Fotoball USA Reports Fourth Quarter and Year-End 2000 Results.

Business Editors

SAN DIEGO--(BUSINESS WIRE)--Feb. 22, 2001

Fotoball USA Inc. (Nasdaq:FUSA) Thursday announced operating results for the fourth quarter and year ended Dec. 31, 2000.

For the quarter, sales were $6.8 million, a 3% decrease from the fourth quarter of 1999. The decrease was attributable to a drop in retail sales from the fourth quarter of 1999. Promotional sales generated $.7 million, a 196% increase from the fourth quarter of 1999. For the year ended Dec. 31, 2000, sales were $26.9 million, a 6% decrease from the prior year. Overall, retail sales were $24.7 million, a 1% decrease from the prior year. Promotional sales generated $2.3 million for the year 2000, a 41% decrease from the prior year.

For the quarter, the net loss was ($232,153), or ($.06) per diluted share, as compared to $529,308 net income, or $.14 per diluted share, during the fourth quarter of 1999. Net income for the year ended Dec. 31, 2000 was $179,271, or $.05 per diluted share, compared to $2,646,066, or $.83 per diluted share ($.59 per diluted share on a pro forma fully taxed basis, using the same 32% income tax rate as 2000), for the prior year. The decreases in net income for the quarter and year were due to a combination of lower revenue, lower gross margin, down 10% for the fourth quarter of 2000 and 5% for the year ended Dec. 31, 2000, and higher operating expenses, up 21% for the quarter and up 6% for the year. Annual per share amounts were based on diluted weighted average shares outstanding of 3.7 million at Dec. 31, 2000 as compared to 3.2 million as of Dec. 31, 1999, a 16% increase.

Michael Favish, Fotoball's president and chief executive officer stated, "We are disappointed in reporting our first quarterly loss in three years. While our top line sales did not drop dramatically in 2000, they were at lower margins than the previous year, which put significant pressure on the bottom line. In a soft retail environment, we were able to maintain our overall retail sales level for the year 2000 with our non-entertainment retail sales actually increasing for the year. We have invested in and improved our infrastructure, which has added operating expense, but as we've said before, we feel this investment is necessary to allow us to grow in the future. Our challenge for 2001 will be to increase sales and gross profit. With continued growth in the promotions business and a successful launch of the new Rawlings Golf division, we are optimistic that 2001 will show improved financial performance."

Fotoball will hold its quarterly conference call today, Feb. 22, 2001 at 1:45 p.m. PST. You can access the conference call by calling 888/694-1579 or you can listen to the Internet broadcast by visiting http://webcast.themeetingson.com/webcast.jsp?reservation=18014536.

Fotoball is a leading provider of specialty sports balls and souvenir/novelty products. These products are sold in the licensed product retail market through a nationwide network of over 3,000 retailers including Target, Toys R Us, Sears, Wal-Mart, and J.C. Penney. Additionally, Fotoball provides custom sports and non-sports related products for corporate promotions and non-licensed specialty sports products to corporations for resale, including sales to amusement parks and entertainment related companies. Fotoball currently holds licenses with Major League Baseball Properties and the National Football League Properties and NFL Players Inc., Major League Baseball Players Association, NHL Enterprises and the National Hockey League Players Association, over 300 NCAA colleges and certain entertainment properties including Warner Bros. Looney Tunes(R), Nickelodeon's "Rugrats" and "Blue's Clues" character, Disney's ESPN(R), Coca-Cola, and Saban Merchandising Inc's "Digimon: Digital Monsters."

With its new Rawlings Golf division, Fotoball will enter the golf business with a full line of affordably priced professional quality golf clubs, balls and accessories. The Rawlings Golf products will be sold through Fotoball's existing network of national sporting goods retailers and select on-course and off-course golf retailers.

Statements in this press release which are not historical, including Fotoball's or management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future, are forward-looking statements. Such statements include statements regarding expectations for increased sales and gross profit and growth in the Promotions and Rawlings Golf divisions and growth in other areas of operation. All forward-looking statements made by the company, including such statements herein, involve material risks and uncertainties and are subject to change based on factors beyond the control of the company. Accordingly, the company's actual results may differ from those expressed or implied in any such forward-looking statements as a result of various factors and risks including the company's inability to obtain new licenses, expanding its retail capabilities and the risk factors listed from time to time in the company's filings with the Securities and Exchange Commission including but not limited to, the annual report on Form 10-KSB for the year ended Dec. 31, 1999 and the quarterly reports on Form 10-QSB for the quarters ended March 31, 2000, June 30, 2000 and Sept. 30, 2000.

The following table sets for a summary statement of income and condensed balance sheet data and should be read in conjunction with this statement.

                          FOTOBALL USA, INC.
                    CONDENSED FINANCIAL STATEMENTS
                              (Unaudited)

                    SUMMARY STATEMENT OF OPERATIONS

                   Three Months Ended           Twelve Months Ended
                        Dec. 31,                      Dec. 31,
                   2000          1999           2000           1999

SALES          $ 6,821,304   $ 7,017,800    $ 26,929,330  $ 28,690,211

GROSS PROFIT     2,322,963     3,117,466       9,687,751    11,767,962

OPERATING
 EXPENSES        2,764,931     2,278,902       9,517,331     8,939,658

OPERATING INCOME/
 (LOSS)           (441,968)      838,564         170,420     2,828,304

INCOME/(LOSS) BEFORE
 INCOME TAX       (420,437)      868,308         265,271     2,759,066

INCOME TAX EXPENSE/
 (BENEFIT)        (188,284)      339,000          86,000       113,000

NET INCOME/
 (LOSS)         ($ 232,153)    $ 529,308       $ 179,271   $ 2,646,066

NET INCOME/(LOSS) PER
 SHARE, DILUTED     ($ .06)        $ .14           $ .05      $ .83(a)

DILUTED WEIGHTED AVERAGE
 SHARES          3,640,183     3,817,097       3,720,952     3,201,494

(a) Based on an effective income tax rate of 32% (same rate as 2000),
    pro forma net income per share, diluted was $.59 for the twelve
    months ended Dec. 31, 1999.

                     CONDENSED BALANCE SHEET DATA

                              Dec. 31, 2000        Dec. 31, 1999

CASH                           $ 2,921,358          $ 3,797,918

ACCOUNTS RECEIVABLE              3,277,700            3,713,015

INVENTORIES                      4,033,094            4,105,675

TOTAL ASSETS                    14,808,886           13,824,878

NOTE PAYABLE TO BANK               618,659                   --

WORKING CAPITAL                  9,897,355           10,497,850

STOCKHOLDERS' EQUITY            11,806,523           11,588,721