Orange 21 Inc., parent company to Spy Optics, is still battling with restructuring and integration following the acquisition of their Italian factory, LEM. Second quarter sales increased 15.5% to $11.9 million from $10.3 million for the same period last year due to increases in international sales and sales of sunglasses.


Gross profit as a percentage of sales increased 700 basis points to 61% of sales compared to 54% for the same quarter last year. This was mainly due to efficiencies achieved at LEM, more favorable product mix and the sale of inventory that was previously written down.


Sales and marketing expense increased 12.3 full percentage points to 46.2% of sales. This was due to a $2.0 million write off of point-of-purchase displays in the U.S., which was a result of transferring ownership of the displays to Spy Optics’ customers during June 2007. General and administrative expenses declined 330 basis points to 21.0% of sales.


Research and development expense decreased slightly to $200,000, or 1.7% of sales from $300,000, or 2.9% of sales last year. The decrease is mainly due the company’s effort, made late in 2006, to reduce research and development expense through a reduction in employee compensation expense.


The company reported a net loss of $1.5 million, which was 87.5% higher than the loss of $800,000 for the second quarter last year.