Big Dog Holdings, Inc. third quarter ended September 30, 2006 consolidated net sales were $54. 1million as compared with $44.9 million in the third quarter 2005, an increase of 20.5%. This was primarily due to the addition of 53 new The Walking Company stores, including 35 stores acquired from Steve's Shoes in January 2006. Comparative retail store sales increased 3.0% for the third quarter 2006, with an 11.5% increase for TWC, offset by a 3.4% decline for Big Dogs.

The company had a total of 297 stores opened (155 Big Dog stores and 139 TWC stores) at the end of September 30, 2006, as compared to 261 stores last year (175 Big Dogs stores and 86 TWC stores as of September 30, 2005).

Consolidated gross profit increased to $28,982,000 in the third quarter 2006 as compared with $25,286,000 in the third quarter 2005. The overall increase in consolidated gross profit is the result of increased sales for TWC, as well as increased margin contributions from TWC which increased to 51.3% compared to 50.9% last year. Big Dogs' gross margin for the period decreased to 56.4%, as compared to last year's margin of 60.4%.

Consolidated operating expenses in the third quarter 2006 were $27,656,000, or 51.1% of consolidated net sales, compared to $22,262,000 or 49.6% in 2005. Consolidated EBITDA for the third quarter 2006 was $2,995,000, compared to $4,026,000 for the third quarter 2005. The increase in operating expenses as a percentage of sales, and the decrease in EBITDA, are attributable to the reduction in Big Dog's revenue and contribution, the building of our corporate overhead structure for anticipated future growth of TWC, as well as continued turnaround and integration of the Steve's Shoes operations into TWC. As a result, the fully diluted net income per share decreased to $.05 per share as compared with $.18 per share last year.

Andrew Feshbach, Chief Executive Officer, stated, “As expected, we experienced a decline in income this quarter. However we are pleased with our progress for TWC in several areas: (1) We had projected that it would take until September to turnaround the stores acquired out of bankruptcy from Steve's Shoes. While the turnaround is still ongoing, we are pleased to report a positive comparative store sales trend for those stores in September (although not included in our reported comparative stores sales for the stores opened for 12 months). (2) The stores acquired from Footworks in the 3rd quarter of 2005 are now fully integrated into TWC and achieved comparable store sales increases in September. (3) We have begun some operations at our new distribution center in North Carolina and we are on track to be fully transitioned from the Los Angeles operations by January 2007. (4) We opened 6 new TWC stores this quarter and are underway to open another 10 stores in the 4th quarter, ending the year at approximately 149 stores.

Andrew Feshbach further stated, “In regard to business at TWC, we achieved strong comparative stores sales increases on improved margins this last quarter, and our new store openings as a whole are performing better than our sales projections. We are optimistic about the 4th quarter and our results to date are ahead of those achieved in the 3rd quarter. In regard to business at Big Dogs, we previously noted softer sales at outlet malls and took a more promotional approach to maintain a small sales decrease for the third quarter. We view that the 4th quarter will be similar to the 3rd quarter in this respect.”



                  BIG DOG HOLDINGS, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)


                      Three Months Ended            Nine Months Ended
                         September 30,                September 30,
                ----------------------------  ----------------------------
                    2006           2005           2006           2005
                -------------  -------------  -------------  -------------

NET SALES       $  54,127,000  $  44,909,000  $ 145,975,000  $ 119,695,000
COST OF GOODS
 SOLD              25,145,000     19,623,000     67,513,000     53,502,000
                -------------  -------------  -------------  -------------
GROSS PROFIT       28,982,000     25,286,000     78,462,000     66,193,000
                -------------  -------------  -------------  -------------
OPERATING
 EXPENSES:
  Selling,
   marketing and
   distribution    23,945,000     19,168,000     69,695,000     55,052,000

  General and
   administrative   2,042,000      2,092,000      6,164,000      5,909,000
  Depreciation
   and
   amortization     1,669,000      1,002,000      4,526,000      2,924,000
                -------------  -------------  -------------  -------------
    Total
     operating
     expenses      27,656,000     22,262,000     80,385,000     63,885,000
                -------------  -------------  -------------  -------------
INCOME (LOSS)
 FROM
 OPERATIONS         1,326,000      3,024,000     (1,923,000)     2,308,000
INTEREST INCOME         2,000          1,000          6,000         42,000
INTEREST
 EXPENSE             (573,000)      (170,000)    (1,358,000)      (618,000)
                -------------  -------------  -------------  -------------
INCOME (LOSS)
 BEFORE
 PROVISION
 FOR (BENEFIT
 FROM) INCOME
 TAXES                755,000      2,855,000     (3,275,000)     1,732,000
PROVISION FOR
 (BENEFIT FROM)
 INCOME TAXES         284,000      1,085,000     (1,227,000)       658,000
                -------------  -------------  -------------  -------------
NET INCOME
 (LOSS)         $     471,000  $   1,770,000  $  (2,048,000) $   1,074,000
                =============  =============  =============  =============
NET INCOME
 (LOSS) PER
 SHARE
  BASIC         $        0.05  $        0.19  $       (0.22) $        0.12
                =============  =============  =============  =============
  DILUTED       $        0.05  $        0.18  $       (0.22) $        0.11
                =============  =============  =============  =============