ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and plan of operations together with our financial statements and related notes appearing elsewhere in this Quarterly Report. Various statements have been made in this Quarterly Report on Form 10-Q that may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may also be made in Advanced Growing's other reports filed with or furnished to the SEC and in other documents. In addition, from time to time, Advanced Growing through its management may make oral forward-looking statements. Forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from such statements. The words "believe," "expect," "anticipate," "optimistic," "intend," "plan," "aim," "will," "may," "should," "could," "would," "likely" and similar expressions are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. Advanced Growing undertakes no obligation to update or revise any forward-looking statements.

Results of Operations

The Company had a net loss from continuing operations of $475,215 ($.02 per share) for the three months ended March 31, 2009 compared to a net loss from continuing operations of $780,920 ($.03 per share) for the three months ended March 31, 2008. For the six months ended March 31, 2009 the Company had a net operating loss of $1,304,394 compared to $1,329,666 for the six months ended March 31, 2008. Net sales from continuing operations increased $599,892, or 177%, for the three months ended March 31, 2009, as did all categories of expenses as the Company. Net sales for the six months ended March 31, 2009 increased $886,300 over the six month period ended March 31, 2008. Cost of goods sold increased $523,544 for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. For the six months ended March 31, 2009 the cost of goods sold increased $730,358 compared to the six months ended March 31, 2008. This increase is attributable to an increase in sales, as well as the Company using a contract manufacturer to help fulfill several customer's orders resulting in a lower gross margin on those sales. For the three months ended March 31, 2009, interest expense increased $54,530 over the same period ended March 31, 2008. For the six months ended March 31, 2009 interest expense increased $171,947 over the same six month period ended March 31, 2008. This increase is due to the amortization and interest paid on the Lamassu note. Depreciation and amortization expense increased $25,391 for the three months ended March 31, 2009 over the same three month period ended March 31, 2008. For the six months ended March 31, 2009 depreciation and amortization increased $53,825 compared to the six months ended March 31, 2008. This increase is attributable to the addition of the second and third manufacturing lines at the Mississippi plant. Operating expenses for the three month period ended March 31, 2009 decreased $285,215 over the three month period ended March 31, 2008. For the six months ended March 31, 2009 operating expenses decreased $166,513 compared to the six months ended March 31, 2008. These decreases are attributable to closing the Houston, TX warehouse and well as cutting back on sales, general and administration expenses. Overall, management feels that all of the infrastructure, sales and general and administrative expenses are in place to handle the upcoming in-season for the Company. These levels are not expected to increase over the next three fiscal quarters in order to achieve the projections for the year.

Plan of Operations

For the three months ended March 31, 2009 OGSI increased their revenue $475,215 as compared to the three months ended March 31, 2008. For the six months ended March 31, 2009 revenues increased $780,920 over the six months ended March 31, 2008. The increase is due to a more mature sales approach as well as the customers learning the benefits of using our product as compared to synthetic fertilizers. Management feels that revenues could have been even higher if the manufacturing facility had a more dependable manufacturing process. Sales for the first six months of 2009 have exceeded the sales for all of fiscal 2008 of 1,286,860. Management is working with an engineering firm to improve the up front problems of the manufacturing process. In the past, the emphasis was placed on the back end of the manufacturing process to ensure that the end product was consistent and to specifications. The engineering firm changed this emphasis to the front end to eliminate damaging materials from entering the production process. By changing this emphasis the raw materials entering the production process is consistent and will lead to fewer downtimes as a result of the machinery now processing a uniform raw material from the beginning of the process. The sales team is continuing to discuss the positives of the organic fertilizer products. Sales have been primarily focused upon sod farmers and municipal entities, but once a consistent production capacity can be obtained the sales force will begin working with larger farmers in an effort to obtain larger volume customers. The sales team has been pursuing many larger farms and believes that the third quarter will produce year long commitments from some of the larger clients that have been pursued over the last six months. This is typically considered the planning time for the industry and the Company feels that some of the bigger groups will begin purchasing more of the product to be ready for the fertilization period. For the last twelve months, the sales team has been able to sell all of the fertilizer product produced or available to be sold. They feel that they can continue to sell all of the finished goods produced and maintain a backlog of potential sales.

Management feels that the engineering firm will have the necessary changes made to the facility by the middle part of May and will be well on their way to getting the production capacity to the 150-200 tons per day before the end of May. The engineering firm will be paid in Company stock, up to $500,000, for services rendered in increasing manufacturing capacity. The engineering firm will also share in a percentage of gross margin dollars once it gets per day production capacity above 100 tons per day. This capacity along with the anticipated sales should be able to generate enough gross profit to bring the Company to break even or positive net income.

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Liquidity and Capital Resources

At March 31, 2009, we had total current assets of $579,689, consisting primarily of accounts receivable and inventories. Current liabilities of $5,914,170 consisting primarily of accounts payable, accrued expenses and term and convertible notes payable. The Company has accumulated a net loss from inception through March 31, 2009 of $17,036,082. Stockholders' deficit as of March 31, 2008 was $3,733,674. The Company has recorded gross revenues of $1,422,124 for the six months ended March 31, 2009.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.