**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**







**x                             
                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF
                1934**




**For
      the quarterly period ended September 30, 2007**




**o                                
                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF
                1934**




**For
      the transition period
      fromto**




**Commission
      File No. 000-50888**




**AEROGROW
      INTERNATIONAL, INC.**


(Exact
      Name of Registrant as Specified in its Charter)





**NEVADA**
            
            **46-0510685**(State
                or other jurisdiction of
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                Number)**6075
                Longbow Drive, Suite 200****BOULDER,
                COLORADO**
            
            **80301**(Address
                of principal executive offices)
            
            (Zip
                Code)**(303)
                444-7755**Registrant’s
                telephone number, including area
                code




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the registrant
      was required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days.   Yes  x  No  o




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
      (Check one):





Large
                accelerated filer   o
            Accelerated
                filer   o
            Non-accelerated
                filer  x





Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).   Yes  o  No  x





**Number
      of shares of issuer's common stock outstanding as of November 1, 2007:
      12,026,581**





Table
            of Contents




**AeroGrowInternational,
      Inc.**


**TABLE
      OF CONTENTS**


**FORM
      10-Q REPORT**


**September
      30, 2007**




**Page****Part I.**
              **Item
                  1.   Condensed Financial
                  Statements**
              3Condensed Balance Sheets as of September 30, 2007 (Unaudited)and
                  March 31, 2007
              3Condensed Statements of
                  Operations for the Three and Six Months Ended September 30, 2007
                  and
                  September 30, 2006 (Unaudited)
              4Condensed Statements of Cash Flows for the
                  Six  Months Ended September 30, 2007 and September 30, 2006
                  (Unaudited)
              5Notes to the
                  Condensed Financial Statements (Unaudited)
              6**Item
                  2.   Management’s Discussion and Analysis of
                  Financial Condition and Results of Operations**
              11**Item
                  3.   Quantitative and Qualitative Disclosures
                  About Market Risk**
              17**Item
                  4.   Controls and
                  Procedures**
              17**Part II.**
              **Other
                  Information**
              18**Item
                  1.    Legal
                  Proceedings**
              18**Item
                  1A. Risk Factors**
              18**Item
                  2.    Unregistered Sales of Equity
                  Securities and Use of Proceeds**
              18**Item
                  3.    Defaults Upon Senior
                  Securities**
              18**Item
                  4.    Submission of Matters to a Vote of
                  Security Holders**
              18**Item
                  5.    Other
                  Information**
              18**Item
                  6.    Exhibits**
              18








Table
          of Contents





**AEROGROWINTERNATIONAL,
      INC.**


**CONDENSED
      BALANCE SHEETS**





**September
                30,**
            
            
            **March
                31,****2007**
            
            
            **2007****(Unaudited)****ASSETS**Current
                assetsCash
                and cash equivalents
            
            $
            6,193,987
            
            
            $
            5,495,501Restricted
                cash
            
            
            85,712
            
            
            
            84,363Accounts
                receivable, net of allowance for doubtful accounts
                of  $82,603
              and
                $80,695 at September 30, 2007 and March 31, 2007,
                respectively
            
            
            4,873,177
            
            
            
            1,884,743Other
                receivables
            
            
            180,449
            
            
            
            182,221Inventory
            
            
            6,480,391
            
            
            
            3,940,614Prepaid
                expenses and other
            
            
            415,629
            
            
            
            480,990Total
                current assets
            
            
            18,229,345
            
            
            
            12,068,432Property
                and equipment, net of accumulated depreciation of $502,875 and $322,405
                at
                September 30, 2007 and March 31, 2007,     
                respectively
            
            
            1,138,965
            
            
            
            909,496Other
                assetsIntangible
                assets, net of $10,935 and $6,659 of accumulated
              amortization
                at September 30, 2007 and March 31, 2007, respectively
            
            
            38,886
            
            
            
            28,723Deposits
            
            
            69,242
            
            
            
            35,155108,128
            
            
            
            63,878Total
                Assets
            
            $
            19,476,438
            
            
            $
            13,041,806**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilitiesCurrent
                portion - capital lease obligation
            
            $
            52,913
            
            
            $
            -Due
                to factor
            
            
            3,577,447
            
            
            
            645,151Accounts
                payable
            
            
            4,036,087
            
            
            
            3,192,734Accrued
                expenses
            
            
            1,544,109
            
            
            
            1,166,485Customer
                deposits
            
            
            900,568
            
            
            
            -Deferred
                rent
            
            
            61,035
            
            
            
            53,531Total
                current liabilities
            
            
            10,172,159
            
            
            
            5,057,901Capital
                lease obligation – long term portion
            
            
            79,137
            
            
            
            -Stockholders'
                equityPreferred
                stock, $.001 par value, 20,000,000 shares authorized,
              none
                issued or outstanding
            
            
            -
            
            
            
            -Common
                stock, $.001 par value, 75,000,000 shares authorized,
                12,018,581
              and
                11,065,609 shares issued and outstanding at
              September
                30, 2007 and March 31, 2007, respectively
            
            
            12,018
            
            
            
            11,065Additional
                paid-in capital
            
            
            43,367,278
            
            
            
            37,765,003Accumulated
                (deficit)
            
            
            (34,154,154
            )
            
            
            (29,792,163
            )Total
                Stockholders' Equity
            
            
            9,225,142
            
            
            
            7,983,905Total
                Liabilities and Stockholders' Equity
            
            $
            19,476,438
            
            
            $
            13,041,806





See
      accompanying notes to the condensed financial statements.








3
 Table
          of Contents






**AEROGROWINTERNATIONAL,
      INC.**


**CONDENSED
      STATEMENTS OF OPERATIONS**


**(Unaudited)**








**Three
                Months ended September 30,**
            
            
            **Six
                Months ended September 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**RevenueProduct
                sales
            
            $
            6,283,645
            
            
            $
            1,030,316
            
            
            $
            12,562,079
            
            
            $
            1,852,254Operating
                expensesCost
                of revenue
            
            
            3,765,376
            
            
            
            827,165
            
            
            
            7,347,794
            
            
            
            1,502,860Research
                and development
            
            
            628,542
            
            
            
            409,453
            
            
            
            1,157,987
            
            
            
            844,384Sales
                and marketing
            
            
            3,156,414
            
            
            
            1,359,797
            
            
            
            6,091,537
            
            
            
            2,320,271General
                and administrative
            
            
            982,181
            
            
            
            773,362
            
            
            
            2,208,033
            
            
            
            1,629,402Total
                operating expenses
            
            
            8,532,513
            
            
            
            3,369,777
            
            
            
            16,805,351
            
            
            
            6,296,917Loss
                from operations
            
            
            (2,248,868
            )
            
            
            (2,339,461
            )
            
            
            (4,243,272
            )
            
            
            (4,444,663
            )Other
                (income) expense, netInterest
                (income)
            
            
            (32,341
            )
            
            
            (60,749
            )
            
            
            (70,200
            )
            
            
            (144,862
            )Interest
                expense
            
            
            125,664
            
            
            
            101,804
            
            
            
            191,849
            
            
            
            203,604Other
                income
            
            
            (2,929
            )
            
            
            -
            
            
            
            (2,929
            )
            
            
            -Registration
                rights penalty
            
            
            -
            
            
            
            1,028,250
            
            
            
            -
            
            
            
            1,028,250Total
                other (income) expense, net
            
            
            90,394
            
            
            
            1,069,305
            
            
            
            118,720
            
            
            
            1,086,992Net
                loss
            
            $
            (2,339,262
            )
            
            $
            (3,408,766
            )
            
            $
            (4,361,992
            )
            
            $
            (5,531,655
            )Net
                loss per share, basic and diluted
            
            $
            (0.20
            )
            
            $
            (0.37
            )
            
            $
            (0.39
            )
            
            $
            (0.60
            )Weighted
                average number of commonshares
                outstanding, basic and diluted
            
            
            11,469,707
            
            
            
            9,286,678
            
            
            
            11,278,598
            
            
            
            9,202,219





See
      accompanying notes to the condensed financial statements.






4
 Table
          of Contents






**AEROGROW
      INTERNATIONAL, INC.**


**CONDENSEDSTATEMENTS
      OF CASH FLOWS**


**(Unaudited)**





**Six
                Months ended September 30,****2007**
            
            
            **2006**Cash
                flows from operating activities:Net
                (loss)
            
            $
            (4,361,992
            )
            
            $
            (5,531,655
            )Adjustments
                to reconcile net (loss) to cash provided (used) by
                operations:Common
                stock issued for registration rights penalty
            
            
            -
            
            
            
            1,028,250Issuance
                of common stock and options under equity compensation
                plans
            
            
            246,414
            
            
            
            339,404Issuance
                of common stock not under equity compensation plan
            
            
            -
            
            
            
            38,020Issuance
                of warrants for services
            
            
            23,003
            
            
            
            -Depreciation
                and amortization expense
            
            
            184,746
            
            
            
            86,617Allowance
                for bad debt
            
            
            1,908
            
            
            
            6,684Amortization
                of debt issuance costs
            
            
            -
            
            
            
            30,412Amortization
                of convertible debentures, beneficial conversion feature
            
            
            -
            
            
            
            54,375Interest
                expense from warrants issued with convertible debentures
            
            
            -
            
            
            
            76,812Change
                in assets and liabilities:(Increase)
                in accounts receivable
            
            
            (2,990,342
            )
            
            
            (409,241
            )Decrease
                in other receivable
            
            
            1,772
            
            
            
            -(Increase)
                in inventory
            
            
            (2,539,777
            )
            
            
            (1,199,771
            )Increase
                (decrease) in other current assets
            
            
            65,361
            
            
            
            (44,015
            )(Increase)
                decrease  in deposits
            
            
            (34,087
            )
            
            
            (32,169
            )Increase
                in accounts payable
            
            
            843,353
            
            
            
            246,116Increase
                (decrease) in accrued expenses
            
            
            377,624
            
            
            
            (73,308
            )Increase
                in customer deposits
            
            
            900,568
            
            
            
            -Decrease
                in deferred rent
            
            
            7,504
            
            
            
            -Net
                cash (used) by operating activities
            
            
            (7,273,945
            )
            
            
            (5,383,469
            )Cash
                flows from investing activities:Increase
                in restricted cash
            
            
            (1,349
            )
            
            
            (18,389
            )Purchases
                of equipment
            
            
            (273,417
            )
            
            
            (82,905
            )Patent
                expenses
            
            
            (14,438
            )
            
            
            (4,325
            )Net
                cash (used) by investing activities
            
            
            (289,204
            )
            
            
            (105,619
            )Cash
                flows from financing activities:Increase
                in amount due to factor
            
            
            2,932,296
            
            
            
            -Stock
                repurchase
            
            
            -
            
            
            
            (15,000
            )Proceeds
                from issuance of common stock, net
            
            
            4,433,372
            
            
            
            -Proceeds
                from exercise and issuance of warrants, net
            
            
            890,937
            
            
            
            56,250Proceeds
                from the exercise of stock options
            
            
            9,503
            
            
            
            -Payments
                on capital lease
            
            
            (4,473
            )
            
            
            -Proceeds
                from issuance of convertible debentures
            
            
            -
            
            
            
            (30,000
            )Net
                cash provided by financing activities
            
            
            8,261,635
            
            
            
            11,250Net
                increase (decrease) in cash
            
            
            698,486
            
            
            
            (5,477,838
            )Cash,
                beginning of period
            
            
            5,495,501
            
            
            
            8,852,548Cash,
                end of period
            
            $
            6,193,987
            
            
            $
            3,374,710Supplemental
                disclosure of non-cash investing and financing activities:Interest
                paid
            
            $
            184,804
            
            
            $
            42,005Income
                taxes paid
            
            $
            -
            
            
            $
            -Equipment
                under capital lease
            
            $
            136,523
            
            
            $
            -Accretion
                of debt modification
            
            $
            -
            
            
            $
            76,812





See
      accompanying notes to the condensed financial statements.






5
 Table
          of Contents




**AEROGROWINTERNATIONAL
      INC.**


**NOTES
      TO THE CONDENSED FINANCIAL STATEMENTS**


**(Unaudited)**





**1.** **Description
      of the Business**





AeroGrow
      International, Inc. ("the Company") was incorporated in the State of Nevada
      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 gardening, cooking and small kitchen appliance
      markets worldwide.  The Company’s principal activities since 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 AeroGardenTM system and, in March 2006, began shipping these systems to
      retail and catalogue customers.  Prior to March 2006, the Company was
      considered a Development Stage Enterprise in accordance with Statement of
      Financial Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting by
      Development Stage Enterprises.”  Effective March 2006, the Company
      ceased being considered a development stage enterprise. The Company is
      headquartered in Boulder, Colorado.





On
      January 12, 2006, the Company and Wentworth I, Inc., a Delaware corporation
      (“Wentworth”), entered into an Agreement and Plan of Merger (the “Merger
      Agreement”) which was consummated on February 24, 2006.  Under the
      Merger Agreement, Wentworth merged with and into the Company, and the Company
      was the surviving corporation (“Merger”). The Merger, for accounting and
      financial reporting purposes, has been accounted as an acquisition of Wentworth
      by the Company.  As such, the Company was the accounting acquirer in
      the Merger, and the historical financial statements of the Company will be
      the
      financial statements for the Company following the Merger.





**2.** **Basis
      of Presentation**




Interim
      Financial Information


The
      unaudited interim financial statements of the Company included herein have
      been
      prepared in accordance with the rules and regulations of the Securities and
      Exchange Commission (“SEC”) for interim reporting including the instructions to
      Form 10-Q and Rule 10-01 of Regulation S-X. These condensed statements
      do not include all disclosures required by accounting principles generally
      accepted in the United States of America (“U.S. GAAP”) for annual audited
      financial statements and should be read in conjunction with the Company’s
      audited consolidated financial statements and related notes included in the
      Company’s Annual Report on Form 10-KSB for the year ended March 31, 2007 as
      filed with the SEC.





In
      the
      opinion of management, the accompanying unaudited interim financial statements
      reflect all adjustments, including normal recurring accruals, necessary to
      present fairly the financial position of the Company at September 30, 2007,
      the
      results of operations for the three and six months ended September 30, 2007
      and
      2006, and the cash flows for the six months ended September 30, 2007 and 2006.
      The results of operations for the three and six months ended September 30,
      2007
      are not necessarily indicative of the expected results of operations for the
      full year or any future period. The balance sheet as of March 31, 2007 is
      derived from the Company’s audited financial statements.





Use
      of
      Estimates


The
      preparation of financial statements in conformity with U.S. GAAP requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period.  Actual results could differ
      from those estimates.


Net
      Income (Loss) per Share of Common Stock


The
      Company computes net income (loss) per share of common stock in accordance
      with
      Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings per
      Share,” and SEC Staff Accounting Bulletin No. 98 (“SAB 98”).  SFAS No.
      128 requires companies with complex capital structures to present basic and
      diluted earnings per share (“EPS”).  Basic EPS is measured as the
      income or loss available to common stock shareholders divided by the weighted
      average shares of common stock outstanding for the period. Diluted EPS is
      similar to basic EPS but presents the dilutive effect on a per share basis
      of
      potential common stock (e.g., convertible securities, options and warrants)
      as
      if they had been converted at the beginning of the periods presented. Potential
      shares of common stock that have an anti-dilutive effect (i.e., those that
      increase income per share or decrease loss per share) are excluded from the
      calculation of diluted EPS.





6
 Table
          of Contents
 Reclassifications


Certain
      prior period amounts have been reclassified to conform to the current period’s
      presentation.




Segments
      of an Enterprise and Related Information


SFAS
      No.
      131, "Disclosures about Segments of an Enterprise and Related Information"
      replaces the industry segment approach under previously issued pronouncements
      with the management approach.  The management approach designates the
      internal organization that is used by management for allocating resources and
      assessing performance as the source of the Company's reportable
      segments.  SFAS No. 131 also requires disclosures about products and
      services, geographic areas and major customers.  At present, the
      Company only operates in one segment.





Concentration
      of Credit Risk


SFAS
      No.
      105, "Disclosure of Information About Financial Instruments with Off-Balance
      Sheet Risk and Financial Instruments with Concentrations of Credit Risk,"
      requires disclosure of significant concentrations of credit risk regardless
      of
      the degree of such risk.  Financial instruments with significant
      credit risk include cash.  The amount of cash the Company has on
      deposit with a financial institution exceeded the $100,000 federally insured
      limit as of September 30, 2007 and March 31, 2007.  However,
      management believes that the financial institution is financially sound and
      the
      risk of loss is minimal.





Financial
      instruments consist of cash and cash equivalents, accounts receivable and
      accounts payable. The carrying values of all financial instruments approximate
      their fair value.





*Customers:*


For
      the
      three months ended September 30, 2007, the Company had two customers who
      represented 24.0% and 17.8%, respectively of net product sales. For the
      three months ended September 30, 2006, the Company had one customer who
      represented 24.0% of net product sales. For the six months ended September
      30,
      2007, the Company had one customer who represented 12.0% of net product
      sales. For the six months ended September 30, 2006, the Company had
      one customer who represented 24.0% of net product sales.





At
      September 30, 2007, the Company had three customers each of which accounted
      for
      in excess of 10% of total accounts receivable consisting of 10.8%, 31.6% and
      24.9%, respectively, of the total outstanding accounts receivable. As of March
      31, 2007, the Company had four customers each of which accounted for in excess
      of 10% of total accounts receivable consisting of 14.7%, 13.4%, 11.3% and 11.3%,
      respectively, of total outstanding accounts receivable.





*Suppliers:*


As
      of
      September 30, 2007, the Company had one supplier that accounted for in excess
      of
      10% of total accounts payable consisting of $1,630,034, or 40.4%, of total
      outstanding accounts payable.  As of March 31, 2007, the Company had
      two suppliers each of which accounted for in excess of 10% of total accounts
      payable consisting of $942,758 and $383,976, or 29.5% and 12.0% respectively,
      of
      total outstanding accounts payable.





During
      the three months ended September 30, 2007, the Company purchased inventories
      and
      other inventory related items from two manufacturers totaling $1,382,769 and
      $2,240,978, representing 36.7% and 59.5%, respectively, of the cost of revenues
      for the three months ended September 30, 2007. During the six months ended
      September 30, 2007, the Company purchased inventories and other inventory
      related items from two manufacturers totaling $2,062,819 and $3,287,599,
      representing 28.1% and 44.7% respectively of the cost of revenues for the six
      months ended September 30, 2007.





During
      the six months ended September 30, 2006, the Company utilized one manufacturer
      for 100% of its manufacturing of its aeroponic garden systems which accounted
      for $784,040, or 52%, of cost of revenues. As of September 30, 2006, the Company
      had paid cash deposits to this manufacturer for goods not yet shipped totaling
      $157,417 which are included in prepaid expenses, and had outstanding accounts
      payable to this manufacturer as of September 30, 2006 of $139,896 or 19% of
      the
      accounts payable balance.





Restricted
      Cash


The
      Company has secured with a cash deposit in restricted money market account
      the
      activity related to its corporate credit card purchase account with a restricted
      money market account. The balance in this restricted money market account as
      of
      September 30, 2007 and March 31, 2007 was $85,712 and $84,363,
      respectively.





Inventory


Inventories
      are valued at the lower of cost, determined by the first-in, first-out method,
      or market. Included in inventory costs where the Company is the manufacturer
      are
      raw materials, labor and manufacturing overhead. The Company records the raw
      materials at delivered cost. Standard labor and manufacturing overhead costs
      are
      applied to the finished goods based on normal production capacity as prescribed
      under Accounting Research Bulletin No. 43, Chapter 4, “Inventory
      Pricing.”  A majority of the Company’s products are manufactured
      overseas and are recorded at cost.




**September
                    30,2007**
              
              
              **March
                    31,2007**Finished
                  goods
              
              $
              5,501,595
              
              
              $
              3,626,671Raw
                  materials
              
              
              978,796
              
              
              
              313,943$
              6,480,391
              
              
              $
              3,940,614
  The
        Company will determine inventory obsolescence reserve based on management’s
        historical experience and establishes reserves against inventory according
        to
        the age of the product. As of September 30, 2007 and March 31, 2007, the
        Company
        had determined that no inventory obsolescence reserve was
        required.


7
 Table
          of Contents
 Accounts
        Receivable and Allowance for Doubtful Accounts


The
      Company sells its products to retailers and consumers. Consumer transactions
      are
      paid primarily by credit card and are recognized as revenue once the applicable
      trial period has expired (see “Revenue Recognition” below). Sales to retailers
      vary by customer, but are generally on net 30-60 day terms. Accounts receivable
      are reported at net realizable value and net of allowance for doubtful accounts.
      The Company uses the allowance method to account for uncollectible accounts
      receivable. The Company's estimate is based on a review of the current status
      of
      trade accounts receivable.  The Company had recorded an allowance for
      bad debts of $82,603 and $80,695, as of September 30, 2007 and March 31, 2007,
      respectively.




Other
      Receivables


In
      conjunction with the Company’s processing of credit card transactions and for
      its direct to consumer sales activities and as security with respect to the
      Company’s performance for required credit card refunds and chargebacks, the
      Company is required to maintain a cash reserve with Litle and Company, the
      Company’s credit card processor. This reserve is equal to 5% of the credit card
      sales processed over the previous six months of activity. As of September 30,
      2007 and March 31, 2007, the balance in this reserve account was $180,449 and
      $182,221, respectively.




Revenue
      Recognition


The
      Company recognizes revenue from product sales, net of estimated returns, when
      persuasive evidence of a sale exists: that is, a product is shipped under an
      agreement with a customer; risk of loss and title has passed to the customer;
      the fee is fixed or determinable; and collection of the resulting receivable
      is
      reasonably assured. Beginning with the quarter ended December 31, 2006, the
      Company began to offer promotions to its direct sales consumers allowing thirty
      or thirty-six days for product evaluation, where the customer pays only the
      shipping and handling costs for such products before making the required
      installment payments after the expiration of the thirty or thirty-six day trial
      period.  During the six months ended September 30, 2007, the Company
      offered a thirty-six day trial period and accordingly, the Company did not
      record as of September 30, 2007 $280,493 related to the unpaid balance due
      for
      orders shipped in conjunction with this evaluation program.  The Company
      also deferred, as of September 30, 2007, recognition of $84,507 of product
      costs
      associated the foregoing revenue in as much as the customer is required to
      return the product and the Company is therefore able to recover these costs
      through resale of the goods.




Additionally,
      the Company did not record $883,632 of revenue as of September 30, 2007 related
      to the wholesale sales value of inventory held by one of its retail shopping
      channel customers that was paid in full by the customer.  Accordingly,
      the Company has also recorded a customer deposit for $883,632 related to this
      transaction.  The Company has also deferred, as of September 30, 2007,
      recognition of $510,462 of product and freight costs associated with this sale,
      which have been included in inventory.




The
      Company records estimated reductions to revenues for customer and distributor
      sales programs and incentive offerings, including, promotions, general
      advertising, merchandising and other volume-based incentives. Future market
      conditions and product transitions may require the Company to take actions
      to
      increase customer incentive offerings, possibly resulting in an incremental
      reduction of revenue at the time the incentive is offered. Additionally, certain
      incentive programs require the Company to estimate based on industry experience
      the number of customers who will actually redeem the incentive. At September
      30,
      2007 and March 31, 2007, the Company had accrued $372,788 and $65,385,
      respectively, as its estimate for the foregoing deductions and
      allowances.




Warranty
      and Return Reserves


The
      Company records warranty liabilities at the time of sale for the estimated
      costs
      that may be incurred under its basic warranty program. The specific warranty
      terms and conditions vary depending upon the product sold but generally include
      technical support, repair parts and labor for periods up to one year. Factors
      that affect the Company’s warranty liability include the number of installed
      units currently under warranty, historical and anticipated rates of warranty
      claims on those units, and cost per claim to satisfy the Company’s warranty
      obligation.  Both manufacturers of the Company’s products provide
      replacement parts for any defective components free of charge up to 2% of the
      total units purchased.  Based upon the foregoing, the Company has
      recorded a provision for potential future warranty costs of $49,424 and $15,593
      at September 30, 2007 and March 31, 2007, respectively.




The
      Company reserves for potential returns from customers and associated refunds
      or
      credits related to such returns based upon historical experience. The Company
      has recorded reserves for customer returns of $139,019 and $238,569 at September
      30, 2007 and March 31, 2007, respectively.





**3.** **Capital
      Lease Obligations**




The
      Company has capitalized lease obligations for computer equipment and licensed
      software due on various dates through August 2010 of $132,050 as of September
      30, 2007. The interest rates range from 12% to 15% per annum. These lease
      obligations are collateralized by the related assets with a net book value
      of
      $132,731 as of September 30, 2007. In addition, recorded as Deposits, is a
      security deposit of $26,667 which will be released upon theCompany achieving certain
      financial requirements. The leases also require $11,046 in prepaid
      rents.





Maturities
      of capital lease obligations as of September 30, 2007, are as
      follows:





Year
                ended March 31, 2008
            
            $
            36,564Year
                ended March 31, 2009
            
            
            73,128Year
                ended March 31, 2010
            
            
            38,471Year
                ended March 31, 2011
            
            
            5,715Total
                minimum lease payments
            
            
            153,878Less
                - amount related to interest
            
            
            (21,828
            )Principal
                portion of future obligations
            
            
            132,050Less
                - current portion
            
            
            (52,913
            )$
            79,137




The
      following table summarizes the assets included in property and equipment that
      were acquired under the capital leases:





Class
                of property:Computer
                equipment
            
            $
            58,618Software
            
            
            77,905136,523Accumulated
                depreciation
            
            
            (3,792
            )$
            132,731


8
 Table
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**4.** **Due
      to Factor**




On
      February 9, 2007, the Company entered into an agreement with Benefactor Group
      Inc. (“Benefactor”) whereby Benefactor agreed to factor the company’s retail
      accounts receivable invoices. The term of the agreement is for one year but
      can
      be terminated by the Company with 60 days written notice. In accordance with
      the
      terms of the agreement, Benefactor will purchase the invoices that it approves
      for an initial payment of 85% of the amount of the invoice with the remaining
      15% paid upon collection less any deductions from the customer. Benefactor
      charges a commission of 11⁄4% of the gross amount of the invoice and a maintenance
      fee equal to an annual rate of prime plus 3%, prime being determined by
      Benefactor based upon either the prime rate published by Benefactor’s bank or
      the Wall Street Journal, (10.75% at September 30, 2007 and 11.25% at March
      31,
      2007), charged on a daily basis for the unpaid invoice amounts outstanding.
      The
      Company has agreed, beginning May 2007, to factor with Benefactor a minimum
      of
      $800,000 of invoices monthly. The Company is responsible for any invoices that
      are unpaid after 91 days or are subject to other defaults by the customer and
      this obligation is secured by the Company with a security interest granted
      to
      Benefactor on all assets. As of September 30, 2007, Benefactor had advanced
      the
      Company $3,577,447 against invoices totaling $4,188,573.  Fees paid to
      Benefactor for interest, discounts and other services for the three and six
      months ended September 30, 2007 totaled $97,732 and $164,881,
      respectively.  The receivables are considered recourse and are shown
      at their gross value on the balance sheet.





**5.** **Stock
      Based Compensation**




Prior
      to
      January 1, 2006, the Company accounted for employee stock options using the
      intrinsic value method under Accounting Principles Board (“APB”) Opinion No. 25,
“Accounting for Stock Issued to Employees” and related interpretations, which
      generally results in no employee stock option expense. The Company adopted
      SFAS
      No. 123R, “Share-Based Payment” on January 1, 2006, and does not plan to restate
      financial statements for prior periods.




For
      the
      six months ended September 30, 2007 and September 30, 2006, respectively, the
      Company granted 0 and 125,000 options to purchase the Company’s common stock at
      an exercise price of $5.00 per share under the 2005 Equity Compensation Plan
      (“2005 Plan”).




For
      the
      option grants issued from January 1, 2006 through December 31, 2006, inclusive
      of the six months ended September 30, 2006, the Company used the following
      weighted average assumptions: no dividend yield; expected volatility rate of
      129.67%; risk free interest rate of 5%; and average lives of four years
      resulting in a value of $4.12 per option granted. In March 2007, in as much
      as
      the Company’s stock had begun trading in the public market but trading history
      was limited; the Company reviewed the assumptions utilized for the volatility
      rate.  This review included researching companies within the consumer
      products category with comparable market capitalizations, comparable per share
      prices and with a minimum of five years of trading history, five years
      representing the length of time the options are exercisable. Accordingly, for
      the options granted subsequent to December 31, 2006, the Company used the
      following weighted average assumptions: no dividend yield; expected volatility
      rate of 50.3%; risk free interest rate of 5%; and average lives of three years.
      As a result of recognizing compensation expense for stock options pursuant
      to
      the provisions of SFAS No. 123R, the net loss for the six months ended September
      30, 2007 and the six months ended September 30, 2006 was $246,414 and $182,404
      greater, respectively, than if the Company had continued to account for stock
      options under APB Opinion No. 25. In addition, both basic and diluted loss
      per
      share for the six months ended September 30, 2007 and the six months ended
      September 30, 2006 was $0.02 and $0.02 greater, respectively, than if the
      Company had continued to account for stock options under APB Opinion No.
      25.




There
      were no additional grants or forfeitures and exercises of 4,872 shares of stock
      options under the Company’s equity compensation plans for the six months ended
      September 30, 2007. At September 30, 2007, the Company had granted options
      for
      88,498 shares of the Company’s common stock that are unvested that will result
      in $340,314 of compensation expense in future periods if fully
      vested.




Information
      regarding all stock options outstanding under the 2005 Plan as of September
      30,
      2007 is as follows:





**OPTIONS
                OUTSTANDING**
            
            **OPTIONS
                EXERCISABLE****Weighted-**
            
            
            
            
            
            
            
            
            
            **Weighted-****average**
            
            
            **Weighted-**
            
            
            
            
            
            
            **average**
            
            
            **Weighted-****Remaining**
            
            
            **average**
            
            **Aggregate**
            
            
            
            
            **Remaining**
            
            
            **average**
            
            **Aggregate****Exercise**
            
            
            
            
            
            **Contractual**
            
            
            **Exercise**
            
            **Intrinsic**
            
            
            
            
            **Contractual**
            
            
            **Exercise**
            
            **Intrinsic****price range**
            
            
            **Options**
            
            
            **Life (years)**
            
            
            **Price**
            
            **Value**
            
            **Options**
            
            
            **Life (years)**
            
            
            **Price**
            
            **Value**Over
                $0.00 to $0.50
            
            
            
            21,169
            
            
            
            1.10
            
            
            $
            0.06
            
            
            
            
            21,169
            
            
            
            3.08
            
            
            $
            0.06Over
                $0.50 to $2.50
            
            
            
            136,259
            
            
            
            1.23
            
            
            $
            1.57
            
            
            
            
            136,259
            
            
            
            3.08
            
            
            $
            1.57$
            5.00
            
            
            
            1,114,760
            
            
            
            3.49
            
            
            $
            5.00
            
            
            
            
            1,039,466
            
            
            
            3.72
            
            
            $
            5.00$
            5.90
            
            
            
            60,300
            
            
            
            4.47
            
            
            $
            5.90
            
            
            
            
            47,096
            
            
            
            5.00
            
            
            $
            5.901,332,488
            
            
            
            3.27
            
            
            $
            4.35
            
            $5,048,551
            
            
            1,243,990
            
            
            
            3.40
            
            
            $
            4.35
            
            $
                4,759,543








9
 Table
          of Contents





**6.** **Income
      Taxes**





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes.” FIN
      48 clarifies the accounting for uncertainty in income taxes recognized in an
      enterprise’s financial statements in accordance with SFAS No. 109, Accounting
      for Income Taxes. This Interpretation defines the minimum recognition threshold
      a tax position is required to meet before being recognized in the financial
      statements. The Company adopted FIN 48 on April 1, 2007. As a result of the
      implementation, the Company recognized no material adjustment in the liability
      of unrecognized income tax benefits. At the adoption date of April 1, 2007,
      the
      Company had $4.0 million of unrecognized tax benefits, all of which would affect
      the Company’s effective tax rate if recognized. It is reasonably possible that
      the Company’s unrecognized tax benefit could change; however, the Company does
      not expect any such change to be material.





The
      Company is subject to U.S. federal income tax as well as income tax of several
      state jurisdictions including primarily Colorado and California. The Company
      has
      concluded all U.S. federal income tax matters for the year ended December 31,
      2002. Substantially all material state and local income tax matters have been
      concluded through December 31, 2002, depending on the statute of limitations
      for
      a given jurisdiction. Federal and state income tax returns for 2003 through
      2006
      have not yet been examined by the applicable jurisdictions.





**7.** **Related
      Party Transactions**





During
      the six months ended September 30, 2007 and September 30, 2006, the Company
      paid
      fees totaling $2,000 per month, a total of $12,000, to one director as a
      retainer for general legal services.





Also
      during the six months ended September 30, 2007 and September 30, 2006, the
      Company incurred fees totaling $582,808 and $584,903, respectively to MedEd
      Architects LLC, a video production company owned 33% by Randy Seffren, the
      Company’s Chief Marketing Officer.





**8.** **Stockholders’
      Equity**





In
      September 2007, the Company completed a private offering in which it sold an
      aggregate of 800,000 shares of common stock and warrants to purchase 800,000
      shares of common stock at an exercise price of $8.00 per share in the form
      of
      units consisting of one share of common stock and one warrant per unit. The
      units were sold at a per unit price of $6.25. Upon closing of offering, the
      Company received gross proceeds of $5,000,000, less a placement agent fee in
      the
      amount of $400,000 and approximately $170,000 in other expenses related to
      the
      offering. In addition, the Company issued warrants to purchase 80,000 shares
      of
      common stock at an exercise price of $8.25 per share to the placement agent
      of
      this offering.





During
      the six months ended September 2007, the Company received proceeds, net of
      $5,000 in expenses, of $890,937 from the exercise of warrants to purchase
      148,100 shares of the Company’s common stock at prices ranging from $2.50 to
      $6.25 per share.





On
      August
      1, 2007, the Company entered into an agreement with an investor relations firm
      that included a grant of a five year warrant to purchase 50,000 shares of the
      Company’s common stock at an exercise price of $6.96, the closing market price
      as of the date of the agreement. The warrants will vest monthly over a one
      year
      period unless the agreement is terminated. The Company used the following
      weighted average assumptions for valuation of the warrants issued: no dividend
      yield; expected volatility rate of 50.3%; risk free interest rate of 6%; and
      average lives of three years, resulting in a total value of $138,023 to be
      recognized monthly over the twelve month period.





A
      summary
      of the Company’s warrant activity for the period from April 1, 2007 through
      September 30, 2007 is presented below:




**Weighted****Warrants**
            
            
            **Average**
            
            **Aggregate****Outstanding**
            
            
            **Exercise
                Price**
            
            **Intrinsic
                Value****Outstanding,
                March 31, 2007**
            
            ****
            **5,724,094**
            
            
            **$**
            **7.21**Granted
            
            
            930,000
            
            
            $
            6.96Exercised
            
            
            (148,100
            )
            
            $
            6.05Expired
            
            
            -
            
            
            $
            -**Outstanding,
                September 30, 2007**
            
            ****
            **6,505,994**
            
            
            **$**
            **7.34**
            
            **$     9,584,926**






10
 Table
          of Contents




As
      of
      September 30, 2007, the Company had the following outstanding warrants to
      purchase its common stock:




**Weighted**
            
            
            **Weighted****Warrants**
            
            
            **Average**
            
            
            **Average****Outstanding**
            
            
            **Exercise
                Price**
            
            
            **Remaining
                Life**31,498
            
            
            $
            2.50
            
            
            
            0.4015,000
            
            
            $
            5.00
            
            
            
            0.40580,000
            
            
            $
            5.01
            
            
            
            2.95644,000
            
            
            $
            6.00
            
            
            
            3.622,240,300
            
            
            $
            6.25
            
            
            
            3.4050,000
            
            
            $
            6.96
            
            
            
            4.831,283,436
            
            
            $
            7.57
            
            
            
            4.49800,000
            
            
            $
            8.00
            
            
            
            6.9280,000
            
            
            $
            8.25
            
            
            
            6.92390,880
            
            
            $
            10.00
            
            
            
            0.25390,880
            
            
            $
            15.00
            
            
            
            0.256,505,994
            
            
            $
            7.34
            
            
            
            3.68











**Item2.
      Management’s Discussion and Analysis of Financial
      Condition and Results of Operations**





The
      discussion contained herein is for the three and six months ended September
      30,
      2007 and September 30, 2006. The following discussion should be read in
      conjunction with the financial statements of AeroGrow International, Inc. (the
      “Company, ” “we,” or “our”) and the notes to the financial statements included
      elsewhere in this Quarterly Report on Form 10-Q for the quarterly period ended
      September 30, 2007. The following discussion contains forward-looking statements
      within the meaning of Section 27A of the Securities Act of 1933, as amended,
      (the “Securities Act”), 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, our intentions
      with respect to strategic acquisitions, the ability of our products to achieve
      or maintain commercial acceptance and our ability to obtain financing for our
      obligations. Such statements are not guarantees of future performance and are
      subject to risks, uncertainties and assumptions that are difficult to predict.
      Therefore, the Company’s 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 “Risk Factors” and elsewhere in the Company’s annual report on Form 10-KSB
      filed on June 29, 2007 with the Securities and Exchange Commission (the “SEC”)
      and the Form S-3/A filed with the SEC September 28, 2007. Except as required
      by
      applicable law or regulation, the Company undertakes no obligation to revise
      or
      update any forward-looking statements contained in this Quarterly Report on
      Form
      10-Q for the quarterly period ended September 30, 2007. The information
      contained in this Quarterly Report on Form 10-Q for the quarterly period ended
      September 30, 2007 is not a complete description of the Company’s business or
      the risks associated with an investment in the Company’s common stock. Each
      reader should carefully review and consider the various disclosures made by
      the
      Company in this Quarterly Report on Form 10-Q for the quarterly period ended
      September 30, 2007 and in the Company’s other filings with the SEC.





**Overview**





We
      are in
      the business of developing, marketing, and distributing advanced indoor
      aeroponic garden systems and related products. Since formation and through
      our
      development stage that ended March 1, 2006, our principal activities consisted
      of product research and development, market research, business planning, and
      raising the capital necessary to fund these activities. We have completed
      development of our initial kitchen garden systems and related “bio-grow” seed
      pods and have contracted with two third-party manufacturers who have commenced
      production activities. We began sales activities as of March 2006. As of
      September 30, 2007, we had manufactured and taken delivery of over 245,000
      units
      of our kitchen garden systems and had manufactured over 800,000 seed kits.
      We
      commenced initial marketing and distribution of our products during March 2006,
      and have expanded these marketing efforts to encompass retail, home shopping,
      catalogue, international, and direct to consumer sales channels. We have also
      completed development of multiple new models of our AeroGarden systems, seed
      kits and other accessory products for the AeroGarden.. Prior to March 2006
      when
      we commenced sales of our first aeroponic garden system, we were considered
      a
      Development Stage Enterprise in accordance with Statement of Financial
      Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting by Development
      Stage Enterprises.”





**Our
      Critical Accounting Policies**





*Inventory*


Inventories
      are valued at the lower of cost, determined by the first-in, first-out method,
      or market. When we are the manufacturer, we include in inventory costs raw
      materials, labor and manufacturing overhead. We record the raw materials at
      delivered cost. Standard labor and manufacturing overhead costs are applied
      to
      the finished goods based on normal production capacity as prescribed under
      Accounting Research Bulletin No. 43, Chapter 4, “Inventory Pricing.” A majority
      of our products are manufactured overseas and are recorded at cost.




We
      will determine an inventory obsolescence reserve
      based on historical experience and will establish reserves against inventory
      according to the age of the product. As of September 30, 2007 and March 31,
      2007, we had determined that no inventory obsolescence reserve was
      required.


11
 Table
          of Contents


*Revenue
      Recognition*


We
      recognize revenue from product sales, net of estimated returns, when persuasive
      evidence of a sale exists: that is, a product is shipped under an agreement
      with
      a customer; risk of loss and title has passed to the customer; the fee is fixed
      or determinable; and collection of the resulting receivable is reasonably
      assured. Beginning with the quarter ended December 31, 2006, we began to offer
      promotions to its direct sales consumers allowing thirty or thirty-six days
      for
      product evaluation, where the customer pays only the shipping and handling
      costs
      for such products before making the required installment payments after the
      expiration of the thirty or thirty-six day trial period.  During the
      six months ended September 30, 2007, we offered a thirty-six day trial period
      and accordingly, we did not record $280,493 as of September 30, 2007 related
      to
      the unpaid balance due for orders shipped in conjunction with this evaluation
      program.  We also deferred, as of September 30, 2007, recognition of
      $84,507 of product costs associated the foregoing revenue in as much as the
      customer is required to return the product and we are therefore able to recover
      these costs through resale of the goods.





Additionally,
      we did not record $883,632 of revenue as of September 30, 2007 related to the
      wholesale sales value of inventory held by one of our retail shopping channel
      customers that was paid in full by the customer.  Accordingly, we have
      also recorded a customer deposit for $883,632 related to this
      transaction.  We also deferred, as of September 30, 2007, recognition
      of $510,462 of product and freight costs associated with this sale, which have
      been included in inventory.





We
      record
      estimated reductions to revenues for customer and distributor sales programs
      and
      incentive offerings, including, promotions, general advertising, merchandising
      and other volume-based incentives. Future market conditions and product
      transitions may require that we take actions to increase customer incentive
      offerings, possibly resulting in an incremental reduction of revenue at the
      time
      the incentive is offered. Additionally, certain incentive programs require
      us to
      estimate based on industry experience the number of customers who will actually
      redeem the incentive. At September 30, 2007 and March 31, 2007, we had accrued
      $372,788 and $65,385, respectively, as our estimate for the foregoing deductions
      and allowances.





*Warranty
      and Return Reserves*


We
      record
      warranty liabilities at the time of sale for the estimated costs that may be
      incurred under our basic warranty program. The specific warranty terms and
      conditions vary depending upon the product sold but generally include technical
      support, repair parts and labor for periods up to one year. Factors that affect
      our warranty liability include the number of installed units currently under
      warranty, historical and anticipated rates of warranty claims on those units,
      and cost per claim to satisfy our warranty obligation.   Both
      manufacturers of our products provide replacement parts for any defective
      components free of charge up to 2% of the total units
      purchased.  Based upon the foregoing, we have recorded a provision for
      potential future warranty costs of $49,424 and $15,593 at September 30, 2007
      and
      March 31, 2007, respectively.   The liability for sales returns
      is estimated based upon historical experience of return levels and, as of
      September 30, 2007, we had recorded a liability of $139,019 representing the
      estimated sales value of future returns.








*Shipping
      and Handling Costs*


Shipping
      and handling costs associated with inbound freight are recorded in cost of
      revenue. Shipping and handling costs associated with freight out to customers
      are also included in cost of revenue. Shipping and handling charges to customers
      are included in sales.





*Stock
      Based Compensation*


In
      December 2004, the Financial Accounting Standards Board issued SFAS No. 123R,
      “Share-Based Payment.” Subsequently, the SEC provided for a phase-in
      implementation process for SFAS No. 123R, which required adoption of the new
      accounting standard no later than January 1, 2006. SFAS No. 123R requires
      accounting for stock options using a fair-value-based method as described in
      such statement and recognition of the resulting compensation expense in our
      financial statements. Prior to January 1, 2006, we accounted for employee stock
      options using the intrinsic value method under Accounting Principles Board
      (“APB”) No. 25, “Accounting for Stock Issued to Employees” and related
      interpretations, which generally results in no employee stock option expense.
      We
      adopted SFAS No. 123R on January 1, 2006 and do not plan to restate financial
      statements for prior periods. We plan to continue to use the Black-Scholes
      option valuation model in estimating the fair value of the stock option awards
      issued under SFAS No. 123R. The adoption of SFAS No. 123R has increased net
      loss
      by $246,414 and $182,404 for the six months ended September 30, 2007 and the
      six
      months ended September 30, 2006, respectively, as compared to using our prior
      method under APB No. 25.





**Results
      of Operations**





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





**Three
                Months ended**
              **September
                30,**
            
            
            **Six
                Months ended**
              **September
                30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**RevenueProduct
                sales- retail
            
            
            77.2
            %
            
            
            77.6
            %
            
            
            71.5
            %
            
            
            80.6
            %Product
                sales- direct to consumer
            
            
            22.8
            %
            
            
            22.4
            %
            
            
            28.5
            %
            
            
            19.4
            %Total
                sales
            
            
            100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %Operating
                expensesCost
                of revenue
            
            
            60.0
            %
            
            
            80.3
            %
            
            
            58.5
            %
            
            
            81.1
            %Research
                and development
            
            
            10.0
            %
            
            
            39.7
            %
            
            
            9.2
            %
            
            
            45.6
            %Sales
                and marketing
            
            
            50.2
            %
            
            
            132.0
            %
            
            
            48.5
            %
            
            
            125.3
            %General
                and administrative
            
            
            15.6
            %
            
            
            75.1
            %
            
            
            17.6
            %
            
            
            88.0
            %Total
                operating expenses
            
            
            135.8
            %
            
            
            327.1
            %
            
            
            133.8
            %
            
            
            340.0
            %Loss
                from operations
            
            
            -35.8
            %
            
            
            -227.1
            %
            
            
            -33.8
            %
            
            
            -240.0
            %






12
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For
      the
      three months ended September 30, 2007 and September 30, 2006, product sales
      totaled $6,283,645 and $1,030,316, respectively, an increase of $5,253,329
      or
      510%. For the six months ended September 30, 2007 and September 30, 2006,
      product sales totaled $ 12,562,079 and $1,852,254, respectively, an increase
      of
      $10,709,825 or 578%. Our AeroGarden products are primarily sold through two
      sales methods. Direct sales are generated as a result of airings of our
      infomercial, our websites, our own catalogues and other direct to consumer
      advertisements. Retail sales are generated through sales to “brick and mortar”
retailers, catalogues and home shopping companies who in turn sell to consumers.
      The increase in sales is directly attributable to higher direct sales as a
      result of our increased media spending for our infomercials as compared to
      the
      prior year as well as our increased retail distribution which grew to
      approximately 3,500 storefronts as of September 30, 2007 compared to 600
      storefronts as of September 30, 2006.   During the quarter, we
      commenced initial shipment and recognized revenues of $36,000 for sales to
      international distributors in Japan and Europe and we anticipate this will
      become a significant component of our aggregate sales volume in future periods.
      A summary of our sales categories for the three and six months ended September
      30, 2007 and 2006 is as follows:




**Three
                  Months ended September 30,**
              
              
              **Six
                  Months ended September 30,**Product
                  Revenues
              
              **2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Product
                  sales- retail
              
              $
              4,850,298
              
              
              $
              799,335
              
              
              $
              8,979,900
              
              
              $
              1,492,945Product
                  sales- direct to consumer
              
              
              1,433,347
              
              
              
              230,981
              
              
              
              3,582,179
              
              
              
              359,309Total
              
              $
              6,283,645
              
              
              $
              1,030,316
              
              
              $
              12,562,079
              
              
              $
              1,852,254%
                  of RevenuesProduct
                  sales- retail
              
              
              77.19
              %
              
              
              77.58
              %
              
              
              71.48
              %
              
              
              80.60
              %Product
                  sales- direct to consumer
              
              
              22.81
              %
              
              
              22.42
              %
              
              
              28.52
              %
              
              
              19.40
              %Total
                  sales
              
              
              100.00
              %
              
              
              100.00
              %
              
              
              100.00
              %
              
              
              100.00
              %
 
 Our
        products consist of our AeroGardens
        as well as seed kits and accessories which represent recurring revenue
        opportunity for each AeroGarden sold. A summary of the sales of these two
        product categories is as follows:
 
 **Three
                  Months ended September 30,**
              
              
              **Six
                  Months ended September 30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Product
                  RevenuesAeroGardens
              
              $
              4,816,504
              
              
              $
              889,979
              
              
              $
              10,460,138
              
              
              $
              1,616,870Seed
                  kits and accessories
              
              
              1,467,141
              
              
              
              140,337
              
              
              
              2,101,941
              
              
              
              235,384Total
              
              $
              6,283,645
              
              
              $
              1,030,316
              
              
              $
              12,562,079
              
              
              $
              1,852,254%
                  of RevenuesAeroGardens
              
              
              76.65
              %
              
              
              86.38
              %
              
              
              83.27
              %
              
              
              87.29
              %Seed
                  kits and accessories
              
              
              23.35
              %
              
              
              13.62
              %
              
              
              16.73
              %
              
              
              12.71
              %Total
              
              
              100.00
              %
              
              
              100.00
              %
              
              
              100.00
              %
              
              
              100.00
              %


In
      regard
      to our direct sales, we offer our direct customers 36 days to evaluate the
      product (“Trial Sales”) paying only the shipping and handling costs for such
      products before making the required installment payments after the expiration
      of
      the 36- day trial period. Accordingly, we did not record $280,493 of revenue
      from these Trial Sales as of September 30, 2007. We also deferred, as of
      September 30, 2007, recognition of $84,507 of product costs associated with
      the
      foregoing Trial Sales in as much as the customer is required to return the
      product and we are therefore able to recover these costs through resale of
      the
      goods. The liability for sales returns is estimated based upon historical
      experience of return levels.





Also,
      we
      did not record $883,632 of revenue as of September 30, 2007 related to the
      wholesale sales value of inventory held by one of our retail shopping channel
      customers that was paid in full by the customer.  Accordingly, we also
      recorded a customer deposit for $883,632 related to this
      transaction.  We have also deferred, as of September 30, 2007,
      recognition of $510,462 of product and freight costs associated with this sale,
      which have been included in inventory.





For
      the
      three months ended September 30, 2007, we had two customers who represented
      24.0% and 17.8%, respectively of net product sales. For the three months ended
      September 30, 2006, we had one customer who represented 24.0% of net product
      sales. For the six months ended September 30, 2007, we had one customer who
      represented 12.0% of net product sales. For the six months ended September
      30,
      2006, we had one customer who represented 45.0% of net product
      sales.





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 Table
          of Contents




Retail
      sales for three months ended September 30, 2007 increased  as a
      percentage of our total sales over the previous quarter ended June 30, 2007
      as a
      result primarily of our obtaining distribution in four key accounts in September
      2007 on a nationwide basis including Sears, JC Penney’s, Macy’s and Bed, Bath
      and Beyond. The increase in retail sales was, in part, offset by a decrease
      in
      direct to consumer sales during the three months ended September 30, 2007 due
      to
      reduced media expenditures for direct response offerings and offset by
      reductions in our sales to home shopping channels reflecting the reduced
      seasonal demand for our indoor gardening products during the summer months
      as
      well as reduced television viewership during these months as well.





Cost
      of
      revenues for the three months ended September 30, 2007 and September 30, 2006
      totaled $3,765,376 and $827,165, respectively, representing 60.0% and 80.3%
      of
      revenues for the respective periods, an increase of $2,938,211 or 355.2%. Cost
      of revenues include product costs for purchased and manufactured products,
      freight costs for inbound freight from manufacturers and outbound freight to
      customers, costs related to warehousing and the shipping of products to
      customers, credit card processing fees for direct sales and duties and customs
      applicable to products imported.





Cost
      of
      revenues for the six months ended September 30, 2007 and September 30, 2006
      totaled $7,347,794 and $1,502,860, respectively, representing 58.5% and 81.1%
      of
      revenues for the respective periods, an increase of $5,844,934 or 388.9%. The
      increase in cost of revenues is a direct result of the increase in revenues
      discussed above.  Included in cost of revenue for the six months ended
      September 30, 2006 are costs associated with expedited shipping of 5,000 of
      our
      AeroGarden units from our factory in China by air rather than by sea in order
      to
      expedite our initial deliveries in April 2006, at an incremental airfreight
      cost
      of $27 per unit. We also experienced higher than anticipated costs in the
      startup of our seed kit manufacturing operations during the three months ended
      September 30, 2006. Since our product launch, we continue to strive to improve
      both manufacturing costs and transportation costs. Impacting cost of revenues
      during the three and six months ended September 30, 2007 were increases in
      freight costs associated with outbound freight to retail customers as well
      as
      inbound freight for finished goods from China and seed kits components as a
      result of imposed fuel surcharges by freight providers as well as higher freight
      and fulfillment costs, as a percentage of sales, associated with retail
      sales.





Gross
      margins vary based upon the factors impacting cost of revenue discussed above
      as
      well as the ratio of direct sales versus retail sales. In a direct to consumer
      sale, we recognize as revenue the full purchase price for the product as opposed
      to retail sales, where we recognize as revenue the wholesale price for the
      product charged to the retailer less allowances granted for merchandising and
      promotion. Media costs associated with direct sales are included in sales and
      marketing costs. Gross margins for the three and six months ended September
      30,
      2007 were $2,518,269 and $5,214,285, representing 40.1% and 41.5% of revenues,
      respectively, as compared to $203,151 and $349,394 for the three and six months
      ended September 30, 2006, representing 19.7% and 18.9% of revenues,
      respectively.





Sales
      and
      marketing costs for the three months ended September 30, 2007 totaled
      $3,156,414, as compared to $1,359,797 for the three months ended September
      30,
      2006, an increase of $1,796,617 or 132.1%. For the six months ended September
      30, 2007 and September 30, 2006, sales and marketing costs were $6,091,537
      and
      $2,320,271, respectively, representing an increase of $3,771,266 or
      162.5%.





Sales
      and
      marketing costs include all costs associated with the marketing, and sales,
      sales and customer support and sales order processing for our products and
      consist of the following:





**Three
                Months ended September 30,**
            
            
            **Six
                Months ended September 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Advertising
            
            $
            643,382
            
            
            $
            84,786
            
            
            $
            1,910,376
            
            
            $
            81,788Salaries
                and related expenses
            
            
            786,802
            
            
            
            372,389
            
            
            
            1,450,930
            
            
            
            642,313Infomercial
                production costs
            
            
            729,131
            
            
            
            458,856
            
            
            
            829,348
            
            
            
            590,890Sales
                commissions
            
            
            183,765
            
            
            
            66,664
            
            
            
            420,458
            
            
            
            133,729Retail
                point of sale displays
            
            
            113,046
            
            
            
            -
            
            
            
            150,768
            
            
            
            -Supplies
                and printing
            
            
            108,655
            
            
            
            31,499
            
            
            
            236,518
            
            
            
            59,437Consulting
                fees
            
            
            113,766
            
            
            
            71,725
            
            
            
            260,047
            
            
            
            234,904Public
                relations
            
            
            29,433
            
            
            
            26,158
            
            
            
            98,735
            
            
            
            124,249Trade
                Shows
            
            
            88,095
            
            
            
            8,515
            
            
            
            198,596
            
            
            
            53,521Telemarketing
            
            
            98,664
            
            
            
            5,211
            
            
            
            203,250
            
            
            
            5,211Other
            
            
            261,675
            
            
            
            233,994
            
            
            
            332,511
            
            
            
            394,229$
            3,156,414
            
            
            $
            1,359,797
            
            
            $
            6,091,537
            
            
            $
            2,320,271





Advertising
      is primarily comprised of media costs for airing of our infomercial which we
      consider a key component of our marketing strategy in that it helps build
      awareness, and therefore consumer demand, for all channels of distribution
      as
      well as generating revenues from direct to consumer sales. We anticipate
      continued airing of our current infomercial through December 2007.





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          of Contents




During
      the three months ended September 30, 2007, we substantially completed at a
      cost
      to date of approximately $700,000 two new infomercials focused on our next
      generation of product, a three pod AeroGarden utilizing a new aeroponic
      technology. All infomercial production costs are expensed as
      incurred.  During the three months ended September 30, 2006, we had
      incurred similar costs for the production of our current infomercial featuring
      our original AeroGarden product which has been airing since September 2006
      with
      $3.5 million in media expenditures to date. The new technology for our three
      pod
      unit is anticipated to reduce manufacturing costs with no loss of efficacy.
      The
      two infomercials will feature this new unit in conjunction with accessory
      components that result in a product targeted at the cooking market to be called
      “Chef in the Box” and a separate offering targeted at the market for year round,
      fresh home flowers called “Florist in the Box.” We plan to test market these two
      product offerings on television in the fourth calendar quarter of 2007 with
      a
      targeted retail price of $99-$129 based the accessory components included with
      the offer.





Sales
      and
      marketing salaries and related costs shown above consist of salaries, payroll
      taxes, employee benefits and other payroll costs for our sales, customer service
      operations, graphics and marketing departments. Stock based compensation
      represents charges related to the granting of stock options and grants to
      employees and consultants who service the foregoing
      departments.  Infomercial production costs represent costs related to
      the development, production, editing and revision of our 30-minute infomercial
      and short form (0:60 and 1:20 second) television commercials. Sales commissions
      reflect commissions equal to 7% of collections from net retail sales to
      retailers, which were paid to sales representative organizations that assisted
      us in opening and maintaining our retail customers. We have recently
      renegotiated the agreements with our sales representative organizations to
      sliding scales based upon the size of the customers and, as a result, anticipate
      the aggregate percentage rate of these commissions to decline in the next 12
      months.





General
      and administrative costs for the three months ended September 30, 2007 totaled
      $982,181 as compared to $773,362 for the three months ended September 30, 2006,
      an increase of $208,819 or 27.0%. General and administrative costs have
      increased in most areas as we have positioned our organization to manage our
      sales growth and diversification of products and distribution channels.
      Increases in general and administrative costs for the three months ended
      September 30, 2007 over the three months ended September 30, 2006 include
      $42,000 in salary related costs, $50,000 in depreciation expense, $76,000 in
      facility rent, $55,000 in corporate governance costs.





For
      the
      six months ended September 30, 2007, general and administrative costs totaled
      $2,208,033 as compared to $1,629,402 for the six months ended September 30,
      2006, an increase of $578,631 or 35.5%. Increases in general and administrative
      costs for the six months ended September 30, 2007 over the six months ended
      September 30, 2006 include $160,000 in salary related costs, $98,000 in
      depreciation expense, $106,000 in facility rent, $112,000 in corporate
      governance costs and $170,000 in bad debt expense allowances offset by a
      reduction in outside consulting fees on $116,000.





During
      the three months ended September 30, 2007, we incurred $628,542 in research
      and
      development costs, as compared to $409,453 for the three months ended September
      30, 2006, an increase of $219,089 or 53.5%. The period over period increase
      was
      due to an approximate $70,000 increase in personnel costs for our plant labs
      and
      engineering personnel as well as costs associated with development of our new
      three pod and six pod products including prototyping, travel and costs
      associated with research in furthering our development of live plants for our
      AeroGardens such as strawberries and baby roses.





For
      the
      six months ended September 30, 2007, research and development costs totaled
      $1,157,987 as compared to $844,384 for the six months ended September 30, 2006,
      an increase of $313,603 or 37.1% as a result of the reasons discussed
      above.





We
      have
      substantially completed development of multiple new models of our AeroGarden
      systems including our Pro series which feature stainless steel trim and more
      sophisticated electronics for managing light and nutrient delivery during the
      plant’s life cycle; our deluxe series, which feature a higher adjustable light
      hood and a new light bulb technology that delivers more light
      enabling  higher height for the light hood and therefore ability to
      grow full size tomatoes, peppers etc.; as well as our new six pod and three
      pod
      systems which will feature lower retail price points combined with a new, more
      efficient seed pod technology and nutrient delivery system. In the next 12
      months we intend to continue researching and developing new product designs
      and
      product extensions including, but not limited to, nutrient delivery systems
      and
      additional seed varieties for our seed kits.  We have also begun
      development of a methodology to cultivate and ship live “starter” plants in the
      grow pod mediums that will be able to grow in our kitchen garden systems. We
      started market testing this process with strawberries during the first quarter
      of calendar 2007 and continue to refine and develop this process.





Our
      loss
      from operations for the three months ended September 30, 2007 was $2,248,868
      as
      compared to $2,339,461 for the three months ended September 30, 2006, a decrease
      of $90,593 or 3.9%. For the six months ended September 30, 2007, the loss from
      operations is $4,243,272 as compared to $4,444,663 for the three months ended
      September 30, 2006, a decrease in net loss of $201,391 or 4.5%. With the
      additional retail distribution obtained during the quarter ended September
      30,
      2007, the non-recurrence of the $720,000 in infomercial production costs
      incurred during this same quarter, the commencement of our international
      expansion in Japan, Europe and elsewhere and the diversification of our product
      line, we anticipate losses from operations will be decreased significantly
      in
      future periods.





Other
      income and expense for the three months ended September 30, 2007 totaled $90,394
      as compared to $1,069,305 for the three months ended September 30, 2006, a
      decrease of $978,911. In the three months ended September 30, 2006 we incurred
      $1,028,250 in penalties payable in our common stock related to delays we
      encountered in registering common stock issued in various private offerings.
      Current interest expense is the result of our factoring arrangement for our
      accounts receivable as discussed below. For the six months ended September
      30,
      2007, other income and expense totaled $118,720 as compared to $1,086,992 for
      the six months ended September 30, 2006, a decrease of $968,272.




15
 Table
          of Contents





**Liquidity
      and Capital Resources**




In
      September 2007, we completed a private offering in which we sold an aggregate
      of
      800,000 shares of common stock and warrants to purchase 800,000 shares of common
      stock at an exercise price of $8.00 per share in the form of units consisting
      of
      one share of common stock and one warrant per unit. The units were sold at
      a per
      unit price of $6.25. Upon closing of offering, we received gross proceeds of
      $5,000,000, less a placement agent fee in the amount of $400,000 and
      approximately $200,000 in other expenses related to the offering. In addition,
      we issued warrants to purchase 80,000 shares of common stock at an exercise
      price of $8.25 per share to the placement agent of this offering.





During
      the six months ended September 2007, we received proceeds, net of $5,000 in
      expenses, of $890,875 from the exercise of warrants to purchase 148,100 shares
      of our common stock at prices ranging from $2.50 to $6.25 per
      share.





On
      February 9, 2007, we entered into an agreement with Benefactor Group Inc.
      (“Benefactor”) whereby Benefactor agreed to factor our retail accounts
      receivable invoices. The term of the agreement is for one year but can be
      terminated by us with 60 days written notice. In accordance with the terms
      of
      the agreement, Benefactor will purchase the invoices that it approves for an
      initial payment of 85% of the amount of the invoice with the remaining 15%
      paid
      upon collection less any deductions from the customer. Benefactor charges a
      commission of 11⁄4% of the gross amount of the invoice and a maintenance fee equal
      to an annual rate of prime plus 3%, prime being determined by Benefactor based
      upon either the prime rate published by Benefactor’s bank or the Wall Street
      Journal, (10.75% at September 30, 2007 and 11.25% at March 31, 2007), charged
      on
      a daily basis for the unpaid invoice amounts outstanding. We have agreed,
      beginning May 2007, to factor with Benefactor a minimum of $800,000 of invoices
      monthly. We are responsible for any invoices that are unpaid after 91 days
      or
      are subject to other defaults by the customer and this obligation is secured
      by
      a security interest granted to Benefactor on all assets. As of September 30,
      2007, Benefactor had advanced us $3,577,447 against invoices totaling
      $4,188,573.  Fees paid to Benefactor for interest, discounts and other
      services for the three and six months ended September 30, 2007 totaled $97,732
      and $164,881, respectively.  The receivables are considered recourse
      and are shown at their gross value on the balance sheet.





As
      of
      September 30, 2007, we had a cash balance of approximately $6,193,987. We
      anticipate our principal sources of liquidity during the next 12 months will
      be
      proceeds from sales of our products. We intend to use our working capital
      principally to purchase inventory, fund media advertising, fund product
      promotion and trade show costs as well as support ongoing product development,
      overhead and operational costs. During July 2007, we were able to negotiate
      more
      favorable payment terms with both of our manufacturing sources in China which
      has improved cash utilization for inventory purchases. Accordingly, we
      anticipate that existing cash resources will be sufficient for the next 12
      months. However, in the event retail and/or direct response sales accelerate
      more rapidly than currently anticipated, we would need to support this growth
      through additional asset-based or other debt financing or the raising of
      additional equity. However, there is no assurance that such financing will
      be
      available on attractive terms or at all.





For
      the
      six months ended September 30, 2007, cash used in operations was $7,273,945
      as
      compared to cash used in operations for the six months ended September 30,
      2006
      of $5,383,469, an increase of $1,890,476. The principal use of cash in
      operations was the net loss, which, after add back of non cash items, equaled
      $3,906,000,  increases in accounts receivable of $2,990,000 related to
      our expansion of our retail distribution and increases in inventory of
      $2,540,000 acquired to support our expanded distribution for the upcoming
      holiday season. Offsetting the foregoing are increases in customer deposits
      for
      goods under guaranteed sale arrangements of $901,000 and increase in accrued
      expenses and accounts payable of $1,221,000 related to increased purchases
      in
      transit.





Cash
      used
      by investing activities totaled $289,204 for the six months ended September
      30,
      2007, as compared to $105,619 used in investing activities for the six months
      ended September 30, 2006. The principal use of cash in investing activities
      was
      the purchase of $275,000 in computer equipment and software related to our
      installation of a new computer network and ERP accounting and purchasing system,
      inclusive of $136,523 through a capitalized lease program that did not require
      the outlay of cash, as well computers purchased due to our increased staffing
      requirements and $48,000 in manufacturing equipment, $30,000 in new tooling
      and $15,000 in office equipment.





Cash
      provided by financing activities was $8,261,635 for the six months ended
      September 30, 2007, as compared to cash provided by financing activities of
      $11,250 for the three months ended September 30, 2006. Cash provided by
      financing activities included $4,433,372 from the issuance of common stock
      in
      our September 2007 offering discussed above, $890,937 of proceeds from exercise
      of warrants and $2,932,296 from our accounts receivable factoring
      facility.




**Off-Balance
      Sheet Arrangements**





We
      have certain current commitments under operating leases and capital leases
      and
      have not entered into any contracts for financial derivative instruments such
      as
      futures, swaps and options.






16
 Table
          of Contents




**Item
      3. Quantitative and Qualitative Disclosures About
      Market
      Risk**





We
      do not
      have any assets or liabilities which, in our view, impose upon us significant
      market risk except for our credit facility from our accounts receivable factor
      which has a variable rate of interest generally consisting of stated premiums
      above prime. At September 30, 2007, we had $3,577,447 in outstanding borrowings
      under this credit facility as compared to $645,151 at March 31, 2007. As
      short-term interest rates fluctuate, the interest expense we incur on our credit
      facility will change resulting in either a positive or negative effect on our
      financial position, results of operations and cash flows. At this borrowing
      level for our credit facility, a one percentage point increase in interest
      rates
      would have an unfavorable impact on our net loss of $35,774 on an annual basis;
      however, because our excess cash is generally invested in short-term, high
      quality interest bearing investments, a comparable increase in interest income
      would offset much of the unfavorable impact.





We
      purchase the majority of our inventory from vendors in China in transactions
      that are U.S. dollar denominated transactions. Because the percentage of our
      international purchases denominated in currencies other than the U.S. dollar
      is
      small, any currency risks related to these transactions are immaterial to us.
      However, a decline in the relative value of the U.S. dollar to other foreign
      currencies, particularly the Chinese Ren Min Bi, could lead to increased
      purchasing costs. In order to mitigate this exposure, we make virtually all
      of
      our purchase commitments in U.S. dollars.





**Item
      4. Controlsand Procedures**





(a)
      Evaluation of Disclosure Controls and Procedures





Disclosure
      controls and procedures are designed to ensure that information required to
      be
      disclosed in the reports filed or submitted by the Company under the Exchange
      Act is recorded, processed, summarized and reported, within the time periods
      specified in the rules and forms of the SEC. Disclosure controls and procedures
      include, without limitation, controls and procedures designed to ensure that
      information required to be disclosed in the reports filed under the Exchange
      Act
      is accumulated and communicated to the Company’s management, including its
      principal executive and financial officer, as appropriate, to allow timely
      decisions regarding required disclosure.





The
      Company carried out an evaluation, under the supervision and with the
      participation of its management, including its principal executive officer
      and
      principal financial officer, of the effectiveness of the design and operation
      of
      the Company’s disclosure controls and procedures as of the end of the period
      covered by this report. Based upon and as of the date of that evaluation, the
      Company’s principal executive officer and financial officers concluded that the
      Company’s disclosure controls and procedures are effective to ensure that
      information required to be disclosed in the reports the Company files and
      submits under the Exchange Act is recorded, processed, summarized and reported
      within the time periods specified in the SEC’s rules and forms.





(b)
      Changes in Internal Controls




There
      were no changes in the Company’s internal controls or in other factors that
      could have significantly affected those controls during the period ended
      September 30, 2007.






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**PART
      II - OTHERINFORMATION**





**Item
      1. Legal Proceedings**





None.





**Item
      1A. Risk Factors**





During
      the three months ended September 30, 2007, there has not been any material
      changes in risk factors previously disclosed.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**





As
      part
      of the private offering that we completed in September 2007, we sold an
      aggregate of 40,000 shares of common stock and warrants to purchase 40,000
      shares of common stock at an exercise price of $8.00 per share in the form
      of
      units consisting of one share of common stock and one warrant per
      unit.  The units were sold at a per unit price of $6.25.  In
      addition, as part of the private offering that we completed in September 2007
      we
      issued warrants to purchase 4,000 shares of common stock at an exercise price
      of
      $8.25 per share to the placement agent of this offering.





**Item
      3. Defaults Upon Senior Securities**





None.





**Item
      4. Submission of Matters to a Vote of Security Holders**





During
      the three months ended September 30, 2007 there were no matters brought to
      a
      vote of the security holders.





**Item
      5. Other Information**





None





**Item
      6. Exhibits**





31.1
            Certifications
                of the Chief Executive Officer Under Section 302 of the Sarbanes-Oxley
                Act*31.2
            Certifications
                of the Chief Financial Officer Under Section 302 of the Sarbanes-Oxley
                Act*32.1
            Certifications
                of the Chief Executive Officer Under Section 906 of the Sarbanes-Oxley
                Act*32.2
            Certifications
                of the Chief Financial Officer Under Section 906 of the Sarbanes-Oxley
                Act*





*
            Filed
                Herewith








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**SIGNATURES**





In
      accordance with the requirements of the Securities Exchange Act of 1934 the
      registrant has duly caused this report to be signed on its behalf by the
      undersigned thereunto duly authorized.




**AeroGrow
                International Inc.**Date:  November
                14, 2007
            
            /s/Michael
                BissonnetteBy:
                Michael BissonnetteIts:
                Chief Executive Officer (Principal Executive Officer) and
                DirectorDate: : November
                14, 2007
            
            /s/Mitchell
                B.
                RubinBy:
                Mitchell B. RubinIts:
                Chief Financial Officer (Principal Financial Officer and Principal
                Accounting Officer)







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