SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON  D. C.  20549

                          	FORM  10-QSB

   X    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  
  ---   SECURITIES EXCHANGE ACT OF 1934

        For the quarterly period ended September 30, 1998
	
  ---   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  
	SECURITIES EXCHANGE ACT OF 1934

        For the transition period from _____________ to ______________        

                       Commission file number 0 - 24608    
                                              ---------

                              FOTOBALL USA, INC.
        --------------------------------------------------------------
            (Exact name of registrant as specified in its charter)


                Delaware                               33 - 0614889
        --------------------------------------------------------------
          (State or other jurisdiction of          (I.R.S. Employer
           incorporation or organization)       Identification Number)
           

            3738 Ruffin Road, San Diego, California     92123
        --------------------------------------------------------------
        (Address of principal executive offices)     (Zip Code)

                               (619) 467 - 9900
                        -----------------------------
                         (Issuer's telephone number)
	
     Check whether the registrant (1) has 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( )
	
     As of October 31, 1998, the Company had 2,699,242  shares of its common
stock issued and outstanding.

        Transitional Small Business Disclosure Format  Yes ( )  No (X)   















































                                      1<PAGE>
                              FOTOBALL USA, INC.

                                    INDEX
                                                                             
                                                                 Sequential
PART I.     FINANCIAL INFORMATION                                 Page No.
                                                                 ----------
   Item 1.  Financial Statements

            Condensed Balance Sheets as of December 31, 1997
                and September 30, 1998                               3

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

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

            Notes to Condensed Financial Statements                6-9

   Item 2.  Management's Discussion and Analysis or
                Plan of Operation                                10-16

PART II.    OTHER INFORMATION

   Item 6.  Exhibits and Reports on Form 8-K                        17

SIGNATURES                                                          18




              























                                     2<PAGE>
                         PART I. FINANCIAL INFORMATION
                         ITEM 1. FINANCIAL STATEMENTS
                              FOTOBALL USA, INC.
                           CONDENSED BALANCE SHEETS
                                (Unaudited)

                                        December 31, 1997   September 30, 1998
                                       -----------------    ------------------
CURRENT ASSETS                   ASSETS
  Cash and equivalents                     $     764,855         $      21,141
  Accounts receivable less
    allowances of $151,000
    in 1997 and $63,000 in 1998                1,402,607             2,945,997
  Inventories (Note 3)                         2,476,815             3,481,959
  Prepaid expenses and other                     148,855               169,473
  Deferred income taxes                          150,000               288,000
                                           -------------         -------------
        TOTAL CURRENT ASSETS                   4,943,132             6,906,570
                                           -------------         -------------
PROPERTY AND EQUIPMENT, net                    1,217,892             1,103,766
                                           -------------         -------------
OTHER ASSETS
  Deferred income taxes                          301,000                     -
  Deposits and other                             115,382                80,767
                                           -------------         ------------- 
        TOTAL OTHER ASSETS                       416,382                80,767
                                           -------------         -------------
                                           $   6,577,406         $   8,091,103
                                           =============         =============
                     LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Current portion of capital leases        $      90,182        $       96,699
  Accounts payable and accrued expenses          789,388             1,484,359
  Settlement liability                           200,000                50,000
  Revolving credit loan                               --               700,000
                                           -------------         -------------
        TOTAL CURRENT LIABILITIES              1,079,570             2,331,058
CAPITAL LEASES, net of current portion           229,930               177,115
                                           -------------         -------------
        TOTAL LIABILITIES                      1,309,500             2,508,173
                                           -------------         -------------
STOCKHOLDERS' EQUITY 
  Preferred stock, $.01 par value; Authorized
   -1,000,000 shares; issued and outstanding-none
  Common stock, $.01 par value; Authorized
   - 15,000,000 shares; issued and outstanding
   - 2,676,742 shares in 1997 and
     2,699,242 shares in 1998                     26,767                26,992
  Additional paid-in capital                   8,568,494             8,588,519
  Accumulated deficit                         (3,327,355)           (3,032,581)
                                           -------------         -------------
        TOTAL STOCKHOLDERS' EQUITY             5,267,906             5,582,930
                                           -------------         -------------
                                           $   6,577,406         $   8,091,103
                                           =============         =============
              See accompanying notes to condensed financial statements.

                                     3<PAGE>
<TABLE>
                              FOTOBALL USA, INC.
                      CONDENSED STATEMENTS OF OPERATIONS
                                (Unaudited)
<CAPTION>
                                  Three Months Ended         
   Nine Months Ended
                                     September 30,           
      September 30,
                               -------------------------     
-------------------------
                                  1997          1998         
    1997          1998
                               -----------   -----------     
-----------  ------------
<S>                            <C>           <C>             
<C>          <C>         
SALES                          $ 2,625,750   $ 4,675,501     
$ 9,430,585  $ 12,462,847
COST OF SALES                    1,763,866     2,796,056     
  6,075,789     7,772,688
                               -----------   -----------     
-----------  ------------
     GROSS PROFIT                  861,884     1,879,445     
  3,354,796     4,690,159
                               -----------   -----------     
-----------  ------------
OPERATING EXPENSES
   Royalties                       237,352       417,152      
    563,718       919,505
   Marketing                       591,372       559,861     
  1,613,646     1,428,932
   General and administrative      642,131       555,596     
  1,695,315     1,569,477
   Depreciation and amortization    67,437        80,629       
    179,855       235,821
   Settlement cost                 210,000             -     
    210,000             -
                               -----------   -----------     
-----------  ------------
     TOTAL OPERATING EXPENSES    1,748,292     1,613,238     
  4,262,534     4,153,735
                               -----------   -----------     
-----------  ------------
     INCOME (LOSS) BEFORE OTHER
     (INCOME) EXPENSE AND
     INCOME TAXES                 (886,408)      266,207     
   (907,738)      536,424
                               -----------   -----------     
-----------  ------------
OTHER (INCOME) EXPENSE
   Interest expense                  8,993        28,101      
     29,347        55,536
   Interest income                 (25,209)         (809)    
    (80,171)       (9,088)
                               -----------   -----------     
-----------  ------------
     TOTAL OTHER INCOME            (16,216)       27,292     
    (50,824)       46,448
                               -----------   -----------     
-----------  ------------
     INCOME (LOSS) BEFORE 
      INCOME TAX                  (870,192)      238,915      
   (856,914)      489,976
     INCOME TAX EXPENSE (BENEFIT)   (5,300)       95,200     
          -       195,200
                               -----------   -----------     
-----------  ------------
     NET INCOME (LOSS)         $  (864,892)  $   143,715     
$  (856,914) $    294,776
                               ===========   ===========     
===========  ============
WEIGHTED AVERAGE NUMBER OF  
  COMMON SHARES OUTSTANDING
   BASIC                         2,676,742     2,694,242     
  2,676,742     2,692,575
                               ===========   ===========     
===========  ============

   DILUTED                       2,676,742     2,823,065     
  2,676,742     2,772,654
                               ===========   ===========     
===========  ============
NET INCOME (LOSS) PER 
  COMMON SHARE
   BASIC                       $      (.32)  $       .05     
$      (.32) $        .11
                               ===========   ===========     
===========  ============
   DILUTED                     $      (.32)  $       .05     
$      (.32) $        .11
                               ===========   ===========     
===========  ============



















            See accompanying notes to condensed financial statements.

                                     4<PAGE>


                              FOTOBALL USA, INC.
                      CONDENSED STATEMENTS OF CASH FLOWS
                                (Unaudited)

                                                       Nine Months Ended
                                                          September 30,        
                                                    -------------------------
                                                        1997          1998
                                                    -----------    ----------
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income (loss)                                  $  (856,914)   $  294,776
 Adjustments to reconcile net income
  (loss) to net cash provided
  by (used in) operating activities:
   Depreciation and amortization                        206,658       248,237
   Amortization of stock compensation expense                 -         7,425
   Changes in operating assets and liabilities:
     Accounts receivable                              5,956,546    (1,543,390)
     Inventories                                     (1,407,391)   (1,005,144)
     Prepaid expenses and other                         (29,274)      (20,618)
     Deferred income taxes                              (32,200)      163,000
     Accounts payable and accrued expenses           (1,054,576)      544,971
     Income taxes payable                              (119,200)            -
                                                    -----------    ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES   2,663,649    (1,310,743)
                                                    -----------    ----------
CASH FLOWS FROM INVESTING ACTIVITIES
 Purchase of property and equipment                    (314,139)     (105,963)
 Increase in long term deposits                               -        34,615
                                                    -----------    ----------
NET CASH USED IN INVESTING ACTIVITIES                  (314,139)      (71,348)
                                                    -----------    ----------
CASH FLOWS FROM FINANCING ACTIVITIES
 Net additions (reductions) in short-term
  credit facilities                                  (1,825,000)      700,000
 Proceeds from exercise of options and warrants               -        12,825
 Repayment of capital lease obligations                 (52,642)      (74,448)
                                                    -----------    ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES  (1,877,642)      638,377
                                                    -----------    ----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS         471,868      (743,714)
CASH AND EQUIVALENTS, Beginning of period               981,554       764,855
                                                    -----------    ----------
CASH AND EQUIVALENTS, End of period                 $ 1,453,422    $   21,141
                                                    ===========    ==========







                                          
            See accompanying notes to condensed financial statements.

                                     5<PAGE>

                              FOTOBALL USA, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
         THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
         
1.  CONDENSED FINANCIAL STATEMENTS

The condensed balance sheet as of September 30, 1998, the condensed 
statements of operations for the three months and nine months ended 
September 30, 1997 and 1998, and the condensed statements of cash flows 
for the nine months ended September 30, 1997 and 1998 have been 
prepared by the Company without audit.  In the opinion of management, all 
adjustments (which include only normal recurring adjustments) necessary 
to present fairly the financial position, results of operations and cash
flows for all periods presented have been made.

Certain information and footnote disclosures normally included in financial 
statements prepared in accordance with generally accepted accounting 
principles have been omitted, pursuant to the rules and regulations of the 
Securities and Exchange Commission.  It is suggested that these condensed 
financial statements be read in conjunction with the financial statements 
and notes thereto included in the Company's Annual Report on Form 10-
KSB for the fiscal year ended December 31, 1997.  The results of operations 
for the three months and nine months ended September 30, 1998 are not 
necessarily indicative of the results of operations to be expected for the
full year ending December 31, 1998.

2.  DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES

Significant Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires 
management to make estimates and assumptions that affect the reported 
amounts of assets and liabilities and disclosure of contingent assets and 
liabilities as of the date of the financial statements and the reported
amounts of revenue and expenses during the period.  Significant estimates
have been made by management with respect to the realizability of the
Company's deferred tax assets, the possible outcome of threatened litigation
and the provision for discontinued and excess inventories.  Actual results
could differ from these estimates making it reasonably possible that a change
in these estimates could occur in the near term.

Dependence Upon Licensing Arrangements - The Company's business is
based primarily upon its use of the insignia, logos, names, colors, likenesses 
and other identifying marks and images borne by many of its products 
pursuant to license arrangements with Professional Baseball, NFL and, to 
a lesser extent, Colleges. The Company's licensing arrangements expire at 
various times through March 31, 2000.  The following table summarizes, 
in descending order of 1997 revenue contribution, the Company's 
significant license agreements and their terms:

       Licensor         Product      Term                    Expiration Date
       --------         --------     -----                   ---------------
       MLBP             Baseball     3 years                 December 31, 1999
       MLBPA            Baseball     1 year (2 year option)  December 31, 1999
       NFL Team Logo    Football     2 years                 March 31, 2000

                                     6<PAGE>

                              FOTOBALL USA, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
         THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
                                (continued)

The Company believes that its relationships with these licensors are
satisfactory and anticipates that each of the license agreements will be
renewed on acceptable terms and conditions.  The non-renewal or termination
of one or more of the Company's licenses, particularly with Professional
Baseball or the NFL, could have a material adverse effect on the Company's
business.

Dependence on Promotions Business - The Company's promotions business depends
primarily upon a series of one-time projects with its customers. Although the
Company has had repeat business from certain promotions customers, there can
be no assurance that the Company will be able to continue its relationships
with its promotions customers or attract new promotions customers to generate
sufficient revenues to operate profitably.  During the year ended December 31,
1997, 33% of the Company's sales was derived from promotions, of which one
customer accounted for aggregate sales of $2,438,000, or 20% of total sales.
During the nine month period ended September 30, 1998, 21% of the Company's
sales were derived from sales of the Company's promotional products, with no
one customer accounting for sales greater than 10%.

Variability of Gross Margins - Historically, the Company has realized higher
gross margins on its retail sales as compared to promotional sales.  In 1996,
the Company realized gross margins of 29% as a result of $14,000,000 of low
margin toy promotion sales.  In 1997, the Company realized gross margins of
26% as a result of a $1,175,000 provision for discontinued and excess
inventory.  Excluding this operating charge, gross margins were 36% in 1997,
which are consistent with the margins realized on the Company's sports-related
sales in 1996.  The Company's gross margins fluctuate, particularly between
quarters, based in part on the concentration of promotions and retail sales
during the reporting period.  The type of product sold, the size of the
promotion and extent of competition also create variability in realized gross
margins.

Variability of Operating Results; Seasonality; Dependence Upon Baseball-Related
Sales - The Company has historically experienced significant quarter-to-quarter
variability in its sales and net income.  This was due in part to the
seasonality of its licensed sports product business, a reliance upon
significant promotional programs, combined with a significant concentration of
its business from baseball.  The Company anticipates that the expected
increasing contribution of retail sales in future periods should mitigate
this quarter-to-quarter variability. Historically, the Company has derived a
significant amount of sales from baseball-related products, representing 35%
and 47% of the Company's sales during the years ended December 31, 1996 and
1997, respectively. As such, its sales tended to be concentrated during the
second and third quarters which coincided with the baseball season.
Baseball-related sales as a percentage of total sales decreased significantly
in 1996 due to the $14,000,000 of toy car sales realized in 1996.  Excluding
the toy car sales, baseball-related sales accounted for 76% of the Company's
product sales in 1996.  The Company believes that the decrease in the



                                     7<PAGE>

                              FOTOBALL USA, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
         THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
                                (continued)

dependence upon baseball-related sales during the past several years will
continue in the future, with the introduction of new product lines including
new vulcanized rubber sports balls. Baseball-related sales, however, are
expected to remain a significant percentage of total sales for the foreseeable
future.  The second factor which significantly contributes to the variability
of the Company's operations is its dependence on promotions business as more
fully explained above.

Dependence Upon Key Personnel - The success of the Company is largely
dependent on the personal efforts of Michael Favish, its President and Chief 
Executive Officer.  Mr. Favish has entered into a five-year employment
agreement with the Company, commencing on August 11, 1994, which, among other
things, precludes Mr. Favish from competing with the Company for a period of
two years following termination of his employment with the Company.  The loss
of the services of Mr. Favish would have a material adverse effect on the
Company's business and prospects.  The Company maintains "key man" life
insurance on the life of Michael Favish in the amount of $1,000,000.

Dependence on Suppliers - In 1997, the Company purchased approximately 97% of
its raw material, consisting primarily of synthetic baseballs, footballs,
basketballs, hockey pucks and Fototires, from six companies located in China,
with one manufacturer accounting for 52% of total raw material purchased.
China currently holds most favored nation ("MFN") trading status with the
United States. Any conditions imposed by the President of the United States
and any legislation in the United States revoking or placing further
conditions on China's MFN trading status could have a material adverse effect
on the cost of all of the Company's products because products originating
from China could be subjected to substantially higher rates of duty.

3.  INVENTORIES

Inventories net of reserves are valued at the lower of cost or market.  Cost
is determined on the first-in first-out (FIFO) method.  Inventories consist
of the following:

                           December 31, 1997        September 30, 1998
                           -----------------        ------------------
Finished goods                   $   808,408              $  1,771,878
Raw material                       1,668,407                 1,710,081
                                 -----------              ------------
Total inventory                  $ 2,476,815              $  3,481,959
                                 ===========              ============








                                     8<PAGE>

                              FOTOBALL USA, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
         THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
                                (continued)

4.  THREATENED LITIGATION 

In October 1997, Chevron U.S.A., Inc. ("Chevron") filed and subsequently
dismissed without prejudice a claim for breach of contract against the
Company arising from the 1996 toy car promotions.  Discussions between the
Company and Chevron to resolve the matter are on-going. The Company vigorously
denies any wrongdoing and believes it has substantial meritorious defenses if
the matter is pursued by Chevron.  While the effect, if any, on future
financial results is not subject to reasonable estimates because considerable
uncertainty exists, any unfavorable outcome could materially affect the
financial position of the Company.








































                                     9<PAGE>

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
                             OR PLAN OF OPERATION

Results of Operations

</TABLE>
<TABLE>
     The following table sets forth certain (unaudited) operating data (in 
dollars and as a percentage of the Company's sales) for the periods presented:
<CAPTION>
                             Three Months Ended              
        Nine Months Ended
                                 September 30,               
           September 30,
                   ---------------------------------------   
-------------------------------------
                          1997                 1998          
     1997                  1998
                   ------------------    -----------------   
------------------    ------------------
<S>                <C>           <C>     <C>          <C>    
<C>          <C>    
Sales              $  2,625,750  100%    $ 4,675,501  100%   
$  9,430,585  100%    $ 12,462,847  100%
Cost of Sales         1,763,866   67       2,796,056   60       
   6,075,789   64        7,772,688   62
Operating Expenses    1,748,292   67       1,613,238   35     
   4,262,534   45        4,153,735   33
Operating Income 
 (Loss)                (886,408) (34)        266,207    6     
    (907,738) (10)         536,424    4
Interest Expense          8,993    1          28,101    1       
      29,347    1           55,536    1
Interest Income          25,209    1             809    1       
      80,171    1            9,088    1
Income (Loss)
 Before Income Tax     (870,192) (33)        238,915    5     
    (856,914)  (9)         489,976    4
Income Tax Expense 
 (Benefit)               (5,300)  (1)         95,200    2    
           -    -          195,200    2
Net Income (Loss)  $   (864,892) (33)%   $   143,715    3%   
$   (856,914)  (9)%   $    294,776    2%


Three Months Ended September 30, 1997 and 1998:

Sales:

    Sales were $4,676,000 for the three months ended September 30, 1998,
an increase of 78% from sales of $2,626,000 for the three months ended 
September 30, 1997.  For the three months ended September 30, 1998, 
promotional sales were $584,000, a decrease of 17% from promotional sales of 
$702,000, for the three months ended September 30, 1997.  Retail sales were 




                                   10<PAGE>

  
$4,092,000 for the three months ended September 30, 1998, an increase of 
113% from retail sales of $1,924,000 for the three months ended September 30, 
1997. Sales increases were realized primarily from the Company's baseball, 
football and basketball-related sales.  Baseball-related sales increased by 
$927,000, or 90%, due to several factors: the Company's expanding retail 
distribution, significantly greater consumer interest in Major League Baseball 
("MLB") and MLB licensed merchandise combined with a significant sales 
contribution surrounding the breaking of Roger Maris' home run record.  
Football-related sales increased by $1,004,000, or 238%, due primarily to
strong demand for the Company's new full-size line of NFL and college
footballs, combined with sales from its college rubber football product line.
Basketball-related sales increased by $182,000, or 92%, due to the new rubber
product line for colleges.  The Company anticipates that given its current
sales to date and current retail and promotional sales backlog, the Company's
fourth quarter 1998 sales and earnings will be similar to the third quarter
of 1998.

Gross Profit:

    Gross profit was $1,879,000 for the three months ended September 30,
1998, an increase of 118% from gross profit of $862,000 for the three months 
ended September 30, 1997.  Gross profit increased on an absolute basis as a 
result of the 78% increase in sales.  Gross margins, as a percentage of sales, 
increased from 33% to 40% for the three months ended September 30, 1997 and
1998, respectively.  This increase was due to a significantly greater
percentage of aggregate sales being derived from higher margin retail as
compared to generally lower promotional sales.  The Company expects the fourth
quarter of 1998 gross margin percentage to be similar to the third quarter of
1998.  As previously noted, the Company's gross margins fluctuate,
particularly between quarters, based on several factors including sales and
product mix (see Note 2 of the "Notes to Condensed Financial Statements").

Operating Expense:

    Operating expenses were $1,613,000, or 34% of sales, for the three
months ended September 30, 1998, a decrease of 8% from operating expenses 
of $1,748,000, or 67% of sales, for the three months ended September 30, 1997. 
Operating expenses decreased in absolute terms in 1998 due to a settlement 
charge of $210,000 recorded in the third quarter of 1997.  Excluding this 
charge, operating expenses increased moderately between periods due to a 
significant increase in royalty expense offset by decreases in marketing and 
general and administrative expenses, as further noted below.

    Royalties expense was $417,000 for the three months ended September
30, 1998, an increase of 76% from royalties expense of $237,000 for the three 
months ended September 30, 1997.  Royalties expense as a percentage of sales 
remained unchanged at 9% of sales for the three months ended September 30, 
1998 and 1997, respectively, due to similar percentages of retail sales to
total aggregate sales in both periods.  Royalties expense in absolute terms
increased significantly between periods due to significantly higher sales.
Retail sales typically require a royalty of 10-18% as compared to 10% for
promotional sales.


 
                                    11<PAGE>
 
    Marketing expenses were $560,000 for the three months ended 
September 30, 1998, a decrease of 5% from marketing expenses of $591,000 for 
the three months ended September 30, 1997.  Marketing expenses as a 
percentage of sales decreased to 12% of sales for the three months ended 
September 30, 1998 from 23% of sales for the three months ended September 
30, 1997, due to lower expenses combined with higher sales volume.  Marketing 
expenses decreased by $30,000 from 1997 to 1998 due to lower sales wages, 
advertising and travel costs reflecting the Company's continuing efforts to 
reduce its cost structure and increase productivity.

    General and administrative expenses were $556,000 for the three
months ended September 30, 1998, a decrease of 14% from general and 
administrative expenses of $642,000 for the three months ended September 30, 
1997. This decrease is primarily the result of significantly lower legal and 
professional fees offset in part by higher administrative wages and facility
costs.

Other Income (Expense):

    Interest expense was $28,000 for the three months ended
September 30, 1998, an increase of 211% from interest expense of $9,000 
for the three months ended September 30, 1997.  The Company expects 
interest expense to increase moderately in future periods reflecting the 
Company's higher borrowings under its credit line facility combined with an
increase in capital leases in 1999, as more fully discussed in "Liquidity and
Capital Resources". Total capitalized equipment and machinery leases were 
$274,000 at September 30, 1998, a decrease of $69,000 from total capitalized
equipment and machinery leases of $343,000 at September 30, 1997.

    Interest income was insignificant for the three months ended
September 30, 1998, as compared to $25,000 for the three months ended 
September 30, 1997, reflecting the significantly lower cash balances 
available for investment between periods.

Nine Months Ended September 30, 1997 and 1998:

Sales:
    Sales were $12,463,000 for the nine months ended September 30, 
1998, an increase of 32% from sales of $9,431,000 for the nine months 
ended September 30, 1997.  The $3,032,000 increase in sales was due to a 
$3,836,000 increase in retail sales offset in part by a $804,000 decrease in 
promotion sales. For the nine months ended September 30, 1998, 
promotional sales were $2,646,000, as compared to promotional sales of 
$3,450,000 in 1997.  The decrease in promotion sales in 1998 was due to 
a multi-regional hockey promotion in 1997 which was non-recurring.  The 
$1,700,000 reduction in promotion sales resulting from this non-recurring 
program was partially offset in 1998 by increases in baseball, football and 
soccer-related promotion sales.  Retail sales accounted for all of the
increase in aggregate sales during the period, and is expected to continue
to account in the future for a greater percentage of aggregate sales.  Retail
sales were led by increases in baseball, football and basketball of
$1,016,000, $1,214,000 and $1,412,000, respectively.


                                     12<PAGE>
Gross Profit:

    Gross profit was $4,690,000 for the nine months ended September
30, 1998, an increase of 40% from gross profit of $3,355,000 for the nine 
months ended September 30, 1997.  As previously noted, gross profit 
increased on an absolute basis due to increased sales. Gross margins as a 
percentage of sales increased from 36% to 38% for the nine months ended 
September 30, 1997 and 1998, respectively, reflecting the greater 
concentration of higher margin retail sales during the period.

Operating Expenses:

    Operating expenses were $4,154,000 for the nine months ended
September 30, 1998, a decrease of 3% from operating expenses of 
$4,263,000 for the nine months ended September 30, 1997. Operating 
expenses as a percentage of sales decreased to 33% of sales for the nine 
months ended September 30, 1998 from 45% of sales for the nine months 
ended September 30, 1997, as a result of the Company's fixed operating 
costs being allocated over significantly higher sales volumes.  

    Royalties expense was $920,000 for the nine months ended
September 30, 1998, an increase of 63% from royalties expense of 
$564,000 for the nine months ended September 30, 1997.  The increase in 
royalties expense during this period was the result of significantly higher 
retail sales as compared to the corresponding period in 1997.  Royalties 
expense as a percentage of sales increased to 7% of sales for the nine 
months ended September 30, 1998 from 6% of sales for the nine months 
ended September 30, 1997. The Company anticipates that royalties expense 
as a percentage of sales in the fourth quarter of 1998, as well as in 1999 
should be moderately higher than the percentage realized in the third quarter
of 1998 due to expected greater sales from higher royalty-bearing products such
as the NFL full-size football and "Rugrats" branded sports ball. 

    Marketing expenses were $1,429,000 for the nine months ended
September 30, 1998, a decrease of 11% from marketing expenses of 
$1,614,000 for the nine months ended September 30, 1997.  Marketing 
expenses as a percentage of sales decreased to 11% of sales for the nine 
months ended September 30, 1998 from 17% of sales for the nine months 
ended September 30 1997, as a result of the non-variable component of 
marketing expenses, such as wages and exhibiting costs, being allocated 
over substantially higher sales volumes.  Marketing expenses on an absolute
basis decreased by $185,000 between periods reflecting the Company's 
efforts to reduce its operating costs through the elimination of less 
productive sales positions and the reduction in certain discretionary 
expenses such as travel costs.

    General and administrative expenses were $1,569,000 for the nine
months ended September 30, 1998, a decrease of 7% from general and 
administrative expenses of $1,695,000 for the nine months ended 
September 30, 1997. This decrease is a result of several factors, including 
decreased legal and professional service costs offset in part by higher 
facility and personnel expenses.

Other Income (Expense):

    Interest expense was $56,000 for the nine months ended September

                                    13<PAGE>

30, 1998, an increase of 93% from interest expense of $29,000 for the nine 
months ended September 30, 1997. The increase of $27,000 in interest 
expense reflects the increase in the amount of the Company's credit line 
usage during the period.

    Interest income was $9,000 for the nine months ended September
30, 1998, as compared to $80,000 for the nine months ended September 30, 
1997. This decrease is due to the Company's average cash balances 
available for investment being significantly lower during the nine months 
ended September 30, 1998 as compared to the corresponding prior year 
period, as more fully explained below.
Liquidity and Capital Resources

Liquidity and Capital Resources

    The Company's net working capital increased by approximately
$713,000 from December 31, 1997 to September 30, 1998, to a net working 
capital surplus of $4,576,000 at September 30, 1998 from a net working 
capital surplus of $3,863,000 at December 31, 1997.  Cash flow provided 
by operating activities decreased by $3,975,000 from cash used in operating 
activities of  $1,311,000 for the nine months ended September 30, 1998, to 
cash provided by operating activities of $2,664,000 for the nine months 
ended September 30, 1997. The decrease in cash provided by operating 
activities was principally due to significant increases in both accounts 
receivable and inventory.  The Company's inventories have increased 
significantly during the nine months ended September 30, 1998, increasing 
to $3,482,000 from $2,477,000 at December 31, 1997.  This increase is due 
to the increasing contribution of retail sales, which require certain minimum 
inventory levels to properly service retail customer demand. Additionally, 
the inventory balance at September 30, 1998 is higher in order to meet a 
significant retail and promotional sales backlog which will be shipping in 
the fourth quarter of 1998.

    Cash and equivalents aggregated $21,000 at September 30, 1998,
a decrease of $744,000 from cash and equivalents of $765,000 at December 
31, 1997.  This decrease was due to the use of cash to finance increasing 
sales which has resulted in a correspondingly higher accounts receivable 
balance, combined with higher inventory levels to meet increasing retail 
demand, as previously noted.

    Accounts receivable were $2,946,000 at September 30, 1998, an 
increase of $1,543,000 from accounts receivable of $1,403,000 at 
December 31, 1997.  This increase was due to significantly higher sales for 
the quarterly period ended September 30, 1998 as compared to the quarterly 
period ended December 31, 1997.  Contributing also to the increase is a 
moderate increase in accounts  receivable  days sales outstanding. This is 
due to a greater amount of sales being derived from national retail accounts, 
which typically have payment terms somewhat longer than the Company's 
traditional terms of 30 days.  Given the Company's expectation that a 
greater percentage of its future sales will be derived from these national 
retail customers, the Company expects a continued moderate increase in its 
days sales outstanding in the near term.  

    At September 30, 1998, the Company has commitments for
minimum guaranteed royalties under licensing agreements totaling 
$589,735 in the aggregate through 2000, of which $65,735 is due at various 
times in 1998.  Given the Company's expectation that it will realize 

                                     14<PAGE>
 
operating profits during the fourth quarter of 1998 and future periods, these 
guaranteed royalties are anticipated to be funded from operations.

    In December 1995, the Company entered into a one year credit
agreement with Scripps Bank. This revolving line of credit facility (the
"credit line") in the amount of $1,000,000 is collateralized by assets of the
Company and actual borrowings are limited to available collateral, as defined
in the agreement.  Borrowings under the line of credit bear interest at the
bank's prime rate plus .75%.  The credit line contains financial covenants
requiring the Company to maintain minimum net worth levels, minimum working
capital and debt to equity ratios.  In November 1996, the credit line was
increased to $2,000,000 and was extended to April 15, 1998, with the same
terms.  In February 1998, Scripps Bank renewed the credit line in the amount
of $1,500,000 expiring on October 15, 1998.  The bank also waived the net
worth covenant at December 31, 1997 and reduced the working capital
requirements and modified the borrowing base formula on the new credit line.
In August 1998, the bank increased the credit line to $2,000,000 and extended
the maturity to May 15, 1999. There were $700,000 in borrowings under the
credit line at September 30, 1998.  The Company is evaluating its credit
requirements for 1999 based on its sales projections for the 1999 fiscal year.
Discussions will be held with Scripps Bank in the near future regarding the
renewal and the size of the credit facility needed to meet the Company's
credit requirements. There can be no assurance that the Company will receive
an increase in the size of or modification to the terms of the credit line
which are acceptable to the Company.

    Management believes that the Company's existing cash position,
credit facilities, combined with internally generated cash flows, will be 
adequate to support the Company's liquidity and capital needs at least
through 1999.

    The Company has prepared a plan to become Year 2000 compliant.   Pursuant
to the Company's Year 2000 plan, the Company is currently evaluating its
information technology ("IT") and non-IT computerized systems to assure that
the transition to a Year 2000 compliant system will not disrupt the Company's
operations.  This evaluation should be completed in the fourth quarter of
1998.  The Company is currently in the process of upgrading its accounting and
manufacturing software systems.  The Company expects that the new systems
should be Year 2000 compliant.  Given that such upgrade is expected to be
completed in the first quarter of 1999, the Company has not prepared a
contingency plan and does not currently believe that a contingency plan is
necessary.  The costs of achieving Year 2000 compliance are not expected to
have a material impact on the Company's business, operations or its financial
condition.

    The Company is also evaluating the systems of its key customers
and suppliers to ensure that these companies are Year 2000 compliant.  The 
cost of this evaluation is expected to be nominal.  In the event that its
current suppliers are either unable to certify that they will be Year 2000
compliant by early 1999 or unable to give the Company reasonable assurance
that Year 2000 issues will have no material adverse impact on their
operations, then the Company will review its alternatives with respect to
other suppliers.  There can be no assurance that the Company will be able to


                                     15<PAGE>

find suppliers that are acceptable to the Company.  In the event that its key
customers are unable to certify that they will be Year 2000 compliant by early
1999, the Company will be assessing the accounts receivable collection risk of
such key customers. 


Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995:

    This report contains "forward-looking statements" within the meaning 
of the federal securities laws. These forward-looking statements include, 
among others, statements concerning the Company's outlook for the fourth 
quarter of 1998 and for the 1999 fiscal year, its ability to realize similar 
profitability in the fourth quarter of 1998 as compared to the third quarter
of 1998, overall sales trends, gross margin trends, operating cost trends and
cost reduction strategies and their results, the Company's expectations as to
funding its capital expenditures and operations during 1999, and other 
statements of expectations, beliefs, future plans and strategies, anticipated 
events or trends, and similar expressions concerning matters that are not 
historical facts.  The forward-looking statements in this report and those 
included in the Annual Report on Form 10-KSB for the fiscal year ended 
December 31, 1997 are subject to risks and uncertainties that could cause 
actual results to differ materially from those expressed in or implied by the 
statements.































                                   16<PAGE>

                         PART II.  OTHER INFORMATION

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

         (a)    Exhibits
                    27     Financial Data Schedule

         (b)    Reports on Form 8-K for the three months ended
                 September 30, 1998 - None 














































                                     17<PAGE>

                                   SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.




                                                  FOTOBALL USA, INC.
                                            -----------------------------
                                                    (Registant)

Dated: November 13, 1998               BY:  /s/ Michael Favish
                                            -----------------------------
                                            Michael Favish
                                            President and Chief Executive
                                            Officer
                                            (Duly Authorized Officer)



Dated: November 13, 1998               BY:  /s/ David G. Forster
                                            -----------------------------
                       	                    David G. Forster
                                            Executive Vice President-
                                            Finance,  Treasurer and Chief
                                            Financial Officer
                                            (Principal Accounting Officer)






















                                       
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