Orange 21 Reports First Quarter 2006 Financial Results

CARLSBAD, Calif.--(BUSINESS WIRE)--May 15, 2006--Orange 21 Inc. (NASDAQ: ORNG), a leading developer of brands that produce premium products for the action sport and youth lifestyle markets, today announced financial results for the three months ended March 31, 2006.

The Company's net sales for the first quarter of 2006 increased 11% to $9.4 million compared to $8.5 million in the first quarter of 2005. The Company reported a net loss for the first quarter of 2006 of approximately $1.7 million, or $0.21 loss per diluted share on approximately 8.1 million weighted average shares outstanding, compared to a net loss of approximately $495,000, or $0.06 loss per diluted share on 8.0 million weighted average shares outstanding in the same period a year ago.

Cash, cash equivalents, and short term investments at March 31, 2006, totaled approximately $5.9 million.

"We are pleased that our first quarter results were in line with our expectations. Demand for our product was strong in the first quarter, however our results continue to be adversely impacted by delays in product delivery. We are making progress in our efforts to correct these issues," said Barry Buchholtz, Chief Executive Officer. "On the positive side, our brand continues to gain market awareness on a global basis. We continue to develop exceptional products and demand is growing. In fact, during the first four months of the year, domestic sunglass bookings were up 31%. Additionally, our preliminary snow goggle bookings are strong versus a year ago. Finally, we are just a few weeks away from launching our Spring 2007 eyewear collection and we are very excited about the new styles."

2006 Outlook

The Company continues to forecast 2006 annual net sales in the range of $46 - $48 million and a net loss of $0.15 - $0.20 per fully diluted share for the year.

Investor Conference Call

As previously announced, Orange 21's quarterly earnings conference call is scheduled to begin today, Monday, May 15, 2006 at 4:30 p.m. Eastern Time. The call will be open to all interested investors through a live audio Web broadcast via the Internet at www.orangetwentyone.com. Alternatively, investors may listen in by telephone to the conference call by dialing 877-704-5380 (international callers can dial 913-312-1294). A replay will be available beginning at 7:30 p.m. ET by calling 888-203-1112, passcode: 5438949 (international callers can dial 719-457-0820 and use the same passcode). For those who are not available to listen to the live broadcast, the call will be archived.

About Orange 21 Inc.

Orange 21 develops brands that produce premium products for the action sport and youth lifestyle markets. Orange 21's primary brand, Spy Optic(TM), manufactures sunglasses and goggles targeted towards the action sports and youth lifestyle markets.

Safe Harbor Statement

This press release and the company's conference call to be held on May 15, 2006 contain forward-looking statements. These statements relate to future events or future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," or "continue," the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Factors that could cause actual results to differ materially from those contained in the forward-looking statements include, but are not limited to: risks related to the Company's ability to manage growth; risks related to the limited visibility of future orders; the ability to identify and work with qualified manufacturing partners and consultants; the ability to expand distribution channels and retail operations in a timely manner; unanticipated changes in general market conditions or other factors, which may result in cancellation of advance orders or a reduction in the rate of reorders placed by retailers; the ability to continue to develop, produce and introduce innovative new products in timely manner; the ability to source raw materials and finished products at favorable prices; the ability to identify and execute successfully cost control initiatives; uncertainties associated with the Company's ability to maintain a sufficient supply of products and to manufacture successfully products; the integration of the LEM acquisition, the performance of new products and continued acceptance of current products; the execution of strategic initiatives and alliances; the impact of ongoing litigation; uncertainties associated with intellectual property protection for the Company's products; matters generally affected the domestic and global economy, such as changes in interest and currency rates; and other factors described under the caption "Risk Factors" in the Company's Form 10-Q for the quarter ended March 31, 2006 and other filings made with the U.S. Securities and Exchange Commission.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Company, nor any other person, assumes responsibility for the accuracy or completeness of such forward-looking statements. The Company undertakes no obligation to update any of the forward-looking statements.


                   Orange 21 Inc. and Subsidiaries
                      Consolidated Balance Sheet

                                             December 31,   March 31,
Assets                                           2005         2006
                                             ------------ ------------
Current assets
Cash and cash equivalents                     $2,668,636   $4,391,857
Short-term investments                         5,477,728    1,478,705
Restricted cash                                        -      847,333
Accounts receivable--net                       9,142,264    7,923,100
Inventories                                   11,206,232   11,008,295
Prepaid expenses and other current assets      1,374,350    1,872,371
Income taxes receivable                          239,046      418,257
Deferred income taxes                          1,512,584    1,338,145
                                             ------------ ------------

           Total current assets               31,620,840   29,278,063
Property and equipment - net                   4,636,305    7,793,534
Goodwill                                               -    9,015,174
Intangible assets, net of accumulated
 amortization of $395,760 and $402,724
 at 2005 and 2006, respectively                  483,854      480,724
Deferred income taxes                            126,000      404,000
Other long-term assets                         1,389,682       61,260
                                             ------------ ------------

                        Total assets         $38,256,681  $47,032,755
                                             ============ ============

Liabilities and Stockholders' Equity
Current liabilities
Lines of credit                                       $-   $1,882,454
Current portion of notes payable                       -      362,426
Current portion of capitalized leases             19,575      496,101
Accounts payable                               1,643,427    3,770,135
Accrued expenses and other liabilities         2,349,946    3,436,604
Deferred purchase price obligation                     -    1,696,240
Income taxes payable                                   -       91,207
                                             ------------ ------------

           Total current liabilities           4,012,948   11,735,167
Notes payable, less current portion                    -      978,242
Capitalized leases, less current portion          12,588      805,278
Other liabilities                                      -      734,003
                                             ------------ ------------

           Total liabilities                   4,025,536   14,252,690
Commitments and contingencies
Stockholders' equity
Preferred stock; par value $0.0001;
 5,000,000 authorized                                  -            -
Common stock; par value $0.0001; 100,000,000
 shares authorized; 8,084,314 shares issued
 and outstanding                                     806          806
Additional paid-in capital                    36,099,820   36,121,562
Accumulated other comprehensive income            32,497      293,550
Accumulated deficit                           (1,901,978)  (3,635,853)
                                             ------------ ------------

           Total stockholders' equity         34,231,145   32,780,065
                                             ------------ ------------

           Total liabilities and
            stockholders' equity             $38,256,681  $47,032,755
                                             ============ ============


                   Orange 21 Inc. and Subsidiaries
                 Consolidated Statement of Operations

                                          Three months ended March 31,
                                          ----------------------------
                                               2005           2006
                                          -------------  -------------

Net sales                                   $8,472,553     $9,382,480
Cost of sales                                4,397,694      4,867,246
                                          -------------  -------------

Gross Profit                                 4,074,859      4,515,234
                                          -------------  -------------

Operating expenses:
  Sales and marketing                        2,868,516      3,506,593
  General and administrative                 1,299,926      2,139,332
  Shipping and warehousing                     292,189        476,291
  Research and development                     136,075        265,857
                                          -------------  -------------

    Total operating expenses                 4,596,706      6,388,073
                                          -------------  -------------

  Loss from operations                        (521,847)    (1,872,839)

    Other expense                              (72,214)       (68,450)
                                          -------------  -------------
    Loss before income taxes                  (594,061)    (1,941,289)
Income tax benefit                             (99,000)      (207,414)
                                          -------------  -------------
  Net loss                                   $(495,061)   $(1,733,875)
                                          =============  =============
Net loss per common share
  Basic                                         $(0.06)        $(0.21)
                                          =============  =============
  Diluted                                       $(0.06)        $(0.21)
                                          =============  =============
Weighted average common shares outstanding
  Basic                                      8,012,483      8,084,314
                                          =============  =============
  Diluted                                    8,012,483      8,084,314
                                          =============  =============

CONTACT: Orange 21 Inc.
Michael Brower, 760-804-8420
or
Integrated Corporate Relations
Investor Relations
310-395-2215
Andrew Greenebaum, agreenebaum@icrinc.com
Allyson Pooley, apooley@icrinc.com

SOURCE: Orange 21 Inc.