SOURCE: AeroGrow International, Inc.

November 14, 2007 16:00 ET

AeroGrow Reports Second Quarter Financial Results

Quarterly Revenues Increase 510% Over Prior Year Quarter to $6.3 Million; Retail Storefronts Expand to Over 3,900 for 2007 Holiday Season

BOULDER, CO--(Marketwire - November 14, 2007) - AeroGrow International, Inc. (NASDAQ: AERO) ("AeroGrow" or the "Company"), makers of the AeroGarden® kitchen garden appliance, today announced results for the quarter and six months ended September 30, 2007.

For the quarter ended September 30, 2007, AeroGrow reported revenues of approximately $6.3 million, an increase of 510% over the $1.03 million reported for the prior year's quarter ended September 30, 2006. For the quarter ended September 30, 2007, AeroGrow reported a net loss of $2.3 million or $0.20 per share as compared to a net loss of $3.4 million, or $0.37 per share, for the quarter ended September 30, 2006.

For the six months ended September 30, 2007, AeroGrow reported revenues of approximately $12.6 million, an increase of 578% over the $1.9 million, in revenues, reported for the six months ended September 30, 2006. For the six months ended September 30, 2007, AeroGrow reported a net loss of $4.4 million or $0.39 per share as compared to a net loss of $5.5 million, or $0.60 per share, for the six months ended September 30, 2006.

"The past quarter ushered in the next phase of AeroGrow's growth," stated AeroGrow Founder and CEO, Michael Bissonnette. "Key accomplishments achieved during the quarter to date include:

--  Significantly expanding our domestic retail distribution, from 750
    storefronts last holiday season to 3,900 storefronts this holiday season.
--  Completing development of multiple new products, including our new
    lower cost, smaller footprint six pod AeroGardens and our new three pod
    AeroGarden systems including Chef in a Box™ , Florist in a Box™ and
    Garden in a Box™ products. We believe these products will greatly expand
    both our domestic and international markets with new compact designs
    tailored for smaller homes, condos and apartments with smaller kitchens as
    well as better price points for greater mass distribution. We are
    encouraged by the response these new products have received from major
    catalog and home shopping channels interested in participating as launch
    partners in 2008 for these new offerings.
--  Substantially completing two new infomercials for Florist in a Box and
    Chef in a Box.
--  Strengthening our management team with the addition of a new President
    and COO, a 30 year veteran in consumer products with a history of achieving
    significant top line and bottom line results in large successful public
    companies.
    

We have also begun our international launch, to date accomplishing:

--  Infomercial testing in Japan through our Japanese distributor, with
    additional testing, including incorporation of Japanese video footage and
    testimonials, to be completed by December 31, 2008.
--  Launching in the UK with successful airings of our infomercial and a
    successful debut of the AeroGarden in Selfridges, a premiere London high
    end department store. We have also obtained multiple catalog placements
    including Scotts of Stow and additional retailers including Fenwicks and
    Bentals who will begin selling the AeroGarden by December 31, 2008.
--  Obtaining commitments for airings by major home shopping networks in
    the UK and Germany to feature the AeroGarden in February 2008.
--  Finalizing agreements with distributors to air the AeroGarden
    infomercial before December 31, 2007 in Germany, Spain, Ireland and
    Belgium.
    

As a result of these actions, we stand ready to maximize our opportunities for the upcoming holiday season and beyond."

The following table sets forth, as a percentage of sales, our quarterly financial results for the three and six months ended September 30, 2007 and the three and six months ended September 30, 2006:

                                    Three months ended   Six months ended
                                      September 30,       September 30,
                                    ------------------  ------------------
                                      2007      2006      2007      2006
                                    --------  --------  --------  --------
Revenue
   Product sales- retail                77.2%     77.6%     71.5%     80.6%
   Product sales- direct to
    consumer                            22.8%     22.4%     28.5%     19.4%
                                    --------  --------  --------  --------
      Total sales                      100.0%    100.0%    100.0%    100.0%

Operating expenses
   Cost of revenue                      60.0%     80.3%     58.5%     81.1%
   Research and development             10.0%     39.7%      9.2%     45.6%
   Sales and marketing                  50.2%    132.0%     48.5%    125.3%
   General and administrative           15.6%     75.1%     17.6%     88.0%
                                    --------  --------  --------  --------
      Total operating expenses         135.8%    327.1%    133.8%    340.0%
                                    --------  --------  --------  --------

Loss from operations                   -35.8%   -227.1%    -33.8%   -240.0%
                                    ========  ========  ========  ========

Retail revenues for the quarter ended September 30, 2007, representing sales to retailers, increased to $4.9 million, 77% of total sales, reflecting an expansion in retail storefronts carrying the AeroGarden products for the quarter of approximately 2,800 storefronts as compared to the prior quarter, bringing the total to approximately 3,900 storefronts. Initial inventory load in of these new retailers occurred primarily during September 2007 and store merchandising has been substantially completed during October and November. Direct to consumer sales derived through AeroGrow's infomercials, websites and AeroGrow's newly launched catalog mailings totaled $1.4 million for the quarter, 23% of total sales, representing a decline from previous three quarters due to the seasonality associated with television sales due to reduced viewership during the summer months which resulted in a decrease of television media spending of 50% from the previous quarter, as well as seasonality related to the sale of indoor gardening products during the summer outdoor gardening season. Seed Kit and accessory sales increased to $1.5 million for the quarter to 23% of total sales, as a result both retail stocking of seed kits for the holiday season as well as increases in sales to existing customers through our websites and catalogs. A table reflecting our sales for the three and six months ended September 30, 2007 and 2006 by both channel of distribution (retail/direct) and product category (AeroGardens/Seed Kits and accessories) is attached.

Net loss for the quarter was impacted by $730,000 in costs associated with production of two new infomercials for the Chef in a Box and Florist in a Box products to be launched in calendar year 2008 as well as $113,000 in initial display and merchandising costs related to the expanded retail distribution realized during the quarter.

Earnings Conference Call

AeroGrow will host a conference call today, Wednesday, November 14, 2007, to review operational results for the six months ended September 30, 2007. In addition, AeroGrow will discuss additional developments including major new retailers that will be launching the AeroGarden within the next six months.

The conference call is scheduled for 4:30 PM ET. To participate in the call, please dial:

            U.S. and Canada: 1 (800) 374-0113

            International:   1 (706) 758-9607

A replay of the call will be available within 12 hours of completion. You will be able to access it for the following 30 days through the AeroGrow website at www.aerogrow.com/investors or by phone until December 14, 2007. To access the replay by phone, please dial:

            U.S. and Canada:  1 (800) 642-1687

            International:    1 (706) 645-9291

            Conference ID:            23976558

About AeroGrow International, Inc.

Founded in 2002 in Boulder, Colorado, AeroGrow International, Inc. is dedicated to the research, development and marketing of the AeroGarden®, the world's first kitchen garden appliance. The AeroGarden features NASA-proven, dirt-free aeroponic technology, allowing anyone to grow farmer's market fresh herbs, salad greens, tomatoes, chili peppers, strawberries 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 Michael Bissonnette 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 kitchen garden appliance 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.


AEROGROW INTERNATIONAL, INC.
CONDENSED STATEMENTS OF
OPERATIONS (Unaudited)

                           Three months ended         Six months ended
                              September 30,             September 30,
                        ------------------------  ------------------------
                            2007         2006         2007         2006
                        -----------  -----------  -----------  -----------
Revenue
   Product sales        $ 6,283,645  $ 1,030,316  $12,562,079  $ 1,852,254
Operating expenses
   Cost of revenue        3,765,376      827,165    7,347,794    1,502,860
   Research and
    development             628,542      409,453    1,157,987      844,384
   Sales and marketing    3,156,414    1,359,797    6,091,537    2,320,271
   General and
    administrative          982,181      773,362    2,208,033    1,629,402
                        -----------  -----------  -----------  -----------
   Total operating
    expenses              8,532,513    3,369,777   16,805,351    6,296,917
                        -----------  -----------  -----------  -----------

Loss from operations     (2,248,868)  (2,339,461)  (4,243,272)  (4,444,663)
Other (income) expense,
 net
   Interest (income)        (32,341)     (60,749)     (70,200)    (144,862)
   Interest expense         125,664      101,804      191,849      203,604
   Other income              (2,929)           -       (2,929)           -
   Registration rights
    penalty                       -    1,028,250            -    1,028,250
                        -----------  -----------  -----------  -----------
   Total other (income)
    expense, net             90,394    1,069,305      118,720    1,086,992
                        -----------  -----------  -----------  -----------
Net loss                $(2,339,262) $(3,408,766) $(4,361,992) $(5,531,655)
                        ===========  ===========  ===========  ===========
Net loss per share,
 basic and diluted      $     (0.20) $     (0.37) $     (0.39) $     (0.60)
                        ===========  ===========  ===========  ===========
Weighted average number
 of common shares
 outstanding, basic and
 diluted                 11,469,707    9,286,678   11,278,598    9,202,219
                        ===========  ===========  ===========  ===========





BALANCE SHEET DATA                            September 30,    March 31,
                                                  2007           2007
                                              -------------  -------------
ASSETS                                         (Unaudited)
                                              -------------
   Current assets
      Cash and cash equivalents               $   6,193,987  $   5,495,501
      Restricted cash                                85,712         84,363
      Accounts receivable                         4,873,177      1,884,743
      Other receivable                              180,449        182,221
      Inventory                                   6,480,391      3,940,614
      Prepaid expenses and other                    415,629        480,990
                                              -------------  -------------
   Total current assets                          18,229,345     12,068,432
   Property and equipment                         1,138,965        909,496
   Other assets                                     108,128         63,878
                                              -------------  -------------
   Total Assets                               $  19,476,438  $  13,041,806
                                              =============  =============
LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities
      Current portion - capital lease
       obligation                             $      52,913  $           -
      Due to factor                               3,577,447        645,151
      Accounts payable                            4,036,087      3,192,734
      Accrued expenses                            1,544,109      1,166,485
      Customer deposits                             900,568              -
      Deferred rent                                  61,035         53,531
                                              -------------  -------------
   Total current liabilities                     10,172,159      5,057,901
                                                             -------------
   Capital lease obligation - long term
    portion                                          79,137              -
   Stockholders' equity
      Common stock                                   12,018         11,065
      Additional paid-in capital                 43,367,278     37,765,003
      Accumulated (deficit)                     (34,154,154)   (29,792,163)
                                              -------------  -------------
   Total Stockholders' Equity                     9,225,142      7,983,905
                                              -------------  -------------
   Total Liabilities and Stockholders' Equity $  19,476,438  $  13,041,806
                                              =============  =============



Sales by Channel           Three months ended         Six months ended
 (Unaudited)                  September 30,             September 30,
                        ------------------------  ------------------------
Product Revenues            2007         2006         2007         2006
                        -----------  -----------  -----------  -----------
   Product sales- retail $4,850,298  $   799,335  $ 8,979,900  $ 1,492,945
Product sales- direct to
                consumer  1,433,347      230,981    3,582,179      359,309
                        -----------  -----------  -----------  -----------
                  Total $ 6,283,645  $ 1,030,316  $12,562,079  $ 1,852,254
                        ===========  ===========  ===========  ===========

% of Revenues
   Product sales- retail      77.19%       77.58%       71.48%       80.60%
Product sales- direct to
                consumer      22.81%       22.42%       28.52%       19.40%
                        -----------  -----------  -----------  -----------
             Total sales     100.00%      100.00%      100.00%      100.00%
                        ===========  ===========  ===========  ===========


Sales by product           Three months ended         Six months ended
 category (Unaudited)         September 30,             September 30,
                        ------------------------  ------------------------
Product Revenues            2007         2006         2007         2006
                        -----------  -----------  -----------  -----------
            AeroGardens $ 4,816,504  $   889,979  $10,460,138  $ 1,616,870
          Seed kits and
            accessories   1,467,141      140,337    2,101,941      235,384
                        -----------  -----------  -----------  -----------
                  Total $ 6,283,645  $ 1,030,316  $12,562,079  $ 1,852,254
                        ===========  ===========  ===========  ===========

% of Revenues
            AeroGardens       76.65%       86.38%       83.27%       87.29%
          Seed kits and
            accessories       23.35%       13.62%       16.73%       12.71%
                        -----------  -----------  -----------  -----------
                  Total      100.00%      100.00%      100.00%      100.00%
                        ===========  ===========  ===========  ===========

Contact Information

  • CONTACTS:
    Corporate
    John Thompson
    AeroGrow International, Inc.
    (303) 444-7755
    Email Contact

    Investor
    Budd Zuckerman
    Genesis Select Corporation
    (303) 415-0200
    Email Contact