Dreams (DRJ)

Three Months June 30, 2007 Compared to the Three Months Ended June 30, 2006

Revenue. Total revenues increased 33% to $10.5 million in the first three months of fiscal 2008 from $7.9 million in the same period last year. The increase was primarily due to an increase in retail revenues generated through our e-commerce and brick and mortar components.

Manufacturing and distribution revenues decreased 17% to $3.4 million in the first three months of fiscal 2008 from $4.1 million in the same period last year. Net revenues (after eliminating intercompany sales) decreased 24% to $2.5 million in the first three months of fiscal 2008 from $3.3 million in the same period last year. The decrease is as a result of more items being sold to the Company-owned stores and Internet sites.

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Retail operation revenues increased 90% to $7.8 million in the first three months of fiscal 2008 from $4.1 million in the same period last year. Our internet retail division revenues increased 48% to $4.6 million in the first three months of fiscal 2008 from $3.1 million in the same period last year. The increase is as a result of our providing more robust platforms, improving our user interface, better merchandising of our products on-line, increased traffic and better conversion rates. Additionally, retail revenues generated through our sixteen company-owned Field of Dreams stores increased 220% to $3.2 million in the first three months of fiscal 2008 from $1.0 million in the same period last year when we operated nine stores.

Franchise revenues are no longer significant as a result of the Company acquiring 8 previously franchised Field of Dreams^® stores in the past several months along with the Company promoting growth in other areas of its business. Henceforth, franchise revenues will simply be reflected as a component of “Other” revenues in the Company’s financial statements.

Costs and expenses. Total cost of sales for the first three months of fiscal 2008 increased 22% to $5.5 million, versus $4.5 million in the same period last year. The increase directly relates to the increase in overall company sales. However, as a percentage of total sales, cost of sales was 52% for the first three months of fiscal 2008 compared to 57% for the same period last year.

Cost of sales of manufacturing/distribution products decreased 36% to $1.2 million in the first three months of fiscal 2008, versus $1.9 million in the same period last year. As a percentage of manufacturing/distribution revenues, cost of sales was approximately 48% for the first three months of fiscal 2008 compared to 58% for the same period last year. However, as a percentage of manufacturing/distribution revenues before elimination of inter-company sales, costs were 62% for the first three months of fiscal 2008 versus 67% for the same period last year.

Cost of sales of retail products increased 75% to $4.2 million in the first three months of fiscal 2008, from $2.4 million in the same period last year. The increase is a direct result of incremental retail sales. As a percentage of total retail sales, costs were 54% in the first three months of fiscal 2008, versus 58.5% for the same period last year.

Operating expenses increased 59% to $5.9 million in the first three months of fiscal 2008, from $3.7 million in the same period last year. As a percentage of sales, operating expenses increased from 46.5% for the first three months of last year to 56% for the first three months of fiscal 2008. The increase in overall operating expenses is attributable to some one-time expenses in the period, re-investments in additional infrastructure and the costs of operating several newly acquired Field of Dreams^® stores.

Interest Expense., net. Net interest expense was $237 for the first three months of fiscal 2008, versus $152 for the same period last year. The increase in interest expense for the period was attributable to the Company writing off its deferred loan costs associated with the early re-financing of its previous senior lender along with additional interest expense related to the Company’s notes payables accumulated in the Pro Stars, Inc. transaction.

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Provision for income taxes. The Company recognized an income tax benefit of $552 for the first three months of fiscal 2008, versus an income tax benefit of $214 for the same period last 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. The Company believes that it is more likely than not that the net deferred tax asset will be realized. Therefore, the Company has determined that a valuation allowance was not necessary as of June 30, 2007 and June 30, 2006. The effective tax rate for both periods was approximately 40.0%.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity 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 June 30, 2007 reflects working capital of $18.4 million, versus working capital of $12.7 million last year. At June 30, 2007, the Company’s cash and cash equivalents were $1,109, versus $541 last year. Net accounts receivable at June 30, 2007 were $1.5 million compared to $2.2 million last year.

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.

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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 $0 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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FISCAL 2006 COMPARED TO FISCAL 2005

Revenues. Total revenues increased 29% to $42.7 million in fiscal 2006 from $33.0 million in fiscal 2005 due primarily to an increase in retail revenues, particularly retail revenues generated through e-commerce component (approximately $6.5 million increase). During October 2003 the Company acquired FansEdge, which generated retail revenues for the Company through FansEdge.com and the Company acquired ProSports Memorabilia in April 2004, which generated retail revenues through ProSportsmemorabilia.com. Prior to our holiday season, the internet division was properly positioned with healthy inventory levels; thus enabling them to fill and ship incremental sales orders received. The Company’s credit facility secured in June 2005 provided the ability to make these additional investments in inventory levels.

Manufacturing and distribution revenues increased from $15.9 million in fiscal 2005 to $18.8 million, an 18% increase in fiscal 2006. Net revenues (after eliminating intercompany sales) increased 27% to $16.2 million in fiscal 2006 from $12.8 million in fiscal 2005. The increase primarily is the result of incremental activity associated with MMI’s on-line customers; MLB.com, NFL.com and NASCAR.com and the additional sales generated by the Pittsburgh Steelers Championship products produced and sold by the Company.

Retail operations revenues increased significantly from $18.8 million in fiscal 2005 to $25.1 million, a 34% increase in fiscal 2006. Our internet retail division, which is primarily comprised of two websites (FansEdge.com and ProSportsmemorabilia.com), began operations in October 2003 concurrent with the Company’s acquisition of FansEdge. The Company then purchased ProSportsmemorabilia.com in April 2004. The internet division had retail sales of $13.0 million in fiscal 2005 versus $19.5 million, a 50% increase, in fiscal 2006. In October 2005, we moved the internet operations into a larger and more efficient facility to accommodate this growth. We continue to see a growing acceptance in the marketplace for the purchasing of items via the Internet. Additionally, retail sales through our company-owned Field of Dreams stores decreased 5% from $5.9 million in fiscal 2005 to $5.6 million in fiscal 2006. This was primarily due to the sale of one store in August 2005 and the early closing of two under-performing stores in December 2005. However, the same 10 store sales were up $500 or 11.2% for the year. As of March 31, 2006 and March 31, 2005 we owned and operated 10 and 13 company-owned Field of Dreams stores respectively.

Franchise operations revenues were $1.2 million in fiscal 2005 and $724 in fiscal 2006; a 40% decrease. The reduction in revenue is partly due to the fact that the Company no longer includes a 1.5% marketing fund royalty in gross revenues and two fewer stores operating in the period. However, the same store sales were up $1.4 million or 8.6% yielding an additional $71 in net royalty income for our Franchise business.

The Company realized $324 in net management fee revenues in fiscal 2005 versus $224 in fiscal 2006. The 30% decrease relates to a reduction in the frequency of significant athlete marketing events in the year. We will continue to market opportunities for these significant events, however, we have seen a slowdown in corporate spending for these large events.

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Costs and expenses. Total cost of sales for fiscal 2006 was $24.4 million versus $18.2 million in fiscal 2005, a 34.0% increase. The increase relates to an increase in Company sales. As a percentage of total sales, cost of sales was comparable in both periods and was 55.2% for fiscal 2005 versus 57.2% for fiscal 2006.

Costs of sales of manufacturing/distribution products were $10.1 million for fiscal 2006 versus $7.3 million for fiscal 2005 or a 38% increase. This increase relates to an increase in manufacturing/distribution product sales. As a percentage of total manufacturing/distribution sales, cost of sales were 62.9% for fiscal 2006 versus 56.6% for fiscal 2005. This increase in percentage of cost of sales for this segment does not represent an erosion of margin and is attributable to a one-time net impairment charge to inventory of approximately $510 and a reduction in inter-company sales of $500 as a result of fewer stores in the chain.

Cost of sales of retail products were $14.3 million for fiscal 2006 versus $10.9 million for fiscal 2005, or a 31% increase. This increase relates to an increase in retail sales. As a percentage of total retail sales, costs were comparable for both periods; 57% for fiscal 2006 versus 58% for fiscal 2005.

Operating expenses increased 15% from $14.4 million in fiscal 2005 to $16.6 million in fiscal 2006. The increase related to an increase in overall Company sales. As a percentage of total sales, expenses declined from 44% in fiscal 2005 to 38% in fiscal 2006. The Company had previously built infrastructure to support future growth. Hence, upon achieving incremental sales, our operating costs should continue to decrease as a percentage of sales as a significant portion of our expenses are fixed in nature.

Interest expense, net. Net interest expense decreased from $585 in fiscal 2005 to $454 in fiscal 2006 due to lower levels of borrowing on the Company’s line of credit, partially offset by increased interest rates.

Provision for income taxes. The Company recognized an income tax benefit of $174,000 in fiscal 2005 and an income tax expense of $1.8 million in fiscal 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, both positive and negative, management has determined that a $187 and $0 valuation allowance as of March 31, 2006 and 2005 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 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 March 31, 2007 reflects working capital of $17.1 million versus working capital of $13.6 million one year earlier. At March 31, 2007, the Company’s cash and cash equivalents were $753 compared to $433 at March 31, 2006. Net accounts receivable at March 31, 2007 were $2.3 million compared to $6.9 million at March 31, 2006 when the Company booked an insurance proceeds receivable of $3.6 million.