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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549


FORM 10-Q

(Mark One)

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the quarterly period ended March 29, 2003

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from                      to

|                       |  |       |  | 
|---------------------- |  | ----- |  | 
|Commission file number |  | 0-774 |  | 
|                       |  |       |  | 

PHOENIX FOOTWEAR GROUP, INC.




(Exact Name of Registrant as Specified in Its Charter)


|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 15-0327010                       
|                                                               |  |                                  
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (IRS Employer
Identification No.)

|                                                   |  |  |            | 
|-------------------------------------------------- |  |  | ---------- | 
|5759 Fleet Street, Suite 220, Carlsbad, California |  |  | 92008      | 
|                                                   |  |  |            | 
|(Address of Principal Executive Offices)           |  |  | (Zip Code) | 

|                                                                   
|-------------------------------------------------------------------
|(760) 602-9688
(Registrants Telephone Number, Including Area Code)

|                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------
|Daniel Green Co. 450 Main Street, Old Town, ME 04468
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12
months (or for 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  o

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and
reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934
subsequent to the distribution of securities under a plan confirmed by a court.

|             
|-------------
|Yes  o  No  o

Indicate the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date.

|                        |  |                               |           | 
|----------------------- |  | ----------------------------- | --------- | 
|CLASS                   |  | OUTSTANDING AT APRIL 11, 2003
|Common, $0.01 par value |  |                               | 2,147,098 | 





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TABLE OF CONTENTS



|                              |                                                                                               |  |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I: FINANCIAL INFORMATION
|                              | Item 1. Consolidated Financial Statements                                                    
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                              | Item 4. Controls and Procedures                                                              
|Part II  Other Information  
|                              | Item 1. Legal Proceedings                                                                    
|                              | Item 2. Changes in Securities                                                                
|                              | Item 3. Defaults upon Senior Securities                                                      
|                              | Item 4. Submission of matters to a vote of security holders.                                 
|                              | Item 5. Other Information                                                                    
|                              | Item 6. Exhibits and Reports on Form 8-K:                                                    
|SIGNATURES                   
|EXHIBIT 99.1                 
|EXHIBIT 99.2                 



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PHOENIX FOOTWEAR GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

|                                                  |                                                                                              |  |      |    | 
|------------------------------------------------- | -------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                  |                                                                                              |  | Page
|                                                  |                                                                                              |  |     
|PART I                      FINANCIAL INFORMATION |                                                                                              |  |      |   
|                                                  | Item 1.Consolidated Financial Statements and Notes to
Consolidated Financial Statements      |  |      | 3  | 
|                                                  | Item 2.Managements Discussion and Analysis of Financial
Condition and Results of Operations |  |      | 8  | 
|                                                  | Item 3.Quantitative and Qualitative Disclosures About Market Risk                            |  |      | 10 | 
|                                                  | Item 4.Controls and Procedures                                                               |  |      | 10 | 
|PART II                      OTHER INFORMATION    |                                                                                              |  |      |   
|                                                  | Item 1.Legal Proceedings                                                                     |  |      | 11 | 
|                                                  | Item 2.Changes in Securities                                                                 |  |      | 11 | 
|                                                  | Item 3.Defaults Upon Senior Securities                                                       |  |      | 11 | 
|                                                  | Item 4.Submission of Matters to a Vote of Security Holders                                   |  |      | 11 | 
|                                                  | Item 5.Other Information                                                                     |  |      | 11 | 
|                                                  | Item 6.Exhibits and Reports on Form 8-K                                                      |  |      | 11 | 
|Signatures                                        |                                                                                              |  | 12   |   

2



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PART I: FINANCIAL INFORMATION




Item 1. Consolidated Financial Statements

PHOENIX FOOTWEAR GROUP, INC.
CONSOLIDATED BALANCE SHEETS

|                                           |                                                                                                                                |                            |            |             |            |              |            |            |            | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ---------- | ----------- | ---------- | ------------ | ---------- | ---------- | ---------- | 
|                                           |                                                                                                                                |                            |            | March 29,   |            | December 31,
|                                           |                                                                                                                                |                            |            | 2003        |            | 2002        
|                                           |                                                                                                                                |                            |            | (Unaudited) |            |             
|ASSETS                                     |                                                                                                                                |                            |            |             |            |              |            |           
|CURRENT ASSETS:                            |                                                                                                                                |                            |            |             |            |              |            |           
|                                           | Cash                                                                                                                           |                            | $          | 1,015,000   |            |              | $          | 1,265,000  |           
|                                           | Accounts
receivable (less allowances of $500,000 in 2003 and $479,000 in 2002)                                                 |                            |            | 7,165,000   |            |              |            | 5,679,000  |           
|                                           | Inventoriesnet                                                                                                                |                            |            | 7,873,000   |            |              |            | 6,662,000  |           
|                                           | Other receivable                                                                                                               |                            |            | 545,000     |            |              |            | 316,000    |           
|                                           | Other current assets                                                                                                           |                            |            | 786,000     |            |              |            | 185,000    |           
|                                           | Deferred income tax asset                                                                                                      |                            |            | 297,000     |            |              |            | 297,000    |           
|                                           |                                                                                                                                |                            |            |             |            |              |            |            |           
|                                           |                                                                                                                                | Total current assets       |            |             | 17,681,000 |              |            |            | 14,404,000 | 
|PLANT AND EQUIPMENTNet                    |                                                                                                                                |                            | 1,025,000  |             |            |              | 1,499,000  |           
|OTHER ASSETS:                              |                                                                                                                                |                            |            |             |            |              |            |           
|                                           | Other assetsnet                                                                                                               |                            |            | 146,000     |            |              |            | 158,000    |           
|                                           | Goodwill                                                                                                                       |                            |            | 1,645,000   |            |              |            | 1,645,000  |           
|                                           | Other receivable                                                                                                               |                            |            | 718,000     |            |              |            | 1,248,000  |           
|                                           |                                                                                                                                |                            |            |             |            |              |            |            |           
|                                           |                                                                                                                                | Total other assets         |            |             | 2,509,000  |              |            |            | 3,051,000  | 
|                                           |                                                                                                                                |                            |            |             |            |              |            |            |           
|TOTAL ASSETS                               |                                                                                                                                | $                          | 21,215,000 |             |            | $            | 18,954,000 |           
|                                           |                                                                                                                                |                            |            |             |            |              |            |            |           
|LIABILITIES AND STOCKHOLDERS EQUITY       |                                                                                                                                |                            |            |             |            |              |            |           
|CURRENT LIABILITIES:                       |                                                                                                                                |                            |            |             |            |              |            |           
|                                           | Accounts payable                                                                                                               |                            | $          | 3,286,000   |            |              | $          | 1,872,000  |           
|                                           | Accrued expenses                                                                                                               |                            |            | 1,152,000   |            |              |            | 1,164,000  |           
|                                           | Notes payablecurrent                                                                                                          |                            |            | 750,000     |            |              |            | 750,000    |           
|                                           | Liability to former stockholders                                                                                               |                            |            | 1,806,000   |            |              |            | 1,806,000  |           
|                                           | Income taxes payable                                                                                                           |                            |            | 159,000     |            |              |            |           |           
|                                           |                                                                                                                                |                            |            |             |            |              |            |            |           
|                                           |                                                                                                                                | Total current liabilities  |            |             | 7,153,000  |              |            |            | 5,592,000  | 
|OTHER LIABILITIES:                         |                                                                                                                                |                            |            |             |            |              |            |           
|                                           | Notes payablenoncurrent                                                                                                       |                            |            | 2,250,000   |            |              |            | 2,250,000  |           
|                                           | Deferred income tax liability                                                                                                  |                            |            | 1,000,000   |            |              |            | 1,000,000  |           
|                                           |                                                                                                                                |                            |            |             |            |              |            |            |           
|                                           |                                                                                                                                | Total other liabilities    |            |             | 3,250,000  |              |            |            | 3,250,000  | 
|                                           |                                                                                                                                |                            |            |             |            |              |            |            |           
|                                           |                                                                                                                                | Total liabilities          |            |             | 10,403,000 |              |            |            | 8,842,000  | 
|STOCKHOLDERS EQUITY:                      |                                                                                                                                |                            |            |             |            |              |            |           
|                                           | Common stock, $.01 par value6,000,000 shares authorized;
2,309,000 and 2,294,000 shares issued in 2003 and 2002, respectively |                            |            | 23,000      |            |              |            | 23,000     |           
|                                           | Additional paid-in-capital                                                                                                     |                            |            | 8,252,000   |            |              |            | 8,104,000  |           
|                                           | Retained earnings                                                                                                              |                            |            | 4,754,000   |            |              |            | 4,379,000  |           
|                                           |                                                                                                                                |                            |            |             |            |              |            |            |           
|                                           |                                                                                                                                |                            | 13,029,000 |             |            |              | 12,506,000 |           
|                                           | Less: Treasury stock at cost, 460,398 and 499,097 shares in 2003
and 2002, respectively                                        |                            |            | (2,217,000  | )          |              |            | (2,394,000 | )         
|                                           |                                                                                                                                |                            |            |             |            |              |            |            |           
|                                           |                                                                                                                                | Total stockholders equity |            |             | 10,812,000 |              |            |            | 10,112,000 | 
|                                           |                                                                                                                                |                            |            |             |            |              |            |            |           
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                                | $                          | 21,215,000 |             |            | $            | 18,954,000 |           
|                                           |                                                                                                                                |                            |            |             |            |              |            |            |           

See notes to consolidated financial statements.

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PHOENIX FOOTWEAR GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                             |                                              |                          |           |                    |           |           |            |           |           | 
|---------------------------- | -------------------------------------------- | ------------------------ | --------- | ------------------ | --------- | --------- | ---------- | --------- | --------- | 
|                             |                                              |                          |           | Three Months Ended
|                             |                                              |                          |           | March 29,          |           | March 31,
|                             |                                              |                          |           | 2003               |           | 2002     
|NET SALES                    |                                              | $                        | 9,207,000 |                    |           | $         | 10,793,000 |          
|COST OF GOODS SOLD           |                                              |                          | 5,187,000 |                    |           |           | 6,960,000  |          
|                             |                                              |                          |           |                    |           |           |            |          
|GROSS PROFIT                 |                                              |                          | 4,020,000 |                    |           |           | 3,833,000  |          
|                             |                                              |                          |           |                    |           |           |            |          
|OPERATING EXPENSES:          |                                              |                          |           |                    |           |           |            |          
|                             | Selling, general and administrative expenses |                          |           | 2,853,000          |           |           |            | 2,593,000 |          
|                             | Other
expensesnet                           |                          |           | 476,000            |           |           |            |          |          
|                             |                                              |                          |           |                    |           |           |            |          
|                             |                                              | Total operating expenses |           |                    | 3,329,000 |           |            |           | 2,593,000 | 
|                             |                                              |                          |           |                    |           |           |            |          
|OPERATING INCOME             |                                              |                          | 691,000   |                    |           |           | 1,240,000  |          
|INTEREST EXPENSE             |                                              |                          | 66,000    |                    |           |           | 232,000    |          
|                             |                                              |                          |           |                    |           |           |            |          
|EARNINGS BEFORE INCOME TAXES |                                              |                          | 625,000   |                    |           |           | 1,008,000  |          
|INCOME TAX PROVISION         |                                              |                          | 250,000   |                    |           |           | 403,000    |          
|                             |                                              |                          |           |                    |           |           |            |          
|NET INCOME                   |                                              | $                        | 375,000   |                    |           | $         | 605,000    |          
|                             |                                              |                          |           |                    |           |           |            |          
|NET INCOME PER SHARE:        |                                              |                          |           |                    |           |           |            |          
|                             | Basic                                        |                          | $         | .20                |           |           | $          | .39       |          
|                             |                                              |                          |           |                    |           |           |            |          
|                             | Diluted                                      |                          | $         | .19                |           |           | $          | .33       |          
|                             |                                              |                          |           |                    |           |           |            |          
|SHARES OUTSTANDING:          |                                              |                          |           |                    |           |           |            |          
|                             | Basic                                        |                          |           | 1,833,094          |           |           |            | 1,566,051 |          
|                             |                                              |                          |           |                    |           |           |            |          
|                             | Diluted                                      |                          |           | 1,931,568          |           |           |            | 1,889,173 |          
|                             |                                              |                          |           |                    |           |           |            |          

See notes to consolidated financial statements.

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PHOENIX FOOTWEAR GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                      |                                                                                          |                                                   |                         |                                                  |         |                    |            |            |        |  |            |  
|------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------- | ----------------------- | ------------------------------------------------ | ------- | ------------------ | ---------- | ---------- | ------ |  | ---------- | -
|                                      |                                                                                          |                                                   |                         |                                                  |         | Three Months Ended
|                                      |                                                                                          |                                                   |                         |                                                  |         | March 29,          |            | March 31, 
|                                      |                                                                                          |                                                   |                         |                                                  |         | 2003               |            | 2002      
|CASH FLOWS FROM OPERATING ACTIVITIES: |                                                                                          |                                                   |                         |                                                  |         |                    |            |           
|                                      | Net Income                                                                               |                                                   | $                       | 375,000                                          |         |                    | $          | 605,000    |       
|                                      | Adjustments to reconcile net income to net
cash (used) provided by operating activities: |                                                   |                         |                                                  |         |                    |            |            |       
|                                      |                                                                                          | Depreciation and amortization                     |                         |                                                  | 48,000  |                    |            |            | 75,000 | 
|                                      |                                                                                          | Allocation of shares in defined contribution plan |                         |                                                  | 402,000 |                    |            |            |       | 
|                                      |                                                                                          | Loss on sale of property and equipment            |                         |                                                  | 8,000   |                    |            |            |       | 
|                                      |                                                                                          | Changes in assets and liabilities:                |                         |                                                  |         |                    |            |            |        | 
|                                      |                                                                                          |                                                   | (Increase) decrease in: |                                                  |         |                    |            |            |        |  |           
|                                      |                                                                                          |                                                   |                         | Accounts receivable  net                        |         |                    | (1,486,000 | )          |        |  | (961,000   | )
|                                      |                                                                                          |                                                   |                         | Inventories  net                                |         |                    | (1,211,000 | )          |        |  | 2,109,000  |  
|                                      |                                                                                          |                                                   |                         | Other current receivable                         |         |                    | (229,000   | )          |        |  |           |  
|                                      |                                                                                          |                                                   |                         | Other current assets                             |         |                    | (601,000   | )          |        |  | (281,000   | )
|                                      |                                                                                          |                                                   |                         | Other noncurrent assets                          |         |                    | 542,000    |            |        |  | (167,000   | )
|                                      |                                                                                          |                                                   | Increase (decrease) in: |                                                  |         |                    |            |            |        |  |           
|                                      |                                                                                          |                                                   |                         | Accounts payable                                 |         |                    | 1,414,000  |            |        |  | 944,000    |  
|                                      |                                                                                          |                                                   |                         | Accrued expenses                                 |         |                    | (12,000    | )          |        |  | (440,000   | )
|                                      |                                                                                          |                                                   |                         | Income taxes payable                             |         |                    | 159,000    |            |        |  | 378,000    |  
|                                      |                                                                                          |                                                   |                         |                                                  |         |                    |            |            |       
|                                      |                                                                                          |                                                   |                         | Net cash (used) provided by operating activities |         |                    | (591,000   | )          |        |  | 2,262,000  |  
|                                      |                                                                                          |                                                   |                         |                                                  |         |                    |            |            |       
|CASH FLOWS FROM INVESTING ACTIVITIES: |                                                                                          |                                                   |                         |                                                  |         |                    |            |           
|                                      | Purchases of equipment                                                                   |                                                   |                         | (39,000                                          | )       |                    |            | (100,000   | )     
|                                      | Proceeds from disposal of property and equipment                                         |                                                   |                         | 457,000                                          |         |                    |            |           |       
|                                      |                                                                                          |                                                   |                         |                                                  |         |                    |            |            |       
|                                      |                                                                                          |                                                   |                         | Net cash provided (used) by investing activities |         |                    | 418,000    |            |        |  | (100,000   | )
|                                      |                                                                                          |                                                   |                         |                                                  |         |                    |            |            |       
|CASH FLOWS FROM FINANCING ACTIVITIES: |                                                                                          |                                                   |                         |                                                  |         |                    |            |           
|                                      | Net payments on note payableline of credit                                              |                                                   |                         |                                                 |         |                    |            | (2,350,000 | )     
|                                      | Repayments of notes payable                                                              |                                                   |                         |                                                 |         |                    |            | (614,000   | )     
|                                      | Issuance of common stock                                                                 |                                                   |                         | 52,000                                           |         |                    |            |           |       
|                                      | Purchases of treasury stock                                                              |                                                   |                         | (129,000                                         | )       |                    |            |           |       
|                                      |                                                                                          |                                                   |                         |                                                  |         |                    |            |            |       
|                                      |                                                                                          |                                                   |                         | Net cash used by financing activities            |         |                    | (77,000    | )          |        |  | (2,964,000 | )
|                                      |                                                                                          |                                                   |                         |                                                  |         |                    |            |            |       
|NET DECREASE IN CASH                  |                                                                                          |                                                   | (250,000                | )                                                |         |                    | (802,000   | )         
|CASHBeginning of period              |                                                                                          |                                                   | 1,265,000               |                                                  |         |                    | 1,161,000  |           
|                                      |                                                                                          |                                                   |                         |                                                  |         |                    |            |            |       
|CASHEnd of period                    |                                                                                          | $                                                 | 1,015,000               |                                                  |         | $                  | 359,000    |           
|                                      |                                                                                          |                                                   |                         |                                                  |         |                    |            |            |       

See notes to consolidated financial statements.

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PHOENIX FOOTWEAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Description of Business and Summary of Significant Accounting

1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments which are
of a normal recurring nature, necessary for fair presentation have been
included in the accompanying financial statements. These financial statements
should be read in conjunction with the consolidated financial statements and
footnotes included in the Companys Annual Report on Form 10-K filed with the
Securities and Exchange Commission for the fiscal year ended December 31, 2002.
The results of operations for the three months ended March 29, 2003, or for
any other interim period, are not necessarily indicative of the results that
may be expected for the full year.


Principles of Consolidation

The consolidated financial statements consist of Phoenix Footwear Group, Inc.
and its wholly owned subsidiary, Penobscot Shoe Company. Intercompany accounts
and transactions have been eliminated in consolidation.


Accounting Period

Effective January 1, 2003, the Company changed its year-end to a fiscal year
that is the 52- or 53-week period ending the Saturday nearest to December 31st.


2. Per Share Data

In addition to shares outstanding held by the public, the Companys defined
contribution 401(k) savings plan held approximately 297,000 shares as of March
29, 2003, which were issued during 2001 in connection with the termination of
the defined benefit pension plan. These shares, while eligible to vote, are
classified as treasury stock and therefore are not outstanding for purpose of
determining per share earnings until the time that such shares are allocated to
employee accounts. This allocation is occurring over a seven year
period which commenced in 2002. During the first quarter of 2003 approximately 59,000 shares were
allocated to the defined contribution 401(k) savings plan. Basic net income
per share is computed by dividing net income by the weighted average number of
common shares outstanding for the period. Diluted net income per share is
calculated by dividing net income and the effect of assumed conversions by the
weighted average number of common and, when applicable, potential common shares
outstanding during the period. A reconciliation of the numerators and
denominators of basic and diluted income per share is presented below.


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|                              |                                                                 |                                     |      |                    |        |                |      |           |         | 
|----------------------------- | --------------------------------------------------------------- | ----------------------------------- | ---- | ------------------ | ------ | -------------- | ---- | --------- | ------- | 
|                              |                                                                 |                                     |      | Three Months Ended
|                              |                                                                 |                                     |      | March 29, 2003     |        | March 31, 2002
|Basic net income per share:   |                                                                 |                                     |      |                    |        |                |      |          
|                              | Net income                                                      |                                     | $    | 375,000            |        |                | $    | 605,000   |        
|                              | Weighted average common shares
outstanding                      |                                     |      | 1,833,094          |        |                |      | 1,566,051 |        
|Basic net income per share    |                                                                 | $                                   | 0.20 |                    |        | $              | 0.39 |          
|                              |                                                                 |                                     |      |                    |        |                |      |          
|Diluted net income per share: |                                                                 |                                     |      |                    |        |                |      |          
|                              | Net income                                                      |                                     | $    | 375,000            |        |                | $    | 605,000   |        
|                              | Interest on convertible debt                                    |                                     |      |                   |        |                |      | 17,000    |        
|                              |                                                                 |                                     |      |                    |        |                |      |          
|                              | Net income and effect of assumed
conversions                    |                                     |      | 375,000            |        |                |      | 622,000   |        
|                              |                                                                 |                                     |      |                    |        |               
|                              | Weighted average common shares
outstanding                      |                                     |      | 1,833,094          |        |                |      | 1,566,051 |        
|                              |                                                                 | Effect of stock options outstanding |      |                    | 98,474 |                |      |           | 119,318 | 
|                              |                                                                 | Effect of convertible debt          |      |                    |       |                |      | 203,804  
|                              |                                                                 |                                     |      |                    |        |                |      |          
|                              | Weighted average common and potential
common shares outstanding |                                     |      | 1,931,568          |        |                |      | 1,889,173 |        
|Diluted net income per share  |                                                                 | $                                   | 0.19 |                    |        | $              | 0.33 |          
|                              |                                                                 |                                     |      |                    |        |                |      |          

3. Other Expenses -Net

Other expenses-net, of $476,000 for the quarter
ended March 29, 2003 consists primarily of costs associated with the relocation
of the Companys corporate headquarters from Old Town, Maine to Carlsbad,
California and the discontinued Antigua Enterprises acquisition
effort. In accordance with Statement of Financial Accounting Standards (SFAS) No. 146,
Accounting for Costs Associated with Exit or Disposal Activities, the
relocation costs have been recorded as incurred at their fair values for the quarter ended
March 29, 2003.


4. Goodwill

Effective January 1, 2002, the Company changed its method of accounting for
goodwill to conform with Statement of Financial Accounting Standards (SFAS) No.
142, Goodwill and Other Intangible Assets. SFAS No. 142 discontinues the
practice of amortizing goodwill and initiates an annual review for impairment.
Impairment would be examined more frequently if certain indicators are
encountered. The Company determined that there was no impairment of goodwill
to be recorded during the quarter ended March 29, 2003. In accordance with
SFAS No. 142 no goodwill amortization was recognized in either the quarter
ended March 29, 2003 or March 31, 2002.


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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Comparison of the quarter ended March 29, 2003 and March 31, 2002.


Sales

Net sales for the quarter ended March 29, 2003 were $9.2 million, a decrease of
$1.6 million or 14.7% as compared to $10.8 million for the prior year period.
This decrease is due primarily to softness experienced in the domestic footwear
market by our customers associated with unseasonably cold weather and continued
war and economic concerns.


Gross Profit

Gross profit in the first quarter of 2003 was $4.0 million or 43.7% of net
sales as compared to $3.8 million or 35.5% of net sales in the first quarter of
2002. The improvement in gross margin as a percentage of net sales primarily
relates to an improved product sales mix and a reduction in the volume of
closeout sales. Cost of goods sold, as a percentage of net sales was 56.3% in
2003, compared to 64.5% for the prior year period. Cost of goods sold reflects
the direct costs of footwear sold, sourced variances from pre-determined
standards, and adjustments to the value of the inventory on hand.


Expenses

Selling, general and administrative expenses as a percentage of net sales were
31.0% or $2.9 million in the first quarter of 2003 versus 24.0% or $2.6 million
for the comparable prior year period. This increase was primarily related to
increased advertising and promotional expenses.


Other net operating expenses were $476,000 in 2003 and consisted primarily of
costs associated with the relocation of the Companys corporate headquarters
from Old Town, Maine to Carlsbad, California and the discontinued Antigua
Enterprises acquisition effort.

Interest Expense

Interest expense for the first quarter of 2003 was $66,000, down from $232,000
in the prior year quarter. The decrease in interest expense during 2003 is a
result of lower interest rates and lower average outstanding indebtedness as
compared to 2002.


Income Tax Provision

The Companys tax expense for the first quarter of 2003 was $250,000 as
compared to $403,000 in the prior year period. The Companys effective tax
rate was 40% in 2003 and 2002. Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities, for financial reporting purposes, and the amounts used for income
tax purposes.


Liquidity and Capital Resources

As of March 29, 2003 the Company had working capital of approximately $10.5
million as compared to working capital of $8.8 million at December 31, 2002.
Working capital may vary from time to time as a result of seasonal
requirements, which are heightened during the first and third quarters, the
timing of factory shipments and the need to increase inventories and support an
in-stock position in anticipation of customers orders, and the timing of
accounts receivable collections.


The consolidated statement of cash flows for the first quarter of 2003 shows a
decrease of cash since December 31, 2002. Net cash used by operations was
approximately $591,000, due primarily to the increase in inventories and
accounts receivable. The Companys current ratio, the relationship of current
assets to current liabilities, decreased to 2.47 in 2003 from 2.58 in 2002.
Capital expenditures for the first quarter of 2003 approximated $39,000, as
compared to $100,000 in the prior year period.

8



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##### Table of Contents



As of March 29, 2003, total bank indebtedness was $3.0 million and total
indebtedness was $4.8 million, which consisted of: notes payable of $3.0
million and a liability relating to the dissenting shareholders of Penobscot of
$1.8 million.

Management is not aware of any known demands, commitments, or events that would
materially affect its liquidity. There are no material expenditures or
commitments, which would affect capital resources in a significant way. Cash
generated by operations, supplemented by borrowings, are considered sufficient
to cover planned requirements.

Contractual Obligations

Contractual obligations as of March 29, 2003 consists of long-term debt, and
are summarized in the following table:


Long-term debt:

| |  |                             |  |   |           | 
| |  | --------------------------- |  | - | --------- | 
| |  | Total                       |  | $ | 3,000,000 | 
| |  | Payments due in one year    |  |   | 750,000   | 
| |  | Payments due in two years   |  |   | 750,000   | 
| |  | Payments due in three years |  |   | 750,000   | 
| |  | Payments due in four years  |  |   | 750,000   | 

Statements in this document, other than the statements of historical
information, are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that
forward-looking statements are inherently uncertain. Actual results and timing
of the events may differ materially from the future results, timing,
performance or achievements expressed or implied by such forward-looking
statements.

Forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995 (the Act), include certain written and oral
statements made, or incorporated by reference, by the Company or its
representatives in this report, other reports, filings with the Securities and
Exchange Commission (the S.E.C.), press releases, conferences or otherwise.
Such forward-looking statements include without limitation, any statement that
may predict, forecast, indicate, or imply future results, performance, or
achievements, and may contain the words believe, anticipate, expect,
estimate, intend, plan, project, will likely result, or any
variations of such words with similar meaning. These statements are not
guarantees of future performance and are subject to certain risks,
uncertainties and assumptions that are difficult to predict; therefore, actual
results may differ materially from those expressed or forecasted in any such
forward-looking statements. Investors should carefully review the risk factors
set forth in other reports or documents the Company files with the S.E.C.,
including Forms 10-Q, 10-K, and 8-K. Some of the other risks and uncertainties
that should be considered include, but are not limited to, the following:
international, national and local general economic and market conditions; the
inability to source the Companys products because of adverse political and
economic factors or the imposition of trade or duty restrictions; changing
consumer preferences; changing fashion trends; intense competition amount other
footwear brands; demographic changes; popularity of particular designs and
products; seasonal and geographic demand for the Companys products;
fluctuations and difficulty in forecasting operating results, including without
limitation, the ability of the Company to continue, to manage and forecast its
growth and inventories; risk of unavailability or price increases in raw
materials needed to make the Companys products; new product development and
commercialization; the ability to secure and protect trademarks; performance
and reliability of products; customer service; adverse publicity; the loss of
significant customers or suppliers; increase cost of freight and transportation
to meet delivery deadlines; changes in business strategy or development plans;
general risks of doing business outside the United States; including without
limitation, import duties, quotas, tariffs, and political and economic
instability; changes in government regulation; liability and other claims
asserted against the Company; the ability to attract and retain qualified
personnel; the risk of the Companys customers filing bankruptcy and other
factors referenced or incorporated by reference in this report and other
reports.

9



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##### Table of Contents



The Company operates in a very competitive and rapidly changing environment.
New risk factors can arise and it is not possible for management to predict all
such risk factors, nor can it assess the impact of all such risk factors on the
Companys business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements.

Investors should also be aware that while the Company does, from time to time,
communicate with securities analysts, it is against the Companys policy to
disclose to them any material non-public information or other confidential
commercial information. Accordingly, investors should not assume that the
Company agrees with any statement or report issued by any analyst irrespective
of the content of the statement or report.

Furthermore, the Company has a policy against issuing or confirming financial
forecasts or projections issued by others. Thus, to the extent that reports
issued by securities analysts contain any projections, forecasts or opinions,
such reports are not the responsibility of the Company.

The Company undertakes no obligation to release publicly the results of any
revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business and consistent with established policies and
procedures we use the necessary financial instruments to manage the
fluctuations in interest rates. The Company does not have any foreign currency
risk. The Company does not enter into any of these transactions for
speculative purposes.




Item 4. Controls and Procedures

We have for many years had procedures in place for gathering the information
that is needed to enable us to file required quarterly and annual reports with
the Securities and Exchange Commission (SEC). However, because of additional
disclosure requirements imposed by the SEC in August 2002, as required by the
Sarbanes-Oxley Act of 2002, we formed a committee consisting of the people who
are primarily responsible for preparation of those reports, including our
general counsel and our principal accounting officer, to review and formalize
our procedures, and to have ongoing responsibility for designing and
implementing our disclosure controls and procedures (i.e., the controls and
procedures by which we ensure that information we are required to disclose in
the annual and quarterly reports we file with the SEC is processed, summarized
and reported within the required time periods). On February 27, 2003, our chief
executive officer and our chief financial officer met with that committee to
evaluate the disclosure controls and procedures we had in place and the steps
that are being taken to formalize those procedures and to introduce some
additional steps to the information-gathering process. Based upon that
evaluation, our chief executive officer and our chief financial officer
concluded that, while the procedures we have had in place appear to have
provided all the information we have needed to date, the committee should
proceed to formalize and supplement our disclosure controls and procedures in
order to ensure that all the information required to be disclosed in our
reports is accumulated and communicated to the people responsible for preparing
those reports, and to our principal executive and financial officers, at times
and in a manner that will allow timely decisions regarding required
disclosures.

10



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##### Table of Contents






Part II  Other Information




Item 1. Legal Proceedings  None.




Item 2. Changes in Securities  None




Item 3. Defaults upon Senior Securities  None




Item 4. Submission of matters to a vote of security holders.  None




Item 5. Other Information  None




Item 6. Exhibits and Reports on
Form 8-K:



| | a) |  | Exhibit 99.1  Certification of Chief Executive Officer            
| | -- |  | -------------------------------------------------------------------
|
| | b) |  | Exhibit 99.2  Certification of Chief Financial Officer            
|
| | c) |  | Certification of Chief Financial Officer on Controls and Procedures
|
| | d) |  | Certification of Chief Executive Officer on Controls and Procedures
|
| | e) |  | Forms 8-K                                                          



| | 1) |  | On April 30, 2003, we filed a report on Form 8-K
announcing that on April 28, 2003, we issued a press release
regarding our financial results for the first quarter of 2003.                 
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2) |  | On March 20, 2003, we filed a report on Form 8-K
announcing that on March 18, 2003 we issued a press release
stating that our attempt to acquire Antigua Enterprises had
proved unsuccessful.

11



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##### Table of Contents






Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto, duly authorized.

PHOENIX FOOTWEAR GROUP, INC.
Registrant

|                   |  |                                                       | 
|------------------ |  | ----------------------------------------------------- | 
|Date: May 12, 2003 |  | /s/ James R. Riedman                                  | 
|                   |  |                                                       | 
|                   |  | James R. Riedman
Chairman and Chief Executive Officer | 
|                   |  |                                                       | 
|Date: May 12, 2003 |  | /s/ Kenneth E. Wolf                                   | 
|                   |  |                                                       | 
|                   |  | Kenneth E. Wolf
Chief Financial Officer and Treasurer | 

12



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##### Table of Contents



CERTIFICATION OF DISCLOSURE CONTROLS AND PROCEDURES

I, James R. Riedman, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Phoenix Footwear
Group, Inc.;                                                                                                                                                                                                                                           
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| |  |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| |  |  | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                                                          | 
| |  | ------------------------------------------------------------------------ | 
| |  | /s/ James R. Riedman                                                     | 
| |  |                                                                          | 
| |  | Name: James R. Riedman
Title: Chief Executive Officer
Date: May 12, 2003 | 

13



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##### Table of Contents



CERTIFICATION OF DISCLOSURE CONTROLS AND PROCEDURES

I, Kenneth E. Wolf, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Phoenix Footwear
Group, Inc.;                                                                                                                                                                                                                                           
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| |  |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| |  |  | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                                                                     | 
| |  | ----------------------------------------------------------------------------------- | 
| |  | /s/ Kenneth E. Wolf                                                                 | 
| |  |                                                                                     | 
| |  | Name: Kenneth E. Wolf
Title: Chief Financial Officer & Treasurer
Date: May 12, 2003 | 

14