SECURITIES AND EXCHANGE COMMISSION
                                 Washington, DC

                                   Form 10-QSB

                  Quarterly Report under Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

       For the quarter ended September 30, 1998 Commission File No. 0-774

                              DANIEL GREEN COMPANY
             (Exact name of registrant as specified in its charter)

     MASSACHUSETTS                                        15-0327010
(State or other jurisdiction of              (IRS Employer Identification No.)
incorporation or organization)

     DOLGEVILLE, NEW YORK                                      13329
(Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code: (315) 429-3131

Former  name,  former  address and former  fiscal  year,  if changed  since last
report: None.

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  Act of 1934  during the
preceding twelve months and (2) has been subject to the filing  requirements for
at least the past 90 days. YES X NO

         CLASS                              OUTSTANDING AT SEPTEMBER 30, 1998

Common Stock $2.50 par value                              1,693,329




<PAGE>

                              DANIEL GREEN COMPANY

                                      INDEX
                                                                        Page
                                                                       Number

Index    ................................................................i


PART I - Financial Information


Balance Sheets, Assets
         September 30, 1998 & December 31, 1997..........................2

Balance Sheets, Liabilities & Stockholders' Equity
         September 30, 1998 & December 31, 1997..........................3

Statements of  Operations  for the three  months and nine 
        months periods ended September 30, 1998 and 1997.................4

Statements of Cash Flows for the nine months ended
         September 30, 1998 and 1997.....................................5

Notes to Financial Statements............................................6

Management Discussion & Analysis of Financial Condition
         and Results of Operations.......................................7

PART II - Other Information..............................................9




                                       i
<PAGE>
                                                                               2

                              DANIEL GREEN COMPANY
                                 Balance Sheets

                                     ASSETS

                                                  September 30,  December 31,
                                                      1998          1997
                                                   (Unaudited)      (*)
                                                  ------------- -------------
Current Assets:
Cash                                              $     7,600   $   901,875
Accounts Receivable, trade
 less allowances for doubtful accounts
 (1998 - $185,517  1997 - $231,000a                 3,167,056     5,721,431
Deferred Income Tax Asset                             287,306       287,306
Income Tax Receivable                               1,064,742             0

Inventories, at lower of cost (FIFO) or market:
         Raw Materials                              1,629,333     1,941,033
         Work In Process                              196,433       374,484
         Finished Goods                             6,327,596     6,153,858
                                                  -----------   -----------
                  Total Inventories                 8,153,362     8,469,375

Other Current Assets                                    2,423        65,656
                                                  -----------   -----------   

Total Current Assets                               12,682,489    15,445,643

Property, plant & equipment:
Real Estate and Water Power, at cost                3,374,864     3,374,864
Machinery, Equipment, & Lasts, at cost              5,733,683     5,565,199
                                                  -----------   -----------
                                                    9,108,547     8,940,063

Less: Accumulated Depreciation                      7,384,975     7,232,416
                                                  -----------   -----------   
Property, plant & equipment, net                    1,723,572     1,707,647

Other Assets:
Prepaid Benefit Plan Contribution                     655,110       894,896
Other Assets                                          160,643       114,687
                                                  -----------   -----------    

Total Other Assets                                    815,753     1,009,583
                                                  -----------   -----------

Total Assets                                      $15,221,814   $18,162,873
                                                  ===========   ===========
                                                      

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                                                                               3

                              DANIEL GREEN COMPANY

                                 Balance Sheets

                       Liabilities & Stockholders' Equity

                                                                           

                                                  September 30,  December 3
                                                      1998          1997
                                                   (Unaudited)      (*)
                                                  ------------- -----------
Current Liabilities:

Notes Payable, line of credit                     $ 1,952,551   $ 2,219,802
Notes Payable, current                              1,353,647       562,030
Accounts Payable, trade                               564,356       303,492
Accrued Salaries & Commissions                         72,377       240,065
Other Accrued Liabilities                             120,127       283,261
Income Tax Payable                                          0       421,389
                                                  -----------   -----------   
Total Current Liabilities                           4,063,058     4,030,039

Notes Payable, non-current                            112,236     1,325,104
Deferred Tax Liability                                611,726       611,726
                                                  -----------   -----------
Total Liabilities                                   4,787,020     5,966,869

Stockholders' Equity

Common Stock                                        4,245,823     4,245,823
Paid-in-excess of par value                           741,303       741,303
Retained Earnings                                   5,471,668     7,208,878
                                                  -----------   -----------
                                                   10,458,794    12,196,004
Less: Treasury Stock, 5,000 shs.                       24,000             0
                                                  -----------   -----------
                                                    

Total Stockholders' Equity                         10,434,794    12,196,004
                                                  -----------   -----------

Total Liabilities & Stockholders' Equity          $15,221,814   $18,162,873
                                                  ===========   ===========


(*)      Derived from audited financial statements.

         See notes to financial statements.

<PAGE>
                                                                               4

<TABLE>
<CAPTION>
                                      DANIEL GREEN COMPANY


                                    Statements of Operations
                                          (Unaudited)

                                             For the                       For the
                                        Three Months Ended            Nine Months Ended
                                     Sept. 30       Sept. 30       Sept. 30        Sept. 30
                                       1998           1997            1998           1997   
                                 -------------------------------------------------------------

<S>                             <C>               <C>             <C>            <C>        
Net Sales                        $  3,188,641      $5,492,030      $8,389,976     $12,538,909

Costs and Expenses:
 Cost of Goods Sold                 2,326,707       3,466,039       6,600,261       9,030,202
 Selling, General,
 & Administrative                   2,154,822       1,801,699       4,442,947       3,992,706
 Interest Expense                      48,419         148,537         148,720         398,322
                                 ------------    ------------    ------------    ------------

Total Costs and
Expenses                            4,529,948       5,416,275      11,191,928      13,421,230
                                 ------------    ------------    ------------    ------------

Earnings(loss)before credit
 for Income Taxes                  (1,341,307)         75,755      (2,801,952)       (882,321)

(Provision)Credit for Income
 Taxes                                509,697         (28,787)      1,064,742         335,282
                                 ------------    ------------    ------------    ------------

Net Earnings (loss)              ($   831,610)   $     46,968    ($ 1,737,210)   ($   547,039)
                                 ============    ============    ============    ============

Net Earnings (Loss) per Share:
Basis                            ($       .49)   $        .03    ($      1.02)   ($       .36)
Diluted                          ($       .49)   $        .03    ($      1.02)   ($       .36)

Shares Outstanding:
Basic                               1,695,750       1,511,892       1,697,471       1,511,892
Diluted                             1,695,750       1,511,892       1,697,471       1,511,892


See notes to financial statements.
</TABLE>
<PAGE>

                                                                               5


                              DANIEL GREEN COMPANY
                            Statements of Cash Flows
                                   (Unaudited)

                                             For the Nine Months Ended
                                             September 30   September 30
                                                  1998           1997    
                                             ------------   ------------    
Operating Activities:
 Net Loss                                    $(1,737,210)   $  (547,039)
 Adjustments to reconcile net loss to net
 cash used by operating activities:
  Depreciation                                   152,559        252,805
  Amortization                                         0         18,402
Changes in assets & liabilities:
 (increases) decreases in:
  Accounts Receivable, trade                   2,554,375      1,233,264
  Income Tax Receivable                       (1,064,742)      (177,966)
  Inventories                                    316,013     (2,060,956)
  Other Current Assets                            63,233        (28,188)
  Other Assets                                   193,830         (4,733)
 increases (decreases) in:
  Accounts Payable, trade                        260,864        280,333
  Accrued Salaries                              (167,688)      (150,432)
  Income Taxes Payable                          (421,389)             0
  Deferred tax liability                               0              0
  Other Accrued Liabilities                     (163,134)        93,859
                                             -----------    -----------
Net Cash Used by Operating
 Activities                                      (13,289)    (1,090,651)
Investing Activities:
 Purchase of property & equipment               (168,484)      (165,082)
                                             -----------    -----------
Net Cash Used by Investing Activities           (168,484)      (165,082)

Financing Activities:
 Net(Payments)Borrowings on Line of Credit      (267,251)     1,027,582
 Repayments & Borrowings of Notes Payable       (421,251)       244,123
 Principal payments under Capital Leases               0        (19,530)
 Purchase of Treasury Stock                      (24,000)             0
                                             -----------    -----------
Net Cash(Used)Provided by Financing
 Activities                                     (712,502)     1,252,175
                                             -----------    -----------

Net Decrease in Cash                            (894,275)        (3,558)

Cash at Beginning of Period                      901,875         13,213
                                             -----------    -----------

Cash at End of Period                        $     7,600    $     9,655
                                             ===========    ===========

See notes to financial statements.

<PAGE>
                                                                               6
                              DANIEL GREEN COMPANY


                          Notes to Financial Statements


Note 1.  In the opinion of the Company, the accompanying  unaudited financial
         statements  contain  adjustments,  all of  which  are of a  normal  and
         recurring nature, necessary to present fairly the financial position as
         of September 30, 1998 and the results of operations  and cash flows for
         the three and nine months then ended.


Note 2.  The results of  operations  for the nine months ended  September 30,
         1998 are not  necessarily  indicative of the results to be expected for
         the full year.


Note 3.  The Company's  financial  statements for the quarter ended September
         30, 1997 have been restated due to an error in accounting  for the sale
         of certain  products.  The  Company  erroneously  recognized  sales for
         product  shipped to a  customer  on a  consigned  basis.  The  previous
         practice of the Company was to adjust these sales  numbers on an annual
         basis, for year-end reporting purposes. Since the Company expects these
         types of  consignment  arrangements  to  increase  in the  future,  the
         Company  decided that it was  necessary to account for them properly on
         an interim basis as well.

         The  effects  of this  restatement  on the net  earnings(loss)  and net
         earnings(loss)  per share for the  quarter  and the nine  month  period
         ended September 30, 1997 were as follows:

                        For the                    For the
                     Quarter Ended            Nine Months Ended
                     Sept. 30, 1997            Sept. 30, 1997
                      Net Income                   Net Loss
                Net Income  Per Share        Net Loss    Per Share

Previously
 Reported      $  45,135   $   0.03         ($418,254)   ($  0.28)
Restatement    $   1,833   $   0.00         ($128,785)   ($  0.08)
                                            
 As Restated   $  46,968   $   0.03         ($547,039)   ($  0.36)
                                      
<PAGE>


                                                                               7



                              DANIEL GREEN COMPANY

             Management Discussion & Analysis of Financial Condition
                            and Results of Operations

1.  Liquidity and Capital Resources

For the first nine months of 1998, the Company's operating  activities used only
$13,289 in cash , compared to  $1,090,651,  for the same period in 1997.  At the
end of the third  quarter,  accounts  receivable  decreased  by $498,654 or 15.5
percent over the same period last year and is $2,554,375  lower  compared to the
end of fiscal year 1997.  Inventories  ended the quarter of 1998,  at $8,153,362
which is $1,827,165 lower than one year ago and has decreased  $316,013 from the
beginning  of the year.  The  reduction  in  inventory  levels  from a year ago,
reflects  the  Company's  efforts to control  and  reduce  the  quantity  of raw
materials and the number of shoes in stock.

Total debt  consists of notes  payable,  the line of credit,  and capital  lease
obligations.  At the end of the third  quarter  of 1998,  total  debt  stands at
$3,418,434  as compared with  $8,113,730 a year ago, for an overall  decrease of
$4,695,296  or 57.8  percent.  This  decrease is the result of the proceeds from
terminating  the  Company's  defined  benefit plan during the fourth  quarter of
1997, by cash generated from operating activities,  and by regular repayments of
the debt during the first nine months of 1998.

The Company currently has in place a revolving line of credit ("revolver"), with
KeyBank National Association which contains financial covenants.  On October 20,
1998, after three quarters of reported  results,  KeyBank  National  Association
("Bank")  notified the Company that the Bank  established that the Company is in
default when comparing the Company's quarterly rather than yearly results to the
credit facility loan agreement's  negative covenants.  Accordingly,  the Company
has reclassified  $796,192 of debt owed to KeyBank from a long-term liability to
a current  liability  per the  accompanying  Balance  Sheets as of September 30,
1998.

Management is not aware of any known  demands,  commitments or events that would
materially affect its liquidity,  other than the  non-compliance  referred to in
the previous paragraph.  There are no material expenditures or commitments which
would  affect  capital  resources  in  a  significant  way.  Cash  generated  by
operations,   supplemented  by  short-term  borrowings,   should  cover  planned
requirements.

2.  Results of Operations

Net sales for the third  quarter were  approximately  $3.2 million which is 41.9
percent lower than last year during this  timeframe.  For the first nine months,
net sales amounted to  approximately  $8.4 million,  a 33.1 percent decline from
net sales in the first nine  months of 1997.  The  decline  in sales  represents

<PAGE>
                                                                               8


reduced  shipments to several major customers,  and the loss of a large customer
due to competition.  This decline in sales has  carried-over  from the first six
months  of this  year.  Management  expects  last  quarter  sales  levels  to be
comparable to last year.

Gross profit during the third  quarter of 1998,  amounted to  approximately  $.9
million,  or 27 percent of net sales.  This compares with a gross profit percent
of 36.9  percent in the same  quarter of 1997.  For the nine  months,  the gross
profit  percentage is 21.3 percent  compared to 28 percent in 1997. The decrease
in gross  profit  percentages  from  year to year  reflects  a higher  degree of
underabsorbed  overhead  due to lower  production  volumes in  response to lower
customer demand levels and a concerted effort to reduce inventory.

For the quarter  and nine  months,  total  selling,  general and  administrative
expenses were 19.6 percent and 11.3 percent higher, respectively,  than expenses
reported during the comparable periods of 1997. The increase in selling, general
and  administrative  expenses  primarily  represents:  the costs associated with
administering  the Company's new 401(k) plan - employer  contributions and stock
allocations,  consultant's fees of $422,000 related to formulating an efficiency
plan, and marketing  expenses  associated with the re-design of the Daniel Green
logo, to include shoe carton  artwork and  development,  new Company signs and a
more expansive advertising campaign. Senior management trips to overseas vendors
have impacted travel  expenses,  an increase of $60,000 over the comparable 1997
period.  These trips were made in an effort to evaluate and qualify  vendors for
present and future outsourced product needs. The timing of expenditures  related
to the new  compensation  program for the field sales force has also  affected a
higher than expected increase in selling expense.

During the third quarter of 1998, net interest expense amounted to approximately
$48 thousand  compared to  approximately  $149 thousand a year ago. For the nine
months, net interest expense has also declined to approximately $149 thousand in
1998 from  approximately  $398  thousand in 1997.  This decrease in net interest
expense is principally due to debt reduction, discussed previously.

The Company incurred a net loss before taxes of approximately  $1,341,000 in the
third  quarter of 1998,  versus  earnings  of $75,755  for the  comparable  1997
period. On an after-tax basis, the loss for the quarter was  approximately  $832
thousand or $.49 per share as opposed to earnings of approximately  $47 thousand
or $.03 per share in 1997.  The net loss for the first  nine  months of the year
was  approximately  $1,737,000 or $1.02 per share.  This compared to last year's
first nine month loss of approximately $547 thousand or $.36 per share.


<PAGE>
                                                                               9


                              DANIEL GREEN COMPANY

                           Part II - Other Information


1. Legal Proceedings - None.

2. Changes in Securities - None.

3. Default upon Senior  Securities - The Company has been notified that it is in
violation of loan agreements. See discussion in Management Discussion & Analysis
of Financial  Condition and Results of Operations,  under  Liquidity and Capital
Resources, page 7.

4. Submission of matters to a vote of security holders - None.

5. Other Information - None.

6. Exhibits and Reports on Form 8K - None.



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.



                                     DANIEL GREEN COMPANY 
                                     Registrant



Date: November 13, 1998              /s/ Greg Alan Tunney
                                     Greg Alan Tunney
                                     President,                    
                                     Chief Operating Officer


                                     /s/ Janet S. Cool          
                                     Janet S. Cool,
                                     Financial Controller