SPY Reports Financial Results for Q1 2013

CARLSBAD, Calif.— SPY Inc. (OTCBB: XSPY) has announced their financial results for the three months ended March 31, 2013.

First quarter sales of Spy brand products were $9.0 million in 2013, an increase of 14 percent or $1.1 million greater than the first quarter of 2012. Net sales increased by 11 percent or $0.9 million, to $9.0 million in the first quarter of 2013, compared to $8.1 million in the first quarter of 2012.

We are especially happy to have achieved our 8th consecutive quarter of year over year growth of Spy brand products with our strong Spy brand sales growth of 14 percent for the first quarter of 2013 over the first quarter of 2012," said Michael Marckx, president and CEO of SPY Inc. "This is very encouraging for our efforts during the remainder of 2013, as our most important product, the Spy Happy Lens, which is the most innovative product Spy has ever launched, was a significant part of our first quarter success. Moving forward, our Happy Lens Collection is expanding to include a growing list of new styles and will be featured in our Rx and Performance Collections, which will further leverage this innovation in new ways.”

“On top of our successful Happy Lens launch, we are even more enthralled with the combination of things we accomplished this quarter: solid sales growth, improved gross margins, lower operating expenses, positive cash flow from operations and a break even income from operations. We believe this solid first quarter of the year helps to position us well for the balance of 2013," he concluded.

The net loss improved by $1.9 million to $0.7 million in the first quarter of 2013, compared to a net loss of $2.6 million in the first quarter of 2012, primarily due to the reduction in the company’s loss from operations to become breakeven, partially offset by higher interest expense due to the increased level of indebtedness. Interest expense included in the net losses is primarily "paid in kind" by being added to the outstanding principal balance rather than being paid in cash.

In May 2013, the company amended their subordinated long-term debt arrangements, which in aggregate totaled $19.6 million at March 31, 2013. These long-term debt arrangements are due to Costa Brava III, LLP ($18.0 million) and Harlingwood (Alpha) LLC ($1.6 million), entities that as of March 31, 2013 owned approximately 48.3 percent and 5.4 percent of their common stock, respectively.