Three Months Ended
September 30,
------------------------
2009 2008
---------- -----------
Revenue
Product sales - retail, net 55.8 % 83.0%
Product sales - direct to consumer, net 41.8 % 9.9%
Product sales - international 2.4 % 7.1%
---------- -----------
Total sales 100.0 % 100.0%
Operating expenses
Cost of revenue 69.1 % 57.9%
Research and development 5.3 % 3.0%
Sales and marketing 38.0 % 20.8%
General and administrative 41.2 % 13.7%
---------- -----------
Total operating expenses 153.6 % 95.4%
---------- -----------
Profit/(loss) from operations (53.6)% 4.6%
========== ===========
Summary Results of Operations - Three Months Ended September 30, 2009
For the three months ended September 30, 2009, our sales totaled
$3,285,949, a 76.3% decrease from the same period in the prior year. The
decline in sales reflected an 84.1% reduction in sales to retailers, caused
in part by the decline in economic activity associated with the global
recession, which adversely affected the levels of consumer spending and
retailer procurement relative to the prior year period. In addition, our
sales to retailers relative to the prior year period declined because of a
comparison to the 2008 period during which retailers took large stocking
orders in anticipation of the holiday shopping season. In 2009, retailers
are delaying orders until later in the year, and ordering inventories on a
just-in-time, replenishment basis, rather than placing large stocking
orders. In addition, we experienced a decline in the number of retail
storefronts carrying our products, from approximately 9,000 at September
30, 2008 to approximately 3,600 at September 30, 2009, reflecting a shift
in stocking strategy by many retail chains to focus inventory investment on
more traditional consumer product categories. Our direct-to-consumer sales
were up slightly from the prior year, despite a 25.9% reduction in the
amount of revenue-generating media spending during the period. The
increase in sales was driven by strong direct-to-consumer sales of seed
kits and accessories, reflecting continued strength in the recurring
revenue portion of our direct-to-consumer business, as the cumulative
number of AeroGardens sold continued to increase, to 852,092 as of
September 30, 2009. As a percent of total revenue, seed kits and
accessories represented 28.7% for the three months ended September 30,
2009, up from 18.6% in the prior year period.
The gross margin for the three months ended September 30, 2009, was 30.9%
as compared to 42.1% for the year earlier period. The decline reflected
changes in channel, customer, and product mix, as well as the impact of
fixed facility costs in our Indianapolis, Indiana manufacturing and
distribution facility that became fully operational in September 2008, on a
lower revenue base in the current year period. Operating expenses other
than cost of revenue were reduced $2,419,382, or 46.6%, from the prior year
reflecting cost saving initiatives and staffing reductions.
The loss from operations totaled $1,759,845 for the three months ended
September 30, 2009, as compared to an operating profit of $633,985 in the
prior year period. The increased loss principally reflected the impact of
the decline in revenue and the lower gross margin, which, in combination,
more than offset the significant decrease in operating expenses other than
cost of revenue.
The net loss for the three months ended September 30, 2009 was $1,765,254
as compared to a net profit of $418,370 in the same period a year earlier.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months ended
--------------------------
September 30,
--------------------------
2009 2008
------------ ------------
Revenue
Product sales $ 3,285,949 $ 13,854,930
Operating expenses
Cost of revenue 2,270,556 8,026,325
Research and development 173,354 416,778
Sales and marketing 1,248,102 2,875,729
General and administrative 1,353,782 1,902,113
------------ ------------
Total operating expenses 5,045,794 13,220,945
------------ ------------
Profit (loss) from operations (1,759,845) 633,985
Other (income) expense, net
Interest (income) (61) (454)
Interest expense 185,756 216,069
Other (income) (180,286) -
------------ ------------
Total other (income) expense, net 5,409 215,615
------------ ------------
Net income (loss) (1,765,254) $ 418,370
============ ============
Net income (loss) per share, basic (0.14) $ 0.03
============ ============
Net income (loss) per share, diluted (0.14) $ 0.03
============ ============
Weighted average number of common shares
outstanding used to calculate basic net
income per share 12,422,249 12,121,858
============ ============
Effect of dilutive securities:
Equity based compensation - 254,698
------------
Weighted average number of common shares
outstanding used to calculate diluted net
income per share 12,422,249 12,376,556
============ ============
Six Months ended
--------------------------
September 30,
--------------------------
2009 2008
------------ ------------
Revenue
Product sales $ 6,265,642 $ 20,575,011
Operating expenses
Cost of revenue 4,140,361 11,713,148
Research and development 742,552 1,142,193
Sales and marketing 2,407,898 6,325,612
General and administrative 2,405,042 3,420,825
------------ ------------
Total operating expenses 9,695,853 22,601,778
------------ ------------
Profit (loss) from operations (3,430,211) (2,026,767)
Other (income) expense, net
Interest (income) (141) (1,504)
Interest expense 384,754 373,716
Other (income) (987,838) -
------------ ------------
Total other (income) expense, net (603,225) 372,212
------------ ------------
Net income (loss) (2,826,986) (2,398,979)
============ ============
Net income (loss) per share, basic (0.22) (0.20)
============ ============
Net income (loss) per share, diluted (0.22) (0.20)
============ ============
Weighted average number of common shares
outstanding used to calculate basic net
income per share 12,729,125 12,108,177
============ ============
Effect of dilutive securities:
Equity based compensation - -
Weighted average number of common shares
outstanding used to calculate diluted net
income per share 12,729,125 12,108,177
============ ============
CONDENSED BALANCE SHEETS
(Unaudited)
September 30, March 31,
2009 2009
------------- -------------
ASSETS
Current assets
Cash $ 46,891 $ 332,698
Restricted cash 438,441 438,331
Accounts receivable 2,444,181 2,278,052
Other receivable 39,461 332,059
Inventory 7,753,816 8,350,135
Prepaid expenses and other 506,356 565,454
------------- -------------
Total current assets 11,229,146 12,296,729
Property and equipment 1,336,464 1,768,369
Other assets
Intangible assets 257,145 231,590
Deposit 190,776 110,776
Deferred debt issuance costs 162,990 201,726
------------- -------------
Total other assets 610,911 544,092
------------- -------------
Total Assets $ 13,176,521 $ 14,609,190
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities
Current portion - long term debt $ 5,996,083 $ 1,099,060
Accounts payable 4,452,184 8,338,559
Accrued expenses 1,474,916 2,318,670
Customer deposits 459,869 246,728
Deferred rent 49,028 57,283
------------- -------------
Total current liabilities 12,432,080 12,060,300
Long term debt 1,405,113 5,547,144
Long term debt-related party - 1,233,371
Stockholders' equity
Preferred stock 7 --
Common stock 12,422 13,343
Additional paid-in capital 52,095,483 45,696,630
Accumulated (deficit) (52,768,584) (49,941,598)
------------- -------------
Total Stockholders' Equity (Deficit) (660,672) (4,231,625)
------------- -------------
Total Liabilities and Stockholders' Equity
(Deficit) $ 13,176,521 $ 14,609,190
============= =============
SALES BY CHANNEL
(Unaudited)
Three Months Ended
September 30,
------------------------
2009 2008
----------- -----------
Revenue
Product sales - retail, net 55.8% 83.0%
Product sales - direct to consumer, net 41.8% 9.9%
Product sales - international 2.4% 7.1%
----------- -----------
Total sales 100.0% 100.0%
Three Months Ended
September 30,
-------------------------
Product Revenue 2009 2008
------------ ------------
Retail, net $ 1,831,781 $ 11,508,030
Direct to consumer, net 1,375,141 1,365,438
International 79,027 981,462
------------ ------------
Total $ 3,285,949 $ 13,854,930
============ ============
SALES BY PRODUCT CATEGORY
(Unaudited)
Three Months Ended
September 30,
--------------------------
2009 2008
------------ ------------
Product Revenue
AeroGardens $ 2,343,439 $ 11,278,260
Seed kits and accessories 942,510 2,576,670
------------ ------------
Total $ 3,285,949 $ 13,854,930
============ ============
% of Total Revenue
AeroGardens 71.3% 81.4%
Seed kits and accessories 28.7% 18.6%
------------ ------------
Total 100.0% 100.0%
============ ============
About AeroGrow International, Inc.
Founded in 2002 in Boulder, Colorado, AeroGrow International, Inc. is
dedicated to the research, development and marketing of the AeroGarden line
of foolproof, dirt-free indoor gardens. AeroGardens allow anyone to grow
farmer's market fresh herbs, salad greens, tomatoes, chili peppers, flowers
and more, indoors, year-round, so simply and easily that no green thumb is
required. See www.aerogrow.com.
FORWARD-LOOKING STATEMENTS
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: Statements by Jerry Perkins, and/or the Company, statements
regarding growth of the AeroGarden product line, optimism related to the
business, expanding sales, and other statements in this press release are
forward-looking statements within the meaning of the Securities Litigation
Reform Act of 1995. Such statements are based on current expectations,
estimates and projections about the Company's business. Words such as
expects, anticipates, intends, plans, believes, sees, estimates and
variations of such words and similar expressions are intended to identify
such forward-looking statements. These statements are not guarantees of
future performance and involve certain risks and uncertainties that are
difficult to predict. Actual results could vary materially from the
description contained herein due to many factors including continued market
acceptance of the Company's products or the need to raise additional
capital. In addition, actual results could vary materially based on changes
or slower growth in the indoor garden market; the potential inability to
realize expected benefits and synergies; domestic and international
business and economic conditions; changes in customer demand or ordering
patterns; changes in the competitive environment including pricing
pressures or technological changes; technological advances; shortages of
manufacturing capacity; future production variables impacting excess
inventory and other risk factors listed from time to time in the Company's
Securities and Exchange Commission (SEC) filings under "risk factors" and
elsewhere. The forward-looking statements contained in this press release
speak only as of the date on which they are made, and the Company does not
undertake any obligation to update any forward-looking statement to reflect
events or circumstances after the date of this press release.
Contact Information: Contact: John Thompson 303-444-7755