<PAGE>

                       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 DECEMBER 31, 1999

                  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 FEBRUARY 9, 2000
         COMMON STOCK, NO PAR VALUE                      3,647,052

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


                                      INDEX

                                                                          PAGE
                                                                          ----
PART 1 - FINANCIAL INFORMATION

     ITEM 1 - FINANCIAL STATEMENTS

       CONSOLIDATED BALANCE SHEETS                                          3

       CONSOLIDATED STATEMENTS OF INCOME                                    4

       CONSOLIDATED STATEMENTS OF CASH FLOWS                                5

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                         6-9

     ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS            10-12

PART II - OTHER INFORMATION                                                13

SIGNATURES                                                                 14


<PAGE>


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

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,               JUNE 30,
                                                                           1999                      1999
                                                                       -------------           --------------
                                                                         (UNAUDITED)                 (NOTE)
<S>                                                                    <C>                     <C>
                                     ASSETS

Current assets:
     Cash and cash equivalents                                         $       8,601           $       8,581
     Short-term investments and marketable securities                              1                       1
     Accounts receivable, net of allowances of
       $45 and $87, respectively                                               4,107                   5,671
     Inventories                                                              12,839                  13,283
     Other current assets                                                      1,182                   1,585
     Deferred taxes                                                              108                     124
                                                                       -------------           -------------
       Total current assets                                                   26,838                  29,245


Property and equipment, net                                                    2,279                   2,468
Net assets of discontinued operations                                              -                     306
Goodwill, net of amortization                                                    258                      84
Deferred taxes                                                                   154                      51
Other assets                                                                     303                     313
                                                                       -------------           -------------
                                                                       $      29,832           $      32,467
                                                                       =============           =============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Note payable                                                      $         600           $         600
     Accounts payable                                                            196                     788
     Accrued income taxes                                                          -                       -
     Accrued commissions and other expenses                                      862                     769
                                                                       -------------           -------------
       Total current liabilities                                               1,658                   2,157
                                                                       -------------           -------------
Minority interest                                                                (18)                   (191)
                                                                       -------------           -------------

Shareholders' equity:
     Preferred stock, no par value; 1,500,000 shares
       authorized; none issued and outstanding                                     -                       -
     Common stock, no par value; 15,000,000 shares
       authorized; 3,657,052 and 4,257,552 shares
       issued and outstanding, respectively                                   13,916                  16,355
     Additional paid-in capital                                                  985                     880
     Retained earnings                                                        13,291                  13,266
                                                                       -------------           -------------
     Total shareholders' equity                                               28,192                  30,501
                                                                       -------------           -------------

                                                                       $      29,832           $      32,467
                                                                       =============           =============
</TABLE>

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


                                       3
<PAGE>


                                SPORT-HALEY, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED               SIX MONTHS ENDED
                                                           DECEMBER 31,                    DECEMBER 31,
                                                       1999         1998                1999            1998
                                                  ------------   ------------       ------------   ------------
                                                   (UNAUDITED)    (UNAUDITED)        (UNAUDITED)    (UNAUDITED)
<S>                                               <C>            <C>                <C>            <C>
Net sales                                          $  4,726         $  5,574         $  9,934         $ 12,921

Cost of goods sold                                    3,378            3,673            6,934            8,191
                                                   --------         --------         --------         --------

Gross profit                                          1,348            1,901            3,000            4,730

Selling, general and administrative expense           1,688            1,601            3,230            3,384
                                                   --------         --------         --------         --------

Income (loss) from operations                          (340)             300             (230)           1,346

Other income (expense):
     Other income, net                                  290              112              415              231
                                                   --------         --------         --------         --------

Income (loss) from continuing operations
     before income taxes and
     minority interest                                  (50)             412              185            1,577

Minority interest income                                  8               85               11               98

Provision for income taxes                              (78)             199               14              549
                                                   --------         --------         --------         --------

Income from continuing operations                        36              298              182            1,126

Discontinued operations:
     Loss from discontinued operations,
     net of income tax benefit of 0, 17, 0,
     and 17, respectively                                 -              (26)               -              (27)

     Loss on disposal of assets, net of
     income tax benefit of 65, 0, 101,
     and 0, respectively                               (101)               -             (158)               -
                                                   --------         --------         --------         --------

Net Income (Loss)                                  $    (65)        $    272         $     24         $  1,099
                                                   ========         ========         ========         ========

Basic earnings (loss) per common share             $  (0.01)        $   0.07         $   0.01         $   0.25
                                                   ========         ========         ========         ========

Diluted earnings (loss) per common share           $  (0.01)        $   0.07         $   0.01         $   0.25
                                                   ========         ========         ========         ========
</TABLE>


                                       4
<PAGE>


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

<TABLE>
<CAPTION>
                                                                                     SIX MONTHS ENDED
                                                                                       DECEMBER 31,
                                                                               1999                    1998
                                                                           -------------          ------------
                                                                            (UNAUDITED)            (UNAUDITED)
<S>                                                                        <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                                 $ 24                 $ 1,099
     Adjustments to reconcile net income to net cash
       provided by operating activities:
       Loss on disposal of assets                                                259                       -
       Depreciation and amortization                                             360                     289
       Deferred taxes, net                                                       (87)                      8
       Allowance for doubtful accounts                                            86                      30
       Stock option compensation                                                 114                     131

     Cash provided (used) due to changes in assets and liabilities:
       Accounts receivable                                                     1,473                   1,112
       Inventory                                                                 444                     494
       Other assets                                                              230                     133
       Accounts payable                                                         (592)                 (1,660)
       Accrued commissions and other expenses                                     93                    (489)
       Accrued income taxes                                                        -                    (317)
       Other liabilities                                                           -                      (4)
       Minority interest                                                         161                     (98)
                                                                       -------------           -------------
       Net cash provided by operating activities                               2,565                     728
                                                                       -------------           -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Advance on note payable                                                       -                     100
     Net proceeds from issuance of common stock                                   11                      46
     Repurchase of common stock                                               (2,450)                 (1,138)
                                                                       -------------           -------------

     Net cash provided by financing activities                                (2,439)                   (992)
                                                                       -------------           -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from disposal of assets                                             54                      45
     Purchase of fixed assets                                                   (160)                   (491)
                                                                       -------------           -------------

     Net cash used by investing activities                                      (106)                   (446)
                                                                       -------------           -------------

     Net increase (decrease) in cash                                              20                    (710)

CASH AND CASH EQUIVALENTS, BEGINNING                                           8,581                   6,502
                                                                       -------------           -------------

CASH AND CASH EQUIVALENTS, ENDING                                      $       8,601           $       5,792
                                                                       =============           =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the period for:

       Income taxes                                                    $           -           $         694
                                                                       =============           =============

       Interest                                                        $          24           $          22
                                                                       =============           =============
</TABLE>


                                       5
<PAGE>


                                SPORT-HALEY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

          The consolidated 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 audited consolidated
          financial statements dated June 30, 1999, included in the Company's
          annual report on Form 10-K as filed with the Securities and Exchange
          Commission. 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 consolidated financial statements are prepared in conformity
          with generally accepted accounting principles, which require the use
          of management estimates, and contain all adjustments (including normal
          recurring adjustments) necessary to present fairly the operations and
          cash flows for the period presented.

          The consolidated financial statements include the accounts of
          Sport-Haley, Inc., and its majority owned subsidiary, B&L Sportswear,
          Inc. (collectively referred to as the Company). All significant
          intercompany accounts and transactions have been eliminated.

NOTE 2    INVENTORIES

          Inventories at December 31, 1999 consist of the following:

<TABLE>
                     <S>                                              <C>
                      Raw materials                                    $   4,119,000
                      Finished goods                                       8,720,000
                                                                       -------------
                                                                       $  12,839,000
                                                                       =============
</TABLE>

NOTE 3    INCOME TAXES

          The components of the deferred tax asset and net deferred tax
          liability recognized in the accompanying balance sheet as of December
          31, 1999, are as follows:

<TABLE>
<CAPTION>
                                                                           Current                Long-Term
                     <S>                                              <C>                     <C>
                      Deferred tax liability                           $           -           $           -
                      Deferred tax asset                                     108,000                 154,000
                                                                       -------------           -------------
                                                                       $     108,000           $     154,000
                                                                       =============           =============
</TABLE>


                                       6
<PAGE>


                                SPORT-HALEY, INC.
                   NOTES TO CONSOLIDATED 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 December 31, 1999, are as follows:

<TABLE>
<CAPTION>
                                                                                           Tax Effect
                                                                 Difference           Current      Long-Term
                                                               -------------        -----------  ------------
                    <S>                                        <C>                  <C>          <C>
                      Unrealized loss on investment             $   233,000         $   91,000   $         -
                      Allowance for doubtful accounts                45,000             17,000             -
                      Stock option compensation                     674,000                  -       263,000
                      Accumulated depreciation                      279,000                  -      (109,000)
                                                                                    ----------   -----------
                                                                                    $  108,000   $   154,000
                                                                                    ==========   ===========
</TABLE>

                The components of income tax expenses are as follows:

<TABLE>
                    <S>                                       <C>
                      Continuing operations:
                         Current:
                           Federal                              $    88,000
                           State                                     13,000
                                                                -----------
                                                                    101,000
                                                                -----------
                         Deferred:
                           Federal                                  (76,000)
                           State                                    (11,000)
                                                                -----------
                                                                    (87,000)
                                                                -----------
                                                                     14,000
                                                                -----------

                      Discontinued operations:
                         Current:
                           Federal                                  (88,000)
                           State                                    (13,000)
                                                                -----------
                                                                   (101,000)
                                                                -----------
                      Grand Total:                              $   (87,000)
                                                                ===========
</TABLE>


NOTE 4    REPURCHASE OF COMMON STOCK

          The repurchase of the Company's common stock is based upon the Board
          of Directors' belief that the Company's common stock is underpriced
          given its earnings, book value, working capital, and prospects for
          future operations. Repurchases may be made periodically in the open
          market, block purchases or in privately negotiated transactions,
          depending on market conditions and other factors. The Company has no
          commitment or obligation to repurchase all or any portion of the
          shares. All shares repurchased by the Company are cancelled and
          returned to the status of authorized but unissued common stock.


                                       7
<PAGE>


                                SPORT-HALEY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4    REPURCHASE OF COMMON STOCK  (continued)

          From December 1994 through December 1999, the Company's Board of
          Directors has authorized the repurchase of up to a total of 1,500,000
          shares. Through December 31, 1999, the Company has repurchased a total
          of 1,292,000 shares at a cost of approximately $9.4 million.

          From January 1, 2000, through February 10, 2000, the Company
          repurchased an additional 10,000 shares of its common stock at a cost
          of approximately $35,000.

NOTE 5    COMMON STOCK OPTIONS

          At December 31, 1999, there were outstanding common stock options to
          purchase 390,214 shares of the Company's common stock at prices
          ranging from $2.50 to $10.63, with expiration dates between March 15,
          2002, and January 4, 2009. During the six months ended December 31,
          1999, 4,500 options were exercised at a price of $2.50 per share.

          During October 1999, the Board of Directors authorized a 100,000 share
          increase in the maximum number of shares of common stock available for
          award grants (including incentive stock options). As of December 31,
          1999, the maximum number of shares of common stock available for award
          grants was 1,450,000.

          Included in the Company's net income for the six months ended December
          31, 1999, is a charge of approximately $114,000 which is a result of
          applying Statement of Financial Accounting Standards No. 123,
          ACCOUNTING FOR STOCK BASED COMPENSATION.

          In January 2000, the Compensation Committee of the Board of Directors
          granted to certain employees the option to collectively purchase
          166,000 shares of common stock at a price of $3.00 per share. Those
          options expire on January 5, 2010.

NOTE 6    EARNINGS PER SHARE

          The Company has adopted the provisions of Statement of Financial
          Accounting Standards No. 128, EARNINGS PER SHARE (SFAS No. 128),
          effective with the year ended June 30, 1998. SFAS No. 128 requires the
          presentation of basic and diluted earnings per common share. The
          following table provides a reconciliation of the numerator and
          denominator of basic and diluted earnings per common share:

<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED DECEMBER 31, 1999
                                                             ---------------------------------------------------
                                                                  Net
                                                             Income (Loss)             Shares         Per Share
                                                             -------------         ------------     ------------
              <S>                                           <C>                    <C>              <C>
               EARNINGS PER COMMON SHARE

               Basic earnings (loss) per share               $    (65,000)            3,722,454      $    (0.01)
                                                                                                     ==========
               Effect of dilutive securities
                   options                                              -                     -
                                                             ------------          ------------

               Diluted earnings (loss) per share             $    (65,000)            3,722,454      $    (0.01)
                                                             ============          ============      ==========
</TABLE>


                                       8
<PAGE>


                                SPORT-HALEY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 EARNINGS PER SHARE  (continued)

<TABLE>
<CAPTION>
                                                                       SIX MONTHS ENDED DECEMBER 31, 1999
                                                             ---------------------------------------------------
                                                                  Net
                                                             Income (Loss)             Shares         Per Share
                                                             -------------         ------------     ------------
              <S>                                           <C>                    <C>              <C>
               EARNINGS PER COMMON SHARE

               Basic earnings (loss) per share               $     24,000             3,852,087      $      0.01
                                                                                                     ===========
               Effect of dilutive securities
                   options                                              -                     -
                                                             ------------          ------------

               Diluted earnings (loss) per share             $     24,000             3,852,087      $      0.01
                                                             ============          ============      ===========
</TABLE>


<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED DECEMBER 31, 1998
                                                             ---------------------------------------------------
                                                                  Net
                                                                 Income               Shares         Per Share
                                                             -------------         ------------     ------------
              <S>                                           <C>                    <C>              <C>
               EARNINGS PER COMMON SHARE

               Basic earnings per share                      $    271,000             4,425,208      $      0.07
                                                                                                     ===========

               Effect of dilutive securities
                   options                                                                    -
                                                             -------------         ------------
               Diluted earnings per share                    $    271,000             4,425,208      $      0.07
                                                             ============          ============      ===========
</TABLE>


<TABLE>
<CAPTION>
                                                                        SIX MONTHS ENDED DECEMBER 31, 1998
                                                             ---------------------------------------------------
                                                                  Net
                                                                 Income               Shares         Per Share
                                                             -------------         ------------     ------------
              <S>                                           <C>                    <C>              <C>
               EARNINGS PER COMMON SHARE

               Basic earnings per share                      $  1,099,000             4,463,597      $      0.25
                                                                                                     ===========

               Effect of dilutive securities
                   options                                                                    -
                                                             -------------         ------------
               Diluted earnings per share                    $  1,099,000             4,463,577      $      0.25
                                                             ============          ============      ===========
</TABLE>


                                       9
<PAGE>


                                SPORT-HALEY, INC.

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

FINANCIAL CONDITION

The Company intends to rely on cash generated from operations and available
cash on hand to finance 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. Working capital at December
31, 1999, was approximately $25.2 million compared to approximately $28.6
million at December 31, 1998. Working capital decreased primarily because the
Company spent $3.8 million to repurchase 780,000 shares of its common stock
during the twelve-month period ended December 31, 1999.

Cash and cash equivalents have increased since June 30, 1999, by
approximately $20,000. During the six months ended December 31, 1999,
operating activities provided cash of approximately $2.6 million. During the
same six month period, the Company expended approximately $2.4 million to
repurchase 605,000 shares of its common stock. The Board of Directors had
authorized the repurchase, and management believed the repurchase of these
shares would benefit the shareholders by increasing book value with no
material adverse effect on working capital. The book value per share at
December 31, 1999, increased by approximately $0.55 per share since June 30,
1999.

Since June 30, 1999, receivables have decreased by approximately $1.5 million
from approximately $5.7 million. Receivables have decreased, primarily
because of the Company's intensified collection efforts and fewer orders
placed by golf professional shops for the Fall 1999 season. During the same
period, inventories have decreased by approximately $444,000 from
approximately $13.3 million. The decrease in inventories is reflective of
management's efforts to reduce prior seasons' inventories and the
implementation of improved controls relating to levels of production for
current-season merchandise.

Other current assets decreased by approximately $403,000 since June 30, 1999,
to approximately $1.2 million. The decrease, primarily in prepaid expenses,
is attributable to management's continued efforts to control costs and
spending.

For the six months ended December 31, 1999, the Company expended
approximately $160,000 for the purchase of property and equipment. During the
same period, the Company also received approximately $54,000 from the
disposition of its headwear manufacturing equipment, which had a book value
of approximately $313,000, resulting in a loss on disposition of
approximately $259,000. During the six months ended December 31, 1999,
approximately $360,000 in depreciation and amortization expense was charged
to current operations.

During the six months ended December 31, 1999, the Company used approximately
$592,000 in funds to reduce the June 30, 1999, accounts payable balance of
approximately $788,000. Accrued income taxes and other accrued liabilities
have increased approximately $93,000 since June 30, 1999.

Total shareholders' equity decreased by approximately $2.3 million for the
six month period. This was primarily the result of the repurchase by the
Company of 600,500 shares of its common stock at a cost of approximately $2.4
million. As a result, the Company's book value per share increased by $0.55
per share to $7.71, due to fewer outstanding shares.


                                       10
<PAGE>


                                SPORT-HALEY, INC.

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

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 quarter and six months ended December 31, 1999, were
approximately $4.7 million and $9.9 million, respectively, a decrease of
approximately $848,000 or 15%, and $3.0 million or 23%, from net sales of
approximately $5.5 million and $12.9 million for the same periods in the
prior fiscal year. The net sales decrease is attributable to fewer orders
placed by golf professional shops for the Fall 1999 season, continued
reduction of prior seasons' inventory at reduced sales prices, and relatively
flat sales in the intensely competitive golf apparel market as a whole.

As a percentage of net sales, gross profit was approximately 29% and 30% for
the quarter and six months ended December 31, 1999, respectively, and 34% and
37% for the same periods in the prior fiscal year. The decrease in gross
profit is due to a combination of factors, including the disposal of excess
prior seasons' inventories at reduced sale prices and increases in indirect
allocable costs. Management has implemented new marketing strategies designed
to improve brand identity and loyalty for the Company's products. Because of
the new marketing strategies, the seasonal nature of the golf apparel
business, and continued efforts to control costs, management expects margins
to improve somewhat in the third and fourth fiscal quarters.

Selling, general and administrative expenses decreased by approximately
$154,000, or 5%, to approximately $3.2 million for the six months ended
December 31, 1999, from approximately $3.4 million for the same period in the
prior fiscal year. The decrease is a result of commissions paid to
independent sales representatives on lower sales volume, decreased
advertising expenditures, and management's controls designed to reduce
general and administrative expenditures.

Other income (expense) increased by approximately $184,000 for the six months
ended December 31, 1999, as compared to the same period in the prior fiscal
year. The increase is primarily due to pending refunds of state income taxes
relating to certain capital expenditures in prior years.

Effective July 1, 1999, the Company increased its 52% ownership in its
subsidiary to a 93% interest by exchanging outstanding debt owed by the
subsidiary to the Company for additional equity in the subsidiary. The
subsidiary incurred a loss for the six-month period ended December 31, 1999.
The minority interest decrease attributable to the loss was approximately
$8,000.

Income from continuing operations before provision for income taxes and
minority interest decreased by approximately $1.4 million, or 88%, to
$185,000 for the six months ended December 31, 1999, from approximately $1.6
million for the same period in the prior fiscal year.

Included in earnings for the fiscal quarter and six months ended December 31,
1999, are pre-tax losses of approximately $166,000 and $259,000,
respectively, from the disposition of headwear equipment. The Company
discontinued the manufacturing and sale of headwear during the fiscal year
ended June 30, 1999, and had disposed of all inventories and equipment
relating to headwear as of December 31, 1999.


                                       11
<PAGE>


                                SPORT-HALEY, INC.

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

RESULTS OF OPERATIONS  (continued)

The Company's effective income tax rates for the six months ended December
31, 1999 and 1998, were approximately 7% and 33%, respectively. The decrease
in the effective rate for the six months ended December 31, 1999, is due to
the decrease in taxable income and timing differences of certain book
expenses and tax deductions.

For the six-month period ended December 31, 1999, net income decreased by
approximately $944,000 or 84% when compared to the same period in the prior
fiscal year. The decrease is the result of reduced sales, lower gross
margins, and loss on the disposition of headwear manufacturing equipment.

Both the basic and diluted earnings per share were $0.01 for the six months
ended December 31, 1999. This compares to basic and diluted earnings per
share of $0.25 for the same period in fiscal 1998.

YEAR 2000 ISSUE

The Company was cognizant of the Year 2000 issues associated with programming
code in computer systems. The Company utilizes an integrated computer system
to manage all business transactions, historical data and record keeping, from
sourcing to warehousing, to embroidery to shipping. In preparation for the
Year 2000, the Company installed a Year 2000 compliant upgrade to the
software for this system and tested all other systems. As of February 14,
2000, the Company had not experienced, nor does it expect to experience, any
disruption related to the Year 2000 problems in the operation of its systems.
To the best knowledge of the Company, none of the material suppliers, vendors
and financial institutions with which the Company has a business relationship
experienced any failures or disruptions in their computer systems caused by
the Year 2000.

Although most Year 2000 related problems should have become evident on
January 1, 2000, some problems may arise later. For example, some software
programs may have difficulty resolving the so-called "century leap year"
algorithm which will also occur during the Year 2000. The Company does not
expect any material adverse effects from any remaining Year 2000 issues that
could arise, nor does it anticipate expending additional funds on the Year
2000 compliance issues.


                                       12
<PAGE>


                                SPORT-HALEY, INC.
                                     PART II
                                OTHER INFORMATION

ITEM 1   LEGAL PROCEEDINGS - NONE

ITEM 2   CHANGES IN SECURITIES AND USE OF PROCEEDS- 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


                                       13

<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:         February 14, 2000                      /s/ Robert G. Tomlinson
              -----------------                      -----------------------
                                                     Robert G. Tomlinson
                                                     Chief Executive Officer



Date:        February 14, 2000                       /s/ Patrick W. Hurley
             -----------------                       ---------------------
                                                     Patrick W. Hurley
                                                     Chief Accounting Officer



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