)
Net Cash Used in Operating Activities from Discontinued Operations		(2,000	)		(40,000	)
Net Cash Used in Operating Activities		(1,478,000	)		(2,151,000	)

Cash Flows From Investing Activities:
Purchase of licensing rights		—			(50,000	)
Net Cash (Used in) Provided by Investing Activities		—			(50,000	)

Cash Flows From Financing Activities:
Proceeds from sale of common stock		905,000			300,000
Proceeds from short-term advances - related party		55,000			—
Proceeds from line of credit - related party		200,000			—
Proceeds from convertible notes payable		400,000			—
Net Cash Provided by Financing Activities		1,560,000			300,000

Net Increase (Decrease) in Cash		82,000			(1,901,000	)
Cash and cash equivalents at beginning of period		86,000			3,204,000
Cash and cash equivalents at end of period	$	168,000		$	1,303,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

F- 36

SPYR, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)(Continued)

		For the Six Months Ended June 30,
		2018		2017
Supplemental Disclosure of Interest and Income Taxes Paid:
Interest paid during the period	$	—	$	—
Income taxes paid during the period	$	—	$	—

Supplemental Disclosure of Non-cash Investing and Financing Activities:
Reclassification of other assets to capitalized licensing rights	$	—	$	100,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

F- 37

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018 and 2017

(Unaudited)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements

The accompanying condensed consolidated financial statements 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/A for the fiscal year ended December 31, 2017 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2017 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.

Organization

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

Nature of Business

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

Through our wholly owned subsidiary, SPYR APPS, LLC we operate our mobile games and applications business. The focus of the SPYR APPS subsidiary is the development and publication of our own mobile games as well as the publication of games developed by third-party developers.

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 7), and Branded Foods Concepts, Inc., a Nevada corporation. Intercompany accounts and transactions have been eliminated.

Going Concern

As shown in the accompanying financial statements, for the six months ended June 30, 2018, the Company recorded a net loss from continuing operations of $5,013,000 and utilized cash in continuing operations of $1,476,000. As of June 30, 2018, our cash balance was $168,000 and we had trading securities of $19,000. These issues raise substantial doubt about the Company’s ability to continue as a going concern.

F-38

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018 and 2017

(Unaudited)

The Company plans to expand its mobile games and application development and publishing activities, such as Pocket Starships and Steven Universe: Tap Together, through acquisition and/or development of its own intellectual property and publishing agreements with developers.

Historically, we have financed our operations primarily through private sales of our trading securities, through sales of our common stock, and through related party loans. If our sales goals for our products do not materialize as planned, we believe that the Company can reduce its operating and product development costs that would allow us to maintain sufficient cash levels to continue operations. However, 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.

Use of Estimates

Earnings (Loss) Per Share

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

The basic and fully diluted shares for the six months ended June 30, 2018 are the same because the inclusion of the potential shares (Class A – 26,909,028, Class E – 312,520, Options – 13,740,000, Warrants – 5,300,000) would have had an anti-dilutive effect due to the Company generating a loss for the six months ended June 30, 2018.

The basic and fully diluted shares for the three months ended June 30, 2018 are the same because the inclusion of the potential shares (Class A – 26,909,028, Class E – 312,520, Options – 13,740,000, Warrants – 5,300,000) would have had an anti-dilutive effect due to the Company generating a loss for the three months ended June 30, 2018.

The basic and fully diluted shares for the six months ended June 30, 2017 are the same because the inclusion of the potential shares (Class A – 26,909,028, Class E – 185,874, Options – 6,120,000, Warrants – 1,200,000) would have had an anti-dilutive effect due to the Company generating a loss for the six months ended June 30, 2017.

The basic and fully diluted shares for the three months ended June 30, 2017 are the same because the inclusion of the potential shares (Class A – 26,909,028, Class E – 185,874, Options – 6,120,000, Warrants – 1,200,000) would have had an anti-dilutive effect due to the Company generating a loss for the three months ended June 30, 2017.

F- 39

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018 and 2017

(Unaudited)

Capitalized Gaming Assets and Licensing Rights

As consideration for the acquisition, the Company issued eight million shares of the Company’s restricted common stock valued at $3,200,000, options to purchase up to eight million shares of the Company’s restricted common stock valued at $2,452,000 and assumed liabilities of $210,000 for a total purchase price of $5,862,000. The options are fully vested, exercisable at a price per share of $0.50 and will expire starting August 31, 2020. The acquisition of “Pocket Starships” was reported as part of capitalized gaming assets and licensing rights valued at $481,000 based upon discounted cash flows. The difference between purchase price and the capitalized value was recorded as loss on write down on assets during 4 ^th quarter 2017. The Company amortizes the capitalized cost on a straight-line basis over an estimated life of seven to ten years.

During the three and six months ended June 30, 2018, the Company recorded amortization expense of $17,000 and $34,000, respectively. As of June 30, 2018 and December 31, 2017, the unamortized capitalized gaming assets and licensing rights amounted to $709,000 and $743,000 respectively.

F- 40

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018 and 2017

(Unaudited)

Software Development Costs

Costs incurred for software development are expensed as incurred. During the six months ended June 30, 2018 and 2017, the Company incurred $453,000 and $265,000 in software development costs paid to independent gaming software developers.

During the three months ended June 30, 2018 and 2017, the Company incurred $154,000 and $152,000 in software development costs paid to independent gaming software developers.

Revenue Recognition

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 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.

Through our wholly owned subsidiary SPYR APPS, LLC, d/b/a SPYR GAMES, we develop, publish and co-publish mobile games, and then generate revenue through those games by way of advertising and in-app purchases. The Company’s dedicated mobile gaming applications can be downloaded through the app stores maintained by Apple and Google. The Company’s cross platform gaming application, which can be played on personal computers, Facebook and mobile devices, can be downloaded from the internet and Facebook as well as through the app stores maintained by Apple, Google and Amazon.

We operate our games as live services that allow players to play for free. Within these games players can purchase virtual items to enhance their game-playing experience. Our identified performance obligation is to display the virtual items within the game. Payment is required at time of purchase and the purchase price is a fixed amount.

Players can purchase our virtual items through various widely accepted payment methods offered in the games, including Apple iTunes accounts, Google Play accounts, Facebook local currency payments, PayPal and credit cards. Payments from players for virtual items are non-refundable and relate to non-cancellable contracts that specify our obligations.

For revenue earned through app stores, players utilize the app store’s local currency-based payments program to purchase virtual items in our games. For all payment transactions on these app store platforms, the app store remits to us 70% of the price we request to be charged to the player for each transaction, which represents the transaction price. We recognize revenue net of the amounts retained by the app stores for platform and payment processing fees.

Recent Accounting Standards

F- 41

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018 and 2017

(Unaudited)

In July 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. (“ASU 2017-11”). ASU 2017-11 allows companies to exclude a down round feature when determining whether a financial instrument is considered indexed to the entity’s own stock. As a result, financial instruments with down round features are no longer classified as liabilities and embedded conversion options with down round features are no longer bifurcated. For equity-classified freestanding financial instruments, such as warrants, an entity will treat the value of the effect of the down round, when triggered, as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion options that have down round features, an entity will recognize the intrinsic value of the feature only when the feature becomes beneficial. The guidance in ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. We early adopted ASU 2017-11 effective January 1, 2018 without a material impact on our consolidated financial statements.

NOTE 2 - TRADING SECURITIES

Investments in securities are summarized as follows:

		Fair Value at		Gain on		Unrealized			Fair Value at
Year		Beginning of Year		Sale		Loss			June 30, 2018
	2018	$	48,000	$	—	$	(29,000	)	$	19,000

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

		Fair Value Measurements at Reporting Date Using
		Quoted Prices	Significant	Significant
		in Active	Other	Unobservable
	Fair Value at	Markets	Observable Inputs	Inputs
	June 30, 2018	(Level 1)	(Level 2)	(Level 3)
Trading securities	$ 19,000	$ 19,000	$ -	$ -
Money market funds	36,000	36,000	-	-
Total	$ 55,000	$ 55,000	$ -	$ -

F- 42

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018 and 2017

(Unaudited)

		Fair Value Measurements at Reporting Date Using
		Quoted Prices	Significant	Significant
		in Active	Other	Unobservable
	Fair Value at	Markets	Observable Inputs	Inputs
	December 31, 2017	(Level 1)	(Level 2)	(Level 3)
Trading securities	$ 48,000	$ 48,000	$ -	$ -
Money market funds	36,000	36,000	-	-
Total	$ 84,000	$ 84,000	$ -	$ -

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

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	June 30, 2018			December 31, 2017

Equipment	$	28,000		$	28,000
Furniture & fixtures		114,000			114,000
Leasehold improvements		107,000			107,000
		249,000			249,000
Less: accumulated depreciation and amortization		(136,000	)		(115,000	)
Property and Equipment, Net	$	113,000		$	134,000

Depreciation expense for the six months ended June 30, 2018 and 2017 was $21,000 and $23,000, respectively.

NOTE 4 - RELATED PARTY TRANSACTIONS

On September 5, 2017, the Company obtained a revolving line of credit from Berkshire Capital Management Co., Inc. Berkshire is controlled by Joseph Fiore, majority shareholder and former chairman of the board of directors of the Company. The line of credit allows the Company to borrow up to $1,000,000 with interest at 6% per annum. The loan is secured by a first lien on all the assets of the Company and its wholly owned subsidiary SPYR APPS, LLC. Repayment on the loan is due February 28, 2019. As of June 30, 2018, the Company has borrowed $1,000,000 and accrued interest of $36,000.

During the six months ended June 30, 2018, the Company received an additional $55,000 in the form of short-term advances from Berkshire Capital Management Co., Inc. The $55,000 short-term advances are due upon demand.

During the six months ended June 30, 2018, the Company issued 500,000 shares of restricted common stock to the father of an executive officer of the Company for cash of $50,000.

F- 43

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018 and 2017

(Unaudited)

NOTE 5 – CONVERTIBLE NOTES

On April 20, 2018, the Company issued a $158,000 convertible note with original issue discount (OID) of $8,000 and bearing interest at 8% per annum. The note matures on April 20, 2019 and is convertible on or after October 17, 2018 into the Company’s restricted common stock at $0.20 per share at the holder’s request. The OID is recorded as a discount to the debt agreement. The Company has determined the note to contain a beneficial conversion feature valued as $104,000 based on the intrinsic per share value of the conversion feature. This beneficial conversion feature is recorded as a discount to the debt agreement. The noteholder was also granted detachable 3-year warrants to purchase 200,000 shares of the company’s restricted common stock at an exercise price of $0.375 per share, 200,000 shares of the company’s restricted common stock at an exercise price of $0.50 per share, and 100,000 shares of the company’s restricted common stock at an exercise price of $0.625 per share. The warrants were valued at $126,000 using the Black-Scholes pricing model and were recorded as a discount to the debt agreement. During the six months ended June 30, 2018 the Company has accrued interest for this note in the amount of $3,000. At June 30, 2018, the principal balance together with total accrued interest of $3,000 is recorded on the Company’s consolidated balance sheets net of discounts of $127,000.

On May 22, 2018, the Company issued a $275,000 convertible note with original issue discount (OID) of $25,000 and bearing a one-time interest charge at 8%. The note matures on January 22, 2019 and is convertible into the Company’s restricted common stock at $0.25 per share at the holder’s request. The OID is recorded as a discount to the debt agreement. The Company has determined the note to contain a beneficial conversion feature valued as $40,000 based on the intrinsic per share value of the conversion feature. This beneficial conversion feature is recorded as a discount to the debt agreement. The noteholder was also granted detachable 5-year warrants to purchase 500,000 shares of the company’s restricted common stock at an exercise price of $2.00 per share. The warrants were valued at $45,000 using the Black-Scholes pricing model and were recorded as a discount to the debt agreement. The noteholder was also issued 200,000 shares of the company’s restricted common stock valued at $58,000 based upon the closing price of the Company stock on the date of the agreement and recorded as a discount to the debt agreement. During the six months ended June 30, 2018 the Company has accrued interest for this note in the amount of $3,000. At June 30, 2018, the principal balance together with total accrued interest of $3,000 is recorded on the Company’s consolidated balance sheets net of discounts of $116,000.

The following table summarized the Company's convertible notes payable as of June 30, 2018 and December 31, 2017:

	June 30, 2018		December 31, 2017
Beginning Balance	$	—	$	—
Proceeds from the issuance of convertible notes, net of issuance discounts		137,000		—
Repayments		—		—
Conversion of notes payable into common stock		—		—
Amortization of discounts		53,000
Accrued Interest		6,000		—
Ending Balance	$	196,000	$	—

Convertible notes, short term	$	433,000	$	—

Debt discounts	$	243,000	$	—

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

F- 44

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018 and 2017

(Unaudited)

The Company is being represented by Alex Spiro, Esq., a partner with the firm of Quinn Emmanuel, Urquhart & Sullivan, LLP and Marc S. Gottlieb, Esq., a partner with the firm of Ortoli Rosenstadt LLP.

Employment Agreements

Game Development Agreements

The Company is party to various game development agreements. Payments are contingent upon the developer(s) meeting specified milestones and game performance. Pursuant to these agreements, the Company has agreed to pay up to $416,000 during the period from July 2018 through January 2019.

Common Stock To Be Issued

The Company is party to various third-party service agreements to be paid through the issuance of the company’s restricted common stock. Contingent upon the third parties providing the agreed upon services, the Company will issue up to 2,403,769 restricted common shares and 200,000 common stock warrants at various intervals during the period from July 2018 through October 2019. The shares will be recorded at fair value on the date earned under the respective agreements.

NOTE 7 – EQUITY TRANSACTIONS

Common Stock:

Six Months Ended June 30, 2018:

During the six months ended June 30, 2018, the Company issued an aggregate of 6,200,000 shares of restricted common stock to third parties for cash of $855,000.

F- 45

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018 and 2017

(Unaudited)

During the six months ended June 30, 2018, the Company issued 500,000 shares of restricted common stock to the father of an executive officer of the Company for cash of $50,000.

During the six months ended June 30, 2018, the Company issued an aggregate of 1,250,000 shares of restricted common stock to employees with a total fair value of $625,000 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $625,000 upon issuance. The shares issued were valued at the date earned under the respective agreement based upon closing market price of the Company’s common stock.

During the six months ended June 30, 2018, the Company issued an aggregate of 5,337,782 shares of restricted common stock to consultants with a total fair value of $1,929,000. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $1,929,000 upon issuance. The shares issued were valued at the date earned under the respective agreements based upon closing market price of the Company’s common stock.

During the six months ended June 30, 2018, the Company cancelled an aggregate of 625,000 shares of restricted common stock on termination of a third-party service agreement with a total fair value on the date of termination of $207,000. The Company recorded a gain on cancellation of $113,000 for the portion of shares (375,000) issued during 2017 and reversed expenses of $94,000 for the portion of shares (250,000) issued during 2018. The shares issued were valued at the termination date of the agreement based upon closing market price of the Company’s common stock.

Options:

The following table summarizes common stock options activity:

			Weighted
			Average
			Exercise
	Options		Price
December 31, 2017		13,320,000	$	1.74
Granted		420,000		1.00
Exercised		—		—
Forfeited		—		—
Outstanding, June 30, 2018		13,740,000	$	1.72
Exercisable, June 30, 2018		12,960,000	$	1.61

During the year ended December 31, 2017, the Company granted stock options to a consultant to purchase a total of 420,000 shares of common stock. During the six months ended June 30, 2018, the Company renewed the contract for an additional year and granted the consultant an additional 420,000 stock options with a total fair value of $115,000. A total of 350,000 vested during 2017, 210,000 options vested during the six months ended June 30, 2018 while the remaining 280,000 options will vest through February 2019 at a rate of 35,000 shares per month. The options are exercisable at $1.00 per share and will expire over 4 years. The fair values of the options are recorded at their respective grant dates computed using the Black-Scholes Option Pricing Model. During the six months ended June 30, 2018, the Company recognized $80,000 in compensation expense based upon the vesting of outstanding options. As of June 30, 2018, the unamortized compensation expense for unvested options was $77,000 which will be recognized over the vesting period.

The weighted average exercise prices, remaining lives for options granted, and exercisable as of June 30, 2018 were as follows:


	Outstanding Options			Exercisable Options
Options			Weighted		Weighted
Exercise Price		Life	Average Exercise		Average Exercise
Per Share	Shares	(Years)	Price	Shares	Price
$0.50	8,000,000	2.17	$0.50	8,000,000	$0.50
$1.00	1,490,000	1.32 – 3.61	$1.00	1,210,000	$1.00
$2.50	1,250,000	.50	$2.50	1,250,000	$2.50
$5.00	3,000,000	1.50	$5.00	2,500,000	$5.00
	13,740,000		$1.72	12,960,000	$1.61

F- 46

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018 and 2017

(Unaudited)

At June 30, 2018, the Company’s closing stock price was $0.305 per share. As all outstanding options had an exercise price greater than $0.305 per share, there was no intrinsic value of the options outstanding at June 30, 2018.

The following table summarizes options granted with vesting terms activity:

				Weighted
				Average
		Number of		Grant Date
		Shares		Fair Value
Non-vested, December 31, 2017		70,000	$	1.00
	Granted	420,000		1.00
	Vested	(210,000)		1.00
	Forfeited	—		—
Non-vested, June 30, 2018		280,000	$	1.00

Warrants:

The following table summarizes common stock warrants activity:

			Weighted
			Average
			Exercise
	Warrants		Price
Outstanding, December 31, 2017		1,700,000	$	1.06
Granted		3,600,000		0.60
Exercised		—		—
Forfeited		—		—
Outstanding, June 30, 2018		5,300,000	$	0.75
Exercisable, June 30, 2018		5,300,000	$	0.75

In January 2018, pursuant to a services agreement, the Company granted warrants to purchase a total of 1,200,000 shares of restricted common stock with an exercise price of $0.40 and will expire 36 months after date of grant. The warrants are fully vested and exercisable upon grant. Total fair value of the warrants at grant date amounted to $383,000 computed using the Black-Scholes Option Pricing Model and was fully recognized on the date of grant.

In March 2018, pursuant to a stock purchase agreement, the Company granted warrants to purchase a total of 700,000 shares of restricted common stock with an exercise price of $0.50 and will expire March 18, 2023. The warrants are fully vested and exercisable upon grant. Total fair value of the options at grant date amounted to $234,000 computed using the Black-Scholes Option Pricing Model and was fully recognized on the date of grant.

In April 2018, in combination with a 12-month convertible promissory note, the Company granted warrants to purchase a total of 500,000 shares of restricted common stock with exercise prices ranging from $0.375 to $0.625 and will expire April 20, 2021. The warrants are fully vested and exercisable upon grant. The proceeds of the note were allocated between the note and the warrants based on the relative fair values which resulted in proceeds of $69,000 allocated to the warrants and recorded as paid in capital and debt discount. The debt discount will be amortized over the life of the note as interest expense. During the six months ended June 30, 2018, the Company recognized $13,000 of debt discount interest. As of June 30, 2018, the unamortized debt discount was $56,000 which will be recognized over the life of the note.

In May 2018, in combination with an 8-month convertible promissory note, the Company granted warrants to purchase a total of 200,000 shares of restricted common stock with an exercise prices of $2.00 and will expire May 22, 2023. The warrants are fully vested and exercisable upon grant. The proceeds of the note were allocated between the note and the warrants based on the relative fair values which resulted in proceeds of $32,000 allocated to the warrants and recorded as paid in capital and debt discount. The debt discount will be amortized over the life of the note as interest expense. During the six months ended June 30, 2018, the Company recognized $5,000 of debt discount interest. As of June 30, 2018, the unamortized debt discount was $27,000 which will be recognized over the life of the note.

F- 47

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018 and 2017

(Unaudited)

In May 2018, pursuant to a stock purchase agreement, the Company granted warrants to purchase a total of 1,000,000 shares of restricted common stock with exercise prices ranging from $0.50 to $1.00 and will expire May 29, 2021. The warrants are fully vested and exercisable upon grant. Total fair value of the options at grant date amounted to $184,000 computed using the Black-Scholes Option Pricing Model and was fully recognized on the date of grant.

The weighted average exercise prices, remaining lives for warrants granted, and exercisable as of June 30, 2018, were as follows:

	Outstanding and Exercisable Warrants
Warrants
Exercise Price		Life
Per Share	Shares	(Years)
$0.01	600,000	2.51
$0.375	200,000	2.81
$0.40	1,200,000	2.54
$0.50	1,500,000	0.33 – 4.72
$0.625	100,000	2.81
$0.75	250,000	2.92
$1.00	250,000	2.92
$1.50	500,000	0.50
$2.00	700,000	1.77 – 4.90
	5,300,000

At June 30, 2018, the Company’s closing stock price was $0.305 per share. The Company had 600,000 warrants outstanding with exercise prices less than $0.305 with an intrinsic value of $182,400 at June 30, 2018.

The table below represents the average assumptions used in valuing the stock options and warrants granted in fiscal 2018:

			Six Months Ended June 30,
			2018
Expected life in years			3.00 – 5.00
Stock price volatility			138% - 153%
Risk free interest rate			2.12 % - 2.9%
Expected dividends			—
Forfeiture rate			—

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

Shares Reserved:

At June 30, 2018, the Company has reserved 30,000,000 shares of common stock in connection with 2 convertible notes with detachable warrants.

F- 48

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018 and 2017

(Unaudited)

NOTE 8 – DISCONTINUED OPERATIONS

Restaurant

Through our other wholly owned subsidiary, E.A.J.: PHL Airport, Inc., we owned and operated the restaurant “Eat at Joe’s®,” which was located in the Philadelphia International Airport since 1997. Our lease in the Philadelphia Airport expired in April 2017. Concurrent with expiration of the lease the restaurant closed. Pursuant to current accounting guidelines, the restaurant segment is reported as discontinued operations.

The following table summarizes the assets and liabilities of our discontinued restaurant segment's discontinued operations as of June 30, 2018 and December 31, 2017:

	June 30, 2018		December 31, 2017
Assets:
Total Assets	$	—	$	—

Liabilities:
Accounts payable and accrued liabilities	$	22,000	$	22,000
Total Liabilities	$	22,000	$	22,000

The following table summarizes the results of operations of our discontinued restaurant for the three and six months ended June 30, 2018 and 2017 and is included in the consolidated statements of operations as discontinued operations:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2018		2017			2018			2017

Revenues	$	—	$	109,000		$	—		$	421,000
Cost of sales		—		35,000			—			134,000
Gross Margin		—		74,000			—			287,000
Expenses
Labor and related expenses		—		55,000			—			178,000
Rent		—		21,000			1,000			82,000
Depreciation and amortization		—		5,000			—			20,000
Professional fees		—		3,000			—			3,000
Other general and administrative		—		40,000			1,000			89,000
Total Operating Expenses		—		124,000			2,000			372,000
Operating Income (Loss)		—		(50,000	)		(2,000	)		(85,000	)
Other Income (Expense)
Loss on disposal of assets		—		(19,000	)		—			(19,000	)
Income (Loss) on discontinued operations	$	—	$	(69,000	)	$	(2,000	)	$	(104,000	)

F- 49

SPYR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018 and 2017

(Unaudited)

NOTE 9 – SUBSEQUENT EVENTS

Subsequent to June 30, 2018, the Company issued 603,334 shares of common stock pursuant to various third-party service agreements.

F- 50

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and supplementary data referred to in this Form S-1.

This discussion contains forward-looking statements that involve risks and uncertainties. Such statements, which include statements concerning revenue sources and concentration, selling, general and administrative expenses and capital resources, are subject to risks and uncertainties, including, but not limited to, those discussed elsewhere in this Form S-1 that could cause actual results to differ materially from those projected. Unless otherwise expressly indicated, the information set forth in this Form S-1 is as of June 30, 2018, and we undertake no duty to update this information.

Plan of Operations – Through our wholly owned subsidiary SPYR APPS ^® , LLC, d/b/a SPYR GAMES we develop, publish and co-publish mobile games, and then generate revenue through those games by way of advertising and in-app purchases. Our primary focus is on the development and expansion of our mobile games and applications. We anticipate we will need to hire additional employees during 2018 to help with the development and marketing of existing and future games and applications.

During the past two years we have invested in the Company’s future by working closely with the development team at Spectacle Games to optimize game play and expand the availability of our game Pocket Starships to more users through new and existing game portals, social networking sites and app stores throughout the world. During 2017, we signed an agreement with CBS Consumer Products that will allow the incorporation of intellectual property (IP) from various Star Trek television series into future Pocket Starships updates and expansions. Our Pocket Starships development team is already working on expansions of Pocket Starships to include the Star Trek IP, which we expect will be released during the 4 ^th quarter of 2018. In Pocket Starships, players can build and pilot several ships and forge alliances on their quest for galactic domination. Players can perform or initiate various activities ranging from fighting pirates to participating in Faction Alerts. With the release of the expansion, those playing Pocket Starships will be able to explore new sectors and engage in exciting battles with the Borg and will be able to staff their ships with their favorite Star Trek characters from the Star Trek TV series franchise – including Star Trek: The Next Generation , Star Trek: Deep Space Nine , and Star Trek: Voyager , through a trading card expansion. In addition, working together with the development team at Reset Studios LLC, we have developed. Steven Universe: Tap Together, a new tapper game featuring characters and storylines from Steven Universe , a popular animated television series on Cartoon Network. Steven Universe: Tap Together was launched globally on the Google Play Store on August 2, 2018 and on the IOS App Store on August 9, 2018.

Management’s plan for the next 12 months is to build upon this foundation and focus our efforts on marketing and optimizing user acquisition and retention. We will also continue to provide the monthly advances to Spectacle and Reset for further development, enhancement and maintenance of the games as needed to meet the needs of the users and maximize revenue into the future. In addition to our plans for Pocket Starships and the new tapper, we will continue to seek additional games and apps to publish as we strive to broaden our range of products and increase revenues and operating cash flows. We expect these marketing, development and expansion plans will be financed through existing cash, operating cash flows from game revenues and other forms of financing such as the sale of additional equity and debt securities, capital leases and other credit facilities. The Company may also decide to expand and/or diversify, through acquisition or otherwise, in other related or unrelated business areas if opportunities present themselves.

RESULTS OF OPERATIONS

Comparison of 2017 to 2016

The consolidated results of continuing operations are as follows:

	Digital Media			Corporate			Consolidated

Year Ended December 31, 2017
Revenues	$	128,000		$	—		$	128,000
Labor and related expenses		889,000			1,469,000			2,358,000
Rent		43,000			143,000			186,000
Depreciation and amortization		56,000			49,000			105,000
Professional fees		680,000			4,875,000			5,555,000
Research and development		1,666,000			—			1,666,000
Other general and administrative		288,000			214,000			502,000
Operating loss		(3,494,000	)		(6,750,000	)		(10,244,000	)

Other income (expense)		(5,385,000	)		(14,000	)		(5,399,000	)
Loss from continuing operations	$	(8,879,000	)	$	(6,764,000	)	$	(15,643,000	)

Year Ended December 31, 2016
Revenues	$	139,000		$	—		$	139,000
Labor and related expenses		575,000			892,000			1,467,000
Rent		8,000			138,000			146,000
Depreciation and amortization		51,000			47,000			98,000
Professional fees		250,000			3,042,000			3,292,000
Research and Development		1,151,000			—			1,151,000
Other general and administrative		479,000			261,000			740,000
Cost of acquisition option		472,000			—			472,000
Operating income (loss)		(2,847,000	)		(4,380,000	)		(7,227,000	)

Other income (expense)		—			(2,117,000	)		(2,117,000	)
Income (loss) from continuing operations	$	(2,847,000	)	$	(6,497,000	)	$	(9,344,000	)

For the year ended December 31, 2017 the Company had a loss from continuing operations of $15,643,000 compared to a loss from continuing operations of $9,344,000 for the year ended December 31, 2016. This change is due primarily to the issuance of restricted common stock, options and warrants in exchange for services, gaming assets, and litigation settlement costs. During 2017 we issued 22,741,924 common shares, 8,920,000 options, and 1,700,000 warrants with a total fair value of $11,512,000 compared to 6,353,899 common shares, 12,900,000 options, and 200,000 warrants with a total fair value of $3,308,000 during 2016.

More detailed explanation of the year ended December 31, 2017 and 2016 changes are included in the following discussions.

Total Revenues - For the years ended December 31, 2017 and 2016, the Company had total sales of $128,000 and $139,000, respectively, for a decrease of $11,000. Management plans to expand its mobile application and game development and monetization efforts and believes the anticipated updates to Pocket Starships with Star Trek IP and the release of two new idle tapper games planned during 2018 will bring increased revenues in the coming year.

Labor and related expenses include the costs of salaries, wages, leased employees, contract labor, and the fair value of common stock and options granted to employees for services. For the year ended December 31, 2017 the company had total labor and related expenses of $2,358,000 with $898,000 ($386,000 Digital Media and $512,000 Corporate) being settled in cash and $1,459,000 ($503,000 Digital Media and $956,000 corporate) being paid in restricted stock recorded at fair value. For the year ended December 31, 2016 the company had total labor and related expenses of $1,467,000 with $941,000 ($385,000 Digital Media and $556,000 Corporate) being settled in cash and $526,000 ($190,000 Digital Media and $336,000 Corporate) being paid in restricted stock recorded at fair value. At the corporate level, cash compensation decreased by $44,000, while the amounts paid in restricted stock recorded at fair value increased by $620,000 for a net increase of $577,000. At the digital media level, cash compensation increased by $1,000, and the amounts paid in restricted stock recorded at fair value increased by $313,000 for a net increase of $577,000. The cost of labor is expected to increase in conjunction with expansion of the digital media operations.

The cost of rent increased $44,000 from $146,000 for the year ended December 31, 2016 to $186,000 for the year ended December 31, 2017. The Company leases approximately 5,169 square feet at 4643 South Ulster Street, Denver, Colorado pursuant to an amended lease dated May 21, 2015 and expiring on December 31, 2020. Under the lease, the Company pays annual base rent on an escalating scale ranging from $142,000 to $152,000. Beginning September 1, 2016, we began leasing office space in Berlin, Germany on a month to month basis at a cost of EUR 250 plus 19% tax per person up to a maximum of 10 people. On June 29, 2017, we signed a new lease for the Berlin office space for EUR 3,570 per month beginning July 2017 through March 31, 2018. Berlin office is being used by leased employees hired by the Company for the marketing and user acquisition for the Pocket Starships game. Beginning October 17, 2016, we began leasing shared office for one employee in Redmond, Washington on a month to month basis at a cost of $225 per month per desk, increasing to $275 per month starting in December 2016.

Depreciation and amortization expenses increased by $7,000 for the year ended December 31, 2017 compared to the year ended December 31, 2016. This is attributable to depreciation and amortization expenses on the purchase of office equipment, furniture and fixtures and leasehold improvements for the new corporate headquarters in Denver Colorado of $41,000 in 2016, new office equipment of approximately $7,000 in 2016 for use in our Digital Media Mobile Games Publishing and Advertising operations, and the exchange of share and options for the acquisition of $481,000 of gaming assets during 2017.

Professional fees increased $2,263,000 from $3,292,000 in 2016 to $5,555,000 in 2017. This increase is Professional fees during 2017 included the grant of 13,442,912 shares of restricted common stock, 920,000 options and 1,700,000 warrants to purchase restricted common stock issued to third parties for legal, public relations, and consulting services, and vesting of shares of restricted common stock with a total fair value of $4,401,000. The remaining $1,154,000 is due to $254,000 in legal, accounting and other professional service needs, $617,000 for public relations, and $293,000 in consulting services related to our digital media operations. Professional fees during 2016 included the grant of 4,509,912 shares of restricted common stock, 150,000 options and 200,000 warrants issued to third parties for public relations and consulting services recorded at fair value of $2,306,000. The remaining $986,000 is due to $234,000 in legal, accounting and other professional service needs, $587,000 for public relations, and $163,000 in consulting services related to our digital media operations.

Research and development costs. During the year ended December 31, 2017, the Company incurred research and development costs of $1,666,000 in connection with fees paid to game developers for the development of its current and soon to be released games, compared to research and development costs of $1,151,000 during the year ended December 31, 2016.

Other general and administrative expenses decreased approximately $238,000 for the year months ended December 31, 2017 compared to the year months ended December 31, 2016. The decrease can be attributed primarily to marketing costs which decreased by $155,000, travel costs which decreased by $108,000, insurance costs which increased by $17,000 and various other general and administrative cost increases.

As described above, during 2016, the Company obtained an exclusive option to purchase all of MMOJoe’s assets including but not limited to all assets pertaining to Pocket Starships for cash of $5,000,000 plus $10,000,000 worth of shares of the Company’s common stock, valued at the time of closing of the purchase in exchange for granted MMOJoe stock options to purchase an aggregate of 3.75 million shares of the Company’s common stock. The stock options are fully vested, exercisable at a price per share of $1.00, $2.50 and $5.00 and expire starting in December 31,

2017 through December 31, 2019. Total fair value of the options of $472,000 was recorded as an expense in full in 2016 due to the uncertainty of the timing of such acquisition.

The Company had unrealized losses on trading securities of $11,000 for the year ended December 31, 2017 compared to unrealized losses of $57,000 for the year ended December 31, 2016. Unrealized gains and losses are the result of fluctuations in the quoted market price of the underlying securities.

The Company did not sell any trading securities during the year ended December 31, 2017. The Company realized losses from the sale of trading securities of $95,000 for the year ended December 31, 2016. Realized gains and losses are the difference between the selling prices and fair value of the underlying trading securities at the date of sale.

As previously described, during 2017, the Company completed the acquisition of all assets that refer, relate or pertain to the real—time cross-platform MMO game commonly known and referred to as “Pocket Starships.” As consideration for the acquisition, the Company issued eight million shares of the Company’s restricted common stock valued at $3,200,000, options to purchase up to eight million shares of the Company’s restricted common stock valued at $2,452,000 and assumed liabilities of $210,000 for a total purchase price of $5,862,000. The assets acquired are reported as part of capitalized gaming assets and licensing rights valued at $481,000 based upon discounted cash flows. The difference between purchase price and the capitalized value was recorded as loss on write down on assets of $5,381,000.

As of December 31, 2017, the Company had deferred tax assets arising from net operating loss carry-forwards, capital loss carry overs, unrealized losses on trading securities, and deductible temporary differences of approximately $21,700,000 compared to $13,700,000 in deferred tax assets at December 31, 2016. During the year ended December 31, 2017, the Company increased its net operating loss carry-forwards by approximately $9,000,000 and used or lost approximately $1,000,000 in deductible temporary differences. Management believes it is more likely than not that forecasted income, together with future reversals of existing taxable temporary differences, will not be sufficient to fully recover the deferred tax assets and has established a 100% valuation allowance of $4,915,000 against these potential future tax benefits. The Company will continue to evaluate the realizability of deferred tax assets quarterly.

Comparison Of The Six Months Ended June 30, 2018 To 2017

The consolidated results of continuing operations for the six months ended June 30, 2018 and 2017 are as follows:

	Digital Media			Corporate			Consolidated

Six Months Ended June 30, 2018
Revenues	$	27,000		$	—		$	27,000
Labor and related expenses		149,000			972,000			1,121,000
Rent		15,000			73,000			88,000
Depreciation and amortization		36,000			21,000			57,000
Professional fees		167,000			2,907,000			3,074,000
Research and development		453,000			—			453,000
Other general and administrative		95,000			132,000			227,000
Operating loss		(888,000	)		(4,105,000	)		(4,993,000	)

Other expense		(15,000	)		(5,000	)		(20,000	)
Loss from continuing operations	$	(903,000	)	$	(4,110,000	)	$	(5,013,000	)

Six Months Ended June 30, 2017
Revenues	$	84,000		$	—		$	84,000
Labor and related expenses		551,000			1,127,000			1,678,000
Rent		15,000			72,000			87,000
Depreciation and amortization		22,000			23,000			45,000
Professional fees		305,000			2,587,000			2,892,000
Research and development		265,000			—			265,000
Other general and administrative		587,000			116,000			703,000
Operating income (loss)		(1,661,000	)		(3,925,000	)		(5,586,000	)

Other income (expense)		—			(23,000	)		(23,000	)
Loss from continuing operations	$	(1,661,000	)	$	(3,948,000	)		(5,609,000	)

Results of Operations - For the six months ended June 30, 2018 the Company had a loss from continuing operations of $5,013,000 compared to a loss from continuing operations of approximately $5,609,000 for the six months ended June 30, 2017. This change is due primarily to decreases in labor and related expenses of $557,000 and decreases in other general and administrative costs $476,000 during the six months ended June 30, 2018 compared to the six months ended June 30, 2017.

More detailed explanation of the six months ended June 30, 2018 and 2017 changes are included in the following discussions.

Total Revenues - For the six months ended June 30, 2018 and 2017, the Company had total sales of $27,000 and $84,000, respectively, for a decrease of $57,000. This change is due to the cessation of marketing during the latter part of 2017 and first two quarters of 2018 pending updates and expansion of our games Pocket Starships. Management plans to expand its mobile application and game development and monetization efforts and believes the anticipated updates to Pocket Starships with Star Trek IP, and the release of Steven Universe: Tap Together and finalizing the acquisition of a new game during 2018 will bring increased revenues in the coming year.

The cost of rent increased $1,000 from $87,000 for the six months ended June 30, 2017 to $88,000 for the six months ended June 30, 2018. The Company leases approximately 5,169 square feet at 4643 South Ulster Street, Denver, Colorado pursuant to an amended lease dated May 21, 2015 and expiring on December 31, 2020. Under the lease, the Company pays annual base rent on an escalating scale ranging from $142,000 to $152,000. Beginning July 2017, we began leasing office space in Berlin, Germany for EUR 3,570 per month through March 31, 2018. The Berlin office was used by leased employees hired by the Company for the operation of our Pocket Starships game. Beginning October 17, 2016, we began leasing shared office for one employee in Redmond, Washington on a month to month basis at a cost of $275 per month per desk.

Depreciation and amortization expenses increased by approximately $12,000 for the six months ended June 30, 2018 compared to the six months ended June 30, 2017. This increase is primarily attributable to amortization of the $481,000 of gaming assets acquired during fourth quarter 2017.

Professional fees increased $182,000 from $2,892,000 for the six months ended June 30, 2017 to $3,074,000 for the six months ended June 30, 2018. This increase is Professional fees during 2018 included the grant of 5,587,782 shares of restricted common stock, 420,000 options and 2,900,000 warrants to purchase restricted common stock issued to third parties for consulting services, public relations, and other professional fees with a total fair value of $2,811,000. The remaining $263,000 is due to $207,000 in legal, accounting and other professional service needs, $46,000 for public relations, and $10,000 in consulting services related to our digital media operations. Professional fees during the six months ended June 30, 2017 included the grant of 2,715,000 shares of restricted common stock and 720,000 option issued to third parties for consulting services, public relations and vesting of shares of restricted common stock recorded at fair value of $2,172,000. The remaining $720,000 is due to $167,000 in legal, accounting and other professional service needs, $417,000 for public relations, and $136,000 in consulting services related to our digital media operations.

Research and development costs. During the six months ended June 30, 2018, the Company incurred research and development costs of $453,000 in connection with fees paid to game developers for the development of its current and soon to be released games, compared to research and development costs of $265,000 during the six months ended June 30, 2017.

Other general and administrative expenses decreased $476,000 for the six months ended June 30, 2018 compared to the six months ended June 30, 2017. The decrease can be attributed primarily to marketing costs which decreased by $124,000 and various other general and administrative cost decreases.

The Company had interest expense on a related party line of credit, convertible notes payable and accrued expenses of $104,000 for the six months ended June 30, 2018. The company did not have interest expense for the six months ended June 30, 2017.

The Company cancelled an aggregate of 625,000 shares of restricted common stock on termination of a third-party service agreement with a total fair value on the date of termination of $207,000. The Company recorded a gain on cancellation of $113,000 during the six months ended June 30, 2018. The company did not have a gain on cancellation of shares for the six months ended June 30, 2017.

The Company had unrealized losses on trading securities of $29,000 for the six months ended June 30, 2018 compared to unrealized losses of $27,000 for the six months ended June 30, 2017. Unrealized gains and losses are the result of fluctuations in the quoted market price of the underlying securities at the respective reporting dates.

Comparison Of The Three Months Ended June 30, 2018 To 2017

The consolidated results of continuing operations for the three months ended June 30, 2018 and 2017 are as follows:

	Digital Media			Corporate			Consolidated

Three Months Ended June 30, 2018
Revenues	$	21,000		$	—		$	21,000
Labor and related expenses		68,000			167,000			235,000
Rent		2,000			37,000			39,000
Depreciation and amortization		18,000			10,000			28,000
Professional fees		64,000			454,000			518,000
Research and development		154,000			—			154,000
Other general and administrative		49,000			73,000			122,000
Operating loss		(334,000	)		(741,000	)		(1,075,000	)

Other expense		(9,000	)		20,000			11,000
Loss from continuing operations	$	(343,000	)	$	(721,000	)	$	(1,064,000	)

Three Months Ended June 30, 2017
Revenues	$	32,000		$	—		$	32,000
Labor and related expenses		168,000			140,000			308,000
Rent		12,000			37,000			49,000
Depreciation and amortization		19,000			11,000			30,000
Professional fees		212,000			1,088,000			1,300,000
Research and development		152,000			—			152,000
Other general and administrative		314,000			55,000			369,000
Operating income (loss)		(845,000	)		(1,331,000	)		(2,176,000	)

Other income (expense)		—			(11,000	)		(11,000	)
Loss from continuing operations	$	(845,000	)	$	(1,342,000	)	$	(2,187,000	)

Results of Operations - For the three months ended June 30, 2018 the Company had a loss from continuing operations of $1,064,000 compared to a loss from continuing operations of approximately $2,187,000 for the three months ended June 30, 2017. This change is due primarily to decreases in labor and related expenses of $73,000, rent of $10,000, professional fees of 782,000, and other general and administrative costs $247,000 during the three months ended June 30, 2018 compared to the three months ended June 30, 2017.

More detailed explanation of the three months ended June 30, 2018 and 2017 changes are included in the following discussions.

Total Revenues - For the three months ended June 30, 2018 and 2017, the Company had total sales of $21,000 and $32,000, respectively, for a decrease of $11,000. This change is due to the cessation of marketing during the latter part of 2017 and first two quarters of 2018 for updates and expansion of our existing games. Management plans to expand its mobile application and game development and monetization efforts and believes the anticipated updates to Pocket Starships with Star Trek IP and the release two new idle tapper games planned during 2018 will bring increased revenues in the coming year.

The cost of rent decreased $10,000 from $49,000 for the three months ended June 30, 2017 to $39,000 for the three months ended June 30, 2018. The Company leases approximately 5,169 square feet at 4643 South Ulster Street, Denver, Colorado pursuant to an amended lease dated May 21, 2015 and expiring on December 31, 2020. Under the lease, the Company pays annual base rent on an escalating scale ranging from $142,000 to $152,000. Beginning July 2017, we began leasing office space in Berlin, Germany for EUR 3,570 per month through March 31, 2018. The Berlin office was used by leased employees hired by the Company for the operation of our Pocket Starships game. Beginning October 17, 2016, we began leasing shared office for one employee in Redmond, Washington on a month to month basis at a cost of $275 per month per desk.

Depreciation and amortization expenses decreased by approximately $2,000 for the three months ended June 30, 2018 compared to the three months ended June 30, 2017.

Professional fees decreased $782,000 from $1,300,000 for the three months ended June 30, 2017 to $518,000 for the three months ended June 30, 2018. This decrease is Professional fees during 2018 included the grant of 1,045,840 shares of restricted common stock and 1,000,000 warrants to purchase restricted common stock issued to third parties for consulting services, public relations, and other professional fees with a total fair value of $430,000. The remaining $88,000 is due to $70,000 in legal, accounting and other professional service needs, $17,000 for public relations, and $1,000 in consulting services related to our digital media operations. Professional fees during the three months ended June 30, 2017 included the grant of 1,155,000 shares of restricted common stock and 150,000 option issued to third parties for consulting services, public relations and vesting of shares of restricted common stock recorded at fair value of $965,000. The remaining $335,000 is due to $72,000 in legal, accounting and other professional service needs, $172,000 for public relations, and $91,000 in consulting services related to our digital media operations.

Research and development costs. During the three months ended June 30, 2018, the Company incurred research and development costs of $154,000 in connection with fees paid to game developers for the development of its current and soon to be released games, compared to research and development costs of $152,000 during the three months ended June 30, 2017.

Other general and administrative expenses decreased $247,000 for the three months ended June 30, 2018 compared to the three months ended June 30, 2017. The decrease can be attributed primarily to marketing costs which decreased by $85,000 and various other general and administrative cost decreases.

The Company had interest expense on a related party line of credit, convertible notes payable and accrued expenses of $84,000 for the three months ended June 30, 2018. The company did not have interest expense for the three months ended June 30, 2017.

The Company cancelled an aggregate of 625,000 shares of restricted common stock on termination of a third-party service agreement with a total fair value on the date of termination of $207,000. The Company recorded a gain on cancellation of $113,000 during the three months ended June 30, 2018. The company did not have a gain on cancellation of shares for the three months ended June 30, 2017.

The Company had unrealized losses on trading securities of $18,000 for the three months ended June 30, 2018 compared to unrealized losses of $12,000 for the three months ended June 30, 2017. Unrealized gains and losses are the result of fluctuations in the quoted market price of the underlying securities at the respective reporting dates.

DISCONTINUED OPERATIONS

Through our other wholly owned subsidiary, E.A.J.: PHL Airport, Inc., we owned and operated the restaurant “Eat at Joe’s®,” which was located in the Philadelphia International Airport since 1997. Our lease in the Philadelphia Airport expired in April 2017. Concurrent with expiration of the lease the restaurant closed. Pursuant to current accounting guidelines, the assets and liabilities of EAJ as well as the results of its operations were presented in the accompanying financial statements as discontinued operations.

LIQUIDITY AND CAPITAL RESOURCES

The Company generated a net loss from continuing operations for the year ended December 31, 2017 of $15,643,000 and utilized cash in operations of $4,118,000. As of December 31, 2017, the Company had current assets of $173,000, which included cash and cash equivalents of $86,000, and trading securities of $48,000. During the year ended December 31, 2017, the Company met its capital requirements through a combination of collection of receivables, the sale restricted common stock of $300,000, borrowing from a related party line of credit of $800,000, and through the use of existing cash reserves.

The Company has generated a net loss from continuing operations for the six months ended June 30, 2018 of approximately $5,013,000. As of June 30, 2018, the Company had current assets of $231,000, which included cash and cash equivalents of $168,000, accounts receivable of $18,000 and trading securities of approximately $19,000. During the six months ended June 30, 2018, the Company has met its capital requirements through a combination of collection of receivables, the sale of restricted common stock of $905,000, related party short-term advances of $55,000, borrowing from a related party line of credit of $200,000, convertible debt borrowing from third-party lenders of $400,000, and through the use of existing cash reserves.

On April 20, 2018. the Company signed a convertible promissory note with a third-party lender for up to $475,000 (net of original issue discount of $25,000). The note is for 12 months with interest at 8% per annum on the unpaid principal amount. The note holder has the right, at any time on or after 181 calendar days after the date of the note, to convert all or any portion of the outstanding principal and interest into the Company’s restricted common stock at $0.20 per share. On April 26, 2018 the Company borrowed $150,000 on this note.

As previously described, during the past two years we have invested in the Company’s future by working closely with the development team at Spectacle Games to optimize game play and expand the availability of our game Pocket Starships to more users through new and existing game portals, social networking sites and app stores throughout the world. During 2017, we signed an agreement with CBS Consumer Products that will allow the incorporation of intellectual property (IP) from various Star Trek television series into future Pocket Starships updates and expansions. Our Pocket Starships development team is already working on expansions of Pocket Starships to include the Star Trek IP, which we expect will be released during the second half of 2018. In Pocket Starships, players can build and pilot several ships and forge alliances on their quest for galactic domination. Players can perform or initiate various activities ranging from fighting pirates to participating in Faction Alerts. With the release of the expansion, those playing Pocket Starships will be able to explore new sectors and engage in exciting battles with the Borg and will be able to staff their ships with their favorite Star Trek characters from the Star Trek TV series franchise – including Star Trek: The Next Generation , Star Trek: Deep Space Nine , and Star Trek: Voyager , through a trading card expansion.

In addition, working together with the development team at Reset Studios LLC, we have developed of a new tapper game, Steven Universe: Tap Together, featuring characters and storylines from Steven Universe , a popular animated television series on Cartoon Network. Steven Universe: Tap Together was launched globally on the Google Play Store on August 2, 2018 and on the IOS App Store on August 9, 2018.

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 these goals do not materialize as planned, we believe that the Company can reduce its operating and product development costs and that would allow us to maintain sufficient cash levels to continue operations. However, 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. There can be no assurance that we will be able to obtain such financing on acceptable terms, or at all.

Comparison of 2017 to 2016

Operating Activities - For the year ended December 31, 2017 and 2016, the Company used cash for operating activities of $4,118,000 and $3,929,000, respectively. Operating activities consist of corporate overhead and development of our digital media publishing, advertising and gaming operations. Increases are due primarily to increases in rent, professional fees, and game development costs, partially mitigated by decreases in labor and other general and administrative expenses. See the above results of operations discussion for more details.

Investing Activities - During the year ended December 31, 2017 , the Company paid $100,000 and is obligated to pay another $75,000 during 2018 for licensing rights to CBS Consumer Products that will allow the incorporation of intellectual property (IP) from various Star Trek television series into future Pocket Starships updates and expansions. During the year ended December 31, 2016 , the Company received $783,000 in cash proceeds from sales of trading securities and used cash of $569,000 for the purchase of trading securities, property plant and equipment, and licensing rights.

Financing Activities - During the year ended December 31, 2017, the Company sold 750,000 shares of restricted common stock to an existing shareholder and former officer/employee for cash of $300,000. The common shares had a fair value of $510,000 at the date of sale, and as a result, the Company reflected an additional expense of $210,000 to account the difference between the sale price and the fair market value of common shares sold. T he Company also obtained a revolving line of credit from Berkshire Capital Management Co., Inc. The line of credit allows the Company to borrow up to $1,000,000 with interest at 6% per annum. Repayment on the loan is due February 28, 2019. During 2017 we borrowed $800,000 on this line of credit. During the year ended December 31, 2016, the Company sold 100,000 shares of restricted common stock to a service provider for $15,000.

During 2016 and 2017 we have invested in the Company’s future by working closely with the development team at Spectacle Games to optimize game play and expand the availability of Pocket Starships to more users through new and existing game portals, social networking sites and app stores throughout the world. In addition, working together with the development team at Reset Studios LLC, we have developed a new tapper game, Steven Universe: Tap Together, featuring characters and storylines from Steven Universe , a popular television series on Cartoon Network . Management’s plan for the next 12 months is to build upon this foundation and focus our efforts on marketing and optimizing user acquisition and retention. We will also continue to provide the monthly advances to Spectacle and Reset for further development, enhancement and maintenance of the existing games as needed to meet the needs of the users and maximize revenue into the future. In addition to our plans for Pocket Starships and Steven Universe: Tap Together, we will continue to seek additional games and apps to publish as we strive to broaden our range of products and increase revenues and operating cash flows. We expect these marketing, development and expansion plans will be financed through existing cash, operating cash flows from game revenues and other forms of financing such as the sale of additional equity and debt securities, capital leases and other credit facilities.

Comparison of The Six Months Ended June 30, 2018 to 2017

Operating Activities - For the six months ended June 30, 2018, the Company used cash in operating activities from continuing operations of $1,476,000. For the six months ended June 30, 2017, the Company used cash in operating activities of $2,111,000. Operating activities consist of corporate overhead and development of our digital media publishing, advertising and gaming operations. Decreases are due primarily to decreases in cash settled professional fees, game development costs, and other general and administrative expenses partially offset by increased in rent and cash settled labor and related costs. See the above results of operations discussion for more details.

Investing Activities – The Company did not have any investing activities during the six months ended June 30, 2018. During the six months ended June 30, 2017 , the Company used cash of $50,000 for the purchase of software licensing rights.

Financing Activities - During the six months ended June 30, 2018, the Company sold 6,700,000 shares of restricted common stock to third parties and one related party for $905,000, borrowed $55,000 from a related party short-term advance, borrowed $200,000 from a related party line of credit, and borrowed $400,000 from convertible debt from third-party lenders. During the six months ended June 30, 2017 , the Company sold 750,000 shares of restricted common stock to a former officer/employee for $300,000.

The Company expects future development and expansion will be financed through cash flows from operations and other forms of financing such as the sale of additional equity and debt securities, capital leases and other credit facilities. There are no assurances that such financing will be available on terms acceptable or favorable to the Company.

The Company currently does not have sufficient cash and liquidity to meet its anticipated working capital for the next twelve months. Historically, we have financed our operations primarily through private sales of our trading securities or through sales of our common stock. If our sales goals for our products do not materialize as planned, we believe that the Company can reduce its operating and product development costs that would allow us to maintain sufficient cash levels to continue operations. However, 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. There can be no assurance that we will be able to obtain such financing on acceptable terms, or at all.

GOVERNMENT REGULATIONS

The Company is subject to all pertinent Federal, State, and Local laws governing its business. Each subsidiary is subject to licensing and regulation by a number of authorities in its State or municipality. These may include health, safety, and fire regulations. The Company's operations are also subject to Federal and State minimum wage laws governing such matters as working conditions, overtime and tip credits.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Note 1 to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Estimates are used for, but not limited to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements.

REVENUE RECOGNITION

Through our wholly owned subsidiary SPYR APPS ^® , LLC, d/b/a SPYR GAMES, we develop, publish and co-publish mobile games, and then generate revenue through those games by way of advertising and in-app purchases. The Company’s dedicated mobile gaming applications can be downloaded through the app stores maintained by Apple and Google. The Company’s cross platform gaming application, which can be played on personal computers, Facebook and mobile devices, can be downloaded from the internet and Facebook as well as through the app stores maintained by Apple, Google and Amazon.

STOCK-BASED COMPENSATION

generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

LOSS CONTINGENCIES

The Company is subject to various loss contingencies arising in the ordinary course of business. The Company considers the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as its ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. The Company regularly evaluates current information available to us to determine whether such accruals should be adjusted.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 of the consolidated financial statements for discussion of recent accounting pronouncements.

DIRECTORS AND EXECUTIVE OFFICERS

Executive Officers and Directors

The following table sets forth the name, age, and position of each executive officer and director of the Company:


Director's Name	Age		Office	Term Expires
James R. Thompson, Esq		56	President, Chief Executive Officer & General Counsel	January 31, 2020

Joseph Fiore		56	Chairman of the Board of Directors	Resigned 8/1/18

Jennifer Duettra, Esq		39	Executive Vice President, Assistant General Counsel & Secretary	January 31, 2020

Barry D. Loveless, CPA		51	Chief Financial Officer	October 15, 2020

James Mylock, Jr.		51	Director	Next annual meeting

Tim Matula		56	Director	Next annual meeting

James R. Thompson - Effective February 1, 2015, James R. Thompson, Esq., was appointed the Company’s President and Chief Executive Officer for a term of five years. There was no arrangement or understanding between Mr. Thompson and any other person pursuant to which he was selected as an officer. There exists no family relationship between any director, executive officer, and Mr. Thompson. Since graduating law school in 1986, Mr. Thompson has been engaged in the private practice of law with an emphasis in the areas of business, real estate and construction law, representing clients in both transactional and litigation matters. Prior to completing his legal studies, Mr. Thompson was awarded a Bachelor of Science Degree in Business Administration from the University of Denver in 1983. Since the beginning of the Company’s last fiscal year, Mr. Thompson was not involved in any transaction with any related person, promoter or control person of the Company that is required to be disclosed pursuant to Item 404 of Regulation S-K.

Joseph Fiore - Joseph Fiore was the Company’s Chairman until his resignation on August 1, 2018. In 1982, Mr. Fiore formed East Coast Equipment and Supply Co., Inc., a restaurant supply company that he still owns. Between 1982 and 1993, Mr. Fiore established 9 restaurants (2 owned and 7 franchised) which featured a 1950's theme restaurant concept offering a traditional American menu. Since the beginning of the Company’s last fiscal year, Mr. Fiore was not involved in any transaction with any related person, promoter or control person of the Company that is required to be disclosed pursuant to Item 404 of Regulation S-K.

Jennifer Duettra - Effective February 9, 2015, Jennifer Duettra was appointed the Company’s Vice President and Assistant General Counsel for a term of five years. Effective April 1, 2015, Jennifer Duettra was appointed the Company’s Secretary. There was no arrangement or understanding between Ms. Duettra and any other person pursuant to which she was selected as an officer. There exists no family relationship between any director, executive officer, and Ms. Duettra. Since graduating from Harvard Law School in 2004, Ms. Duettra has been actively engaged in the practice of law. Prior to completing her law studies, Ms. Duettra attended Colorado State University where in 2001 she was awarded a Bachelor of Arts Degree in Speech Communication and Political Science. Since the beginning of the Company’s last fiscal year, Ms. Duettra was not involved in any transaction with any related person, promoter or control person of the Company that is required to be disclosed pursuant to Item 404 of Regulation S-K.

Barry D. Loveless - Effective October 16, 2015, Barry D. Loveless was appointed the Company’s Chief Financial Officer for a term of five years. There was no arrangement or understanding between Mr. Loveless and any other

person pursuant to which he was selected as an officer. There exists no family relationship between any director, executive officer, and Mr. Loveless. Mr. Loveless is a licensed Certified Public Accountant, graduating with a Bachelor of Arts degree in Accounting from the University of Utah in 1992. Mr. Loveless completed his Masters of Professional Accountancy degree from the University of Utah in 1993. Mr. Loveless has practiced as a licensed Certified Public Accountant since 1995. Since 1998, Mr. Loveless served as an officer and shareholder of Robison, Hill & Co. While at Robison, Hill & Co. Mr. Loveless focused on providing professional accounting services for various public company clients including financial statement audits and registration statements along with the annual, interim and information filings required by the Securities Exchange Commission. He is a member of the American Institute of Certified Public Accountants and the Utah Association of Certified Public Accountants. Since the beginning of the Company’s last fiscal year, Mr. Loveless was not involved in any transaction with any related person, promoter or control person of the Company that is required to be disclosed pursuant to Item 404 of Regulation S-K.

James Mylock, Jr. has worked with Joseph Fiore in marketing and business development since graduating from the State University of New York at Buffalo in 1990. Since the beginning of the Company’s last fiscal year, Mr. Mylock was not involved in any transaction with any related person, promoter or control person of the Company that is required to be disclosed pursuant to Item 404 of Regulation S-K.

Tim Matula joined Shearson Lehman Brothers as a financial consultant in 1992. In 1994 he joined Prudential Securities and when he left Prudential in 1997, he was Associate Vice President, Investments, Quantum Portfolio Manager. Since the beginning of the Company’s last fiscal year, Mr. Matula was not involved in any transaction with any related person, promoter or control person of the Company that is required to be disclosed pursuant to Item 404 of Regulation S-K.

The Company's Certificate of Incorporation provides that the board of directors shall consist of from one to nine members as elected by the shareholders. Each director shall hold office until the next annual meeting of stockholders and until his successor shall have been elected and qualified.

Board Meetings and Committees

The Directors and Officers will not receive remuneration from the Company for attendance at Board Meetings or participation on Committees until a subsequent offering has been successfully completed, or cash flow from operations permits, all in the discretion of the Board of Directors. Directors may be paid their expenses, if any, of attendance at such meetings of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefore. No compensation has been paid to the Directors. The Board of Directors may designate from among its members an executive committee and one or more other committees. No such committees have been appointed.

Compliance with Section 16(a) of the Exchange Act

Based solely upon a review of forms 3, 4, and 5 and amendments thereto, furnished to the Company during or respecting its last fiscal year, no director, officer, beneficial owner of more than 10% of any class of equity securities of the Company or any other person known to be subject to Section 16 of the Exchange Act of 1934, as amended, failed to file on a timely basis reports required by Section 16(a) of the Exchange Act for the last fiscal year.

Audit Committee Financial Expert

The Company's board of directors does not have an "audit committee financial expert," within the meaning of such phrase under applicable regulations of the Securities and Exchange Commission, serving on its audit committee. The board of directors believes that all members of its audit committee are financially literate and experienced in business matters, and that one or more members of the audit committee are capable of: (i) understanding generally accepted accounting principles ("GAAP") and financial statements; (ii) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves; (iii) analyzing and evaluating our financial statements; (iv) understanding our internal controls and procedures for financial reporting; and (v) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the board of directors believes that there is not any audit committee member who has obtained these attributes through the experience

specified in the SEC's definition of "audit committee financial expert." Further, like many small companies, it is difficult for the Company to attract and retain board members who qualify as "audit committee financial experts," and competition for these individuals is significant. The board believes that its current audit committee is able to fulfill its role under SEC regulations despite not having a designated "audit committee financial expert."

EXECUTIVE COMPENSATION

Our primary objective for of our senior officer compensation is to attract, motivate and retain qualified officers to lead the Company in the pursuit of its business goals and combine strategic thinking, creative talent, and strict corporate governance in order to position the Company to capitalize on a wide variety of business opportunities without being limited by any single industry or platform.

Compensation for executive officers is based upon their individual employment contracts with such base salary and annual bonuses as may be determined by the Chairman of the Board from time to time, payable in accordance with the regular practices of the Company.

The following table set forth the compensation of the Company’s executive officers for the year ended 2017 and 2016.

Summary Compensation Table
Name & Principal Position	Year		Salary $	Stock Awards $	All Others $	Total $
James R. Thompson	2017	(1)	$ 194,000	$ 678,000	$ -	$ 872,000
Chief Executive Officer &	2016	(2)	$ 209,000	$ 150,000	$ -	$ 359,000
General Counsel

Barry D. Loveless	2017	(3)	$ 159,000	$ 110,000	$ -	$ 269,000
Chief Financial Office	2016	(4)	$ 155,000	$ 137,000	$ -	$ 292,000

Jennifer D Duettra	2017	(5)	$ 127,000	$ 169,000	$ -	$ 296,000
Executive Vice President,	2016	(6)	$ 130,000	$ 38,000	$ -	$ 168,000
Assistant General Counsel &
Secretary
(1) Stock Award includes 1,000,000 shares of restricted common stock valued at fair value on grant date February 1, 2017.
(2) Stock Award includes 1,000,000 shares of restricted common stock valued at fair value on grant date February 1, 2016.
(3) Stock Award includes 300,000 shares of restricted common stock valued at fair value on grant date October 16, 2017.
(4) Stock Award includes 300,000 shares of restricted common stock valued at fair value on grant date October 16, 2016.
(5) Stock Award includes 250,000 shares of restricted common stock valued at fair value on grant date February 1, 2017.
(6) Stock Award includes 250,000 shares of restricted common stock valued at fair value on grant date February 1, 2016.

Employment Agreements

Effective January 1, 1997, the Company entered into an employment Agreement with Joseph Fiore (the “Fiore Employment Agreement”) under which Joseph Fiore served as chairman of the board of the Company until his resignation on August 1, 2018. Pursuant to the Fiore Employment Agreement, Mr. Fiore was to be paid $50,000 in 1997 and $75,000 in 1998. In addition, Mr. Fiore was to receive family health insurance coverage until age 70 and life insurance coverage until age 70 with a death benefit of $1,000,000 and the use of an automobile, with all expenses associated with the maintenance and operation of the automobile paid by the Corporation. Mr. Fiore deferred all salaries and benefits under this agreement until the Company reaches profitability.

Effective February 1, 2015 the Company entered into an employment Agreement with James R. Thompson in which Mr. Thompson agreed to render services and assume fiduciary duties to protect and advance the best interests of the Company as Chief Executive Officer of the Company for a period of five years. Mr. Thompson’s duties include, but are not limited to: employing and terminating key employees, signing agreements and otherwise committing the Company consistent with policies and budgets established by the Company. The Company agreed to compensate Mr. Thompson with a base salary of $180,000 with annual predetermined increases paid in accordance with the regular payroll practices of the Company for executives, less such deductions or amounts as are required to be deducted or withheld by applicable laws or regulations. In addition, at the beginning of each employment year, the Company agreed to issue to Mr. Thompson One Million (1,000,000) shares of the Company’s common stock. All common stock issued to Mr. Thompson was agreed to be restricted pursuant to Rule 144 and contained additional restrictions on Mr. Thompson’s re-sale limiting his sales to no more than 10,000 shares per day, plus an additional 10,000 shares per day for every 250,000 shares of daily trading volume. The Company also agreed to pay Mr. Thompson a signing bonus in the amount of $360,000.00 and to issue to Mr. Thompson 5,000,000 shares of the Company’s restricted common stock.

Effective February 1, 2015 the Company entered into an employment Agreement with Jennifer Duettra in which Ms. Duettra agreed to render services as Vice President and Assistant General Counsel to the Company for a period of five years. Ms. Duettra’s duties include, but are not limited to: providing such services and fiduciary duties as are necessary and desirable to protect and advance the best interests of the Company, signing agreements, and otherwise committing the Company consistent with policies and budgets established by the Company. The Company agreed to compensate Ms. Duettra with an annual base salary of $120,000.00, increased to $125,000 on February 1, 2016, paid in accordance with the regular payroll practices of the Company for executives, less such deductions or amounts as are required to be deducted or withheld by applicable laws or regulations. In addition, at the beginning of each employment year, the Company agreed to issue to Ms. Duettra 250,000 shares of the Company’s common stock. All common stock issued to Ms. Duettra was agreed to be restricted pursuant to Rule 144, and contained additional restrictions limiting Ms. Duettra’s sales to no more than 5,000 shares per day for every 250,000 shares of daily trading volume. The Company also agreed to pay Ms. Duettra a signing bonus in the amount of $25,000.00, and issue to her 500,000 shares of the Company’s restricted common stock.

Effective October 16, 2015 the Company entered into an employment Agreement with Barry D. Loveless in which Mr. Loveless agreed to render services as Chief Financial Officer to the Company for a period of five years. Mr. Loveless’s duties include, but are not limited to: providing such services and fiduciary duties as are provided by a Chief Financial Officer of a publicly traded fully reporting company in compliance with the 1934 Securities and Exchange Act, the 2002 Sarbanes-Oxley Act, and the Rules and Regulations promulgated by the Securities and Exchange Commission. The Company agreed to compensate Mr. Loveless with an annual base salary of $150,000.00, increased to $155,000 on October 16, 2016, paid in accordance with the regular payroll practices of the Company for executives, less such deductions or amounts as are required to be deducted or withheld by applicable laws or regulations. In addition, at the beginning of each employment year, the Company agreed to issue to Mr. Loveless 300,000 shares of the Company’s common stock. All common stock issued to Mr. Loveless was agreed to be restricted pursuant to Rule 144, and contained additional restrictions limiting Mr. Loveless’s sales to no more than 5,000 shares per day for every 250,000 shares of daily trading volume. The Company also agreed to pay Mr. Loveless a signing bonus in the amount of 300,000 shares of the Company’s restricted common stock.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Principal Shareholders

The table below sets forth information as to each person owning of record or who was known by the Company to own beneficially more than 5% of the 181,128,950 shares of issued and outstanding Common Stock of the Company as of December 31, 2017, and information as to the ownership of the Company’s Stock by each of its directors and executive officers and by the directors and executive officers as a group. Except as otherwise indicated, all shares are owned directly, and the persons named in the table have sole voting and investment power with respect to shares shown as beneficially owned by them.

Name and Address of Beneficial Owners & Directors	Nature of Ownership	# of Shares Owned		Percent
Joseph Fiore	Common Stock	100,127,271	*	55%
Tim Matula	Common Stock	11,000,000		6%
James R. Thompson	Common Stock	8,000,000		4%
James Mylock, Jr.	Common Stock	4,760,184		3%
Jennifer Duettra	Common Stock	1,250,000		1%
Barry D. Loveless	Common Stock	1,200,000		1%
All Executive Officers and Directors as a Group (6 persons)	Common Stock	126,337,455	**	70%

* Includes 72,802,684 shares of common stock, 107,636 shares of Series A preferred stock (convertible to 26,909,028 common shares), and 20,000 shares of Series E preferred stock (convertible to 415,559 common shares).

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On October 3, 2016, the Company sold trading securities with a cost basis of $510,000 and a fair value of $340,000 to Berkshire Capital Management Co., Inc. (“Berkshire”) for $500,000. Berkshire is controlled by Joseph Fiore, majority shareholder and former chairman of the board of directors of the Company. The Company reported the $160,000 difference between the value of the trading securities and cash sale price as contributed capital.

During May 2017, the Company sold 750,000 restricted common shares to a former officer/employee of the company for cash of $300,000. These shares were recorded at fair value of $510,000 with $210,000 being recorded in the statement of operations and comprehensive income as part of professional fees for the three months ended June 30, 2017.

On September 5, 2017, the Company obtained a revolving line of credit from Berkshire Capital Management Co., Inc. Berkshire is controlled by Joseph Fiore, majority shareholder and former chairman of the board of directors of the Company. The line of credit allows the Company to borrow up to $1,000,000 with interest at 6% per annum. The loan is secured by a first lien on all the assets of the Company and its wholly owned subsidiary SPYR APPS ^® , LLC. Repayment on the loan is due February 28, 2019. As of August 31, 2018, the Company has borrowed $1,000,000 and accrued interest of $47,000. During 2018, the Company received an additional $173,000 in the form of short-term advances from Berkshire Capital Management Co., Inc. The $173,000 short-term advances are due upon demand.

During January 2018, the Company issued 500,000 shares of restricted common stock to the father of an executive officer of the Company for cash of $50,000.

Where You Can Find More Information

We are not required to deliver an annual report to our stockholders unless our directors are elected at a meeting of our stockholders or by written consents of our stockholders. If our directors are not elected in such manner, we are not required to deliver an annual report to our stockholders and will not voluntarily send an annual report.

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. Such filings are available to the public over the Internet at the Securities and Exchange Commission’s website at http://www.sec.gov .

We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act of 1933 with respect to the securities offered under this Prospectus. This prospectus, which forms a part of that registration statement, does not contain all information included in the registration statement. Certain information is omitted and you should refer to the registration statement and its exhibits.

You may review a copy of the registration statement at the Securities and Exchange Commission’s public reference room at 100 F Street, N.E. Washington, D.C. 20549 on official business days during the hours of 10 a.m. to 3 p.m. You may obtain information on the operation of the public reference room by calling the Securities and Exchange Commission at 1-800-SEC-0330. You may also read and copy any materials we file with the Securities and Exchange Commission at the Securities and Exchange Commission’s public reference room. Our filings and the registration statement can also be reviewed by accessing the Securities and Exchange Commission’s website at http://www.sec.gov.

The information in this Prospectus is not complete and may be changed. The selling stockholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SPYR ^® , Inc.

Shares of Common Stock

Prospectus

August 31, 2018

Part II

Information Not Required in Prospectus

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities being registered hereunder. The selling stockholder will bear no expenses associated with this offering except for any broker discounts and commissions or equivalent expenses and expenses of the selling stockholder’s legal counsel applicable to the sale of its shares. All of the amounts shown are estimates, except for the Securities and Exchange Commission registration fees.

Securities and Exchange Commission registration fees	$	1,021

Accounting fees and expenses	$	10,000

Legal fees and expenses	$	10,000

Miscellaneous fees and expenses	$	0

Total	$	21,021

INDEMNIFICATION OF OFFICERS AND DIRECTORS

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

The Company's Certificate of Incorporation provides that no director of the Company shall be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director except as limited by Nevada law. The Company's Bylaws provide that the Company shall indemnify to the full extent authorized by law each of its directors and officers against expenses incurred in connection with any proceeding arising by reason of the fact that such person is or was an agent of the corporation.

Nevada law

Section 78.751 of the Nevada General Corporation Laws provides as follows: “78.751 Indemnification of officers, directors, employees and agents; advance of expenses. 1. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the

fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorney's fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was lawful.”

“A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation.”

“Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.”

“To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, he must be indemnified by the corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense.”

“Any indemnification under subsections 1 and 2, unless ordered by a court or advanced pursuant to subsection 5, must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (a) By the stockholders: (b) By the board of directors by majority vote of a quorum consisting of directors who were not parties to act, suit or proceeding; (c) If a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion; or (d) If a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion. The Articles of Incorporation, the Bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than the directors or officers may be entitled under any contract or otherwise by law.”

“The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this section: (a) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to subsection 2 or for the advancement of expenses made pursuant to subsection 5, may not be made to or on behalf of any director or officer if a final adjudication establishes that his act or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. (b) Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(5) Each Prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than Prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however , that no statement made in a registration statement or Prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or Prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or Prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(6) The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary Prospectus or Prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§ 230.424 of this chapter);

(ii) Any free writing Prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing Prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

RECENT SALES OF UNREGISTERED SECURITIES

During the past three years, the Company has sold the following unregistered securities:

Year Ended December 31, 2015

In December 2014 the Company agreed to issue a total of 5,500,000 shares of the Company’s restricted common stock as a form of signing bonus to two employees with a fair value of $987,500. The shares were valued at the date of the respective agreements. These shares were issued on January 9, 2015. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

On February 1, 2015, the Company granted and issued 500,000 restricted common shares to a consultant. The shares are forfeitable and are deemed earned upon completion of service over a period of twenty-four months with a fair value of $247,500 at the date of grant. Pursuant to current accounting guidelines, the Company recognizes the fair value of these shares as they vest. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

On February 23, 2015 the Company issued 2,500,000 restricted common shares valued at $1,700,000, in exchange for all of the issued and outstanding shares of Franklin Networks, Inc., a Tennessee corporation (“Franklin”). The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

On August 1, 2015, the Company issued 100,000 restricted common shares as part of the base salary pursuant to employment contracts with an employee of the Company. The shares vest over a period of one year with a fair value of $37,000 at the date of grant. Pursuant to current accounting guidelines, the Company recognizes the fair value of these shares as they vest. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

During the year ended December 31, 2015, the Company issued an aggregate of 2,360,417 restricted common shares employees with a total fair value of $1,075,426 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. The shares issuable were valued at the date of the respective agreements. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

During the year ended December 31, 2015, the Company issued an aggregate of 2,420,000 restricted common shares to consultants with a total fair value of $1,265,133 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. The shares issuable were valued at the date of the respective agreements. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

Year Ended December 31, 2016

During the year ended December 31, 2016, the Company issued an aggregate of 1,843,987 restricted common shares to employees with a total fair value of $413,000 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. The shares issued were valued at the date of the respective agreements. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

During the year ended December 31, 2016, the Company issued an aggregate of 4,509,912 restricted common shares to consultants with a total fair value of $1,951,000. The shares issued are non-refundable and deemed earned upon issuance. The shares issued were valued at the date of the respective agreements. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

During the year ended December 31, 2016, the Company issued an aggregate of 100,000 restricted common shares to consultants for cash of $15,000. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

Year Ended December 31, 2017

During the year ended December 31, 2017, the Company issued an aggregate of 750,000 restricted common shares to an existing shareholder and former officer/employee for cash of $300,000. The shares had a fair value of $510,000 at the date of sale, and as a result, the Company reflected an additional expense of $210,000 to account the difference between the sale price and the fair market value of common shares sold. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

During the year ended December 31, 2017, the Company issued an aggregate of 2,050,000 restricted common shares to employees with a total fair value of $1,109,000 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. The shares issued were valued at the date earned under the respective agreements. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

During year ended December 31, 2017, the Company issued an aggregate of 12,691,924 restricted common shares to consultants with a total fair value of $3,758,000. The shares issued are non-refundable and deemed earned upon issuance. The shares issued were valued at the date earned under the respective agreements. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

During year ended December 31, 2017, the Company issued an aggregate of 8,000,000 restricted common shares to third parties with a total fair value of $3,320,000. The shares issued are non-refundable and deemed earned upon issuance. The shares issued were valued at the date earned under the respective agreements. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

Six Month Period Ended June 30, 2018

During January 2018, the Company issued 500,000 restricted common shares pursuant to stock purchase agreements with a related party for cash of $50,000. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

During February, and March 2018, the Company issued 4,200,000 restricted common shares pursuant to stock purchase agreements with third party investors for cash of $555,000. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

During February 2018, the Company issued 1,250,000 restricted common shares as part of the base salary pursuant to employment contracts with two officers of the Company. These shares were recorded at fair value of $625,000 in the statement of operations and comprehensive income as part of Labor and related expenses for the three months ended March 31, 2018. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

During January, February, and March 2018, the Company issued 4,441,942 restricted common shares pursuant to third party service agreements. These shares were recorded at fair value of $1,712,000 in the statement of operations and comprehensive income as part of Professional fees for the three months ended March 31, 2018. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

During May 2018, the Company issued 2,000,000 restricted common shares pursuant to stock purchase agreements with third party investors for cash of $300,000. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

During April, May and June 2018, the Company issued 1,045,840 restricted common shares pursuant to third party service agreements. These shares were recorded at fair value of $315,000 in the statement of operations and comprehensive income as part of Professional fees for the six months ended June 30, 2018. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

Subsequent to June 30, 2018

During July and August 2018, the Company issued 603,334 restricted common shares pursuant to third party service agreements. The Company relied upon the Section 4(a)(2) exemption from registration provided by Rule 506(b) of Regulation D.

On July 12, 2018, the Company issued 3,500,000 common shares pursuant to a court approved litigation settlement agreement. The Company relied upon the Section 3(a)(10) exemption from the registration requirements of the 1933 Securities and Exchange Act; 15 U.S.C. §77a et seq.

EXHIBITS


Exhibit No.		Description

3.1		Articles of Incorporation of SPYR ^® , Inc. (1)

3.2		Amended Articles of Incorporation of SPYR ^® , Inc. (1)

3.3		Bylaws of SPYR ^® , Inc. (1)

5.1		Opinion of Mailander Law Office, Inc.

10.1		Warrant Agreements First Fire

10.2		Warrant Agreement Collier Investments, LLC

10.3		Warrant Agreement William D. Moreland

10.4		Convertible Note Collier Investments, LLC

10.5		Stock Purchase Agreement Collier Investments, LLC

10.6		Stock Purchase Agreement with Underlying Warrant Richard Goldfarb

10.7		Consulting Agreement Callan Investments, LLC dba Kreloff Capital Partners

10.8		Settlement Agreement with Zakeni Limited

10.9		Warrant Agreements Zakeni Limited

14.1		Code of Business Conduct and Ethics. (1)

23.1		Consent of Haynie & Company

23.2		Consent of Counsel (included in Exhibit 5.1 filed as Exhibit 5.1).

(1) Incorporated by reference.

Undertakings

(A) The undersigned Registrant hereby undertakes:

(1)

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

i. To include any Prospectus required by section 10(a)(3) of the Securities Act of 1933;

ii. To reflect in the Prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of Prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.

iii. To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(i) Any preliminary Prospectus or Prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§ 230.424 of this chapter);

(ii) Any free writing Prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

	SPYR ^® , INC
Date: August 31, 2018
	By:	/s/ James R. Thompson
		James R. Thompson
		Chief Executive Officer

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Corey Hollister and Jesus M Quintero and each of them, with full power of substitution and re-substitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file, any and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their and his or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this registration statement has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ James R. Thompson	Chief Executive Officer	August 31, 2018
James R. Thompson	(Principal Executive Officer)

/s/ Barry Loveless	Chief Financial Officer	August 31, 2018
Barry Loveless	(Principal Financial Officer)

/s/ Timothy Matula
Timothy Matula	Director	August 31, 2018
/s/ James Mylock, Jr.

James Mylock, Jr.	Director	August 31, 2018

Mailander Law Office, Inc.

945 4 ^th Avenue, Suite 311

San Diego, CA 92101

(619) 239-9034

tmailander@gmail.com

August 31, 2018

SPYR, Inc.

4643 South Ulster Street, Suite 1510

Regency Plaza

Denver Colorado 80237

United States of America

Ladies and Gentlemen:

You have requested our opinion as counsel to SPYR, Inc., a Nevada corporation, (the “Company”) in connection with the Company’s registration statement on Form S-1 filed with the U.S. Securities and Exchange Commission (the Commission”) under the Securities Act of 1933, as amended (the “Securities Act”) (the “Registration Statement”) with respect to the registration of 11,788,000 shares of the Company’s common stock, par value $0.0001 per share (the “Shares”) that are issuable pursuant to the terms and conditions of warrant agreements, convertible notes, warrants underlying stock purchase agreements and consulting agreements. This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act.

In connection with this opinion, we have examined and relied upon the originals or copies of such documents, corporate records, and other instruments as we have deemed necessary or appropriate for the purpose of this opinion, including, without limitation, the following: (a) the articles of incorporation of the Company; (b) the bylaws of the Company; and (c) the Registration Statement, including all exhibits thereto.

In our examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such documents, and the accuracy and completeness of the corporate records made available to us by the Company. As to any facts material to the opinions expressed below, with your permission we have relied solely upon, without independent verification or investigation of the accuracy or completeness thereof, any certificates and oral or written statements and other information of or from public officials, officers or other representatives of the Company and others.

Based upon the foregoing, and in reliance thereon, we are of the opinion that the Shares have been duly authorized, and when sold pursuant to the terms described in the Registration Statement, will be legally issued, fully paid and non-assessable.

The opinion expressed herein is limited to the laws of the State of Nevada, all applicable provisions of the statutory provisions thereof, reported judicial decisions interpreting those laws, and federal securities laws. This opinion is limited to the laws in effect as of the date hereof and is provided exclusively in connection with the registration of the Shares and Resale Shares contemplated by the Registration Statement.

We assume no obligation to update or supplement this opinion letter if any applicable laws change after the date of this opinion letter, or if we become aware after the date of this opinion letter of any facts, whether existing before or arising after the date hereof, that might change the opinions expressed above.

This opinion letter is furnished in connection with the filing of the Registration Statement and may not be relied upon for any other purpose without our prior written consent in each instance. Further, no portion of this letter may be quoted, circulated or referred to in any other document for any other purpose without our prior written consent.

We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement and to the use of our name as it appears in the Prospectus included in the Registration Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder. This opinion is expressed as of the date hereof unless otherwise expressly stated, and we disclaim any undertaking to advise you of any subsequent changes in the facts stated or assumed herein or of any subsequent changes in applicable laws.

Very Truly Yours,

/s/ Mailander Law Office, Inc.

Mailander Law Office, Inc.

NEITHER THIS SECURITY NOR THE SECURITIES AS TO WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT

SPYR, INC.

Warrant Shares: 200,000

Date of Issuance: April 20, 2018 (“ Issuance Date ”)

This COMMON STOCK PURCHASE WARRANT (the “ Warrant ”) certifies that, for value received (in connection with the funding of the purchase price of $150,000.00 for the first tranche of $157,894.74 under the $500,000.00 convertible promissory note issued to the Holder (as defined below) on April 20, 2018 by the Company (as defined below) (the “Note”), FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company (including any permitted and registered assigns, the “ Holder ”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance hereof, to purchase from Spyr, Inc., a Nevada corporation (the “ Company ”), up to 200,000 shares of Common Stock (as defined below) (the “ Warrant Shares ”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect. This Warrant is issued by the Company as of the date hereof in connection with that certain securities purchase agreement dated April 20, 2018, by and among the Company and the Holder (the “ Purchase Agreement ”).

Capitalized terms used in this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section 12 below. For purposes of this Warrant, the term “ Exercise Price ” shall mean $0.375, subject to adjustment as provided herein (including but not limited to cashless exercise), and the term “ Exercise Period ” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. eastern standard time on the three-year anniversary thereof.

1. EXERCISE OF WARRANT .

(a) Mechanics of Exercise . Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part at any time or times during the Exercise Period by delivery of a written notice, in the form attached hereto as Exhibit A (the “ Exercise Notice ”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. On or before the third Trading Day (the “ Warrant Share Delivery Date ”) following the date on which the Company shall have received the Exercise Notice, and upon receipt by the Company of payment to the Company of an amount equal

to the applicable Exercise Price multiplied by the number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “ Aggregate Exercise Price ” and together with the Exercise Notice, the “ Exercise Delivery Documents ”) in cash or by wire transfer of immediately available funds (or by cashless exercise, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct its transfer agent to) issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three Business Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.

If the Company fails to cause its transfer agent to transmit to the Holder the respective shares of Common Stock by the respective Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise in Holder’s sole discretion, and such failure shall be deemed an event of default under the Note.

If the Market Price of one share of Common Stock is greater than the Exercise Price and the Company does not have an effective non-stale registration statement covering the Holder’s immediate public resale of the Warrant Shares at prevailing market prices, the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this Warrant and a Notice of Exercise, in which event the Company shall issue to Holder a number of Common Stock computed using the following formula:

X = Y (A-B)

Where X = the number of Shares to be issued to Holder.

Y =

the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation).

A = the Market Price (at the date of such calculation).

B = Exercise Price (as adjusted to the date of such calculation).

(b) No Fractional Shares . No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.

(c) Holder’s Exercise Limitations . The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, to the extent that after giving effect to issuance of Warrant Shares upon exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation, as defined below. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, non-exercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or non-converted portion of any other securities of the Company (including without limitation any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this paragraph (d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this paragraph applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.

For purposes of this paragraph, in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or its transfer agent setting forth the number of shares of Common Stock outstanding. Upon the request of a Holder, the Company shall within two Trading Days confirm to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “ Beneficial Ownership Limitation ” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. Upon no fewer than 61 days’ prior notice to the Company, a Holder may increase or decrease the Beneficial Ownership Limitation provisions of this paragraph, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this paragraph shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company and shall only apply to such Holder and no other Holder. The limitations contained in this paragraph shall apply to a successor Holder of this Warrant.

2. ADJUSTMENTS . The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this

Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 2(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(b) Distribution of Assets . If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “ Distribution ”), at any time after the issuance of this Warrant, then, in each such case:

(i) any Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (ii) the denominator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date; and

(ii) the number of Warrant Shares shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i); provided, however, that in the event that the Distribution is of shares of common stock of a company (other than the Company) whose common stock is traded on a national securities exchange or a national automated quotation system (“ Other Shares of Common Stock ”), then the Holder may elect to receive a warrant to purchase Other Shares of Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Shares of Common Stock that would have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding clause (i) and the number of Warrant Shares calculated in accordance with the first part of this clause (ii).

(c) Anti-Dilution Adjustments due to Share Issuances . If the Warrant Share Percentage (as defined below) as calculated on the date which is the earlier of (i) 180 calendar days from the date of this Agreement or (ii) the date of the first Exercise Notice under this Warrant (the “Make-Whole Date”) is lower than the Warrant Share Percentage on the date of this Agreement (the “First Warrant Share Percentage”), then the number of Warrant Shares shall automatically increase, such that the Warrant Share Percentage on the Make-Whole Date shall equal the First Warrant Share Percentage. The Warrant Share Percentage shall mean the

quotient of 200,000 and the total number of outstanding shares of Common Stock of the Company on the respective date of calculation, multiplied by 100.

(d) Anti-Dilution Adjustments to Exercise Price After Event of Default . (b) Anti-Dilution Adjustments to Exercise Price . If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, amend the terms of any security issued by the Company prior to the Issuance Date, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise) (including but not limited to under the Note), at an effective price per share less than the then Exercise Price (such lower price, the “ Base Share Price ” and such issuances collectively, a “ Dilutive Issuance ”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price, and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 2(d), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “ Dilutive Issuance Notice ”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 2(d), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. Notwithstanding anything contained herein, this Section 2(d) shall only be utilized by the Holder on or after the date that an Event of Default (as defined in the Note) occurs under the Note.

3. FUNDAMENTAL TRANSACTIONS . If, at any time while this Warrant is outstanding, (i) the Company effects any merger of the Company with or into another entity and the Company is not the surviving entity (such surviving entity, the “ Successor Entity ”), (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders of at least 50% of the Common Stock accept such offer, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock) (in any such case, a “ Fundamental Transaction ”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive the number of shares of Common Stock of the Successor Entity or of the Company and any additional consideration (the “ Alternate Consideration ”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event (disregarding any limitation on exercise contained herein solely for the purpose of such determination). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then

the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any Successor Entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration.

4. NON-CIRCUMVENTION . The Company covenants and agrees that it will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, for so long as this Warrant is outstanding, have authorized and reserved, free from preemptive rights, five (5) times the number of shares of Common Stock into which the Warrants are then exercisable into to provide for the exercise of the rights represented by this Warrant (without regard to any limitations on exercise).

5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER . Except as otherwise specifically provided herein, this Warrant, in and of itself, shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

6. REISSUANCE .

(a) Lost, Stolen or Mutilated Warrant . If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.

(b) Issuance of New Warrants . Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date.

7. TRANSFER .

(a) Notice of Transfer . The Holder agrees to give written notice to the Company before transferring this Warrant or transferring any Warrant Shares of such Holder’s intention to do so, describing briefly the manner of any proposed transfer. Promptly upon receiving such written notice, the Company shall present copies thereof to the Company’s counsel. If the proposed transfer may be effected without registration or qualification (under any federal or state securities laws), the Company, as promptly as practicable, shall notify the Holder thereof, whereupon the Holder shall be entitled to transfer this Warrant or to dispose of Warrant Shares received upon the previous exercise of this Warrant, all in accordance with the terms of the notice delivered by the Holder to the Company; provided, however, that an appropriate legend may be endorsed on this Warrant or the certificates for such Warrant Shares respecting restrictions upon transfer thereof necessary or advisable in the opinion of counsel and satisfactory to the Company to prevent further transfers which would be in violation of Section 5 of the Securities Act and applicable state securities laws; and provided further that the prospective transferee or purchaser shall execute the Assignment of Warrant attached hereto as Exhibit B and such other documents and make such representations, warranties, and agreements as may be required solely to comply with the exemptions relied upon by the Company for the transfer or disposition of the Warrant or Warrant Shares.

(b) If the proposed transfer or disposition of this Warrant or such Warrant Shares described in the written notice given pursuant to this Section 7 may not be effected without registration or qualification of this Warrant or such Warrant Shares, the Holder will limit its activities in respect to such transfer or disposition as are permitted by law.

(c) Any transferee of all or a portion of this Warrant shall succeed to the rights and benefits of the initial Holder of this Warrant.

8. NOTICES . Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the notice provisions contained in the Purchase Agreement. The Company shall provide the Holder with prompt written notice (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20 days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any stock or other securities directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock or other property, pro rata to the holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.

9. AMENDMENT AND WAIVER . The terms of this Warrant may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.

10. GOVERNING LAW . This Warrant shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts or federal courts located in New York. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens . EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY . The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

11. ACCEPTANCE . Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

12. CERTAIN DEFINITIONS . For purposes of this Warrant, the following terms shall have the following meanings:

(a) “ Nasdaq ” means www.Nasdaq.com.

(b) “ Closing Sale Price ” means, for any security as of any date, (i) the last closing trade price for such security on the Principal Market, as reported by Nasdaq, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00 p.m., New York time, as reported by Nasdaq, or (ii) if the foregoing does not apply, the last trade price of such security in the over-the-counter market for such security as reported by Nasdaq, or (iii) if no last trade price is reported for such security by Nasdaq, the average of the bid and ask prices of any market makers for such security as reported by the OTC Markets. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

(c) “ Common Stock ” means the Company’s common stock, and any other class of securities into which such securities may hereafter be reclassified or changed.

(d) “ Common Stock Equivalents ” means any securities of the Company that would entitle the holder thereof to acquire at any time Common Stock, including without limitation any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

(e) “ Dilutive Issuance ” is any issuance of Common Stock or Common Stock Equivalents described in Section 2(b) above; provided, however, that a Dilutive Issuance shall not include any Exempt Issuance.

(f) “ Exempt Issuance ” means the issuance of (i) shares of Common Stock or options to employees, officers, or directors of the Company pursuant to any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, (ii) securities issued pursuant to acquisitions approved by a majority of the disinterested directors of the Company, and (iii) shares of Common Stock issued pursuant to any real property leasing arrangement.

(g) “ Principal Market ” means the primary national securities exchange on which the Common Stock is then traded.

(h) “ Market Price ” means the highest traded price of the Common Stock during the thirty (30) Trading Days prior to the date of the respective Exercise Notice.

(i) “ Trading Day ” means (i) any day on which the Common Stock is listed or quoted and traded on its Principal Market, (ii) if the Common Stock is not then listed or quoted and traded on any national securities exchange, then a day on which trading occurs on any over-the-counter markets, or (iii) if trading does not occur on the over-the-counter markets, any Business Day.

* * * * * * *

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date set forth above.

SPYR, INC.

__________________________
Name: James Thompson

Title: Chief Executive Officer

EXHIBIT A

EXERCISE NOTICE

(To be executed by the registered holder to exercise this Common Stock Purchase Warrant)

The Undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“Warrant Shares”) of Spyr, Inc., a Nevada corporation (the “Company”), evidenced by the attached copy of the Common Stock Purchase Warrant (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

Form of Exercise Price . The Holder intends that payment of the Exercise Price shall be made as (check one):

	☐	a cash exercise with respect to _________________ Warrant Shares; or
	☐	by cashless exercise pursuant to the Warrant.

Payment of Exercise Price . If cash exercise is selected above, the holder shall pay the applicable Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

Delivery of Warrant Shares . The Company shall deliver to the holder __________________ Warrant Shares in accordance with the terms of the Warrant.

Date:__________________________

(Print Name of Registered Holder)

By: ____________________________

Name: __________________________

Title: ___________________________

EXHIBIT B

ASSIGNMENT OF WARRANT

(To be signed only upon authorized transfer of the Warrant)

For Value Received , the undersigned hereby sells, assigns, and transfers unto ____________________ the right to purchase _______________ shares of common stock of Spyr, Inc., to which the within Common Stock Purchase Warrant relates and appoints ____________________, as attorney-in-fact, to transfer said right on the books of Spyr, Inc. with full power of substitution and re-substitution in the premises. By accepting such transfer, the transferee has agreed to be bound in all respects by the terms and conditions of the within Warrant.

Dated: __________________

________________________________
(Signature) *

________________________________
(Name)

________________________________
(Address)

________________________________
(Social Security or Tax Identification No.)

* The signature on this Assignment of Warrant must correspond to the name as written upon the face of the Common Stock Purchase Warrant in every particular without alteration or enlargement or any change whatsoever. When signing on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and title(s) with such entity.

COMMON STOCK PURCHASE WARRANT

SPYR, INC.

Warrant Shares: 200,000

Date of Issuance: April 20, 2018 (“ Issuance Date ”)

Capitalized terms used in this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section 12 below. For purposes of this Warrant, the term “ Exercise Price ” shall mean $0.50, subject to adjustment as provided herein (including but not limited to cashless exercise), and the term “ Exercise Period ” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. eastern standard time on the three-year anniversary thereof.

1. EXERCISE OF WARRANT .

X = Y (A-B)

Where X = the number of Shares to be issued to Holder.

Y =

the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation).

A = the Market Price (at the date of such calculation).

B = Exercise Price (as adjusted to the date of such calculation).

2. ADJUSTMENTS . The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

quotient of 200,000 and the total number of outstanding shares of Common Stock of the Company on the respective date of calculation, multiplied by 100.

6. REISSUANCE .

7. TRANSFER .

(c) Any transferee of all or a portion of this Warrant shall succeed to the rights and benefits of the initial Holder of this Warrant.

11. ACCEPTANCE . Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

12. CERTAIN DEFINITIONS . For purposes of this Warrant, the following terms shall have the following meanings:

(a) “ Nasdaq ” means www.Nasdaq.com.

(c) “ Common Stock ” means the Company’s common stock, and any other class of securities into which such securities may hereafter be reclassified or changed.

(g) “ Principal Market ” means the primary national securities exchange on which the Common Stock is then traded.

(h) “ Market Price ” means the highest traded price of the Common Stock during the thirty (30) Trading Days prior to the date of the respective Exercise Notice.

* * * * * * *

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date set forth above.

SPYR, INC.

________________________
Name: James Thompson

Title: Chief Executive Officer

EXHIBIT A

EXERCISE NOTICE

(To be executed by the registered holder to exercise this Common Stock Purchase Warrant)

Form of Exercise Price . The Holder intends that payment of the Exercise Price shall be made as (check one):

	☐	a cash exercise with respect to _________________ Warrant Shares; or
	☐	by cashless exercise pursuant to the Warrant.

Delivery of Warrant Shares . The Company shall deliver to the holder __________________ Warrant Shares in accordance with the terms of the Warrant.

Date: _____________________

(Print Name of Registered Holder)

By: __________________________

Name: ________________________

Title: _________________________

EXHIBIT B

ASSIGNMENT OF WARRANT

(To be signed only upon authorized transfer of the Warrant)

Dated: __________________

________________________________
(Signature) *

________________________________
(Name)

________________________________
(Address)

________________________________
(Social Security or Tax Identification No.)

COMMON STOCK PURCHASE WARRANT

SPYR, INC.

Warrant Shares: 100,000

Date of Issuance: April 20, 2018 (“ Issuance Date ”)

This COMMON STOCK PURCHASE WARRANT (the “ Warrant ”) certifies that, for value received (in connection with the funding of the purchase price of $150,000.00 for the first tranche of $157,894.74 under the $500,000.00 convertible promissory note issued to the Holder (as defined below) on April 20, 2018 by the Company (as defined below) (the “Note”), FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company (including any permitted and registered assigns, the “ Holder ”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance hereof, to purchase from Spyr, Inc., a Nevada corporation (the “ Company ”), up to 100,000 shares of Common Stock (as defined below) (the “ Warrant Shares ”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect. This Warrant is issued by the Company as of the date hereof in connection with that certain securities purchase agreement dated April 20, 2018, by and among the Company and the Holder (the “ Purchase Agreement ”).

Capitalized terms used in this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section 12 below. For purposes of this Warrant, the term “ Exercise Price ” shall mean $0.625, subject to adjustment as provided herein (including but not limited to cashless exercise), and the term “ Exercise Period ” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. eastern standard time on the three-year anniversary thereof.

1. EXERCISE OF WARRANT .

X = Y (A-B)

Where X = the number of Shares to be issued to Holder.

Y =

the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation).

A = the Market Price (at the date of such calculation).

B = Exercise Price (as adjusted to the date of such calculation).

2. ADJUSTMENTS . The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

quotient of 200,000 and the total number of outstanding shares of Common Stock of the Company on the respective date of calculation, multiplied by 100.

6. REISSUANCE .

7. TRANSFER .

(c) Any transferee of all or a portion of this Warrant shall succeed to the rights and benefits of the initial Holder of this Warrant.

11. ACCEPTANCE . Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

12. CERTAIN DEFINITIONS . For purposes of this Warrant, the following terms shall have the following meanings:

(a) “ Nasdaq ” means www.Nasdaq.com.

(c) “ Common Stock ” means the Company’s common stock, and any other class of securities into which such securities may hereafter be reclassified or changed.

(g) “ Principal Market ” means the primary national securities exchange on which the Common Stock is then traded.

(h) “ Market Price ” means the highest traded price of the Common Stock during the thirty (30) Trading Days prior to the date of the respective Exercise Notice.

* * * * * * *

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date set forth above.

SPYR, INC.

__________________________
Name: James Thompson

Title: Chief Executive Officer

EXHIBIT A

EXERCISE NOTICE

(To be executed by the registered holder to exercise this Common Stock Purchase Warrant)

Form of Exercise Price . The Holder intends that payment of the Exercise Price shall be made as (check one):

	☐	a cash exercise with respect to _________________ Warrant Shares; or
	☐	by cashless exercise pursuant to the Warrant.

Delivery of Warrant Shares . The Company shall deliver to the holder __________________ Warrant Shares in accordance with the terms of the Warrant.

Date: ________________________

(Print Name of Registered Holder)

By: __________________________

Name: ________________________

Title: _________________________

EXHIBIT B

ASSIGNMENT OF WARRANT

(To be signed only upon authorized transfer of the Warrant)

Dated: __________________

________________________________
(Signature) *

________________________________
(Name)

________________________________
(Address)

________________________________
(Social Security or Tax Identification No.)

COMMON STOCK PURCHASE WARRANT

SPYR, INC.

Warrant Shares: 200,000

Date of Issuance: May 22, 2018 (“ Issuance Date ”)

This COMMON STOCK PURCHASE WARRANT (the “ Warrant ”) certifies that, for value received (in connection with the issuance of the $275,000.00 convertible note to the Holder (as defined below) of even date) (the “Note”), Collier Investments, LLC (including any permitted and registered assigns, the “ Holder ”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance hereof, to purchase from SPYR, INC., a Nevada corporation (the “ Company ”), up to 200,000 shares of Common Stock (as defined below) (the “ Warrant Shares ”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect. This Warrant is issued by the Company as of the date hereof in connection with the Note.

Capitalized terms used in this Warrant shall have the meanings set forth in the Note unless otherwise defined in the body of this Warrant or in Section 12 below. For purposes of this Warrant, the term “ Exercise Price ” shall mean $2.00, subject to adjustment as provided herein (including but not limited to cashless exercise), and the term “ Exercise Period ” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. eastern standard time on the five-year anniversary thereof.

1. EXERCISE OF WARRANT .

provided below, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct its transfer agent to) issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three Business Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.

If, at the time of exercise, the Market Price of one share of Common Stock is greater than the Exercise Price and (ii) there is no effective non-stale registration statement of the Company covering the Holder’s immediate resale of the Warrant Shares at prevailing market prices without any limitations, the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this Warrant and a Notice of Exercise, in which event the Company shall issue to Holder a number of Common Stock computed using the following formula:

X = Y (A-B)

Where X = the number of Shares to be issued to Holder.

Y =

the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation).

A = the Market Price (at the date of such calculation).

B = Exercise Price (as adjusted to the date of such calculation).

any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation, as defined below. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, non-exercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or non-converted portion of any other securities of the Company (including without limitation any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this paragraph (d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this paragraph applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.

2. ADJUSTMENTS . The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

(a) Distribution of Assets . If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “ Distribution ”), at any time after the issuance of this Warrant, then, in each such case:

(i) any Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the

Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (ii) the denominator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date; and

(b) Anti-Dilution Adjustments to Exercise Price . If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise), at an effective price per share less than the then Exercise Price (such lower price, the “ Base Share Price ” and such issuances collectively, a “ Dilutive Issuance ”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price, and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 2(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “ Dilutive Issuance Notice ”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 2(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise.

of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders of at least 50% of the Common Stock accept such offer, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock) (in any such case, a “ Fundamental Transaction ”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive the number of shares of Common Stock of the Successor Entity or of the Company and any additional consideration (the “ Alternate Consideration ”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event (disregarding any limitation on exercise contained herein solely for the purpose of such determination). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any Successor Entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration.

6. REISSUANCE .

7. TRANSFER .

(c) Any transferee of all or a portion of this Warrant shall succeed to the rights and benefits of the initial Holder of this Warrant.

8. NOTICES . Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the notice provisions contained in the Note. The Company shall provide the Holder with prompt written notice (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20 days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any stock or other securities directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock or other property, pro rata to the holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.

REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.

11. ACCEPTANCE . Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

12. CERTAIN DEFINITIONS . For purposes of this Warrant, the following terms shall have the following meanings:

(a) “ Nasdaq ” means www.Nasdaq.com.

(c) “ Common Stock ” means the Company’s common stock, and any other class of securities into which such securities may hereafter be reclassified or changed.

(f) “ Exempt Issuance ” means the issuance of (i) shares of Common Stock or options to employees, officers, or directors of the Company pursuant to any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, (ii) shares of Common Stock issued pursuant to real property leasing arrangement from a bank approved by the Board of Directors of the Company; and (iii) any shares and/or warrants issued by the Company in connection with a settlement of the pending Zakeni litigation (there shall be no adjustments to any of the terms of this Warrant or any of the related transaction

documents as a result of any shares and/or warrants issued by the Company in connection with a settlement of the pending Zakeni litigation).

(g) “ Principal Market ” means the primary national securities exchange on which the Common Stock is then traded.

(h) “ Market Price ” means the highest traded price of the Common Stock during the thirty (30) Trading Days prior to the date of the respective Exercise Notice.

* * * * * * *

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date set forth above.

SPYR, INC.

_______________________
Name: James Thompson

Title: Chief Executive Officer

EXHIBIT A

EXERCISE NOTICE

(To be executed by the registered holder to exercise this Common Stock Purchase Warrant)

The Undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“Warrant Shares”) of SPYR, INC., a Nevada corporation (the “Company”), evidenced by the attached copy of the Common Stock Purchase Warrant (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

Form of Exercise Price . The Holder intends that payment of the Exercise Price shall be made as (check one):

	☐	a cash exercise with respect to _________________ Warrant Shares; or
	☐	by cashless exercise pursuant to the Warrant.

Delivery of Warrant Shares . The Company shall deliver to the holder __________________ Warrant Shares in accordance with the terms of the Warrant.

Date: ____________________________

(Print Name of Registered Holder)

By: _____________________________

Name: ___________________________

Title: ____________________________

EXHIBIT B

ASSIGNMENT OF WARRANT

(To be signed only upon authorized transfer of the Warrant)

For Value Received , the undersigned hereby sells, assigns, and transfers unto ____________________ the right to purchase _______________ shares of common stock of SPYR, INC., to which the within Common Stock Purchase Warrant relates and appoints ____________________, as attorney-in-fact, to transfer said right on the books of SPYR, INC. with full power of substitution and re-substitution in the premises. By accepting such transfer, the transferee has agreed to be bound in all respects by the terms and conditions of the within Warrant.

Dated: __________________

__________________________________
(Signature) *

__________________________________
(Name)

__________________________________
(Address)

__________________________________
(Social Security or Tax Identification No.)

CASH WARRANT AGREEMENT

This Cash Warrant Agreement (“ Warrant Agreement ”) is entered into by and between SPYR, Inc., a Nevada Corporation (“ Company ”), with a business address of 4643 South Ulster Street, Suite 1510, Regency Plaza, Denver Colorado 80237, and William D. Moreland, with an address of 1655 East Layton Drive, Englewood, CO 80113 (“ Warrant Holder ”). Both Company and Warrant Holder may be referred to individually as a “ Party ” and collectively as the “ Parties .”

1. Issuance . Company shall issue to Warrant Holder a certificate (“ Warrant Certificate ”) dated May 30, 2018, providing Warrant Holder, and any subsequent assignee or transferee of Warrant Holder, with the right to purchase, at any time, commencing after March 30, 2018 (“ Effective Date ”) until the Expiration Date (defined below in Section 3), up to one million (1,000,000) restricted shares of common stock of Company (“ Warrant Shares ”) in the following amounts and at the following exercise prices: (i) 500,000 shares at fifty cents ($0.50) per Warrant Share; (ii) 250,000 shares at seventy-five cents ($0.75) per Warrant Share; and (iii) 250,000 shares at one dollar ($1.00) per Warrant Share. The Warrant Certificate issued hereunder shall be non-cancelable and non-callable by Company.

2. Warrant Certificates . The Warrant Certificate to be delivered pursuant to this Warrant Agreement shall be in the form attached hereto as Exhibit A.

3. Exercisability of Warrants . The Warrant Certificate shall expire if and to the extent the Warrant Shares are not exercised by May 29, 2021 (“ Expiration Date ”).

4. Procedure for Exercise of Warrant Shares . The Warrant Shares are exercisable in the following amounts and at the following exercise prices: (i) 500,000 shares at fifty cents ($0.50) per Warrant Share; (ii) 250,000 shares at seventy-five cents ($0.75) per Warrant Share; and (iii) 250,000 shares at one dollar ($1.00) per Warrant Share. (each a respective “ Exercise Price ”). Upon surrender of a Warrant Certificate with the attached form of Election to Purchase Warrant Shares fully completed and duly executed, together with payment of the Exercise Price for the Warrant Shares purchased, at the Company's principal offices at 4643 South Ulster Street, Suite 1510, Regency Plaza, Denver Colorado 80237, Warrant Holder shall be entitled to receive a restricted stock certificate or certificates for the Warrant Shares so purchased. The purchase rights represented by the Warrant Certificates are exercisable at the option of Warrant Holder, in whole or in part. Upon the exercise of less than all of the Warrants evidenced by a Warrant Certificate, Company shall forthwith issue to Warrant Holder a new warrant certificate (“ Adjusted Warrant Certificate ”) representing the number of the remaining unexercised Warrant Shares.

5. Issuance of Stock Certificate . Upon the exercise of a Warrant Certificate or Adjusted Warrant Certificate, the issuance of stock certificate(s) for Warrant Shares shall be made within ten (10) business days thereafter, and such stock certificate(s) shall be issued in the name of, or in such names as may be directed by Warrant Holder. Upon exchange of the Warrant Certificate by Warrant Holder for a partial exercise of the Warrant Shares, Company shall issue Warrant Holder an Adjusted Warrant Certificate, legally binding as of the Effective Date and pursuant to the terms of this Warrant Agreement.

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6. Transfer of Warrants . Warrant Holder, by its acceptance hereof, covenants and agrees that the Warrants are being acquired as an investment and not with a view to the distribution thereof. The Warrant Shares may only be sold, transferred, assigned, hypothecated or otherwise disposed of, in whole or in part, subject to the applicable restrictions set forth in Warrant Holder’s Stock Purchase Agreement dated May 30, 2018, and subject to compliance with applicable securities laws. Any costs associated with any transfer (transfer agent fees, legal, copying charges, etc.) shall be the sole and exclusive responsibility of Warrant Holder. This Warrant Agreement, and the rights and obligations of the Parties hereunder, will be binding upon and inure to the benefit of the Parties’ respective successors, assigns, heirs, executors, administrators and legal representatives.

7. Registration Under the Securities Act of 1933 . As of the Effective Date, neither the Warrant Agreement nor the Warrant Shares have been registered under the Securities Act of 1933, as amended (“ Securities Act ”). Upon exercise, in whole or in part of the Warrant Shares, a stock certificate representing the Warrant Shares shall bear the following legend:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“ACT”), AND MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.

The Company shall use its best efforts to file with the SEC a registration statement that includes the Purchased Shares within ninety (90) days of the Closing.

8. Exchange and Replacement of Warrant Certificate . Upon receipt by Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of the Warrant Certificate or any Adjusted Warrant Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and reimbursement to Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of the Warrant Shares, if mutilated, Company will make and deliver a new Warrant Certificate or Adjusted Warrant Certificate in lieu thereof.

9. Elimination of Fractional Interests . Company shall not be required to issue stock certificates representing fractions of common stock upon the exercise of the Warrant Shares, nor shall it be required to issue scrip or pay cash in lieu of fractional interests, it being the intent of the Parties that all fractional interests shall be eliminated by rounding any fraction up to the nearest whole number of Warrant Shares.

10. Reservation of Securities . Company shall at all times reserve and keep available out of its authorized common stock, solely for the purpose of issuance upon the exercise of the Warrant Shares, such number of shares of its common stock as shall be issuable upon the exercise thereof. Company covenants and agrees that the Warrant Shares shall be duly and validly issued,

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CASH WARRANT AGREEMENT

fully paid, non-assessable and not subject to the preemptive rights of any holder of its common stock.

11. Voting Rights and Notices to Warrant Holder . Nothing contained in this Warrant Agreement shall be construed as conferring upon the Warrant Holder by virtue of its holding the Warrant Agreement the right to vote or to consent or to receive notice as a holder of common stock of Company in respect of any meetings of such holders for the election of directors or any other matter, or as having any rights whatsoever as possessed by a shareholder of Company.

12. Notices . All notices, requests, consents and other communications pursuant to this Warrant Agreement shall be in writing and shall be deemed to have been duly made and sent when delivered by email to Warrant Holder at Warrant Holder’s email address of record with Company, or by U.S. Certified Mail, return receipt requested: (i) If to Warrant Holder, to the address of Warrant Holder as shown on the books of the Company; or (ii) if to Company, to the address set forth on page 1 of this Warrant Agreement or to such other address as Company may designate by notice to Warrant Holder.

13. Supplements and Amendments . The Company and Warrant Holder may from time to time supplement or amend this Warrant Agreement in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any provisions herein, or to make any other provisions in regard to matters or questions arising hereunder which Company and Warrant Holder may deem necessary or desirable. Any and all amendments and supplements shall be in writing and signed by the Parties.

14. Successors . All of the covenants and provisions of this Warrant Agreement shall be binding upon and inure to the benefit of Company and Warrant Holder, and their respective successors and assigns.

15. Governing Law . This Warrant Agreement, Warrant Certificate and any Adjusted Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Colorado and for all purposes shall be construed in accordance with the laws of the State of Colorado without giving effect to the rules of the State of Colorado governing the conflicts of laws. The Parties submit to the jurisdiction of the Courts for the State of Colorado, County of Denver, to resolve any disputes regarding the interpretation or enforcement of this Agreement. Additionally, the Parties agree, prior to the filing of any action at law or equity regarding this Warrant Agreement, to submit their dispute to non-binding mediation with the JAG office located in Denver, Colorado. The Parties agree that the costs for any non-binding mediation shall be borne equally between them, and that the Parties shall bear their own respective costs for counsel, if any, and related party expenses.

16. Entire Agreement; Modification . This Warrant Agreement contains the entire understanding between the Parties with respect to the subject matter hereof and may not be modified or amended except by a writing duly signed by the Party against whom enforcement of the modification or amendment is sought.

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17. Severability . If any provision of this Warrant Agreement shall be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision of this Warrant Agreement.

18. Captions . The caption headings of the sections of this Warrant Agreement are for convenience of reference only and are not intended, nor should they be construed as, a part of this Warrant Agreement and shall be given no substantive effect.

19. Benefits of this Warrant Agreement . Nothing in this Warrant Agreement shall be construed to give to any person or corporation other than Company and Warrant Holder any legal or equitable right, remedy or claim under this Warrant Agreement, and this Agreement shall be for the sole and exclusive benefit of Company and Warrant Holder.

20. Counterparts . This Warrant Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and such counterparts shall together constitute but one and the same instrument.

IN WITNESS WHEREOF, the Parties hereto have caused this Warrant Agreement to be duly executed as of May 30, 2018.

SPYR, INC.

By: _____________________________

Printed Name: James R. Thompson

Title: Chief Executive Officer and President

ACCEPTED AND AGREED TO BY:

WILLIAM D. MORELAND

By: ______________________________

Printed Name: WILLIAM D. MORELAND

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EXHIBIT A

THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO: (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“ACT”); (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES); OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.

WARRANT CERTIFICATE

This Warrant Certificate certifies that William D. Moreland (“ Moreland ”) or his assign(s) (“ Warrant Holder ”) is the registered Warrant Holder eligible to purchase at any time after May 30, 2018, (“ Effective Date ”), until 5:00 p.m. Mountain Standard Time on May 29, 2021 (“ Expiration Date ”), up to one million (1,000,000) shares of restricted common stock (“ Warrant Shares ”) of SPYR, Inc. (“ Company ”), at the following exercise prices: (i) 500,000 shares at fifty cents ($0.50) per Warrant Share; (ii) 250,000 shares at seventy-five cents ($0.75) per Warrant Share; and (iii) 250,000 shares at one dollar ($1.00) per Warrant Share (the “ Exercise Price ”), upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of Company, but subject to the conditions set forth herein and in the Warrant Agreement between Moreland and SPYR effective as of May 30 2018 (“ Warrant Agreement ”). Payment of the Exercise Price shall be made by certified check or official bank check in immediately available funds payable to the order of Company. No Warrant Shares may be exercised after 5:00 p.m. Mountain Standard Time on the Expiration Date defined in the Warrant Agreement, at which time all Warrant Shares evidenced hereby, unless exercised prior thereto, shall thereafter be void. The Warrant Shares evidenced by this Warrant Certificate are part of a duly authorized issuance of Warrant Shares to be issued pursuant to the Warrant Agreement, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of Company and Warrant Holder of the Warrant Shares. Upon the exercise of less than all of the Warrant Shares evidenced by this Warrant Certificate, Company shall promptly issue to Warrant Holder a new Warrant Certificate representing such number of unexercised Warrant Shares. Company may deem and treat the registered Warrant Holder hereof as the absolute owner of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, and of any distribution to the Warrant Holder hereof, and for all other purposes, and Company shall not be affected by any notice to the contrary. All terms used in this Warrant Certificate that are defined in the Warrant Agreement shall have the meanings assigned to them in the Warrant Agreement.

[SIGNATURE TO FOLLOW ON NEXT PAGE]

IN WITNESS WHEREOF, Company has caused this Warrant Certificate to be duly executed as of May 30, 2018.

SPYR, INC.

By: _____________________________

Printed Name: James R. Thompson

Title: Chief Executive Officer and President

EXHIBIT A

ELECTION TO PURCHASE WARRANT SHARES

The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to purchase _______ shares of common stock of Company and herewith tenders in payment for such Warrant Shares a certified check or official bank check payable to the order of SPYR, Inc. in the amount of $______________, all in accordance with the terms of the Warrant Agreement.

The undersigned requests that a stock certificate for such Warrant Shares be registered in the name of:

________________________________________ ;

Whose address of record is:

[Address] ________________________________________;

[City] _______________________________;

[State] ______________________________;

With a tax identification number or social security number of _________________________and

That such stock certificate be delivered to ________________________________________.

Dated:

Signature: ________________________ (Signature must conform in all respects to name of Warrant Holder as specified on the face of the Warrant Certificate.)

Signature: ________________________ (Signature must conform in all respects to the name of Warrant Holder as specified on the face of the Warrant Certificate.)

EXHIBIT A

FORM OF ASSIGNMENT

(To be executed by the registered Holder if such Warrant Holder

elects to transfer the Warrant Certificate.)

FOR VALUE RECEIVED _____________________________ hereby sells, assigns and transfers unto

(Please print name and address of transferee)

the Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint as attorney to transfer the Warrant Certificate on the books of Company, with full power of substitution.

Dated: ________________

Signature:________________________ (Signature must conform in all respects to name of Warrant Holder as specified on the face of the Warrant Certificate.)

Signature:________________________ (Signature must conform in all respects to name of Holder as specified on the face of the Warrant Certificate.)

SSN/TIN: ___________________________ (Insert Social Security or Other Identifying Number of Assignee)

NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

SPYR, INC.

Convertible Note

Issuance Date: May 22, 2018	Original Principal Amount: $275,000
Note No. SPYR-1	Consideration Paid at Close: $250,000

FOR VALUE RECEIVED, SPYR, INC. , a Nevada corporation with a par value of $0.0001 per common share (“Par Value”) (the " Company "), hereby promises to pay to the order of Collier Investments, LLC or registered assigns (the " Holder ") the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the " Principal ") when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (" Interest ") on any outstanding Principal at the applicable Interest Rate from the date set out above as the Issuance Date (the " Issuance Date ") until the same becomes due and payable, upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof).

The Original Principal Amount is $275,000 plus accrued and unpaid interest and any other fees. The Consideration is $250,000 payable by wire transfer (there exists a $25,000 original issue discount (the “OID”)). The Holder shall pay $250,000 of Consideration upon closing of this Note. For purposes hereof, the term “Outstanding Balance” means the Original Principal Amount, as reduced or increased, as the case may be, pursuant to the terms hereof for conversion, breach hereof or otherwise, plus any accrued but unpaid interest, collection and enforcements costs, and any other fees, penalties, damages or charges incurred under this Note.

(1) GENERAL TERMS

(a) Payment of Principal . The " Maturity Date " shall be eight (8) months after the Issuance Date, as may be extended at the option of the Holder in the event that, and for so long as, an Event of Default (as defined below) shall not have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) or any event shall not have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) that with the passage of time and the failure to cure would result in an Event of Default.

(b) Interest . A one-time interest charge of eight percent (8%) (“ Interest Rate ”) shall be applied on the Issuance Date to the Outstanding Balance. Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Note

is registered on the records of the Company regarding registration and transfers of Notes in cash or converted into Common Stock at the Conversion Price provided the Equity Conditions are satisfied.

(c) Security . This Note shall be secured by collateral and assets of the Company, as further provided in that certain security agreement entered into on the Issuance Date by the Company and Holder.

(2) EVENTS OF DEFAULT.

(a) An “ Event of Default ”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

(i) The Company's failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Note (including, without limitation, the Company's failure to pay any redemption payments or amounts hereunder);

(ii) A Conversion Failure as defined in section 3(b)(ii)

(iii) The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;

(iv) The Company or any subsidiary of the Company shall default in any of its obligations under any other Note or any mortgage, credit agreement or other facility, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall hereafter be created; and

(v) The Common Stock is suspended or delisted for trading on the OTCPink Open Marketplace or any other principal market that the Common Stock is then traded on (the “ Primary Market ”).

(vi) The Company loses its ability to deliver shares via “DWAC/FAST” electronic transfer.

(vii) The Company loses its status as “DTC Eligible.”

(viii) The Company shall become late or delinquent in its filing requirements as a fully-reporting issuer registered with the Securities & Exchange Commission.

(ix) The Company shall fail to reserve and keep available out of its authorized Common Stock a number of shares equal to at least 3 (three) times the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Note.

(x) The Company shall fail to meet all requirements to satisfy the availability of Rule 144 to the Investor or its assigns including but not limited to timely fulfillment of its filing requirements as a fully-reporting issuer registered with the SEC, requirements for XBRL filings, and requirements for disclosure of financial statements on its website.

(xi) The Common Stock trades at less than $0.02 per share at any time while the Note is outstanding.

(b) Upon the occurrence of any Event of Default (without the need for any party to give any notice or take any other action), the Outstanding Balance shall immediately and automatically increase to 120% of the Outstanding Balance immediately prior to the occurrence of the Event of Default (the “Default Sum”) (except that 120% shall be replaced with 100% with respect to an event of default under Section 2(a)(xi), and the Conversion Price shall be redefined to equal the lesser of (a) 100% multiplied by the price per share paid by the investors in the Qualified Financing (as defined in this Note), or (b) $0.25. Upon the occurrence of any Event of Default, the Note shall become immediately due and payable and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Outstanding Balance, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

(3) CONVERSION OF NOTE . This Note shall be convertible into shares of the Company's Common Stock, on the terms and conditions set forth in this Section 3.

(a) Conversion Right . Subject to the provisions of Section 3(c), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(b), at the Conversion Price (as defined below). The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this Section 3(a) shall be equal to the quotient of dividing the Conversion Amount by the Conversion Price. The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer agent fees, legal fees, costs and any other fees or costs that may be incurred or charged in connection with the issuance of shares of the Company’s Common Stock to the Holder arising out of or relating to the conversion of this Note.

(i) " Conversion Amount " means the portion of the Original Principal Amount and Interest to be converted, plus any penalties, redeemed or otherwise with respect to which this determination is being made.

(ii) " Conversion Price " shall equal the lesser of (i) $0.25 or (ii) 100% multiplied by the price per share paid by the investors in the next capital raising transaction consummated by the Company in the amount of $5,000,000.00 or more primarily from the sale of equity of the Company (the “Qualified Financing”), subject to adjustment as provided in this Note, subject to adjustment as provided in this Note.

(b) Mechanics of Conversion .

(i) Optional Conversion . To convert any Conversion Amount into shares of Common Stock on any date (a " Conversion Date "), the Holder shall (A) transmit by email, facsimile (or otherwise deliver), for receipt on or prior to 5:00 p.m., New York, NY Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit A (the " Conversion Notice ") to the Company. On or before the third Business Day following the date of receipt of a Conversion Notice (the " Share Delivery Date "), the Company shall (A) if legends are not required to be placed on certificates of Common Stock pursuant to the then existing provisions of Rule 144 of the Securities Act of 1933 (“Rule 144”) and provided that the Transfer Agent is participating in the Depository Trust Company's (" DTC ") Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system or (B) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant the Rule 144. If this Note is physically surrendered for conversion and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall, upon request of the Holder, as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock upon the transmission of a Conversion Notice.

(ii) Company's Failure to Timely Convert . If within three (3) Trading Days after the Company's receipt of the facsimile or email copy of a Conversion Notice the Company shall fail to issue and deliver to Holder via “DWAC/FAST” electronic transfer the number of shares of Common Stock to which the Holder is entitled upon such holder's conversion of any Conversion Amount (a " Conversion Failure "), the Original Principal Amount of the Note shall increase by $2,000 per day until the Company issues and delivers a certificate to the Holder or credit the Holder's balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such holder's conversion of any Conversion Amount (under Holder’s and Company’s expectation that any damages will tack back to the Issuance Date). Company will not be subject to any penalties once its transfer agent processes the shares to the DWAC system. If the Company fails to deliver shares in accordance with the timeframe stated in this Section, resulting in a Conversion Failure, the Holder, at any time prior to selling all of those shares, may rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the Outstanding Balance with the rescinded conversion shares returned to the Company (under Holder’s and Company’s expectations that any returned conversion amounts will tack back to the original date of the Note).

(iii) [Intentionally Omitted].

(iv) [Intentionally Omitted].

(v) [Intentionally Omitted].

(vi) Book-Entry . Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.

(i) Beneficial Ownership . The Company shall not effect any conversions of this Note and the Holder shall not have the right to convert any portion of this Note or receive shares of Common Stock as payment of interest hereunder to the extent that after giving effect to such conversion or receipt of such interest payment, the Holder, together with any affiliate thereof, would beneficially own (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or receipt of shares as payment of interest. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of this Note is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of this Note that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with Section 3(a) and, any principal amount tendered for conversion in excess of the permitted amount hereunder shall remain outstanding under this Note. In the event that the Market Capitalization of the Company falls below $2,500,000, the term “4.99%” above shall be permanently replaced with “9.99%”. “Market Capitalization” shall be defined as the product of (a) the closing price of the Common Stock of the Common stock multiplied by (b) the number of shares of Common Stock outstanding as reported on the Company’s most recently filed Form 10-K or Form 10-Q. The provisions of this Section may be waived by Holder upon not less than 65 days prior written notification to the Company.

(ii) Capitalization. So long as this as this Note is outstanding, upon written request of the Holder, the Company shall furnish to the Holder the then-current number of common shares issued and outstanding, the then-current number of common shares authorized, and the then-current number of shares reserved for third parties.

(d) Other Provisions .

(i) Share Reservation. The Company shall at all times reserve and keep available out of its authorized Common Stock a number of shares equal to at least 3 (three) times the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Note; and within 3 (three) Business Days following the receipt by the Company of a Holder's notice that such minimum number of shares of Common Stock is not so reserved, the Company shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement. The Company will at all times reserve at least 10,000,000 shares of Common Stock for conversion.

(ii) Prepayment. At any time within the 90 day period immediately following the Issuance Date, the Company shall have the option, upon 10 business days’ notice to Holder, to pre-pay the entire remaining outstanding principal amount of this Note in cash, provided that (i) the Company shall pay the Holder 120% of the Outstanding Balance, (ii) such amount must be paid in cash on the next business day following such 10 business day notice period, and (iii) the Holder may still convert this Note pursuant to the terms hereof at all times until such prepayment amount has been received in full. Except as set forth in this Section the Company may not prepay this Note in whole or in part.

(iii) Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Company or any of its subsidiaries of any security (or upon any amendment to any existing security) with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Company shall notify the Holder of such additional or more favorable term and such term, at Holder’s option, shall become a part of the Note. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.

(iv) All calculations under this Section 3 shall be rounded up to the nearest $0.00001 or whole share.

(v) Nothing herein shall limit a Holder's right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company's failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

(vi) Except as described in Schedule (3)(d)(vi), if the Company, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion any convertible notes or warrants outstanding as of or following the Issuance Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than

the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal the Base Conversion Price.

(4) Section 3(a)(9) or 3(a)(10) Transaction . Except with respect to settlement of the pending Zakeni litigation, so long as this Note is outstanding, the Company shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”). In the event that the Company does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(10) Transaction while this note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than $25,000, will be assessed and will become immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.

(5) PIGGYBACK REGISTRATION RIGHTS . The Company shall include on the next registration statement the Company files with SEC (or on the subsequent registration statement if such registration statement is withdrawn) all shares issuable upon conversion of this Note. Failure to do so will result in liquidated damages of 25% of the outstanding principal balance of this Note, but not less than $25,000, being immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.

(6) REISSUANCE OF THIS NOTE .

(a) Assignability. The Company may not assign this Note. This Note will be binding upon the Company and its successors and will inure to the benefit of the Holder and its successors and assigns and may be assigned by the Holder to anyone of its choosing without Company’s approval.

(b) Lost, Stolen or Mutilated Note . Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note representing the outstanding Principal.

(7) NOTICES . Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) (iii) upon receipt, when sent by email; or (iv) one (1) Trading Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be those set forth in the communications and documents that each party has provided the other immediately preceding the issuance of this Note or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

The addresses for such communications shall be:

If to the Company, to:

Spyr, Inc.

4643 S. Ulster St., Suite 1510

Denver, CO 80237

E-mail: jthompson@spyr.com

With a copy to:

Mailander Law Office

Attn: Tad Mailander, Esq.

945 4th Avenue, Ste. 311

San Diego, CA 92101

E-mail: tmailander@gmail.com

If to the Holder:

COLLIER INVESTMENTS, LLC

120 Birmingham Drive, Suite 230

Cardiff, CA 92007

Attn: David Clark, Principal

Email: dclark@vci.us.com

(8) APPLICABLE LAW AND VENUE . This Note shall be governed by and construed in accordance with the laws of the State of Nevada, without giving effect to conflicts of laws thereof. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of California or in the federal courts located in the city and county of San Diego, in the State of California. Both parties and the individuals signing this Agreement agree to submit to the jurisdiction of such courts.

(9) WAIVER . Any waiver by the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver must be in writing.

(10) LIQUIDATED DAMAGES . Holder and Company agree that in the event Company fails to comply with any of the terms or provisions of this Note, Holder's damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties' inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Holder and Company agree that any fees, balance adjustments, default interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Holder's and Company's expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period under Rule 144).

(11) ADJUSTMENTS . Notwithstanding anything to the contrary, any references herein to share numbers or share prices shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

(12) QUALIFIED FINANCING . If the Company fails to consummate a Qualified Financing on or before October 17, 2018 and the Note has not been satisfied in full on or before October 17, 2018, then a liquidated damages charge of $25,000.00 shall be immediately added to the balance of this Note.

(13) Prohibition Variable Securities . So long as the Note is outstanding, the Company shall not, without written consent of the Investor, issue any Variable Security (as defined herein). A Variable Security shall mean any security issued by the Company that (i) has or may have conversion rights of any kind, contingent, conditional or otherwise in which the number of shares that may be issued pursuant to such conversion right varies with the market price of the common stock; (ii) is or may become convertible into common stock (including without limitation convertible debt, warrants or convertible preferred stock), with a conversion or exercise price that varies with the market price of the common stock, even if such security only becomes convertible or exercisable following an event of default, the passage of time, or another trigger event or condition; or (iii) was issued or may be issued in the future in exchange for or in connection with any contract, security, or instrument, whether convertible or not, where the number of shares of common stock issued or to be issued is based upon or related in any way to the market price of the common stock, including, but not limited to, common stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar settlement or exchange.

(14) LEAK-OUT . Unless (i) an Event of Default occurs under the Note or (ii) the Company’s common stock closes at less than $0.20 per share at any time while the Note is outstanding, the Holder’s sales of the Company’s common stock underlying the Note and the Commitment Shares (as defined in the securities purchase agreement entered into with respect to the Note) , per trading day, shall be limited to the greater of (i) 10,000 shares of the Company’s common stock or (ii) 15% of the daily

traded volume of the Company’s common stock (based on the weekly cumulated traded volume of the Company’s common stock).

(15) HOLDER’S TRADING ACTIVITY . The Company and Holder acknowledge and agree that (i) the Holder has not been asked to agree, nor has the Holder agreed, to desist from purchasing or selling, long, securities of the Company; (ii) the Holder may not at any time while the Note is outstanding have a “short” position in the Common Stock, and (iii) the Holder shall not be deemed to have an affiliation with or control over any arm’s length counter-party in any “derivative” transaction.

[Signature Page Follows]

IN WITNESS WHEREOF , the Company has caused this Convertible Note to be duly executed by a duly authorized officer as of the date set forth above.

	COMPANY:
	SPYR, INC.

	By: _____________________________
	Name: James Thompson
	Title: Chief Executive Officer

	HOLDER:
	COLLIER INVESTMENTS, LLC

	By: ______________________________
	Name: David Clark
	Title: Principal

[Signature Page to Convertible Note No. SPYR-1]

EXHIBIT A
CONVERSION NOTICE
[Company Contact, Position]
SPYR, INC.
[Company Address]
[Contact Email Address}
The undersigned hereby elects to convert a portion of the $________ Convertible Note _______ issued to Collier Investments, LLC on ____________ into Shares of Common Stock of ____________ according to the conditions set forth in such Note as of the date written below.
By accepting this notice of conversion, you are acknowledging that the number of shares to be delivered represents less than 10% (ten percent) of the common stock outstanding. If the number of shares to be delivered represents more than 9.99% of the common stock outstanding, this conversion notice shall immediately automatically extinguish and debenture Holder must be immediately notified.

Date of Conversion:
Conversion Amount:
Conversion Price:
Shares to be Delivered:

Shares delivered in name of:
COLLIER INVESTMENTS, LLC

Signature:
		By: Title:
		Collier Investments, LLC

EXHIBIT B
TRUE-UP NOTICE
[Company Contact, Position]
SPYR, INC.
[Company Address]
[Contact Email Address}

The undersigned hereby gives notice to SPYR, INC. , a ______ corporation (the “Company”), pursuant to that certain Note dated _______ ___, 20__ by and between the Company and the Holder (the “Note”), that the Holder elects to:

___

Receive fully paid and non-assessable True-Up Shares pursuant to Section 3(b)(v) of the Note (such Additional Origination Shares shall be calculated as set forth below), or

___

Add to the Outstanding Balance a dollar amount equal to the True-Up Amount (such True-Up Amount shall be calculated as set forth below).

The number of True-Up Shares Holder is entitled to receive is calculated as follows:

Conversion Amount ($___) / ___% of the lowest trade occurring during the _________ (__) consecutive Trading Days immediately preceding the applicable Conversion Date ($_.__) - Conversion Amount ($___) divided by the Par Value ($_.__) =

____________ True-Up Shares

The amount of True-Up Balance to be added to the Outstanding Balance is calculated as follows:

Number of True-Up Shares (_____) * high trade price on the Conversion Date ($_.__)=

____________ True-Up Balance

Shares delivered in name of:
COLLIER INVESTMENTS, LLC

Signature:
	By: Title:
	Collier Investments, LLC

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of May 22, 2018, by and between SPYR, Inc. , a Nevada corporation, with headquarters located at 4643 S. Ulster St., Suite 1510, Denver, CO 80237 (the “Company”), and COLLIER INVESTMENTS, LLC , a California limited liability company, with its address at 120 Birmingham Drive, Suite 230, Cardiff, CA 92007 (the “Buyer”).

WHEREAS :

A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement an 8% convertible promissory note of the Company, in the form attached hereto as Exhibit A , in the aggregate principal amount of US$275,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, $0.0001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.

C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto; and

NOW THEREFORE , the Company and the Buyer severally (and not jointly) hereby agree as follows:

1. PURCHASE AND SALE OF NOTE .

a. Purchase of Note . On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto, subject to the express terms of the Note. In connection with the issuance of the Note, the Company shall issue a warrant to Buyer to purchase 200,000 shares of the Company’s common stock (the “Warrant”) as a commitment fee. Further, the Company shall issue to Buyer as a commitment fee, 200,000 shares of the Company’s Common Stock (the “Commitment Shares”).

b. Form of Payment . On the Closing Date, the Buyer shall pay the purchase price of $250,000.00 (the “Purchase Price”) the Note, by wire transfer of immediately

available funds, in accordance with the Company’s written wiring instructions against delivery, of the Note, pursuant to the terms of the Note.

c. Closing Date . Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 5:00 P.M., Eastern Standard Time on or about May 22, 2018, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

2. REPRESENTATIONS AND WARRANTIES OF THE BUYER . The Buyer represents and warrants to the Company that:

a. Investment Purpose . As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (including, without limitation, such additional shares of Common Stock, if any, as are issuable (i) on account of interest on the Note or (ii) as a result of the events described in Sections 1.3 and 1.4(g) of the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided , however , that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

b. Reliance on Exemptions . The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

c. Information . The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence

investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.

d. Governmental Review . The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

e. Transfer or Re-sale . The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

f. Legends . The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

g. Authorization; Enforcement . This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . The Company represents and warrants to the Buyer that:

a. Organization and Qualification . The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

b. Authorization; Enforcement . (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

c. Capitalization . Except as disclosed in the SEC Documents and except for 20,000,000 shares reserved for First Fire Global Opportunities Fund, LLC in connection with a $150,000.00 convertible promissory note, no shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved for issuance pursuant to securities (other than the Note) exercisable for, or convertible into or exchangeable for shares of Common Stock and sufficient shares are reserved for issuance upon conversion of the Note (as required by the

Note and transfer agent share reserve letter). All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. Except as disclosed in the SEC Documents, the 500,000 warrants held by First Fire Global Opportunities Fund, LLC in connection with a $150,000.00 convertible promissory note and possible conversions thereunder, and the right of Doug Moreland to acquire 2,000,000 shares at a price of $0.15 per share, as of the effective date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Note or the Conversion Shares. The Company has filed in its SEC Documents true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto. The Company shall provide the Buyer with a written update of this representation signed by the Company’s Chief Executive on behalf of the Company as of the Closing Date.

d. Issuance of Shares . The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

e. Acknowledgment of Dilution . The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

f. No Conflicts . The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for

issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and to issue the Conversion Shares upon conversion of the Note. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the OTCBB, OTCQX, OTCQB, OTC Pink, the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), the NYSE American, or any equivalent replacement exchange or quotation system (as applicable at the time, the “Principal Trading Market”), and does not reasonably anticipate that the Common Stock will be delisted by the Principal Trading Market in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

g. SEC Documents; Financial Statements . The Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the

SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements of the 1934 Act. For the avoidance of doubt, filing of the documents required in this Section 3(g) via the SEC’s Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) shall satisfy all delivery requirements of this Section 3(g).

h. Absence of Certain Changes . There have been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.

i. Absence of Litigation . Except as disclosed in the SEC Documents, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. The SEC Documents contain a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the

Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

j. Patents, Copyrights, etc . The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); Except as disclosed in the SEC Documents, there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.

k. No Materially Adverse Contracts, Etc . Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.

l. Tax Status . The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority.

m. Certain Transactions . Except as disclosed in the SEC Documents and except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

n. Disclosure . All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).

o. Acknowledgment Regarding Buyer’ Purchase of Securities . The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

p. No Integrated Offering . Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s

securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

q. No Brokers . The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

r. Permits; Compliance . The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

s. Environmental Matters .

(i) There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

(ii) Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its Subsidiaries’ business.

(iii) There are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries that are not in compliance with applicable law.

t. Title to Property . Except as disclosed in the SEC Documents the Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

u. Internal Accounting Controls . Except as disclosed in the SEC Documents the Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

v. Foreign Corrupt Practices . Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

w. Solvency . The Company, based upon reasonable business assumptions, reasonably believes that it will be able to fulfill its business objectives.

x. No Investment Company . The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

y. Insurance . Upon written request the Company will provide to the Buyer true and correct copies of all policies relating to directors’ and officers’ liability coverage, errors and omissions coverage, and commercial general liability coverage, if any.

z. Breach of Representations and Warranties by the Company . If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under Section 3.4 of the Note.

4. COVENANTS .

a. Best Efforts . The parties shall use their commercially reasonable best efforts to satisfy timely each of the conditions described in Section 6 and 7 of this Agreement.

b. Use of Proceeds . The Company shall use the proceeds from the sale of the Note for working capital and other general corporate purposes and shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other person (except in connection with its currently existing direct or indirect Subsidiaries).

c. Intentionally omitted.

d. Listing . The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the Principal Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any material notices it receives from the Principal Trading Market and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.

e. Corporate Existence . So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the Principal Trading Market

f. No Integration . The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

g. Failure to Comply with the 1934 Act . So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.

h. Trading Activities . Neither the Buyer nor its affiliates has an open short position (or other hedging or similar transactions) in the common stock of the Company and the Buyer agree that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the common stock of the Company.

i. Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under Section 3.3 of the Note.

5. Transfer Agent Instructions . Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note

and this Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company, at the cost of the Buyer, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

6. CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL . The obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

a. The Buyer shall have executed this Agreement and delivered the same to the Company.

b. The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.

c. The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or

governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

7. CONDITIONS PRECEDENT TO THE BUYER’S OBLIGATION TO PURCHASE . The obligation of the Buyer hereunder to purchase the Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

a. The Company shall have executed this Agreement and delivered the same to the Buyer.

b. The Company shall have delivered to the Buyer duly executed Note (in such denominations as the Buyer shall request) in accordance with Section 1(b) above.

c. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’ resolutions relating to the transactions contemplated hereby.

d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

e. No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.

f. The Conversion Shares shall have been authorized for quotation on the Principal Trading Market or any similar quotation system and trading in the Common Stock on the Principal Trading Market or any similar quotation system shall not have been suspended by the SEC, the Principal Trading Market, or any similar quotation system.

g. The Buyer shall have received an officer’s certificate described in Section 3(c) above, dated as of the Closing Date.

8. GOVERNING LAW; MISCELLANEOUS .

a. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state or federal courts of San Diego County, California. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens . The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.

b. Counterparts; Signatures by Facsimile . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

c. Headings . The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

d. Severability . In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

e. Entire Agreement; Amendments . This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with

respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

f. Notices . All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to the Company, to:

Spyr, Inc.

4643 S. Ulster St., Suite 1510

Denver, CO 80237

E-mail: jthompson@spyr.com

With a copy to:

Mailander Law Office

Attn: Tad Mailander, Esq.

945 4th Avenue, Ste. 311

San Diego, CA 92101

E-mail: tmailander@gmail.com

If to the Holder, to:

COLLIER INVESTMENTS, LLC

120 Birmingham Drive, Suite 230

Cardiff, CA 92007

E-mail: dclark@vci.us.com

Each party shall provide notice to the other party of any change in address.

g. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

h. Third Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

i. Survival . The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

j. Further Assurances . Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

k. No Strict Construction . The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

l. Remedies .

(i) The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

(ii) In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

m. Publicity . The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, Principal Trading Market, or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided , however , that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, Principal Trading Market, or FINRA filings with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof).

[ - signature page follows - ]

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

SPYR, Inc.

By: _________________________________

Name: James Thompson

Title: Chief Executive Officer

COLLIER INVESTMENTS, LLC

By:_________________________________

Name: David Clark

Title: Principal

AGGREGATE SUBSCRIPTION AMOUNT:

Aggregate Principal Amount of Note: US$275,000.00

Aggregate Purchase Price: US$250,000.00

THE SECURITIES THAT ARE THE SUBJECT OF THIS TRANSACTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE OR ANY OTHER JURISDICTION. THERE MAY BE FURTHER RESTRICTIONS ON THE TRANSFERABILITY OF THE SECURITIES DESCRIBED HEREIN.

THE PURCHASE OF THE SECURITIES INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY QUALIFIED PERSONS WHO CAN BEAR THE RISK OF THE LOSS OF THEIR ENTIRE INVESTMENT.

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (“Agreement”) is made and entered into this 19 day of March 2018 (“Effective Date”), by and between SPYR, Inc., a Nevada corporation (“SPYR, Inc.,” or, “Seller”), and Richard Goldfarb, M.D. (“Purchaser”). Seller and the Purchaser may be individually referred to as a “Party” or collectively referred to as the “Parties.”

RECITALS

WHEREAS, Purchaser wishes to purchase from the Seller, seven hundred thousand (700,000) unregistered and restricted shares of common stock in Seller, subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

INCORPORATION OF RECITALS

The above Recitals are incorporated into this Agreement hereafter by reference as though fully set out. The Parties hereby waive any rule of construction that would prevent any court of competent jurisdiction from using and referring to the Recitals as a means of interpreting or enforcing this Agreement.

DEFINITIONS

“Act” means the 1934 Securities and Exchange Act.

“Affiliate” means a person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with SPYR, Inc.

“Agreement” shall mean this Stock Purchase Agreement, including any amendments agreed to by the Purchaser and Seller.

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“Closing Date” shall mean March 19, 2018.

“Effective Date” shall mean March 19, 2018.

“Exempt or Exemption” means a security or transaction that is exempt from registration under Section 5.

“Proceedings” means all legal proceedings concerning the interpretations, enforcement and defense of this Agreement and the transactions herein contemplated.

“Purchase Price” shall mean one hundred five thousand dollars ($105,000.00).

“Purchased Shares” shall mean seven hundred thousand (700,000) shares of unregistered restricted shares of common stock Seller, par value $0.0001 per share subject to a gating provision limiting the sale thereof to no more than 5,000 shares per day regardless of trading volume and an additional 5,000 shares per day for every 250,000 shares of daily trading volume.

“Reporting Company” means a reporting issuer and public company subject to Section 13 or 15(d) of the Exchange Act, with a class of stock registered under Sections 12(b), 12(g) or 15(d), and responsible for filing periodic and current reporting requirements with the Securities and Exchange Commission.

“Restricted Securities” means securities acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer.

“Rule 144” means an exemption from the registration requirements of Section 5 of the Act when securities have been acquired from the issuer or an affiliate of the issuer in a non-public offering and all subparts of Rule 144 (17 CFR § 230.144) have been satisfied.

“SEC” means the United States Securities and Exchange Commission.

“Section 5” means the requirement that a registration statement under the 1933 Securities and Exchange Act be found effective by the SEC pertaining to the offer and sale of a security.

“Underwriter” means a person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates, or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking.

ARTICLE I

PURCHASE AND SALE

1. Purchase and Sale . Subject to the terms and conditions hereinafter set forth, upon the Closing Date, Purchaser shall convey to Seller the Purchase Price via wire transfer and as soon as practicable thereafter, Seller shall sell, convey, transfer, and deliver to Purchaser a certificate or

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certificates representing the Purchased Shares in consideration of Purchaser’s payment of one hundred five thousand dollars ($105,000.00).

The certificates representing the Purchased Shares shall be duly issued in the name of Purchaser.

2. Closing . Subject to the terms and conditions of this Agreement, the purchase and sale of the Purchased Shares contemplated hereby will conclude on the Closing Date, or at such other time or on such other date or at such other place or by such other method as Seller and Purchaser may mutually agree upon orally or in writing.

ARTICLE II

REPRESENTATIONS OF THE PARTIES

1. Representations of Seller . Seller hereby warrants and represents to Purchaser that the statements contained in this Article II are true and correct as of the date hereof.

Seller has full power and authority to enter into this Agreement, to carry out its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery by Seller of this Agreement, and the consummation by Seller of the transactions contemplated hereby, constitutes a legal, valid and binding obligation enforceable against Seller in accordance with its terms.

The Purchased Shares have been duly authorized and, when conveyed by Seller to Purchaser on the Closing Date, all in accordance with the terms of this Agreement, will be duly and validly issued, fully paid and non-assessable. The Purchased Shares are free and clear of any and all mortgages, deeds of trust, encumbrances, adverse claims, actual or threatened litigation, and security interests;

Neither the execution or delivery of this Agreement, nor any other documents required to be executed and delivered by Seller regarding this Agreement, nor the consummation of the transactions contemplated this Agreement conflicts with or constitutes any violation or breach, or gives any other person any rights (including, but not limited to, any legal rights to acceleration, termination, cancellation or recession) under any document or agreement Seller is a party to. Neither Seller’s entry into this Agreement, nor Seller’s representations made in this Agreement, constitute a violation of any order or applicable law that Seller is subject to.

Seller is duly organized, validly existing and in good standing under the laws of the State of Nevada. Seller is a Reporting Company under the 1934 Act. As of the Effective Date SPYR, Inc. is current with its reporting obligations under the 1934 Act. Seller has all requisite power and authority to execute, deliver, and perform its obligations under this Agreement, and the execution, delivery, and performance by the Seller of its obligations under the Agreement has been duly authorized by all requisite action on the part of the Seller and, when executed and delivered by the Seller, shall constitute the valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, subject

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to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

The Purchased Shares have not been registered under Section 5 of the 1933 Securities and Exchange Act (“1933 Act”). The shares are offered and sold to Purchaser pursuant to an exemption from registration provided by Section 506 of Reg. D. The Company shall use its best efforts to file with the SEC a registration statement that includes the Purchased Shares within ninety (90) days of the Closing.

The Purchased Securities are restricted shares. Purchaser may not execute a public sale of the Purchased Shares without their first being registered by Seller in a registration statement made effective by the SEC, or otherwise found to be exempt from registration by virtue of compliance with Rule 144 or other applicable legal exemption pursuant to a legal opinion satisfactory to Seller. There is no guarantee or representation that the Purchased Shares will ever be registered under the 1933 Act. Purchaser acknowledges it will have to bear the risk and burden associated with lack of liquidity indefinitely. Purchaser understands that the Purchased Shares have not been registered under the 1933 Act and the Purchased Shares will bear the following restrictive legend:

THESE SECURITIES NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITY UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THIS PROMISSORY NOTE THAT AN EXEMPTION FROM REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE WITH RESPECT TO SUCH TRANSFER. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.

Seller has made available or referred Purchaser to complete copies of Seller’s Exchange Act reports filed with the Securities & Exchange Commission (“SEC”), including Seller’s audited financial statements, informational disclosures, and any other information Purchaser requested.

2. Representations of Purchaser . Purchaser hereby warrants and represents:

Purchaser has all requisite power and authority to execute, deliver and perform its obligations under the Agreement, and the execution, delivery, and performance by Purchaser of its obligations under the Agreement has been duly authorized by all requisite action on the part of Purchaser. The Agreement, when executed and delivered by Purchaser, shall constitute the valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting creditors’ rights and

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remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

With respect to the Purchased Shares acquired by Purchaser, Purchaser acknowledges that the Purchased Shares have not been registered under Section 5 or under any state securities laws. Purchaser acknowledges being informed and understanding that the Purchased Shares are Restricted Securities that have not been registered under the 1933 Act. Purchaser acknowledges that no public market for the Purchased Shares exists, and any future market is uncertain. Purchaser understands that no assurance can be given that such a trading market will further develop at any time, or, if so developed, that it will continue.

Purchaser represents that it is familiar with the requirements of Rule 144 of the 1933 Act as presently in effect and understands the resale limitations imposed thereby. Purchaser understands that Seller is under no obligation to register any of the Purchased Shares acquired hereunder. Purchaser further agrees not to make any disposition of all or any portion of the Purchased Shares except in compliance with applicable securities laws.

Purchaser further acknowledges and agrees that its purchase of the Purchased Shares involves risks. Purchaser: (i) either alone or together with its representatives has such knowledge and experience in ﬁnancial and business matters as to be capable of evaluating the merits and risks of this investment, and make an informed decision to so invest, and has so evaluated the risks and merits of such investment; (ii) has the ability to bear the economic risks of this investment for an indefinite period and can afford a complete loss of such investment; (iii) understands the terms of, and the risks associated with the acquisition of the Purchased Shares, including, without limitation, a lack of liquidity, price transparency or pricing availability and risks associated with the industry in which Seller operates; (iv) has had the opportunity to review such disclosures regarding Seller’s business, ﬁnancial condition and prospects as Purchaser has determined to be necessary in connection with the acquisition of the Purchased Shares; (v) is an “accredited investor” and a “sophisticated investor” as that term is defined in Rule 501(a) of Regulation D of the Act and elsewhere; (vi) acknowledges and agrees that the Purchased Shares are being offered and sold in reliance on specific exemptions from the registration requirements of United States federal and state securities laws, and that Seller is relying upon the truth and accuracy of, and such Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of such Purchaser to acquire the Purchased Shares; and, (vii) understands and acknowledges that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Purchased Shares or the fairness or suitability of the investment in the Purchased Shares nor have such authorities passed upon or endorsed the merits of this Agreement.

Purchaser has received or has had full access to all the information Purchaser considers necessary or appropriate to make an informed investment decision with respect to the Purchased Shares. Purchaser further has had an opportunity to ask questions of and receive answers from Seller regarding the Purchased Shares and to obtain additional information necessary to verify any information furnished to Purchaser or to which Purchaser had

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access. Further, Purchaser has undertaken its own review of the business of Seller and the wisdom of an investment in the Purchased Shares. Purchaser has had the opportunity to review all of Seller’s financial statements and disclosures and risk factors that Seller has published concerning its operations, along with any other information Purchaser requested about Seller and its business, prospects, and associated risks.

Purchaser understands that the acquisition of the Purchased Shares involves substantial risk. Purchaser has experience as an investor in securities of private companies and companies in the development stage and acknowledges that Purchaser is able to fend for itself, can bear the economic risk of the Purchaser’s investment in the Purchased Shares and has such knowledge and experience in financial or business matters that Purchaser is capable of evaluating the merits and risks of this investment in Purchased Shares and protecting its own interests in connection with this investment.

Purchaser is acquiring the Purchased Shares for its own account, for long term investment, and not with a view towards a public distribution of those Purchased Shares as an Underwriter for Seller. Purchaser acknowledges that it is not acquiring the Purchased Shares as the result of any advertisement or solicitation, including any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase from Seller regarding Purchaser’s investment pursuant to this Agreement.

3. Representations, Warranties and Covenants of Seller and Purchaser .

Seller and Purchaser hereby represent that there has been no act or omission by Seller or Purchaser which would give rise to any valid claim against either Party for a brokerage commission, finder's fee or other like payment in connection with the transaction contemplated hereby, except for such claims as shall have been waived on or before the Closing Date;

The representations of Seller and Purchaser contained herein shall survive the Closing Date of this transaction. Each Party acknowledges and agrees that, except as expressly set forth in this Agreement, no Party has made (and no Party is relying on) any representation or warranties of any nature, express or implied, regarding anything relating to the transaction contemplated by this Agreement that are not contained herein; and

Seller and Purchaser agree that each will, at any time and from time to time after the Closing, upon the request of the other Party, do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, all such further acts, assignments, transfers, conveyances, powers of attorney and assurances as may be reasonably required from time to time in order to effectuate the provisions and purposes of this Agreement.

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ARTICLE III

CONDITIONS TO CLOSING

1. Conditions to Purchaser’s Obligations at Closing .

Representations . Each of the representations of Seller shall be true and complete on and as of the Closing; and

Performance . The Seller shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing.

2. Conditions to Seller’s Obligations at Closing .

Representations . Each of the representations of Purchaser shall be true and complete on and as of the Closing; and

Payment of Purchase Price . Purchaser shall have delivered to Seller the Purchase Price.

ARTICLE IV

GENERAL PROVISIONS

Entire Agreement . This Agreement constitutes the entire agreement between the Parties and supersedes all prior agreements and understandings, oral and written, between the Parties with respect to the subject matter hereof. This Agreement may not be amended except by a written agreement signed by Purchaser and Seller.

Sections and Other Headings; Interpretation . The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Whenever the context requires, words used in the singular shall be construed to mean or include the plural and vice versa, and pronouns of any gender shall be deemed to include and designate the masculine, feminine or neuter gender.

Governing Law; Jurisdiction . This Agreement shall be deemed to be a contract made under the laws of the State of Colorado, United States of America. This Agreement and the construction, validity, enforcement, performance and interpretation of, or any dispute or claim arising out of or in relation to, this Agreement (whether in contract, tort or otherwise) shall be construed in accordance with the laws of the State of Colorado without giving effect to the conflicts of laws of the State of Colorado. Each Party agrees that all Proceedings, whether brought against a Party or a Party’s Affiliates, employees or agents, shall be commenced exclusively in the state and federal Courts located in Denver, Colorado. Each Party hereto hereby irrevocably submits to the exclusive jurisdiction of these Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any proceeding, any claim that it is not personally subject

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to the jurisdiction of such Colorado Court, or that such proceeding has been commenced in an improper or inconvenient forum. Each Party hereby irrevocably waives personal service of process and consents to process being served in any such proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such Party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each Party hereby irrevocably, knowingly and voluntarily waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

Severability . If any provision of this Agreement is determined by any court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible given the intent of the Parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken from this Agreement and the remainder of this Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Agreement.

Counterparts . This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.

Waiver . The rights and remedies of the Parties are cumulative and not alternative. Neither the failure nor any delay by any Party in exercising any right, power, or privilege under this Agreement, or the documents referred to in this Agreement, will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege.

Successors and Assigns . Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the Parties hereunder, will be binding upon and inure to the benefit of the Parties’ respective successors, assigns, heirs, executors, administrators and legal representatives.

Survival of Warranties . The representations, warranties and covenants of Seller and Purchaser contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing.

Notices . All notices, requests and demands (“Notice”) to or upon a Party, to be effective, shall be in writing and shall be sent: (i) certified or registered mail, return receipt requested;

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(ii) by personal delivery against receipt; (iii) by overnight courier; or (iv) by email and, unless otherwise expressly provided herein, and shall be deemed to have been validly served, given, delivered and received: (x) on the date indicated on the receipt, when delivered by personal delivery against receipt or by certified or registered mail; (y) one business day after deposit with an overnight courier; or (z) in the case of email notice, when sent. Notices shall be addressed as follows:

To Seller:

SPYR, Inc.

c/o James R. Thompson

4643 South Ulster Street, Suite 1510

Denver, CO 80237

jthompson@spyr.com

To Purchaser:

Richard Goldfarb, M.D.

9 Bayshore Drive

Newtown, PA 18940

RichardGoldfarb@gmail.com

Either Party may change the address to which Notices shall be addressed by providing Notice of such change to the other Party in the manner set forth in this subsection.

Third Parties . Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the Parties hereto and their successors and assigns, any rights or remedies under or by reason of this Agreement.

Preparation of Agreement . Seller prepared this Agreement. Each Party to this Agreement acknowledges that: (i) the Party had the advice of, or sufficient opportunity to obtain the advice of, legal counsel separate and independent of legal counsel for any other Party hereto; (ii) the terms of the transactions contemplated by this Agreement are fair and reasonable to such Party; and (iii) such Party has voluntarily entered into the transactions contemplated by this Agreement without duress or coercion. Each Party agrees that no conflict, omission or ambiguity in this Agreement, or the interpretation thereof, shall be presumed, implied, or otherwise construed against the other Party on the basis that such Party was responsible for drafting this Agreement.

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IN WITNESS WHEREOF, each of the undersigned has duly executed this Stock Purchase Agreement as of the date first written above.

“SELLER”

SPYR, INC.

By:

_________________________________

Printed Name:

JAMES R. THOMPSON

Title: CEO & President

“PURCHASER”

RICHARD GOLDFARB, M.D.

By:

_________________________________

Printed Name:

RICHARD GOLDFARB, M.D.

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CASH WARRANT AGREEMENT

This Cash Warrant Agreement (“ Warrant Agreement ”) is entered into by and between SPYR, Inc., a Nevada Corporation (“ Company ”), with a business address of 4643 South Ulster Street, Suite 1510, Regency Plaza, Denver Colorado 80237, and Richard Goldfarb, M.D., with an address of 9 Bayshore Drive, Newtown, PA 18940 (“ Warrant Holder ”). Both Company and Warrant Holder may be referred to individually as a “ Party ” and collectively as the “ Parties .”

1. Issuance . Company shall issue to Warrant Holder a certificate (“ Warrant Certificate ”) dated March 19, 2018, providing Warrant Holder, and any subsequent assignee or transferee of Warrant Holder, with the right to purchase, at any time, commencing after March 19, 2018 (“ Effective Date ”) until the Expiration Date (defined below in Section 3), up to seven hundred thousand (700,000) restricted shares of common stock of Company (“ Warrant Shares ”) at an exercise price of fifty cents ($0.50) per Warrant Share. The Warrant Certificate issued hereunder shall be non-cancelable and non-callable by Company.

2. Warrant Certificates . The Warrant Certificate to be delivered pursuant to this Warrant Agreement shall be in the form attached hereto as Exhibit A.

3. Exercisability of Warrants . The Warrant Certificate shall expire if and to the extent the Warrant Shares are not exercised by March 18, 2023 (“ Expiration Date ”).

4. Procedure for Exercise of Warrant Shares . The Warrant Shares are exercisable at an exercise price of fifty cents ($0.50) per Warrant Share (“ Exercise Price ”). Upon surrender of a Warrant Certificate with the attached form of Election to Purchase Warrant Shares fully completed and duly executed, together with payment of the Exercise Price for the Warrant Shares purchased, at the Company's principal offices at 4643 South Ulster Street, Suite 1510, Regency Plaza, Denver Colorado 80237, Warrant Holder shall be entitled to receive a restricted stock certificate or certificates for the Warrant Shares so purchased. The purchase rights represented by the Warrant Certificates are exercisable at the option of Warrant Holder, in whole or in part. Upon the exercise of less than all of the Warrants evidenced by a Warrant Certificate, Company shall forthwith issue to Warrant Holder a new warrant certificate (“ Adjusted Warrant Certificate ”) representing the number of the remaining unexercised Warrant Shares.

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CASH WARRANT AGREEMENT

disposed of, in whole or in part, subject to the applicable restrictions and gating provisions set forth in Warrant Holder’s Stock Purchase Agreement dated March 19, 2018, and subject to compliance with applicable securities laws. Any costs associated with any transfer (transfer agent fees, legal, copying charges, etc.) shall be the sole and exclusive responsibility of Warrant Holder. This Warrant Agreement, and the rights and obligations of the Parties hereunder, will be binding upon and inure to the benefit of the Parties’ respective successors, assigns, heirs, executors, administrators and legal representatives.

The Company shall use its best efforts to file with the SEC a registration statement that includes the Purchased Shares within ninety (90) days of the Closing.

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CASH WARRANT AGREEMENT

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CASH WARRANT AGREEMENT

IN WITNESS WHEREOF, the Parties hereto have caused this Warrant Agreement to be duly executed as of March 19, 2018.

SPYR, INC.

By: _____________________________

Printed Name: James R. Thompson

Title: Chief Executive Officer and President

ACCEPTED AND AGREED TO BY:

RICHARD GOLDFARB, M.D.

By: ______________________________

Printed Name: RICHARD GOLDFARB, M.D.

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CASH WARRANT AGREEMENT

EXHIBIT A

WARRANT CERTIFICATE

This Warrant Certificate certifies that Richard Goldfarb M.D. (“ Goldfarb ”) or his assign(s) (“ Warrant Holder ”) is the registered Warrant Holder eligible to purchase at any time after March 19, 2018, (“ Effective Date ”), until 5:00 p.m. Pacific Standard Time on March 18, 2023 (“ Expiration Date ”), up to seven hundred thousand (700,000) shares of restricted common stock (“ Warrant Shares ”) of SPYR, Inc. (“ Company ”), at a variable exercise price of fifty cents ($0.50) per Warrant Share (the “ Exercise Price ”), upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of Company, but subject to the conditions set forth herein and in the Warrant Agreement between Goldfarb and SPYR effective as of March 19, 2018 (“ Warrant Agreement ”). Payment of the Exercise Price shall be made by certified check or official bank check in immediately available funds payable to the order of Company. No Warrant Shares may be exercised after 5:00 p.m. Pacific Standard Time on the Expiration Date defined in the Warrant Agreement, at which time all Warrant Shares evidenced hereby, unless exercised prior thereto, shall thereafter be void. The Warrant Shares evidenced by this Warrant Certificate are part of a duly authorized issuance of Warrant Shares to be issued pursuant to the Warrant Agreement, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of Company and Warrant Holder of the Warrant Shares. Upon the exercise of less than all of the Warrant Shares evidenced by this Warrant Certificate, Company shall promptly issue to Warrant Holder a new Warrant Certificate representing such number of unexercised Warrant Shares. Company may deem and treat the registered Warrant Holder hereof as the absolute owner of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, and of any distribution to the Warrant Holder hereof, and for all other purposes, and Company shall not be affected by any notice to the contrary. All terms used in this Warrant Certificate that are defined in the Warrant Agreement shall have the meanings assigned to them in the Warrant Agreement.

[SIGNATURE TO FOLLOW ON NEXT PAGE]

EXHIBIT A

IN WITNESS WHEREOF, Company has caused this Warrant Certificate to be duly executed as of March 19, 2018.

SPYR, INC.

By: _____________________________

Printed Name: James R. Thompson

Title: Chief Executive Officer and President

EXHIBIT A

ELECTION TO PURCHASE WARRANT SHARES

The undersigned requests that a stock certificate for such Warrant Shares be registered in the name of:

________________________________________ ;

Whose address of record is:

[Address] ________________________________________;

[City] _______________________________;

[State] ______________________________;

With a tax identification number or social security number of _________________________and

That such stock certificate be delivered to ________________________________________.

Dated:

Signature: ________________________ (Signature must conform in all respects to name of Warrant Holder as specified on the face of the Warrant Certificate.)

Signature: ________________________ (Signature must conform in all respects to the name of Warrant Holder as specified on the face of the Warrant Certificate.)

EXHIBIT A

FORM OF ASSIGNMENT

(To be executed by the registered Holder if such Warrant Holder

elects to transfer the Warrant Certificate.)

FOR VALUE RECEIVED _____________________________ hereby sells, assigns and transfers unto

(Please print name and address of transferee)

Dated: ________________

Signature:________________________ (Signature must conform in all respects to name of Warrant Holder as specified on the face of the Warrant Certificate.)

Signature:________________________ (Signature must conform in all respects to name of Holder as specified on the face of the Warrant Certificate.)

SSN/TIN: ___________________________ (Insert Social Security or Other Identifying Number of Assignee)

CONSULTING AGREEMENT

This Consulting Agreement (the “ Agreement ”), made and effective as of January 12, 2018 (“ Effective Date ”), is entered into by and between SPYR, Inc., a corporation organized and operating in good standing under the laws of the State of Nevada (herein referred to as the “ Company ”), with a business address of 4643 South Ulster Street, Regency Plaza, Denver, CO 80237, and Calan Investments, LLC dba Kreloff Capital Partners (hereafter, referred to as the “ Consultant ”). Both the Company and the Consultant may be individually referred to as a “ Party ” and jointly referred to as the “ Parties .”

RECITALS

WHEREAS, the Parties entered into an agreement on January 12, 2018, which agreement the Parties wish to nullify and replace with this Agreement in all respects; and

WHEREAS, the Consultant’s business includes the Consultant’s Services, as more particularly described and defined below; and

WHEREAS, Company is currently a publicly held and traded corporation, duly organized and operating in good standing under the laws of the State of Nevada, with its common stock traded on the OTCQB Market under the symbol “SPYR;” and,

WHEREAS, Company desires to engage the Consultant to provide the Consultant’s Services to the Company; and

WHEREAS, Consultant desires to enter into an agreement with the Company and to provide Consultant’s Services to the Company;

NOW THEREFORE, in consideration of the foregoing recitals, and the promises and the mutual covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:

1. Recitals . The recitals set forth above constitute part of this Agreement and are incorporated herein by this reference.

2. Termination of January 12, 2018 Agreement . The January 12, 2018 agreement is hereby nullified and voided in its entirety and is of no further force or effect.

3. Term of Consultancy . Company hereby agrees to retain Consultant to act in an advisory capacity to the Company, and Consultant hereby agrees to provide services to the Company, for a twelve (12) month term, commencing upon the Effective Date and terminating on January 11, 2019 (“ Term ”).

3. Duties of Consultant . During the term of this engagement, Consultant shall provide the following to the Company (“ Consultant’s Services ”):

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(a) Work closely with the Company’s Management to develop a set of long and short-term goals with a special focus on enhancing corporate and shareholder value. This will also include assisting the Company to determine key business actions, including review of financing requirements and the Company’s capital structure. The overall objective of the services is to enhance the Company’s enterprise value.

(b) Assist the Company in business development activities including the introduction of potential new business contacts, acquisition and potential joint venture opportunities.

(c) Assist the Company in identifying companies in the targeted industries, which may include public companies, divisions of public companies, and privately held companies, and, after evaluating such companies, assist in ranking them in terms of priority and providing an opinion as to value and the price level necessary to consummate a transaction. Work with the Company’s staff in developing acquisition criteria both from the point of view of business compatibility and financial acceptability.

(d) Advise the Company with respect to its strategic planning process and business plans, including an analysis of markets, positioning, financial models, organizational structure, potential strategic alliances and similar.

(e) Advise and consult along a broad scope not limited to just the above, but for the best interest of the Company.

(f) Introductions to Institutional Investors, which will include Hedge Funds, Family offices, High Net Worth Individuals, Private Equity and Venture Capital Firms, and introductions to Investment professionals, Portfolio managers and Managing Directors, Financial Institutions and members of University endowments. Developing relationships for the Company for current and future opportunities whether in finance or strategic corporate development.

(g) Develop relationships with corporate executives and high net worth individuals with synergistic mindsets.

4. Allocation of Time and Energies . Consultant promises to perform and discharge faithfully the targeted responsibilities which it may be assigned from time to time by the duly authorized representatives of the Company in connection with its investor relations and communications activities, so long as such activities are in compliance with applicable securities laws and regulations. The Consultant is not required to devote a certain of number of hours per day to its duties under this Agreement. It is explicitly understood that Consultant’s performance of its duties hereunder will in no way be measured by the price of Company’s common stock, nor the trading volume of Company’s common stock. It is acknowledged that the Consultant has other work and engagement duties other than those he will perform for the Company and that same, by definition, do NOT automatically conflict with, nor are they detrimental to, the Company's business or its interests. Further, as a result thereof, it is acknowledged that the Consultant’s obligations to the Company are part-time and are to be performed in such a manner and within such time as Consultant, in his sole discretion, determines is reasonable under the circumstances.

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5. Remuneration . As consideration for Consultant’s services described in this Agreement, the Company shall compensate Consultant in SPYR restricted common stock, warrants and cash, and additionally as to any mergers and acquisitions, as provided below:

(a) SPYR Stock . Subject to the provisions of Section 12 below, Company agrees to issue Consultant One Million Two Hundred Thousand (1,200,000) shares of Company’s Restricted Common Stock (“Shares”) deemed to be earned and vested according to the following schedule:

Two Hundred Thousand (200,000) Shares upon execution of this Agreement (Consultant acknowledges that is has already received Sixty Thousand (60,000) of such shares, represented by SPYR stock certificate number 3653);

ii.

One Hundred Thousand (100,000) Shares on the first day of each month beginning May 1, 2018 through and including February 1, 2019.

(b) Subject to the provisions of sub-section (f) below, the Consultant agrees that all public re-sales of Restricted Common Stock issued under this Agreement, and pursuant to Rule 144, shall be limited to no more than five thousand (5,000) shares per day for every two hundred and fifty thousand (250,000) shares of trading volume on any given trading day.

(c) The Company’s issuance of the Restricted Stock shall, when issued and delivered to Consultant, be fully paid and non-assessable. Further, if and in the event the Company is acquired in whole or in part during the term of this agreement, it is agreed and understood Consultant will not be requested or demanded by the Company to return any of the Restricted Stock paid to it hereunder. It is further agreed that if at any time during the term of this agreement, the Company or substantially all of the Company’s assets are merged with or acquired by another entity, or some other change occurs in the legal entity that constitutes the Company, the Consultant shall retain and will not be requested by the Company to return any of the Restricted Stock paid to it under this Agreement.

(d) With the transfer of shares of Restricted Stock to be issued pursuant to this Agreement (collectively, the “Shares”), the Company shall cause to be issued a certificate representing the Shares and, if required by applicable law, a written opinion of counsel for the Company stating that said shares are validly issued, fully paid and non-assessable and that the issuance and eventual transfer of them to Consultant has been duly authorized by the Company.

(e) Consultant acknowledges that the Restricted Stock to be issued pursuant to this Agreement have not been registered under the Securities Act of 1933, and accordingly are “Restricted Securities” within the meaning of Rule 144 of the Act. As such, the Restricted Stock may not be publicly resold unless the underlying Shares have been registered under the Securities and Exchange Act (the “Act”) in a registration statement deemed effective by the U.S. Securities and Exchange Commission (the “Commission”), or the Company has received an opinion of counsel reasonably satisfactory to the Company that such resale or transfer is exempt from the registration requirements of the Act. The Company agrees to take any and all action(s) necessary to clear the subject securities of restriction upon presentation of any Rule 144(b) application by Consultant or its broker, including, but not limited to: (1) Authorizing the Company’s transfer

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agent to remove the restrictive legend on the subject securities; (2) Expediting either the acquisition of a legal opinion from Company’s counsel authorizing the removal of the restrictive legend, or accepting a third party legal opinion acknowledging same; and (3) Cooperating and communicating with Consultant and its broker in order to use Company’s best efforts to clear the subject securities of restriction as soon as possible after presentation of a Rule 144(b) application by Consultant (or its broker) to either the Company and/or the Company’s transfer agent. Further, the Company agrees to not unreasonably withhold or delay approval of any application filed by Consultant under Rule 144(b) of the Act to clear the subject securities of restriction.

(f) In connection with the acquisition of Restricted Stock hereunder, Consultant represents and warrants to the Company, to the best of its knowledge, as follows:

Consultant acknowledges that Consultant has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Company concerning an investment in the Securities, and any additional information that Consultant has requested.

ii.

Consultant’s investment in restricted securities is reasonable in relation to Consultant’s net worth, which is in excess of ten (10) times Consultant’s cost basis in the Shares. Consultant has had experience in investments in restricted and publicly traded securities, and Consultant has had experience in investments in speculative securities and other investments that involve the risk of loss of investment. Consultant acknowledges that an investment in the Securities is speculative and involves the risk of loss. Consultant has the requisite knowledge to assess the relative merits and risks of this investment without the necessity of relying upon other advisors, and Consultant can afford the risk of loss of its entire investment in the Securities. Consultant is (i) an accredited investor, as that term is defined in Regulation D promulgated under the Securities Act of 1933.

iii.

Consultant is acquiring the Securities for its own account for long-term investment and not with a view toward resale or distribution thereof except in accordance with applicable securities laws.

(g) Consultant acknowledges his understanding of the legal prohibitions against insider trading, and agrees that he will not use any material, non-public information to gain any advantage or benefit in the trading in the Company’s stock. Consultant agrees at all time to comply with all applicable U.S. Securities Laws.

(h) Cash-Based Warrants . Subject to entry into Company’s form of Warrant Agreement, Consultant shall receive 1,200,000 cash-based Warrants to purchase restricted common stock of the Company at a strike price of forty cents ($0.40).

(i) Cash . In addition to the forgoing, Company shall make cash payments to Consultant as follows:

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Thirty Thousand Dollars ($30,000.00) on or before March 1, 2018, payment of which is acknowledged by Consultant; and

ii.

Thirty Thousand Dollars ($30,000.00) on or before April 30, 2018.

(ii) Mergers and Acquisitions . As to any mergers and acquisitions, the financing of which is facilitated by Consultant, Consultant shall receive five percent (5%) of the amount financed from such funder, in like kind. For purposes hereof, a “financing facilitated by Consultant” shall mean the financing for merger or acquisition where Consultant introduced to Company the funding source that funds the transaction. By way of further explanation and for sake of clarity, if a funder provides acquisition funding solely in the form of debt, Consultant shall receive a payment equal to five percent (5%) of the debt incurred by Company and if the funding is obtained in some combination of debt and equity, then and in that event Consultant shall receive five percent (5%) of the debt incurred and equity issued.

6. Non-Assignability of Services . Consultant’s services under this contract are offered to Company only and may not be assigned by Company to any entity with which Company merges or which acquires the Company or substantially all of its assets. In the event of such merger or acquisition, all Shares issued to Consultant herein shall remain non-cancellable and due and payable. Consultant shall retain all Restricted Stock in its entirety. All Restricted Stock earned and paid to the Consultant shall be retained in its entirety by the Consultant. The Company shall assure that in the event of any merger, acquisition, or similar change of form of entity, that its successor entity shall agree to complete all obligations to Consultant, including the provision and transfer of all compensation herein.

7. Expenses . Consultant agrees to pay for all its expenses (phone, mailing, labor, etc.), other than extraordinary items (travel required by/or specifically requested by the Company, luncheons or dinners to large groups of investment professionals, mass faxing to a sizable percentage of the Company's constituents, investor conference calls, print advertisements in publications, etc.) approved by the Company prior to its incurring an obligation for reimbursement.

8. Indemnification . The Company warrants and represents that all oral communications, written documents or materials furnished to Consultant by the Company with respect to financial affairs, operations, profitability and strategic planning of the Company are accurate and Consultant may rely upon the accuracy thereof without independent investigation. The Company will protect, indemnify and hold harmless Consultant against any claims or litigation, and any damages, liability, cost and reasonable attorney's fees, resulting from Consultant's performance of its services under this Agreement, including the communication and dissemination of Company authorized information, documents or materials, but excluding any such claims or litigation resulting from Consultant's communication or dissemination of information not provided or authorized by the Company. The Consultant will protect, indemnify and hold harmless Company against any claims or litigation, and any damages, liability, cost and reasonable attorney's fees, resulting from Consultant’s performance of its services under this Agreement.

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9. Representations and Warranties .

(a) The Company represents and warrants that any information furnished to Consultant will contain no untrue statement of any material fact nor omit any material facts, which would make the information false or misleading. The Company represents and warrants that it will adhere to any and all local, state and federal laws, rules and regulations governing the Company’s businesses and any and all actions and activities involving the Company, its shareholders and the investment community. The Company further warrants that if the circumstances relating to information or documents furnished to Consultant materially change at any time, the Company will inform Consultant promptly of the changes and immediately deliver to Consultant documents or information necessary to ensure the continued accuracy and completeness of all information and documents.

(b) Consultant represents to the Company that he will not, to the best of Consultant’s knowledge and belief, make any untrue statement of material fact. Consultant further represents and warrant to the Company that he will not disseminate any information or documents that have not been approved by Company. Consultant further represents and warrants to the Company that, to the best of Consultant’s knowledge and belief, all actions taken by him on behalf of the Company in connection with his consulting services, will be conducted in compliance with all applicable state and federal laws. Further, Consultant shall comply with any procedures that might be reasonably imposed by the Company or its legal counsel to ensure compliance with such laws.

(c) Both the Company and Consultant agree and acknowledge that they and their employees, advisors and consultants, in performing their duties and obligations under this Agreement, will act consistent with applicable state and federal law, including without limitation the federal securities laws. All parties expressly understand, agree and acknowledge that Consultant's performance of its duties hereunder cannot and therefore will in no way be measured by the price of the Company's common stock, nor the trading volume of the Company's common stock.

(d) Consultant represents that he is not required to maintain any licenses and registrations under federal or any state regulations necessary to perform the services set forth herein. Consultant acknowledges that, to the best of its knowledge, the performance of the services set forth under this Agreement will not violate any rule or provision of any regulatory agency having jurisdiction over Consultant. Consultant acknowledges that, to the best of his knowledge, Consultant and his agents are not the subject of any investigation, claim, decree or judgment involving any violation of the Act. Consultant further acknowledges that he is not a securities Broker Dealer or a registered investment advisor.

(e) Company acknowledges that, to the best of its knowledge, that it has not violated any rule or provision of any regulatory agency having jurisdiction over the Company.

10. Legal Representation . The Parties acknowledge that they have been afforded the opportunity to consult with independent legal counsel throughout the preparation of this Agreement. Consultant represents that it has consulted with independent legal counsel and/or tax, financial and business advisors, to the extent the Consultant deemed necessary.

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11. Status as Independent Contractor . Consultant’s engagement pursuant to this Agreement shall be as independent contractor, and not as an employee, officer or other agent of the Company. Neither party to this Agreement shall represent or hold itself out to be the employer or employee of the other. Consultant further acknowledges the consideration provided hereinabove is a gross amount of consideration and that the Company will not withhold from such consideration any amounts as to income taxes, social security payments or any other payroll taxes. All such income taxes and other such payment shall be made or provided for by Consultant and the Company shall have no responsibility or duties regarding such matters. Neither the Company nor the Consultant possesses the authority to bind each other in any agreements without the express written consent of the entity to be bound.

12. Termination . This Agreement may be terminated by either party, with or without cause, upon thirty (30) days written notice. In the event of any Termination, other than for reason of Consultant’s violation of the law, Consultant shall be entitled to all stock compensation due it hereunder, prorated as of the termination date and any cash compensation then being paid will continue to be paid through the end of the Term. In the event Company terminates this Agreement as a result of Consultant’s violation of the law, then and in that event, Consultant shall be entitled to all compensation due it hereunder, prorated as of the termination date and no further stock or cash compensation will be owed to Consultant by Company.

13. Attorney's Fees . If any legal action is filed by either Party, because of any alleged dispute, breach, default or misrepresentation in connection with or related to this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys' fees and other costs in connection with that action or proceeding, in addition to any other relief to which it or they may be entitled.

14. Waiver . The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other part of this Agreement or subsequent breach by such other party.

15. Notices . All notices, requests, and other communications hereunder shall be deemed to be duly given if sent by Certified U.S. mail, postage prepaid, with return receipt requested, addressed to the other party at the address as set forth herein below:

To the Company :

SPYR, Inc.

Attention: James R. Thompson, President, Chief Executive Officer

4643 South Ulster Street, Regency Plaza, Suite 1510

Denver, CO 80237

jthompson@spyr.com

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To Consultant :

KRELOFF CAPITAL PARTNERS

Attention: Mark Kreloff

16 West 19 ^th Street, Suite 800

New York, N.Y. 10011

mark@kreloff.com

(a) Receipt shall be deemed effective five (5) business days from the date the communication was placed into the U.S. Mail as evidenced by the receipt provided upon sending by the U.S. Postal Service.

(b) It is agreed that either party may change the address to which notices for it shall be addressed by providing notice of such change to the other party in the manner set forth in this paragraph.

16. Choice of Law, Jurisdiction and Venue . This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Colorado without regard to its conflict of laws provisions. The parties also agree that this contract shall be deemed to have been entered into in Colorado, and the parties agree that the State and Federal Courts for the State of Colorado, County of Denver will be the venue of any dispute and will have jurisdiction over all Parties.

17. Dispute Resolution . Each of the parties hereto irrevocably agrees that any dispute or controversy arising out of, relating to, or concerning any interpretation, construction, performance or breach of this Agreement, shall be settled by litigation in the state or federal courts located in the City and County of Denver, State of Colorado. The parties agree that the state and federal courts located in Denver, Colorado shall have personal jurisdiction over the parties with respect to any claims arising under this Agreement and that venue in Denver, Colorado is convenient and proper. Notwithstanding the foregoing, as a condition precedent to the initiation of any litigation, the parties shall submit any dispute to non-binding mediation with a mutually acceptable mediator located in Denver, Colorado, such as The Judicial Arbiter Group. The parties shall use their best efforts to agree on a mediator. In the event the parties cannot agree on a mutually acceptable mediator, each party shall select a mediator, who together shall appoint a third mediator to act as the sole mediator with respect to the dispute. The parties shall share in the costs of the mediation equally. If the dispute is not resolved within thirty (30) days of the mediation, either party may initiate litigation in the appropriate court as set forth above. In the event a party files suit prior to engaging in mediation as required herein, any such action shall be stayed pending the completion of mediation.

18. Complete Agreement . This Agreement contains the entire agreement of the parties relating to the subject matter hereof. This Agreement and its terms may not be changed orally but instead only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

19. Counterparts/Facsimile/Electronic Signatures . This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together

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shall be but a single instrument. Signature pages may be exchanged by facsimile or electronically, which shall be deemed originals.

20. Severability . In the event that any particular provision or provisions of this Agreement or the other agreements contained herein shall for any reason hereafter be determined to be unenforceable, or in violation of any law, governmental order or regulation, such unenforceability or violation shall not affect the remaining provisions of such agreements, which shall continue in full force and effect and be binding upon the respective parties hereto.

21. Corporate Authority . Both the Company and the Consultant have undertaken and complied with all necessary and required formalities (whether contained in their respective Articles of Incorporation or Operating Agreement, and the laws of their respective States of Incorporation or Organization) in entering into this Agreement.

ACCEPTED AND AGREED TO:

SPYR, INC.

By: _____________________________________
JAMES R. THOMPSON, CEO and President

KRELOFF CAPITAL PARTNERS

By: ________________________________
MARK KRELOFF, Managing Member

9 of 9

NEITHER THESE SECURITIES, NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THESE SECURITIES, HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY (AS DEFINED BELOW).

SPYR, INC.

COMMON STOCK WARRANT

SERIES 2018S

CLASS A

Warrant Certificate No.: 2018S-A-1

Original Issue Date: July 12, 2018

This Common Stock Warrant (“ Warrant ”) certifies that, for value received, Zakeni Limited, or its assigns ( “Holder ”) is entitled to purchase from SPYR, Inc., a Nevada corporation (“ Company ” or “Issuer” ), up to a total of One Million (1,000,000) shares of Common Stock (as defined below) (each such share of Common Stock, a “Warrant Share” and all such shares of Common Stock, the “Warrant Shares ” ), at any time and from time to time after January 12, 2019 (the “Earliest Exercise Date” ) through and including the Expiration Date, all on the terms and subject to the conditions set forth below:

1. Definitions . As used in this Warrant, the following terms shall have the definitions set forth in this Section 1. Other capitalized terms used and not otherwise defined shall have the meanings set forth in that certain Settlement Agreement and Mutual Release, dated June 22, 2018 (the “Settlement Agreement”), between the Company and the Holder.

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144.

“ Board ” means the board of directors of the Company.

“Business Day” means any day except a Saturday, Sunday and any day that is a federal legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Common Stock” means the common stock of the Company, $0.0001 par value per share, and any securities into which such common stock may hereafter be reclassified or for which it may be exchanged as a class.

“Convertible Securities” means Company securities which by their terms are convertible into shares of the Company’s Common Stock at a specified conversion price or pursuant to a formula to determine such conversion price. Convertible Securities which were issued prior to and were outstanding as of the Original Issue Date are “ Existing Convertible Securities ,” and Convertible Securities which are issued after the Original Issue Date are “ New Convertible Securities .”

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Issuances” means any issuance or sale by the Company after the Original Issue Date of: (a) shares of Common Stock issued upon the exercise of this Warrant or any other Warrant in this Series; (b) shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations) issued directly or upon the exercise of options or warrants to directors, officers, employees, or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company, in each case authorized by the Board and issued pursuant to the Company's Employee Incentive Plan, or other like plan or employment agreements, including all such shares of Common Stock and options or warrants outstanding prior to the Original Issue Date; or (c) shares of Common Stock issued upon the conversion or exercise of options or warrants (other than the options and warrants covered by clause (b) above) or Existing Convertible Securities; provided that such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof or to extend the term, except as may be provided by the terms thereof as currently in effect; (d) shares of Common Stock, options, warrants, or New Convertible Securities issued (i) to persons in connection with a joint venture, acquisition, merger in which the Company is the surviving entity, strategic alliance or other commercial relationship with such person (including persons that are customers, suppliers and strategic partners of the Company) relating to the operation of the Company's business and not for the primary purpose of raising equity capital, (ii) in connection with a transaction in which the Company, directly or indirectly, acquires another business or its tangible or intangible assets, or (iii) to lenders as equity kickers in connection with debt financings of the Company, in each case where such transactions have been approved by the Board; (e) shares of Common Stock in an offering for cash for the account of the Company that is underwritten on a firm commitment basis and is registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended; or (f) shares of Common Stock, options, warrants or New Convertible Securities issued to the lessor or vendor in any office lease or equipment lease or similar equipment financing transaction in which the Company obtains the use of such office space or equipment for its business.

“Exercise Date” means, for any given exercise of this Warrant, the date, which date shall be during the Exercise Period, on which the conditions to such exercise as set forth herein shall

have been satisfied, including, without limitation, the receipt by the Company by 5:00 PM Denver, Colorado Time of the Exercise Notice, the Warrant (if fully exercised) and the aggregate Exercise Price (if the exercise is not a cashless exercise).

“Exercise Notice” means a written notice from the Holder to the Company substantially in the form attached hereto as Exhibit A, specifying, among other things, the number of Warrant Shares being exercised and the manner of such exercise.

“Exercise Period” means the period commencing on the Earliest Exercise Date and expiring at 5:00 p.m., Denver, Colorado Time on the Expiration Date

“Exercise Price” means $0.25 in United States Dollars, subject to adjustment in accordance with Section 8 of this Warrant Agreement.

“Expiration Date” means the earlier of July 31, 2023 (the “Scheduled Expiration Date” ) or, if an Exercise Demand (as defined below) is duly given by the Company and not canceled, the Early Expiration Date.

“Fair Market Value” means on any particular date (a) the closing sales price per share of the Common Stock on such date on any registered national stock exchange on which the Common Stock is then listed, or if there is no such closing sales price on such date, then the closing sales price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not then listed on a registered national stock exchange, the closing sales price for a share of Common Stock in the over-the-counter market, as reported by the Trading Market (or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the Trading Market (or similar organization or agency succeeding to its functions of reporting prices), then the fair market value of a share of Common Stock as determined by an Independent Appraiser selected in good faith by the Holder; provided , however , that all determinations of the Fair Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. The determination of fair market value by an Independent Appraiser (i) shall be based upon the fair market value of the Issuer determined on a going concern basis as between a willing buyer and a willing seller and taking into account all relevant factors determinative of value, and (ii) shall be final and binding on all parties. In determining the fair market value of any shares of Common Stock, no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.

“Fundamental Transaction” means any of the following: (i) the Company effects any merger or consolidation of the Company with or into another Person as a result of which transaction, the stockholders of the Company as of a time immediately prior to such transaction no longer hold at least 50% of the voting securities of the surviving entity and the Company is not the surviving entity; (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions; (iii) any tender offer or exchange offer (whether by the Company or another Person), as defined under the federal securities laws, is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other

securities, cash or property; or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is converted into or exchanged for other securities, cash or property. For avoidance of doubt, in no event shall any Excluded Issuance be considered a Fundamental Transaction.

“New York Courts” means the state and federal courts sitting in the State of New York, City of New York, Borough of Manhattan.

“ Person ” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

“Original Issue Date” means the Original Issue Date first set forth on the first page of this Warrant Agreement.

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Register”, “registered”, and “registration” shall refer to a registration effected by preparing and (a) filing a Registration Statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration of or automatic effectiveness of such Registration Statement or (b) filing a Prospectus and/or prospectus supplement in respect of an appropriate effective Registration Statement on an appropriate form.

“Rule 144” means Rule 144 promulgated by the Securities and Exchange Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission having substantially the same effect as such Rule.

“Securities Act” means the Securities Act of 1933, as amended.

“ Series ” means the Series 2018S Warrants, which, as of the Original Issue Date, consist of one or more warrants in each of three (3) classes (each, a “ Class ”), which (i) provide for an aggregate of 3,500,000 Warrant Shares and (ii) have initial Exercise Prices of Class A - $0.25, Class B - $0.50, and Class C - $0.75, respectively. Such term applies to any adjustments in the Warrant Shares or Exercise Prices contemplated herein and to any replacement Warrant or Warrant issued to a transferee as contemplated herein. The Issuer agrees that, except for such adjustments and replacement certificates, no additional Warrants in this Series will be issued to any third Party without the express prior written consent of the Holder in each instance, which consent is in the sole discretion of the Holder and may be withheld or delayed for any reason or for no reason whatsoever. This Warrant is issued as all or part of one of such Classes.

“Trading Day” means a day on which the Common Stock is traded or quoted on a Trading Market; provided, that if the Common Stock is not traded or quoted on a Trading Market, then “Trading Day” shall mean a Business Day.

“Trading Market” means whichever of the New York Stock Exchange, the NYSE MKT, The NASDAQ Global Select Market, The NASDAQ Global Market, The NASDAQ Capital Market, the OTC Markets or any market owned or operated by OTC Markets Group Inc. (or any similar organization or agency succeeding to its functions of reporting prices) on which the Common Stock is listed or quoted for trading on the date in question.

2. [Reserved]

3. Exercise of Warrant .

(a) Exercise Procedure . This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i) delivery to the Company of a duly completed and executed Exercise Notice, (which delivery may be made by electronic means);

(ii) if such exercise represents the final exercise hereof, surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction); and

(iii) payment (if the exercise is not a cashless exercise contemplated by the other provisions of this Section 3) to the Company of the Aggregate Exercise Price in accordance with Section 3(b)(i).

(b) Payment of the Aggregate Exercise Price . Payment of the Aggregate Exercise Price (Exercise Price multiplied by the number of Warrant Shares being exercised) shall be made, at the option of the Holder, by the following methods:

(i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price; or,

(ii) in the event the Warrant Shares are not registered in an effective registration statement under the Securities Act on the Exercise Date, by instructing the Company to issue Warrant Shares then issuable upon exercise of all or any part of this Warrant on a net basis such that, without payment of any cash consideration or other immediately available funds, the Holder shall be deemed to have exercised this Warrant for the number of shares being exercised in exchange for the issuance of the number of Warrant Shares as is computed using the following formula:

X = [Y(A - B)] ÷ A

Where:

X =

the number of Warrant Shares to be issued to the Holder.

Y =

the total number of Warrant Shares for which the Holder has elected to exercise this Warrant pursuant to Section 3(a).

A =

the Fair Market Value of one Warrant Share as of the applicable Exercise Date.

B =

the Exercise Price in effect under this Warrant as of the applicable Exercise Date.

(c) No Limitation on Sales of Warrant Shares . Any other provision of this Warrant or any other agreement between the Company and the Holder to the contrary notwithstanding, the Holder’s sale of Warrant Shares (i) shall not be subject to any provision limiting the sale of such Warrant Shares by the Holder on any given day or over any given period of time and (ii) shall not count towards any other gating or other limitation which may otherwise be applicable to sales of any other shares held or acquired by the Holder.

(d) Delivery of Stock Certificates .

(i) Upon receipt by the Company of the Exercise Notice, and, if the exercise is not a cashless exercise, payment of the Aggregate Exercise Price (in accordance with Section 3(a) hereof), the Holder hereof shall be deemed for all purposes to be the holder of the Warrant Shares so purchased as of the date of such exercise, and the Company shall execute (or cause to be executed) and deliver (or cause to be delivered) as promptly as practicable, and in any event within five (5) Trading Days thereafter (such fifth Trading Day, a “Delivery Date”) (i) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise,) or, (ii) subject to the provisions of the following sentence, if requested by the Holder, issue and deliver such shares to the Depository Trust Company (“DTC”) account on the Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”). Notwithstanding anything in the foregoing sentence to the contrary, the Issuer or its transfer agent shall only be obligated to issue and deliver the shares to DTC on a holder’s behalf via DWAC if (a) such shares may be issued without restrictive legends and (b) the Issuer and the transfer agent are participating in DTC through the DWAC system. If all of the conditions set forth in clauses (a) and (b) above are not satisfied, the transfer agent shall deliver physical certificates representing the Warrant Shares to the Holder. The stock certificate or certificates (or DWAC shares) so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Notice and shall be registered in the name of the Holder or, subject to compliance with Section 5 below, such other Person's name as shall be designated in the Exercise Notice. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

(ii) The Issuer understands that a delay in the delivery of the Warrant Shares upon exercise of this Warrant beyond the Delivery Date could result in economic loss to the Holder. As such, if the Issuer fails for any reason to deliver to the Holder any Warrant Shares issuable upon the exercise of this Warrant via DWAC or physical certificate, as the case may be, by the relevant Delivery Date, the Issuer shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the Fair Market Value of the Common Stock on the Exercise Date), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Delivery Date until such certificates are delivered.

(iii) In addition to, and not in lieu of, any other rights available to the Holder, if at any time that there shall be a Trading Market for the Common Stock, the Issuer fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise on or before the relevant Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Issuer was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Issuer timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Issuer shall be required to pay the Holder $1,000. The Holder shall provide the Issuer written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Issuer.

(e) Charges, Taxes and Expenses . Issuance and delivery of Warrant Shares upon exercise of any Warrants shall be made without charge to the Holder for any issue or transfer tax, transfer agent fee, Rule 144 legal fees or other incidental tax or expense solely in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any Holder Taxes (as defined below). The term “Holder Tax” means a tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder or any tax based on the net taxable income of the Holder as a result of any transaction relating to the Warrants or the Warrant Shares.

(f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes . With respect to the exercise of this Warrant, the Company hereby represents, covenants and agrees:

(i) This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

(ii) All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

(iii) The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

(iv) The Company shall use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise.

(v) The Company shall pay all expenses in connection with, and all taxes (other than Holder Taxes) and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided , that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

(g) Compliance with Securities Laws .

This Warrant and, except with respect to certificates issued in connection with a cashless exercise of this Warrant, all certificates representing Warrant Shares issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form:

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

The Company agrees to reissue this Warrant or certificates representing any of the Warrant Shares, without the legend set forth above if at such time, prior to making any transfer of any such securities, the Holder shall give written notice to the Issuer describing the manner and terms of such transfer. Such proposed transfer will not be effected until: (i) the Issuer has received an opinion of its counsel reasonably satisfactory to the Issuer, to the effect that the registration of such securities under the Securities Act is not required in connection with such proposed transfer; (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by the Issuer with the SEC and has become effective under the Securities Act; (iii) the Issuer has received evidence reasonably satisfactory to the Issuer that such registration and qualification under the Securities Act and state securities laws are not required (in which event, the Issuer shall provide its transfer agent with any required legal opinions); (iv) the Holder provides the Issuer with reasonable assurances that such security can be sold pursuant to Rule 144 under the Securities Act (in which event, the Issuer shall, at the Issuer’s expense, provide its transfer agent with any required legal opinions) or (v) in the event of a cashless exercise . For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Securities issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date these Warrants were originally issued.

(h) Holder Representations. In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act. The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

(i) Registration; Listing .

(i) Reference is made to the Registration Rights Agreement, the terms of which are incorporated herein by reference.

(ii) If any shares of Common Stock required to be reserved for issuance upon exercise of this Warrant or as otherwise provided hereunder require registration or qualification with any

Governmental Authority under any federal or state law before such shares may be so issued, the Issuer will in good faith use its best efforts as expeditiously as possible at its expense to cause such shares to be duly registered or qualified. If, and for so long as, the Common Stock of the Issuer is listed on any securities exchange or market, the Issuer will, at its expense, list thereon, maintain and increase when necessary such listing, of, all Warrant Shares from time to time issued upon exercise of this Warrant or as otherwise provided hereunder, and, to the extent permissible under the applicable securities exchange rules, all unissued Warrant Shares which are at any time issuable hereunder. The Issuer will also so list on each securities exchange or market, and will maintain such listing of, any other securities which the Holder of this Warrant shall be entitled to receive upon the exercise of this Warrant if at the time any securities of the same class shall be listed on such securities exchange or market by the Issuer.

(j) Reservation of Shares . During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

(k) Exercise and Duration of Warrants . These Warrants shall be exercisable by the registered Holder at any time and from time to time during the Exercise Period. At 5:00 p.m., Denver, Colorado Time, on the Expiration Date, the portion of these Warrants not exercised prior thereto shall be and become void and of no value.

(l) Company’s Right to Demand Exercise or Cancellation .

(i) The Company’s right to issue an Exercise Demand (as defined below), subject to the following provisions, shall apply only on or after the Earliest Exercise Date.

(ii) In the event that, during each of twenty (20) consecutive Trading Days (the last of such consecutive Trading Days, the “Trigger Date” ) each of all of the following conditions has been satisfied,

(x) the Company’s Common Stock trades on the Trading Market at a closing price for each such Trading Day that equals or exceeds 150% the Exercise Price then in effect for this Warrant;

(y) the trading volume on the Trading Market for each such Trading Day is at least 75,000 shares (such number to be adjusted for any stock splits and similar capital adjustments effected after the Original Issue Date); and

(z) the Warrant Shares are subject to an effective Registration Statement for each such Trading Day; provided, however, that, as of the date of the Holder’s receipt of the

Exercise Demand (as defined below), the last day of the effectiveness of such Registration Statement is at least 90 days after the date of the Holder’s receipt of the Exercise Demand,

the Company shall have the right to provide written notice (the “ Exercise Demand ”) to Holder, which Exercise Notice may be given no later than 5 PM, New York Time on the date which is the fifth (5th) Trading Day after the Trigger Date as of which all such conditions have been satisfied, accelerating the Expiration Date to a specified date (the “Early Expiration Date” ), which date shall be no earlier than the date which is fifteen (15) Trading Days after the date of the Holder’s receipt of the Exercise Demand; provided, however, if the Registration Statement covering the Warrant Shares is not effective at any time from the Trigger Date through and including the end of the Early Expiration Date, the Exercise Demand shall be deemed automatically withdrawn and canceled and the Expiration Date shall remain the Scheduled Expiration Date, as in effect prior to and without regard to the Exercise Demand.

(iii) After receiving a duly issued Exercise Demand, Holder may exercise this Warrant in accordance with its terms at any time up to end of the Early Expiration Date, but any outstanding and unexercised portion of this Warrant at the end of the Early Expiration Date shall automatically lapse and be deemed cancelled, forfeited, waived, voided and of no further force or effect.

4. Registration of Warrants . The Company shall register these Warrants upon records to be maintained by the Company for that purpose ( “Warrant Register” ), in the name of the record Holder from time to time. The Company may deem and treat the registered Holder of these Warrants as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

5. Registration of Transfers . On the terms and subject to the conditions set forth in this Warrant Agreement, the Company shall register the transfer of any portion of these Warrants in the Warrant Register, upon surrender of these Warrants, with the Form of Assignment attached hereto duly completed and signed, to the Company at its address specified in this Warrant Agreement. Upon any such registration or transfer, a new certificate representing the right to purchase Warrant Shares in substantially the form of this Warrant Agreement (a “New Warrant Certificate” ), evidencing the portion of these Warrants so transferred shall be issued to the transferee and a New Warrant Certificate evidencing the remaining portion of these Warrants not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant Certificate by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant.

6. Replacement of Warrant; Partial Exercise .

(i) If this Warrant Agreement is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant Agreement, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity (which shall not include a surety bond), if requested. Applicants for a

New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. If a New Warrant Certificate is requested as a result of a mutilation of this Warrant Agreement, then the Holder shall deliver such mutilated Warrant Agreement to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.

(ii) With respect to partial exercises of this Warrant, the Issuer shall keep written records for the Holder of the number of Warrant Shares exercised as of each date of exercise.

(iii) The Holder shall deliver this original Warrant, or an indemnification undertaking with respect to such Warrant in the case of its loss, theft or destruction, at such time that this Warrant is fully exercised.

7. Holder Not Deemed a Stockholder; Limitations on Liability . Except as otherwise specifically provided herein, prior to the exercise of this Warrant for the issuance to the Holder of the Warrant Shares, which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

8. Certain Adjustments . The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time, excepting Excluded Issuances, as set forth in this Section 8.

(a) Recapitalization, Reorganization, Reclassification, Consolidation, Merger or Sale .

(i) In case the Issuer after the Original Issue Date shall do a Fundamental Transaction (the occurrence of any Fundamental Transaction, a “Triggering Event” ), proper provision shall be made to the Exercise Price and the number of shares of Warrant Shares that may be purchased upon exercise of this Warrant so that, upon the basis and the terms and in the manner provided in this Warrant, the Holder of this Warrant shall be entitled upon the exercise hereof at any time after the consummation of such Triggering Event, to the extent this Warrant is not exercised prior to such Triggering Event, to receive at the Exercise Price as adjusted to take into account the consummation of such Triggering Event, in lieu of the Common Stock issuable upon such exercise of this Warrant prior to such Triggering Event, the securities, cash and property to which the Holder would have been entitled upon the consummation of such Triggering Event if the Holder had exercised the rights represented by this Warrant immediately prior thereto (including the right of a stockholder to elect the type of consideration it will receive upon a Triggering Event), subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for elsewhere in this Section 8. Upon the

Holder’s request, the continuing or surviving corporation as a result of such Triggering Event shall issue to the Holder a new warrant of like tenor evidencing the right to purchase the adjusted amount of Warrant Shares, cash or property and the adjusted Exercise Price pursuant to the terms and provisions of this Section).

(ii) In the event that the Holder has elected not to exercise this Warrant prior to the consummation of a Triggering Event, the surviving entity and/or each Person (other than the Issuer) which may be required to deliver any securities, cash or property upon the exercise of this Warrant as provided herein shall assume, by written instrument delivered to, and reasonably satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer under this Warrant (and if the Issuer shall survive the consummation of such Triggering Event, such assumption shall be in addition to, and shall not release the Issuer from, any continuing obligations of the Issuer under this Warrant) and (B) the obligation to deliver to the Holder such securities, cash or property as, in accordance with the foregoing provisions of this subsection (a), the Holder shall be entitled to receive, and the surviving entity and/or each such Person shall have similarly delivered to the Holder an opinion of counsel for the surviving entity and/or each such Person, which counsel shall be reasonably satisfactory to the Holder, or in the alternative, a written acknowledgement executed by the President or Chief Financial Officer of the Issuer, stating that this Warrant shall thereafter continue in full force and effect and the terms hereof (including, without limitation, all of the provisions of this subsection (a)) shall be applicable to the securities, cash or property which the surviving entity and/or each such Person may be required to deliver upon any exercise of this Warrant or the exercise of any rights pursuant hereto.

(b) Stock Dividends. If at any time the Issuer shall make or issue or set a record date for the holders of the Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, shares of Common Stock, the Company shall reserve for Holder the appropriate number of shares in the event the Holder exercises the Warrants in the future.

(c) Subdivisions and Combinations . If at any time the Issuer shall: (i) make or issue or set a record date for the holders of the Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (ii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then (1) the number of shares of Common Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (2) the Exercise Price then in effect shall be adjusted to equal (A) the Exercise Price then in effect multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment.

(d) Certain Other Distributions . If at any time the Issuer shall make or issue or set a record date for the holders of the Common Stock for the purpose of entitling them to receive any dividend or other distribution of cash, property, evidences of indebtedness or securities of any

nature whatsoever (other than Common Stock), then (1) the number of shares of Common Stock for which this Warrant is exercisable shall be adjusted to equal the product of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such adjustment multiplied by a fraction (A) the numerator of which shall be the Fair Market Value of Common Stock at the date of taking such record and (B) the denominator of which shall be such Fair Market Value minus the amount allocable to one share of Common Stock of any such cash so distributable and of the fair value (as determined in good faith by the Board and supported by an opinion from an investment banking firm mutually agreed upon by the Issuer and the Holder) of any and all such evidences of indebtedness, securities or property so distributable, and (2) the Exercise Price then in effect shall be adjusted to equal the Exercise Price then in effect multiplied by a fraction (A) the numerator of which shall be the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment and (B) the denominator of which shall be the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment. A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Issuer to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 4(e) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 4(b).

(e) Number of Warrant Shares . Simultaneously with any adjustment to the Exercise Price pursuant to this Section 8, the number of Warrant Shares that may be purchased upon exercise of these Warrants shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

(f) Calculations . All calculations under this Section 8 shall be made to the nearest cent or the nearest 1/100 ^th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

(g) Notice of Adjustments . Upon the occurrence of each adjustment pursuant to this Section 8, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant Agreement and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of these Warrants (as applicable). Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder.

9. Limitations on Exercise .

(a) Except as specified in Section 9(b), notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Holder upon any exercise of these Warrants (or otherwise in respect hereof) shall be limited to the extent

necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed 9.99% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Notwithstanding anything to the contrary contained in this Warrant Agreement: (i) no term of this Section 9 may be waived by any party, nor may any term of this Section 9 be amended such that the threshold percentage of ownership as set forth above would be directly or indirectly increased; (ii) this restriction runs with these Warrants and may not be modified or waived by any subsequent Holder hereof; and (iii) any attempted waiver, modification or amendment of this Section 9 will be void ab initio .

(b) The provisions of this Section 9 shall not apply to any or more of the following periods: (i) while there is an outstanding tender offer for any or all of the shares of the Company’s Common Stock, (ii) after the Holder has received a duly issued Exercise Demand for the Warrant Shares of this Warrant, but not after such Exercise Demand has been withdrawn or canceled pursuant to the provisions of Section 3(l)(ii), or (iii) at any time which is thirty (30) days or less before the Expiration Date.

10. Notices . All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the [third] day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10).

If to the Company:

Attention: James R. Thompson, Chief Executive Officer

4643 S. Ulster Street, Suite 1510

Denver, Colorado 80237

Facsimile: (303) 991-8001

E-mail: jthompson@spyr.com

with a copy to:

Mailander Law Office, Inc.

835 5th Avenue, Ste. 312

San Diego, CA 92101

Facsimile: (619) 537-7193

E-mail: tmailander@gmail.com

Attention: Tad Mailander

If to the Holder:

Zakeni Limited

c/o Lodestar International Corp.

Suite 100, Whitepark House

White Park House

St. Michael, Barbados BB11135

Facsimile: : 246-429-2677

Email: ssalcman@lodestar.bb

Attention: Sheldon Salcman, President

with a copy to:

Krieger & Prager LLP

Attention: Samuel M. Krieger, Esq.

39 Broadway, Suite 920

New York, New York 10006

E-mail: skrieger@kplawfirm.com

Facsimile: (212) 363-2999

11. Miscellaneous .

(a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder and their successors and assigns. The foregoing sentence shall be subject to the restrictions on waivers and amendments set forth in Sections 9 and 11(l) of this Warrant.

(b) All questions concerning the construction, validity, enforcement, performance and interpretation of this Warrant Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof (other than Section 5-1401 of the General Obligations Law of the State of New York). Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of this Warrant and the transactions herein contemplated ( “Proceedings” ) (whether brought against a party hereto or its respective Affiliates, employees

or agents) shall be commenced exclusively in the New York Courts. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Warrant or the transactions contemplated hereby. If either party shall commence a Proceeding to enforce any provisions of this Warrant, then the prevailing party in such Proceeding shall be reimbursed by the other party for its reasonable attorney’s fees. The parties hereby waive all rights to a trial by jury

(c) The failure of any of the parties hereto to at any time enforce any of the provisions of this Warrant shall not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Warrant or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Warrant. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Warrant shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.

(d) The headings herein are for convenience only, do not constitute a part of this Warrant Agreement and shall not be deemed to limit or affect any of the provisions hereof. Whenever the context requires, words used in the singular shall be construed to mean or include the plural and vice versa, and pronouns of any gender shall be deemed to include and designate the masculine, feminine or neuter gender.

(e) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

(f) Prior to exercise of a Warrant, the Holder hereof shall not, by reason of being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.

(g) Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

(h) Entire Agreement . This Warrant, together with the Settlement Agreement and the Registration Rights Agreement, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Warrant, the Settlement Agreement and the Registration Rights Agreement, the statements in the body of this Warrant shall control.

(i) Successor and Assigns . This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

(j) No Third-Party Beneficiaries . This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

(k) Headings . The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

[Balance of page intentionally left blank]

(l) Amendment and Modification; Waiver . Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

IN WITNESS WHEREOF , the Company has caused this Warrant to be duly executed by its authorized officer this 12th day of July, 2018, as of the Original Issue Date.

		SPYR, INC.

		By:
		Name: James R. Thompson
		Title: Chief Executive Officer

EXERCISE NOTICE

SPYR, INC.

WARRANT DATED JULY 12, 2018

SERIES 2018S

CLASS A

Warrant Certificate No.: 2018S-A-1

The undersigned Holder hereby irrevocably elects to purchase Warrant Shares pursuant to the above referenced Warrant. Capitalized terms used herein and not otherwise defined have the meanings set forth in the Warrant.

(1)	The undersigned Holder hereby exercises its right to purchase ______Warrant Shares pursuant to the Warrant.

(2)	(PLEASE CHECK ONE METHOD OF PAYMENT)  The Holder shall pay the sum of $__________ to the Company in accordance with the terms of the Warrant; or  The Holder is acquiring the Warrant Share through a cashless exercise in accordance with the terms of the Warrant; the net number of Warrant Shares to be issued, as provided below, pursuant to this cashless exercise is ________ shares of Common Stock.

(3)	Pursuant to this Exercise Notice, the Company shall deliver to the holder Warrant Shares in accordance with the terms of the Warrant.

(4)	Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified here: ______________________________________.


(5)	By its delivery of this Exercise Notice, the undersigned represents and warrants to the Company that in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned under Section 9 of the Warrant.

Dated: __________________________		Name of Holder: _________________________

		(Print)

		Name: ____________________________
		Title: _____________________________
		Date: _____________________________

		(Signature must conform in all respects to name of holder as specified on the face of the Warrant.)

WARRANT EXERCISE LOG

WARRANT DATED JULY 12, 2018

SERIES 2018S

CLASS A

Warrant Certificate No.: 2018S-A-1

Date	Number of Warrant Shares Available to be Exercised	Number of Warrant Shares Exercised	Number of Warrant Shares Remaining to be Exercised

SPYR, INC.

WARRANT DATED JULY 12, 2018

SERIES 2018S

CLASS A

Warrant Certificate No.: 2018S-A-1

ASSIGNMENT FORM

(To assign the foregoing warrant or warrants, execute
this form and supply required information.
Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] Warrants and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Date: ______________, _______

Holder’s Signature: _____________________________

Holder’s Address: ______________________________

_______________________________

Signature Guaranteed: ___________________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the Warrant.

SPYR, INC.

COMMON STOCK WARRANT

SERIES 2018S

CLASS B

Warrant Certificate No.: 2018S-B-1

Original Issue Date: July 12, 2018

This Common Stock Warrant (“ Warrant ”) certifies that, for value received, Zakeni Limited, or its assigns ( “Holder ”) is entitled to purchase from SPYR, Inc., a Nevada corporation (“ Company ” or “Issuer” ), up to a total of One Million Five Hundred Thousand (1,500,000) shares of Common Stock (as defined below) (each such share of Common Stock, a “Warrant Share” and all such shares of Common Stock, the “Warrant Shares ” ), at any time and from time to time after January 12, 2019 (the “Earliest Exercise Date” ) through and including the Expiration Date, all on the terms and subject to the conditions set forth below:

“ Board ” means the board of directors of the Company.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exercise Date” means, for any given exercise of this Warrant, the date, which date shall be during the Exercise Period, on which the conditions to such exercise as set forth herein shall

“Exercise Period” means the period commencing on the Earliest Exercise Date and expiring at 5:00 p.m., Denver, Colorado Time on the Expiration Date

“Exercise Price” means $0.50 in United States Dollars, subject to adjustment in accordance with Section 8 of this Warrant Agreement.

“New York Courts” means the state and federal courts sitting in the State of New York, City of New York, Borough of Manhattan.

“Original Issue Date” means the Original Issue Date first set forth on the first page of this Warrant Agreement.

“Securities Act” means the Securities Act of 1933, as amended.

2. [Reserved]

3. Exercise of Warrant .

(a) Exercise Procedure . This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i) delivery to the Company of a duly completed and executed Exercise Notice, (which delivery may be made by electronic means);

(iii) payment (if the exercise is not a cashless exercise contemplated by the other provisions of this Section 3) to the Company of the Aggregate Exercise Price in accordance with Section 3(b)(i).

X = [Y(A - B)] ÷ A

Where:

X =

the number of Warrant Shares to be issued to the Holder.

Y =

the total number of Warrant Shares for which the Holder has elected to exercise this Warrant pursuant to Section 3(a).

A =

the Fair Market Value of one Warrant Share as of the applicable Exercise Date.

B =

the Exercise Price in effect under this Warrant as of the applicable Exercise Date.

(d) Delivery of Stock Certificates .

(f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes . With respect to the exercise of this Warrant, the Company hereby represents, covenants and agrees:

(i) This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

(g) Compliance with Securities Laws .

(i) Registration; Listing .

(i) Reference is made to the Registration Rights Agreement, the terms of which are incorporated herein by reference.

(ii) If any shares of Common Stock required to be reserved for issuance upon exercise of this Warrant or as otherwise provided hereunder require registration or qualification with any

(l) Company’s Right to Demand Exercise or Cancellation .

(i) The Company’s right to issue an Exercise Demand (as defined below), subject to the following provisions, shall apply only on or after the Earliest Exercise Date.

(x) the Company’s Common Stock trades on the Trading Market at a closing price for each such Trading Day that equals or exceeds 150% the Exercise Price then in effect for this Warrant;

(z) the Warrant Shares are subject to an effective Registration Statement for each such Trading Day; provided, however, that, as of the date of the Holder’s receipt of the

Exercise Demand (as defined below), the last day of the effectiveness of such Registration Statement is at least 90 days after the date of the Holder’s receipt of the Exercise Demand,

6. Replacement of Warrant; Partial Exercise .

(ii) With respect to partial exercises of this Warrant, the Issuer shall keep written records for the Holder of the number of Warrant Shares exercised as of each date of exercise.

(a) Recapitalization, Reorganization, Reclassification, Consolidation, Merger or Sale .

9. Limitations on Exercise .

If to the Company:

Attention: James R. Thompson, Chief Executive Officer

4643 S. Ulster Street, Suite 1510

Denver, Colorado 80237

Facsimile: (303) 991-8001

E-mail: jthompson@spyr.com

with a copy to:

Mailander Law Office, Inc.

835 5th Avenue, Ste. 312

San Diego, CA 92101

Facsimile: (619) 537-7193

E-mail: tmailander@gmail.com

Attention: Tad Mailander

If to the Holder:

Zakeni Limited

c/o Lodestar International Corp.

Suite 100, Whitepark House

White Park House

St. Michael, Barbados BB11135

Facsimile: : 246-429-2677

Email: ssalcman@lodestar.bb

Attention: Sheldon Salcman, President

with a copy to:

Krieger & Prager LLP

Attention: Samuel M. Krieger, Esq.

39 Broadway, Suite 920

New York, New York 10006

E-mail: skrieger@kplawfirm.com

Facsimile: (212) 363-2999

11. Miscellaneous .

(f) Prior to exercise of a Warrant, the Holder hereof shall not, by reason of being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.

(k) Headings . The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

[Balance of page intentionally left blank]

IN WITNESS WHEREOF , the Company has caused this Warrant to be duly executed by its authorized officer this 12th day of July, 2018, as of the Original Issue Date.

		SPYR, INC.

		By:
		Name: James R. Thompson
		Title: Chief Executive Officer

EXERCISE NOTICE

SPYR, INC.

WARRANT DATED JULY 12, 2018

SERIES 2018S

CLASS B

Warrant Certificate No.: 2018S-B-1

(1)	The undersigned Holder hereby exercises its right to purchase ______Warrant Shares pursuant to the Warrant.

(2)	(PLEASE CHECK ONE METHOD OF PAYMENT)  The Holder shall pay the sum of $__________ to the Company in accordance with the terms of the Warrant; or  The Holder is acquiring the Warrant Share through a cashless exercise in accordance with the terms of the Warrant; the net number of Warrant Shares to be issued, as provided below, pursuant to this cashless exercise is ________ shares of Common Stock.

(3)	Pursuant to this Exercise Notice, the Company shall deliver to the holder Warrant Shares in accordance with the terms of the Warrant.

(4)	Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified here: ______________________________________.


(5)	By its delivery of this Exercise Notice, the undersigned represents and warrants to the Company that in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned under Section 9 of the Warrant.

Dated: __________________________		Name of Holder: ______________________

		(Print)

		Name: ____________________________
		Title: _____________________________
		Date: _____________________________

		(Signature must conform in all respects to name of holder as specified on the face of the Warrant.)

WARRANT EXERCISE LOG

WARRANT DATED JULY 12, 2018

SERIES 2018S

CLASS B

Warrant Certificate No.: 2018S-B-1

Date	Number of Warrant Shares Available to be Exercised	Number of Warrant Shares Exercised	Number of Warrant Shares Remaining to be Exercised

SPYR, INC.

WARRANT DATED JULY 12, 2018

SERIES 2018S

CLASS B

Warrant Certificate No.: 2018S-B-1

ASSIGNMENT FORM

(To assign the foregoing warrant or warrants, execute
this form and supply required information.
Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] Warrants and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Date: ______________, _______

Holder’s Signature: _____________________________

Holder’s Address: ______________________________

_______________________________

Signature Guaranteed: ___________________________________________

SPYR, INC.

COMMON STOCK WARRANT

SERIES 2018S

CLASS C

Warrant Certificate No.: 2018S-C-1

Original Issue Date: July 12, 2018

“ Board ” means the board of directors of the Company.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exercise Date” means, for any given exercise of this Warrant, the date, which date shall be during the Exercise Period, on which the conditions to such exercise as set forth herein shall

“Exercise Period” means the period commencing on the Earliest Exercise Date and expiring at 5:00 p.m., Denver, Colorado Time on the Expiration Date

“Exercise Price” means $0.75 in United States Dollars, subject to adjustment in accordance with Section 8 of this Warrant Agreement.

“New York Courts” means the state and federal courts sitting in the State of New York, City of New York, Borough of Manhattan.

“Original Issue Date” means the Original Issue Date first set forth on the first page of this Warrant Agreement.

“Securities Act” means the Securities Act of 1933, as amended.

2. [Reserved]

3. Exercise of Warrant .

(a) Exercise Procedure . This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i) delivery to the Company of a duly completed and executed Exercise Notice, (which delivery may be made by electronic means);

(iii) payment (if the exercise is not a cashless exercise contemplated by the other provisions of this Section 3) to the Company of the Aggregate Exercise Price in accordance with Section 3(b)(i).

X = [Y(A - B)] ÷ A

Where:

X =

the number of Warrant Shares to be issued to the Holder.

Y =

the total number of Warrant Shares for which the Holder has elected to exercise this Warrant pursuant to Section 3(a).

A =

the Fair Market Value of one Warrant Share as of the applicable Exercise Date.

B =

the Exercise Price in effect under this Warrant as of the applicable Exercise Date.

(d) Delivery of Stock Certificates .

(f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes . With respect to the exercise of this Warrant, the Company hereby represents, covenants and agrees:

(i) This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

(g) Compliance with Securities Laws .

(i) Registration; Listing .

(i) Reference is made to the Registration Rights Agreement, the terms of which are incorporated herein by reference.

(ii) If any shares of Common Stock required to be reserved for issuance upon exercise of this Warrant or as otherwise provided hereunder require registration or qualification with any

(l) Company’s Right to Demand Exercise or Cancellation .

(i) The Company’s right to issue an Exercise Demand (as defined below), subject to the following provisions, shall apply only on or after the Earliest Exercise Date.

(x) the Company’s Common Stock trades on the Trading Market at a closing price for each such Trading Day that equals or exceeds 150% the Exercise Price then in effect for this Warrant;

(z) the Warrant Shares are subject to an effective Registration Statement for each such Trading Day; provided, however, that, as of the date of the Holder’s receipt of the

Exercise Demand (as defined below), the last day of the effectiveness of such Registration Statement is at least 90 days after the date of the Holder’s receipt of the Exercise Demand,

6. Replacement of Warrant; Partial Exercise .

(ii) With respect to partial exercises of this Warrant, the Issuer shall keep written records for the Holder of the number of Warrant Shares exercised as of each date of exercise.

(a) Recapitalization, Reorganization, Reclassification, Consolidation, Merger or Sale .

9. Limitations on Exercise .

If to the Company:

Attention: James R. Thompson, Chief Executive Officer

4643 S. Ulster Street, Suite 1510

Denver, Colorado 80237

Facsimile: (303) 991-8001

E-mail: jthompson@spyr.com

with a copy to:

Mailander Law Office, Inc.

835 5th Avenue, Ste. 312

San Diego, CA 92101

Facsimile: (619) 537-7193

E-mail: tmailander@gmail.com

Attention: Tad Mailander

If to the Holder:

Zakeni Limited

c/o Lodestar International Corp.

Suite 100, Whitepark House

White Park House

St. Michael, Barbados BB11135

Facsimile: : 246-429-2677

Email: ssalcman@lodestar.bb

Attention: Sheldon Salcman, President

with a copy to:

Krieger & Prager LLP

Attention: Samuel M. Krieger, Esq.

39 Broadway, Suite 920

New York, New York 10006

E-mail: skrieger@kplawfirm.com

Facsimile: (212) 363-2999

11. Miscellaneous .

(f) Prior to exercise of a Warrant, the Holder hereof shall not, by reason of being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.

(k) Headings . The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

[Balance of page intentionally left blank]

IN WITNESS WHEREOF , the Company has caused this Warrant to be duly executed by its authorized officer this 12th day of July, 2018, as of the Original Issue Date.

		SPYR, INC.

		By:
		Name: James R. Thompson
		Title: Chief Executive Officer

EXERCISE NOTICE

SPYR, INC.

WARRANT DATED JULY 12, 2018

SERIES 2018S

CLASS C

Warrant Certificate No.: 2018S-C-1

(1)	The undersigned Holder hereby exercises its right to purchase ______Warrant Shares pursuant to the Warrant.

(2)	(PLEASE CHECK ONE METHOD OF PAYMENT)  The Holder shall pay the sum of $__________ to the Company in accordance with the terms of the Warrant; or  The Holder is acquiring the Warrant Share through a cashless exercise in accordance with the terms of the Warrant; the net number of Warrant Shares to be issued, as provided below, pursuant to this cashless exercise is ________ shares of Common Stock.

(3)	Pursuant to this Exercise Notice, the Company shall deliver to the holder Warrant Shares in accordance with the terms of the Warrant.

(4)	Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified here: ______________________________________.


(5)	By its delivery of this Exercise Notice, the undersigned represents and warrants to the Company that in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned under Section 9 of the Warrant.

Dated: __________________________		Name of Holder: _________________________

		(Print)

		Name: ________________________
		Title: _____________________________
		Date: _____________________________

		(Signature must conform in all respects to name of holder as specified on the face of the Warrant.)

WARRANT EXERCISE LOG

WARRANT DATED JULY 12, 2018

SERIES 2018S

CLASS C

Warrant Certificate No.: 2018S-C-1

Date	Number of Warrant Shares Available to be Exercised	Number of Warrant Shares Exercised	Number of Warrant Shares Remaining to be Exercised

SPYR, INC.

WARRANT DATED JULY 12, 2018

SERIES 2018S

CLASS C

Warrant Certificate No.: 2018S-C-1

ASSIGNMENT FORM

(To assign the foregoing warrant or warrants, execute
this form and supply required information.
Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] Warrants and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Date: ______________, _______

Holder’s Signature: _____________________________

Holder’s Address: ______________________________

_______________________________

Signature Guaranteed: ___________________________________________

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the inclusion in this Registration Statement on Form S-1 of SPYR, Inc. of our report dated August 14, 2018 relating to our audits of the December 31, 2017 and 2016 consolidated financial statements, which report appears in the Prospectus that is part of this Registration Statement.

We also consent to the reference to our firm under the caption “Experts” in such Prospectus.

/s/ Haynie & Company
Haynie & Company
Littleton, CO
August 31, 2018