UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   Form 10-KSB

                Annual Report Pursuant to Sec. 13 or 15(d) of the
                         Securities Exchange Act of 1934

For the Fiscal Year Ended 12/31/00                  Commission File Number 0-774

                              DANIEL GREEN COMPANY
                 (Name of Small Business Issuer in its Charter)

MASSACHUSETTS                               15-0327010
(State or other jurisdiction of             (IRS Employer Identification Number)
incorporation or organization)

450 NORTH MAIN STREET, OLD TOWN, ME         04468
(Address of principal executive offices)    (Zip Code)

                                 (207) 827-4431
                (Issuer's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

     COMMON STOCK, $2.50 PAR VALUE PER SHARE
     (Title of Class)

     Check whether the issuer: (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. YES (X) NO( )

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB ( ).

State issuer's revenues for its most recent fiscal year.
     Net Sales of $33,200,000

Aggregate market value of the voting stock held by non-affiliates of the
registrant:
     $2,408,288 as of March 8, 2001

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date:

CLASS                                      ISSUED & OUTSTANDING AT MARCH 8, 2001
COMMON STOCK, $2.50 PAR VALUE                            1,573,004 SHARES

List hereunder the following documents, if incorporated by reference, and the
part of the Form 10-KSB into which the document is incorporated:



                                  Page 1 of _
<PAGE>


     Definitive Proxy Statement Dated April 5, 2001   Part III

Transitional Small Business Disclosure Format (check one): YES ( )     NO (X)

                                     Part I

Item 1.   Description of Business

     The Daniel Green Company and its predecessors (the "Company") have been
engaged in the manufacture or importation and sale of quality footwear since
1882. The Daniel Green slipper is one of the oldest and best known in the
industry. Materials in Daniel Green slippers include satin, rayon, terrycloth,
nylon, brocade, felt, polyurethane and several types of leather.

     The Company sells products using the following registered trademarks:
Daniel Green, LB Evans, Softwalk and Trotters.

     The Company operates in only one business segment. Moreover, the Company's
internal reporting does not make it practicable to provide financial information
for different styles of footwear or from different geographical locations.

     Women's footwear products, which account for over 80% of the Company's
annual sales, retail at prices varying from $18.00 to $90.00 per pair, while
Men's footwear products retail at prices varying from $20.00 to $75.00 per pair.
In all, the Company sells approximately 150 styles of footwear, many of which
change from year to year. The Company designs most of its own products, having
for many years maintained a style research department. Research and Development
costs incurred by the Company for the last two fiscal years were approximately
$320,000 in 2000 and $125,000 in 1999.

     Prior to June 30, 1999, a portion of the footwear sold by the Company was
manufactured in its plants in Dolgeville, New York, while the remainder was
manufactured for the Company by foreign sources. Thereafter, the Company
outsourced entirely the production of its footwear while continuing to
distribute the footwear to its customers under the Company's labels and certain
private labels.

     Before outsourcing its manufacturing completely, the Company had
experienced no difficulty in obtaining the raw materials needed to manufacture
its products and it does not expect its foreign manufacturing partners to have
any difficulty in obtaining the raw materials required for footwear production.
However, certain sources may experience some difficulty in obtaining leather
where there has been a drop in beef consumption related to concerns about
so-called "mad cow" disease and where there has been a destruction of livestock
as a result of "hoof and mouth" disease. The Company does not have a practice of
entering into long-term purchase commitments.

     The Company's products are sold directly to retailers through its own sales
force, which covers the entire United States. Approximately 5,000 stores carry
the Daniel Green Company products, including most of the major department stores
in the country. Sales to any one customer in 2000 did not account for more than
10% of net sales; sales to one customer in 1999 represented 12% of net sales.
Ten major customers represented approximately 45% of net sales in 2000; most of
these same customers represented 52% of net sales in 1999, and 48% of net sales
in 1998. Due to the uncertain nature of the retail industry, the loss of any one
or more of these customers could have a material adverse effect on the Company's
business.

     The Company advertises its products through a competitive necessity
advertising program. It avoids granting restricted or exclusive shoe sale
arrangements, believing that profitable distribution of its products requires
the greatest number of outlets. Private label products are sold to a small
number of customers by the Company's sales management and several companies
account for a majority of this business.



                                  Page 2 of _
<PAGE>


     A portion of the Company's business, specifically the slippers, is seasonal
with the majority of the Company's sales generated during the latter half of the
year.

     The Company experiences severe competition in the sale of its slippers from
other manufacturers and importers of footwear. It maintains an active research
and development staff, which concentrates on the introduction and release of new
products into the market place. The Company is not aware of any patent held by
others, which might materially affect its ability to compete.

     The Company believes that a definitive competitive advantage attaches to
its ownership of the registered trademarks Daniel Green, LB Evans, Softwalk, and
Trotters, which have been used by the Company for many years.

     The Company knows of no material effects that compliance with federal,
state and local provisions regulating the discharge of materials into the
environment may have upon its capital expenditures, earnings and competitive
position or upon its foreign manufacturing partners.

     The Company has enjoyed a good relationship with its approximately 80
employees, all of whom are full time. The majority of the registrant's
employees, except for the field sales representatives and certain research and
development staff, are employed in Old Town, Maine.

     The amount of the Company's backlog orders believed to be firm as of
December 31, 2000 was approximately $8,900,000, compared with approximately
$617,400 and $1,610,000 as of December 31, 1999 and 1998 respectively. All
backlog orders are expected to be filled within the next fiscal year.

     On February 3, 2000 the Company acquired certain assets, consisting
primarily of inventory and trademarks, from L.B. Evans Company, predominantly a
men's slipper company. The purchase price for the assets consisted of $781,000
for the inventory and a royalty of 8% of the net invoice cost of products sold
during the next three years with the L.B. Evans' brand names (except for
Woolrich brand products which carry a royalty of 4%).

     On February 10, 2000 the Company entered into a definitive stock purchase
agreement to acquire, for approximately $17.8 million, all of the outstanding
shares of Penobscot Shoe Company owned by a related party. The related party is
a major stockholder of the Company and one of its owners is the Company's
Chairman and Chief Executive Officer. The purchase closed on March 30, 2000.
Penobscot Shoe Company has been making women's footwear for over 60 years and is
based in Old Town, Maine. During May, 2000 and pursuant to public announcements
made by the Company, the Company's headquarters and distribution operation
previously located in Dolgeville, New York, were relocated to Old Town, Maine.

     The transactions described in the two preceding paragraphs are more fully
set forth in the Company's current reports on Form 8-K filed with the Securities
and Exchange Commission.

Item 2.   Description of Properties

     The Company's executive offices and distribution facilities are situated in
two locations in Old Town, Maine. The sites comprise approximately 3 acres of
land with two buildings constructed of wood, brick and limestone between 1900
and 1920. Both buildings are owned by the Company and, in the opinion of
management, are sufficient for current plans and are adequately covered by
insurance. The Company uses certain office equipment under leases which expire
in the year 2002.

     The facilities in Dolgeville, New York which the Company vacated in
mid-1999 are for sale.



                                  Page 3 of _
<PAGE>


Item 3.   Legal Proceedings.

     The Company acquired Penobscot Shoe Company ("Penobscot") from Riedman
Corporation on March 30, 2000. Riedman Corporation had acquired Penobscot in a
cash tender offer of $11.75 per share which was concluded on November 16, 1999.
At that time, the holders of 253,026 shares of Penobscot stock exercised their
dissenters rights under Maine law applicable to Penobscot and demanded payment
of the fair value of their shares. On or about April 3, 2000, Penobscot filed
suit in the Superior Court in Maine, Penobscot County, to have the Court
determine the fair value of dissenter shares.

     Subsequently , several dissenting shareholders withdrew from the
litigation, accepting the $11.75 per share offered. As a result, there are
currently only five persons remaining, dissenting as to 148,318 shares. One of
those dissenters requested the Court to compel Penobscot to post a bond of $2
million to assure payment of the fair value of his shares once that was
determined by the Court. The Court ordered Penobscot to post a bond for
approximately $1.56 million, being the product of the number of shares held by
that dissenter and $11.75, the amount of the tender offer. The Company believes
that a final determination of value will not be made by the Court until late
2001. The Company believes the decision will be $11.75 per share and has
arranged to finance the full amount.

     For a discussion of the Company's involvement in the Penobscot transaction
and its interaction with Riedman Corporation of which James R. Riedman, the
Company's Chairman and CEO is President and a director, see the Daniel Green
Company Proxy Statement for 2000 Annual Meeting of Stockholders (Proposal 1 -
Election of Directors, Certain Transactions and Related Matters) filed as
Exhibit 13 hereto.

Item 4.   Submission of Matters to a Vote of Security Holders.

     During the fourth quarter of the Company's fiscal year, no matter was
submitted to a vote of stockholders.

                                     Part II

Item 5.   Market for the Registrant's Common Stock and Related Stockholder
          Matters.

Daniel Green Company's common stock is traded in the over-the-counter market and
is listed on the National Association of Securities Dealers Automated Quotation
system (NASDAQ) under the ticker symbol DAGR. The range of high and low bid per
share for the periods indicated is as follows:

<TABLE>
<CAPTION>
                      1999                              2000
                      Market Price Bid                  Market Price Bid
                      High             Low              High             Low
                      ----             ---              ----             ---

<S>                   <C>              <C>              <C>              <C>
1st Quarter           $3.75            $2.625           $5.25            $3.75
2nd Quarter             3.75             2.50             3.9375           3.125
3rd Quarter             3.875            3.125            3.50             3.125
4th Quarter             4.00             3.50             4.6875           3.25
</TABLE>

Based on records maintained by the Transfer Agent, Boston EquiServe, there were
480 registered shareholders as of the March 8, 2001 record date.



                                  Page 4 of _
<PAGE>


Item 6.   Management's Discussion and Analysis or Plan of Operations.

Sales

2000 net sales of $33.2 million increased $18.3 million over the prior year(1)s
net sales of $14.9 million, as a result of the Penobscot Shoe Company
acquisition which took place in 2000, and the sales associated with products
bearing the L.B. Evans label. On a proforma basis, assuming these acquisitions
had occurred on January 1, 1999, the Company(1)s net sales in 2000 would have
been approximately $39,693,000 in 2000 and $36,532,000 in January 1, 1999.

From a sales mix standpoint, the increase in net sales on a proforma basis for
2000, of $3,161,000 or 8.7%, over 1999 relates to the increased sales of the
Trotters and SoftWalk brands, combined with the sales of the Daniel Green
products at higher average selling prices due to fewer sales of the
slow-moving/obsolete inventory in 2000, which tend to be at lower average
selling prices. Overall, the Daniel Green sales decreased in 2000 versus 1999,
and the Trotters and SoftWalk sales increased, and the Trotters and SoftWalk
products are sold at higher average selling prices.

Sales to any one customer in 2000 did not account for more than 10% of net
sales; sales to one customer in 1999 represented approximately 12% of net sales.
Ten major customers represented approximately 45% of net sales in 2000; most of
these same customers represented 52% of net sales in 1999, and 45% of net sales
in 1998.

1999 net sales of $14.9 million increased $256,500 or 1.8% over the prior years
net sales of $14.6 million. The number of pairs shipped increased 6.2% from
948,632 in 1998 to 1,007,241 in 1999. However, the comparable 1999 average
selling price per pair of $14.98 is 4.9% less than the $15.76 average selling
price per pair for the same period in 1998. The lower price points of
slow-moving/close out inventory written down in 1998 and the introduction of
lower priced specialty footwear drove the lower average selling price per pair.

In 1999 the Company completed the scheduled restructuring plan, converting from
domestically produced footwear and closing the Dolgeville manufacturing facility
to presently outsourcing all footwear products from primarily Brazil and China.
In 1999 and 1998, imports accounted for approximately $9.4 million or 63.4% of
net sales and $4.1 million or 28% of net sales, respectively.

Expenses

Cost of goods sold, as a percentage of net sales, was 67% in 2000, compared to
81% in 1999 and 83% in 1998. Cost of goods sold reflects the direct costs of
footwear sold, sourced variances from pre-determined standards, and adjustments
to the value of inventory on hand. The gross profit margin for 2000 was 33%,
compared to 19.5% in 1999 and 17% in 1998. The gross profit margin improvement
in 2000 resulted from a) improved margins in the Trotters and Softwalk business;
b) the reduced effect for slow-moving/obsolete inventory; and c) the Company is
no longer involved in the


<PAGE>

manufacturing process directly and consequently experiences no negative impact
for any raw material write-offs that previously occurred in 1999 and 1998.
Selling and administrative expenses for 2000 increased approximately $6 million
from $4.7 million in 1999, and $4.6 million from $6.1 million in 1998, to $10.7
million. As a percentage of net sales, selling general and administrative
expenses were approximately 32.3% in 2000 compared to 31.7% in 1999. Since the
majority of these expenses are variable in nature, much of the $6 million
increase relates directly to the increase in net sales in 2000. In addition,
year 2000 expenses included non-recurring costs associated with the closing of
the Dolgeville property and asset impairments which were in excess of $1.2
million. The decrease in 1999 from 1998 reflects significant reductions in
benefit plan expenses and payroll taxes due to decreased employment levels. In
addition, the new 1999 commission based sales force compensation plan more
appropriately responded to sales performance, and in 1999 foreign travel by
management was reduced as compared to 1998.

Operating Income/(Loss)
Operating Income/(loss) is directly related to the items discussed above.

Interest Expense

Interest expense in 2000 was $1.4 million, up from $0.2 million in 1999 and $0.3
million in 1998. On August 11, 1999 the Company entered into a new credit
arrangement with Manufacturers and Traders Trust Company (M&T bank), which
provides the Company with a revolving line of credit, a term loan and a
mortgage/term loan. Borrowings under this new credit arrangement totalled $18.9
million as of December 31, 2000 which resulted in the interest expense increase
in 2000. The increased borrowings were required primarily to support the
Penobscot acquisition. The revolving line of credit is a three-year credit
facility bearing interest at prime plus .75%. The term loan bears interest at
the prime rate plus 2% and is due through April 2003. The mortgage/term loan has
level monthly principal and interest payments based on a ten-year amortization
with a balloon payment on April 1, 2001 and bears interest at LIBOR plus 2.25%
and is 80% guaranteed by FMHA. Additionally, the new facility is guaranteed by a
major stockholder of the Company.

Income Tax Provision

The Company(1)s income tax benefit decreased slightly in 2000, to approximately
$455,000, from $482,000 in 1999, and approximately $1.1 million in 1998.

The effective income tax rate was a benefit of approximately 40% in 2000, and
24% in 1999 and 1998. 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.
The increase in the effective income tax rate benefit in 2000 resulted from
lowering the Company(1)s deferral tax valuation allowance as a result of the
Company(1)s evaluation of the realization of its deferred tax assets.


<PAGE>


At December 31, 2000, the Company has approximately $3,252,000 of federal net
operating loss carryforwards which expire in 2018. The Company has an AMT credit
carryforward of approximately $49,000 which will never expire. The Company has
approximately $4,967,000 of net operating loss carryforwards available for New
York State tax purposes, which begin to expire in 2011.

Net (Loss)

The net loss for 2000 was approximately $682,000, or $.43 per share, compared
with last year(1)s net loss of approximately $1.5 million, or $.97 per share.
The Company had a net loss of approximately $3.7 million or $2.39 per share in
1998.

Financial Condition

The Company(1)s bank indebtedness increased approximately $16.1 million during
2000. Total debt consists of notes payable, the line of credit and capital lease
obligations. At December 31, 2000, total debt was approximately $18.9 million,
compared with approximately $2.8 million at December 31, 1999. At December 31,
1998 the Company(1)s total debt was approximately $2.5 million.

Inventory levels increased from $3.5 million in 1999 to $14.8 million in 2000,
reflective of the acquired businesses in 2000. Accounts receivable increased
from $4.2 million in 1999 to $14.6 million in 2000. Accounts receivable days
increased from 77 days in 1999 to 123 days in 2000, reflective of increased
terms and slower cash collections being experienced.

During 2000, the Company used approximately $3.8 million in cash flow from
operating activities. In 1999 and 1998, the Company generated approximately
$712,000 and $1.1 million, respectively. The principal components of cash flow
from operations were changes in accounts receivable, inventories and accounts
payable. Working capital at the end of 2000 was negative of approximately $1.6
million, compared to positive of approximately $4.4 million at the end of 1999
and positive $6.8 million at the end of 1998. The Company(1)s current ratio, the
relationship of current assets to current liabilities, decreased from 2.19 in
1999 to 0.95 in 2000, and decreased from 2.93 in 1998.

Capital expenditures approximated $360,000 in 2000, as compared to $169,000 in
1999 and $341,000 in 1998. The primary reason for the purchases in 2000 related
to computer equipment and warehouse equipment.

The Company(1)s revolving and term loan credit agreements contain covenants
relative to average borrowed funds to earnings ratio, net income, current ratio,
and cash flow coverage. In addition, the payment or declaration of dividends and
distributions is prohibited unless a written consent from the lender is
received. As of December 31, 2000 the Company was in violation of its bank
covenants. The Company has not obtained


<PAGE>


     waivers from the bank on these financial covenants which resulted in
classifying all the related debt as a current liability at December 31, 2000. In
2001, the Company is exposed to a higher interest rate on its indebtedness with
financial penalty at least until the Company obtains waivers, cures the
violations, or establishes new financing. The Company is currently addressing
its entire financing needs based on its current business plan. If the Company is
unable to secure such financing on reasonable terms, it could have a material
adverse effect on the Company and its Business.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. In June 2000, the FASB issued SFAS No. 138,
which amends certain provisions of SFAS No.133 to clarify areas causing
difficulties in implementation. SFAS No.133, as amended, requires the Company to
recognize all derivatives on the consolidated balance sheet at fair value.
Derivatives that are not hedges of underlying transactions must be adjusted to
fair value through income. If the derivative is a hedge, depending on the nature
of the hedge, changes in the fair value of derivatives will either be offset
against the change in fair value of the hedged assets, liabilities or firm
commitments through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a
derivative(1)s change in fair value will be immediately recognized in earnings.
The Company has completed the process of evaluating the impact that of adopting
SFAS No.133, as amended. The Company has not identified any derivatives that
meet the criteria for a derivative instrument and does not participate in any
hedging activities. As a result, there was no effect on the Company(1)s
consolidated financial position, results of operations or cash flows resulting
from the adoption of SFAS No.133, as amended, during the first quarter of 2001.

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin ("SAB") No.101, Revenue Recognition in the Financial
Statements, which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. The Company(1)s adoption of
SABNo.101 during the fourth quarter of 2000 did not impact the Company(1)s
consolidated financial position, results of operations or cash flows.

In September 2000, the FASB issued SFAS No.140, Accounting for Transfers and
Serving of Financial Assets and Extinguishment of Liabilities, which replaces
SFAS No.125. This Standard is effective for transfers occurring after March 31,
2001. The Company does not believe the adoption of this Standard will have a
material impact on the Company(1)s consolidated financial position, results of
operations or cash flows.

<PAGE>

Item 7.   Financial Statements.

DANIEL GREEN COMPANY

Consolidated Financial Statements as of December 31, 2000 and 1999, and for Each
of the Three Years in the Period Ended December 31, 2000 and Independent
Auditors' Report

<PAGE>


INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
   Daniel Green Company

We have audited the accompanying consolidated balance sheets of Daniel Green
Company and subsidiary as of December 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2000
and 1999, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America.


Deloitte & Touche LLP

Rochester, New York
March 13, 2001

<PAGE>


DANIEL GREEN COMPANY AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------

ASSETS                                                                    2000                 1999
<S>                                                                  <C>                   <C>
CURRENT ASSETS:
  Cash                                                               $      1,395          $    225,079
  Accounts receivable (less allowances of $2,249,000 in 2000
    and $321,000 in 1999)                                              14,601,499             4,167,612
  Inventories                                                          14,758,949             3,542,255
  Other current assets                                                    193,757                71,725
  Deferred income tax asset - current                                     654,491               101,629
                                                                     ------------          ------------
        Total current assets                                           30,210,091             8,108,300

PROPERTY - net                                                          2,054,578               821,650

OTHER ASSETS:
  Other assets, net                                                     1,754,176               506,535
  Deferred income tax asset                                               795,038               815,176
  Prepaid pension costs                                                 3,610,518                  --
                                                                     ------------          ------------
        Total other assets                                              6,159,732             1,321,711
                                                                     ------------          ------------

TOTAL ASSETS                                                         $ 38,424,401          $ 10,251,661
                                                                     ============          ============


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Note payable - line of credit                                      $ 12,500,000          $  1,903,078
  Accounts payable                                                      9,158,314               548,816
  Accrued expenses                                                      1,038,078               377,383
  Notes payable - current                                               6,416,743               864,754
  Liability to former stockholders                                      1,805,951                  --
  Income taxes payable                                                    898,364                  --
                                                                      -----------          ------------
        Total current liabilities                                      31,817,450             3,694,031

OTHER LIABILITIES:
  Notes payable - noncurrent                                                9,320                81,087
  Other liability                                                         700,000                  --
                                                                     ------------          ------------
        Total other liabilities                                           709,320                81,087
                                                                     ------------          ------------
        Total liabilities                                              32,526,770             3,775,118

COMMITMENTS (Note 9)

STOCKHOLDERS' EQUITY:
  Common stock - $2.50 par value; authorized 4,000,000 shares;
      1,698,329 shares issued in 2000 and 1999                          4,245,823             4,245,823
  Additional paid-in-capital                                              815,940               815,940
  Retained earnings                                                     1,305,759             1,987,992
                                                                     ------------          ------------
                                                                        6,367,522             7,049,755
  Less:  Treasury stock at cost, 120,601 shares in 2000
    and 130,987 in 1999                                                  (469,891)             (573,212)
                                                                     ------------          ------------
        Total stockholders' equity                                      5,897,631             6,476,543
                                                                     ------------          ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           $ 38,424,401          $ 10,251,661
                                                                     ============          ============
</TABLE>


See notes to consolidated financial statements.


                                      - 2 -
<PAGE>

DANIEL GREEN COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------

                                                          2000                1999               1998

<S>                                                 <C>                  <C>                  <C>
NET SALES                                           $ 33,179,232         $ 14,867,332         $ 14,610,867
                                                    ------------         ------------         ------------

OPERATING EXPENSES:
  Cost of goods sold (Note 8)                         22,232,692           11,971,909           12,172,075
  Selling and administrative expenses (Note 8)        10,720,825            4,713,074            6,981,305
                                                    ------------         ------------         ------------
      Total operating expenses                        32,953,517           16,684,983           19,153,380
                                                    ------------         ------------         ------------

OPERATING INCOME (LOSS)                                  225,715           (1,817,651)          (4,542,513)

INTEREST EXPENSE                                       1,362,770              193,116              291,544
                                                    ------------         ------------         ------------

LOSS BEFORE INCOME TAXES                              (1,137,055)          (2,010,767)          (4,834,057)

INCOME TAX BENEFIT                                      (454,822)            (482,570)          (1,141,368)
                                                    ------------         ------------         ------------

NET LOSS                                            $   (682,233)        $ (1,528,197)        $ (3,692,689)
                                                    ============         ============         ============

NET LOSS PER COMMON
  SHARE:
    Basic and Diluted                               $       (.43)        $       (.97)        $      (2.39)
                                                    ============         ============         ============
</TABLE>

See notes to consolidated financial statements.


                                      -3-
<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

                                                Common Stock       Additional                    Treasury Stock
                                           ----------------------   Paid-In     Retained      --------------------
                                             Shares      Amount     Capital     Earnings       Shares       Amount          Total

<S>                                        <C>         <C>          <C>        <C>            <C>         <C>          <C>
Balance, January 1, 1998                   1,698,329   $4,245,823   $741,303   $ 7,208,878    (186,437)   $(894,896)   $ 11,301,108

Purchases of treasury stock                     --           --         --            --        (7,165)     (34,392)        (34,392)

Allocation of shares in Company
  sponsored defined
  contribution plan                             --           --         --            --        70,201      336,965         336,965

Net loss, 1998                                  --           --         --      (3,692,689)       --           --        (3,692,689)
                                           ---------   ----------   --------   -----------    --------    ---------    ------------

Balance, December 31, 1998                 1,698,329    4,245,823    741,303     3,516,189    (123,401)    (592,323)      7,910,992

Purchases of treasury stock                     --           --         --            --       (65,704)    (259,854)       (259,854)

Allocation of shares in Company
  sponsored defined
  contribution plan                             --           --         --            --        58,118      278,965         278,965

Issuance of common stock
  options in consideration for
  a debt guarantee                              --           --       74,637          --          --           --            74,637

Net loss, 1999                                  --           --         --      (1,528,197)       --           --        (1,528,197)
                                           ---------   ----------   --------   -----------    --------    ---------    ------------

Balance, December 31, 1999                 1,698,329    4,245,823    815,940     1,987,992    (130,987)    (573,212)      6,476,543

Purchases of treasury stock                     --           --         --            --       (47,732)    (175,645)       (175,645)

Allocation of shares in Company
  sponsored defined
  contribution plan                             --           --         --            --        58,118      278,966         278,966

Net loss, 2000                                  --           --         --        (682,233)       --           --          (682,233)
                                           ---------   ----------   --------   -----------    --------    ---------    ------------

Balance, December 31, 2000                 1,698,329   $4,245,823   $815,940   $ 1,305,759    (120,601)   $(469,891)   $  5,897,631
                                           =========   ==========   ========   ===========    ========    =========    ============

</TABLE>

See notes to consolidated financial statements.

                                      -4-
<PAGE>

DANIEL GREEN COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

                                                                                   2000                1999                1998
<S>                                                                          <C>                   <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                   $   (682,233)         $(1,528,197)         $(3,692,689)
  Adjustments to reconcile net loss to net cash (used)
    provided by operating activities:
    Depreciation and amortization                                                 430,368              297,086              355,016
    Allocation of shares in defined contribution plan                             278,966              278,965              336,965
    Loss on impairment of assets                                                  208,066                 --                784,581
    Gain on sale of property and equipment                                           --                   --                (11,515)
    Changes in assets and liabilities:
      (Increase) decrease in:
        Accounts receivable, net                                               (5,775,887)              38,367            1,515,452
        Inventories                                                            (5,292,694)           1,938,644            2,988,476
        Other current assets                                                      (56,032)             (21,450)              15,381
        Income taxes receivable                                                      --                387,142             (387,142)
        Other noncurrent assets                                                    71,413               36,084               45,288
        Deferred income tax asset                                                (458,822)            (484,776)            (756,449)
        Prepaid pension credit                                                   (194,518)                --                   --
      Increase (decrease) in:
        Accounts payable                                                        7,841,498             (284,361)             529,685
        Accrued expenses                                                         (150,305)              54,339             (200,282)
        Income taxes payable                                                      (22,636)                --               (421,389)
                                                                             ------------          -----------          -----------
      Net cash (used) provided by operating activities                         (3,802,816)             711,843            1,101,378
                                                                             ------------          -----------          -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment                                            (359,694)            (169,588)            (341,191)
  Proceeds from disposal of property and equipment                                  2,058               22,475               13,689
  Acquisition of business, net of cash acquired                               (15,148,084)                --                   --
  Proceeds from notes receivable                                                4,000,000                 --                   --
                                                                             ------------          -----------          -----------
      Net cash used by investing activities                                   (11,505,720)            (147,113)            (327,502)
                                                                             ------------          -----------          -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings (payments) on line of credit                                  10,596,922              758,986           (1,075,710)
  Proceeds from notes payable                                                   6,000,000                7,950                 --
  Repayments of notes payable                                                    (519,778)            (390,894)            (558,349)
  Purchases of treasury stock                                                    (175,645)            (259,854)             (34,392)
  Debt issuance and other costs                                                   (69,383)            (463,139)                --
  Other noncurrent liabilities                                                   (747,264)                --                   --
                                                                             ------------          -----------          -----------
      Net cash provided (used) by financing activities                         15,084,852             (346,951)          (1,668,451)
                                                                             ------------          -----------          -----------
NET (DECREASE) INCREASE IN CASH                                                  (223,684)             217,779             (894,575)

CASH, BEGINNING OF YEAR                                                           225,079                7,300              901,875
                                                                             ------------          -----------          -----------
CASH, END OF YEAR                                                            $      1,395          $   225,079          $     7,300
                                                                             ============          ===========          ===========

                                                                                                                         (Continued)
</TABLE>

See notes to consolidated financial statements.


                                       -5-
<PAGE>

DANIEL GREEN COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------

                                                                  2000                 1999                1998
SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid during the year for:
<S>                                                         <C>                    <C>                  <C>
      Interest                                              $   1,381,752          $   191,726          $   369,214
                                                             ============          ===========          ===========
      Income taxes                                          $       2,469          $     2,742          $   436,628
                                                             ============          ===========          ===========
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NONCASH
  FINANCING ACTIVITY:
    During 2000, the Company incurred a liability totaling
      $1,050,000 related to an acquisition of assets.
    During 1999, the Company issued common stock
      options valued at $74,637 in consideration for a debt guarantee.

                                                                     (Concluded)
See notes to consolidated financial statements.


                                     -6-
<PAGE>

DANIEL GREEN COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------


1.   DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Description of Business - The Company is engaged primarily in the import
     and sale of leisure footwear. Sales are made principally to retailers in
     the United States.

     On March 30, 2000, the Company purchased all of the outstanding shares of
     Penobscot Shoe Company ("Penobscot") from a related party for approximately
     $18,218,000, including direct costs of the acquisition. Penobscot is also
     engaged in the import and sale of footwear. The acquisition of Penobscot
     has been accounted for under the purchase method of accounting and
     accordingly, the operating results of Penobscot have been included in the
     Company's consolidated financial statements since the date of acquisition.
     The estimated fair market value of assets and liabilities acquired was
     approximately $20,387,000 and $2,632,000 respectively. The excess of the
     aggregate purchase price over the estimated fair market value of the net
     assets acquired ("goodwill") was approximately $463,000 which is being
     amortized on a straight-line basis over 15 years.

     The 2000, 1999 and 1998 results of operations on a proforma basis, assuming
     the Penobscot acquisition occurred at the beginning of the respective
     periods, are as follows:

                                                 2000            1999           1998
                                                              (Unaudited)

<S>                                          <C>              <C>            <C>
Net sales                                    $ 39,693,000     $36,532,000    $ 34,218,000
                                             ============     ===========    ============
Net (loss) earnings                          $    (43,000)    $   154,000    $ (2,445,000)
                                             ============     ===========    ============
Net (loss) earnings per common share         $      (0.03)    $      0.10    $      (1.58)
                                             ============     ===========    ============
</TABLE>

     Principles of Consolidation - The consolidated financial statements consist
     of Daniel Green Company and its wholly-owned subsidiary, Penobscot Shoe
     Company. Intercompany accounts and transactions have been eliminated.

     Estimates - The preparation of financial statements in conformity with
     accounting principles generally accepted in the United States of America
     requires management to make estimates and assumptions that affect the
     reported amounts of assets and liabilities and disclosure of contingent
     assets and liabilities at the date of the financial statements and the
     reported amounts of revenues and expenses during the reporting period.
     Actual results could differ from those estimates.

     Inventories - Inventories are stated at the lower of cost or market. Cost
     is determined on a first-in, first-out basis. Inventories consist of
     finished goods.

                                      -7-

<PAGE>

     Property and Accumulated Depreciation - Property is stated at cost, less
     accumulated depreciation. Expenditures for maintenance and repairs are
     charged to earnings as incurred. Replacements of significant items and
     major renewals and betterments are capitalized. Depreciation is computed
     using estimated useful lives under the straight-line method as follows:

        Buildings                                      20 years
        Machinery and equipment                        10 years
        Computers                                       4 years
        Vehicles                                        4 years
        Furniture and fixtures                          8 years

     Other Assets - Other assets consist primarily of tradenames, goodwill
     associated with the Penobscot acquisition and deferred financing costs.
     Goodwill and tradenames are being amortized on a straight-line basis over
     15 years. Deferred financing costs are being amortized over the term of the
     related debt instruments. Accumulated amortization as of December 30, 2000
     and 1999 totaled approximately $291,000 and $36,000, respectively.

     Asset Impairments - The Company periodically reviews the carrying value of
     its long-lived assets for impairment whenever events or changes in
     circumstances indicate that the carrying value of assets may not be
     recoverable. Identification of any impairment would include a comparison of
     estimated future operating cash flows anticipated to be generated during
     the remaining life of the assets with their net carrying value. An
     impairment loss would be recognized as the amount by which the carrying
     value of the assets exceeds their fair value. The Company recorded an
     impairment loss associated with property totaling approximately $208,000 in
     2000 and $785,000 in 1998 (See Note 8). The impairment loss in 2000 and
     1998 is included in selling and administrative expenses.

     Revenue Recognition - Revenues are recognized when products are shipped
     since all risk of loss transfers to the Company's customer upon shipment.
     Provisions for discounts, returns and other adjustments are provided for in
     the same period the related sales are recorded.

     Research and Development Costs - Expenditures relating to the development
     of new products and processes, including significant improvements and
     refinements to existing products, are expensed as incurred. The amounts
     charged to expense were approximately $320,000 in 2000, $125,000 in 1999
     and $168,000 in 1998.

     Income Taxes - Income taxes are provided on the earnings (losses) in the
     consolidated financial statements. Deferred income taxes are provided to
     reflect the impact of "temporary differences" between the amounts of assets
     and liabilities for financial reporting purposes and such amounts as
     measured by tax laws and regulations. Tax credits are recognized as a
     reduction to income taxes in the year the credits are earned.

     Net Loss Per Common Share (EPS) - The calculations for both basic and
     diluted EPS were based on the Company's net loss and weighted average
     number of common shares outstanding of 1,570,595, 1,569,086 and 1,547,764
     for the years ended December 31, 2000, 1999 and 1998, respectively. Options
     to purchase shares of common stock were outstanding in 2000, 1999 and 1998
     totalling 115,500, 75,000 and 87,000, respectively, but were not included
     in the computation of diluted earnings per share because the effect would
     be antidilutive due to the net loss in those years.

     Concentration of Credit Risk - Financial instruments that potentially
     subject the Company to credit risks consist primarily of accounts
     receivable. Companies in the retail industry comprise a significant portion
     of the accounts receivable balance; collateral is not required. The Company
     monitors its exposure for credit losses and maintains allowances for
     anticipated losses.

     Fair Value of Financial Instruments - The fair value of financial
     instruments is determined by reference to various market data and other
     valuation techniques, as appropriate. Unless otherwise

                                       -8-
<PAGE>

     disclosed,  the fair value of  short-term  instruments  approximates  their
     recorded values due to the short-term  nature of the instruments.  The fair
     value of long-term debt  instruments  approximates  their  recorded  values
     primarily due to interest rates  approximating  current rates available for
     similar instruments.

     Stock-Based Compensation - The Company accounts for stock-based
     compensation in accordance with Statement of Financial Accounting Standards
     (SFAS) No. 123, Accounting for Stock-Based Compensation. As permitted in
     that Standard, the Company has elected to continue to follow recognition
     provisions of Accounting Principles Board Opinion No. 25, Accounting for
     Stock Issued to Employees, and related interpretations in accounting for
     employee stock-based compensation. No employee stock-based compensation
     expense was recorded for the years ended December 31, 2000, 1999 and 1998.

     Segments - The Company operates in only one business segment. In addition,
     the Company's internal reporting does not make it practicable to provide
     information on net sales earned from different styles of footwear or from
     different geographic locations. Long-lived assets are entirely located in
     the United States. Sales to one customer in 1999 totalled approximately
     $1,790,000, or 12 percent of the Company's net sales in 1999. Sales to any
     one customer in 2000 or 1998 did not exceed 10% of the Company's net sales
     in those years. Ten major customers represented approximately 45% of net
     sales in 2000; most of these same customers represented 52% of net sales in
     1999, and 48% of net sales in 1998. Due to the uncertain nature of the
     retail industry, the loss of any one or more of these customers could have
     a material adverse effect on the Company's business.

     Recent Accounting Pronouncements - In June 1998, the Financial Accounting
     Standards Board ("FASB") issued Statement of Financial Accounting Standards
     ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging
     Activities. In June 2000, the FASB issued SFAS No. 138, which amends
     certain provisions of SFAS No. 133 to clarify areas causing difficulties in
     implementation. SFAS No. 133, as amended, requires the Company to recognize
     all derivatives on the consolidated balance sheet at fair value.
     Derivatives that are not hedges of underlying transactions must be adjusted
     to fair value through income. If the derivative is a hedge, depending on
     the nature of the hedge, changes in the fair value of derivatives will
     either be offset against the change in fair value of the hedged assets,
     liabilities or firm commitments through earnings or recognized in other
     comprehensive income until the hedged item is recognized in earnings. The
     ineffective portion of a derivative's change in fair value will be
     immediately recognized in earnings. The Company has completed the process
     of evaluating the impact of adopting SFAS No. 133, as amended. The Company
     has not identified any derivatives that meet the criteria for a derivative
     instrument and does not participate in any hedging activities. As a result,
     there was no effect on the Company's consolidated financial position,
     results of operations or cash flows resulting from the adoption of SFAS No.
     133, as amended, during the first quarter of 2001.

     In December 1999, the Securities and Exchange Commission (SEC) issued Staff
     Accounting Bulletin ("SAB") No. 101, Revenue Recognition in the Financial
     Statements, which provides guidance on the recognition, presentation and
     disclosure of revenue in financial statements. The Company's adoption of
     SAB No. 101 during the fourth quarter of 2000 did not impact the Company's
     consolidated financial position, results of operations or cash flows.

     In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers
     and Serving of Financial Assets and Extinguishment of Liabilities, which
     replaces SFAS No. 125. This Standard is effective for transfers occurring
     after March 31, 2001. The Company does not believe the adoption of this
     Standard will have a material impact on the Company's consolidated
     financial position, results of operations or cash flows.

     Reclassifications - Certain reclassifications have been made to the 1999
     financial statements to conform to the classifications used in 2000.

                                      -9-
<PAGE>

2.   PROPERTY

     Property as of December 31 consisted of the following:
<TABLE>
<CAPTION>

                                                       2000              1999

<S>                                                 <C>               <C>
Land and buildings                                  $1,698,581        $2,560,504
Machinery and equipment                                 90,070           116,666
Computers                                              562,529           420,010
Vehicles                                                47,430            74,011
Furniture and fixtures                                  34,301           984,159
                                                    ----------        ----------
                                                     2,432,911         4,155,350
Less accumulated depreciation                          378,333         3,333,700
                                                    ----------        ----------
Property - net                                      $2,054,578        $  821,650
                                                    ==========        ==========
</TABLE>

3.   BENEFIT PLANS

     Defined Contribution Plan

     During 1997, following the termination of its defined benefit plan, the
     Company established a defined contribution 401(k) savings plan ("the Plan")
     covering substantially all employees of the Company. In December 1997, the
     Plan acquired 186,437 shares of the Company's common stock at a price per
     share of $4.80, which was based on an independent appraisal. As of December
     31, 2000, all shares acquired by the Plan have been allocated to the
     participants. The unallocated shares in the Plan as of December 31, 1999
     were recorded as treasury stock in stockholders' equity. Compensation
     expense was recognized as the shares were allocated to the participants and
     totalled $278,966, $278,965 and $336,965 for the years ended December 31,
     2000, 1999 and 1998, respectively. In addition, the Company's matching
     contribution to the Plan totaled $11,424, $45,429 and $74,178 in 2000, 1999
     and 1998, respectively.

     Defined Benefit Pension Plan

     Penobscot has a retirement plan ("the Plan") covering substantially all of
     its employees. The Company's policy is to fund retirement costs as accrued.
     Plan assets consist principally of equity securities and corporate and U.S.
     Government obligations.

     In June 2000, the Company announced its intention to terminate the
     Penobscot Plan. As a result, all future benefit accruals were frozen on
     June 30, 2000. The Company anticipates that the liabilities will be settled
     through the purchase of an insurance contract sometime in 2001. The freeze
     of benefits on June 30, 2000 resulted in a curtailment, as defined under
     SFAS No. 88. The curtailment resulted in a gain of $322,869, due to the
     elimination of future pay projection in the liability calculation.

                                      -10-
<PAGE>

The following table sets forth the plan's funded status as of December 31, 2000:

<TABLE>
<CAPTION>

<S>                                                                       <C>
The change in the benefit obligation is:
  Benefit obligation at date of Penobscot acquisition, March 30, 2000     $ 3,369,079
  Service cost                                                                 14,602
  Interest cost                                                               171,032
  Curtailment gain                                                           (322,869)
  Actuarial loss                                                              684,318
  Benefits paid                                                              (252,143)
                                                                          -----------
  Benefit obligation at end of year                                       $ 3,664,019
                                                                          ===========
The change in plan assets is:
  Fair value of assets at date of Penobscot acquisition, March 30, 2000   $ 6,785,440
  Actual return on plan assets                                                 10,234
  Benefits paid                                                              (252,143)
  Administrative expenses                                                     (85,112)
                                                                          -----------
  Fair value of assets at end of year                                     $ 6,458,419
                                                                          ===========
Reconciliation of funded status as of December 31, 2000:
  Funded status                                                           $ 2,794,400
  Unrecognized actuarial loss                                                 816,118
                                                                          -----------
  Net prepaid pension costs recognized as of December 31, 2000            $ 3,610,518
                                                                          ===========
</TABLE>

     The discount rate and the expected long-term rate of return on plan assets
     used in determining the actuarial present value of the projected benefit
     obligation as of December 31, 2000 were 6% and 7.5%, respectively. The
     discount rate and the expected long-term rate of return on plan assets used
     in determining the actuarial present value of the projected benefit
     obligation as of March 30, 2000 were 7.5% and 7.5%, respectively.

     The net pension income for 2000 included the following components:
<TABLE>
<CAPTION>

                                                                               2000

<S>                                                                       <C>
Service cost                                                              $   (14,602)
Interest cost                                                                (171,032)
Actual return on plan assets                                                  379,791
                                                                          -----------
Net pension income                                                        $   194,157
                                                                          ===========
</TABLE>

4.   DEBT

     Notes Payable - During 2000, the Company entered into a new loan agreement
     with its existing bank resulting in a new revolving line of credit
     ("revolver"), an additional term loan facility in the amount of $6,000,000
     and a supplemental loan facility in the amount of up to $2,800,000. Under
     the terms of the new agreement, the borrowing base for the revolver is
     based on certain balances of accounts receivable and inventory, as defined
     in the agreement. The maximum credit amount under the revolver is
     $12,500,000, the interest rate is prime plus .75% (the prime rate was 9.5%
     at December 31, 2000) and the revolver expires on April 1, 2003. The
     revolver is secured by accounts receivable, inventory and equipment. The
     term loan is payable through April 1, 2003 and is also secured by accounts
     receivable, inventory and equipment. The supplemental loan facility is
     available through April 1, 2003; there were no borrowings under this
     facility at December 31, 2000. The above facilities are guaranteed by a
     major stockholder of the Company.

                                      -11-
<PAGE>

     An existing mortgage/term loan is payable through April 2001 and is secured
     by the Company's facilities.

     The balance owed under the Company's revolving line of credit as of
     December 31, 2000 and 1999 totaled $12,500,000 and $1,903,078,
     respectively.

     Long-term debt as of December 31 consisted of the following:
<TABLE>
<CAPTION>

                                                                             2000                   1999
<S>                                                                       <C>                     <C>

Note payable to bank in quarterly installments of
$187,500 through April 2003, interest due monthly
at prime plus 2%                                                          $5,625,000              $     --

Note payable to bank in monthly principal installments of approximately $4,900
through April 2001 at which time a balloon payment of approximately $751,000 is
due;
interest is due monthly at LIBOR plus 2.25%                                  768,780               824,132

Other                                                                         32,283               121,709
                                                                          ----------              --------
                                                                           6,426,063               945,841
Less:  current portion                                                     6,416,743               864,754
                                                                          ----------              --------
Noncurrent portion                                                        $    9,320              $ 81,087
                                                                          ==========              ========

</TABLE>

     The aggregate principal payments of notes payable are as follows:
<TABLE>
<CAPTION>

<S>                   <C>                              <C>
                      2001                             $ 6,416,743
                      2002                                   9,320
                                                       -----------
                      Total                            $ 6,426,063
                                                       ===========
</TABLE>

     The line of credit and the note payable to bank contain certain financial
     covenants relative to average borrowed funds to earnings ratio, net income,
     current ratio, and cash flow coverage. In addition, the payment or
     declaration of dividends and distributions is prohibited unless a written
     consent from the lender is received. As of December 31, 2000, the Company
     was not in compliance with its financial covenants. The Company has not
     obtained a waiver from the lender and accordingly, has reclassified
     $4,875,000 of debt from a long-term liability to a current liability as of
     December 31, 2000.

     As of December 31, 1999, the Company was not in compliance with the
     covenants related to average borrowed funds to earnings ratio and cash flow
     coverage. The Company has not obtained a waiver from the lender and
     accordingly, has reclassified $765,609 of the note payable to bank from a
     long-term liability to a current liability as of December 31, 1999.

                                      -12-
<PAGE>

5.   INCOME TAXES

     The income tax benefit consists of:
<TABLE>
<CAPTION>

                                              2000                 1999                1998
<S>                                        <C>                  <C>                <C>
Current:
  Federal                                  $    --              $    --            $  (387,142)
  State                                        4,094                2,206                2,223
                                           ---------            ---------          -----------
                                               4,094                2,206             (384,919)
                                           ---------            ---------          -----------
Deferred:
  Federal                                   (410,353)            (385,799)            (595,235)
  State                                      (48,563)             (98,977)            (161,214)
                                           ---------            ---------          -----------
                                            (458,916)            (484,776)            (756,449)
                                           ---------            ---------          -----------
Total                                      $(454,822)           $(482,570)         $(1,141,368)
                                           =========            =========          ===========
</TABLE>

     The difference  between tax computed at the statutory  U.S.  federal income
     tax rate and the Company's effective tax rate is as follows:
<TABLE>
<CAPTION>

                                              2000                  1999               1998
<S>                                        <C>                  <C>                <C>
Benefit at statutory rate                  $(386,599)           $(683,657)         $(1,643,580)
State and other taxes, net of federal
  tax benefit                                (36,130)               1,456               1,467
Items not deductible                           6,938
Reduction in state net operating loss         12,115
  due to rate change
Change in valuation allowance                (80,127)             287,243              500,000
Other                                         28,981              (87,612)                 745
                                           ---------            ---------          -----------
Income tax benefit                         $(454,822)           $(482,570)         $(1,141,368)
                                           =========            =========          ===========
</TABLE>

     At December 31, 2000, the Company has approximately $3,252,000 of federal
     net operating loss carryforwards which begin to expire in 2018. The Company
     has an alternative minimum tax (AMT) credit carryforward of $49,074 which
     will never expire. The Company has approximately $4,967,000 of net
     operating loss carryforwards available for New York State tax purposes,
     which begin to expire in 2011.

                                      -13-
<PAGE>


     Components of the Company's deferred income tax asset as of December 31,
     2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                               2000
                                                                 --------------------------------
                                                                    Current           Noncurrent
<S>                                                              <C>                  <C>
Assets

Non-deductible bad debt reserves                                 $   691,470          $      --
Uniform capitalization of inventory                                   57,720                 --
Non-deductible sales allowances                                      185,250                 --
Other accruals                                                        39,328                 --
Net operating loss carryforwards                                        --              1,311,674
Compensation                                                            --                 58,885
AMT credit carryforward                                                 --                 49,074
Charitable contribution                                                 --                262,603

Liabilities

Depreciation                                                            --               (499,359)
Valuation allowance                                                 (319,277)            (387,839)
                                                                 -----------          -----------

Deferred income tax asset                                        $   654,491          $   795,038
                                                                 ===========          ===========

<CAPTION>
                                                                               1999
                                                                 --------------------------------
                                                                    Current           Noncurrent
<S>                                                              <C>                  <C>
Assets

Non-deductible bad debt reserves                                 $    78,482          $      --
Uniform capitalization of inventory                                   63,618                 --
Non-deductible sales allowances                                       46,796                 --
Net operating loss carryforward                                         --              1,409,616
Fixed assets                                                            --                129,978
AMT credit carryforward                                                 --                 49,074
Charitable contribution                                                 --                262,435

Liabilities

Prepaid pension expense                                                 --               (108,797)
Depreciation                                                            --               (227,154)
Valuation allowance                                                  (87,267)            (699,976)
                                                                 -----------          -----------

Deferred income tax asset                                        $   101,629          $   815,176
                                                                 ===========          ===========
</TABLE>

6.    LIABILITY TO FORMER STOCKHOLDERS

      The accompanying consolidated balance sheet as of December 31, 2000
      includes an obligation of approximately $1,806,000 to dissenting
      stockholders of Penobscot. This liability, which was assumed by the
      Company in the acquisition of Penobscot, arose when Penobscot was acquired
      by a related party of the Company in November 1999.

                                       -14-
<PAGE>

7.    STOCKHOLDERS' EQUITY

      Stock Option Plan - The Company has reserved 100,000 shares of its common
      stock for issuance under its Stock Incentive Plan. Options granted in 2000
      can be exercised at the fair market value of the Company's stock on the
      date of grant. For option grants prior to 2000, the price at which such
      options can be exercised shall be at least $1 more than 100% of the fair
      market value of the Company's stock on the date of grant; for an optionee
      who at the time of grant owns more than 10% of the Company's stock, the
      price at which options can be exercised shall be at least $1 more than
      110% of the fair market value of the Company's stock on the date of grant.

      The stock option activity for the years ended December 31, 2000, 1999 and
      1998 is as follows:
<TABLE>
<CAPTION>
                                                                             2000           1999          1998
<S>                                                                        <C>            <C>           <C>
Options outstanding, beginning of year                                      75,000         87,000        22,000

Options granted                                                             65,500             --        75,000
Options cancelled                                                          (75,000)       (12,000)      (10,000)
                                                                           -------        -------       -------
Options outstanding, end of year                                            65,500         75,000        87,000
                                                                           =======        =======       =======
Options exercisable, end of year                                            32,750             --        12,000
                                                                           =======        =======       =======
</TABLE>

     The  outstanding  options  have an  exercise  price of $3.56  per share and
     expire in October 2010.

      The Company granted 50,000 stock options in 1999, separate from the
      Company's Stock Incentive Plan, to a major stockholder in consideration
      for a guarantee of the Company's revolver and mortgage/term note. These
      options are all outstanding and exercisable at December 31, 2000.

     Pro forma  information  regarding  the  Company's  net loss and related per
     share amounts as required by SFAS No. 123 are as follows:

<TABLE>
<CAPTION>
                                                            2000              1999               1998
<S>                                                      <C>               <C>                <C>
   Net loss:
     As reported                                         $ 682,233         $ 1,528,197        $ 3,692,689
     Pro forma                                           $ 754,534         $ 1,514,583        $ 3,806,387

   Basic and diluted loss per share:
    As reported                                          $     .43         $       .97        $      2.39
    Pro forma                                            $     .48         $       .97        $      2.46
</TABLE>

      The weighted average grant-date fair value of options granted in 2000 and
      1998 was $1.10 and $1.52, respectively. The weighted average fair value of
      the options outstanding as of 2000, 1999 and 1998 is estimated as $1.10,
      $1.33 and $1.52, respectively, using the Black-Scholes option pricing
      model with the following weighted average assumptions:

<TABLE>
<CAPTION>
                                                                              2000          1999          1998
<S>                                                                      <C>             <C>            <C>
Expected life                                                            9.0 years       5.5 years      6.5 years
Volatility                                                                   28.70 %        30.63 %       33.18 %
Risk-free interest rate                                                       6.06 %         6.50 %        6.15 %
Dividend yield                                                                   0 %            0 %           0 %


</TABLE>


                                       -15-
<PAGE>


8.    OTHER EXPENSE

      Effective May 1, 2000, the Company's headquarters and distribution
      operation relocated from Dolgeville, New York to the newly acquired
      facilities in Old Town, Maine. Costs incurred in 2000 associated with this
      relocation, including severance, moving expenses and closing facilities,
      totalled approximately $808,000 which are included in selling and
      administrative expenses. In addition, an impairment loss of $208,000 was
      recognized in 2000 (see "Asset Impairments" in Note 1). As of December 31,
      2000, all costs associated with this move have been paid, therefore, no
      liability remains as of December 31, 2000.

      In the first quarter of 1998, the Company hired a new President who, among
      other things, began to assemble a substantially new management team for
      the Company. In the fourth quarter of 1998, the Company's Board of
      Directors, President and the new management team completed and began to
      implement a formal restructuring plan. Based on the restructuring plan,
      the Company ceased its manufacturing operations completely during 1999. As
      a result, the Company's primary business activity, subsequent to closing
      manufacturing operations, has been to outsource entirely the production of
      its footwear and to distribute the footwear to its customers under the
      Company's label and certain private labels. As part of the restructuring,
      the Company incurred severance costs of $311,153 in 1999, of which $67,248
      are included in selling and administrative expenses and $243,905 are
      included in cost of goods sold. Raw material inventory write-offs of
      $589,177 are also included in cost of goods sold in 1999 as part of the
      restructuring. As of December 31, 2000, there was no remaining liability
      for severance costs.

      In 1998, the Company ceased production in two separate facilities owned by
      the Company and substantially vacated these two facilities. A third
      facility owned by the Company ceased production and was vacated during
      1999. Accordingly, the Company has recognized an expense in 1998 for
      impaired assets totaling $572,352 and a liability totaling $153,249
      related to lease commitments for equipment used in these facilities that
      expire at various dates subsequent to their closure dates. These expenses
      are included in selling and administrative expenses in 1998. As of
      December 31, 1999, this liability had a zero balance.

      In addition, in the fourth quarter of 1998 the Company determined that
      certain software that it currently uses would not be year 2000 compliant.
      Accordingly, the Company was required to write-off the net book value of
      the software in 1998 totaling $212,229. This expense is included in
      selling and administrative expenses in 1998.

      The impaired facilities are greater than fifty years old and have been
      used exclusively for footwear production by the Company. In addition,
      these facilities are located in a depressed, rural region of New York
      State where the economy has been contracting in recent years. The prospect
      of a business expanding or relocating to this region given the current
      economic climate is remote. These factors, among others, were considered
      by management in estimating the fair values of these facilities.

9.    COMMITMENTS

      Leases - In 1999 and 1998, the Company leased machinery and equipment
      under noncancelable lease agreements which were classified as operating
      leases for financial reporting purposes. Rental expense was $30,497 in
      1999 and $121,819 in 1998. The leases expired in 2000.

      Letter of Credit - The Company routinely uses letters of credit when
      entering into inventory purchase transactions with foreign vendors. At
      December 31, 2000, these outstanding letters of credit totaled
      approximately $370,000.


                                       -16-


<PAGE>


Item 8.   Changes In and Disagreements with Accountants on Accounting and
          Financial Disclosure.

     None

                                    Part III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act.

     This information is contained in the Definitive Proxy Statement dated
April 5, 2001, which has been filed with the Commission, and is incorporated by
reference in this Form 10-KSB Annual Report.

Item 10.  Executive Compensation.

     This information is contained in the Definitive Proxy Statement dated
April 5, 2001, which has been filed with the Commission, and is incorporated by
reference in this Form 10-KSB Annual Report.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

     This information is contained in the Definitive Proxy Statement dated
April 5, 2001, which has been filed with the Commission, and is incorporated by
reference in this Form 10-KSB Annual Report.

Item 12.  Certain Relationships and Related Transactions.

     This information is contained in the Definitive Proxy Statement dated
April 5, 2001, which has been filed with the Commission, and is incorporated by
reference in this Form 10-KSB Annual Report.

                                     Part IV

Item 13.  Exhibits, List and Reports on Form 8-K.



                                  Page 5 of _
<PAGE>


          (a). Exhibits

               (24)  Power of Attorney

          (b). Reports on Form 8-K.

               There were no reports filed on Form 8-K for the quarter ended
               December 31, 2000. .



                                  Page 6 of _
<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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: March 30, 2001                  By:  /s/ James R. Riedman
                                           -------------------------------------
                                           James R. Riedman,
                                           Chairman and Chief Executive Officer


                                      By:  /s/ Robert Weedon
                                           -------------------------------------
                                           Robert Weedon,
                                           Chief Financial Officer and Treasurer


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in capacities and on the date indicated.

                                    DIRECTORS


/s/       Edward Bloomberg           *     /s/       Steven DePerrior          *
--------------------------------------     -------------------------------------
          Edward Bloomberg                           Steven DePerrior


/s/       Gregory Harden             *     /s/       Gary E/ Pflugfelder       *
--------------------------------------     -------------------------------------
          Gregory Harden                             Gary E. Pflugfelder


/s/       James R. Riedman           *     /s/ Greg A. Tunney
--------------------------------------     -------------------------------------
          James R. Riedman                           Greg A. Tunney


/s/       Wilhelm Pfander            *
--------------------------------------
          Wilhelm Pfander


                           *By:  /s/ James R. Riedman
                                 --------------------------------------
                                 James R. Riedman, as Attorney-in-Fact

DATE: March 30, 2001



                                  Page 7 of _