SB-2

As Filed with the Securities and Exchange Commission on January 28, 2005

Registration No. 333-            

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Dreams, Inc.

(Name Of Small Business Issuer In Its Charter)

Utah	5812	87-0368170
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

2 South University Drive

Plantation, Florida 33324

(954) 377-0002

(Address and Telephone Number of Principal Executive Offices

and Principal Place of Business)

Ross Tannenbaum

President and Chief Executive Officer

Dreams, Inc.

2 South University Drive

Plantation, Florida 33324

(954) 377-0002

(Name, Address and Telephone Number of Agent for Service)

Copies of Communications to:

Donn A. Beloff, Esq.

Brian J. Gavsie, Esq.

Greenberg Traurig, P.A.

401 E. Las Olas Blvd., Suite 2000

Ft. Lauderdale, FL 33301

Telephone: (954) 765-0500

Telecopier: (954) 765-1477

Approximate Date of Proposed Sale to the Public: As soon as practicable after this registration statement becomes effective.

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.  ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Maximum Amount of Shares to Be Registered	Proposed Maximum Offering Price Per Unit	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee (1)
Common Stock, no par value	123,360,008	$0.03	$3,700,800.24	$435.58
Common Stock Subscription Rights (2)	—	—	—	—

(1) Calculated in accordance with Rule 457(e) under the Securities Act of 1933, as amended.

(2) The non-transferable common stock subscription rights are being issued for no consideration.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

EXPLANATORY NOTE

Subject to shareholder approval, the registrant plans to reincorporate as a Florida corporation prior to the closing of the offering made hereby.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JANUARY 28, 2005

PROSPECTUS

123,360,008 Shares

Common Stock

Common Stock Subscription Rights

We are distributing, together with this prospectus, at no charge, non-transferable subscription rights to purchase shares of our common stock to our shareholders as of the close of business on                     , 2005, the record date. These are called basic subscription rights. You will not be entitled to receive any of these rights unless you were a shareholder of ours at that time. You will receive one subscription right for each share of our common stock that you owned on the record date. Each subscription right will entitle you to purchase two (2) shares of our common stock for each share of our common stock that you owned on the record date at the subscription price of $0.03 per share ($0.06 per two shares). The shares in the rights offering are being offered directly by us without the services of an underwriter or selling agent.

Certain of our existing shareholders and other outside investors may, but are not obligated to, purchase in a private sale, after the expiration of the period for exercising rights, including any extension period, such number of shares of our common stock at the subscription price of $0.03 per share as may be required to sell the entire number of shares offered hereby.

The subscription rights are exercisable beginning on the date of this prospectus and will expire at 5:00 P.M., Mountain Standard Time, on                     , 2005, the expiration date. We, at our sole discretion, may extend the period for exercising the rights. Rights which are not exercised by the expiration date will expire and will have no value. Your exercise of the rights may not be revoked unless the expiration date is extended for more than thirty days or there is a material change in the terms of the rights offering. You should carefully consider whether or not to exercise your rights before the expiration date.

If you timely exercise all of your basic subscription rights, you will be entitled to exercise over-subscription rights to purchase additional shares of our common stock at the same subscription price. The over-subscription right will expire concurrently with the expiration of the basic subscription rights. Shares for which subscription rights have not been exercised prior to the expiration date of the rights offering will be offered to certain of our existing shareholders and certain outside investors at the subscription price.

There is no minimum number of shares which must be subscribed for in order for this offering to be completed. The subscription rights may not be sold, transferred or assigned, and will not be listed for trading on any stock exchange.

Our common stock is listed on the OTC Bulletin Board under the symbol “DRMS.OB”. On January 26, 2005, the closing bid price of our common stock was $0.10.

Investing in our common stock is speculative and involves a high degree of risk. See “ Risk Factors” beginning on page 9.

	Per Share		Total
Subscription Price	$	0.03	$	3,700,800
Estimated Expenses		*		120,000
Net Proceeds to Us	$	0.029	$	3,580,800
* Less than $.01 per share

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Shares of common stock available after the expiration of the period for our shareholders to exercise their basic subscription and over-subscription rights will not be offered by us to outside investors states where such offers and sales are prohibited.

The date of this prospectus is                    , 2005

TABLE OF CONTENTS

Prospectus Summary	1
Risk Factors	9
Special Note About Forward-Looking Statements	17
Use of Proceeds	18
Market Price for our Common Stock and Related Shareholder Matters	19
Capitalization	20
Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Business	30
Management	38
Certain Relationships and Related Transactions	41
Security Ownership of Certain Beneficial Owners and Management	43
Description of The Rights Offering	44
Description of Securities	53
Material U.S. Federal Income Tax Consequences	55
Plan of Distribution	57
Legal Matters	58
Experts	58
Index to Financial Statements	F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock.

The Dreams, Inc. logo is a trademark of Dreams, Inc. Field of Dreams^® is a copyright and registered trademark owned by Universal City Studios, Inc. with all rights reserved. All other trademarks or service marks appearing in this prospectus are trademarks or service marks of others.

References in this prospectus, to “Dreams”, “we”, “us” and “our” refer to Dreams, Inc. and our subsidiaries.

i

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this prospectus. Each prospective investor is urged to read this prospectus in its entirety. Except as set forth on the cover page or as otherwise specified herein, all information included in this prospectus assumes that none of the outstanding options to purchase 5,316,809 shares of our common stock will be exercised and no subscription rights will be issued with respect to such shares.

Our Business

Dreams, Inc. presently owns or franchises 33 Field of Dreams^® sports memorabilia retail stores and several e-commerce businesses including FansEdge.com and ProSportsMemorabilia.com. Through our wholly-owned subsidiary, Mounted Memories, we also manufacture and sell sports memorabilia products, custom artwork and reproductions and acrylic cases. Through our wholly-owned subsidiary, The Greene Organization, we are also engaged in athlete representation and the corporate marketing of individual athletes by providing athletes with all “off-field” activities including personal appearances, endorsement and marketing opportunities.

The Reincorporation

We are a Utah Corporation which was formed in 1980. Prior to the delivery of shares issuable upon the exercise of subscription rights or upon the sale of shares of our common stock to our existing shareholders or outside investors, we will hold an Annual Meeting of Shareholders at which our shareholders will vote on, among other things, whether to reincorporate in the State of Florida. This offering is conditioned upon the approval of our reincorporation by our shareholders at our Annual Meeting. Our principal shareholders and their affiliates control in excess of 42% of our outstanding shares and have indicated to us that they intend to vote in favor of the reincorporation. Assuming shareholder approval, you will receive rights to purchase shares in, and upon exercise of those rights you will receive common shares of, the new Florida corporation.

The Offering

The shares of our common stock being offered under this prospectus are initially being offered to our shareholders of record as of the record date, to whom we are distributing, at no charge, subscription rights which are each exercisable to purchase two (2) shares of our common stock for each share of our common stock that those shareholders owned on the record date at a subscription price of $0.03 per share ($0.06 per two shares). Shareholders who exercise all of their basic subscription rights prior to the expiration date will also have an over-subscription right to subscribe for additional shares of our common stock at the same subscription price per share, to the extent that other shareholders do not exercise their subscription rights in full, prior to the expiration date. This is referred to in this prospectus as the rights offering.

To the extent shares offered hereby are not subscribed for by the shareholders in the rights offering, we will offer those shares to certain of our existing shareholders and outside investors at the subscription price for a period ending on the later of (i) a date determined by our board of directors and (ii) the expiration date. In either case, we reserve the right to extend the rights offering and/or the offering of shares to certain of our shareholders and outside investors. The term “offering”, as used in this prospectus, includes the rights offering and the subsequent offer of remaining shares to certain shareholders and outside investors.

1

Executive Offices

Our executive offices are located at 2 South University Drive, Plantation, Florida 33324 and our telephone number is (954) 377-0002.

2

Questions and Answers About the Rights Offering

What is a rights offering?

A rights offering is an opportunity for you to purchase additional shares of our common stock at a fixed price and in an amount at least proportional to your existing interest.

What is a subscription right?

We are distributing to you, at no charge, one subscription right for each share of our common stock that you owned as a holder of record on                     , 2005. Each subscription right entitles you to purchase two (2) shares of our common stock for each share of our common stock that you owned on the record date for $0.03 per share ($0.06 per two shares). When you “exercise” a subscription right that means that you choose to purchase the number of shares of common stock that the subscription right entitles you to purchase. You may exercise any number of your subscription rights or you may choose not to exercise any subscription rights. You cannot give away, transfer or sell your subscription rights, except by operation of law or through involuntary transfers. Consequently, except in very limited circumstances, only you will be able to exercise your subscription rights. See “About the Rights Offering—The Subscription Rights.”

What is the basic subscription right?

The basic subscription right of each subscription right entitles you to purchase two (2) shares of our common stock for each share of our common stock that you owned on the record date at a subscription price of $0.03 per share ($0.06 per two shares). See “About the Rights Offering—Basic Subscription Right.”

What is the over-subscription right?

We do not expect that all of our shareholders will exercise all of their basic subscription rights. By extending over-subscription rights to our shareholders, we are providing for the purchase of those shares that are not purchased through exercise of basic subscription rights. The over-subscription right of each subscription right entitles you, if and when you fully exercise your basic subscription right, to subscribe for additional shares of common stock at the subscription price to the extent that other shareholders do not exercise their subscription rights in full. See “About the Rights Offering—Over-Subscription Right.”

What are the limitations on the over-subscription right?

If sufficient shares are available in the rights offering, we will honor all over-subscription requests in full. If over-subscription requests exceed the number of shares available, we will allocate the available shares among shareholders who over-subscribed pro rata based on the total number of shares purchased by such over subscribing shareholders through the exercise of their basic subscription rights. If you request and pay for more shares than are allocated to you, we will refund that overpayment, without interest, as soon as practicable.

3

Will shares not sold as part of the rights offering be offered to other investors?

Yes. Any shares not sold as part of the rights offering will be offered by us to certain of our existing shareholders and certain outside investors at the subscription price. See “About the Rights Offering—Sale of Shares for Which Subscription Rights Have Not Been Exercised by Eligible Shareholders.”

Certain of our existing shareholders and other outside investors may, but are not obligated to, purchase in a private sale, after the expiration of the period for exercising rights, including any extension period, such number of shares of our common stock at the subscription price of $0.03 per share as may be required to sell the entire number of shares offered hereby. Consequently if subscription rights are not exercised in full by our existing shareholders, and our existing shareholders or other outside investors determine not to acquire the remainder of the shares, we may not realize an aggregate of $3,381,792 of gross proceeds in the offering.

What happens if I choose not to exercise my subscription rights?

You will retain your current number of shares of our common stock even if you do not exercise your subscription rights. However, if other shareholders exercise their subscription rights and you do not, the percentage of Dreams that you own will diminish, and your voting power and percentage equity ownership in us will suffer substantial dilution. See “Risk Factors—Risk Factors Relating to the Offering of Subscription Rights—Your percentage ownership of Dreams may be diluted.”

Why are we engaging in a rights offering?

Our primary purpose for engaging in the rights offering is to assist us in raising capital in a cost-effective manner in order to satisfy (i) $1.0 million in partial repayment of indebtedness to Merrill Lynch Business Financial Services, or MLBFS, the lender under our line of credit facility, pursuant to a forbearance agreement and (ii) $1.0 million in full repayment of indebtedness to the brother of our president and chief executive officer. In determining to proceed with the rights offering our board of directors considered a number of factors including the opportunity afforded to our shareholders to participate in this equity offering and acquire additional shares of our common stock so that they would have the ability to maintain their proportional interest in us. After application of the proceeds from this offering, approximately $4.3 million of indebtedness will remain outstanding under our line of credit facility. See “Use of Proceeds.”

How did we arrive at the $0.03 per share subscription price?

Our board of directors arrived at the subscription price of $0.03 per share by considering, among other things, the limited trading activity of our common stock and the price at which our common stock was trading on the Over-The-Counter Bulletin Board, and discounting such price to an amount at which the board determined, in good faith, that the maximum number of shareholders would participate in the rights offering in a timely fashion. The subscription price of $0.03 per share is not necessarily indicative of the actual value of a share of our common stock, which may be significantly more or less than the subscription price. In addition, the subscription price is not an appraisal of, and may not reflect the price at which, the shares may be resold.

What is the Board of Directors recommendation regarding the rights offering?

Our Board of Directors is not making any recommendation as to whether or not you should exercise your subscription rights. You should make your decision based on your own assessment of your best interests and after considering all of the information in this prospectus, including the risk factors.

4

How many shares may I purchase?

You will receive one subscription right for each share of our common stock that you owned on the record date. Each subscription right entitles you to purchase two (2) shares of our common stock for each share of our common stock that you owned on the record date for $0.03 per share ($0.06 per two shares). See “About the Rights Offering—Basic Subscription Right.” If you exercise all of the subscription rights that you receive, you may have the opportunity to purchase additional shares of common stock at the same subscription price to the extent that other shareholders do not exercise their subscription rights in full. In your subscription agreement, you may request to purchase as many additional shares as you wish for $0.03 per share. Subject to compliance with applicable state securities laws, we intend to honor all of these over-subscription requests. However, you may not be able to purchase as many shares as you requested in your over-subscription request if a sufficient number of shares are not available after fulfillment of the basic subscription rights. We have the discretion to issue less than the total number of shares that may be available for over-subscription requests in order to comply with state securities laws. In the event that, as a result of the exercise of basic and over-subscription rights by our shareholders, the rights offering is over-subscribed, we will allocate the available shares among shareholders who over-subscribed pro rata based on the total number of shares purchased by such over subscribing shareholders through the exercise of their basic subscription rights. If you request and pay for more shares than are allocated to you, we will refund that overpayment, without interest, as soon as practicable. See “About the Rights Offering—Over-Subscription Right.”

Is there any minimum purchase requirement?

No. There is no minimum number of shares which must be subscribed for in order for this offering to be completed.

How much money will we receive from the rights offering and how will we use the proceeds?

If we sell all of the shares being offered by this prospectus (excluding shares issuable upon the exercise of subscription rights by optionholders who exercise their options to purchase our common stock prior to this offering), we will receive gross proceeds of approximately $3,381,792. After payment of expenses of the offering, we intend to use the net cash proceeds for (i) repayment of $1.0 million in partial repayment of indebtedness under our line of credit facility due by March 31, 2005 to MLBFS pursuant to a forbearance agreement, (ii) repayment of $1.0 million in full repayment of indebtedness to the brother of our president and chief executive officer and (iii) working capital and general corporate purposes. After application of the proceeds from this offering, approximately $4.3 million of indebtedness will remain outstanding under our line of credit facility. See “Use of Proceeds.”

We presently have outstanding options to purchase 5,316,809 shares of our common stock. If all of our optionholders exercise their options to purchase our common stock prior to this offering, and concurrently or subsequently exercise their basic subscription rights in full, we would receive an additional $319,009 in connection with this offering (not including any proceeds from the exercise of these options). We cannot assure you that any optionholder will exercise options to purchase our common stock, and if so, that these optionholders will exercise their subscription rights in connection with this offering.

5

How many shares will be outstanding after the rights offering?

Although we cannot at this time determine the number of shares of common stock that will be outstanding after the rights offering, if we sell all of the shares registered for sale hereby (excluding shares issuable upon the exercise of subscription rights by optionholders who exercise their options to purchase our common stock prior to this offering) then we will issue 112,726,390 shares of common stock in connection with this offering and we will have 169,089,585 shares of common stock outstanding upon completion of the offering. If all of our optionholders exercise their options to purchase shares of our common stock prior to this offering, and concurrently or subsequently exercise their basic subscription rights in full, we will have an additional 15,950,427 shares of common stock outstanding after this offering, and we will have 185,040,012 shares of common stock outstanding upon completion of the offering. We do not expect our optionholders to exercise their options and participate in this offering.

Are there any conditions to the offering?

Yes. The offering is conditioned upon the approval of our reincorporation by our shareholders at our Annual Meeting. Our principal shareholders and their affiliates control in excess of 42% of our outstanding shares and have indicated to us that they intend to vote in favor of the reincorporation.

How do I exercise my subscription rights?

You must properly complete the appropriate subscription agreement and it must be received by our subscription agent, described more fully below, before 5:00 P.M., Mountain Standard Time on                     , 2005, which is referred to throughout this prospectus as the expiration date. The address for our subscription agent and payment instructions are provided in this section below. See “About the Rights Offering—Exercise of Subscription Rights and Method of Payment.”

How do I pay for my shares?

Your subscription agreement must be accompanied by proper payment for each share that you wish to purchase pursuant to both your basic and over-subscription rights. See “About the Rights Offering—Exercise of Subscription Rights and Method of Payment.”

How long will the rights offering last?

You will be able to exercise your subscription rights only during a limited period. If our subscription agent does not receive your properly executed subscription agreement and payment for the shares being purchased before 5:00 P.M., Mountain Standard Time on the expiration date the subscription rights will expire. We may, in our sole discretion, decide to extend the rights offering. We may also, in our sole discretion, decide to extend the time period for the offering of shares to outside investors. See “About the Rights Offering—Expiration Dates.”

6

What if my shares are not held in my name?

If you hold your shares of our common stock in the name of a broker, dealer or other nominee, then your broker, dealer or other nominee is the record holder of the shares you own. The record holder must exercise the subscription rights on your behalf for the shares of common stock you wish to purchase. Therefore, you will need to have your record holder act for you.

If you are not the record holder of your shares and you wish to participate in this rights offering and purchase shares of our common stock, please promptly contact the record holder of your shares. We will ask your broker, dealer or other nominee to notify you of this rights offering. You should complete and return to your record holder the form entitled “Beneficial Owner Election Form” or other similar election form that you should receive from your record holder with the other rights offering materials. See “About the Rights Offering—Shares Held for Others.”

What fees or charges apply if I purchase shares of common stock?

We are not charging you any fee or sales commission to issue rights to you or to issue shares of our common stock to you if you exercise your rights. If you exercise your rights through the record holder of your shares, you will be responsible for paying any fees your record holder may charge you. You will not be responsible for any fees payable to our subscription agent.

To whom should I send my forms and payment?

If your shares are held in the name of a broker, dealer or other nominee, then you should send your subscription documents and payment to that record holder. If you are the record holder then you should send your subscription agreement and payment by hand delivery, first class mail or courier service to:

Fidelity Transfer Company

1800 S. West Temple, Suite 301

Salt Lake City, UT 84115

You are solely responsible for completing delivery to the subscription agent of your properly completed subscription agreement and your subscription payment. We urge you to allow sufficient time for delivery of your subscription materials to the subscription agent.

What should I do if I have any questions regarding the mechanics of exercising my subscription rights or require assistance?

If you have questions regarding the mechanics of exercising your subscription rights, you need additional copies of rights offering documents or otherwise need assistance, please contact the subscription agent for this rights offering at the following address and telephone number or by e-mail or fax at:

Fidelity Transfer Company

1800 S. West Temple, Suite 301

Salt Lake City, UT 84115

Phone: 801-484-7222

Fax: 801-466-4122

Email: info@fidelitytransfer.com

7

After I exercise my subscription rights, can I change my mind and cancel my purchase?

Except as described below, once you send in your subscription agreement and payment you cannot revoke the exercise of your subscription rights, even if you later learn information about us that you consider to be unfavorable and even if the market price of our common stock is below the $0.03 per share subscription price. Consequently, you should not exercise your subscription rights unless you are certain that you wish to purchase additional shares of our common stock at a price of $0.03 per share. However, your exercise of subscription rights may be revoked if we extend the expiration date of the rights offering for more than thirty days or there is a material change in the terms of the rights offering. See “About the Rights Offering—No Revocation.”

Is exercising my subscription rights risky?

The exercise of your subscription rights involves significant risks. Exercising your subscription rights means buying additional shares of our common stock and should be considered as carefully as you would consider any other equity investment. Among other things, you should carefully consider the risks described under the heading “Risk Factors,” beginning on page 9.

Must I exercise any subscription rights?

No. You are not required to exercise your subscription rights or take any other action.

Can I sell or give away my subscription rights?

No. Your rights may only be transferred by operation of law or through involuntary transfers. Otherwise, both the basic subscription rights and over-subscription rights are non-transferable and non-assignable. See “About the Rights Offering—Non-Transferability of Subscription Rights.”

What are the federal income tax consequences of exercising my subscription rights?

The receipt and exercise of your subscription rights are intended to be nontaxable events. You should seek specific tax advice from your personal tax adviser. See “About the Rights Offering—Income Tax Effect of Exercising Subscription Rights.”

When will I receive my new shares?

If you purchase shares of common stock through the rights offering, you will receive certificates or your account will be credited by an amount representing those shares as soon as practicable after the expiration date.

Can the Board of Directors cancel the rights offering?

Yes. The Board of Directors may decide to cancel the rights offering at any time, on or before the expiration date, for any reason in which case we will return your payment to you without any interest. See “About the Rights Offering—Cancellation Right.”

What if I have other questions?

If you have other questions about the rights offering, please contact our Senior Vice President, David M. Greene at 2 South University Drive, Plantation, Florida 33324, or by telephone at (954) 377-0002.

8

RISK FACTORS

The shares offered by this prospectus are speculative and involve a high degree of risk. In addition to other information contained elsewhere in this prospectus, you should carefully consider the following risk factors before making an investment decision.

Risk Factors Relating to Dreams

Our line of credit facility has expired, we are subject to a forbearance agreement, we may not incur additional senior indebtedness or any additional indebtedness under our credit facility and we may not be able to obtain additional financing on favorable terms, or at all.

Our MLBFS line of credit facility, which as of December 31, 2004 had an outstanding balance of approximately $5.3 million, expired by its terms on November 30, 2004. MLBFS has advised us that it does not intend to renew the line of credit facility. We entered into a forbearance agreement on December 31, 2004 with MLBFS pursuant to which MLBFS agreed to forebear from the exercise of its rights and remedies under our line of credit facility and to permit us to repay the outstanding obligations over a period of time ending on April 29, 2005, provided that we repay $1.0 million in partial repayment of outstanding indebtedness to MLBFS by March 31, 2005. Beginning January 1, 2005, we have been obligated to make monthly payments to MLBFS in the amount of $20,000. In addition, pursuant to the forbearance agreement, we may not incur any additional senior indebtedness or any additional indebtedness under our credit facility.

We are presently negotiating with third party lenders to replace MLBFS. However, there is no assurance that such additional financing may be obtained, or if available, on terms acceptable to us. Should we not be successful in obtaining additional financing, it could adversely affect our operations and financial condition. Pursuant to the terms of the forbearance agreement, if we fail to repay $1.0 million of indebtedness by March 31, 2005, or all of our obligations are not satisfied in full by April 29, 2005 (including repayment of approximately $4.3 million of outstanding indebtedness after the application of the proceeds from this offering), then MLBFS may, among other things, seize and sell all of our assets or appoint a receiver for our operations. We may be unable to restructure or refinance our debt, obtain additional equity financing or sell assets on satisfactory terms or at all. Under these circumstances, if you have exercised your subscription rights, you will lose your entire investment.

Our significant level of debt could adversely affect our financial condition and prevent us from fulfilling our debt service obligations.

We currently have a significant amount of debt outstanding under our line of credit facility with MLBFS and our ability to meet our debt service obligations will depend on our future performance. Numerous factors outside of our control, including changes in economic or other business conditions generally or in the markets or industry in which we do business, may adversely affect our operating results and cash flows, which in turn may affect our ability to meet our debt service obligations. As of December 31, 2004, on a consolidated basis, we had approximately $6.5 million aggregate principal amount of debt outstanding. Upon the application of the proceeds from this offering to such indebtedness, we will still have approximately $4.3 million of indebtedness outstanding to MLBFS. If we are unable to meet our debt service obligations, we may need to restructure or refinance our debt, seek additional equity financing or sell assets.

9

The proceeds from this offering may not be sufficient to meet our capital requirements and we may need additional subsequent financing which may not be readily available to us.

Our capital requirements have been and will continue to be significant. We are dependent on the proceeds of this offering in order to repay a significant amount of indebtedness, continue our operations as currently conducted during the near term. There is no minimum number of shares which must be subscribed for before a closing may occur and our shareholders or other prospective investors will not know whether all or a portion of the shares of common stock offered hereby have been sold. To the extent that less than all of the shares offered hereby are sold, we will have less resources available to us. See the section below entitled “Use of Proceeds.” Consequently, the amount of proceeds we will raise in this offering may not be sufficient to satisfy our future cash requirements. Unanticipated declines in revenues or increases in operating costs could require resources substantially greater than the proceeds available to us from this offering. As a result, we may be required to seek additional equity or debt financing in order to meet these increased operating expenses. We have no current arrangements with respect to, or sources of, additional financing, which if available to us, may not be on acceptable terms. Our inability to obtain additional capital financing when needed could materially adversely affect our business and financial condition and could require us to curtail or otherwise cease our existing operations.

Our line of credit facility imposes significant operating and financial restrictions which may limit our ability to finance future operations or capital needs and pursue business opportunities, thereby limiting our growth.

In addition to our obligations under the forbearance agreement, our line of credit facility imposes significant operating and financial restrictions on us. These restrictions limit our ability to, among other things:

• incur additional debt;

• create or permit certain liens, other than customary and ordinary liens;

• sell assets other than in the ordinary course of our business;

• create or permit restrictions on our ability to pay dividends or make other distributions;

• engage in transactions with affiliates; and

• consolidate or merge with or into other companies or sell all or substantially all of our assets.

These restrictions could limit our ability to finance our future operations or capital needs, make acquisitions or pursue available business opportunities. In addition, our line of credit facility requires us to maintain specified financial ratios and satisfy certain financial covenants and maintain the collateral value of our borrowing base. We may be required to take action to reduce our debt or to act in a manner contrary to our business objectives to meet these ratios and satisfy these covenants. A breach of any of the covenants in, or our inability to maintain the required financial ratios under, our line of credit facility or the forbearance agreement could result in a default under the forbearance agreement and our other debt obligations. In the event of a default of our obligations under our line of credit or the forbearance agreement, MLBFS may, among other things, seize and sell all of our assets or appoint a receiver for our operations.

10

We have recently incurred significant operating losses and may continue to incur losses in the future.

We have recently incurred significant operating losses, including a net loss of $494,000 for the fiscal year ended March 31, 2004, and a net loss of $860,000 for the six months ended September 30, 2004. Losses are continuing through the date of this prospectus. We will continue to have a high level of operating expenses following this offering and we anticipate that we may continue to incur losses until we generate revenues sufficient to offset our operating costs. We may not be able to generate significant revenues or achieve or maintain profitable operations. In addition, the issuance of shares of our common stock as a result of this rights offering could result in our undergoing an ownership change within the meaning of the Internal Revenue Code of 1986, as amended. In that event, our ability to use our net operating loss carryovers that we have incurred up to the date of the ownership change to offset positive taxable income derived after the ownership change could be severely restricted.

A significant portion of our growth has come from acquisitions, and we plan to make more acquisitions in the future as part of our continuing growth strategy. This growth strategy subjects us to numerous risks:

A very important aspect of our growth strategy has been and is to pursue strategic acquisitions of related businesses that we believe can expand or compliment our business. Since October 2003, we have substantially grown our business through the completion of two acquisitions. Acquisitions require significant capital resources and divert management’s attention from our existing business. Acquisitions also entail an inherent risk that we could become subject to contingent or other liabilities, including liabilities arising from events or conduct pre-dating our acquisition of a business that were not known to us at the time of acquisition. We may also incur significantly greater expenditures in integrating an acquired business than we had anticipated at the time of its purchase. In addition, acquisitions may create unanticipated tax and accounting problems, including the possibility that we might be required to writeoff goodwill which we have paid for in connection with an acquisition. A key element of our acquisition strategy has been to retain management of acquired businesses to operate the acquired business for us. Many of these individuals maintain important contacts with clients of the acquired business. Our inability to retain these individuals could materially impair the value of an acquired business. Our failure to successfully accomplish future acquisitions or to manage and integrate completed or future acquisitions could have a material adverse effect on our business, financial condition or results of operations. We cannot assure you that:

• we will identify suitable acquisition candidates;

• we can consummate acquisitions on acceptable terms;

• we can successfully integrate any acquired business into our operations or successfully manage the operations of any acquired business; or

• we will be able to retain an acquired company’s significant client relationships, goodwill and key personnel or otherwise realize the intended benefits of any acquisition.

As a result of competition, and the strength of some of our competitors in the market, we may not be able to compete effectively.

The markets for our services and products are highly competitive. We compete with numerous local, regional and national companies, including certain of our suppliers, some of which possess substantially greater financial, marketing, personnel and other resources than us. Our retail stores compete with other retail establishments, including our franchise stores and other stores that sell sports related merchandise, memorabilia and similar products. Our e-commerce business competes with a variety of online and multi-channel competitors including mass merchants, fan shops, major sporting goods chains and online

11

retailers. Mounted Memories, or MMI, competes with several major companies and numerous individuals in the sports and celebrity memorabilia industry. We also compete with various manufacturers of acrylic cases. We may not be able to compete successfully, particularly as we seek to enter into new markets.

We have grown rapidly since October 2003, and our growth has placed, and is expected to continue to place, significant demands on us.

We have grown rapidly since October 2003, including through acquisitions. Businesses that grow rapidly often have difficulty managing their growth. Our rapid growth has placed and is expected to continue to place significant demands on our management, on our accounting, financial, information and other systems and on our business. Although we have expanded our management, we need to continue recruiting and employing experienced executives and key employees capable of providing the necessary support. In addition, we will need to continue to improve our financial, accounting, information and other systems in order to effectively manage our growth. We will be required in fiscal 2006 to comply with the new annual internal control certification pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and the related SEC rules. We cannot assure you that our management will be able to manage our growth effectively or successfully, or that our financial, accounting, information or other systems will be able to successfully accommodate our growth or that we will be able to timely comply with Section 404 of the Sarbanes-Oxley Act. Our failure to meet these challenges could materially impair our business.

If we are required to write off goodwill or other intangible assets, our financial position and results of operations would be adversely affected.

As of September 30, 2004, we had goodwill and other intangible assets of approximately $5.2 million, which constituted approximately 24.1% of our total assets. We periodically evaluate goodwill and other intangible assets for impairment. Any determination requiring the write off of a significant portion of our goodwill or other intangible assets, could adversely affect our results of operations and financial condition.

Lack of available retail store sites on terms acceptable to us, rising rents and other costs and risks relating to new store openings could severely limit our growth opportunities.

Our strategy includes opening stores in new and existing markets. We must successfully choose store sites, execute favorable leases on terms that are acceptable to us, hire competent personnel and effectively open and operate these new stores. Our plans to increase the number of our company-owned retail stores will depend in part on the availability of existing retail stores or store sites. We may not have stores or sites available to us for lease, or available on terms acceptable to us. If additional retail store sites are unavailable on acceptable terms, we may not be able to carry out a significant part of our growth strategy. Rising rents in malls and other retail shopping areas could also inhibit our ability to grow. If we fail to locate desirable sites, obtain lease rights to these sites on terms acceptable to us, hire adequate personnel and open and effectively operate these new stores, our financial performance could be adversely affected.

Our business depends on anticipating consumer tastes and identifying, forming and maintaining relationships with popular athletes.

A significant portion of our revenues is generated by the sale of sports memorabilia and sports licensed products. Our success depends upon our ability to anticipate and respond in a timely manner to trends in sports memorabilia and sports licensed products and our ability to identify, form and maintain relationships with popular athletes. If we fail to anticipate changes in consumer preferences for these products or fail to identify, form and maintain relationships with these athletes, we may experience lower

12

revenues, higher inventory markdowns and lower margins. Our products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty. These preferences are also subject to change. Sports memorabilia, licensed products and the popularity of athletes are often subject to short-lived trends, such as the short-lived popularity of certain athletes or sports teams. If we misjudge the popularity or staying power of a sports team or an athlete, we may over-stock unpopular products and force inventory markdowns that could have a negative impact on profitability, or have insufficient inventory of a popular item that can be sold at full markup.

We are dependent upon the Field of Dreams^® trademark.

Field of Dreams^® is a copyright and trademark owned by Universal City Studios, Inc. with all rights reserved. We license certain rights to use the name “Field of Dreams^®” from an affiliate of Universal City Studios in connection with retail operations and catalog sales pursuant to an agreement that expires in December 2005. We believe that the rights in the licensed name are a significant part of our business and that our ability to create demand for our products is dependent to a large extent on our ability to exploit this trademark. We cannot assure you that we will be able to renew the license agreement upon favorable terms, if at all. Any inability to do so, could have a material adverse effect on our business, financial condition and results of operation.

Our retail business segment is highly seasonal.

Historically, the third quarter of our fiscal year (October through December) has accounted for a greater proportion of our operating income than have each of the other three quarters of our fiscal year. In the year ended March 31, 2004, more than 44% of the revenues from our retail business segment and a substantial portion of our operating earnings and cash flows from operations were generated in the third quarter. Our results of operations depend significantly upon the holiday selling season in the third quarter. If less than satisfactory revenues, operating earnings or cash flows from operations are achieved during the key third quarter, we may not be able to compensate sufficiently for the lower revenues, operating earnings, or cash flows from operations during the other three quarters of the fiscal year. Our manufacturing/distribution segment and our franchise segment are not significantly impacted by seasonality.

The loss of key management personnel would adversely impact our business.

Our success is largely dependent upon the efforts of our key management personnel, including our chief executive officer and chairman, the loss of the services of any of them would have a material adverse effect on our business and prospects. We do not have employment agreements in effect with, or key-man life-insurance in the event of the death of, our president and chief executive officer or any of our other key employees, except for one of our divisional presidents. In addition, we do not currently have a chief financial officer. If we are unable to recruit and employ an experienced chief financial officer our financial, accounting, information and other systems may be adversely effected.

Proceeds from this offering applied to working capital may be allocated at the discretion of management.

A portion of the proceeds from this offering has been allocated to working capital and general corporate purposes. Accordingly, our management will have broad discretion as to the application of any such proceeds.

13

The trading price of our common stock is subject to significant volatility, which is due, in part, to the lack of liquidity of our shares. This lack of liquidity may continue for the foreseeable future.

Our common stock currently trades on the Over-The-Counter Bulletin Board. The trading markets for securities quoted on the Over-The-Counter Bulletin Board typically lack the depth, liquidity and orderliness necessary to maintain an active market in the trading of such securities. The development of a public trading market depends upon the existence of willing buyers and sellers, the presence of which is not within the control of Dreams nor assured by listing our common stock on the Over –The-Counter Bulletin Board. Accordingly, you should consider the potential illiquid and long-term nature of an investment in our common stock. There can be no assurance that an active and liquid trading market for our common stock will develop, or once developed, will continue. The absence of a liquid and active trading market, or the discontinuance thereof, may have an adverse effect on both the price and liquidity of our common stock.

Additionally, disclosures of our operating results, announcements of regulatory changes affecting our franchise segment, other factors affecting our operations and general conditions in the securities markets unrelated to our operating performance may cause the market price of our common stock to change significantly over short periods of time. In addition, sales of shares under this prospectus may have a depressive effect on the market price of our common stock. The trading price of our common stock has been and is likely to continue to be volatile.

Risks related to the E-commerce Industry

Government regulation of the Internet and E-commerce is evolving and unfavorable changes could harm our business.

A significant portion of our revenues are generated from our e-commerce business. Our e-commerce business is subject to regulations and laws specifically governing the Internet and e-commerce. Such existing and future laws and regulations may impede the growth of the Internet or other online services. These regulations and laws may cover taxation, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services, broadband residential Internet access, and the characteristics and quality of products and services. It is not clear how existing laws governing issues such as property ownership, sales and other taxes, libel, and personal privacy apply to the Internet and e-commerce. Unfavorable resolution of these issues may harm our business.

We may be subject to tax liability for past sales and our future sales may decrease.

In accordance with current industry practice, we do not collect sales taxes or other taxes with respect to shipments of most of our goods. One or more states or foreign countries may seek to impose sales or other tax collection obligations on out-of-jurisdiction companies that engage in e-commerce. A successful assertion by one or more states or foreign countries that we should collect sales or other taxes on the sale of merchandise or services could result in substantial tax liabilities for past sales, decrease our ability to compete with traditional retailers of sports licensed products, and otherwise harm our business.

Currently, decisions of the U.S. Supreme Court restrict the imposition of obligations to collect state and local sales and use taxes with respect to sales made over the Internet. However, a number of states, as well as the U.S. Congress, have been considering various initiatives that could limit or supersede the Supreme Court’s position regarding sales and use taxes on Internet sales. If any of these initiatives addressed the Supreme Court’s constitutional concerns and resulted in a reversal of its current position, we could be required to collect sales and use taxes. The imposition by state and local governments of

14

various taxes upon Internet commerce could create administrative burdens for us and could decrease our future sales.

We buy a significant portion of our inventory from a few vendors.

Although we continue to increase our direct purchasing from manufacturers, we source a significant amount of inventory from relatively few vendors. However, no vendor accounts for 10% or more of our inventory purchases. We do not have long-term contracts or arrangements with most of our vendors to guarantee the availability of merchandise, particular payment terms, or the extension of credit limits. If our current vendors were to stop selling merchandise to us on acceptable terms, we may not be able to acquire merchandise from other suppliers in a timely and efficient manner and on acceptable terms.

We could be liable for breaches of security on our website.

A fundamental requirement for e-commerce is the secure transmission of confidential information over public networks. Although we have developed systems and processes that are designed to protect consumer information and prevent fraudulent credit card transactions and other security breaches, failure to mitigate such fraud or breaches may adversely affect our operating results.

The Internet as a medium for commerce is uncertain.

Consumer use of the Internet as a medium for commerce is a recent phenomenon and is subject to a high level of uncertainty. While the number of Internet users has been rising, the Internet infrastructure may not expand fast enough to meet the increased levels of demand. If use of the Internet as a medium for commerce does not continue to grow or grows at a slower rate than we anticipate, our sales would be lower than expected and our business would be harmed.

Risk Factors Relating to the Offering of Subscription Rights

Upon completion of the rights offering, one or more of our principal shareholders may be in a position to terminate our status as a public company in a going private transaction.

Since our initial public offering, our common stock has been relatively thinly traded, providing little liquidity for our shareholders. In the opinion of our board of directors and management, our public market valuation has been constrained due to our small market capitalization, limited public float, relatively low trading volume and the lack of research coverage from securities analysts. Because we have been unable to realize the principal benefits of public ownership, we have from time to time considered strategic alternatives to maximize shareholder value, including terminating our status as a public company in a going private transaction and delisting our common stock.

To the extent that all of our existing shareholders do not exercise their basic subscription rights, and the unexercised subscription rights are instead acquired and exercised by one or more of our principal shareholders, those shareholders could collectively acquire 80.54% of our outstanding common stock upon completion of the rights offering. In the event that one or more of our principal shareholders were to acquire more than 90% of our outstanding stock upon completion of the rights offering, those shareholders would be in a position to unilaterally take such actions that would be necessary to cause us to terminate our status as a public company in a going private transaction. Upon completion of a going private transaction, our common stock would no longer be listed on the Over-The-Counter Bulletin Board and our minority shareholders would be forced to receive a cash amount equal to the fair market value of our common stock in exchange for their shares of our common stock.

15

The market price of our common stock may decline after you have committed to purchase our common stock.

The market price of our common stock may increase or decline before the subscription rights expire. Once you exercise your subscription rights, you may not revoke the exercise. Therefore, if you exercise your subscription rights and the market price of the common stock goes below the $0.03 subscription price, then you will have committed to buy shares of common stock in the rights offering at a price that is higher than the price at which our shares could be purchased in the open market. Moreover, you may not be able to sell the shares of common stock that you purchase in our rights offering at a price equal to or greater than the subscription price.

We cannot assure you that the subscription price is a fair price for shares of our common stock.

We have not obtained a fairness opinion in connection with setting the subscription price for this offering. Our board of directors arrived at the subscription price of $0.03 per share by considering, among other things, the limited trading activity of our common stock and the price at which our common stock was trading on the Over-The-Counter Bulletin Board, and discounting such price to an amount at which the board determined, in good faith, that the maximum number of shareholders would participate in the rights offering in a timely fashion. The subscription price of $0.03 per share is not necessarily indicative of the actual value of a share of our common stock, which may be significantly more or less than the subscription price. In addition, the subscription price is not an appraisal of, and may not reflect the price at which, the shares may be resold.

Your percentage ownership of Dreams may be diluted.

If you do not exercise all of your basic subscription rights, you may suffer significant dilution of your percentage ownership of Dreams relative to shareholders who fully exercise their subscription rights in addition to any dilution that will result from any purchases of shares by the public. For example, if you own 56,000 shares of common stock before the rights offering, or approximately 0.1% of the equity of Dreams, and you exercise none of your subscription rights while all other subscription rights are exercised and purchased for cash through the basic subscription right and/or over-subscription right, then the percentage ownership represented by your 56,000 shares will be reduced to approximately 0.03%.

You may not be able to sell your shares of common stock immediately upon expiration of the rights offering.

Until certificates are delivered, or your account is credited for the purchased shares after expiration of the rights offering, you may not be able to sell the shares of our common stock that you purchase in the rights offering. Certificates representing shares of our common stock that you purchased will be delivered and/or your account will be credited as soon as practicable after the expiration date of the rights offering, which may be extended by Dreams.

The rights offering may be canceled and funds returned without interest.

Our Board of Directors may withdraw or cancel the rights offering in its sole discretion at any time prior to or on the expiration date for any reason including, without limitation, a change in the market price of our common stock. However, your exercise of your subscription rights is irrevocable. If we withdraw or cancel the rights offering, or if you over-subscribe and we don’t have a sufficient number of shares available for you to purchase, we will have no obligation with respect to the subscription rights except to return, without interest, any subscription payments as soon as practicable.

16

You will not earn interest on any funds delivered to us to exercise your subscription rights.

We will not pay you interest on funds delivered to us pursuant to your exercise of rights regardless of the length of time during which we hold your subscription payment.

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

Certain statements contained in this section and elsewhere in this prospectus constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such statements are indicated by words or phrases such as “anticipates,” “projects,” “management believes,” “we believe,” “intends,” “expects,” and similar words or phrases. Such factors include, among others, the following: competition; seasonality; success of operating initiatives; new product development and introduction schedules; acceptance of new product offerings; franchise sales; advertising and promotional efforts; adverse publicity; expansion of the franchise chain; availability, locations and terms of sites for franchise development; changes in business strategy or development plans; availability and terms of capital; labor and employee benefit costs; changes in government regulations; and other factors particular to us.

Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, our actual results, performance, or achievements may vary materially from any future results, performance or achievements expressed or implied by such forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. We disclaim any obligation to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

17

USE OF PROCEEDS

In the event that all of the shares offered hereby are sold for cash, we expect to use the net cash proceeds of this offering, which are estimated to be approximately $3,261,792 after payment of the expenses of this offering, as follows:

Purpose	Approximate Dollar Amount
Repayment of a portion of the MLBFS Indebtedness	$	1,000,000
Repayment of the related party note payable		1,000,000
Working capital		1,261,792
Total	$	3,261,792

In the event that less than all of the shares offered hereby are sold for cash, we currently intend to allocate the net proceeds in the priority of the following categories: (i) repayment of a portion of our outstanding indebtedness to MLBFS under our line of credit facility pursuant to the forbearance agreement, (ii) repayment of the related party note payable and (iii) working capital and general corporate purposes.

Our MLBFS line of credit facility, which as of December 31, 2004 had an outstanding balance of approximately $5.3 million, expired by its terms on November 30, 2004. MLBFS has advised us that it does not intend to renew the line of credit facility. We entered into a forbearance agreement on December 31, 2004 with MLBFS pursuant to which MLBFS agreed to forebear from the exercise of its rights and remedies under our line of credit facility and to permit us to repay the outstanding obligations over a period of time ending on April 29, 2005, provided that we repay $1.0 million of outstanding indebtedness to MLBFS by March 31, 2005. Beginning January 1, 2005, we have been obligated to make monthly payments to MLBFS in the amount of $20,000. We expect to use $1.0 million from the proceeds of the offering to pay down a portion of our borrowings under the line of credit facility. The line of credit facility currently bears interest at the rate of 4% over the one-month London Interbank Offered Rate.

We also expect to use $1.0 million from the proceeds of this offering to pay off our borrowings under a related party note due to the brother of our president and chief executive officer. The related-party note was initially due on January 15, 2005 but was extended to April 29, 2005. The related-party note currently bears interest annually at the rate of 12%. We have used the proceeds from these borrowings principally for working capital and general corporate purposes.

Our indicated allocation of the net cash proceeds of this offering represents our best estimates based upon our currently proposed plans and assumptions relating to our operations and certain assumptions regarding general economic conditions. If any of these factors change, we may find it necessary or advisable to reallocate some of the cash proceeds within the categories set forth above or use portions of those proceeds for other purposes.

After application of the proceeds from this offering, approximately $4.3 million of indebtedness will remain outstanding under our line of credit facility. We are presently negotiating with third party lenders to replace MLBFS. However, there is no assurance that such additional financing may be obtained, or if available, on terms acceptable to us. Should we not be successful in obtaining additional financing, it could adversely affect our operations and financial condition. Pursuant to the terms of the forbearance agreement, if we fail to repay $1.0 million of indebtedness by March 31, 2005, or all of our obligations are not satisfied in full by April 29, 2005 (including repayment of approximately $4.3 million of outstanding indebtedness after the application of the proceeds from this offering), then MLBFS may, among other things, seize and sell all of our assets or appoint a receiver for our operations. We may be unable to restructure or refinance our debt, obtain additional equity financing or sell assets on satisfactory terms or at all.

18

MARKET PRICE FOR OUR COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Our common stock is listed on the Over-The-Counter Bulletin Board, an electronic screen based market available to brokers on desk-top terminals, under the symbol “DRMS.OB.” The high and low bids of our common stock for each quarter during fiscal years ended March 31, 2003 2004 and 2005 (to date), as quoted by the Over-The-Counter Bulletin Board, are as follows:

	High Bid Price		Low Bid Price
Fiscal Year Ended March 31, 2003
First Quarter	$	0.36	$	0.24
Second Quarter		0.28		0.18
Third Quarter		0.25		0.13
Fourth Quarter		0.18		0.13
Fiscal Year Ended March 31, 2004
First Quarter	$	0.24	$	0.14
Second Quarter		0.20		0.07
Third Quarter		0.21		0.11
Fourth Quarter		0.35		0.13
Fiscal Year Ending March 31, 2005
First Quarter	$	0.45	$	0.25
Second Quarter		0.36		0.20
Third Quarter		0.23		0.11
Fourth Quarter (through January 26, 2005)		0.16		0.09

On January 26, 2005, the high and low bid price was $0.10 for our common stock.

Such over-the-counter quotations reflect inter-dealer prices, without retail markup, markdown or commission, and may not represent actual transactions.

The records of Fidelity Transfer Company, our transfer agent, indicate that there were three hundred fifty-nine (359) record owners of our common stock as of December 31, 2004.

We have never paid dividends and we intend to retain future earnings to finance the expansion of our operations and for general corporate purposes.

19

CAPITALIZATION

The following table sets forth our capitalization and our cash and cash equivalents as of September 30, 2004 on:

• an actual basis; and

• an as adjusted basis to give effect to:

• the issuance of an additional $300,000 of indebtedness subsequent to September 30, 2004 in connection with a related party note payable to the brother of our president and chief executive officer;

• the sale of 112,726,390 shares of common stock by us in this offering after deducting the estimated offering expenses payable by us;

• the repayment of $1.0 million in partial repayment of indebtedness under our line of credit facility due by March 31, 2005 to MLBFS pursuant to a forbearance agreement; and

• the repayment of $1.0 million in full repayment of indebtedness to the brother of our president and chief executive officer.

	As of September 30, 2004
	(in thousands, except share amounts)
	Actual			As Adjusted
Cash and cash equivalents:	$	333		$	1,595
Debt:
Current maturities of long-term debt		6,772			5,772
Long-term debt, less current portion		1,098			98
Common stock, no par value (100,000,000 shares authorized, no par value, and 56,363,195 shares issued and outstanding; 500,000,000 shares authorized, no par value, and 169,089,585 shares issued and outstanding, as adjusted)		22,848			26,110
Accumulated deficit		(13,170	)		(13,170	)
Total stockholders’ equity		9,678			12,940
Total capitalization	$	17,548		$	18,810

You should read this table in conjunction with our consolidated financial statements and the related notes as well as the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.

20

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Overview

We are engaged in multiple aspects of the sports entertainment and memorabilia industry through a variety of distribution channels.

We generate revenues from:

• our retail segment which includes our Company owned stores and our e-commerce component;

• our manufacturing distribution segment, through manufacturing and wholesaling of sports memorabilia products, custom artwork and other items;

• our franchise program through our 20 Field of Dreams^® franchise stores presently owned and operated; and

• our representation and corporate marketing of individual athletes, including personal appearances, endorsement and marketing opportunities.

In 2002 we adopted a plan to focus on expansion into retail stores. The decision to implement this plan was based upon a number of factors including management’s experience in this area, knowledge of the sports memorabilia retail marketplace and prior experiences as a franchisor and as a wholesaler in the sports memorabilia market. We believe that there existed significant synergies between our existing operations and the retail stores which would allow us to achieve efficiencies in our operating expenses and provide for an overall improvement of our operating results.

We also began a strategic acquisition program for the expansion of our e-commerce component. These acquisitions including Fansedge.com in October of 2003 and ProSports Memorabilia.com in April of 2004. These acquisitions present both significant challenges and opportunities for us. Our success depends, in part, on our ability to integrate operations with these companies, manage the growth associated with these entities, and continue to improve the platforms presented by these opportunities.

Historically, the third quarter of our fiscal year (October to December) has accounted for a greater proportion of our operating income than have each of the other three quarters of our fiscal year. This is primarily due to increased activities as a result of the holiday season. We expect that we will continue to experience quarterly variations and operating results principally as a result of the seasonal nature of our industry. Other factors also make for a significant fluctuation of our quarterly results, including the timing of special events, the amount and timing of new sales contributed by new stores, the timing of personal appearances by particular athletes and general economic conditions. Additional factors may cause fluctuations and expenses, including the costs associated with the opening of new stores, the integration of acquired businesses and stores into our operations and corporate expenses to support our expansion and growth strategy.

We continue to need available capital to grow our business and to meet our inventory purchase obligations and address our revenue fluctuations.

We set ourselves apart from other companies with our diversified product and services line, as well as our relationships with sports leagues, agents and athletes.

21

Use of Estimates and Critical Accounting Policies

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and revenues and expenses during the period. Future events and their effects cannot be determined with absolute certainty; therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to our financial statements. Management continually evaluates its estimates and assumptions, which are based on historical experience and other factors that are believed to be reasonable under the circumstances.

Management believes that the following may involve a higher degree of judgment or complexity:

Collectibility of Accounts Receivable

Our allowance for doubtful accounts is based on management’s estimates of the creditworthiness of our customers, current economic conditions and historical information, and, in the opinion of management, is believed to be an amount sufficient to respond to normal business conditions. Should business conditions deteriorate or any major customer default on its obligations to us, this allowance may need to be significantly increased, which would have a negative impact upon our operations.

Reserves on Inventories

We establish a reserve based on historical experience and specific reserves when it is apparent that the expected realizable value of an inventory item falls below its original cost. A charge to operations results when the estimated net realizable value of inventory items declines below cost. Management regularly reviews our investment in inventories for declines in value.

Income Taxes

Significant management judgment is required in developing our provision for income taxes, including the determination of deferred tax assets and liabilities and any valuation allowances that might be required against the deferred tax assets. We evaluate quarterly our ability to realize our deferred tax assets and adjust the amount of our valuation allowance, if necessary. We provide a valuation allowance against our deferred tax assets when we believe that it is more likely than not that the asset will not be realized.

Goodwill

We perform goodwill impairment tests on at least an annual basis and more frequently in certain circumstances. We cannot predict the occurrence of certain events that might adversely affect the reported value of goodwill. For example, such events may include strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our customer base, or a material negative change in our relationships with significant customers. If events occur or circumstances change that would more likely than not reduce the fair value of goodwill below its carrying amount, goodwill will be tested for impairment. We will recognize an impairment loss if the carrying value of the asset exceeds the fair value determination. We perform an annual fair value assessment of our goodwill on March 31 on each year, and no impairment was noted in fiscal 2004 or 2003.

22

Fiscal Years

Our fiscal year ends each March 31, and the fiscal years ended March 31, 2004 and March 31, 2003 are referred to as “fiscal 2004” and “fiscal 2003,” respectively. Certain prior period amounts have been reclassified to conform with the current year financial statement presentation.

Revenue Recognition

We recognize retail (including e-commerce sales) and wholesale/distribution revenues and related cost of sales at the later of (a) the time of shipment or (b) when title passes to the customers, all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured. Retail revenues and wholesale distribution revenue and related cost of sales are recognized at the time of sale.

Revenues from the sale of franchises are deferred until we fulfill our obligations under the franchise agreement and the franchised unit opens. The franchise agreements provide for continuing royalty fees based on a percentage of gross receipts. Management fee revenue related to the representation and marketing of professional athletes is recognized when earned and is reflected net of its related costs of sales. The majority of the revenue generated from the representation and marketing of professional athletes relates to services as an agent. In these arrangements, we are not the primary obligor in these transactions but rather only receive a net agent fee.

Fiscal 2004 Compared to Fiscal 2003

Revenues. Total revenues increased 22.5% from $17.8 million in fiscal 2003 to $21.8 million in fiscal 2004, due primarily to the expansion of the company-owned retail store business model ($2.4 million of increase) and the October 2003 acquisition of FansEdge ($3.5 million increase), offset partially by a decrease in revenues generated by two of our operating divisions (The Greene Organization and Farley Art had a combined decrease of $1.1 million) and the elimination of a product line ($379,000 in revenue in fiscal 2003).

Manufacturing/distribution net revenues (after elimination of intersegment sales) decreased by 10.6% from $14.1 million in fiscal 2003 to $12.6 million in fiscal 2004, due primarily to a discontinued product line (bobbleheads) which generated $379,000 in revenue in fiscal 2003, a reduction in sales generated by our Farley Art division ($340,000 decrease) and the absence of significant large-scale sales in fiscal 2004 at the same rate experienced in fiscal 2003. A single, significant marketing event in fiscal 2003 generated approximately $200,000 in merchandise revenue for our athlete marketing division. No single sale in fiscal 2004 was in excess of $30,000 for this division. Our athlete marketing division had a decrease in merchandise sales of approximately $430,000 in fiscal 2004 when compared to fiscal 2003 due primarily to the reduction in frequency of certain large individual sales associated with significant marketing appearances and/or events.

Retail sales increased significantly in fiscal 2004 primarily due to the addition of new company-owned retail stores during fiscal 2004, the full year effect of stores opened during fiscal 2003 and the October 2003 acquisition of FansEdge. Retail sales in fiscal 2004 were $7.5 million versus $1.6 million in fiscal 2003. We operated 13 and five retail stores as of March 31, 2004 and 2003, respectively, and opened two new stores subsequent to March 31, 2004.

We opened eight new company-owned retail stores during fiscal 2004. These stores generated approximately $1.6 million in revenue during fiscal 2004. Additionally, we opened three stores during fiscal 2003 which had incremental revenues of approximately $700,000 in fiscal 2004 due to the full year

23

effect. The two stores which were open for both full year periods had an increase in sales of 13.7% in fiscal 2004 as compared with fiscal 2003 which resulted in incremental sales of approximately $142,000. We achieved the increase in same store sales as a result of our ability to continue to develop each of the store’s customer base as well as being able to constantly improve the product and pricing mix. We entered the company-owned retail store business in March 2002 and we are continually challenging all aspects of our retail operation, using the knowledge we have gained to utilize and implement the best retailing methods possible to maximize sales and profitability. Our intention is to continue to open company-owned retail stores.

We completed our acquisition of FansEdge in October 2003 which allowed us to capitalize on the important holiday season and to begin realizing retail sales through the web. The internet division within our Retail segment, which began operations in October 2003 concurrent with the FansEdge acquisition, had revenues of $3.5 million in fiscal 2004 (six months). During the same period of time in the prior fiscal year (October 2002 through March 2003) when FansEdge was separately owned, the website generated about $1.9 million in revenue. The reason for the increase relates to the synergies employed by us after the acquisition, increased awareness of the website and its brand with internet shoppers due to marketing and promotional efforts and increased product offerings. Additionally, FansEdge entered into an agreement with Amazon.com in July 2003 to sell FansEdge products on Amazon’s website which generated significant incremental revenues (approximately $704,000) in the six months ending March 31, 2004 over the same period in the prior (when FansEdge was separately owned).

Management fee revenue decreased 34.7% from $942,000 in fiscal 2003 to $615,000 in fiscal 2004. Management fees are generated through athlete representation and marketing fees we charge our customers, and are reported net of the related cost of sales. During fiscal 2003 we organized two significant revenue generating events with casino properties which generated approximated $249,000 in net management fee revenues. The number of events/transactions organized by us was comparable in both fiscal periods (84 transactions in fiscal 2004 versus 81 transactions last year); however, the average net revenue generated per transaction decreased by 37.1% due to the absence of significant large-scale events at the same frequency in the prior year. Fiscal 2003 included three large-scale events which each generated in excess of $50,000 net revenue for us, including one event that generated $179,000 in net revenue. Fiscal 2004 included only one such large-scale event which generated $54,000 in net revenue.

Net franchise operations revenue decreased slightly due primarily to a reduction in franchise royalties associated with five store closings during fiscal 2004, the loss of franchise royalties relating to one conversion of a previously franchised store into a company-owned store and only one new franchise store opening during fiscal 2004. The 20 franchise stores that were open for both full year periods had a combined increase in revenues of 9.7% over fiscal 2003 which provided an incremental $76,000 in franchise royalties to us.

Cost and Expenses. Cost of sales for wholesale/distribution sales was $8.3 million in fiscal 2004 versus $8.9 million in fiscal 2003. As a percentage of wholesale/distribution revenues, cost of sales for wholesale/distribution sales was 65.7% in fiscal 2004 versus 62.6% in fiscal 2003. The reason for the increase is mostly due to a slight shift in the sales mix. The historical cost of sales percentage of wholesale/distribution sales has been in the mid-60’s range.

Cost of sales for retail sales was $3.6 million in fiscal 2004 versus $587,000 in fiscal 2003. As a percentage of total revenues, cost of sales for retail sales was 48.2% in fiscal 2004 versus 36.1% in fiscal 2003. The reason for the increase relates to certain, non-recurring one time costs ($44,600) occurring in fiscal 2003. The gross margin realized in our internet division within the retail segment is approximately 40% (60% cost of sales), while the historical cost of sales percentage in our company-owned retail stores

24

is in the mid-40’s range. We anticipate that the cost of sales percentage for retail sales in future periods to be in the mid-to-high 40’s range.

Operating expenses increased 37.8% from $7.4 million in fiscal 2003 (41.4% of total revenue) to $10.2 million in fiscal 2004 (46.8% of total revenue). The increase principally relates to incremental expenses associated with the development of our company-owned retail store model ($1.5 million increase) and the October 2003 acquisition of FansEdge ($1.1 million). We believe the majority of our operating expenses are fixed in nature. Over the past two fiscal years we have built our infrastructure in anticipation of expected future growth. We believe we have the necessary staffing levels and facilities to support such growth and don’t anticipate having to increase any fixed operating expense items. As a percentage of revenues, we expect that the percentage will decrease to the low-to-mid 40’s range in future periods.

Depreciation and amortization. Depreciation and amortization increased from $153,000 in fiscal 2003 to $239,000 in fiscal 2004 due mostly to depreciation costs associated with assets relating to our company-owned retail stores (two stores as of March 31, 2002, five stores as of March 31, 2003 and 13 stores as of March 31, 2004). As we continue to open new company-owned retail stores, we expect depreciation expense to increase.

Interest expense. Net interest expense increased slightly from $159,000 in fiscal 2003 to $191,000 in fiscal 2004 due to interest associated with increased borrowings against our line of credit facility in fiscal 2004. The interest rate was comparable in both periods (3.7% as of March 31, 2003 and 3.5% as of March 31, 2004).

Provision for income taxes. We recognized an income tax benefit of $283,000 during fiscal 2004 due to a pre-tax loss as opposed to income tax expense in fiscal 2003 of $272,000 associated with a pre-tax profit. The effective tax rate for both periods was approximately 40%.

Six Months Ended September 30, 2004 Compared to the Six Months Ended September 30, 2003

Revenue. Total revenues increased 67.2% to $11.2 million in the first six months of fiscal 2005 from $6.7 million in the same period last year due primarily to an increase of $682,000 or 12.4% in manufacturing and distribution revenues and an increase of $4.3 million to $5.4 million representing a 391% increase in retail revenues. The increase in retail revenues is due to our company-owned retail stores which expanded from seven units as of September 30, 2003 to fifteen units as of September 30, 2004. In addition, during October 2003 we acquired FansEdge, which generated retail revenues for us through FansEdge.com and we acquired Pro Sports Memorabilia in April 2004, which generated retail revenue through Prosportsmemorabilia.com. Manufacturing and distribution revenues increased from $5.5 million in the first six months of fiscal 2004 to $6.2 million in the first six months of fiscal 2005. The increase primarily is the result of the introduction of an expanded product line relating to NASCAR products which were developed throughout fiscal 2004.

Retail operations revenues increased significantly from $1.1 million in the first six months of fiscal 2004 to $5.4 million in the same period this year. We operated seven retail stores during the first six months of last fiscal year versus fifteen stores this fiscal year. Our internet retail division, which is comprised of two websites (FansEdge.com and ProSportsmemorabilia.com), began operations in October 2003 concurrent with our acquisition of FansEdge. The internet division had retail sales of $1.4 million during the first quarter of fiscal 2005 and $1.7 million during the second quarter of fiscal 2005 for a total of $3.1 million for the six months ended September 30, 2005.

25

Franchise operations revenues were $463,000 in the six month period ending September 30, 2003 compared to $519,000 in the same period this year. The 12.1% increase in revenue principally relates to increased royalty revenue.

We realized $191,000 in net management fee revenues in the six months ending September 30, 2003 versus $143,000 in the same period this year. The decrease relates to a reduction in the frequency of significant athlete marketing events in the current year period. We will continue to market opportunities for these significant events, however, we have seen a slowdown in corporate spending for these large events.

As a result of the forgoing events, for the six month ended September 30, 2004 we incurred a net loss of $860,000 respectively.

Costs and expenses. Total cost of sales for the first six months of fiscal 2004 was $3.4 million versus $6.0 million in the same period in fiscal 2005, a 76.5% increase. The increase relates to an increase in our sales. As a percentage of total sales, cost of sales was 54.2% for the six months ending September 30, 2004 versus 50.5% for the same period a year ago. The change relates to an increase in revenue from our internet division which operates at a lower margin than retail stores.

Cost of sales of manufacturing/distribution products were $3.0 million in the first six months of fiscal 2004 versus $3.0 million in the same period in fiscal 2005. As a percentage of manufacturing/distribution revenues, cost of sales was approximately 56.3% in the current year period versus 59.6% a year ago.

Operating expenses increased from $3.6 million in the first six months of fiscal 2004 to $6.2 million in the same period this fiscal year. The increase relates primarily to incremental operating expenses associated with operating fifteen retail stores and the internet division in the current year period versus only seven stores last year. As a percentage of sales, operating expenses increased from 53.9% to 55.2% as a result of an increase in corporate overhead in anticipation of future revenue growth.

Interest expense, net. Net interest expense increased due to higher levels of borrowing including the line of credit facility, note payable - related party, and amortization of the deferred loan costs on the related party loan.

Provision for income taxes. We recognized an income tax benefit of $573,000 during the current year period due to a pre-tax loss and an income tax benefit in the same period last year of $186,000. The effective tax rate for both periods was approximately 40%.

Liquidity and Capital Resources

The balance sheet as of September 30, 2004 reflects working capital of $2.8 million versus working capital of $5.8 million one year earlier.

At September 30, 2004, our cash and cash equivalents were $333,000, as compared to $185,000 at September 30, 2003. Net accounts receivable at September 30, 2004 were $1.7 million compared to $1.5 million at September 30, 2003.

Cash used in operations amounted to $1.3 million for the first six months of fiscal 2005, compared to $1.6 million used in operations in the same period of fiscal 2004. Cash used in operations for the six months ended September 30, 2004 improved $305,000 over the six months ended September 30, 2003. Cash flow used in investing activities was ($480,000); including $200,000 cash paid for acquisition of Pro Sports Memorabilia. Cash generated from financing activities was $1.8 million, including the $700,000

26

of cash from note payable - related party, an increase in the borrowings against the line of credit facility of $1.2 million, offset by costs attributed to the repayment of certain debt facilities. As of September 30, 2004, our cash balance was $333,000.

The amount outstanding on our line of credit facility, which is classified in the financing section of the Statement of Cash Flows, increased by approximately $1.2 million since September 30, 2003. Outstanding borrowings against our line of credit facility were $5.5 million at September 30, 2004. The line of credit facility, which has a maximum borrowing capacity of $5.5 million, has annual renewal terms and renewed most recently in November 2003. The line of credit facility is used for working capital purposes and was used to fund our retail store expansion, pay for costs incurred relating to our planned acquisition of FansEdge (completed in October 2003) and ProSports Memorabilia (completed in April 2004), the move of our primary warehouse facility and the replacement of our primary accounting software. The line of credit facility is collateralized by our accounts receivable and inventories. We are required to comply with certain annual financial ratios with respect to the line of credit facility. The interest rate is a floating rate based on adding a fixed interest charge of 2.40% to the thirty day “Dealer Commercial Paper Rate” (4.24% at September 30, 2004).

By virtue of our expansion and investment in the company-owned retail store model, the October 2003 acquisition of FansEdge and the April 2004 acquisition of ProSports Memorabilia, we have become more cyclical and reliant on the calendar fourth quarter (our fiscal 3rd quarter) for revenues and profits. As a result of such factors, we sought to obtain financing to satisfy our short term capital needs including the planning for the holiday season. In order to satisfy these needs, subsequent to the end of the fiscal first quarter, we received a convertible loan to borrow up to $1.0 million due January 15, 2005 from the brother of our president and chief executive officer. The initial advance of $700,000 as of September 30, 2004, was used for working capital purposes. As of November 22, 2004 the remaining $300,000 has been funded and used. In consideration for such loan, we have agreed to pay such third party interest at the rate of 12% per annum and granted five year options to purchase 1,000,000 shares of common stock at an exercise price of $0.25 per share. In an event of a default under the loan, the loan is convertible into our common stock at $0.05 per share. On January 25, 2005, effective as of January 15, 2005, we extended the maturity date of the note to April 29, 2005 and modified the convertibility feature to provide for conversion of the note, only upon an event of default, at the lower of (i) the average closing sales price for a share of our common stock for the three trading days immediately prior to conversion or (ii) in the event we sell or issue common stock or other convertible securities after December 31, 2004, at the lowest issue or conversion price per share of such securities, as applicable.

In addition, to provide us with additional working capital, nine of our senior employees, including our chairman and chief executive officer, agreed to defer all but $1 of their monthly salary effective August 1, 2004. In consideration for such deferral, each employee received options to purchase common stock which the number of shares is equal to the amount deferred. The five year options are exercisable at $0.25 per share. In addition, upon payment of such accrued amounts, each employee received a 5% deferral bonus. The deferrals ceased on November 19, 2004. We have also begun a program to review our operational expenses and examining ways to reduce costs on a going-forward basis.

On December 31, 2004, we entered into a Forbearance Agreement with MLBFS, the lender under our line of credit facility. Our line of credit facility expired by its terms on November 30, 2004 and MLBFS has advised us that it does not intend to renew the line of credit facility. As a result of such factors, we and MLBFS entered into the Forbearance Agreement. Pursuant to the terms of the Forbearance Agreement, MLBFS has agreed to forebear from the exercise of its rights and remedies under our revolving and term loan agreement documents and to permit us to repay the outstanding obligations over a period of time, as discussed below. Since January 1, 2005, we have made monthly payments to MLBFS in the amount of $20,000. As of January 1, 2005, we owed approximately $5.3 million to MLBFS. The

27

Forbearance Agreement terminates on April 29, 2005, at which time all sums then due and owing MLBFS are payable, provided that we repay $1.0 million in partial repayment of outstanding indebtedness to MLBFS by March 31, 2005. We are presently negotiating with third party lenders to replace MLBFS, although there is no assurance that such funding may be obtained, or if available, on terms acceptable to us. Should we not be successful in obtaining additional financing, it could adversely affect our operations and financial condition.

We have not created and are not a party to any special purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. However, we may not generate sufficient cash flow from operations, our anticipated revenue growth and operating improvements may not be realized and future borrowings may not be available in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs. Except as described herein, our management is not aware of any known trends or demands, commitments, events, or uncertainties, as they relate to liquidity which could negatively affect our ability to operate and grow as planned.

We are a defendant in an action in the United States Bankruptcy Court for the District of Maryland in an action brought by Unitas Management, Inc. Unitas Management has brought a claim against us for damages of up to $419,000, based upon an alleged breach of contract. On January 10, 2005, the Bankruptcy Court granted Unitas Management’s motion for summary judgment and entered a judgment for Unitas Management for approximately $435,000. On January 20, 2005, we filed an appeal of judgment in the United States District Court. We are unable to predict the results of such appeal. In order to secure a bond necessary to stay the judgment during the appeal, we intend to obtain debt financing of approximately $550,000 by January 31, 2005. As of September 30, 2004, we have not accrued any amount related to this litigation. If we are unsuccessful in such appeal, our business and results of operations may be materially and adversely effected. No assurance can be given as to the outcome of the litigation at this time.

New Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities,” which establishes criteria to identify variable interest entities (“VIE”) and the primary beneficiary of such entities. An entity that qualifies as a VIE must be consolidated by its primary beneficiary. All other holders of interests in a VIE must disclose the nature, purpose, size and activity of the VIE as well as their maximum exposure to losses as a result of involvement with the VIE. FIN 46 was revised in December 2003 and is effective for financial statements of public entities that have special-purpose entities, as defined, for periods ending after December 15, 2003. For public entities without special-purpose entities, it is effective for financial statements for periods ending after March 15, 2004. We do not have any special-purpose entities, as defined. The adoption of FIN 46 did not have a material effect on our financial statements.

In May 2003, the FASB issued Statement of Financial Accounting Standard No. 150 (“SFAS 150”), “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS 150 establishes standards on the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The provisions of SFAS 150 are effective for financial instruments entered into or modified after May 31, 2003 and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003. The adoption of SFAS 150 did not have a material impact on our results of operations or financial position.

In December 2003, the SEC issued Staff Accounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition,” which codifies, revises and rescinds certain sections of Staff Accounting Bulletin No. 101 (“SAB 101”), “Revenue Recognition in Financial Statements,” in order to make this interpretive guidance

28

consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The changes noted in SAB 104 did not have a material effect on our consolidated results of operations, consolidated financial position or consolidated cash flows.

In December 2004, the Financial Accounting Standards Board (FASB) issued FAS 123(R) Share-Based Payment, that addresses the accounting for share-based payment transactions (for example, stock options and awards of restricted stock) in which an employer receives employee-services in exchange for equity securities of the company or liabilities that are based on the fair value of the company’s equity securities. This standard eliminates the use of APB No. 25, Accounting for Stock Issued to Employees, and will generally require such transactions be accounted for using a fair-value-based method and recording compensation expense rather than optional pro forma disclosure. This standard is effective on July 1, 2005. This accounting standard will not have a material effect on our operations.

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to our consolidated financial statements.

29

BUSINESS

Dreams, Inc. is a Utah Corporation which was formed in 1980. Assuming shareholder approval of our reincorporation as a Florida corporation, which is a condition to this offering, we will be a Florida corporation prior to the completion of this offering.

We operate in three business segments:

• Retail. The retail segment represents the Company owned Field of Dreams^® retail stores and our e-commerce business operations including FansEdge.com (acquired in October 2003) and ProSportsMemorabilia.com (acquired in April 2004). There are currently 13 company-owned and operated Field of Dreams^® stores. The e-commerce component of the segment consists of two e-commerce retailers selling a diversified selection of sports licensed products and memorabilia on the Internet.

• Manufacturing/Distribution. The manufacturing/distribution segment represents the manufacturing and wholesaling of sports memorabilia products, custom artwork and reproductions and acrylic cases. These operations are principally conducted through our wholly-owned subsidiary, Mounted Memories.

• Franchise. This segment represents the results of our franchise program. We are in business of selling Field of Dreams^® retail store franchises in the United States. There are currently 20 Field of Dreams^® franchise stores open and operating.

Retail Segment

Retail Stores

In March 2002, we entered into the retail business with the purchase of two existing Field of Dreams^® franchises including inventory on hand as of the acquisition date. As of the date of this prospectus, we owned and operated 13 Field of Dreams^® retail stores. We may identify other franchised stores which we may purchase from time to time as we believe appropriate. We will also evaluate the opening of new retail operations. Stores are located in high traffic areas in regional shopping malls. The stores average approximately 1,000 square feet. The average cost of opening a new company-owned retail store in fiscal 2004 was approximately $100,000 per store. We pay a 1% royalty fee to MCA Universal Licensing for the use of the “Field of Dreams” trademark relating to sales generated in our stores. During fiscal 2004 and 2003 we had royalty fees of $40,296 and $16,264, respectively.

A store typically has a full time manager and full time assistant manager in addition to hourly personnel, most of whom work part time. The number of hourly sales personnel in each store fluctuates depending upon our seasonal needs. Our stores are generally open seven days per week and generally ten hours per day.

30

Set forth below is a listing of our stores as of December 31, 2004, their location and the date opened.

City	Store Location	Date Opened
Denver, CO	Park Meadows Mall	March 2002
Detroit, MI	Somerset Mall	March 2002
Chicago, IL	Woodfield Mall	October 2002
Norfolk, VA	MacArthur Center	October 2002
San Diego, CA	Horton Plaza	November 2002
Paramus, NJ	Garden State Plaza	May 2003
San Francisco, CA	Pier 39	September 2003
Glendale, CA	Glendale Galleries	October 2003
Beverly Hills, CA	Beverly Center	November 2003
Farmington, CT	West Farms Mall	November 2003
Wellington, FL	Wellington Place	November 2003
Denver, CO	Cherry Creek Mall	May 2004
Scottsdale, AZ	Scottsdale Fashion Square	June 2004

In December 2004, we chose not to extend the terms of our leases for our stores located in Copley Place, Boston, MA and Riverchase Galleria, Birmingham, AL and closed these stores. We did not incur any costs in terminating these leases and inventory was sent back to our warehouse.

E-Commerce Operations.

In October 2003 we purchased the website and 100% of the outstanding common stock of FansEdge Incorporated and in April 2004 we acquired certain assets, including the website of ProSports Memorabilia, Inc. The e-commerce division is focused on the sales of sports licensed products and memorabilia. It sells official licensed products of the NFL, MLB, NHL, NBA, NASCAR and collegiate products. The websites also provide authentic autographed memorabilia for over 200 teams and over 1,300 different athletes. This division sells over 20,000 products across categories such as apparel, auto accessories, autographed memorabilia, collectibles, headwear, home and office, jewelry and watches, tailgate and stadium gear and DVD’s. The e-commerce products are marketed through a series of websites. These websites represent several of the leading brand names in this market and include:

• www.FansEdge.com;

• www.prosportsmemorabilia.com;

• www.sportcases.com; and

• www.peterose.com.

This division’s business strategy is to:

• strengthen its brands, improve customer service, expand its catalog and increase buying power;

• target new customers;

• transform shoppers into customers and customers into repeat customers; and

• operate efficiently.

31

FansEdge recently entered into a strategic alliance with Amazon.com in which the FansEdge brand and its products are sold in the apparel and sporting section of the Amazon.com website. This division will continue to expand its marketing practices and seek strategic alliances with other companies and brands in addition to marketing its products as currently marketed.

We fulfill the orders generated through our website sales through third-party fulfillment and products shipped out of our warehouse facilities in Sunrise, Florida, Chicago, Illinois and Denver, Colorado. Our distribution network enables us to provide immediate delivery service to our online customers. It is our goal to distribute online merchandise within 48 hours of receiving an order.

Manufacturing/Distribution Segment

Mounted Memories

Mounted Memories (“MMI”) is a wholesaler of sports and celebrity memorabilia products and acrylic cases. MMI also organizes, operates and participates in hobby and collectible shows. MMI has non-exclusive informal agreements with numerous well-known athletes who frequently provide autographs at agreed-upon terms. MMI also enters into exclusive agreements with athletes. MMI has entered into an exclusive arrangement with Dan Marino, who is a former member of our board of directors. Through its relationships with athletes, agents and other persons and entities in the sporting industry, MMI is able to arrange for the appearance of popular athletes and celebrities at collectible shows, and at the same time, generate inventory for future sales from the warehouse. MMI negotiates directly with the athlete or with the athlete’s agent to determine contract specifics. These contracts are formal in that they stipulate the logistic specifics, payment terms and number of autographs to be received. MMI generally receives a fee when it arranges an athlete for a corporate event.

MMI has been in business since 1989 and has achieved its industry leading status partly due to its strict authenticity policies. The only sports memorabilia products sold by MMI are those produced by MMI through private or public signings organized by MMI or purchased from an authorized agent of MMI and witnessed by an MMI representative. In addition to sports and celebrity memorabilia products, MMI manufacturers a very large selection and supply of acrylic cases, with over 50 combinations of materials, colors and styles. The primary raw material used in the production process is plastic. There are many vendors who sell plastic throughout South Florida and MMI seeks to obtain the best pricing through competitive vendor bidding. MMI does not produce the helmets, footballs, baseballs or other objects which are autographed. Those products are available through numerous suppliers. No individual suppliers represent more than ten percent of our total fiscal 2004 or fiscal 2003 purchases.

MMI’s customer base varies greatly and includes, for example, internet companies, traditional catalog retailers and retail stores which sell sports and celebrity memorabilia products and cases. Field of Dreams^® franchise and company-owned stores purchase products from MMI. No customer provided greater than ten percent of MMI’s total fiscal 2004 revenue. MMI pays annual license fees to Major League Baseball, the National Football League and NASCAR.

The sports memorabilia industry faces several challenges, most notably the assurance of product authenticity. Through its caution in only selling items produced internally or purchased from authorized agents, witnessed by an MMI representative, MMI avoids significant authenticity problems. MMI feels the way it has achieved a competitive advantage over its competitors is through its reputation for authenticity, professional league and player relationships, customer service and automation of shipping. MMI uses approximately 5,000 square feet of its warehousing facilities for shipping. MMI has achieved

32

a significant positive reputation in its industry for timely and accurate shipments and commits to shipping orders within 72 hours of order receipt. Additionally, through the implementation of advanced and effective fulfillment techniques and processes, and utilization of the most current shipping software, MMI has experienced very low breakage over the past several years.

The Greene Organization

The Greene Organization is engaged in athlete representation and corporate marketing of individual athletes. The Greene Organization provides athletes with all “off-field” activities including personal appearances, endorsement and marketing opportunities. Warren H. Greene, president of The Greene Organization, is the brother-in-law of our president and chief executive officer.

Franchise Segment

We conduct our Field of Dreams^® operations through Dreams Franchise Corporation (“DFC”). DFC licenses certain rights from Universal Studios Licensing, Inc. (“USL”) to use the name “Field of Dreams^®” in connection with retail operations and catalog sales. Field of Dreams^® is a copyright and trademark owned by Universal City Studios, Inc. with all rights reserved. Universal has authorized USL to license the marks. Neither company is in any way related to or an affiliate of us. We do not presently have a Field of Dreams^® catalog.

Merchandising License Agreement

DFC has acquired from USL the exclusive license to use “Field of Dreams^®” as the name of retail stores in the United States and a non-exclusive right to use the name “Field of Dreams^®” as a logo on products. DFC has also licensed from USL the exclusive right to sublicense the “Field of Dreams^®” name to franchisees for use as a retail store name. The license agreement between DFC and USL is referred to herein as the “USL License”. Under the terms of the USL License, DFC is obligated to pay to USL a 1% royalty based on gross sales of Field of Dreams^® stores. DFC must pay USL a $2,500 advance on royalties for each company-owned store which is opened. DFC is obligated to pay $5,000 to USL upon the opening of each franchised store. The $5,000 fee is not an advance on royalties. DFC guarantees to pay USL a minimum yearly royalty of $2,500 regardless of the amount of gross sales. The current term of the USL License expires in December 2005. DFC has successive five-year options to renew the USL License. The USL License requires DFC to submit all uses of the Field of Dreams^® mark for approval prior to use. Ownership of the Field of Dreams^® name remains with USL. Neither we nor DFC will acquire any rights to that name. Should DFC breach the terms of the USL License, USL may, in addition to other remedies, terminate DFC’s rights to use the “Field of Dreams^®” name. Such a termination would have an adverse effect on DFC’s and our business.

If DFC is in compliance with the terms of the USL License and if USL wishes to open and operate or license third parties to open and operate Field of Dreams^® stores outside of the United States, DFC has a right of first refusal to obtain the license for such non-United States territory. DFC may exercise its right of first refusal by notifying USL of its desire to undertake a proposed new territory and paying to USL a non-refundable advance license fee of $10,000. Following such notice and payment, DFC and USL must negotiate in good faith to reach a definitive license agreement for the additional territory. If DFC fails to send notification, make the $10,000 payment or if a definitive license cannot be reached, USL may offer the new territory to another party.

DFC is required to indemnify USL for certain losses and claims, including those based on defective products, violation of franchise law and other acts and omissions of DFC. DFC is required to maintain

33

insurance coverage of $3,000,000 per single incident. The coverage must name USL as an insured party. We have guaranteed the monetary obligations of DFC pursuant to the USL License.

Franchising

The laws of each state vary regarding regulation of the sale of franchises. Certain states require compliance with the regulations of the Federal Trade Commission (the “FTC Regulations”) prior to commencement of sales activity (the “FTC States”). Other states require compliance with specific additional registration procedures which vary in complexity. DFC is currently offering franchises in 44 states. Compliance with the FTC Regulations and various state regulations requires preparation of an extensive offering circular and the filing of such circular in certain states. Compliance with some state regulations requires significant time in connection with satisfying comments of franchise offering circular examiners. Compliance with FTC Regulations and certain state laws significantly limits the means by which DFC offers and sells franchises. DFC offers five types of franchises: Individual Standard Store (“Standard”), Individual Kiosk (“Kiosk”), Area Development (“Area Development”), Conversion (“Conversion”), and Seasonal (“Seasonal”). We do not depend on any one or a few franchisees for a material portion of our revenues. Royalties from the largest franchisee accounted for less than one percent of our fiscal 2004 consolidated revenues.

Standard Franchises

Our Standard franchise provides a franchisee the right to open and operate a single Field of Dreams^® store at a single specified location. Franchisees pay DFC $10,000 upon execution of a Standard franchise agreement and an additional $22,500 upon execution by the franchisee of a lease for the franchised store. Standard franchise agreements vary in length. It is DFC’s general practice that the term of Standard franchise agreements concur with the term of the franchisee’s lease. In addition to sublicensing the right to use the Field of Dreams^® name for a single franchised store, DFC is required to provide the franchisee certain training, start-up assistance and a system for the operation of the store. Prior to opening a Field of Dreams^® store, a franchisee or its designated manager is required to attend and successfully complete a 2-week training course. The course is conducted at a DFC designated site. DFC also makes the same training available to a reasonable number of the franchisee’s employees. For a period of five days during startup of a franchised store, DFC furnishes to a franchisee a representative to assist in the store opening. DFC loans to each franchisee a copy of its operations manual which sets out the policies and procedures for operating a Field of Dreams^® store. DFC does not provide an accounting system to franchisees. DFC does provide operational advice to franchisees and will, upon request, assist a franchisee in locating a site for a store. DFC reserves the right to modify at any time the system used in the store. DFC also reserves the right to change the name used in the system from Field of Dreams^® to any other name and require all franchisees to discontinue any use of any aspect of the system or the name Field of Dreams^®. DFC has reserved this right in its franchise agreements to provide for the event that it determines that another name would be better for its franchise system, that the royalty it pays to USL in connection with use of the name is excessive or if DFC should breach the terms of the USL license and lose the right to use the Field of Dreams^® name.

DFC imposes certain controls and requirements on Field of Dreams^® franchisees in connection with site selection, site development, pre-opening purchases, initial training, opening procedures, payment of fees, compliance with operating manual procedures including purchasing through approved vendors, protection of trademark and other proprietary rights, maintenance and store appearance, insurance, advertising, owner participation in operations, record keeping, audit procedures, autograph authenticity standards and other matters. Franchisees are required to pay DFC 6% of gross revenues as an on-going royalty. Payments must be made weekly. Franchisees are required to comply with certain accounting procedures and use computer systems acceptable to DFC. Franchisees are also required to contribute an

34

additional 1.5% of gross revenues to a marketing and development fund which is administered by DFC for the promotion of the Field of Dreams^® system. Each franchisee is also required to spend 1% of its gross revenues for its own local advertising and promotion. During its first 90 days of operation, each franchisee is required to spend a minimum of $2,500 for promotion and advertising. Franchisees are required to maintain standards of quality and performance and to maintain the proprietary nature of the Field of Dreams^® name. Franchisees must commence operation of the franchised stores within 180 days after execution of the Standard franchise agreement. DFC has prepared and amends from time-to-time an approved supplier list from which franchisees may purchase certain inventory and other supplies. Each franchisee is required to maintain specified amounts of liability insurance which names DFC and USL as insured parties. Franchisee’s rights under the Standard franchise are not transferable without the consent of DFC and DFC has a right of first refusal to purchase any franchised store which is proposed to be sold. DFC has not sold any Standard franchises since the fiscal year ended March 31, 2004.

Area Development

An Area Development agreement grants rights to develop a minimum of four Field of Dreams^® stores in a designated area. The stores are required to be open pursuant to a specified time schedule. The developer must execute separate Standard franchise agreements for each store as it is opened. Upon execution of the Area Development agreement, the developer is required to pay DFC $5,000 for each store to be opened, with a minimum payment upon execution of $20,000. The developer must obtain DFC’s approval for each store site the developer proposes to open. The developer then pays DFC an additional $20,000 for each store upon execution by the developer of a lease for that store. Development Agreements are not transferable without the consent of DFC.

Franchise Broker

DFC does not currently employ a franchise broker. The officers of DFC currently act as sales agents for Field of Dreams^® franchises. We may engage an outside franchise broker in the future. DFC advertises Field of Dreams^® franchises in a very limited number of business magazines. Most persons expressing an interest in purchasing a Field of Dreams^® franchise have visited a Field of Dreams^® store and have subsequently contacted DFC.

Competition

Our retail stores compete with other retail establishments, including our franchise stores and other stores that sell sports related merchandise, memorabilia and similar products. The success of our stores depends, in part, on the quality, availability and the varied selection of authentic products as well as providing strong customer service.

Our e-commerce business competes with a variety of online and multi-channel competitors including mass merchants, fan shops, major sporting goods chains and online retailers.

MMI competes with several major companies and numerous individuals in the sports and celebrity memorabilia industry. MMI believes it competes well within the industry because of the reputation it has established in its 15-year existence. MMI focuses on ensuring authenticity and providing the best possible customer service. MMI has concentrated on maintaining and selling memorabilia items of athletes and celebrities that have a broad national appeal. MMI believes it maintains its competitive edge because of its long established relationships with numerous high profile athletes, each of the major sports leagues and several of the largest sports agencies. Several of its competitors tend to focus on specific regional markets due to their relationships with sports franchises in their immediate markets. The success of those competitors typically depends on the athletic performance of those specific franchises.

35

Additionally, MMI typically focuses on the three core sports that provide the greatest source of industry revenue, baseball, football and NASCAR.

Within the acrylic case line of business, MMI competes with other companies which mass produce cases. MMI does not compete with companies which custom design one-of-a-kind cases. MMI believes that because it is one of the country’s largest acrylic case manufacturers, it is very price competitive due to its ability to purchase large quantities of material and pass the savings to customers.

The Greene Organization competes with other companies which provide “off-field” services to athletes, some of which are much larger and better capitalized, including traditional sports agencies such as International Management Group.

DFC competes with other larger, more well-known and substantially better funded franchisors for the sale of franchises. Field of Dreams^® stores compete with other retail establishments. We believe that the principal competitive factors in the sale of franchises are franchise sales price, services rendered, public awareness and acceptance of trademarks and franchise agreement terms

Employees

We currently employ one hundred thirty-five (135) full-time employees and thirty (30) part-time employees. We also hire temporary seasonal employees as needed. None of our employees are represented by a labor union and we believe that our employee relations are good.

Seasonality

Our business is highly seasonal with operating results varying from quarter to quarter. We have historically experienced higher revenues in the third quarter of our fiscal year (October through December), primarily due to holiday sales. Approximately 44% and 35% of our consolidated revenues were generated in the third quarter of fiscal 2004 and fiscal 2003, respectively. Management believes that the percentage of revenues in the third fiscal quarter will increase in future fiscal years as we grow the retail segment.

Properties

We lease our corporate office and primary manufacturing/warehouse facility in Plantation, Florida, and Sunrise, Florida, respectively. The corporate office lease is for approximately 4,500 square feet of office space and expires in June 2008. Our principal executive offices are located at the Plantation, Florida facility.

As of March 31, 2004, our primary manufacturing/warehouse facility in Sunrise, Florida, had approximately 50,000 square feet of office, manufacturing and warehousing space. The lease is for a 10 year term with occupancy costs of approximately $32,000 per month with 3% annual increases in rent per year.

Our 13 company-owned stores currently lease their facilities, with lease terms (including renewal options) expiring in various years through September 2013 with initial terms of 7 to 10 years. We also lease a warehouse facility in Denver, Colorado which has approximately 3,000 square feet as well as a warehouse facility for our internet division in Chicago, Illinois which has approximately 10,000 square feet. Both leases expire in October 2005.

36

Legal Proceedings

We are a defendant in an action in the United States Bankruptcy Court for the District of Maryland in an action brought by Unitas Management, Inc. Unitas Management has brought a claim against us for damages of up to $419,000, based upon an alleged breach of contract. On January 10, 2005, the Bankruptcy Court granted Unitas Management’s motion for summary judgment and entered a judgment for Unitas Management for approximately $435,000. On January 20, 2005, we filed an appeal of judgment in the United States District Court. We are unable to predict the results of such appeal. In order to secure a bond necessary to stay the judgment during the appeal, we intend to obtain debt financing of approximately $550,000 by January 31, 2005. As of September 30, 2004, we have not accrued any amount related to this litigation. If we are unsuccessful in such appeal, our business and results of operations may be materially and adversely effected. No assurance can be given as to the outcome of the litigation at this time.

We are also subject to other legal proceedings that arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability, if any, in excess of applicable insurance coverage, is not likely to have a material effect on our financial condition, results of operations or liquidity. However, as the outcome of litigation or other legal claims is difficult to predict, significant changes in the estimated exposures could occur, which could have a material impact on our operations.

37

MANAGEMENT

Directors And Executive Officers

Our Directors and Executive Officers and the positions held by each of them are as follows. All directors serve until our next annual meeting of shareholders.

Name	Age	Serving as our Officer and/or Director Since	Position Held With the Company
Sam D. Battistone	64	1983	Chairman/Director
Ross Tannenbaum	42	1998	President/CEO/Director
David M. Greene	42	2001	Senior Vice President of Strategic Planning & Corporate Secretary
Dale E. Larsson	59	1982	Director
Victor Shaffer	44	2004	Executive Vice President

Biographical Information

Sam D. Battistone has been Chairman of the Board since our inception. Mr. Battistone served as our president until November 1998. He was the principal owner, founder and served as Chairman of the Board, President and Governor of the New Orleans Jazz and Utah Jazz of the National Basketball Association (NBA) from 1974 to 1986. In 1983, he was appointed by the Commissioner of the NBA to the Advisory committee of the Board of Governors of the NBA. He held that position until we sold our interest in the team. He served as a founding director of Sambo’s Restaurants, Inc. and in each of the following capacities, from time to time, from 1967 to 1979: President, Chief Executive Officer, Vice-Chairman and Chairman of the Board of Directors. During that period, Sambo’s grew from a regional operation of 59 restaurants to a national chain of more than 1,100 units in 47 states. From 1971 to 1973, he served on the Board of Directors of the National Restaurant Association.

Ross Tannenbaum has served as our President and Director since November 1998. From August 1994 to November 1998, Mr. Tannenbaum was President, director and one-third owner of MMI. From May 1992 to July 1994, Mr. Tannenbaum was a co-founder of Video Depositions of Florida. From 1986 to 1992, Mr. Tannenbaum served in various capacities in the investment banking division of City National Bank of Florida. Mr. Tannenbaum is the brother-in-law of David M. Greene, our Senior Vice President.

David M. Greene has been our Senior Vice President of Strategic Planning since June 2001 and our Corporate Secretary since August 2004. From May 1992 to May 2001, he was the President of Florida Tool & Gauge, Inc., an aerospace manufacturing company located in Fort Lauderdale, Florida. From April 1987 to April 1992, he served as President of GGH Consultants, Inc., an investment and business consulting company. From May 1984 to March 1987, he worked as an investment executive at the investment banking firm of Drexel, Burnham, Lambert, Inc. Mr. Greene is the brother-in-law of Ross Tannenbaum, our president, chief executive officer and a director.

Dale E. Larsson has served as a Director of ours since 1982. From 1982 until September 1998, Mr. Larsson was our Secretary-Treasurer. Mr. Larsson graduated from Brigham Young University in 1971 with a degree in business. From 1972 to 1980, Mr. Larsson served as controller of Invest West Financial Corporation, a Santa Barbara, California based real estate company. From 1980 to 1981, he was employed by Invest West Financial Corporation as a real estate representative. From 1981 to 1982, he

38

served as the corporate controller of WMS Famco, a Nevada corporation based in Salt Lake City, Utah, which engaged in the business of investing in land, restaurants and radio stations.

Victor Shaffer has served as our Executive Vice President since June 2004. Prior to the hiring of Mr. Shaffer, he served as a part-time consultant since August 2003 in support of our NASCAR initiative. Mr. Shaffer has over 20 years of executive experience in advertising and marketing. From 1992 to 1998 he served as president and chief executive officer of Press Pass, a trading card and collectibles company. From 1998 to 2000 he served as an executive vice president of Racing Champions.

Director Compensation

Our directors are not paid fees for serving on our board. Directors are reimbursed for their out of pocket expenses incurred in connection with the attendance at our board meetings.

Compensation of Executive Officers

Summary Compensation Table

The following table sets forth information concerning compensation for services in all capacities to us and our subsidiaries for fiscal years ended March 31, 2002, 2003 and 2004 of those persons who were, at March 31, 2004, our chief executive officer and our executive officers whose compensation exceeded $100,000.

		Annual Compensation						Long-Term Compensation
Name and Principal Position	Fiscal Year	Salary		Bonus		Other Annual Compensation(1)		Securities Underlying Options/SARs
Ross Tannenbaum	2002	$	250,000	$	5,000	$	9,600	—
CEO and Director	2003		275,000		9,600		9,600	—
	2004		288,750		9,600		9,600	—
Mark Viner (2)	2002		124,583		5,000		7,500	—
Chief Financial Officer,	2003		147,667		—		—	—
Secretary & Treasurer	2004		151,000		—		7,500	—
								—
David M. Greene (3)	2002		75,000		1,500		—	—
Senior Vice President	2003		100,000		—		7,200	—
	2004		100,000		—		7,200	—

(1) Other annual compensation represents automobile allowances.

(2) Mr. Viner resigned from his position as our chief financial officer, secretary and treasurer effective August 16, 2004.

(3) Mr. Greene commenced employment with us in June 2001.

Option Grants in Last Fiscal Year and Potential Realizable Values

The following table sets forth as to each of the named executive officers information with respect to option grants during fiscal 2004 and the potential realizable values of such option grants. The 5% and

39

10% assumed rates of growth, based on the grant price, are for illustrative purposes only. They are not intended to predict future stock prices, which will depend on market conditions, our performance and other factors.

Name	Number of Securities Underlying Options Granted (#)	% of Total Options Granted to Employees in Fiscal Year		Exercise Price		Expiration Date(1)
Ross Tannenbaum	—	—			—	—
Mark Viner	500,000	41.67	%	$	0.20	January 8, 2004
David M. Greene	500,000	41.67			0.20	January 8, 2004

Aggregated Option Exercises In Fiscal Year and FY-End Option Values

The following table sets forth, with respect to each of the named executive officers, the number of share options exercised and the dollar value realized from those exercises during fiscal 2004 and the total number and aggregate dollar value of exercisable and non-exercisable stock options held on March 31, 2004.

Name	Shares Acquired On Exercise (#)	Value Realized ($)	Number of Securities Underlying Unexercised Options/SARs At FY-End (#)		Value of Unexercised In-The-Money Options/SARs At FY-End ($) (1)
			Exercisable	Unexercisable	Exercisable		Unexercisable
Ross Tannenbaum	—	—	—	—		—	—
Mark Viner	—	—	500,000	—	$	75,000	—
David M. Greene	—	—	500,000	—	$	75,000	—

At March 31, 2004, the closing bid price of our common stock was $0.35, and on June 4, 2004, was $0.35.

(1) Based on the closing bid price of our common stock of $0.35 on March 31, 2004.

Employment Agreements

We are not currently a party to any employment agreement with any of our named executive officers.

Equity Compensation Plans

We do not currently have any equity compensation plans in effect.

40

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Ross Tannenbaum, our president and chief executive officer and a director, and Sam Battistone, our chairman, each have ownership interests in franchised Field of Dreams^® stores. Prior to November 1, 2004, Mr. Tannenbaum was a 25% owner in M&S, Inc., a Florida Corporation that owns and operates three Field of Dreams^® franchised stores in the state of Florida. As of November 1, 2004, Mr. Tannenbaum has divested himself of any equity ownership of M&S, Inc. Mr. Battistone is a principal in FOD Las Vegas, LLC which owns and operates three Field of Dreams^® franchised stores in the state of Nevada and one in the state of Minnesota. Mr. Tannenbaum and Mr. Battistone, through their partnerships with M&S, Inc. and FOD Las Vegas, LLC, respectively, have entered into our standard franchise agreements.

During fiscal 2004, M&S and FOD Las Vegas, LLC paid us $73,000 and $272,000, respectively in franchise royalties. Additionally, during fiscal 2004, M&S, Inc. and FOD Las Vegas, LLC purchased products from us totaling $202,000 and $223,000, respectively. During fiscal 2003, M&S, Inc. and FOD Las Vegas, LLC paid us $75,000 and $247,000 in franchise royalties, respectively. Additionally, during fiscal 2003, M&S, Inc. and FOD Las Vegas, LLC purchased products from us totaling $162,000 and $105,000, respectively.

During fiscal 2004 and 2003, we paid Dan Marino, then a member of our board of directors, $291,000 and $308,000, respectively, for his autograph on inventory items and appearance fees. We have a three year agreement with Mr. Marino, which expires March 31, 2006. Under the terms of the agreement, Mr. Marino will earn a minimum of $1.5 million over the three year period. Mr. Marino will provide autographs and make personal appearances under the contract terms. Such payments were based on arms-length negotiations between the parties. Mr. Marino resigned from our Board of Directors on January 25, 2005.

On May 13, 2002, we loaned Mr. Battistone $275,000. This amount was repaid in June 2002.

In April 2002, we entered into a consulting agreement with a corporation wholly-owned by Mr. Battistone. The term of the agreement is through March 31, 2007. We agreed to pay the consultant $145,000 for the first year, $160,000 in each of years two, three and four and $175,000 in year five. We are responsible for all expenses incurred by the consultant in the performance of his duties. The consultant agreed to provide consulting services utilizing his business contacts. Mr. Battistone agreed to continue as Chairman of our Board of Directors.

During fiscal 2004, Mr. Battistone caused to have tendered an aggregate of 98,240 shares of our common stock to repay $19,000 of personal expenses (incurred in the ordinary course of business) paid on his behalf by us. This transaction was recorded at the fair market value of the shares at the date of the agreement. The common stock received by us from Mr. Battistone was retired.

During fiscal 2003, Mr. Battistone caused to be tendered an aggregate of 891,400 shares of our common stock to us to repay $112,000 of personal expenses (incurred in the ordinary course of business) paid on his behalf by us. As additional consideration for the tendered shares, Mr. Battistone received the rights to a prepaid asset valued at $61,000. These transactions were recorded at the fair market value of the common stock at the date of the agreements. The common stock received by us from Mr. Battistone was retired.

In August, 2004, we obtained a convertible loan to borrow up to $1.0 million due January 15, 2005 from the brother of our president and chief executive officer. The initial advance of $700,000 as of September 30, 2004, was used for working capital purposes. As of November 22, 2004 the remaining

41

$300,000 has been funded and used. In consideration for such loan, we have agreed to pay such third party interest at the rate of 12% per annum and granted five year options to purchase 1,000,000 shares of common stock at an exercise price of $0.25 per share. In an event of a default under the loan, the loan is convertible into our common stock at $0.05 per share. On January 25, 2005, effective as of January 15, 2005, we extended the maturity date of the note to April 29, 2005 and modified the convertibility feature to provide for conversion of the note, only upon an event of default, at the lower of (i) the average closing sales price for a share of our common stock for the three trading days immediately prior to conversion or (ii) in the event we sell or issue common stock or other convertible securities after December 31, 2004, at the lowest issue or conversion price per share of such securities, as applicable.

To provide us with additional working capital, nine of our senior employees, including our chairman and chief executive officer, agreed to defer all but $1 of their monthly salary effective August 1, 2004. In consideration for such deferral, each employee received options to purchase that number of shares of our common stock equal to the dollar amount deferred. The five year options are exercisable at $0.25 per share. In addition, upon payment of such accrued amounts, each employee received a 5% deferral bonus. The deferrals ceased on November 19, 2004 for each of our senior employees other than our chief executive officer and our chairman, which continue to be in effect.

In August 2004, we agreed to amend our former chief financial officer’s stock option agreement to reduce the number of options to 250,000 from 500,000 in exchange for the extension of the period during which such options were exercisable. These options have an expiration period of three years and are exercisable immediately.

42

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of December 31, 2004, the number of shares of our common stock beneficially owned by persons who own five percent or more of our voting stock, by each director, by each executive officer, and by all executive officers and directors as a group. The table presented below includes shares issued and outstanding and warrants to purchase shares and options exercisable within 60 days.

Name and Address of Beneficial Owner (1)	Number of Shares Beneficially Owned	Percent of Class
Sam D. Battistone (2)	10,966,574	19.5	%
Ross Tannenbaum (3)	12,500,000	22.2
Owen Randall Rissman 1101 Skokie Road, Suite 255 North Brook, IL 60062	4,655,000	8.3
Dale E. Larsson 3230 North University Ave. Provo, UT 84604 (4)	261,477	*
Victor Shaffer (5)	—	—
Mark Viner (6)	250,000	*
David M. Greene(7)	503,000	*
All Current Executive Officers and Directors as a group (5 persons) (8)	24,056,050	42.6

* Less than 1%

(1) Unless otherwise indicated, the address for each person is 2 South University Drive, Plantation, Florida 33324.

(2) Excludes options Mr. Battistone is to receive for certain salary deferrals; also excludes 1,300,000 shares owned by the following family members of which Mr. Battistone disclaims beneficial ownership:

Name	Number of Shares Owned
Kelly Battistone	350,000
Dann Battistone	350,000
Brian Battistone	350,000
Mark Battistone	250,000

(3) Excludes options Mr. Tannenbaum is to receive for certain salary deferrals.

(4) Includes 7,800 shares owned jointly by Mr. Larsson and his wife.

(5) Does not include 1,200,000 shares which are the subject of stock options which vest over a three year period.

(6) Includes 250,000 shares which are the subject of stock options; Mr. Viner resigned from his position as our chief financial officer, secretary and treasurer effective August 16, 2004.

(7) Includes 500,000 shares which are the subject of stock options.

(8) The directors and officers have sole voting and investment power as to the shares beneficially owned by them; does not include shares or options of any executive officer or director no longer employed by us.

43

DESCRIPTION OF THE RIGHTS OFFERING

The Reason for the Rights Offering

We are offering the subscription rights to our current shareholders with the intention of raising up to $3,381,792 of gross proceeds (or $3,700,800 if all of our optionholders exercise their options to purchase our common stock prior to this offering, and concurrently or subsequently exercise their basic subscription rights in full). We do not expect our optionholders to exercise their options and participate in this offering.

Our primary purpose for authorizing the rights offering is to assist us in raising capital in a cost-effective manner in order to satisfy (i) $1.0 million in partial repayment of indebtedness under our line of credit facility due by March 31, 2005 to MLBFS pursuant to a forbearance agreement and (ii) $1.0 million in full repayment of indebtedness to the brother of our president and chief executive officer.

Our Board of Directors has chosen to give you the opportunity to buy more shares and provide us with additional capital. This right provides each shareholder the opportunity to avoid additional dilution of their ownership interest, at least insofar as this current financing is concerned. In determining to proceed with the rights offering, our board of directors considered a number of factors including the opportunity afforded to our shareholders to participate in this equity offering and acquire additional shares of our common stock so that they would have the ability to maintain their proportional interest in us. Of course, we cannot assure you that we will not need to seek additional financing in the future that could result in dilution of your ownership. After application of the proceeds from this offering, approximately $4.3 million of indebtedness will remain outstanding under our line of credit facility.

The Reincorporation

Prior to the delivery of shares issuable upon the exercise of subscription rights or upon the sale of shares of our common stock to our existing shareholders or outside investors, we will hold an Annual Meeting of Shareholders at which our shareholders will vote on, among other things, whether to reincorporate in the State of Florida. The offering is conditioned upon the approval of our reincorporation by our shareholders at our Annual Meeting. Our principal shareholders and their affiliates control in excess of 42% of our outstanding shares and have indicated to us that they intend to vote in favor of the reincorporation. Assuming shareholder approval, you will receive rights to purchase shares in, and upon exercise of those rights you will receive common shares of, the new Florida corporation.

The Subscription Rights

Without cost to you, we are distributing to you an instrument known as a “subscription right.” You will receive one non-transferable subscription right for each share of our common stock you owned as of                 , 2005, which we arbitrarily established as the “record date” for the rights offering. Each subscription right will entitle you, at your option, to purchase two (2) shares of our common stock for each share of our common stock that you owned on the record date at the “subscription price,” which we have established as $0.03 per share ($0.06 per two shares). Should you elect to exercise your rights to subscribe, meaning that you choose to purchase the common stock offered to you, you may do so only on the terms and conditions of the offering.

You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights. You cannot give or sell your subscription rights to anyone; only you can exercise them. If not exercised, your right will expire at 5:00 P.M., Mountain Standard Time on the expiration date. Prior to that date and time, the Board of Directors may cancel the rights offering for any reason. After that date, the subscription rights will expire and will no longer be exercisable. There is no

44

minimum number of shares which must be subscribed for in order for this offering to be completed. The rights offering and any other sales of shares under this prospectus is being made on an “any or all basis,” which means that we may accept payment for shares sold pursuant to any subscription received even if all of the shares of common stock offered are not subscribed for in the offering.

Except as described below, once you submit your subscription agreement to our subscription agent together with your payment, you may not revoke your subscription, even if you subsequently learn unfavorable information about Dreams or if the market price of our common stock declines to below the subscription price of the shares. You may revoke your prior subscription for our shares only in the event that we extend the expiration date of this rights offering for more than thirty days or there is a material change in the terms of this offering.

Basic Subscription Right

Each subscription right will entitle you to receive two (2) shares of our common stock for each share of our common stock that you owned on the record date, upon payment of $0.03 per share ($0.06 per two shares). You will receive certificates, or your account will be credited by an amount representing shares that you purchase pursuant to your basic subscription right, as soon as practicable after the expiration date, whether you exercise your subscription right immediately prior to the expiration date or earlier.

Over-Subscription Right

Subject to the allocation described below, your subscription right also grants you an over-subscription right to purchase additional shares of common stock that are subject to basic subscription rights not exercised by other shareholders. You are entitled to exercise your over-subscription right only if you exercise your basic subscription right in full.

If you wish to exercise your over-subscription right, you should indicate the number of additional shares that you would like to purchase in the space provided on your subscription agreement or Beneficial Owner Election Form, as the case may be. When you send in your subscription documents, you must also send the full purchase price for the number of additional shares that you have requested to purchase through your over-subscription right, which payment is in addition to the payment due for shares purchased through your basic subscription right. If we receive over-subscription requests for a number of shares greater than the number of shares available, we will allocate the available shares among shareholders who over-subscribed pro rata based on the total number of shares purchased by such over subscribing shareholders through the exercise of their basic subscription rights. Regardless of the proportion, however, you will not receive more over-subscription shares than you actually apply for, although you may receive fewer. We have the discretion to issue less than the total number of shares that may be available for over-subscription requests in order to comply with state securities laws.

As soon as practicable after the expiration date, we will determine the number of shares of common stock that you may purchase pursuant to the over-subscription right. You will receive certificates, or your account will be credited by an amount, representing these shares as soon as practicable after the expiration date. We have the discretion to delay allocation and distribution of any and all shares to shareholders who elect to participate in the rights offering and are affected by state securities laws, if any, including shares that we issue with respect to basic or over-subscription rights, in order to comply with such regulations. If you request and pay for more shares than are allocated to you, we will refund that overpayment, without interest, as soon as practicable. In connection with the exercise of the over-subscription right, banks, brokers and other nominee holders of subscription rights who act on behalf of beneficial owners will be required to certify to us as to the aggregate number of subscription rights that

45

have been exercised, and the number of shares of common stock that are being requested through the over-subscription right, by each beneficial owner on whose behalf the nominee holder is acting.

Conditions to the Offering

The offering is conditioned upon the approval of our reincorporation by our shareholders at our Annual Meeting of Shareholders. Our principal shareholders and their affiliates control in excess of 42% of our outstanding shares and have indicated to us that they intend to vote in favor of the reincorporation.

Subscription Price

Our board of directors arrived at the subscription price of $0.03 per share by considering, among other things, the limited trading activity of our common stock and the price at which our common stock was trading on the Over-The-Counter Bulletin Board, and discounting such price to an amount at which the board determined, in good faith, that the maximum number of shareholders would participate in the rights offering in a timely fashion. The subscription price of $0.03 per share is not necessarily indicative of the actual value of a share of our common stock, which may be significantly more or less than the subscription price. In addition, the subscription price is not an appraisal of, and may not reflect the price at which, the shares may be resold.

No Recommendation

We are not making any recommendations as to whether or not you should exercise your subscription rights. You should make your decision based on your own assessment of your best interests.

Expiration Dates

The rights will expire at 5:00 P.M., Mountain Standard Time, on the expiration date, unless we decide to extend the rights offering. If you do not exercise your subscription rights prior to that time, your subscription rights will be null and void. We will not be required to issue shares of common stock to you if our subscription agent receives your subscription agreement or your payment after that time, regardless of when you sent the subscription agreement and payment. In addition we may, in our sole discretion, determine to extend the time period during which we may offer shares to outside investors.

Board of Directors’ Withdrawal Right

Our Board of Directors may withdraw or cancel the rights offering in its sole discretion at any time prior to or on the expiration date for any reason including, without limitation, a change in the market price of our common stock. If we withdraw the rights offering, any funds you paid will be refunded, without interest or penalty, as soon as practicable.

Non-Transferability of Subscription Rights

Except in the limited circumstances described below, both the basic subscription rights and over-subscription rights are non-transferable and non-assignable. Only you may exercise these rights.

Notwithstanding the foregoing, your rights may be transferred by operation of law or through involuntary transfers. For example, a transfer of rights to the estate of the recipient upon the death of the recipient would be permitted. If the rights are transferred as permitted, evidence satisfactory to us that the transfer was proper must be received by us prior to the expiration date of the rights offering.

46

Subscription Agent

The subscription agent for this offering is Fidelity Transfer Company. The address to which subscription agreements and payments should be mailed or delivered is Fidelity Transfer Company, 1800 S. West Temple, Suite 301, Salt Lake City, UT 84115. If you deliver subscription agreements in a manner different than that described in this prospectus, we may not honor the exercise of your subscription rights.

You should direct any questions or requests for assistance concerning the method of subscribing for the shares of common stock or requests for additional copies of this prospectus to the subscription agent, at Fidelity Transfer Company, 1800 S. West Temple, Suite 301, Salt Lake City, UT 84115 or by telephone at (801) 484-7222, by fax at (801) 466-4122 or email to info@fidelitytransfer.com.

Fractional Shares of Common Stock and Fractional Rights

We will not issue any fractional shares of common stock in this offering. Banks, trust companies, securities dealers and brokers that hold shares of our common stock as nominees for more than one beneficial owner may have the applicable subscription rights divided by the subscription agent or may, upon proper showing to the subscription agent, exercise their rights on the same basis as if the beneficial owners were record holders on the record date. We reserve the right to deny any division of subscription rights if, in our opinion, the result would be inconsistent with the intent of this right.

Exercise of Subscription Rights and Method of Payment

Our shareholders may exercise their subscription rights by delivering to our subscription agent the following, all of which must be received by our subscription agent on or prior to the expiration date:

• a properly completed and duly executed subscription agreement;

• any required signature guarantees; and

• payment in full of $0.03 per share for the shares of common stock subscribed for by exercising basic subscription rights and, if desired, over-subscription rights.

You should deliver your subscription agreement and payment to our subscription agent at the address set forth under the subsection “Subscription Agent” above on or prior to the expiration date of the subscription period. We will not pay you interest on funds delivered to us pursuant to the exercise of rights. If you hold shares of our common stock in street name and receive rights through a broker, dealer, commercial bank, trust company or other nominee, or if you hold common stock certificates and would prefer to have an institution conduct the transaction relating to the rights on your behalf, you should contact the appropriate nominee or institution and request that it conduct the subscription transaction for you. In most cases you will receive a “Beneficial Owner Election Form” or other form of election to subscribe for shares of common stock which you will be required to complete and return to your holder or other nominee in accordance with their instructions, together with any applicable payment of the subscription price as such holder or nominee may require.

Payment for the shares must be made by check or bank draft (cashier’s check) drawn upon a United States bank or a postal, telegraphic or express money order payable to the order of “Fidelity Transfer Company as agent for Dreams, Inc.”

47

Payment will be deemed to have been received by us only upon:

• clearance of any uncertified check;

• receipt by our subscription agent of any certified check or bank draft drawn upon a U.S. bank or of any postal, telegraphic or express money order; or

• receipt of funds by our subscription agent through an alternative payment method approved by our subscription agent.

Please note that funds paid by uncertified personal check may take at least ten business days to clear. Accordingly, if you wish to pay by means of an uncertified personal check, we urge you to make payment sufficiently in advance of the expiration date to ensure that the payment is received and clears before that date. We are not responsible for any delay in payment and urge you to consider payment by means of a certified or cashier’s check or money order.

You should read the instructions accompanying the subscription agreement carefully and strictly follow it. DO NOT SEND SUBSCRIPTION AGREEMENTS OR PAYMENTS TO US. We will not consider your subscription received until the subscription agent has received delivery of a properly completed and duly executed subscription agreement and payment of the full subscription amount. The risk of delivery of all documents and payments is yours or your nominee’s, not ours or the subscription agent’s.

The method of delivery of subscription agreements and payments of the subscription amount to the subscription agent will be at the right of the rights holders, but, if sent by mail, we recommend that you send the subscription agreement and payment by overnight courier or by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the subscription agent and clearance of payment before the expiration date of the subscription period.

Signature Guarantee

Signatures on the subscription agreement do not need to be guaranteed if either the subscription agreement provides that the shares of common stock to be purchased are to be delivered directly to the record owner of such subscription rights, or the subscription agreement is submitted for the account of a member firm of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the Untied States. If a signature guarantee is required, signatures on the subscription agreement must be guaranteed by an Eligible Guarantor Institution, as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended. Eligible Guarantor Institutions include banks, brokers, dealers, credit unions, national securities exchanges and savings associations.

Shares Held for Others

If you are a broker, a trustee or a depository for securities, or you otherwise hold shares of our common stock for the account of a beneficial owner of our common stock, you should notify the beneficial owner of such shares as soon as possible to obtain instructions with respect to their subscription rights. If you are a beneficial owner of our common stock held by a holder of record, such as a broker, trustee or a depository for securities and you wish to participate in this rights offering, you should contact the record holder and ask him or her to effect transactions in accordance with your instructions.

48

Ambiguities in Exercise of Subscription Rights

If you do not specify the number of shares of common stock being subscribed for in your subscription agreement, or if your payment is not sufficient to pay the total purchase price for all of the shares that you indicated you wished to purchase, you will be deemed to have subscribed for the maximum number of shares of common stock that could be subscribed for with the payment received from you. If your payment exceeds the total purchase price for all of the shares of common stock shown in your subscription agreement, your payment will be applied, until depleted, to subscribe for shares of common stock in the following order:

1. to subscribe for the number of shares, if any, that you indicated on your subscription agreement that you wished to purchase through your basic subscription right;

2. to subscribe for shares of common stock until your basic subscription right has been fully exercised;

3. to subscribe for additional shares of common stock pursuant to the over-subscription right, subject to any applicable proration.

Any excess payment remaining after the foregoing allocation will be returned to you as soon as practicable by mail, without interest or deduction.

Regulatory Limitation

We will not issue shares of common stock in the rights offering to residents in states whose securities laws prohibits such sales to those who do not meet any suitability requirements described in this Prospectus. State securities laws require an offering to be registered or exempt in each state where the offering is made. We believe we have complied, or will comply, with the registration or exemption requirements in all states where we know shareholders reside. If you are resident in another jurisdiction, we will not be required to issue common stock to you pursuant to the rights offering if we are advised by counsel that the cost of compliance with the local securities laws will substantially exceed your subscription amount.

State and Foreign Securities Law

The rights offering is not being made in any state or other jurisdiction in which it is unlawful to do so, nor are we selling to you or accepting any offers to purchase any shares of common stock from you if you are a resident of any such state or other jurisdiction. We may delay the commencement of the rights offering in certain states or other jurisdictions in order to comply with the securities law requirements of such states and other jurisdictions. It is not anticipated that there will be any changes in the terms of the rights offering. In our sole discretion, we may decline to make modifications to the terms of the rights offering requested by certain states or other jurisdictions, in which case shareholders who live in those states or jurisdictions will not be eligible to participate in the rights offering.

Our Decision Regarding Certain Matters Binding on You

All questions concerning the timeliness, validity, form and eligibility of any exercise of subscription rights will be determined by us, and our determinations will be final and binding. In our sole discretion, we may waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as we may determine, or reject the purported exercise of any subscription right by reason of any defect or irregularity in such exercise. Subscriptions will not be deemed to have been received or accepted until all

49

irregularities have been waived or cured within such time as we determine in our sole discretion. We will not be under any duty to notify you of any defect or irregularity in connection with the submission of a subscription agreement or incur any liability for failure to give such notification.

It is not anticipated that we will give notice to you of any defects in your subscription, if any, but we reserve the right to do so, and to condition the re-submission of your subscription upon such conditions as we deem necessary or appropriate under the circumstances. Under no circumstance, however, will we be obligated to give you notification of defects in your subscription. No exercise of rights will be accepted until all defects have been cured or waived. If your exercise is rejected, any payments made on account of this offering will be returned as soon as practicable without penalty or interest.

No Revocation

Except as described below, after you have exercised your basic subscription right and, if applicable, your over-subscription right and delivered the appropriate payment, YOU MAY NOT REVOKE THAT EXERCISE EVEN IF THE SUBSCRIPTION PERIOD HAS NOT YET ENDED. However, your exercise of subscription rights may be revoked if we extend the expiration date of the rights offering for more than thirty days or there is a material change in the terms of the rights offering. You should not exercise your subscription rights unless you are certain that you wish to purchase additional shares of our common stock.

Delivery of Subscribed Shares

If you purchase shares of common stock through the rights offering, you will receive certificates or your account will be credited by an amount representing those shares as soon as practicable after the expiration date.

Fees and Expenses

We are offering shares of our common stock through the issuance of rights directly to our shareholders as of the record date. Upon the expiration of the rights offering period we intend to solicit offers and sales of shares registered hereby and available to outside investors, subject to applicable state securities regulations. Certain of our officers, directors and employees may participate in the offer and sale of shares to the public but will receive no compensation or remuneration for those efforts. We will not engage any NASD member firm to participate in the offer and sale of shares in the rights offering or in the public portion of this offering. You will be responsible for paying any commissions, fees, taxes or other expenses incurred in connection with your exercise of the subscription rights. We will not pay such expenses.

Sales of Shares for Which Subscription Rights Have Not Been Exercised by Eligible Shareholders

Any shares not sold as part of the rights offering may be offered by us to other shareholders or outside investors at the subscription price. Certain of our existing shareholders and other outside investors may, but are not obligated to, purchase in a private sale, after the expiration of the period for exercising rights, including any extension period, such number of shares of our common stock at the subscription price of $0.03 per share as may be required to sell the entire number of shares offered hereby. Consequently if subscription rights are not exercised in full by our existing shareholders, and our existing shareholders or other outside investors determine not to acquire the remainder of the shares, we may not realize an aggregate of $3,381,792 of gross proceeds in the offering.

50

Shares of Our Common Stock Outstanding After the Rights Offering

Although we cannot at this time determine the number of shares of common stock that will be outstanding after the rights offering, if we sell all of the shares registered for sale hereby (excluding shares issuable upon the exercise of subscription rights by optionholders who exercise their options to purchase our common stock prior to this offering) then we will issue 112,726,390 shares of common stock in connection with this offering and we will have 169,089,585 shares of common stock outstanding upon completion of the offering.

If all of our optionholders exercise their options to purchase shares of our common stock prior to this offering, and concurrently or subsequently exercise their basic subscription rights in full, we will have an additional 15,950,427 shares of common stock outstanding after this offering, and we will have 185,040,012 shares of common stock outstanding upon completion of the offering. This would represent a 200% increase in the number of outstanding shares of our common stock on a fully diluted basis. We do not expect our optionholders to exercise their options and participate in this offering.

THE PERCENTAGE OF OUR COMMON STOCK THAT YOU HOLD WILL DECREASE IF YOU DO NOT EXERCISE YOUR BASIC SUBSCRIPTION RIGHTS AND SHARES ARE PURCHASED IN THE OFFERING BY OTHER SHAREHOLDERS AND/OR OUTSIDE INVESTORS.

IMPORTANT

We may offer to certain existing shareholders and outside investors shares of our common stock, if any, that remain after the expiration date of the rights offering. Subscriptions for shares offered to these existing shareholders and outside investors will be accepted and filled on a “first come first served” basis. The offering of shares to these existing shareholders and outside investors will expire on the later of (i) a date determined by our board of directors and (ii) the expiration date.

PLEASE CAREFULLY READ THE INSTRUCTIONS ACCOMPANYING THE SUBSCRIPTION AGREEMENT AND FOLLOW THOSE INSTRUCTIONS IN DETAIL.

• IF YOU ARE THE RECORD HOLDER OF YOUR SHARES OF OUR COMMON STOCK, SEND YOUR COMPLETED AND EXECUTED SUBSCRIPTION AGREEMENT DIRECTLY TO OUR SUBSCRIPTION AGENT.

• IF A BANK, BROKER OR OTHER NOMINEE IS THE RECORD HOLDER OF THE SHARES OF OUR COMMON STOCK BENEFICIALLY OWNED BY YOU, PLEASE CONTACT THAT RECORD HOLDER TO DETERMINE THE PROCEDURE REQUIRED FOR SUBMITTING YOUR SUBSCRIPTION DOCUMENTS AND PAYMENT.

• YOU ARE RESPONSIBLE FOR CHOOSING THE PAYMENT AND DELIVERY METHOD FOR YOUR SUBSCRIPTION AGREEMENT, AND YOU BEAR THE RISKS ASSOCIATED WITH SUCH DELIVERY.

• IF YOU CHOOSE TO DELIVER YOUR SUBSCRIPTION AGREEMENT AND PAYMENT BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED.

51

• WE ALSO RECOMMEND THAT YOU ALLOW A SUFFICIENT NUMBER OF DAYS TO ENSURE TIMELY DELIVERY AND CLEARANCE OF PAYMENT PRIOR TO THE EXPIRATION DATE FOR SHAREHOLDERS SUBSCRIBING IN THE RIGHTS OFFERING, AND THE EXPIRATION DATE (UNLESS SUCH DATE IS EXTENDED BY US), FOR SHAREHOLDERS OR OUTSIDE INVESTORS SUBSCRIBING AFTER THE RIGHTS OFFERING FOR REMAINING SHARES, IF ANY.

• BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST TEN BUSINESS DAYS TO CLEAR, WE STRONGLY URGE YOU TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER’S CHECK OR MONEY ORDER.

If You Have Questions

If you have questions or need assistance concerning the procedure for exercising subscription rights or if you would like additional copies of this prospectus or the subscription agreement you should contact our Senior Vice President, David M. Greene, at (954) 377-0002.

52

DESCRIPTION OF SECURITIES

Assuming shareholder approval of our reincorporation as a Florida corporation, which is a condition to this offering, we will be a Florida corporation prior to the completion of this offering. The following description assumes shareholder approval of our reincorporation as a Florida corporation and describes the proposed capital structure of the Florida corporation.

Our authorized capital stock will consist of 500,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of preferred stock, $0.001 par value. The following summary of the terms of our common stock and preferred stock does not purport to be complete and is subject to, and qualified in its entirety by, the provisions in our articles of incorporation and bylaws, which are included as exhibits to the registration statement of which this prospectus is a part, and the provisions of applicable law.

Common Stock

Each share of our common stock will entitle the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors. Subject to preferences that may be applicable to any then outstanding preferred stock, holders of common stock will be entitled to receive dividends, if any, declared from time to time by the directors out of legally available funds. We have never paid any cash dividends with respect to our common stock. Cumulative voting for the election of directors is not authorized by our articles of incorporation, which means that the holders of a majority of the shares voted can elect all of the directors then standing for election. Holders of our common stock will not be entitled to preemptive rights, and our common stock is not subject to conversion or redemption. In the event of our liquidation, dissolution or winding up, the holders of our common stock will be entitled to share ratably in all assets remaining after the payment of liabilities, subject to any rights of holders of any outstanding preferred stock to prior distribution.

Preferred Stock

Upon the completion of this offering, we will not have any shares of preferred stock outstanding. Our 10,000,000 authorized shares of preferred stock may be issued in one or more series without further shareholder authorization, and our board of directors is authorized to fix and determine the terms, limitations and relative rights and preferences of the preferred stock, to establish series of preferred stock and to fix and determine the variations between these series. If we issue preferred stock, it would have priority over our common stock with respect to dividends and to other distributions, including the distribution of assets upon liquidation, and we may be obligated to repurchase or redeem any such preferred stock. Our board of directors can issue preferred stock without the further approval of our common stockholders. Any preferred stock we issue may have voting and conversion rights which could adversely affect the rights of holders of our common stock. We do not have any present plans to issue any shares of preferred stock.

Anti-Takeover Effects of Provisions of Our Charter, Our By-Laws and Florida Law

Provisions of our articles of incorporation and bylaws and Florida law could make it more difficult to acquire us by means of a tender offer or proxy contest, or to remove incumbent officers and directors.

Our articles of incorporation provides that our board of directors may establish the rights of and issue shares of preferred stock without the need for stockholder approval. Further, our board may determine the terms, conditions, rights, privileges and preferences of these shares of preferred stock. This ability to issue preferred stock may inhibit the ability of third parties to acquire us. For example, our board could issue preferred stock having terms that would dilute the shares of our common stock held by entities seeking to obtain control of us. We believe our preferred stock provides desirable flexibility in connection with possible acquisitions, financings and other corporate transactions. However, it may also have the effect of discouraging, delaying or making it more difficult for third parties to acquire or attempt to acquire control of us or substantial amounts of our common stock.

53

Our bylaws restrict special meetings of shareholders by requiring that special meetings be requested by shareholders owning no less than 50% of our outstanding shares. This provision may have the effect of preventing shareholders from exercising influence over, or gaining greater control over, us.

Florida has enacted legislation that may have the effect of deterring or preventing a tender offer or takeover attempt of us that a stockholder might consider in its best interest, including acquisitions that might result in a premium over the market price for the shares held by our shareholders. Section 607.0902 of the Florida Business Corporation Act generally provides that shares of our common stock acquired without approval of our board of directors in excess of specified thresholds, beginning at 20% of the outstanding common stock, will not possess any voting rights unless these voting rights are approved by a majority vote of our disinterested shareholders. Additionally, under Florida law, we may amend our articles of incorporation or bylaws to authorize the redemption by us of shares acquired in excess of specified thresholds, unless the acquiring person filed an “acquiring person statement” under the statute.

Limitation of Liability and Indemnification

To the fullest extent permitted by Florida law, our articles of incorporation provide that our directors shall not be personally liable to us, our shareholders or any other person for monetary damages for any statement, vote, design, decision or failure to act, regarding corporate management or policy or any other matter relating to the Corporation, by a director, unless the breach or failure to perform his or her duties as a director satisfies the standards set forth in Section 607.0831 of the Florida Business Corporation Act. Generally, Florida law permits indemnification of a director or officer upon a determination that he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

Our articles of incorporation and bylaws provide for the indemnification of our directors and officers and any person who is or was serving at our request as a director, officer, employee or agent of another corporation or other enterprise to the fullest extent permitted by Florida law. The indemnification provided under our articles of incorporation and bylaws includes the right to be paid by us the expenses (including attorneys’ fees) in advance of the final disposition of a proceeding for which indemnification may be had, provided that the payment of such expenses (including attorneys’ fees) incurred by a director or officer in advance of the final disposition of a proceeding may be made only upon delivery to us of an undertaking by or on behalf of such director or officer to repay all amounts so paid in advance if it is ultimately determined that such director or officer is not entitled to be indemnified. Under our articles of incorporation, we have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of ours, or is or was serving at our request as a director, officer, employee or agent of another corporation or other enterprise, against any liability asserted against such person or incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not we would have the power to indemnify such person against such liability under the provisions of Florida law. We maintain director and officer liability insurance on behalf of our directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore, unenforceable.

Transfer Agent

The transfer agent and registrar for the common stock is Fidelity Transfer Company, Salt Lake City, Utah.

54

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

General

The following discussion summarizes the material U.S. federal income tax consequences to you as a United States shareholder of Dreams as a result of the receipt and the exercise or lapse of the subscription rights distributed to you pursuant to the rights offering. This discussion does not deal with all aspects of U.S. federal income taxation that may be relevant to a particular United States shareholder in light of that shareholder’s circumstances or to all categories of investors, some of which (like dealers in securities, banks, insurance companies, tax-exempt organizations, persons holding our common stock as part of a “straddle”, “hedge”, “conversion transaction” or other risk reduction transaction, persons who have a “functional currency” other than the U.S. dollar and persons who are not United States shareholders) may be subject to special rules. This discussion assumes that the subscription rights that you acquire pursuant to the rights offering and your shares of common stock constitute capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, which we refer to in this prospectus as the “Code”. This summary is based on the Code, the Treasury regulations promulgated thereunder, judicial authority and current administrative rules and practice, all of which are subject to change on a prospective or retroactive basis. This discussion does not address the tax consequences of the rights offering under applicable state, local or foreign tax laws.

For purposes of this discussion, a United States shareholder is a beneficial owner of a subscription right or a share of our common stock that is, for U.S. federal income tax purposes, (i) a citizen or resident alien individual of the United States, (ii) a corporation (or an entity treated as a corporation) organized under the law of the United States, any State thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax without regard to its source or (iv) a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust, and one or more United States persons have the authority to control all substantial decisions of the trust, or (2) the trust was in existence on August 20, 1996 and properly elected to continue to be treated as a United States person. This discussion does not address any U.S. federal tax consequences in the case of our common stock held by an entity classified as a partnership for U.S. federal income tax purposes or any U.S. federal income tax consequences to any stockholder or beneficiary of a Non-U.S. Holder. Those types of holders should consult their personal tax advisers with respect to the tax consequences to them.

Taxation of United States Shareholders With Respect to the Reincorporation

You will not recognize any gain or loss on the exchange of your shares of the Utah corporation for shares of the new Florida corporation. Your holding period for your shares of the new Florida corporation will include your holding period for your shares of the Utah corporation surrendered in exchange therefor. Your basis in your shares of the new Florida corporation will be the same as your basis in your shares of the Utah corporation surrendered in exchange therefor. If you hold shares of the Utah corporation acquired at different prices or on different dates, you should consult your tax adviser with respect to your ability to identify shares of the new Florida corporation attributable those blocks of shares of the Utah corporation.

Taxation of United States Shareholders With Respect to Subscription Rights

Receipt of a Subscription Right. You will not recognize any gain or other income upon receipt of a subscription right in respect of your common stock. Except as provided in the following sentence, your tax basis in that subscription right will be zero. If, however, either (i) the fair market value of the subscription rights on their date of issuance is 15% or more of the fair market value on that same date of the common stock with respect to which they are received or (ii) you properly elect, in your federal

55

income tax return for the taxable year in which you receive the subscription rights, to allocate part of your basis in your common stock to the subscription rights, then, upon exercise of the rights, your basis in the common stock will be allocated between the common stock and the rights in proportion to their relative fair market values on the date the rights are issued. Your holding period for a subscription right will include your holding period for the share of common stock upon which the subscription right is issued.

Expiration of Subscription Rights. You will not recognize any loss upon the expiration of a subscription right. Any tax basis allocated to a subscription right that lapses unexercised will be reallocated to the common stock on which that right was distributed.

Exercise of Subscription Rights. You generally will not recognize any gain or loss on the exercise of a subscription right. Your tax basis in a share of common stock that you purchase through the rights offering will be equal to the sum of your tax basis, if any, in the subscription right exercised and the price paid for the share. Your holding period for a share of common stock purchased through the rights offering will begin on the date that you exercise your subscription right.

Taxation of United States Shareholders With Respect to Common Stock

Distributions. Any distribution paid on our common stock will constitute a dividend, taxable as ordinary income, to the extent the distribution is treated as paid out of our current or accumulated earnings and profits (as computed for U.S. federal income tax purposes). To the extent a distribution with respect to a share of our common stock in any taxable year is not treated as paid out of current or accumulated earnings and profits, it will be treated as a non-taxable return (and reduction) of basis in that share of common stock to the extent thereof, and if and to the extent it exceeds earnings and profits and basis, it will be treated as gain from the sale of the share of common stock. The rate of federal income tax that noncorporate taxpayers pay on dividends generally is 15% provided the shareholder meets certain holding period and other requirements. Dividends received by a corporation are generally eligible for the dividends received deduction, subject to limitations.

Dispositions. Upon a sale or other taxable disposition of a share of our common stock, the United States shareholder generally will recognize capital gain or loss equal to the difference between the amount realized and the shareholder’s tax basis in that share. That gain or loss generally will be long-term capital gain or loss if the share of common stock was held for more than one year.

Backup Withholding. A United States shareholder may be subject to backup withholding at the rate of 28% of the dividends on a share of common stock and of the proceeds from the sale, exchange or retirement of a share of common stock unless the shareholder (a) is a corporation or other exempt recipient or (b) provides, when required, his taxpayer identification number to the payer, certifies that he is not subject to backup withholding and otherwise complies with the backup withholding rules. Backup withholding is not an additional tax; any amount so withheld is creditable against the shareholder’s U.S. federal income tax liability or is refundable, provided the required information is furnished to the IRS.

THIS DISCUSSION IS INCLUDED FOR YOUR GENERAL INFORMATION ONLY. YOU SHOULD CONSULT YOUR TAX ADVISER TO DETERMINE THE TAX CONSEQUENCES TO YOU OF THE RIGHTS OFFERING AND OF THE OWNERSHIP AND DISPOSITION OF COMMON STOCK IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES, INCLUDING ANY STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.

56

PLAN OF DISTRIBUTION

The common stock offered hereby is being offered by us through the issuance of subscription rights directly to our shareholders of record as of the record date. Shares for which subscription rights have not been exercised by eligible shareholders will be offered to outside investors at the subscription price.

We intend to distribute subscription rights and copies of this prospectus to shareholders of record on the record date, as well as to certain outside investors whom we believe may have an interest in purchasing shares as soon as the Registration Statement, of which this prospectus is a part, becomes effective with the Securities and Exchange Commission. Additionally, we do not otherwise intend to engage in any transaction that stabilizes, maintains or otherwise affects the market price of the offering.

We will not engage any NASD member firms in connection with the offer and sale of securities under this prospectus. However, certain of our employees, officers or directors who are not affiliated or associated with any NASD member firm may solicit responses from holders of subscription rights or outside investors who are sent copies of the prospectus, but such individuals will not receive any commissions or compensation for such services other than their normal employment compensation.

We have agreed to pay the subscription agent a fee plus certain expenses, which we estimate will total $8,000. We estimate that our total expenses in connection with the rights offering will be approximately $120,000.

57

LEGAL MATTERS

The validity of the rights and shares of common stock offered in this prospectus has been passed upon for us by Greenberg Traurig, P.A., Ft. Lauderdale, Florida.

EXPERTS

Our consolidated financial statements appearing in this prospectus have been examined by the accounting firm of Grant Thornton LLP, independent registered public accounting firm. These financial statements are included in this Prospectus in reliance upon the said report, given upon such firm’s authority as an expert in auditing and accounting.

58

DREAMS, INC.

I NDEX TO FINANCIAL STATEMENTS

	PAGE
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of March 31, 2004 and 2003	F-3
Consolidated Statements of Operations for the years ended March 31, 2004 and 2003	F-4
Consolidated Statement of Stockholders’ Equity for the years ended March 31, 2004 and 2003	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Condensed Consolidated Financial Statements	F-7
Condensed Consolidated Balance Sheet – Unaudited as of September 30, 2004	F-25
Condensed Consolidated Statements of Operating – Unaudited for the three and six months ended September 30, 2004 and 2003	F-26
Condensed Consolidated Statements of Cash Flows – Unaudited for the six months ended September 30, 2004 and 2003	F-27
Notes to Consolidated Financial Statements	F-28

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Dreams, Inc.

We have audited the accompanying consolidated balance sheets of Dreams, Inc. and subsidiaries (the “Company”) as of March 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Dreams, Inc. and subsidiaries as of March 31, 2004 and 2003, and the consolidated results of their operations and their consolidated cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/    Grant Thornton LLP        

Fort Lauderdale, Florida

June 4, 2004

F-2

DREAMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, except share amounts)

	March 31, 2004			March 31, 2003
Assets
Current assets:
Cash and cash equivalents	$	319		$	146
Accounts receivable, net		1,388			1,283
Inventories		9,168			8,149
Prepaid expenses and deposits		734			187
Deferred tax asset		401			258
Total current assets		12,010			10,023
Property and equipment, net		1,373			814
Goodwill, net		1,932			1,932
Other intangible assets, net		2,586			1,940
Deferred tax asset		653			512
	$	18,554		$	15,221
Liabilities And Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,485		$	775
Accrued liabilities		1,018			470
Short-term notes payable		108			—
Current portion of long-term debt		362			305
Borrowings against line of credit		4,287			2,051
Deferred credits		47			110
Total current liabilities		7,307			3,711
Long-term debt, less current portion		876			637
Commitments and contingencies		—			—
Stockholders’ equity :
Common stock, no par value; authorized 100,000,000 shares; issued 56,363,195 and 56,961,435 shares, respectively		22,682			22,860
Accumulated deficit		(12,311	)		(11,817	)
		10,371			11,043
Less: deferred compensation		—			(170	)
Total stockholders’ equity		10,371			10,873
Total Liabilities and stockholders’ equity	$	18,554		$	15,221

The accompanying notes are an integral part of these consolidated financial statements.

F-3

DREAMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended March 31, 2004 and 2003

(Dollars in Thousands, except share and earnings per share amounts)

	Fiscal 2004			Fiscal 2003
Revenues:
Wholesale/Distribution	$	12,648		$	14,147
Retail		7,489			1,628
Management fees, net		615			942
Franchise fees and royalties		1,018			1,108
Total revenues		21,770			17,825
Expenses:
Cost of sales – wholesale/distribution		8,305			8,862
Cost of sales – retail		3,613			587
Operating expenses		10,199			7,384
Depreciation and amortization		239			153
Total expenses		22,356			16,986
Income (loss) from operations before interest and income taxes		(586	)		839
Interest, net		191			159
Income (loss) from operations before income taxes		(777	)		680
Income tax expense (benefit)		(283	)		272
Net income (loss)	$	(494	)	$	408
Earnings (loss) per share - basic and diluted:	$	(0.01	)	$	0.01
Weighted average shares outstanding		56,677,584			57,550,046

The accompanying notes are an integral part of these consolidated financial statements.

F-4

DREAMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Dollars in Thousands, except share amounts)

	Shares Outstanding		Common Stock			Accumulated Deficit			Deferred Compensation			Total Stockholders’ Equity
Balance at March 31, 2002	57,852,835		$	23,033		$	(12,225	)	$	(195	)	$	10,613
Redemption of common stock (as settlement of advances to related party)	(891,400	)		(173	)		—			—			(173	)
Deferred compensation Expense	—			—			—			25			25
Net income	—			—			408			—			408
Balance at March 31, 2003	56,961,435			22,860			(11,817	)		(170	)		10,873
Redemption of common stock (as settlement of advances to related party)	(98,240	)		(19	)		—			—			(19	)
Cancellation of shares upon settlement (Note 11)	(500,000	)		(170	)		—			170			—
Noncash compensation	—			11			—			—			11
Net loss	—			—			(494	)		—			(494	)
Balance at March 31, 2004	56,363,195		$	22,682		$	(12,311	)	$	—		$	10,371

The accompanying notes are an integral part of these consolidated financial statements.

F-5

DREAMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended March 31, 2004 and 2003

(Dollars in Thousands)

	Fiscal 2004			Fiscal 2003
Cash Flows From Operating Activities:
Net income (loss)	$	(494	)	$	408
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization:
Property and equipment		214			128
Non-compete agreement		25			25
Noncash compensation		11			—
Deferred compensation		—			25
Deferred tax expense (benefit)		(283	)		264
Change in assets and liabilities, net of acquisition:
Accounts receivable		(124	)		979
Inventories		(753	)		(1,190	)
Prepaid expenses and deposits		(546	)		(101	)
Accounts payable		354			195
Accrued liabilities		(8	)		(190	)
Deferred credits		(63	)		(384	)
Net cash provided by (used in) operating activities		(1,667	)		159
Cash Flows From Investing Activities:
Cash acquired in acquisition		50			—
Purchase of property and equipment		(739	)		(396	)
Net cash used in investing activities		(689	)		(396	)
Cash Flows From Financing Activities:
Borrowings under line of credit		10,966			10,357
Repayments to line of credit		(8,730	)		(9,712	)
Repayments on notes payable		(351	)		(487	)
Proceeds from notes payable		644			—
Net cash provided by financing activities		2,529			158
Net (decrease) increase in cash and cash equivalents		173			(79	)
Cash and cash equivalents at beginning of period		146			225
Cash and cash equivalents at end of period		319			146

The accompanying notes are an integral part of these consolidated financial statements.

F-6

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

1. Nature of Business and Summary of Significant Accounting Policies

Description of Business

Dreams, Inc. and its subsidiaries (collectively the “Company”) is principally engaged in the manufacture, distribution and sale of sports memorabilia products and acrylic cases. The Company is also in the business of selling Field of Dreams^® retail store franchises and operates retail stores and websites selling memorabilia and related products, as well as athlete representation and corporate marketing of individual athletes. The Company’s customers are located throughout the United States of America.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany transactions and accounts have been eliminated in consolidation. The fiscal years ended March 31, 2004 and March 31, 2003 are herein referred to as “fiscal 2004” and “fiscal 2003”, respectively.

Reclassifications

Certain prior period amounts have been reclassified to conform with the current year presentation.

Cash and Cash Equivalents

Cash and cash equivalents are defined as highly liquid investments with original maturities of three months or less and consist of amounts held as bank deposits.

Accounts Receivable

The Company’s accounts receivable principally result from uncollected royalties and advertising royalties from Field of Dreams^® franchisees and from credit sales to third-party customers.

Revenue Recognition

The Company recognizes retail (including e-commerce sales) and wholesale/distribution revenues and related cost of sales at the later of (a) the time of shipment or (b) when title passes to the customers, all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured. Retail revenues and wholesale/distribution revenues and related cost of sales are recognized at the time of sale.

Revenues from the sale of franchises are deferred until the Company fulfills its obligations under the franchise agreement and the franchised unit opens. The franchise agreements provide for continuing royalty fees based on a percentage of gross receipts. Management fee revenue related to the representation and marketing of professional athletes is recognized when earned and is reflected net of its related costs of sales. The majority of the revenue generated from the representation and marketing of professional athletes relates to services as an agent. In these arrangements, the Company is not the primary obligor in these transactions but rather only receives a net agent fee.

F-7

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

Shipping and Handling Costs

Costs incurred for shipping and handling associated with a sale are included in cost of sales in the period when the sale occurred. Amounts billed to a customer for shipping and handling are reported as revenue.

Advertising and Promotional Costs

All advertising and promotional costs associated with advertising and promoting the Company’s lines of business are expensed in the period incurred and included in operating expenses. These expenses were $780 and $301 in fiscal 2004 and 2003, respectively.

Inventories

Inventories, consisting primarily of sports memorabilia products, prepaid autographs and acrylic cases, are valued at the lower of cost or market. Cost is determined using the first-in, first-out and specific identification methods. Prepaid autographs represent amounts paid for the rights to certain autographs to be received in the next twelve months.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided for using the straight-line method over the estimated useful lives of the assets ranging from three to ten years. Leasehold improvements are amortized over the remaining lease period or the estimated useful life of the improvements, whichever is less. Maintenance and repairs are charged to expense as incurred and major renewals and betterments are capitalized.

Goodwill and Intangible Assets

In June 2001, the Financial Accounting Standards Board approved the issuance of SFAS 142, “Goodwill and Other Intangible Assets”, which establishes new accounting and reporting requirements for goodwill and other intangible assets. The new standard requires that all intangible assets acquired that are obtained through contractual or legal right, or are capable of being separately sold, transferred, licensed, rented or exchanged must be recognized as an asset apart from goodwill. Goodwill and intangibles with indefinite lives are no longer amortized, but are subject to an annual assessment for impairment by applying a fair value based test.

The Company applied the provisions of SFAS 142 beginning on April 1, 2001 and on March 31, 2004 and 2003 performed transitional fair valued based impairment tests on its goodwill and other intangible assets and no impairment was noted.

Other intangible assets represent the Company-owned Mounted Memories and FansEdge trademarks and a non-compete agreement. As of March 31, 2004 and 2003, the unamortized book value of the trademarks were $2.4 million and $1.8 million, respectively. As of March 31, 2004 and 2003, the unamortized book value of the non-compete agreement was $125 and $150, respectively.

Commencing April 1, 2001, the Company no longer records amortization on goodwill and the trademarks. The non-compete agreements are being amortized using the straight-line method over the terms of the agreements.

F-8

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

Long-Lived Assets

Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of such asset and eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximated their fair values because of the short maturity of these instruments. The fair value of the Company’s notes payable and long-term debt is estimated based on quoted market prices for the same or similar issues or on current rates offered to the Company for debt of the same remaining maturities. At March 31, 2004 and 2003, the aggregate fair value of the Company’s notes payable and long-term debt approximated its carrying value.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” Under the asset and liability method with SFAS No. 109, deferred income taxes are required for the tax consequences of temporary differences by applying enacted statutory rates applicable to future years to the difference between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Under SFAS No. 109, the effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The Company provides a valuation allowance against its deferred tax assets when it believes that is more likely than not that the asset will not be realized.

Earnings (Loss) Per Share

Basic earnings (loss) per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average of common shares outstanding during the year. Diluted EPS is computed by dividing net income by the sum of the weighted average of common shares outstanding including the dilutive effect of common stock equivalents.

Common stock equivalents have been excluded from the diluted per share calculation in fiscal 2004, as the Company incurred a net loss in that year and their inclusion would have been anti-dilutive. Potential common stock equivalents at March 31, 2004 were stock options to purchase 4,200,250 shares of common stock with exercise prices ranging from $0.15 to $0.35 per share.

Potential common stock equivalents at March 31, 2003 were stock options to purchase 3,254,750 shares of common stock with exercise prices ranging from $0.25 to $0.75 per share. These common stock equivalents have been excluded from the diluted per share calculations in fiscal 2003 because the options’ exercise prices were greater than the average market price of the Company’s common stock during the period and thus their inclusion would be anti-dilutive.

F-9

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

Stock Compensation

The Company accounts for stock options issued to non-employees under Statement of Financial Accounting Standards No. 123, “Accounting for Stock Based Compensation.” The Company’s issuance of employee stock options is accounted for using the intrinsic value method under APB 25, “Accounting for Stock Issued to Employees.” The Company provides disclosure of certain pro forma information as if the fair value-based method had been applied in measuring compensation expense.

The Company accounts for stock-based compensation to employees using the intrinsic value method. Accordingly, compensation cost for stock options issued to employees is measured as the excess, if any, of the fair value of the Company’s common stock at the date of grant over the exercise price of the options. The Company’s net earnings (loss) and earnings (loss) per share would have been changed to the pro forma amounts indicated below had compensation cost for the stock option plans and non-qualified options issued to employees been determined based on the fair value of the options at the grant dates consistent with the method of SFAS 123:

	Fiscal 2004			Fiscal 2003
Net earnings (loss):
As reported	$	(494	)	$	408
Pro forma	$	(644	)	$	408
Basic earnings (loss) per share:
As reported	$	(0.01	)	$	0.01
Pro forma	$	(0.01	)	$	0.01
Diluted earnings (loss) per share:
As reported	$	(0.01	)	$	0.01
Pro forma	$	(0.01	)	$	0.01

There was no stock-based employee compensation expense included in net earnings (loss) in fiscal 2004 or 2003. The above pro forma disclosures may not be representative of the effects on reported net earnings (loss) for future years as options vest over several years and Dreams, Inc. may continue to grant options to employees.

In accordance with the requirements of SFAS 123, the fair value of each employee option grant was estimated on the date of grant using a binomial option-pricing model with the following weighted-average assumptions used for grants in fiscal 2004, no dividend yield; expected volatility of 130%, risk-free interest rates of 2% and expected holding periods of three years. There were no stock options issued to employees in fiscal 2003.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

F-10

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

New Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities,” which establishes criteria to identify variable interest entities (“VIE”) and the primary beneficiary of such entities. An entity that qualifies as a VIE must be consolidated by its primary beneficiary. All other holders of interests in a VIE must disclose the nature, purpose, size and activity of the VIE as well as their maximum exposure to losses as a result of involvement with the VIE. FIN 46 was revised in December 2003 and is effective for financial statements of public entities that have special-purpose entities, as defined, for periods ending after December 15, 2003. For public entities without special-purpose entities, it is effective for financial statements for periods ending after March 15, 2004. The Company does not have any special-purpose entities, as defined. The adoption of FIN 46 did not have a material effect on the Company’s financial statements.

In May 2003, the FASB issued Statement of Financial Accounting Standard No. 150 (“SFAS 150”), “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS 150 establishes standards on the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The provisions of SFAS 150 are effective for financial instruments entered into or modified after May 31, 2003 and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003. The adoption of SFAS 150 did not have a material impact on our results of operations or financial position.

In December 2003, the SEC issued Staff Accounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition,” which codifies, revises and rescinds certain sections of Staff Accounting Bulletin No. 101 (“SAB 101”), “Revenue Recognition in Financial Statements,” in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The changes noted in SAB 104 did not have a material effect on the Company’s consolidated results of operations, consolidated financial position or consolidated cash flows.

On March 31, 2004, the Financial Accounting Standards Board (FASB) issued a proposed statement, Share-Based Payment, that addresses the accounting for share-based payment transactions (for example, stock options and awards of restricted stock) in which an employer receives employee-services in exchange for equity securities of the company or liabilities that are based on the fair value of the company’s equity securities. This proposal, if finalized as proposed, would eliminate use of APB Opinion No. 25, Accounting for Stock Issued to Employees, and generally would require such transactions be accounted for using a fair-value-based method and recording compensation expense rather than optional pro forma disclosure of what expense amounts might be. The proposal, if approved, would substantially amend FASB Statement No. 123, Accounting for Stock-Based Compensation. Because of the timing of the proposal and the uncertainty of whether it will be adopted substantially as proposed, management has not completed its review of the proposal or assessed its potential impact on the Company.

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to the Company’s consolidated financial statements.

F-11

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

2. Acquisition of Business

During October 2003, the Company purchased 100% of the outstanding common stock of FansEdge Incorporated (“FansEdge”), an e-commerce retailer selling a diversified selection of sports licensed products and memorabilia on the Web, in order to further support our e-commerce initiative. The Company did not issue any consideration for this purchase other than the assumptions of the FansEdge liabilities. However, the prior shareholders of FansEdge are entitled to additional consideration based on 25% of the earnings before interest and taxes (“EBIT”) of FansEdge for four years after the date of the acquisition. The amount of additional consideration is based on a formula defined in the purchase agreement and is not limited to a certain amount. The Company shall have the right to terminate the consideration to be received by the FansEdge shareholders in certain circumstances based upon the financial performance of FansEdge and Dreams’ cost of investment. In the event Dreams exercises its termination rights, the former FansEdge shareholders shall have the right to repurchase certain agreed upon assets of FansEdge based upon certain Dreams’ acquisition and other related costs. Any additional consideration incurred by the Company will be reflected as additional cost basis of the acquired intangible assets in the period in which the additional consideration is earned. As of March 31, 2004, the Company accrued additional purchase consideration of $75.

The acquisition was accounted for as a purchase in accordance with SFAS 141 and, accordingly, the purchase price was allocated based on the estimated fair market values of the identifiable assets and liabilities obtained. The results of operations of FansEdge were included in the accompanying consolidated statement of operations since the date of the acquisition.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

Current assets, net	$	317
Property, plant and equipment, net		31
Intangible assets		595
Total assets acquired		943
Total liabilities assumed		(943	)
Net assets acquired	$	—

Of the $595 of acquired intangible assets, $560 was assigned to indefinite lived intellectual property, $30 was assigned to internally developed software, and $6 was assigned to customer lists. The internally developed software has been assigned a useful life of five years and the customer lists have been assigned useful lives of three years.

F-12

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

Unaudited Pro Forma Results

Unaudited pro forma results of operations after giving effect to certain adjustments resulting from the acquisition were as follows for fiscal 2004 and fiscal 2003, as if the business combination had occurred at the beginning of each period.

	Fiscal 2004 (unaudited)			Fiscal 2003 (unaudited)
Net revenue	$	22,890		$	20,232
Net income (loss)		(469	)		434
Earnings (loss) per share – basic and diluted	$	(0.01	)	$	0.01

The pro forma data is provided for information purposes only and does not purport to be indicative of results which actually would have been obtained if the combinations had been effected at the beginning of each period presented, or of those results which may be obtained in the future.

3. Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash and cash equivalents and accounts receivable arising from its normal business activities.

Franchisee receivables subject the Company to credit risk. The Company’s franchisee receivables are derived primarily from royalties on franchisee sales, sales of merchandise to franchisees and the reimbursement of various costs incurred on behalf of franchisees.

Regarding accounts receivable, the Company believes that credit risk is limited due to the large number of entities comprising the Company’s customer base and the diversified industries in which the Company operates. The Company performs certain credit evaluation procedures and does not require collateral. The Company believes that credit risk is limited because the Company routinely assesses the financial strength of its customers, and based upon factors surrounding the credit risk of customers, establishes an allowance for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowances is limited.

The Company’s allowance for doubtful accounts is based on management’s estimates of the creditworthiness of its customers, current economic conditions and historical information, and, in the opinion of management is believed to be set in an amount sufficient to respond to normal business conditions. Should such conditions deteriorate or any major credit customer default on its obligations to the Company, this allowance may need to be increased which may have an adverse impact on the Company’s operations. The Company reviews its accounts receivable aging on a regular basis to determine if any of the receivables are past due. The Company writes off all uncollectible trade receivables against its allowance for doubtful accounts. As of March 31, 2004 and 2003, the allowance for doubtful accounts was $78 and $54, respectively.

F-13

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

4. Inventories

The components of inventories are as follows:

	March 31, 2004		March 31, 2003
Raw materials	$	213	$	345
Work in process		23		25
Finished goods, net		8,932		7,779
	$	9,168	$	8,149

As of March 31, 2004 and 2003, the reserve for slow moving inventory was $491 and $265, respectively.

5. Property and Equipment

The components of property and equipment as of March 31 are as follows:

	2004			2003
Leasehold improvements	$	486		$	30
Machinery and equipment		174			99
Office and other equipment and fixtures		1,405			1,163
Transportation equipment		47			47
		2,112			1,339
Less accumulated depreciation and amortization		(739	)		(525	)
	$	1,373		$	814

6. Intangible Assets

In June 2001, the Financial Accounting Standards Board approved the issuance of SFAS 142, “Goodwill and Other Intangible Assets”, which establishes new accounting and reporting requirements for goodwill and other intangible assets. The new standard requires that all intangible assets acquired that are obtained through contractual or legal right, or are capable of being separately sold, transferred, licensed, rented or exchanged must be recognized as an asset apart from goodwill. Goodwill and intangibles with indefinite lives are no longer amortized, but are subject to an annual assessment for impairment by applying a fair value based test.

The Company applied the provisions of SFAS 142 beginning on April 1, 2001 and during fiscal 2004 and fiscal 2003 performed transitional fair valued based impairment tests on its goodwill and other intangible assets and no impairment was noted.

As of March 31, 2004 and 2003, the Company has total consolidated goodwill, net of accumulated amortization, of $1.9 million, all of which is allocated to the Manufacturing/Distribution segment.

F-14

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

In connection with adopting SFAS 142, the Company also reassessed the useful lives and the classifications of its identifiable intangible assets and determined that they continue to be appropriate. The Company’s intangible assets subject to amortization represent primarily a seven year non-compete agreement.

As of March 31, 2004 and 2003, intangible assets not subject to amortization consists of the following:

	March 31, 2004				March 31, 2003
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Goodwill	$	2,015	$	83	$	2,015	$	83
Trademark		2,635		210		2,000		210
	$	4,650	$	293	$	4,015	$	293

7. Line of Credit

The Company has a formula-based revolving line of credit which allows the Company to borrow up to $5.5 million for working capital purposes based on eligible accounts receivable and inventories. The balance outstanding as of March 31, 2004 was approximately $4.3 million and the amount available under the line of credit was approximately $1.2 million. The line of credit carries a floating annual interest rate based on adding a fixed interest charge of 2.4% to the thirty day “Dealer Commercial Paper” rate (3.5% at March 31, 2004). The line of credit is collateralized by the Company’s accounts receivable and inventories. The line of credit matures in November 2004. The Company is required to comply with certain loan covenants. As of March 31, 2004, the Company did not meet the requirements of two of the covenants and the bank has waived such noncompliance as of March 31, 2004.

8. Accrued Liabilities

Accrued liabilities consisted of the following at March 31:

	2004		2003
Payroll costs (including bonuses and commissions)	$	294	$	157
Royalties		229		125
Other		495		188
	$	1,018	$	470

9. Short-Term Notes Payable

The Company had three unsecured short-term notes payable as of March 31, 2004 totaling $108. The notes relate to the October 2003 acquisition of FansEdge. The notes bear interest at 7% per year and are due October 2004.

F-15

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

10. Long-Term Debt

Long-term debt consists of the following at March 31:

	2004			2003
Note payable to a lending institution at a floating annual interest rate based on adding a fixed interest charge of 2.4% to the thirty day “Dealer Commercial Paper Rate” (3.5% at March 31, 2004), plus monthly principal payments through November 2007. The note is collateralized by the Company’s accounts receivables and inventories. The Company is required to comply with certain loan covenants. As of March 31, 2004, the Company did not meet the requirements of two of the covenants and the bank has waived such noncompliance as of March 31, 2004	$	960		$	608
Note payable to an individual at 12% annual interest, with monthly principal and interest payments of $8 through November 2007. The note is unsecured and guaranteed by the Company’s Chairman.		278			334
		1,238			942
Less current portion		(362	)		(305	)
	$	876		$	637

Future maturities of long-term debt are summarized as follows:

Fiscal Year
2005	$	362
2006		370
2007		379
2008		127
	$	1,238

11. Stockholders’ Equity

Common Stock

In fiscal 2003, the Company filed an action in the Circuit Court of Broward County, Florida, against an athlete in connection with a certain exclusive services agreement between the athlete and the Company, whereby the athlete would provide his autograph on sports memorabilia and licensed products for a period of three years. The Company and the athlete agreed on a settlement, which was finalized in August 2003. Under the terms of the settlement, the athlete agreed to sign 2,500 licensed products and reimburse the Company $285 for legal fees. The $285 payment was received by the Company during fiscal 2004 and was posted as a credit in operating expenses in the consolidated statements of operations. In November 2003, the athlete returned to the Company 500,000 shares of common stock issued to the athlete by the Company which was immediately retired. In addition, as a result of the settlement and the termination of the exclusive services agreement, the Company wrote off the deferred compensation balance of $170 against stockholders’ equity during fiscal 2004.

During fiscal 2003, the Company’s Chairman, caused to be tendered an aggregate of 891,400 shares of the Company’s common stock to the Company to repay $112 of personal expenses (incurred in the

F-16

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

ordinary course of business) paid on his behalf by the Company. As additional consideration for the tendered shares, the Company’s Chairman received the rights to a prepaid asset valued at $61. These transactions were recorded at the fair market value of the common stock at the date of the agreements. The common stock received by the Company from the Company’s Chairman was retired.

During fiscal 2004, the Company’s Chairman caused to have tendered an aggregate of 98,240 shares of the Company’s common stock to the Company to repay $19 of personal expenses (incurred in the ordinary course of business) paid on his behalf by the Company. This transaction was recorded at the fair market value of the shares at the date of the agreement. The common stock received by the Company from the Company’s Chairman was retired.

Stock Options

The following table summarizes information about the stock options outstanding at March 31, 2004:

	Stock Options
	Shares		Wtd. Avg. Exercise Price
Outstanding at March 31, 2002	3,275,250		$	.33
Granted	—			—
Exercised	—			—
Expired/Canceled	(20,500	)	$	.25
Outstanding at March 31, 2003	3,254,750		$	.33
Granted	2,200,000			.17
Exercised	—			—
Expired/Canceled	(1,254,500	)	$	.44
Outstanding at March 31, 2004	4,200,250		$	.21

Options exercisable as of March 31, 2004 and 2003 were 3,000,250 and 3,254,750, respectively.

The weighted-average fair value of options granted during fiscal 2004 was $.13 per share. There were no options granted in fiscal 2003.

The following table summarizes information about all of the stock options outstanding at March 31, 2004:

	Outstanding options				Exercisable options
Range of Exercise prices	Shares	Weighted Average remaining contractual life (years)	Weighted avg. exercise price		Shares	Weighted avg. exercise price
$ .15 - .35	4,200,250	2.26	$	.21	3,000,250	$	.24

F-17

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

In January 2004, the Company issued stock options to a consultant to purchase up to 1.2 million shares of the Company’s common stock at an exercise price of $0.15 per share. The options vest over three years and expire in June 2007. As a result of this transaction, the Company recorded compensation expense of $11 and the offsetting credit was recorded as common stock. In June 2004, the Company hired the consultant as an employee.

12. Income Taxes

Income tax expense (benefit) consists of the following:

	Fiscal 2004			Fiscal 2003
Current:
Federal tax expense	$	—		$	—
State tax expense		—			41
Deferred:
Federal tax expense (benefit)		(253	)		199
State tax expense (benefit)		(30	)		32
	$	(283	)	$	272

The components of the deferred tax asset at March 31, 2004 and 2003 are as follows:

Deferred Tax Asset - Current

	2004		2003
Allowance for doubtful accounts	$	31	$	21
Inventory obsolescence reserve		192		98
Deferred revenue		6		18
Inventory capitalization adjustment		94		75
Accrued expenses		78		46
Total current assets		401		258

Deferred Tax Asset - - Long Term

	2004			2003
Depreciation and amortization	$	(356	)	$	(224	)
Net operating loss carryforward		964			736
Charitable contributions carryover		31			—
Alternative minimum tax credit		14			—
Total noncurrent assets		653			512

SFAS No. 109 requires a valuation allowance to be recorded when it is more likely than not that some or all of the deferred tax assets will not be realized. As of March 31, 2004 and 2003, there was no valuation allowance, as the Company believes that its estimated taxable income in future fiscal years will more than exceed the net operating loss carryforward. The estimated future taxable income is based on the Company’s plan to open additional retail stores which traditionally result in higher gross margin percentages than the Company’s wholesale business. Should the Company’s plan to open more retail stores not materialize or should the new retail stores not be profitable, the Company may be required to record a valuation allowance. This recording of this valuation allowance could have a significant impact on the Company’s financial results.

F-18

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

A reconciliation of the Company’s effective tax rate compared to the statutory federal tax rate for the years ended March 31, 2004 and 2003 is as follows:

	2004		2003
Federal income taxes at statutory rate	(34	)%	34	%
State taxes, net of federal benefit	(5	)	6
Other	3		—
	(36	)%	40	%

At March 31, 2004, the Company had available net operating loss carryforwards of approximately $2.8 million which expire as follows:

2010	$	800
2012		1,010
2018		390
2024		636
	$	2,836

13. Commitments and Contingencies

Operating Leases

As of March 31, 2004, the Company leases office, warehouse and retail space under operating leases. The leases expire over the next 10 years and some contain provisions for certain annual rental escalations. Rent expense charged to operations for fiscal 2004 and 2003 was $1,351 and $691, respectively. Certain of the Company’s leases require the Company to pay percentage rent based on the revenues of the company-owned stores. There was no such percentage rent paid in fiscal 2004 and 2003.

The future aggregate minimum annual lease payments under the Company’s noncancellable operating leases are as follows:

Fiscal
2005	$	1,402
2006		1,210
2007		1,059
2008		882
2009		784
Thereafter		1,605
Total minimum lease commitments	$	6,942

F-19

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

Future Contractual Payments to Athletes

As of March 31, 2004, the Company had several agreements with athletes to provide autographs in the future and the rights to produce and sell certain products. The autographs are received by the Company as a part of inventory products and re-sold throughout the Company’s distribution channels. The future aggregate minimum payments to athletes under contractual agreements are as follows:

Fiscal
2005	$	3,061
2006		1,616
Total minimum athlete commitments	$	4,677

Litigation

The Company is a defendant in an action in the United States Bankruptcy Court for the District of Maryland in an action brought by Unitas Management, Inc. Unitas Management has brought a claim against the Company for damages of up to $419, based upon an alleged breach of contract. The Company is vigorously defending such claim. We believe that the amount of ultimate liability of these matters, if any, is not likely to have a material effect on our business, financial condition, results of operations or liquidity and accordingly, no accrual has been recorded as of March 31, 2004.

The Company is also subject to other legal proceedings that arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability, if any, in excess of applicable insurance coverage, is not likely to have a material effect on the financial condition, results of operations or liquidity of the Company. However, as the outcome of litigation or other legal claims is difficult to predict, significant changes in the estimated exposures could occur, which could have a material impact on the Company’s operations.

Employment Agreements

The Company has entered into employment agreements with several of its key employees. The agreements provide for certain annual salaries and bonuses over the term of the agreements.

14. Related Party Transactions

Ross Tannenbaum, the Company’s Chief Executive Officer and a director, and Sam Battistone, the Company’s Chairman, each have ownership interests in franchised Field of Dreams^® stores. Mr. Tannenbaum is a 25% owner in M&S, Inc., a Florida Corporation that owns and operates two Field of Dreams^® franchised stores in the state of Florida. Mr. Battistone is a principal in FOD Las Vegas, LLC which owns and operates three Field of Dreams^® franchised stores in the state of Nevada and one in the state of Minnesota. Mr. Tannenbaum and Mr. Battistone, through their partnerships with M&S, Inc. and FOD Las Vegas, LLC, respectively, have entered into the Company’s standard franchise agreements.

During fiscal 2004, M&S and FOD Las Vegas, LLC paid the Company $73 and $272, respectively in franchise royalties. Additionally, during fiscal 2004, M&S, Inc. and FOD Las Vegas, LLC purchased

F-20

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

products from the Company totaling $202 and $223, respectively. During fiscal 2003, M&S, Inc. and FOD Las Vegas, LLC paid the Company $75 and $247 in franchise royalties, respectively. Additionally, during fiscal 2003, M&S, Inc. and FOD Las Vegas, LLC purchased products from the Company totaling $162 and $105, respectively.

During fiscal 2004 and 2003, the Company paid Dan Marino, a director of the Company, $291 and $308, respectively, for his autograph on inventory items and appearance fees. The Company has a three year agreement with Mr. Marino, which expires March 31, 2006. Under the terms of the agreement, Mr. Marino will earn a minimum of $1.5 million over the three year period. Mr. Marino will provide autographs and make personal appearances under the contract terms. Such payments were based on arms-length negotiations between the parties.

On May 13, 2002, the Company loaned Mr. Battistone $275. This amount was repaid in June 2002. In April 2002, the Company entered into a consulting agreement with a corporation wholly-owned by Mr. Battistone. The term of the agreement shall be until March 31, 2007. The Company shall pay the consultant $145 for the first year, $160 in each of years two, three and four and $175 in year five. Mr. Battistone shall continue as Chairman of the Company’s Board of Directors.

During fiscal 2004, Mr. Battistone caused to have tendered an aggregate of 98,240 shares of the Company’s common stock to the Company to repay $19 of personal expenses (incurred in the ordinary course of business) paid on his behalf by the Company. This transaction was recorded at the fair market value of the shares at the date of the agreement. The common stock received by the Company from Mr. Battistone was retired.

During fiscal 2003, Mr. Battistone caused to be tendered an aggregate of 891,400 shares of the Company’s common stock to the Company to repay $112 of personal expenses (incurred in the ordinary course of business) paid on his behalf by the Company. As additional consideration for the tendered shares, Mr. Battistone received the rights to a prepaid asset valued at $61. These transactions were recorded at the fair market value of the common stock at the date of the agreements. The common stock received by the Company from Mr. Battistone was retired.

15. Franchise Information

The Company licenses the right to use the proprietary name Field of Dreams^® from Universal Studios Licensing, Inc. (“USL”), formerly known as Universal Merchandising, Inc. Pursuant to the license agreement, the Company pays USL one percent of each company-owned and franchise unit’s gross sales, with a minimum annual royalty of $3 per store. The Company pays royalties to USL of $5 for each new franchised unit opened and one percent of each franchised unit’s gross sales. This $5 fee is not an advance against royalties. At March 31, 2004, the Company had 22 units owned by franchisees and had 13 company-owned units.

The Company is required to indemnify USL for certain losses and claims, including those based on defective products, violation of franchise law and other acts and omissions by the Company. The Company is required to maintain insurance coverage of $3.0 million per single incident. The coverage is current as of March 31, 2004 and names USL as the insured party.

The license agreement expires December 2005. The agreement may be renewed for additional five-year terms, provided that the Company is in compliance with all aspects of the agreement. If the Company fails to comply with the license requirements of the agreement, either during the initial term or

F-21

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

during an option term, the agreement may be terminated by USL. Termination of the license agreement would eliminate the Company’s right to use the Field of Dreams^® service mark. Such determination could have an adverse effect on the Company’s franchise and retail operations.

The Company franchise activity is summarized as follows for the years ended March 31:

	2004	2003
In operation at year end	22	27
Opened during the year	1	1
Closed during the year	5	4
Acquired by franchisor during the year	1	3

16. Business Segment Information

The Company has three reportable segments as identified by information reviewed by the Company’s chief operating decision maker: the Manufacturing/Distribution segment, the Retail segment and the Franchise Operations segment.

The Manufacturing/Distribution segment represents the manufacturing and wholesaling of sports memorabilia products, custom artwork and reproductions and acrylic cases. Sales are handled primarily through in-house salespersons that sell to specialty retailers and other distributors in the United States. The Company’s manufacturing and distributing facilities are located in the United States. The majority of the Company’s products are manufactured in these facilities.

The Retail segment represents the Company-owned Field of Dreams^® retail stores and FansEdge.com. As of March 31, 2004, the Company owned and operated 13 Field of Dreams^® stores. During October 2003, the Company purchased 100% of the outstanding common stock of FansEdge Incorporated (“FansEdge”), an e-commerce retailer selling a diversified selection of sports licensed products and memorabilia on the Web.

The Franchise Operations segment represents the results of the Company’s franchise program. The Company is in the business of selling Field of Dreams^® retail store franchises in the United States and generates revenues through the sale of those franchises and continuing royalties.

All of the Company’s revenue generated in fiscal 2004 and 2003 was derived in the United States and all of the Company’s assets are located in the United States.

Summarized financial information concerning the Company’s reportable segments is shown in the following tables. Corporate related items, results of insignificant operations and income and expenses not allocated to reportable segments are included in the reconciliations to consolidated results table.

F-22

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

Segment information for the fiscal years ended March 31, 2004 and 2003 was as follows:

Twelve Months Ended:	Manufacturing/ Distribution		Retail Operations		Franchise Operations		Total
March 31, 2004
Net sales	$	14,019	$	7,489	$	1,203	$	22,711
Intersegment net sales		1,422		—		131		1,553
Operating earnings		142		321		257		720
Total assets		9,974		2,957		148		13,079
March 31, 2003
Net sales	$	14,643	$	1,628	$	1,163	$	17,434
Intersegment net sales		473		—		41		514
Operating earnings		1,396		206		278		1,880
Total assets		9,407		903		89		10,399

Reconciliation to consolidated amounts is as follows:

	FY2004			FY2003
Revenues:
Total revenues for reportable segments	$	22,711		$	17,434
Other revenues		612			905
Eliminations of intersegment revenues		(1,553	)		(514	)
Total consolidated revenues	$	21,770		$	17,825
Pre-tax earnings (loss):
Total earnings (loss) for reportable segments	$	720		$	1,880
Other loss (primarily parent company expenses)		(1,306	)		(1,041	)
Interest expense		(191	)		(159	)
Total consolidated income (loss) before taxes	$	(777	)	$	680

17. Supplemental Cash Flow Information

Interest and Taxes Paid

Cash paid for interest during fiscal 2004 and 2003 was $197 and $162, respectively. The Company paid $45 during fiscal 2004 and $71 during fiscal 2003 for income taxes.

During fiscal 2003, the Company’s Chairman, caused to be tendered an aggregate of 891,400 shares of the Company’s common stock to the Company to repay $112 of personal expenses (incurred in the ordinary course of business) paid on his behalf by the Company. As additional consideration for the tendered shares, the Company’s Chairman received the rights to a prepaid asset valued at $61. These transactions were recorded at the fair market value of the common stock at the date of the agreements. The common stock received by the Company from the Company’s Chairman was retired.

During fiscal 2004, the Company’s Chairman caused to have tendered an aggregate of 98,240 shares of the Company’s common stock to the Company to repay $19 of personal expenses (incurred in the ordinary course of business) paid on his behalf by the company. This transaction was recorded at the fair

F-23

Dreams, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share and earnings per share amounts)

market value of the shares at the date of the agreement. The common stock received by the Company from the Company’s Chairman was retired.

During October 2003, the Company purchased 100% of the website and outstanding common stock of FansEdge Incorporated (“FansEdge”), an e-commerce retailer selling a diversified selection of sports licensed products and memorabilia on the Web, in order to further support our e-commerce initiative. The Company did not issue any consideration for this purchase other than the assumptions of the FansEdge liabilities. Any additional consideration incurred by the Company will be reflected as additional cost basis of the acquired intangible assets in the period in which the additional consideration is earned. As of March 31, 2004, the Company accrued additional purchase consideration of $75. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

Current assets, net	$	317
Property, plant and equipment, net		31
Intangible assets		595
Total assets acquired		943
Total liabilities assumed		(943	)
Net assets acquired	$	—

In fiscal 2003, the Company filed an action in the Circuit Court of Broward County, Florida, against an athlete in connection with a certain exclusive services agreement between the athlete and the Company, whereby the athlete would provide his autograph on sports memorabilia and licensed products for a period of three years. The Company and the athlete agreed on a settlement, which was finalized in August 2003. Under the terms of the settlement, the athlete agreed to sign 2,500 licensed products and reimburse the Company $285. The $285 payment was received by the Company fiscal 2004 and was posted as a credit in operating expenses in the consolidated statements of operations. In November 2003 the athlete returned to the Company 500,000 shares of common stock issued to the athlete by the Company which was immediately retired. In addition, as a result of the settlement the Company wrote off the deferred compensation balance of $170 against stockholders’ equity during fiscal 2004.

18. Subsequent Event

On April 1, 2004, the Company acquired certain assets of ProSports Memorabilia, Inc. (“ProSports”), in order to further support our e-commerce initiative, for an aggregate purchase price of $750. $100 was paid at closing and the remaining $650 shall be paid over a three year period, ending in March 2007. The payments are not pursuant to a note payable, not secured or subject to interest. Due to the recent nature of this acquisition, it was not practicable to provide further disclosure under SFAS 141.

F-24

Dreams, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet – Unaudited

(Dollars in Thousands, except share amounts)

	At September 30, 2004
Assets
Current assets:
Cash and cash equivalents	$	333
Accounts receivable, net		1,650
Inventories, net		10,267
Prepaid expenses and deposits		681
Deferred loan costs		84
Deferred Tax Asset, net		401
Total current assets		13,416
Property and equipment, net		1,578
Deferred tax asset		1,226
Other intangible assets, net		3,227
Goodwill, net		1,932
	$	21,379
Liabilities And Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,383
Accrued liabilities		1,351
Current portion of long-term debt		362
Note payable-related party		700
Short-term notes payable		210
Borrowings against line of credit		5,500
Deferred credits		97
Total current liabilities		10,603
Long-term debt, less current portion		1,098
Commitments and contingencies		—
Stockholders’ equity :
Common stock, no par value; authorized 100,000,000 shares; issued 56,363,195 and 56,961,435 shares, respectively		22,848
Accumulated deficit		(13,170	)
Total stockholders’ equity		9,678
Total Liabilities and stockholders’ equity	$	21,379

The accompanying notes are an integral part of this condensed consolidated financial statement.

F-25

Dreams, Inc. and Subsidiaries

Condensed Consolidated Statements of Operating – Unaudited

(Dollars in Thousands, except share amounts and earnings per share amounts)

	For the six months ended:						For the three months ended:
	Sept. 30, 2004			Sept. 30, 2003			Sept. 30, 2004			Sept. 30, 2003
Revenues	$	11,183		$	6,732		$	6,056		$	3,353
Expenses:
Cost of sales		6,062			3,397			3,259			1,624
Operating expenses		6,171			3,628			3,308			1,733
Depreciation and amortization		163			79			81			41
Total expenses		12,396			7,104			6,648			3,398
Loss before interest and taxes		(1,213	)		(372	)		(592	)		(45	)
Interest, net		220			91			163			50
Loss before provision for income taxes		(1,433	)		(463	)		(755	)		(95	)
Income tax benefit		(573	)		(186	)		(302	)		(39	)
Net loss	$	(860	)	$	(277	)	$	(453	)	$	(56	)
Earnings per share:
Basic: Loss per share	$	(0.02	)	$	0.00		$	(0.01	)	$	0.00
Weighted average shares outstanding		56,363,195			56,908,537			56,363,195			56,863,195
Diluted: Loss per share	$	(0.02	)	$	0.00		$	(0.01	)	$	0.00
Weighted average shares outstanding		56,363,195			56,908,537			56,363,195			56,863,195

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-26

Dreams, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows – Unaudited

(Dollars in Thousands, except share amounts)

	Six Months Ended September 30,
	2004			2003
Net cash used in operating activities	$	(1,325	)	$	(1,630	)
Cash flows from investing activities:
Issuance of promissory note		—			(149	)
Cash paid for acquisition		(200	)		—
Purchase of property and equipment		(280	)		(176	)
Net cash used in investing activities		(480	)		(325	)
Cash flows from financing activities:
Net change in line of credit		1,213			1,856
Proceeds from term loan		—			325
Proceeds from short term note payable		700			—
Repayments on notes payable and term loans		(94	)		(187	)
Net cash provided by financing activities		1,819			1,994
Net increase in cash and cash equivalents		14			39
Cash and cash equivalents at beginning of period		319			146
Cash and cash equivalents at end of period	$	333		$	185
Supplemental Disclosure of Cash Flow Information:
Cash paid during the six month period ended September 30:
Interest	$	194		$	91
Income taxes		—			—
	$	194		$	91

Non-cash investing and financing activities:

On April 1, 2004, the Company acquired certain assets of ProSports Memorabilia, Inc. (“ProSports”), in order to further support its e-commerce initiative, for an aggregate purchase price of $683. $100 was paid at closing and $100 since closing, and the remaining $483 will be paid over a three year period, ending in March 2007. The payments are not pursuant to a note payable, not secured or subject to interest.

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-27

Dreams, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows – Unaudited

(Dollars in Thousands, except share amounts)

1. Management’s Representations

The condensed consolidated interim financial statements included herein have been prepared by Dreams, Inc. (“the Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. The condensed consolidated interim financial statements and notes thereto should be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on Form 10K-SB, for the fiscal year ended March 31, 2004.

The accompanying condensed consolidated interim financial statements have been prepared, in all material respects, in conformity with the standards of accounting measurements set forth in Accounting Principles Board Opinion No. 28 and reflect, in management’s opinion, all adjustments, which are of normal recurring nature, necessary to summarize fairly the financial position and results of operations for such periods. The results of operations for such interim periods are not necessarily indicative of the results expected for future quarters or the full fiscal year.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. All material intercompany transactions and accounts have been eliminated in consolidation.

Earnings Per Share

For the six months ended September 30, 2004, weighted average shares outstanding for basic earnings per share purposes and diluted earnings per share purposes was 56,363,195. For the six months ended September 30, 2003, weighted average shares outstanding for basic earnings per share purposes and diluted earnings per share purposes were 56,908,537.

For the three months ended September 30, 2004, weighted average shares outstanding for basic earnings per share purposes and diluted earnings per share purposes was 56,363,195. For the three months ended September 30, 2003, weighted average shares outstanding for basic earnings per share purposes and diluted earnings per share purposes was 56,863,195.

Common stock equivalents have been excluded from the diluted earnings per share calculation for the six and three month periods ending September 30, 2004 and September 30, 2003 as the Company incurred a net loss during those periods.

Stock options to purchase up to 4,994,809 shares of the Company’s common stock with an exercise price ranging from $0.15 to $0.25 per share were not considered in the calculation of diluted earnings per share for the six and three month periods ended September 30, 2004, due to their anti-dilutive effects. Stock options to purchase up to 2,650,250 shares of the Company’s common stock with an exercise price ranging from $0.25 to $0.75 per share were not considered in the calculation of diluted earnings per share for the three and six month period ended September 30, 2003, due to their anti-dilutive effects.

F-28

Dreams, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows – Unaudited

(Dollars in Thousands, except share amounts)

Stock Compensation

The Company accounts for stock options issued to non-employees under Statement of Financial Accounting Standards No. 123, “Accounting for Stock Based Compensation.” The Company’s issuance of employee stock options is accounted for using the intrinsic value method under APB 25, “Accounting for Stock Issued to Employees.” The Company provides disclosure of certain pro forma information as if the fair value-based method had been applied in measuring compensation expense.

In accordance with the requirements of SFAS 123, the fair value of each employee option grant was estimated on the date of grant using a binomial option-pricing model with the following weighted-average assumptions used for grants in fiscal 2005 and fiscal 2004, no dividend yield; expected volatility of 60% in fiscal 2005 and 130% in fiscal 2004, risk-free interest rates of 2% and expected holding periods of three years.

The Company accounts for stock-based compensation to employees using the intrinsic value method. Accordingly, compensation cost for stock options issued to employees is measured as the excess, if any, of the fair value of the Company’s common stock at the date of grant over the exercise price of the options. The Company’s net earnings (loss) and earnings (loss) per share would have been changed to the pro forma amounts indicated below had compensation cost for the stock option plans and non-qualified options issued to employees been determined based on the fair value of the options at the grant dates consistent with the method of SFAS 123:

	For the six months ended:						For the three months ended:
	Sept. 30 2004			Sept. 30 2003			Sept. 30 2004			Sept. 30 2003
Net loss:
As reported	$	(860	)	$	(277	)	$	(453	)	$	(56	)
Pro forma	$	(936	)	$	(324	)	$	(491	)	$	(65	)
Basic and diluted loss per share:
As reported	$	(0.02	)	$	0.00		$	(0.01	)	$	(0.00	)
Pro forma	$	(0.02	)	$	(0.01	)	$	(0.01	)	$	(0.00	)

3. Business Segment Information

The Company has three reportable segments: the Manufacturing/Distribution segment, the Retail Operations segment and the Franchise Operations segment.

The Manufacturing/Distribution segment represents the manufacturing and wholesaling of sports memorabilia products, custom artwork and reproductions and acrylic cases. Sales are handled primarily through in-house salespersons that sell to specialty retailers and other distributors in the United States. The Company’s manufacturing and distributing facilities are located in the United States. The majority of the Company’s products are manufactured in these facilities.

The Retail Operations segment represents the Company-owned Field of Dreams^® retail stores and the Company’s e-commerce division. As of September 30, 2004, the Company owned and operated 15 Field of Dreams^® stores. During October 2003, the Company purchased 100% of the outstanding common stock of FansEdge Incorporated (“FansEdge”), an e-commerce retailer selling a diversified selection of

F-29

Dreams, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows – Unaudited

(Dollars in Thousands, except share amounts)

sports licensed products and memorabilia on the Web. Additionally, in April 2004, the Company acquired the assets of Pro Sports Memorabilia (“ProSports”), and e-commerce retailer of sports memorabilia products on the Web.

The Franchise Operations segment represents the results of the Company’s franchise program. The Company is in the business of selling Field of Dreams^® retail store franchises in the United States and generates revenues through the sale of those franchises and continuing royalties.

All of the Company’s revenue generated in the first six months of fiscal 2005 and 2004 was derived in the United States and all of the Company’s assets are located in the United States.

Summarized financial information concerning the Company’s reportable segments is shown in the following tables. Corporate related items, results of insignificant operations and income and expenses not allocated to reportable segments are included in the reconciliations to consolidated results table.

Segment information for the six month periods ended September 30, 2004 and 2003 was as follows:

Six Months Ended:	Manufacturing/ Distribution			Retail Operations			Franchise Operations			Total
September 30, 2004
Net sales	$	6,173		$	5,367		$	519		$	12,059
Intersegment net sales		(932	)		—			(86	)		(1,018	)
Operating earnings		184			(626	)		50			(392	)
Total assets		10,028			4,246			212			14,486
September 30, 2003
Net sales	$	5,491		$	1,069		$	463		$	7,023
Intersegment net sales		(460	)		—			(10	)		(470	)
Operating earnings		7			5			61			73
Total assets		9,979			1,453			115			11,547

Reconciliation to consolidated amounts is as follows:

	YTD FY 2005			YTD FY 2004
Revenues:
Total revenues for reportable segments	$	12,059		$	7,023
Other revenues		142			179
Eliminations of intersegment revenues		(1,018	)		(470	)
Total consolidated revenues	$	11,183		$	6,732
Pre-tax loss:
Total earnings for reportable segments	$	(392	)	$	73
Other loss		(821	)		(445	)
Interest expense		(220	)		(91	)
Total consolidated loss before taxes	$	(1,433	)	$	(463	)

F-30

Dreams, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows – Unaudited

(Dollars in Thousands, except share amounts)

Segment information for the three month periods ended September 30, 2004 and 2003 was as follows:

Three Months Ended:	Manufacturing/ Distribution			Retail Operations			Franchise Operations			Total
September 30, 2004
Net sales	$	3,356		$	2,906		$	259		$	6,521
Intersegment net sales		(467	)		—			(45	)		(512	)
Operating earnings		219			(385	)		17			(149	)
Total assets		10,028			4,246			212			14,486
September 30, 2003
Net sales	$	2,781		$	573		$	235		$	3,589
Intersegment net sales		(315	)		—			(5	)		(320	)
Operating earnings		14			6			15			35
Total assets		9,979			1,453			115			11,547

Reconciliation to consolidated amounts is as follows:

	Q2 FY2005			Q2 FY2004
Revenues:
Total revenues for reportable segments	$	6,521		$	3,589
Other revenues		42			84
Eliminations of intersegment revenues		(507	)		(320	)
Total consolidated revenues	$	6,056		$	3,353
Pre-tax loss:
Total earnings for reportable segments	$	(149	)	$	35
Other loss		(443	)		(80	)
Interest expense		(163	)		(50	)
Total consolidated loss before taxes	$	(755	)	$	(95	)

4. Inventories

The components of inventories as of September 30, 2004 are as follows:

Raw materials	$	511
Work in process		69
Finished goods, net		9,687
	$	10,267

5. Related Party Transactions

Ross Tannenbaum, the Company’s Chief Executive Officer and a director, and Sam Battistone, the Company’s Chairman, each have ownership interests in franchised Field of Dreams^® stores. Mr. Tannenbaum is a 25% owner in M&S, Inc., a Florida Corporation that owns and operates two Field of Dreams^® franchised stores in the state of Florida. Mr. Battistone is a principal in FOD Las Vegas, LLC which owns and operates four Field of Dreams^® franchised stores in the state of Nevada. Mr. Tannenbaum and Mr. Battistone, through their partnerships with M&S, Inc. and FOD Las Vegas,

F-31

Dreams, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows – Unaudited

(Dollars in Thousands, except share amounts)

LLC, respectively, have entered into the Company’s standard franchise agreements, in an arms length transaction on commercially reasonable terms.

For the six months ended September 30, 2004, M&S and FOD Las Vegas, LLC paid the Company $24 and $140 in royalties, respectively. Additionally, during the first six months of fiscal 2005, M&S, Inc. and FOD Las Vegas, LLC purchased products from the Company totaling $79 and $103, respectively. For the six months ended September 30, 2003, M&S, Inc. and FOD Las Vegas, LLC paid the Company $25 and $121 in royalties, respectively. During the first six months of fiscal 2004, M&S, Inc. and FOD Las Vegas, LLC purchased products from the Company totaling $71 and $138, respectively.

For the three months ended September 30, 2004, M&S and FOD Las Vegas, LLC paid the Company $12 and $72 in royalties, respectively. Additionally, during the second quarter of fiscal 2004, M&S, Inc. and FOD Las Vegas, LLC purchased products from the Company totaling $37 and $90, respectively. For the three months ended September 30, 2003, M&S, Inc. and FOD Las Vegas, LLC paid the Company $14 and $65 in royalties, respectively. During the second quarter of fiscal 2004, M&S, Inc. and FOD Las Vegas, LLC purchased products from the Company totaling $60 and $116, respectively.

During the six and three month periods ended September 30, 2004, the Company paid Dan Marino, a director of the Company, $90 and $0, respectively, for his autograph on inventory items and appearance fees. During the six and three month periods ended September 30, 2003, the Company paid Mr. Marino $211 and $95, respectively, for his autograph on inventory items and appearance fees. Such payments were based on arms-length negotiations between the parties.

In August 2004, the Company received an unsecured loan of up to $1.0 million due January 15, 2005 from the brother of the Company’s Chief Executive Officer. As of September 30, 2004 the Company has borrowed $700 under this facility that was used for working capital purposes. In consideration for such loan, the Company has agreed to pay such third party interest at the rate of 12% per annum and granted five year options to purchase 1,000,000 shares of common stock at an exercise price of $0.25 per share. These options are exercisable immediately. In an event of a default under the loan, the loan is convertible into the Company’s common stock at $0.05 per share. The Company performed a valuation to determine the fair value of the stock options issued. The fair value determination was $0.18 per share. The Company capitalized the $180 to deferred loan costs and will amortize these costs over the five-month term of the asset using the effective interest method. Accordingly, the Company incurred expenses of $72 during the quarter ended September 30, 2004. As of November 22, 2004, the outstanding balance of this loan was $1 million. The value of the beneficial conversion feature embedded in this loan is $4 million due to the conversion rate upon default being less than the market value of the common stock on the date the loan agreement was entered into. Should the company default on this loan the $4 million will be expensed in the fourth quarter of fiscal 2005.

To provide the Company with additional working capital, nine senior Company employees, including the Company’s Chairman and Chief Executive Officer, have agreed to defer all but $1 of their monthly salary effective August 1, 2004. In consideration for such deferral, each employee shall receive options to purchase common stock which the number of shares equal to the dollar amount deferred. The five year options shall be exercisable at $0.25 per share. In addition, upon payment of such accrued amounts, each employee will receive a 5% deferral bonus. As of September 30, 2004, the Company has accrued approximately $100 for such deferred salaries and bonuses and as of November 22, 2004 the amount accrued is $371. Effective November 15, 2004, the Company ceased to defer salaries from the nine senior Company employees. As of November 22, 2004, stock options to purchase up to 353,273 shares

F-32

Dreams, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows – Unaudited

(Dollars in Thousands, except share amounts)

have been issued at an exercise price of $0.25 share. These options are exercisable immediately. The Company is continuing to review its operational expenses and examining ways to reduce costs on a going-forward basis.

The Company has agreed to amend the former Chief Financial Officer’s, stock option agreement to reduce the number of options to 250,000 from 500,000. These options have an expiration period of three years and are exercisable immediately.

6. Legal Proceedings

The Company is a defendant in an action in the United States Bankruptcy Court for the District of Maryland in an action brought by Unitas Management, Inc. Unitas Management has brought a claim against the Company for damages of up to $419, based upon an alleged breach of contract. The Company is vigorously defending such claim. On September 22, 2004 in a related ruling the Court of Special Appeals of Maryland ruled that Unitas Management did not have the authority to control the business and on October 26, 2004, the bankruptcy court heard our Motion for Summary Judgment. We believe that the amount of ultimate liability of these matters, if any, is not likely to have a material effect on our business, financial condition, results of operations or liquidity and accordingly, no accrual has been recorded as of September 30, 2004.

The Company is also subject to other legal proceedings that arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability, if any, in excess of applicable insurance coverage, is not likely to have a material effect on the financial condition, results of operations or liquidity of the Company. However, as the outcome of litigation or other legal claims is difficult to predict, significant changes in the estimated exposures could occur, which could have a material impact on the Company’s operations.

7. Commitments

The Company is a party to certain contracts with several athletes which will require the Company to make minimum payments to these athletes over the next three years. The payments are in exchange for autographs and licensing rights on inventory items to be received in the future.

8. Acquisition

On April 1, 2004, the Company acquired certain assets of ProSports Memorabilia, Inc. (“ProSports”), in order to further support our e-commerce initiative, for an aggregate purchase price of $750. $100 was paid at closing and the remaining $650 shall be paid over a three year period, ending in March 2007. The present value of the remaining payments as of September 30, 2004 is $550. The payments are not pursuant to a note payable, not secured or subject to interest. The Company paid an additional $50 in October 2004 leaving an amount due of $500.

The following table summarizes the fair values of the assets and liabilities acquired at the date of acquisition:

Purchase price	$	683
Current assets, net		30
Intangible assets		653
Liabilities	$	—

F-33

Dreams, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows – Unaudited

(Dollars in Thousands, except share amounts)

Primarily all of the $653 of acquired intangible assets represents indefinite lived intellectual property. The remaining amount represents intangible assets such as customer lists which have been assigned useful lives of three years.

The acquisition was accounted for as a purchase in accordance with SFAS 141 and accordingly, the purchase price was allocated based on the estimated fair market value of the assets and liabilities acquired. The excess purchase price over the estimated fair market value of the assets and liabilities acquired amounted to $653 and was primarily allocated to certain identifiable intangible assets which have indefinite useful lives. The results of operations of

ProSports from April 1, 2004 through September 30, 2004 are included in the accompanying statement of operations for the three and six months ended September 30, 2004.

Unaudited Pro Forma Results

Unaudited pro forma results of operations after giving effect to certain adjustments resulting from the acquisition were as follows for three month periods ended September 30, 2004 and 2003 as if the business combination had occurred at the beginning of each period presented.

	For the six months ended:						For the three months ended:
Net Revenue	$	11,183		$	7,148		$	6,056		$	3,904
Net loss	$	(860	)	$	(243	)	$	(453	)	$	(45	)
Earnings per share – basic	$	(0.02	)	$	0.00		$	(0.01	)	$	0.00
Earnings per share – diluted	$	(0.02	)	$	0.00		$	(0.01	)	$	0.00

The pro forma data is provided for information purposes only and does not purport to be indicative of results which actually would have been obtained if the combination had been effected at the beginning of each period presented, or of those results which may be obtained in the future.

9. New Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities,” which establishes criteria to identify variable interest entities (“VIE”) and the primary beneficiary of such entities. An entity that qualifies as a VIE must be consolidated by its primary beneficiary. All other holders of interests in a VIE must disclose the nature, purpose, size and activity of the VIE as well as their maximum exposure to losses as a result of involvement with the VIE. FIN 46 was revised in December 2003 and is effective for financial statements of public entities that have special-purpose entities, as defined, for periods ending after December 15, 2003. For public entities without special-purpose entities, it is effective for financial statements for periods ending after March 15, 2004. The Company does not have any special-purpose entities, as defined. The adoption of FIN 46 did not have a material effect on the Company’s financial statements.

In May 2003, the FASB issued Statement of Financial Accounting Standard No. 150 (“SFAS 150”), “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS 150 establishes standards on the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The provisions of SFAS 150 are effective for financial instruments entered into or modified after May 31, 2003 and to all other instruments that exist as of the

F-34

Dreams, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows – Unaudited

(Dollars in Thousands, except share amounts)

beginning of the first interim financial reporting period beginning after June 15, 2003. The adoption of SFAS 150 did not have a material impact on our results of operations or financial position.

In December 2003, the SEC issued Staff Accounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition,” which codifies, revises and rescinds certain sections of Staff Accounting Bulletin No. 101 (“SAB 101”), “Revenue Recognition in Financial Statements,” in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The changes noted in SAB 104 did not have a material effect on our consolidated results of operations, consolidated financial position or consolidated cash flows.

On March 31, 2004, the Financial Accounting Standards Board (FASB) issued a proposed statement, Share-Based Payment, that addresses the accounting for share-based payment transactions (for example, stock options and awards of restricted stock) in which an employer receives employee-services in exchange for equity securities of the company or liabilities that are based on the fair value of the company’s equity securities. This proposal, if finalized as proposed, would eliminate use of APB Opinion No. 25, Accounting for Stock Issued to Employees, and generally would require such transactions be accounted for using a fair-value-based method and recording compensation expense rather than optional pro forma disclosure of what expense amounts might be. The proposal, if approved, would substantially amend FASB Statement No. 123, Accounting for Stock-Based Compensation. Because of the timing of the proposal and the uncertainty of whether it will be adopted substantially as proposed, management has not completed its review of the proposal or assessed its potential impact on the Company.

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to the Company’s consolidated financial statements.

F-35

123,360,008 Shares

Common Stock

PROSPECTUS

                         , 2005

Part II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

Our articles of incorporation and bylaws provide for the indemnification of our directors and officers and any person who is or was serving at our request as a director, officer, employee or agent of another corporation or other enterprise to the fullest extent permitted by Florida law. The indemnification provided under our articles of incorporation and bylaws includes the right to be paid by us the expenses (including attorneys’ fees) in advance of the final disposition of a proceeding for which indemnification may be had, provided that the payment of such expenses (including attorneys’ fees) incurred by a director or officer in advance of the final disposition of a proceeding may be made only upon delivery to us of an undertaking by or on behalf of such director or officer to repay all amounts so paid in advance if it is ultimately determined that such director or officer is not entitled to be indemnified. Under our articles of incorporation, we have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of ours, or is or was serving at our request as a director, officer, employee or agent of another corporation or other enterprise, against any liability asserted against such person or incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not we would have the power to indemnify such person against such liability under the provisions of Florida law. We maintain director and officer liability insurance on behalf of our directors and officers.

The foregoing indemnity and insurance provisions have the effect of reducing directors’ and officers’ exposure to personal liability for actions taken in connection with their respective positions.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore, unenforceable.

Item 25. Other Expenses of Issuance and Distribution.

The expenses of the offering, which, except for the SEC filing fee, are estimated, are set forth below.

SEC registration fee	$	436
Legal fees and expenses		65,000
Accounting fees and expenses		20,000
Printing fees and expenses		14,000
Subscription agent fees and expenses		8,000
Blue sky fees and expenses		10,000
Miscellaneous		2,564
Total	$	120,000

Item 26. Recent Sales of Unregistered Securities.

The registrant has not sold within the past three years any securities without registering the securities under the Securities Act.

II-1

Item 27. Exhibits

Exhibit	Description of Exhibit
3.1	Articles of Incorporation (of the Registrant). (1)
3.2	Articles of Incorporation (of the Florida corporation after the reincorporation of the Registrant).*
3.3	Bylaws (of the Registrant).(1)
3.4	Bylaws (of the Florida corporation after the reincorporation of the Registrant).*
5.1	Opinion of Greenberg Traurig, P.A.*
10.1	Merchandise License Agreement. (1)
10.2	Standard Franchise Documents. (1)
10.3	Line of Credit Agreement with Merrill Lynch Business Financial Services, Inc. (2)
10.4	Agreement and Plan of Merger effective as of August 15, 2001 by and among Dreams, Inc., Dreams/GOI Merger Sub, Inc., The Greene Organization, Inc. and Warren H. Greene as sole shareholder of The Greene Organization, Inc. (3)
10.5	Employment Agreement dated August 15, 2001 by and among Dreams, Inc. and Warren H. Greene. (3)
10.6	Consulting Agreement dated April 1, 2002 with Dreamstar, Inc. (4)
10.7	Forbearance Agreement dated December 31, 2004 with Merrill Lynch Business Financial Services.
22.1	Subsidiaries of the Registrant. (5)
23.1	Consent of Independent Registered Public Accounting Firm.
23.2	Consent of Greenberg Traurig, P.A. (included in Exhibit 5.1). *
24.1	Power of Attorney (included on the signature page of this Registration Statement).
99.1	Form of Subscription Agreement for Shareholders.
99.2	Form of Subscription Agreement for Outside investors.
99.3	Form of Letter to Shareholders.
99.4	Form W-9, Request for Taxpayer Identification Number and Certification.
99.5	Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding.
99.6	Form of Letter to Brokers.
99.7	Form of Letter to Clients.
99.8	Form of Beneficial Owner Election Form.
99.9	Form of Nominee Holder Certification.
99.10	Form of DTC Participant Over-Subscription Form.

* To be filed by amendment.

(1) Filed with our Form 10-KSB dated September 7, 1999 and incorporated by this reference.

(2) Filed with our Form 10-KSB for the year ended March 31, 2001 and incorporated by this reference.

(3) Filed with our Form 8-K dated August 29, 2001 and incorporated by this reference.

(4) Filed with our Form 10-KSB for the year ended March 31, 2002 and incorporated by this reference.

(5) Filed with our Form 10-KSB for the year ended March 31, 2003 and incorporated by this reference.

II-2

Item 28. Undertakings

The undersigned Registrant hereby undertakes to:

(1)(a) File, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement to:

(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) Reflect in the prospectus any facts or events which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement;

(iii) Include any additional or changed material information on the plan of distribution.

(b) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

(c) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

(2) Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(3) For determining any liability under the Securities Act, treat the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant under Rule 424(b)(1), or (4) or 497(h) under the Securities Act (§§230.424(b)(1), (4) or 230.497(h)) as part of this registration statement as of the time the Commission declared it effective. For determining any liability under the Securities Act, treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that offering of the securities at that time as the initial bona fide offering of those securities.

II-3

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this Registration Statement to be signed on its behalf by the undersigned, in the city of Fort Lauderdale, State of Florida, on the 28^th day of January, 2005.

DREAMS, INC.
By:	/s/    ROSS TANNENBAUM
Name:	Ross Tannenbaum
Title:	President and Chief Executive Officer

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints each of Ross Tannenbaum and David M. Greene, each with full authority to act without the others, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this registration statement, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Signature	Title	Date
/s/    ROSS TANNENBAUM         Ross Tannenbaum	President, Chief Executive Officer and a Director (principal executive officer and principal financial and accounting officer)	January 28, 2005
/s/    SAM D. BATTISTONE         Sam D. Battistone	Chairman of the Board	January 28, 2005
/s/    DALE E. LARSSON         Dale E. Larsson	Director	January 28, 2005

II-4

Exhibit Index

Exhibit No.	Description
10.7	Forbearance Agreement dated December 30, 2004 with Merrill Lynch Business Financial Services.
23.1	Consent of Independent Registered Public Accounting Firm.
99.1	Form of Subscription Agreement for Shareholders.
99.2	Form of Subscription Agreement for Outside Investors.
99.3	Form of Letter to Shareholders.
99.4	Form W-9, Request for Taxpayer Identification Number and Certification.
99.5	Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding.
99.6	Form of Letter to Brokers.
99.7	Form of Letter to Clients.
99.8	Form of Beneficial Owner Election Form.
99.9	Form of Nominee Holder Certification.
99.10	Form of DTC Participant Over-Subscription Form.

EX-10.7

Exhibit 10.7

December 30, 2004 FORBEARANCE AGREEMENT

This FORBEARANCE AGREEMENT (“Forbearance Agreement”) is entered into as of December 30, 2004, and will serve to confirm certain agreements of Merrill Lynch Business Financial Services Inc. (“MLBFS”), DREAMS PRODUCTS, INC. (d/b/a Mounted Memories) a Utah corporation (“Customer”), DREAMS INC. a Utah corporation (“Dreams”), and DREAMS FRANCHISE CORPORATION a California Corporation (“Dreams Franchise”) with respect to the following:

(i) that certain WCMA REDUCING REVOLVER LOAN AND SECURITY AGREEMENT NO. 760-07K52 dated as of November 17, 2003 between MLBFS and Customer, including any extensions or amendments thereto (the “WCMA RR Agreement”);

(ii) that certain WCMA LOAN AND SECURITY AGREEMENT NO. 760-07H76 dated as of December 20, 2000 between MLBFS and Customer, including any extensions or amendments thereto (the “WCMA Loan Agreement”);

(iii) that certain UNCONDITIONAL GUARANTY dated as of November 17, 2003 (amended and restated from December 20, 2000), and given by Dreams to MLBFS;

(iv) that certain UNCONDITIONAL GUARANTY dated as of November 17, 2003 (amended and restated from December 20, 2000), and given by Dreams Franchise to MLBFS;

(v) that certain SECURITY AGREEMENT dated as of November 17, 2003 (amended and restated from December 20, 2000), and given by Dreams to MLBFS; and

(vi) that certain SECURITY AGREEMENT dated as of November 17, 2003 (amended and restated from December 20, 2000), and given by Dreams Franchise to MLBFS.

For purposes of this letter, (i) the WCMA Loan Agreement, the WCMA RR Agreement, along with each of the other documents listed above will collectively be referred to as the “Loan Documents”, and (ii) Customer, Dreams, and Dreams Franchise will collectively be referred to herein as “Obligors”. MLBFS and Obligors are hereafter referred to as “Parties”. The Parties acknowledge that the Loan Documents reflect all of the Obligations owed by the Obligors to MLBFS. Capitalized terms used herein and not defined herein shall have the meaning set forth in the Loan Documents.

RECITALS

1. The WCMA Loan Agreement expired by it terms on November 30, 2004, and MLBFS has advised the Obligors that it has elected not to renew the line of credit and the obligation of MLBFS under the WCMA Loan Agreement;

2. As a result of the maturity of the Obligations under the WCMA Loan Agreement, and the failure of the Customer to make full payment to MLBFS upon the maturity of the loans, MLBFS is entitled to exercise its rights and remedies under the Loan Documents and applicable law;

3. Obligors and MLBFS have engaged in discussions relating to the circumstances under which MLBFS will forbear from exercising its rights and remedies under the Loan Documents, defer the full and immediate collection of the Obligations, and permit the Obligors to repay the Obligations over the next several months, provided no Default Event (as hereinafter defined) shall occur under this Forbearance Agreement and all Obligations are paid in full in accordance with the terms of This Forbearance Agreement;

4. Although MLBFS is under no obligation to do so, MLBFS has agreed (i) to forbear from exercising its rights and remedies under the Loan Documents, (ii) to defer the full and immediate collection of the Obligations, and (iii) to permit Obligors to repay the outstanding Obligations over a period of time, in each case, as set forth in this Forbearance Agreement, subject to Obligors’ compliance with all of the terms set forth in this Forbearance Agreement.

Now therefore, in consideration of the premises and of the mutual covenants and agreements contained herein, the receipt and sufficiency of which are hereby acknowledged by the Parties, the Parties hereby agree as follows:

1. Recitals. The Recitals are true, accurate and complete, are not misleading in any material respect, constitute a material part of this Forbearance Agreement, and are incorporated by reference as if fully set forth herein.

2. Acknowledgment of Defaults and Events of Default. Obligors acknowledge and agree: (i) that the loans made by MLBFS to the Obligors pursuant to the Loan Documents have matured and have become fully due and payable in accordance with their terms and the Obligors have not, as of the date hereof, repaid the Obligations; (ii) that Obligors, as a result of the maturity of the loans, have no further right to borrow any additional funds under the Loan Documents in any capacity; and (iii) that MLBFS has not waived any of the rights and remedies available to MLBFS with respect to the repayment of the Obligations, in any respect, except as expressly set forth in this Forbearance Agreement.

3. Exercise of Remedies. Obligors acknowledge that since all of the loans made pursuant to the Loan Documents have matured and become fully due and payable, except as expressly set forth in this Forbearance Agreement, (i) MLBFS has had and continues to have the right to exercise any remedies it may have under the Loan Documents, including, without limitation, the right to require the full and immediate repayment of the principal of and interest on the WCMA Loan Balance and all Obligations and all other amounts outstanding under the Loan Documents; and (ii) MLBFS’ exercise of any remedies under the Loan Documents and/or applicable law would be adequate and proper in all respects.

4. Modifications to the Loan Documents: As a material inducement for MLBFS to forbear from exercising its rights and remedies under the Loan Documents and applicable law, and to defer the full and immediate collection of the Obligations, subject to the terms hereof, effective as of the “Effective Date” (as defined below), the Loan Documents are hereby amended as follows:

(a) The term “Interest Rate” shall mean a variable per annum rate of interest equal to the sum of 4.00% and the One-Month LIBOR. “One-Month LIBOR” shall mean, as of the date of any determination, the interest rate then most recently published in the “Money Rates” section of The Wall Street Journal as the one-month London Interbank Offered Rate. The Interest Rate will change as of the date of publication in The Wall Street Journal of a One-Month LIBOR that is different from that published on the preceding Business Day. In the event that The Wall Street Journal shall, for any reason, fail or cease to publish the One-Month LIBOR, MLBFS will choose a reasonably comparable index or source to use as the basis for the Interest Rate.

(b) A/R Aging and Inventory Report. In addition to existing requirements, Customer and all Obligors shall provide or cause to be provided to MLBFS within 15 days after the close of each fiscal month of Customer, a copy of (a) the Accounts Receivable Aging and (b) the Inventory Report (as and to the extent applicable, breaking out Inventory by location, and separately reporting any work in process) of Customer and each other Obligor as of the end of such fiscal month. All financial information required to be furnished by Customer or any other Obligor to MLBFS hereunder will be certified as correct in all material respects by the party who has prepared such information, and, in the case of internally prepared information with respect to Customer of any other Obligor, certified as correct by the respective chief executive officer or chief financial officer of Customer or such other Obligor, as applicable (at the option of the Customer or Obligor, as applicable).

(c) In addition to the existing representations and warranties, Customer and each of the Obligors further covenant and agree, that at all times hereafter, that:

i. Collateral Value. As of the date hereof, and at all times thereafter, the aggregate of the Approved Cash or Cash Equivalent (as hereinafter defined, the book value of Customer’s Inventory (i.e. cost less depreciation) and Accounts Receivable (excluding Accounts over 90 days old, Chattel Paper with installments or other sums more than 90 days past due, Accounts and Chattel Paper directly or indirectly due from any shareholder, officer or employee of Customer or any affiliated entity, Accounts due from any governmental authority or body and

Accounts and Chattel Paper due from persons or entities not domiciled in the United States) (the “Qualified Accounts Receivable”) shall not be less than the lesser of (1) $9,000,000 or (2) the greater of (a) the sum of the aggregate of the Approved Cash or Cash Equivalents, the book value of Customer’s Inventory and Qualified Accounts Receivable of the Customer and other Obligors as of December 31, 2004 (based in the case of Customer’s Inventory on the actual physical inventory regularly conducted by Customer and the other Obligors as of such date), or (b) $9,000,000. For purposes hereof, the term “Approved Cash or Cash Equivalent shall mean that amount of the cash or cash equivalent or other assets acceptable to MLBFS in its sole and absolute discretion that has been pledged, conveyed and assigned to MLBFS by Customer or another Obligor, granting MLBFS a first lien and security interest upon such cash and cash equivalents and other acceptable assets pursuant to such security agreements as MLBFS may hereinafter accept in its sole and absolute discretion.

ii. Subordinated Debt. The aggregate outstanding indebtedness of the Customer and the other Obligors subordinated to the Obligations shall not be less than $1,000,000.00, unless and until one of the following shall have occurred: (1) all Obligations shall have been repaid in full, (2) the Customer shall have consummated or shall have contemporaneously therewith consummated a Rights Offering (as described below) or other sale of equity securities of the Customer or any other Obligor resulting in net proceeds to the Customer of at least $2,000,000 (of which $1,000,000 may be used to repay any such subordinated indebtedness, provided following such consummation of such Rights Offering or other offering of equity securities, Customer or any other Obligor has an equity infusement of $1,000,000.00 more than that existing immediately prior to the consummation of such Rights Offering or other offering of equity securities) or (3) the aggregate outstanding indebtedness of Customer to any other obligor or any third party, which shall be subordinated to the Obligations in form and substance acceptable to MLBFS in its sole and absolute discretion, is in an amount not less than $1,000,000.00. The Parties acknowledge that any outstanding indebtedness for money borrowed by the Customer or by any of the other Obligors for the benefit of the Customer, which is hereinafter incurred, shall be made in accordance with the express terms of a written subordination agreement prepared or approved in writing by MLBFS and executed by the applicable subordinated creditor. The Parties further acknowledge that notwithstanding anything to the contrary contained in this Forbearance Agreement or in any such subordination agreement, all or any portion of the subordinated debt, described above, may at the option of the Customer or other Obligor be converted into equity of the Customer in connection with the Rights Offering or other sale of equity securities at such a conversion ratio as the Customer and its Board of Directors shall deem appropriate and the amount of such subordinated debt shall be included as net proceeds received by Customer in connection with the Rights Offering or other sale of equity securities for purposes of determining if the $2,000,000 threshold described above has been met.

iii. Salaries and Distributions. Unless and until all Obligations have been indefeasible paid to MLBFS: (i) no Obligor shall directly or indirectly make any loans or distributions to or guaranty any of the debt of any of its respective shareholders; and (ii) the salaries, bonuses and other compensation directly or indirectly paid by Customer or any Obligor to Sam Battistone or Ross Tannebaum or both of them, heretofore deferred and/or hereinafter deferred, shall not be paid; provided, however, that notwithstanding the foregoing, the Customer shall have the right to pay to Ross Tannenbaum an amount equal to $1,000 per month to enable him to continue to qualify as an employee entitled to participate in the insurance plans and policies of the Customer and other Obligors in which he participates as of the date hereof or any other insurance plans and policies in which the executives of the Obligors may participate from time to time.

(d) As to the WCMA RR Agreement the following terms shall have the following meanings:

i. The term “Termination Date” shall mean the first to occur of: (i) the last Business Day of the seventeenth (17^th) full calendar month following the Closing Date, or (ii) April 29, 2005, or (iii) if earlier, the date of termination of the WCMA Line of Credit pursuant to the terms of this Forbearance Agreement.

ii. Section 3.6 of the WCMA RR Agreement is hereby amended and restated to read as follows:

1. Periodic Reduction of Maximum WCMA Line of Credit. Commencing on the last Business Day of the first full calendar month following the Closing Date, and continuing on the last Business Day of each calendar month thereafter to and including the last Business Day of the sixteenth (16^th) such calendar month, the Maximum WCMA Line of Credit shall be reduced by an amount equal to the amount set forth below opposite the number of such month following the Closing Date as follows:

Months	Monthly Reduction (Percentage of Loan Amount)
1-12	$10,000.00
13-16	$20,000.00

Unless the WCMA Line of Credit shall have been earlier terminated pursuant to the terms of this Forbearance Agreement, on the last Business Day of the seventeenth (17^th) calendar month following the Closing Date, the WCMA Line of Credit shall, without further action of either of the parties hereto, be terminated, Customer shall pay to MLBFS the entire WCMA Loan Balance, if any, and all other Obligations, and the WCMA Account, at the option of Customer, will either be converted to a WCMA Cash Account (subject to any requirements of MLPF&S) or terminated. No failure or delay on the part of MLBFS in entering into the WCMA computer system any scheduled reduction in the Maximum WCMA Line of Credit pursuant to this Section shall have the effect of preventing or delaying such reduction.

(e) As to the WCMA Loan Agreement the following terms shall have the following meanings:

i. The term “Maximum WCMA Line of Credit” shall mean, (i) as of the Effective Date (as hereinafter defined) through and including the calendar day immediately preceding the “Change Date” (as hereinafter defined), $4,500,000.00 and (iii) effective the Change Date through April 29, 2005, $3,500,000.00. For purposes hereof, the term “Change Date” shall mean the earlier to occur of (a) the date of the closing of any transaction involving the sale of $2,200,000.00, or any other sum, in equity by the Customer or any Obligor through a “rights offering” or any other equity offering consummated by Customer or any Obligor (the “Rights Offering”), or (b) March 31, 2005. CUSTOMER AGREES THAT IT WILL, WITHOUT DEMAND, INVOICING OR THE REQUEST OF MLBFS, FROM TIME TO TIME MAKE SUFFICIENT PAYMENTS ON ACCOUNT OF THE WCMA LOAN BALANCE TO ASSURE THAT THE WCMA LOAN BALANCE WILL NOT AT ANY TIME EXCEED THE MAXIMUM WCMA LINE OF CREDIT, AS REDUCED EACH MONTH PURSUANT TO THIS SECTION IN THE AMOUNTS SPECIFIED IN THIS SECTION.

5. Loan Documents. Obligors acknowledge and agree as of the date hereof (i) that the Loan Documents are legal, valid and binding obligations of Obligors and are enforceable in accordance with their terms by MLBFS, and (ii) that Obligors have no defenses, counterclaims or rights of set-off which would affect MLBFS’ ability to enforce the Loan Documents. If Obligors have any such defenses, counterclaims or rights of setoff as of the date hereof, Obligors, through their execution of this Forbearance Agreement, hereby waive such defenses, counterclaims or rights of setoff. Except as expressly amended hereby, the Loan Documents shall continue in full force and effect upon all of their terms and conditions. By their execution of this Forbearance Agreement, the Obligors hereby consent to the foregoing modifications to the Loan Documents, and hereby agree that the “Obligations” under

their respective Unconditional Guaranty, and/or agreements providing collateral shall extend to and include the Obligations of Customer under the Loan Documents, as amended hereby.

6. Representations of Obligors. In addition to any representations set forth in the Loan Documents, all of which are hereby ratified and confirmed in all respects as of the date hereof, Obligors represent: (i) that Customer is validly existing and in good standing under the laws of the state of Utah and in any other state where it conducts its business; (ii) that Customer’s principal place of business and the locations of the Collateral are currently set forth on Schedule A attached hereto; (iii) that MLBFS has a validly perfected and enforceable first lien on and security interest in the Collateral; (iv) that none of the Collateral is subject to any lien, encumbrance or security interest other than the liens and security interests of MLBFS; (v) except as set forth on Schedule B attached hereto and made a part hereof, that no litigation, arbitration, administrative or governmental proceedings are pending or, to the knowledge of Obligors, are threatened against Obligors, which would, if adversely determined, materially and adversely affect the liens and security interests of MLBFS hereunder or under any of the Loan Documents, the financial condition of any Obligor or the continued operations of any Obligor.

7. Forbearance Fee. Obligors agree, concurrent with their execution of this Forbearance Agreement, to pay MLBFS a non-refundable Forbearance Fee of $7,500.00 covering the period between the Effective Date and April 29, 2005 (the “Forbearance Period”). Customer agrees to pay the Forbearance Fee with a check drawn on a non-Merrill Lynch checking account, and agrees that the Forbearance Fee will be fully non-refundable once it has been paid. Obligors further agree that additional forbearance fees will become due and owing to MLBFS for any extensions to this Forbearance Agreement granted by MLBFS.

8. Default Interest Rate Provision. Obligors hereby agree that upon the occurrence of a Default Event under this Forbearance Agreement, or any event which with the giving of notice, passage of time, or both, would constitute an Default Event under this Forbearance Agreement (a “Default”), but without limiting any rights or remedies otherwise available to MLBFS or waiving such Default, the interest payable by Customer under the Loan Documents shall at the option of MLBFS be payable at a rate equal to the sum of the Interest Rate (as defined in the Loan Documents) plus 2.0% per annum (the “Default Interest Rate”). The Default Interest Rate, once implemented, shall continue to be payable by Customer and apply to the Obligations of Customer under the Loan Documents for so long as MLBFS shall elect to have such rate apply to the Obligations.

9. Obligations of MLBFS. Provide that no Default Event has occurred during the time from of the date hereof through and including April 29, 2005, then MLBFS will forbear from exercising its legal rights and remedies as a secured creditor under the Loan Documents, including without limitation, the WCMA Loan Agreement and the related Unconditional Guaranties and Security Agreements, or under common or statutory law until April 29, 2005. Additionally, upon mutual consent of MLBFS and Obligors, in the sole and absolute discretion of either or both Parties, this Agreement may be renewed for an additional period beyond the Forbearance Period.

10. Release of MLBFS. With the exception of MLBFS’ duties and obligations under this Forbearance Agreement and the duties and obligations under the Loan Documents which continue in effect pursuant to and following the execution of this Forbearance Agreement, Obligor(s), for itself and by its respective employees, agents, servants and representatives, completely release and forever discharge MLBFS and its parents, affiliates, subsidiaries, and divisions, and each such entity’s officers, directors, shareholders, employees, owners, partners, agents, successors, and assigns, of and from any and all causes of action, claims, or demands whatsoever, in law or in equity, whether now known or hereafter discovered, including but not limited to those that in any way pertain to the Loan Documents or arise from the conduct of MLBFS, its parents, affiliates, subsidiaries, and divisions.

11. No Insolvency. Obligors hereby represent and warrant that as of the date hereof, they: (i) are not Insolvent (as defined below), and will not be rendered Insolvent as a result of executing and performing under this Forbearance Agreement, or any other document or agreement executed and/or delivered to MLBFS in connection with this Forbearance Agreement, and (ii) will not be left with remaining property that constitutes unreasonably small capital or property the value of which was unreasonably small in relation to their businesses. For purposes of this Forbearance Agreement, the word “Insolvent” means that the present fair saleable value (i.e. the amount that would be arrived at by a willing seller and a willing buyer under no compulsion to make a sale) of Obligors’ assets is less than the amount that will be required to pay the probable liability on existing debts (including, without limitation, any legal liability, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent) as they become absolute and matured.

12. Default Event. The occurrence of any of the following events shall constitute a “Default Event” under this Forbearance Agreement: (i) MLBFS does not receive any of the payments set forth in this Forbearance Agreement by the applicable due dates; (ii) Obligors default in the performance or observance of any covenant or provision to be performed or observed under this Forbearance Agreement, any other agreement entered into by the Parties following the date hereof pursuant to this Forbearance Agreement; (iii) any representation or warranty made by Obligors contained in this Forbearance Agreement, or any other agreement entered into by the Parties pursuant to this Forbearance Agreement following the date hereof, or any of the Loan Documents shall at any time following the date hereof prove to have been incorrect in any material respect when made; (iv) a proceeding under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt or receivership law or statute shall be filed or consented to by any or all of the Obligors, or any such proceeding shall be filed against any or all of the Obligors, or any or all of the Obligors shall make a general assignment for the benefit of creditors, or any or all of the Obligors shall generally fail to pay or admit in writing their inability to pay their debts as they become due, or any or all of the Obligors shall be adjudicated as bankrupt or insolvent. For purposes hereof, the Parties acknowledge that any and all rights to cure and/or notices required under the Loan Documents shall not be effected by the provisions hereof, and to the extent such rights for cure or notice is required, such rights and requirements shall continue hereunder. The parties acknowledge that (1) Customer and the other Obligors may presently be in default under the Loan Documents and such defaults may give rise to one or more Events of Default under the Loan Documents, (2) Customer and the other Obligors may be in default under the Loan Documents and such defaults may give rise to one or more Events of Default under the Loan Documents between the Effective Date and April 29, 2005, and (3) no such defaults or Events of Defaults described in (1) or (2) which arise from non-compliance with any financial covenants contained in any of the Loan Documents or those set forth on Schedule C shall constitute a Default Event hereunder unless the facts and circumstances giving rise to such defaults or Events of Default shall, notwithstanding the Loan Documents, otherwise independently give rise to a Default Event hereunder.

13. Remedies. Upon the occurrence of a Default Event, in addition to the remedies available to MLBFS under the Loan Documents, MLBFS shall have all rights hereunder and under law and equity, including but not limited to the following rights:

(i) MLBFS may obtain a replevin order by consent in a replevin action in favor of MLBFS and against Customer or any other Obligor, jointly and severally, with respect to all Collateral. This replevin may be filed in Illinois, Georgia, or such other jurisdiction as permitted by law. Obligors agree to not contest the entry of a consent replevin order should it be pursued by MLBFS.

(ii) MLBFS may demand and obtain from the Obligors any and all Collateral without the need for judicial process. MLBFS may, at any time, take possession of any portion or all of the Collateral and keep it on the premises of Customer or any Obligor, at no cost to MLBFS, or remove any part of it to such other location or place as MLBFS may desire; or Customer or any Obligor shall, upon demand of MLBFS, at the sole cost of Customer or such Obligor, assemble the Collateral and make it available to MLBFS at a place reasonably convenient to MLBFS.

(iii) MLBFS may file a lawsuit against either or both of the Obligors for the sole purpose of having a trial court enter judgment in favor of MLBFS against Obligors for all amounts owed by them. Obligors agree to not contest the entry of said judgment.

(iv) MLBFS shall have any and all default rights and remedies of a secured party under the Uniform Commercial Code.

(v) Obligors hereby consent to the appointment of a receiver by MLBFS or any court of competent jurisdiction in any action initiated by MLBFS pursuant to this Forbearance Agreement or the Loan Documents, and each Obligor hereby waives notice and posting of a bond in connection therewith. Such receiver so appointed may be MLBFS. Such appointment shall be without regard to the value of the Collateral at the time the receivership is sought, and without the applicant being required to post a bond. The receivership may be appointed without notice and without regard to the solvency or insolvency of the person or persons, if any, liable for the repayment of the Obligations.

(vi) MLBFS may sell and deliver any Collateral at public or private sales, for cash, upon credit or otherwise, at such prices and upon such terms as MLBFS deems advisable, at MLBFS’ discretion. MLBFS may, if MLBFS deems it reasonable, postpone or adjourn any sale of the Collateral by an announcement at the time and place of sale or of such postponed or adjourned sale without giving a new notice of sale.

(vii) Obligors agree that MLBFS has no obligation to preserve rights to the Collateral or marshal any assets, including the Collateral, for the benefit of any person.

(viii) Where applicable, MLBFS is hereby granted a license or other right to use, without charge, Obligors’ labels, patents, copyrights, name, trade secrets, trade names, trademarks, and advertising matter, or any similar property, in completing production, advertising or selling any Collateral and Obligor’s rights under all licenses and all franchise agreements shall inure to MLBFS’s benefit. Any requirement of reasonable notice shall be met if such notice is mailed postage prepaid to Customer at its address set forth above in this Forbearance Agreement at least five (5) business days before sale or other disposition. The proceeds of any sale shall be applied first to all attorney fees and other expenses of sale, and second on account of the Obligations in such order as MLBFS shall elect, in its sole discretion. MLBFS shall return any excess proceeds to Obligors. However, all Obligors shall remain jointly and severally liable for any deficiency to the fullest extent permitted by law.

(ix) Except as otherwise provided herein, MLBFS shall have the continuing and exclusive right to apply or reverse and reapply any and all payments to any portion of the Obligations in such order and in such manner as MLBFS, in its sole discretion, shall determine. If Obligors make a payment, or if MLBFS receives any payment or proceeds of the Collateral which is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor-in-possession, receiver or any other party under any bankruptcy law, common law or equitable cause, or otherwise, then the Obligations or the portion of the Obligations that was intended to be satisfied by such payment shall be revived and continue as if such payment or proceeds had not been received by MLBFS.

(x) Obligors shall perform without objection any other act required or requested by MLBFS in accordance with the terms of this Forbearance Agreement under any right or remedy given to it pursuant to the Loan Documents or under the law.

14. Sales of Assets. Without the prior written consent of MLBFS, Obligors shall not sell, transfer or otherwise dispose of any of their assets or Collateral other than in the ordinary course of dealing.

15. Execution of Documents. Obligors agree to execute all documents necessary to effectuate the terms and conditions of this Forbearance Agreement.

16. Insurance. Obligors agree that the Obligors shall maintain insurance on all Collateral under a policy or policies of physical damage insurance for the full replacement value thereof, providing that losses will be payable to MLBFS as its interests appear pursuant to the lender’s or mortgagee’s long form loss payable endorsement. Obligors shall further maintain a policy or policies of commercial general liability. Obligors further agree that MLBFS may at its sole and absolute discretion, obtain, and maintain insurance on the Collateral under a policy or policies of physical damage insurance for the full replacement value thereof and providing that losses will be payable to MLBFS. Obligors agree to execute any and all documents necessary in order for MLBFS to obtain and maintain insurance on the Collateral.

17. Course of Dealing. No course of dealing on the part of Obligors or any delay or failure on the part of MLBFS to exercise any right shall operate as a waiver of such rights or otherwise prejudice MLBFS’ rights, powers or remedies.

18. No Further Advance. Obligors acknowledge and agree, except as expressly provided for in this Forbearance Agreement, that MLBFS has no obligation to advance, provide or loan any further or additional monies or credit to Customer, and that MLBFS has no obligation to grant any further forbearance to Obligors or to further extend the time for the repayment of the Obligations except as and to the extent set forth in this Forbearance Agreement.

19. Mutual Consent. The Parties each acknowledge that this Forbearance Agreement has been negotiated at arms length, that each has had the opportunity to consult with legal counsel of their choosing, if so desired, about the consequences and effect of entering into this Forbearance Agreement, and that the Parties have entered into this Forbearance Agreement of their own free will, without force, coercion or duress.

20. Fax Signature. This Forbearance Agreement may be signed by fax copy with any duplicate original to follow, which original shall have the same force as one document with original signatures. Thereafter, the Parties may sign original confirmation agreements.

21. Governing Law. This Forbearance Agreement shall be governed in all respects by the laws of the State of Illinois.

22. Binding Agreement. This Forbearance Agreement shall be binding upon, and shall inure to the benefit of MLBFS, the Obligors and their respective successors and assigns. Obligors shall not assign any of their rights or delegate any of their obligations under this Forbearance Agreement without the prior written consent of MLBFS. Unless otherwise expressly agreed to in a writing signed by MLBFS, no such consent shall in any event relieve Obligors of any of their obligations under this Forbearance Agreement.

23. No Release of Security. Nothing contained herein shall annul, release, vary, modify or affect the liens or the priority of the liens securing the Obligations, as the case may be, any guaranty, lien, priority assignment or security interest in favor of MLBFS, or any right, title, interest, claim, lien or priority which MLBFS now has or may hereafter have in or to any property securing the Obligations, all of which shall continue in full force and effect. MLBFS specifically reserves and shall have all rights and remedies available to it under the provisions of the Loan Documents and in any agreement with respect to security for the repayment thereof.

24. Not a Novation. This Forbearance Agreement is not a novation or a creation of any new indebtedness, and is not to be construed as a release or modification of any of the terms, conditions, warranties, waivers or rights set forth in the Loan Documents, except as expressly provided herein.

25. Headings. Section headings used in this Forbearance Agreement are for convenience only and shall not affect the construction of this Forbearance Agreement.

26. Neutral Interpretation. This Forbearance Agreement constitutes the product of negotiation of the Parties hereto and in the enforcement hereof shall be interpreted in a neutral manner, and not more strongly for or against any party based upon the source of the draftsmanship hereof. Whenever the context so requires, the masculine gender shall include the feminine or neuter, the singular shall include the plural, and vice versa.

27. Review by Legal Counsel. Obligors acknowledge that they have thoroughly read and reviewed the terms and provisions of this Forbearance Agreement, are familiar with all of the terms, and clearly understand and fully and unconditionally consent to each of them. Obligors have had the full benefit and advice of legal counsel of their own choosing, or the opportunity to obtain the benefit and advice of legal counsel of their own choosing, in order to understand the terms, meanings and effect of entering into this Forbearance Agreement. Obligors represent and warrant that their execution of this Forbearance Agreement and the delivery of the documents is done freely and voluntarily, with full knowledge and without duress, force or coercion, and that Obligors have relied on no other representations, whether written, oral, express or implied, made to them by MLBFS or any party as the reason they executed this Forbearance Agreement.

28. Counterparts. This Forbearance Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed an original document, and all of which counterparts, when taken together, shall constitute one and the same agreement.

29. Authority to Execute. The Parties to this Forbearance Agreement, and each of their representatives, represent and warrant to the other Parties that they have the full power and authority to execute this Forbearance Agreement in the capacity in which they are signing, that they have the full power and authority to execute and deliver this Forbearance Agreement without the necessity or joinder of any other third party, that each of the Parties and its undersigned representative is legally competent to execute this Forbearance Agreement, and that each of the Parties has not assigned, transferred, sold, pledged or in any other manner whatsoever conveyed any right, title, interest or claim of any portion of the Loan Documents to any other party.

30. Severability. In the event that any provision of this Forbearance Agreement is held to be unenforceable or invalid, the remaining provisions hereof shall nevertheless be given full force and effect.

31. Jurisdiction; Waiver. THE OBLIGORS ACKNOWLEDGE THAT THIS FORBEARANCE AGREEMENT IS BEING ACCEPTED BY MLBFS IN PARTIAL CONSIDERATION OF MLBFS’ RIGHT AND OPTION, IN ITS SOLE DISCRETION, TO ENFORCE THIS FORBEARANCE AGREEMENT AND THE LOAN DOCUMENTS IN EITHER THE STATE OF ILLINOIS OR IN ANY OTHER JURISDICTION WHERE THE OBLIGORS OR ANY COLLATERAL FOR THE OBLIGATIONS MAY BE LOCATED. THE OBLIGORS CONSENT TO JURISDICTION IN THE STATE OF ILLINOIS AND VENUE IN ANY STATE OR FEDERAL COURT IN COOK COUNTY FOR SUCH PURPOSES, AND THE OBLIGORS WAIVE ANY AND ALL RIGHTS TO CONTEST SAID JURISDICTION AND VENUE. THE OBLIGORS FURTHER WAIVE ANY RIGHTS TO COMMENCE ANY ACTION AGAINST MLBFS IN ANY JURISDICTION EXCEPT IN COOK COUNTY AND THE STATE OF ILLINOIS. MLBFS AND THE OBLIGORS HEREBY EACH EXPRESSLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER PARTY WITH RESPECT TO ANY MATTER RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE OBLIGATIONS, THIS FORBEARANCE AGREEMENT, ANY ADDITIONAL AGREEMENTS RELATED HERETO, THE LOAN DOCUMENTS AND/OR ANY OF THE TRANSACTIONS WHICH ARE THE SUBJECT MATTER OF THIS FORBEARANCE AGREEMENT, ANY ADDITIONAL AGREEMENTS RELATED HERETO, OR THE LOAN DOCUMENTS.

32. Integration. THIS FORBEARANCE AGREEMENT, TOGETHER WITH THE LOAN DOCUMENTS AND ANY ADDITIONAL AGREEMENTS RELATED HERETO, CONSTITUTES THE ENTIRE UNDERSTANDING AND REPRESENTS THE FULL AND FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR WRITTEN AGREEMENTS OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES. NO AMENDMENT OR MODIFICATION OF THIS FORBEARANCE AGREEMENT OR ANY OF THE ADDITIONAL AGREEMENTS TO WHICH ANY OF THE OBLIGORS ARE A PARTY SHALL BE EFFECTIVE UNLESS IN A WRITING SIGNED BY MLBFS AND EACH OBLIGOR.

33. Return of Executed Documents. If no further Event of Default, or event which with the giving of notice, passage of time, or both, would constitute an Event of Default, shall then have occurred and be continuing under the terms of the Loan Documents, then the amendments and agreements in this Forbearance Agreement will become effective on the date (the “Effective Date”) upon which: (i) Obligors shall have executed and returned the original or facsimile copy of this Forbearance Agreement to MLBFS (provide, however, that if delivery of this Forbearance Agreement is made by facsimile delivery, Obligors shall send or cause to be sent the original thereof via overnight mail to MLBFS), along with the Subordination Agreement; and (ii) an officer of MLBFS shall have executed and returned the original or facsimile copy of this Forbearance Agreement, but in no event shall the Effective Date be later than December 31, 2004. If Obligors do not return to MLBFS (a) the fully executed original copy of this Forbearance Agreement and all attachments or enclosures hereof, including but not limited to the Subordination Agreement; (b) a check for $7,500.00 to satisfy the Forbearance Fee requirement; and (c) any other documents reasonably required by MLBFS in its sole discretion, to effectuate the terms of this Forbearance Agreement all by December 30, 2004, (collectively, items (a), (b) and (c) are referred to as “Obligors’ Conditions”), or if for any other reason (other than the sole fault of MLBFS) the Effective Date shall not occur by December 31, 2004, then this Forbearance Agreement and all of the terms contained herein may, at the sole option of MLBFS, be declared to be null and void and be of no force and effect.

IN WITNESS WHEREOF, the Parties have signed and delivered this Forbearance Agreement, on or about the date stated above.

MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.

By:	/S/    MICHAEL KOZAK
Printed Name:	Michael Kozak
Title:	Vice President
OBLIGORS:
DREAMS PRODUCTS, INC.
By:	/S/    ROSS TANNENBAUM
Printed Name:	Ross Tannenbaum
Its:	President
DREAMS INC.
By:	/S/    ROSS TANNENBAUM
Printed Name:	Ross Tannenbaum
Its:	President/CEO
DREAMS FRANCHISE CORPORATION
By:	/S/    ROSS TANNENBAUM
Printed Name:	Ross Tannenbaum
Its:	President

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated June 4, 2004, accompanying the financial statements of Dreams, Inc. and Subsidiaries contained in the Registration Statement and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and the Prospectus, and to the use of our name as it appears under the caption “Experts.”

/S/ GRANT THORNTON LLP

Fort Lauderdale, Florida

January 26, 2005

EX-99.1

Exhibit 99.1

FORM OF DREAMS, INC. SUBSCRIPTION AGREEMENT

PLEASE CAREFULLY REVIEW THE INSTRUCTIONS

This Subscription Agreement represents a subscription to acquire the number of shares of common stock of Dreams, Inc. (the “Company”) set forth below at a subscription price of $0.03 per share ($0.06 per two shares) for the total subscription price set forth below. The registered owner named below is entitled to subscribe for two shares of common stock for each share of the Company’s common stock owned on [                    ], 2005 (the “Record Date”), as set forth below, pursuant to subscription rights granted to shareholders upon the terms and conditions set forth in the related prospectus. For each share of common stock subscribed for, the subscription price of $0.03 per share ($0.06 per two shares) must be forwarded to Fidelity Transfer Company, as subscription agent for the Company.

THE SUBSCRIPTION RIGHTS EXPIRE AT 5:00 P.M. MOUNTAIN STANDARD TIME ON [                    ], 2005 (the “Expiration Date”). NO SUBSCRIPTION AGREEMENTS WILL BE ACCEPTED THEREAFTER.

Shareholder Name:                                                                                                                                                                                 

Shareholder Address:                                                                                                                                                                             

Number of Shares of the Company’s Common Stock Owned by Shareholder on the Record Date:                                                  

Number of Shares Subject To Basic Subscription Rights:                                                                                                                   

Section 1. — SUBSCRIPTION AND SIGNATURE

I hereby irrevocably subscribe for the number of shares of the Company’s Common Stock as indicated below, on the terms specified in the related Prospectus.

a.	Basic Subscription (up to two times the number of shares you owned on the Record Date)	Shares
b.	Over-Subscription:	Shares
c.	Total Subscription (a + b):	Shares
d.	Total Cost (c x $0.03 rounded up to whole cents):	$

Signature of Shareholder: Telephone Number: (            )                    

Section 2. — ADDRESS FOR DELIVERY OF STOCK CERTIFICATE IF DIFFERENT FROM ABOVE

INSTRUCTIONS FOR USE OF SUBSCRIPTION AGREEMENT

Each shareholder of the Company has the right to subscribe for two shares of common stock for each full share of the Company’s common stock (the “Rights”) owned of record at the close of business on [            ], 2005 (the “Record Date”). The number of shares of common stock that you are entitled to subscribe for appears on the front of the Subscription Agreement or can be calculated by multiplying the number of shares of common stock owned of record on the Record Date by two. The Subscription Price of $0.03 per share ($0.06 per two shares) is needed to subscribe for each share of common stock. You may also subscribe for shares of common stock pursuant to an Over-Subscription Right. To exercise your Rights, you must complete the appropriate sections on the Subscription Agreement. If you wish to exercise your Basic Subscription Right or your Over-Subscription Right, you must do so by no later than 5:00 P.M. Mountain Standard Time on [            ], 2005 (the “Expiration Date”). Rights may be exercised only through Fidelity Transfer Company, the Subscription Agent for the Rights Offering. As described below, Rights are not transferable.

TO EXERCISE YOUR RIGHTS-PLEASE COMPLETE AND RETURN

THE SUBSCRIPTION AGREEMENT TO THE SUBSCRIPTION AGENT

1. Complete “SECTION 1-SUBSCRIPTION AND SIGNATURE.”

a. Basic Subscription Right. Enter the number of shares you intend to purchase under your Basic Subscription Rights. The maximum number of shares you may purchase pursuant to your Basic Subscription Right [appears on the front of the Subscription Agreement or] can be calculated by multiplying the number of shares of common stock owned of record on the Record Date by two.

b. Over-Subscription Right. Enter the number of shares you desire to purchase under your Over-Subscription Right. The Over-Subscription Right is available only if you exercise in full your Basic Subscription Right. In the event that, as a result of the exercise of the Basic and Over-Subscription Rights by the Company’s shareholders, the Rights Offering is over-subscribed, the Company will allocate the available shares among shareholders who over-subscribed pro rata based on the total number of shares purchased by such over subscribing shareholders through the exercise of their Basic Subscription Rights. If a shareholder requests and pays for more shares than are allocated to such shareholder, the Company will refund that overpayment, without interest, as soon as practicable, as more fully described in the Prospectus.

When you send in your Subscription Agreement, you must also send the full purchase price for the number of additional shares that you have requested to purchase (in addition to the payment due for shares purchased through your Basic Subscription Right). The Company has the discretion to issue less than the total number of shares that may be available for Over-Subscription requests in order to comply with state securities laws.

c. Total Subscription. Enter the total number of shares you want to purchase in the offering. This number is the sum of the number of shares you are purchasing on Basic Subscription Right plus the number of shares you desire to purchase pursuant to your Over-Subscription Right.

d. Total Cost. Enter the total cost of your subscription. Your total cost is the dollar number obtained when you multiply the number of shares shown under Total Subscription by $0.03, the Subscription Price per share and rounding up to the nearest whole cent.

2. Sign the Subscription Agreement in the space provided at the bottom of Section 1. Include your daytime telephone number in the space provided.

3. Enclose the executed Subscription Agreement, together with a certified check, bank draft (cashier’s check) drawn on a U.S. bank, or money order made payable to “Fidelity Transfer Company as agent for Dreams, Inc.” in the amount of the Total Cost (Item d. of Section 1) in the envelope provided. If you use your own envelope, address it to Fidelity Transfer Company, 1800 S. West Temple, Suite 301, Salt Lake City, UT 84115. You may also personally deliver your Subscription Agreement and payment to the Subscription Agent at such address.

PLEASE DO NOT SEND SUBSCRIPTION AGREEMENTS OR PAYMENTS TO THE COMPANY. The Company will not consider your subscription received until the Subscription Agent has received delivery of a properly completed and duly executed Subscription Agreement and payment of the full subscription amount.

4. Mail or deliver your executed Subscription Agreement and payment for the Total Cost on a timely basis so that it is received by the Subscription Agent no later than 5:00 P.M. Mountain Standard Time on the Expiration Date. If the Subscription Agent has not received your Subscription Agreement and payment for the Total Cost by 5:00 p.m. Mountain Standard Time on the Expiration Date, you will not be entitled to purchase shares pursuant to the Rights. Accordingly, if you are sending your executed Subscription Agreement and payment by mail, please allow sufficient time for them to be received by the Subscription Agent prior to 5:00 p.m. Mountain Standard Time on the Expiration Date.

No Minimum; Any or All Offering

There is no minimum number of shares which must be subscribed for in order for this offering to be completed. This means that the Company may accept any subscription received even if all [123,360,008] shares of common stock offered are not subscribed for in the Rights Offering.

No Recommendation

The Company is not making any recommendation as to whether or not you should exercise your subscription rights. You should make your decision based on your own assessment of your best interests and after considering all of the information in the Prospectus, including the risk factors.

Conditions to the Offering

The offering is conditioned upon the approval of the Company’s reincorporation by its shareholders at its 2005 Annual Meeting of Shareholders, as more fully described in the Prospectus.

Cancellation Right

The Board of Directors of the Company may cancel the Rights Offering in its sole discretion at any time prior to or on the Expiration Date for any reason (including a change in the market price of the common stock). If the Company cancels the Rights Offering, any funds you paid will be refunded to you, without interest.

Non-transferability of Subscription Rights

Your rights may only be transferred by operation of law or through involuntary transfers. Otherwise, both the Basic Subscription Rights and Over-Subscription Rights are non-transferable and non-assignable.

Shares Held for Others

If you are a broker, a trustee or a depository for securities, or you otherwise hold shares of common stock for the account of others as a nominee holder, you should notify the beneficial owner of such shares as soon as possible to obtain instructions with respect to their subscription rights, as set forth in the instructions we have provided to you for your distribution to beneficial owners. If the beneficial owner so instructs, you should complete the Subscription Agreement and submit it to us with the proper payment.

If you are a beneficial owner of common stock held by a nominee holder, such as a broker, trustee or a depository for securities, we will ask your broker, dealer or other nominee to notify you of this Rights Offering. If you wish to purchase shares through this Rights Offering, you should contact the holder and ask him or her to effect transactions in accordance with your instructions.

Ambiguities in Exercise of Subscription Rights

If you do not specify the number of shares of common stock being subscribed for in your Subscription Agreement, or if your payment is not sufficient to pay the total purchase price for all of the shares that you indicated you wished to purchase, you will be deemed to have subscribed for the maximum number of shares of common stock that could be subscribed for with the payment received from you. If your payment exceeds the total purchase price for all of the shares of common stock shown in your Subscription Agreement, your payment will be applied, until depleted, to subscribe for shares of common stock in the following order:

(1) to subscribe for the number of shares, if any, that you indicated on the subscription certificate that you wished to purchase through your Basic Subscription Right;

(2) to subscribe for shares of common stock until your Basic Subscription Right has been fully exercised;

(3) to subscribe for additional shares of common stock pursuant to the Over-Subscription Right (subject to any applicable proration).

Any excess payment remaining after the foregoing allocation will be returned to you as soon as practicable by mail, without interest or deduction.

Regulatory Limitation

The Company will not issue shares of common stock in the Rights Offering to residents in states whose securities laws prohibits such sales to those who do not meet any suitability requirements described in the Prospectus. State securities laws require an offering to be registered or exempt in each state where the offering is made. The Company believes it has complied with the registration or exemption requirements in all states where it knows shareholders reside. If you are resident in another jurisdiction, the Company will not be required to issue common stock to you pursuant to the Rights Offering if it is advised by counsel that the cost of compliance with the local securities laws will substantially exceed your subscription amount.

The Company’s Decision Binding

All questions concerning the timeliness, validity, form and eligibility of any exercise of subscription right will be determined by the Company and its determinations will be final and binding. In its sole discretion, the Company may waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as it may determine, or reject the purported exercise of any subscription right by reason of any defect or irregularity in such exercise. Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as the Company determines in its sole discretion. The Company will not be under any duty to notify you of any defect or irregularity in connection with the submission of a Subscription Agreement or incur any liability for failure to give such notification.

No Revocation

Except as described below, after you have exercised your Basic Subscription Right and, if applicable, your Over-Subscription Right and delivered the appropriate payment, YOU MAY NOT REVOKE THAT EXERCISE EVEN IF THE SUBSCRIPTION PERIOD HAS NOT YET ENDED. However, your exercise of subscription rights may be revoked if the Company extends the Expiration Date of the Rights Offering for more than thirty days or there is a material change in the terms of the Rights Offering. You should not exercise your subscription rights unless you are certain that you wish to purchase additional shares of the Company’s common stock.

Fees and Expenses

You are responsible for paying commissions, fees, taxes or other expenses incurred in connection with the exercise of the subscription rights. The Company will not pay these expenses.

Rejection Right

The Company reserves the right to reject any Subscription Agreement and payment not properly submitted. The Company has no duty to give notification of defects in any Subscription Agreement or payment and will have no liability for failure to give such notification. The Company will return any Subscription Agreement or payment not properly submitted.

SHAREHOLDERS SHOULD CAREFULLY REVIEW THE RELATED PROSPECTUS PRIOR TO MAKING AN INVESTMENT DECISION WITH RESPECT TO THE RIGHTS REFERRED TO IN THIS SUBSCRIPTION AGREEMENT.

Governing Law. This Subscription Agreement is governed by the laws of the State of Florida.

EX-99.2

Exhibit 99.2

FORM OF SUBSCRIPTION AGREEMENT

DREAMS, INC.

SUBSCRIPTION AGREEMENT FOR SHARES OFFERED TO MEMBERS OF THE PUBLIC

EXPIRATION DATE: [                    ], 2005

You may subscribe for shares of Dreams, Inc. (the “Company”) common stock through the offering that begins on [                    ], 2005 and ends on [                    ], 2005 (the “Expiration Date”). This offering will only be available if any shares remain unsold after our Rights Offering that we commenced on [                    ], 2005 and ends on [                    ], 2005. To participate in the offering, you must complete this Subscription Agreement and include full payment for the shares you want to purchase. Orders received in the offering are subject to our acceptance and fulfillment on a “first come, first served” basis, subject to the number of shares remaining after the Rights Offering. Also, orders in the offering are subject to rejection in whole or in part solely at our discretion.

To order shares in the offering, we must receive a properly completed and executed copy of this Subscription Agreement by the Expiration Date, together with a personal check, cashier’s check or money order payable to “DREAMS, INC.” for an amount equal to the number of shares subscribed for multiplied by the price per share you must pay. The subscription price is $0.03 per share, which was the subscription price for shares in the Rights Offering. The deadline for submitting the Subscription Agreement and related payment in the offering is the Expiration Date.

FOR A MORE COMPLETE DESCRIPTION OF THE TERMS AND CONDITIONS OF THIS OFFERING, PLEASE REFER TO THE PROSPECTUS DATED                     , 2005 (THE “PROSPECTUS”), WHICH IS INCORPORATED HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM DREAMS, INC. BY CALLING DAVID M. GREENE, SENIOR VICE PRESIDENT, AT 954-377-0002.

EXERCISE AND SUBSCRIPTION: The undersigned hereby irrevocably subscribes for the number of shares of common stock indicated below, on the terms and subject to the conditions specified in the Prospectus, receipt of which is hereby acknowledged.

1. Number of shares you are subscribing for:                                 

2. Total subscription price: (Number of shares in line 1 x $0.03)                                 

METHOD OF PAYMENT: Payment by members of the general public for the shares subscribed for above must be in the form of cashier’s check, certified check, money order, or personal check payable to “DREAMS, INC.”

If the aggregate payment amount enclosed is insufficient to purchase the total number of shares listed in line 1, or if payment is enclosed but the number of shares being subscribed for is not specified, the holder of this Subscription Agreement shall be deemed to have subscribed for the maximum amount of shares that could be subscribed for upon payment of such amount. Any remaining funds shall be mailed to the subscriber without interest as soon as practicable.

Please indicate the form of ownership desired for the Shares:

¨	Individual	¨	Corporation	¨	Joint Tenants with Right of Survivorship
¨	Partnership	¨	Tenants in Common	¨	Custodian
¨	Trust	¨	Other (please describe below)

PLEASE PRINT OR TYPE BELOW THE EXACT TITLING IN WHICH THE UNDERSIGNED DESIRES THE COMMON SHARES TO BE REGISTERED:

___________________________________________________

Date	Signature
Joint Owner, if applicable	Area Code and Telephone Number
Social Security or Federal Taxpayer Identification Number	Street Address
	City                                          State                                         Zip

TO BE COMPLETED BY DREAMS, INC.

Accepted as of                     , 2005, as to                      Shares.

Ross Tannenbaum

President and Chief Executive Officer

EX-99.3

Exhibit 99.3

FORM OF LETTER TO SHAREHOLDERS

DREAMS, INC.

2 South University Drive

Plantation, Florida 33324

(954) 377-0002

[                    ], 2005

Dear Shareholders:

We are sending you this letter as a holder of our common stock as of [                    ], 2005 (the “Record Date”), in connection with our offering of non-transferable subscription rights which may be exercised to acquire two shares of our common stock for each share of our common stock that you owned on the Record Date for $0.03 per share ($0.06 per two shares) (the “Rights Offering”). We have described the subscription rights and the Rights Offering in the enclosed Prospectus and evidenced the subscription rights by a Subscription Agreement registered in your name. Enclosed are copies of the following documents:

1. a prospectus dated [                    ], 2005 (the “Prospectus”);

2. a Subscription Agreement with instructions for use of the Subscription Agreement;

3. an Internal Revenue Service Form W-9 (Request for Taxpayer Identification Number and Certification), which you will fill out and return if you are a United States person, and an Internal Revenue Service Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding), which you will fill out and return if you are not a United States person; and

4. a return envelope addressed to Fidelity Transfer Company as the subscription agent (the “Subscription Agent”) for the Rights Offering.

Please review the Prospectus which describes how you may participate in this Rights Offering. If you wish to participate in the Rights Offering, you must complete and return your Subscription Agreement and IRS Form W-9 (if you are a United States person) or IRS Form W-8BEN (if you are not a United States person) to the Subscription Agent in the enclosed return envelope. As indicated in the Prospectus, there is a limited period of time during which you will be able to exercise the subscription rights and purchase shares of our common stock in the Rights Offering. We therefore suggest that you act promptly in order to participate in the Rights Offering. The subscription rights are not transferable other than in very limited circumstances (as set forth in the Prospectus) and will not be listed for trading on any stock exchange.

Neither Dreams, Inc. nor its Board of Directors is making any recommendation as to whether or not you should exercise your subscription rights. You should make your decision based upon your own assessment of your best interests and after considering all of the information in the Prospectus, including the risk factors.

We thank you for your support and confidence and look forward to continuing to serve you.

If you have any questions about the Rights Offering, please contact David M. Greene, Senior Vice President of Dreams, Inc., at (954) 377-0002.

Very truly yours,

Ross Tannenbaum

President and Chief Executive Officer

EX-99.4

Exhibit 99.4

Form W-9 (Rev. October 2004) Department of the Treasury Internal Revenue Service Request for Taxpayer Identification Number and Certification Give form to the requester. Do not send to the IRS.

Print or type

See Specific Instructions on page 2.

Name (as reported on your income tax return)
Business name, if different from above
Check appropriate box:	¨   Individual/ Sole proprietor	¨ Corporation	¨ Partnership	¨ Other	¨   Exempt from backup withholding
Address (number, street, and apt. or suite no.)				Requester’s name and address (optional)
City, state, and ZIP code
List account number(s) here (optional)

Part I Taxpayer Identification Number (TIN)

Enter your TIN in the appropriate box. The TIN provided must match the name given on Line 1 to avoid backup withholding. For individuals, this is your social security number (SSN). However, for a resident alien, sole proprietor, or disregarded entity, see the Part I instructions on page 3. For other entities, it is your employer identification number (EIN). If you do not have a number, see How to get a TIN on page 3.

Social security number

or                

Note. If the account is in more than one name, see the chart on page 4 for guidelines on whose number to enter. Employer identification number

Part II Certification

Under penalties of perjury, I certify that:

1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and

2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and

3. I am a U.S. person (including a U.S. resident alien).

Certification instructions. You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. For real estate transactions, item 2 does not apply. For mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, contributions to an individual retirement arrangement (IRA), and generally, payments other than interest and dividends, you are not required to sign the Certification, but you must provide your correct TIN. (See the instructions on page 4.)

Sign Here Signature of U.S. person     *                                                              Date *                                                             

Purpose of Form Cat. No. 10231X Form W-9 (Rev. 10-2004)

A person who is required to file an information return with the IRS, must obtain your correct taxpayer identification number (TIN) to report, for example, income paid to you, real estate transactions, mortgage interest you paid, acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA.

U.S. person. Use Form W-9 only if you are a U.S. person (including a resident alien), to provide your correct TIN to the person requesting it (the requester) and, when applicable, to:

1. Certify that the TIN you are giving is correct (or you are waiting for a number to be issued),

2. Certify that you are not subject to backup withholding, or

3. Claim exemption from backup withholding if you are a U.S. exempt payee.

Note. If a requester gives you a form other than Form W-9 to request your TIN, you must use the requester’s form if it is substantially similar to this Form W-9.

For federal tax purposes you are considered a person if you are:

• an individual who is a citizen or resident of the United States,

• a partnership, corporation, company, or association created or organized in the United States or under the laws of the United States, or

• any estate (other than a foreign estate) or trust. See Regulation section 301.7701-6(a) for additional information.

Foreign person. If you are a foreign person, use the appropriate Form W-8 (see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities).

Nonresident alien who becomes a resident alien. Generally, only a nonresident alien individual may use the terms of a tax treaty to reduce or eliminate U.S. tax on certain types of income. However, most tax treaties contain a provision known as a “saving clause.” Exceptions specified in the saving clause may permit an exemption from tax to continue for certain types of income even after the recipient has otherwise become a U.S. resident alien for tax purposes.

If you are a U.S. resident alien who is relying on an exception contained in the saving clause of a tax treaty to claim an exemption from U.S. tax on certain types of income, you must attach a statement that specifies the following five items:

1. The treaty country. Generally, this must be the same treaty under which you claimed exemption from tax as a nonresident alien.

2. The treaty article addressing the income.

3. The article number (or location) in the tax treaty that contains the saving clause and its exceptions.

Form W-9 (Rev. 10-2004) Page 2

4. The type and amount of income that qualifies for the exemption from tax.

5. Sufficient facts to justify the exemption from tax under the terms of the treaty article.

Example. Article 20 of the U.S.-China income tax treaty allows an exemption from tax for scholarship income received by a Chinese student temporarily present in the United States. Under U.S. law, this student will become a resident alien for tax purposes if his or her stay in the United States exceeds 5 calendar years. However, paragraph 2 of the first Protocol to the U.S.-China treaty (dated April 30, 1984) allows the provisions of Article 20 to continue to apply even after the Chinese student becomes a resident alien of the United States. A Chinese student who qualifies for this exception (under paragraph 2 of the first protocol) and is relying on this exception to claim an exemption from tax on his or her scholarship or fellowship income would attach to Form W-9 a statement that includes the information described above to support that exemption.

If you are a nonresident alien or a foreign entity not subject to backup withholding, give the requester the appropriate completed Form W-8.

What is backup withholding? Persons making certain payments to you must under certain conditions withhold and pay to the IRS 28% of such payments (after December 31, 2002). This is called “backup withholding.” Payments that may be subject to backup withholding include interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee pay, and certain payments from fishing boat operators. Real estate transactions are not subject to backup withholding.

You will not be subject to backup withholding on payments you receive if you give the requester your correct TIN, make the proper certifications, and report all your taxable interest and dividends on your tax return.

Payments you receive will be subject to backup withholding if:

1. You do not furnish your TIN to the requester, or

2. You do not certify your TIN when required (see the Part II instructions on page 4 for details), or

3. The IRS tells the requester that you furnished an incorrect TIN, or

4. The IRS tells you that you are subject to backup withholding because you did not report all your interest and dividends on your tax return (for reportable interest and dividends only), or

5. You do not certify to the requester that you are not subject to backup withholding under 4 above (for reportable interest and dividend accounts opened after 1983 only).

Certain payees and payments are exempt from backup withholding. See the instructions below and the separate Instructions for the Requester of Form W-9.

Penalties

Failure to furnish TIN. If you fail to furnish your correct TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

Civil penalty for false information with respect to withholding. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty.

Criminal penalty for falsifying information. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.

Misuse of TINs. If the requester discloses or uses TINs in violation of Federal law, the requester may be subject to civil and criminal penalties.

Specific Instructions

Name

If you are an individual, you must generally enter the name shown on your social security card. However, if you have changed your last name, for instance, due to marriage without informing the Social Security Administration of the name change, enter your first name, the last name shown on your social security card, and your new last name.

If the account is in joint names, list first, and then circle, the name of the person or entity whose number you entered in Part I of the form.

Sole proprietor. Enter your individual name as shown on your social security card on the “Name” line. You may enter your business, trade, or “doing business as (DBA)” name on the “Business name” line.

Limited liability company (LLC). If you are a single-member LLC (including a foreign LLC with a domestic owner) that is disregarded as an entity separate from its owner under Treasury regulations section 301.7701-3, enter the owner’s name on the “Name” line. Enter the LLC’s name on the “Business name” line. Check the appropriate box for your filing status (sole proprietor, corporation, etc.), then check the box for “Other” and enter “LLC” in the space provided.

Other entities. Enter your business name as shown on required Federal tax documents on the “Name” line. This name should match the name shown on the charter or other legal document creating the entity. You may enter any business, trade, or DBA name on the “Business name” line.

Note. You are requested to check the appropriate box for your status (individual/sole proprietor, corporation, etc.).

Exempt From Backup Withholding

If you are exempt, enter your name as described above and check the appropriate box for your status, then check the “Exempt from backup withholding” box in the line following the business name, sign and date the form.

Generally, individuals (including sole proprietors) are not exempt from backup withholding. Corporations are exempt from backup withholding for certain payments, such as interest and dividends.

Note. If you are exempt from backup withholding, you should still complete this form to avoid possible erroneous backup withholding.

Exempt payees. Backup withholding is not required on any payments made to the following payees:

1. An organization exempt from tax under section 501(a), any IRA, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2),

2. The United States or any of its agencies or instrumentalities,

3. A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities,

4. A foreign government or any of its political subdivisions, agencies, or instrumentalities, or

5. An international organization or any of its agencies or instrumentalities.

Other payees that may be exempt from backup withholding include:

6. A corporation,

Form W-9 (Rev. 10-2004) Page 3

7. A foreign central bank of issue,

8. A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States,

9. A futures commission merchant registered with the Commodity Futures Trading Commission,

10. A real estate investment trust,

11. An entity registered at all times during the tax year under the Investment Company Act of 1940,

12. A common trust fund operated by a bank under section 584(a),

13. A financial institution,

14. A middleman known in the investment community as a nominee or custodian, or

15. A trust exempt from tax under section 664 or described in section 4947.

The chart below shows types of payments that may be exempt from backup withholding. The chart applies to the exempt recipients listed above, 1 through 15.

IF the payment is for . . .	THEN the payment is exempt for . . .
Interest and dividend payments	All exempt recipients except for 9
Broker transactions	Exempt recipients 1 through 13. Also, a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker
Barter exchange transactions and patronage dividends	Exempt recipients 1 through 5
Payments over $600 required to be reported and direct sales over $ 5,000 1	Generally, exempt recipients 1 through 7 2

¹ See Form 1099-MISC, Miscellaneous Income, and its instructions.

² However, the following payments made to a corporation (including gross proceeds paid to an attorney under section 6045(f), even if the attorney is a corporation) and reportable on Form 1099-MISC are not exempt from backup withholding: medical and health care payments, attorneys’ fees; and payments for services paid by a Federal executive agency.

Part I. Taxpayer Identification Number (TIN)

Enter your TIN in the appropriate box. If you are a resident alien and you do not have and are not eligible to get an SSN, your TIN is your IRS individual taxpayer identification number (ITIN). Enter it in the social security number box. If you do not have an ITIN, see How to get a TIN below.

If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN. However, the IRS prefers that you use your SSN.

If you are a single-owner LLC that is disregarded as an entity separate from its owner (see Limited liability company (LLC) on page 2), enter your SSN (or EIN, if you have one). If the LLC is a corporation, partnership, etc., enter the entity’s EIN.

Note. See the chart on page 4 for further clarification of name and TIN combinations.

How to get a TIN. If you do not have a TIN, apply for one immediately. To apply for an SSN, get Form SS-5, Application for a Social Security Card, from your local Social Security Administration office or get this form on-line at www.socialsecurity.gov/online/ss-5.pdf. You may also get this form by calling 1-800-772-1213. Use Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN, or Form SS-4, Application for Employer Identification Number, to apply for an EIN. You can apply for an EIN online by accessing the IRS website at www.irs.gov/businesses/ and clicking on Employer ID Numbers under Related Topics. You can get Forms W-7 and SS-4 from the IRS by visiting www.irs.gov or by calling 1-800-TAX-FORM (1-800-829-3676).

        If you are asked to complete Form W-9 but do not have a TIN, write “Applied For” in the space for the TIN, sign and date the form, and give it to the requester. For interest and dividend payments, and certain payments made with respect to readily tradable instruments, generally you will have 60 days to get a TIN and give it to the requester before you are subject to backup withholding on payments. The 60-day rule does not apply to other types of payments. You will be subject to backup withholding on all such payments until you provide your TIN to the requester.

Note. Writing “Applied For” means that you have already applied for a TIN or that you intend to apply for one soon.

Caution: A disregarded domestic entity that has a foreign owner must use the appropriate Form W-8.

Form W-9 (Rev. 10-2004) Page 4

Part II. Certification

To establish to the withholding agent that you are a U.S. person, or resident alien, sign Form W-9. You may be requested to sign by the withholding agent even if items 1, 4, and 5 below indicate otherwise.

For a joint account, only the person whose TIN is shown in Part I should sign (when required). Exempt recipients, see Exempt From Backup Withholding on page 2.

Signature requirements. Complete the certification as indicated in 1 through 5 below.

1. Interest, dividend, and barter exchange accounts opened before 1984 and broker accounts considered active during 1983. You must give your correct TIN, but you do not have to sign the certification.

2. Interest, dividend, broker, and barter exchange accounts opened after 1983 and broker accounts considered inactive during 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form.

3. Real estate transactions. You must sign the certification. You may cross out item 2 of the certification.

4. Other payments. You must give your correct TIN, but you do not have to sign the certification unless you have been notified that you have previously given an incorrect TIN. “Other payments” include payments made in the course of the requester’s trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services (including payments to corporations), payments to a nonemployee for services, payments to certain fishing boat crew members and fishermen, and gross proceeds paid to attorneys (including payments to corporations).

5. Mortgage interest paid by you, acquisition or abandonment of secured property, cancellation of debt, qualified tuition program payments (under section 529), IRA, Coverdell ESA, Archer MSA or HSA contributions or distributions, and pension distributions. You must give your correct TIN, but you do not have to sign the certification.

What Name and Number To Give the Requester

For this type of account:	Give name and SSN of:
1.      Individual	The individual
2.      Two or more individuals (joint account)	The actual owner of the account or, if combined funds, the first individual on the account 1
3.      Custodian account of a minor (Uniform Gift to Minors Act)	The minor 2
4.      a.     The usual revocable savings trust (grantor is also trustee)	The grantor-trustee 1
b.      So-called trust account that is not a legal or valid trust under state law	The actual owner 1
5.      Sole proprietorship or single-owner LLC	The owner 3
For this type of account:	Give name and EIN of:
6.      Sole proprietorship or single-owner LLC	The owner 3
7.      A valid trust, estate, or pension trust	Legal entity 4
8.      Corporate or LLC electing corporate status on Form 8832	The corporation
9.      Association, club, religious, charitable, educational, or other tax-exempt organization	The organization
10.    Partnership or multi-member LLC	The partnership
11.    A broker or registered nominee	The broker or nominee
12.    Account with the Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments	The public entity

¹ List first and circle the name of the person whose number you furnish. If only one person on a joint account has an SSN, that person’s number must be furnished.

² Circle the minor’s name and furnish the minor’s SSN.

³ You must show your individual name and you may also enter your business or “DBA” name on the second name line. You may use either your SSN or EIN (if you have one). If you are a sole proprietor, IRS encourages you to use your SSN.

⁴ List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title.)

Note. If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed.

Privacy Act Notice

Section 6109 of the Internal Revenue Code requires you to provide your correct TIN to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA, or Archer MSA or HSA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. The IRS may also provide this information to the Department of Justice for civil and criminal litigation, and to cities, states, and the District of Columbia to carry out their tax laws. We may also disclose this information to other countries under a tax treaty, or to Federal and state agencies to enforce Federal nontax criminal laws and to combat terrorism. The authority to disclose information to combat terrorism expired on December 31, 2003. Legislation is pending that would reinstate this authority.

You must provide your TIN whether or not you are required to file a tax return. Payers must generally withhold 28% of taxable interest, dividend, and certain other payments to a payee who does not give a TIN to a payer. Certain penalties may also apply.

EX-99.5

Exhibit 99.5

Form W-8BEN (Rev. December 2000) Department of the Treasury Internal Revenue Service	Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding Section references are to the Internal Revenue Code. See separate instructions. Give this form to the withholding agent or payer. Do not send to the IRS.	OMB No. 1545-1621
Do not use this form for:		Instead, use Form:
•       A U.S. citizen or other U.S. person, including a resident alien individual		W-9
•       A person claiming an exemption from U.S. withholding on income effectively connected with the conduct of a trade or business in the United States		W-8ECI
•       A foreign partnership, a foreign simple trust, or a foreign grantor trust (see instructions for exceptions)		W-8ECI or W-8IMY
•       A foreign government, international organization, foreign central bank of issue, foreign tax-exempt organization, foreign private foundation, or government of a U.S. possession that received effectively connected income or that is claiming the applicability of section(s) 115(2), 501(c), 892, 895, or 1443(b) (see instructions)		W-8ECI or W-8EXP
Note: These entities should use Form W-8BEN if they are claiming treaty benefits or are providing the form only to claim they are a foreign person exempt from backup withholding.
•       A person acting as an intermediary		W-8IMY
Note: See instructions for additional exceptions.

Part I Identification of Beneficial Owner (See instructions.)

1   Name of individual or organization that is the beneficial owner 2 Country of incorporation or organization

3	Type of beneficial owner:	¨ Individual	¨ Corporation	¨ Disregarded entity	¨ Partnership    ¨ Simple trust
	¨ Grantor trust	¨ Complex trust	¨ Estate	¨ Government	¨ International organization
	¨ Central bank of issue	¨ Tax-exempt organization	¨ Private foundation
4	Permanent residence address (street, apt. or suite no., or rural route). Do not use a P.O. box or in-care-of address.

  City or town, state or province. Include postal code where appropriate. Country (do not abbreviate)

  5 Mailing address (if different from above)

  City or town, state or province. Include postal code where appropriate. Country (do not abbreviate)

6	U.S. taxpayer identification number, if required (see instructions)  ¨  SSN or ITIN ¨  EIN	7 Foreign tax identifying number, if any (optional)
8	Reference number(s) (see instructions)

Part II Claim of Tax Treaty Benefits (if applicable)

  9       I certify that (check all that apply):

a ¨    The beneficial owner is a resident of _ _ _ _ _ _ _ within the meaning of the income tax treaty between the United States and that country.

b ¨    If required, the U.S. taxpayer identification number is stated on line 6 (see instructions).

c ¨     The beneficial owner is not an individual, derives the item (or items) of income for which the treaty benefits are claimed, and, if applicable, meets the requirements of the treaty provision dealing with limitation on benefits (see instructions).

d ¨    The beneficial owner is not an individual, is claiming treaty benefits for dividends received from a foreign corporation or interest from a U.S. trade or business of a foreign corporation, and meets qualified resident status (see instructions).

e ¨     The beneficial owner is related to the person obligated to pay the income within the meaning of section 267(b) or 707(b), and will file Form 8833 if the amount subject to withholding received during a calendar year exceeds, in the aggregate, $500,000.

10 Special rates and conditions (if applicable—see instructions): The beneficial owner is claiming the provisions of Article _ _ _ _ _ of the treaty identified on line 9a above to claim a _ _ _ _ _ _% rate of withholding on (specify type of income): _ _ _ _ _ _ _ _ _ Explain the reasons the beneficial owner meets the terms of the treaty article: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _

Part III Notional Principal Contracts

11 ¨  I have provided or will provide a statement that identifies those notional principal contracts from which the income is not effectively connected with the conduct of a trade or business in the United States. I agree to update this statement as required.

Part IV Certification

Under penalties of perjury, I declare that I have examined the information on this form and to the best of my knowledge and belief it is true, correct, and complete. I further certify under penalties of perjury that:

•       I am the beneficial owner (or am authorized to sign for the beneficial owner) of all the income to which this form relates,

•       The beneficial owner is not a U.S. person,

•       The income to which this form relates is not effectively connected with the conduct of a trade or business in the United States or is effectively connected but is not subject to tax under an income tax treaty, and

•       For broker transactions or barter exchanges, the beneficial owner is an exempt foreign person as defined in the instructions.

Furthermore, I authorize this form to be provided to any withholding agent that has control, receipt, or custody of the income of which I am the beneficial owner or any withholding agent that can disburse or make payments of the income of which I am the beneficial owner.

Sign Here	_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _		_ _ _ _ _ _ _	__ _ _ _ _ _ _ _ _ _ _ _
	Signature of beneficial owner (or individual authorized to sign for beneficial owner)		Date (MM -DD- YYYY)	Capacity in which acting
For Paperwork Reduction Act Notice, see separate instructions.		Cat. No. 25047Z		Form W-8BEN (Rev. 12-2000)

EX-99.6

Exhibit 99.6

FORM OF LETTER TO BROKERS

DREAMS, INC. RIGHTS OFFERING OF NON-TRANSFERABLE RIGHTS TO PURCHASE

SHARES OF COMMON STOCK

[                    ], 2005

To Securities Dealers, Commercial Banks,

Trust Companies and Other Nominees:

We are sending you this letter in connection with the offering by Dreams, Inc. (the “Company”) to our shareholders of non-transferable subscription rights to purchase two shares of our common stock for $0.03 per share ($0.06 per two shares) for each share of our common stock owned by our shareholders on [                    ], 2005 (the “Rights Offering”). The subscription right also carry the right to “oversubscribe” for shares of our common stock that are not otherwise purchased pursuant to the exercise of subscription rights. We have described the subscription rights and the Rights Offering in the enclosed prospectus dated [                    ], 2005 (the “Prospectus”) and evidenced the subscription rights by a Subscription Agreement registered in your name or the name of your nominee. We are asking you to contact your clients for whom you hold our common stock, registered in your name or in the name of your nominee, to obtain instructions with respect to the subscription rights. We have enclosed several copies of the following documents for you to use:

1. The Prospectus;

2. A letter from us to our shareholders;

3. The Subscription Agreement together with the “Instructions for Use of the Shareholders Subscription Agreement;”

4. Internal Revenue Service Form W-9 (Request for Taxpayer Identification Number and Certification) and Internal Revenue Service Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding);

5. A form letter which may be sent to your clients for whose accounts you hold our common stock registered in your name or the name of your nominee;

6. A Beneficial Owner Election Form, on which you may obtain your clients’ instructions with regard to the subscription rights;

7. A DTC Participant Over-Subscription Exercise Form;

8. A Nominee Holder Certification Form; and

9. A return envelope addressed to Fidelity Transfer Company, as Subscription Agent (the “Subscription Agent”) for the Rights Offering.

We request that you act promptly as the subscription rights will expire at 5:00 p.m., Mountain Standard Time on [                    ], 2005 unless extended by us in our sole discretion (such date, as may be extended by us, is referred to as the “Expiration Date”). To exercise rights, a properly completed and executed Subscription Agreement and payment in full for all subscription rights must be delivered to the Subscription Agent as indicated in the Prospectus prior to the Expiration Date. In addition, please note that we will not provide for subscription by Notice of Guaranteed Delivery.

If you have any questions about the Rights Offering, please contact our Senior Vice President, David M. Greene by mail at 2 South University Drive, Plantation, Florida 33324, or by telephone at (954) 377-0002. If you have any questions regarding the mechanics of exercising the subscription rights or you need additional copies of rights offering documents, please contact Fidelity Transfer Company, the Subscription Agent for this Rights Offering, by mail at 1800 S. West Temple, Suite 301, Salt Lake City, UT 84115, by telephone at (801) 484-7222, by Fax at (801) 466-4122 or by email at info@fidelitytransfer.com.

Very truly yours,

DREAMS, INC.

NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF DREAMS, INC., THE SUBSCRIPTION AGENT OR ANY OTHER PERSON MAKING OR DEEMED TO BE MAKING OFFERS OF THE COMMON STOCK ISSUABLE UPON VALID EXERCISE OF THE RIGHTS, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFERING EXCEPT FOR STATEMENTS MADE IN THE PROSPECTUS.

EX-99.7

Exhibit 99.7

FORM OF LETTER TO CLIENTS

RIGHTS OFFERING FOR SHARES

OF COMMON STOCK

OF

DREAMS, INC.

[                    ], 2005

To Our Clients:

We are enclosing for your consideration a Prospectus dated [                    ], 2005 (the “Prospectus”), describing the issuance to shareholders of record of Dreams, Inc. (the “Company”) on [                    ], 2005 (the “Record Date”), of non-transferable subscription rights (“Rights”) which may be exercised to purchase, at the Subscription Price (as defined below), two shares of the Company’s common stock (the “Common Stock”) for each share of the Company’s Common Stock that you owned on the Record Date.

Your attention is directed to the following:

• Each of the Company’s shareholders will receive one (1) Right to purchase two shares of the Company’s Common Stock for each share of Common Stock that such shareholder held as of the Record Date. This is referred to as the “Basic Subscription Right.”

• The Rights are non-transferable and will not be listed for trading on any stock exchange.

• Basic Subscription Right: One Right will entitle the holder to purchase two shares of the Company’s Common Stock at the Subscription Price of $0.03 per share ($0.06 per two shares) (the “Subscription Price”). In order for a holder of Rights to be able to exercise his or her Over-Subscription Right, that holder must exercise his or her Basic Subscription Right in full.

• Over-Subscription Right: Any holder of Rights who fully exercises all Rights held by him or her under the Basic Subscription Right is entitled to subscribe, at the Subscription Price, for shares that were not otherwise subscribed for by other shareholders under their Basic Subscription Rights. In the event that, as a result of the exercise of Basic and Over-Subscription rights by the Company’s shareholders, the Rights Offering is over-subscribed, the Company will allocate the available shares among shareholders who over-subscribed pro rata based on the total number of shares purchased by such over subscribing shareholders through the exercise of their Basic Subscription Rights. If a shareholder requests and pays for more shares than are allocated to such shareholder, the Company will refund that overpayment, without interest, as soon as practicable., as more fully described in the Prospectus.

• The expiration date of the Rights offering is 5:00 p.m., Mountain Standard Time, on [                    ], 2005, unless extended by the Company in its sole discretion (the “Expiration Date”).

Since we are the holder of record of the shares of the Company’s Common Stock held in your account, we have received your non-transferable Rights. We will exercise or sell your Rights only in accordance with your instructions. IF YOU DO NOT GIVE US YOUR INSTRUCTIONS, YOUR RIGHTS WILL BECOME VALUELESS AFTER THE EXPIRATION DATE.

Your Rights will expire as of the Expiration Date. Therefore if you would like to participate and exercise your Rights for the purchase of shares of the Company’s Common Stock, please forward your instructions to us immediately by completing the enclosed Beneficial Owner Election Form.

EX-99.8

Exhibit 99.8

FORM OF BENEFICIAL OWNER ELECTION FORM

FOR THE EXERCISE OF RIGHTS TO PURCHASE

SHARES OF COMMON STOCK IN THE

RIGHTS OFFERING

OF

DREAMS, INC.

I (we) acknowledge receipt of your letter and the enclosed materials relating to the offering of non-transferable subscription rights (“Rights”) to purchase shares of common stock (the “Common Stock”) of Dreams, Inc. (the “Company”).

In this form, I (we) instruct you whether to exercise Rights distributed with respect to the Common Stock held by you for my (our) account, pursuant to the terms and subject to the conditions set forth in the prospectus dated [                    ], 2005 (the “Prospectus”).

BOX 1.¨	Please do not exercise Rights for shares of the Common Stock.
BOX 2.¨	Please exercise Rights for shares of the Common Stock as set forth below. (The number of Rights you have in the Basic Subscription Right is equal to the number of shares you owned on [                    ], 2005 (the “Record Date”). You may subscribe for any number of shares pursuant to the Over-Subscription Right, subject to the limitations set forth in the Prospectus.

	Number of Rights		Subscription Price Per Share		Payment
Basic Subscription Right:		x	$	0.03 =	$
Over-Subscription Right:		x	$	0.03 =	$
				Total Payment Required =	$
						(Must equal total of amounts in Boxes 3 and 4 below)

By exercising the Over-Subscription Right, I (we) hereby represent and certify that I (we) have fully exercised my (our) Basic Subscription Right received in respect of shares of Common Stock held in the below-described capacity.

BOX 3.¨	Payment in the following amount is enclosed: $
BOX 4.¨	Please deduct payment from the following account maintained by you as follows:

		$
Type of Account	Account No	Amount to be Deducted

Date:                    , 2005
	Print Name(s) as it/they appear on your account
	Signature(s)

EX-99.9

Exhibit 99.9

FORM OF NOMINEE HOLDER CERTIFICATION

RIGHTS OFFERING BY DREAMS, INC. OF NON-TRANSFERABLE RIGHTS

EXERCISABLE TO PURCHASE COMMON SHARES

To the Subscription Agent:

The undersigned hereby certifies that it is a broker-dealer registered with the Securities and Exchange Commission, a commercial bank or trust company, a securities depository or participant therein, or a nominee therefor, holding of record                      shares of common stock (“Common Stock”) of Dreams, Inc. (the “Company”) on behalf of                      beneficial owners as of the close of business on [                    ], 2005 (the “Record Date”), for the offering by the Company of shares of Common Stock pursuant to the exercise of non-transferable subscription rights (the “Rights”) being distributed to record holders of shares of the Company’s Common Stock, all as described in the Company’s prospectus dated [                    ], 2005 (the “Prospectus”), a copy of which the undersigned has received. As stated in the Prospectus, one Right to purchase two shares of the Company’s Common Stock at $0.03 per share ($0.06 per two shares) is being distributed to each shareholder of record as of 5:00 p.m., Mountain Standard Time, on the Record Date. The undersigned further certifies that each such beneficial owner is a bona fide beneficial owner of shares of Common Stock, that such beneficial ownership is reflected on the undersigned’s records and that all shares of Common Stock which, to the undersigned’s knowledge, are beneficially owned by any such beneficial owner through the undersigned have been aggregated in calculating the foregoing.

The undersigned hereby further certifies:

(1) the undersigned has exercised the number of Rights specified below pursuant to the Basic Subscription Right (as described in the Prospectus) and pursuant to the Over-Subscription Right (as described in the Prospectus), on behalf of beneficial owners of Rights listing separately below such exercised Basic Subscription Right and the corresponding Over-Subscription Right (without identifying any such beneficial owner); and

(2) each such beneficial owner’s Basic Subscription Right has been exercised in full if it is exercising its Over-Subscription Right.

NUMBER OF SHARES OWNED ON THE RECORD DATE RIGHTS EXERCISED PURSUANT TO BASIC SUBSCRIPTION RIGHT RIGHTS EXERCISED PURSUANT TO OVER-SUBSCRIPTION RIGHT

The undersigned agrees to provide the Subscription Agent with such additional information as the Subscription Agent deems necessary to verify the foregoing.

Name of Record Holder

By:

Name:

Title:

Address:

Telephone Number:

Date:                  , 2005

EX-99.10

Exhibit 99.10

FORM OF DTC PARTICIPANT OVER-SUBSCRIPTION FORM

FOR

RIGHTS OFFERING BY

DREAMS, INC.

OF NON-TRANSFERABLE RIGHTS

EXERCISABLE TO PURCHASE

COMMON SHARES

THIS FORM IS TO BE USED ONLY BY DEPOSITORY TRUST COMPANY PARTICIPANTS TO EXERCISE THE OVER-SUBSCRIPTION RIGHT IN RESPECT OF RIGHTS WITH RESPECT TO WHICH THE BASIC SUBSCRIPTION RIGHT WAS EXERCISED AND DELIVERED THROUGH THE FACILITIES OF THE DEPOSITORY TRUST COMPANY. ALL OTHER EXERCISES OF OVER-SUBSCRIPTION RIGHTS MUST BE EFFECTED BY DELIVERY OF A SUBSCRIPTION AGREEMENT.

THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE PROSPECTUS OF DREAMS, INC. (THE “COMPANY”) DATED [                    ], 2005 (THE “PROSPECTUS”) AND ARE INCORPORATED HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM THE COMPANY AND THE SUBSCRIPTION AGENT.

THE EXERCISE OF RIGHTS IS VOID UNLESS RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL BY 5:00 P.M., MOUNTAIN STANDARD TIME, ON [            ], 2005 OR SUCH LATER DATE AS MAY BE EXTENDED BY THE COMPANY (THE “EXPIRATION DATE”).

1. The undersigned hereby certifies to the Company and the Subscription Agent that it is a participant in The Depository Trust Company (“DTC”) and that it has exercised the Basic Subscription Right in respect of rights (the “Rights”) to purchase shares of common stock (the “Common Stock”) of the Company and delivered such exercised Rights to the Subscription Agent by means of transfer to the DTC account of the Subscription Agent. The undersigned hereby certifies to the Company and the Subscription Agent that it owned                      Shares of Common Stock on [            ], 2005 (the “Record Date”).

2. The undersigned hereby exercises the Over-subscription Right to purchase, to the extent available,                      shares of the Company’s Common Stock and certifies to the Company and the Subscription Agent that such Over-Subscription Right is being exercised for the account or accounts of persons (which may include the undersigned) on whose behalf all Basic Subscription Rights have been exercised.

3. The undersigned understands that payment of the Subscription Price of $0.03 per share ($0.06 per two shares) of Common Stock subscribed for pursuant to the Over-subscription Right must be received by the Subscription Agent at or before 5:00 p.m. Mountain Standard Time on the Expiration Date and represents that such payment, in the aggregate amount of $                     either (check appropriate box):

¨ is being delivered to the Subscription Agent herewith; or

¨ has been delivered separately to the Subscription Agent;

and, is or was delivered in the manner set forth below (check appropriate box and complete information relating thereto):

¨ uncertified check

¨ certified check

¨ money order

___________________________________________

Basic Subscription Confirmation Number

___________________________________________

DTC Participant

___________________________________________

Name of DTC Participant

By:

Name:

Title:

Contact Name:

Telephone Number:

Dated:                         , 2005