Orange 21 Inc.'s net sales for the fourth quarter of 2005 decreased 7.1% to $8.9 million compared to $9.5 million in the fourth quarter of 2004. The Company reported a net loss for the fourth quarter of 2005 of approximately $1.8 million, or 22 cents per diluted share on approximately 8.0 million shares, compared to net income of approximately $722,000, or 13 cents per diluted share on 5.8 million shares in the same period a year ago.

For the full year of 2005, net sales were $38.6 million, a 14.9% increase over 2004. The Company reported a net loss for the year of $1.7 million, or $0.21 per diluted share on approximately 8.0 million weighted average shares outstanding. This compares to net income of approximately $807,000, or $0.16 per diluted share on approximately 5.0 million weighted average shares outstanding a year ago.

Cash, cash equivalents and short term investments at December 31, 2005 totaled approximately $8.1 million compared to $11.5 million at December 31, 2004.

“Our first year as a public company was a challenging one. As we have previously discussed, we experienced substantial delays in product deliveries, as well as other operational issues during the fourth quarter that impacted our business. In addition, the transition of our Australian distributor and changes in our Asian dealer network also had a substantial impact on the fourth quarter. Results also reflect the late deployment of point of purchase displays, lower revenues from the E Eyewear product line, the impact of the Euro on our product purchases and additional inventory reserves taken for slow moving and obsolete inventory.

“Our Spy Optic(TM) brand continued to show strong growth and increased brand recognition; however, our financial results were below our expectations. While we were disappointed with our results in Australia and Asia, on the positive side we continue to see increased awareness and acceptance on a global basis, and achieved approximately 15% net sales growth for the year. Regional growth in the U.S. was 18%, Canada was 24% and Europe was 37%,” said Barry Buchholtz, Chief Executive Officer.

Mr. Buchholtz continued, “As we enter 2006, we continue to refine our business model. We have many strengths, including our strong brand, innovative products and a dedicated team. And we will continue to implement new initiatives to streamline our operations to return to long-term profitability. The new initiatives include substantial improvements in our operations and manufacturing capabilities, including consolidating warehouse and manufacturing facilities, strengthening IT infrastructure, reducing SKU count and reorganizing the Company's international distribution strategy in Asia and Australia. We are determined to improve our performance so Orange can continue its growth and return the Company to profitability.”

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

Separately, Orange announced today that it appointed Fran Richards as Vice President of Marketing. Mr. Richards joins the Company with over 20 years of action sports and youth culture marketing experience. Prior to joining Orange 21, Mr. Richards was Group Publisher of Future USA's action sports media group, a division of Future PLC, a publisher of video game and music enthusiast magazines. Previously, he was President of Modern World LLC, a youth marketing firm whose clients included Universal Music Group's Island Records, Warner Strategic Marketing, ski resort operator Intrawest and NBC's Gravity Games. Additionally, he spent close to 15 years as a marketing executive at Transworld Media, a large action sports media company.

Barry Buchholtz commented, “We are extremely pleased that Fran has joined our team to spearhead our marketing initiatives. Fran's extensive experience, particularly his expertise in the action sports and youth lifestyle markets, will be a tremendous benefit to Orange. With his leadership, and the team we have in place, we expect to continue to build on our already successful brands.”


                    Orange 21 Inc. and Subsidiaries
                 Consolidated Statements of Operations


                      Three months ended      
                          December 31         Year ended December 31,
                    -----------------------   -----------------------
                       2004         2005         2004         2005
                    -----------------------   -----------------------

Net sales           $9,535,118   $8,860,426  $33,563,443  $38,568,382
Cost of sales        4,600,213    5,190,091   15,530,588   19,684,792
                    -----------------------   -----------------------

Gross Profit         4,934,905    3,670,335   18,032,855   18,883,590
                    -----------------------   -----------------------

Operating expenses:
  Sales and
   marketing         2,515,679    3,478,027   10,391,611   12,859,130
  General and
   administrative    1,321,491    2,050,008    4,563,612    6,273,157
  Shipping and
   warehousing         320,085      520,778      990,398    1,445,286
  Research and
   development         227,922      197,652      511,601      672,670
                    -----------------------   -----------------------

    Total operating
     expenses        4,385,177    6,246,465   16,457,222   21,250,243
                    -----------------------   -----------------------

  Income (loss)
   from operations     549,728   (2,576,130)   1,575,633   (2,366,653)

Other income (expense)
  Interest (expense)
   income -- net       (73,234)      75,900     (398,164)     311,945
  Foreign currency
   transaction gain    431,073       52,108      528,243      118,453
  Other income
   (expense) -- net    (13,410)          78       35,162       (7,839)
                    -----------------------   -----------------------
    Total other
     income
     (expense)         344,429      128,086      165,241      422,559
                    -----------------------   -----------------------
    Income (loss)
     before income
     taxes             894,157   (2,448,044)   1,740,874   (1,944,094)
Income tax provision
 (benefit)             172,169     (680,549)     933,570     (236,098)
                    -----------------------   -----------------------
  Net income (loss)   $721,988  $(1,767,495)    $807,304  $(1,707,996)
                    =======================   =======================
Net earnings (loss)
 per common share
  Basic                  $0.13       $(0.22)       $0.17       $(0.21)
                    =======================   =======================
  Diluted                $0.13       $(0.22)       $0.16       $(0.21)
                    =======================   =======================
Weighted average
 common shares
 outstanding
  Basic              5,424,587    8,040,043    4,643,320    8,017,479
                    =======================   =======================
  Diluted            5,754,519    8,040,043    4,973,252    8,017,479
                    =======================   =======================