<PAGE>

                          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, 1996

                  / /  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
                                     EXCHANGE ACT


                             COMMISSION FILE NO. 1-12888
                                           
                                           
                                  SPORT-HALEY, INC.
          (Exact name of small business issuer as specified in its charter)
                                           
                                           
              COLORADO                                84-1111669
      (State of other jurisdiction of             (I.R.S. Employer
      incorporation or organization)              Identification No.)

                   4600 E. 48TH AVENUE, DENVER, COLORADO  80216
                    (Address of principal executive offices)
                                  (303) 320-8800
                   (Issuer's telephone number including area code)

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

     State the number of shares outstanding in each of the issuer's classes 
of common stock, as of the latest practicable date.

             CLASS                         OUTSTANDING AT NOVEMBER 8, 1996
     COMMON STOCK, NO PAR VALUE                        4,311,147

     Transitional Small Business Disclosure Format 
(check one):  Yes         No   X 
                  -----      -----


<PAGE>

                                        INDEX


                                                             PAGE
                                                            -------
PART 1 - FINANCIAL INFORMATION


     ITEM 1 - FINANCIAL STATEMENTS

          BALANCE SHEETS                                         3

          STATEMENTS OF INCOME                                   4

          STATEMENTS OF CASH FLOWS                             5-6

          NOTES TO FINANCIAL STATEMENTS                        7-9

     ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITIONS AND RESULTS OPERATIONS    10-11


PART II - OTHER INFORMATION                                     12

SIGNATURE                                                       13


<PAGE>

                                  SPORT-HALEY, INC.
                                    BALANCE SHEETS
                                    (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30,      JUNE 30,
                                                                         1996             1996 
                                                                     -------------     ----------
                                                                      (UNAUDITED)        (NOTE)
<S>                                                                  <C>               <C>
                                        ASSETS
Current assets:
     Cash and cash equivalents                                        $    8,183      $    8,648
     Short-term investments and marketable securities                      1,260           2,750
     Accounts receivable, net of allowances of 
          $88,000 and $90,000, respectively                                4,077           4,549
     Inventories (Note 2)                                                  8,568           7,716
     Other current assets                                                  1,207           1,097
                                                                      ----------      ----------
                                                                          23,295          24,760
                                                                      ----------      ----------
Property and equipment                                                     2,782           2,294
Property held under capital leases                                             7               7
     Less, accumulated depreciation                                         (479)           (601)
                                                                      ----------      ----------
                                                                           2,310           1,700
                                                                      ----------      ----------
Other assets:
     Long-term investments                                                 1,925           1,274
     Other assets                                                             25              32
                                                                      ----------      ----------
                                                                           1,950           1,306
                                                                      ----------      ----------
                                                                      $   27,555      $   27,766
                                                                      ----------      ----------
                                                                      ----------      ----------

                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                 $    1,315      $    2,141
     Capital lease obligations maturing within one year                        1               2
     Accrued income taxes (Note 3)                                           485             464
     Accrued commissions and other expenses                                  471             725
                                                                      ----------      ----------
                                                                           2,272           3,332
                                                                      ----------      ----------
Long-term liabilities:
     Capital lease obligations, net of current maturities                      2               2
     Other                                                                    87              66
                                                                      ----------      ----------
                                                                              89              68
                                                                      ----------      ----------
                                                                           2,361           3,400
                                                                      ----------      ----------
Stockholders' equity: (Note 4)
     Preferred stock, no par value; 1,500,000 shares 
          authorized; none issued and outstanding                             --              --
     Common stock, no par value; 
          15,000,000 shares authorized; 4,428,437 and
          4,419,271 shares issued and outstanding, respectively           20,220          20,166
     Additional paid in capital                                               87              63
     Unrealized losses on available for sale securities                     (187)           (140)
     Retained earnings                                                     5,074           4,277
                                                                      ----------      ----------
                                                                          25,194          24,366
                                                                      ----------      ----------
Total Liabilities and Stockholders' Equity                           $    27,555     $    27,766
                                                                      ----------      ----------
                                                                      ----------      ----------
</TABLE>

              Note:  Taken from the audited balance sheet at that date.

                                       3

<PAGE>

                                  SPORT-HALEY, INC.
                                 STATEMENTS OF INCOME
                        (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                 THREE MONTHS ENDED
                                                   SEPTEMBER 30,
                                                1996            1995
                                            -----------     ----------
                                            (UNAUDITED)     (UNAUDITED)


Net sales                                      $  6,266      $   4,168

Cost of goods sold                                3,646          2,373
                                               --------       --------
Gross profit                                      2,620          1,795

Selling, general and administrative expense       1,486          1,048
                                               --------       --------
Income from operations                            1,134            747

Other income (expense):
     Other income                                   164             84
                                               --------       --------
Income before income taxes                        1,298            831

Provision for income taxes (Note 3)                 501            309
                                               --------       --------
Net Income                                     $    797       $    522
                                               --------       --------
                                               --------       --------
Net income per common share                    $   0.17       $   0.15
                                               --------       --------
                                               --------       --------
Weighted average number of common and
     common equivalent shares outstanding         4,776          3,511
                                               --------       --------
                                               --------       --------

                                       4

<PAGE>

                                  SPORT-HALEY, INC.
                               STATEMENTS OF CASH FLOWS
                                    (IN THOUSANDS)
                                           
                                                        THREE MONTHS ENDED
                                                          SEPTEMBER 30,
                                                       1996            1995
                                                    -----------     ----------
                                                    (UNAUDITED)     (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income                                           $    797       $    522

Adjustments to reconcile net income to net cash 
     provided by operating activities:
     Depreciation and amortization                         85             59
     Depreciation recorded as prepaid expense              (4)            (6)
     Deferred taxes, net                                   14             (6)
     Increase in allowance for doubtful accounts           (3)             8
     Deferred rents                                         1              1

(Increase) decrease in assets:
     Short-term investments to maturity                 1,489             --
     Accounts receivable                                  475            198
     Inventory                                           (900)          (545)
     Other current assets                                 (43)            37

(Increase) decrease in liabilities:
     Accounts payable                                    (827)          (771)
     Accrued commissions and other expenses              (254)           290
     Accrued income taxes                                  21           (189)
     Deferred rent                                         (1)            (1)
                                                      -------        -------
     Net cash used by operating activities                850           (403)
                                                      -------        -------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Principal payments on capital lease obligation        (1)            (1)
     Net proceeds from issuance of common stock            54            177
     Stock purchased and retired                           --           (129)
                                                      -------        -------
     Net cash provided by financing activities        $    53        $    47
                                                      -------        -------

                                       5

<PAGE>


                                  SPORT-HALEY, INC.
                               STATEMENTS OF CASH FLOWS
                                    (IN THOUSANDS)

                                                        THREE MONTHS ENDED
                                                           SEPTEMBER 30, 
                                                       1996            1995   
                                                    -----------     ----------
                                                    (UNAUDITED)    (UNAUDITED)
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of fixed assets                       $    (702)      $    (48)
     Disposal of assets                                   (15)            --
     Investment in "available to sell" 
       securities, net                                   (651)            --
                                                      -------        -------
     Net cash used by investing activities             (1,368)           (48)

     Net increase (decrease) in cash                     (465)          (404)
                                                      -------        -------
CASH AND CASH EQUIVALENTS, BEGINNING                    8,648          4,758
                                                      -------        -------
CASH AND CASH EQUIVALENTS, ENDING                  $    8,183      $   4,354
                                                      -------        -------
                                                      -------        -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the period for:

          Income taxes                               $    466       $    489
                                                      -------        -------
                                                      -------        -------
          Interest                                   $     --       $     --
                                                      -------        -------
                                                      -------        -------

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
     At September 30, 1996, the Company has unrealized holding losses on
     marketable securities of approximately $187,000.

                                       6

<PAGE>


                                  SPORT-HALEY, INC.
                            NOTES TO FINANCIAL STATEMENTS
                                           
                                           
                                           
                                           
NOTE 1     CONDENSED FINANCIAL STATEMENTS

           The financial statements included herein have been prepared by 
           Sport-Haley, Inc. (the "Company") without audit, pursuant to the 
           rules and regulations of the Securities and Exchange Commission.  
           Certain information and footnote disclosures normally included in 
           the financial statements prepared in accordance with generally 
           accepted accounting principles have been condensed or omitted as 
           allowed by such rules and regulations.  The Company believes that 
           the disclosures are adequate to make the information presented 
           not misleading.  It is suggested that these financial statements 
           be read in conjunction with the Company's annual financial 
           statements dated June 30, 1996.  While management believes the 
           procedures followed in preparing these financial statements are 
           reasonable, the accuracy of the amounts are, in some respects, 
           dependent upon the facts that will exist, and procedures that 
           will be accomplished by the Company later in the year.

           The management of the Company believes that the accompanying 
           unaudited condensed financial statements prepared in conformity 
           with generally accepted accounting principles, which require the 
           use of management estimates, contain all adjustments (including 
           normal recurring adjustments) necessary to present fairly the 
           operations and cash flows for the period presented.

NOTE 2    INVENTORIES

           Inventories at September 30, 1996 consist of the following:
           
                Raw materials  $    3,791,057
                Finished goods      4,776,708
                               ---------------
                               $    8,567,765
                               ---------------
                               ---------------
NOTE 3    INCOME TAXES

           The components of the deferred tax asset and net deferred tax 
           liability recognized in the accompanying balance sheet as of 
           September 30, 1996, are as follows:

                                          Current      Long-Term 
                                          -------      ---------
                Deferred tax (liability) $    --      $(82,871)
                Deferred tax asset        43,655            --
                                         -------      ---------
                                         $43,655      $(82,871)
                                         -------      ---------
                                         -------      ---------


                                       7

<PAGE>


                                  SPORT-HALEY, INC.
                            NOTES TO FINANCIAL STATEMENTS
                                           
                                           
                                           
                                           
NOTE 3     INCOME TAXES (Continued)

           The types of temporary differences between the tax bases of 
           assets and liabilities and the financial reporting amounts that 
           give rise to a significant portion of the deferred tax liability 
           and their appropriate tax effects at September 30, 1996, as 
           follows:

                                                               Tax Effect
                                               Difference  Current    Long-Term
                                               ----------  --------   ---------
              Allowance for doubtful accounts   $ 87,534   $ 34,138   $    --
              Stock option compensation           24,403      9,517        --
              Accumulated depreciation           212,491         --    (82,871)
                                                           --------   ---------
                                                           $ 43,655   $(82,871)
                                                           --------   ---------
                                                           --------   ---------

           The components of income tax expenses are as follows:

                Current:
                     Federal   $   424,300
                     State          62,700
                               -----------
                                   487,000
                               -----------

                Deferred:
                     Federal        11,965
                     State           1,770
                               -----------
                                    13,735
                               -----------
                              $    500,735
                               -----------
                               -----------

NOTE 4    REPURCHASE OF COMMON STOCK

           During December 1994, the Company's Board of Directors authorized 
           the repurchase of up to 150,000 shares of the Company's issued 
           and outstanding common stock. The shares may be purchased from 
           time to time in open market transactions at prevailing market 
           prices.  The Company has no commitment or obligation to purchase 
           all or any portion of the shares.  All shares purchased by the 
           Company will be cancelled and returned to the status of 
           authorized but unissued common stock.  As of September 30, 1996, 
           the Company repurchased 15,100 shares of its common stock.  
           Subsequent to September 30, 1996, the Company's Board of 
           Directors authorized an increase of an additional 150,000 common 
           shares that the Company may repurchase thus bringing the total 
           common shares authorized for repurchase under the plan to 300,000 
           shares.  From October 1, 1996 through November 8, 1996, the 
           Company repurchased an additional 117,290 shares of its common stock.

                                       8

<PAGE>


                                   SPORT-HALEY, INC.      
                           NOTES TO FINANCIAL STATEMENTS


NOTE 5    COMMON STOCK OPTIONS

           At September 30, 1996, the Company had 493,593 options granted to 
           purchase common stock at prices ranging from $1.60 to $12.75, 
           with expiration dates between March 15, 2002 and July 1, 2006.  
           During the three months ended September 30, 1996, option holders 
           exercised and purchased 9,166 shares of the Company's common 
           stock.  The Company realized gross proceeds of approximately 
           $54,000.

           During May 1996, the Company's Board of Directors authorized the 
           Company to prepare and issue a "net issuance" offer to the 
           holders of the Company's non-qualified stock options, to purchase 
           the interests of the option holders.  The Company will pay the 
           difference between the exercise price of the non-qualified stock 
           option and the fair market value of the Company's common stock on 
           the date the option holder accepts the offer.  As of September 
           30, 1996, the Company had repurchased 2,500 non-qualified stock 
           options for approximately $30,800.  At September 30, 1996 the 
           Company had outstanding, approximately 310,000 non-qualified 
           stock options.  Accordingly, the Company's net issuance cost to 
           repurchase these options would be approximately $2.5 million if 
           substantially all of the non-qualified option holders elected to 
           accept the Company's offer.
           
           Included in the Company's first quarter net earnings is a charge 
           of approximately $13,700 which is a result of the Company's 
           implementation of FASB 123-Accounting for Stock Based 
           Compensation.

NOTE 6     SUBSEQUENT EVENT

           On October 28, 1996, the Company announced it had signed a new 
           line of credit agreement with a bank which now permits borrowings 
           of up to $10 million.  The Company's former line of credit 
           provided for borrowings of up to $4 million. The new line of 
           credit agreement expires October 31, 1997, and is collateralized 
           by accounts receivable, inventories, machinery and equipment and 
           general intangibles.  The interest rate on borrowings is at 1/2 % 
           below the bank's base rate with interest payable monthly.  At 
           September 30, 1996 there were no borrowings outstanding on the 
           line of credit. 

                                       9

<PAGE>

                                   SPORT-HALEY, INC.

                   ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS


FINANCIAL CONDITION

The Company's financial position continues to demonstrate strength from 
growth in its net sales, gross profit margin and net income.  The Company 
intends to rely on its cash generated from operations and the net proceeds 
realized from the March 1996 public offering to finance in its working 
capital requirements for at least the next 12 months.  To the extent such 
amounts are insufficient to finance the Company's working capital 
requirements, the Company may also make periodic borrowings under its 
revolving line of credit.

During the quarter ended September 30, 1996, current assets and current 
liabilities decreased by approximately $1.5 million and $1.0 million, 
respectively.

For the three months ended September 30, 1996, the Company spent 
approximately $702,000 for property and equipment.  These expenditures relate 
to equipment and leasehold improvements for the headwear and embroidery 
operations.  Also, during this quarter the Company removed approximately 
$200,000 of fully depreciated and disposed assets.

The Company received proceeds of approximately $54,000 from the exercise of 
stock options during the quarter ended September 30, 1996.  Stockholders' 
equity increased by approximately $828,000 for the quarter resulting 
primarily from its net income of $797,000.

RESULTS OF OPERATIONS

The Company's business is seasonal in nature, and therefore the results for 
any one or more quarters are not necessarily indicative of the annual results 
or continuing trends.

Net sales for the first quarter ended September 30, 1996, were approximately 
$6.3 million, an increase of approximately $2.1 million, or 50%, from net 
sales of $4.2 million for the same quarter in the prior fiscal year.  The 
increase in net sales is due to a combination of factors, including a greater 
number of products within each of the women's and men's lines, an increase in 
the number of golf course professional shops that carry the Company's apparel 
and increase in corporate and international sales.

The Company's gross profit increased by approximately $825,000 or 46% to $2.6 
million for the first quarter ended September 30, 1996, from $1.8 million for 
the same quarter in the prior fiscal year.  The Company's gross profit margin 
continued relatively unchanged at approximately 42% of net sales.

                                       10

<PAGE>


                                  SPORT-HALEY, INC.

                   ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS (CONTINUED)

Selling, general and administrative expenses increased by approximately 
$438,000 or 42% for the first quarter ended September 30, 1996, from $1.0 
million for the same quarter in the prior fiscal year.  The increase can be 
attributed to commissions paid to independent sales representatives on higher 
sales volume, increased advertising expenditures and costs associated with 
the start up of the head wear operations.

Other income increased by approximately $80,000 for the first fiscal quarter 
ended September 30, 1996 as compared to the same quarter in the prior fiscal 
year.  The increase can be attributed to an increase in interest income 
generated by short-and long-term investments during the quarter.

Income before provision for income taxes increased by approximately $467,000, 
or 56%, for the first fiscal quarter ended September 30, 1996, from $831,000 
for the same quarter in the prior fiscal year.

Net income increased by approximately $275,000 or 53% for the first fiscal 
quarter ended September 30, 1996 from approximately $522,000 for the same 
quarter in the prior fiscal year.

Earnings were $.17 per share for the quarter ended September 31, 1996 as 
compared to $.15 for the same quarter in the prior fiscal year.  These 
earnings per share are based on 4,776,000 and 3,511,000 weighted average 
shares outstanding for the 1996 and 1995 quarters, respectively.

                                       11

<PAGE>
                                  SPORT-HALEY, INC.
                                       PART II
                                  OTHER INFORMATION




ITEM 1    LEGAL PROCEEDINGS - NONE

ITEM 2    CHANGES IN SECURITIES - NONE

ITEM 3    DEFAULTS UPON SENIOR SECURITIES - NONE

ITEM 4    SUBMISSION TO MATTERS TO A VOTE OF SECURITY HOLDERS - NONE

ITEM 5    OTHER INFORMATION - NONE

ITEM 6    EXHIBITS AND REPORTS ON FORM 8-K

               (A)  EXHIBITS

                      27   FINANCIAL DATA SCHEDULE

               (B)  REPORTS ON FORM 8-K - NONE


                                       12

<PAGE>


                                      SIGNATURES


In accordance with the requirements of the Securities Exchange Act of 1934, 
the Registrant caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.

                                           SPORT-HALEY, INC.
                                           (Registrant)



Date:           NOVEMBER 11, 1996          /s/ Robert G. Tomlinson
                                           ------------------------
                                           Robert G. Tomlinson
                                           Chief Executive Officer


Date:           NOVEMBER 11, 1996          /s/ Steve S. Auger
                                           ------------------------
                                           Steve S. Auger
                                           Chief Accounting Officer


                                       13