SOURCE: AeroGrow International, Inc.

August 14, 2007 15:53 ET

AeroGrow Reports Fiscal First Quarter Financial Results

Revenues Increase 664% Over Prior Year to $6.3 Million for the Quarter; Quarterly Revenue Exceeds 2006 "Holiday" Quarter by 28%

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

For the quarter ended June 30, 2007, AeroGrow reported revenues of approximately $6.3 million, an increase of 664% over the $822,000 reported for the prior year's quarter ended June 30, 2006 and on par with the $6.4 million reported for the previous quarter ended March 31, 2007. Further, for the quarter ended June 30, 2007, gross margins improved to 43.1% of revenues, or $2.7 million, as compared to 17.8% of revenues, or $146,243, for the three months ended June 30, 2006. For the quarter ended June 30, 2007 AeroGrow reported a net loss of $2.0 million or $0.18 per share as compared to $2.1 million, or $0.23 per share, for the quarter ended June 30, 2006.

Accomplishments for AeroGrow for the quarter ended June 30, 2007 include:

    
--  Launching the AeroGarden products chain-wide with Linens 'n Things,
    including a Mother's Day promotion that featured the AeroGarden on the
    cover of 41 million Linens 'n Things Sunday newspaper inserts.
    
--  The launch of the new AeroGarden Pro 100 on April 29th on the world's
    largest TV retailer, where it sold more than $1.7 million dollars in just
    24 hours. The Pro 100 features stylish stainless steel trim and Adaptive
    Growth Intelligence™ that monitors plant growth to give plants exactly
    what they need at each stage of growth for maximum plant health and yields.
    
--  AeroGrow expanded internationally into Japan through an agreement
    reached with Japan's largest TV direct response/retail distribution
    company, Oak Lawn Marketing Inc. ("OLM"), headquartered in Nagoya, Japan.
    OLM will sell AeroGarden products through a wide variety of retail outlets
    and television (including home shopping channels and infomercials) along
    with web marketing and public relations initiatives. Initial airings of the
    infomercial in Japan should begin in September 2007.
    
--  AeroGrow was approved for listing and commenced trading on the NASDAQ
    Capital Market under the new ticker symbol AERO effective at market opening
    on June 13, 2007.
    
--  AeroGrow launched a full-line, 16 page, full-color product catalog for
    database marketing to existing customers and purchased mailing lists. The
    new catalog features 31 AeroGarden products and accessories, including 19
    new products. The new products included 9 new seed kits, 9 new accessories,
    and the new AeroGarden Pro 100.
    

"We are excited by the consumer acceptance shown for our AeroGarden products as evidenced by a 664% year over year increase," stated AeroGrow Founder and CEO, Michael Bissonnette. "We look forward to continuing our growth with the addition of nationwide distribution at Sears, Macy's and Bed, Bath & Beyond in September and our initial product launches in Europe and Japan."

Reported revenues for the three months ended June 30, 2007 exclude $910,847 of product shipments under an arrangement with one customer, a home shopping channel, which, though paid in full, grant this customer the right to return unsold products. Also excluded from revenue is $294,719 of revenue from direct TV sales related to a trial offer that allows the customer to evaluate the product, paying only the shipping and handling costs, before making the required installment payments.

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



                                           Three months ended
                                       =========================
                                        30-Jun-07     30-Jun-06
                                       ===========   ===========

Revenue
  Product sales - retail                      65.8%         84.4%
  Product sales - direct to consumer          34.2%         15.6%
                                       -----------   -----------
    Total sales                              100.0%        100.0%

Operating expenses
  Cost of revenue                             56.9%         82.2%
  Research and development                     8.3%         52.9%
  Sales and marketing                         46.5%        116.9%
  General and administrative                  20.0%        104.1%
                                       -----------   -----------
    Total operating expenses                 131.7%        356.1%
                                       -----------   -----------

Loss from operations                         -31.7%       -256.1%
                                       ===========   ===========

Earnings Conference Call

AeroGrow will host a conference call today, Tuesday, August 14, 2007 to review operational results for the six months ended June 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 P.M. Eastern Time (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 September 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:    12593613

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.                   Three Months Ended June 30,
CONDENSED STATEMENTS OF OPERATIONS                  2007          2006
                                                ============  ============
                                                        (Unaudited)
                                                --------------------------
Revenue
  Product sales, net                            $  6,278,685  $    821,938
Operating expenses
  Cost of revenue                                  3,575,276       675,695
  Research and development                           521,819       434,931
  Sales and marketing                              2,920,987       960,474
  General and administrative                       1,255,008       856,040
                                                ------------  ------------
  Total operating expenses                         8,273,090     2,927,140
                                                ------------  ------------
Loss from operations                              (1,994,405)   (2,105,202)

Other (income) expense, net
  Interest (income)                                  (37,859)      (84,113)
  Interest expense                                    66,184       101,800
                                                ------------  ------------
  Total other (income) expense, net                   28,325        17,687
                                                ------------  ------------
Net loss                                        $ (2,022,730) $ (2,122,889)
                                                ============  ============

Net loss per share, basic and diluted           $      (0.18) $      (0.23)
                                                ============  ============
Weighted average number of common
 shares outstanding, basic and diluted            11,085,389     9,116,832
                                                ============  ============


BALANCE SHEET DATA                                June 30,      June 30,
                                                    2007          2006
                                                ============  ============
ASSETS                                          (Unaudited)
                                                ------------
 Current assets
  Cash and cash equivalents                     $  3,418,227  $  5,495,501
  Restricted cash                                     85,036        84,363
  Accounts receivable                              2,197,609     1,884,743
  Other receivable                                   229,470       182,221
  Inventory                                        3,908,224     3,940,614
  Prepaid expenses and other                         419,090       480,990
                                                ------------  ------------
 Total current assets                             10,257,656    12,068,432
 Property and equipment                              953,067       909,496
 Other assets                                        166,513        63,878
                                                ------------  ------------
 Total Assets                                   $ 11,377,236  $ 13,041,806
                                                ============  ============
LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities
  Due to factor                                 $  1,266,140  $    645,151
  Accounts payable                                 1,601,523     3,192,734
  Accrued expenses                                 1,082,066     1,166,485
  Customer deposits                                  910,847             -
  Deferred rent                                       57,283        53,531
                                                ------------  ------------
 Total current liabilities                         4,917,859     5,057,901
 Stockholders' equity
  Common stock                                        11,125        11,065
  Additional paid-in capital                      38,263,145    37,765,003
  Accumulated (deficit)                          (31,814,893)  (29,792,163)
                                                ------------  ------------
 Total Stockholders' Equity                        6,459,377     7,983,905
                                                ------------  ------------
 Total Liabilities and Stockholders' Equity     $ 11,377,236  $ 13,041,806
                                                ============  ============

Contact Information