Orange 21 is giving each of its existing shareholders the right to buy one share of its common stock for $0.80 cents for each share they currently own or warrant they have. Before the offering, they had 8,199,314 shares outstanding. Assuming that everybody buys the shares, they would have 17,744,128 shares outstanding afterwards and would raise $7,635,851.20
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Spy Optic’s parent company Orange 21 announced today that it was offering 7.6 million-dollars of common stock to its current share holders for 80 cents per share.
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After being dismissed as its CEO in September and having repeated attempts to merge with his No Fear retail stores squashed, Spy and No Fear founder Mark Simo submitted his letter of resignation from the Orange 21 board of directors.
Here’s Simo’s letter to Stone Douglas, Orange 21’s chairman, which was submitted to the SEC:
Dear Stone:
As you well know, I have great affection for the Spy brand and business. I created the brand, successfully grew it and the business, and then over the course of nearly two years revived them both. I put my money, along with a significant amount of time and effort, into the company and persuaded numerous shareholders to invest also. It was a severe blow, then, to be summarily dismissed as chief executive officer in September. The rationale for that decision by the board remains a mystery to me still.
Nevertheless, I have stayed on as a director in an effort to assist in maximizing value for all shareholders. I have done so because of my confidence in the brand and its future. I am convinced, as much as I ever have been, that real opportunities exist for enhancing shareholder value while at the same time doing right by the company’s employees and business partners. I believe that, in this radically changing environment, the merger I have proposed with No Fear Retail Stores offers the best opportunity to achieve those goals. There may be other options that the board also should consider, but the one thing this company cannot afford is to do nothing. That, unfortunately, is the course this board has chosen to take.
Collapsing consumer demand and limited capital availability, and the overall global economic slowdown, have created unprecedented challenges for Spy. Management has a duty to work vigorously and diligently to address these challenges, and the board is obliged to intensify its oversight and support. This management and this board have done just the opposite. Since September, as the economic crisis has deepened, there have been a mere handful of board meetings, all of them brief, and not one of them dealing substantively with management’s strategy for maintaining revenue and trimming costs.
The board has been similarly indifferent to other matters of significant importance to the company’s business and well-being. I have attempted repeatedly to negotiate a commercial agreement for future orders with No Fear, only to be summarily dismissed. If this is how the company now deals with one of its largest customers, I have serious concerns about its retention of other major accounts. There is also the matter of my outstanding compensation. I have presented several possible structures and elements in order to move us toward a reasonable settlement, but the company has been unresponsive. You finally assured me that the matter would be resolved by the end of November, but I have yet to receive a settlement proposal.
My repeated attempts to convene board meetings to address these challenges have been ignored or denied. This pattern of passivity is dangerous and is inexcusable. Ultimately, it has made it impossible for me to fulfill my fiduciary duties as a director of the company. Accordingly, and with great disappointment, I am resigning as a director of Orange 21 and any and all of its subsidiary companies, effective immediately.
Let there be no misunderstanding that, on behalf of No Fear, a significant shareholder of the company as well as its largest customer, and as a shareholder in my own right, I will continue to expect and demand more accountability from the company’s management and board.
| Sincerely, |
| Mark Simo |
You probably recall I wrote at some length about the letter from former Orange 21 CEO Mark Simo to the Orange board of directors requesting/recommending strongly talks between Orange and No Fear, of which Mr. Simo is the CEO and 37% shareholder, about a merger between the two. Orange said, “No thanks.” Read more here.
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I imagined you noticed recently that the retailer, No Fear, proposed a merger to the board of directors of Orange 21 (Spy Optics). Orange announced November 5th that they were not considering it. We’ll see what, if anything happens next. But in the meantime, I think it’s instructive to review a little of the history and relationships that exist between Orange 21 and No Fear. And there may be a lesson for companies battling to manage through the recession.
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AS REPORTED BY SPORTSONESOURCE.COM - Orange 21, Inc. has reviewed the proposal submitted by No Fear Retail Stores, Inc., a wholly owned subsidiary of NFI, regarding a potential merger between the two companies and is not considering it further at this time, said the company in an SEC filing.
Orange 21’s Board of Directors has not formed a special committee to evaluate the proposal nor is the company conducting due diligence on NFI Retail at this time.
CARLSBAD, Calif. - (Business Wire) Orange 21 Inc. (NASDAQ:ORNG), a leading developer of brands that produce premium products for the action sports and youth lifestyle markets, announced today that Mark Simo has resigned as Chief Executive Officer effective as of September 29, 2008 and that the Board has appointed A. Stone Douglass to replace him.
Mr. Douglass will immediately commence a comprehensive strategic review of Orange 21’s business and various options to build value. Orange 21 also intends to streamline operations and rework its executive compensation scheme to align it with the goal of increasing shareholder value. Orange 21 will report back to investors regarding the results of this review and its progress.
Mr. Douglass joined the Board on August 7, 2008 and was appointed Chairman of the Board effective August 20, 2008. Mr. Douglass has extensive turnaround and restructuring experience. He is a merchant banker and business management consultant with over 30 years of experience in finance and managing public and private companies, including acting as director and/or interim chief executive officer of more than twenty companies.
About Orange 21 Inc.
Orange 21 designs, develops, markets and produces premium products for the action sport and youth lifestyle markets. Orange 21’s primary brand, Spy Optic(TM), manufactures sunglasses and goggles targeted toward the action sports and youth lifestyle markets.
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or future financial performance and are subject to risks and uncertainties. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “feel,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company can not guarantee future results, levels of activity, performance or achievements. Moreover, neither the Company, nor any other person, assumes responsibility for the accuracy or completeness of such forward-looking statements. The Company undertakes no obligation to update any of the forward-looking statements.
Orange 21 Inc.
Jerry Collazo, Chief Financial Officer
760-804-8420
Orange 21 Inc. today announced that their consolidated net sales increased 17% to $14.0 million for the three months ended June 30, 2008 from $12.0 million for the three months ended June 30, 2007. The increase is largely due to an improvement in product mix and availability and increased prices. A net loss of $0.3 million was incurred for the three months ended June 30, 2008 compared to a net loss of $1.6 million for the three months ended June 30, 2007.
The company’s consolidated gross profit decreased 2% to $6.9 million for the three months ended June 30, 2008 from $7.1 million for the three months ended June 30, 2007. Gross profit as a percentage of sales decreased to 50% for the three months ended June 30, 2008 from 59% for the three months ended June 30, 2007 largely due to increased materials costs due to increased gas and oil prices and an increase in Euro foreign exchange rates, partly offset by a decrease in outsourcing costs at LEM, their subsidiary and primary manufacturer and an increase in selling prices. Gross profit for the three months ended June 30, 2008, includes net decreases in inventory reserves for slow moving and obsolete inventory that is no longer being marketed for resale of approximately of $0.3 million. During the three months ended June 30, 2008, inventory with an adjusted basis of $0.2 million was sold for approximately $0.3 million in revenue, affecting margins by $0.1 million or 0.8% of net sales. The remaining decrease in the inventory reserve was mainly due to the disposal of product which has no effect on the results of operations.
Sales and marketing expense decreased 38% to $3.5 million for the three months ended June 30, 2008 from $5.6 million for the three months ended June 30, 2007. The decrease was primarily due to a $0.4 million decrease in depreciation expense and a $1.9 million write off in June 2007 for point-of-purchase displays in the U.S. partly offset by a $0.3 million increase in expense related to purchases of new point-of-purchase displays. During June 2007, the point-of-purchase displays in the U.S. were written off as a result of transferring ownership of the point-of-purchase displays to their customers. In addition, in the U.S., future purchases of point-of-purchase displays will no longer be capitalized since the displays will be owned by the customers. The cost of these displays will be charged to sales and marketing expense.
General and administrative expense increased 5% to $2.7 million for the three months ended June 30, 2008 from $2.5 million for the three months ended June 30, 2007 primarily due to employee-related expenses and bad debt expense.
Shipping and warehousing expense increased 26% to $0.5 million for the three months ended June 30, 2008 from $0.4 million for the three months ended June 30, 2007 primarily due to increased employee-related expense.
Research and development expense increased 42% to $0.3 million for the three months ended June 30, 2008 from $0.2 million for the three months ended June 30, 2007 primarily due to an increase in employee-related expense.
Other net expense decreased 48% to $0.1 million for the three months ended June 30, 2008 from $0.3 million for the three months ended June 30, 2007. The decrease in other net expense is primarily due to decreases in foreign currency transaction losses.
The income tax (benefit) expense for the three months ended June 30, 2008 and 2007 was $38,000 and ($429,000), respectively. The effective tax rate for the three months ended June 30, 2008 and 2007 was 16% and (21%), respectively.
Mark Simo, Orange 21’s Co-Chairman and CEO, commented: “This quarter’s and year to date results have been encouraging, but still short of my goal for Spy Optic. Revenues have increased over the prior year, our costs have been managed within expectations and the net results are considerably better than the same periods in the prior year. However, this year we have had to manage our business with the U.S. dollar weakening against the Euro. This has significantly increased our costs of goods sold, as the majority of our products are sourced in Italy. In addition, higher oil prices have resulted in an increase in the cost of our frame and lens materials. We also believe that the slowdown in the global economy is having a significant negative impact on the demand for our products as consumers have less disposable income. Going into the second half of this year, we continue to be concerned by the weakness of the U.S. dollar against the Euro and the high cost of oil. For the remainder of the year, we plan to continue to focus on making our sales and marketing efforts more efficient and effective while at the same time reducing our operating expenses. We have substantially improved the flow of products from our factory to our retail customers. And we have introduced several new styles that have sold well in the market. Although general economic conditions appear to have impacted our business, we believe that the strength of and demand for our brand will allow us to be successful. Our goal is to continue to show revenue growth over the prior year irrespective of the current economic environment.
Originally posted on SportsOneSource.com
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