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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

   (Mark One)
      [x]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
               For the three-month period ended September 30, 2006
                                       OR
      [ ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        Commission file number 000-22515


                       SPEAKING ROSES INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

               Utah                                         20-0612376
  (State or other jurisdiction of                         (I.R.S. Employer
  incorporation or organization)                        Identification Number)

             404 Ironwood Drive                               84115
            Salt Lake City, Utah                           (Zip Code)
  (Address of principal executive offices)

       Registrant's telephone number, including area code: (801) 433-3900

          Securities registered pursuant to Section 12 (b) of the Act:
    Title of each class                Name of each exchange on which registered
            None                                          None

           Securities registered pursuant to Section 12(g) of the Act:

                                 Title of class
                                 --------------
                    Common Stock (par value, $.001 per share)

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 [ ]

As of November 7, 2006, there were 30,635,273 common shares outstanding.


                                       1
<PAGE>
                                TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION
Item 1.          Financial Statements
Item 2.          Management's Discussion and Analysis or
                   Plan of Operations
Item 3.          Controls and Procedures

PART II
OTHER INFORMATION
Item 1.          Legal Proceedings
Item 2.          Unregistered Sales of Equity Securities and
                   Use of Proceeds
Item 3.          Defaults Upon Senior Securities
Item 4.          Submission of Matters to a Vote of Security
                   Holders
Item 5.          Other Information
Item 6.          Exhibits and Reports on Form 8-K

SIGNATURES
Exhibit 31.1     (Certifications required under Section 302 of
                    the Sarbanes-Oxley Act of 2002)
Exhibit 31.2     (Certifications required under Section 302 of
                    the Sarbanes-Oxley Act of 2002)
Exhibit 32.1     (Certifications required under Section 906 of
                    the Sarbanes-Oxley Act of 2002)
Exhibit 32.2     (Certifications required under Section 906 of
                    the Sarbanes-Oxley Act of 2002)







                                       2
<PAGE>

                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY

PART I.  FINANCIAL INFORMATION.


Item 1.  Financial Statements

The  accompanying  unaudited  condensed  consolidated  financial  statements  of
Speaking Roses International,  Inc. and subsidiary (collectively,  "SRII" or the
"Company")  as of September 30, 2006 and December 31, 2005 and for the three and
nine months ended  September 30, 2006 and 2005, have been prepared in accordance
with  U.S.  generally  accepted  accounting  principles  for  interim  financial
reporting  and  pursuant  to the rules and  regulations  of the  Securities  and
Exchange  Commission.  The condensed  consolidated  financial  statements do not
include all of the information and footnotes required by U.S. generally accepted
accounting  principles  for  complete  financial  statements.   These  condensed
consolidated  financial  statements  should  be read  in  conjunction  with  the
accompanying notes, and the consolidated  financial statements and notes thereto
included  in our annual  report on Form 10-KSB for the year ended  December  31,
2005.

All adjustments  (consisting only of normal recurring adjustments) necessary for
the fair presentation of our consolidated financial position as of September 30,
2006 and December 31, 2005 and our  consolidated  results of operations and cash
flows for the three and nine months ended  September 30, 2006 and 2005 have been
included.  The  consolidated  results of operations and cash flows for the three
and nine months ended  September  30, 2006 may not be  indicative of the results
for the year ending December 31, 2006.

In Management's Discussion and Analysis or Plan of Operations in Item 2, we have
compared  the  operating  results  of SRII for the three and nine  months  ended
September  30,  2006 with the  operating  results  for the three and nine months
ended September 30, 2005.  However,  because of the changes to our business plan
and the  difficulty we have had in obtaining  financing to fund our  operations,
there has been a lack of consistency in our  operations.  Therefore,  we believe
these  comparisons  may not be  meaningful  and caution  should be  exercised by
readers in utilizing these comparisons.









                                       3
<PAGE>
                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY


                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

                                                  September 30,    December 31,
                                                      2006             2005
                                                 --------------   --------------
                      ASSETS
                      ------
CURRENT ASSETS
     Cash                                        $       40,050   $      36,814
     Accounts receivable, less allowance
        for doubtful accounts  of $33,813
        and $25,222, respectively                       137,615          98,786
     Inventories                                         86,214          85,196
     Prepaid expenses                                    20,877          24,506
     Other                                                  447           8,500
                                                 --------------   --------------

           TOTAL CURRENT ASSETS                         285,203         253,802
                                                 --------------   --------------

PROPERTY AND EQUIPMENT, at cost, net of
     accumulated depreciation and amortization
     of $239,974 and $132,640, respectively             337,855         307,015
                                                 --------------   --------------

OTHER ASSETS
     Deposits                                            10,292          17,004
     Patents and trademarks, net of
        accumulated amortization of
        $48,630 and $30,778, respectively               464,059         390,623
     Other                                                1,748               -
                                                 --------------   --------------

           TOTAL OTHER ASSETS                           476,099         407,627
                                                 --------------   --------------


           TOTAL ASSETS                          $    1,099,157   $     968,444
                                                 ==============   ==============


                                    Continued










     See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>

                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY


                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)


                                                  September 30,    December 31,
                                                      2006             2005
                                                 --------------   --------------
         LIABILITIES AND STOCKHOLDERS' DEFICIT
         -------------------------------------

CURRENT LIABILITIES
     Accounts payable                            $      546,446   $     443,769
     Accrued expenses                                   165,888         114,161
     Area development rights deposits                         -         856,790
     Accrued interest                                   231,517          21,003
     Current portion of deferred revenue                494,632         140,172
     Current portion of capital lease
        obligations                                       3,626           3,377
     Convertible notes payable to stockholders,
        net of discount of $141,202 and
        $219,174, respectively                        1,158,113         280,826
     Convertible line of credit borrowings
        from stockholder                              1,967,832               -
     Related party notes payable                        579,147         620,526
     Notes payable                                      100,000               -
                                                 --------------   --------------

           TOTAL CURRENT LIABILITIES                  5,247,201       2,480,624
                                                 --------------   --------------

DEFERRED REVENUE, less current portion                  398,890         304,575
                                                 --------------   --------------

CAPITAL LEASE OBLIGATIONS, less current portion           8,474          11,225
                                                 --------------   --------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
     Preferred Stock, par value $.001;
        authorized 30,000,000 shares,
        no shares issued                                      -               -
     Common Stock, par value $.001;
        authorized 70,000,000 shares,
        30,635,273 and 29,260,273 shares
        outstanding, respectively                        30,635          29,260
     Additional paid-in capital                       8,787,050       6,797,476
     Deferred compensation                             (342,593)              -
     Accumulated deficit                            (13,030,500)     (8,654,716)
                                                 --------------   --------------

           TOTAL STOCKHOLDERS' DEFICIT               (4,555,408)     (1,827,980)
                                                 --------------   --------------

           TOTAL LIABILITIES AND STOCKHOLDERS'
           DEFICIT                               $    1,099,157   $     968,444
                                                 ==============   ==============




     See accompanying notes to condensed consolidated financial statements.



                                       5
<PAGE>
<TABLE>
<CAPTION>
                                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY


                                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                   (Unaudited)

                                                 Three months ended                   Nine months ended
                                           September 30,                       September 30,
                                               2006              2005              2006              2005
                                         ----------------   ---------------   ---------------   ---------------
<S>                                      <C>                <C>               <C>               <C>
SALES
     Product sales                       $        192,652   $       202,201   $       831,010   $       896,667
     License fees and other revenue               148,070            50,017           352,548           142,105
     Royalties                                        186            10,500            26,200            31,500
                                         ----------------   ---------------   ---------------   ---------------
         NET SALES                                340,908           262,718         1,209,758         1,070,272
                                         ----------------   ---------------   ---------------   ---------------

OPERATING EXPENSES
     Cost of goods sold                           229,799           196,418           888,745           924,999
     General and administrative                   388,595           450,349         2,217,168         1,248,392
     Sales and marketing                          344,295           314,973         1,002,231         1,386,551
     Research and development                       8,051           413,716            65,078           461,151
                                         ----------------   ---------------   ---------------   ---------------

         TOTAL OPERATING EXPENSES                 970,740         1,375,456         4,173,222         4,021,093
                                         ----------------   ---------------   ---------------   ---------------

         OPERATING LOSS                          (629,832)       (1,112,738)       (2,963,464)       (2,950,821)
                                         ----------------   ---------------   ---------------   ---------------

OTHER INCOME (EXPENSE)
     Other income (expense)                          (286)           (2,338)           18,406            11,865
     Interest income                                    -               371                 5               747
     Loss on extinguishment of debt                     -                 -          (598,457)         (449,871)
     Interest expense                            (176,708)           (9,474)         (832,274)          (31,992)
                                         ----------------   ---------------   ---------------   ---------------

         TOTAL OTHER (EXPENSE), NET              (176,994)          (11,441)       (1,412,320)         (469,251)
                                         ----------------   ---------------   ---------------   ---------------

         LOSS BEFORE PROVISION FOR
             INCOME TAXES                        (806,826)       (1,124,179)       (4,375,784)       (3,420,072)

         Provision for income taxes                     -              (930)                -            (1,730)
                                         ----------------   ---------------   ---------------   ---------------

         NET LOSS                         $      (806,826)  $    (1,125,109)  $    (4,375,784)  $    (3,421,802)
                                         ================   ===============   ===============   ===============

         NET LOSS PER COMMON SHARE,
             BASIC AND DILUTED            $         (0.03)  $         (0.04)  $         (0.15)  $         (0.12)
                                         ================   ===============   ===============   ===============

         WEIGHTED AVERAGE NUMBER OF
             COMMON SHARES OUTSTANDING,
                 BASIC AND DILUTED             30,548,588        29,026,112        29,994,797        28,066,176
                                         ================   ===============   ===============   ===============





                     See accompanying notes to condensed consolidated financial statements.

</TABLE>

                                                        6
<PAGE>
                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY


                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)


                                                        Nine months ended
                                                          September 30,
                                                     2006              2005
                                                ---------------   --------------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                      $    (4,375,784)  $  (3,421,802)
  Adjustments to reconcile net loss to
    net cash used in operating activities:
      Depreciation and amortization                     131,655          74,531
      Provision for losses on accounts
        receivable                                        8,591               -
      Loss on sale of assets                              1,077           2,338
      Interest expense from debt beneficial
        conversion feature                              548,650               -
      Interest expense recorded as an increase
         to convertible notes payable                    38,959               -
      Loss on extinguishment of debt                    598,457         449,871
      Amortization of deferred compensation             459,541               -
      Issuance of stock for consulting services           7,500               -
      Issuance of stock for compensation                 19,000
      Gain on forgiveness of liability                   (9,656)        (14,203)
  (Increase) decrease in operating assets, net
     of effect of acquisition:
      Accounts receivable                               (13,711)         12,804
      Inventories                                        42,127         (55,134)
      Prepaid expenses                                    6,176          (7,659)
      Other current assets                                6,305            (709)
      Deposits                                            7,097          (2,982)
  Increase (decrease) in operating liabilities,
     net of effect of acquisition:
      Accounts payable                                   17,568         299,312
      Accrued expenses                                   60,453          59,691
      Accrued interest                                  243,703          24,196
      Area development rights deposits                   (6,790)        870,300
      Deferred revenue                                  644,735         173,873
                                                 --------------   --------------

         NET CASH USED IN OPERATING ACTIVITIES       (1,564,347)     (1,535,573)
                                                 --------------   --------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of franchise, net of cash acquired          (134,742)              -
  Purchase of area development rights                   (15,000)              -
  Purchase of property and equipment                    (33,860)        (90,036)
  Proceeds from sale of assets                            1,355           4,415
  Increase in patents and trademarks                    (91,288)       (101,541)
                                                 --------------   --------------

         NET CASH USED IN INVESTING ACTIVITIES         (273,535)       (187,162)
                                                 --------------   --------------



                                   Continued




     See accompanying notes to condensed consolidated financial statements.



                                       7
<PAGE>

                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY


                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)



CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of convertible notes
    payable to stockholders                      $    1,880,000   $     750,000
  Principal payments on notes payable                   (36,379)              -
  Principal payments on capital lease
    obligations                                          (2,503)        (31,907)
  Proceeds from sale of common stock                          -         575,970
                                                 --------------   --------------

         NET CASH PROVIDED BY FINANCING
         ACTIVITIES                                   1,841,118       1,294,063
                                                 --------------   --------------

         INCREASE (DECREASE)  IN CASH                     3,236        (428,672)

         CASH AT BEGINNING OF PERIOD                     36,814         523,072
                                                 --------------   --------------

         CASH AT END OF PERIOD                   $       40,050   $      94,400
                                                 ==============   ==============
 -------------------------------------------------------------------------------
CASH PAID DURING THE PERIOD FOR
     Interest                                    $          962   $      15,863
     Income taxes                                $            -   $       1,730

Supplemental  schedule of non-cash investing and financing activities during the
nine months ended September 30, 2006:

On January 10, 2006, the Company exchanged $750,000 recorded as area development
rights  deposits for an  unsecured  convertible  note  payable to a  significant
stockholder.  As required by the exchange agreement, the Company added an amount
of $38,959 to the principal of the convertible note payable,  which  represented
the interest  that would have been earned on the deposit had it been an interest
bearing  note when the deposit was  received by the  Company.  The Company  also
recorded a  beneficial  conversion  feature of  $362,921  which was  immediately
expensed because the convertible note payable is due on demand.

Effective as of February 6, 2006, the Company entered into an exchange agreement
with a  significant  stockholder  (see Note 6). The  Company  recorded  non-cash
interest  expense of $10,356  that was included in the  principal  amount of the
replacement  notes as of  February  6, 2006.  In  connection  with the  exchange
agreement,  the  Company  recorded a loss on  extinguishment  of debt of $98,457
which  included  the  allocation  of the  extinguishment  proceeds  between  the
beneficial  conversion feature, the extinguishment of the convertible  security,
and the value of the common shares  issued to effect the  exchange.  The Company
recorded a beneficial  conversion feature of $306,213 related to the replacement
notes which will be amortized over the life of the replacement notes.

On February 28, 2006,  the Company  issued a promissory  note to a member of the
Board of Directors who is also a significant stockholder in the principal amount
of $178,452 in settlement of a promissory  note dated  November 30, 2005 payable
to the  Director  maturing  on  February  28,  2006 in the  principal  amount of
$175,000,  with $3,452 of non-cash accrued interest.  This note was exchanged as
part of the line of credit agreement entered into on May 11, 2006 (see Note 7).


                                   Continued


     See accompanying notes to condensed consolidated financial statements.


                                       8
<PAGE>

                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY


                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)


On May 9, 2006, the Company  acquired a franchise store with a net book value of
$172,580  for cash  consideration  of $135,000 and a  promissory  note  totaling
$37,580  (see  Note  4).  Also  on May  9,  2006,  the  Company  purchased  area
development rights for cash consideration of $15,000, a promissory note totaling
$60,000, and a warrant to purchase 150,000 shares of the Company's common stock,
which had a fair value of $93,181.

On June 23, 2006, the Company exchanged $100,000 recorded as an area development
rights deposit for an unsecured note payable to an unrelated  party.  As part of
the transaction and as required by the agreement, the Company recorded $8,056 of
interest  expense,  which is accrued but not yet paid as of September  30, 2006.
The terms of the area development rights deposit require that the Company accrue
interest from the date of the original deposit should the Company fail to timely
formulate the area development agreement.

Supplemental  schedule of non-cash investing and financing activities during the
nine months ended September 30, 2005:

In  connection  with the  repayment  of notes  payable to related  parties,  the
Company issued  1,000,000  shares of its common stock valued at $966,000 in full
settlement of loan balances  totaling $500,000 plus $16,129 in accrued interest.
As a result of this  transaction,  the Company recorded a loss on extinguishment
of debt of $449,871  representing  the difference  between the fair value of the
common stock on the settlement date and the loan balances.

The Company acquired  equipment  totaling $38,125 for which payment had not been
made as of September 30, 2005, and which is included in accounts payable.



     See accompanying notes to condensed consolidated financial statements.


                                       9
<PAGE>
                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(1)      Basis of Presentation and Recent Accounting Pronouncements
---      ----------------------------------------------------------


         The accompanying  unaudited condensed consolidated financial statements
         have been prepared on the accrual basis of accounting and in accordance
         with the instructions to Form 10-QSB. These financial statements do not
         include all of the  information  and notes  required by U.S.  generally
         accepted  accounting  principles  and  should,  therefore,  be  read in
         conjunction  with  the  consolidated  financial  statements  and  notes
         thereto  included in the Company's annual report on Form 10-KSB for the
         year  ended  December  31,  2005.  In the  opinion of  management,  all
         adjustments (consisting only of normal recurring adjustments) necessary
         for the  fair  presentation  of the  Company's  consolidated  financial
         position and  consolidated  results of operations  have been  included.
         Certain  amounts  in the  prior  periods  have  been  reclassified  for
         comparability    to   the   current    year's    presentation.    These
         reclassifications  have no  effect  on net loss or total  stockholders'
         deficit.  The interim operating results are not necessarily  indicative
         of the results for the full year ending December 31, 2006.

         In September  2006,  the FASB issued SFAS No. 157,  entitled Fair Value
         Measurements.  SFAS No. 157 defines fair value, establishes a framework
         for measuring fair value, and requires enhanced  disclosures about fair
         value  measurements.  SFAS No. 157  requires  companies to disclose the
         fair value of their  financial  instruments  according  to a fair value
         hierarchy  as  defined in the  standard.  Additionally,  companies  are
         required to provide enhanced disclosure regarding financial instruments
         in one of the categories  [level 3], including a reconciliation  of the
         beginning and ending  balances  separately  for each major  category of
         assets  and  liabilities.  SFAS  No.  157 is  effective  for  financial
         statements  issued for fiscal years  beginning after November 15, 2007,
         and interim  periods  within those fiscal years.  The Company  believes
         that the  adoption  of SFAS No. 157 will not have a material  impact on
         it's consolidated financial statements.

         In  July  2006,  the  FASB  issued  FIN  48,  entitled  Accounting  for
         Uncertainty  in Income  Taxes.  FIN 48  clarifies  the  accounting  for
         uncertainty  in income  taxes  recognized  in financial  statements  in
         accordance  with SFAS No. 109,  entitled  Accounting  for Income Taxes.
         This Interpretation  prescribes a recognition threshold and measurement
         attribute for the financial statement  recognition and measurement of a
         tax position taken or expected to be taken in a tax return. FIN 48 also
         provides  guidance  on  derecognition,   classification,  interest  and
         penalties,  accounting in interim  periods,  disclosure and transition.
         The Company is currently evaluating the impact this Interpretation will
         have on it's consolidated  financial  statements.  This  Interpretation
         will be effective for the Company's financial statements for the fiscal
         year beginning January 1, 2007.


                                       10
<PAGE>


                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(2)      Net Loss Per Common Share
         -------------------------

         The Company applies Statement of Financial  Accounting Standards (SFAS)
         No. 128,  "Earnings Per Share," which requires the calculation of basic
         and diluted net loss per common share.  Basic net loss per common share
         ("basic  EPS") is  computed by dividing  net loss  available  to common
         stockholders   by  the  weighted   average   number  of  common  shares
         outstanding  during  the  period.  Diluted  net loss per  common  share
         ("diluted  EPS") is  computed  by  dividing  net loss by the sum of the
         weighted-average   number  of  common   shares   outstanding   and  the
         weighted-average  dilutive common share  equivalents then  outstanding.
         The  computation of diluted EPS does not assume  exercise or conversion
         of securities that would have an anti-dilutive  effect. The Company had
         a net loss for all periods  presented  herein;  therefore,  none of the
         stock options and convertible debt instruments  outstanding  during the
         periods  presented,  as discussed in Notes 6, 7 and 8, were included in
         the  computation  of  diluted  net loss per  common  share as they were
         anti-dilutive.

         Common share  equivalents  consist of shares issuable upon the exercise
         of  common  stock  options  and  shares  issuable  upon  conversion  of
         convertible  debt.  As of  September  30,  2006 and  2005,  there  were
         8,867,316  and   1,480,000   outstanding   common  share   equivalents,
         respectively,  that were not included in the computation of diluted net
         loss per common share as their effect would have been anti-dilutive.

(3)      Going concern
         -------------

         The accompanying  condensed consolidated financial statements have been
         prepared  assuming the Company will continue as a going concern,  which
         contemplates   the  realization  of  assets  and  the  satisfaction  of
         liabilities in the normal course of business.  The Company has incurred
         cumulative net losses of $13,030,500  through  September 30, 2006 and a
         net loss of $806,826 for the three months ended  September 30, 2006. As
         of September 30, 2006,  the Company had total cash available of $40,050
         and a working  capital  deficit of $4,961,998  (total current assets of
         $285,203 less total current liabilities of $5,247,201).

         The above factors raise  substantial  doubt about the Company's ability
         to continue  as a going  concern.  Furthermore,  during the nine months
         ended  September  30,  2006,  the Company has  received  cash  advances
         pursuant to a $2,000,000 line of credit  agreement as described in Note
         7. As of August 2, 2006,  the line of  credit,  including  the  related
         accrued expense,  had been fully utilized and no agreement has been put
         in place to advance additional cash to the Company.  Consequently,  the
         Company will need to obtain  financing  from other  sources if it is to
         continue as a going concern.  The need for that additional financing is
         critical as the  Company  has minimal  cash and has high levels of debt
         including  a  convertible   line  of  credit  with  a  stockholder   of
         $1,967,832,  notes payable of $100,000,  related party notes payable of
         $579,147,  and convertible  notes payable to stockholders of $1,158,113
         as of  September  30,  2006.  Of these  amounts,  $1,444,485  is due on
         demand.  On August 28, 2006,  $788,959 of the convertible notes payable
         to  stockholders  was  demanded  by the note  holder.  The  Company has
         insufficient  funds to satisfy  this  demand or any other  demand.  The
         creditor may determine to take action to render the Company insolvent.


                                       11
<PAGE>


               SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(3)      Going concern (continued)

         The  Company is  attempting  to raise  additional  funds;  however,  no
         assurance  can be given that the  Company  will be able to obtain  such
         financing  on terms  favorable  to the  Company or at all.  Any sale of
         additional  equity or the conversion of any convertible debt securities
         would result in additional dilution to the Company's  stockholders.  If
         the Company is unable to obtain additional  funding, it may be required
         to reduce or cease operations.

         Management's plans to improve the Company's  liquidity position include
         raising  additional  capital  through the sale of equity  securities or
         issuance of debt.  During the nine months ended September 30, 2006, the
         Company did not issue any of its shares of common  stock for cash.  The
         Company received  $1,770,000 of cash in exchange for convertible  notes
         payable  to  stockholders  and a line  of  credit  with a  stockholder,
         $110,000 of cash in exchange for notes  payable  from related  parties,
         and $805,000 of cash for international area development rights.

         The accompanying  condensed  consolidated  financial  statements do not
         include   any   adjustments   relating   to  the   recoverability   and
         classification   of  asset   carrying   amounts   or  the   amount  and
         classification  of  liabilities  that  might be  necessary  should  the
         Company be unable to continue as a going concern.

(4)      Acquisition of franchise store
         ------------------------------

         On May 9, 2006, the Company  consummated the acquisition of a franchise
         store from the Business Retail Group, LLC (the "Retail Group") owned by
         Mike Glauser,  the Company's Vice President of Retail  Operations,  and
         his wife. The Company had previously entered into a franchise agreement
         with the Retail Group pursuant to which the Retail Group had opened the
         franchise store.

         The  purchase  price of $172,580  consisted  of cash paid at closing of
         $135,000 and an additional  cash payment of $37,580 upon  determination
         of the net book value of the net assets purchased.

         The  allocation  of the  purchase  price  to the  assets  acquired  and
         liabilities  assumed  based  on  their  estimated  fair  values  was as
         follows:

                                                                Amounts

                                                          -------------------

         Cash acquired                                    $              258
         Other tangible assets acquired                              193,010
         Liabilities assumed                                         (20,688)
                                                          -------------------

                                                          $          172,580
                                                          ===================

         The fair value of the assets  purchased  was  determined to equal their
         net book value due to the short period of time the assets had been held
         by the Retail Group.  The operations of the franchise store  subsequent
         to May 9,  2006  have  been  included  in  the  condensed  consolidated
         financial statements of the Company. This transaction is not a material
         business  combination;  therefore,  no pro forma  results are  required
         under SFAS No. 141, "Business Combinations."


                                       12
<PAGE>

               SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(5)      Inventories
         -----------

         As of September 30, 2006, inventories consist of the following:

                                                             September 30,
                                                                 2006
                                                          ------------------

         Floral products                                  $           15,236
         Non-floral products                                          42,226
         Embossing supplies                                           24,475
         Shipping materials                                            4,277
                                                          ------------------

                Total inventories                         $           86,214
                                                          ==================

(6)      Convertible notes payable to stockholders
         -----------------------------------------

         Development   Loan.   Effective   January  10,  2006,  an  area  rights
         development  deposit  totaling  $788,960,   representing   $750,000  in
         principal  and  $38,960  in  accrued  interest,  was  exchanged  for  a
         convertible note payable to stockholder. The note payable is unsecured,
         bears interest at 12% per annum,  and is convertible into common shares
         of the  Company at the  conversion  rate of $0.50 per common  share.  A
         beneficial  conversion  feature of $362,921 was recorded in  connection
         with the note payable.  Because the note payable is due on demand,  the
         beneficial conversion feature was recognized immediately. On August 28,
         2006,  the note holder  demanded  repayment of by the note. The Company
         has insufficient funds to satisfy this demand.

         Exchange  Agreement.  Effective  as of  February  6, 2006,  the Company
         entered  into an  exchange  agreement  with a  significant  stockholder
         pursuant to which the Company issued the  significant  stockholder  two
         promissory  notes in exchange for and in cancellation of the promissory
         notes the Company issued to the significant stockholder on November 14,
         November  29 and  December  30,  2005.  The  principal  amount of these
         replacement   notes  totaled  $510,356  in  the  aggregate,   and  each
         replacement  note  was  in  the  principal  amount  of  $255,178.   The
         replacement  notes bear interest at an annual rate of 12% and mature on
         December  31,  2006.   The  principal  and  accrued   interest  of  the
         replacement  notes are  convertible  at the option of the holder at any
         time into common shares of the Company at the conversion  rate of $0.50
         per common share, subject to any share splits or reclassifications.

         As  additional  consideration  in exchanging  these notes,  the Company
         agreed  to  issue to the  holder  of the  replacement  notes a total of
         250,000  shares of  unregistered  common stock of the Company,  equally
         apportioned between each replacement note. The fair value of the common
         shares was $200,000 and in accordance  with Emerging  Issues Task Force
         (EITF) Issue 96-19,  the exchange of the notes was considered to result
         in  a  substantially  different  debt  instrument.   Accordingly,   the
         transaction was accounted for as a debt  extinguishment of the original
         notes and the new notes were recorded at fair value.  As of the date of
         extinguishment,  the Company recorded a loss on  extinguishment of debt
         of $98,457.

         The  Company  recorded a  beneficial  conversion  feature  of  $306,213
         related to the replacement notes which will be amortized and recognized
         as interest expense over the life of the replacement notes.



                                       13
<PAGE>
               SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(7)      Convertible line of credit with stockholder
         -------------------------------------------

         On May 11, 2006,  the Company  entered into a line of credit  agreement
         ("Credit  Agreement")  with Dos Lagos,  LLC, a Utah  limited  liability
         company whose sole member is a significant  stockholder and who is also
         a member of the Board of  Directors  ("Lender"),  pursuant to which the
         Company  issued  Lender  a  promissory  note  in  exchange  for  and in
         cancellation  of, the promissory notes the Company issued to the Lender
         on January 10,  February 10,  February 28, March 20, March 29, April 26
         and May 10, 2006. The principal  amount of the replacement note totaled
         $1,287,832  as of May 11,  2006,  which  included  $19,380  in  accrued
         interest  on  the  original  promissory  notes.  The  Credit  Agreement
         establishes  a line of credit for a period  extending  to December  31,
         2006 (the "Maturity Date"), for up to $2 million.  All sums advanced by
         the  Lender to the  Company  on the line of credit or  pursuant  to the
         terms of the Credit Agreement shall become part of the principal of the
         replacement  note and shall bear interest from the date each advance is
         made until paid in full at an interest  rate of ten  percent  (10%) per
         annum.  The principal and accrued  interest of the replacement  note is
         convertible  at the  option  of the  Lender on the  Maturity  Date into
         common shares of the Company at the conversion rate of $0.50 per common
         share.  As  additional  consideration  for  entering  into  the  Credit
         Agreement,  the  Company  agreed  to  issue  to the  Lender  a total of
         1,000,000 shares of unregistered common stock of the Company.  The fair
         value of the common  shares was  $500,000 and in  accordance  with EITF
         Issue No. 96-19,  the exchange of the notes was considered to result in
         a substantially different debt instrument. Accordingly, the transaction
         was accounted for as a debt  extinguishment  of the original  notes and
         the  new  note  was  recorded  at  fair  value.   As  of  the  date  of
         extinguishment,  the Company recorded a loss on  extinguishment of debt
         of $500,000.

         Subsequent to May 11, 2006 when the Credit  Agreement  was  established
         and before September 30, 2006, the Company received additional advances
         pursuant to the Credit Agreement  totaling $680,000  resulting in total
         convertible  notes  payable to the Lender of $1,967,832 as of September
         30, 2006.  As of August 6, 2006,  when the last  advance was made,  the
         total of the sums advanced pursuant to the credit agreement and accrued
         on those sums exceeded the $2 million credit limit, thus exhausting the
         line of credit.

(8)      Stock-based compensation
         ------------------------

         Prior to January 1, 2006, as permitted  under SFAS No. 123, the Company
         accounted  for its stock option plans  following  the  recognition  and
         measurement  principles of Accounting  Principles Board ("APB") No. 25,
         Accounting for Stock Issued to Employees,  and related interpretations.
         Accordingly,  no stock-based compensation expense had been reflected in
         the Company's  statements  of operations as all options  granted had an
         exercise  price  equal  to or  greater  than  the  market  value of the
         underlying  common stock on the date of grant and the related number of
         shares granted was fixed at that point in time.



                                       14
<PAGE>
               SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(8)      Stock-based compensation (continued)
         ------------------------------------

         The Company  adopted  SFAS No.  123R  effective  January 1, 2006.  This
         pronouncement  requires  companies  to  measure  the  cost of  employee
         services  received  in  exchange  for an  award of  equity  instruments
         (typically  stock options)  based on the  grant-date  fair value of the
         award. The fair value is estimated using an  option-pricing  model. The
         resulting  cost is recognized  over the period during which an employee
         is required to provide  service in exchange for the award,  usually the
         vesting  period.  The  Company  adopted  SFAS 123R  using the  modified
         prospective transition method, which is explained below.

         SFAS  123R is  effective  for all  stock  options  the  Company  grants
         beginning  January 1, 2006. For those stock option awards granted prior
         to January 1, 2006,  but for which the vesting  period is not complete,
         the Company used the modified  prospective  transition method permitted
         by SFAS 123R.  Under this method,  the Company accounts for such awards
         on a prospective  basis, with expense being recognized in its statement
         of  operations  beginning  in the  first  quarter  of  2006  using  the
         grant-date  fair  values  previously   calculated  for  its  pro  forma
         disclosures.  The Company will recognize the related  compensation cost
         not  previously  recognized  in the  pro  forma  disclosures  over  the
         remaining vesting period. The Company's stock options typically vest in
         equal annual  installments  over a service  period.  Expense related to
         each portion of an option grant is recognized over the specific vesting
         period for those stock options.

         The fair value of stock options is determined at the grant date using a
         Black-Scholes  option-pricing model, which requires the Company to make
         several  assumptions.  The  risk-free  interest  rate is  based on U.S.
         Treasury  interest  rates.  The dividend yield on the Company's  common
         stock is assumed to be zero since the  Company  does not pay  dividends
         and has no  current  plans to do so in the  future.  The  market  price
         volatility  of the  Company's  common stock is based on the  historical
         volatility  of the stock.  The expected life of the options is based on
         the  Company's  historical  experience  of stock  option  exercise  and
         employee  termination  within the valuation  model;  separate groups of
         employees that have similar historical exercise behavior are considered
         separately  for  valuation  purposes.  The Company also  estimates  the
         expected rate of stock option  forfeitures  separately for officers and
         directors  and for  employees  based on the  historical  experience  of
         options forfeiture in each class of employee and the difference between
         the  Company's  stock price as of  September  30, 2006 and the weighted
         average exercise price of outstanding options as of that date.

         The following table  summarizes  stock option activity  pursuant to the
         Company's  2004 Speaking  Roses Equity  Incentive Plan (the "Plan") for
         the nine months ended  September  30, 2006.  Under the Plan,  5,000,000
         shares of the Company's  common stock are available for issuance.  With
         one exception,  options  outstanding and exercisable  were granted at a
         stock option price which was not less than the fair market value of the
         Company's common stock on the date the option was granted and no option
         has a term in excess of ten years. The Company made one option grant of
         150,000 shares to the Company's former Chief Executive Officer pursuant
         to a separation agreement with an exercise price of $.25 per share on a
         day when the  Company's  common  stock  closed at $.45 per  share.  All
         options  vested and became  exercisable  either on the date of grant or
         commencing either six or 12 months from the option grant date.


                                       15
<PAGE>
               SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(8)      Stock-based compensation (continued)
         ------------------------------------
<TABLE>
<CAPTION>

                                                                        Weighted Average
                                                    Weighted Average    Contractual Life      Aggregate
                                    Options         Exercise Price          in Years       Intrinsic Value*
                                    -------         ----------------    ----------------   ----------------
<S>                                 <C>                     <C>                 <C>             <C>
Outstanding, December 31, 2005      1,450,000        $      1.32

    Granted                         1,580,000               0.53
    Exercised                               -                  -
    Canceled                       (1,045,000)              1.10
                 -------
                 -------

Outstanding, September 20, 2006     1,985,000               0.81                9.10            $      -

Exercisable, September 30, 2006       905,000               0.99                8.69                   -

</TABLE>

         * The  intrinsic  value of a stock  option  is the  amount by which the
         market value of the underlying  stock exceeds the exercise price of the
         option.  The market value of the Company's stock was $0.16 per share as
         of September 30, 2006.

         The  weighted-average  fair value of options  granted  during the third
         quarter  of 2006 was  determined  to be $0.18,  based on the  following
         weighted-average assumptions:

                Dividend yield                              --
                Expected volatility                        172%
                Risk-free interest rate                    4.7%
                Expected life of option (years)            6.0



         The following  table  summarizes  the range of exercise  prices and the
         weighted average remaining  contractual life of the options outstanding
         and the range of  exercise  prices for the  options  exercisable  as of
         September 30, 2006:

                       Options Outstanding                Options Exercisable
             -------------------------------------    -------------------------
                                        Weighted                    Weighted
                          Remaining     Average                     Average
Exercise     Options     Contractual    Exercise     Options        Exercise
 Prices    Outstanding   Life (Years)    Price     Exercisable       Price
--------   -----------   ------------   ---------  -----------      --------

$  0.19      400,000         9.98       $ 0.19              -        $ 0.19
   0.25      150,000         9.68         0.25        150,000          0.25
   0.70      615,000         9.41         0.70        100,000          0.70
   0.71      300,000         8.56         0.71        300,000          0.71
   1.50       50,000         8.85         1.50         12,500          1.50
   1.60      300,000         8.15         1.60        300,000          1.60
   1.70      170,000         8.06         1.70         42,500          1.70
           ---------                                  -------

           1,985,000                                  905,000
           =========                                  =======

Weighted Average             9.10         0.81                         0.99





                                       16
<PAGE>
               SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(8)      Stock-based compensation (continued)
         ------------------------------------

         Stock based  compensation  expense  recognized  under SFAS 123R for the
         three months ended  September 30, 2006  increased  wages,  salaries and
         benefits  expense  and net loss by  $62,452,  or  $0.002  per basic and
         diluted  share,  and by $459,541,  or $.015 per basic and diluted share
         for the nine months ended September 30, 2006.  There was no stock-based
         compensation  expense  capitalized  as of  September  30,  2006.  As of
         September  30,  2006,  $342,593  of  compensation  expense  related  to
         unvested stock options and warrants  attributable to future performance
         had not yet been recognized.  This amount will be recognized in expense
         over a weighted-average period of 1.5 years.

         SFAS  123R  requires  the  benefits  of tax  deductions  in  excess  of
         recognized compensation expense to be reported as financing cash flows,
         rather than as an operating  cash flows as  prescribed  under the prior
         accounting rules. This requirement reduces net operating cash flows and
         increases net financing  cash flows in periods  after  adoption.  Total
         cash flows remain  unchanged  from what would have been reported  under
         prior accounting rules.

         Prior to the  adoption  of SFAS No.  123R,  the  Company  followed  the
         intrinsic value method in accordance with APB No. 25 to account for its
         employee  stock  options.  Accordingly,  no  compensation  expense  was
         recognized  for employee stock options  granted in connection  with the
         issuance of stock  options  under the Plan for  periods  ended prior to
         January 1, 2006. The adoption of SFAS No. 123R primarily  resulted in a
         change  in the  Company's  method  of  recognizing  the  fair  value of
         share-based compensation.  Specifically,  the adoption of SFAS No. 123R
         will result in the recording of compensation expense for employee stock
         option rights.

         The following  table  illustrates  the pro forma effect on net loss and
         net loss per common  share for the three  months and nine months  ended
         September 30, 2005 had the Company  applied the fair value  recognition
         provisions of SFAS No. 123:

                                             Three Months       Nine Months
                                                 Ended            Ended
                                             September 30,     September 30,
                                                 2005              2005
                                           -----------------------------------
Net loss as reported                        $  (1,125,109)    $    (3,421,802)
Deduct total stock-based employee
   compensation expense determined under
   SFAS 123, net of tax in 2005                   (40,680)           (109,352)
                                           -----------------------------------

Pro forma net loss                          $  (1,165,789)    $    (3,531,154)
                                           ===================================

Net loss per common share (basic
 and diluted):
   As reported                              $       (0.04)    $         (0.12)
   Pro forma                               ===================================
                                            $       (0.04)    $         (0.13)
                                           ===================================




                                       17
<PAGE>

               SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(9)      Commitments and contingencies
         -----------------------------

         On May 26, 2006, John W.  Winterholler  tendered his resignation as the
         Chief Executive  Officer of the Company,  effective as of June 1, 2006.
         In  connection  with  his  resignation,  the  Company  entered  into  a
         separation  agreement  with Mr.  Winterholler  and provided him with 13
         months of base salary, which amounts to $162,500, payable in accordance
         with the Company's  standard payroll  practices and subject to required
         withholdings and certain  insurance  benefits.  The entire $162,500 was
         recorded as compensation expense during the three months ended June 30,
         2006.  Of this amount,  $112,500  remained as an accrued  expense as of
         September 30, 2006.

(10)     Related party transactions
         --------------------------

         On September 18, 2006,  the Company  issued 100,000 shares of its $.001
         par value common stock to the  Company's  new Chief  Executive  Officer
         ("CEO") as partial  compensation  for the CEO's  agreement  to serve in
         that capacity.

         For the three months  ended  September  30, 2006 and 2005,  the Company
         paid management and consulting fees and other expenses totaling $57,023
         and $14,669, respectively, and $172,306 and $73,497 for the nine months
         ended September 30, 2006 and 2005, respectively,  to related parties or
         to companies controlled by affiliates of certain principal stockholders
         of the  Company.  As of  September  30,  2006,  the Company had amounts
         payable to those entities totaling $13,298 recorded in accounts payable
         and  an  additional  $216,524  recorded  in  accrued  interest.  As  of
         September 30, 2006, the Company has accounts receivable from the son of
         a member of the  board of  directors  totaling  $15,734  pursuant  to a
         franchise agreement representing expenses for franchise store equipment
         and supplies.

         Debt  Arrangements.  As of  September  30,  2006,  the  Company  has an
         unsecured  demand note payable to Mr. Bob Warfield,  who is a member of
         the Company's Board of Directors,  with a principal amount of $250,000.
         The note bears simple interest at an annual rate of 8%.

         As of September 30, 2006, the Company has demand notes  payable,  which
         are unsecured,  to Mr. Blaine Harris,  who is the Company's Chairman of
         the Board of Directors,  with principal amounts totaling $195,526.  The
         notes bear simple interest at an annual rate of 8%.

         As of September 30, 2006, the Company has a convertible  line of credit
         with Dos Lagos, LLC, a Utah limited liability company whose sole member
         is Mr. Roland N. Walker, a significant stockholder who is also a member
         of the Board of Directors,  with a principal amount of $1,967,832.  The
         note is unsecured  and bears  simple  interest at an annual rate of 10%
         (see Note 7). The Company  also has  unsecured  notes  payable with Dos
         Lagos, LLC with principal  amounts totaling  $80,000.  These notes bear
         simple interest at 10% and are due upon demand.



                                       18
<PAGE>
               SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(10)     Related party transactions (continued)
         --------------------------------------

         As of  September  30,  2006,  the Company has a demand note  payable to
         Terrell A. Lassetter,  who was the Company's Chief Executive Officer at
         the time of issuance,  with a principal amount of $30,000. This note is
         unsecured and bears simple interest at an annual rate of 10%.

         As of September 30, 2006, the Company has convertible  notes payable to
         Mr.  Steven F. Hanson,  who owns more than 5% of the  Company's  common
         stock  with  principal  amounts  totaling  $1,044,137.  The  notes  are
         unsecured and bear simple interest at an annual rate of 12%. The holder
         of the notes may  convert  any  portion of the  principal  and  accrued
         interest for shares of the Company's common stock at $0.50 per share at
         any time prior to payment (see Note 6). On August 28, 2006, the Company
         received a letter from Mr.  Hanson  demanding  payment of the principal
         and accrued interest of the note payable.  The Company has insufficient
         funds to satisfy this demand.

         For the three and nine  months  ended  September  30,  2006,  the total
         amount  of  interest   expense  paid  to  or  accrued  for  loans  from
         stockholders was $95,914 and $228,710, respectively.

         Franchise  Agreement.  The Company  entered into a franchise  agreement
         with T. A. Lassetter,  Jr. who is the son of Ted Lassetter, a member of
         the  Company's  Board of  Directors,  the chairman of the  Compensation
         Committee  of the  Board,  and the  Company's  acting  Chief  Financial
         Officer. The franchise agreement allows the franchisee to open a retail
         store under the Speaking Roses name using the Company's technology. The
         Company will receive  continuing  royalties from the store and will act
         as the wholesaler of floral and other products to the store. The retail
         store opened in July 2006. The Company's Board of Directors  determined
         to waive the franchise fee for this franchise agreement.

         Additionally,  the Company's Board of Directors has determined to waive
         the  franchise  fee for any  director  who  chooses  to open a Speaking
         Roses' franchise store, for up to 10 stores.

         Franchise and Area  Development  Agreements.  The Company  acquired the
         area development  rights  described in the Area  Development  Agreement
         (the  "Development  Agreement")  with Business  Retail Group,  LLC (the
         "Retail Group") owned by Mike Glauser,  the Company's Vice President of
         Retail Operations,  and his wife. The Development  Agreement  permitted
         the area developer to refer potential franchisees to the Company and to
         share in any  franchise  fees  paid by  franchisees  in Utah and  Clark
         County,  Nevada.  The Company  granted the Retail Group these rights in
         exchange for research and development  consulting  services provided to
         the Company  for its retail  expansion.  During the nine  months  ended
         September  30,  2006,  the  Company  also  purchased  all of the Retail
         Group's  rights,   title  and  interest  in  the  business  and  assets
         comprising  the operations of the franchise  store thereby  terminating
         the franchise agreement as described in Note 4.

         Sales and Marketing.  During the three months ended September 30, 2006,
         the Company retained Chad Harris as an independent contractor to manage
         its sales and  marketing  activities.  Mr.  Harris is the son of Blaine
         Harris, the Company's Chairman of the Board of Directors.

                                       19
<PAGE>
               SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(11)     Subsequent events
         -----------------

         Promissory  Notes. On October 12, 2006, the Company issued a promissory
         note to Roland N.  Walker  ("Walker"),  a director  of the  Company and
         significant  shareholder,  for  $82,000 of cash  proceeds.  The note is
         unsecured and bears  interest at an annual rate of 10%, and is due upon
         demand.

         On October 30, 2006,  the Company  issued a promissory  note to Walker,
         which is secured by certain intellectual property, for $181,000 of cash
         proceeds. The note bears interest at an annual rate of 10%, and matures
         on February 1, 2007.




















                                       20
<PAGE>

                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY


Item 2.  Management's Discussion and Analysis or Plan of Operations

This Management's  Discussion and Analysis or Plan of Operations ("MD&A") should
be read  in  conjunction  with  our  interim  condensed  consolidated  financial
statements and notes thereto which appear elsewhere in this Quarterly Report and
the MD&A contained in our Annual Report on Form 10-KSB filed with the Securities
and Exchange  Commission (the "SEC") on April 3, 2006. The following  discussion
contains forward-looking  statements and should also be read in conjunction with
"Forward-looking  statements"  below.  All  amounts  presented  in the  MD&A are
rounded to the nearest thousand dollars.

Overview

We own  patented and other  proprietary  technology  used to emboss  flowers and
other products.  The technology allows end users to request  personalized floral
arrangements  using  standardized or unique  messages,  logos,  trademarks,  and
pictures. In addition to our own production, we have licensed that technology to
large  wholesale  flower  concerns  and other  parties  to  perform  the  actual
embossing  of  flowers.  In the United  States,  we sell  embossed  flowers  and
bouquets  containing  embossed  flowers  directly  to  individuals,  businesses,
florists,  chain stores,  funeral  homes and large  wedding and corporate  event
planners  with  production  and  fulfillment  primarily  provided  by us  and by
licensed wholesale flower providers.

We have recently  developed a retail  distribution model and have begun to offer
area development and franchise rights for sale in those  jurisdictions  which do
not require  regulatory  approval.  In order to improve our retail  distribution
model,  during the nine months ended September 30, 2006, we purchased the assets
of our first  franchise  store and entered into an agreement with an operator of
grocery stores to manage the floral  operations of one of its stores in exchange
for store rent based on the gross floral sales of the store. We intend to pursue
similar  agreements with this and other  comparable  operators in support of our
retail distribution  outlets. We have also licensed the technology and equipment
to exclusive  licensees in  international  markets and we are beginning to offer
area development and franchise rights for sale internationally.

Set forth below are comparisons of financial statement information for the three
and nine months ended September 30, 2006 and September 30, 2005. Interim results
are not necessarily indicative of results for future quarters or the full fiscal
year.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements have been prepared in accordance
with U.S.  generally accepted  accounting  principles and form the basis for the
following discussion and analysis on critical accounting policies and estimates.
The preparation of these financial  statements requires us to make estimates and
assumptions  that affect the reported amounts of assets,  liabilities,  revenues
and expenses, and related disclosure of contingent assets and liabilities.  On a
regular basis we evaluate our estimates and  assumptions.  We base our estimates
on historical  experience and on various other  assumptions that are believed to
be reasonable under the  circumstances,  the results of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent from other  sources.  Actual results may differ from these
estimates under different assumptions or conditions.



                                       21
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                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY



A summary of our  significant  accounting  policies  is  provided  in our annual
report on Form  10-KSB for the year ended  December  31,  2005.  We believe  the
critical  accounting  policies and  estimates  described  below reflect our more
significant  estimates and assumptions  used in the preparation of our condensed
consolidated financial statements.

Revenue recognition - The Company recognizes revenue from direct sales of floral
products and supplies,  the sale of license  agreements  and related  equipment,
royalties related to licensing agreements,  the sale of area development rights,
and the sale of franchises.

         Direct Product Sales
         Revenue from direct product sales is recognized when the following four
         revenue   criteria   (as  defined  by  the   Securities   and  Exchange
         Commission's  (SEC's) Staff Accounting Bulletin (SAB) No. 104) are met:
         (1)  persuasive  evidence of an  arrangement  exists;  (2) products are
         shipped and the customer takes  ownership and assumes the risk of loss;
         (3) the selling price is fixed or determinable;  and (4) collectibility
         is reasonably assured.  The Company uses domestic floral wholesalers to
         emboss,   fulfill  and  distribute   its  direct  product  sales.   The
         wholesalers  emboss and fulfill orders using the Company's  proprietary
         technology and equipment.  Under these  fulfillment  arrangements,  the
         Company is the primary  obligor,  assumes  inventory risk upon customer
         return,   establishes  price,  provides  embossing  specifications  and
         techniques and assumes credit risk. As a result, and in accordance with
         Emerging Issues Task Force (EITF) No. 99-19,  "Reporting  Revenue Gross
         as a Principal versus Net as an Agent," the Company  recognizes revenue
         on a gross basis for direct product  sales.  Gross sales are reduced by
         returns, charge backs and other discounts.

         The Company  also has  agreements  with some  wholesalers  in which the
         Company  does not act as the  primary  obligor  and does not assume the
         inventory risk or establish pricing for the product. In accordance with
         EITF No.  99-19,  revenue  from these  wholesaler  originated  sales is
         recognized as commission revenue when the revenue recognition  criteria
         as  defined  in SAB No.  104 are met.  Under  these  arrangements,  the
         wholesalers  initiate sales to their  customers,  are  responsible  for
         collections and have a risk of loss of inventory.  Commission  revenues
         are reduced accordingly for returns, charge backs and discounts.

         License Agreements and Related Equipment and Support
         The Company  enters into  license  agreements  in which it licenses its
         patented technology, leases or sells the equipment necessary to utilize
         the technology, and provides customer support related to the equipment.
         The  sale  of  the  licensed  technology,  together  with  the  related
         equipment and support is considered a revenue arrangement with multiple
         deliverables  under EITF Issue No. 00-21,  "Revenue  Arrangements  with
         Multiple  Deliverables."  In accordance with EITF No. 00-21,  fees from
         the sale of licensing  agreements  including  customer  support and the
         lease or sale of the related  equipment,  are  initially  deferred  and
         subsequently  recognized as revenue on a  straight-line  basis over the
         life of the agreement beginning on the commencement date of the license
         agreement.  The terms of these  non-cancelable  license  agreements are
         generally 2 to 4 years, although some terms are as long as 10 years.

                                       22
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                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY



         In certain  circumstances,  mainly with  international  licensees,  the
         Company  enters into  non-cancelable  license  agreements  that grant a
         license to the  technology,  provide the  equipment  and  support,  and
         provide exclusive rights to distribute imprinted floral products within
         a geographical  region.  Fees from these licensing  agreements are also
         recognized in accordance with EITF No. 00-21 and are recorded initially
         as deferred revenue and recognized as revenue on a straight-line  basis
         over the lives of the agreements.

         Royalty Fees
         In connection  with the license  agreements,  the Company also receives
         royalties  on  the  sales  of  all  imprinted  flowers.  Royalties  are
         recognized as earned in accordance with SAB No. 104 and EITF No. 99-19.

         Franchise Fees
         The Company recognizes  franchise fee revenue when earned in accordance
         with SFAS No. 45, "Accounting for Franchise Fee Revenue." Franchise fee
         revenue is recognized when all material services or conditions relating
         to the  sale  of a  franchise  have  been  substantially  performed  or
         satisfied by the Company,  which generally occurs upon the commencement
         of  franchise  operations.  The  Company's  agreements  with  the  area
         developers  generally require a portion of the franchise fee to be paid
         to the area  developer.  Any portion of the  franchise  fee paid to the
         area developer is recorded as a reduction to the franchise fee revenue.

         Sale of Area Development Rights
         Revenues  from the sale of area  development  rights are  deferred  and
         recognized  proportionately  based on the  number  of  franchises  sold
         compared  to the total  franchises  expected to be sold as set forth in
         each area developer's agreement with the Company.  Franchise royalties,
         which  are based on a  percentage  of  franchised  stores'  sales,  are
         recognized as earned.

         Sales-Type Lease Revenue
         Revenue  attributable to sales-type  leases is recognized over the term
         of the lease agreement in accordance with SFAS No. 13,  "Accounting for
         Leases," as amended.

Stock-based  compensation - The Company adopted SFAS No. 123R effective  January
1, 2006. This  pronouncement  requires companies to measure the cost of employee
services  received in  exchange  for an award of equity  instruments  (typically
stock options) based on the grant-date  fair value of the award.  The fair value
is estimated using option-pricing  models. The resulting cost is recognized over
the period  during which an employee is required to provide  service in exchange
for the award,  usually the vesting period.  The Company adopted SFAS 123R using
the modified prospective transition method, which is explained below.



                                       23
<PAGE>
                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY



SFAS 123R is  effective  for all stock  options  the  Company  grants  beginning
January 1, 2006. For those stock option awards granted prior to January 1, 2006,
but for which the vesting period is not complete,  the Company used the modified
prospective  transition  method permitted by SFAS 123R.  Under this method,  the
Company  accounts for such awards on a  prospective  basis,  with expense  being
recognized in its statement of operations beginning in the first quarter of 2006
using  the  grant-date  fair  values  previously  calculated  for its pro  forma
disclosures.  The  Company  will  recognize  the related  compensation  cost not
previously  recognized in the pro forma  disclosures over the remaining  vesting
period. The Company's stock options typically vest in equal annual  installments
over a service  period.  Expense  related to each  portion of an option grant is
recognized over the specific vesting period for those stock options.

The fair  value  of stock  options  is  determined  at the  grant  date  using a
Black-Scholes  option pricing model,  which requires the Company to make several
assumptions.  The  risk-free  interest rate is based on U.S.  Treasury  interest
rates.  The dividend  yield on the Company's  common stock is assumed to be zero
since the Company does not pay  dividends  and has no current  plans to do so in
the future.  The market price  volatility of the Company's common stock is based
on the historical  volatility of the stock.  The expected life of the options is
based on the  Company's  historical  experience  of stock  option  exercise  and
employee  termination  within the valuation model;  separate groups of employees
that have similar  historical  exercise  behavior are considered  separately for
valuation purposes. The Company also estimates the expected rate of stock option
forfeitures separately for officers and directors and for employees based on the
historical  experience  of options  forfeiture in each class of employee and the
difference  between the  Company's  stock price as of September 30, 2006 and the
weighted average exercise price of outstanding options as of that date.

Results of Operations

Sales
-----

Sales for the three and nine months ended  September  30, 2006 were $341,000 and
$1,210,000,  respectively,  compared to sales of $263,000 and $1,070,000 for the
same periods in the prior year.  Product  (flower)  sales were  $831,000 for the
nine months ended  September 30, 2006 and $897,000 for the comparable  period in
2005.  License fees and other  revenue  were  $353,000 for the nine months ended
September  30, 2006 and $142,000 for the  comparable  period in 2005.  Royalties
were  $26,000 for the nine months ended  September  30, 2006 and $32,000 for the
nine months ended  September 30, 2005. The decrease of $66,000 in product sales,
the increase of $211,000 in license fees and other revenue,  and the decrease of
$6,000  in  royalties  for  the  two  comparable   nine-month  periods  are  all
attributable  to our  increasing  emphasis on  licensing  and  franchising  both
domestically and  internationally  while striving to sustain and grow our direct
product sales,  even though we have allocated  proportionately  fewer  resources
toward that effort.

During the nine months ended  September  30,  2006,  we entered into several new
international  license  agreements.  In  each  case,  the  licensee  paid  us  a
non-cancelable fee and was granted a license to use our technology to distribute
imprinted floral products within a geographical  region for initial periods of 2
to 4 years.  Revenue for these license  agreements is initially  deferred and is
recognized  over the life of the license  agreement.  These  agreements  provide
licenses  with respect to the  countries  of South  Africa,  Namibia,  Botswana,
Swaziland, Lesotho, Zimbabwe,  Mozambique, Spain, Portugal, India, Kenya, Russia
and Singapore.


                                       24
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                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY



Cost of goods sold
------------------

Cost of goods sold for the three and nine months ended  September  30, 2006 were
$230,000 and $889,000,  respectively,  compared to $196,000 and $925,000 for the
same  periods in the prior  year.  Cost of goods  sold  consisted  primarily  of
purchases of roses and the labor and supplies necessary to emboss and ship them.
The overall  decrease in cost of goods sold for the two  comparative  nine-month
periods is attributable  to the decrease in product sales discussed  previously.
The ratio of cost of goods  sold as a  percentage  of  product  sales  increased
between the two comparative  three-month periods and between the two comparative
nine-month periods. The unfavorable ratio is much higher than our targets due to
the fact that we have  invested in  production  capability  anticipating  higher
sales which have not materialized as projected.

General and administrative
--------------------------

General  and  administrative  expenses  for the  three  and  nine  months  ended
September  30, 2006 were  $389,000  and  $2,217,000,  respectively,  compared to
$450,000 and  $1,248,000 for the same periods in the prior year. The increase in
general and  administrative  expenses when comparing the two nine-month  periods
totals  $969,000.  The  majority  of  this  increase  consists  of  $480,000  of
compensation  expense due to our adoption of SFAS No. 123R which  requires us to
expense the fair value of stock  options  granted to  employees  in exchange for
employee  services  (previously,  we had not  recognized  such  expense  but had
provided disclosure on a pro forma basis);  $162,000 in severance expense to our
former chief executive  officer;  $98,000  increase in consulting and legal fees
incurred  in support  of our  increasing  focus on  franchising  and  retailing;
$66,000  increase due to an increase in our executive staff payroll  including a
new  president and chief  executive  officer,  chief  financial  officer,  chief
operating officer; and $60,000 in increased auditing fees due to a change in our
independent registered public accounting firm.

Sales and marketing
-------------------

Sales and marketing  expenses for the three and nine months ended  September 30,
2006 were  $344,000  and  $1,002,000,  respectively,  compared to  $315,000  and
$1,387,000  for the same  periods in the prior year.  The  decrease in sales and
marketing  expenses between the two comparative  nine-month  periods is due to a
reduction in our sales and  marketing  personnel and other  associated  expenses
which  were  not  expected  to  benefit  us in the  execution  of our  retailing
strategy.  The decrease in direct  product sales is partly  attributable  to the
decrease in these expenses as we have shifted the focus of our sales efforts.




                                       25
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                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY



Research and development
------------------------

Research and development  expenses for the three and nine months ended September
30,  2006 were  $8,000 and  $65,000,  respectively,  compared  to  $414,000  and
$461,000,  respectively, for the same periods in the prior year. The decrease in
research  and  development  expenses  for the three and  nine-month  comparative
periods is due to a significant  investment in research and development expenses
incurred during 2005 associated with the development of the Company's  retailing
strategy.

Other income (expense)
----------------------

Other  expense  for the three  and nine  months  ended  September  30,  2006 was
$177,000  and  $1,412,000,  respectively,  compared  to  $11,000  and  $469,000,
respectively,  for the same  periods in the prior  year.  The  increase in other
expense   for  the   nine-month   comparative   periods  is  due  to  losses  on
extinguishment  of debt,  significantly  increased  interest  expense due to the
increased interest bearing debt that the Company has incurred,  the recording of
beneficial  conversion  features  associated with the  restructuring  of certain
loans  payable  to  shareholders,  the  amortization  of  beneficial  conversion
features  recorded in earlier  periods,  and the recognition of interest expense
for a  beneficial  conversion  feature  associated  with  the  exchange  of area
development rights deposits for a note payable.

Net loss
--------

Our net loss for the three and nine months ended September 30, 2006 was $807,000
or $.03 per common share, and $4,376,000 or $.15 per common share, respectively,
compared to  $1,125,000  or $.04 per common  share,  and  $3,422,000 or $.12 per
common  share,  for the same periods in the prior year.  The increase in our net
loss for the  nine-month  comparative  periods  is due  primarily  to  increased
interest expense and losses on extinguishment of debt as discussed previously.

Liquidity and Capital Resources

Cash
----

We had cash of $40,000 held in demand  deposits as of September 30, 2006 to fund
operations and capital expenditures. We will require additional financing. If we
acquire that funding  through the issuance of equity or convertible  securities,
our shareholders may experience  dilution in the value per share of their equity
securities.  If we acquire  the  funding  through  the  issuance  of debt,  that
financing could result in a substantial portion of our cash flows from operating
activities,  if any, being dedicated to the payment of principal and interest on
that indebtedness,  and could render us more vulnerable to competitive pressures
and economic downturns. We can give no assurances that we will be able to obtain
additional  financing,  either  through  debt  or  equity,  on  terms  that  are
acceptable  to us,  or at  all.  Accordingly,  unless  we are  able  to  operate
profitably,  we can  give no  assurance  that we  have or will  have  sufficient
capital  resources  or  liquidity  to  satisfy  working  capital  and  operating
requirements.

                                       26
<PAGE>
                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY



Cash flows
----------

Cash flows used in operating  activities were  $(1,564,000) and $(1,536,000) for
the nine months ended  September  30, 2006 and 2005,  respectively.  Because our
operating cash flows are currently insufficient to fund our operations,  we have
relied on funding from our directors and stockholders, as described below.

Capital expenditures
--------------------

Capital  expenditures  totaled  $274,000 for the nine months ended September 30,
2006,  up from $187,000 for the nine months ended  September  30, 2005.  Capital
expenditures  during the nine months ended September 30, 2006 were primarily for
computer  equipment,  computer  software,  furniture  and  fixtures,  patent and
trademark  applications  and the purchase of the franchise store as described in
Note 4 of the condensed consolidated financial statements presented in this Form
10-QSB.

Financing
---------

As of the date of this Form 10-QSB, we have been unable to obtain financing from
external sources under terms which we deem to be reasonably acceptable,  and the
revenues  generated from our operations are  insufficient for our current needs.
Consequently,  certain of our directors and shareholders  have extended debt and
convertible  debt financing to us as described in Notes 6 and 7 to our condensed
consolidated financial statements. During the three months ended March 31, 2006,
we  received  $740,000 in loans from a member of the Board of  Directors  who is
also a significant  stockholder  (the  "Lender").  During the three months ended
June 30, 2006,  we received an additional  $650,000 from the Lender.  During the
three months ended  September 30, 2006, we received an additional  $460,000 from
the Lender.  The total of  $1,850,000 in new loans to the Lender during the nine
months ended September 30, 2006 has materially increased the amount of our total
debt. The Lender has only agreed to advance minimal additional amounts,  but not
enough to satisfy our needs. Consequently, we will need to obtain financing from
other sources if we are to continue as a going concern.

The need for that  additional  financing  is  critical  given our  minimal  cash
balance and our high levels of debt including a convertible  line of credit with
a stockholder  of  $1,968,000,  notes  payable of $100,000,  related party notes
payable  of  $579,000,   and  convertible   notes  payable  to  stockholders  of
$1,158,000.  Of these amounts,  $1,434,000 is due on demand. On August 28, 2006,
the  Company  received  a letter  from a note  holder  demanding  payment of the
principal  and accrued  interest of a note payable (see Note 6). The Company has
insufficient funds to satisfy this or any other demand.

The total amount and nature of notes  payable,  convertible  line of credit with
stockholder,  related  party notes  payable,  and  convertible  notes payable to
stockholders  as described in this Form 10-QSB has  significantly  increased our
total debt and will likely  negatively  affect our  ability to raise  additional
funds.  While  we are  attempting  to  obtain  additional  commitments  from our
directors,  certain  shareholders  and other outside parties to continue to fund
our operations  beyond those  commitments  described herein, no assurance can be
given nor relied upon that we will be able to obtain such  commitments  on terms
and conditions  reasonably  acceptable to us or that we will be able to continue
to operate as a going concern. Our expenses continue to exceed our revenues by a
significant margin.  Accordingly,  unless we are able to operate profitably,  we
can give no assurance that we have or will have sufficient  capital resources or
liquidity to satisfy working capital and operating requirements.

                                       27
<PAGE>
                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY



We have not achieved  quarterly or annual  profits as either SRII or as Speaking
Roses,  LLC. Our ability to continue as a going  concern is  dependent  upon our
ability to generate  future profits and to generate  sufficient  capital to meet
our  obligations  as they come due.  During the nine months ended  September 30,
2006,  we incurred a net loss of  $4,376,000.  Net cash flows used in  operating
activities during the nine months ended September 30, 2006 were $1,564,000.  The
above factors raise  substantial doubt that the Company will be able to continue
as a going concern.

Estimated  capital  expenditures for the three months beginning  October 1, 2006
are  approximately  $75,000.  We believe we will be able to minimize our capital
and  operating  spending  in the future by varying  the extent of our  licensing
activities, hiring practices,  geographical expansion, and marketing activities.
If we elect to slow the speed, or narrow the focus, of our business plan, we may
be able to reduce our capital  expenditures  and losses.  Our actual  ability to
execute our proposed business plan will depend on a number of factors including:

         o    the acceptance of our floral embossing process in the market place
              at profitable prices;

         o    the success of our retail business strategy;

         o    our ability to protect our intellectual property;

         o    our ability to continue to raise capital; and

         o    factors  over  which  we  have  little  or  no  control,  such  as
              regulatory  changes,  changes  in  technology,  failures  by third
              parties  to meet  their  contractual  obligations  or  significant
              changes in the competitive environment in which we operate.

Our actual costs and revenues can vary from the amounts that we expect or budget
in our business plan,  possibly  materially,  and those variations are likely to
affect our ability to generate a profit and our need for  additional  financing.
Accordingly,  we can give no assurance  that our actual debt and equity  capital
needs  will  not  exceed  the  anticipated  amounts  that are  available  to us,
including from our  affiliates,  directors,  and  stockholders,  and new outside
parties.

The unaudited condensed  consolidated  financial statements included herein have
been prepared assuming we will continue as a going concern,  which  contemplates
the  realization  of assets and the  satisfaction  of  liabilities in the normal
course of business.

The above factors raise  substantial doubt that we will be able to continue as a
going concern. The unaudited condensed  consolidated financial statements do not
include any adjustments  relating to the  recoverability  and  classification of
asset carrying  amounts or the amount and  classification  of  liabilities  that
might be necessary should we be unable to continue as a going concern.

                                       28
<PAGE>
                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY



Forward-looking statements

This report includes  forward-looking  statements  within the meaning of Section
27A of the  Securities  Act and Section 21E of the  Securities  Exchange  Act of
1934, as amended (the "34 Act"). Although we believe our expectations  regarding
future  events  are based on  reasonable  assumptions  within  the bounds of our
knowledge,   these   forward-looking   statements   are  subject  to  risks  and
uncertainties  that  could  prevent  our goals from  being  achieved.  Important
factors that could cause actual results to differ  materially  from those in the
forward-looking  statements include the effects of competition,  legislative and
regulatory  developments,  conditions of the capital  markets and equity markets
and, in general,  our ability to achieve the goals  described  in this report as
well as other factors contained in other cautionary  statements included in this
report.

Certain  statements  contained in this  report,  including  without  limitation,
statements   containing   the   words   "may,"   "will,"   "expects,"   "plans,"
"anticipates,"  "believes," "intends," "estimates,"  "projects," "potential," or
"continue" and similar types of expressions  identify such statements,  although
not  all   forward-looking   statements   contain   these   identifying   words.
Forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors that may cause our actual results,  performance or achievements to
be materially  different from any future  results,  performance or  achievements
expressed   or  implied  by  the   forward-looking   statements.   Those  risks,
uncertainties and other factors include, among others, the following:

         o    our  ability  to develop a  presence  in the  market  and  sustain
              profitable operations;

         o    the acceptance by the public of our product and retail concept;

         o    the availability  and terms of the additional  capital required to
              fund our operations as needed;

         o    performance by third parties of their  contractual  obligations to
              us;

         o    our ability to manage growth and retail operations;

         o    technological changes; and

         o    competitive factors.

All  forward-looking  statements speak only as of the date of this report. We do
not undertake any  obligation to update or revise  publicly any  forward-looking
statements, whether as a result of new information,  future events or otherwise.
Although we believe that the plans,  intentions and expectations reflected in or
suggested by the forward-looking  statements made in this report are reasonable,
we can give no assurance  that such plans,  intentions or  expectations  will be
achieved. Given these uncertainties,  prospective investors are cautioned not to
place undue reliance on such forward-looking  statements.  Readers and potential
investors should  carefully  review the risk factors  described in this document
and in other  documents that Speaking Roses  International,  Inc. and subsidiary
files from time to time with the Securities and Exchange Commission,  including,
but not limited to, our annual report on Form 10-KSB for the year ended December
31, 2005.

                                       29
<PAGE>
                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY



Item 3. Controls and Procedures

In accordance with the rules  promulgated  under the Securities  Exchange Act of
1934, our management has evaluated,  with the participation of our president and
Chief   Executive   Officer  and  our  acting  Chief  Financial   Officer,   the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures  (as defined in Rule  13a-15(e)  under the 1934 Act) as of the end of
the fiscal quarter ended September 30, 2006 ("the Evaluation Date").  Based upon
our  evaluation  of  these  disclosure  controls,  at the  Evaluation  date,  we
concluded  that our  disclosure  controls and  procedures  are not  effective to
ensure that  information  required to be  disclosed  in the reports that we file
under the 1934 Act is recorded,  processed,  summarized and reported  within the
time  periods  specified  by the  SEC's  rules  and  regulations.  Based on this
evaluation,  we concluded  that our  disclosure  controls and procedures are not
effective due to: 1) adjustments  required to correct the accounting for certain
debt and equity  transactions  which was also noted and previously  disclosed in
our annual  report on Form 10-KSB as of  December  31,  2005;  and 2) failure to
timely  file  certain  Current  Reports  on Form 8-K.  We are in the  process of
improving our internal control and related disclosures in an effort to remediate
these deficiencies  through improved  supervision and training of our accounting
staff.  These deficiencies have been disclosed to our audit committee and to our
independent  registered public  accounting firm.  Additional effort is needed to
fully remedy these deficiencies and we are continuing our efforts to improve and
strengthen  our  control  processes  and  procedures.   Our  management,   audit
committee,  and directors will continue to work with our independent  registered
public  accounting  firm and outside  advisors to ensure that our  controls  and
procedures are adequate and effective.

Our  management,  including  our Chief  Executive  Officer and our acting  Chief
Financial Officer,  do not expect that our disclosure controls and procedures or
our internal controls will prevent all error and all fraud. A control system, no
matter how well  conceived and operated,  can provide only  reasonable,  but not
absolute,  assurance that the objectives of the control system are met. Further,
the design of a control  system must  reflect  the fact that there are  resource
constraints,  and the benefits of controls must be considered  relative to their
cause. Because of the inherent limitations in all control systems, no evaluation
of  controls  can  provide  absolute  assurance  that  all  control  issues  and
incidences of fraud, if any, within a company have been detected. These inherent
limitations  reflect the fact that judgments and  decision-making  can be faulty
and that breakdowns can occur because of simple error or mistake.  Additionally,
controls  can be  circumvented  by the  individual  acts  of  some  persons,  by
collusion of two or more people, or by management override of the controls.  The
design  of any  system  of  controls  also  is  based,  in  part,  upon  certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving  its stated goals under all  potential
future conditions.  Over time, controls may become inadequate because of changes
and conditions,  or the degree of compliance with the policies or procedures may
deteriorate.  Because of the inherent  limitations in a cost  effective  control
system, errors and fraud may occur and still not be detected.



                                       30
<PAGE>
                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY



PART II  OTHER INFORMATION

Item 1.   Legal Proceedings

None

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

During the three months ended March 31, 2006,  the Company issued 250,000 shares
of common stock to two  accredited  investors as  additional  consideration  for
entering  into terms of an exchange  agreement to  restructure  notes payable to
stockholders.

During the three months ended June 30, 2006, the Company issued 1,000,000 shares
of common  stock to an  accredited  investor  as  additional  consideration  for
entering into the terms of a $2,000,000  line of credit  agreement  ("the Credit
Agreement")  which  establishes  a line of  credit  for a  period  extending  to
December 31, 2006.

During the three months ended June 30, 2006, the Company issued 25,000 shares of
common stock to an accredited  investor as consideration  for advisory  services
performed by the accredited  investor (the  "Advisor")  pursuant to the Advisory
Agreement  dated January 6, 2006 (the  "Agreement"),  by and between the Company
and  Advisor as  amended  on June 29,  2006.  The  issuance  of the shares is in
exchange for and in cancellation of, the Company's commitment to issue 1,200,000
stock warrants previously contemplated by the Agreement.

During the three months ended  September 30, 2006,  the Company  issued  100,000
shares of common stock to the Company's new Chief  Executive  Officer ("CEO") as
partial compensation for the CEO's agreement to serve in that capacity.

The  Company  believes  the  issuance  of these  securities  was exempt from the
registration  requirements  of the  Securities  Act of 1933, as amended (the "33
Act"),  pursuant  to  Sections  4(2) and  other  provisions  of the 33 Act.  The
investors were  "accredited  investors" and represented that they were accepting
the common shares for  investment  and without a view to their  distribution  in
violation of the federal or state securities laws, and that they understood that
the  common  shares  were  being  issued  in  reliance  upon   exemptions   from
registration  under the  federal and state  securities  laws and that they were,
therefore,  "restricted  securities"  subject  to  significant  restrictions  on
transfer. The certificates evidencing the securities bear a standard restrictive
legend.

Item 3.   Defaults Upon Senior Securities

None


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<PAGE>
                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY



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

At the annual meeting of stockholders  held on May 10, 2006, the stockholders of
the Company elected the following five directors for terms of office expiring at
the annual meeting of stockholders in the year 2007:


-----------------------------------------------------------------------------
    Name                         For             Against          Abstentions
-----------------------------------------------------------------------------
Blaine Harris                 20,410,410         3,045,971                 0
-----------------------------------------------------------------------------
Rene Rodriguez                20,468,145         2,988,236                 0
-----------------------------------------------------------------------------
Roland N. Walker              20,500,242         2,956,139                 0
-----------------------------------------------------------------------------
Terrell A. Lassetter          20,468,145         2,988,236                 0
-----------------------------------------------------------------------------
Robert E. Warfield            20,452,145         3,004,236                 0
-----------------------------------------------------------------------------

The  proposal  for Tanner LC to serve as the  Company's  independent  registered
public  accounting  firm  for the  fiscal  year  ending  December  30,  2006 was
ratified.   The  votes  were  23,432,323  (For);   24,028   (Against);   and  30
(Abstentions).

Item 5.  Other Information

None

                                       32
<PAGE>
                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY


Item 6. Exhibits and Reports on Form 8-K

(A) EXHIBITS
The  exhibits  listed below are hereby  filed with the  Securities  and Exchange
Commission  as part of this  Quarterly  Report on Form  10-QSB.  Certain  of the
following  exhibits have been previously  filed with the Commission  pursuant to
the  requirements  of the 33 Act or the 34 Act. Those exhibits are identified by
the parenthetical  references following the listing of each such exhibit and are
incorporated  herein by  reference.  We will  furnish a copy of any exhibit upon
request, but a reasonable fee will be charged to cover our expense in furnishing
such exhibit.

 Exhibit      Description
 -------      -----------
   2.1        Agreement and Plan of Merger  between Millennium Electronics, Inc.
              and Speaking Roses International, Inc.(1)

   3.1        Articles of Incorporation of Speaking Roses International, Inc (1)

   3.2        Bylaws of Speaking Roses International, Inc. as amended on October
              19, 2005 (2)

   10.1       Contribution Agreement between  Speaking Roses, LLC and Millennium
              Electronics, Inc. (3)

   10.2       Line of Credit Agreement  between the  Company  and Dos Lagos, LLC
              dated May 11, 2006 (4)

   10.3       Advisory Agreement between the Company and  BayHill Group LC dated
              January 6, 2006 (5)

   10.4       Modification  and  Restructuring  Agreement among  Speaking  Roses
              Development  Corporation, Business  Retail Group, LLC and  Michael
              Glauser, effective as of May 9, 2006 (6)

    14        Codes of Ethics (7)

    31        Certifications required by Rule 13a-15(e) and 15d-15(e)

    32        Section 1350 Certifications
________________

(1)  Incorporated  by reference from our  information  statement on Schedule 14C
filed December 23, 2003.

(2)  Incorporated  by reference  from our current report on Form 8-K filed March
29, 2006.

(3) Incorporated by reference from our current report on Form 8-K filed February
5, 2004.

(4) Incorporated by reference from our quarterly report on Form 10-QSB filed May
15, 2006.

(5) Incorporated by reference from our current report on Form 8-K filed February
8, 2006.

                                       33
<PAGE>
                SPEAKING ROSES INTERNATIONAL, INC. AND SUBSIDIARY



(6) Incorporated by reference from our current report on Form 8-K filed June 29,
2006.

(7)  Incorporated by reference from our annual report on Form 10-KSB filed April
13, 2004.

(B) REPORTS ON FORM 8-K

The  following  reports on Form 8-K were filed  during  the three  months  ended
September 30, 2006:

          Report Filing Date                       Items Reported
          ------------------                       --------------
(a)       Current Report on Form 8-K filed         Departure of Directors or
          August 24, 2006                          Principal Officers; Election
                                                   of Directors; Appointment of
                                                   Principal  Officers regarding
                                                   the resignation of the
                                                   Company's Chief Financial
                                                   Officer.

(b)       Current Report on Form 8-K filed         Departure of Directors or
          September 1, 2006                        Principal Officers; Election
                                                   of Directors; Appointment of
                                                   Principal Officers regarding
                                                   the resignation of the
                                                   Company's Vice President of
                                                   Retail Operations.

                                                   Other Events regarding the
                                                   demand for payment from
                                                   Steven F. Hanson of a loan
                                                   to the Company including
                                                   accrued interest thereon.

(c)       Current Report on Form 8-K filed         Departure of Directors or
          September 11, 2006                       Principal Officers; Election
                                                   of Directors; Appointment of
                                                   Principal Officers regarding
                                                   the resignation of the
                                                   Company's Chief Executive
                                                   Officer and the appointment
                                                   of a new Chief Executive
                                                   Officer Unregistered Sale of
                                                   Equity Securities

SIGNATURES

In accordance with the requirements Exchange Act, the Registrant has duly caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

SPEAKING ROSES INTERNATIONAL, INC.

By:       /s/ Alan K. Farrell
          Alan K. Farrell
          President and Chief Executive Officer
Date:     November 20, 2006

By:       Terrell A. Lassetter
          Acting Chief Financial Officer
Date:     November 20, 2006



                                       34

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