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0 1230

Form 8-K for AEROGROW INTERNATIONAL, INC.


17-Feb-2015

Results of Operations and Financial Condition, Financial Statements

Item 2.02 Results of Operations and Financial Condition.On February 17, 2015, AeroGrow International, Inc. (the “Company”) issued a press release announcing the Company’s operational results for the three months ended December 31, 2014. A copy of the press release announcing the Company’s operational results for the three months ended February 17, 2015, is furnished as Exhibit 99.1 to this report.The information contained in this Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, and shall not be deemed incorporated by reference in any filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934 or the Securities Act of 1933, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

 

Item 9.01 Financial Statements and Exhibits.Exhibits. The following exhibit is furnished with this Form 8-K: 

Exhibit                      Description
Number

99.1        Press Release Issued by AeroGrow International,
          Inc. on February 17, 2015.

Portions of this report may constitute “forward-looking statements” as defined by federal law. Although the Company believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Any such statements are made in reliance on the “safe harbor” protections provided under the Private Securities Litigation Reform Act of 1995. Additional information about issues that could lead to material changes in the Company’s performance is contained in the Company’s filings with the Securities and Exchange Commission.

0 1057

AeroGrow Reports Results for the Third Quarter Ended December 31, 2014

BOULDER, CO–(Marketwired – Feb 17, 2015) – AeroGrow International, Inc. (OTCQB: AERO)

  • Sales increase 121% to $11.0 million; record quarterly operating profit and EBITDA
  • Retail channel sales increase 241% to $8.3 million
  • Multiple new products launched during quarter

AeroGrow International, Inc. (OTCQB: AERO) (“AeroGrow” or the “Company”), which sells the Miracle-Gro AeroGarden® line of high output, soil-free indoor gardens, seed pod kits and hydroponic nutrients, today announced financial results for the quarter ended December 31, 2014, the third quarter of the Company’s fiscal 2015.

For the three months ended December 31, 2014, the Company recorded total revenue of $11.0 million, an increase of 121% over the same period in the prior year. Profit from Operations for the quarter was $914,000, a year-over-year increase of 146%, with quarterly EBITDA increasing 139% to $1.6 million.

“The headline for the quarter is our tremendous revenue growth coupled with significant profitability,” said President and CEO J. Michael Wolfe. “Our core strategy for fiscal year 2015 has been to grow at a rapid rate while generating at least a modest bottom line, and these results are a strong validation of our approach. Quarterly revenue exceeded annual revenue for all of fiscal 2014 and I think this speaks to the velocity of our growth and the emerging acceptance of our product line in the market place.

“Our growth was driven largely by sales in our Retail distribution channel, which increased by 241% over the prior year period. We continued to show strong results with our on-line retail partners, including Amazon, Costco.com, Walmart.com, HomeDepot.com, and others. Additionally, the Fall of 2014 marked our re-entry into the in-store retail distribution channel where we tested with multiple accounts at different price points, demographics and geographies. These tests included Costco, Walmart, True Value and others. Overall, we are pleased with the results we achieved in this area while also learning a great deal about how to better execute our in-store efforts. As we go forward, we now have a base to build on and are very excited about our future in this important channel.

“Our Direct-to-Consumer channel generated 6.0% growth over the prior year period, which we view as solid given all of the new distribution that created competition for this channel, but increased sales overall. In addition, the focus of our marketing resources were shifted to help drive retail sales. We also felt that our new product introductions were well received during the holiday shopping season.

“Significantly, we were able to deliver the 121% revenue growth while increasing EBITDA by 139% to $1.6 million, reflecting the leverage that is inherent in our business. Our gross margins declined primarily due to the substantial shift toward the lower margin retail channel, but also as we spent to assist retailers in featuring the AeroGarden at the point of purchase, to ensure timely shipments after delays at ports on the west coast, and as a result of higher proportional royalties paid to the Scotts Miracle-Gro Company.

“We are very proud of these results and the progress that we have made. We now look forward to building on everything we learned during the Fall of 2014 and continuing our trend of strong growth in Fiscal 2016 and beyond.”

Forward-Looking Statements

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements by J. Michael 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, 2014. 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.

Additional detailed information concerning a number of the important factors that could cause actual results to differ materially from the forward-looking information contained in this release is readily available in the Company’s publicly filed quarterly, annual and other reports. The Company disclaims any obligation to update developments of these risk factors or to announce publicly any revision to any of the forward-looking statements contained in this release, or to make corrections to reflect future events or developments.

AEROGROW INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months ended
December 31,
(in thousands, except per share data) 2014 2013
Net revenue $ 10,980 $ 4,968
Cost of revenue 7,635 2,867
Gross profit 3,345 2,101
Operating expenses
Research and development 83 53
Sales and marketing 1,724 1,188
General and administrative 624 489
Total operating expenses $ 2,431 $ 1,730
Profit (loss) from operations 914 371
Other (expense) income, net
Fair value changes in derivative warrant liability 373 (18 )
Interest expense - (14 )
Interest expense – related party (106 ) (2 )
Other (expense) income, net (1 ) (35 )
Total other (expense) income, net 266 (69 )
Net income (loss) $ 1,180 $ 302
Less: Deemed dividend on convertible preferred stock - -
Change in fair value of preferred stock dividend (153 ) (226 )
Net income (loss) attributable to common shareholders $ 1,027 $ 76
Net income (loss) per share, basic $ 0.16 $ 0.01
Net income (loss) per share, diluted $ 0.15 $ 0.01
Weighted average number of common shares outstanding, basic 6,536 5,906
Weighted average number of common shares outstanding, diluted 6,775 5,992
AEROGROW INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
December 31,
2014
March 31,
2014
(in thousands, except share and per share data)
ASSETS
(Unaudited) (Derived from Audited Statements)
Current assets
Cash $ 2,261 $ 1,707
Restricted cash 15 15
Accounts receivable, net of allowance for doubtful accounts of $54 and $5 at December 31, 2014 and March 31, 2014, respectively 5,401 573
Other receivables 152 187
Inventory 3,472 1,311
Prepaid expenses and other 219 306
Total current assets 11,520 4,099
Property and equipment, net of accumulated depreciation of $3,205 and $3,024 at December 31, 2014 and March 31, 2014, respectively 594 298
Other assets
Intangible assets 2 2
Deposits 156 145
Total other assets 158 147
Total assets $ 12,272 $ 4,544
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable $ 2,753 $ 553
Accrued expenses 1,002 306
Deferred rent 1 3
Notes payable – related party 4,643 -
Derivative warrant liability 2,369 2,530
Debt associated with sale of intellectual property 220 258
  Total current liabilities 10,988 3,650
Commitments and contingencies
Stockholders’ equity (deficit)
Preferred stock, $.001 par value, 20,000,000 shares authorized, 2,649,007 issued and outstanding at December 31, 2014 and March 31, 2014 3 3
Common stock, $.001 par value, 750,000,000 shares authorized, 6,536,018 and 6,129,326 shares issued and outstanding at December 31, 2014 and March 31, 2014, respectively 7 6
Additional paid-in capital 81,232 79,563
Stock dividend to be distributed 598 1,456
Accumulated deficit (80,556 ) (80,134 )
Total stockholders’ equity 1,284 894
Total liabilities and stockholders’ equity $ 12,272 $ 4,544
AEROGROW INTERNATIONAL, INC.
EBITDA CALCULATION
Three Months Ended December 31,
(in thousands)
2014 2013
Operating profit (loss) $ 914 $ 371
Add back non-cash items:
Depreciation 76 42
Amortization - -
Stock based compensation 88 89
Common stock warrant expense - 18
Scott’s Miracle-Gro IP royalty and branding license 557 165
Total non-cash items 721 314
Adjusted EBITDA $ 1,635 $ 685

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 Details

The conference call is scheduled for 5:00pm EST on February 17, 2015. To participate in the call, please dial:

U.S. (Toll Free): 1 (877) 300-8521
Toll/International: 1 (412) 317-6026

A telephonic replay of the call will be available within 2 hours of completion and will be available for the next 24 hours. Additionally, 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 May 18, 2015. To access the replay by phone, please dial:

U.S. and Canada: 1 (877) 870-5176
Toll/International: 1 (858) 384-5517
Conference Number: 10060244

About AeroGrow International, Inc. Headquartered in Boulder, Colorado, AeroGrow International, Inc. is the leader in the rapidly growing indoor gardening category. 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 http://www.aerogrow.com.

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AeroGrow to Announce Third Quarter Fiscal 2015 Financial Results on February 17, 2015

 BOULDER, CO–(Marketwired – Feb 2, 2015) – AeroGrow International, Inc. (OTCQB: AERO) (“AeroGrow” or the “Company”), makers of the AeroGarden® line of indoor gardening products, will announce financial results for its fiscal third quarter ended December 31, 2014 on Tuesday, February 17, 2015, immediately following the closing of regular stock market trading hours. The Company will hold a conference call at 5:00 pm EST to review the results. Michael Wolfe, President and Chief Executive Officer, and Grey Gibbs, Vice President of Accounting and Finance, will participate on the call.

To participate in the 5:00 pm EST conference call, please dial
U.S. (Toll Free): 1 (877) 300-8521
Toll/International: 1 (412) 317-6026

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 atwww.aerogrow.com/investors until May 18, 2015. To access the replay by phone, please dial:

U.S. and Canada: 1 (877) 870-5176
Toll/International: 1 (858) 384-5517
Conference Number: 10060244

About AeroGrow International, Inc.
Headquartered in Boulder, Colorado, AeroGrow International, Inc. is the leader in the rapidly growing indoor gardening category. 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.

Contact:

Investor Relations:
Genesis Select Corp.
Budd Zuckerman
bzuckerman@genesisselect.com
303-415-0200

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

1 4415

Miracle-Gro AeroGarden 7 LED Sells Out Amazon.com’s ‘Gold Box’ Deal of the Day

BOULDER, CO–(Marketwired – Dec 17, 2014) – AeroGrow International, Inc. (AERO) (“AeroGrow” or the “Company”), which sells the Miracle-Gro AeroGarden® line of high output, soil-free indoor gardens, seed pod kits and hydroponic nutrients, announced today that the all new Miracle-Gro AeroGarden® 7 LED, SOLD OUT as the main Gold Box feature on Amazon.com’s “Deal of the Day” on December 14, 2014. The AeroGarden was recognized as an Amazon “Holiday Best Seller” during the 2013 holiday season, leading to Amazon.com’s promotion of the AeroGarden 7 LED on one of the biggest shopping days of the year.

“We are very excited to have been chosen by Amazon.com to lead with the AeroGarden 7 LED on such an important shopping day during the holiday season,” said Mike Wolfe, President and CEO of AeroGrow. “Our strong showing with this Deal of the Day promotion was our most successful one-day sale at Amazon to date, and continues our strong partnership with the world’s largest online retailer. Our dot-com distribution channel continues to show excellent strength this season, with several shopping days remaining before Christmas.”

In addition, The AeroGarden® ULTRA was featured at a special price as one of the highlighted gifts on Costco.com’s 10th day of its “15 Days of Christmas” promotions. The promotion continues until December 17th.

“This is the second year Costco has featured us on their ‘Days of Christmas Deals,” continued Mr. Wolfe. “The specially priced ULTRA is available online, with other products available at Costco’s online store and at select brick-and-mortar Costco stores throughout the US.”

The Miracle-Gro AeroGarden ULTRA is a high output indoor garden that easily grows fresh herbs, lettuce, cherry tomatoes and more. The ULTRA’s advanced, easy-to-use Control Panel features an interactive LCD display that utilizes on screen prompts to simply guide users step by step from set-up through harvest. It automatically creates optimal conditions for plants by turning grow lights on and off and regulating water and nutrient delivery. And it puts decades of indoor gardening experience at your fingertips — with timely gardening tips, complete customization options, and friendly reminders when it’s time to add water and the specially formulated Liquid Nutrients.

The Miracle-Gro AeroGarden 7 LED is the extraordinary soil-free indoor garden that grows plants 5 times faster than soil. The easy-to-use Control Panel automatically creates optimal conditions for plants by turning the Grow Lights on and off and reminding consumers when to add water and nutrients. The AeroGarden 7 LED features high-performance, energy-efficient LED grow lights. LED’s save hundreds of dollars in energy and Grow Light replacement costs while providing up to 30% more growth.

About AeroGrow International, Inc.

Headquartered in Boulder, Colorado, AeroGrow International, Inc. is the leader in the rapidly growing indoor gardening category. 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 http://www.aerogrow.com.

Forward-Looking Statements

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements by the Company, statements regarding growth of the AeroGarden product line, ability to raise capital, 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, including in “Item 1A Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2012. 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.

Image Available: http://www2.marketwire.com/mw/frame_mw?attachid=2739272
Image Available: http://www2.marketwire.com/mw/frame_mw?attachid=2739274

Contact:
Investor Relations:
Genesis Select Corp.
Budd Zuckerman and Jeff Fowlds
303-415-0200
jfowlds@genesisselect.com

OR

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

0 1536

AeroGrow to Present at the LD Micro Conference

BOULDER, CO–(Marketwired – Nov 26, 2014) – AeroGrow International, Inc (AERO) (“AeroGrow” or the “Company”), which sells the Miracle-Gro AeroGarden® line of high output, soil-free indoor gardens, seed pod kits and hydroponic nutrients, announced that J. Michael Wolfe, CEO and President, and Grey Gibbs, Vice President of Finance and Accounting, will present at the LD Micro Conference held December 2-4, 2014 at the Luxe Sunset Boulevard Hotel in Los Angeles, CA. AeroGrow will present on December 4th at 11:30 AM, Pacific Time, track two.

For more information about AeroGrow, visitwww.aerogrow.com. Please visit ldmicro.com to view the conference details and schedule one-on-ones. Presentation times are subject to change. Please check conference website for final details.

About AeroGrow International, Inc.

Headquartered in Boulder, Colorado, AeroGrow International, Inc. is the leader in the rapidly growing indoor gardening market place. 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 MiracleGro to continue to expand the indoor gardening market. For more information, visit http://www.aerogrow.com.

About LD Micro

LD Micro is an investment newsletter firm that focuses on finding undervalued companies in the micro-cap space. Since 2002, the firm has published reports on select companies throughout the year. The firm also hosts the LD Micro Invitational. It is a non-registered investment advisor. For more information, please contact 408-457-1042 or visit www.ldmicro.com.

Contact:
Investor Relations:
Genesis Select Corp.
Budd Zuckerman and Jeff Fowlds
303-415-0200
jfowlds@genesisselect.com

OR

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

0 1344

Form 10-Q for AEROGROW INTERNATIONAL, INC.

10-Nov-2014

Quarterly Report

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe discussion contained herein is for the three and six months ended September 30, 2014 and September 30, 2013. The following discussion should be read in conjunction with the financial statements of AeroGrow International, Inc. (the “Company,” “we,” “AeroGrow,” or “our”) and the notes to the financial statements included in Item 1 above in this Quarterly Report on Form 10-Q for the period ended September 30, 2014 (this “Quarterly Report”). The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements that include words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “may,” “will,” or similar expressions that are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Such statements include, but are not limited to, statements regarding our intent, belief, or current expectations regarding our strategies, plans, and objectives, our product release schedules, our ability to design, develop, manufacture, and market products, the ability of our products to achieve or maintain commercial acceptance, our ability to obtain financing necessary to fund our future operations, and our ability to continue as a going concern. Such statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Factors that could cause or contribute to the differences are discussed in this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended March 31, 2014. Except as required by applicable law or regulation, we undertake no obligation to revise or update any forward-looking statements contained in this Quarterly Report. The information contained in this Quarterly Report is not a complete description of our business or the risks associated with an investment in our common stock. Each reader should carefully review and consider the various disclosures we made in this Quarterly Report and in our other filings with the U.S. Securities and Exchange Commission (“SEC”).

Overview

AeroGrow International, Inc. was formed as a Nevada corporation on March 25, 2002. The Company’s principal business is developing, marketing, and distributing advanced indoor aeroponic garden systems designed and priced to appeal to the consumer gardening, cooking and small indoor appliance markets worldwide. The Company’s principal activities from its formation through March 2006, consisted of product research and development, market research, business planning, and raising the capital necessary to fund these activities. In December 2005, the Company commenced pilot production of its AeroGarden system and, in March 2006, began shipping these systems to retail and catalogue customers. The Company manufactures, distributes and markets seven different models of its AeroGarden systems in multiple colors, as well as over 40 varieties of seed pod kits and a full line of accessory products through multiple channels including retail, catalogue and direct-to-consumer sales primarily in the United States and Canada as well as selected countries in Europe, Asia and Australia.

In April 2013, we entered into a Securities Purchase Agreement and strategic alliance with a wholly owned subsidiary of The Scotts Miracle-Gro Company (collectively with its subsidiary, “SMG” or “Scotts Miracle-Gro”). Pursuant to the Securities Purchase Agreement, we issued (i) 2.6 million shares of Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock); and (ii) a warrant to purchase shares of our common stock for an aggregate purchase price of $4.0 million. In addition, as part of the strategic alliance, we entered into several other agreements with Scotts Miracle-Gro, including: (i) an Intellectual Property Sale Agreement; (ii) a Technology Licensing Agreement; (iii) a Brand License Agreement; and (iv) a Supply Chain Management Agreement.

Pursuant to the Intellectual Property Agreement, we agreed to sell all intellectual property associated with our hydroponic products (the “Hydroponic IP”), other than the AeroGrow and AeroGarden trademarks, free and clear of all encumbrances, to Scotts Miracle-Gro for $500,000. Scotts Miracle-Gro has the right to use the AeroGrow and AeroGarden trademarks in connection with the sale of products incorporating the Hydroponic IP. In addition to the working capital infusion of approximately $4.5 million from the Securities Purchase Agreement and Intellectual Property Sale Agreement, the strategic alliance allows us to use the globally recognized and highly trusted Miracle-Gro brand name. We believe that the strategic alliance also gives Scotts Miracle-Gro an entry into the burgeoning indoor gardening market, while providing AeroGrow a broad base of support in marketing, distribution, supply chain logistics, R&D, and sourcing. We intend to use our strategic alliance with Scotts Miracle-Gro to re-establish our presence in the retail and international sales channels.


Table of Contents
On July 10, 2014, the Company entered into a Term Loan Agreement in the principal amount of up to $4.5 million with Scotts Miracle-Gro. The proceeds were made available as needed in three advances of up to $1.0 million, $1.5 million, and $2.0 million in July, August, and after September of 2014, respectively, with a due date of February 15, 2015. The Term Loan Agreement is secured by a lien on the assets of the Company. Interest is charged at the stated rate of 10% per annum, but will paid in shares of AeroGrow common stock, valued at a price per share equal to the conversion price of the Series B Preferred Stock, (which was previously issued to Scotts Miracle-Gro in April 2013) up to 30 days after the date the Term Loan is paid in full. The funding provided general working capital and was used for the purpose of acquiring inventory to support anticipated growth as the Company expands its retail and its direct-to-consumer sales channels. See Note 3 “Notes Payable, Long Term Debt and Current Portion – Long Term Debt” to our condensed financial statements.

Results of Operations

Three Months Ended September 30, 2014 and September 30, 2013

Summary Overview
For the three months ended September 30, 2014, total revenue of $1.7 million was up 152.5%, or $1.0 million, relative to the same period in the prior year. The increase was primarily due to a $782,000, or 526.4%, increase in sales to the retail channel due an increase in sales to existing accounts (namely Amazon and Costco.com) and to newly acquired retail accounts (namely BJ’s Wholesale Club). Sales in direct-to-consumer channels were also up by $243,000 or 46.7%, primarily due to increased marketing activity versus the prior year, an increased base of AeroGardens causing more consumers to purchase our seed pod kits and grow bulbs and due to higher stocking levels in the channel versus the prior year as we co-branded our product line with the Scotts Miracle-Gro trade name. Sales to international distributors increased by 97.0% to $13,000 in the three months ended September 30, 2014 relative to the same period in the prior year.

For the three months ended September 30, 2014, AeroGarden sales increased by 456.3% from the prior year period due to the large increase in retail sales, which were primarily garden sales. Seed pod kit and accessory sales increased by 23.6% over prior year period as our established base of AeroGardeners continues to grow. AeroGarden sales represented 70.7% of total revenue, as compared to 32.1% in the prior year period. This percentage increase, on a product line basis, was attributable to sales to newly acquired retail accounts. Seed pod kit and accessory sales decreased as a percent of the total to 29.9% from 61.2% even though overall revenue from seed pod kits and accessories increased, again due to the large increase in AeroGarden sales to retailers, which grew faster than seed pod kit sales.

During the three months ended September 30, 2014, we spent $68,000 in advertising expenditures to support our direct-to-consumer and retail channels, a $25,000 or 59.3% year-over-year increase compared to the same period ended September 30, 2013. These expenditures were divided as follows:

  • Direct-to-consumer advertising increased $23,000 to $63,000 during the three months ended September 30, 2014, primarily reflecting increased spending on pay per click and digital display advertising campaigns. Efficiency, as measured by dollars of direct-to-consumer sales generated per dollar of related advertising expense continued to be strong, although the ratio decreased 8.7% to $12.19 for the three months ended September 30, 2014, as compared to $13.35 for the same period in Fiscal 2014.
  •  Retail advertising increased to $5,000 from $2,000 for the three months ended September 30, 2014 and September 30, 2013, respectively.
  • Media and related expenses decreased $1,000 to $0 during the three months ended September 30, 2014, reflecting the Company’s limited exposure in this channel of communication and the increased focus on driving sales with more direct advertising.

Our gross margin for the three months ended September 30, 2014 was 36.5%, down from 42.6% in the prior year period. This decline was anticipated as we shift our channel mix from higher margin direct- to-consumer and seed pod kit sales to lower margin retailers. In addition, AeroGarden sales have lower margins than seed pod kit sales, so we can expect lower margins as we ramp up sales of gardens to increase our installed base of consumers. We also increased our warranty reserves in support of significantly higher AeroGarden sales.


Table of Contents
In aggregate, our total operating expenses increased 36.6% or $296,000 year-over-year, principally because we spent more in all operating expense categories to support the increase in current quarter revenue and anticipated future growth. Even with this increase, operating expenses as a percentage of total revenue decreased significantly, by 55.0% year over year. We spent $113,000 more in personnel-related expenses to expand our sales and marketing operation and support customer service as our established base of AeroGardens and awareness in the marketplace grows. We spent $25,000 more in advertising and $37,000 in investor relations to further drive product and investor awareness. Additionally, we spent more in ongoing certification and testing of our existing and new products introduced in the prior year. Due to our higher sales, offset by increased expenditures to drive growth, our operating loss improved to $481,000 for the three months ended September 30, 2014, as compared to an operating loss of $521,000 in the prior year period.

Other income and expense for the three months ended September 30, 2014 totaled to a net other expense of $26,000, as compared to net other expense of $20,000 in the prior year period. The net other expense in the current period includes $11,000 of non-cash income relating to the fair value revaluation of the warrant held by Scotts Miracle-Gro. For the three months ended September 30, 2013, net other expense included $12,000 of non-cash expense relating to the fair value revaluation of the warrant held by Scotts Miracle-Gro.

The net loss for the three months ended September 30, 2014 improved to $507,000, as compared to the $541,000 loss in the prior year. The decreased net loss is due to higher overall sales, which are a result of the accelerating popularity of cobranded Miracle-Gro AeroGarden products, offset by an increase in operating expenses to meet current and future demand.

The following table sets forth, as a percentage of sales, our financial results for the three months ended September 30, 2014 and the three months ended September 30, 2013:

                                        Three Months Ended September 30,
                                         2014                      2013
       Net revenue
       Direct-to-consumer                      44.8 %                    77.2 %
       Retail                                  54.5 %                    21.9 %
       International                            0.7 %                     0.9 %
       Total net revenue                      100.0 %                   100.0 %

       Cost of revenue                         63.5 %                    57.4 %
       Gross profit                            36.5 %                    42.6 %

       Operating expenses
       Research and development                 6.8 %                    12.6 %
       Sales and marketing                     28.3 %                    48.1 %
       General and administrative              29.6 %                    59.0 %
       Total operating expenses                64.7 %                   119.7 %
       Loss from operations                   (28.2 )%                  (77.1 )%

Revenue
For the three months ended September 30, 2014, revenue totaled $1.7 million, a
year-over-year increase of 152.5% or $1.0 million, from the three months ended
September 30, 2013.

                                     Three Months Ended September 30,
                                              (in thousands)
             Net Revenue                 2014                    2013
             Direct-to-consumer   $              764         $        521
             Retail                              930                  148
             International                        13                    7
             Total                $            1,707         $        676

Direct-to-consumer sales for the three months ended September 30, 2014 totaled $764,000, up $243,000 or 46.7%, from the prior year period. The increase in sales to direct-to-consumer channels was caused by the increased size in our active customer database, demand for our new products (particularly AeroGardens with LED lighting systems) and the increased availability of the various cobranded Miracle-Gro AeroGardens. Sales in the prior year period were adversely affected by low inventory levels, as we cobranded new inventory with the Miracle-Gro trade name.


Table of Contents
Sales to retailer customers for the three months ended September 30, 2014 totaled $930,000, up $782,000 from the prior-year period, principally reflecting sales to newly acquired retail accounts, as well as growth in the existing Amazon.com and Costco.com accounts.

International sales for the three months ended September 30, 2014 totaled $13,000, up $6,000 or 97.0% from the same period in the prior fiscal year. Sales in both periods principally reflect the timing of reorders from existing international distributors only and our current lack of focus on the international channel.

Our products consist of AeroGardens, and seed pod kits and accessories. A summary of the sales of these two product categories for the three months ended September 30, 2014 and September 30, 2013 is as follows:

                                          Three Months Ended September 30,
                                                   (in thousands)
                                           2014                      2013
      Product Revenue
      AeroGardens                     $         1,207           $           217
      Seed pod kits and accessories               511                       414
      Other                                       (11 )                      45
      Total                           $         1,707           $           676
      % of Total Revenue
      AeroGardens                                70.7 %                    32.1 %

Seed pod kits and accessories 29.9 % 61.2 % Other (0.6 )% 6.7 % Total 100.0 % 100.0 %AeroGarden sales increased $990,000, or 456.3%, from the prior year period, reflecting increased retail channel sales and increased sales of gardens in our Direct-to-Consumer channel. The increase in seed pod kit and accessory sales, from $414,000 to $511,000, principally reflects the increase in our established base of AeroGardens. For the three months ended September 30, 2014, sales of seed pod kits and accessories represented 29.9% of total revenue, as compared to 61.2% in the prior year period, even with the increase in revenue, as AeroGarden sales grew faster than seed pod and accessory sales. Other revenue which is comprised primarily of grow club revenue, shipping revenue, accruals and deductions decreased as a percent of the total to (0.6)% from 6.7% in the prior year period due to lower shipping revenue as a percentage of sales and higher deductions and accruals for new retail accounts.

Cost of Revenue
Cost of revenue for the three months ended September 30, 2014 totaled $1.1 million, an increase of $695,000 from the three months ended September 30, 2013, due to the increased revenue. Cost of revenue includes product costs for purchased and manufactured products, freight costs for inbound freight from manufacturers, costs related to warehousing and the shipping of products to customers, credit card processing fees for direct sales, and duties and customs applicable to imported products. As a percent of total revenue, cost of revenue represented 63.5% of revenue as compared to 57.4% for the quarter ended September 30, 2013. The increase in costs as a percent of revenue reflected the shift in product mix from higher margin seed kits to lower margin AeroGardens and in customer mix from higher margin direct-to-consumer customers to lower margin retailers and product mix.

Gross Margin
Our gross margin varies based upon the factors affecting net revenue and cost of revenue as discussed above, as well as the mix of our revenue that comes from the retail, direct-to-consumer, and international channels. In a direct-to-consumer sale, we recognize as revenue the full consumer purchase price for the product. In retail and international sales, by comparison, we recognize as revenue the wholesale price for the product which we charge to the retailer or international distributor. Media costs associated with direct sales are included in sales and marketing expenses. For international sales, margins are structured based on the distributor purchasing products by letter of credit or cash in advance terms with the distributor bearing all of the marketing and distribution costs within its territory. As a result, international sales generally have lower gross margins than domestic retail sales. The gross margin for the quarter ended September 30, 2014 was 36.5% as compared to 42.6% for the quarter ended September 30, 2013. The decrease in our gross margin was primarily attributable to the increased percentage of sales to retailers, primarily BJ’s Wholesale Club and Amazon.com, as well as product mix, and warranty costs.


Table of Contents

Sales and Marketing
Sales and marketing costs for the three months ended September 30, 2014 totaled
$484,000, as compared to $325,000 for the three months ended September 30, 2013,
an increase of 48.7%, or $158,000. Sales and marketing costs include all costs
associated with the marketing, sales, operations, customer support, and sales
order processing for our products, and consisted of the following:

                                    Three Months Ended September 30,
                                             (in thousands)
                                     2014                      2013
            Advertising         $            68           $            43
            Personnel                       330                       217
            Sales commissions                 3                        (6 )
            Trade shows                       -                         1
            Other                            83                        70
                                $           484           $           325

Advertising expense is principally comprised of the costs of development, production, printing, and postage for our catalogue mailing and web media costs for search and affiliate web marketing programs, and developing and employing other forms of advertising. Each of these are key components of our integrated marketing strategy because they help build awareness of, and consumer demand for, our products, in addition to generating direct-to-consumer sales. Advertising expense totaled $68,000 for the quarter ended September 30, 2014, a year-over-year increase of 59.3%, or $25,000, due to our participation in various promotional programs to increase product awareness of our cobranded product line with the Miracle-Gro AeroGarden trade name, along with growth in our web-based advertising programs.

Sales and marketing personnel costs include salaries, payroll taxes, employee benefits and other payroll costs for our sales, operations, customer service, graphics and marketing departments. For the three months ended September 30, 2014, personnel costs for sales and marketing were $330,000, up $113,000 or 52.1% from the three months ended September 30, 2013. The increase reflected increased headcount necessary to drive what we anticipate will be increased sales to retailers and through our Direct Response channel beginning in the fall of 2014. Personnel expenses include all related payroll and equity-based compensation expenses.

Other marketing expenses increased year-over-year principally because of a public relations program and promotional items and new products that were initiated during the current year quarter.

General and Administrative
General and administrative costs for the three months ended September 30, 2014 totaled $506,000, as compared to $399,000 for the three months ended September 30, 2013, an increase of 26.7%, or $107,000. The increase is attributable to expenses associated with an investor relations program, contractor services such as IT, depreciation expense, an increase in the employee expenses such as travel and non-cash compensation.

Research and Development
Research and development costs for the quarter ended September 30, 2014 totaled $115,000, an increase of $31,000 from the quarter ended September 30, 2013. The increase reflects the support of new products development activities, including the ongoing certification and testing of the LED products, as required by our retail partners.

Operating Loss and EBITDA
Our operating loss for the three months ended September 30, 2014 was $481,000, an improvement of $40,000 from the operating loss of $521,000 for the three months ended September 30, 2013. The decreased loss reflected higher sales partially offset with higher operating expenses, as discussed in greater detail above.


Table of Contents
As a non-U.S. GAAP measure of our operating performance, we track earnings before interest, taxes, depreciation and amortization (“EBITDA”) as an indicator of our ability to generate cash, which we define as operating profit or loss, excluding the non-cash depreciation, amortization, Scott’s Miracle-Gro intellectual property royalty and branding, common stock warrant expense and stock based compensation expense incurred during the period (“Adjusted EBITDA”). As calculated in the table below, our Adjusted EBITDA loss for the quarter ended September 30, 2014 totaled $251,000, which was a $175,000 improvement over the $426,000 Adjusted EBITDA loss recognized during the prior year quarter.

                                              Three Months Ended September 30,
                                                       (in thousands)
                                                2014                    2013
   Loss from operations                    $          (481 )       $          (521 )
   Add back non-cash items:
   Depreciation                                         61                      34
   Amortization                                          -                      (1 )
   Stock based compensation                             83                      43
   Common stock warrant expense                         18                       -
   Scott's Miracle-Gro intellectual                     68                      19
   property royalty and branding license
   Total non-cash items                                230                      95
    Adjusted EBITDA                        $          (251 )       $          (426 )

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.

Net Loss
For the three months ended September 30, 2014, we incurred a net loss of $507,000 as compared to a net loss of $541,000 for the three months ended September 30, 2013.

Six Months Ended September 30, 2014 and September 30, 2013

Summary Overview
For the six months ended September 30, 2014, total revenue of $3.4 million was up 88.4%, or $1.6 million, relative to the same period in the prior year. Sales in our direct-to-consumer channels were up, by 38.1%, or $498,000, reflecting increased size in our active customer database, new products (particularly AeroGardens with LED lighting systems), the co-branding agreement with Scotts Miracle-Gro, more available inventory, and joint marketing programs with Scotts Miracle-Gro. In addition to the direct-to-consumer increase, sales in our retail channels which were up 391.5%, or $1.2 million, primarily due to sales to newly acquired retail accounts, particularly BJ’s Wholesale Club, and existing Amazon.com and Costco.com accounts. Sales to international distributors declined by 86.5% to $23,000 in the six months ended September 30, 2014, relative to the same period in the prior year. This decline is exclusively attributable to timing of reorders from existing customers and reflects the Company’s current lack of focus on the international channel as we focus on domestic growth.

For the six months ended September 30, 2014, AeroGarden sales increased by 208.0% from the prior year period and seed pod kit and accessory sales increased by 14.7% over prior year period. AeroGarden sales represented 65.5% of total revenue, as compared to 40.1% in the prior year period. This percentage increase, on a product line basis, was attributable to existing and new . . .

 

0 1321

Form 8-K for AEROGROW INTERNATIONAL, INC.

10-Nov-2014

Results of Operations and Financial Condition, Financial Statements

Item 2.02 Results of Operations and Financial Condition.On November 10, 2014, AeroGrow International, Inc. (the “Company”) issued a press release announcing the Company’s operational results for the three months ended September 30, 2014. A copy of the press release announcing the Company’s operational results for the three months ended November 10, 2014, is furnished as Exhibit 99.1 to this report.

The information contained in this Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, and shall not be deemed incorporated by reference in any filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934 or the Securities Act of 1933, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

 

Item 9.01 Financial Statements and Exhibits.Exhibits. The following exhibit is furnished with this Form 8-K:

Exhibit                      Description
Number

 99.1       Press Release Issued by AeroGrow International,
          Inc. on November 10, 2014.

Portions of this report may constitute “forward-looking statements” as defined by federal law. Although the Company believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Any such statements are made in reliance on the “safe harbor” protections provided under the Private Securities Litigation Reform Act of 1995. Additional information about issues that could lead to material changes in the Company’s performance is contained in the Company’s filings with the Securities and Exchange Commission.

 

0 1416

AeroGrow Reports Results for the Second Quarter Ended September 30, 2014

Second Quarter Revenue up 153%; Retail Revenue up 526%; Direct-to-Consumer Revenue up 47%; New Products Launched; New Retail Tests Begin

BOULDER, CO–(Marketwired – Nov 10, 2014) – AeroGrow International, Inc (OTCQB: AERO) (“AeroGrow” or the “Company”), which sells the Miracle-Gro AeroGarden® line of high output, soil-free indoor gardens, seed pod kits and hydroponic nutrients, announced results for the quarter ended September 30, 2014, the second quarter of their 2015 Fiscal Year.

“Our second quarter saw an acceleration of the positive trends we’ve seen over the past year in revenue growth, product development and expansion of our retail foot print,” said President and CEO, J. Michael Wolfe.

“Second quarter net revenue was up 153% to $1.7 million. The biggest driver of this strong revenue trend was our Retail Channel, up 526% with a $782,000 increase year over year. This growth was primarily due to increases at existing accounts such as Amazon and Costco.com as well as several newly acquired retail accounts, particularly BJ’s Wholesale Club. In addition, our direct-to-consumer channel continued to show strong growth, increasing by 47% as sales of both gardens and high margin seed kit and accessories increased to our growing installed base of consumers.

“Product development has been a major initiative in FY 2015. With the addition of several new high output LED AeroGarden products and the launch of the innovative new AeroGarden 3SL, we now have AeroGardens priced from $50 to $300, a strategy that we believe will appeal to a wide range of consumers and drive broader category acceptance. As we look forward, we will continue our efforts to take costs out of the line while creating innovative designs for introduction in new retail channels like housewares, high-end culinary and others that will drive future growth and expansion in North America and abroad.

“I am very pleased with the sell-in we have achieved at a number of key retailers. In the coming days you will begin to see AeroGarden products in test at a number of America’s top brick and mortar retailers, including Costco, Walmart, Sam’s, and others. The key for us now is to drive sell-thru during the critical Holiday selling season. With this in mind we have established what we believe is a robust marketing, advertising and public relations strategy to help drive sell-thru both in-store and on-line.

“Bottom line results for the quarter were in line with our internal projections. Overhead grew at a modest rate of 37% to support a growth rate of 153% in the quarter — and more critically to support what we believe will be much higher sales levels in the December quarter and beyond as we continue to scale the business. We’ve anticipated lower margins as we continue to shift our sales mix to the retail channel. We have also experienced some margin pressure due to expediting in-bound freight as a result of the serious port congestion on the west coast that has been reported in the national media.

“This is an exciting time at AeroGrow… and I believe we are well positioned for the critical Holiday selling season that kicks off Black Friday and lasts through our high volume selling season next spring. I look forward to updating you on our progress.”

SECOND QUARTER FINANCIAL RESULTS

For the three months ended September 30, 2014, the Company recorded total revenue of $1.7 million, an increase of 152.5% from the same period in the year prior. The increase was primarily due to a $782,000 or 526.4% increase in sales to the retail channel due to an increased presence in newly acquired retail accounts. In addition to the retail channel increase, the sales in direct-to-consumer channels were up $243,000 or 46.7%.

Gross margins for the second quarter of fiscal 2015 were 36.5%, down from 42.6% in the prior year period. This is a direct result of the shift in our revenue mix from one weighted heavily toward the higher margin Direct Response channel to one weighted more heavily to the lower margin retail channel. Year over year, sales through our lower margin retail channel increased from 21.9% of sales in the second quarter of 2014, to 54.5% of sales in the second quarter of 2015. During the second quarter, operating expenses increased 36.6% or $296,000 year-over-year. This spending tracks favorably to the overall increase in revenue in the quarter and is in part in anticipation of a busy holiday season which annually is our largest quarter. Furthermore, we spent $113,000 more in personnel to expand our sales and marketing operation and support our customer service as our established base of AeroGardens and awareness in the marketplace continued to grow.

EBITDA in the second quarter resulted in a loss of $251,000 compared to a loss of $426,000 in the second quarter of Fiscal 2014. The $175,000 improvement in EBITDA reflected increased sales offset by higher operating expenses and lower margins due to sales into the retail channel.

Loss from operations in the second quarter of Fiscal 2015 was $481,000, an improvement of $40,000 from the operating loss of $521,000 in second quarter of Fiscal 2014. The Company incurred a net loss of $507,000 for the three months ending September 30, 2014 vs. a net loss of $541,000 in the three months ending September 30, 2013.

STRATEGIC PARTNERSHIP
On July 16, 2014 the Company announced the close on a $4.5 million term loan with the Scotts Miracle-Gro Company. The proceeds will be made in three advances of $1.0 million, $1.5 million, and $2.0 million in July, August, and September, respectively with a due date of February 15, 2015. The interest on this loan will be paid in stock, which we expect to be minimally dilutive due to the short term nature of the instrument.

On April 23, 2013 the Company announced that Scotts Miracle-Gro made a $4.0 million equity investment in the Company and acquired $0.5 million of the Company’s intellectual property, resulting in a 30% beneficial ownership interest in AeroGrow. In the process, AeroGrow took steps to entirely eliminate its long term debt, restructured the balance sheet to facilitate potential future transactions, and gained a valuable partnership for growth. The agreement affords AeroGrow the use of the globally recognized and highly trusted Miracle-Gro brand name while also providing AeroGrow a broad base of support in marketing, distribution, supply chain logistics, R&D, and sourcing.

AEROGROW INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months ended September 30,
(in thousands, except per share and share data) 2014 2013
Net revenue $ 1,707 $ 676
Cost of revenue 1,083 388
Gross profit 624 288
Operating expenses
Research and development 115 85
Sales and marketing 484 325
General and administrative 506 399
Total operating expenses 1,105 809
(Loss) from operations (481) (521)
Other (expense) income, net
Fair value changes in derivative warrant liability 11 (1)
Interest expense - (21)
Interest expense – related party (37) (3))
Other (income) - 16
Total other (expense) income, net (26) (20)
Net (loss) $ (507) $ (541)
Less: Deemed dividend on convertible preferred stock - -
Less: Preferred stock dividend 154 (81)
Net income (loss) attributable to common shareholders (353) (622)
Net loss per share, basic and diluted $ (0.06) $ (0.11)
Weighted average number of common shares outstanding, basic and diluted 6,405 5,905
AEROGROW INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
September 30, 2014 March 31, 2014
(in thousands, except per share data) (Unaudited) (Derived from Audited Statements)
ASSETS
Current assets
Cash $ 1,140 $ 1,707
Restricted cash 15 15
Accounts receivable, net of allowance for doubtful accounts of $9 and $5 at September 30, 2014 and March 31, 2014, respectively 911 573
Other receivables 81 187
Inventory 5,017 1,311
Prepaid expenses and other 789 306
Total current assets 7,953 4,099
Property and equipment, net of accumulated depreciation of $3,129 and $3,024 at September 30, 2014 and March 31, 2014, respectively 555 298
Other assets
Intangible assets 2 2
Deposits 156 145
Total other assets 158 147
Total assets $ 8,666 $ 4,544
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 2,702 $ 553
Accrued expenses 436 306
Deferred rent - 3
Notes payable 2,537 -
Derivative warrant liability 2,742 2,530
Debt associated with sale of intellectual property 232 258
Total current liabilities 8,649 3,650
Commitments and contingencies
Stockholders’ equity
Preferred stock, $.001 par value, 20,000,000 shares authorized, 2,649,007 issued and outstanding at September 30, 2014 and March 31, 2014 3 3
Common stock, $.001 par value, 750,000,000 shares authorized, 6,536,018 and 6,129,326 shares issued and outstanding at September 30, 2014 and March 31, 2014, respectively 7 6
Additional paid-in capital 81,145 79,563
Stock dividend to be distributed 446 1,456
Accumulated deficit (81,584) (80,134)
Total stockholders’ equity 17 894
Total liabilities and stockholders’ equity $ 8,666 $ 4,544
AEROGROW INTERNATIONAL, INC.
EBITDA CALCULATIONS
Three Months Ended September 30,
(in thousands)
2014 2013
Loss from operations $ (481) $ (521)
Add back non-cash items:
Depreciation 61 34
Amortization - (1)
Stock based compensation 83 43
Common stock warrant expense 18 -
Scott’s Miracle-Gro intellectual property royalty and branding license 68 19
Total non-cash items 230 95
EBITDA $ (251) $ (426)

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 5:00pm EST on November 10, 2014. To participate in the call, please dial:

U.S. (Toll Free): 1 (877) 300-8521
Toll/International: 1 (412) 317-6026

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, 2014. To access the replay by phone, please dial:

U.S. and Canada: 1 (877) 870-5176
Toll/International: 1 (858) 384-5517
Conference Number: 10055144

About AeroGrow International, Inc.
Headquartered in Boulder, Colorado, AeroGrow International, Inc. is the leader in the rapidly growing indoor gardening market. With a commitment to “Grow Anything…Anytime…Guaranteed,” 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. 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, 2013. 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:
Investor Relations:

Genesis Select Corp.
Budd Zuckerman
bzuckerman@genesisselect.com
303-415-0200

OR

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

0 1583

AeroGrow to Announce Fiscal Second Quarter Financial Results on November 10, 2014

BOULDER, CO–(Marketwired – Oct 27, 2014) –  AeroGrow International, Inc. (OTCQB: AERO) (“AeroGrow” or the “Company”), makers of the AeroGarden® line of indoor gardening products, will announce financial results for its fiscal second quarter ended September 30, 2014 on Monday, November 10, 2014, immediately following the closing of regular stock market trading hours. The Company will hold a conference call at 4:30 pm EST to review the results. Michael Wolfe, President and Chief Executive Officer, and Grey Gibbs, Vice President of Accounting and Finance, will participate on the call.

The conference call is scheduled for 4:30 pm EST. To participate in the call, please dial
U.S. (Toll Free): 1 (877) 300-8521
Toll/International: 1 (412) 317-6026

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, 2015. To access the replay by phone, please dial:

U.S. and Canada: 1 (877) 870-5176
Toll/International: 1 (858) 384-5517
Conference Number: 10055144

About AeroGrow International, Inc.
Headquartered in Boulder, Colorado, AeroGrow International, Inc. is the leader in the rapidly growing indoor gardening market. With a commitment to “Grow Anything…Anytime…Guaranteed,” 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. For more information, visit www.aerogrow.com.

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

Investor Relations:
Genesis Select Corp.
Budd Zuckerman
bzuckerman@genesisselect.com
303-415-0200

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