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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                      FOR FISCAL YEAR ENDED MARCH 31, 2000


                                  Dreams, Inc.
                 ----------------------------------------------
                 (Name of Small Business Issuer in its charter)


             Utah                                         87-0368170
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)



5009 Hiatus Road, Sunrise, Florida                          33351
----------------------------------          ------------------------------------
(Address of principal executive offices)                 (Zip Code)


Issuer's telephone number (954) 742-8544
                          --------------

Securities registered under Section 12(b) of the Act:


Title of each class                               Name of each exchange on which
                                                     each class is registered

      None                                                    N/A
-------------------                               ------------------------------


Securities registered under Section 12(g) of the Act:

                           Common stock, no par value
--------------------------------------------------------------------------------
                                (Title of class)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Act during the past 12 months (or for such 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.
                                                              Yes  X    No
                                                                 -----     -----

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB.
  X
-----

State issuer's revenues for its most recent fiscal year: $13,406,000
                                                        -------------

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. Based on the closing price of the common
stock quoted on the OTC Bulletin Board as reported on June 12, 2000 the
aggregate market value of the Twenty Seven Million Two Hundred Twenty Eight
Thousand Eight Hundred Eleven (27,228,811) shares of common stock held by
persons other than officers, directors and parties known to the Registrant to be
the beneficial owner (as that term is defined under the runes of the Securities
and Exchange Commission) of more than five percent of the Common Stock on that
date was Thirty Seven Million Four Hundred Thirty Nine Thousand Six Hundred
Fifteen Dollars ($37,439,615). By the

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foregoing statement, the Registrant does not intend to imply that any of these
officers, directors or beneficial owners are affiliates of the Registrant or
that the aggregate market value, as computed pursuant to rules of the Securities
and Exchange Commission, is in any way indicative of the amount which could be
obtained for such shares of common stock of the Registrant.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 40,148,500
                                          ------------

Transitional Small Business Disclosure Format (check one):     Y      X   N
                                                          -----     -----

                           FORWARD LOOKING STATEMENTS

The Registrant cautions readers that certain important factors may affect actual
results and could cause such results to differ materially from any
forward-looking statements that may have been made in this Form 10-KSB or that
are otherwise made by or on behalf of the Registrant. For this purpose, any
statements contained in the Form 10-KSB that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as "may," "expect," "believe,"
"anticipate," "intend," "could," "estimate," "plan," or "continue" or the
negative other variations thereof or comparable terminology are intended to
identify forward-looking statements.

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                                TABLE OF CONTENTS
                                   FORM 10-KSB

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                                                                            Page
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                                    PART I

Item 1.   DESCRIPTION OF BUSINESS.........................................     1

Item 2.   DESCRIPTION OF PROPERTY.........................................     7

Item 3.   LEGAL PROCEEDINGS...............................................     8

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............     8

                                     PART II

Item 5.   MARKET FOR COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS.............................................     8

Item 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR
          PLAN OF OPERATION...............................................     9

Item 7.   FINANCIAL STATEMENTS............................................    12

Item 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
          ON ACCOUNTING AND FINANCIAL DISCLOSURE..........................    37

                                    PART III

Item 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
          CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
          OF THE EXCHANGE ACT.............................................    37

Item 10.  EXECUTIVE COMPENSATION..........................................    39

Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
          OWNERS AND MANAGEMENT...........................................    40

Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................    42

Item 13.  EXHIBITS AND REPORTS ON FORM 8-K................................    43

SIGNATURES................................................................    44

</TABLE>

                                        i

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                                     PART I

Item 1.  DESCRIPTION OF BUSINESS

GENERAL.

     Dreams, Inc. (the "Company") is a Utah Corporation which was formed in
April 1980. During fiscal year ended March 31, 2000, the Company's primary lines
of business were the offer and sale of Field of Dreams-Registered Trademark-
franchises through its subsidiary Dreams Franchise Corporation ("DFC") and the
manufacture and sale of sports and celebrity memorabilia products through DFC's
wholly-owned subsidiary Dreams Products, Inc. ("DPI") which employs the
trademark "Mounted Memories". There are currently 35 Field of Dreams-Registered
Trademark- franchise stores open and operating. Additionally, six Area
Development Agreements which are currently effective have been sold to
franchisees. Included among the total 35 Field of Dreams-Registered Trademark-
franchise stores are thirteen franchised stores which have been opened pursuant
to those six agreements. An additional eleven franchised stores may be opened
under those agreements. DPI has a manufacturing and distribution facility
located in Sunrise, Florida and a distribution center in Denver, Colorado. See
"Mounted Memories" for information regarding the reorganization of the Company
which resulted in the acquisition of the assets and business now employed by
DPI. See "Consolidated Financial Statements" for financial information.

FIELD OF DREAMS-REGISTERED TRADEMARK- FRANCHISING BACKGROUND.

     The Company conducts its Field of Dreams-Registered Trademark- operations
through its subsidiary DFC. DFC licenses certain rights from MCA/Universal
Merchandising Inc. ("MCA") to use the name "Field of Dreams-Registered
Trademark-" in connection with retail operations and catalog sales. Field of
Dreams-Registered Trademark- is a copyright and trademark owned by Universal
City Studios, Inc. with all rights reserved. Universal has authorized MCA to
license the marks. Neither company is in any way related to or an affiliate of
the Company. The Company does not own or operate any Field of Dreams-Registered
Trademark- stores. The Company does not presently have any Field of
Dreams-Registered Trademark- catalog.

MERCHANDISING LICENSE AGREEMENT.

     DFC has acquired from MCA the exclusive license to use "Field of
Dreams-Registered Trademark-" as the name of retail stores in the United States
and a non-exclusive right to use the name "Field of Dreams-Registered
Trademark-" as a logo on products. DFC has also licensed from MCA the exclusive
right to sublicense the "Field of Dreams-Registered Trademark-" name to
franchisees for use as a retail store name. The license agreement between DFC
and MCA is referred to herein as the "MCA License". Under the terms of the MCA
License, DFC is obligated to pay to MCA a 1% royalty based on gross sales of
Field of Dreams-Registered Trademark- stores. DFC must pay MCA a $2,500 advance
on royalties for each company-owned store which is opened. DFC is obligated to
pay $5,000 to MCA upon the opening of each franchised store. The $5,000 fee is
not an advance on royalties. DFC guarantees to pay MCA a minimum yearly royalty
of $2,500 regardless of the amount of gross sales. The current term of the MCA
License expires in 2005. DFC has successive five-year options to renew the MCA
License. The MCA License requires DFC to submit all uses of the Field of
Dreams-Registered Trademark- mark for approval prior to use. Ownership of the
Field of Dreams-Registered Trademark- name remains with MCA and will not become
that of DFC or the Company. Should DFC breach the

                                       1
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terms of the MCA License, MCA may, in addition to other remedies, terminate
DFC's rights to use the "Field of Dreams-Registered Trademark-" name. Such a
termination would have a seriously adverse effect on DFC's and the Company's
business.

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

     DFC is required to indemnify MCA for certain losses and claims, including
those based on defective products, violation of franchise law and other acts and
omissions of DFC. DFC is required to maintain insurance coverage of $3,000,000
per single incident. The coverage must name MCA as an insured party. The Company
has guaranteed the monetary obligations of DFC pursuant to the MCA License. In
September 1997, DFC and MCA settled and released claims in connection with the
payment of royalties pursuant to the MCA license.

FRANCHISING.

     In June 1991 DFC began offering franchises for the development and
operation of Field of Dreams-Registered Trademark- stores in the United States.
The laws of each state vary regarding regulation of the sale of franchises.
Certain states require compliance with the regulations of the Federal Trade
Commission (the "FTC Regulations") prior to commencement of sales activity (the
"FTC States"). Other states require compliance with specific additional
registration procedures which vary in complexity. DFC is currently offering
franchises in FTC States and a limited number of other states. It will offer
franchises in other states as compliance with each states' regulation is
completed. Compliance with the FTC Regulations and various state regulations
requires preparation of an extensive offering circular and the filing of such
circular in certain states. Compliance with some state regulations requires
significant time in connection with satisfying comments of franchise offering
circular examiners. Compliance with FTC Regulations and certain state laws
significantly limits the means by which the Company offers and sells franchises.
In the future, DFC intends to acquire from MCA the rights to open and franchise
stores in Canada and other countries. As summarized below, DFC offers five types
of franchises: Individual Standard Store ("Standard"), Individual Kiosk
("Kiosk"), Area Development ("Area Development"), Conversion ("Conversion"), and
Seasonal ("Seasonal"). The Company does not depend on any one or a few
franchisees for a material portion of its revenues. Royalties from the largest
franchisee accounted for only one percent of the Company's consolidated
revenues.

                                       2
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     STANDARD FRANCHISES:

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

          DFC imposes certain controls and requirements on Field of
     Dreams-Registered Trademark- franchisees in connection with site selection,
     site development, pre-opening purchases, initial training, opening
     procedures, payment of fees, compliance with operating manual procedures
     including purchasing through approved vendors, protection of trademark and
     other proprietary rights, maintenance and store appearance, insurance,
     advertising, owner participation in operations, record keeping, audit
     procedures, autograph authenticity standards and other matters. Franchisees
     are required to pay DFC 6% of gross revenues as an on-going royalty.
     Payments must be made weekly. Franchisees are required to comply with
     certain accounting procedures and use computer systems acceptable to DFC.
     Franchisees are also required to contribute an additional 1.5% of gross
     revenues to a marketing and development fund which is administered by DFC
     for the promotion of the Field of Dreams-Registered Trademark- system. Each
     franchisee is also required to spend 1% of its gross revenues for its own
     local advertising and promotion. During its first 90 days of operation,
     each franchisee is required to spend a minimum of $2,500 for promotion and
     advertising. Franchisees are required to maintain standards of quality and
     performance and to maintain the proprietary nature of the Field of
     Dreams-Registered Trademark- name. Franchisees must commence operation of
     the franchised stores within 180 days after execution of the

                                       3
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     Standard franchise agreement. DFC has prepared and amends from time-to-time
     an approved supplier list from which franchisees may purchase certain
     inventory and other supplies. Each franchisee is required to maintain
     specified amounts of liability insurance which names DFC and MCA 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.

     KIOSK:

          Pursuant to a Kiosk franchise, a franchisee acquires the same rights
     as a Standard franchise, except that the franchisee is licensed to open a
     freestanding Kiosk for an initial franchise fee of $19,000 rather than
     $32,500. Other fees paid by Kiosk franchisees, including ongoing royalties,
     and marketing and development fund contributions are the same as under a
     Standard franchise agreement.

     AREA DEVELOPMENT:

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

     CONVERSION:

          DFC offers Conversion franchises to certain operators of businesses
     which currently sell sport related merchandise, memorabilia, trading cards
     and similar products. Among other conditions to the granting of a
     Conversion franchise, an operator must have run such a business for a
     minimum of three months. Such a business owner will execute a Standard
     franchise agreement as well as a Conversion franchise addendum. A
     Conversion franchisee is required to pay DFC $32,500 upon execution of the
     Standard franchise and the Conversion addendum. The Conversion franchisee
     is required to pay to DFC all amounts required in the Standard franchise.
     Conversion franchises are not transferable without the consent of DFC.

     SEASONAL:

          DFC offers existing franchisees the right to open one or more
     temporary holiday Seasonal location stores during the period beginning
     October 15 and ending not later than the Monday following the second full
     calendar week in January of the following year.

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Seasonal franchisees must pay the Company an initial fee of $2,500 for each
seasonal location. As Seasonal franchises are open for a very limited period
of time, DFC offers very limited service to such franchisees. Consequently,
Seasonal franchises are available only to existing Field of Dreams-Registered
Trademark- Franchisees.

     DFC has sold only Standard franchises, Area Development rights, and
Seasonal franchises. It has sold no Kiosk or Conversion Franchises. It is not
anticipated that Kiosk or Conversion Franchises will be a substantial portion of
DFC's business in the future. DFC does not actively market Kiosk and Conversion
Franchises and there appears to be little interest in those types of franchises
from potential purchases.

FRANCHISE BROKER.

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

MOUNTED MEMORIES.

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

     MMI has been in business since 1989 and has achieved its industry leading
status partly due to its strict authenticity policies. The only 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 offers a very large selection and supply of acrylic
cases, with over 50 combinations of materials, colors and styles. The primary
raw material used in the production process is plastic. There are many vendors
who sell plastic throughout South Florida and 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.


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     MMI's customer base varies greatly and includes, for example, internet
companies, traditional catalog retailers and retail stores which sell sports and
celebrity memorabilia products and cases. Field of Dreams-Registered Trademark-
franchise stores purchase products from MMI and have historically provided
approximately eleven percent of MMI's revenues. No other customer provides
greater than ten percent of MMI's total revenue.

     The sports memorabilia industry faces several challenges, most notably the
assurance of product authenticity. Through its caution in only selling items
produced internally or purchased from authorized agents, witnessed by an MMI
representative, MMI avoids significant authenticity problems. MMI feels the way
it has achieved a competitive advantage over its competitors is through accurate
and timely shipping. MMI uses approximately 2,000 square feet of its warehousing
facility for shipping. MMI has achieved a significant positive reputation in its
industry for timely and accurate shipments and commits to shipping orders within
72 hours of order receipt. Additionally, through the implementation of advanced
and effective fulfillment techniques and processes, and utilization of the most
current shipping software, MMI has experienced a very low breakage ratio over
the past several years.

MMI BACKGROUND.

     In November 1998, the Company through its wholly-owned subsidiary, DPI,
purchased all of the assets of Mounted Memories, Inc., a Florida corporation.
The purchase price for the MMI assets was $2,275,000 in cash and 15,000,000
shares of the Company's common stock. MMI since 1989 had engaged in the
manufacture and wholesale of sports and celebrity memorabilia products. Upon the
acquisition of MMI's assets, the Company, through DPI continued the business of
MMI and uses the Mounted Memories trademark.

FINANCING OF MMI ACQUISITION.

     In connection with the purchase of the MMI assets, the Company and all of
its subsidiaries borrowed $3,000,000 from a lender ("Lender"). The loan bears
interest at 14% per annum and is payable interest only monthly until November
16, 2003 at which time all principal and interest is due and payable. The loan
is secured by all of the Company's assets and a pledge of 27,059,470 shares (and
1,050,000 options to acquire shares) pledged by the control persons of the
Company and certain of their family members and associated persons and entities.
The pledged shares constitute approximately 67% of the Company's currently
issued and outstanding shares. The Company also granted to Lender warrants to
purchase a number of shares of the Company's common stock. The number of shares
which may be purchased pursuant to exercise of the warrants varies between a
minimum of 14% and a maximum of 18.5% of the then issued and outstanding shares.
The exercise price of the warrants is $0.01 per share. The warrants have
anti-dilution rights, registration rights and co-sale rights. In May 2000,
Lender exercised warrants to acquire One Million (1,000,000) shares of the
Company's common stock. The warrant also has a "put" feature which entitles
Lender to require the Company to purchase the warrants for their fair market
value. Fair market value is determined by an appraisal process. In the appraisal
process, each of the Company and Lender appoint an experienced appraiser who is
a member of a professional association. Each appraiser estimates the value of
the shares which would be issued upon exercise of the warrant. If the two
appraisals do not vary by more than 10%, the fair market value is the average of
the two. If the two appraisals vary by more than

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10%, a third appraiser is chosen and fair market value is determined to be the
mean of the three appraisals. Payment of the "put" price may be paid by the
Company by issuance to Lender of a promissory note with 10% interest per annum
and 24 monthly payments of principal and interest.

COMPETITION.

     DFC competes with other larger, more well-known and substantially better
funded franchisors for the sale of franchises. Field of Dreams-Registered
Trademark- 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.

     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 ten-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. 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 two core sports
that provide the greatest source of industry revenue, baseball and football.

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

EMPLOYEES.

     The Company employs forty-six (46) full-time employees and two (2)
part-time employees.

Item 2. DESCRIPTION OF PROPERTY.

     The Company leases approximately 26,000 square feet of office,
manufacturing and warehouse space between two offices in Sunrise, Florida
(approximately 23,000 square feet) and Denver, Colorado (approximately 3,000
square feet). All manufacturing is performed at the Florida location. The
Company's principal executive offices are located at its Florida facility.

     The Company's Colorado lease terminates in September 2002. Colorado rent is
approximately $3,500 per month and escalates to approximately $3,800 per month
in its final year.

     The Company's Florida lease terminates in April 2003. Florida rent is
approximately $15,700 per month plus certain expenses and escalates to
approximately $17,700 in its final year.

                                       7
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Item 3.  LEGAL PROCEEDINGS.

     In the fourth quarter of Fiscal year ended March 31, 2000, the Company
brought an action in California Superior Court against one franchisee for breach
of its franchise agreement. The Company seeks damages and other remedies against
the franchisee.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.

                                     PART II

Item 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     The Company's common stock is listed on the OTC Bulletin Board, an
electronic screen based market available to brokers on desk-top terminals. The
high and low bids of the Company's common stock for each quarter during fiscal
years ended March 31, 1999 and 2000 are as follows:

<TABLE>
<CAPTION>
         Fiscal Year Ended March 31, 1999:     High Bid Price      Low Bid Price
                                               --------------      -------------
<S>                                            <C>                 <C>
                  First Quarter                  $  .28                  .17
                  Second Quarter                    .8125                .17
                  Third Quarter                     .4375                .1875
                  Fourth Quarter                    .375                 .125

         Fiscal Year Ended March 31, 2000:

                  First Quarter                  $  .75                  .312
                  Second Quarter                    .512                 .344
                  Third Quarter                     .625                 .25
                  Fourth Quarter                   1.031                 .25

</TABLE>

     On June 12, 2000, the high bid price was $1.375 and the low bid price was
$1.375 for the Company's common stock.

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

     The records of Fidelity Transfer, the Company's transfer agent, indicate
that there are five hundred thirty two (532) registered owners of the Company's
common stock as of March 31, 2000.

     The Company has paid no dividends in the past two fiscal years. The Company
has no intention of paying dividends in the future.

                                       8
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Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Certain statements in this Form 10-KSB 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 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.

GENERAL

     The Company's fiscal year ends each March 31, and the fiscal years ended
March 31, 2000 and March 31, 1999 are referred to as "fiscal 2000" and "fiscal
1999", respectively.

     The Company operates through its wholly-owned subsidiary DFC and through
DPI and Dreams Entertainment, Inc. ("DEI"), wholly-owned subsidiaries of DFC.
DFC is the franchisor of Field of Dreams-Registered Trademark- retail units that
sell sports and celebrity memorabilia products. As of June 16, 2000, there were
35 Field of Dreams-Registered Trademark- franchises operating in 19 states and
in the District of Columbia.

     DPI is a wholesaler of sports memorabilia products and acrylic cases. It
sells to a wide customer base, which includes internet companies, traditional
catalog companies and other retailers of sports and celebrity memorabilia
products, including Field of Dreams-Registered Trademark-. Approximately eleven
percent of DPI's revenues are generated through sales to Field of
Dreams-Registered Trademark- franchises. DPI is licensed by the National
Football League and Major League Baseball as a distributor of autographed
products. DEI was incorporated in fiscal 1999 and has been inactive since its
inception.

     The Company believes that the factors that will drive the future growth of
its business will be the opening of new franchised units and, to some extent,
capitalizing on its relationships with certain entities, such as the National
Football League, Major League Baseball and Universal Studios, and with certain
well-known athletes, as those relationships and agreements will allow. The
Company plans to open approximately ten franchised units each of the next three
fiscal years. There can be no assurance, however, that any such franchised units
will open or that they will be successful.

                                       9
<PAGE>

RESULTS OF OPERATIONS

FISCAL 2000 COMPARED TO FISCAL 1999

     Revenue. Total revenue increased 90.3% from $7.0 million in fiscal 1999 to
$13.4 million in fiscal 2000.

     Retail and wholesale revenue increased 119.9% from $5.5 million in fiscal
1999 to $12.1 million in fiscal 2000, due primarily to the acquisition of
Mounted Memories, Inc. ("MMI") effective November 1, 1999. MMI's wholesale
revenue for fiscal 1999 was $5.5 million (five months) versus $12.0 million in
fiscal 2000 (twelve months). On a twelve-month proforma comparison, wholesale
revenue increased 10.0% from $10.9 million in fiscal 1999 to $12.0 million in
fiscal 2000.

     Franchise fee and royalty revenue decreased 8.0% from $1.4 million in
fiscal 1999 to $1.3 million in fiscal 2000, due primarily to opening two less
units in fiscal 2000 than in fiscal 1999 ($65,000 of decrease).

     Other revenue decreased from $161,000 in fiscal 1999 to $20,000 in fiscal
2000, due to the Company selling merchandise items with its logo on them
directly to franchised stores in fiscal 2000 (retail sales) versus utilizing a
third party to sell these items, and realizing commission (other) revenue, in
fiscal 1999.

     Costs and expenses. Cost of sales was $8.0 million, or 65.9% of retail and
wholesale revenues, in fiscal 2000 versus $3.1 million, or 55.6%, in fiscal
1999. Fiscal 1999 cost of sales represents MMI's cost of sales from the date of
acquisition (i.e., five months). As a percentage of retail and wholesale
revenue, cost of sales increased to a percentage more representative of MMI's
historical percentage for a full twelve months. Historically, cost of sales of
wholesale items has been in the mid-sixties range, which is where the Company
ended up for fiscal 2000. Operating expenses decreased 12.5% from $1.2 million
in fiscal 1999 to $1.1 million in fiscal 2000. The decrease relates to savings
associated with consolidating its operations in Florida during fiscal 2000
($106,000 of decrease), unusually high bad debt write-offs in fiscal 1999
($169,000 of decrease), expenses associated with a fiscal 1999 lithograph
project which realized immaterial sales ($150,000 of decrease), offset by having
twelve months of MMI operating expenses in fiscal 2000 versus only five months
in fiscal 1999 ($351,000 incremental expense).

     General and administrative expenses increased 32.8% from $1.9 million in
fiscal 1999 to $2.5 million in fiscal 2000. The increase was due to the
acquisition of MMI ($1.1 million of the increase) offset by a one-time
preferential distribution charge ($409,000) the Company booked in fiscal 1999
relating to the issuance of stock to its Chairman. The preferential distribution
was treated as compensation expense and was the result of the Company issuing
shares of its' common stock at a discounted value. Depreciation and amortization
increased from $126,000 in fiscal 1999 to $274,000 in fiscal 2000 due to twelve
months of fiscal 2000 amortization of intangible assets and debt issuance costs
associated with the fiscal 1999 acquisition of MMI versus only five months in
fiscal 1999.

                                       10
<PAGE>

     Interest expense, net. Net interest expense increased 67.1% from $322,000
in fiscal 1999 to $538,000 in fiscal 2000, due primarily to twelve months of
fiscal 2000 interest charges associated with the $3.0 million note issued by the
Company in November 1998 versus only five months in fiscal 1999.

     Provision for income taxes. At March 31, 2000, the Company had available
net operating loss carryforwards of approximately $4.4 million, which expire in
various years beginning in 2007 through 2014. Accordingly, a valuation allowance
was provided for the full amount of federal taxes as of the end of both fiscal
1999 and fiscal 2000. However, a provision for state income taxes was provided
for in both fiscal 1999 and fiscal 2000 for applicable taxes. See Note 9 to the
Consolidated Financial Statements of the Company.

     Other. The Company realized income from discontinued operations of $268,000
in fiscal 1999. This amount represents a gain associated with the foregiveness
of debt, or expiration of liability, to former shareholders and unrelated third
party creditors of a restaurant segment discontinued by the Company prior to
fiscal 1999.

LIQUIDITY AND CAPITAL RESOURCES

     The primary sources of the Company's cash are net cash flows from operating
activities and short-term vendor financing. Currently, the Company does not have
available any established lines of credit with banking facilities.

     The Company's cash and cash equivalents were $203,000 as of March 31, 2000
compared with $425,000 as of March 31, 1999. During the year ended March 31,
2000, consolidated earnings before interest, taxes, depreciation and
amortization ("EBITDA") increased $970,000 to $1.8 million from $858,000 for the
year ended March 31, 1999. The increase directly relates to DPI's acquisition of
MMI in November 1998.

     The Company presently does not operate or own any Field of Dreams units,
and does not plan to own any in the future. It will continue to sell franchised
units to prospective and current third-party franchisees. Additionally, there
are no major capital expenditures planned for in the foreseeable future, nor any
payments planned for off-balance sheet obligations or other demands or
commitments for which payments become due after the next 12 months.

     The Company believes its current available cash position, coupled with its
cash forecast for the year and periods beyond, is sufficient to meet its cash
needs on both a short-term and long-term basis. The balance sheet has a strong
working capital ratio and its long-term debt obligations require interest-only
payments totaling $39,000 per month. The Company's management is not aware of
any known trends or demands, commitments, events, or uncertainties, as they
relate to liquidity which could negatively affect the Company's ability to
operate and grow as planned.



                                       11
<PAGE>

Item 7.  FINANCIAL STATEMENTS.

                                  DREAMS, INC.
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                            13

CONSOLIDATED FINANCIAL STATEMENTS:

     Consolidated Balance Sheets                                              14

     Consolidated Statements of Income                                        15

     Consolidated Statements of Stockholders' Equity                          16

     Consolidated Statements of Cash Flows                                    17

     Notes to Consolidated Financial Statements                               18

</TABLE>



                                       12
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors and Stockholders
Dreams, Inc.

We have audited the accompanying consolidated balance sheets of Dreams, Inc. and
subsidiaries as of March 31, 2000 and 1999, and the related consolidated
statements of income, stockholders' equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Dreams,
Inc. and subsidiaries as of March 31, 2000 and 1999 and the consolidated results
of their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.


MARGOLIES, FINK AND WICHROWSKI
Certified Public Accountants


Pompano Beach, Florida
May 25, 2000


                                       13
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                       March 31,         March 31,
                                                                         2000              1999
                                                                       ---------         ---------
<S>                                                                    <C>               <C>
ASSETS

Current assets:
     Cash and cash equivalents                                          $    203          $    425
     Restricted cash                                                          33               415
     Accounts receivable, net                                              1,577             1,369
     Inventories                                                           4,029             2,799
     Prepaid expenses and deposits                                            75                34
     Notes receivable                                                         --                19
                                                                        --------          --------
          Total current assets                                             5,917             5,061

Property and equipment, net                                                  195               119
Intangible assets, net                                                     2,635             2,446
Deferred loan costs, net                                                     215               275
Debt issuance costs, net                                                     353               437
                                                                        --------          --------
                                                                        $  9,315          $  8,338
                                                                        ========          ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                   $  1,132          $    883
     Accrued liabilities                                                     690               865
     Deferred franchise fees                                                  95               128
                                                                        --------          --------
          Total current liabilities                                        1,917             1,876

Long-term debt, less current portion                                       3,443             3,443
Detachable stock warrants                                                    300               300
                                                                        --------          --------
Total liabilities                                                          5,660             5,619
                                                                        --------          --------

Commitments and contingencies                                                 --                --

Stockholders' equity :
     Common stock, no par value; authorized 100,000,000 shares;
       40,148,500 shares issued and outstanding                           18,084            18,084
     Accumulated deficit                                                 (14,429)          (15,365)
                                                                        --------          --------

          Total stockholders' equity                                       3,655             2,719
                                                                        --------          --------

                                                                        $  9,315          $  8,338
                                                                        ========          ========

</TABLE>

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


                                       14
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                              Fiscal                 Fiscal
                                                                               2000                   1999
                                                                            ------------          ------------
<S>                                                                         <C>                   <C>
Revenues:
     Retail / Wholesale                                                     $     12,128          $      5,515
     Franchise fees and royalties                                                  1,258                 1,368
     Other                                                                            20                   161
                                                                            ------------          ------------
          Total revenues                                                          13,406                 7,044
                                                                            ------------          ------------

Expenses:
     Cost of sales                                                                 7,995                 3,064
     Operating expenses                                                            1,088                 1,244
     General and administrative expenses                                           2,495                 1,878
     Depreciation and amortization                                                   274                   126
                                                                            ------------          ------------
          Total expenses                                                          11,852                 6,312
                                                                            ------------          ------------

Income from continuing operations before interest and taxes                        1,554                   732

Interest, net                                                                        538                   322
                                                                            ------------          ------------

Income from continuing operations before provision for income taxes                1,016                   410
Provision for income taxes:
     Current tax expense                                                             452                   416
     Deferred tax expense                                                           (372)                 (341)
                                                                            ------------          ------------
Income from continuing operations                                                    936                   335

Discontinued operations:
     Gain on disposal of restaurant segment                                           --                   268
                                                                            ------------          ------------

Income from discontinued operations                                                   --                   268
                                                                            ------------          ------------

Net income                                                                  $        936          $        603
                                                                            ============          ============

Earnings per share:

Basic:   Income from continuing operations                                  $       0.02          $       0.01
                                                                            ============          ============
         Net income                                                         $       0.02          $       0.02
                                                                            ============          ============
         Weighted average shares outstanding                                  40,148,500            25,181,915
                                                                            ============          ============

Diluted: Income from continuing operations                                  $       0.02          $       0.01
                                                                            ============          ============
         Net income                                                         $       0.02          $       0.02
                                                                            ============          ============
         Weighted average shares outstanding                                  47,110,730            25,181,915
                                                                            ============          ============

</TABLE>

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

                                       15
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                Additional                            Total
                                                 Shares          Common          Paid-in         Accumulated       Stockholders'
                                              Outstanding         Stock          Capital           Deficit            Equity
                                              -----------        -------        ----------       -----------       -------------
<S>                                           <C>                <C>            <C>              <C>               <C>
Balance at March 31, 1998                     16,500,000         $   825         $ 12,530          $(15,968)         $(2,613)

Shares issued in exchange of notes
  payable (See Note 8)                         8,248,500             412            1,237                --

                                                                                                                       1,649
Shares issued to acquire assets of
  Mounted Memories, Inc. (See Note 3)         15,000,000             750            2,250                --            3,000

Conversion of third party fees
  to equity (See Note 8)                         400,000              20               60                --
                                                                                                                          80
Elimination of par value                              --          16,077          (16,077)               --               --

Net income for the year ended
  March 31, 1999                                      --              --               --               603              603
                                              ----------         -------         --------          --------          -------
Balance at March 31, 1999                     40,148,500          18,084               --           (15,365)           2,719

Net income for the year ended
  March 31, 2000                                      --              --               --               936              936
                                              ----------         -------         --------          --------          -------

Balance at March 31, 2000                     40,148,500         $18,084         $     --          $(14,429)         $ 3,655
                                              ==========         =======         ========          ========          =======

</TABLE>

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


                                       16
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                               Fiscal           Fiscal
                                                                                2000             1999
                                                                               -------          -------
<S>                                                                            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                                $   936          $   603
     Adjustments to reconcile net income to net cash provided
        by (used in) operating activities:
         Depreciation and amortization:
           Property and equipment                                                   40               35
           Goodwill                                                                136               52
           Debt issuance and debt discount costs                                   158               64
         Provision for losses on accounts and notes receivable                    (103)             211
         Gain on disposal of restaurant segment                                     --             (268)
     Change in assets and liabilities, net of effects from acquisition
        of business:
         Increase in accounts receivable                                          (208)            (356)
         Decrease in accounts receivable - related party                            --                2
         Increase in inventories                                                (1,205)            (590)
         (Increase) decrease in prepaid expenses                                   (41)              83
         (Increase) decrease in notes receivable                                    19              (14)
         Increase in accounts payable                                              249              249
         Increase (decrease) in accrued liabilities                               (175)             143
         Increase (decrease) in deferred franchise fees                            (33)              23
         Other                                                                      77               52
                                                                               -------          -------
         Net cash provided by (used in) operating activities                      (150)             289
                                                                               -------          -------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of Mounted Memories, Inc., net of cash acquired                       --           (2,218)
     Release of restricted cash                                                   (325)              --
     Purchase of property and equipment                                           (115)             (24)
                                                                               -------          -------
         Net cash used in investing activities                                    (440)          (2,242)
                                                                               -------          -------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from notes payable                                                    --              591
     Proceeds from long-term debt                                                   --            3,000
     Payments on notes payable                                                      --             (450)
     Financing costs capitalized                                                   (14)            (437)
                                                                               -------          -------
         Net cash provided by (used in) financing activities                       (14)           2,704
                                                                               -------          -------

Net increase (decrease) in cash, cash equivalents and restricted cash             (604)             751

Cash, cash equivalents and restricted cash at beginning of period                  840               89
                                                                               -------          -------
Cash, cash equivalents and restricted cash at end of period                    $   236          $   840
                                                                               =======          =======

</TABLE>

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


                                       17
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)

1.   NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     DESCRIPTION OF BUSINESS

     Dreams, Inc. (the "Company") operates through its wholly-owned subsidiary,
     Dreams Franchise Corporation ("DFC") and through Dreams Entertainment, Inc.
     ("DEI") and Dreams Products, Inc. ("DPI"), wholly-owned subsidiaries of
     DFC. DFC is in the business of selling Field of Dreams retail store
     franchises and generates revenues through the sale of those franchises and
     continuing royalties. DEI was incorporated in fiscal 1999 and was inactive
     throughout fiscal 1999 and 2000, and as of March 31, 2000. DPI is a
     wholesaler of sports memorabilia products and acrylic cases. DPI pays an
     annual fee to the National Football League which officially licenses DPI's
     football memorabilia products.

     BASIS OF PRESENTATION

     The accompanying consolidated financial statements include the accounts of
     the Company and its subsidiaries. All material intercompany transactions
     and accounts have been eliminated in consolidation. Results of operations
     of acquired companies accounted for as purchases are included from their
     respective dates of acquisition. The fiscal years ended March 31, 2000 and
     March 31, 1999 are herein referred to as "fiscal 2000" and "fiscal 1999",
     respectively.

     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.

     RESTRICTED CASH

     Field of Dreams franchisees pay advertising royalties to DFC to be used for
     designated franchise advertising and promotional activities. These
     restricted funds are held by the Company. Restricted cash relating to
     advertising royalties paid by franchisees was $33 and $90 at March 31, 2000
     and 1999, respectively. The Company also had $325 restricted as to use at
     March 31, 1999 relating to an acquisition (see Note 3).

     ACCOUNTS RECEIVABLE

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

     RETAIL AND WHOLESALE REVENUES

     Retail and wholesale revenues are recognized as the products are sold and
     shipped to customers. DPI had wholesale sales to Field of Dreams franchises
     of $1.3 million and $755 in fiscal 2000 and 1999, respectively.

                                                                     (CONTINUED)

                                       18
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)

1.   NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     (CONTINUED)

     FRANCHISE FEE AND ROYALTY REVENUES

     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.

     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.

     INVENTORIES

     Inventories, consisting primarily of sports memorabilia products and
     acrylic cases, are valued at the lower of cost or market. Cost is
     determined using the first-in, first-out (FIFO) method for both raw
     materials and finished goods.

     PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost. Depreciation is provided for
     using the straight-line method over the estimated useful lives of the
     assets ranging from three to ten years. Leasehold improvements are
     amortized over the 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. Gains and losses are credited or
     charged to earnings upon disposition.

     INTANGIBLE ASSETS

     The excess of cost over the fair value of net assets of purchased companies
     (goodwill and trademarks) are being amortized by the straight-line method
     over 20 years. As of March 31, 2000, unamortized intangible assets were
     $2.6 million, net of accumulated amortization of $188. Goodwill and other
     intangibles are reassessed annually to determine whether any potential
     impairment exists.

     Costs relating to the issuance of debt are capitalized and amortized over
     the term of the related debt. As of March 31, 2000, the unamortized debt
     issuance costs were $353, net of accumulated amortization of $137.

                                                                     (CONTINUED)


                                       19
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)


1.   NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     (CONTINUED)

     IMPAIRMENT OF LONG-LIVED ASSETS

     In the event that facts and circumstances indicate that the carrying value
     of long-lived assets, including associated intangibles, may be impaired, an
     evaluation of recoverability is performed by comparing the estimated future
     undiscounted cash flows associated with the asset to the asset's carrying
     amount to determine if a write-down to market value or discounted cash flow
     is required.

     FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying values of cash and cash equivalents, accounts receivable,
     accounts payable and accrued liabilities approximated their fair values
     because of the short maturity of these instruments. The fair value of the
     Company's notes payable and long-term debt is estimated based on quoted
     market prices for the same or similar issues or on current rates offered to
     the Company for debt of the same remaining maturities. At March 31, 2000
     and 1999, the aggregate fair value of the Company's notes payable and
     long-term debt approximated its carrying value.

     INCOME TAXES

     The Company accounts for income taxes in accordance with SFAS No. 109,
     "Accounting for Income Taxes." Under the asset and liability method with
     SFAS No. 109, deferred income taxes are required for the tax consequences
     of temporary differences by applying enacted statutory rates applicable to
     future years to the difference between the financial statement carrying
     amounts and the tax bases of existing assets and liabilities. Under SFAS
     No. 109, the effect on deferred taxes of a change in tax rates is
     recognized in income in the period that includes the enactment date.

     NET INCOME PER SHARE

     Prior to fiscal 1999, the Company adopted the provisions of SFAS No. 128,
     "Earnings Per Share." SFAS No. 128 requires companies to present basic
     earnings per share ("EPS") and diluted EPS, instead of the primary and
     fully diluted EPS presentations that were formerly required by the
     Accounting Principles Board Opinion No. 15, "Earnings Per Share." Basic EPS
     was computed by dividing net income by the weighted average of common
     shares outstanding during the year. Diluted EPS was computed by dividing
     net income by the sum of the weighted average of common shares outstanding
     plus all additional common shares that would have been outstanding if
     potentially dilutive securities or common stock equivalents had been
     issued.

                                                                     (CONTINUED)


                                       20
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)


1.   NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     (CONTINUED)

     STOCK BASED COMPENSATION

     Statement of Financial Accounting Standard No. 123, "Accounting for Stock
     Based Compensation," is effective for fiscal years beginning after December
     15, 1995. Statement No. 123 provides companies with a choice to follow the
     provisions of No. 123 in determination of stock based compensation expense
     or to continue with the provisions of APB 25, "Accounting for Stock Issued
     to Employees." The Company will continue to follow APB 25 and will provide
     proforma disclosure as required by Statement No. 123 in the notes to the
     consolidated financial statements.

     USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the amounts reported in the consolidated financial
     statements and related notes to the financial statements. Estimates are
     used when accounting for uncollectible accounts receivable, inventory
     obsolescence, depreciation, taxes, contingencies, among others. Actual
     results could differ from those estimated by management and changes in such
     estimates may affect amounts reported in future periods.

     RECLASSIFICATION

     Certain items previously reported in specific financial statement captions
     have been reclassified to conform with the fiscal 2000 presentation.

2.   CONCENTRATION OF CREDIT RISK

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

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

                                                                     (CONTINUED)


                                       21
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)

2.   CONCENTRATION OF CREDIT RISK (CONTINUED)

     Regarding retail accounts receivable, the Company believes that credit risk
     is limited due to the large number of entities comprising the Company's
     customer base and the diversified industries in which the Company operates.
     The Company performs certain credit evaluation procedures and does not
     require collateral. The Company believes that credit risk is limited
     because the Company routinely assesses the financial strength of its
     customers, and based upon factors surrounding the credit risk of customers,
     establishes an allowance for uncollectible accounts and, as a consequence,
     believes that its accounts receivable credit risk exposure beyond such
     allowances is limited. The Company had a consolidated allowance for
     doubtful accounts at March 31, 2000 of approximately $108. The Company
     believes any credit risk beyond this amount would be negligible.

3.   BUSINESS COMBINATION

     During November 1998, DPI acquired all of the assets of Mounted Memories,
     Inc. ("MMI"), a wholesaler of sports memorabilia products and acrylic
     cases. The aggregate consideration paid was $5.3 million, consisting of
     cash in the amount of $2.3 million and the issuance of 15,000,000 shares of
     Dreams, Inc. common stock, which was trading at approximately $0.20 at the
     date of the transaction. The purchase price was financed through the
     issuance of a long-term note of $3.0 million (see Note 7). The acquisition
     was accounted for as a purchase and, accordingly, MMI's results are
     included in the consolidated financial statements since the date of
     acquisition. The aggregate of the net assets acquired was approximately
     $2.8 million, which was allocated based on the fair values of the assets
     and liabilities acquired at the date of acquisition. The excess of purchase
     price ($5.3 million) over net assets acquired of $2.5 million has been
     allocated to goodwill ($498) and $2.0 million to trademarks. These amounts
     will be amortized on the straight-line basis over 20 years. Liabilities of
     $552 were assumed in connection with the acquisition, consisting primarily
     of accounts payable and accrued liabilities.

     At March 31, 1999, $325 of the loan proceeds were being held by an escrow
     agent of the lender until certain criteria were met. The conditions for
     release were met in fiscal 2000 and the Company appropriately adjusted
     goodwill.

                                                                     (CONTINUED)


                                       22
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)

3.   BUSINESS COMBINATION (CONTINUED)

     The following unaudited proforma information has been prepared assuming MMI
     had been acquired as of the beginning of the period presented. The proforma
     information is presented for information purposes only and is not
     necessarily indicative of what would have occurred if the acquisition had
     been made as of that date. In addition, the proforma information is not
     intended to be a projection of future results and does not reflect
     synergies expected to result from the integration of MMI and the Company's
     operations.

     PROFORMA INFORMATION (UNAUDITED)
     (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
     Year ended March 31                                             1999
     -------------------                                           --------
<S>                                                                <C>
     Sales and other income                                        $ 12,446
     Net income from continuing operations                              575
     Earnings per share from continuing operations                 $   0.01

</TABLE>

4.   INVENTORIES

     The components of inventories are as follows:

<TABLE>
<CAPTION>
                                             March 31,        March 31,
                                               2000             1999
                                             ---------        ---------
<S>                                          <C>              <C>
     Memorabilia products                    $ 3,147          $ 2,199
     Licensed products                           572              370
     Acrylic cases and raw materials             360              305
                                             -------          -------
                                               4,079            2,874
     Less reserve for obsolescence               (50)             (75)
                                             -------          -------
                                             $ 4,029          $ 2,799
                                             =======          =======
</TABLE>

                                                                     (CONTINUED)


                                       23
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)

5.   PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                            2000          1999
                                           -----          -----
<S>                                        <C>            <C>
     Leasehold improvements                $  26          $  23
     Machinery and equipment                  76             71
     Office and other equipment              340            232
     Transportation equipment                 47             47
                                           -----          -----
                                             489            373
     Less accumulated depreciation
     and amortization                       (294)          (254)
                                           -----          -----
                                           $ 195          $ 119
                                           =====          =====
</TABLE>

6.   ACCRUED LIABILITIES

     Accrued liabilities consisted of the following at March 31:

<TABLE>
<CAPTION>
                                                                2000         1999
                                                                ----         ----
<S>                                                             <C>          <C>
     Payroll costs (including commissions)                      $164         $ 99
     Interest                                                     35           35
     Sales taxes                                                  19            9
     Income taxes, penalties, and interest (see Note 9)          313          491
     Other                                                       159          231
                                                                ----         ----
                                                                $690         $865
                                                                ====         ====

</TABLE>

                                                                     (CONTINUED)


                                       24
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)

7.   LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                                                                          2000         1999
                                                                                         ------       ------

<S>                                                                                      <C>          <C>
     Note payable to a lending institution at 14% interest, with monthly
       interest only payments of $35 through November 2003. Principal balance of
       $3.0 million due November 2003. Secured by all of the assets of the Company
       and Company stock pledged by the Company's Chairman, President and other
       key employees, family members and associated persons and entities.                3,000        $3,000

     Note payable to an individual at 12% interest, with monthly interest only
       payments of $4 through November 2007. Secured through a personal guarantee
       of the Company's Chairman and is subordinate to the 14% note described
       above.                                                                              443           443
                                                                                         ------       ------
                                                                                          3,443        3,443
         Less current portion                                                            (  -  )      (  -  )
                                                                                         ------       ------
                                                                                         $3,443       $3,443
                                                                                         ======       ======
</TABLE>

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

<TABLE>
<CAPTION>
         Fiscal year
         -----------
<S>                              <C>
            2001                 $     --
            2002                       --
            2003                       --
            2004                    3,033
            2005                       95
            Thereafter                315
                                 --------
                                 $  3,443
                                 ========

</TABLE>

                                                                     (CONTINUED)

                                       25
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)


8.   STOCKHOLDERS' EQUITY

     On January 14, 1999 the stockholders of the Company approved a resolution
     which amended the Company's Restated Articles of Incorporation to increase
     the number of authorized shares of common stock from 50,000,000 shares, par
     value $0.05, to 100,000,000 shares, of no par value common stock. As a
     result of this amendment, the additional paid-in capital account has been
     combined with common stock as presented in the Consolidated Statements of
     Stockholders' Equity.

     COMMON STOCK

     In July 1998, the Company borrowed $200 at a rate of 12% interest from the
     brother of the Company's Chairman. The Company repaid the principal and
     accrued interest of $4 through the issuance of 1,020,000 shares of its
     common stock in November 1998. The stock was trading at approximately $0.20
     at the time of the exchange.

     In November 1998, Dreamstar, a corporation owned by the Company's Chairman,
     assumed the Company's obligation of $363 owed to the NBA Legends
     Foundation. In consideration for that assumption and release, the Company
     issued Dreamstar 3,625,000 shares of common stock. The stock was trading at
     approximately $0.20 at the time of the exchange. The preferential
     distribution of $363 was booked as compensation expense, and charged to
     operational income during fiscal 1999.

     In addition, Dreamstar loaned the Company $70, at a rate of 12% interest,
     during fiscal 1999. As of November 1998, the Company owed Dreamstar $46,
     net of repayments and accrued interest of $1. The Company paid this
     obligation in November 1998 by issuing 460,000 shares of its common stock.
     The stock was trading at approximately $0.20 at the time of the exchange.
     The preferential distribution of $46 was booked as compensation expense,
     and charged to operational income during fiscal 1999.

     In November 1998, the Company exchanged its remaining notes payable for
     3,143,500 of its common shares. The total amount of remaining notes payable
     at the time of the exchange was $629, net of repayments and accrued
     interest of $32. The stock was trading at approximately $0.20 at the time
     of the exchange.

                                                                     (CONTINUED)


                                       26
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)


8.   STOCKHOLDERS' EQUITY (CONTINUED)

     During November 1998, the Company issued 400,000 shares of its previously
     authorized, but unissued common stock to third parties for services
     rendered. The value assigned to the issuance of these shares totaled $80.
     The stock was trading at approximately $0.20 per share at the time of the
     transaction.

     WARRANTS

     The Company granted the lending institution which loaned the Company $3.0
     million in fiscal 1999 warrants to purchase approximately 6,658,000 of the
     Company's common stock. The number of shares which may be purchased
     pursuant to exercise of the warrants varies between a minimum of 14% and a
     maximum of 18.5% of the issued and outstanding shares. In connection with
     the issuance of the debt, $300 of the proceeds has been allocated to the
     detachable stock warrants. Upon surrender of a warrant, the holder is
     entitled to purchase one share of the Company's common stock for $0.01. The
     amount allocated to the warrants has been recorded as a liability as of
     March 31, 1999 and 2000. The related deferred debt discount has been
     recorded and amortized to interest expense over the life of the loan.
     Amortization of debt discount of $60 has been included in interest expense
     for the year ended March 31, 2000. The warrants have anti-dilution rights,
     registration rights and co-sale rights. The warrants also have a "put"
     feature which entitles the lending institution to require the Company to
     purchase the warrants for their fair market value determined by an
     appraisal process. Payment of the "put" price may be paid by the Company by
     issuance to the lending institution of a promissory note with 10% interest
     per annum and 24 monthly payments of principal and interest.

     STOCK OPTIONS

     During fiscal 1999, the Company's Board of Directors adopted a stock option
     plan for certain employees and franchisees ("Optionees") whereby Optionees
     are granted the right to purchase shares of the Company's common stock at a
     price of 100% of the fair market value of the shares at the date of grant,
     110% in the case of a holder of more than 10% of the Company's stock. The
     options generally vest between a two and five years.

     Transactions and other information relating to the plan for fiscal 2000 are
     summarized as follows:


                                                                     (CONTINUED)

                                       27
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)


8.   STOCKHOLDERS' EQUITY (CONTINUED)

<TABLE>
<CAPTION>
                                                 Stock Options
                                                 -------------
                                            Shares       Wtd. Avg. Price
                                          ---------      ---------------
<S>                                       <C>            <C>
     Outstanding at April 1, 1998               -0-
        Granted                             950,000            $ .38
        Exercised                                --
                                          ---------

     Outstanding at March 31, 1999          950,000            $ .38
        Granted                           2,500,250            $ .25
        Exercised                                --
                                          ---------

     Outstanding at March 31, 2000        3,450,250            $ .29
                                          =========
</TABLE>

     The exercise prices of the stock options discussed below were the fair
     market value of the common stock on the date the options were granted.

          On August 25, 1998, the Company issued options to purchase 500,000
          shares at $.4375 per share to a former employee, officer, and director
          of the Company. The options expire on September 25, 2003 and 250,000
          were exercisable upon issuance. The remaining 250,000 vest ratably
          over five years beginning on the first anniversary date of the grant.

          On September 4, 1998, the Company issued options to purchase 250,000
          shares at $.4375 per share to an employee and officer of the Company.
          The options expire on October 1, 2001. The options vest ratably over
          three years beginning on the first anniversary date of the grant.

          On January 1, 1999, the Company issued options to purchase 200,000
          shares at $.1875 per share to an employee of the Company. The options
          expire on January 1, 2002 and 100,000 were exercisable upon issuance.
          The remaining 100,000 vest on the first anniversary date of the grant.

          On January 31, 2000, the Company issued options to purchase 1,800,000
          shares at $.25 per share to two employees of the Company, who are also
          both officers of the Company. The options expire as follows -
          1,500,000 on January 31, 2003 and 300,000 on February 28, 2003. The
          options vest as follows - 750,000 during fiscal 2000, 850,000 during
          the year ended March 31, 2001, 100,000 during the year ended March 31,
          2002 and 100,000 during the year ended March 31, 2003.

                                                                     (CONTINUED)


                                       28
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)


8.   STOCKHOLDERS' EQUITY (CONTINUED)

          On January 31, 2000, the Company issued options to purchase 200,250
          shares at $.25 per share to various employees of the Company. The
          options expire on February 28, 2005. The options vest ratably over two
          years beginning on the first anniversary date of the grant.

          On January 31, 2000, the Company issued options to purchase 250,000
          shares at $.25 per share to a consultant of the Company. The options
          expire on January 31, 2005 and125,000 were exercisable upon issuance.
          The remaining 125,000 vest on the first anniversary date of the grant.

          On February 1, 2000, the Company granted options to purchase 250,000
          shares at $.30 per share to a consultant of the Company. The options
          expire on March 31, 2001 and require the performance of certain
          obligations by the consultant in order for their issuance.

The following table summarizes information about all of the stock options
outstanding at March 31, 2000: Outstanding options Exercisable options

<TABLE>
<CAPTION>
                                    Weighted
                                    average
    Range of                       remaining        Weighted                     Weighted
exercise prices       Shares      life (years)     avg. price      Shares       avg. price
---------------     ---------     ------------     ----------     ---------     ----------
<S>                 <C>           <C>              <C>            <C>           <C>
 $ .15 - .25        2,450,250        3.27             $ .24       1,075,000       $ .24
   .26 - .50        1,000,000        2.38               .40         383,333         .44
 -----------        ---------        ----             -----       ---------       -----
 $ .15 - .50        3,450,250        3.01             $ .29       1,458,333       $ .29
 ===========        =========        ====             =====       =========       =====

</TABLE>

For purposes of the following proforma disclosures, the weighted average fair
value of each option has been estimated on the date of grant using the
Black-Scholes options-pricing model with the following weighted average
assumptions used for grants in fiscal 2000: no dividend yield; volatility of
113%; risk-free interest rate of 7%; and an expected term of five years. The
weighted average Black-Scholes value of options granted during fiscal 2000 was
$.98 per option. Had compensation cost for the Company's fixed stock-based
compensation plan been determined based on the fair value at the grant dates for
awards under this plan consistent with the method of SFAS 123, the Company's pro
forma net income and pro forma net income per share would have been as indicated
below:

                                                                     (CONTINUED)


                                       29
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)


8.   STOCKHOLDERS' EQUITY (CONTINUED)

<TABLE>
<CAPTION>
                                        Fiscal           Fiscal
                                         2000             1999
                                        -------         -------
<S>                                     <C>             <C>
     Net income -
              As reported               $   936         $   603
                                        =======         =======

              Pro forma                 $   300         $   605
                                        =======         =======

     Basic income per share -
              As reported               $   .02         $   .02
                                        =======         =======

              Pro forma                 $   .01         $   .02
                                        =======         =======

     Diluted income per share -
              As reported               $   .02         $   .02
                                        =======         =======

              Pro forma                 $   .01         $   .02
                                        =======         =======
</TABLE>

9.   INCOME TAXES

     The provision (benefit) for income taxes consisted of the following:

<TABLE>
<CAPTION>
                                       Fiscal         Fiscal
                                        2000           1999
                                       ------         ------
<S>                                   <C>            <C>
     Current:
          Federal tax expense          $ 387          $ 341
          State tax expense               65             75
     Deferred:
          Federal tax expense           (372)          (341)
          State tax expense               --             --
                                       -----          -----
                                       $  80          $  75
                                       =====          =====

</TABLE>

                                                                     (CONTINUED)


                                       30
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)

9.   INCOME TAXES (CONTINUED)

     The Company's deferred tax balances consist of the following at March 31:

<TABLE>
<CAPTION>
                                                             2000              1999
                                                            -------          -------
<S>                                                         <C>              <C>
     Deferred tax assets:
          Net operating loss carryforwards                  $ 1,247          $ 1,608
          Accrued liabilities                                    89               54
          Deferred revenue                                       37               50
          Inventory capitalization adjustment                    18               15
          Allowance for doubtful accounts                        24               52
                                                            -------          -------
                                                              1,415            1,779
     Deferred tax liability:
          Goodwill amortization                                  (8)              --
          Accelerated depreciation for tax purposes              (9)              (9)
                                                            -------          -------
                                                              1,398            1,770

     Valuation allowance                                     (1,398)          (1,770)
                                                            -------          -------
                                                            $    --          $    --
                                                            =======          =======
</TABLE>

     SFAS No. 109 requires a valuation allowance to be recorded when it is more
     likely than not that some or all of the deferred tax assets will not be
     realized. At March 31, 2000, a valuation allowance for the full amount of
     the net deferred tax asset was recorded because of pre-2000 losses and
     uncertainties as to the amount of taxable income that would be generated in
     future years. The net change in the valuation allowance for the years ended
     March 31, 2000 and 1999 was $372 and $341, respectively.

     A reconciliation of the Company's effective tax rate compared to the
     statutory federal tax rate for the years ended March 31, 2000 and 1999 is
     as follows:

<TABLE>
<CAPTION>
                                                    2000           1999
                                                    ----           ----
<S>                                                <C>           <C>
     Federal income taxes at statutory rate          34%           34%
     State taxes, net of federal benefit              6             6
     Net operating loss carryforwards               (34)          (52)
     Stock based compensation adjustment             --            24
     Other                                            2            (1)
                                                    ---           ---

                                                      8%           11%
                                                    ===           ===
</TABLE>

                                                                     (CONTINUED)

                                       31
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)

9.   INCOME TAXES (CONTINUED)

     The Company at March 31, 2000 and 1999 had $263 and $415, respectively,
     owing to certain states for income taxes, penalties and fees, and interest.
     The amount has been accrued by the Company and is included in accrued
     liabilities (see Note 6).

     At March 31, 2000, the Company had available net operating loss
     carryforwards of approximately $4,357 which expire in various years
     beginning in 2007 through 2014.

     The Company closed operations of its B.B. O'Brien's sports bar ("BB's")
     during July 1995. Since operations have ceased, it is doubtful that these
     tax benefits will ever be realized. If certain substantial changes in the
     Company's ownership should occur, there would be an annual limitation on
     the amount of carryforwards that could be utilized. BB's had
     pre-acquisition tax net operating loss carryforwards which arose prior to
     becoming a member of the consolidated group on November 1, 1990, which were
     available to offset future taxable income of BB's. The possible benefit to
     be recognized from the realization of these amounts has not been recorded,
     as there is no assurance as to their ultimate realization. The tax
     benefits, which may ultimately be realized, are limited to approximately
     $100 per year. BB's pre-acquisition tax net operating loss carryforwards
     total approximately $1,501, which expire in various years through 2005.

10.  COMMITMENTS AND CONTINGENCIES

     As of March 31, 2000, the Company leases office and warehouse space under
     operating leases in Florida (approximately 23,000 square feet) and Colorado
     (approximately 3,000 square feet). The leases for these two facilities
     expire in April 2003 and September 2002, respectively. Rent expense charged
     to operations for fiscal 2000 and fiscal 1999 was $226 and $118,
     respectively.

     The aggregate minimum annual lease payments under noncancellable operating
     leases are as follows:

<TABLE>
<CAPTION>
                       Fiscal
                       ------
<S>                                            <C>
                        2001                      $  206
                        2002                         204
                        2003                         212
                        2004                          17
                     Thereafter                       --
                                                  ------
            Total minimum lease commitments       $  639
                                                  ======

</TABLE>

                                                                     (CONTINUED)

                                       32
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)


10.  COMMITMENTS AND CONTINGENCIES (CONTINUED)

     The Company has executed employment agreements with several of its key
     employees. The most significant agreement is with its President. This
     employment agreement, which expires in November 2003, calls for a salary of
     $250 per year and an annual car allowance of $10.

     The Company's Chairman does not have an employment agreement but can be
     compensated under terms set forth by the lending institution which lent the
     Company $3.0 million in fiscal 1999 (see Note 7). The Chairman does not
     receive a base salary. However, for fiscal years 2000 through 2003, the
     Company may make a bonus payment to the Chairman in the amount of $90 if
     the Company's audited earnings before interest, depreciation and
     amortization ("EBITDA") exceeds $1.5 million for such fiscal year. An
     additional $90 bonus payment may be made to the Chairman if EBITDA in such
     fiscal year exceeds $2.0 million.

     The Company's Chairman did not receive any salary or bonus payments in
     fiscal 1999. The Company met the initial EBITDA target of $1.5 million in
     fiscal 2000, and accordingly accrued a bonus payment to the Chairman of $90
     at March 31, 2000.

11.  DISCONTINUED OPERATIONS

     The Company was formerly engaged in the ownership and operation of a sports
     cafe through BB O'Brien's, Inc. ("BB's"). In July 1995, the Company closed
     its BB O'Brien's sports bar. All fixed assets and goodwill related to BB's
     were fully depreciated and amortized during the year ended March 31, 1995.
     At March 31, 1998, BB's had net liabilities owed to unrelated third parties
     of $268. The Company received an opinion during fiscal 1999 from
     independent counsel concluding that the statute of limitations for
     liability on these obligations had expired. Consequently, the Company
     eliminated these liabilities from its balance sheet and recognized the
     effect in discontinued operations in fiscal 1999.

12.  RELATED PARTY TRANSACTIONS

     The Company's Chairman often makes advances to the Company, which are
     non-interest bearing and payable upon demand. These net advances totaled
     $52 and $52 at March 31, 2000 and 1999, respectively, and have been
     included in accrued liabilities on the balance sheet for those respective
     dates.

     The Company had certain amounts payable and receivable to related parties
     for purchases of certain sports memorabilia merchandise. During the year
     ended March 31, 1999, the payable and receivable were combined leaving a
     receivable from the related parties for $2. This amount was repaid in
     fiscal 1999.

                                                                     (CONTINUED)

                                       33
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)


12.  RELATED PARTY TRANSACTIONS (CONTINUED)

     During the year ended March 31, 1999, a shareholder and officer of the
     Company through December 1998, loaned the Company $92 to pay for
     obligations of the Company. The fiscal 1999 loans included interest at 12%
     per annum. The net amount due, including accrued interest of $1, at
     November 18, 1999 was $14 and was repaid through issuance of the Company's
     common stock at the market rate at the time of the exchange (see Note 8).

13.  DFC FRANCHISE INFORMATION

     DFC licenses the right to use the proprietary name Field of Dreams from
     Universal Studios Licensing, Inc. ("USL"), formerly known as Universal
     Merchandising, Inc. Pursuant to the license agreement, DFC pays USL one
     percent of each company-owned unit's gross sales, with a minimum annual
     royalty of $3 per store. DFC pays royalties of $5 for each new franchised
     unit opened and one percent of each franchised unit's gross sales. This $5
     fee is not an advance against royalties. At March 31, 2000, DFC had 35
     units owned by franchisees and had no company-owned units.

     Effective June 1, 1991, DFC has the right to use and display the Field of
     Dreams service mark in company-owned or franchised retail units located in
     the United States. It also provides for the non-exclusive right to affix
     the Field of Dreams trademark to approved licensed articles for resale. DFC
     also has certain rights of first refusal related to the use of the service
     mark outside the United States. There is an exception of the right to
     transfer this licensing agreement to Dreams, Inc. or to a newly
     incorporated majority-owned subsidiary of Dreams, Inc. within a six-month
     period; these licensing rights are non-transferable and non-assignable.

     The license agreement expires December 2005. The agreement may be renewed
     for additional five-year terms, provided that DFC is in compliance with all
     aspects of the agreement. If DFC fails to comply with the license
     requirements of the agreement, either during the initial term of during an
     option term, the agreement may be terminated by USL. Termination of the
     license agreement would eliminate DFC's right to use the Field of Dreams
     service mark.

     On June 5, 1997, DFC received from USL a notice of termination of the USL
     License based upon an allegation of more than four material breaches within
     a period of eighteen (18) months. Subsequently, USL suspended the notice of
     termination as DFC and USL negotiated a settlement of and amendment to the
     License agreement. Effective September 1997, DFC and USL agreed that the
     USL License is in good standing. Under the terms of the settlement
     agreement, DFC was required to pay to USL $100 over a one year period and
     immediately pay all royalties due.

                                                                     (CONTINUED)


                                       34
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)


13.  DFC FRANCHISE INFORMATION (CONTINUED)

     The Company paid USL $25 in fiscal 1999, which represented the balance
     remaining on the agreement. The settlement agreement also modified the USL
     License to exclude USL properties and the surrounding five-mile radius
     (excluding large regional malls) from DFC's exclusive territory. DFC has
     the right of first refusal to the third-party retail sports memorabilia
     operation on the USL properties. Should DFC fail to meet its obligation
     under the settlement agreement, the USL license would again be in breach
     and subject to termination by USL.

     DFC may be precluded from offering franchises in certain states where USL
     may be deemed to be a franchisor under the laws of the applicable states.
     Accordingly, before offering franchises in said states, DFC shall notify
     USL of its intent, and USL must conclude that it will not be deemed a
     franchisor in those states, or the rights to sell franchises may be
     withheld.

     DFC is required to indemnify USL from certain losses and claims, including
     those based on defective products, violation of franchise law and other
     acts and omissions of DFC. DFC is required to maintain insurance coverage
     of $3 million per single incident. The coverage must name USL as an insured
     party. At March 31, 1999, DFC had the required insurance coverage.

     The Company has entered into a continuing guarantee agreement with USL,
     whereby the Company has guaranteed the full and prompt payment to USL of
     all amounts due under this agreement. Royalty expense for the years ended
     March 31, 2000 and 1999 was $188 and $189, respectively.

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

<TABLE>
<CAPTION>
                                          2000       1999
                                          ----       ----
<S>                                       <C>        <C>
     In operation at year end              35         34
     Opened during the year                 6          8
     Closed during the year                 5          1
     Under development at year end          1          3

</TABLE>

                                                                     (CONTINUED)


                                       35
<PAGE>

DREAMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)


14.  SUPPLEMENTAL CASH FLOW INFORMATION

     Cash paid for interest during fiscal 2000 and 1999 was $480 and $156,
     respectively. The Company did not pay any income taxes during fiscal 1999.
     The Company paid $104 during fiscal 2000 for income taxes. There were no
     noncash items in fiscal 2000, the information for fiscal 1999 is detailed
     as follows:

<TABLE>
<CAPTION>
                                                                 1999
                                                                 ----
<S>                                                            <C>
     Noncash investing and financing activities:
          Capital stock issued for acquisition                 $ 3,000
          Capital stock issued as consideration to
             extinguish debt                                     1,649
          Capital stock issued for payment of services
             to third parties                                       80
          Capital stock issued to acquire minority
             interest in subsidiary                                 --


     Details of acquisition:
          Fair value of assets acquired                        $ 3,577
          Liabilities assumed                                     (552)
          Capital stock issued                                    (750)
                                                               -------
          Cash paid                                              2,275
          Less cash acquired                                       (57)
                                                               -------

          Net cash paid for acquisition                        $ 2,218
                                                               =======

</TABLE>



                                       36
<PAGE>

Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     On March 10, 1999, the Company dismissed Pritchett, Siler & Hardy, P.C.
("PSH") and on March 12, 1999 engaged Margolies, Fink and Wichrowski as its
principal independent accountants. The change of independent accountants was
approved by the Company's Board of Directors. There were no disagreements with
PSH on any matter of accounting principles or practices, financial disclosure or
auditing scope or procedure. PSH's audit reports of the past two years did not
contain any adverse or disclaimed opinions, nor were the opinions qualified or
modified as to uncertainty, audit scope or accounting principles.

                                    PART III

Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT.

     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.

<TABLE>
<CAPTION>
                                   Serving as
                                   Director of           Position Held With
Name                    Age        the Company Since     the Company
-----------------       ---        -----------------     -----------------------
<S>                     <C>        <C>                   <C>
Sam D. Battistone       60              1983             Chairman/Director

Ross Tannenbaum         38              1998             President/Director

Dan Marino              38              2000             Director of Business
                                                         Development/Director

Dale Larsson            56              1999             Director

Mark Viner              33               --              Secretary/Treasurer/
                                                         Chief Financial Officer

John Walrod             47               --              Executive Vice President

</TABLE>

     BIOGRAPHICAL INFORMATION.

     SAM D. BATTISTONE. For more than the past five years, Sam D. Battistone has
been majority shareholder, Chairman, Chief Executive Officer, President and a
Director of the Company. 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

                                       37
<PAGE>

Company sold its interest in the team. He served as a founding director of
Sambo's Restaurants, Inc. and variously as President, Chief Executive Officer,
Vice-Chairman and Chairman of the Board of Directors from 1967 to 1979. 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.

     DAN MARINO. Dan Marino is one of the most recognizable and popular sports
figures in the entire world and has served as the Company's Director of Business
Development since January 2000. In April 2000, Mr. Marino announced his
retirement from professional football after 17 consecutive seasons with the
Miami Dolphins of the National Football League. He holds twenty NFL records and
is considered by many as the most prolific passer in NFL history. His ongoing
work for the community is centered on the Dan Marino Foundation for children's
charities of South Florida.

     DALE E. LARSSON. For more than the past five years until 1999, Dale E.
Larsson was the Secretary-Treasurer and director of the Company. Mr. Larsson was
re-elected a director in August 1999. 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.

     MARK VINER. Mr. Viner has been Secretary, Treasurer and Chief Financial
Officer of the Company since September 1998. He is a Certified Public
Accountant. From June 1994 to October 1997, Mr. Viner was the Director of
Financial Reporting for Planet Hollywood International, Inc. and was
instrumental in every phase of that company's 1996 initial public offering. From
May 1992 to May 1994, Mr. Viner was a financial manager for the Walt Disney
Company, responsible for all financial activities of Pleasure Island, a $75
million nighttime entertainment district.

     JOHN WALROD. Mr. Walrod has been Executive Vice President of Franchise
Operations since January 1998. From 1992 to December 1997, he owned and operated
several franchise stores, including three Field of Dreams-Registered Trademark-
stores. Prior to his franchise ownership, John held several executive positions
in the real estate and banking industries.


                                       38
<PAGE>

Item 10. EXECUTIVE COMPENSATION.

     The following table sets forth information concerning compensation for
services in all capacities by the Company and its subsidiaries for fiscal years
ended March 31, 1998, 1999 and 2000 of those persons who were, at March 31,
2000, the Chief Executive Officer of the Company and other highly compensated
executive officers and employees of the Company.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                    Annual Compensation                                  Long-Term
                                                                                        Compensation
                                                                                         Securities
Name and principal                                                   Other Annual        Underlying
Position                     Year          Salary         Bonus     Compensation(5)     Options/SARs
----------------------------------------------------------------------------------------------------
<S>                          <C>        <C>             <C>         <C>                <C>
Ross Tannenbaum,             1998       $     --        $    --       $     --                  --
CEO and Director             1999         93,750(1)          --          4,000                  --
                             2000        250,000             --          9,600                  --

John Walrod,                 1998         21,846(2)          --             --                  --
Executive Vice               1999        120,000             --             --             200,000
President                    2000        123,750          5,000             --                  --

Mark Viner, Chief            1998             --             --             --                  --
Financial Officer,           1999         63,000(3)      16,000          3,500             250,000
Secretary & Treasurer        2000        113,250          5,000          7,500             300,000

Mitch Adelstein,             1998             --             --             --                  --
Product Development          1999         46,875(4)          --          2,700                  --
Coordinator                  2000        127,500          7,500          7,200                  --
(employee, not officer)

</TABLE>

-------------------

(1)  Mr. Tannenbaum's employment commenced on November 10, 1998.

(2)  Mr. Walrod's employment commenced on January 27, 1998.

(3)  Mr. Viner's employment commenced on September 4, 1998.

(4)  Mr. Adelstein's employment commenced on November 10, 1998.

(5)  Other annual compensation represents automobile allowances.

     The Company and Ross Tannenbaum entered into an Employment Agreement on
November 10, 1998. Under the terms of that Agreement, Mr. Tannenbaum is employed
for a five-year period at a base salary rate of $250,000 per year subject to
certain adjustments based on the Company's financial performance. Mr. Tannenbaum
also receives certain benefits including car allowance and insurance. The
Employment Agreement may be terminated for cause prior to expiration of its full
term.

     The Company and Mark Viner entered into an Employment Agreement on
September 4, 1998. Under the terms of that Agreement, Mr. Viner is employed for
a three year period at a

                                       39
<PAGE>

base salary rate of $108,000 per year with minimum eight percent per year
increases. Mr. Viner received an incentive bonus in 1998 pursuant to the terms
of the Agreement and was issued options to purchase 250,000 shares of the
Company's common stock at an exercise price of $0.4375 per share, the closing
price of the common stock at the date of the Agreement. The options are
conditioned upon continued employment by the Company of Mr. Viner and vest 1/3
per year beginning on the first anniversary of his Employment Agreement. Mr.
Viner also receives certain benefits including car allowance and insurance. The
Employment Agreement may be terminated for cause prior to expiration of its full
term.

                      Option/SAR Grants in Last Fiscal Year

<TABLE>
<CAPTION>

                                  Individual Grants
--------------------------------------------------------------------------------    Potential Realizable Value
                                     % of Total                                       At Assumed Annual Rates
                                    Options/SARs                                     Of Stock Price Appreciation
                                     Granted to      Exercise or                        For Option Term (2)
                   Options/SARs     Employees in      Base Price      Expiration    ---------------------------
    Name             Granted        Fiscal Year      ($/Share)(1)        Date           5%              10%
--------------     ------------     ------------     ------------     ----------     ----------     -----------
<S>                <C>              <C>              <C>              <C>            <C>            <C>
Mark Viner              300,000         16.67%          $ 0.25        2/28/2003      $   315,000    $   330,000

Dan Marino            1,500,000         83.33%          $ 0.25        1/31/2003      $ 1,575,000    $ 1,650,000

</TABLE>

(1)  All options were issued pursuant to terms provided for in option agreements
     at the fair market value at the date of grants.

(2)  The amounts disclosed in these columns, which represent appreciation of the
     Company's common stock price at the 5% and 10% rates dictated by the
     Securities and Exchange Commission, are not intended to be a forecast of
     the Company's common stock price and are not necessarily indicative of the
     actual values which may be realized by the named Executive Officers or the
     shareholders.


Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

PRINCIPAL SHAREHOLDERS.

     The following table sets forth as of June 16, 2000, the number of the
Company's voting securities beneficially owned by persons who own five percent
or more of the Company's voting stock, by each director and by all officers and
directors as a group. The table presented below includes shares issued and
outstanding, and warrants to purchase shares and options exercisable within 60
days.

<TABLE>
<CAPTION>
                   Name and Address                                   Number of         Percent
  Title and               of                     Type of               Shares             of
    Class          Beneficial Owner             Ownership              Owned             Class
------------       ----------------             ---------             ---------         -------
<S>                <C>                          <C>               <C>                   <C>
No par value       Sam D. Battistone            Record and        14,303,511(1)(3)       29.6%
Common Stock       5009 Hiatus Road             Beneficial
                   Sunrise, FL  33351

</TABLE>



                                       40
<PAGE>

<TABLE>
<CAPTION>
                   Name and Address                                       Number of         Percent
  Title and               of                          Type of               Shares             of
    Class          Beneficial Owner                  Ownership              Owned             Class
------------       ----------------                  ---------             ---------         -------
<S>                <C>                               <C>                 <C>                 <C>
No par value       Ross Tannenbaum                    Record and         12,500,000            25.8%
Common Stock       5009 Hiatus Road                   Beneficial
                   Sunrise, FL  33351

No par value       Dale Larsson                       Record and            425,300             0.9%
Common Stock       3230 North University Ave.         Beneficial
                   Provo, UT  84604

No par value       Dan Marino                         Record and            750,000 (5)         1.5%
Common Stock       5009 Hiatus Road                   Beneficial
                   Sunrise, FL  33351

No par value       Finova Mezzanine Capital, Inc.     Record and          6,657,895 (4)        13.8%
Common Stock       500 Church Street                  Beneficial
                   Nashville, TN 37219

No par value       All Officers and                   Record and         28,345,478            58.6%
Common Stock       Directors as a                     Beneficial
                   Group (6 persons)(2)
</TABLE>

     (1)  Includes 3,100,000 shares owned by the following family members of
          which Mr. Battistone disclaims beneficial ownership:

<TABLE>
<CAPTION>
          Name                                   Number of Shares Owned
          ----                                   ----------------------
<S>                                         <C>
          J. Roger Battistone                           1,000,000
          Justin Battistone                               350,000
          Kelly Battistone                                350,000
          Dann Battistone                                 350,000
          Brian Battistone                                350,000
          Mark Battistone                                 350,000
          Cynthia Battistone Hill                         350,000

</TABLE>

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

     (3)  Sam D. Battistone, has pledged to B.A. Leasing and Capital
          Corporation, an unaffiliated corporation, all shares of common stock
          of the Company which he now owns or may acquire in the future to
          secure personal indebtedness of approximately $500,000. Mr. Battistone
          is currently not in compliance with the terms of the applicable
          agreements.

                                       41
<PAGE>

     (4)  Warrants to purchase shares issued in connection with Mounted Memories
          financing.

     (5)  Includes 750,000 shares which are the subject of stock options.

     27,059,470 shares of the Company's no par value common stock (and 1,050,000
options) have been pledged to Lender to secure the Company's obligations in
connection with a $3.0 million loan. Should the Company default on any
obligation to Lender and should Lender exercise its rights as a secured party, a
change in control of the Company would occur.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     From October 1997 to November 1998, the Company borrowed a total of
$522,000 from Signature, Inc., a corporation owned by the children of Sam D.
Battistone, Chairman of the Company. The Company repaid that indebtedness plus
interest in November 1998 by issuing 2,275,000 shares (at $0.20 per share) of
its common stock to Signature, Inc. plus cash payments totaling $90,000.

     In July 1998, the Company borrowed $200,000 from J. Roger Battistone, the
brother of Sam D. Battistone. The Company repaid the principal plus accrued
interest in November 1998 by issuing 1,020,000 shares (at $0.20 per share) of
its common stock to J. Roger Battistone.

     From April 1997 to July 1998, the Company borrowed a total of $210,000 from
Invest West Sports, Inc., a corporation owned by Sam D. Battistone. The Company
repaid all indebtedness to Invest West Sports, Inc. (including interest) during
fiscal years 1998 and 1999.

     During the fiscal year ended March 31, 1999, the Company borrowed $70,000
from Dreamstar, a corporation owned by Sam D. Battistone. During the same fiscal
year, the Company repaid all principal and accrued interest owed Dreamstar by
issuing to Dreamstar 460,000 shares (at $0.10 per share) of common stock and
paying $25,000 in cash. The stock was trading at approximately $0.20 at the time
of the exchange. The $46,000 discount was booked as compensation expense, and
charged to an operational income during fiscal 1999.

     In November 1998, Dreamstar assumed an obligation of the Company and the
Company was released of a $362,500 obligation the Company owed to the National
Basketball Association. In consideration for that assumption and release, the
Company issued to Dreamstar 3,625,000 shares (at $0.10 per share) of common
stock. The stock was trading at approximately $0.20 at the time of the exchange.
The $362,500 discount was booked as compensation expense, and charged to an
operational income during fiscal 1999.

     In January 2000, the Company and Dan Marino entered into an exclusive
arrangement pursuant to which Mr. Marino provides autographs and certain
services.

                                       42
<PAGE>

Item 13. EXHIBITS AND REPORTS ON FORM 8-K.

<TABLE>
<CAPTION>
Exhibit Number                                                               Page #
<S>                                                                          <C>

2  (i)    Articles of Incorporation............................................*
   (ii)   Bylaws   *

6  Material Contracts..........................................................*
   (i)    Sirrom Financing Agreements..........................................*
   (ii)   Ross Tannenbaum Employment Agreement.................................*
   (iii)  Merchandise License Agreement........................................*
   (iv)   Standard Franchise Documents.........................................*

7  Letter on change in certifying accountant...................................*

</TABLE>

*    Filed with the Company's Form 10-SB dated September 7, 1999 and
     incorporated by this reference.


                                       43
<PAGE>

                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the Company
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, Chief Executive Officer

                                        Dated:  June 21, 2000

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the Company and in the  capacities and on
the dates indicated.



                                     By: /s/ Mark Viner
                                        ----------------------------------------
                                        Mark Viner, Chief Financial Officer

                                        Dated:  June 21, 2000



                                     By: /s/ Sam Battistone
                                        ----------------------------------------
                                        Sam Battistone, Director

                                        Dated:  June 21, 2000



                                     By: /s/ Dale E. Larrson
                                        ----------------------------------------
                                        Dale E. Larrson, Director

                                        Dated:  June 21, 2000



                                       44