Welcome and thank you for standing by. At this time all participantsare in a listen-only mode. We would like to thank you for joining us for the ThirdQuarter 2007 Financial Results. (Operator Instructions) Today's conference isbeing recorded, if you have any objections you may disconnect at this time. NowI will turn the meeting over to Mr. John Mills. Thank you sir, you may begin.

Thank you. Good afternoon everyone and welcome to Gaiam'sthird quarter 2007 Earnings Call. The following constitutes the Safe Harborstatement under the Private Securities Litigation Reform Act of 1995. Exceptfor historical information contained herein, the matters discussed in this callare forward-looking statements that involve risks and uncertainties, including,but not limited to, general business conditions, integration of acquisitions,the timely development of new businesses, the impact of competition, and otherrisks detailed from time-to-time in the company's SEC reports. The company does not undertake any obligation to updateforward-looking statements. On the call today representing Gaiam, Mr. JirkaRysavy, Chairman and CEO; Lynn Powers, President; and Vilia Valentine, CFO. Now I'd like to turn the call over to the company's Chairmanand CEO, Jirka Rysavy.

Thank you John, and welcome everyone to our third quartercall. And I'm very pleased again it was another very good quarter. Revenue forthe quarter ended September 30, 2007 increased 36% to $70.3 million from $51.8 million in thesame period of last year. This strong performance reflects internal growth rateof 34%. Gross margin increased 260 basis points to 65.6% from 63% inthe 3Q of 2006, which was on top of a 750 basis point increase from 55.5% inthe third quarter of 2005. Operating expenses as a percentage of revenuedecreased to 59.7% from 61.0% even this increase in expenses relates to ourexpanding of community business. Net income for the third quarter increased 77% to $2.9million from $1.7 million and with the share buyback we did early this year wehave doubled EPS for the quarter to $0.12 from $0.06 in a same quarter of 2006. Depreciation and amortization for the quarter was $3.3million. For the nine months Gaiam revenue increased 24% to $181.1 million from$146.7 million and net income tripled to $4.3 million, or $0.17 per share,compared to $1.4 million, or $0.06 per share, for the nine months in 2006. The record 34% internal growth for the quarter is pointingto the increasing shift in our seasonal revenue flow. We estimate thatapproximately $6 million to $8 million of revenue were received early ascompared to the last year. So I think to normalize the kind of internal growth thatit comes for the third and fourth quarters for this year should be probablyviewed together. According to Nielsen's VideoScan, Gaiam's market share inthe fitness/wellness DVD category increased to 49% year-to-date from 45% in thesame nine months in last year and for the third quarter Gaiam’s market shareincreased further to 53% up from 46% during the third quarter of last year. And we have currently 66 titles in…

Thank you Jirka. We are pleased to report successful resultsfor the third quarter including double-digit revenue growth, improved operatingleverage and positive operating cash even after seasonal outlays for inventoryand preparation for the upcoming holiday season. We generated revenues of $70.3 million in the third quarterof 2007,a net increase of 35.8% from $55.8 million in the third quarter of lastyear. Revenues produced by the direct-to-consumer segment of $40.2 millionreflect the strong performance by our e-commerce and community divisions. Revenues from our business segment of $30.1 million reflectour success in the international markets, particularly in Japan. For the third quarter, weexperienced solid growth in our overall gross margins, of 260 basis points fromthe same quarter in 2006. As a percentage of revenue, selling and operatingexpenses were consistent at 53.9% of third quarter of 2007 compared to 54%during the quarter ended September 30, 2006. Our corporate, general and administration expenses decreasedto 5.8% of revenue for the third quarter of 2007, compared to 7.1% in the sameperiod last year, reflecting improved leverage of our corporate resourcesacross all divisions. Our improved operations resulted in significant increaseto consolidated net income for the third quarter. Net income increased 76.5% to $2.9 million compared to $1.7million in the same period last year. Our earnings per share doubled to $0.12per share for the quarter from $0.06 per share in the third quarter 2006. Thedecrease in other income reflects less interest earned on our lower averagecash balances as a result of our stock repurchase in the first quarter of 2007and acquisitions. Year-to-date revenues of $181.1 million were up 23.5% from$146.7 million for the same nine month period in 2006. Overall gross marginremains solid at over 64%. The improved performance that we have experienced during the first threequarters of 2007 have contributed to a net income for the year of $4.3…

Thanks, Vilia. I will now review our third quarter resultsby operating segment and outline our strategy for the reminder of 2007 and2008. Our third quarter was highlighted by a 34% overall internal growth rate,a 77% increase in net income quarter-over-quarter, and the successful executionof our acquisition growth strategy that is further positioning Gaiam as theleader in LOHAS. The business segment, which primarily produces anddistributes to media and other proprietary media based products to retailersgenerated growth of $10.9 million or 57% and revenues of $30.1 million for thethird quarter of 2007 compared to $19.2 million for the same period in theprior year. The increase in revenues was bolstered by continued success of ourdirect response programs in international markets, particularly in Japanas well as solid growth in certain key accounts including Target. We continueto expand our media and media based product distribution and are currently anapproximately 70,000 retail doors in the US, up from 65,000 in the thirdquarter of 2006. Our broad distribution of media in the US retail market is the largestpenetration of any visual media company and continues to be a key factor in ourgrowth strategy. Our expertise on authentic media content continues to anchorour position in the market. At the end of September, according to Nielsen'sVideoScan, Gaiam ranked fifth in overall US non-theatrical DVD sales, aheadof Twentieth Century Fox, Universal and Sony. Our market share for the fitness/wellness category increasedto 49% at the end of September compared to 45% for the same nine months periodin 2006. For the quarter, which ended September 30, 2007, our market share increased to 53%,compared to 46% for the third quarter of '06. At the end of September, we had six of the top 10 bestselling fitness DVDs, year-to-date and 66 of the top 100 titles. We lead the fitness/wellnesscategory with over four times,…

(Operator Instructions). First question today comes fromGordon Hodge with Thomas Weisel Partners. Thank you, sir, your line is open.

Yeah, good afternoon. Just a couple of questions: I know youwould – mentioned you were going to give some metrics on the subscriptionbusiness later and I guess next quarter, but I was curious if you could justgive us the number of subscribers that you have as you have also given in thepast and then also it sounds like you have some orders for The FIRM forholiday? I'm just curious: how many doors do you expect that to go into and ---were those orders fourth quarter orders and would not to get the business isgoing to be pretty strong in the fourth quarter as well? Thanks

Gordan, this is Lynn.I'll talk a little bit about: The FIRM. First of all: there are two differentprograms that go along with The FIRM. One is our stores-in-store concept, whichcurrently above a 1,000 doors and the other is individual product more or lessyou have seen on TV type product that we launch periodically out to retail.That we will see in fourth quarter, but the stores-in-store we've been prettyoutsourcing throughout the year primarily in third quarter index.

And for the subscribers, we don't do it quarterly, so wewill not do it. But it does increase at an accelerating pace.

Perfect. Thanks.

Next question comes from Mark Argento with Craig-HallumCaptial. Thank you, your line is open.

Hi, Lynn, hi, Jirka. Question for just going off of thefocusing on the subscriber model a little bit more, assuming that you are goingto give us an update next quarter in terms of metrics, I would assume thatmeans that you are actively marketing their products and are up on your newgaia.com site. But could you talk a little bit about how you're going to reachout to your customer base is it going to be predominantly e-commerce, e-mail,what different types of way that you are going to reach out to be able to tryto draw people under these subscriptions?

Well, right now, we still pretty limit this to up sell toour existing customers and they will pretty much continue to probably next firstquarter. Whenever we launch the site, which is will be the kind of we tick itout of a data incorporate and all these other acquisitions and so this sitewill get more robust and that time we will start to generally market it. So Ithink in the next call, we wouldn't really do any marketing to speak of yet,except internal.

So, have you actually gone into your kind of big flat fileof customers that you built up over the years or are you still, it's just kindof more of active customer kind of touch right now you are not really going in and[minding] the data base?

No, we pretty much up selling is based on customer pasthistories to the different clubs to different people, which has recently launcheda new club called Earth Cinema Circle, which is another DVD kind ofenvironmental and green film club and but it still pretty much mostly up sellto our base. I think our overall cost acquiring new customer converting them isstill below $5.

Okay. And then in terms of the Mayo launch will that be --is there going to be the soft launch this year yet? Or is it going to bebasically beginning in Q1, Q2?

Well we are doing it in two phases, Mark. First we launchthe 10 Mayo DVDs, which have a street date of January 1st, kind of New Year NewEve launch. But we'll launch the full four foot wellness section late March,early April so it will be first, second quarter kind of launch on that.

And what type of commitment did you say you had in terms ofthe stores-in-store?

I can only tell you the channels that are very interested init, they are the book channel natural grocery and pharmacy.

Sure. And then Jirka, a little bit about the kind of thetimetable in terms of reinvestment where are you in enough you had to say 50%through kind of the build out of these new businesses, I know this continuebuild out but where are we in terms of the reinvestment cycle because clearlyour big gross margin expansion, you continue to spend to build out some of theseother programs can you guess kind of at a high level give us a little bit idea onyour thoughts there?

Yeah, I mean, it's kind of going pretty much at the plan wespend a little bit more because our results were a little more so we took theliberty to spend a little more. And it will probably continue through mid nextyear as this goes. However, when we kind of launch the sites and have the testdone, it will probably start to slowdown. But it will continue for at least thefirst part of ’08. But we've kind of -- the results getting very, veryencouraging so we wanted to make sure that we don't miss anything, leaveanything on the table.

Okay. And then last question. You had mentioned in yourprepared remarks that you are potentially further down the path on theacquisition front what type of companies you are looking at, more of the socialnetworking media type companies or you are looking at content companies or anyhints you want to give us there?

Yes, yes, yes.

Fair enough, better try.

I meant like all of them.

Okay.

It's pretty much what you said it's kind of what we are.

I should know better. Thank you.

Thank your.

Next question comes from [Lloyd Warmsley] from Thomas WeiselPartners. Thank you, your line is open.

Yes, thank you. I was wondering if you could just tell uslittle bit more about the Care2 social networking deal if that is exclusive?And then just taking step back if you could give us your broader view two yearsout how you see that business developing is it more of an effort to up sell intopaid subscriptions versus an advertising model and how you see that? That wouldbe helpful.

All right. So the Care2 deal is not closed yet so I need to limitmy comments on it, but effectively from our point what we really want from thedeal is that they would not sell any paid subscription and will promoteexclusively ours, and we become the exclusive e-commerce partner that means weprovide the e-commerce and paying them a fees, and they generate most of theirrevenue from selling risk to non-profits and we agree obviously not to do that.We don't do that in our regular business. So this is the kind of the basics,our interest as I said mostly that was to do obviously have a big futurepromotion for our subscription business. What's the other question?

Subscription versus advertising?

Subscription is definitely our core model. We [require] acouple of companies with some advertising on it and we would plan to do theadvertising however to subscribe you have a choice to undo all ads so if yousubscriber pin basically disallows all the ads what you see even on the freesite. But it's how we intend to do that but nothing will really be down [until]first quarter.

Thanks.

Thank you that subscription revenues will well out performthe advertising as we go forward.

That's great. Thank you.

Excuse me at this time I show no other questions.

Thank you very much. Thank you everybody for being with us andhopefully you will be with us on one of the next quarter and hopefully we havegood news as well. So, thank you very much.

At this time I conclude today's conference call, I wouldlike to thank you for your participation you may disconnect at this time.