10-KT

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K/T

(Mark One)

¨ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Or

x TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from April 1, 2007 to December 31, 2007

Commission file number 0-15399

Dreams, Inc.

(Exact name of registrant as specified in its charter)

Utah	87-0368170
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2 South University Drive, suite 325 Plantation, Florida	33324
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number (954) 377-0002

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

Title of each class	Name of each exchange on which registered
Common stock, no par value	American Stock Exchange

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

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ¨  Yes    x  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    ¨  Yes    x  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for a shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K/T or any amendment to this Form 10-K/T.    x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨            Accelerated filer  ¨            Non-accelerated filer  ¨            Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)    ¨  Yes    x  No

The aggregate market value of the common equity held by non-affiliates as of the closing price of such shares on the last day of the registrant’s most recent second fiscal quarter was approximately $56,900,000.

The number of shares outstanding of the registrant’s common stock as of March 1, 2008 is 37,564,114.

DOCUMENTS INCORPORATED BY REFERENCE—NONE

TABLE OF CONTENTS

FORM 10-K/T

		Page
Part I
Item 1.	BUSINESS	1
Item 1A.	RISK FACTORS	8
Item 1B.	UNRESOLVED STAFF COMMENTS	12
Item 2.	PROPERTIES	12
Item 3.	LEGAL PROCEEDINGS	13
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	13
Part II
Item 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	13
Item 6.	SELECTED FINANCIAL DATA	17
Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	29
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	30
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	31
Item 9A.	CONTROLS AND PROCEDURES	33
Item 9B.	OTHER INFORMATION	33
Part III
Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	34
Item 11.	EXECUTIVE COMPENSATION	39
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	47
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	48
Item 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	50
Part IV
Item 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	51
	SIGNATURES	53

Part I

Item 1. BUSINESS.

Introduction.

As used in this Form 10-K/T “we”, “our”, “us”, “the Company” and “Dreams” refer to Dreams, Inc. and its subsidiaries unless the context requires otherwise.

Overview

Dreams, Inc., headquartered in Plantation, Florida is a Utah Corporation which was formed on April 9, 1980 and has evolved into the premier vertically integrated licensed sports products firm in the industry. This has been accomplished, in part, via organic growth and strategic acquisitions. Our continuing pursuit of this dual strategy should result in our becoming a principal leader and a consolidator in this highly fragmented industry. We believe our senior management and corporate infrastructure is well suited to acquire both large and small industry competitors.

Fiscal Year

Pursuant to a Consent Resolution of the Board of Directors dated September 12, 2007, the Company has changed its fiscal year end from March 31 to December 31. Management believes this will provide greater clarity to the investment community.

Organic Growth

Key components of our organic growth strategy include building brand recognition; improving sales conversion rates both in our stores and web sites; exploring additional distribution channels for our products; and lastly, cross pollinating corporate assets among our various operating divisions.

Strategic Acquisitions

Our strategic acquisition initiatives will focus on e-commerce companies, brick and mortar retailers, other manufacturers of licensed sports and entertainment products and collectibles. These are companies that can offer incremental distribution channels for our products and whose value can be enhanced by placing them under the Dreams corporate umbrella. Hence, our ability to evaluate potential acquisition candidates and consummate these transactions will remain an integral part of our business model.

Objective

Our overall objective is to establish a market leading, totally licensed, sports and entertainment products enterprise and true multi-channel retailer. That is, to service the customer by every possible means necessary in an efficient and profitable manner, driving and building our brands through on-line, brick and mortar, catalogue, and in-bound and out-bound call centers.

Current Landscape

Dreams presently operates in three business segments:

• Retail. The retail segment represents the seventeen (17) Company owned and operated Field of Dreams^® retail stores and its e-commerce business operations including FansEdge.com and ProSportsMemorabilia.com. The e-commerce component of the segment consists primarily of two e-commerce retailers along with a portfolio of athlete web sites selling a diversified selection of sports licensed products and memorabilia on the Internet and has represented the fastest growing area of the Company.

• Manufacturing/Distribution. The manufacturing/distribution segment represents the manufacturing and wholesaling of sports memorabilia products and acrylic display cases. These operations are principally conducted through wholly-owned subsidiaries, doing business as Mounted Memories™ and Schwartz Sports.

• Franchise. This segment represents the results of the Company’s franchise program. Although, as a result of the Company acquiring eight (8) previously franchised Field of Dreams^® stores in the past fourteen months; these revenues are no longer significant to the entity as a whole. Henceforth, franchise revenues will be reflected as a component of “Other” revenues in the Company’s financial statements. There are currently ten (10) Field of Dreams^® franchise stores open and operating.

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Retail Segment.

Company-owned Retail Stores.

As of March 1, 2008 we own and operate sixteen (16) Field of Dreams^® retail stores and one (1) FansEdge store. During the past two years, we purchased three (3) existing Field of Dreams^® stores operating in both Las Vegas and south Florida, another store operating in Orlando, Florida and a Field of Dreams store in San Diego, CA. The Company may purchase other franchised stores from time to time as it believes is appropriate. In addition, we sold our Somerset store effective June 30, 2006 to an existing franchisee and chose not to renew a lease for our Field of Dreams store at Horton Plaza in San Diego, CA. The Company will also evaluate the opening of new retail operations, under both Field of Dreams^® and FansEdge brands, specifically in the Las Vegas and Chicago markets. Stores typically are located in high traffic areas in regional shopping malls. The stores average approximately 1,000 square feet. 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. Effective December 31, 2005, the parties extended the exclusive licensing agreement for an additional five-year term. During the nine months ended December 31, 2007 and 2006 we incurred royalty fees of $152 and $162, respectively.

This division prides itself on being the ultimate, corporate-owned sports and celebrity gift store in the country. This goal has been achieved by:

• Staying ahead of the competition by offering innovative and fresh products;

• Offering unrivaled service and product knowledge communicated through the best personnel in the industry;

• Implementing management, product and financial controls to ensure maximum profitability.

A store typically has a full-time manager and full time assistant manager in addition to hourly personnel, most of who 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 ten hours per day.

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Set forth below is a listing of our stores as of March 1, 2008, their location and the date opened or acquired.

City	Store Location	Date Opened or Acquired
Denver, CO	Park Meadows Mall	March 2002
Chicago, IL	Woodfield Mall	October 2002
Norfolk, VA	MacArthur Center	October 2002
Paramus, NJ	Garden State Plaza	May 2003
San Francisco, CA	Pier 39	September 2003
Farmington, CT	West Farms Mall	November 2003
Denver, CO	Cherry Creek Mall	May 2004
Scottsdale, AZ	Scottsdale Fashion Square	June 2004
San Diego, CA	Fashion Valley Mall	November 2006
Las Vegas, NV	The Rio Hotel	December 2006
Las Vegas, NV	Smith & Wollensky Plaza	December 2006
Las Vegas, NV	Caesars Palace Forum Shops	December 2006
Sunrise, FL	Sawgrass Mills Mall	June 2007
Boca Raton, FL	Boca Town Center	June 2007
Wellington, FL	Wellington Green Mall	June 2007
Orlando, FL	Florida Mall	July 2007
Aurora, IL	Fox Valley Mall (FansEdge Store)	April 2008 (projected)

E-Commerce Operations.

The Company sells officially licensed products and authentic autographed memorabilia of the NFL, MLB, NHL, NBA, NCAA and NASCAR. In October 2003 the Company purchased 100% of the outstanding common stock of FansEdge Incorporated and in April 2004 the Company acquired certain assets, including the website of Pro Sports Memorabilia, Inc. The e-commerce division, which includes these online properties and others, is focused on providing the best customer experience in the online sports-licensed products and memorabilia vertical.

These e-commerce operations have provided for the fastest growing area of the Company with revenues climbing from approximately $4 million in 2004 to nearly $40 million in 2007.

E-commerce products are marketed through a series of websites that offer customers a daily selection of items from more than 200 teams and over 1,300 different athletes. This division sells over 80,000 products across categories such as apparel, auto accessories, autographed memorabilia, collectibles, headwear, home and office items, jewelry and watches, tailgate and stadium gear, and DVD’s. These online properties represent several of the leading brand names in this market; including:

•        www.FansEdge.com

•        www.ProSportsMemorabilia.com

•        www.SportCases.com

•        www.DanMarino.com

•        www.JohnElway.com

•        www.BigBen7.com

•        www.LarryBird.com

•        www.DickButkus.com

•        www.MikeSchmidt.com

•        www.PeteRose.com

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In addition, FansEdge maintains strategic alliances with Amazon.com in which the FansEdge brand and its products are sold in the apparel and sporting section of the Amazon.com website. Amazon, with an audience of more than 50 million active customer accounts, affords us national brand prominence for our FansEdge.com property.

The division fulfills orders generated through website sales by shipping products from its own warehouse facilities in Sunrise, Florida, Chicago, Illinois and Denver, Colorado, and from suppliers via drop-ship agreements. Our distribution network enables us to provide immediate delivery service to our online customers. It is our goal to be the market leader by shipping orders the same day they are received.

This division’s business strategy is to be the best at what they do within the sports-licensed products and memorabilia vertical. Tactics employed to execute this strategy include:

• Applying critical expertise to improve logistics and provide the best possible customer experience;

• Strengthening brands by continually expanding catalogs and reinforcing market positioning in response to market demand;

• Efficiently transforming shoppers into customers and effectively turning customers into repeat customers; and

• Operating with optimal efficiencies realized through superior market expertise and technology, total commitment to both quality and accuracy, and timely fulfillment.

This division will continue to expand and optimize its marketing practices exclusively within its chosen vertical by seeking strategic alliances with other companies and brands, in some cases providing expertise and technology to third-party entities, including other online marketers, professional athletes and sister divisions.

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Manufacturing/Distribution Segment.

Mounted Memories.

Mounted Memories (“MMI”) is one of the largest wholesalers of authentic sports and celebrity memorabilia products and acrylic display cases. The Company maintains many exclusive and non-exclusive agreements with numerous athletes who frequently provide autographs and / or game used memorabilia at agreed upon terms. In addition to its relationships with various athletes and their representatives, MMI holds licenses with different sports leagues which allow for the manufacture and distribution of a wide array of products. Licenses are currently held with MLB, MLBPA, NFL, Golden Bear (Jack Nicklaus), NASCAR and a variety of NASCAR teams and drivers.

Specifically, MMI strives to enhance its market leading position by executing against the following objectives:

• Further expand distribution channels and deepen existing customer relationships.

• Expand and diversify product lines by adding new licenses and bringing new products to market.

• Continue to pursue exclusive licensing and memorabilia opportunities.

• Enhance manufacturing efficiencies.

MMI has been in business since 1989 and has achieved its industry leading status fundamentally due to a combination of its licenses and 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 large selection and supply of custom acrylic display cases, with over 50 combinations of materials, colors and styles. The primary raw material used in the production process is acrylic. There are many vendors who sell plastic throughout south Florida and the Company seeks to obtain the best pricing through competitive vendor bidding. The Company does not produce the helmets, footballs, baseballs or other objects which are autographed. Those products are available through numerous suppliers. No individual suppliers represented more than ten percent of the Company’s total nine months ended December 2007 or 2006 purchases.

MMI continues to work on the development of new distribution channels. In fact, in November of 2007, they announced their first significant mass market order from the Target Corporation for a series of NASCAR autographed items. MMI’s customer base varies greatly and includes transactional television, internet companies, traditional retail stores, specialty retail which sell sports and celebrity memorabilia as well as corporate account sales. MMI has worked diligently to expand and diversify its customer base and currently only one customer accounted for more than ten percent of MMI’s total nine month revenues ended December 31, 2007.

MMI has one of the most advanced and effective fulfillment processes in the industry and utilizes the most current shipping software to assist in the process. MMI operates out of a 50,000 square foot facility and will continue to invest in technologies that enhance its competitive manufacturing and distribution advantages.

Schwartz Sports

Schwartz Sports (“Schwartz”) distributes autographed sports memorabilia and collectibles. For the past eight-years, the company has provided hand-signed collectibles to retailers, corporations, charities and individual collectors with authentic products from every major sport. Once considered a competitor of Mounted Memories (see above), this Chicago based division fit our criteria for a strategic acquisition candidate and now works in concert with MMI on achieving our overall market positioning in the sports & celebrity memorabilia segment.

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The Greene Organization.

The Greene Organization since 1991 has been engaged in athlete representation and corporate sports marketing of individual athletes. This boutique division provides athletes with all “off-field” activities including but not limited to; personal appearances, product endorsements, book publishing deals, public/private autograph signings, licensing and marketing opportunities. As a result, over the years, The Greene Organization has become a portal for numerous corporate clients who regularly contract this division to identify a professional athlete to enhance their company’s profile, products and or services. In addition, the auction arm of this division, SCAC (Sports Collectibles and Auction Company) provides complete auction services to charities and organizations throughout the country. Warren H. Greene, president of The Greene Organization, is the brother-in-law of the Company’s president.

Franchise Segment.

The Company conducts its Field of Dreams^® operations through Dreams Franchise Corporation (“DFC”). On March 1, 2006, the Company announced the hiring of a new president of the franchise division. DFC will focus its attention on two principal objectives;

Improving its support structure for existing franchisees by creating “value-added” services such as:

• Analyzing top line revenues and creating short and long-term action plans for sales increases through improved personnel training/recruitment, more regionally appropriate marketing/advertising based incentives, and direct interface with landlord’s marketing department to create better traffic opportunities.

• Assisting franchisees in resolving real estate issues from expansion to renewal and beyond.

• Bringing in new vendor relationships that enhance both the store’s top line revenues and operating expense savings.

Increasing brand awareness by opening more stores throughout the United States and Canada, and revamping the www.fieldofdreams.com website which includes adding an e-commerce component. These objectives have begun to be addressed by:

• An increase in expenditures for prospective franchisees through traditional print media and online services.

• Improving the screening process for qualified prospects with the proper financial and operational experience.

• Developing and enhancing relationships with national landlords to secure “A” rated locations within their malls.

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 the Company. The Company does not presently have a Field of Dreams^® catalog.

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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. The current term of the USL License expires in December 2010. 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 and will not become that of DFC or the Company. 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 the Company’s business.

Franchising.

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 begins 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. 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 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. Royalties from the largest franchisee accounted for less than one percent of the Company’s nine months ended December 31, 2007 and 2006 consolidated revenues.

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. Each franchisee is also required to spend 1% of its gross revenues for its own local advertising and promotion. Franchisees are required to maintain standards of quality and performance and to maintain the proprietary nature of the Field of Dreams^® name. 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 sold no standard franchises during the nine months ended December 31, 2007.

Competition.

The Company’s retail stores compete with other retail establishments, including the Company’s 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. We believe the principal competitive factors are product selection, price, customer service and support, web site features and functionality, and delivery performance.

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

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Within the acrylic display 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 price competitive due to its ability to purchase large quantities of material and pass the savings on 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 of all kinds. The Company believes 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.

The Company employs 243 full-time employees and 85 part-time employees. 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 October – December quarter, primarily due to holiday sales. Approximately 61% and 60% of our nine month revenues were generated during this quarter for 2007 and 2006. Management believes that the percentage of revenues in the holiday quarter will increase in future years as we focus on and grow the retail segment. As a result, we may incur additional expenses during our holiday quarter, including higher inventory of product and additional staffing in anticipation of increased sales activity.

Item 1A. Risk Factors.

Risk Factors Relating to Dreams, Inc.

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.

Our line of credit facility imposes significant operating and financial restrictions on us. These restrictions, without the prior written waivers from our Bank, may 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 could result in a default. In the event of a default of our obligations under our line of credit or the security agreement, Comerica Bank may, among other things, seize and sell all of our assets or appoint a receiver for our operations.

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 complement our business. 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

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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 write-off 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 relationship, 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 or 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 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.

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

We have grown rapidly in the past few years, 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 2008 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 December 31, 2007, we had goodwill and other intangible assets of approximately $13.9 million, which constituted approximately 27% 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 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 2010. 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 on 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.

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Our retail business segment is highly seasonal.

Historically, the (October through December) holiday quarter has accounted for a greater proportion of our operating income than have each of the other three quarters of our year. In the nine month transition period ended December 31, 2007, more than 75% 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 holiday quarter. Our results of operations depend significantly upon the holiday selling season. If less than satisfactory revenues, operating earnings or cash flows from operations are achieved during the key holiday 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 year. Our manufacturing/distribution segment and our franchise segment are not as 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 we have an employment agreement with one of our divisional presidents and key-man life insurance for two of our divisional presidents.

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 American Stock Exchange. 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 American Stock Exchange. 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. The trading price of our common stock has been and may 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 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 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.

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Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We do not own any real property. The Company leases its corporate office and primary manufacturing/warehouse facility in Plantation, Florida and Sunrise, Florida, respectively. The corporate office lease is for approximately 8,000 square feet of office space and expires in June 2011, and has total occupancy costs of approximately, $18,000 per month. The Company’s principal executive and accounting offices are located at the Plantation, Florida facility.

Our primary manufacturing/warehouse facility in Sunrise, Florida has approximately 50,000 square feet of office, manufacturing and warehousing space. The lease is for a 10 year term expiring in 2012 with total occupancy costs of approximately $34,000 per month with 3% annual increases.

Our 17 company-owned stores currently lease their facilities, with lease terms (including renewal options) expiring in various years through September 2015 with initial terms of 7 to 10 years. We also lease a warehouse facility in Denver, Colorado which has approximately 1,400 square feet and a warehouse facility in Las Vegas, NV which has approximately 12,000 square feet.

To support our Internet division, we currently lease 66,000 square feet in Niles, IL with a monthly occupancy cost of approximately, $30,000. However, we will seek to add additional space for these operations when the lease expires in the summer of 2008.

All in all, we believe our current facilities are adequate for our operations for the foreseeable future.

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Item 3. Legal Proceedings.

We are involved from time to time with legal proceedings arising in the ordinary course of business. The Company is not presently involved in any other litigation, the result of which would have a material adverse effect on the Company.

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

On November 8, 2007, the Company held an Annual Meeting of its Stockholders. There were two proposals voted upon at the meeting; to elect directors to each serve until the next Annual Meeting of Stockholders of the Company and until their successors have been duly elected and qualified; and to ratify the appointment of Friedman, Cohen, Taubman & Company, LLC, as independent auditors for the Company for the year ending December 31, 2007. Both proposals passed with 80% and 81% approval, respectively.

The following individuals were re-elected for another year:

Name	Votes For	Votes Against/ Withheld
Sam D. Battistone	30,513,738	84
Ross Tannenbaum	30,514,439	84
Dale Larsson	30,513,658	84
David Malina	30,513,738	84
Steven Rubin	30,514,325	84

Part II

Item 5. Market for the registrant’s common equity, related stockholder matters and Issuer purchases of equity securities.

As of April 16, 2007, the Company’s common stock was listed on the American Stock Exchange (Amex), an international, technologically advanced auction market, under the symbol “DRJ”. Prior to April 16, 2007, the Company’s common stock was traded on the *over-the-counter bulletin board under the symbol “DRMN.OB”. The high and low bids of the Company’s common stock for each quarter during the nine months ended December 31, 2007 and fiscal years ended March 31, 2007 and 2006 are as follows: (prices shown have been retroactively adjusted to reflect the 1 for 6 reverse stock split effective January 30, 2007)

Transition Period (April 1, 2007-December 31, 2007):

	High Bid Price		Low Bid Price
Second Quarter	$	2.71	2.54
Third Quarter	$	2.00	1.85
Fourth Quarter	$	1.90	1.60

Fiscal Year Ended March 31, 2007:

	High Bid Price		Low Bid Price
First Quarter	$	1.08	$	.78
Second Quarter		1.20		.60
Third Quarter		3.54		.54
Fourth Quarter		4.03		2.64

Fiscal Year Ended March 31, 2006:

	High Bid Price		Low Bid Price
First Quarter	$	.54	$	.18
Second Quarter		.72		.30
Third Quarter		.54		.36
Fourth Quarter		1.20		.36

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

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Performance Graph

The information contained in this Performance Graph section of this Item 5 shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the Securities and Exchange Commission (“SEC”), or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.

The graph below compares the performance of the Company’s Common Stock with the performance of the S & P 500 Index and a peer group index (the “Peer Group Index”) by measuring the respective changes in Common Stock prices from March 31, 2003 through December 31, 2007.

Pursuant to the SEC’s rules, the Company created a peer group index with which to compare its own stock performance. The Company has selected a grouping of companies that it believes share similar characteristics to its own. The following companies were included in the Peer Group Index: Collectors Universe, Inc. (CLCT) and Redenvelope, Inc. (REDE).

The graph assumes that $100 was invested on March 31, 2003 in each of the Company’s Common Stock, the S & P 500 Index and the Peer Group Index, and that all dividends, if applicable, were reinvested into additional shares of the same class of equity securities during the applicable fiscal year. The Peer Group Index weighs the returns of each constituent company according to its stock market capitalization at the beginning of each period for which a return is indicated.

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Copyright ^© 2008 Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. All rights reserved.

www.researchdatagroup.com/S&P.htm

	3/03	3/04	3/05	3/06	3/07	12/07
Dreams, Inc.	100.00	180.00	33.33	113.33	361.60	192.00
S&P 500	100.00	135.12	144.16	161.07	180.13	188.81
Peer Group	100.00	459.00	560.28	517.68	482.55	381.14

THE STOCK PRICE PERFORMANCE SHOWN IN THE PERFORMANCE GRAPH IS NOT NECESSARILY INDICATIVE OF FUTURE PRICE PERFORMANCE. THE PERFORMANCE GRAPH WILL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE IN ANY FILING BY THE COMPANY UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934.

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The records of Fidelity Transfer, the Company’s transfer agent, indicate that there are 374 record owners of the Company’s common stock as of December 31, 2007. Because many of our shares of common stock are held by brokers, and other institutions on behalf of stockholders, we are unable to determine the total number of stockholders represented by these record holders. However, we believe there are more than 1,600 beneficial holders of our common stock. On March 1, 2008 the high bid price was $1.35 and the low bid price was $1.30 for the Company’s common stock.

Dividend Policy

The Company has never paid dividends and we intend to retain future earnings to finance the expansion of our operations and for general corporate purposes. In addition, our current loan and security agreement with Comerica Bank prohibits the Company from paying cash dividends.

Repurchase of Equity Securities during 2007

There were no issuer purchases of our common stock during 2007. However, on February 6, 2008, the Company announced that its Board of Directors has authorized the repurchase of up to $1,000,000 of the Company’s common stock as and when market prices make repurchases advantageous.

Issuance of Unregistered Securities

The Company has on two separate occasions during the nine months ended December 31, 2007 issued unregistered securities to support a particular transaction. The particulars of each of these transactions are set forth below. In addition, the Company has issued approximately 50,000 unregistered common shares as a result of options that were exercised during the reporting period.

Effective August 1, 2007, the Company entered into a stock purchase agreement with the shareholders of BKJ Consulting Corp., an Illinois corporation that owned and operated Schwartz Sports, a Chicago based sports memorabilia company. The Company acquired 100% of the outstanding shares of BKJ Consulting Corp. in exchange for 500,000 newly issued, restricted common shares of Dreams, Inc. The Company disclosed this transaction on a Form 8-K dated August 2, 2007. In connection with this agreement, an additional 182,218 newly issued, restricted common shares were issued to support debt converted to equity at closing.

Effective February 2, 2007, the Company acquired the assets of Frameart, LLC d/b/a Unique Images, a Nevada limited liability company in return for 258,333 newly issued, restricted, common shares of Dreams, Inc. This boutique custom framing firm is one of the industry’s innovators in high-end custom framing.

All of the common stock issued for the above transactions were not registered under the Securities Act of 1933 (the “Act”) and were issued pursuant to an exemption from registration under Section 4 (2) of the Act.

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EQUITY COMPENSATION PLAN INFORMATION

	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted – average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity Compensation Plans Approved by Security Holders	36,667	$	2.69	2,463,333
Equity Compensation Plans Not Approved by Security Holders	*401,083	$	0.85	0
Total	401,083	$	0.85	0

* Represents options granted during the previous four-years to employees and consultants prior to the adoption of the Company’s 2006 Equity Incentive Plan which was approved by the shareholders in January 2007.

Item 6. Selected Financial Data.

(Dollar amounts in thousands)

	Nine-Months Ended December 31, 2007			Fiscal Years Ended March, 31
				2007			2006		2005			2004
Net Sales	$	59,702		$	55,960		$	42,730	$	32,978		$	21,770
Cost of Goods Sold		33,135			31,789			24,460		18,237			11,918
Gross Profit		26,567			24,171			18,270		14,741			9,852
Operating Expenses		24,334			22,152			17,162		14,793			10,438
Operating Income/(Loss)		2,233			2,019			1,108		(52	)		(586	)
Other (Expenses) / Income		(110	)		(42	)		3,657		—			—
Income(Loss) Before Taxes		1,415			1,449			4,311		(637	)		(777	)
Provision (Benefit) for income taxes		623			469			1,762		(174	)		(283	)
Net Income (loss)	$	792		$	980		$	2,549		(463	)		(494	)
Earnings (loss) per common share, basic	$	.02		$	.03		$	.09	$	(0.05	)	$	(0.05	)
Earnings (loss) per common share, diluted	$	.02		$	.03		$	.09	$	(0.05	)	$	(0.05	)
Weighted Average shares Outstanding:
Basic		37,328,962			32,271,327			27,404,645		9,393,866			9,446,262
Diluted		37,596,089			32,271,327			27,404,645		9,393,866			9,446,262

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There were no accounting changes for these five fiscal years. The Company acquired FansEdge in October 2003. This internet retailer has been the catalyst for the Company’s revenue growth. The Company’s outstanding stock options were not considered in the calculation of diluted earnings per share for fiscal years 2003 through fiscal 2006, due to their anti-dilutive effects. The Company received $3.6 million in insurance proceeds which was booked as other income in fiscal year 2006. Also, as a result of our asset purchase agreement with Pro-Stars, Inc. the Company has an on-going obligation to make quarterly distributions to limited partners on pro-rata bases depending on the actual profitability of the 3 Las Vegas based Field of Dreams stores and Stars Live 365.

Consolidated Balance Sheet Data: (Dollars in thousands)

	Nine-Months Ended December 31, 2007		Year Ended March 31,
			2007		2006		2005		2004
Cash	$	1,601	$	753	$	433	$	211	$	319
*Working Capital	$	17,548	$	17,263	$	13,638	$	7,110	$	8,990
Total Assets	$	51,386	$	37,655	$	28,551	$	22,292	$	18,554
Notes and Capital Leases Payable-non-current	$	7,244	$	6,731	$	5,744	$	5,677	$	876
Total Shareholder’s Equity	$	26,760	$	24,391	$	16,061	$	10,071	$	10,371

* Total current assets minus total current liabilities.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-K/T under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” 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 the actual results, performance or achievements of the Company 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,” “Dreams believes,” “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 the Company.

Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance, or achievements of Dreams 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 Dreams or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. Dreams disclaims 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.

Management’s Overview

Dreams, Inc., headquartered in Plantation, Florida has evolved into the premier vertically integrated licensed sports products firm in the industry. This has been accomplished, in part, via organic growth and strategic acquisitions. Our continuing pursuit of this dual strategy should result in our becoming a principal leader and a consolidator in this highly fragmented industry. We believe our senior management and corporate infrastructure is well suited to acquire both large and small industry competitors.

Specifically, we are engaged in multiple aspects of the licensed sports products and autographed memorabilia industry through a variety of distribution channels.

We generate revenues from:

• our retail segment which includes our 17 Company owned stores and our e-commerce component;

• our manufacturing distribution segment, through manufacturing and wholesaling of sports memorabilia products, custom acrylic display cases and custom framing and other items;

• our franchise program through the 10 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.

Organic Growth

Key components of our organic growth strategy include building brand recognition; improving sales conversion rates both in our stores and web sites; exploring additional distribution channels for our products; and lastly, by cross pollinating corporate assets among our various operating divisions. Management believes that there remain significant benefits to cross pollinating the various corporate assets and leveraging the vertically integrated model that has been constructed over the years. For example, one of our focuses is to integrate technology in use at our Internet division as the basis of fueling a high tech kiosk unit positioned within our stores; thus creating an un-paralleled customer experience pertaining to the breadth and depth of product selection as our Internet’s skus (stock keeping units) portfolio consists of over 80,000 different items. As a result, we believe we should experience higher conversion rates at our stores.

In addition, we are targeting to sell more of the items that we manufacture through our own retail distribution channels on an exclusive basis whereby Dreams will enjoy the “long dollar”; or more traditionally characterized as going from manufacturing to retail. As a result, Dreams anticipates improvement in our consolidated gross margins, on a blended basis.

We have had success with the marketing of our products on-line via FansEdge.com and the complement of each of our web properties. The Company’s sales associated with these e-commerce initiatives have grown from $4 million in 2004 to nearly $40 million this year. Initially, we built sales by concentrating on customer acquisition and building brand awareness. Recently, we have shifted resources to applications providing more robust platforms and merchandising strategies that result in more repeat business. We

19

will continue to offer technology services to third parties with the building of our SYNDICATION model; explore the leveraging of our unique visitors data base by constructing an OUTBOUND CALL CENTER and open our first FansEdge brick and mortar store in Chicago to execute our multi-channel retailing strategy by marketing a single brand (FansEdge) via multiple channels.

We believe this strategy; coupled with the significant investments made these past few years in the design, development and implementation of our proprietary platform, have us well positioned to benefit from the ever-growing increasing purchases being made directly on-line and indirectly (on-line influenced) by consumers.

Strategic Acquisitions

Our strategic acquisition initiatives will focus on e-commerce companies, brick and mortar retailers, other manufacturers of licensed sports and entertainment products and collectibles. These are companies that can offer incremental distribution channels for our products and whose value can be enhanced by placing them under the Dreams corporate umbrella. Normally, upon successfully completing these types of acquisitions, we seek to retain key management personnel while instituting a growth culture. Hence, our ability to evaluate potential acquisition candidates and consummate these transactions will remain an integral part of our business model.

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Corporate Initiatives

Some of our corporate initiatives have focused on:

• Designing and building our first prototype FansEdge™ brick and mortar store in the greater Chicago market. This enables the Company to pursue its multi-channel retailing strategy by marketing a single brand via multiple channels.

• Enhancing our 365 Live marketing model by populating the additional days with athletes such as Dan Marino, Dick Butkus, Steve Garvey and others to complement the 15 days per month; already featuring Pete Rose. Also, test marketing additional venues in Las Vegas to concurrently offer the unique experience enjoyed by millions at our Caesars Forum Shops location.

• Improving blended margins by going from manufacture to retail.

• Targeting additional Las Vegas based Field of Dreams^® locations, as this area of the country has provided the highest volumes for our products and services.

We believe we have sufficient capital available under our credit facilities to fund these corporate initiatives.

Objective

Our overall objective is to establish a market leading totally licensed, sports and entertainment products enterprise and true multi-channel retailer. That is, to service the customer by every possible means necessary in an efficient and professional manner by driving and building our brands through on-line, brick and mortar, catalogue, and in-bound and out-bound call centers.

Analysis

We review our operations based on both our financial results and various non financial measures. Management’s focus in reviewing performance begins with growth in sales, margin integrity and operating income. On the expense side, with a majority of our sales being achieved as an on-line retailer of licensed sports products, we spend a disproportionate amount of our operating expenses in internet marketing. Therefore, we continuously monitor the return on investment of these particular expenses. As the on-line retail market continues to grow, we believe that the market for our products sold over the Internet will also grow.

Some of the important non financial measures which management reviews are; unique visitors to our web sites, foot traffic in our stores, sales conversion rates and average sold unit prices.

Historically, the (October to December) fourth quarter has accounted for a greater proportion of our operating income than have each of the other three quarters of the 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 general popularity of a specific team that wins a championship or an individual athlete who enters their respective sports’ Hall of Fame, the amount and timing of new sales contributed by new stores, the timing of personal appearances by particularathletes 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.

Conclusion

We set ourselves apart from other companies with our diversified product and services line, our proprietary eCommerce platform, as well as our relationships with sports leagues, agents and athletes. Management believes we can become a consolidator in the highly fragmented licensed sports products industry.

GENERAL

As used in this Form 10-K/T “we”, “our”, “us”, “the Company” and “Dreams” refer to Dreams, Inc. and its subsidiaries unless the context requires otherwise. The fiscal years ended March 31, 2007 and March 31, 2006 are herein referred to as (fiscal 2007) and (fiscal 2006).

Use of Estimates and Critical Accounting Policies

The preparation of our financial statements in conformity with generally accounting principles 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.

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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

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 an amount sufficient to respond to normal business conditions. Should business conditions deteriorate or any major customer default on its obligations to the Company, this allowance may need to be significantly increased, which would have a negative impact upon the Company’s operations. The Company’s current allowance for doubtful accounts is $67.

Reserves on Inventories

The Company establishes 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 the Company’s investment in inventories for declines in value. The Company’s current reserve for inventory obsolescence is $270.

Income Taxes

Significant management judgment is required in developing the Company’s 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. The Company evaluates quarterly its ability to realize its deferred tax assets and adjusts the amount of its valuation allowance, if necessary. The Company provides a valuation allowance against its deferred tax assets when it believes that it is more likely than not that the asset will not be realized. The Company has prepared an analysis based upon historical data and forecasted earnings projections to determine its ability to realize its net deferred tax asset. After consideration of all the evidence, both positive and negative, management has determined that a $187, $187 and $187 valuation allowance as of December 31, 2007, March 31, 2007 and March 31, 2006, respectively, is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized.

Goodwill and Unamortized Intangible Assets

The Company performs goodwill impairment tests on at least an annual basis and more frequently in certain circumstances. The Company 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 the Company’s customer base, or a material negative change in its 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. The Company will recognize an impairment loss if the carrying value of the asset exceeds the fair value determination. The Company performed an annual fair value assessment of its goodwill on December 31, 2007 and previously, on March 31 of each year, and no impairment was noted for the nine months ended December 31, 2007, nor in fiscal 2007 or 2006.

Revenue Recognition

The Company recognizes retail (including e-commerce sales) and wholesale/distribution revenues 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 are recognized at the time of sale. Return allowances, which reduce gross sales, are estimated using historical experience.

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.

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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.

Revenues from industry trade shows are recognized at the time of the show when tickets are submitted for autographs or actual product purchases take place. In instances when the Company receives pre-payments for show autographs, the Company records these amounts as deferred revenue.

The Company had approximately $1.0 million in orders not yet shipped as of December 31, 2007.

RESULTS OF OPERATIONS

The following table presents our historical operating results for the periods indicated as a percentage of net sales:

	9 mths 12/31/07	Year Ended March 31,
	2007	2007	2006
Net Sales	1.00	1.00	1.00
COGS	0.55	0.57	0.57
Gross Profit	0.45	0.43	0.43
*Operating Expenses	0.39	0.38	0.38
Operating Income	0.05	0.04	0.03
Other Income	0.00	0.00	0.08
Income before income taxes	0.03	0.03	0.10
Net Income	0.01	0.02	0.06

* Does not include depreciation.

** The above table may not foot due to rounding.

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RESULTS OF OPERATIONS-NINE MONTHS ENDED DECEMBER 31, 2007 AS COMPARED TO THE NINE

MONTHS ENDED DECEMBER 31, 2006

Revenues. Total revenues increased 45% to $59.7 million during the nine months ended December 31, 2007 from $41.3 million during the same nine month period ended December 31, 2006. This is increase was primarily attributed to an increase in retail revenues generated through our e-commerce and brick and mortar components.

Manufacturing and distribution revenues increased 33.8% to $17.4 million during the nine months ended December 31, 2007 from $13.0 million during the same nine month period ended December 31, 2006. This increase was attributed to a large order received from a national mass market retailer and an acquisition completed in the current period. Net revenues, after elimination of intercompany sales increased 28.5% to $13.5 million during the current nine months, versus $10.5 million for the same nine month period the previous year.

Retail operations revenues increased 53% to $45.0 million during the nine months ended December 31, 2007 from $29.5 million during the same nine month period ended December 31, 2006. This increase was attributed to the continuing growth the Company is experiencing with its on-line properties. The Internet division contributed $32.9 million of the retail sales, up 32% from $25.0 million for the same nine month period last year. The Field of Dreams stores generated the $12.1 million balance of the nine months ended December 31, 2007 retail revenues. The store revenues were up 175% as we enjoyed the full benefit in the current period of acquiring the (3) Las Vegas based stores on December 26, 2006.

Costs and expenses. Total costs of sales for the nine months ended December 31, 2007 was $33.1 million versus $23.1 million for the same nine month period in 2006, or a 43% increase. This increase was as a result of overall greater sales generated in the current period. As a percentage of total sales, costs were 55% and 56% for the nine months ended December 31, 2007 and 2006, respectively.

Costs of sales of manufacturing/distribution products were $7.6 million for the nine month period ended December 31, 2007, versus $6.2 million for the same nine month period in 2006, or a 22.5% increase. This increase was as a result of higher manufacturing/distribution product sales in the current period. As a percentage of total manufacturing/distribution sales, costs were 42.9% and 47.6% for the nine months ended December 31, 2007 and 2006, respectively. After elimination of intercompany sales, as a percentage of total manufacturing/distribution sales, costs were 56.2% and 59.2%, respectively.

Cost of sales of retail products were $25.5 million for the nine month period ended December 31, 2007, versus $16.9 million for the same nine month period in 2006, or a 50.8% increase. This increase is attributable to an overall increase in retail sales. As a percentage of total sales, costs were 56.6% and 57.3% for the nine months ended December 31, 2007 and 2006, respectively.

Operating expenses increased 56% to $23.4 million for the nine month period ended December 31, 2007, versus $15.0 for the same nine month period in 2006. The increase is as a result of adding additional personnel to manage the (4) acquired Field of Dreams stores in the period, investments made in our new Syndication business model that will not begin to generate revenues until early 2008, initial fee requirements to have our shares listed on the American Stock Exchange, fees associated with a consulting company working on the Company Sarbanes-Oxley compliance and an increase in overall Company sales. As a percentage of sales, operating expenses were 39% and 36% for the nine month period ended December 31, 2007 and 2006, respectively.

Interest expense, net. Net interest expense was $708 for the nine months ended December 31, 2007, versus $390 for the same period last year. This increase is as a result of higher levels of borrowing to support our inventory purchases to support our sales growth, and several notes payables acquired during the period associated with the Company’s completed acquisitions.

Provision for income taxes. The Company recognized an income tax expense of $623 for the nine month period ended December 31, 2007 versus an income tax expense of $912 for the same nine month period in 2006. Each quarter, the Company evaluates whether the realizability of its net deferred tax assets is more likely than not. Should the Company determine that a valuation reserve is necessary, it would have a material impact on the Company’s operations. The Company has prepared an analysis based upon historical data and forecasted earnings projections to determine its ability to realize its net deferred tax asset. After consideration of all of the evidence, management has determined that a valuation allowance of $187 is necessary for the nine months ended December 31, 2007 and for the nine months ended December 31, 2006. The Company expects its continuing effective tax rate to approximate 40%.

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FISCAL 2007 COMPARED TO FISCAL 2006

Revenues. Total revenues increased 31% to $56.0 million in fiscal 2007 from $42.7 million in fiscal 2006, due primarily to an increase in retail revenues, particularly retail revenues generated through our e-commerce component (approximately $12 million increase).

Manufacturing and distribution revenues decreased slightly or 4% from $18.8 million in fiscal 2006 to $18.0 million this year. Net revenues (after eliminating intercompany sales) decreased 7% from $16.2 million in fiscal 2006 to $15.0 million this year.

Retail operations revenues increased significantly from $25.1 million in fiscal 2006 to $39.4 million, or a 57% increase this year. The internet division had retail sales of $31.4 million this year versus $19.5 million in fiscal 2006, or a 61% increase. This was a result of higher volumes of orders received on our web sites. Additionally, retail sales through our company-owned Field of Dreams stores increased 43% to $8.0 million this year from $5.6 million in fiscal 2006. This was primarily due to the acquisition of the 3 Las Vegas based Field of Dreams stores on December 26, 2007. As of March 31, 2007 and March 31, 2006 we owned and operated 13 and 10 company-owned Field of Dreams stores, respectively.

Franchise royalty revenues were constant at $747 this year versus $724 in fiscal 2006. Total royalty revenues received totaled $1.1 million for both fiscal years.

The Company realized $334 in net management fee revenues for this year versus $224 in fiscal 2006, or a 49% increase.

Costs and expenses. Total cost of sales for this year was $31.8 million versus $24.4 million in fiscal 2006, a 30.0% increase. The increase relates to an increase in total Company sales. As a percentage of total sales, cost of sales was comparable in both periods at approximately 57%.

Costs of sales of manufacturing/distribution products were $10.1 million for fiscal 2006 versus $9.2 million this year, or a 9% decrease. This decrease relates to a decrease in manufacturing/distribution product sales and slightly improved margins. As a percentage of total manufacturing/distribution sales, cost of sales were 62.9% for fiscal 2006 versus 61.3% for this year.

Cost of sales of retail products were $14.3 million for fiscal 2006 versus $22.7 million for this year, or a 59% increase. This increase relates to an increase in retail sales. As a percentage of total retail sales, costs were comparable for both periods; approximately 57%.

Operating expenses increased 29% to $21.4 million this year from $16.6 million in fiscal 2006. The increase related to an increase in overall Company sales. As a percentage of total sales, operating expenses remained constant at 38%, for both years.

Interest expense, net. Net interest expense increased from $454,000 in fiscal 2006 to $528,000, due to slightly higher levels of borrowing on the Company’s line of credit.

Provision for income taxes. The Company recognized an income tax expense of $1.8 million in fiscal 2006 compared to an income tax expense of $469 for this year. Each quarter, the Company evaluates whether the realizability of its net deferred tax assets is more likely than not. Should the Company determine that a valuation reserve is necessary, it would have a material impact on the Company’s operations. The Company has prepared an analysis based upon historical data and forecasted earnings projections to determine its ability to realize its net deferred tax asset. After consideration of all of the evidence, both positive and negative, management has determined that a $187 and $187 valuation allowance as of March 31, 2007 and 2006 respectively, is necessary to reduce the deferred tax asset to the amount that will more likely than not be realized. The Company expects its continuing effective tax rate to approximate 40%.

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LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity during the nine month period ended December 31, 2007, are the cash flow generated from our operating subsidiaries; availability under our $15 million senior revolving credit facility; availability under our $3 million acquisition line and available cash and cash equivalents. We are unaware of any trends that may have a negative impact on our ability to continue our operations. In fact, with the improvement of the financial results of the Company and a further strengthening of the balance sheet, our ability to capitalize on market opportunities should be enhanced.

The balance sheet as of December 31, 2007 reflects working capital of $17.5 million versus working capital of $17.3 million at March 31, 2007. At December 31, 2007, the Company’s cash and cash equivalents were $1.6 million compared to $753 at March 31, 2007. Please note that the Company is not negatively impacted by the cash balance of $1.6 million, as it has sufficient access to capital under its revolving credit facility with its senior lender. As a lead-in to the holiday season, the Company draws down on its line of credit to make inventory purchases so it is properly positioned to support the increased sales activity experienced during the quarter ending December 31, 2007. The increased throughput results in significant pay-downs to the line balances; and the yearly cycle starts anew. Net accounts receivable at December 31, 2007 were $4.4 million compared to $2.3 million at March 31, 2007.

Use of Funds

Cash provided by operations amounted to $3.3 million for the nine months ended December 31, 2007, compared to $5.0 million provided by operations during the same period of 2006. The decrease is as a result of additional cash used for inventory purchases. Cash used in investing activities was $1.8 million for the nine months ended December 31, 2007 & $1.7 million for the nine months ended December 31, 2006 with the majority of the cash used for the purchase of property and equipment, in both periods. Cash used in financing activities was approximately $682 for the nine months ended December 31, 2007, versus $2.8 million for the same period in 2006. In the prior year period, the Company received $2 million from a private stock sale.

The Company had previously disclosed that its primary warehouse facility in Sunrise, Florida sustained damage as a result of Hurricane Wilma in the fall of 2005. The Company was unable to predict the financial impact of such damage; however, the Company believed that is had sufficient insurance coverage to protect itself. On June 28, 2006, the Company received a settlement payment of $3.6 million which was reflected as other income in the fiscal 2006 statement of operations. The Company anticipates minimal expenditures for repairs and replacement related costs in the future.

Other Activity

On November 1, 2006, the Company entered into a Securities Purchase Agreement with The Frost Group, LLC, a Florida limited liability company (“Frost”). Pursuant to the Agreement, the Company sold to Frost 5,128,205 shares of the Company’s common stock. The purchase price for the common stock was $0.39 per share in cash for an aggregate price of $2 million. As a result of the purchase, Frost owns approximately 14% of the Company’s outstanding common stock. The common stock issued in the transaction was not registered under the Securities Act of 1933 (the “Act”) and was issued pursuant to an exemption from registration under Section 4(2) of the Act.

On June 6, 2007, the Company entered into a three-year loan and security agreement with Comerica Bank. Comerica provided the company with $18 million in credit facilities; consisting of a $15 million revolver and a $3 million acquisition line for the cash portion of future strategic acquisitions. The loan is collateralized by all of the assets of the Company and its divisions. The interest rate for the revolver is floating at prime minus .75 or 30 day Comerica costs of funds plus 1.50%; and prime minus .25 or 30 day Comerica costs of funds plus 2.25%, for the funds drawn from the acquisition line. The Company used $6.7 million of the revolver at closing to pay-off the remaining loan balance with its prior senior lender, La Salle Bank.

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Analysis

We are currently analyzing our company-owned retail store business model and looking at the profitability of each store. We expanded this new model rapidly. Our first two company-owned stores opened in March 2002 and grew to 15 stores by June 2004. As of December 31, 2007, we owned and operated 17 stores. We have and will continue to analyze the performance of each of the store operations and determine whether they are providing the Company with its desired results. This may include additional future closings and/or conversion to franchise stores or in certain instances the re-purchasing of existing franchise stores to company-owned stores.

We are continuing to review our operational expenses and examining ways to reduce costs on a going-forward basis. With our recent change in our independent auditors and bank; we believe we will experience lower fees and costs typically associated with a smaller, yet highly regarded accounting firm; and moving away from a traditional asset-based lender to a more traditional cash-flow lender, respectively. However, we will be required in 2008 to include the attestation report of the Company’s registered public accounting firm regarding internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and the related SEC rules. There will be increased audit and other compliance costs as a result. To support our ultimate compliance with Section 404, we have engaged the services of an outside consulting company who began working with our management team in March of 2007. In addition, effective April 16, 2007, the Company’s Common shares became listed on the American Stock Exchange under the symbol “DRJ”. The Company has incurred additional costs and fees associated with this listing.

Contractual Obligations (In thousands)

	Total		Less than 1-yr		1-3 yrs		3-5 yrs		More than 5-yrs
Long-term debts:*	$	7,800	$	582	$	5,900	$	1,300	$	0
Capital (finance leases):	$	93	$	17	$	59	$	17	$	0
Operating leases:	$	15,100	$	2,800	$	6,700	$	1,400	$	4,200
Purchase obligations:	$	0	$	0	$	0	$	0	$	0
Other long-term liabilities:	$	3,600	$	1,700	$	1,900	$	15	$	0

* Does not include interest payable

Summary

Management believes that future funds generated from our operations and available borrowing capacity will be sufficient to fund our debt service requirements, working capital requirements and our budgeted capital expenditure requirements for the foreseeable future.

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Off-balance sheet arrangements

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.

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, other than those previously disclosed.

NEW ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51”. SFAS No. 160 establishes accounting and reporting standards that will require noncontrolling interests to be reported as a component of equity, changes in a parent’s ownership interest while the parent retains its controlling interest to be accounted for as equity transactions, and any retained noncontrolling equity investment upon the deconsolidation of a subsidiary to be initially measured at fair value. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008 and is to be applied prospectively, except for the presentation and disclosure requirements which should be retrospectively applied. Early adoption of SFAS No. 160 is also prohibited. Accordingly, the Company will be required to adopt SFAS No. 160 as of January 1, 2009. Management does not believe that the adoption of SFAS No. 160 will have a material effect on the Company’s consolidated results of operations, cash flows or financial position.

In December 2007, the FASB also issued SFAS No. 141(R), “Business Combinations” (“SFAS No. 141(R)”), which requires an acquirer to recognize in its financial statements as of the acquisition date (i) the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, measured at their fair values on the acquisition date, and (ii) goodwill as the excess of the consideration transferred plus the fair value of any noncontrolling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired. Acquisition-related costs, which are the costs the acquirer incurs to effect a business combination, will be accounted for as expenses in the periods in which the costs are incurred and the services are received, except that costs to issue debt or equity securities will be recognized in accordance with other applicable GAAP.SFAS No. 141(R) makes significant amendments to other Statements and other authoritative guidance to provide additional guidance or to conform the guidance in that literature to that provided in SFAS No. 141(R). SFAS No. 141(R) also provides guidance as to what information is to be disclosed to enable users of financial statements to evaluate the nature and financial effects of a business combination. SFAS No. 141(R) is effective for financial statements issued for fiscal years beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of SFAS No. 141(R) will affect how the Company accounts for the acquisition of a business after December 31, 2008.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115”. SFAS No. 159 permits entities to measure at fair value eligible financial assets and liabilities that are not currently required to be measured at fair value. If the fair value option for an eligible item is elected, unrealized gains and losses for that item will be reported in current earnings at each subsequent reporting date. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparison between the different measurements attributes the entity elects for similar types of assets and liabilities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company will not elect the fair value option available for those assets and liabilities which are eligible under SFAS No. 159, and accordingly, there will be no impact on the Company financial position and results of operations attributable to SFAS No. 159.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). This statement provides a single definition of fair value, a framework for measuring fair value, and expanded disclosures concerning fair value. Previously, different definitions of fair value were contained in various accounting pronouncements creating inconsistencies in measurement and disclosures. SFAS No. 157 applies to those previously issued pronouncements that prescribe fair value as the relevant measure of value, except SFAS No. 123(R) and related interpretations and pronouncements that require or permit measurement similar to fair value but are not intended to measure fair value. This pronouncement is effective for fiscal years beginning after November 15, 2007. Dreams does not expect the adoption of SFAS No. 157 to have a material impact on its financial position, results of operations, or cash flows.

In September 2006, the SEC Office of the Chief Accountant and Divisions of Corporation Finance and Investment Management released SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB No. 108”), which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The SEC staff believes that registrants should quantify errors using both a balance sheet and an income statement approach and evaluate whether either approach results in

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quantifying a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. This guidance is effective for fiscal years ending after November 15, 2006. The application of SAB No. 108 did not have any impact on our Consolidated Balance Sheet, Statement of Operations or Statement of Stockholders’ Equity for fiscal 2007.

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation Number 48 (FIN 48), “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.” The interpretation contains a two step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The interpretation is effective for the first interim period for fiscal years beginning after December 15, 2006. Dreams has adopted FIN 48 and there is no material impact on its financial condition, results of operations, cash flows or disclosures.

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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Market risk generally represents the risk of loss that may result from the potential change in value of a financial instrument as a result of fluctuations in interest rates and market prices. We do not currently have any trading derivatives nor do we expect to have any in the future. We have established policies and internal processes related to the management of market risks, which we use in the normal course of our business operations.

Interest Rate Risk. We have interest rate risk, in that borrowings under our credit facility with Comerica Bank are based on variable market interest rates. As of December 31, 2007, we had $4.9 million of variable rate debt outstanding under our credit facility with Comerica Bank. Presently, the revolving credit line bears interest at the prime rate minus 75 basis points or 4.50%. A hypothetically 10% increase in our credit facility’s weighted average interest rate of 4.95% per annum for the nine months ended December 31, 2007 would correspondingly decrease our pre-tax earnings and our operating cash flows by approximately $60.

Intangible Asset Risk. We have a substantial amount of intangible assets. We are required to perform goodwill impairment tests whenever events or circumstances indicate that the carrying value may not be recoverable from estimated future cash flows. As a result of our periodic evaluations, we may determine that the intangible asset values need to be written down to their fair values, which could result in material changes that could be adverse to our operating results and financial position. Although at December 31, 2007 we believed our intangible assets were recoverable, changes in the economy, the business in which we operate and our own relative performance could change the assumptions used to evaluate intangible asset recoverability. We continue to monitor those assumptions and their effect on the estimated recoverability of our intangible assets.

Foreign Currency Exchange Rate Risk.

None.

Commodity Price Risk.

None.

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Item 8. Financial Statements and Supplementary Data.

The financial statements required by this Item 8 are included at the end of this Report beginning on page F-1 as follows:

	Page
AUDITED FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm (s) (Grant Thornton & FCT)	F-1
Consolidated Balance Sheets as of December 31, 2007 and March 31, 2007	F-3
Consolidated Statements of Operations for the nine months ended December 31, 2007, December 31, 2006, the year ended March 31, 2007 and the year ended March 31, 2006.	F-4
Consolidated Statement of Stockholders Equity for the nine months ended December 31, 2007, the year ended March 31, 2007 and the year ended March 31, 2006.	F-5
Consolidated Statement of Cash Flows for the nine months ended December 31, 2007, the nine months ended December 31, 2006, the year ended March 31, 2007 and the year ended March 31, 2006.	F-6
Notes to Consolidated Audited Financial Statements	F-7
Quarterly Financial Information	F-30

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Dreams, Inc. had elected to terminate its engagement of Grant Thornton LLP as the independent registered public accounting firm responsible for auditing the Company’s financial statements. The termination, which was effective as of March 20, 2007, was approved by the Company’s Audit Committee and the Board of Directors.

Grant Thornton’s report on the Company’s financial statements for the past two years did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope, or accounting principles. During the Company’s two most recent fiscal years and any subsequent interim period preceding the termination of Grant Thornton, the Company did not have any disagreements with Grant Thornton on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Grant Thornton, would have caused it to make reference to the subject matter of the disagreements in connection with its report.

During the Company’s two most recent fiscal years and any subsequent interim period preceding the termination of Grant Thornton, other than as is set forth herein, Grant Thornton did not advise the Company of any of the following:

(A) That the internal controls necessary for the Company to develop reliable financial statements did not exist, with the exception of the disclosure set forth below;

(B) That information had come to Grant Thornton’s attention that had led it to no longer be able to rely on management’s representations, or that had made it unwilling to be associated with the financial statements prepared by management;

(C)(1) That Grant Thornton needed to expand significantly the scope of its audit, or that information had come to Grant Thornton’s attention that if further investigated may: (i) materially impact the fairness or reliability of either: a previously issued audit report or the underlying financial statements; or the financial statements issued or to be issued covering the fiscal period(s) subsequent to the date of the most recent financial statements covered by an audit report (including information that would have prevented it from rendering an unqualified audit report on those financial statements), or (ii) cause it to be unwilling to rely on management’s representations or be associated with the Company’s financial statements, and (2) due to Grant Thornton’s dismissal (due to audit scope limitations or otherwise), or for any other reason, the accountant did not so expand the scope of its audit or conduct such further investigation; or

(D)(1) That information has come to Grant Thornton’s attention that it had concluded materially impacted the fairness or reliability of either: (i) a previously issued audit report or the underlying financial statements, or (ii) the financial statements issued or to be issued covering the fiscal period(s) subsequent to the date of the most recent financial statements covered by an audit report (including information that, unless resolved to Grant Thornton’s satisfaction, would prevent it from rendering an unqualified audit report on those financial statements), and (2) the issue has not been resolved to Grant Thornton’s satisfaction prior to its termination.

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The Company provided Grant Thornton with a copy of the disclosures set forth in their Report on Form 8-K dated March 21, 2007, and requested that Grant Thornton furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made by the Company herein. The letter received by the Company from Grant Thornton, in which Grant Thornton states that it is in agreement with the disclosures set forth herein, is attached as an Exhibit.

Engagement of Friedman, Cohen, Taubman & Company, LLC

The Company has engaged Friedman, Cohen, Taubman & Company, LLC (“Friedman”) to serve as the independent registered public accounting firm responsible for auditing the Company’s financial statements. The engagement, which was effective as of March 19, 2007, was approved by the Company’s Audit Committee and the Board of Directors.

Neither the Company nor anyone on behalf of the Company consulted Friedman during the two most recent fiscal years and any subsequent interim period prior to engaging Friedman, regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements, and either a written report was provided to the Company or oral advice was provided that Friedman concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) and the related instructions of Item 304 of Regulation S-K) or reportable event (as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K).

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Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls, Internal Controls and Procedures. Our management has conducted an evaluation of the effectiveness of our disclosure controls, internal controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the period year covered by this report on Form 10K/T.

This evaluation was done under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Rules adopted by the Securities and Exchange Commission (“SEC”) require that in this section of this Transition Report on Form 10-K, we present the conclusions of the CEO and the CFO about the effectiveness of our Disclosure Controls and Internal Controls based on and as of the date of the Controls Evaluation.

Report of Management on Internal Controls Over Financial Reporting.

Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007, utilizing the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2007 is effective.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Management necessarily applied its judgment in assessing the benefits of controls relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and may not be detected.

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal controls over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting. There have been no significant changes made in the registrant’s internal controls over financial reporting and there were no other factors that could significantly affect our internal controls over financial reporting during the fiscal year (the registrant’s fourth fiscal quarter in the case of an annual report) covered by this report.

Item 9B. Other Information.

None

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Part III

Item 10. Directors, Executive Officers and Corporate Governance.

Directors and Officers. The Directors and Executive Officers of the Company and the positions held by each of them are as follows. All directors serve until the Company’s next annual meeting of shareholders.

Name	Age	Serving as Director/Officer of the Company Since	Position Held With the Company
Sam D. Battistone	68	1982	Chairman/Director
Ross Tannenbaum	45	1998	President/CEO/Director
David M. Greene	46	2001	Senior Vice President/Corporate Secretary
Dale Larsson	63	1982	Director
Kevin Bates	40	2006	Divisional President - Retail
Mitch Adelstein	43	2006	Divisional President -Manufacturing
Dorothy Sillano	51	2006	V.P. / Chief Financial Officer
David Malina	63	2006	Director
Steven Rubin	47	2006	Director
Manoharan Sivashanmugam	37	2007	Chief Information Officer

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Biographical Information.

Sam D. Battistone. Sam D. Battistone has been Chairman of the Board since our inception. Mr. Battistone served as president until November 1998. He also served as the Chairman and CEO of Pro Stars, Inc. from January 2005 until he resigned his position in January 2007. 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 the Company sold its 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. Mr. Tannenbaum has served as President and a Director of the Company 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 earned a B.A. from the University of Florida in 1984. Mr. Tannenbaum is the brother-in-law of David M. Greene, the Company’s Senior Vice President.

David M. Greene. David M. Greene has been Senior Vice President of Finance & 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 that provided precision machined jet and rocket engine components for the Department of Defense, Pratt & Whitney Aircraft and NASA. From April 1987 to April 1992, he served as President of GGH Consultants, Inc., an investment and business consulting company that provided private and public companies with equity and debt financings, M & A advice, Initial Public Offering and Secondary Offering consultation. From May 1984 to March 1987, he worked as an investment executive at the investment banking firm of Drexel, Burnham, Lambert, Inc. in New York City and Ft. Lauderdale, Florida. Mr. Greene earned a B.A. from Tufts University in 1984 and a MBA from Nova University in 1993. Mr. Greene is the brother-in-law of Ross Tannenbaum, the Company’s President.

Dale E. Larsson. Mr. Larsson has served as Director of our Company since 1982. From 1982 until September 1998, Mr. Larsson was our Secretary-Treasurer. Mr. Larsson served as a Director and CFO of Pro Stars, Inc. from January 2005 until he resigned his positions in January 2007. 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 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. Since 1998, Mr. Larsson has also served as the controller of Dreamstar, Inc., an investment and Retail Sports Memorabilia Company.

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Kevin Bates. Kevin Bates founded FansEdge^® in 1998, serving as its CEO. When Dreams, Inc. acquired FansEdge in 2003, he became President of our e-commerce division and now serves as President of our retail division. From 1996 to 1999, Mr. Bates was President of Galvin and Wright, Inc., a consulting firm based in Glenview, Illinois. Prior to that he worked on a contract basis for a wide range of firms including Republic Mortgage Insurance Company of Winston-Salem, North Carolina, Allegiance Health Care of McGaw Park, Illinois, Cincinnati Bell Information Systems of Itasca, Illinois, A.C. Nielson of Bannockburn, Illinois, and others. Mr. Bates holds a B.S. degree in computer science from Northern Illinois University in DeKalb, Illinois. He also holds various technology certificates from DePaul University in Chicago, Illinois, and Internet Webmaster E-commerce Professional from Net Guru Technologies of Oak Brook, Illinois.

Mitch Adelstein. Mitch Adelstein was the founder of Mounted Memories in 1989 and has served as its president since its inception. He is considered a true pioneer of the sports collectibles industry with over 30 years of sports collectible and memorabilia knowledge. Mr. Adelstein has been responsible for all new product designs and day-to-day activities of Mounted Memories for the past 18 years. In 1998, Mounted Memories was acquired by Dreams, Inc. at which time Mr. Adelstein remained on as a member of the management team, until he was renamed its president in 2000. Under Mr. Adelstein, Mounted Memories has evolved into the leader in the autographed sports memorabilia and collectibles industry.

Dorothy Sillano. Ms. Sillano was promoted to Vice President and Chief Financial Officer of the Company in November 2007 after having served as the Company’s Controller since August 2005. From January 1987 until November 1996, Ms. Sillano was Second Vice President of Accounting at Chase Personal Financial Services, the upscale mortgage division of JP Morgan Chase. From 1997 through 1999, Ms. Sillano was the Controller of First American lending, a sub-prime auto finance company. From 2000 through May 2005, Ms. Sillano held the positions of Controller, acting CFO and CFO at three private educational institutions. Also, during this period, she served as a Sarbanes-Oxley consultant with MSI Consulting, Inc. In December 1990, Ms. Sillano earned a B.B.A. in Accounting from Florida Atlantic University, became a Certified Public Accountant in 1991 and was conferred with a MBA from DeVry University in July 2005.

David Malina. Mr. Malina was named as a director of the Company in November 2006 and is currently Vice President of Business Development for Ladenburg Thalmann & Company, Inc., a full service investment banking and brokerage firm that has recently relocated its headquarters to Miami, Florida. From 2003 to 2006, Mr. Malina was corporate Vice President in charge of Investor Relations and Corporate Communications for IVAX Corporation, a multinational pharmaceutical company, with direct operations in 39 countries, sales in over 80 countries, and over 7000 employees. IVAX was sold to Teva Pharmaceuticals Industries Ltd in January 2006 for an enterprise value of $9.9 billion. Prior to his employment at IVAX, Mr. Malina was a Managing Director at the Kriegsman Group, a boutique investment bank in Los Angles, California that specialized in health care. From 1974 to 2000, Mr. Malina was a highly regarded screenplay and teleplay writer working for the major film studios and television networks and producing luminaries such as David Geffin, Arnold Koppelson, Roger Birnbaum, Larry Turman, and Frank Price. Mr. Malina is an honors graduate of the Wharton School at the University of Pennsylvania and attended graduate school at the London School of Economics and Political Science.

Steven D. Rubin. Mr. Rubin was named a director of the Company in November 2006. Mr. Rubin has served as Executive Vice President-Administration and as a director of Opko Health, Inc. since March, 2007. He is also a member of The Frost Group. Mr. Rubin served as the Senior Vice President, General Counsel and Secretary of IVAX from August 2001 until September 2006. Before joining IVAX, from January 2000 to August 2001, Mr. Rubin served as the Senior Vice President, General Counsel and Secretary of privately-held Telergy, Inc., a provider of business telecommunications and diverse optical network solutions. He was with the Miami law firm of Stearns Weaver Miller Weissler Alhadeff & Sitterson from 1986 until 2000, in the Corporate and Securities Department. Mr. Rubin was a shareholder of that firm from 1991 until 2000 and a director from 1998 until 2000. Mr. Rubin currently serves on the board of directors of Dreams, Inc., a vertically-integrated sports products company, Modigene Inc., a development stage biopharmaceutical company, Safe Stitch Medical, Inc., a medical device company, and Longfoot Communications Corp., a shell company seeking a merger or other business partner. Mr. Rubin holds a B.A. in Economics from Tulane University and a J.D. from the University of Florida.

Manoharan Sivashanmugam. Mr. Sivashanmugam was named the Company’s Chief Information Officer in March 2007. From January 2001 to November 2006, he served in the capacity of Vice President of Technology for uBid.com; a leading retail auction and e-Commerce site specializing in computer and consumer electronic sales with nearly $1 Billion in annual revenues. The uBid.com site attracts over 5 million registered users with daily orders exceeding 10,000. From January 2000 to December 2000, he was a co-founder and Director of Development for Fansedge.com; a company that was purchased by Dreams, Inc. in October 2003. From September 1996 to January 2000, he was the Technical Project Manager for Whittman-Hart in Chicago, Illinois, the premier consulting agency providing integrated solutions across all industry verticals using emerging and legacy technologies. Mr. Sivashanmugam is an expert in application development for online auction engines, internet business-to-business and business-to-consumer, manufacturing, financial and sports information systems and online retailing. He is proficient with all major technology platforms. He received both a Master of Science degree in Computer Science and a Bachelor of Science degree in Physics from the University of Madras, India.

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Meetings of Directors

During the nine months ended December 31, 2007, the Board of Directors acted by unanimous consent on three occasions and had two meetings.

Compensation of Directors.

In addition to reimbursing outside Directors for their out-of-pocket expenses associated with attending Board and or Committee Meetings, the following compensation was paid to our outside Board and Committee Members in 2007:

Sam Battistone – $15,000

Dale Larsson – $20,000

David Malina – $10,000 and 10,000 stock options

Steven Rubin – $10,000 and 10,000 stock options

Code of Ethics.

We have adopted a code of ethics for our officers and directors. The Code of Ethics was approved by our Board of Directors in June 2004 and is posted on our web site. We will also disclose any amendments or waivers to our Code of Ethics on our website www.dreamscorp.com.

Independence of the Board.

The Board of Directors has determined that the following four individuals of its five member board are independent as defined under the federal securities laws, including Section 121 of the American Stock Exchange Guide: Mr. Battistone, Mr. Larsson. Mr. Malina and Mr. Rubin.

Committees of the Board of Directors. Until the creation and adoption of the Company’s audit committee in March of 2007, the Board of Directors has acted as our Audit Committee. In addition to the audit committee, in March of 2007, the Company has established a Compensation Committee and a Nominating and Corporate Governance Committee. Each of these charters meets the requirements of the American Stock Exchange.

Audit Committee

The Audit Committee presently consists of Messrs. Larsson, Battistone and Malina; with Mr. Larsson serving as chairman. The Audit Committee is responsible for monitoring and reviewing our financial statements and internal controls over financial reporting. In addition, they recommend the selection of the independent auditors and consult with management and our independent auditors prior to the presentation of financial statements to shareholders and the filing of our forms 10-Q and 10-K. Our Board has determined that Mr. Dale Larsson qualifies as an “audit committee financial expert” as defined under the federal securities laws. The Audit Committee’s responsibilities are set forth in an Audit Committee Charter, a copy of which is currently available from the Company and will be posted soon on our web site at www.dreamscorp.com.

Compensation Committee

The Compensation Committee presently consists of Messrs. Larsson and Malina. The Compensation Committee is responsible for reviewing and recommending to the Board of Directors the compensation and over-all benefits of our executive officers, including administering the Company’s Equity Incentive Stock Option Plan. The Compensation Committee Charter, a copy of which is currently available from the Company, will be posted soon on our web site at www.dreamscorp.com.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee presently consists of Messrs. Battistone and Rubin. The Nominating and Corporate Governance Committee is responsible for identifying prospective qualified Board of Director candidates as well as those names submitted by our shareholders. In addition, this committee provides recommendations to the Board of Directors as to a proper set of corporate governance guidelines and principles to adopt. The Nominating and Corporate Governance Committee Charter, a copy of which is currently available from the Company, will be posted soon on our web site at www.dreamscorp.com.

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Compliance With Section 16(a) of the Exchange Act. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company under Rule 16a-3(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) during nine months ended December 31, 2007 and amendments thereto furnished to the Company with respect to the nine months ended December 31, 2006, the Company is not aware of any person that failed to file on a timely basis, as disclosed in the aforementioned Forms, reports required by Section 16(a) of the Exchange Act during the nine months ended December 31, 2007.

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Item 11. Executive Compensation.

Compensation Discussion and Analysis

Overview and Philosophy of Compensation

The Compensation Committee has the responsibility to review, recommend, and approve all executive officer compensation arrangements. The Compensation Committee has the specific responsibility to (i) review and approve corporate goals and objectives relevant to the compensation of our Chief Executive Officer (“CEO”), (ii) evaluate the performance of our CEO in light of those goals and objectives, and (iii) determine and approve the compensation level of our CEO based upon that evaluation. The Compensation Committee also has the responsibility to annually review the compensation of our other executive officers and to determine whether such compensation is reasonable under existing facts and circumstances. In making such determinations, the Compensation Committee seeks to ensure that the compensation of our executive officers aligns the executives’ interests with the interests of our shareholders. The Compensation Committee must also review and approve all forms of incentive compensation, including stock option grants, stock grants, and other forms of incentive compensation granted to our executive officers. The Compensation Committee takes into account the recommendations of our CEO in reviewing and approving the overall compensation of the other executive officers.

We believe that the quality, skills, and dedication of our executive officers are critical factors affecting our long-term value and success. Thus, one of our primary executive compensation goals is to attract, motivate, and retain qualified executive officers. We seek to accomplish this goal by rewarding past performance, providing an incentive for future performance, and aligning our executive officers’ long-term interests with those of our shareholders. Our compensation program is specifically designed to reward our executive officers for individual performance, years of experience, contributions to our financial success, and creation of shareholder value. Our compensation philosophy is to provide overall compensation levels that (i) attract and retain talented executives and motivate those executives to achieve superior results, and (ii) align executives’ interests with our corporate strategies, our business objectives, and the long-term interests of our shareholders, and (iii) enhance executives’ incentives to increase our stock price and maximize shareholder value. In addition we strive to ensure that our compensation, particularly salary compensation, is consistent with our constant focus on controlling costs. Our primary strategy for building senior management depth is to develop personnel from within our company to ensure that our executive team as a whole remains dedicated to our customs, practices, and culture, recognizing, however, that we may gain talent and new perspectives from external sources.

Elements of Compensation

Our compensation program for executive officers generally consists of the following five elements:

• Base salary;

• performance based annual cash bonuses;

• long-term equity incentives in the form of stock options and other stock-based awards and grants;

• specified perquisites; and

• employee benefits available generally to all of our employees.

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The Compensation Committee has the responsibility to make and approve changes in the total compensation of our executive officers, including the mix of compensation elements. In making decisions regarding an executive’s total compensation, the Compensation Committee considers whether the total compensation is (i) fair and reasonable to us, (ii) internally appropriate based upon our culture and the compensation of our other employees, and (iii) within a reasonable range of the compensation afforded by other opportunities. The Compensation Committee also bases its decisions regarding compensation upon its assessment of the executive’s leadership, individual performance, years of experience, skill set, level of commitment and responsibility required in the position, contributions to our financial success, the creation of shareholder value, and current and past compensation. In determining the mix of compensation elements, the Compensation Committee considers the effect of each element in relation to total compensation. Consistent with our desired culture of industry leading performance and cost control, the Compensation Committee has attempted to keep base salaries at moderate levels for companies within our market and total capitalization. The Compensation Committee specifically considers whether each particular element provides an appropriate incentive and reward for performance that sustains and enhances long-term shareholder value. In determining whether to increase or decrease an element of compensation, we rely upon the Compensation Committee’s judgment concerning the contributions of each executive and, with respect to executives other than the CEO, we consider the recommendations of the CEO. We generally do not rely on rigid formulas or short-term changes in business performance when setting compensation.

The following is a discussion of each element of our compensation program, including (i) why we choose to pay each element, (ii) how we determine the specific amount to pay for each element, and (iii) how each element, and our decisions regarding each element, fit into our overall compensation objectives and affect decisions regarding other elements. We also discuss the specific decisions we made with respect to the compensation of our Chief Executive Officer, and the remaining executive officers for the nine months ended December 31, 2007 (collectively, the “Named Executive Officers” or “NEO’s”).

Base Salary

We pay base salaries at levels that reward executive officers for ongoing performance and that enable us to attract and retain highly qualified executives, but not at a level that allows them to achieve the overall compensation they desire. Base pay is a critical element of our compensation program because it provides our executive officers with stability. Such stability allows our executives to focus their attention and efforts on creating shareholder value and on our other business objectives. In determining base salaries, we consider an executive’s qualifications and experience, including, but not limited to, the executive’s industry knowledge and the quality and effectiveness of the executive’s leadership, scope of responsibilities, past performance, and future potential of providing value to our shareholders. Although we do not believe it is appropriate to establish compensation levels based solely on benchmarking because of geographic and incentive compensation differences, we consider base salaries of executives having similar qualifications and holding comparable positions in companies similarly situated to ours. We set our base salaries at a level that allows us to pay a portion of an executive officer’s total compensation in the form of perquisites, cash bonuses, and long-term incentives. We believe that such a mix of compensation helps us to provide an incentive to our executives to maximize shareholder value. We consider adjustments to base salaries annually to reflect the foregoing factors but do not apply a specific weighting to such factors.

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Base Salary of Our Chief Executive Officer

In April, 2006, the Compensation Committee, who at the time consisted of our outside Board of Directors, reviewed the overall compensation of Ross Tannenbaum, our President and CEO. As part of this review, the Compensation Committee reviewed the compensation of numerous publicly traded companies similarly situated to ours, and based upon this review set Mr. Tannenbaum’s base salary at $325,000 for periods after this date and again in June 2007, effective April 1, 2007, Mr. Tannenbaum’s base salary has been set at $350,000 for 2008.

Base Salary of Our Other Named Executive Officers

In April, 2006, after reviewing our financial performance and considering our compensation philosophy and the guidelines described above, the Compensation Committee, who at the time consisted of our outside Board of Directors, approved a $15,000 base salary increase for David Greene in continued recognition of his corporate initiative results and level of responsibilities as our Senior Vice President and Corporate Secretary.

The following table reflects the adjustments we made from Fiscal 2006 to Fiscal 2007 and from Fiscal 2007 to 2008, to the base salaries of our Named Executive Officers. Base salaries of our NEO’s are reviewed, and if warranted adjusted by the Compensation Committee and Board of Directors. The amounts reflected within the columns represent the amount of base salary for each NEO as of March 31 for Fiscal Year 2006 and Fiscal Year 2007 and December 31, 2007 of each respective year represented.

Named Executive Officer and Position	FY 06 Base		FY 07 Base		2008 Base
Ross Tannenbaum, President and CEO	$	288,750	$	325,000	$	350,000
David Greene, Senior V.P.	$	125,000	$	140,000	$	165,000
Dorothy Sillano, V.P. and CFO					$	145,000

Performance-Based Annual Cash Bonuses

In April, 2006 our Board of Directors approved our Executive Cash Bonus Plan (“Cash Bonus Plan”). We use our Cash Bonus Plan to provide annual incentives to executive officers and members of our senior management team in a manner designed to (i) link increases in compensation to increases in our revenues and income in order to reinforce our focus on creating shareholder value, (ii) reinforce our desire to control costs, and (iii) link a significant portion of our executives’ compensation to the achievement of such goals. Cash bonuses are designed to reward executive officers for their contributions to our financial and operating performance and are based primarily upon our financial results with weighting apportioned between revenue and earnings growth targets, as determined by the Compensation Committee each year. The bonus remains discretionary, and may be adjusted at the sole discretion of the Board of Directors.

Performance-Based Annual Cash Bonuses Paid to Our Named Executive Officers

For the nine months ended December 31, 2007, the following named executive officers earned a cash bonus (i) Ross Tannenbaum earned a cash bonus of $50; (ii) David Greene earned a cash bonus of $35; (iii) Mitch Adelstein earned a cash bonus of $29; (iv) Kevin Bates earned a cash bonus of $112 and (v) Dorothy Sillano earned a cash bonus of $12.

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Long-Term Incentives

On January 15, 2007, our shareholders approved and ratified our 2006 Equity Incentive Plan (“Equity Plan”). Our Equity Plan is a broad-based equity compensation plan that we use to attract, motivate, and retain qualified executive officers by providing them with long-term incentives. We also use the Equity Plan to align our executives’ and shareholders’ long-term interests by creating a strong and direct link between executive pay and shareholder return.

The Equity Plan allows the Compensation Committee to link compensation to performance over a period of time by granting awards that have multiple-year vesting schedules. Awards with multiple-year vesting schedules, such as stock options, provide balance to the other elements of our compensation program that otherwise link compensation to annual performance. Awards with multiple-year vesting schedules create incentives for executive officers to increase shareholder value over an extended period of time because the value received from such awards is based on the growth of the stock price above the grant price. Such awards also provide our executives with an incentive to remain with us over an extended period of time. Thus, we believe our Equity Plan is an effective way of aligning the interests of our executive officers with those of our shareholders.

Under the Equity Plan, the Compensation Committee may grant incentive stock options or nonqualified stock options, stock purchase rights, stock appreciation rights and restricted and unrestricted stock awards as forms of executive officer compensation. To date, the Compensation Committee has not made any awards under the Equity Plan.

The Compensation Committee will consider several factors when determining the number of awards to be made to our executive officers under the Equity Plan, including, but not limited to, the following: (i) the recommendations of our CEO; (ii) the value of the award in relation to other elements of total compensation; (iii) the number of options, stock purchase rights, stock appreciation rights, and stock awards currently held by the executive; (iv) the number of options, stock purchase rights, stock appreciation rights, and stock awards granted to the executive in prior years; and (v) the executive’s position, scope of responsibility, ability to affect our profits, ability to create shareholder value, and historic and recent performance.

Other Compensation

We provide our Named Executive Officers with certain other benefits that we believe are reasonable, competitive, and consistent with our overall executive compensation program. We believe that these benefits generally allow our executives to work more efficiently. The costs of these benefits generally constitute only a small percentage of each executive’s total compensation. In setting the amount of these benefits, the Compensation Committee considers (i) each executive’s position and scope of responsibilities, and (ii) all other elements comprising the executive’s compensation. For the nine months ended December 31, 2007, we provided an automotive allowance to certain of our NEO’s. We report these costs as personal benefits for the NEO’s in the “Non-equity Deferred Compensation” and “All Other Compensation” columns in the Summary Compensation Table below.

Employee Benefits

Our NEO’s are eligible to participate in all of our employee benefit plans, such as our 401(k) Plan and medical, dental, and group life insurance plans, in each case on the same basis as our other employees.

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Employment Agreements

We do not currently have employment contracts in place with any of our Named Executive Officers, other than Kevin Bates. It is the position of the Compensation Committee to explore whether it is strategically favorable for the Company to enter into employment contracts with various key executives. Set forth below is a description of those employment contracts currently in place with our NEO’s.

Kevin Bates and the Company entered into a 3-year employment agreement, in June 2007, where Mr. Bates is to serve as the president of all of Dreams Retail operations. The base salary, effective April 1, 2007, is $350,000 with annual CPI increases. In addition, Mr. Bates is entitled to a 5% performance bonus based on the EBIT (earnings before interest and taxes) up to the first $10 million and 3% thereafter of all of Dreams Retail operations. This employment agreement replaces the 20% EBIT (earnings before interest and taxes) that the Company was contractually obligated to pay to Mr. Bates pursuant to the original stock purchase agreement when Dreams acquired FansEdge in October of 2003. For the first four years following the acquisition, the Company has provided the former shareholders of FansEdge with a 25% of the EBIT (earnings before interest and taxes) and has recorded these payments as additional purchase price consideration for fiscal years 2004 through 2007.

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2007 Compensation Tables.

Summary Compensation Table as of December 31, 2007**

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Ross Tannenbaum PEO	2007	343,750	50,000			9,600	403,350
David M. Greene Senior V.P Finance	2007	158,750	35,000			7,200	200,950
Victor Shaffer* Executive V.P.	2007	30,000				550	30,550
Kevin Bates Division President	2007	300,000	112,000				412,000
Mitch Adelstein Division President	2007	197,500	28,785			7,200	233,485
Dorothy Sillano V.P, PFO	2007	121,250	12,000				133,250
Mano Sivashanmugam CIO	2007	175,000			27,714		202,714

* Mr. Shaffer resigned his position effective February 16, 2007

** Company changed its fiscal year to calendar year and chose to reflect a full 12 month actual pay for 2007 for its NEO’s as opposed to the 9 month period covered by this transition report.

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Outstanding Equity Awards At December 31, 2007 Table

	Option Awards					Stock Awards
	Number of Securities Underlying Unexercised Options (#)	Number of Securities Underlying Unexercised Options (#)	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other rights That Have Not Vested ($)
Name	Exercisable	Unexercisable
RossTannenbaum	28,283			1.50	8/09
PEO
David Greene	4,128			1.50	8/09
Senior V.P.
Kevin Bates	166,667			.60	2/11
Division President
Mitch Adelstein	7,942			1.50	8/09
Division President
ManoSivashanmugam			16,667	2.75	6/11
CIO

OPTION EXERCISES AND STOCK VESTED

Option Awards Name	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)
David Greene, Senior V.P.	46,969	129,166

DIRECTOR COMPENSATION

Name	Year	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	Total ($)
Sam Battistone	2007	15,000			15,000
Dale Larsson	2007	20,000			20,000
Steven Rubin	2007	10,000		23,820	33,820
David Malina	2007	10,000		23,820	33,820

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COMPENSATION COMMITTEE REPORT

The information contained in this report shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.

The members of the Compensation Committee of the Company’s Board of Directors have reviewed and discussed the Compensation Discussion and Analysis appearing in this transition report on Form 10-KT with management, and based upon such review and discussion, the Compensation Committee recommended to the Company’s Board of Directors that such Compensation Discussion and Analysis be included herein.

The Compensation Committee – Dale Larsson, David Malina

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Principal Shareholders.

The following table sets forth as of March 1, 2008 the number of the Company’s common stock beneficially owned by persons who own five percent or more of the Company’s 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 options exercisable within 60 days.

Name and Address of Beneficial Owner(1)	Number of Shares Owned		Percent of Class
Sam D. Battistone	1,914,564	(2)(3)	5.1	%
Ross Tannenbaum	7,667,172	(4)	20.4	%
Mano Sivashanmugam	16,667	(5)	*
Dorothy Sillano	750		*
Dale Larsson 1776 North State Street, ste #160 Orem, UT 84057	94,809		*
Mitch Adelstein	360,454	(6)	*
Kevin Bates	183,334	(7)	*
David M. Greene	392,747	(8)	1.0	%
Steven Rubin 4400 Biscayne Blvd Miami, FL 33137	42,051	(9)	*
David Malina 4400 Biscayne Blvd Miami, FL 33137	10,000	(10)	*
The Frost Group, LLC 4400 Biscayne Blvd, 15th Floor Miami, FL 33137	5,205,405	(11)	13.8	%
All Executive Officers and Directors as a group (10 persons)(12)	10,682,548		28.4	%

See footnotes below.

* Less than 1.0%

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⁽¹⁾ Unless otherwise indicated, the address for each person is 2 South University Drive, suite 325 Plantation, Florida 33324.

⁽²⁾ Excludes 935,608 shares owned by the following family members of which Mr. Battistone disclaims beneficial ownership:

Name	Number of Shares Owned
Kelly Battistone	131,102
Dann Battistone	112,527
Brian Battistone	107,252
Mark Battistone	120,702
Cindy Battistone Hill	121,300
Signature, Inc.	342,725

⁽³⁾ Includes 11,725 shares which are the subject of stock options.

⁽⁴⁾ Includes 28,283 shares which are the subject of stock options.

⁽⁵⁾ Includes 16,667 shares which are the subject of stock options.

⁽⁶⁾ Includes 7,942 shares which are the subject of stock options.

⁽⁷⁾ Includes 166,667 shares which are the subject of stock options.

⁽⁸⁾ Includes 4,128 shares which are the subject of stock options.

₍₉₎ Mr. Rubin is a member of The Frost Group, LLC. He disclaims beneficial ownership of the securities held by The Frost Group, LLC except to the extent of his pecuniary interest therein. Also, includes 10,000 shares which are the subject of stock options.

⁽¹⁰⁾ Includes 10,000 shares which are the subject of stock options.

⁽¹¹⁾ Includes 77,200 shares owned by Frost Gamma.

⁽¹²⁾ The directors and officers have sole voting and investment power as to the shares beneficially owned by them.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

On January 12, 2005, the Company entered into a licensing agreement with Pro Stars, Inc., a corporation in which our chairman of the board was an executive officer. Under the terms of the agreement, we received a 10% licensing fee on the revenues generated from our 365 live marketing concepts which we licensed to Pro Stars, Inc. The license fees received in fiscal 2007 were $327 and 2006 were $350. The license fees received in fiscal 2005 were insignificant. On December 26, 2006, Dreams, Inc acquired the assets and assumed certain liabilities of ProStars, Inc., a Utah corporation, pursuant to the terms of an Asset Purchase Agreement entered into by the parties.

The assets acquired by the Company under the Agreement include, without limitation, (i) a majority equity interest in four entities that operate three Field of Dreams^® retail stores that offer unique sports and entertainment memorabilia products to consumers, (ii) at least $2 million of inventory used in the stores, (iii) substantially all other assets used by Seller in the operation of the Business, and (iv) a marketing venture know as “Stars Live 365”.

The purchase price for the Assets included 1,500,000 shares of restricted common stock of the Company, issued as follows: (i) 1,000,000 Shares at closing; (ii) 166,667 Shares to be held in escrow to satisfy any Seller obligations arising under the indemnification provisions of the Agreement, and (iii) 333,334 shares (the “Rio Shares”) to be held in escrow to secure Seller’s obligation to obtain and assign to the Company a lease with respect to Seller’s operations at the Rio Hotel in Las Vegas Nevada of which said lease was subsequently received, triggering the release of the escrow shares. The number of Shares is subject to adjustment in the event certain payables of Seller being assumed by the Company exceed $500 or certain debt Seller owes the Company exceeds $1,418,000.

The Company had agreed to assume certain liabilities of Seller, including, but not limited to, notes payable in the amount of approximately $1,422,000, and an additional note payable to Sam Battistone, a principal and shareholder of Seller and a member of the Company’s Board of Directors, in the amount of $1,029,000 which was satisfied through the issuance by the Company of 166,667 shares of the Company’s common stock (with 83,333 shares issued at closing and 83,334 shares held together with the Rio Shares to secure Seller’s obligation to provide the Company with the Rio Lease), which said lease was subsequently received, triggering the release of the escrow shares, and the transfer of all interests of Seller in and to that certain NBA litho project.

The Agreement provides the Company with certain rights of first refusal with respect to post closing sales of the Shares by Seller and/or certain of Seller’s shareholders, and the right to obtain lock up agreements from certain of Seller’s shareholders upon their receipt of Shares in a distribution by Seller.

48

The shares of the Company’s common stock issued under the Agreement were not registered under the Securities Act of 1933 (the “Act”) and were issued pursuant to an exemption from registration under Section 4(2) of the Act.

The description of the terms of the Agreement set forth herein is qualified in its entirety by the terms of the Agreement which text was filed in a Form 8-K by the Company on January 3, 2007.

Director Independence

The Board of Directors has determined that four individuals of its five member board are independent as defined under federal securities laws, including rule 121 of the American Stock Exchange: Mr. Larsson, Mr. Battistone, Mr. Malina and Mr. Rubin.

49

Item 14. Principal Accountant Fees and Services.

The following table shows the fees that the Company paid or accrued for the audit and other services provided by Friedman, Cohen, Taubman & Company for the nine months ended December 31, 2007 and Fiscal Year 2007.

	Nine Mths Ended 12/31/ 2007		Fiscal 2007
Audit Fees	$	86,135	$	70,000
Audit-Related Fees		—		—
Tax Fees		—		—
All Other Fees		—		—
Total	$	86,135	$	70,000

Audit Fees—This category includes the audit of the Company’s annual financial statements, review of financial statements included in the Company’s Form 10-Q Quarterly Reports and services that are normally provided by the independent auditors in connection with engagements for those fiscal years.

Audit-Related Fees—This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of Dreams, Inc.’s financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include the consent for the Uniform Franchise Offering Circular and other accounting consulting for the nine months ended December 31, 2007.

Tax Fees—N/A

Overview—Prior to the establishment of our audit committee on March 9, 2007; the Board of Directors, serving as the Company’s Audit Committee, reviews, and in its sole discretion pre-approves, our independent auditors’ annual engagement letter including proposed fees and all audit and non-audit services provided by the independent auditors. Accordingly, all services described under “Audit Fees,” “Audit-Related Fees,” and “Tax Fees” were pre-approved by our Board of Directors. Board of Directors, serving as the Company’s Audit Committee, may not engage the independent auditors to perform the non-audit services proscribed by law or regulation. The Board of Directors, serving as the Company’s Audit Committee, may delegate pre-approval authority to a member of the Board of Directors, and authority delegated in such manner must be reported at the next scheduled meeting of the Board of Directors. However, these responsibilities have been assumed by the Company’s Audit Committee.

50

Part IV

Item 15. Exhibits, Financial Statement Schedules.

(a) Financial Statements.

Financial Statements Included in this Report	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets as of December 31, 2007 and March 31, 2007.	F-3
Consolidated Statements of Operations for the nine months ended December 31, 2007, the nine months ended December 31, 2006, the year ended March 31, 2007 and the year ended March 31, 2006.	F-4
Consolidated Statement of Stockholders Equity for the nine months ended December 31, 2007, the year ended March 31, 2007 and the year ended March 31, 2006.	F-5
Consolidated Statement of Cash Flows for the nine months ended December 31, 2007, the nine months ended December 31, 2006, the year ended March 31, 2007, and the year ended March 31, 2006.	F-6
Notes to Consolidated Audited Financial Statements	F-7
Quarterly Financial Information	F-30

(b) Exhibits

Exhibit No.
3.1	Restated Articles of Incorporation, dated June 8, 1989 (1)
3.2	Articles of Amendment, dated March 28, 1996 (1)
3.3	Articles of Amendment, dated January 14, 1999 (1)
3.4	Articles of Amendment to the Revised Articles of Incorporation, dated April 5, 2005 (2)
3.5	Certificate of Amendment to the Certificate of Incorporation, dated January 25, 2007 (3)
3.6	Bylaws (1)
4	Dreams, Inc. Equity Incentive Plan (3)
10.1	Stock Purchase Agreement between the Company and The Frost Group, LLC (4)
10.2	Asset Purchase Agreement between the Company and ProStars, Inc., dated December 26, 2006 (5)
10.3	Loan Agreement with Comerica Bank (6)
10.4	Form of Revolving Note (6)
10.5	Form of Acquisition Note (6)
10.6	Security Agreement dated June 6, 2007 (6)
10.7	Stock Purchase Agreement between Company and BKJ Consulting Corp, dated August 1, 2007
16	Letter from Grant Thornton LLP re: change in independent accountants (7)
21	Subsidiaries of the Company
31.1	Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed incorporated by reference into any other filing under the Security Act of 1933, as amended, or by the Security Exchange Act of 1934, as amended.)

51

32.2 Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 as amended or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed incorporated by reference into any other filing under the Security Act of 1933, as amended, or by the Security Exchange Act of 1934, as amended.)

(1) Filed with the Company’s Form 10-SB on September 7, 1999, and incorporated by this reference.

(2) Filed with the Company’s Form SB-2/A on April 5, 2005, and incorporated by this reference.

(3) Filed as an exhibit with the Company’s Form 8-k on January 29, 2007, and incorporated herein by this reference.

(4) Filed as an exhibit with the Company’s Form 8-k on November 1, 2006, and incorporated herein by this reference.

(5) Filed as an exhibit with the Company’s Form 8-k/a on March 12, 2007, and incorporated herein by this reference.

(6) Filed as an exhibit with the Company’s Form 8-k/a on June 12, 2007, and incorporated herein by this reference.

(7) Filed as an exhibit with the Company’s Form 8-k on March 23, 2007, and incorporated herein by this reference.

52

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DREAMS, INC., a Utah corporation
By:	/s/ Ross Tannenbaum
	Ross Tannenbaum
	President, Chief Executive Officer
Dated: March 27, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

By:	/s/ Ross Tannenbaum
	Ross Tannenbaum,
	Chief Executive Officer and a Director
	(principal executive officer )

Dated: March 27, 2008

By:	/s/ Dorothy Sillano
	Dorothy Sillano, V.P. and Chief Financial Officer (principal financial officer)

Dated: March 27, 2008

By:	/s/ Sam Battistone
	Sam Battistone, Director

Dated: March 27, 2008

By:	/s/ Dale E. Larsson
	Dale E. Larsson, Director

Dated: March 27, 2008

By:	/s/ David Malina
	David Malina, Director

Dated: March 27, 2008

By:	/s/ Steven Rubin
	Steven Rubin, Director

Dated: March 27, 2008

53

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Dreams, Inc.

We have audited the accompanying consolidated statements of operations, changes in stockholders’ equity and cash flows of Dreams, Inc. and Subsidiaries for the year ended March 31, 2006. 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 audit.

We conducted our audit 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. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Dreams, Inc. and Subsidiaries for the year ended March 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

/s/  Grant Thornton LLP

Fort Lauderdale, Florida

June 7, 2006 (except for Note 17, as to

    which the date is June 28, 2006)

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Dreams, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Dreams, Inc. and Subsidiaries (the “Company”) as of December 31, 2007 and March 31, 2007, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the nine months ended December 31, 2007 and for the year ended March 31, 2007. 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. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, such consolidated financial statements present fairly, in all material respects, the financial position of Dreams, Inc. and Subsidiaries as of December 31, 2007 and March 31, 2007, and the results of their operations and their cash flows for the nine months ended December 31, 2007 and for the year ended March 31, 2007 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, effective September 12, 2007 the Company changed its fiscal year to begin on January 1 and end on December 31.

FRIEDMAN, COHEN, TAUBMAN AND COMPANY, LLC

March 27, 2008

F-2

Dreams, Inc. and Subsidiaries

Consolidated Balance Sheets

(Dollars in Thousands, except share amounts)

	December31, 2007			March 31, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	1,601		$	753
Accounts receivable, net		4,395			2,287
Inventories		24,319			17,867
Prepaid expenses and deposits		1,999			1,337
Deferred tax asset		645			292
Total current assets		32,959			22,536
Property and equipment, net		3,891			3,504
Deferred loan costs		51			42
Goodwill, net		8,727			7,497
Other intangible assets, net		5,465			4,076
Deferred tax asset		284			—
Other assets		9			—
Total Assets	$	51,386		$	37,655
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,698		$	3,198
Accrued liabilities		2,400			1,164
Current portion of long-term debt		712			667
Deferred credits		1,186			244
Deferred tax liability		—			—
Income tax payable		415			—
Total current liabilities	$	15,411			5,273
Long-term debt, less current portion		2,199			379
Capital lease obligation		93			—
Long-term deferred tax liability		1,967			1,218
Borrowings against line of credit		4,952			6,352
Total Liabilities	$	24,622		$	13,222
Minority Interest in subsidiary	$	4		$	42
Stockholders’ equity:
Preferred stock authorized 10,000,000 shares; issued and outstanding 0 shares as of December 31, 2007 and March 31, 2007		—			—
Common stock and additional paid-in capital, no par value; authorized 100,000,000 and 100,000,000 shares; issued and outstanding 37,702,523 and 36,952,943 shares as of December 31, 2007 and March 31, 2007, respectively		35,213			33,636
Accumulated deficit		(8,453	)		(9,245	)
Total stockholders’ equity		26,760			24,391
Total liabilities and stockholders’ equity	$	51,386		$	37,655

F-3

Dreams, Inc. and Subsidiaries

Consolidated Statements of Operations

For the Nine Months Ended December 31, 2007 & 2006 and the Years Ended March 31, 2007 and 2006.

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

	9 months ended December 31, 2007			9 months ended December 31, 2006 (unaudited)			March 31, 2007			March 31, 2006
Revenues:
Manufacturing/Distribution	$	13,554		$	10,545		$	14,960		$	16,185
Retail		45,068			29,501			39,382			25,095
Management fees, net		—			263			334			224
Franchise fees and royalties		—			882			1,100			1,226
Other		1,080			143			184			—
Total revenues		59,702			41,334			55,960			42,730
Expenses:
Cost of sales – manufacturing/distribution		7,611			6,229			9,151			10,181
Cost of sales – retail		25,524			16,911			22,638			14,279
Operating expenses		23,406			14,951			21,444			16,523
Depreciation and amortization		928			515			708			639
Total expenses		57,469			38,606			53,941			41,622
Income from operations		2,233			2,728			2,019			1,108
Interest (expense), net		(708	)		(390	)		(528	)		(454	)
Other (expense) / income		(110	)		—			(42	)		3,657
Income before income taxes		1,415			2,338			1,449			4,311
Income tax (expense)		(623	)		(912	)		(469	)		(1,762	)
Net income	$	792		$	1,426		$	980		$	2,549
Basic and diluted income per share		0.02			0.05		$	0.03		$	0.09
Weighted average shares outstanding		37,328,962			30,808,547			32,271,327			27,404,643

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

F-4

Dreams, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

For the Nine Months Ended December 31, 2007 and the Years Ended March 31, 2007 and 2006.

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

	Shares Outstanding		Common Stock & Additional Paid-In-Capital			Accumulated Deficit			Total Stockholders’ Equity
Balance as of March 31, 2005	9,393,866			22,845			(12,774	)		10,071
Shares Issued-Rights Offering	9,695,389			1,745			—			1,745
Settlement of Debt and accruals via stock issuance	10,594,532			1,907			—			1,907
Rights Offering Costs	—			(241	)		—			(241	)
Stock options issued	—			30			—			30
Net income	—			—			2,549			2,549
Balance as of March 31,2006	29,683,787			26,286			(10,225	)		16,061
Share Based Compensation Expense	—			32			—			32
Stock Options Converted/shares Issued	272,857			180			—			180
Settlement of debt	109,763			312			—			312
Shares Issued-Investor	5,128,205			1,992			—			1,992
Shares Issued-Acquisition (1)	1,666,667			4,500			—			4,500
Shares Held back-acquisition (1)	(166,667	)		(400	)		—			(400	)
Shares Issued-Acquisition (2)	258,333			734			—			734
Net Income				0			980			980
Balance as of March 31, 2007	36,952,945		$	33,636		$	(9,245	)	$	24,391
Share Based Compensation Expense	—			76			—			76
Stock Options Converted/shares Issued	47,967			—			—			—
Reinstatement of debt	(109,763	)		(312	)		—			(312	)
Shares Issued-Acquisition (3)	500,000			1,075			—			1,075
Shares Issued-Acquisition (1)	129,246			310			—			310
Shares Held back-acquisition (3)	182,128			428			—			428
Net Income	—			—			792			792
Balance as of December 31, 2007	37,702,523			35,213			(8,453	)		26,760

(1) Acquisition of Pro Stars

(2) Acquisition of Unique Images

(3) Acquisition of Schwartz Sports

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 Nine Months Ended December 31, 2007, 2006 and the Years Ended March 31, 2007 and 2006.

(Dollars in Thousands)

	December 31, 2007			December 31, 2006 (unaudited)			March 31, 2007			March 31, 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	792		$	1,426		$	980		$	2,549
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation		893			443			649			562
Amortization		35			72			59			71
Deferred Loan Costs		40			15			39			59
Net loss from the sale of furniture, fixtures and equipment		—			—			40			—
FAS 123R Compensation expense		76			26			32			—
Deferred stock option expense		—			—			15			—
Deferred/current income tax expense(benefit)		113			521			421			1,750
Changes in assets and liabilities, net of effects from non-cash investing and finance activities:
(Increase)decrease in assets:
Accounts receivable		(2,108	)		4,522			4,617			(5,165	)
Notes receivable		—			(5	)		—			—
Inventory		(6,452	)		(4,482	)		(5,978	)		(2,070	)
Prepaid expenses		(662	)		(741	)		(187	)		397
Other asset		(9	)		(130	)		(387	)		—
Increase(decrease) in liabilities:
Accounts Payable		7,132			1,921			(52	)		784
Accrued liabilities		2,166			528			(135	)		422
Minority interest in subsidiary					—			42
Deferred credits		942			496			(1	)		87
Income tax payable		415			417			—			—
Net Cash Provided By (Used In) Operating Activities		3,373			5,029			154			(554	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and equipment		(1,280	)		(1,290	)		(1,429	)		(672	)
Payment of contingent consideration		(454	)		—			(401	)		(270	)
Sale/disposal of Property and equipment		—			(401	)		78			25
Payments received on notes payable of Somerset sale		—			—			35			—
Payment made on acquisition of Fashion Valley		—			(50	)		(55	)		—
Acquisition costs-Pro Stars		—			—			(59	)
Minority interest in subsidiary		(110	)
Acquisition costs-Unique		—			—			(12	)
Acquisition costs-Fashion Valley		—			—			(5	)
Net cash Used in Investing Activities		(1,844	)		(1,741	)		(1,848	)		(917	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Line of Credit		37,854			21,743			62,015			41,419
Paydown on Line of Credit		(37,379	)		(26,398	)		(61,877	)		(35,674	)
Proceeds from Merrill Lynch Line of Credit		—			—			—			—
Payoff of Merrill Lynch Line of Credit		—			—			—			(4,499	)
Proceeds from stock option exercise		—			—			180			—
Deferred loan costs		(48	)		—			(13	)		(88	)
Cash received from stock offering, net		—			2,000			1,993			—
Repayment of Notes payable		(1,108	)		(183	)		(546	)		(1,163	)
Proceeds from Notes Payable											—
Rights Offering Costs		—			—			—			(46	)
Cash acquired in acquisition of ProStars		—			—			262			—
Cash received from rights offering		—			—			—			1,745
Net Cash (Used in) Provided by Financing Activities		(682	)		(2,838	)		2,014			1,693
NET INCREASE IN CASH AND CASH EQUIVALENTS		848			450			320			222
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD		753			433			433			211
CASH AND CASH EQUIVALENTS, END OF THE PERIOD		1,601		$	883		$	753		$	433
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes	$	80		$	0		$	0		$	0
Cash paid during the period for interest	$	673		$	349		$	491		$	421
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Purchase of M&S stores inventory and accounts payable	$	48
Cashless exercise of stock options	$	129
Common stock issued in acquisition of Schwartz Sports	$	1,503			—			—			—
Common stock issued in acquisition of ProStars, net				$	4,100		$	4,100
Common stock issued in acquisition of Unique							$	734
Common stock issued in connection with note payable conversion										$	1,000
Common stock issued in lieu of Casey debt repayment				$	312		$	312
Common stock issued resulting from cashless option exercise				$	157		$	157
Debt incurred in acquisition of Schwartz Sports	$	1,168
Debt incurred in acquisition of Chicago Sun Times Show rights	$	1,375
Debt incurred to buyout minority shareholder	$	40
Debt incurred in acquisition of Florida Mall	$	50
Debt incurred in acquisition of Fashion Valley				$	241		$	241
Debt incurred in acquisition of ProStars				$	1,401		$	1,401
Debt incurred in acquisition of Unique							$	17
Debt originated from settlement										$	524
Fixed assets acquired in acquisition of ProStars				$	1,063		$	1,063
Fixed assets acquired in acquisition of Unique							$	73
Fixed assets acquired in acquisition of Fashion Valley				$	10		$	10
Deferred costs funded by loan
Note receivable for Somerset sale	$	5		$	35		$	35
Goodwill adjustment to FansEdge acquisition price	$	30		$	222		$	222		$	651
Goodwill adjustment to Dreams Unique acquisition price	$	42
Stock options issued in related party loan
Stock options issued in connection with services
Capitalized Rights offering costs										$	241

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”) are principally engaged in the manufacture, distribution and sale of sports memorabilia products and acrylic display 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 licensed sports products, as well as athlete representation and corporate marketing of individual athletes. The Company’s customers are located throughout the United States of America. The nine months ended December 31, 2007 results are reflected in this transition report. The fiscal years ended March 31, 2007and March 31, 2006 are herein referred to as “fiscal 2007”and “fiscal 2006”, respectively.

Fiscal Year Change

Pursuant to a Consent Resolution of the Board of Directors dated September 12, 2007, the Company has changed its fiscal year end from March 31 to December 31. Management believes this will provide greater clarity to the investment community. As a result, the Company is filing this transitional report for the period of April 1, 2007 to December 31, 2007, on Form 10-K/T.

Principals of Consolidation

The accompanying consolidated audited financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material inter-company transactions and accounts have been eliminated in consolidation.

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.

Stock Split

The Company received approval from a majority of its shareholders on January 25, 2007 to effectuate a reverse stock split of its common shares. Consequently, the Board determined that a 1 for 6 reverse stock split would be effective on January 30, 2007. All share and per share amounts have been retroactively adjusted to reflect this reverse stock split.

Accounts Receivable

The Company’s accounts receivable principally result from uncollected royalties from Field of Dreams^® franchisees and from credit sales to third-party customers from its wholesale operations and credit card transactions from the internet division. 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 at 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 December 31, 2007 and March 31, 2007, the allowance for doubtful accounts was $67 and $33, respectively.

Revenue Recognition

The Company recognizes retail (including e-commerce sales) and wholesale/distribution revenues 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 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.

F-7

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.

Revenues from industry trade shows are recognized at the time of the show when tickets are submitted for autographs or actual product purchases take place. In instances when the Company receives pre-payments for show autographs, the Company records these amounts as deferred revenue.

F-8

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 is 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. For the nine months ended December 31, 2007, these expenses were $4.4 million. Additionally, these expenses were $3.4 million and $1.9 million in fiscal 2007, and fiscal 2006, respectively.

Inventories

Inventories, consisting primarily of sports memorabilia products and acrylic cases, are valued at the lower of cost or market. Inventory value is determined using the specific identification and average cost methods.

Property and Equipment

Property and equipment is stated at cost. Depreciation is provided for using the straight-line method over the estimated useful lives of the assets ranging from three to seven 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 established accounting and reporting requirements for goodwill and other intangible assets. The 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 the years ended December 31, 2007 and March 31, 2007, and performed fair value based impairment tests on its goodwill and other indefinite lived intangible assets and determined no impairment was necessary.

Long-Lived Assets

Long-lived assets and certain non-amortizable 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.

F-9

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, pre paid expenses, accounts payable, accrued liabilities and deferred credits; 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 December 31, 2007 and March 31, 2007, the aggregate fair value of the Company’s notes payable and long-term debt approximated its carrying value.

Income Taxes

Income tax expense includes United States and state income taxes. Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial reporting and the tax basis of existing assets and liabilities per SFAS 109. The tax rate used to determine the deferred tax assets and liabilities is the enacted tax rate for the year in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. In 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“Interpretation No. 48”) to account for uncertainty in income taxes recognized in the Company’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” Refer to Note 11.

Earnings (Loss) Per Share

Basic earnings (loss) per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the year. Diluted EPS is computed by dividing net income by the sum of the weighted average number of common shares outstanding including the dilutive effect of common stock equivalents. There was no dilutive effect of common stock equivalents in fiscal 2006 and fiscal 2005, as all of the outstanding stock options had exercise prices greater than the average fiscal 2006 stock price.

Potential common stock equivalents at December 31, 2007 were stock options to purchase 437,750 shares of common stock with exercise prices ranging from $.60 to $2.75 per share.

Stock Compensation

On April 1, 2006, the Company adopted Statement of Financial Accounting Standards 123(R), Share-Based Payment. Accordingly, the Company is now recognizing share-based compensation expense for all awards granted to employees, which is based on the fair value of the award on the date of grant. The Company adopted FAS No. 123(R) under the modified prospective transition method and, consequently, prior period results have not been restated. Under this transition method, in fiscal 2007, the Company’s reported share-based compensation expense will include expense related to share-based compensation awards granted subsequent to April 1, 2006, which is based on the grant date fair value estimated in accordance with the provisions of FAS No. 123(R), as well as any unrecognized compensation expense related to non-vested awards that were outstanding as of the date of adoption. Prior to April 1, 2006, the Company applied APB Opinion No. 25 “Accounting for Stock Issued to Employees” in accounting for its employee share-based compensation and applied FAS No. 123 “Accounting for Stock Issued to Employees” for disclosure purposes only. Under APB 25, the intrinsic value method was used to account for share-based employee compensation plans and compensation expense was not recorded for awards granted with no intrinsic value. The FAS No. 123 disclosures include pro forma net earnings (loss) and earnings (loss) per share as if the fair value-based method of accounting had been used. Determining the appropriate fair value model and calculating the fair value of share-based compensation awards requires the input of certain highly complex and subjective assumptions, including the expected life of the share-based compensation awards, the Company’s common stock price volatility, and the rate of employee forfeitures. The assumptions used in calculating the fair value of share-based compensation awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and the Company deems it necessary to use different assumptions, share-based compensation expense could be materially different from what has been recorded in the current period.

For the nine months ended December 31, 2007, the Company recorded $76 of pre-tax share-based compensation expense under FAS No. 123(R), as part of operating expense in the Company’s Consolidated Statement of Operations. This expense was offset by a $30 deferred tax benefit for non-qualified share–based compensation.

F-10

Share-Based Compensation Awards

The following disclosure provides information regarding the Company’s share-based compensation awards, all of which are classified as equity awards in accordance with FAS No. 123(R): (Which the Company adopted effective Fiscal Year 2007).

Stock Options—The Company grants stock options to employees that allow them to purchase shares of the Company’s common stock. Options may also be granted to outside members of the Board of Directors of the Company as well as independent contractors. The Company determines the fair value of stock options at the date of grant using the Black-Scholes valuation model. Options generally vest immediately, however, the Company has granted options that vest over three and five years. There were 36,667 options granted during the nine months ended December 31, 2007 with a weighted average issue price of $2.69. No options were granted during the fiscal year 2007, however, certain options awarded prior to March 31, 2006 vested during the year. Awards generally expire three to five years after the date of grant.

During the nine months ended December 31, 2007, 24,166 options vested. The Total Weighted Average (TWA) of shares vested for the nine months was 16,714. The TWA price vested during the period was $1.84.

As of December 31, 2007, there were 437,750 options outstanding with a weighted average exercise price of $.94 Vested options totaled 332,246 with a weighted average exercise price of $.97. Total outstanding options that were “in the money” at December 31, 2007 were 401,083 with an average price per option of $.78. Of those options, the vested “in the money” options totaled 309,080 with an average price of $.84 and the “in the money” unvested options totaled 92,003.

The following table summarizes the stock option activity from April 1, 2007 through December 31, 2007:

	Shares	Exercise Price		Weighted Avg. Exercise Price
April 1, 2007	493,582	$	.60 - $1.50	$	.89
Granted	36,667	$	2.64 - $2.75	$	2.69
Expired	(3,166)	$	.90	$	.90
Cancelled	(5,000)	$	.90	$	.90
Exercised	(84,333)	$	1.20	$	1.07
December 31, 2007	437,750	$	.60 - $2.75	$	.97

F-11

The following table breaks down the number of outstanding options with their corresponding contractual life, as well as the exerciseable weighted average (WA) outstanding exercise price, and number of vested options with the corresponding exercise price by price range.

	[Outstanding]				[Exerciseable]
Range	Outstanding Options	Remaining Contractual Life	WA Outstanding Exercise Price		Vested Options	WA Vested Exercise Price
$0.60 to $1.19	319,995	3.2	$	.60	227,992	$	.60
$1.20 to $1.50	81,088	1.6	$	1.50	81,088	$	1.50
$1.51 to $2.75	36,667	3.5	$	2.69	24,166	$	2.66
$0.60 to $2.75	437,750	2.9	$	.94	333,246	$	.97

At December 31, 2007, exercisable options had aggregate intrinsic values of $408,320.

F-12

The fair value for prior year grants was estimated on the date of the grant using the Black-Scholes valuation model with the following weighted-average assumptions for:

	year ended March 31. 2006
Expected Dividend Yield (1)	N/A
Expected Stock Price Volatility (2)	94.00	%
Risk-Free Interest Rate (3)	4.74	%
Expected Life in Years (4)	3

(1) The dividend yield assumption is based on the history and expectation of the Company’s dividend payouts. The Company has not paid dividends in the past and is prohibited from paying dividends without the consent of its secured lender.

(2) The determination of expected stock price volatility for options granted was based on the Company’s historical common stock prices over a period commensurate with the expected life of the option.

(3) The risk-free interest rate is based on the yield of a U.S. treasury bond with a similar maturity as the expected life of the options.

(4) The expected life in years for options is based on evaluations of historical and expected future employee behavior.

	Fiscal 2006
Net income:
As reported	$	2,549
Pro forma	$	2,513
Basic and diluted income per share:
As reported	$	0.09
Pro forma	$	0.09

There was no stock-based employee compensation expense included in net income in fiscal 2006. 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 the Company may continue to grant options to employees.

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.

1. Nature of Business and Summary of Significant Accounting Policies

NEW ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51”. SFAS No. 160 establishes accounting and reporting standards that will require noncontrolling interests to be reported as a component of equity, changes in a parent’s ownership interest while the parent retains its controlling interest to be accounted for as equity transactions, and any retained noncontrolling equity investment upon the deconsolidation of a subsidiary to be initially measured at fair value. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008 and is to be applied prospectively, except for the presentation and disclosure requirements which should be retrospectively applied. Early adoption of SFAS No. 160 is also prohibited. Accordingly, the Company will be required to adopt SFAS No. 160 as of January 1, 2009. Management does not believe that the adoption of SFAS No. 160 will have a material effect on the Company’s consolidated results of operations, cash flows or financial position.

In December 2007, the FASB also issued SFAS No. 141(R), “Business Combinations” (“SFAS No. 141(R)”), which requires an acquirer to recognize in its financial statements as of the acquisition date (i) the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, measured at their fair values on the acquisition date, and (ii) goodwill as the excess of

F-13

the consideration transferred plus the fair value of any noncontrolling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired. Acquisition-related costs, which are the costs the acquirer incurs to effect a business combination, will be accounted for as expenses in the periods in which the costs are incurred and the services are received, except that costs to issue debt or equity securities will be recognized in accordance with other applicable GAAP.SFAS No. 141(R) makes significant amendments to other Statements and other authoritative guidance to provide additional guidance or to conform the guidance in that literature to that provided in SFAS No. 141(R). SFAS No. 141(R) also provides guidance as to what information is to be disclosed to enable users of financial statements to evaluate the nature and financial effects of a business combination. SFAS No. 141(R) is effective for financial statements issued for fiscal years beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of SFAS No. 141(R) will affect how the Company accounts for the acquisition of a business after December 31, 2008.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115”. SFAS No. 159 permits entities to measure at fair value eligible financial assets and liabilities that are not currently required to be measured at fair value. If the fair value option for an eligible item is elected, unrealized gains and losses for that item will be reported in current earnings at each subsequent reporting date. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparison between the different measurements attributes the entity elects for similar types of assets and liabilities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company will not elect the fair value option available for those assets and liabilities which are eligible under SFAS No. 159, and accordingly, there will be no impact on the Company financial position and results of operations attributable to SFAS No. 159.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). This statement provides a single definition of fair value, a framework for measuring fair value, and expanded disclosures concerning fair value. Previously, different definitions of fair value were contained in various accounting pronouncements creating inconsistencies in measurement and disclosures. SFAS No. 157 applies to those previously issued pronouncements that prescribe fair value as the relevant measure of value, except SFAS No. 123(R) and related interpretations and pronouncements that require or permit measurement similar to fair value but are not intended to measure fair value. This pronouncement is effective for fiscal years beginning after November 15, 2007. Dreams does not expect the adoption of SFAS No. 157 to have a material impact on its financial position, results of operations, or cash flows.

In September 2006, the SEC Office of the Chief Accountant and Divisions of Corporation Finance and Investment Management released SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB No. 108”), which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The SEC staff believes that registrants should quantify errors using both a balance sheet and an income statement approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. This guidance is effective for fiscal years ending after November 15, 2006. The application of SAB No. 108 did not have any impact on our Consolidated Balance Sheet, Statement of Operations or Statement of Stockholders’ Equity for fiscal 2007.

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation Number 48 (FIN 48), “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.” The interpretation contains a two step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The interpretation is effective for the first interim period for fiscal years beginning after December 15, 2006. Dreams has adopted FIN 48 and there is no material impact on its financial condition, results of operations, cash flows or disclosures.

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.

Reclassifications

Certain reclassifications have been made to the prior year consolidated financial statements to conform to the current year presentation.

F-14

2. Acquisition of Businesses

General Statement

Upon the closing of an acquisition, management estimates the fair values of assets and liabilities acquired, and consolidates the acquisition as quickly as possible. However, it routinely takes time to obtain all of the pertinent information to finalize the acquired company’s balance sheet and supporting schedules and to adjust the acquired company’s accounting policies, procedures, books and records to the Company’s standards. As a result, it may take several quarters before the Company is able to finalize those initial fair value estimates. Accordingly, it is not uncommon for initial estimates to be subsequently revised.

The Company considers the following transactions to be significant in nature but, not material to the business overall.

Chicago Sun-Times Collectibles Show

Effective September 4, 2007, the Company purchased all of the rights, title and interests in the Chicago Sun-Times Collectibles Show from Sportsnews Productions, Inc. The Agreement grants the Company the exclusive right to produce and operate the Chicago Sun-Times Collectibles Show from the date of the agreement in perpetuity and to receive all revenues and all other benefits and interests from those shows. As a result of the transaction, the Company recorded intangible assets of approximately $1.4 million. The intangible assets consist of a five year non-compete agreement which management estimates to be valued at $150. The remaining amount has been recorded as non-amortizable rights as management believes the asset has an indefinite useful life. In connection with the acquisition, a consulting agreement was executed with the president of the seller of the show for a term of five years.

Schwartz Sports

Effective August 1, 2007, the Company entered into a stock purchase agreement with the shareholders of BKJ Consulting Corp., an Illinois corporation that owned and operated Schwartz Sports, a Chicago based sports memorabilia company. The Company acquired 100% of the outstanding shares of BKJ Consulting Corp. in exchange for 500,000 newly issued, restricted common shares of Dreams, Inc. The Company disclosed this transaction on a Form 8-K dated August 2, 2007. As a result of the acquisition, the Company recorded approximately $1.8 million of inventory and $867 of Goodwill on its books. Additionally, $1.2 million in notes payable and $1.5 million in common stock or 682,128 restricted shares were issued to complete this transaction.

Florida Mall

Effective July 14, 2007, the Company entered into an asset purchase agreement with The Pentagon Group of Orlando, Inc., a Florida corporation that owned and operated a franchised Field of Dreams^® store in Orlando, Florida. The Company paid $50 at closing and provided a $50 one-year promissory note, without interest in return for approximately $50 in inventory and all lease-hold improvements and other tangible assets used in the operation. As a result of the acquisition, the Company recorded $6 of Goodwill.

M & S, Inc.

Effective June 16, 2007, the Company entered into an asset purchase agreement with M & S, Inc. The agreement calls for the Company to acquire certain assets associated with the retail operations of existing Field of Dreams^® stores at The Mall at Wellington Green, Sawgrass Mills Mall, Town Center at Boca Raton, the PGA Gardens Mall (all located in South Florida) and Menlo Park in New Jersey. An executive of the Company is also a 25% owner of the selling group. The assets acquired consist of all inventory located at these stores, all interests in the leases which have been or are to be assigned, all other tangible properties and assets used or held for use at the Field of Dreams stores, including equipment, furniture and fixtures and all intellectual property assets of the Seller. However, leases associated with the PGA Gardens Mall and Menlo Park was not assumed by the Company. The purchase price was the assumption of debts and trade payables up to an equivalent amount of actual inventory which approximated $450.

F-15

3. Concentration of Credit Risk

Cash and Cash Equivalents

The Company maintains cash accounts in financial institutions that are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $100. At times, cash balances may be in excess of the amounts insured by the FDIC. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

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.

Major Vendors

For the nine months ended December 31, 2007, there were no major vendors. However, one of the Company’s vendors represented 13% of the total purchases for the year ended March 31, 2007.

4. Inventories

The components of inventories as of:

	December 31, 2007		March 31, 2007
Raw materials	$	363	$	302
Work in process		76		108
Finished goods, net		23,880		17,457
Total	$	24,319	$	17,867

The reserve for slow moving inventory was$270 at December 31, 2007and $227 at March 31, 2007

5. Property and Equipment

The components of property and equipment as of:

	December 31, 2007			March 31, 2007
Leasehold improvements	$	1,692		$	1,666
Machinery and equipment		454			1,838
Office and other equipment and fixtures		1,085			1,966
Transportation equipment		216			77
Computer equipment and software		3,378
		6,825			5,547
Less accumulated depreciation		(2,934	)		(2,043	)
	$	3,891		$	3,504

F-16

6. Goodwill and Other Intangible Assets

The changes in the carrying amounts of goodwill are as follows:

	Total
Balance – March 31, 2006	$	1,932
Acquisition of businesses		5,381
Adjustment to purchase price		184
Balance as of March 31, 2007	$	7,497
Acquisition of business		867
Adjustment to purchase price		363
Balance as of December 31, 2007	$	8,727

The following table provides information about changes relating to intangible assets for the nine months ended December 31, 2007 and in the year ended March 31, 2007:

	December 31, 2007
	Weighted Avg. Useful Life	Gross Carrying Value		Accum. Amortization			Net
Finite-lived intangible assets:
Non-compete agreement	5.4	$	325		(151	)		174
Other	2.2		78		(78	)		—
			403		(229	)		174
Indefinite-lived intangible assets:
Trademarks			3,886		—			3,886
Franchise licenses			130		—			130
Other			1,275		—			1,275
			5,291					5,291
Total		$	5,694	$	(229	)	$	5,465
	March 31, 2007
	Weighted Avg. Useful Life	Gross Carrying Value		Accum. Amortization			Net
Finite-lived intangible assets:
Non-compete agreement	7	$	175		(125	)		50
Other	2.2		78		(68	)		10
			253		(193	)		60
Indefinite-lived intangible assets:
Trademarks			3,886		—			3,886
Franchise licenses			130		—			130
			4, 016		—			4,016
Total		$	4,269	$	(193	)	$	4,076

Amortization expense for the nine months ended December 31, 2007 was $35. For the fiscal years 2007 and 2006, it was $59 and $71, respectively.

F-17

7. Line of Credit

At December 31, 2007, the Company had a revolving line of credit with a financial institution which allowed the Company to borrow up to $15 million for working capital purposes based on eligible accounts receivable and inventories. The net availability as of December 31, 2007 was $15.0 million, which consisted of $12.2 million in inventory and $2.8 million in accounts receivables. The balance outstanding on the loan as of March 1, 2008 was $8.5_ million resulting in the excess availability of $6.5 million as of March 1, 2008. The line of credit carries a floating annual interest rate at prime minus .75 basis points or fixed at 30 day Comerica costs of funds plus 1.50%. As of March 1, 2008 the interest rate on the loan was 5.25%. The line of credit is collateralized by the Company’s assets. The advanced rates as of December 31, 2007 were 80% for eligible accounts receivables and 60% for inventories. The Company also has a $3 million “Acquisition Line” with Comerica Bank of which the entire amount was available at December 31, 2007. The Loan Security Agreement also requires that certain financial performance covenants be met. These covenants include a fixed charge coverage ratio and minimum tangible net worth. Interest expense associated with the line of credit for the nine months ended December 31, 2007 was $643, and for the twelve months ended March 31, 2007 was $494.

8. Accrued Liabilities

Accrued liabilities consisted of the following at:

	December 31, 2007		March 31, 2007
Payroll costs (including bonuses and commissions)	$	777	$	271
Additional purchase consideration due FansEdge		—		474
Professional fees		50		66
Accrued royalties		630		121
Other trade accruals		943		232
	$	2,400	$	1,164

9. Notes Payable

Notes payable consists of the following at:

	December 31, 2007		March 31, 2007
Note payable, unsecured, due November 2007, monthly payments of $50,000, no stated interest rate	$	—	$	440
Note payable, unsecured, due October 2007, monthly payments of $10,000, no stated interest rate		—		68
Note payable to seller of Field of Dreams store; unsecured, due December 2009, monthly payments of $5,822 including interest at 7% annually. $50,000 balloon payment due at end		181		226
Note payable, unsecured, due February 2011, monthly payments $7,320 including interest at 6.0% annually		252		312
Note payable, unsecured, due July 2008, monthly payments of $4,167, no stated interest rate		29		—
Note payable, unsecured, due January 2011, monthly payments of $8,247, including interest at 6% annually		276		—
Note payable, unsecured, due August 2012, with interest at 7%. There are no monthly payments due. Can be redeemed after 1 year		80		—
Note payable, unsecured, due August 2012, with interest at 7%. There are no monthly payments due. Can be redeemed after 3 years		220		—
Note payable, unsecured, due August 2012, with interest at 7%. There are no monthly payments due. Can be redeemed after 3 years		100		—
Note payable, unsecured, due August 2012, with interest at 7%. There are no monthly payments due. Can be redeemed after 1 year		50		—

F-18

	December 31, 2007			March 31, 2007
Notes payable, unsecured, due August 2012, with interest at 7%. There are no monthly payments due. Can be redeemed after 3 years		200			—
Note payable, unsecured, due August 2012, with interest at 7%. There are no monthly payments due. Can be redeemed after 3 years		518			—
Note payable, unsecured, due February 2008, with no stated interest rate		30			—
Note payable, unsecured, due April 2012, with no stated interest rate. Payments made annually now and until maturity between $100,000 and $300,000		975			—
		2,911			1,046
Less current portion		(712	)		(667	)
	$	2,199		$	379

Interest expense on the notes for the nine months ended December 31, 2007 was $30, and for the twelve months ended March 31, 2007 was $16.

For notes that have no stated interest rates, the Company has imputed a rate of 6%.

F-19

10. Stockholders’ Equity

Common Stock: As of December 31, 2007 and March 31, 2007, the Company had 100,000,000 and 100,000,000 shares authorized and 37,702,523 and 36,952,945 common shares issued and outstanding.

Preferred Stock: As of December 31, 2007 and March 31, 2007, the Company had 10,000,000 shares authorized and -0- preferred shares issued and outstanding for both periods.

Stock Split

The Company received approval from a majority of its shareholders on January 25, 2007 to effectuate a reverse stock split of its common shares. Consequently, the Board determined that a 1 for 6 reverse stock split would be effective on January 30, 2007. All share and per share amounts have been retroactively adjusted to reflect this reverse stock split.

Stock Options: The following table summarizes information about the stock options outstanding:

	Stock Options
	Shares		Wtd. Avg. Exercise Price
Outstanding at March 31, 2005	656,094			1.26
Granted	400,000			.60
Exercised	—			—
Expired/Canceled	(250,000	)		1.50
Outstanding at March 31, 2006	806,094			.84
Granted	—			—
Exercised	(308,332	)		.85
Expired/Canceled	(4,166	)		.60
Less fractional shares as a result of 1 for 6 reverse stock split	(14	)
Outstanding at March 31, 2007	493,582		$	.85
Granted	36,667			2.69
Exercised	(84,333	)		1.20
Expired/Canceled	(8,166	)		.90
Outstanding at December 31, 2007	437,750			.97

Options exercisable as of December 31, 2007, March 31, 2007 and 2006, were 332,246, 396,079 and 606,093, respectively. The weighted average fair value of options granted during the nine months ended December 31, 2007 was $.97 and for fiscal 2007 was $.90, and for fiscal 2006 was $.24 per share.

F-20

11. Income Taxes

The components of the income tax provision (benefit) are as follows:

	9 months December 31, 2007		Fiscal 2007		Fiscal 2006
Current:
Federal tax expense/ (benefit)	$	452	$	85	$	10
State tax expense/ (benefit)		30		2		2
Deferred:
Federal tax expense/ (benefit)		93		301		1,361
State tax expense/ (benefit)		48		81		389
	$	623	$	469	$	1,762

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows:

Deferred Tax Asset (Liability):

	9 months December 31, 2007			Fiscal 2007			Fiscal 2006
Current
Allowance for doubtful accounts	$	27		$	13		$	39
Inventory reserve		109			90			86
Inventory capitalization adjustment		344			157			66
Accrued expenses		165			85			138
Insurance reimbursement		—			(53	)		(1,400	)
		645			292			(1,071	)
Long-term
Stock options		42			21			15
Federal and states NOL carry-forward		194			444			1,919
Capital loss carry-forward		187			187			187
Alternative Minimum Tax credit		49			126			51
Charitable contributions		—			11			5
Depreciation and amortization		(1,968	)		(1,820	)		(1,447	)
Less valuation allowance		(187	)		(187	)		(187	)
	$	(1,683	)	$	(1,218	)	$	543

SFAS No. 109 requires a valuation allowance to reduce the deferred tax assets reported, if based on the weight of evidence, it is more likely than not that some portion or the entire deferred tax asset will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a valuation allowance of $187, $187 and $187 as of December 31, 2007, March 31, 2007 and March 31, 2006, respectively, is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized. The change in the valuation allowance for the current fiscal year is $0.

Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”. The Interpretation provides clarification on accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB No. 109, “Accounting for Income Taxes.” The Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the Company’s evaluation of the implementation of FIN 48, no significant income tax uncertainties were identified. Therefore, the Company recognized no adjustment for unrecognized income tax benefits for the year ended December 31, 2007. The tax years subject to examination by the taxing authorities are the years ended December 31, 2007, March 31, 2007 and March 31, 2006.

In May 2007, the FASB issued FASB Staff Position (“FSP”) FIN 48-1 “Definition of Settlement in FASB Interpretation No. 48” (FSP FIN 48-1). FSP FIN 48-1 provides guidance on how to determine whether a tax position is effectively settled for purpose of recognizing previously unrecognized tax benefits. FSP FIN 48-1 is effective retroactively to January 1, 2007. The implementation of this standard did not have a material impact on our consolidated financial position or results of operation.

F-21

The reconciliation of income tax computed at the U.S. federal statutory rate to income tax expense for the nine months ended December 31, 2007 and for the years ended March 31, 2007 and 2006 is as follows:

	9 months December 31, 2007		Fiscal 2007		Fiscal 2006
Tax at U.S. statutory rate	34	%	34	%	34	%
State taxes, net of federal benefit	6		6		6
Non-deductible items	1		1		—
Other	(1	)	(8	)	—
	40	%	33	%	40	%

At December 31, 2007 the company will use all federal net operating loss carryforwards. The Company has state net operating loss carryforwards of approximately $3.3 million which expires by 2025.

F-22

12. 401 (k) Plan

The Company participates in a 401 (k) defined contribution plan (the “Plan”) under Section 401 (k) of the Internal Revenue Code. The Plan is available to all employees over the age of 21 with at least one year of service and 1,000 hours worked. Eligible participants may contribute up to 50% of their pretax earnings. Participants are immediately vested. The Company does not contribute to the Plan.

13. Commitments and Contingencies

Operating Leases

As of December 31, 2007, the Company leases office, warehouse and retail space under operating leases. The leases expire over the next seven years and some contain provisions for certain annual rental escalations. One of the Company’s leases requires the Company to pay percentage rent based on the revenues of the company-owned stores. Total percentage based rent payments were $33 for the nine months ended December 31, 2007, $50 in fiscal 2007 and $59 in fiscal 2006.

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

Calendar Year
2008	$	5,061
2009		4,120
2010		2,924
2011		2,328
2012		2,693
Thereafter		4,171
Total minimum lease commitments	$	21,297

Rent expense charged to operations for the nine months ended December 31, 2007, fiscal 2007 and fiscal 2006 were $2.9 million, $2.3 million and $2.2 million, respectively.

Capital Leases

The Company has entered into a capital lease for office equipment. The lease requires monthly payments aggregating $1,902 and expire in 2012. The interest rate on this capital lease is 5%.

Future minimum payments required under the capital leases consist of the following as of December 31, 2007:

Year Ending December 31,	Amount
2008	$	23
2009		23
2010		23
2011		23
2012		17
Total		108
Less Amount representing interest		(15	)
Present Value of net minimum lease payments	$	93

F-23

Future Contractual Payments to Athletes

As of December 31, 2007 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:

Calendar Year
2008	$	1,418
2009		1,319
2010		305
2011		236
2012		15
	$	3,293

F-24

FansEdge Earnout

In October 2003, the Company purchased 100% of the outstanding common stock of Fansedge Incorporated (“Fansedge”) The purchase agreement stipulates that the prior shareholders of Fansedge are entitled to additional consideration based on 25% of the earnings before interest and taxes (“EBIT”) of Fansedge each year for a period of four years from the date of the acquisition. The amounts earned for the years ended as of March 31, are as follows:

2007		2006		2005		2004
$	472	$	393	$	170	$	95

* There are no further payments required as the term of the purchase agreement has expired.

14. Related Party Transactions

Effective June 16, 2007, the Company entered into an asset purchase agreement with M & S, Inc. The agreement calls for the Company to acquire certain assets associated with the retail operations of existing Field of Dreams^® stores at The Mall at Wellington Green, Sawgrass Mills Mall, Town Center at Boca Raton, the PGA Gardens Mall (all located in South Florida) and Menlo Park in New Jersey. An executive of the Company is also a 25% owner of the selling group. The assets acquired consist of all inventory located at these stores, all interests in the leases which have been or are to be assigned, all other tangible properties and assets used or held for use at the Field of Dreams stores, including equipment, furniture and fixtures and all intellectual property assets of the Seller. The purchase price is the assumption of debts and trade payables up to an equivalent amount of actual inventory which approximates $450.

At March 31, 2007, the Company had an accrued earn-out obligation to the former shareholders of FansEdge per the stock purchase agreement of October, 2003. One of the former shareholders of FansEdge is a named executive officer. The officer’s share of the earn-out distribution for fiscal year 2007 is approximately $307. Contractually, this is the final year of the earn-out arrangement between Dreams and the former shareholders of FansEdge.

On January 12, 2005, the Company entered into a licensing agreement with Pro Stars, Inc., a corporation in which the Company’s chairman of the board was an executive officer. Under the terms of the agreement, the Company received a 10% licensing fee on the revenues generated from our 365 live marketing concepts which we licensed to Pro Stars, Inc. The license fees received were $327 and $350 in fiscal 2007 and fiscal 2006, respectively. Effective December 26, 2006, the Company bought back the majority interest in the 365 Live marketing concept from Pro Stars, Inc., via an asset purchase agreement. On December 26, 2006, the Company completed its asset purchase agreement with Pro Stars, Inc., a company in which the current Chairman was an executive officer. The assets acquired under the agreement included; (i) a majority equity interest in four entities that operated three Las Vegas based Field of Dreams^® stores (ii) up to $2 million of inventory used in the stores, (iii) substantially all other assets used by the Seller in the operation of the Business and (iv) a marketing venture known as “Stars Live 365”. In January 2007, the Chairman resigned his positions with Pro-Stars, Inc.

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 most recent amendment to the licensing agreement, the Company pays USL one percent of each company-owned and franchise unit’s gross sales, with a minimum annual royalty of $100. 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 December 31, 2007, the Company had 10 units owned by franchisees and had 17 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 December 31, 2007 and names USL as the insured party.

The license agreement expires in December 2010. 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 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 a material adverse effect on the Company’s franchise and retail operations.

F-25

The Company franchise activity is summarized as follows:

	9 months December 31, 2007		March 31, 2007		March 31, 2006
In operation at period end	10		16		19
as a result of the following activity:	—
Opened during the period	—		—		—
Closed during the period	—		—		—
Acquired by franchisee during the period	—		1		—
Acquired by corporate during the period	(6	)	(4	)	(1	)

F-26

16. Business Segment Information

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

The Manufacturing/Distribution segment represents the manufacturing and wholesaling of sports memorabilia products and acrylic display 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 is comprised of traditional brick and mortar and Internet:

Brick and Mortar

As of December 31, 2007, the Company owned and operated 17 Field of Dreams^® stores offering a selection of sports & entertainment memorabilia and collectibles. The Company has multiple stores in the south Florida and Las Vegas markets. The Company is opening its prototype FansEdge store in Chicago in April 2008.

Internet

The Company’s e-commerce components feature FansEdge.com and ProSportsMemorabilia.com along with a complement of athlete web sites including, but not limited to; www.peterose.com, www.danmarino.com, and www.dickbutkus.com.

These e-commerce retailers sell a diversified selection of sports licensed products and autographed memorabilia on the web. These e-commerce operations have provided for the fastest growing area of our retail segment.

All of the Company’s revenue generated during the nine months ended December 31, 2007, fiscal 2007 and fiscal 2006, 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-27

Segment information for the nine months ended December 31, 2007 and fiscal years ended March 31, 2007 and 2006 was as follows:

Nine Months Ended:	Manufacturing/ Distribution			Retail Operations			Total
December 31, 2007
Net sales	$	17,423		$	45,049		$	62,472
Intersegment net sales		(3,869	)		(53	)		(3,922	)
Operating earnings		2,030			2,711			4,741
Total assets		17,097			25,725			42,822

Twelve Months Ended:	Manufacturing/ Distribution			Retail Operations		Franchise Operations			Total
March 31, 2007
Net sales	$	18,138		$	39,371	$	896		$	58,405
Intersegment net sales		(3,026	)		0		(86	)		(3,112	)
Operating earnings		1,255			2,471		179			3,905
Total assets		11,593			18,883		82			30,558
March 31, 2006
Net sales	$	18,796		$	25,095	$	836		$	44,727
Intersegment net sales		(2,565	)		0		(38	)		(2,603	)
Operating earnings		2,236			1,288		386			3,910
Total assets		15,381			7,172		101			22,654

Reconciliation to consolidated amounts is as follows:

	9 mths ended December 31, 2007			FY2007			FY2006
Revenues:
Total revenues for reportable segments	$	62,472		$	58,405		$	44,727
Other revenues		1,152			667			606
Eliminations of intersegment revenues		(3,922	)		(3,112	)		(2,603	)
Total consolidated revenues	$	59,702		$	55,960		$	42,730
Pre-tax earnings / (loss):
Total earnings for reportable segments	$	4,741		$	3,905		$	3,910
*Other (loss) / income		(2,619	)		(1,928	)		855
Interest expense		(707	)		(528	)		(454	)
Total income before income taxes	$	1,415		$	1,449		$	4,311

* These are “unallocated” costs and expenses that have not been allocated to the reportable segments. Some examples of these unallocated overhead costs which are consistent with the Company’s internal accounting policies are executive salaries and benefits; corporate office occupancy costs; professional fees, bank charges; certain insurance policy premiums and public relations/investor relations expenses.

F-28

17. Insurance Proceeds

On June 28, 2006, the Company received a net settlement payment of $3.68 million, all of which is included in Accounts receivable as of March 31, 2006. After consideration of the insurance deductible as a result of hurricane damage, the Company recognized $3.6 million of other income in the fiscal 2006 consolidated statement of operations. The Company anticipates minimal expenditures for repairs and replacement related costs in the future.

18. Minority Interest

As a result of our Asset Purchase Agreement with Pro-Star, Inc. effective December 26, 2006, Dreams received 86.5% of the Caesars Forum Shops Field of Dreams store; 89% of the Rio Hotel Field of Dreams store; 90.5% of the Smith & Wollensky Field of Dreams store; and 88.125% of the marketing venture known as “Stars Live 365”. The Company records 100% of the revenues generated from these operations and then records a “minority interest expense” representing the limited partners’ earned pro-rata share of the actual profits. The minority interest expense at December 31, 2007 was approximately $27 and is included in accrued liabilities at year end. Dreams will have an on-going obligation to make quarterly distributions on a pro-rata basis depending on the actual profitability of each of the three stores and Stars Live 365.

Effective August 29, 2007, the Company bought back 6.5% interest in the Caesars Forum Shops Field of Dreams store from an individual for $40. As a result, the Company’s interest in the Caesars store is now 93%.

19. Valuation and Qualifying Accounts

We maintain an allowance for doubtful accounts that is recorded as a contra asset to our accounts receivable balance. The following table sets forth the change in each of those reserves for the nine months ended December 31, 2007 and the year ended March 31, 2007.

	Allowance for accounts receivable
Balance as of March 31, 2007	$	33
Provision		49
Write offs		(15	)
Balance as of December 31, 2007	$	67

20. Subsequent Events

On February 8, 2008. Dreams, Inc. announced that its Board of Directors has authorized the repurchase of up to $1,000,000 of the Company’s common stock when market prices make repurchases advantageous.

F-29

NINE MONTHS ENDED DECEMBER 31, 2007 QUARTERLY FINANCIAL INFORMATION

Three months ended

	*December 31, 2007			September 30, 2007			June 30, 2007
Net Sales	$	36,570		$	12,584		$	10,548
Cost of Goods Sold		20,630			6,947			5,499
Gross Profit		15,940			5,637			5,049
Operating Expenses		11,477			6,684			6,192
Operating Income/(Loss)		4,463			(1,047	)		(1,143	)
Other Income (Expenses)		(27	)		(38	)		(45	)
Interest Expense		277			194			237
Income (Loss) Before Taxes		4,159			(1,279	)		(1,425	)
Provision (Benefit) for income taxes		1,711			(496	)		(552	)
Net Income (loss)	$	2,448		$	(783	)	$	(873	)
Earnings (loss) per common share, basic	$	0.07		$	(0.02	)	$	(0.02	)
Earnings (loss) per common share, diluted	$	0.07		$	(0.02	)	$	(0.02	)
Weighted Average shares Outstanding:
Basic		37,328,962			37,203,417			36,958,391
Diluted		37,596,089			37,491,410			37,287,900

* The Company’s business is seasonal and it generates a considerable portion of its revenues during the holiday quarter ending December 31. Therefore, quarterly operating results are not necessarily indicative of the results that may be expected for the full fiscal year.

F-30

FISCAL 2007 QUARTERLY FINANCIAL INFORMATION

(unaudited)

Three months ended

	March 31, 2007			*December 31, 2006		September 30, 2006			June 30, 2006
Net Sales	$	14,626		$	24,853	$	8,557		$	7,924
Cost of Goods Sold		8,658			13,929		4,700			4,511
Gross Profit		5,968			10,924		3,857			3,413
Operating Expenses		6,562			7,411		4,229			3,826
Operating Income/(Loss)		(594	)		3,513		(372	)		(413	)
Other Income (Expenses)		(42	)		—		—			—
Interest Expense		138			104		134			152
Income(Loss) Before Taxes		(774	)		3,409		(506	)		(565	)
Provision (Benefit) for income taxes		(327	)		1,328		(202	)		(214	)
Net Income (loss)	$	(447	)	$	2,081	$	(304	)	$	(351	)
Earnings (loss) per common share, basic	$	(.01	)	$	0.06	$	(.01	)	$	(.01	)
Earnings (loss) per common share, diluted	$	(.01	)	$	0.06	$	(.01	)	$	(.01	)
Weighted Average shares Outstanding:
Basic		36,744,642			33,045,843		29,683,787			29,683,787
Diluted		36,744,642			33,045,843		29,683,787			29,683,787

* The Company’s business is seasonal and it generates a considerable portion of its revenues during the holiday quarter ending December 31. Therefore, quarterly operating results are not necessarily indicative of the results that may be expected for the full fiscal year.

F-31

FISCAL 2006 QUARTERLY FINANCIAL INFORMATION

(unaudited)

Three months ended

	March 31, 2006			*December 31, 2005		September 30, 2005			June 30, 2005
Net Sales	$	11,537		$	18,263	$	6,878		$	6,055
Cost of Goods Sold		7,882			9,885		3,483			3,207
Gross Profit		3,655			8,378		3,395			2,848
Operating Expenses		4,911			5,661		3,539			3,052
Operating Income/(Loss)		(1,256	)		2,717		(144	)		(204	)
Other Income (Expenses)		3,657			—		—			—
Earnings Before Interest and Taxes		2,401			2,717		(144	)		(204	)
Interest Expense		115			102		83			154
Income(Loss) Before Taxes		2,286			2,615		(227	)		(358	)
Provision (Benefit) for income taxes		951			1,046		(91	)		(144	)
Net Income (loss)	$	1,335		$	1,569	$	(136	)	$	(214	)
Earnings (loss) per common share, basic	$	0.04		$	0.05	$	(0.00	)	$	(.01	)
Earnings (loss) per common share, diluted	$	0.04		$	0.05	$	(0.00	)	$	(.01	)
Weighted Average shares Outstanding:
Basic		29,683,787			29,683,787		29,683,787			20,542,174
Diluted		29,683,787			29,683,787		29,683,787			20,542,174

* The Company’s business is seasonal and it generates a considerable portion of its revenues during the holiday quarter ending December 31. Therefore, quarterly operating results are not necessarily indicative of the results that may be expected for the full fiscal year.

F-32

Exhibit Index

Exhibit No.	Description
10.7	Stock Purchase Agreement between Company and BKJ Consulting Corp, dated August 1, 2007
21	Subsidiaries of the Company
31.1	Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed incorporated by reference into any other filing under the Security Act of 1933, as amended, or by the Security Exchange Act of 1934, as amended.)
32.2	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 as amended or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed incorporated by reference into any other filing under the Security Act of 1933, as amended, or by the Security Exchange Act of 1934, as amended.)

EX-10.7

EXHIBIT 10.7

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT, dated as of August 1, 2007 (this “Agreement”), by and between Dreams, Inc., a Utah corporation, having its principal place of business at 2 South University Drive, Plantation, Florida (hereinafter “Purchaser”); and the individuals listed on Schedule A hereto (each a “Seller”, collectively, the “Sellers”). Purchaser and Seller are each a “party” and together are “parties” to this Agreement.

WITNESSETH:

WHEREAS, BKJ Consulting Corp, is an Illinois corporation having its principal place of business at 1307 Whitney Lane, Buffalo Grove, Illinois 60089 (the “Company”).

WHEREAS, the Company has Ten Thousand (10,000) authorized shares of common stock, One Thousand (1,000) of which are owned by Sellers (the “Common Stock”), which shares of Common Stock constitute all of the issued and outstanding capital stock of the Company;

WHEREAS, the Company is engaged in the sale of sports memorabilia and collectibles (the “Business”);

WHEREAS, Purchaser is a Utah corporation having its principal place of business at 2 South University Drive, Plantation Florida; and

WHEREAS, Sellers desire to sell to Purchaser and Purchaser desires to purchase from Sellers all of the issued and outstanding shares of Common Stock owned by Sellers.

NOW, THEREFORE, in consideration of these premises and of the respective representations, warranties, covenants, agreements and conditions contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

SECTION 1.

DEFINITIONS

1.1 Terms and Interpretation Generally. References to Articles, Sections, Annexes, Schedules and Exhibits in this Agreement are references to Articles and Sections of, and Annexes, Schedules and Exhibits to, this Agreement unless otherwise indicated. The Article and Section headings in this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof. Whenever the words “include,” “includes” or “including” (or any variation thereof) are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Any reference to the singular in this Agreement shall also include the plural and vice versa. The words “hereof”, “herein”, “hereunder” and comparable terms refer to the entirety of this Agreement and

not to any particular Article, Section or other subdivision hereof or attachment hereto. This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party causing this Agreement or any party thereof to be drafted. In the computation of periods of time from a specified date to a later specified date, (i) the word “from” shall mean “from and including;” (ii) the words “to” and “until” each mean “to but excluding;” and (iii) the word “through” shall mean “to and including”. The word “or” is used in the inclusive sense of “and/or”. Except as may otherwise be expressly provided herein, whenever anything is required to be done or any action is required to be taken hereunder on or by a day which is not a Business Day, then such thing may be validly done and such action may be validly taken on or by the next immediately succeeding day that is a Business Day.

1.2 Certain Terms. As used in this Agreement, the following terms have the following meanings.

“Affiliate” of any Person shall mean any other Person, which, directly or indirectly, controls or is controlled by or is under common control with such Person. A Person shall be deemed to “control,” be “controlled by,” or be “under common control with” any other Person if such other Person possesses, directly or indirectly, power to direct or cause the direction of the management or policies of such Person whether through the ownership of voting securities, partnership interests, member interests, profit interests, by contract, or otherwise.

“Agreement” shall have the same meaning as ascribed to such term in the opening paragraph to this Agreement.

“Business” shall have the same meaning ascribed to such term in the Recitals of this Agreement.

“Business Day” shall mean any day other than (a) Saturday or Sunday or (b) any other day on which banks in Fort Lauderdale, Florida are permitted or required to be closed.

“Closing” and “Closing Date” shall have the same meanings ascribed to such terms in Section 3 hereof.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Common Stock” shall have the meaning ascribed to such term in the Recitals to this Agreement.

“Company” shall have the meaning ascribed to such term in the opening paragraph to this Agreement.

“Company Plans” shall have the same meaning as ascribed to such term in Section 6.8 hereof.

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“Consent” shall mean any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization).

“Contemplated Transactions” shall mean all of the transactions contemplated by this Agreement, including:

(a) the sale of the Shares by Sellers to Purchaser;

(b) the execution and delivery of the Employment Agreements;

(c) the execution and delivery of the Promissory Notes;

(d) the performance by Purchaser and Sellers of their respective covenants and obligations under this Agreement; and

(e) Purchaser’s acquisition and ownership of the Shares and exercise of control over the Company.

“Contract” shall mean any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended and all rules and regulations and promulgated thereunder.

“Employees” shall have the same meaning as ascribed to such term in Section 6.8 hereof.

“Employment Agreements” shall mean the agreements providing for the terms of certain employment between certain Sellers and Company, substantially in the form annexed hereto as Exhibit A.

“Encumbrance” shall mean any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Facility Lease” shall mean the real property lease for the office located at 1307 Whitney Lane, Buffalo Grove, Illinois 60089.

“Financial Statements” shall have the same meaning as ascribed to such term in Section 6.4 hereof.

“GAAP” shall mean generally accepted accounting principles in the United States.

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“Governmental Authority” shall mean any federal, state, local, foreign or other governmental or administrative body, instrumentality, department or agency or any court, tribunal, administrative hearing, arbitration panel, commission or similar dispute resolving panel or body.

“Indemnifiable Claim” shall have the same meaning as ascribed to such term in Section 10.3(c) hereof.

“Indemnitee” shall have the same meaning as ascribed to such term in Section 10.3(a) hereof.

“Indemnitor” shall have the same meaning as ascribed to such term in Section 10.3(b) hereof.

“Intellectual Property Assets” shall have the same meaning as ascribed to such term in Section 6.15 hereof.

“Legal Requirement” shall mean any federal, state, local, municipal, foreign, international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty.

“Losses” shall have the same meaning as ascribed to such term in Section 10.1 hereof.

“Material Adverse Effect” shall mean a material adverse effect on (i) the condition (financial or otherwise), results of operations, properties, prospects or assets of the Company, or (ii) the ability of the Sellers to consummate the Contemplated Transactions.

“Material Agreements” shall mean those Contracts set forth on Schedule 4.2.

“Material Contracts” shall have the meaning ascribed to such term in Section 6.18.

“Order” shall mean any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator.

“Ordinary Course of Business” shall mean when referring to an action taken by a person an action that:

(a) is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person; and

(b) does not require any separate or special authorization of any nature.

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“Organizational Documents” shall mean (a) the articles or certificate of incorporation and the bylaws of a corporation; (c) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (e) any amendment to any of the foregoing.

“Person” shall mean any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Authority.

“Proceeding” shall mean any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority or arbitrator.

“Promissory Notes” shall mean those promissory notes issued at closing with terms to be agreed upon, in the sum of One Million One Hundred Sixty Eight Thousand and No/100 Dollars ($1,168,000.00) by the Company to Sellers.

“Purchaser” shall have the meaning ascribed to such term in the opening paragraph to this Agreement.

“Purchaser Indemnified Parties” shall have the same meaning as ascribed to such term in Section 10.3(d) hereof.

“SEC” shall mean the Securities and Exchange Commission.

“Securities Act” shall refer to the Securities Act of 1933, as amended.

“Sellers” shall have the meaning ascribed to such term in the opening paragraph to this Agreement.

“Sellers’ Closing Documents” shall have the meaning ascribed to such term in Section 6.2(a).

“Sellers’ Knowledge” or “to the Knowledge of Sellers” shall mean the knowledge of Sellers, the Company’s officers, directors and senior management and such knowledge as would be reasonably expected to be known by such officers, directors and management in the ordinary and usual course of the performance of their professional responsibilities to the Company.

“Shares” shall have the same meaning ascribed to such term in Section 2.1 hereof.

“Straddle Period” shall mean all taxes imposed on the Company relating or attributable to taxable periods that begin on or before and then end after the Closing Date.

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“Third Party Claim” shall have the same meaning as ascribed to such term in Section 10.4 hereof.

SECTION 2.

PURCHASE AND SALE OF THE COMMON STOCK

2.1 Purchase and Sale. Subject to the terms and conditions of this Agreement, Sellers shall sell, convey, assign, transfer and deliver to Purchaser on the Closing Date (as hereinafter defined), and Purchaser shall purchase from Sellers, all of the shares of Common Stock (the “Shares”), which represent all of the issued and outstanding capital stock of the Company.

2.2 Purchase Price; Payment of Purchase Price. On the Closing Date, subject to the terms and conditions of this Agreement, Purchaser shall (i) issue 500,000, newly issued, restricted common shares of Purchaser and (ii) the issuance of the Promissory Notes and such additional shares of restricted common stock of Purchaser having a value equal to Four Hundred Twenty Eight Thousand and No/100 Dollars ($428,000.00) (the number of shares to be determined based on the average closing price of Purchaser’s common stock for the prior thirty (30) trading days ending on the trading day prior to the Closing Date) (the “Purchase Price”).

SECTION 3.

CLOSING DATE

The closing of the transactions contemplated herein (the “Closing”) shall be deemed effective as of 11:59 p.m. on August 1, 2007 (hereinafter the “Closing Date”). The Closing shall occur at such time and place as the parties shall mutually agree.

SECTION 4.

DOCUMENTS TO BE DELIVERED TO PURCHASER AT THE CLOSING

At the Closing, Sellers shall deliver to Purchaser the following documents. Receipt of such documents by Purchaser shall be a condition precedent to Purchaser’s obligation to close the transactions contemplated herein:

4.1 Stock Certificates. Stock certificates for all of the Shares with duly executed stock powers and assignments attached in proper form for transfer to Purchaser with all necessary documentary transfer stamps attached to be paid by Seller, if applicable.

4.2 Assignment of Material Agreements. Seller shall have obtained third party consents to assign the Material Agreements set forth in schedule 4.2.

4.3 Resignations. Written resignations of all officers and directors of the Company dated as of the Closing Date.

4.4 Corporate Books and Charter. The complete and correct minute book, stock transfer book and by-laws and a certified copy of the Company’s Articles of Incorporation and all amendments thereto from the State of Nevada and all other books and records relating to the Company.

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4.5 Officer Representations. A certificate executed by Sellers representing and warranting to Purchaser that each of Sellers’ representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date (giving full effect to any supplements to Schedules that were delivered by Seller to Purchaser prior to the Closing Date).

4.6 Certificate of Good Standing. A Certificate of Good Standing of the Company issued by the Secretary of the State of the State of Illinois, certified as of a recent date.

4.7 Employment Agreements. Agreements in a form substantially similar to the documents attached hereto as Exhibit A acknowledging mutually satisfactory terms of employment between Company and each Seller.

4.8 Cancellation of Demand Notes. Sellers shall have cancelled or otherwise terminated all demand notes listed on Schedule 4.8 hereto.

4.9 Landlord Estoppel. Sellers shall have obtained and delivered an executed “Lessor’s Acknowledgment and Subordination” substantially in the form of Exhibit 4.9 hereto.

SECTION 5.

DOCUMENTS TO BE DELIVERED TO SELLER AT THE CLOSING

At the Closing, Purchaser or an Affiliate thereof shall deliver to Sellers:

5.1 Stock Issuance. 500,000 newly issued, restricted common shares of Purchaser in accordance with Section 2.2(i).

5.2 Promissory Notes. Delivery of the Promissory Notes in accordance with Schedule 5.2.

5.3 Additional Stock. Such number of additional common restricted shares of Purchaser as described in Section 2.2(ii) to the Sellers listed on Schedule 5.3.

5.4 Officers’ Certificates. A certificate executed by an officer of Purchaser attesting to the adoption of resolutions authorizing the transactions contemplated by this Agreement by the Board of Directors of Purchaser.

SECTION 6.

REPRESENTATIONS AND WARRANTIES OF SELLER

The Sellers, jointly and severally, do hereby represent and warrant to Purchaser as follows:

6.1 Organization and Good Standing. The Company is duly organized and validly existing in good standing under the laws of the State of Illinois and has the corporate power to own and lease its properties and assets with all requisite power and authority to carry on its business as it is now being conducted and to perform all its obligations under applicable Contracts. Except as disclosed on Schedule 6.1, the present nature of the Company’s business and activities do not require it to be qualified as a foreign corporation in any other state.

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6.2 Authority; No Conflict.

(a) This Agreement constitutes the legal, valid, and binding obligation of each Seller, enforceable against each Seller in accordance with its terms. Upon the execution and delivery by Sellers of the Agreement; the respective Employment Agreements (collectively, the “Sellers’ Closing Documents”), the Sellers’ Closing Documents will constitute the legal, valid, and binding obligations of each Seller, enforceable against each Seller in accordance with their respective terms. Each Seller has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and the Sellers’ Closing Documents and to perform their obligations under this Agreement and the Sellers’ Closing Documents.

(b) Except as set forth in Schedule 6.2(b), neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time:

(i) contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of the Company, or (B) any resolution adopted by the board of directors or the stockholders of the Company;

(ii) contravene, conflict with, or result in a violation of, or give any Governmental Authority or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which the Company or any Seller, or any of the assets owned or used by the Company, may be subject;

(iii) contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that is held by the Company or that otherwise relates to the business of, or any of the assets owned or used by, the Company;

(iv) cause Purchaser or the Company to become subject to, or to become liable for the payment of, any Tax;

(v) cause any of the assets owned by the Company to be reassessed or revalued by any taxing authority or other Governmental Body;

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(vi) contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any contract; or

(vii) result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned or used by the Company.

(c) Each Seller understands that the shares of Purchaser’s common stock are “restricted securities” and have not been registered under the Securities Act or any applicable State securities laws and is acquiring the Shares of Purchaser’s common stock for its own account and with a view to distributing or reselling such shares or any part thereof in violation of the Securities Act or any applicable State securities laws.

(d) Each Seller either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the perspective investment in the Purchaser’s Shares, and to so evaluate the merits and risks of such investment. Such Seller is able to bear the economic risk of investment in such Shares and, at the present time, is able to report a complete loss of such investment. Each Seller acknowledges that a legend may be placed on such shares to the effect that such Shares may not be offered or sold except pursuant to an effective registration statement under the Securities Act and pursuant to any available exemption from, or in a transaction not subject to the registration requirements of the Securities Act and in accordance with applicable State securities laws as evidenced by legal opinion of Counsel to Dreams, to such effect.

Except as set forth in Schedule 6.2, no Seller is or will be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.

6.3 Capitalization. The authorized equity securities of the Company consist of Ten Thousand (10,000) shares of common stock, of which One Thousand (1,000) shares are issued and outstanding and constitute the Shares. Sellers are and will be on the Closing Date the record and beneficial owners and holders of the Shares, free and clear of all Encumbrances. No legend or other reference to any purported Encumbrance appears upon any certificate representing equity securities of the Company. All of the outstanding equity securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. There are no Contracts relating to the issuance, sale, or transfer of any equity securities or other securities of the Company. None of the outstanding equity securities or other securities of the Company was issued in violation of the Securities Act or any other Legal Requirement. The Company does not own, or have any Contract to acquire, any equity securities or other securities of any Person or any direct or indirect equity or ownership interest in any other business.

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6.4 Financial Statements and Information. Seller has delivered to Purchaser:

Unaudited balance sheet of the Company as at December 31, 2006 including the notes thereto (the “Balance Sheet”) and the related unaudited consolidated statements of income, changes in stockholders’ equity, and cash flow for each for the fiscal year then ended (including the notes thereto), (c) an unaudited consolidated balance sheet of the Company as at June 12, 2007 (the “Interim Balance Sheet”) and the related unaudited consolidated statements of income, changes in stockholders’ equity, and cash flow for the two months then ended, including in each case the notes thereto. Such financial statements and notes fairly present the financial condition and the results of operations, changes in stockholders’ equity, and cash flow of the Company as at the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP; the financial statements referred to in this Section 6.4 reflect the consistent application of such accounting principles throughout the periods involved, except as disclosed in the notes to such financial statements. No financial statements of any Person other than the Company are required by GAAP to be included in the consolidated Financial Statements of the Company. The financial statements referred to in this section are defined as the “Financial Statements.”

6.5 Books and Records. The books of account, minute books, stock record books, and other records of the Company, all of which have been made available to Purchaser, are complete and correct and have been maintained in accordance with sound business practices and the requirements of Section 13(b)(2) of the Securities Exchange Act of 1934, as amended (regardless of whether or not the Company is subject to that Section), including the maintenance of an adequate system of internal controls. The minute books of the Company contain accurate and complete records of all meetings held of, and corporate action taken by, the stockholders, the Boards of Directors, and committees of the Boards of Directors of the Company, and no meeting of any such stockholders, Board of Directors, or committee has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the Company.

6.6 Good Title; Encumbrances. Schedule 6.6 contains a complete and accurate list of all leaseholds, or other interests therein owned by the Company. The Company owns no real property. The Company owns all the properties and assets (whether personal, or mixed and whether tangible or intangible) that they purport to own, including all of the properties and assets reflected in the Balance Sheet and the Interim Balance Sheet (except for personal property sold since the date of the Balance Sheet and the Interim Balance Sheet, as the case may be, in the Ordinary Course of Business), and all of the properties and assets purchased or otherwise acquired by the Company since the date of the Balance Sheet (except for personal property acquired and sold since the date of the Balance Sheet in the Ordinary Course of Business and consistent with past practice). All properties and assets reflected in the Balance Sheet and the Interim Balance Sheet are free and clear of all Encumbrances.

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6.7 Lease of Real Property and Use of Machinery and Equipment. Schedule 6.7 attached hereto describes all leases, use, or occupancy agreements of real and/or personal property under which the Company is lessor or lessee and shows for each agreement (i) the name of parties thereto, (ii) a description of property covered, (iii) the terms of agreement, including its expiration date, (iv) monthly rental payments, and (v) the use to which the property is being put. The Company’s use of such real and/or personal property does not violate in any respect any applicable zoning, building or other laws, ordinances, regulations, restrictive covenants, conditions or requirements.

6.8 Employees. Schedule 6.8 attached hereto lists, for each current employee of the Company, the name, starting date, current annual salary (including bonus), other fringe benefits (including the use of an automobile), and the amounts of accrued sick days and vacation days (collectively, the “Employees”). Except as identified on Schedule 6.8, Seller has no “employee benefit plans” within the meaning of §3(3) of ERISA or any bonus, incentive, deferred compensation, supplemental retirement, severance or other employee benefit plans, programs or arrangements, or employment or compensation agreements, in each case for the benefit of, or relating to, Employees or former employees of the Seller or their dependents (collectively, the “Company Plans”). No Employee has resigned from the Company or otherwise had his or her employment terminated by the Company since January 1, 2007. No employee or director is in violation of or restricted by, directly or indirectly, any agreement, including, but not limited to, any agreements regarding confidentiality, non-competition, non-interference or non-solicitation, from carrying on the Business anywhere in the world for any period of time. No Employee is a party to any agreement, arrangement or understanding with the Company to share, participate in or receive any portion of the proceeds from the transactions contemplated hereby or otherwise be awarded any equity (or right to purchase equity) in the Company. Neither the execution and delivery of this Agreement, the performance of the provisions hereof nor the consummation of the transactions contemplated hereby will trigger any severance pay obligation under any agreement the Company is a party to or, to the knowledge of Seller, under any applicable law. Except as set forth on Schedule 6.8 on the Closing Date there will be no bonuses or severance payments owed to the current or prior Employees or the directors or officers of the Company.

6.9 Employee Relations and Agreements.

(a) Except as disclosed in Schedule 6.9(a) attached hereto, the Company is in compliance with all Federal, state and other applicable laws, respecting employment and employment practices, terms and conditions of employment and wages and hours, and, to the knowledge of Sellers, has not and is not engaged in any discriminatory or unfair labor practice;

(b) No unfair labor practice complaint against the Company is pending or to the knowledge of Sellers threatened before any labor relations board or other tribunal;

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(c) There is no labor strike, dispute, slowdown or stoppage actually pending or, to the knowledge of Sellers, threatened against or involving the Company;

(d) No union representation exists respecting the Employees of the Company;

(e) There is no pending or, to the knowledge of Seller, threatened grievance, or claim by any Person or former employee, officer or director of the Company, upon the Company or the conduct of its business;

(f) No collective bargaining agreement is currently being negotiated by the Company;

(g) The Company has no, and is not under any obligation to establish or maintain any, employment or collective bargaining agreements, welfare, pension, retirement, insurance or other Employee Benefit Plans except as listed in Schedule 6.9(g) attached hereto and made a part hereof. True and complete copies of said agreements and plans have been furnished to Purchaser. Schedule 6.9(g) lists all such agreements and plans presently in force showing (i) description of agreement or plan, (ii) date of agreement or plan, (iii) expiration date, (iv) employees and facilities covered, and (v) the amount of any unfunded past service liability under any agreement or plan. Each such agreement or plan has been administered in accordance with its terms and, to Sellers’ Knowledge, is in compliance with ERISA and any other applicable laws, regulations and rulings and each plan administrator and fiduciary in respect thereof is in compliance in all material respects with ERISA and any other applicable laws, regulations and rulings, and the Company has no unfunded or under funded liability under ERISA or other applicable laws, regulations or rulings. There is no material liability relating to any such agreement or plan that is required to be on the Reference Balance Sheet that is not reflected thereon;

(h) The Company has no commission or incentive compensation arrangements which have not been set forth on Schedule 6.9(h) attached hereto; and

(i) Except as identified on Schedule 6.9(i) attached hereto, no director or officer of the Company owns, directly or indirectly, any interest in, or is an officer, director, consultant, agent or employee of any entity which is, a competitor, customer, supplier, sales representative, or distributor of or to the Company.

6.10 Material Adverse Change. Since January 1, 2007, there has not been any material adverse change in the business, operations, properties, prospects, assets, or condition of the Company, and no event has occurred or circumstance exists that may result in such a material adverse change.

6.11 Accounts Receivable. All accounts receivable of the Company that are reflected on the Balance Sheet or the Interim Balance Sheet or on the accounting records of the Company as of the Closing Date (collectively, the “Accounts Receivable”) represent or will represent valid obligations arising from sales actually made or services actually performed in the Ordinary Course of Business. Unless paid prior to the Closing Date, the Accounts Receivable are or will be as of the Closing Date current and collectible

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net of the respective reserves shown on the Balance Sheet or the Interim Balance Sheet or on the accounting records of the Company as of the Closing Date (which reserves are adequate and calculated consistent with past practice). There is no contest, claim, or right of set-off, other than returns in the Ordinary Course of Business, under any Contract with any obligor of an Accounts Receivable relating to the amount or validity of such Accounts Receivable. Schedule 6.11 contains a complete and accurate list of all Accounts Receivable as of the date of the Interim Balance Sheet, which list sets forth the aging of such Accounts Receivable. However, at Closing, the accounts receivable amounts shall equal the accounts payables. If not, the Sellers are responsible for the difference.

6.12 Inventory.

Except as identified on Schedule 6.12, all inventory of the Company, whether or not reflected in the Balance Sheet or the Interim Balance Sheet, consists of a quality and quantity usable and salable in the Ordinary Course of Business, except for obsolete items and items of below-standard quality, all of which have been written off or written down to net realizable value in the Balance Sheet or the Interim Balance Sheet or on the accounting records of the Company as of the Closing Date, as the case may be. The total of the Company’s inventory identified on Schedule 6.12 approximately equals One Million Eight Hundred Fifty Thousand Dollars ($1,850,000).

6.13 No Undisclosed Liabilities. The Company has no liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent, or otherwise) except for liabilities or obligations reflected or reserved against in the Balance Sheet or the Interim Balance Sheet and current liabilities incurred in the Ordinary Course of Business since the respective dates thereof.

6.14 Taxes. Except as identified on Schedule 6.14,

(a) The Company has filed all tax returns in connection with any foreign, federal, state or local taxes required to be filed, and the Company has paid or will pay all taxes due and payable in accordance with such tax returns or otherwise required to be paid. All such returns were correct and complete in all material respects. Seller has delivered to Purchaser copies of all such Tax Returns. There are no liens on any of the assets of the Company of any kind or nature that arose in connection with any failure (or alleged failure) to pay any tax. The Company has withheld and paid or collected and remitted all taxes required to have been withheld and paid in connection with amounts paid or owing to any third party, including any Employee, independent contractor, supplier, vendor, creditor or stockholder.

(b) The Company has not obtained an extension of time within which to file any tax return, which has not yet been filed. The Company has not received written notice from any Governmental Authority in a jurisdiction in which it does not file a tax return stating that it is subject to taxation by that jurisdiction.

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(c) The amounts accrued as liabilities for taxes on the books of the Company and reflected on the Financial Statements are adequate to satisfy all material unpaid liabilities for taxes of the Company through the date of such Financial Statements. There is no agreement, waiver or other document extending, or having the effect of extending, the period for assessment or collection of any taxes of the Company, which extension or waiver is still in effect. The Company has delivered to Purchaser correct and complete copies of all federal income tax returns, examination reports, statements or deficiencies and similar documents prepared by any tax authority that relate to the income, operations or business of the Company with respect to any period ending on or after December 31, 2005. The Company is not a party to any tax sharing or allocation arrangement with any Person, is not a member of an affiliated group filing a consolidated federal tax return and has no liability for taxes of any Person other than the Company under Treasury Regulation Section 1.1502-6 or any similar provision of state law, or as a transferee or successor, by contract or otherwise.

(d) No authority will assess the Company any additional taxes for any period for which tax returns have been filed. There is no dispute or claim concerning any tax liability of the Company either (A) claimed or raised by any authority in writing or (B) as to which any Seller have knowledge.

(e) The Company has not made any payments, is not obligated to make any payments, and is not a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code Section 280G. The Company has not been a United States real property holding corporation within the meaning of Code Section 896(c)(2) during the applicable period specified in Code Section 896(c)(1)(A)(ii). The Company has disclosed on its federal income tax returns all positions taken therein that could give rise to a substantial understatement of federal income tax within the meaning of Code Section 6662.

(f) Schedule 6.14(f) attached hereto sets forth the following information with respect to the Company as of the most recent practicable date: (A) the basis of the Company’s assets; and (B) the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign tax, or excess charitable contribution allocable to the Company.

(g) The unpaid taxes of the Company do not exceed the reserve for tax liability set forth on the Interim Balance Sheet.

(h) Except as set forth on Schedule 6.14(h) attached hereto, the Company’s tax returns have not been audited.

6.15 Intellectual Property.

(a) Intellectual Property Assets—The term “Intellectual Property Assets” includes:

(i) all fictional business names, trading names, registered and unregistered trademarks, service marks, and applications (collectively, “Marks”);

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(ii) all copyrights in both published works and unpublished works (collectively, “Copyrights”); and

(iii) all know-how, trade secrets, confidential information, customer lists, software, technical information, data, process technology, plans, drawings, and blue prints (collectively, “Trade Secrets”); owned, used, or licensed by the Company as licensee or licensor.

(b) Agreements. Schedule 6.15(b) contains a complete and accurate list and summary description, including any royalties paid or received by the Company, of all Contracts relating to the Intellectual Property Assets to which the Company is a party or by which the Company is bound. There are no outstanding and, to Sellers’ Knowledge, no threatened disputes or disagreements with respect to any such agreement.

(c) Know-How Necessary for the Business. The Company is the owner of all right, title, and interest in and to each of the Intellectual Property Assets, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims, and has the right to use without payment to a third party all of the Intellectual Property Assets.

(d) Trademarks.

(i) Schedule 6.15(d) contains a complete and accurate list and summary description of all Marks. The Company is the owner of all right, title, and interest in and to each of the Marks, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims.

(ii) All Marks that have been registered with the United States Patent and Trademark Office are currently in compliance with all formal legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications), are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety days after the Closing Date.

(iii) No Mark has been or is now involved in any opposition, invalidation, or cancellation and, to Sellers’ Knowledge, no such action is threatened with the respect to any of the Marks.

(iv) To Sellers’ Knowledge, there is no potentially interfering trademark or trademark application of any third party.

(v) No Mark is infringed or, to Sellers’ Knowledge, has been challenged or threatened in any way. None of the Marks used by the Company infringes or is alleged to infringe any trade name, trademark, or service mark of any third party.

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(vi) All products and materials containing a Mark bear the proper federal registration notice where permitted by law.

(e) Copyrights.

(i) Schedule 6.15(e) contains a complete and accurate list and summary description of all Copyrights. The Company is the owner of all right, title, and interest in and to each of the Copyrights, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims.

(ii) All the Copyrights have been registered and are currently in compliance with formal legal requirements, are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety days after the date of Closing.

(iii) No Copyright is infringed or, to Sellers’ Knowledge, has been challenged or threatened in any way. None of the subject matter of any of the Copyrights infringes or is alleged to infringe any copyright of any third party or is a derivative work based on the work of a third party.

(iv) All works encompassed by the Copyrights have been marked with the proper copyright notice.

(f) Trade Secrets.

(i) With respect to each Trade Secret, the documentation relating to such Trade Secret is current, accurate, and sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the knowledge or memory of any individual.

(ii) Seller and the Company have taken all reasonable precautions to protect the secrecy, confidentiality, and value of their Trade Secrets.

(iii) The Company has good title and an absolute (but not necessarily exclusive) right to use the Trade Secrets. The Trade Secrets are not part of the public knowledge or literature, and, to Sellers’ Knowledge, have not been used, divulged, or appropriated either for the benefit of any Person or to the detriment of the Company. No Trade Secret is subject to any adverse claim or has been challenged or threatened in any way.

6.16 Accounts Payable; Contracts with Suppliers. Schedule 6.16 attached hereto lists the accounts payable of the Company as of the Closing Date and each agreement between the Company and its suppliers involving an aggregate purchase price of $5,000 or more by (i) name of vendor, (ii) description of goods or services, (iii) purchase order value, and (iv) balance due to vendor. No such order or agreement is subject to any escalation, renegotiation, redetermination, rebate or similar provision. However, at closing, the accounts receivable figure shall equal accounts payable. If not, Sellers are responsible for the difference.

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6.17 Bank Accounts. A list of the bank accounts, and account numbers and full information in respect of all credit cards and charge accounts in the name of the Company or for which the Company is responsible, attached hereto as Schedule 6.17, is complete in all respects.

6.18 Material Contracts.

(a) Schedule 6.18(a) contains a complete and accurate list, and Sellers have delivered to Purchaser true and complete copies of the following (the “Material Contracts”):

(i) each Contract that involves performance of services or delivery of goods or materials by the Company of an amount or value in excess of $10,000.00;

(ii) each Contract that was not entered into in the Ordinary Course of Business and that involves expenditures or receipts of the Company in excess of $10,000.00;

(iii) each lease, rental or occupancy agreement, license, installment and conditional sale agreement, and other Contract affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any real or personal property (except personal property leases and installment and conditional sales agreements having a value per item or aggregate payments of less than $10,000 and with terms of less than one year);

(iv) each licensing agreement or other Contract with respect to trademarks, copyrights, or other intellectual property, including agreements with current or former employees, consultants, or contractors regarding the appropriation or the non-disclosure of any of the Intellectual Property Assets;

(v) each collective bargaining agreement and other Contract to or with any labor union or other employee representative of a group of employees;

(vi) each joint venture, partnership, and other Contract (however named) involving a sharing of profits, losses, costs, or liabilities by the Company with any other Person;

(vii) each Contract containing covenants that in any way purport to restrict the business activity of the Company or limit the freedom of the Company or any Affiliate of the Company to engage in any line of business or to compete with any Person;

(viii) each Contract providing for payments to or by any Person based on sales, purchases, or profits, other than direct payments for goods;

(ix) each power of attorney that is currently effective and outstanding;

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(x) each Contract entered into other than in the Ordinary Course of Business that contains or provides for an express undertaking by the Company to be responsible for consequential damages;

(xi) each Contract for capital expenditures in excess of $10,000.00;

(xii) each written warranty, guaranty, and or other similar undertaking with respect to contractual performance extended by the Company other than in the Ordinary Course of Business; and

(xiii) each amendment, supplement, and modification (whether oral or written) in respect of any of the foregoing.

Schedule 6.18(a) sets forth reasonably complete details concerning such Material Contracts, including the parties to the Contracts and the amount of the remaining commitment of the Company under the Contracts.

(b) Except as set forth in Schedule 6.18(b):

(i) The Sellers do not have or may not acquire any rights under, or have or may become subject to any obligation or liability under, any Contract that relates to the Business of, or any of the assets owned or used by, the Company; and

(ii) To the Knowledge of Sellers, no officer, director, agent, employee, consultant, or contractor of the Company is bound by any Contract that purports to limit the ability of such officer, director, agent, employee, consultant, or contractor to (A) engage in or continue any conduct, activity, or practice relating to the business of the Company, or (B) assign to any the Company or to any other Person any rights to any invention, improvement, or discovery.

(c) Except as set forth in Schedule 6.18(c), each Contract identified or required to be identified in 6.18(a) is in full force and effect and is valid and enforceable in accordance with its terms.

(d) Except as set forth in Schedule 6.18(d):

(i) the Company is, and at all times since January 1, 2005 has been, in full compliance with all applicable terms and requirements of each Contract under which such the Company has or had any obligation or liability or by which the Company or any of the assets owned or used by the Company is or was bound;

(ii) each other Person that has or had any obligation or liability under any Contract under which the Company has or had any rights is, and at all times since January 1, 2005 has been, in full compliance with all applicable terms and requirements of such Contract;

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(iii) no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with, or result in a violation or breach of, or give the Company or other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Material Contract; and

(iv) the Company has not given to or received from any other Person, at any time since January 1, 2005, any notice or other communication (whether oral or written) regarding any actual, alleged, possible, or potential violation or breach of, or default under, any Contract.

(e) There are no renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate any material amounts paid or payable to the Company under current or completed Contracts with any Person and no such Person has made written demand for such renegotiation.

(f) The Contracts relating to the sale, design, manufacture, or provision of products or services by the Company have been entered into in the Ordinary Course of Business and have been entered into without the commission of any act alone or in concert with any other Person, or any consideration having been paid or promised, that is or would be in violation of any Legal Requirement.

6.19 Legal Proceedings; Orders.

(a) There are no pending Proceedings:

(i) that have been commenced by or against the Company or that otherwise relates to or may affect the business of, or any of the assets owned or used by, the Company; or

(ii) that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions.

(b) To the Knowledge of Seller, (1) no such Proceeding has been threatened, and (2) no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding.

(i) there is no Order to which the Company, or any of the assets owned or used by the Company, is subject;

(ii) the Sellers are not subject to any Order that relates to the business of, or any of the assets owned or used by, the Company; and

(iii) no officer, director, agent, or employee of the Company is subject to any Order that prohibits such officer, director, agent, or employee from engaging in or continuing any conduct, activity, or practice relating to the business of the Company.

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(iv) Company is, and at all times since January 1, 2005, has been, in full compliance with all of the terms and requirements of each Order to which it, or any of the assets owned or used by it, is or has been subject;

(v) no event has occurred or circumstance exists that may constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Order to which Company, or any of the assets owned or used by the Company, is subject; and

(vi) the Company has not received, at any time since January 1, 2005, any notice or other communication (whether oral or written) from any Governmental Authority or any other Person regarding any actual, alleged, possible, or potential violation of, or failure to comply with, any term or requirement of any Order to which the Company, or any of the assets owned or used by the Company, is or has been subject.

6.20 Absence of Certain Changes and Events. Since January 1, 2007, the Company has conducted its businesses only in the Ordinary Course of Business and there has not been any:

(a) change in the Company’s authorized or issued capital stock; grant of any stock option or right to purchase shares of capital stock of the Company; issuance of any security convertible into such capital stock; grant of any registration rights; purchase, redemption, retirement, or other acquisition by the Company of any shares of any such capital stock; or declaration or payment of any dividend or other distribution or payment in respect of shares of capital stock;

(b) amendment to the Organizational Documents of the Company;

(c) payment or increase by the Company of any bonuses, salaries, or other compensation to any stockholder, director, officer, or (except in the Ordinary Course of Business) employee or entry into any employment, severance, or similar Contract with any director, officer, or employee excluding salary increases in the ordinary course of business;

(d) adoption of, or increase in the payments to or benefits under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any employees of the Company;

(e) damage to or destruction or loss of any asset or property of the Company, whether or not covered by insurance, materially and adversely affecting the properties, assets, business, financial condition, or prospects of the Company, taken as a whole;

(f) entry into, termination of, or receipt of notice of termination of (i) any license, distributorship, dealer, sales representative, joint venture, credit, or similar agreement, or (ii) any Contract or transaction involving a total remaining commitment by or to the Company of at least $10,000.00;

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(g) sale (other than sales of inventory in the Ordinary Course of Business), lease, or other disposition of any asset or property of the Company or mortgage, pledge, or imposition of any lien or other encumbrance on any material asset or property of the Company, including the sale, lease, or other disposition of any of the Intellectual Property Assets;

(h) material change in the accounting methods used by the Company; or

(i) agreement, whether oral or written, by the Company to do any of the foregoing.

6.21 Stockholders, Officers and Directors. The officers, directors and stockholders of the Company as of the date of this Agreement are set forth on Schedule 6.21 attached hereto and comprise all of the officers, directors and stockholders of the Company. Sellers have no knowledge of any acts or conduct by the officers and directors of the Company exceeding the scope of their authority, or acts or conduct of such officers and directors which may give rise to a liability of the Company, which has not been disclosed previously to Purchaser.

6.22 Disclosure.

(a) No representation or warranty of any Seller in this Agreement and no statement in the Schedules omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading.

(b) To Sellers’ Knowledge, there is no fact that has specific application to any Seller or the Company and that would reasonably be likely to have a Material Adverse Effect that has not been set forth in this Agreement or in the Schedules attached hereto.

6.23 Relationship with Related Persons. Except as disclosed on Schedule 6.23, neither Sellers nor any related Person of any Seller or of the Company has, or has had, any interest in any property (whether real, personal, or mixed and whether tangible or intangible), used in or pertaining to the Business. Neither Sellers nor any related Person of any Seller or of the Company is, or has owned (of record or as a beneficial owner) an equity interest or any other financial or profit interest in, a Person that has (i) had business dealings or a material financial interest in any transaction with the Company (other than business dealings or transactions conducted in the Ordinary Course of Business with the Company at substantially prevailing market prices and on substantially prevailing market terms), or (ii) engaged in competition with the Company with respect to any line of the products or services of the Company (a “Competing Business”) in any market presently served by the Company (except for less than one percent of the outstanding capital stock of any Competing Business that is publicly traded on any recognized exchange or in the over-the-counter market). Except as set forth in Schedule 6.23, neither Sellers nor any related Person of any Seller or of the Company is a party to any Contract with, or has any claim or right against, the Company.

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6.24 Brokers or Finders. Except as set forth on Schedule 6.24, Sellers and their agents have incurred directly or indirectly no obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with this Agreement. Sellers agree and shall be jointly and severally responsible for any such fees and expenses.

SECTION 7.

REPRESENTATIONS AND WARRANTIES BY PURCHASER

Purchaser hereby represents and warrants to Sellers as follows:

7.1 Corporate Status. Purchaser is a corporation duly organized and validly existing in good standing under the laws of the State of Utah.

7.2 No Conflict.

The execution and delivery of this Agreement by Purchaser has been authorized by Purchaser’s Board of Directors. Except as set forth in Schedule 7.2, neither the execution and delivery of this Agreement by Purchaser nor the consummation or performance of any of the Contemplated Transactions by Purchaser will give any Person the right to prevent, delay, or otherwise interfere with any of the Contemplated Transactions pursuant to:

(i) any provision of Purchaser’s Organizational Documents;

(ii) any resolution adopted by the board of directors or the stockholders of Purchaser;

(iii) any Legal Requirement or Order to which Purchaser may be subject; or

(iv) any Contract to which Purchaser is a party or by which Purchaser may be bound.

Except as set forth in Schedule 7.2, Purchaser is not and will not be required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.

7.3 Enforceability. This Agreement has been duly executed and delivered by Purchaser and constitutes the valid and binding obligations of Purchaser enforceable against Purchaser in accordance with its terms, except to the extent enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights in general and subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Purchaser has the right, power and authority to execute and deliver this Agreement and perform Purchaser’s obligations hereunder.

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7.4 Brokers or Finders. Purchaser and its officers and agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with this Agreement and will indemnify and hold Seller harmless from any such payment alleged to be due by or through Purchaser as a result of the action of Purchaser or its officers or agents.

SECTION 8.

ADDITIONAL CONDITIONS TO CLOSING

8.1 No Claim Regarding Stock Ownership or Sale Proceeds. There must not have been made or threatened by any Person any claim asserting that such Person (a) is the holder or the beneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any stock of, or any other voting, equity, or ownership interest in, the Company, or (b) is entitled to all or any portion of the Purchase Price payable for the Shares.

SECTION 9.

POST-CLOSING COVENANTS

Seller covenants and agrees as follows:

9.1 Publicity. Except as may be required by applicable law, (a) no party shall issue any press release or make any other public disclosure concerning the transactions contemplated by this Agreement, including the terms of this Agreement or of any other document required to be executed in order to consummate the transaction, without the prior written consent of the other parties, which consent shall not be unreasonably withheld and (b) if any party is required by law to issue a press release or make any other public disclosure prior to such consent, such party shall use its reasonable efforts to inform the other parties hereto prior to issuing it.

9.2 Tax Returns. Sellers shall prepare or cause to be prepared and file or cause to be filed all tax returns for the Company for all periods ending on or prior to the Closing Date, which are required to be filed after the Closing Date. Seller shall permit Purchaser to review and comment on each such tax return prior to filing. All such tax returns shall be prepared and filed in a manner that is consistent with the prior practice of the Company. If any such tax returns are due after the closing and if the Seller is not authorized to file such tax return by law, the Sellers shall submit drafts of such returns to the Purchaser for its review at least 20-days prior to the due date of any such tax return, provided, however, that such drafts of any such tax return shall be subject to the Purchaser’s review and approval. If the Sellers are not authorized to file such tax return by law, Purchaser shall timely file (or cause to be filed) such tax return due after the Closing Date with the appropriate taxing authorities. The Sellers shall pay or cause to be paid all taxes due and payable in respect of such pre-closing period tax return to the Purchaser no later than three-days prior to the due date of such tax return. The Purchaser shall, in connection with its obligation to file (or cause to be filed) such tax return, pay (or cause to be paid) to the appropriate tax authority the amount of taxes shown to be due on such tax return.

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The Purchaser shall prepare and file or cause the Company to prepare and timely file, all tax returns to be filed by the Company, for all Straddle Periods (as defined herein). All such tax returns shall be prepared and filed in a manner that is consistent with the prior practice of the Company, except as required by applicable law. The Purchaser shall deliver drafts of all such tax returns to the Seller for its review at least 30-days prior to the due date of any such tax return (taking into account valid extensions) and shall notify the Sellers of the Purchaser’s calculation of the Sellers’ share of the taxes of the Company for any Straddle Period, provided, however, that such tax returns and such calculation of the Sellers’ share of the tax liability for such period shall be subject to the Sellers’ review and approval, which approval shall not be unreasonable withheld or delayed.

No later than five days prior to the filing of such tax return, the Seller shall deliver to Purchaser in immediately available funds the amount of Sellers’ share of the tax liability for such period. Subject to the preceding sentence, the Purchaser shall pay or cause to be paid their allocable share of any taxes due and payable in respect of such period. The parties shall act in good faith to resolve any dispute prior to the date on which a tax return is required to be filed. If the parties hereto cannot resolve any disputed item, the item in question shall be resolved by an accounting firm, which may be the accounting firm for the Purchaser, as promptly as practicable. The fees and expenses of the accounting firm shall be paid one half by the Sellers and one half by the Purchaser.

The Sellers shall make available to the Purchaser all tax returns (and other information related to taxes, including tax work papers and files in its possession) of the Company for taxable periods ending on December 31, 2006 and thereafter as well all other information to the extent available. Sellers shall retain all books and records with respect to the tax matters pertinent to the Company relating to any tax period being before the Closing Date until the expiration of the statute of limitations or the respective taxable periods and shall abide by all record retention agreements with any tax authority.

9.3 Further Assurances. The parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.

SECTION 10.

INDEMNIFICATION; REMEDIES

10.1 Indemnification by Sellers. Subject to the provisions of this Section 10, Sellers hereby agree jointly and severally to indemnify, defend and hold harmless Purchaser, and each other Purchaser Indemnified Party from and against any and all actions,

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suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys’ fees and expenses, incurred in the enforcement of the obligations under this Section 10 or settlements (hereinafter referred to as “Losses”) incurred, suffered or threatened arising out of or resulting from:

(a) Any misrepresentation, breach of any representation and warranty of any Seller in this Agreement or any Schedule or Exhibit hereto;

(b) Any breach or non-fulfillment of or any failure to perform, any of the covenants, agreements or undertakings of Sellers contained in or made pursuant to this Agreement or any Schedule or Exhibit hereto;

(c) Any product sold by or any services provided by the Company prior to the Closing Date;

(d) Any payables or other obligations of the Company existing or relating to matters prior to the Closing Date;

(e) Any returns after the Closing Date on account of merchandise sold prior to the Closing Date;

(f) All interest, penalties, costs and expenses arising out of or related to any indemnification made under this Section 10.1.

10.2 Indemnification by Purchaser. Subject to the provisions of Section 10.2, Purchaser agrees to indemnify, defend and hold harmless Sellers from and against any and all Losses incurred, suffered or threatened arising out of or resulting from:

(a) Any misrepresentation, breach of any representation and warranty of Purchaser in this Agreement or any Schedule or Exhibit hereto;

(b) Any breach or non-fulfillment of or any failure to perform, any of the covenants, agreements or undertakings of Purchaser contained in or made pursuant to this Agreement or any Schedule or Exhibit hereto.

10.3 Indemnification Definitions. For the purposes of this Section 10, the following terms shall have the following meanings:

(a) “Indemnitee” shall mean a party or other Person seeking indemnification pursuant to this Agreement.

(b) “lndemnitor” shall mean a party, which is required or requested to provide indemnification pursuant to this Agreement.

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(c) “Indemnifiable Claim” means any claim or other proceeding with respect to which an Indemnitee may be entitled to indemnity hereunder.

(d) “Purchaser Indemnified Parties” shall mean Purchaser, and any officer, director, employee, agent, affiliate, and permitted assignee of Purchaser.

(e) “Seller Indemnified Parties” shall mean any Seller.

10.4 Notification of Indemnifiable Claims. In the event of the occurrence of an event which any party asserts constitutes an Indemnifiable Claim, the Indemnitee shall provide prompt notice of such event to Seller (in the case of a Purchaser’s Indemnifiable Claim) or to Purchaser (in the case of a Sellers’ Indemnifiable Claim) and shall otherwise make available to the Indemnitor all relevant information which is material to the Indemnifiable Claim and which is in the possession of the Indemnitee. Prompt notice shall mean no more than fifteen (15) days from the date in which a party knows or should have known of an Identifiable Claim. An Indemnitee’s failure to give timely notice or to furnish the Indemnitor with any relevant data and documents in connection with any Third-Party Claim (as defined below) shall not constitute a defense (in part or in whole) to any claim for indemnification by such party, except and only to the extent that such failure shall result in any material prejudice to the Indemnitor. If such event involves the claim of any third party (a “Third-Party Claim”) and, so long as the Indemnitor has acknowledged its liability for such indemnification hereunder, the Indemnitor shall (and shall upon the request of Indemnitee), at its sole expense, (without prejudice to the right of the Indemnitee to fully participate at its own expense through counsel of its own choosing) assume control of the defense, settlement, adjustment or compromise of any Third-Party Claim, with counsel reasonably acceptable to the Indemnitee, no later than thirty (30) days following notice thereof by the Indemnitee or such shorter time period as required so that the interests of the Indemnitee would not be materially prejudiced as a result of the failure to have received such notice; provided that (i) the Indemnitor shall obtain the consent of the Indemnitee (which consent shall not be unreasonably withheld or delayed) before entering into any settlement, adjustment or compromise of such claims, or ceasing to defend against such claims, if as a result thereof, or pursuant thereto, there would be imposed on the Indemnitee any material liability or obligation not covered by the indemnity obligations of the Indemnitor under this Agreement (including without limitation, any injunctive relief or other remedy) and (ii) if the Indemnitee shall have reasonably concluded that separate counsel is required because a conflict of interest would otherwise exist, the Indemnitee shall have the right to select separate counsel to participate in the defense of such actions on its behalf at its sole expense. In connection with any Third-Party Claim, the Indemnitee, or the Indemnitor if it has assumed the defense of such claim pursuant to this Section, shall diligently pursue the defense of such Third-Party Claim. The parties hereto agree to cooperate with each other in connection with the defense, negotiation or settlement of any Third-Party Claim.

Notwithstanding anything to the contrary herein, the parties acknowledge and agree that the failure of Indemnitor to assume the defense of Indemnitee in a matter for which Indemnitor is obligated to assume the defense of Indemnitee pursuant to this Agreement, and for which Indemnitee has requested that Indemnitor assume such defense, shall be deemed a material breach of this Agreement.

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SECTION 11.

SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS

All covenants and agreements shall survive the Closing and shall be fully effective and enforceable until the covenant or agreement has been fully performed. All representations and warranties made by the parties hereto and in any writing relating or pursuant to this Agreement or in connection with the transactions contemplated hereby, and in any certificate or other document furnished by any party to any other party pursuant to this Agreement, or in connection with the transactions contemplated hereby, shall survive and continue in force after the Closing for a period of twenty-four (24) months, after which they shall be null and void and without further force and effect (except with respect to any Indemnifiable Claims asserted prior to and pending at the time of such expiration). Notwithstanding anything to the contrary contained herein, the representations and warranties contained in this Agreement shall not be affected by any investigation, verification or examination by any party or by anyone on behalf of such party.

SECTION 12.

EXPENSES

Except as provided herein, each party shall bear its own costs and expenses in connection with this Agreement and the consummation of the transactions provided for herein. Without limiting the generality of the foregoing, Sellers shall pay all taxes, including without limitation, federal, state and local income taxes, if any, arising out of, resulting from or imposed by reason of the sale, assignment, transfer or delivery herein of the Shares to Purchaser.

SECTION 13.

MISCELLANEOUS

13.1 Governing Law; Jurisdiction Venue. In the event of any suit, action or otherwise under this Agreement or otherwise, each party hereby irrevocably agrees only to bring a proceeding in any applicable court sitting in Broward County, Florida. Each party to this Agreement hereby irrevocably waives, to the fullest extent permitted by law, any objections which they may now have now or hereafter have to the laying of any such venue of any such proceeding brought in such a court and claim that such proceeding brought in such a court has been brought in an inconvenient form.

13.2 Successors and Assigns. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties to and their respective successors, legal representatives and permitted assigns. Purchaser may assign this Agreement or any rights hereunder to an entity controlling, controlled by or under common control with Purchaser and in the event of any such assignment all references to Purchaser in this Agreement shall be deemed to refer to such assignee. Sellers shall not assign or

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transfer any rights or privileges hereunder without the prior written consent of Purchaser, and any attempted assignment or transfer without the written consent of Purchaser shall be void.

13.3 Documents to be Satisfactory. All documents and instruments to be delivered under this Agreement, whether prior to, at or following the Closing, shall be in form and substance reasonably satisfactory to counsel for the party receiving the same.

13.4 Entire Agreement; Changes to be in Writing. This Agreement together with the attached Exhibits and Schedules embodies the entire agreement and understanding between the parties and supersedes any previous agreements and understandings among the parties with respect to those matters. There are no oral agreements between or among the parties with respect to the transactions contemplated herein. No waiver, change, amendment or discharge of any term or condition hereof or any consent on the part of any party hereto shall be of any force or effect unless made in writing and signed by the party to be bound thereby.

13.5 Notices. Any notice, request, instruction, consent, approval or other communication provided for herein shall be sufficiently given if given in writing and delivered personally or sent by certified or registered mail, postage prepaid, or by overnight courier, as follows:

(a)	If to Purchaser addressed to:	Dreams, Inc.
		Two South University Drive
		Suite 325
		Plantation, Florida 33324
		Facsimile: 954-475-8785
	with a copy to:	Joel D. Mayersohn, Esq.
		Arnstein & Lehr LLP
		200 East Las Olas Boulevard
		Suite 1700
		Fort Lauderdale, Florida 33301
		Facsimile: 954-713-7700
(b)	If to Sellers, addressed to:	Mark Schwartz
		575 Waukegan Road
		Northbrook, IL 60062
	with a copy to:	Noel Dennis, Esq.
		433 N. Milwaukee Avenue
		Wheeling, IL. 60090
		Facsimile: 847-520-8101

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13.6 Headings Solely for Convenience. The headings contained in this Agreement are set forth for the purpose of convenience only and shall be given no effect in the construction or interpretation of this Agreement.

13.7 Remedies. All rights and remedies of any party under any provision of this Agreement shall be in addition to any other rights and remedies provided for by any law of any kind (including all forms of legal and equitable relief, including specific performance), all rights and remedies contemplated in the preceding part of this sentence shall be independent and cumulative, and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one right or remedy shall not be deemed to be an election of such right or remedy or to preclude or waive the exercise of any other right or remedy.

13.8 Severability. In the event that any provision hereof would, under applicable law, be invalid or unenforceable in any respect (a) such provision shall be enforced to the maximum extent permissible under applicable law, and (b) the invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

13.9 Third Party Beneficiaries. Except as contemplated by Section 10, the provisions of this Agreement (a) are for the sole benefit of the parties, and (b) shall not create or be deemed to create any third party beneficiary rights in any Person not a party to this Agreement.

13.10 Further Assurances. Each party shall, at the reasonable request of any other party hereto, execute and deliver to such other party all such documents, instruments, assignments, assurances and other documents, and take such actions as other party may reasonably request in connection with the carrying out of the terms and provisions of this Agreement, including, in the case of Seller making available to Purchaser any and all financial records necessary for the Purchaser to cause to be prepared all of the financial statements for the Company.

13.11 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original.

SIGNATURE PAGE TO FOLLOW

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

Purchaser:
DREAMS, INC.
By:	/s/ David M. Greene
Name:	David M. Greene
Title:	Senior Vice President
Sellers:
By:	/s/ Mark Schwartz
Name:	Mark Schwartz
By:	/s/ Marlene Schwartz
Name:	Marlene Schwartz
By:	/s/ Brian Schwartz
Name:	Brian Schwartz
By:	/s/ Joel Schwartz
Name:	Joel Schwartz
By:	/s/ Kevin Schwartz
Name:	Kevin Schwartz

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SCHEDULE 5.2

AND

SCHEDULE 5.3

Kevin Schwartz: $470.000

$170,000 in stock

$80,000 in 5 year note that can be redeemed after 1 year

$220,000 in 5 year note that can be redeemed after 3 years

Joel Schwartz: $132,000

$32,000 in stock

$100,000 in 5 year note that can be redeemed after 3 years

Mark and Marlene Schwartz $624,000

$106,000 in stock

$518,000 in 5 year note

Brian Schwartz $370,000

$120,000 in stock

$50,000 in 5 year note that can be redeemed after 1 year

$200,000 in 5 year note that can be redeemed after 3 years

7% interest per year on all notes

EXHIBIT A

Employment Agreement

2

EXHIBIT 4.9

Form of Lessor’s Acknowledgment and Subordination

3

EX-21

Exhibit 21

DREAMS, INC.

(Subsidiaries)

Entity	State of Inc	State(s) Oualified
Dreams, Inc.	UT	CA
d/b/a Stratamerica Corporation		CA
d/b/a Dreams of Utah, Inc.		FL
d/b/a Dreams		FL
Subsidiaries:
1.      Dreams Franchise Corporation	CA	UT, FL
Subsidiaries:
a.      Dreams Entertainment, Inc. d/b/a “Farley Art”	UT
b.      Dreams Products, Inc. d/b/a “Mounted Memories”	UT	CO, FL
2.      Dreams Retail Corporation d/b/a “Field of Dreams”	FL	AZ, CA, CO, CT, IL, NJ, NV, VA
Subsidiaries:
a.      Dreams Paramus, LLC	FL
b.      Dreams / Pro Sports, Inc. d/b/a “Pro Sports Memorabilia”	FL
c.      Fansedge Incorporated d/b/a “ProSports Memorabilia”	DE	IL, WA
d.      RIOFOD, L.P. (73%)	NV
e.      CAEFOD, L.P. (63.5%)	NV
f.       SWFOD, L.P. (60%)	NV

g.      StarsLive 365, LLC	NV
Subsidiaries:
i.       365 Las Vegas, L.P. (76.25%)	NV
Subsidiaries:
(a)    RIOFOD, L.P. (21%)	NV
(b)    CAEFOD, L.P. (30%)	NV
(c)    SWFOD, L.P. (40%)	NV
3.      The Greene Organization, Inc.	FL
Subsidiaries:
a.      The Sports Collectibles & Auction Company, Inc.	FL
4.      Dreams Unique, Inc.	FL	NV
5.      BKJ Consulting Corp. d/b/a Fantastic Memorabilia d/b/a Schwartz Sports	IL

EX-31.1

Exhibit 31.1

Review

CHIEF EXECUTIVE OFFICER CERTIFICATION

PURSUANT TO SECTION 302

I, Ross Tannenbaum, Chief Executive Officer of Dreams, Inc., certify that:

1. I have reviewed this Transition Report on Form 10-K/T of Dreams, Inc. (the “Registrant”);

2. Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Transition Report.

3. Based on my knowledge, the financial statements, and other financial information included in this Transition Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Transition Report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Transition Report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures presented in this Transition Report are conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this Transition Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting;

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation or internal control over financial reporting which are reasonably likely to adversely effect the Registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control; and

Date: March 27, 2008	/s/ Ross Tannenbaum
	Ross Tannenbaum
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CHIEF FINANCIAL OFFICER CERTIFICATION

PURSUANT TO SECTION 302

I, Dorothy Sillano, Chief Financial Officer of Dreams, Inc., certify that:

1. I have reviewed this Transition Report on Form 10-K/T of Dreams, Inc. (the “Registrant”);

2. Based on my knowledge, this Transition Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Transition Report.

3. Based on my knowledge, the financial statements, and other financial information included in this Transition Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Transition Report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Transition Report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures presented in this Transition Report are conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this Transition Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting;

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation or internal control over financial reporting which are reasonably likely to adversely effect the Registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls; and

Date: March 27, 2008	/s/ Dorothy Sillano
	Dorothy Sillano
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Transition Report of Dreams, Inc. (the “Company”) on Form 10-K/T for the nine months ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ross Tannenbaum, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fully presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Ross Tannenbaum
	Ross Tannenbaum
	Principal Executive Officer
	March 27, 2008

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Transition Report of Dreams, Inc. (the “Company”) on Form 10-K/T for the nine months ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dorothy Sillano, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fully presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Dorothy Sillano
	Dorothy Sillano
	Principal Financial Officer
	March 27, 2008