Spy Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE - August 6, 2014

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Exhibit 99.1
SPY Inc.
2070 Las Palmas Drive
Carlsbad, CA 92011
PH: (760) 804-8420
FX: (760) 804-8442
www.spyoptic.com
 
SPY INC. REPORTS FINANCIAL RESULTS FOR THE FIRST HALF AND SECOND QUARTER 2014

SPY® Inc. Total Company First Half Net Sales Reported as $17.4 million

 
For Immediate Release: August 6, 2014
 
CARLSBAD, Calif.—SPY Inc. (OTCBB: XSPY) today announced financial results for the three and six months ended June 30, 2014.

First half sales were $17.4 million in 2014, a decrease of 9% or $1.6 million less than in the first half of 2013. Sales included lower closeout sales of $0.8 million in 2014, compared to $1.4 million in 2013.   The decrease in our net sales was primarily driven by an overall decline in the consumer market coupled with several key retailers currently holding lower levels of inventory and fewer closeout sales of our sunglass products.  Gross profit as a percentage of net sales was 54% for the six months ended June 30, 2014, compared to 52% for the six months ended June 30, 2013.

Second quarter sales were $8.2 million in 2014, a decrease of 18% or $1.8 million less than in the second quarter of 2013. The decrease in our net sales was primarily driven by an overall decline in the consumer market coupled with several key retailers currently holding lower levels of inventory and fewer closeout sales of our sunglass products. Gross profit as a percentage of net sales was 56% for the three months ended June 30, 2014, compared to 53% for the three months ended June 30, 2013.  

 “Although we encountered a challenging consumer environment in the first couple of months of the second quarter we were pleased with the top line improvements in June and especially with the increase in our gross margin rate to the highest level in the last four years” said Michael Marckx, President and CEO. “The margin expansion is a direct result of our strong product development team as well as a concerted effort across the organization to reduce operating costs. Achieving an operating profit along with our expanding portfolio of products, including our successful Happy Lens™ Collection, positions us well for the balance of 2014 as we focus on fulfilling strong pre-orders for snow goggles, driving overall sales, improving our product margins and managing our operating costs.”
Income from operations decreased by $0.2 million to $0.2 million in the first half of 2014, compared to income from operations of $0.4 million in the first half of 2013. The $0.2 million decrease was partially due to the decrease in sales offset with a 167 basis point improvement in gross profit as a percent of sales.  Additionally, total operating expenses in the first half of 2014 were lower by $0.4 million, compared to the first half of 2013.  Cash flow generated by operating activities was $1.5 million in the first half of 2014.

Income from operations decreased by $0.2 million to $0.1 million in the second quarter of 2014, compared to income from operations of approximately $0.3 million in the second quarter of 2013. The $0.2 million decrease was partially due to the decrease in sales offset with a 271 basis point improvement in gross profit as a percent of sales.  Additionally, total operating expenses in the second quarter of 2014 were lower by $0.5 million, compared to the second quarter of 2013.
 
 
 
 
 
 
The Company incurred a net loss of $1.5 million and $1.3 million during the first half of 2014 and 2013, respectively.
 
The Company incurred a net loss of $0.7 million and $0.6 million during the second quarter of 2014 and 2013, respectively.
 
SPY Inc. invites you to join the investor conference call on Wednesday, August 6, 2014, at 1:30 p.m. PDT.  The dial-in number for the call in North America is 1-866-700-6067 and 1-617-213-8834 for international callers.  The participant pass code is 95387010.  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 quarters ended June 30, 2014 and 2013 are more fully discussed in our Form 10-Q for the quarter ended June 30, 2014, filed with the Securities and Exchange Commission on August 6, 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.

 
CONTACTS:
Maddy Isbell, PR Manager
760-804-8420
Fax: 760-804-8442
investor.spyoptic.com
 

 
 
 

SPY INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(Thousands, except number of shares and per share amounts)
 
 
  
June 30,
    
December 31,
  
 
  
2014
    
2013
  
 
  
(Unaudited)
        
Assets
  
              
Current assets
  
              
Cash
  
$
808
  
  
$
686
  
Accounts receivable, net
  
  
5,316
  
    
6,543
  
Inventories, net
  
  
6,557
  
    
5,872
  
Prepaid expenses and other current assets
  
  
883
  
    
680
  
Income taxes receivable
    
-
      
3
  
 
  
              
Total current assets
  
  
13,564
  
    
13,784
  
Property and equipment, net
  
  
391
  
    
438
  
Intangible assets, net of accumulated amortization of $800 and $782 at June 30, 2014 and December 31, 2013, respectively
  
  
54
  
    
72
  
Other long-term assets
  
  
44
  
    
63
  
 
  
              
Total assets
  
$
14,053
  
  
$
14,357
  
 
  
              
Liabilities and Stockholders’ Deficit
  
              
Current liabilities
  
              
Lines of credit
  
$
2,703
  
  
$
4,024
  
Current portion of capital leases
  
  
71
  
    
77
  
Current portion of notes payable
  
  
16
  
    
16
  
Accounts payable
  
  
3,467
  
    
1,302
  
Accrued expenses and other liabilities
  
  
2,866
  
    
3,069
  
 
  
              
Total current liabilities
  
  
9,123
  
    
8,488
  
Capital leases, less current portion
  
  
57
  
    
92
  
Notes payable, less current portion
  
  
8
  
    
16
  
Notes payable to stockholders
  
  
21,597
  
    
21,452
  
 
  
              
Total liabilities
  
  
30,785
  
    
30,048
  
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; 13,350,876 and 13,184,876 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively
  
  
1
  
    
1
  
Additional paid-in capital
  
  
45,780
  
    
45,331
  
Accumulated other comprehensive income
  
  
514
  
    
520
  
Accumulated deficit
  
  
(63,027
) 
    
(61,543
)
 
  
              
Total stockholders’ deficit
  
  
(16,732
) 
    
(15,691
)
 
  
              
Total liabilities and stockholders’ deficit
  
$
14,053
  
  
$
14,357
  

 
 
 
 

SPY INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Thousands, except per share amounts)
 
  
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
 
  
2014
    
2013
    
2014
    
2013
  
 
  
(Unaudited)
    
(Unaudited)
  
Net sales
  
$
8,183
 
  
$
9,995
  
  
$
17,376
  
  
$
19,002
  
Cost of sales
  
  
3,641
 
    
4,718
  
    
8,053
  
    
9,125
  
 
  
                              
Gross profit
  
  
4,542
 
    
5,277
  
    
9,323
  
    
9,877
  
Operating expenses:
  
                              
Sales and marketing
  
  
2,726
 
    
2,950
  
    
5,646
  
    
5,804
  
General and administrative
  
  
1,387
 
    
1,789
  
    
2,871
  
    
3,236
  
Shipping and warehousing
  
  
132
 
    
89
  
    
272
  
    
258
  
Research and development
  
  
196
 
    
122
  
    
349
  
    
223
  
 
  
                              
Total operating expenses
  
  
4,441
 
    
4,950
  
    
9,138
  
    
9,521
  
 
  
                              
Income (Loss) from operations
  
  
101
      
327
      
185
      
356
  
Other income (expense):
  
                              
Interest expense
  
  
(751
)
    
(752
) 
    
(1,509
) 
    
(1,484
) 
Foreign currency transaction gain (loss)
  
  
69
      
(144
) 
    
2
  
    
(162
)  
Other (expense)
  
  
(161
)
    
(5
) 
    
(159
) 
    
(5
) 
 
  
                              
Total other expense
  
  
(843
)
    
(901
) 
    
(1,666
) 
    
(1,651
) 
 
  
                              
Loss before provision for income taxes
  
  
(742
)
    
(574
) 
    
(1,481
) 
    
(1,295
) 
Income tax provision
  
  
—
 
    
—
  
    
3
  
    
—
  
 
  
                              
Net loss
  
$
(742
)
  
$
(574
) 
  
$
(1,484
) 
  
$
(1,295
) 
 
  
                              
Net loss per share of Common Stock
  
                              
Basic
  
$
(.06
)
  
$
(.04
) 
  
$
(.11
) 
  
$
(.10
) 
Diluted
  
$
(.06
)
  
$
(.04
) 
  
$
(.11
) 
  
$
(.10
) 
 
  
                              
Shares used in computing net loss per share of Common Stock
  
                              
Basic
  
  
13,343
 
    
13,135
  
    
13,285
  
    
13,125
  
Diluted
  
  
13,343
 
    
13,135
  
    
13,285
  
    
13,125
  
 
  
                              
Other comprehensive income (loss)
  
                              
Foreign currency translation adjustment
  
$
(93)
    
$
(84
) 
  
$
(187)
    
$
93
  
Unrealized gain (loss) on foreign currency exposure of net investment in foreign operations
  
  
88
      
96
      
180
  
    
(98
)  
 
  
                              
Total other comprehensive income (loss)
  
  
(5
)
    
12
      
(7
) 
    
(5
) 
 
  
                              
Comprehensive loss
  
$
(747
)
  
$
(562
) 
  
$
(1,491
) 
  
$
(1,300
) 

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