Three Months Ended September 30, ------------------------ 2010 2009 ----------- ----------- Revenue Product sales - retail, net 20.8% 55.8% Product sales - direct to consumer, net 77.7% 41.8% Product sales - international 1.5% 2.4% ----------- ----------- Total sales 100.0% 100.0% Operating expenses Cost of revenue 75.3% 69.1% Research and development 3.8% 5.3% Sales and marketing 43.0% 38.0% General and administrative 58.9% 41.2% ----------- ----------- Total operating expenses 181.0% 151.9% ----------- ----------- Profit/(loss) from operations -81.0% -51.9% =========== =========== AEROGROW INTERNATIONAL, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three Months ended Six Months ended September 30, September 30, ------------------------ ------------------------ 2010 2009 2010 2009 ----------- ----------- ----------- ----------- Revenue Product sales $ 1,379,617 $ 3,285,949 $ 3,197,636 $ 6,265,642 Operating expenses Cost of revenue 1,038,812 2,270,556 2,360,515 4,140,361 Research and development 52,745 173,354 89,760 292,552 Sales and marketing 593,309 1,248,102 1,410,287 2,407,898 General and administrative 812,300 1,299,598 1,708,483 2,753,806 ----------- ----------- ----------- ----------- Total operating expenses $ 2,497,166 $ 4,991,610 $ 5,569,045 $ 9,594,617 ----------- ----------- ----------- ----------- Profit (loss) from operations (1,117,549) (1,705,661) (2,371,409) (3,328,975) Other (income) expense, net Interest (income) (1,900) (61) (8,530) (141) Interest expense 933,400 239,940 1,451,500 485,990 Interest expense - related party 94,490 - 155,749 - Other (income) (13,986) (180,286) (111,525) (987,838) Total other (income) expense, net 1,012,004 59,593 1,487,194 (501,989) ----------- ----------- ----------- ----------- Net income (loss) $(2,129,553) $(1,765,254) $(3,858,603) $(2,826,986) =========== =========== =========== =========== Net income (loss) per share, basic $ (0.17) $ (0.14) $ (0.31) $ (0.22) =========== =========== =========== =========== Net income (loss) per share, diluted $ (0.17) $ (0.14) $ (0.31) $ (0.22) =========== =========== =========== =========== Weighted average number of common shares outstanding used to calculate basic net income (loss) per share 12,566,486 12,422,249 12,566,486 12,729,125 =========== =========== =========== =========== Effect of dilutive securities: Equity based compensation - - - - Weighted average number of common shares outstanding used to calculate diluted net income per share 12,566,486 12,422,249 12,566,486 12,729,125 =========== =========== =========== =========== AEROGROW INTERNATIONAL, INC. CONDENSED BALANCE SHEETS September March 31, 30, 2010 2010 ------------ ------------ (Derived from Audited ASSETS (Unaudited) Statements) Current assets Cash $ 629,178 $ 249,582 Restricted cash 87,904 443,862 Accounts receivable, net of allowance for doubtful accounts of $85,416 and $87,207 at September 30, 2010 and March 31, 2010, respectively 360,411 478,113 Other receivables 104,108 259,831 Inventory 4,245,458 3,493,732 Prepaid expenses and other 552,994 338,095 ------------ ------------ Total current assets $ 5,980,053 $ 5,263,215 Property and equipment, net of accumulated depreciation of $2,875,420 and $2,486,377 at September 30, 2010 and March 31, 2010, respectively 672,731 1,002,530 Other assets Intangible assets, net of $16,468 and $6,854 of accumulated amortization at September 30, 2010 and March 31, 2010, respectively 270,053 275,599 Deposits 217,840 240,145 Deferred debt issuance costs, net of accumulated amortization of $244,316 and $486,791 at September 30, 2010 and March 31, 2010, respectively 1,867,280 62,291 ------------ ------------ Total other assets $ 2,355,173 $ 578,035 ------------ ------------ Total Assets $ 9,007,957 $ 6,843,780 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities Current portion - long term debt - related party $ 143,743 $ 911,275 Current portion - long term debt 1,914,636 3,053,984 Accounts payable 1,974,605 3,354,703 Accrued expenses 2,006,646 1,449,977 Customer deposits 13,223 339,041 Deferred rent 32,519 40,773 ------------ ------------ Total current liabilities $ 6,085,372 $ 9,149,753 Long term debt 1,407,070 1,020,957 Long term debt - related party 136,926 - Stockholders' equity Preferred stock, $.001 par value, 20,000,000 shares authorized and 7,586 shares issued and outstanding at September 30, 2010 and March 31, 2010 8 8 Common stock, $.001 par value, 500,000,000 shares authorized, 12,650,605 and 12,398,249 shares issued and outstanding at September 30, 2010 and March 31, 2010, respectively 12,650 12,398 Additional paid-in capital 61,497,338 52,933,467 Accumulated (deficit) (60,131,407) (56,272,803) ------------ ------------ Total Stockholders' Equity (Deficit) $ 1,378,589 $ (3,326,930) ------------ ------------ Total Liabilities and Stockholders' Equity (Deficit) $ 9,007,957 $ 6,843,780 ============ ============ SALES BY CHANNEL Three Months Ended September 30, -------------------------------- Product Revenue 2010 2009 --------------- --------------- Retail, net $ 287,373 $ 1,831,781 Direct to consumer, net 1,071,606 1,375,141 International 20,638 79,027 --------------- --------------- Total $ 1,379,617 $ 3,285,949 =============== =============== SALES BY PRODUCT TYPE Three Months Ended September 30, ------------------------------- 2010 2009 -------------- -------------- Product Revenue AeroGardens $ 510,458 $ 2,343,439 Seed kits and accessories 869,159 942,510 -------------- -------------- Total $ 1,379,617 $ 3,285,949 ============== ============== % of Total Revenue AeroGardens 37.0% 71.3% Seed kits and accessories 63.0% 28.7% -------------- -------------- 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 Jack Walker and/or the Company, statements regarding growth of the AeroGarden product line, optimism related to the business, direct-to-consumer strategy, expanding sales, improved margins, operating efficiencies 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: John Thompson AeroGrow International, Inc. 303-444-7755