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 $717,622 ($.03 per share) for the three months ended June 30, 2009 compared to a net loss from continuing operations of $1,320,124 ($.08 per share) for the three months ended June 30, 2008.
For the nine months ended June 30, 2009 the Company had a net operating loss of $2,022,016 compared to $2,649,790 for the nine months ended June 30, 2008. Net sales from continuing operations decreased $112,407, or 30%, for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008.

Net sales for the nine months ended June 30, 2009 increased $773,893, or 85% over the nine month period ended June 30, 2008. Cost of goods sold increased $114 for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008. For the nine months ended June 30, 2009 the cost of goods sold increased $730,472 compared to the nine months ended June 30, 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 June 30, 2009, interest expense decreased $620,281 over the same period ended June 30, 2008. For the nine months ended June 30, 2009 interest expense decreased $448,334 over the same nine month period ended June 30, 2008. This decrease is due to the amortization and interest expensed on the cashless warrant exchange with Vision Capital Advisors.

Depreciation and amortization expense increased $36,114 for the three months ended June 30, 2009 over the same three month period ended June 30, 2008. For the nine months ended June 30, 2009 depreciation and amortization increased $89,939 compared to the nine months ended June 30, 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 June 30, 2009 decreased $33,186 over the three month period ended June 30, 2008. For the nine months ended June 30, 2009 operating expenses decreased $199,699 compared to the nine months ended June 30, 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 June 30, 2009 OGSI decreased their revenue $112,407 as compared to the three months ended June 30, 2008. For the nine months ended June 30, 2009 revenues increased $773,893 over the nine months ended June 30, 2008. The decrease for the three months ended June 30, 2009 is attributable to the manufacturing facility being re-engineered by enVentive Solutions, ("enVentive") to repair the upfront manufacturing process to remove debris from entering the manufacturing area. This re-engineering will reduce the amount of downtime as well as the amount of repairs needed for broken machinery due to non-conforming materials getting into the process.

The increase in revenues for the nine months ended June 30, 2009 over June 30, 2008 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 nine months of 2009 have exceeded the sales for all of fiscal 2008 of $1,286,860. 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 nine 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.

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Management feels that the engineering firm will have the necessary changes made to the facility by the middle part of July and will be well on their way to getting the production capacity to the 150-200 tons per day before the end of August. 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.

The Company has also introduced a new product into the marketplace called Organisan II-YS. The product acts as an adjuvant and its natural, environmentally friendly active ingredients are designed for use in combination with fungicides, insecticides, miticides and nutritional sprays. Management feels that this product will add a significant revenue opportunity that could eclipse the current fertilizer product in a two to three year period. The product is available in mass quantities and the Company has an exclusive agreement set up with the manufacturer to only sell the product to OGSI. The sales team will initially target turf and sod growers as well as golf courses.

Liquidity and Capital Resources

At June 30, 2009, we had total current assets of $422,770, consisting primarily of accounts receivable and inventories. Current liabilities of $6,413,448 consisting primarily of accounts payable, accrued expenses and term and convertible notes payable. The Company has accumulated a net loss from inception through June 30, 2009 of $17,754,417. Stockholders' deficit as of June 30, 2009 was $4,446,185. The Company has recorded gross revenues of $1,685,527 for the nine months ended June 30, 2009.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.