Orange 21, Inc. reported net sales increased by $2.3 million, or 33 percent, to $9.2 million for the three months ended Sept. 30, 2011, compared to $6.9 million on a “pro forma” basis for the three months ended Sept. 30, 2010.


“Pro forma” numbers exclude the net sales from the LEM, S.r.l. subsidiary that was sold effective Dec. 31, 2010. Sales of core SPY products increased by $1.6 million. Closeout sales, the vast majority of which were from the company's licensed brands, increased by $700,000. Net sales for the three months ended Sept. 30, 2010, including the net sales from LEM, were reported as $8.2 million.


Net sales increased by $2.2 million, or 10 percent, to $24.9 million for the nine months ended Sept. 30, 2011, compared to $22.7 million on a “pro forma” basis for the nine months ended Sept. 30, 2010. Sales of core SPY products increased by $1.6 million, closeout sales of SPY products decreased by $500,000, and sales of licensed brands, the vast majority of which were closeout sales, increased by $1.1 million. Net sales for the nine months ended Sept. 30, 2010, including the net sales from LEM, were reported as $26.0 million.


The company incurred a net loss of $3.0 million for the three months ended Sept. 30, 2011 compared to a net loss of $900,000 for the three months ended Sept. 30, 2010. The net loss for the three months ended Sept. 30, 2011 included the impact of lower gross margin as a percent of sales due to increased inventory reserves of approximately $700,000 related to our licensed brands and significant closeout sales of licensed brands at no or low margin, as well as increased sales and marketing spending related to the core Spy products.


“We are very pleased with the growth that we generated this quarter, particularly in our core Spy products which had nice growth in both goggles and sunglasses, in North America and internationally,” said Orange 21 President Michael Marckx. “This is especially encouraging following the significant decline the company had in the first quarter of the year. Our new team's focus on the marketing, product development and sales programs to leverage the core Spy brand appears to be gaining traction on many fronts.”


Carol Montgomery, Orange 21's CEO, added: “Improvements to internal systems and processes, increased clarity of goals and development of the organization these past few months have strengthened our ability to succeed and grow.”


The 2010 “pro forma” net sales amounts described above exclude $1.3 million and $3.3 million during the three and nine month periods ended Sept. 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 Dec. 31, 2010. As such LEM's operations were not included in the company's consolidated results for the three or nine month periods ended Sept. 30, 2011.

 

However, LEM sales remain included in consolidated results for the three and nine month periods ended Sept. 30, 2010.

 

ORANGE 21 INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands, except per share amounts) 
 
                                  Three Months Ended    Nine Months Ended
                                     September 30,         September 30,
                                 ——————–  ——————–
                                       2011        2010       2011       2010
                                 ———   ———  ———  ———
                                      (Unaudited)           (Unaudited)

Net sales                      $   9,186  $   8,224  $  24,875  $  26,020
Cost of sales                      5,941      4,353      13,334      12,918
                                   ———  ———  ———  ———
  Gross profit                      3,245      3,871      11,541      13,102
Operating expenses:
  Sales and marketing           3,421      2,268     8,863       6,537
  General and admin             1,972      1,812     6,247       5,667
  Shipping and warehousing      164        235        454         802
  Research and development     130        375        445      1,186
  Other operating expense             –          –      1,952          –
                                     ———  ———  ———  ———
    Total operating expenses    5,687     4,690    17,961     14,192
                                     ———  ———  ———  ———
  Loss from operations          (2,442)      (819)    (6,420)    (1,090)
Other income (expense):
  Interest expense                  (413)      (160)      (964)      (397)
  Foreign currency transaction
   gain (loss)                            (81)        85         (68)         76
  Other (expense) income           (27)        20         (26)         84
                                      ———  ———  ———  ———
    Total other expense             (521)       (55)    (1,058)      (237)
                                      ———  ———  ———  ———
  Loss before provision for
   income taxes                     (2,963)     (874)     (7,478)    (1,327)
Income tax provision                    21         58           27         134
                                      ———  ———  ———  ———
Net loss                            $  (2,984) $   (932) $  (7,505) $  (1,461)
                                        =======   ======  =======  ======
Net loss per share of Common
 Stock
    Basic                        $       (0.23) $   (0.08) $   (0.59) $   (0.12)
                                       =======    ======    ======   =====
    Diluted                      $       (0.23) $   (0.08) $   (0.59) $   (0.12)
                                        ======      =====    ======    =====