Orange 21 Inc. Reports Financial Results for the Three Months Ended June 30, 2011; Announces Investor Conference Call

CARLSBAD, CA – August 15, 2011 – (Motor Sports Newswire) –

Orange 21 Inc. (OTCBB: ORNG) today announced financial results for the quarter ended June 30, 2011.

Net sales increased by $0.6 million, or 7%, to $9.0 million for the three months ended June 30, 2011, compared to $8.4 million on a “pro forma” basis for the three months ended June 30, 2010. “Pro forma” numbers exclude the net sales from our LEM, S.r.l. subsidiary that we sold effective December 31, 2010. Net sales for the three months ended June 30, 2010, including the net sales from LEM, were $9.5 million.

The growth achieved in the second quarter of 2011 almost offset a modest net sales decline of $0.1 million for the first six months ending June 30, 2011. Net sales were $15.7 million for the six months ended June 30, 2011, compared to $15.8 million on a “pro forma” basis (excluding the impact of our sale of LEM in December 2010) for the six months ended June 30, 2010. Net sales as reported for the six months ended June 30, 2010, including the net sales from LEM, were $17.8 million.

The 2010 “pro forma” net sales amounts described above exclude the $1.1 million and $2.0 million during the three and six month periods ended June 30, 2010, respectively, of sales products manufactured for third party customers rather than for the Company by its former Italian manufacturing subsidiary, LEM. LEM was sold on December 31, 2010, as such LEM’s operations were not included in the Company’s consolidated results for the three or six month periods ended June 30, 2011. However, LEM sales remain included in our consolidated results for the three and six month periods ended June 30, 2010. Set forth below are “pro forma” financial tables which set forth our operating results for the three and six months ended June 30, 2010 as if we did not own LEM during those periods.

The Company incurred a net loss of $3.0 million for the three months ended June 30, 2011 compared to a net income of $408,000 for the three months ended June 30, 2010. The net loss for the three months ended June 30, 2011 included $2.0 million in other operating expenses primarily because the estimated future cash flows from the sale of certain licensed products would be insufficient to cover the remaining royalty obligations. The net losses for the three months ended June 30, 2011 and 2010, also included $537,000 and $167,000, respectively, in non-cash share-based compensation and warrant expenses.

“We are very pleased with the growth we generated this quarter, especially following the significant decline the Company had last quarter,” said Orange 21 President Michael Marckx. “We are optimistic that we can continue to improve our sales execution and implement growth strategies to enhance our market position as we continue to reshape the organization for ongoing future success. Our new team’s focus on the marketing, product development and sales programs to leverage the core SPY Optic(TM) brand appears to be gaining traction on many fronts. We are particularly enthused by our strong position in snow goggles and we really look forward to the second half of this year.”

Carol Montgomery, Orange 21’s Chief Executive Officer, added: “I am pleased with the improved sales execution and focus of the entire organization, and commend the team for continuing the progress of our turnaround. While much work remains, we are pleased with the success of our second quarter and look forward to ongoing future success during the remainder of the year.”

Investor Conference Call: We invite you to join us for an investor conference call on Thursday, August 18, 2011 at 1:30, p.m. PST. The dial-in number for the call in North America is 1-866-788-0545 and 1-857-350-1683 for international callers. The participant pass code is 16835103. The call will also be webcast live on the Internet and can be accessed by logging on at www.orangetwentyone.com.

The webcast will be archived on the Company’s website for at least 60 days following the call. An audio replay of the conference call will be available for seven days beginning approximately two hours after the completion of the call on August 18, 2011. The audio replay dial-in number for North America is 1-888-286-8010 and +1-617-801-6888 for international callers. The replay pass code is 52315463.

About Orange 21 Inc.: Orange 21 designs, develops and markets premium products for the action sports, motorsports, snowsports and lifestyle markets under the brands SPY Optic(TM), O’Neill(R) and Margaritaville(R).

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. Specifically, comments in this press release regarding our ability to continue to improve our sales execution and implement growth strategies to enhance our market position and our ability to leverage the core SPY Optic(TM) brand are forward-looking statements and are subject to inherent risks. These statements are only predictions. Actual events or results may differ materially. Factors that could cause actual results to differ from those contained in the forward-looking statements include, but are not limited to: the general conditions of the domestic and global economy, changes in consumer discretionary spending; changes in the value of the U.S. dollar, Canadian dollar and Euro; changes in commodity prices; our ability to source raw materials and finished goods at favorable prices; risks related to the limited visibility of future orders; our ability to continue to develop, and introduce innovative new products in a timely manner; our ability to forecast future demand; the ability of our key foreign product suppliers to continue to supply to our forecasted demand, our ability to identify and execute successfully cost-control initiatives without adversely impacting sales; the performance of new products and continued acceptance of current products; our execution of strategic initiatives and alliances; uncertainties associated with intellectual property protection for our products; our ability to improve working capital management, particularly the level of inventory; our ability to obtain additional capital, the ability of our new management team to positively impact the business, and 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 the forward-looking statements are reasonable, we cannot guarantee future results. Moreover, 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.

Note Regarding Pro Forma Information in Period Over Period Comparisons Our period over period comparisons discussed above that are labeled “pro forma” are derived from the “pro forma” financial information below and from Footnote 1 to the Consolidated Financial Statements in our Form 10-Q for the quarter ended June 30, 2011. The references above and in the tables below to “pro forma” information refer to the financial data excluding the operating results for LEM for the quarter and six months ended June 30, 2010. We believe presentation of the pro forma financial data which is required to be presented in footnotes to the consolidated financial statements is also useful to understand how the Company has performed in the most recent operating periods compared to the Company’s performance as if LEM were not included in its operating results for the quarter and six months ended June 30, 2010.

ORANGE 21 INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Thousands, except number of shares and per share amounts)

                                                   June 30,    December 31,
                                                 ------------  ------------
                                                     2011          2010
                                                 ------------  ------------
                                                  (Unaudited)
Assets
Current assets
  Cash                                           $        676  $        263
  Accounts receivable, net                              5,494         4,173
  Inventories, net                                      8,517         8,902
  Prepaid expenses and other current assets               490           618
  Income taxes receivable                                  12            14
                                                 ------------  ------------
    Total current assets                               15,189        13,970
Property and equipment, net                               804           957
Intangible assets, net of accumulated
 amortization of $660 and $631 at June 30, 2011
 and December 31, 2010, respectively                       92           122
Other long-term assets                                     55            50
                                                 ------------  ------------
    Total assets                                 $     16,140  $     15,099
                                                 ============  ============
Liabilities and Stockholders' Equity (Deficit)
Current liabilities
  Lines of credit                                $      1,366  $      2,235
  Current portion of capital leases                        56            27
  Current portion of notes payable                         14            13
  Accounts payable                                      1,939         1,693
  Accrued expenses and other liabilities                4,541         3,007
                                                 ------------  ------------
    Total current liabilities                           7,916         6,975
Capitalized leases, less current portion                  157            38
Notes payable, less current portion                        54            61
Notes payable to stockholder                            9,500         7,000
                                                 ------------  ------------
  Total liabilities                                    17,627        14,074
Stockholders' equity (deficit)
  Preferred stock: par value $0.0001; 5,000,000
   authorized; none issued                                  -             -
  Common stock: par value $0.0001; 100,000,000
   shares authorized; 12,878,514 and 11,980,934
   shares issued and outstanding at June 30,
   2011 and December 31, 2010, respectively                 1             1
  Additional paid-in-capital                           42,911        40,972
  Accumulated other comprehensive income                  622           551
  Accumulated deficit                                 (45,021)      (40,499)
                                                 ------------  ------------
    Total stockholders' equity (deficit)               (1,487)        1,025
                                                 ------------  ------------
    Total liabilities and stockholders' equity
     (deficit)                                   $     16,140  $     15,099
                                                 ------------  ------------

ORANGE 21 INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

                                  Three Months Ended     Six Months Ended
                                       June 30,              June 30,
                                 --------------------  --------------------
                                    2011       2010       2011       2010
                                 ---------  ---------  ---------  ---------
                                      (Unaudited)           (Unaudited)

Net sales                        $   8,986  $   9,528  $  15,689  $  17,796
Cost of sales                        4,104      4,018      7,394      8,565
                                 ---------  ---------  ---------  ---------
  Gross profit                       4,882      5,510      8,295      9,231
Operating expenses:
  Sales and marketing                2,647      2,279      5,442      4,269
  General and administrative         2,609      1,893      4,275      3,855
  Shipping and warehousing             151        289        290        567
  Research and development             161        431        315        811
  Other operating expense            1,952          -      1,952          -
                                 ---------  ---------  ---------  ---------
    Total operating expenses         7,520      4,892     12,274      9,502
                                 ---------  ---------  ---------  ---------
  Income (loss) from operations     (2,638)       618     (3,979)      (271)
Other income (expense):
  Interest expense                    (295)      (152)      (551)      (237)
  Foreign currency transaction
   gain (loss)                         (15)       (75)        13         (9)
  Other income                           -         64          1         64
                                 ---------  ---------  ---------  ---------
    Total other expense               (310)      (163)      (537)      (182)
                                 ---------  ---------  ---------  ---------
  Income (loss) before provision
   for income taxes                 (2,948)       455     (4,516)      (453)
Income tax provision                     3         47          6         76
                                 ---------  ---------  ---------  ---------
Net income (loss)                $  (2,951) $     408  $  (4,522) $    (529)
                                 =========  =========  =========  =========
Net income (loss) per share of
 Common Stock
    Basic                        $   (0.23) $    0.03  $   (0.36) $   (0.04)
                                 =========  =========  =========  =========
    Diluted                      $   (0.23) $    0.03  $   (0.36) $   (0.04)
                                 =========  =========  =========  =========
Shares used in computing net
 income (loss) per share of
 Common Stock
    Basic                           12,841     11,956     12,567     11,941
                                 =========  =========  =========  =========
    Diluted                         12,841     11,987     12,567     11,941
                                 =========  =========  =========  =========

ORANGE 21 INC. AND SUBSIDIARIES

PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS (Thousands, except per share amounts)

The following unaudited pro forma condensed consolidated financial statement of operations for the three months ended June 30, 2010 has been presented as if the deconsolidation of LEM had occurred on April 1, 2010 (in thousands).

                                  Unaudited      Unaudited
                                 Three Months    Pro Forma    Unaudited Pro
                                  Ended June    Adjustments   Forma Results
                                 30, 2010 (1)       (2)            (3)

                                -------------  -------------  -------------
Net sales                       $       9,528  $      (1,112) $       8,416
Cost of Sales                           4,018           (225)         3,793
                                -------------  -------------  -------------

Gross profit (loss)                     5,510           (887)         4,623
Operating expenses:
Sales and marketing                     2,279            (60)         2,219
General and Administrative              1,893           (367)         1,526
Shipping and warehousing                  289           (145)           144
Research and development                  431           (207)           224
                                -------------  -------------  -------------

Total operating expenses                4,892           (779)         4,113
                                -------------  -------------  -------------

Loss from operations                      618           (108)           510
Other income (expense):
Interest expense                         (152)            26           (126)
Foreign currency transaction
 gain                                     (75)             5            (70)
Other expense                              64            (12)            52
Loss on deconsolidation of LEM              -         (1,292)        (1,292)
                                -------------  -------------  -------------

Total other income (expense)             (163)        (1,273)        (1,436)
                                -------------  -------------  -------------

Income (loss) before provision
 (benefit) for income taxes               455         (1,381)          (926)
Income tax provision (benefit)             47            (48)            (1)
                                -------------  -------------  -------------

Net income (loss)               $         408  $      (1,333) $        (925)
                                =============  =============  =============

(1) Represents the Company's actual (as reported) consolidated results of
    operations for the three months ended June 30, 2010.

(2) Represents LEM's results of operations for the three months ended June
    30, 2010 and intercompany eliminations. These pro forma adjustments
    include (i) sales, cost of sales and gross profit associated with LEM's
    sales to third parties, (ii) intercompany eliminations to adjust LEM's
    gross profit associated with the products produced by LEM for other
    subsidiaries of the Company and which were sold by the Company's other
    subsidiaries to third parties during the period presented, and (iii)
    operating and other expenses incurred by LEM. Also includes the
    adjustment for the loss on sale of 90% of LEM as if it had occurred on
    April 1, 2010. This information is provided to show the effect of the
    elimination of LEM's operations from the Company's business.

(3) Represents the pro forma consolidated results of operations of the
    Company and its remaining wholly owned subsidiaries, O21NA and O21
    Europe, for the three months ended June 30, 2010. As noted above, this
    table assumes an effective date of April 1, 2010 for the deconsolidation
    of LEM. Accordingly, while the results of LEM for the three months ended
    June 30, 2010 would be eliminated, the recording of the deconsolidation
    would result in a loss of $1.3 million on April 1, 2010, which would
    result in this $1.3 million loss being recorded for the three months
    ended June 30, 2010.

ORANGE 21 INC. AND SUBSIDIARIES

PRO FORMA UNAUDITED STATEMENT OF OPERATIONS (Thousands, except per share amounts)

The following unaudited pro forma condensed consolidated financial statement of operations for the six months ended June 30, 2010 has been presented as if the deconsolidation of LEM had occurred on January 1, 2010 (in thousands).

                                Unaudited Six    Unaudited
                                 Months Ended    Pro Forma    Unaudited Pro
                                June 30, 2010   Adjustments   Forma Results
                                     (1)            (2)            (3)

                                -------------  -------------  -------------
Net sales                       $      17,796  $      (2,025) $      15,771
Cost of Sales                           8,565           (287)         8,278
                                -------------  -------------  -------------

Gross profit (loss)                     9,231         (1,738)         7,493
Operating expenses:
Sales and marketing                     4,269           (142)         4,127
General and Administrative              3,855           (664)         3,191
Shipping and warehousing                  567           (286)           281
Research and development                  811           (433)           378
                                -------------  -------------  -------------

Total operating expenses                9,502         (1,525)         7,977
                                -------------  -------------  -------------

Loss from operations                     (271)          (213)          (484)
Other income (expense):
Interest expense                         (237)            63           (174)
Foreign currency transaction
 gain                                      (9)             8             (1)
Other expense                              64            (12)            52
Loss on deconsolidation of LEM              -         (1,170)        (1,170)
                                -------------  -------------  -------------

Total other income (expense)             (182)        (1,111)        (1,293)
                                -------------  -------------  -------------

Income (loss) before provision
 (benefit) for income taxes              (453)        (1,324)        (1,777)
Income tax provision (benefit)             76            (83)            (7)
                                -------------  -------------  -------------

Net income (loss)               $        (529) $      (1,241) $      (1,770)
                                =============  =============  =============

(1) Represents the Company's actual (as reported) consolidated results of
    operations for the six months ended June 30, 2010.

(2) Represents LEM's results of operations for the six months ended June 30,
    2010 and intercompany eliminations. These pro forma adjustments include
    (i) sales, cost of sales and gross profit associated with LEM's sales to
    third parties (ii) intercompany eliminations to adjust LEM's gross
    profit associated with the products produced by LEM for other
    subsidiaries of the Company and which were sold by the Company's other
    subsidiaries to third parties during the period presented, and (iii)
    operating and other expenses incurred by LEM. Also includes the
    adjustment for the loss on sale of 90% of LEM as if it had occurred on
    January 1, 2010. This information is provided to show the effect of the
    elimination of LEM's operations from the Company's business.

(3) Represents the pro forma consolidated results of operations of the
    Company and its remaining wholly owned subsidiaries, O21NA and O21
    Europe, for the six months ended June 30, 2010. As noted above, this
    table assumes an effective date of January 1, 2010 for the
    deconsolidation of LEM. Accordingly, while the results of LEM for the
    six months ended June 30, 2010 would be eliminated, the recording of the
    deconsolidation would result in a loss of $1.2 million on January 1,
    2010, which would result in this $1.2 million loss being recorded for
    the six months ended June 30, 2010.

CONTACTS:
Alain Mazer
Marketing Communications Manager
Michael D. Angel
Interim Chief Financial Officer
760-804-8420
Fax: 760-804-8442
www.orangetwentyone.com

SOURCE: Orange 21 Inc.

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