<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 MARCH 31, 1998

            / / 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 MAY 13, 1998
         COMMON STOCK, NO PAR VALUE                       4,492,962

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

<PAGE>

                                     INDEX

<TABLE>
<CAPTION>
                                                                         PAGE
                                                                        ------
<S>                                                                     <C>
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                                      7-11

     ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITIONS AND RESULTS OPERATIONS                12-13


PART II - OTHER INFORMATION                                              14-15


SIGNATURES                                                                  16
</TABLE>


<PAGE>

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

<TABLE>
<CAPTION>
                                                                         MARCH 31,              JUNE 30,
                                                                            1998                   1997
                                                                       -------------           ----------
                                                                        (UNAUDITED)               (NOTE)
<S>                                                                    <C>                     <C>
                                     ASSETS
Current assets:
     Cash and cash equivalents                                         $       3,463           $      10,273
     Short-term investments and marketable securities                          2,075                   1,319
     Accounts receivable, net of allowances of
       $119,000 and $126,000, respectively                                     6,806                   5,756
     Inventories (Note 2)                                                     16,039                   9,982
     Other current assets                                                      1,794                   1,116
                                                                       -------------           -------------
                                                                              30,177                  28,446
                                                                       -------------           -------------
Property and equipment                                                         3,717                   3,243
Property held under capital leases                                                 7                       7
     Less, accumulated depreciation                                           (1,204)                   (841)
                                                                       -------------           -------------
                                                                               2,520                   2,409
                                                                       -------------           -------------
Other assets:
     Other assets                                                                548                      67
                                                                       -------------           -------------
                                                                       $      33,245           $      30,922
                                                                       -------------           -------------
                                                                       -------------           -------------
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                  $       1,481           $       1,319
     Capital lease obligations maturing within one year                            1                       2
     Accrued income taxes (Note 3)                                               319                       -
     Accrued commissions and other expenses                                    1,665                     874
                                                                       -------------           -------------
                                                                               3,466                   2,195
                                                                       -------------           -------------
Long-term liabilities:
     Capital lease obligations, net of current maturities                          -                       1
     Other                                                                        21                      20
                                                                       -------------           -------------
                                                                                  21                      21
                                                                       -------------           -------------
                                                                               3,487                   2,216
                                                                       -------------           -------------
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; 4,492,962 and
       4,651,073 shares issued and outstanding, respectively                  18,254                  20,440
     Additional paid in capital                                                  516                     285
     Unrealized losses on available for sale securities                         (100)                   (206)
     Retained earnings                                                        11,088                   8,187
                                                                       -------------           -------------
                                                                              29,758                  28,706
                                                                       -------------           -------------
Total Liabilities and Stockholders' Equity                             $      33,245           $      30,922
                                                                       -------------           -------------
                                                                       -------------           -------------
</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)

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                              MARCH 31,                          MARCH 31,
                                                       1998             1997               1998            1997
                                                   -----------       -----------        -----------     -----------
                                                   (UNAUDITED)       (UNAUDITED)        (UNAUDITED)     (UNAUDITED)
<S>                                                <C>               <C>                <C>             <C>
Net sales                                          $     8,610       $     8,823        $    21,911     $   20,822

Cost of goods sold                                       4,996             5,089             13,313         12,001
                                                   -----------       -----------        -----------     ----------

Gross profit                                             3,614             3,734              8,598          8,821

Selling, general and administrative expense              1,986             1,826              5,355          4,958
                                                   -----------       -----------        -----------     ----------

Income from operations                                   1,628             1,908              3,243          3,863

Other income (expense):
     Other income                                          167                87                519            540
     Cash Settlements-stock options (Note 5)                 -              (360)                 -           (360)
     Interest and other expense                            (92)               (1)              (144)            (1)
                                                   -----------       -----------        -----------     ----------
                                                            75              (274)               375            179
                                                   -----------       -----------        -----------     ----------

Income before income taxes                               1,703             1,634              3,618          4,042

Provision for income taxes (Note 3)                        344               435                716          1,214
                                                   -----------       -----------        -----------     ----------

Net income                                         $     1,359       $     1,199        $     2,902     $    2,828
                                                   -----------       -----------        -----------     ----------
                                                   -----------       -----------        -----------     ----------

Basic earnings per common share                    $      0.30       $      0.27        $      0.63     $     0.64
                                                   -----------       -----------        -----------     ----------
                                                   -----------       -----------        -----------     ----------

Diluted earnings per common share                  $      0.30       $      0.25        $      0.63     $     0.60
                                                   -----------       -----------        -----------     ----------
                                                   -----------       -----------        -----------     ----------
</TABLE>

                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                NINE MONTHS ENDED
                                                                                     MARCH 31,
                                                                           1998                     1997
                                                                       -------------           -------------
                                                                        (UNAUDITED)             (UNAUDITED)
<S>                                                                    <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income                                                             $       2,902           $       2,828
Adjustments to reconcile net income to net cash
     provided by operating activities:
     Depreciation and amortization                                               405                     322
     Depreciation recorded as prepaid expense                                    (10)                    (12)
     Deferred taxes, net                                                         (15)                    (37)
     (Decrease) increase in allowance for doubtful accounts                       48                      36
     Deferred stock option compensation                                          230                     147
     Deferred rents                                                                -                       3

(Increase) decrease in assets:
     Short-term investments to maturity                                         (755)                  1,037
     Accounts receivable                                                      (1,097)                 (1,691)
     Inventory                                                                (6,058)                 (2,759)
     Other current assets                                                     (1,151)                   (425)

(Increase) decrease in liabilities:
     Accounts payable                                                            595                  (1,032)
     Accrued commissions and other expenses                                      338                     397
     Accrued income taxes                                                        319                    (263)
     Accrued and withheld taxes                                                   21                      18
     Deferred rent                                                                (1)                     (1)
                                                                       -------------           -------------

     Net cash provided by operating activities                                (4,229)                 (1,432)
                                                                       -------------           -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Principal payments on capital lease obligation                               (1)                     (1)
     Net proceeds from issuance of common stock                                  525                   1,337
     Stock purchased and retired                                              (2,711)                 (1,625)
                                                                       -------------           -------------

     Net cash provided by financing activities                         $      (2,187)          $        (289)
                                                                       -------------           -------------
</TABLE>

                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                NINE MONTHS ENDED
                                                                                     MARCH 31,
                                                                           1998                     1997
                                                                       -------------           -------------
                                                                        (UNAUDITED)             (UNAUDITED)
<S>                                                                    <C>                     <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of fixed assets                                          $        (586)          $        (964)
     Disposal of assets                                                          192                       -
     Investment in "available to sell" securities, net                             -                   1,240
                                                                       -------------           -------------

     Net cash used by investing activities                                      (394)                    276
                                                                       -------------           -------------

     Net increase (decrease) in cash                                          (6,810)                 (1,445)

CASH AND CASH EQUIVALENTS, BEGINNING                                          10,273                   8,648
                                                                       -------------           -------------

CASH AND CASH EQUIVALENTS, ENDING                                      $       3,463           $       7,203
                                                                       -------------           -------------
                                                                       -------------           -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: 
     Cash paid during the period for:

       Income taxes                                                    $         466           $       1,050
                                                                       -------------           -------------
                                                                       -------------           -------------

       Interest                                                        $          16           $           1
                                                                       -------------           -------------
                                                                       -------------           -------------

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

</TABLE>

At March 31, 1998, the Company has unrealized holding losses on marketable
securities of approximately $196,000 of which $98,700 has been charged off in
the Company's statement of income at March 31, 1998.


                                       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, 1997. 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 March 31, 1998 consist of the following:

<TABLE>
<CAPTION>
                      <S>                           <C>
                      Raw materials                 $   6,576,000
                      Finished goods                    9,463,400
                                                    -------------
                                                    $  16,039,400
                                                    -------------
                                                    -------------
</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, 1997, are as follows:

<TABLE>
<CAPTION>
                                   Current                Long-Term
                               -------------           -------------
<S>                            <C>                     <C>
Deferred tax (liability)       $           -           $     (20,700)
Deferred tax asset                    71,100                       -
                               -------------           -------------
                               $      71,100           $     (20,700)
                               -------------           -------------
                               -------------           -------------
</TABLE>


                                       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 March 31, 1998, as follows:

<TABLE>
<CAPTION>
                                                                                    Tax Effect
                                                             Difference       Current        Long-Term
                                                             ----------       ----------     -----------
                      <S>                                    <C>              <C>            <C>
                      Loss on stock                          $    96,600      $   24,700     $         -
                      Allowance for doubtful accounts            118,900          46,400               -
                      Stock option compensation                  338,200               -         131,900
                      Accumulated depreciation                   391,200               -        (152,600)
                                                                              ----------     -----------
                                                                              $   71,100     $   (20,700)
                                                                              ----------     -----------
                                                                              ----------     -----------
</TABLE>

                The components of income tax expenses are as follows:

<TABLE>
                      <S>                                    <C>
                      Current:
                         Federal                             $   630,200
                         State                                   100,800
                                                             -----------
                                                                 731,000
                                                             -----------
                      Deferred:
                         Federal                                 (12,668)
                         State                                    (2,032)
                                                             -----------
                                                                 (14,700)
                                                             -----------
                                                             $   716,300
                                                             -----------
                                                             -----------
</TABLE>


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. Additionally, the
                Board of Directors authorized increases of 150,000 common shares
                during October, 1996 and 1997, respectively, that may be
                repurchased, thus bringing the total common shares authorized
                for repurchase under the plan to 450,000 shares.

                The repurchase of the Company's common stock is based upon the
                Board of Director's belief the Company's common stock is
                underpriced given its earnings and prospects for future
                operations. 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.


                                       8
<PAGE>

                                 SPORT-HALEY, INC.
                          NOTES TO FINANCIAL STATEMENTS


NOTE 4          REPURCHASE OF COMMON STOCK (continued)

                As of March 31, 1998, the Company has repurchased 400,000 shares
                of its common stock at a cost of approximately $4.702 million.


NOTE 5          COMMON STOCK OPTIONS

                At March 31, 1998, the Company had 414,999 options outstanding
                to purchase common stock at prices ranging from $2.50 to $14.25,
                with expiration dates between March 15, 2003 and November 13,
                2007. During the nine months ended March 31, 1998 the Company
                issued options to purchase 155,001 shares. Additionally, option
                holders exercised and purchased 73,326 shares of the Company's
                common stock and the Company realized gross proceeds of
                approximately $469,700 from the sale and exercise of these
                options. During the nine months ending March 31, 1998, the
                Company cancelled 34,229 options for individuals no longer
                covered under the Company's option plan.

                Included in the Company's nine month net income is a charge of
                approximately $230,000, which is a result of FASB 123-Accounting
                for Stock Based Compensation.


NOTE 6          EARNINGS PER SHARE

                The following tables reflect the Company's adoption of Financial
                Accounting Standards Statement No. 128, Earnings Per Share.
                Accordingly, the prior-period earnings per share have been
                restated.

<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED MARCH 31, 1998
                                                             --------------------------------------------
                                                                 Net
                                                                Income            Shares        Per Share
                                                             ------------        ---------      ---------
               <S>                                           <C>                 <C>            <C>
               BASIC EARNINGS PER SHARE
               Income available
               to common shareholders                        $  1,359,000        4,499,406      $  0.30
                                                                                                -------
                                                                                                -------
               Effect of Dilutive Securities
                   Warrants                                                         28,120
                   Options, net of future tax benefit                                5,628
                                                             ------------        ---------

               DILUTED EARNINGS PER SHARE                    $  1,359,000        4,533,154      $  0.30
                                                             ------------        ---------      -------
                                                             ------------        ---------      -------
</TABLE>


                                       9
<PAGE>

                                 SPORT-HALEY, INC.
                          NOTES TO FINANCIAL STATEMENTS


NOTE 6          EARNINGS PER SHARE (continued)

<TABLE>
<CAPTION>
                                                                      NINE MONTHS ENDED MARCH 31, 1998
                                                            -------------------------------------------------
                                                                Net
                                                               Income                  Shares       Per Share
                                                            -------------             ---------     ---------
               <S>                                          <C>                       <C>           <C>
               BASIC EARNINGS PER SHARE
               Income available
               to common shareholders                       $   2,902,000             4,587,482      $  0.63
                                                                                                     -------
                                                                                                     -------
               Effect of Dilutive Securities
                   Warrants                                                              28,120
                   Options, net of future tax benefit                                     5,628
                                                            -------------             ---------
               DILUTED EARNINGS PER SHARE                   $   2,902,000             4,621,230      $  0.63
                                                            -------------             ---------      -------
                                                            -------------             ---------      -------
</TABLE>

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED MARCH 31, 1997
                                                            --------------------------------------------------------
                                                                Net
                                                               Income                  Shares       Per Share Amount
                                                            -------------             ---------     ----------------
                <S>                                         <C>                       <C>           <C>
                BASIC EARNINGS PER SHARE
                    Income available
                        to common shareholders              $   1,199,000             4,432,210        $0.27
                                                                                                     -------
                                                                                                     -------
                Effect of Diluted Securities
                    Warrants                                                             27,535
                    Options                                                             300,779
                                                            -------------             ---------      -------
                DILUTED EARNINGS PER SHARE                  $   1,199,000             4,760,524        $0.25
                                                            -------------             ---------      -------
                                                            -------------             ---------      -------
</TABLE>

<TABLE>
<CAPTION>
                                                                          NINE MONTHS ENDED MARCH 31, 1997
                                                            --------------------------------------------------------
                                                               Net
                                                               Income                  Shares       Per Share Amount
                                                            -------------             ---------     ----------------
                <S>                                         <C>                       <C>           <C>
                BASIC EARNINGS PER SHARE
                    Income available
                        to common shareholders              $ 2,828,000               4,403,100        $0.64
                                                                                                     -------
                                                                                                     -------
                Effect of Diluted Securities
                    Warrants                                                             27,535
                    Options                                                             300,779
                                                            -------------             ---------
                DILUTED EARNINGS PER SHARE                  $ 2,828,000               4,731,414        $0.60
                                                            -------------             ---------      -------
                                                            -------------             ---------      -------
</TABLE>

                                       10
<PAGE>

                                 SPORT-HALEY, INC.
                          NOTES TO FINANCIAL STATEMENTS


NOTE 7          ACQUISITION

                On March 27, 1998, the Company closed on its purchase of 52% of
                the outstanding shares of capital stock of B&L Sportswear, Inc.
                ("B&L"). The acquisition was completed pursuant to the terms of
                a stock purchase agreement. The Company paid $171,980 in cash to
                acquire its 52% ownership interest in B&L. The cash payments
                were made out of working capital of the Company. The Company and
                remaining shareholders entered into a buy-sell agreement
                restricting transfer of their shares of B&L and granting the
                other party a right of first refusal upon the occurrence of
                certain events which could lead to a change in ownership of the
                shares.

                In addition to the share purchases, the Company loaned B&L
                $386,317 to pay in full certain outstanding obligations and to
                acquire certain equipment. Principal on the loan and accrued
                interest at 8% per annum are both payable in full on March 31,
                2003. The loan is secured by all fixed assets and inventory of
                B&L.

                B&L, a company headquartered in Four Oaks, North Carolina, has
                been a principal cutting and sewing contractor utilized by the
                Company for several years and is expected to manufacture the
                Company's products on an exclusive basis in the future. The
                Company's management believes that the acquisition of a
                controlling interest in B&L will enhance the Company's ability
                to control costs, product delivery and inventory. It also
                believes that by utilizing a captive cutting and sewing
                contractor, the Company will be able to expand its corporate and
                retail sales efforts, remain competitive and maintain historical
                margins.



                                       11
<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 for the nine month period ended March 31, 1998
continues to improve as a result of growth in net sales, and increase in net
income. The Company intends to rely on cash generated from operations and
investments 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.

During the nine months ended March 31, 1998, current assets and current
liabilities increased by approximately $1.7 million and $1.3 million,
respectively, as compared to current assets and current liabilities at June 30,
1997.

Inventories at March 31, 1998 were approximately $16.0 million, which represents
an increase of approximately $6.1 million from June 30, 1997. The increase in
inventory was to meet the fiscal fourth quarter sales orders and provide for the
fall selling season.

For the nine months ended March 31, 1998, the Company spent approximately
$474,000 for office furniture and equipment.

The Company received proceeds of approximately $525,000 from the exercise of
stock options and warrants during the nine months ended March 31, 1998.
Stockholders' equity increased by approximately $1.1 million for the nine month
period. Net income increased stockholders' equity by approximately $1.9 million
while the Company expended approximately $2.7 million to repurchase 240,000
shares of its common stock.

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 third quarter ended March 31, 1998, were approximately $8.6
million, a decrease of approximately $200,000, or 2%, from net sales of $8.8
million for the same quarter in the prior fiscal year. The 2% reduction in net
sales is attributable to the depressed sales to the Company's professional golf
course accounts, reflecting the impact of El Nino weather patterns on golf
courses in California, North and South Carolina, Florida and Arizona. Net sales
for the nine months ended March 31, 1998 were $21.9 million. This is an increase
of $1.1 million or 5%, over the same nine month period of fiscal 1997. The net
sales for the nine months of fiscal 1998, while positive, reflect the various
problems the Company has encountered with the UPS strike, resulting in canceled
sales orders, and the weather related problems in the second and third quarters.

The Company's gross profit declined approximately $120,000 and $223,000 for the
three months and the nine months ended March 31, 1998. Gross profit as a
percentage of sales was 42% for each of the three month periods and declined to
39% from 42% for the nine month periods.


                                       12
<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 $160,000
or 9% for the third quarter ended March 31, 1998, from $1.8 million for the same
quarter in the prior fiscal year. For the nine months ended March 31, 1998,
these costs increased by approximately $397,000, or 8% from $5.0 million in the
same nine month period in the prior fiscal year. The increase for both periods
can be attributed to personnel additions necessary to handle increased sales
volume, commissions paid to independent sales representatives on higher sales
volume, increased advertising and general administration expenditures.

Other income (expense) increased by approximately $349,000 and $169,000 for the
three months and the nine months ended March 31, 1998 as compared to the same
periods in the prior fiscal year. During the prior fiscal year the Company
incurred costs of approximately $360,000 to repurchase 30,909 shares of its
stock options. The Company has not incurred similar costs during the current
fiscal year period.

Income before provision for income taxes decreased by approximately $91,000, or
21%, for the third fiscal quarter ended March 31, 1998, from $435,000 for the
same quarter in the prior fiscal year. Income before provisions for income taxes
decreased by approximately $498,000 or 41% for the nine months ended March 31,
1998, from $1.2 million in the same period in the prior fiscal year.

The Company's effective tax rates for the quarters ended March 31, 1998 and
March 31, 1997 were approximately 20% and 27%, respectively. The effective tax
rates for the nine month periods ended March 31, 1998 and 1997, were 20% and
30%, respectively. The decrease in the effective rate for the fiscal 1998
periods are due to certain stock option tax deductions net of FASB
123-Accounting for Stock Based Compensation book deductions.

For the three month and the nine month periods ended March 31, 1998, net income
increased by approximately $160,000 or 13% and $74,000 or 3%, respectively, when
compared to the same three and nine month periods in the prior fiscal year.

Both the basic and diluted earnings per share were $.30, respectively, for the
third quarter ended March 31, 1998. This compares to basic and diluted earnings
per share of $.27 and $.25, respectively, for the same quarter in fiscal 1997.
The nine month basic and diluted earnings per share at March 31, 1998 were both
$.63, respectively. This compares to basic and diluted earnings per share of
$.64 and $.60 per share, respectively, for the same nine month period in fiscal
1997.


                                       13
<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 OF MATTERS TO A VOTE OF SECURITY HOLDERS

        (a)   The annual meeting of shareholders was held February 10, 1998.
        (b)   The following were elected directors with terms until their 
              successor shall have been duly elected and qualified.

<TABLE>
<CAPTION>
                                                        Votes for           Votes withheld
                   <S>                                  <C>                 <C>
                   Robert G. Tomlinson                   3,971,696             127,573
                   Robert W. Haley                       3,971,696             127,573
                   Mark J. Stevenson                     3,971,696             127,573
                   Ronald J. Norick                      3,971,196             128,073
                   James H. Everest                      3,971,696             127,573
</TABLE>

        (c)   To consider and act upon a proposal to approve amendments
              to, and a restatement of the Company's 1993 Stock Option
              Plan ("Plan") to (I) permit the issuance of an additional
              150,000 shares of common stock pursuant to the Plan, and
              (II) to simplify administration of the Plan in accordance
              with revisions to Section 16 of the Securities Exchange
              Act of 1934.

<TABLE>
                   <S>                                   <C>
                   For                                   3,871,047
                   Against                                 218,523
                   Abstain                                   9,699
                   Not voted                               493,693
</TABLE>

              To ratify the appointment of Levine, Hughes & Mithuen, 
              Inc. as auditors of the Company.

<TABLE>
                   <S>                                   <C>
                   For                                   4,060,446
                   Against                                  30,430
                   Abstain                                   8,393
</TABLE>

        (d)   None

ITEM 5  OTHER INFORMATION - NONE


                                       14
<PAGE>

                                 SPORT-HALEY, INC.
                                     PART II
                                OTHER INFORMATION


ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K

        (A)  EXHIBITS

             27   FINANCIAL DATA SCHEDULE

        (B)  REPORTS ON FORM 8-K -
             A report on Form 8-K, dated March 27, 1998 was filed on
             April 23, 1998 reporting the Registrant's purchase of 52%
             of the outstanding shares of the capital stock of B&L
             Sportswear, Inc. under Item 5 of such Form.




                                       15
<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:         May 14, 1998           /s/ Robert G. Tomlinson
              ------------           -----------------------
                                     Robert G. Tomlinson
                                     Chief Executive Officer


Date:        May 14, 1998            /s/ Steve S. Auger
             ------------            ------------------
                                     Steve S. Auger
                                     Chief Accounting Officer




                                       16