Orange 21 will 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.