Orange 21 Inc., the parent of Spy Optic, reported revenues slid 5.7 percent in the second quarter, to $9.0 million from $9.5 million a year ago. The company incurred a net loss of $3.0 million for the three months
ended June 30 compared to a net income of $408,000 for the year-ago quarter.
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.
The year-ago revenue figures are “Pro forma” numbers and exclude the net sales from our LEM, S.r.l. subsidiary that we sold effective Dec. 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.
“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.”
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).
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)
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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
========= ========= ========= =========
