<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-Q

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

       For the quarterly period ended September 30, 2001

[ ]    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 small business issuer as specified in its charter)

           Delaware                                  33 - 0614889
--------------------------------------------------------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)


                   6740 Cobra Way, San Diego, California 92121
                   -------------------------------------------
               (Address of principal executive offices) (Zip Code)


                                (858) 909 - 9900
                           ---------------------------
                           (Issuer's telephone number)


     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____

     As of October 31, 2001, the Company had 3,580,033 shares of its common
stock issued and outstanding.


<PAGE>

                               FOTOBALL USA, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                      Page No.
                                                                                      --------
<S>                                                                                 <C>
PART I.  FINANCIAL INFORMATION

     Item 1.   Financial Statements

               Condensed Balance Sheets as of September 30, 2001 (Unaudited)
                 and December 31, 2000                                                    3

               Condensed Statements of Operations for the three and nine months
                 ended September 30, 2001 and 2000 (Unaudited)                            4

               Condensed Statements of Cash Flows for the nine months
                 ended September 30, 2001 and 2000 (Unaudited)                            5

               Notes to Condensed Financial Statements (Unaudited)                    6 - 8

     Item 2.   Management's Discussion and Analysis or
                 Plan of Operations                                                  9 - 14

PART II. OTHER INFORMATION

     Item 6.      Exhibits and Reports on Form 8-K                                       15

SIGNATURES                                                                               16
</TABLE>

<PAGE>

                          PART I FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS

                               FOTOBALL USA, INC.
                                 BALANCE SHEETS
                    SEPTEMBER 30, 2001 AND DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                                                   September 30,     December 31,
                                                                                       2001             2000
                                                                                    (Unaudited)
                                                                                  --------------    --------------
<S>                                                                               <C>               <C>
                                     ASSETS
Current assets
     Cash and equivalents                                                         $    1,469,191    $    2,921,358
     Accounts receivable less uncollectible allowances of
         $181,799 in 2001 and $163,188 in 2000                                         5,992,644         3,277,700
     Other receivables                                                                   340,681           298,559
     Inventories                                                                       4,049,637         4,033,094
     Prepaid expenses and other                                                          509,150           567,275
     Deferred income taxes                                                               729,000           729,000
                                                                                  --------------    --------------
                  Total current assets                                                13,090,303        11,826,986
                                                                                  --------------    --------------

Property and equipment, net                                                            2,240,611         2,229,133
                                                                                  --------------    --------------

Other assets
     Deposits and other                                                                  583,995           752,767
                                                                                  --------------    --------------
                  Total other assets                                                     583,995           752,767
                                                                                  --------------    --------------
                                                                                  $   15,914,909    $   14,808,886
                                                                                  ==============    ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
     Current portion of long term debt                                            $      736,877    $      178,309
     Current portion of capital leases                                                    98,474           103,494
     Accounts payable and accrued expenses                                             2,111,458         1,647,828
                                                                                  --------------    --------------
                  Total current liabilities                                            2,946,809         1,929,631

Long term liabilities
     Long term debt, net of current portion                                            1,113,280           440,350
     Capital leases, net of current portion                                              162,671           222,498
     Deferred rent                                                                       237,141           234,884
     Deferred income taxes                                                               175,000           175,000
                                                                                  --------------    --------------
                  Total long term liabilities                                          1,688,092         1,072,732
                                                                                  --------------    --------------
                  Total liabilities                                                    4,634,901         3,002,363
                                                                                  --------------    --------------

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 - 3,578,033 shares in 2001                                35,797            35,790
     Additional paid-in capital                                                       11,679,776        11,674,877
     Retained earnings/(Accumulated deficit)                                            (435,565)           95,856
                                                                                  --------------    --------------
                  Total stockholders' equity                                          11,280,008        11,806,523
                                                                                  --------------    --------------
                                                                                  $   15,914,909    $   14,808,886
                                                                                  ==============    ==============
</TABLE>

            See accompanying Notes to Condensed Financial Statements

                                  Page 3 of 16

<PAGE>

                               FOTOBALL USA, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED             NINE MONTHS ENDED
                                                                SEPTEMBER 30,                  SEPTEMBER 30,
                                                        ------------------------------------------------------------
                                                            2001             2000            2001            2000
                                                        ------------------------------------------------------------
<S>                                                     <C>             <C>             <C>             <C>
Net sales                                               $ 10,817,997    $  7,097,750    $ 23,804,658    $ 20,108,026
Cost of sales                                              6,704,258       4,538,861      15,454,476      12,743,238
                                                        ------------------------------------------------------------
     Gross profit                                          4,113,739       2,558,889       8,350,182       7,364,788
                                                        ------------------------------------------------------------
Operating expenses
     Royalties                                               797,916         605,354       1,809,994       1,474,027
     Marketing                                             1,112,153         743,688       3,058,955       2,312,144
     General and administrative                            1,457,629         984,934       3,867,671       2,514,972
     Depreciation and amortization                           158,219         113,227         457,720         325,737
     Loss from the sale of equipment                            --           125,518            --           125,518
                                                        ------------------------------------------------------------
                  Total operating expense                  3,525,917       2,572,721       9,194,340       6,752,398
                                                        ------------------------------------------------------------
                  Income (Loss) from operations              587,822         (13,832)       (844,158)        612,390
                                                        ------------------------------------------------------------
Other income (expense)
     Interest expense                                        (46,985)        (11,486)       (126,901)        (29,176)
     Interest income                                          17,785          27,017          85,355         102,496
                                                        ------------------------------------------------------------
                  Total other income (expense)               (29,200)         15,531         (41,546)         73,320
                                                        ------------------------------------------------------------
Income (Loss) before income tax                              558,622           1,699        (885,704)        685,710
     Income tax expense (benefit)                             25,225             680        (354,282)        274,284
                                                        ------------------------------------------------------------
Net income (loss)                                       $    533,397    $      1,019    $ (531,422) $        411,425
                                                        ============================================================

Weighted average number of common shares outstanding:
                  Basic                                    3,579,699       3,578,616       3,579,347       3,566,536
                                                        ============================================================
                  Diluted                                  3,723,358       3,715,669       3,579,347       3,744,000
                                                        ============================================================
Net income (loss) per common share:
                  Basic                                 $        .15    $        .00    $       (.15)   $        .11
                                                        ============================================================
                  Diluted                               $        .14    $        .00    $       (.15)   $        .11
                                                        ============================================================
</TABLE>

            See accompanying Notes to Condensed Financial Statements

                                  Page 4 of 16

<PAGE>

                               FOTOBALL USA, INC.
                            STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                     2001              2000
                                                                               --------------    --------------
<S>                                                                            <C>               <C>
Cash flows from operating activities
     Net income (loss)                                                         $     (531,422)   $      411,425
     Adjustments to reconcile net income to net cash provided by (used in)
         operating activities:
         Depreciation and amortization of property and equipment                      472,308           325,736
         Amortization of stock compensation expense                                     3,780            11,992
         Loss on sale of equipment                                                                      125,518
         Provision for doubtful accounts                                              248,300               100
Changes in operating assets and liabilities:
         Accounts receivable                                                       (2,963,244)         (627,211)
         Other receivables                                                            (42,122)         (620,859)
         Inventories                                                                  (16,543)         (503,526)
         Prepaid expenses and other                                                    58,125          (265,827)
         Deferred income taxes                                                           --                --
         Accounts payable and accrued expenses                                        463,630           452,936
         Income taxes payable                                                            --            (121,068)
         Deferred rent                                                                 (5,053)          157,552
         Deferred rent- Amortization                                                    7,309              --
                                                                               --------------    --------------
Net cash used in operating activities                                              (2,304,932)         (653,232)
                                                                               --------------    --------------

Cash flows from investing activities
     Purchase of property and equipment                                              (408,785)       (1,602,684)
     Decrease (Increase) in long-term deposits                                         93,772          (222,782)
                                                                               --------------    --------------
Net cash used in investing activities                                                (315,013)       (1,825,466)
                                                                               --------------    --------------

Cash flows from financing activities
     Proceeds from capitalized leases                                                  15,419            80,737
     Proceeds from term loans                                                       1,500,000           250,000
     Payments of capitalized leases                                                   (80,266)          (58,561)
     Payments of term loans                                                          (268,501)             --
     Proceeds from exercise of stock options                                            1,126            22,758
                                                                               --------------    --------------
Net cash provided (used in) by financing activities                                 1,167,778           294,934
                                                                               --------------    --------------

Net increase (decrease) in cash and equivalents                                    (1,452,167)       (2,183,764)
Cash and equivalents, beginning of period                                           2,921,358         3,797,918
                                                                               --------------    --------------
Cash and equivalents, end of period                                            $    1,469,191    $    1,614,154
                                                                               ==============    ==============
</TABLE>

            See accompanying Notes to Condensed Financial Statements

                                  Page 5 of 16
<PAGE>

                               FOTOBALL USA, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
         THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

1.   CONDENSED FINANCIAL STATEMENTS

     The condensed balance sheet as of September 30, 2001, the condensed
     statements of operations for the three months and nine months ended
     September 30, 2001 and 2000, and the condensed statements of cash flows for
     the nine months ended September 30, 2001 and 2000 have been prepared by the
     Company without audit. In the opinion of management, all adjustments (which
     include only normal reoccurring 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 are 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, 2000, as amended.

     The results of operations for the three and nine months ended September 30,
     2001 are not necessarily indicative of the results of operations to be
     expected for any other interim period or for the year ending December 31,
     2001.

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 the disclosure of contingent assets
     and liabilities as of the date of the financial statements, as well as 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, allowance for doubtful accounts and the
     provision for discontinued 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, likeness and
     other identifying marks and images borne by many of its products pursuant
     to license arrangements with Major League Baseball ("MLB"), National
     Football League (the "NFL"), various colleges and universities and, to a
     lesser extent, other licensors including the National Hockey League, The
     Coca-Cola Company, Warner Bros. Looney Tunes(R) and "Scooby-Doo", MTV
     Networks' (Nickelodeon) "Rugrats" and "Blue's Clues" characters, Mattel's
     "Barbie" and Rawlings Golf. The Company may acquire additional licenses for
     new product lines; however, there can be no assurance that the Company will
     be successful in obtaining new licenses. The non-renewal or termination of
     one or more of the Company's current material licenses, particularly with
     MLB, the NFL or collectively the various colleges and universities, could
     have a material adverse effect on the Company's business as a whole.

     VARIABILITY OF GROSS MARGINS - The Company realized gross margins of 38%
     for the three months ended September 30, 2001, an increase from 36% during
     the prior year period. The Company's gross margins may fluctuate, based in
     part on the concentration of promotion, retail sales, sales directly to
     licensors and product mix during the reporting period. The types of
     products sold, the size of the promotion and the extent of competition also
     may create variability in realized gross margins. The Company currently
     relies on various retail sales channels for most of its revenue. The retail
     channel is very competitive and price sensitive for certain of the
     Company's products and there is no guarantee that the Company will not be


                                  Page 6 of 16
<PAGE>

                               FOTOBALL USA, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
         THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

     required to reduce prices or change its product mix to replace higher
     margin products with lower margin products in the future to remain
     competitive in the marketplace. Such price reductions and product changes
     could lead to overall lower gross margins. Under the Company's Rawlings
     Golf license, the Company entered the golf product marketplace for the
     first time in January 2001. Without a history in the golf business, the
     Company cannot be certain of the gross margins it will realize on its golf
     product sales. Golf product margins will vary depending on customer
     acceptance of the Company's initial pricing and changes in manufacturing
     costs as the Company ramps up production. The overall Company gross margins
     may vary based on the volume of golf product sales.

     VARIABILITY OF OPERATING RESULTS; SEASONALITY - The Company has
     historically experienced significant quarter-to-quarter variability in its
     sales and net income resulting primarily from two factors. The first factor
     was the seasonality of the sporting industry and the effect this has had on
     the Company's licensed sports product business. The continued introduction
     of quality product lines involving a diverse group of sports and
     entertainment-related products has helped to mitigate this seasonality. The
     second factor, which significantly contributed to prior years' variability
     of the Company's operations, was its dependence on the promotion business.
     However, the Company has successfully grown other channels of distribution
     in the business to help mitigate this variability. For the three months
     ended September 30, 2001, the Company's retail sales accounted for 35%,
     entertainment sales accounted for 31%, promotions sales accounted for 25%
     and team sales accounted for 9% of total sales. Under the Company's new
     Rawlings Golf license, the Company entered the golf marketplace for the
     first time in January 2001. The golf club and golf ball markets are
     generally seasonal due to lower demand in the cold weather months which
     fall during the Company's first and fourth quarters. Once the Company has
     fully ramped up its production capabilities, it anticipates that its golf
     product sales will follow the seasonality of the market.

     KEY CUSTOMERS - One large customer, The Walt Disney Company, accounted for
     approximately 25% of total sales for the three months ended September 30,
     2001, compared to approximately 18% of total sales in the three months
     ended September 30, 2000.

     DEPENDENCE UPON KEY PERSONNEL - The success of the Company is largely
     dependent on the personal efforts of Michael Favish, its Chairman and Chief
     Executive Officer. Mr. Favish has entered into a three-year employment
     agreement with the Company, commencing on August 10, 1999, 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 could 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.

     DEPENDENCE ON SUPPLIERS - In 2000, the Company purchased approximately 88%
     of its raw material and finished goods, consisting primarily of synthetic
     baseballs, footballs, basketballs, hockey pucks and playground balls, from
     six companies located in China, with two manufacturers accounting for 78%
     of total raw materials and finished goods purchased. In May 2000, the
     United States Congress voted to approve Permanent Normal Trade Relations
     ("PNTR"--most-favored-nation status) for China. Until China accedes to the
     World Trade Organization ("WTO"), Congress can vote annually to remove
     most-favored-nation status. Once China joins the WTO, the PNTR law will
     take effect. China concluded multilateral negotiations on its accession to
     the WTO in September 2001. The completion of its accession protocol and
     Working Party Report will allow its entry into the WTO by the end of 2001.
     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 most-favored-nation status could have a material adverse effect on
     the cost of the Company's products primarily because products originating
     from China could be subjected to substantially higher rates of duty.

                                  Page 7 of 16
<PAGE>

                               FOTOBALL USA, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
         THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

3.   INVENTORIES

     Inventories are valued at the lower of cost or market. Cost is determined
     on the first-in first-out (FIFO) method. Inventories consisted of the
     following at September 30, 2001 and December 31, 2000:

<TABLE>
<CAPTION>
                                                        September 30,        December 31,
                                                            2001                 2000
                                                      ----------------     ----------------
<S>                                                   <C>                  <C>
        Finished goods                                  $ 3,222,562          $ 2,673,041
        Raw material                                      1,716,576            1,845,118
        Less allowance for discontinued inventory          (889,501)            (485,065)
                                                      ----------------     ----------------
           Total                                        $ 4,049,637          $ 4,033,094
                                                      ================     ================
</TABLE>

     The Company periodically reviews its inventory to evaluate it for
     discontinued products. The value of products marked as discontinued is
     included in the allowance. The valuation for each product is removed from
     the reserve when the product is either destroyed or liquidated. These
     products usually include products that are dated and produced for special
     promotional events, such as Super Bowls, Final Four college tournaments and
     World Series, products that are produced under licenses that have been
     terminated or outdated products.

4.   LINES OF CREDIT

     In July 2001, the Company extended its one-year credit line with U.S. Bank
     National Association (formerly Scripps Bank) ("US Bank") including an
     decrease in the credit line from $6.0 million to $2.5 million with an
     expiration date of December 15, 2001. The accounts receivable of the
     Company collateralize this credit line and actual borrowings are limited to
     available collateral, as defined in the agreement. Borrowings under the
     credit line bear interest at the Wall Street Journal prime rate. The credit
     line contains financial covenants requiring the Company to maintain minimum
     net worth levels, minimum working capital and debt to equity ratios. The
     Company is in compliance with the covenants as of September 30, 2001. There
     were no outstanding borrowings under the credit line at September 30, 2001
     or December 31, 2000. The Company has entered into a letter of credit for
     $158,911 with US Bank and the Company has a $150,000 Automatic Clearing
     House ("ACH") hold on its credit line relating to funding its payroll on a
     semi-monthly basis. Both the letter of credit and the ACH hold reduce the
     Company's ability to borrow against its credit line.

5.   COMMITMENTS AND CONTINGENCIES

     DEBT - In December 2000, the Company signed a term loan agreement with US
     Bank with a loan advance period effective December 19, 2000 through March
     30, 2001. During this period the Company submitted $1.5 million in expenses
     related to the Rawlings Golf division to be financed under the agreement.
     The Company received, in accordance with the loan, $1.5 million on March
     30, 2001. The loan provides for a variable interest rate equal to the Wall
     Street Journal prime rate. The loan is payable in 36 consecutive monthly
     payments necessary to fully amortize the loan balance outstanding as of
     March 30, 2001. The Company's receivables, inventory, equipment and
     furniture collaterialize the loan.

                                  Page 8 of 16
<PAGE>

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

CAUTIONARY STATEMENTS 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 involve risks,
uncertainties and assumptions that, if they never materialize or prove
incorrect, could cause the results of the Company to differ materially from
those expressed or implied by such forward-looking statements. All statements,
other than statements of historical fact, are forward-looking statements,
including statements regarding adding new license properties, overall sales
trends, gross margin trends, operating cost trends, the Company's expectations
as to funding its capital expenditures and operations during 2001, the Company's
ability to renew expiring license agreements 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 risks, uncertainties and assumptions referred to above include the
Company's inability to obtain new licenses and the risk factors listed in the
"Disclosure of Certain Significant Risks and Uncertainties" in this report and
as listed from time to time in the Company's filings with the Securities and
Exchange Commission including but not limited to, the Annual Report on Form
10-KSB for the year ended December 31, 2000, as amended, and the Quarterly
Reports on Forms 10-Q for the quarters ended March 31, 2001 and June 30, 2001.

RESULTS OF OPERATIONS:

     The following table sets forth certain operating data (in dollars and as a
percentage of the Company's sales) for the periods presented:

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED                                  NINE MONTHS ENDED
                                                SEPTEMBER 30,                                      SEPTEMBER 30,
                                         2001                     2000                     2001                      2000
                                ------------------------------------------------------------------------------------------------
<S>                            <C>             <C>      <C>             <C>      <C>             <C>       <C>             <C>
Sales                           $ 10,817,997    100%     $  7,097,750    100%     $ 23,804,658    100%      $ 20,108,026    100%
Cost of Sales                      6,704,258     62         4,538,861     64        15,454,476     65         12,743,238     63
Operating Expenses                 3,525,917     33         2,572,721     36         9,194,340     39          6,752,398     34
Operating Income (Loss)              587,822      5           (13,832)    --          (844,158)    (4)           612,390      3
Interest Expense                     (46,985)    --            11,486     --          (126,901)    --             29,176     --
Interest Income                       17,785     --           (27,017)    --            85,355     --           (102,496)     1
Inc. (Loss) Before Inc. Tax          558,622      5             1,699     --          (885,704)    (4)           685,710      3
Income Tax Exp. (Benefit)             25,225     --               680     --          (354,282)    (1)           274,284      1
Net Income                      $    533,397      5%     $      1,019     --      $   (531,422)    (2%)     $    411,425      2%
</TABLE>


FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000:

SALES:

     The Company focuses its sales efforts in five main distribution channels.
The retail sales focus is on mass merchants, sporting goods, department stores
and other national retailers. The team sales focus is on professional sports
teams in every major sports league and minor league baseball. The entertainment
sales focus is on entertainment companies such as Disney, Six Flags, Sea World,
Universal Studios, Home Shopping Network and Dave and Busters. The promotions
sales focus is on corporate

                                  Page 9 of 16
<PAGE>

premium and promotions business with major quick-serve restaurants and other
Fortune 500 companies. The new Rawlings Golf sales focus is on sporting goods
and golf specialty retailers.

     Sales increased $3.7 million, or 52%, for the three months ended September
30, 2001 from sales for the three months ended September 30, 2000. The increase
in sales was due to an increase in promotion sales (up 255%), entertainment
sales (up 91%) and team sales (up 48%), which offset a decrease in retail sales
(down 4%). Rawlings Golf generated nominal sales for the three months ended
September 30, 2001. The promotions sales were up due to major promotions with a
national auto parts retailer and two different major quick-serve restaurants.
The entertainment sales were up due to sales to the Disney Store increasing over
200% as a result of the Walt 100 Disney lapel pin promotion. The team sales were
up due to MLB and minor league baseball and NBA team sales increasing between
60% and over 200%. Retail sales were down due to decreases in sales to Toys R
Us, Wal-Mart and some sporting goods retailers. However, through product mix and
cost saving measures, the Company's gross profit on its retail sales was up 3%
from the prior year's quarter.

     During the third quarter of 2001, the Company realized product sales
increases in pins (up 930%), baseball (up 199%), basketball (up 30%), and
footballs (up 18%), with offsetting declines in coins (down 100%), playground
balls (down 9%) and soccer balls (down 7%) compared to the third quarter 2000.

GROSS PROFIT:

     Gross profit increased $1.6 million, or 61%, for the three months ended
September 30, 2001 from gross profit for the three months ended September 30,
2000. Gross profit as a percentage of sales increased to 38% for the three
months ended September 30, 2001 from 36% for the three months ended September
30, 2000. The increase in the Company's gross margin as a percentage of sales
can be attributed primarily to larger lapel pin and baseball sales combined with
raw material cost savings offset by a $.5 million dollar write-down for
discontinued inventory. Excluding the inventory write-down, the Company's gross
margin for the three months ended September 30, 2001 was six percentage points
higher than the gross margin for the three months ended September 30, 2001. As
previously noted, the Company's gross margins may fluctuate, particularly
between quarters, based on several factors including sales and product mix (See
Note 2, "Notes to Condensed Financial Statements").

OPERATING EXPENSES:

     Total operating expenses increased $1 million, or 37%, for the three months
ended September 30, 2001 from total operating expenses for the three months
ended September 30, 2000. Total operating expenses as a percentage of sales
decreased to 33% for the three months ended September 30, 2001 from 36% for the
three months ended September 30, 2000. Total operating expenses less expenses
based on revenue, including royalties, commissions co-op and bad debt expense,
increased by $.5 million or 27% for the three months ended September 30, 2001
compared to the three months ended September 30, 2000. The increase in total
operating expenses is primarily due to an increase in royalties, personnel and
salary related items, facilities cost, higher bad debt reserves and the new
Rawlings Golf division, which was not in operation during the comparable period
in 2000. Total operating expenses for the Rawlings Golf division were $.2
million for the three months ended September 30, 2001.

     Royalty expenses increased $.2 million, or 32%, for the three months ended
September 30, 2001 from royalty expenses for the three months ended September
30, 2000. Royalty expenses as a percentage of sales decreased to 7% for the
three months ended September 30, 2001 from 8% for the three months


                                 Page 10 of 16
<PAGE>

ended September 30, 2000. The Company has successfully renegotiated lower
minimum royalty terms in its Rawlings Golf license and two of its entertainment
property licenses. These reductions in royalty minimums will reduce the
Company's royalty expense reported under these licenses in 2001. As previously
noted, the Company is dependent upon its licensing arrangements and their
successful renewal (See Note 2, "Notes to Condensed Financial Statements"). To
broaden the Company's scope of product lines and expand market share, the
Company will continue to pursue additional license agreements with various
organizations and licensors in the future.

     Marketing expenses increased $.4 million, or 50%, for the three months
ended September 30, 2001 from marketing expenses for the three months ended
September 30, 2000. Marketing expenses as a percentage of sales remained at 10%
for the three months ended September 30, 2001 and for the three months ended
September 30, 2000. This increase is attributable to sample expense, salary
related items and marketing expenses incurred in promoting the Rawlings Golf
division. Excluding Rawlings Golf, marketing expenses increased 33% for the
three months ended September 30, 2001 compared to the three months ended
September 30, 2000.

     General and administrative expenses increased $.3 million, or 31%, for the
three months ended September 30, 2001 from general and administrative expenses
for the three months ended September 30, 2000. General and administrative
expenses as a percentage of sales decreased to 13% for the three months ended
September 30, 2001 from 16% for the three months ended September 30, 2000. The
increase is primarily attributable to salary-related items and bad debt expense,
offset by declines in expenses related to the Company's move to new facilities
in 2000. Excluding Rawlings Golf, general and administrative expense increased
27% for the three months ended September 30, 2001 from general and
administrative expense for the three months ended September 30, 2000.

OTHER INCOME (EXPENSE):

     Interest expense increased by 309% for the three months ended September 30,
2001 from interest expense for the three months ended September 30, 2000. This
increase reflects an increase in term loans used to fund the facilities and
equipment acquired in the second half of 2000 and the loan used to fund the
Rawlings Golf related expansion as further discussed under "Liquidity and
Capital Resources". There were no outstanding borrowings under the line of
credit for the periods ending September 30, 2001 and September 30, 2000.

     Interest income decreased by 34% for the three months ended September 30,
2001, from interest income for the three months ended September 30, 2000. Excess
cash is deposited into an interest-bearing depository account. The decrease was
due to lower average cash balances during the three months ended September 30,
2001 compared to the three months ended September 30, 2000.

INCOME TAX EXPENSE:

     The Company recorded an income tax expense of $25,225 for the three months
ended September 30, 2001 calculated at an effective tax rate of 5% compared to
an income tax expense of $680 for the prior year period, calculated at an
effective tax rate of 40%. The Company's annualized estimated tax benefit for
the nine months ended September 30, 2001 is $.4 million calculated at an
effective tax rate of 40%.

                                 Page 11 of 16
<PAGE>

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000:

SALES:

     Sales increased $3.7 million or 18% for the nine months ended September 30,
2001 from sales for the nine months ended September 30, 2000. For the nine
months ended September 30, 2001, promotions sales were up 187%, entertainment
sales were up 66%, team sales were up 16%, and retail sales were down 11%,
compared to the nine months ended September 30, 2000.

     During the nine months ended September 30, 2001, the Company realized
product sales increases in lapel pins (up 78%), playground balls (up 8%),
baseball (up 24%) and hockey pucks (up 36%), with offsetting declines in
footballs (down 3%), coins (down 2,758%) and basketballs (down 30%) compared to
the nine months ended September 30, 2000.

GROSS PROFIT:

     Gross profit increased $1.0 million, or 13%, for the nine months ended
September 30, 2001 from gross profit for the nine months ended September 30,
2000. Gross profit as a percentage of sales decreased to 35% for the nine months
ended September 30, 2001 from 37% for the nine months ended September 30, 2000.
The decline in the Company's gross margin as a percentage of sales can be
attributed primarily to increase in football, baseball and pins sales, offset by
a $.5 million dollar write down for discontinued inventory. Excluding the
inventory write-down, the Company's gross margin for the nine months ended
September 30, 2001 was equal to the gross margin for the nine months ended
September 30, 2000. As previously noted, the Company's gross margins may
fluctuate, particularly between quarters, based on several factors including
sales and product mix (See Footnote 2, "Notes to Condensed Financial
Statements").

OPERATING EXPENSES:

     Total operating expenses increased $2.4 million, or 36%, for the nine
months ended September 30, 2001 from total operating expenses for the nine
months ended September 30, 2000. Total operating expenses increased to 39% as a
percentage of sales as of September 30, 2001 from 34% as of September 30, 2000.
The increases are primarily due to the increase in royalties, personnel and
salary related items, facilities cost, bad debt expense and the new Rawlings
Golf division. Total operating expenses for Rawlings Golf division were $.6
million for the nine months ended September 30, 2001.

     Royalty expenses increased $.3 million, or 23%, for the nine months ended
September 30, 2001 from royalty expenses for the nine months ended September 30,
2000. Royalty expenses as a percentage of sales increased to 8% of sales for the
nine months ended September 30, 2001, from 7% for the nine months ended
September 30, 2000. Excluding royalties for Rawlings Golf division, the royalty
expense as a percentage of sales for the nine months ended September 30, 2001
was equal to the royalty expense as a percentage of sales for the nine months
ended September 30, 2000.

     Marketing expenses increased $.7 million, or 32%, for the nine months ended
September 30, 2001 from marketing expenses for the nine months ended September
30, 2000. Marketing expenses as a percentage of sales increased to 13% of sales
for the nine months ended September 30, 2001 from 11% of sales for the nine
months ended September 30, 2000. These increases are primarily due to the
introduction of the Rawlings Golf division and increases in personnel and
salary-related items, trade show and product sample expenses. Total marketing
expenses for the Rawlings Golf division were $.3 million for the nine months
ended September 30, 2001.

                                 Page 12 of 16
<PAGE>

     General and administrative expenses increased $1.3 million, or 47%, for the
nine months ended September 30, 2001 from general and administrative expenses
for the nine months ended September 30, 2000. General and administrative
expenses as a percentage of sales increased to 16% for the nine months ended
September 30, 2001 from 13% for the nine months ended September 30, 2000. This
increase is due to increased facility costs including utilities, salary and
personnel costs, bad debt expense and the cost to establish the Rawlings Golf
division. These expenses were offset by the decline in expenses recognized in
2000 for the relocation of the facilities. General and administrative expenses
for Rawlings Golf accounted for $.1 million of the increase from the prior year
period.

OTHER INCOME (EXPENSE):

     Interest expense increased by 335% for the nine months ended September 30,
2001 from interest expense for the nine months ended September 30, 2000. This
increase reflects an increase in term loans used to fund the facilities and
equipment acquired in the second half of 2000 and the loan used to fund the
Rawlings Golf related expansion as further discussed under "Liquidity and
Capital Resources". There were no outstanding borrowings under the line of
credit for the periods ending September 30, 2001 or September 30, 2000.

     Interest income decreased by 17% for the nine months ended September 30,
2001 from interest income for the nine months ended September 30, 2000. Excess
cash is deposited into an interest-bearing depository account. The decrease was
due to lower average cash balances during the nine months ended September 30,
2001 compared to the nine months ended September 30, 2000.

INCOME TAX EXPENSE:

     Income tax benefit was $.4 million for the nine months ended September 30,
2001, calculated at an effective tax rate of 40%, as compared to income tax
expense of $.3 million calculated at an effective tax rate of 40%, for the prior
year period.

LIQUIDITY AND CAPITAL RESOURCES:

     The Company's net working capital increased by $.2 million from December
31, 2000 to September 30, 2001, to a net working capital surplus of $10.1
million.

     Cash and equivalents aggregated $1.5 million at September 30, 2001, a
decrease of $1.4 million from cash and equivalents of $2.9 million at December
31, 2000. This decrease in cash was the result of $2.3 million used in
operations, primarily consisting of a $.5 million net loss, a $3 million
increase in accounts receivables, and a $.4 million increase in accounts payable
and accrued expenses, $.3 million used in purchasing property and equipment and
$.3 million used in the payment of capital leases and term loans offset by the
proceeds from a $1.5 million term loan used for Rawlings Golf division startup
costs (see discussion below).

     At September 30, 2001, the Company has commitments for minimum guaranteed
royalties under licensing agreements totaling $2.6 million in the aggregate
through 2005, of which $.1 million is due at various times during 2001. Based
upon anticipated increases in sales, management expects these guaranteed
royalties to be funded from operating cash flows.

     In December 2000, the Company signed a term loan agreement with US Bank
with a loan advance period effective December 19, 2000 through March 30, 2001.
During this period the Company

                                 Page 13 of 16
<PAGE>

submitted $1.5 million in expenses related to the Rawlings Golf division to be
financed under the agreement. The Company received, in accordance with the loan,
$1.5 million on March 30, 2001. The loan provides for a variable interest rate
equal to the Wall Street Journal prime rate. The loan is payable in 36
consecutive monthly payments necessary to fully amortize the loan balance
outstanding as of March 30, 2001. The Company's receivables, inventory,
equipment and furniture collaterialize the loan.

     In July 2001, the Company extended its credit line with US Bank, including
a decrease in the credit line from $6.0 million to $2.5 million with an
expiration date of December 15, 2001. The accounts receivable of the Company
collateralize this credit line and actual borrowings are limited to available
collateral, as defined in the agreement. Borrowings under the credit line bear
interest at the Wall Street Journal prime rate. The credit line contains
financial covenants requiring the Company to maintain minimum net worth levels,
minimum working capital and debt to equity ratios. The Company is in compliance
with the covenants as of September 30, 2001. There were no outstanding
borrowings under the credit line at September 30, 2001 or December 31, 2000. The
Company has entered into a letter of credit for $158,911 with US Bank and the
Company has a $150,000 Automatic Clearing House ("ACH") hold on its credit line
relating to funding its payroll on a semi-monthly basis. Both the letter of
credit and the ACH hold reduce the Company's ability to borrow against its
credit line.

     The Company has a $3.0 million line of credit facility (the "facility")
with Merrill Lynch International Bank Limited at an interest rate of 1.75% above
the London Interbank Offering Rate ("LIBOR"). The Company may choose any rate
being charged on any one to twelve month term loan (as of the date money is
borrowed from the line) as the base LIBOR. Any borrowing under the line of
credit, which is used solely to collateralize the issuance of stand-by letters
of credit to manufacturers, are required to be secured by cash collateral
deposited with Merrill Lynch equal to the credit outstanding. The line of credit
extends until December 10, 2001. There was no borrowing under the line of credit
as of September 30, 2001 and December 31, 2000.

     Management believes the Company's existing cash position and credit
facilities, combined with internally generated cash flows, will be adequate to
support the Company's liquidity and capital needs at least through the end of
2001.


                                 Page 14 of 16
<PAGE>

                           PART II. OTHER INFORMATION


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

         None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
         --------------------------------

         (a)  Exhibits

              10.10(10)     Loan Agreement dated July 15, 2001 between Fotoball
                            USA, Inc. and U.S. Bank National Association.

         (b)  Reports on Form 8-K for the three months ended September 30, 2001
                            None.



                                 Page 15 of 16
<PAGE>

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
                               --------------------------------------
                                            (Registrant)

Dated: November 13, 2001       BY:  /s/ Michael Favish
                                    ------------------
                               Michael Favish
                               Chairman and Chief Executive Officer
                               (Principal Executive Officer)

Dated: November 13, 2001       BY:  /s/ Thomas R. Hillebrandt
                                    -------------------------
                               Thomas R. Hillebrandt
                               Senior Vice President and Chief Financial Officer
                               (Principal Financial and Accounting Officer)



                                 Page 16 of 16