SPY Inc. Reports Financial Results for the Year Ended December 31, 2013

CARLSBAD, CA--(Marketwired - Mar 20, 2014) - SPY Inc. (OTCBB: XSPY) today announced financial results for the three months and year ended December 31, 2013.

Annual sales of our SPY^® brand products were $37.7 million in 2013, an increase of 8% or $2.6 million, compared to $35.1 million in 2012. SPY^® brand annual sales included slightly higher closeout sales of $2.8 million in 2013, compared to $2.6 million in 2012. Sales from our discontinued licensed brand products, which are no longer a focus of the Company, were less than $0.1 million in 2013, compared $0.5 million in 2012. Total Company net sales increased by 6% or $2.2 million, to $37.8 million for the year ended December 31, 2013, compared to $35.6 million for the year ended December 31, 2012, primarily as a result of increased sales of our snow goggle and optical products. 

Fourth quarter sales of our SPY^® brand products were $8.6 million in 2013, an increase of 7% or $0.5 million over the fourth quarter of 2012. The fourth quarter SPY^® brand sales included higher closeout sales of $0.7 million in the fourth quarter of 2013 compared to $0.6 million in the fourth quarter of 2012, or a $0.1 million increase. Total Company net sales increased by 6% or $0.5 million, to $8.6 million in the fourth quarter of 2013, compared to $8.1 million in the fourth quarter of 2012, primarily as a result of higher sales of our snow goggle and optical products.

"With continued strong SPY^® brand sales and an annual SPY^® brand growth of 8% for 2013 over 2012, we are happy to once again generate annual growth and achieve our 11^th quarter in a row of year over year growth of our SPY^® brand products. What is also noteworthy is we had income from operations of $0.4 million during 2013 compared to an operating loss of $5.0 million in 2012," said Michael Marckx, President and CEO. "We not only managed to significantly reduce our operating expenses for 2013, but also increased our margin to 50% in 2013 from 46% in 2012, which is a dramatic positive shift for us. This directly reflects the strong demand for our product offering as well as the operational and manufacturing efficiencies that we have achieved over the past year. I'd like to mention that this is a definitive culmination of SPY's efforts to reduce costs, which has helped solidify our operating cost structure. Achieving operating profit along with our expanding portfolio of products, including our successful Happy Lens™ Collection, positions us well for 2014 as we continue to focus on disruptive strategies, driving sales, improving our product margins and managing our operating costs."

During 2013 the Company had income from operations of $0.4 million compared to a loss from operations of $5.0 million in 2012 or an improvement of $5.4 million. Our loss from operations was $0.4 million in the fourth quarter of 2013 compared to $0.6 million in the fourth quarter of 2012, or an improvement of $0.2 million.

We incurred an annual net loss of $2.9 million in 2013 compared to a net loss of $7.2 million in 2012. We incurred a net loss of $1.3 million in the fourth quarter of 2013 compared to a net loss of $1.2 million in the fourth quarter of 2012. The primary difference between the net loss and income and loss from operations was due to interest expense on our long-term debt. 

SPY Inc. invites you to join the investor conference call on Thursday, March 20, 2014, at 1:30 p.m. PDT. The dial-in number for the call in North America is 1-866-515-2911 and 1-617-399-5125 for international callers. The participant pass code is 18230516. The call will also be webcast live on the internet and can be accessed by logging on at investor.spyoptic.com.

The results of our operations for the years ended December 31, 2013 and 2012 are more fully discussed in our Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission on March 20, 2014.

SPY Inc.:
We have a happy disrespect for the usual way of looking (at life) and the need to SEE HAPPY. It is this mindset that drives us to design, market, and distribute premium products for people who "live" to be outdoors, pushing the boundaries in action sports, motorsports, snow sports, cycling and multi-sports. We actively support the lifestyle subcultures that surround these pursuits, and as a result our products serve the broader fashion, music and entertainment markets of the youth culture. Our reason for being is to create the unusual and this is what helps us deliver distinctive products to people who are active, fun and a bit irreverent, like us. Our principal products -- sunglasses, goggles and prescription frames -- are marketed with fun and creativity under the SPY® brand. More information about SPY may be obtained from: www.spyoptic.com, www.facebook.com/spyoptic, Twitter @spyoptic and Instagram @spyoptic.

Safe Harbor Statement:
This press release contains forward-looking statements. These statements relate to future events or future financial performance and are subject to risks and uncertainties. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "feel," "estimate," "predict," "hope," the negative of such terms, expressions of optimism or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Factors that could cause actual results to differ from those contained in our forward-looking statements include, but are not limited to lack of continuity and effectiveness of our management team, our ability to generate sufficient incremental sales of our core SPY^® brand and new products to recoup our significant investments in sales and marketing, our ability to lower our expenses or otherwise reduce our breakeven point on an operating basis, our ability to maintain or increase the availability of our existing credit facilities and otherwise finance our strategic objectives, and the other risks identified from time to time in our filings made with the U.S. Securities and Exchange Commission. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results. Moreover, except as required by law, we assume no responsibility for the accuracy or completeness of such forward-looking statements and undertake no obligation to update any of these forward-looking statements.

SPY INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands, except number of shares and per share amounts)
				December 31,
				2013				2012
Assets
Current assets
	Cash			$	686			$	818
	Accounts receivable, net				6,543				5,611
	Inventories, net				5,872				6,274
	Prepaid expenses and other current assets				680				770
	Income taxes receivable				3				16
		Total current assets			13,784				13,489
Property and equipment, net					438				446
Intangible assets, net of accumulated amortization of $782 and $727 at December 31, 2013 and 2012, respectively					72				127
Other long-term assets					63				85
		Total assets		$	14,357			$	14,147
Liabilities and Stockholders' Deficit
Current liabilities
	Lines of credit			$	4,024			$	4,591
	Current portion of capital leases				77				49
	Current portion of notes payable				16				15
	Accounts payable				1,302				1,459
	Accrued expenses and other liabilities				3,069				2,604
	Income taxes payable				--				--
		Total current liabilities			8,488				8,718
Capital leases, less current portion					92				102
Notes payable, less current portion					16				32
Notes payable to stockholders					21,452				19,078
		Total liabilities			30,048				27,930
Stockholders' deficit
	Preferred stock: par value $0.0001; 5,000,000 authorized; none issued				--				--
	Common stock: par value $0.0001; 100,000,000 shares authorized; 13,184,876 and 13,098,374 shares issued and outstanding at December 31, 2013 and 2012, respectively				1				1
	Additional paid-in capital				45,331				44,403
	Accumulated other comprehensive income				520				494
	Accumulated deficit				(61,543	)			(58,681	)
		Total stockholders' deficit			(15,691	)			(13,783	)
		Total liabilities and stockholders' deficit		$	14,357			$	14,147

SPY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Thousands, except per share amounts)
				Three Months Ended December 31,								Year Ended December 31,
				2013				2012				2013				2012
				(Unaudited)
Net sales				$	8,627			$	8,112			$	37,782			$	35,609
Cost of sales					4,571				4,545				18,921				19,189
	Gross profit				4,056				3,567				18,861				16,420
Operating expenses:
	Sales and marketing				2,547				2,552				11,314				13,814
	General and administrative				1,607				1,211				6,112				6,285
	Shipping and warehousing				155				159				534				767
	Research and development				158				222				502				587
	Other operating expense				-				-				-				-
		Total operating expenses			4,467				4,144				18,462				21,453
	Loss from operations				(411	)			(577	)			399				(5,033	)
Other income (expense):
	Interest expense				(737	)			(712	)			(2,966	)			(2,388	)
	Foreign currency transaction gain (loss)				(116	)			57				(290	)			137
	Other (expense) income				(2	)			21				(5	)			50
		Total other expense			(855	)			(634	)			(3,261	)			(2,201	)
	Loss before provision for income taxes				(1,265	)			(1,211	)			(2,862	)			(7,234	)
Income tax provision					-				8				-				8
Net loss				$	(1,265	)		$	(1,219	)		$	(2,862	)		$	(7,242	)
Net loss per share of Common Stock
		Basic		$	(0.10	)		$	(0.09	)		$	(0.22	)		$	(0.56	)
		Diluted		$	(0.10	)		$	(0.09	)		$	(0.22	)		$	(0.56	)
Shares used in computing net loss per share of Common Stock
		Basic			13,185				13,544				13,155				13,047
		Diluted			13,185				13,544				13,155				13,047
Other comprehensive income (loss)
	Foreign currency translation adjustment				(107	)			(144	)			(239	)			(109	)
	Unrealized gain (loss) on foreign currency exposure of net investment in foreign operations				118				177				265				132
		Total other comprehensive income (loss)			11				33				26				23
Comprehensive loss				$	(1,254	)		$	(1,186	)		$	(2,836	)		$	(7,219	)