Orange 21 Announces Acquisition of Eyewear Manufacturer

CARLSBAD, Calif.--(BUSINESS WIRE)--Oct. 24, 2005--Orange 21 Inc. (NASDAQ:ORNG), a leading developer of brands that produce premium products for the action sport and youth lifestyle markets, announced today it has elected to exercise its option to purchase its Italian manufacturer, LEM S.r.l., subject to certain closing requirements. The transaction is expected to close in December 2005, at which time it is anticipated that LEM will become a wholly owned subsidiary of Orange 21 Inc.

LEM, founded in 1984, is one of the world's premier manufacturers of premium sunglasses and goggles. Located in Northern Italy, LEM currently manufactures approximately 79% of Orange 21's eyewear products through September 2005. This represented approximately 70% of LEM's revenue of EUR 11.2 million for the fiscal year ending June 30, 2005. Riccardo Polinelli, who founded LEM, will remain with Orange 21 as the General Manager of the LEM subsidiary.

"We are pleased to announce the acquisition of LEM, and to bring the majority of our sunglass and goggle manufacturing in-house," said Orange 21's Chief Executive Officer, Barry Buchholtz. "LEM has been instrumental in allowing Orange 21 to develop and manufacture premium eyewear products. We believe this acquisition will allow us to shorten manufacturing lead times, accelerate our product to market process, and improve product gross margins. Additionally, this vertical integration will minimize the historical risk of supply chain interruption and product quality issues. This acquisition complements and accelerates our progress towards our long term strategy of developing additional eyewear brands, including E Eyewear, and other brands targeted to different market segments."

Under the terms of the agreement, Orange 21 will pay EUR 3.3 million euro in cash plus a two year earn out in exchange for the outstanding LEM stock. The Company projects that the transaction will be slightly dilutive for the stub period in 2005 and in 2006. The transaction is expected to be accretive in 2007 and beyond.

About Orange 21 Inc.

Orange 21 develops brands that produce premium products for the action sport and youth lifestyle markets. Orange 21's brands include Spy Optic(TM), which manufactures sunglasses and goggles targeted towards the action sports and youth lifestyle market, and E Eyewear(TM), which manufactures the signature Dale Earnhardt, Jr. sunglass line.

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements and forecasts about Orange 21 and its business, such as Orange 21's statements regarding the timing and certainty of closing the transaction, strategic and financial benefits of the acquisition, expectations regarding revenue, accretion, integration and cost savings, and financial guidance. Because forecasts are inherently estimates that cannot be made with precision, the company's performance may at times differ from its estimates and targets.

Statements in this press release regarding financial guidance, management's statements and statements that refer to Orange 21's estimated and anticipated future results are forward-looking statements. All forward-looking statements in this press release reflect Orange 21's current analysis of existing trends and information and represent Orange 21's judgment only as of the date of this press release. Actual results may differ from current expectations based on a number of factors affecting Orange 21's business, including, but not limited to, risks associated with uncertainty as to whether the transaction will be completed; successfully integrating Orange 21 and LEM; the failure to realize the synergies and other perceived advantages resulting from the acquisition; the failure of either party to meet the closing conditions set forth in the definitive agreement; the ability to retain key personnel both before and after the acquisition; each company's ability to successfully execute its business strategies; and the extent and timing of market acceptance of manufacturing, litigation, the procurement, maintenance, enforcement and defense of patents and proprietary rights; competitive conditions in the industry, business cycles affecting the markets in which any products may be sold; uncertainties associated with Orange 21's ability to maintain a sufficient supply of products and to successfully manufacture its products; the performance of new products and continued acceptance of current products; the execution of strategic initiatives and alliances; the impact of ongoing litigation; and the uncertainties associated with intellectual property protection for its products. In addition, matters generally affecting the domestic and global economy, such as changes in interest and currency exchange rates, can affect Orange 21's results. Therefore, the reader is cautioned not to rely on these forward-looking statements. Orange 21 disclaims any intent or obligation to update these forward-looking statements.

Further information on potential risk factors that could affect Orange 21's business and its financial results are detailed in its filings with the Securities and Exchange Commission, including its most recent quarterly report on Form 10-Q. Undue reliance should not be placed on forward-looking statements.

CONTACT: Orange 21, Inc.
Michael Brower, 760-804-8420
Integrated Corporate Relations
Andrew Greenebaum/Allyson Pooley, 310-395-2215

SOURCE: Orange 21, Inc.