This is one of the few times where it makes sense to start on the balance sheet to really understand what’s going on. It shows stockholders’ equity of a negative $4.3 million. How, you might ask, are they paying their bills? If you look under liabilities, you’ll see a “Note payable to stockholder” of $10.5 million.
That $10.5 million is owed to Costa Brava. Costa Brava “beneficially owns” approximately 50% (depends on how you calculate) of Orange 21’s common stock. The sole general partner of Costa Brava is Mr. Seth Hamot, who is the Chairman of the Board of Orange 21. To put it succinctly, if Mr. Hamot didn’t have a whole lot of money and wasn’t willing to lend a bunch of it to Orange 21, the company would have been closed or sold long ago.