Source: AeroGrow International, Inc.

AeroGrow Reports Results for the Second Quarter Ended September 30, 2015

BOULDER, CO--(Marketwired - Nov 9, 2015) -  AeroGrow International, Inc. (OTCQB: AERO) ("AeroGrow" or the "Company"), which sells the Miracle-Gro AeroGarden® line of extraordinary, soil-free indoor gardening systems, announced results for the second quarter ended September 30, 2015.

For the three months ended September 30, 2015, total revenue of $1.1 million was down 36%, or $616,000, relative to the same period in the prior year. The decrease was primarily due to over $500,000 of in-store retail channel sales for tests that were not repeated this year. This was offset by a $109,000 or 30% increase in sales at Amazon.com and other online retailers. In addition, the Company shipped over $1.3 million in future revenue to QVC during the September quarter, but this revenue was not able to be recognized in the quarter on a GAAP basis. The adjusted EBITDA loss for the quarter was $822,000. 

"Year over year sales comparisons in these low volume quarters are always a challenge for us due to the timing of shipments to retailers, but our overall strategy for Fiscal 2016 remains on track," said President and CEO J. Michael Wolfe. "In the quarter we actually shipped over 35% more than we did in the same quarter last year. While we were unable to recognize much of the increase due to GAAP, this gives us a good head start on our December quarter sales. I would add that we anticipate our quarterly sales comps during the first six months of the fiscal year, which over the last two years represented only about 10% of our annual sales, may continue to be inconsistent as we test various retail channel strategies in an effort to optimize sales and profitability throughout the year. 

"Sales this quarter were consistent with our current strategy to build our business through online retailers while refocusing in-store tests, primarily in the culinary channel. In addition to building our business through expanded relationships with Amazon.com, Costco.com, Walmart.com and others, I'm pleased that we will be featured numerous times on QVC and begin testing new in-store distribution at Bed, Bath & Beyond and others. We will also be launching our international initiative during the upcoming holiday season, beginning with a test through Amazon in the UK.

"I'm also excited about our new line of AeroGarden products that are being launched during the first few weeks of November. These all new AeroGardens capture the vision that we've been working on for over two years -- they are great looking, grow better than ever and have an efficient footprint for kitchen countertops. Finally, due to the lower cost points on these units, we stand to see markedly improved margins beginning in November when these new products start comprising a significant portion of our shipments. 

"This fall we'll also begin to execute our strategy to build the AeroGarden brand and the indoor countertop gardening category through a series of new commercials for use on TV and in digital media. I'm confident that these spots will help drive awareness and -- ultimately -- sell thru. Four versions of the spot will begin testing imminently and we plan to increase the frequency of the airings during the key holiday selling season.

"As these efforts come together in our peak selling season, which began in earnest during the last several weeks of October, I'm optimistic we'll drive continued top line growth on an annual basis, with an emphasis on improved bottom line performance."

 
AEROGROW INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 
       
    Three Months ended September 30,  
(in thousands, except per share data)   2015     2014  
Net revenue   $ 1,091     $ 1,707  
  Cost of revenue     761       1,083  
  Gross profit     330       624  
                 
Operating expenses                
  Research and development     143       115  
  Sales and marketing     668       484  
  General and administrative     561       506  
  Total operating expenses     1,372       1,105  
                 
(Loss) from operations     (1,042 )     (481 )
                 
Other (expense) income, net                
  Fair value changes in derivative warrant liability     (66 )     11  
  Interest expense     -       -  
  Interest expense - related party     (58 )     (37 )
  Other income     -       -  
  Total other (expense), net     (124 )     (26 )
                 
Net (loss)   $ (1,166 )   $ (507 )
Change in fair value of stock to be distributed for Scotts Miracle-Gro transactions     1,177       154  
Net income (loss) attributable to common shareholders   $ 11     $ (353 )
Net loss per share, basic and diluted   $ 0.00     $ (0.06 )
                 
Weighted average number of common shares outstanding, basic and diluted     7,500       6,405  
                 
                 
 
AEROGROW INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
 
             
    September 30, 2015     March 31, 2015  
(in thousands, except per share and share data)   (Unaudited)     (Derived from Audited Statements)  
ASSETS                
Current assets                
  Cash   $ 2,411     $ 1,015  
  Restricted cash     15       15  
  Accounts receivable, net of allowance for doubtful accounts of $5 and $10 at September 30, 2015 and March 31, 2015, respectively     632       1,300  
  Other receivables     65       214  
  Inventory     4,162       2,603  
  Prepaid expenses and other     1,140       144  
    Total current assets     8,425       5,291  
Property and equipment, net of accumulated depreciation of $3,464 and $3,284 at September 30, 2015 and March 31, 2015, respectively     752       525  
Other assets                
  Intangible assets     2       2  
  Deposits     156       156  
Total assets   $ 9,335     $ 5,974  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities                
  Accounts payable   $ 1,698     $ 1,641  
  Accrued expenses     624       816  
  Customer deposits     5       30  
  Deferred rent     2       1  
  Notes payable-related party     4,558       207  
  Derivative warrant liability     2,018       1,688  
  Debt associated with sale of intellectual property     184       208  
      Total current liabilities     9,089       4,591  
Commitments and contingencies                
Stockholders' equity                
  Preferred stock, $.001 par value, 20,000,000 shares authorized,2,649,007 issued and outstanding at September 30, 2015and March 31, 2015     3       3  
  Common stock, $.001 par value, 750,000,000 shares authorized,7,499,966 and 6,563,518 shares issued and outstanding atSeptember 30, 2015 and March 31, 2015, respectively     7       6  
  Additional paid-in capital     84,009       82,101  
  Stock dividend to be distributed     317       1,715  
  Accumulated deficit     (84,090 )     (82,442 )
Total stockholders' equity     246       1,383  
Total liabilities and stockholders' equity   $ 9,335     $ 5,974  
                 
                 
 
AEROGROW INTERNATIONAL, INC.
EBITDA CALCULATION
 
       
    Three Months Ended September 30,
(in thousands)
 
    2015     2014  
Loss from operations   $ (1,042 )   $ (481 )
Add back non-cash items:                
  Depreciation     99       61  
  Amortization     -       -  
  Stock based compensation     83       83  
  Common stock warrant expense     -       18  
Scott's Miracle-Gro intellectual property royalty and branding license     38       68  
    Total non-cash items     220       230  
Adjusted EBITDA   $ (822 )   $ (251 )
                 
                 

The U.S. GAAP measure most directly comparable to Adjusted EBITDA is income (loss) from operations. The non-U.S. GAAP financial measure of Adjusted EBITDA should not be considered as an alternative to net earnings. Adjusted EBITDA is not a presentation made in accordance with U.S. GAAP and has important limitations as an analytical tool. Adjusted EBITDA should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Because Adjusted EBITDA excludes some, but not all, items that affect net earnings and is defined differently by different companies, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

CONFERENCE CALL

The conference call is scheduled for 12:00pm ET on November 10, 2015. To participate in the call, please dial
U.S. (Toll Free): 1 (888) 347-7861
Toll/International: 1 (412) 902-4227

A telephonic replay of the call will be available within 2 hours of completion and will be available for the next 24 hours. You will be able to access the audio file for 90 days following the completion of the call through the AeroGrow website at www.aerogrow.com/investors until February 8, 2016. To access the replay by phone, please dial:

U.S. and Canada: 1 (877) 870-5176
Toll/International: 1 (858) 384-5517
Conference Number: 10075806

About AeroGrow International, Inc.
Headquartered in Boulder, Colorado, AeroGrow International, Inc. is the leader in the rapidly growing indoor gardening market. 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. With an AeroGarden...you can grow anything! In April 2013, AeroGrow entered into a strategic partnership with Scotts Miracle-Gro to continue to expand the indoor gardening market. For more information, visit www.aerogrow.com.

Forward-Looking Statements
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements by Mike Wolfe and/or the Company, statements regarding growth of the AeroGarden product line, ability to raise capital, optimism related to the business, expanding sales, market acceptance of developments and enhancements to our product line, improved margins and profitability, 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, including in "Item 1A Risk Factors" of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2015. 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:

Company Representative:
Grey Gibbs
Senior Vice President of Finance and Accounting
grey@aerogrow.com
303-444-7755