<PAGE>

                                    FORM 10-K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    FOR THE FISCAL YEAR ENDED JUNE 30, 1999
                                       OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
    For the transition period from ____________ to ____________

                         Commission file number: 1-12888

                                SPORT-HALEY, INC.
             (Exact Name of Registrant as Specified in Its Charter)

             COLORADO                                     84-1111669
  (State or Other Jurisdiction of                      (I.R.S. Employer
  Incorporation or Organization)                    Identification Number)

       4600 EAST 48TH AVENUE
           DENVER, COLORADO                                 80216
  (Address of Principal Executive Offices)                (Zip Code)

       Registrant's telephone number, including area code: (303) 320-8800

               Securities registered pursuant to Section 12(b) of
                               the Exchange Act:

     Title of each class      Name of each exchange on which registered
            NONE                                NONE

      Securities registered pursuant to section 12(g) of the Exchange Act:

                      COMMON STOCK, NO PAR VALUE PER SHARE

Indicate by checkmark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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
                                      ---   ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

As of September 24, 1999, the aggregate market value of the 3,644,969 shares
of Common Stock (the registrant's only common equity) held by non-affiliates
was $16,630,171 based on the closing sale price of the Registrant's Common
Stock on the Nasdaq National Market-Registered Trademark- on such date. For
purposes of the foregoing calculation only, each of the Registrant's officers
and directors is deemed to be an affiliate.

There were 3,854,552 shares of the registrant's Common Stock outstanding at the
close of business on September 27, 1999.

                      DOCUMENTS INCORPORATED BY REFERENCE:

                                      NONE


<PAGE>

                                     PART I

ITEM 1.  BUSINESS

GENERAL

          Sport-Haley designs, contracts for the manufacture of, and markets
men's and women's quality fashion golf apparel known for its innovative design,
quality fabrics, generous fit and classic style. SportHaley's apparel is sold
under the distinctive Haley-Registered Trademark- label in the premium and
mid-price market, primarily to golf professional shops, country clubs and
resorts throughout the United States and internationally. SportHaley has
historically marketed its apparel through a network of independent sales
representatives and distributors to golf professional shops located at private
and resort courses, which generally enhances the appeal of the Haley brand name.
These golf professional shops prefer to sell quality apparel which is not
broadly distributed in the retail market. Sport-Haley has, over the years,
expanded its marketing program and during the past two years has been focusing
those expanded marketing efforts on the corporate market. Sport-Haley custom
embroiders a majority of its men's apparel with a customer's club, resort or
corporate logo, thereby promoting the image of both Sport-Haley and its
customers and enhancing the marketability of its products. Sport-Haley was
incorporated in Colorado in January 1991. Its principal executive offices are
located at 4600 East 48th Avenue, Denver, Colorado 80216, and its telephone
number is (303) 320-8800.

PRODUCTS AND PRODUCT DESIGN

         During the fiscal year ended June 30, 1999, Sport-Haley's golf
apparel consisted of a men's line, a women's line, the Elements line and a
headwear line. All of the lines were marketed under the distinctive
Haley-Registered Trademark- label. Sport-Haley introduces spring and fall
collections of its men's line and women's line at the two major golf industry
trade shows, generally held in January and September of each year. A new
Elements line is generally introduced at the January trade show. The spring
collection typically accounts for approximately 60% of sales, with the fall
collection accounting for the remaining sales. The corporate collection is
changed less frequently as it contains basic, classic styles.

         As sales have increased, Sport-Haley has expanded the number of items
available in each of the men's and women's lines, offering a more extensive
selection of styles, colors and fabrics. Each of the men's and women's lines
currently has between 130 and 150 pieces of apparel, including shirts,
pullovers, vests, shorts, sweaters, jackets and pants. Sport-Haley introduced
the "Elements line" in January 1996 and a headwear line in the fall of 1996. The
Elements line is a collection of outerwear for both men and women, currently
consisting of over 80 pieces of apparel such as rain suits, casual jackets,
windshirts, vests and pants. The headwear line, consisting of high quality
fabric caps and visors, was discontinued effective June 30, 1999 when it did not
achieve profitability objectives.

         Sport-Haley's golf apparel is sold in the premium and mid-price market.
Apparel designed for premium pricing features larger sizing, higher quality
materials and more detailed designs. The following table sets forth information
regarding suggested retail price ranges for various apparel items.

<TABLE>
<CAPTION>


                                 SUGGESTED RETAIL                          SUGGESTED RETAIL
         MEN'S APPAREL              PRICE RANGE        WOMEN'S APPAREL        PRICE RANGE
         -------------           -----------------     ---------------     -----------------
        <S>                      <C>                  <C>                  <C>
         Shirts                  $  45  - $   80       Tops                 $ 48  -  $  70
         Shorts                  $  60  - $   70       Shorts               $ 60  -  $  84
         Pants                   $  80  - $  120       Pants                $ 70  -  $ 112
         Pullovers/Vests         $  50  - $  100       Sweaters             $ 50  -  $ 140
         Elements Outerwear      $  50  - $  380       Elements Outerwear   $ 50  -  $ 225

</TABLE>

                                       -2-

<PAGE>



         Sport-Haley's golf apparel is designed in the classic style with
contemporary influences intended to develop and maintain brand recognition and
loyalty. Each product in a line of apparel is sold separately, although the
lines are designed using coordinated styles, color schemes and fabrics to
encourage purchase of multiple garments. Apparel is manufactured from a variety
of fabrics and weave patterns, including interlock, pique, french terry and
twill, and may feature a unique trim, a special fabric finish or extra
needlework.

         The design function within Sport-Haley is closely attuned to both sales
and production operations. The design process for each collection is an ongoing
process of coloring, styling, manufacturing of sample products and the selection
of sewing techniques. Sport-Haley relies on in-house designers as well as
outside contract designers in the development of its apparel collections.
Sport-Haley's design staff is responsible for coordinating pattern and sample
making, negotiating price and quantity with cutting and sewing contractors,
purchasing fabric and trim, and coordinating production schedules with
production personnel. The design staff also coordinates inspection of fabric
supplies, as well as sample testing of fabric for shrinkage and colorfastness.

          A majority of the men's apparel, and a smaller percentage of
women's apparel, is custom embroidered with a customer's club or resort logo
and generally with the Haley-Registered Trademark- logo. Shirts and other
garments for tournaments, promotional events, and corporate sales and gifts
are custom embroidered with a sponsor or corporate logo and the
Haley-Registered Trademark- logo. Garments are embroidered on Sport-Haley's
premises using ten computer-controlled embroidering machines which together
can embroider over 3,000 custom logos in two 8-hour daily shifts. Sport-Haley
currently has a library of over8,000 custom logos. Embroidery charges are
added to the customer's wholesale cost and therefore represent an additional
source of revenue.

SALES AND MARKETING

         OVERVIEW. Sport-Haley's marketing strategy is to enhance its position
as a leading provider of fashion golf apparel by capitalizing on the market
awareness of the Haley brand name and expanding distribution of existing apparel
lines. It intends to implement this strategy by (i) increasing distribution
through expansion of its network of independent sales representatives, adding
new golf professional shops to its customer base and increasing purchases from
existing customers, (ii) securing and exploiting distribution arrangements for
international sales, (iii) diversifying product lines by developing new styles
and designs which are natural variations on its existing apparel designs, and
(iv) continuing to focus marketing efforts on the corporate market.

          In the fiscal year ended June 30, 1999 ("fiscal 1999"), approximately
77% of Sport-Haley's sales were made to domestic and foreign golf course
professional shops, country clubs and resorts. Approximately 15% of sales were
made to corporate, special event and retail customers, 1% was sold through a
factory outlet store in Laughlin, Nevada and the remaining 7% was sold to a
limited number of customers at discounted excess inventory prices. No single
customer accounted for 5% or more of net sales.

         GOLF PROFESSIONAL SHOPS, COUNTRY CLUBS AND RESORTS. Domestic sales are
made primarily through a network of approximately 35 independent sales
representatives who sell Sport-Haley's apparel, on a commission basis, mainly to
golf professional shops, country clubs and resorts in all of the 50 states and
Canada. These independent sales representatives, many of whom may also carry
other golf-related lines, are responsible for generating and serving customers
in a specific geographic territory. In January 1997, Sport-Haley began entering
into buying programs with various entities whose golf professional shop members
can purchase directly from Sport-Haley under the programs. These buying programs
accounted for less than 10% of sales in fiscal 1999. International sales are
made through distributors in Puerto Rico,


                                       -3-
<PAGE>

the Carribean Islands, Mexico, Ireland, Japan, Chile, portions of Southeast
Asia, the Philippines, Hong Kong, Portugal and to U.S. military bases overseas.
Although Sport-Haley has distributors in foreign countries, historically most of
its sales have been in the United States. Foreign sales represented less than 3%
of sales in fiscal 1999.

         Sport-Haley's sales and marketing employees are responsible for
implementing marketing plans and sales programs, coordinating the network of
independent sales representatives, providing customer service and participating
in industry trade shows. Sport-Haley supports the sales activities of the
independent sales representatives and distributors by making customer service
personnel available to them, providing detailed catalogs for each collection
which present pricing, sizing and style options, and providing access to VRLink,
a private electronic network designed for companies in the apparel industry.
Using computers, the representatives can access current inventory availability
and create and transmit orders from a remote location, which enhances the
representatives' order processing speed and accuracy and reduces the risk of
orders which cannot be timely filled. VRLink also interfaces with Sport-Haley's
management system which provides management with key sales data which
facilitates planning, production scheduling, product tracking and standard cost
control. Sport-Haley also maintains a homepage at "www.sporthaley.com" on the
internet. The page is purely informational at present, providing limited
information about Sport-Haley and its apparel. Sport-Haley is currently
developing a more comprehensive website which will allow on-line ordering by
sales representatives and their customers.

         Sport-Haley introduces its golf apparel collections at the two major
golf industry trade shows held generally in January and September of each year
in Orlando, Florida, and Las Vegas, Nevada, respectively. Because many buyers
for golf professional shops attend one or both of these trade shows, Sport-Haley
will usually receive a significant number of customer orders at or following
each trade show. At these trade shows, Sport-Haley also obtains consumer
response to apparel designs, fabrics and styles and other information necessary
to prepare more accurate and detailed sales forecasts.

         In order to enhance the visibility of the Haley brand, Sport-Haley has
oral endorsement agreements with several select PGA and LPGA professionals.
Sport-Haley also has an agreement with a Canadian Tour professional, which
exemplifies its commitment to the international markets. In exchange for the
professionals endorsing and wearing Sport-Haley's apparel, Sport-Haley provides
apparel allowances.

         Sport-Haley advertises its apparel in several golf industry
publications which are distributed primarily to operators of golf professional
shops. It also expends a portion of its advertising budget to support the sales
activities of its network of independent sales representatives. International
distributors provide and pay for advertising in their respective geographic
territories.

         In order to increase the commitment of its existing customers,
Sport-Haley recently implemented a program to provide approximately450 customers
with distinctive fixtures dedicated to displaying SportHaley's apparel. If the
customer carries a pre-determined amount of inventory for a specified period of
time, the fixture becomes the property of the customer for a nominal fee. This
program is designed to encourage customers to stock more apparel and to
strengthen their commitment to Sport-Haley, as well as to prominently display
Sport-Haley's apparel.

         CORPORATE MARKET. Sport-Haley believes that there is a natural synergy
between the golf market and corporate market as both markets can be served from
some of the same inventory, allowing quick response to a shifting demand in
either market. Sport-Haley has developed several direct corporate accounts, but
is actively pursuing this market primarily though promotional product companies,
who source and supply a variety of products for corporate fulfillment programs
and special events. These promotional product


                                       -4-
<PAGE>

companies generally create a corporate catalog containing products bearing
the corporate logo, which products are used for employee recognition,
customer appreciation and other corporate purposes. The promotional product
company will also source and supply a specific product or products for
special events sponsored by the corporation. Sport-Haley's apparel is
currently appearing, or confirmed to appear, in a variety of catalogs,
including catalogs for several Fortune 500 companies. Sport-Haley does not
enter into a formal agreement or contract with these promotional product
companies but does agree that it will keep an inventory of the products
advertised in any specific catalog during the period the catalog is being
used, generally a one year period. Sport-Haley generally selects a limited
number of its most popular, classic styles of golf apparel and includes those
in its corporate catalog. As this inventory must be maintained for a longer
period of time and the styles are classic and generally not designed for a
specific season, Sport-Haley features one annual collection in its corporate
catalog. Corporate sales are made throughout the year and do not have fixed
or seasonal selling periods.

         RETAIL AND FACTORY OUTLET SALES. Sport-Haley sells a small percentage
of its apparel in the retail market though a selected upscale department store
chain. Sport-Haley also maintains a 2,200 square feet factory outlet store in
Laughlin, Nevada. Since June 1996, Sport-Haley has used this facility to sell
close-out inventory and discontinued styles at discounted retail prices, as
opposed to discounted wholesale prices, enabling Sport-Haley to maximize sales
revenue attributable to this close-out inventory.

COMPETITION

         The golf apparel market, both domestically or internationally, is
highly fragmented and the leading supplier has only slightly over a 10% market
share. Sport-Haley currently views Ashworth, Izod Club, Polo/Ralph Lauren
Corporation, Tommy Hilfiger and Cutter & Buck Inc. as its most significant
competitors in the golf apparel market. In addition to competing with golf
apparel manufacturers, it must also compete with manufacturers of high quality
men's and women's sportswear and general leisure wear such as Nike, Polo/Ralph
Lauren Corporation, Tommy Hilfiger and Nautica Enterprises Inc. Many of these
same companies are competitors in the corporate market. Competition is intense
and is based primarily on brand recognition and loyalty, quality, price, style
and design, service and availability of shelf space in the golf apparel market.
Many of these competitors have longer operating histories, better name
recognition and greater financial, marketing and other resources than
Sport-Haley. Because of the intense competition, there can be no assurance that
Sport-Haley will be able to increase or even maintain its market share or that
it will not be required to reduce prices or accept reduced margins.

RAW MATERIALS SOURCING AND FINISHED GOODS PURCHASING

         Sport-Haley purchases its fabric in bulk from approximately fifteen
different domestic and foreign mills, the seven largest of which accounted
for approximately 70% of fabric expenditures in fiscal 1999. Most of the
garments are made from 100% cotton fabric. The exceptions are certain women's
apparel made of silk and rayon or micro fiber and certain garments in the
Elements outerwear line which use micro fiber, fleece, nylon or
Gore-tex-Registered Trademark- products, including Gore
Windstopper-Registered Trademark-  fabric, non-exclusive rights to which are
licensed by Sport-Haley. Sport-Haley utilizes various suppliers to provide
different portions of the Elements line, but loss of one or more of these
suppliers could potentially affect its ability to make timely delivery of
outerwear. Raw materials also include trim consisting principally of buttons,
collars, bands, linings, labels and zippers. Sport-Haley purchased trim from
several suppliers during fiscal 1999, with the four largest suppliers
accounting for approximately 80% of total trim expenditures.

       Sport-Haley does not have any formal contractual arrangements for the
purchase of raw materials from its suppliers, but issues purchase orders as raw
materials are required. Although Sport-Haley believes


                                       -5-
<PAGE>

that all of the components of its apparel are available from a large number of
domestic and foreign sources, its inability to secure raw materials from
existing suppliers during periods of high seasonal demand could result in delays
in deliveries to customers, thereby adversely affecting profitability.

         Sport-Haley's production personnel oversee its raw material sourcing.
Production personnel are responsible for ensuring on-time delivery of raw
materials and negotiating costs consistent with the desired profit margins.
Production personnel inspect samples of each item prior to the commencement of
actual production and consult with design personnel in order to ensure that high
quality standards are maintained.

         Sport-Haley also purchases ready-made finished goods which are
manufactured by outside suppliers to its custom quality and styling
specifications. Sport-Haley may assist outside suppliers in sourcing of raw
materials for these finished products, but does not purchase the fabric and trim
for the suppliers. In fiscal 1999, Sport-Haley estimates that approximately 15%
to 20% of its apparel was purchased as finished goods.

MANUFACTURING

         With the exception of custom embroidery which is done at Sport-Haley's
facility in Denver, Colorado, all manufacturing activities are undertaken by
"cutting and sewing" contractors. Following the purchase of raw materials,
Sport-Haley arranges for shipment of these materials directly to cutting and
sewing contractors who are located primarily in the United States and its
territories. These contractors are responsible for cutting and sewing apparel to
specifications. During fiscal 1999, Sport-Haley used eleven cutting and sewing
contractors, although approximately 75% of its apparel was produced by four of
these cutting and sewing contractors. In April 1998, Sport-Haley acquired a 52%
ownership interest in one of its principal cutting and sewing contractors (the
"Subsidiary") and effective July 1, 1999, increased its ownership to a 93%
interest by exchanging debt owed by the Subsidiary to Sport-Haley for additional
equity in the Subsidiary. The Subsidiary is manufacturing exclusively for
Sport-Haley and in fiscal 1999, produced approximately 80% of Sport-Haley's
shirts and tops for men and women. Management believes purchase of this
contractor assures Sport-Haley of the manufacturing capacity necessary to expand
corporate and retail sales and to position Sport-Haley to remain competitive.
Sport-Haley has no contractual arrangements other than purchase orders with any
of its other cutting and sewing contractors and believes that these services may
be obtained from a large number of domestic and foreign sources.

         Sport-Haley receives its orders for the spring or fall collections over
a period commencing when samples are first shown to customers and continuing
through the season. Sport-Haley must schedule production in advance of order
placement, although it can respond to order trends over the period by sequencing
production with reorders. Because production of apparel collections is
time-sensitive, Sport-Haley devotes considerable efforts to the preparation of
forecasts of apparel sales by item and style. Sport-Haley's computer management
system provides management with key data which facilitates planning, production
scheduling, product tracking and standard cost control, as well as providing a
perpetual inventory record and inventory availability.

         Finished apparel is shipped by the cutting and sewing contractors or
the ready-made manufacturers to Sport-Haley's warehouse facilities in Denver,
Colorado. Some apparel, primarily shirts and tops, is embroidered with the
Haley-Registered Trademark-  logo and approximately 75% of the men's shirts
are custom embroidered with a golf course, country club, resort or company
logo, whereas only approximately 40% of women's apparel is similarly
embroidered. Sport-Haley maintains ten computer-controlled embroidering
machines on its premises which together can embroider a minimum of 3,000
custom logos in the two 8-hour daily shifts currently operating. After being
embroidered to the customer's specifications, all apparel has a final
inspection by quality assurance personnel, and is packaged and shipped.

                                       -6-
<PAGE>

NATURE OF BUSINESS

         Golf apparel sales in golf professional shops tend to be seasonal in
nature, with a disproportionate share of sales occurring from January through
June, which are Sport-Haley's third and fourth fiscal quarters of each fiscal
year. Note 24 in the accompanying financial statements shows unaudited quarterly
comparisons of sales during the past two fiscal years. Sport-Haley has been
seeking to reduce the impact of seasonality by trying to increase sales in other
markets, such as the corporate market and the international market.

         The amount of backlog at any particular time is affected by a number of
factors, including the timely flow of product from suppliers and contractors,
which can impact the ability to ship on time, and timing of orders from
customers. Accordingly, a comparison of Sport-Haley's very small backlog of
orders from period to period is not necessarily meaningful and may not be
indicative of eventual actual shipments during any specific period. In addition,
partial orders are shipped if they are at least 75% to 80% complete. Orders may
be changed or canceled up to 30 days prior to the ship date of the order.
Sport-Haley does not sell its apparel on consignment nor accept returns of
purchased apparel other than apparel which is damaged or which is delivered
after the specified delivery date. Returns and allowances were approximately 4%
of net sales in fiscal 1998 and fiscal 1999. Cancellations, rejections and
returns of orders has not historically materially reduced the amount of sales
realized from backlog.

TRADEMARK

          Sport-Haley markets its products under the Haley-Registered Trademark-
label. Sport-Haley has registered the Haley mark and the distinctive "H" design
with the United States Patent and Trademark Office. Sport-Haley has also
registered the Haley mark in a number of foreign countries.

EMPLOYEES

         At June 30, 1999, Sport-Haley had 98 full-time employees and eight
part-time employees, including 27 full-time and four part-time administrative
employees, 13 marketing and corporate sales employees, 55 full-time and two
part-time personnel in inspection, packaging, embroidering and distribution
operations, and three full-time and two part-time retail employees in the
factory outlet store. The Subsidiary has four administrative employees and 87
manufacturing employees. None of Sport-Haley's employees or the Subsidiary's
employees are represented by any unions and Sport-Haley considers its
relations with employees to be good.

MANAGEMENT INFORMATION SYSTEMS AND INVENTORY MANAGEMENT

         Sport-Haley utilizes an integrated computer system to manage all
business transactions, historical data and record keeping, including sourcing,
warehousing, embroidery and shipping. This system provides information to all
departments. The VRLink system used by Sport-Haley's sales representatives
interfaces with the main system to provide sales representatives with inventory
information and order entry capability which has allowed the sales force to
order against actual inventory availability. The computer system has improved
operations by providing information critical to forecasting such as analysis of
sales history, purchasing history, and future customer commitments which allows
better management and purchasing of inventory.

YEAR 2000 COMPUTER CONVERSION

         Sport-Haley is cognizant of the issues associated with the programming
code in existing computer systems as the Year 2000 approaches. The "Year 2000"
problem is pervasive and complex, as virtually every


                                       -7-
<PAGE>

computer operation will be affected in some way. Many currently installed
computer systems and software products are coded to accept only two-digit
entries in the date code field. These date code fields will need to accept four
digit entries to distinguish 21st century dates from 20th century dates. The
issue is whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or fail.

         As a result, in less than four months, computer systems and/or software
used by Sport-Haley will need to be Year 2000 compliant. Sport-Haley has tested
several systems and anticipates additional testing will be completed in October
and November. Sport-Haley's computer operations currently run on an IBM RS6000
computer. Sport-Haley's software is based upon an established, fully integrated,
relational database system designed for manufacturing companies and adapted for
the apparel industry. The software programs running on Sport-Haley's computer
have been modified to accommodate the Year 2000.

         The costs associated with Sport-Haley's Year 2000 initiative are
charged to expense as incurred and Sport-Haley estimates that these costs should
not exceed $50,000. Sport-Haley does not maintain a project tracking system that
tracks the cost and time that its own internal employees spend on Year 2000
issues.

         Presently, Sport-Haley has received written notification from several
of its vendors that they believe their systems are Year 2000 complaint.
Sport-Haley continues to address this issue to ensure the availability and
integrity of its financial systems and the reliability of its operational
systems and is presently evaluating and upgrading its software and hardware, so
that its computer systems will function properly with respect to Year 2000 and
beyond.

         Sport-Haley is continuing discussions with other significant suppliers
and financial institutions with whom Sport-Haley has a relationship, to ensure
those parties have appropriate plans to remediate Year 2000 issues particularly
where their systems interface with Sport-Haley's systems or otherwise impact its
operations.

         If the vendors of Sport-Haley's most important goods and services, or
the suppliers of Sport-Haley's necessary energy, telecommunications and
transportation needs, fail to provide Sport-Haley with the materials and
services which are necessary to produce, distribute and sell its products, and
the electrical power and other utilities to sustain its operations, or reliable
means of obtaining supplies and transporting products to its customers, such
failure could have a material adverse effect on the results of operations,
liquidity and financial condition of Sport-Haley. Sport-Haley is in the process
of developing a contingency plan to address these and other issues.

         If some or all of Sport-Haley's remediated or replaced internal
computer systems fail the testing phase, or if any software applications or
embedded microprocessors critical to Sport-Haley's operations are overlooked in
the assessment and implementation phases, there could be a material adverse
effect on Sport-Haley's results of operations, liquidity and financial condition
of a magnitude which Sport-Haley has not yet fully analyzed.

ITEM 2.  PROPERTIES

         Sport-Haley's executive offices and warehouse facilities are located in
Denver, Colorado and consist of 96,500 square feet of floor space. The facility
is currently leased for an annual base rent of approximately $201,000, which
increases incrementally to $206,000 in 2001. Sport-Haley is obligated to pay
taxes, insurance and maintenance expenses for the leased space through
expiration of the lease in October 2001. Sport-Haley also leases approximately
2,200 square feet of retail space in its factory outlet store in Laughlin,


                                  -8-
<PAGE>

Nevada. The annual base rental for this space for the remaining four year term
of the lease is $48,000. The Subsidiary leases 22,000 square feet of
manufacturing facilities in Four Oaks, North Carolina from the Subsidiary's two
minority shareholders. The lease commenced on April 1, 1998 and expires March
31, 2008, subject to the Subsidiary's right to extend the lease term for two
additional five year periods. The annual lease payments are $64,991 and the
Subsidiary must pay all utilities, taxes, insurance and certain fixture repairs.


ITEM 3.   LEGAL PROCEEDINGS

         At June 30, 1999, Sport-Haley was not a party to any material legal
proceeding. However, both Sport-Haley and its Chief Executive Officer are named
as defendants in counterclaims to a complaint filed by Sport-Haley against a
former officer, director and principal shareholder. Sport-Haley's complaint
alleges breach of a consulting and non-compete agreement, breach of duty of
loyalty and interference with contracts. The counterclaim against Sport-Haley
alleges breach of the agreement and defamation and the counterclaim against the
Chief Executive Officer alleges defamation. The Chief Executive Officer filed a
counterclaim alleging breach of the agreement and defamation. Sport-Haley and
its Chief Executive Officer deny the counterclaim allegations and intend to
vigorously prosecute this action. Although the eventual outcome cannot be
predicted, management believes that neither Sport-Haley's financial position nor
results of its operations will be materially affected by this legal proceeding.


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

         No matter was submitted during the fourth quarter of fiscal 1999 to a
vote of security holders through the solicitation of proxies or otherwise.


                                       -9-
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS

         Sport-Haley's Common Stock is quoted on the Nasdaq National Market
-Registered Trademark- under the trading symbol SPOR. The following table
sets forth the range of high and low sale prices, as reported by The Nasdaq
Stock Market, from July 1, 1997 through June 30, 1999. The prices set forth
below reflect interdealer quotations, without retail markups, markdowns or
commissions, and may not represent actual transactions.
<TABLE>
<CAPTION>
                FISCAL YEAR 1997                    HIGH               LOW
                ----------------                  -------             -----
                <S>                              <C>                 <C>
                First Quarter                     $ 16 1/8            $ 10 7/8
                Second Quarter                      16 3/8              12 1/4
                Third Quarter                       18 1/2              12 1/2
                Fourth Quarter                      20 1/8              14 5/8

                FISCAL YEAR 1998
                -----------------
                First Quarter                     $ 18 1/8            $ 12 1/4
                Second Quarter                      15 3/8              10
                Third Quarter                       13                   9
                Fourth Quarter                      14 1/8              10 1/4

                FISCAL YEAR 1999
                -----------------
                First Quarter                     $ 13 3/4           $  9 1/2
                Second Quarter                      11                  8
                Third Quarter                       10 1/4              8 1/8
                Fourth Quarter                       8 5/8             31 5/16
</TABLE>

                On September 24, 1999 the closing sale price of the Common
Stock was $4.5625. As of September 24, 1999, the number of record holders of
Sport-Haley's Common Stock was approximately 75.  Based on the number of
broker requests for proxy material for the last annual meeting of
shareholders, Sport-Haley believes that it has approximately 1,900 beneficial
holders.

                Holders of Common Stock are entitled to receive such
dividends as may be declared by Sport-Haley's Board of Directors. No
dividends on the Common Stock have been paid, and there is no anticipation
that dividends will be paid in the foreseeable future.

ITEM 6.   SELECTED FINANCIAL DATA

         The following consolidated selected financial data should be read in
conjunction with the Consolidated Financial Statements and related Notes
thereto appearing elsewhere in this report on Form 10-K and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The consolidated statements of operations data for each of the years in the
three-year period ended June 30, 1999 and the balance sheet data at June 30,
1999 and 1998 are derived from the consolidated financial statements of
Sport-Haley which have been audited by Levine, Hughes & Mithuen, Inc.,
independent auditors, as indicated in their report included herein. The
statements of operations data for each of the years in the two-year period
ended June 30, 1996 and the balance sheet data at June 30, 1997, 1996 and
1995 are derived from financial statements which have also been audited by
Levine, Hughes & Mithuen, Inc., but their report for such periods are not
included herein. Certain reclassifications have been made to 1998 and 1997
amounts to conform to the current year presentation and the discontinuance of
headwear operations. The selected

                                      -10-
<PAGE>

financial data provided below is not necessarily indicative of the future
results of operations or financial performance of Sport-Haley.

<TABLE>
<CAPTION>

                                                                              FOR THE YEAR
                                                                              ENDED JUNE 30,
                                                   -------------------------------------------------------------------
                                                        1999          1998          1997          1996         1995
                                                   -------------------------------------------------------------------
                                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
<S>                                                 <C>            <C>           <C>          <C>            <C>
Net sales........................................   $    27,531    $    30,462    $    28,613     $    20,287     $    12,567
Cost of goods sold...............................        19,261         17,936         16,630          11,719           7,465
Gross profit.....................................         8,270         12,526         11,983           8,568           5,102
Selling, general and administrative expenses.....         7,219          7,481          6,710           4,995           3,361
Income from operations...........................         1,051          5,045          5,273           3,573           1,741
Interest and other income, net...................           394            302            389             352             279
Income before minority interest and
  provision for income taxes.....................         1,445          5,347          5,662           3,925           2,020
Income taxes.....................................           609          1,205          1,637           1,453             743
Income from continuing operations................         1,087          4,148          4,025           2,472           1,277
Income (loss) from discontinued operations.......          (272)           116           (115)             --              --
Net income.......................................           815          4,264          3,910           2,472           1,277
Net income per common and equivalent
 shares outstanding :
   From continuing operations (basic)............           .25            .91            .86             .66             .40
   Net income (basic)............................           .18            .93            .84             .65             .40
   From continuing operations (diluted)..........           .25            .90            .86             .66             .40
   Net income (diluted)..........................           .18            .93            .83             .65             .40
Weighted average common and
    equivalent shares outstanding (basic)........     4,408,189      4,564,355      4,658,796       3,769,859       3,201,303
Weighted average common and
    equivalent shares outstanding (diluted)......     4,408,189      4,592,751      4,689,713       3,787,251       3,201,303

</TABLE>


<TABLE>
<CAPTION>


                                                                                  JUNE 30,
                                                   -------------------------------------------------------------------
                                                        1999          1998          1997          1996          1995
                                                   -------------------------------------------------------------------
                                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED BALANCE SHEET DATA:
<S>                                                  <C>          <C>           <C>          <C>          <C>
Working capital...................................   $  27,088    $  28,342     $ 26,251     $ 21,427     $  10,786
Total assets......................................      32,467       35,236       30,922       27,766        14,211
Long-term debt....................................          --           --           --           68            57
Total liabilities.................................       2,158        3,771        2,216        3,400         2,269
Shareholders' equity..............................      30,501       31,465       28,706       24,365        11,942
Net book value per share of common stock..........        7.17         6.97         6.17         5.51          3.83

</TABLE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

     This Report on Form 10-K contains certain forward-looking statements . When
used in this report, the words "may," "will," "expect," "anticipate,"
"continue," "estimate," "project," "intend," "believe" and similar expressions
are intended to identify forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 regarding events, conditions and financial trends
including, without limitation, business conditions and growth in the fashion
golf apparel


                                      -11-
<PAGE>

market and the general economy, competitive factors, and price pressures in the
high-end golf-apparel market; inventory risks due to shifts in market and/or
price erosion of purchased apparel, raw fabric and trim; cost controls; changes
in product mix; and other risks or uncertainties detailed in other Securities
and Exchange Commission filings. Such statements are based on management's
current expectations and are subject to risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, the actual plan of operations, business
strategy, operating results and financial position could differ materially from
those expressed in, or implied by, such forward-looking statements.
Sport-Haley's business in general is subject to certain risks including the
following:

-    The demand for Sport-Haley's products may decrease if the popularity of
     golf decreases or if other factors, such as inclement weather, cause
     golfers not to patronize golf professional shops.

-    Sport-Haley must continue to design apparel that is accepted by consumers
     as fashionable and stylish to continue to have market acceptance.

-    Sport-Haley's sales are seasonal and historically sales from July through
     December, Sport-Haley's first and second fiscal quarters, are weaker than
     sales from January through June, which are Sport-Haley's third and fourth
     fiscal quarters.

-    The market for golf apparel is extremely competitive; price competition or
     industry consolidation could weaken Sport-Haley's competitive position.

-    Sport-Haley maintains a significant level of inventory to support greater
     sales volume and its corporate program. Disposal of excess prior season
     inventory is an ongoing part of operations, but a significant amount of
     sales at the lower margins dictated by inventory reduction may impair
     Sport-Haley's financial condition. Inventory write-downs may also affect
     its financial condition.

     THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO.

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, the percentage
of net sales represented by items included in or derived from Sport-Haley's
statements of income, as restated in fiscal years 1998 and 1997 to account for
the discontinuation of the headwear operations:

<TABLE>
<CAPTION>

                                                                      FISCAL YEAR ENDED JUNE 30,
                                                             -----------------------------------------------
                                                        1999         1998         1997         1996         1995
                                                     ----------   ----------   ----------   ----------   ----------

<S>                                                  <C>          <C>          <C>          <C>          <C>
Net sales..........................................    100.0%       100.0%       100.0%       100.0%       100.0%
Cost of goods sold.................................     70.0         58.9         58.2         57.8         59.4
                                                        ----         ----         ----         ----         ----
Gross profit.......................................     30.0         41.1         41.8         42.2         40.6
Selling, general and administrative expenses            26.2         24.6         24.1         24.6         26.7
                                                        ----         ----         ----         ----         ----
Income from operations.............................      3.8         16.5         17.7         17.6         13.9
Interest and other, net............................      1.4          1.0          1.3          1.8          2.2
                                                        ----         ----         ----         ----         ----
Income before minority interest and
  provision for income taxes.......................      5.2         17.5         19.0         19.4         16.1
Minority interest..................................       .1         --           --           --           --
Income taxes.......................................     (2.3)        (4.0)        (5.5)        (7.2)        (5.9)
Income (loss) from discontinued operations.........      (.1)           .4          5.5          -             -
                                                        ----         ----         ----         ----         ----
Net income.........................................      2.9%        14.0%        13.5%        12.2%        10.2%
                                                        ----         ----         ----         ----         ----
                                                        ----         ----         ----         ----         ----

</TABLE>


                                      -12-
<PAGE>

         COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1999 AND 1998. Net sales for
the year ended June 30, 1999 ("fiscal 1999") were approximately $27.5 million, a
decrease of approximately $3.0 million, or 9.8%, as compared to approximately
$30.5 million for the fiscal year ended June 30, 1998 ("fiscal 1998"). This
decrease was due primarily to slower sales to golf professional shops, many of
which had larger remaining inventory than in prior years. Sport-Haley's slower
sales comport with published reports which have indicated that the golf industry
in general has experienced a slow down in sales in both equipment and apparel.
Another factor which contributed to the decrease during fiscal 1999 was sales of
approximately $1.8 million in excess inventory and prior season inventory at
wholesale prices consistent with disposal of excess inventory. Corporate sales
increases were offset by the reduction in sales in the headwear line. The men's
and women's lines accounted for approximately 46% and 40%, respectively, of
total net sales, the Elements line accounted for approximately 8% of total net
sales and the headwear line accounted for approximately 2%. The remaining 4% was
comprised of embroidery, shipping and the factory outlet store sales, which
Sport-Haley has used to sell close-out inventory and discontinued styles at
discounted retail prices.

         The cost of goods sold as a percentage of net sales increased
significantly, from 59% to 70%, primarily due to inventory adjustments of
approximately $1 million and approximately $448,000 in cost of goods sold by the
Subsidiary. This significant percentage increase in cost of goods sold resulted
in a corresponding decrease in gross profit as a percentage of net sales. Gross
profit decreased by approximately $4.2 million or 33.6%, from approximately
$12.5 million in fiscal 1998 to approximately $8.3 million in fiscal 1999.
Management believes the slowdown in sales in the golf industry created excess
inventory for several manufacturers of golf apparel and that many of them also
disposed of excess inventory at discounted prices. Management is implementing
procedures to identify and resolve inventory issues on a more timely basis and
to reduce the cost of goods sold by the Subsidiary.

         Selling, general and administrative expenses for fiscal 1999 were
approximately $7.2 million, a decrease of approximately $300,000, or
approximately 4.0%, compared to $7.5 million for fiscal 1998. Although
advertising expenses increased by 5%, almost all other expenses in this area
were reduced. Management implemented certain cost-containment measures during
the fiscal year, including a reduction in the number of employees resulting in a
reduction of salaries and related payroll expenses. Another factor was less
commissions paid to the independent sales representatives on lower sales made by
them. Total commissions as a percentage of net sales decreased from 7.8% in
fiscal 1998 to 7.2% in fiscal 1999. This decrease in percentage reflects more
corporate sales and sales of excess inventory where no commissions are paid.
Although the dollar amount of selling, general and administrative expenses
decreased for fiscal 1999, those expenses as a percentage of net sales increased
from 24.6% in fiscal 1998 to 26.2% in fiscal 1999, due to lower net sales.

         Net other income and expenses increased from approximately $302,000 in
fiscal 1998 to approximately $394,000 in fiscal 1999. Although the use of a
significant amount of cash funds used to repurchase common stock reduced
investment income in fiscal 1999, other expenses of approximately $317,000 in
fiscal 1998, including a write-down of approximately $221,000 in marketable
securities, were reduced to approximately $63,000 in fiscal 1999.

         Income from operations before minority interest and provision for
income taxes of approximately $5.3 million in fiscal 1998 decreased by
approximately $3.9 million, or 73.6%, to $1.4 million in fiscal 1999. In fiscal
1998, Sport-Haley acquired a 52% interest in one of its cutting and sewing
contractors. The minority interest benefit of approximately $6,000 in 1998 and
$251,000 in 1999 were included in income from operations. Although the
approximately $609,000 provision for income taxes in fiscal 1999 was only half
of the approximately $1.2 million in fiscal 1998, the effective tax rate
increased significantly from 22.5% in fiscal 1998 to 35.6% in fiscal 1999. The
tax rates in any fiscal year can vary significantly due to


                                      -13-
<PAGE>

deductions recognized for tax purposes but not recorded for financial statement
purposes, or deductions recorded for financial statement purposes but not
recognized for tax purposes. Examples are accounting for stock option
compensation, timing differences and the ability to utilize losses for tax
purposes. The result of including the minority interest benefit and deducting
the provision for income taxes resulted in income from continuing operations of
$4.1 million in fiscal 1998 and $1.1 million in fiscal 1999. A loss, net of
income tax benefits, of approximately $272,000 in fiscal 1999 from discontinued
operations of the headwear line further reduced net income for fiscal 1999. The
discontinued operations resulted in income, net of income tax provision, of
approximately $116,000 in fiscal 1998.

         Net income decreased from approximately $4.3 million in fiscal 1998 to
approximately $815,000 in fiscal 1999, or 81%. This decrease can be attributed
to all of the factors discussed above, but it resulted primarily from reduced
sales volume and reduced gross margins.

         COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1998 AND 1997. As
reclassified for to conform to the current year presentation with discontinued
operations, net sales for fiscal 1998 were approximately $30.5 million, an
increase of approximately $1.9 million, or 6.6%, as compared to approximately
$28.6 million for the fiscal year ended June 30, 1997 ("fiscal 1997"). This
increase was due to many of the same factors which have contributed to increases
in prior years, including a greater number of products offered within each line,
greater sales volume, greater market penetration, and higher sales per account.
Another factor which contributed to the increase during fiscal 1998 was growth
in the Elements line. The men's and women's line accounted for approximately 45%
and 44%, respectively, of total net sales, and the Elements line accounted for
approximately 8% of total net sales. The headwear line which has now been
discontinued accounted for the remaining approximately 3%. Although net sales
increased, growth was slower than it has been historically. Management believes
that sales growth was negatively impacted by canceled sales orders and increased
returns and allowance costs, primarily resulting from late shipments during the
UPS strike. Management also believes that inclement weather attributed to El
Nino dampened sales in fiscal 1998 to many of its golf professional shops in
California, North and South Carolina, Florida and Arizona.

         Gross profit increased by approximately $500,000, or 4.0%, from
approximately $12.0 million in fiscal 1997 to approximately $12.5 million in
fiscal 1998. Increased sales was the primary factor contributing to this
increase. The cost of goods sold as a percentage of net sales increased slightly
due to certain overhead costs which must be included in cost of goods sold and
higher shipping costs during the UPS strike. This percentage increase in cost of
goods sold resulted in a corresponding slight decrease in gross profit as a
percentage of net sales.

         Selling, general and administrative expenses for fiscal 1998 were
approximately $7.5 million, an increase of approximately $800,000, or
approximately 11.9%, compared to $6.7 million for fiscal 1997. As in prior
years, factors contributing to the increase included commissions to independent
sales representatives on higher sales levels and increased marketing
expenditures. Selling, general and administrative expenses for fiscal 1998
increased only slightly as a percentage of net sales, from 23.5% in fiscal 1997
to 24.6% in fiscal 1998.

         Net other income and expenses decreased from approximately $389,000 in
fiscal 1997 to approximately $302,000 in fiscal 1998, resulting primarily from a
decrease in investment income, a write down of a security and no tax refund as
in the prior year.

         Income before minority interest and provision for income taxes of
approximately $5.7 million in fiscal 1997 decreased by approximately $300,000.
In fiscal 1998, Sport-Haley acquired a 52% interest in one of its cutting and
sewing contractors which resulted in a small minority interest benefit.
Provision for


                                      -14-
<PAGE>

income taxes decreased approximately $400,000 from approximately $1.6 million in
fiscal 1997 to approximately $1.2 million in fiscal 1998 with the effective tax
rate for fiscal 1997 being 29% and for fiscal 1998 being 23%. The decrease in
the tax rate in fiscal 1998 was because of a higher deduction for stock option
compensation recognized for tax purposes but not recorded on the books for
financial statement purposes.

         The discontinued operations of the headwear line resulted in a loss of
approximately $115,000 in fiscal 1997 when the line was introduced and income of
approximately $115,000 in fiscal 1998, the first full year's sales of the
headwear line.

         Net income increased from approximately $3.9 million in fiscal 1997 to
approximately $4.3 million in fiscal 1998, an increase of approximately 10%.
This increase can be attributed to the factors discussed above, and resulted
primarily from increases in sales volume, control of the cost of goods and
corresponding margins, control of operating expenditures and a decrease in
income taxes.

         COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1997 AND 1996. Net sales for
the year ended June 30, 1997 ("fiscal 1997") were $28.6 million, an increase of
$8.3 million, or approximately 41%, as compared to $20.3 million for the fiscal
year ended June 30, 1996 ("fiscal 1996"). This increase was due to many of the
same factors which have contributed to increases in the prior years, including a
greater number of products offered within each line, greater market penetration,
and higher sales per account. Other factors which contributed to the increase
during fiscal 1997 were a full year's sales of the Elements line and the opening
of the factory outlet store. The men's and women's line accounted for
approximately 52% and 47%, respectively, of total net sales. Men's line and
women's line sales increased 52% and 31%, respectively, in fiscal 1997 over
fiscal 1996.

         Gross profit increased by $3.4 million, or approximately 40%, from $8.6
million in fiscal 1996 to $12.0 million in fiscal 1997. The increase in gross
profit was primarily a result of the same factors as in prior years, which were
a combination of increased sales, volume purchasing of raw materials and better
pricing from outside cutting and sewing contractors. The cost of goods sold as a
percentage of net sales increased slightly due to an increase in certain design
costs and due to changes in the product sales mix, as the various lines have
different margins.

         Selling, general and administrative expenses for fiscal 1997 were $6.7
million, an increase of $1.7 million, or approximately 34%, compared to $5.0
million for fiscal 1996. This increase was primarily attributable to payroll
costs associated with the additional personnel required to handle increased
sales volume and operation of the factory outlet store. In addition, as in prior
years, other factors contributing to the increase included commissions to
independent sales representatives on higher sales levels and increased
advertising and marketing expenditures. And finally, Sport-Haley incurred lease
expense for the factory outlet store. However, as a percentage of net sales,
selling, general and administrative expenses decreased from 24.6% in fiscal 1996
to 24.1% in fiscal 1997.

         Net other income and expenses increased slightly due primarily to an
increase in interest earned on invested funds and an income tax refund, offset
by expenditures to repurchase non-qualified stock options.

         Income before provision for income taxes increased $1.7 million, or
approximately 44%, from $3.9 million in fiscal 1996 to $5.6 million in fiscal
1997. Provision for income taxes increased approximately $100,000 from $1.5
million in fiscal 1996 to $1.6 million in fiscal 1997. Income taxes for both of
these fiscal years were affected by certain income tax timing differences
between book and taxable income. The effective tax rate for fiscal 1996 was 37%
and for fiscal 1997 was 29%.


                                      -15-
<PAGE>

         Sport-Haley introduced the headwear line in fiscal 1997 and
discontinued that line effective June 30, 1999. Accordingly, the financial
statements reflect a loss of approximately $100,000 on the discontinued
operations in 1997.

         Net income increased from $2.5 million in fiscal 1996 to $3.9 million
in fiscal 1997, an increase of 56%. This increase can be attributed to the
factors discussed above, but resulted primarily from increases in sales volume
and Sport-Haley's control of cost of goods sold and operating expenditures. This
represents growth in net income as a percentage of net sales from 12.2% in
fiscal 1996 to 13.5% in fiscal 1997.

LIQUIDITY AND CAPITAL RESOURCES

         Historically, Sport-Haley has financed its operations through a
combination of bank loans, related party borrowings, the private and public sale
of equity and revenue from operations. Sport-Haley intends to rely on cash
generated from operations to finance its working capital requirements for at
least the next 12 months. To the extent such amounts are insufficient to finance
Sport-Haley's working capital requirements or if working capital requirements
are greater than estimated, Sport-Haley may take down borrowings under its
revolving line of credit.

         Net cash provided by operating activities totaled approximately $4.8
million for fiscal 1999 as compared to net cash used by operating activities of
$2.2 million in fiscal 1998. The primary component of cash provided or used in
operating activities was inventory. Inventory decreased to $13.3 million at June
30, 1999 as compared to $17.6 million at June 30, 1998, including an inventory
adjustment of approximately $1.0 million. Accounts receivable at June 30, 1999
decreased to approximately $5.7 million as compared to approximately $6.6
million at June 30, 1999, and accounts payable decreased to approximately
$800,000 as compared to approximately $1.9 million at June 30, 1998.

         Working capital requirements are expected to remain constant. Working
capital was approximately $27.1 million at June 30, 1999, compared to
approximately $28.3 million at the end of fiscal 1998. As of June 30, 1999,
Sport-Haley had cash and cash equivalents of approximately $8.6 million and no
long-term debt.

         Since April 1994, Sport-Haley has maintained a revolving line of credit
with the same bank. The revolving line of credit agreement, which has been
renewed through November 5, 2000, provides for interest at 1/2% below the bank's
prime rate. The revolving line of credit agreement is divided into two parts,
one of which provides for a maximum loan amount of $9.0 million to Sport-Haley
secured by a lien on substantially all of Sport-Haley's assets and the other of
which provides for a maximum loan amount of $1.0 million to the Subsidiary
secured by a lien on substantially all of the Subsidiary's assets. Sport-Haley
generally maintains its line of credit solely to facilitate the issuance of
letters of credit for inventory purchases from offshore suppliers and to fund
any temporary working capital needs. The Subsidiary has drawn approximately
$600,000 on its revolving line of credit in order to repay a $386,317 loan made
by Sport-Haley to the Subsidiary at closing of the Subsidiary's acquisition, to
purchase additional equipment and to use as operating capital. Sport-Haley has
no outstanding borrowings under the line of credit.

         Gross proceeds received by Sport-Haley from the exercise of stock
options and warrants have fluctuated significantly from year to year.
Sport-Haley has realized proceeds of approximately $205,000 in fiscal 1999,
$687,000 in fiscal 1998, and $1.9 million during fiscal 1997.

         Since December 1994, management has had the authorization of the Board
of Directors to repurchase shares of Sport-Haley's Common Stock and an aggregate
of 687,000 shares had been repurchased at June


                                      -16-
<PAGE>

30, 1999 at an aggregate cost of approximately $7.0 million. In fiscal 1999 and
fiscal 1998, Sport-Haley repurchased 287,000 and 240,000 shares at a cost of
approximately $2.3 million and $2.7 million, respectively. The Board's
authorization is based on its belief that Sport-Haley's Common Stock is
underpriced at times given its earnings, working capital, liquidity, assets,
book value and future prospects. The shares may be repurchased from time to time
in open market, through block purchases or in privately negotiated transactions
depending upon market conditions and other factors. Sport-Haley has no
commitment or obligation to purchase all or any portion of the authorized
shares. All shares purchased are canceled and returned to the status of
authorized but unissued Common Stock.

         All of Sport-Haley's purchases from off-shore manufacturers and sales
to foreign distributors are U.S. Dollar denominated and, consequently,
Sport-Haley has no currency exchange risk. In 1999, SportHaley's agreement with
its distributor in Canada was terminated and it began to use independent sales
representatives in Canada. Certain orders taken by these new independent
representatives were shipped in May and June 1999, but payments on those orders
were not due prior to the end of the fiscal year. Accordingly, no currency
exchange risk existed on June 30, 1999, but may come into existence commencing
July 1, 1999. Sport-Haley is not currently using derivative financial
instruments to reduce its exposure to changes in foreign exchange rates in
connection with sales in Canada. To the extent that it has receivables
denominated in Canadian currency that are not hedged, it will be subject to
foreign currency transaction gains and losses.

         Management believes that inflation has not had a material effect on
results of operations during the three most recent fiscal years.

NEW ACCOUNTING STANDARDS

         Please refer in the accompanying financial statements to the following
pronouncements of Statements of Financial Accounting Standards ("SFAS") made by
the Financial Accounting Standards Board ("FASB"): (i) Note 2 - Summary of
Significant Accounting Policies for SFAS 130 and 131, Note 15 Shareholders'
Equity for SFAS 123 and APB Opinion 25 and Note 21 - Net Income Per Share in the
accompanying financial statements for a recent pronouncement of Statement of
Financial Accounting Standard No. 128.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                      INDEX
<TABLE>
<CAPTION>
                                                                    PAGE
                                                                    ----
     <S>                                                             <C>
     Report of Independent Certified Public Accountants............  F-1

     Consolidated Balance Sheets...................................  F-2

     Consolidated Statements of Income and Comprehensive Income .....F-3

     Consolidated Statement of Shareholders' Equity................  F-4

     Consolidated Statements of Cash Flows.........................  F-5

     Notes to Consolidated Financial Statements....................  F-6
</TABLE>

                                      -17-
<PAGE>

SELECTED QUARTERLY FINANCIAL DATA

     Please refer to Note 25 - Selected Financial Information (Unaudited) in the
accompanying financial statements for a comparison of certain unaudited
financial data for each of the quarters in fiscal 1998 and 1999.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         None.


                                      -18-
<PAGE>

                                                     PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


<TABLE>
<CAPTION>

              NAME                                       AGE               POSITION
              ----                                       ---               --------
 <S>                                                <C>                <C>
         Robert G. Tomlinson(1)                     58                 Chairman of the Board and
                                                                         Chief Executive Officer

         Robert W. Haley                            54                 President and Director

         Steve S. Auger                             54                 Secretary, Treasurer and Controller

         Catherine B. Blair                         48                 Vice President - Merchandising/Design

         Kevin M. Tomlinson                         39                 Chief Operating Officer, Executive Vice
                                                                         President - Operations

         William L. Blair                           57                 Vice President - Corporate Sales

         Mark J. Stevenson(1)(2)                    61                 Director

         Ronald J. Norick(2)                        58                 Director

         James H. Everest(1)(2)                     51                 Director

</TABLE>

         ------------------------
         (1)      Member of the Audit Committee.
         (2)      Member of the Compensation Committee.

         Officers are appointed by and serve at the discretion of the Board of
Directors except in those instances that officers are employed under employment
agreements. Each director holds office until the next annual meeting of
shareholders or until a successor has been duly elected and qualified. All of
Sport-Haley's officers devote full-time to Sport-Haley's business and affairs.

         ROBERT G. TOMLINSON has served as Chairman of the Board and Chief
Executive Officer of SportHaley since October 1992. Since March 1998, he has
also served as a director of the Subsidiary. Prior to joining Sport-Haley, Mr.
Tomlinson was a partner in Tomlinson Enterprises, a real estate investment
partnership, and also engaged in management of his personal investment
portfolio. Mr. Tomlinson is the father of Kevin Tomlinson, the Chief Operating
Officer and Executive Vice President.

         ROBERT W. HALEY has served as President and a director of Sport-Haley
since May 30, 1996. From January 1992 until his appointment to such positions,
he served as Vice President of Marketing of SportHaley. Prior to joining
Sport-Haley, Mr. Haley served in various marketing positions for golf apparel
manufacturers. Mr. Haley is a Class A PGA professional golfer with 25 years'
experience in the golf industry.

         STEVE S. AUGER served as Controller of Sport-Haley since July 1993. In
January 1996, he was appointed Secretary and Treasurer. From March 1998 until
September 1999, he also served as a director of the Subsidiary and as its
Secretary and Treasurer.


                                      -19-
<PAGE>

         CATHERINE B. BLAIR has served as Vice President of Merchandising/Design
since her appointment in May 1996. Ms. Blair has been part of Sport-Haley's
design team since 1992, and was appointed Director of Design in 1995. Prior to
joining Sport-Haley, she was a designer for a golfwear company and also worked
as a freelance designer for companies such as Macy's, Bloomingdale's, Ann Taylor
and The Gap.

         KEVIN M. TOMLINSON served as Vice President of Operations from December
1997 until January 1999, when he became the Chief Operating Officer and
Executive Vice President-Operations. In September 1999, he became a director and
vice-president of the Subsidiary. From 1992 until joining Sport-Haley, Mr.
Tomlinson was employed by Nu-Kote International, Inc., an office products
manufacturer and distributor, in capacities including vice president of product
marketing, vice president of marketing, vice president of global procurement and
vice president of retail sales. Mr. Tomlinson is the son of Robert G. Tomlinson,
the Chairman and Chief Executive Officer of Sport-Haley.

         WILLIAM L. BLAIR has served as Vice President of Corporate Sales since
March 1998. From September 1996 until joining Sport-Haley, Mr. Blair was
director of marketing for the Activewear Division of Fruit of the Loom. From
1992 to 1996, Mr. Blair was a director of and consultant to Osterman API, Inc.,
a promotional product company

         MARK J. STEVENSON has been a director of Sport-Haley since November
1993. Since June 1, 1994, Mr. Stevenson has served as chairman of the board,
president and chief executive officer of Electronic Manufacturing Systems,
Longmont, Colorado, a contract manufacturer serving the computer, data storage,
telecommunications and medical equipment industries. From 1992 to 1994, Mr.
Stevenson served as chairman of the board of Micro Insurance Software, Inc.,
Boulder, Colorado, a manufacturer of computer software oriented to the insurance
industry.

         RONALD J. NORICK has been a director of Sport-Haley since November
1993. From April 1987 until April 1998, Mr. Norick served as the elected Mayor
of the City of Oklahoma City, Oklahoma. From 1960 to 1992, Mr. Norick served in
various capacities, including serving as president from 1981 to 1992, of a
closely-held printing company which was acquired by Reynolds & Reynolds in June
1992. Mr. Norick serves on a number of civic, community, educational, corporate
and public boards, commissions and committees. Mr. Norick also serves as manager
of Norick Investments Company LLC, a family-owned limited liability company
which is engaged in investments.

       JAMES H. EVEREST has been a director of Sport-Haley since November 1993.
Mr. Everest has served as president of the Jean I. Everest Foundation, Oklahoma
City, Oklahoma, since 1991. The Jean I. Everest Foundation was organized by Mr.
Everest's father to conduct charitable activities. Mr. Everest has been the
managing partner of Everest Brothers, a general partnership active in oil and
gas exploration and development, since 1984. Mr. Everest has also been engaged
in managing his personal investments since 1984. Mr. Everest is a member of the
Oklahoma Bar Association and the American Bar Association and serves in a number
of capacities for various civic and community organizations.

BOARD COMMITTEES

       The Board of Directors has delegated certain of its authority to a
Compensation Committee and an Audit Committee. The Compensation Committee is
composed of Messrs. Stevenson, Norick and Everest. The Audit Committee is
composed of Messrs. Tomlinson, Stevenson and Everest. No member of either
committee is a former or current officer or employee of Sport-Haley with the
exception of Mr. Tomlinson.


                                      -20-
<PAGE>

         The Compensation Committee held one meeting in fiscal 1999. The primary
function of the Compensation Committee is to review and make recommendations to
the Board with respect to the compensation, including bonuses, of Sport-Haley's
officers and to administer Sport-Haley's Option Plan.
See "- Compensation Committee Report."

         The Audit Committee had no formal meetings in fiscal 1999. The function
of the Audit Committee is to review and approve the scope of audit procedures
employed by Sport-Haley's independent auditors, to review and approve the audit
reports rendered by Sport-Haley's independent auditors and to approve the audit
fee charged by the independent auditors. The Audit Committee reports to the
Board of Directors with respect to such matters and recommends the selection of
independent auditors.

         In fiscal 1999, the Board of Directors held two formal meetings.
Messrs. Haley and Stevenson attended one of the two meetings and each other
director attended all board and committee meetings held during fiscal 1999.

ITEM 11.   EXECUTIVE COMPENSATION

         SUMMARY COMPENSATION TABLE. The following table sets forth the
annual and long-term compensation for services in all capacities to
Sport-Haley for the three fiscal years ended June 30, 1999 of Robert G.
Tomlinson, Chief Executive Officer, Robert W. Haley, President, and William
L. Blair, Vice President-Corporate Sales, the only executive officers of
Sport-Haley whose total annual salary and bonus exceeded $100,000 during the
year ended June 30, 1999 (the "Named Officers").

<TABLE>
<CAPTION>
                                                                            LONG TERM COMPENSATION
                                                                                    AWARDS
                                         FISCAL      ANNUAL   COMPENSATION  -----------------------
                                                     ---------------------  SECURITIES UNDERLYING     ALL OTHER
NAME AND PRINCIPAL POSITION               YEAR       SALARY       BONUS         OPTIONS/SARS(#)      COMPENSATION
---------------------------             ------       ------     ----------  ---------------------- ----------------
<S>                                     <C>       <C>          <C>          <C>                    <C>
Robert G. Tomlinson,                      1999    $  202,692         -0-               -0-           $  1,022 (1)
 Chairman of the Board and                1998       218,219   $  22,000            30,000              1,022 (1)
 Chief Executive Officer                  1997       192,726      45,000            30,000                796 (1)

Robert W. Haley,                          1999    $  171,154         -0-               -0-           $  1,022 (1)
 President                                1998       170,571   $  15,000            20,001              1,022 (1)
                                          1997       154,164      36,000            30,000                664 (1)

William L. Blair,                         1999    $  114,461         -0-               -0-           $    138 (2)
 Vice President-Corporate Sales           1998        34,615(3)      -0-            20,000                 46

</TABLE>
----------------

(1)    Comprised of contributions by Sport-Haley to the Named Officer's 401(k)
       plan and $138 per year per each Named Officer for term life insurance
       premiums.
(2)    Comprised solely of $138 per year for term life insurance premiums.
(3)    Mr. Blair was first employed by Sport-Haley as an executive officer in
       March 1998. Accordingly, compensation in fiscal 1998 was paid only for a
       four month period.

         OPTION/SAR GRANTS TABLE. The following table sets forth information on
grants of options pursuant to the Sport-Haley 1993 Stock Option Plan, as
amended, during fiscal 1999 to the Named Officers. In accordance with the
applicable regulations of the Securities and Exchange Commission, options
previously granted to the Named Officers which were repriced during fiscal 1999
are reflected as new grants in fiscal 1999.


                                      -21-
<PAGE>

<TABLE>
<CAPTION>


                                                                                       POTENTIAL REALIZABLE VALUE
                                                                                         AT ASSUMED ANNUAL RATES
                                      INDIVIDUAL GRANTS                                OF STOCK PRICE APPRECIATION
                                                                                             FOR OPTION TERM(1)
                    ---------------------------------------------------------------    -----------------------------
                     NUMBER OF SECURITIES      PERCENT OF TOTAL        EXERCISE OR
                      UNDERLYING OPTIONS/   OPTIONS/SARS GRANTED TO    BASE PRICE    EXPIRATION
    NAME              SARS GRANTED(2)(3)   EMPLOYEES IN FISCAL YEAR(4)  ($/SHARE)(5)    DATE         5%($)         10% ($)
--------------      --------------------- ---------------------------------------   ----------      -------        -------
<S>                 <C>                   <C>                          <C>          <C>           <C>            <C>
Robert G. Tomlinson         30,000(6)             9.7%                   $8.625       2/14/07      $123,543       $295,905
                            30,000(7)             9.7                     8.625      11/13/07       142,658        351,371

Robert W. Haley             30,000(6)             9.7                     8.625       2/14/07       123,543        295,905
                            20,001(7)             6.4                     8.625      11/13/07        95,110        234,259

William L. Blair               -0-(8)

</TABLE>
----------------

(1)    The hypothetical gains or "option spreads" that would exist for the
       respective options are included in accordance with the rules of the
       Securities and Exchange Commission. As mandated by the Securities and
       Exchange Commission, these gains are based on the assumed rates of annual
       compound stock price appreciation of 5% and 10% from the date the option
       was granted over the full option term. They do not represent any
       assurance that the shares of Common Stock will appreciate in value and do
       not represent any estimated or projected future prices. The actual value,
       if any, realized may be greater or less than the potential realizable
       value set forth in the table. If the Common Stock does not appreciate,
       the Named Officers will receive no benefit from the options.
(2)    On October 13, 1999, the Compensation Committee authorized the
       cancellation of certain options and replacement of those options with new
       options with an exercise price equivalent to the fair market value of the
       Common Stock on that date. No other changes to such options were made.
(3)    Of the options owned by Mr. Tomlinson, 50,000 are currently exercisable
       and the remaining 10,000 become exercisable in February 2000. One-third
       of each grant of Mr. Haley's options become exercisable on the
       anniversary date of the respective grant dates. Of the 50,001 options
       owned by Mr. Haley, 33,334 are currently exercisable or will become
       exercisable within 60 days, 10,000 will become exercisable in February
       2000 and the remaining 6,667 will become exercisable in November 2001.
(4)    Options to purchase certain shares were repriced and the chart
       reflects those as new grants in fiscal 1999.
(5)    All of the options have an exercise price equal to at least 100% of the
       fair market value of the underlying Common Stock on the date of grant.
(6)    These options were originally issued February 14, 1997 with an exercise
       price of $14.25 per share. The exercise price was changed on October 13,
       1999 to $8.625 per share.
(7)    These options were originally issued November 13, 1997 with an
       exercise price of $10.625 per share. The exercise price was changed on
       October 13, 1999 to $8.625 per share.
(8)    Mr. Blair was not granted any options in fiscal 1999 and his previously
       granted options were not repriced.

     TEN YEAR REPRICING TABLE. In October 13, 1999, the Compensation Committee
authorized the cancellation of certain options and replacement of those option
with new options with an exercise price equivalent to the fair market value of
the Common Stock on that date. No other changes to such options were made. The
following table provides certain information regarding the repricing of options
held by any person who served as an executive officer of Sport Haley since it
became a reporting company in April 1994.


                                      -22-
<PAGE>

<TABLE>
<CAPTION>
                                   NUMBER OF SECURITIES  MARKET PRICE OF  EXERCISE PRICE  NEW    LENGTH OF ORIGINAL
                                    UNDERLYING OPTIONS    STOCK AT TIME     AT TIME OF  EXERCISE   TERM REMAINING AT
NAME AND POSITION              DATE    REPRICED (#)        OF REPRICING     REPRICING    PRICE    DATE OF REPRICING
-----------------              ----    ------------       -------------     ---------   -----    -----------------
<S>                            <C>           <C>            <C>           <C>         <C>        <C>
Robert G. Tomlinson,           10/13/98      30,000         $8.625        $14.250     $8.625        8 yrs., 4 mos.
    Chairman and Chief         10/13/98      30,000          8.625         10.625      8.625        9 yrs., 1 mo.
    Executive Officer
Robert W. Haley,               10/13/98      30,000          8.625         14.250      8.625        8 yrs., 4 mos.
  President                    10/13/98      20,001          8.625         10.625      8.625        9 yrs., 1 mo.
Kevin M. Tomlinson,            10/13/98      25,000          8.625         10.625      8.625        9 yrs., 1 mo.
  Chief Operating Officer
Steve Auger, Controller        10/13/98       7,500          8.625         14.250      8.625        8 yrs., 4 mos.
Cathy Blair, VP of             10/13/98       5,000          8.625         12.750      8.625        7 yrs., 6 mo.
  Merchandising/ Design        10/13/98       7,500          8.625         14.250      8.625        8 yrs., 4 mo.

</TABLE>

FISCAL YEAR-END OPTIONS/OPTION VALUES TABLE.

<TABLE>
<CAPTION>
                                                         NUMBER OF SECURITIES UNDER-     VALUE OF UNEXERCISED IN-
                                                         LYING UNEXERCISED OPTIONS/      THE-MONEY OPTIONS/SARS
                          SHARES                          SARS AT FISCAL YEAR-END        AT FISCAL YEAR-END($)(1)
                         ACQUIRED         VALUE        ---------------------------     ---------------------------
   NAME                ON EXERCISE      REALIZE        EXERCISABLE   UNEXERCISABLE     EXERCISABLE   UNEXERCISABLE
-------------          -----------      -------        -----------   -------------     -----------   --------------
<S>                    <C>              <C>            <C>           <C>               <C>           <C>
Robert G. Tomlinson          -0-          -0-             50,000        10,000               -0-           -0-
Robert W. Haley              -0-          -0-             26,667        23,334               -0-           -0-
William L. Blair             -0-          -0-              6,667        13,333               -0-           -0-
</TABLE>

---------------
(1)      None of such options were "in-the money options" as the exercise price
         of all such options exceeded the closing sale price of $4.813 on June
         30, 1999.

         No employee of Sport-Haley receives any additional compensation for his
services as a director. Non-management directors receive no salary for their
services as such, but receive a fee of $250 per meeting attended. The Board of
Directors has also authorized payment of reasonable travel or other
out-of-pocket expenses incurred by non-management directors in attending
meetings of the Board of Directors. During fiscal 1999, no non-employee
directors were granted any options.

         EMPLOYMENT AGREEMENTS. Effective January 1, 1997, Sport-Haley entered
into an employment agreement with Mr. Robert G. Tomlinson. The agreement
requires that he devote his full business time to Sport-Haley as Chief Executive
Officer and/or Chairman of the Board at an annual salary of $200,000, be
provided an automobile and such bonuses as awarded by the Board of Directors.
The employment agreement extends for a three-year term. Mr. Tomlinson has the
option to convert the employment agreement to a consulting agreement in the
event of a change in control of Sport-Haley or upon his resignation. Subject to
the right of Sport-Haley to terminate the consulting agreement for cause, Mr.
Tomlinson is entitled to serve as a consultant to Sport-Haley for the duration
of the agreement and to continue to receive compensation in the amount of 60% of
his annual salary. If Mr. Tomlinson terminates the agreement with "cause" (as
defined in the agreement), or Sport-Haley terminates the agreement for other
than "cause" (as defined in the agreement), or if there is a change in control
of Sport-Haley or if Mr. Tomlinson dies, Mr. Tomlinson or his estate, as
applicable, is entitled to receive severance compensation for three years from
the date of termination in an amount equal to his annual salary and bonus
payments during the preceding 12 months. During the time he is receiving such
severance compensation, he is entitled to participate in all employee benefit
plans, at Sport-Haley's expense. The change of control provisions and death
benefits entitle Mr.


                                      -23-
<PAGE>

Tomlinson or his estate, as applicable, to receive such amount in a lump sum. If
Mr. Tomlinson becomes totally disabled during the term of the agreement, his
full salary will be continued for one year from the date of disability. If
termination is for any reason other than by Sport-Haley with cause, all options
previously granted shall become fully vested on the date of termination. The
agreement contains a non-competition provision for one year following
termination.

         Effective January 1, 1997, Sport-Haley entered into an employment
agreement with Mr. Robert W. Haley. The agreement requires that he devote his
full business time to Sport-Haley as President or Senior Executive Officer at an
annual salary of $160,000 and such bonuses as awarded by the Board of Directors.
The employment agreement extended through December 31, 1998 and was subsequently
automatically renewed for an additional one year term. If Sport-Haley terminates
the agreement for other than "cause" (as defined in the agreement), Mr. Haley is
entitled to receive severance compensation for one year from the date of
termination in an amount equal to his annual salary and bonus payment during the
preceding 12 months. If Mr. Haley terminates the agreement with or without
cause, Mr. Haley is entitled to receive severance compensation for one year in
an amount equal to 60% of his annual salary and bonus payment during the
preceding 12 months. During the time he is receiving any such severance
compensation, he is eligible to participate in all employee benefit plans, at
Sport-Haley's expense. If there is a non-negotiated change in control of
Sport-Haley or if Mr. Haley dies, Mr. Haley or his estate, as applicable, is
entitled to lump sum severance compensation equal to three times his annual
salary and bonus payment during the preceding 12 months. If Mr. Haley becomes
disabled during the term of the agreement, his full salary will be continued for
one year from the date of disability. If termination is for any reason other
than by Sport-Haley with cause, all options previously granted shall become
fully vested on the date of termination. The agreement contains a
non-competition provision for one year following termination.

         Sport-Haley entered into an employment agreement with Mr. William Blair
effective March 2, 1998. The agreement requires that he devote his full business
time to Sport-Haley as Vice President of Corporate Sales at an annual salary of
$120,000 and such bonuses as awarded by the Board of Directors. The employment
agreement for Mr. Blair extends through March 1, 2001 and is by its terms
automatically renews for one additional year unless notice of termination is
given by either party. If Sport-Haley terminates the agreement for other than
"cause" (as defined in the agreement) or if Mr. Blair terminates the agreement
with or without "cause", he is entitled to receive severance compensation equal
to six months' salary and 50% of the last annual bonus. During the time he is
receiving any such severance compensation, he is eligible to participate in all
employee benefit plans, at Sport-Haley's expense. If there is a non-negotiated
change in control of Sport-Haley, he is entitled to lump sum severance
compensation equal to three times his annual salary and bonus payment during the
preceding 12 months. Options previously granted may become fully vested on the
date of termination, depending on the reason for termination. The agreement
contains a non-competition agreement for six months following termination,
provided Mr. Blair may be released from the non-compete if the agreement is
terminated without cause and he elects to forego any severance pay.

STOCK OPTION PLAN

         Sport-Haley adopted a stock option plan in 1993 (as amended, the
"Option Plan"). The Option Plan, as amended, provides for the granting of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, non-qualified stock options and stock
appreciation rights ("SARs"), up to a maximum number of 1,350,000 shares.
Non-qualified options may be granted to employees, directors and consultants of
Sport-Haley, while incentive options may be granted only to employees. No
options may be granted under the Option Plan subsequent to February 28, 2003.


                                      -24-
<PAGE>

         The Option Plan is administered by the Compensation Committee of the
Board of Directors, which determines the terms and conditions of the options and
SARs granted under the Option Plan, including the exercise price, number of
shares subject to the option and the exercisability thereof.

         The exercise price of all incentive options granted under the Option
Plan must be at least equal to the fair market value of the Common Stock of
Sport-Haley on the date of grant. In the case of an optionee who owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of Sport-Haley, the exercise price of incentive options shall
be not less than 110% of the fair market value of the Common Stock on the date
of grant. The exercise price of all non-qualified stock options granted under
the Option Plan shall be determined by the Compensation Committee, but shall not
be less than 85% of the fair market value of the Common Stock. The term of all
non-qualified stock options granted under the Option Plan may not exceed ten
years and the term of all incentive options may not exceed five years.
The Option Plan may be amended or terminated by the Board of Directors.

         The Option Plan provides the Board of Directors or the Compensation
Committee the discretion to determine when options granted thereunder shall
become exercisable and the vesting period of such options. Upon termination of a
participant's employment or consulting relationship with Sport-Haley, all
unvested options terminate and are no longer exercisable. Vested options shall
remain exercisable for a specified period of time following the termination
date. The length of such extended exercise period generally ranges from 30 days
to one year, depending on the nature and circumstances of the termination.

         The Option Plan provides that, in the event Sport-Haley enters into an
agreement providing for the merger of Sport-Haley into another corporation or
the sale of substantially all of Sport-Haley's assets, any outstanding
unexercised option shall become exercisable at any time prior to the effective
date of such agreement. Upon the consummation of a merger or sale of assets,
such options shall terminate unless they are assumed or another option is
substituted therefor by the successor corporation.

         As of June 30, 1999, a total of 402,214 non-qualified and incentive
options were outstanding, with exercise prices ranging from $2.50 to $10.63 per
share and a weighted average exercise price per share of $8.25.

401(k) PLAN

         In January 1996, Sport-Haley adopted a defined contribution savings
plan (the "401(k) Plan") to provide retirement income to employees of
Sport-Haley. The 401(k) Plan is intended to be qualified under Section 401(a) of
the Internal Revenue Code of 1986, as amended. The 401(k) Plan covers all
employees who are at least age 18 and have been employed at least three months.
It is funded by voluntary pre-tax contributions from employees up to a maximum
amount equal to 15% of annual compensation and through matching contributions by
Sport-Haley up to 5% of the employee's annual compensation. Upon leaving
Sport-Haley, each participant is 100% vested with respect to the participant's
contributions and is vested based on years of service with respect to
Sport-Haley's matching contributions. Contributions are invested as directed by
the participant in investment funds available under the 401(k) Plan. Full
retirement benefits are payable to each participant in a single cash payment or
an actuarial equivalent form of annuity on the first day of the month following
the participant's retirement.


                                      -25-
<PAGE>

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         Under the securities laws of the United States, Sport-Haley's
directors, its executive officers, and any persons holding more than ten percent
of its Common Stock are required to report their initial ownership of Common
Stock and other equity securities and any subsequent changes in that ownership
to the Securities and Exchange Commission and Sport-Haley. Specific due dates
for these reports have been established and Sport-Haley is required to disclose
in this annual report on Form 10-K any failure to file, or late filing, of such
reports with respect to the period ended June 30, 1999. Based solely on
Sport-Haley's review of the reports furnished to Sport-Haley and written
representations that no other reports were required during fiscal 1999,
Sport-Haley's officers, directors and beneficial owners of more than ten percent
of its Common Stock complied with all Section 16(a) filing requirements.

COMPENSATION COMMITTEE REPORT

         Notwithstanding anything to the contrary set forth in any of the
previous filings made by Sport-Haley under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, that might
incorporate future filings, including, but not limited to, this Report on Form
10-K, in whole or in part, the following Compensation Committee Report shall not
be deemed to be "filed" with the Securities and Exchange Commission nor shall it
be incorporated by reference into any such future filings.

         This Compensation Committee Report discusses Sport-Haley's executive
compensation policies and the basis for the compensation paid to Sport-Haley's
executive officers, including its Chief Executive Officer, during fiscal 1999.

      COMPENSATION POLICY. Sport-Haley's policy with respect to executive
compensation has been designed to:

       -      Adequately and fairly compensate executive officers in relation to
              their responsibilities, capabilities and contributions to
              Sport-Haley in a manner that is commensurate with compensation
              paid by companies of comparable size or within the golf apparel
              industry;

       -      Reward executive officers for the achievement of short-term
              operating goals and for the enhancement of the long-term value of
              Sport-Haley; and

       -      Align the interests of the executive officers with those of
              Sport-Haley's shareholders.

         The components of compensation paid to certain executive officers
consist of (a) base salary, (b) incentive compensation in the form of
discretionary annual bonus payments, (c) long-term incentive compensation in the
form of awards under Sport-Haley's Option Plan, and (d) various other benefits.

         BASE SALARY. For fiscal 1999, the Compensation Committee reviewed
the base salary paid by Sport-Haley to its executive officers under their
respective employment agreements. Annual adjustments to base salaries, if
any, are determined based upon a number of factors, including Sport-Haley's
performance (to the extent such performance can fairly be attributed or
related to each executive officer's performance), as well as the value of
each executive officer's responsibilities, capabilities and contributions and
internal compensation equity considerations. In addition, for fiscal 1999,
the Compensation Committee reviewed the base salaries of its executive
officers in an attempt to ascertain whether those salaries fairly reflect job
responsibilities and prevailing market conditions and rates of pay. The
Compensation Committee believes that base salaries for Sport-Haley's
executive officers have been reasonable in relation to its size and
performance in comparison with the compensation paid by similarly sized
companies or companies within


                                      -26-
<PAGE>

the golf apparel industry. The Compensation Committee did not increase the
base pay of any executive officer in fiscal 1999, except for one officer
whose job responsibilities were changed. Due to slow sales and the desire to
reduce corporate overhead and manage expenses, all of the executive officers
of Sport-Haley voluntarily chose to forgo receipt of a portion of their base
pay from January 1, 1999 through June 30, 1999. Those voluntary reductions
ranged from 10% to 25% of their base pay.

         INCENTIVE CASH BONUS COMPENSATION. The Compensation Committee feels
that a relatively lower level of base salary and relatively higher level of
incentive compensation, in the form of bonuses and grants of options, most
effectively aligns the interests of management with that of shareholders. It
also believes that its policy regarding incentive compensation is similar to
policies of other companies of comparable size within the golf apparel industry.
The decision on whether to award incentive cash bonus compensation is based on a
combination of achievement of business targets and objectives and certain other
financial measures which the Compensation Committee feels will dictate, in large
part, Sport-Haley's future operating results, and on an officer's
responsibilities, capabilities and contribution to Sport-Haley. There is no
formal written bonus incentive plan for executive officers, although certain
executive officers' employment agreements provide that the executive is eligible
for a discretionary bonus of up to a specified percentage of his or her base
salary. Although all of the executive officers' contributions were noted and
commended, the Compensation Committee did not award any incentive cash bonuses
to any of the executive officers because it did not believe that such bonuses
were merited in view of the significant slow down in growth of Sport-Haley in
fiscal 1999.

         LONG-TERM INCENTIVE (OPTION) COMPENSATION. The Compensation Committee
also has authority to select the executive officers and employees who will be
granted options and other awards and to determine the timing, pricing and amount
of any such options or awards. As stated above, the Compensation Committee
believes that incentive compensation, in the form of bonuses and grants of
options, most effectively aligns the interests of management with that of
shareholders. The Compensation Committee's only award of options in fiscal 1999
was to an executive who assumed additional job responsibilities. However,
following a sustained drop in the price of Sport-Haley's Common Stock, the
Compensation Committee became concerned with the effect of the price drop on
employees and officers holding stock options granted in prior years with higher
and, in many cases, significantly higher, exercise prices. Despite Sport-Haley's
historic results of operations, its stock price decreased substantially in the
latter part of 1998. The Compensation Committee attributed the drop in price to
general conditions in the small cap market and market perceptions concerning the
golf attire industry in general, as well as announcements about lower sales and
earnings. In response, in October 1999, the Compensation Committee approved the
cancellation of certain options with higher exercise prices and replaced such
options with new options with an exercise price equivalent to the fair market
value of the date of grant. This action was motivated by the desire to retain
talented employees and executives in light of the loss of incentive value
represented by stock options with considerably higher exercise prices than the
prevailing market price in a competitive environment for qualified employees and
executives. The Committee concluded that repricing out-of-the-money options was
advisable in order to retain and motivate its employees and management The
Compensation Committee also believed that the downward pressure on Sport-Haley's
stock price was primarily a result of external factors beyond management's
control.

         OTHER BENEFITS. Executive officers are eligible for various benefits,
including health and welfare plans generally available to all full-time
employees. In addition, the executive officers are eligible to participate in
the 401(k) Plan, also generally available to all employees, whereby they may
elect to defer part or all of their base and incentive cash compensation, with
matching contributions from Sport-Haley. Sport-Haley does not maintain any other
plans and arrangements for the benefit of its executive officers except to
provide a life insurance policy for the benefit of certain executive officers'
named beneficiaries and a vehicle for its Chief Executive Officer. The
Compensation Committee believes these benefits are


                                      -27-
<PAGE>

reasonable in relation to the executive compensation practices of other
similarly sized companies or companies within the golf apparel industry.

         TAX CONSIDERATIONS. Beginning in 1994, the Internal Revenue Code
limited the federal income tax deductibility of compensation paid to a company's
chief executive officer and to each of the four most highly compensated
executive officers. For this purpose, compensation can include, in addition to
cash compensation, the difference between the exercise price of stock options
and the value of the underlying stock on the date of exercise. A company may
deduct compensation with respect to any of these individuals only to the extent
that during any fiscal year such compensation does not exceed $1 million or
meets certain other conditions (such as shareholder approval). Considering
current compensation plans and policy and the exercise price of currently
outstanding stock options held by the executive officers, the Compensation
Committee believes that, for the near future, there is little risk that
Sport-Haley will lose any significant tax deduction relating to executive
compensation. At such time, if any, that the deductibility of executive
compensation becomes an issue, modifications to compensation plans and policies
will be considered by the Compensation Committee.

         CEO COMPENSATION. In reviewing the Chairman and Chief Executive
Officer's compensation package, the Committee pursues the same objectives which
apply for other executive officers. The overall goal is to base the Chairman and
Chief Executive Officer's salary at a base comparable to those of persons
employed in similar capacities with competitors that are similar in industry
size and performance. However, the actual level approved by the Committee may be
higher or lower based upon the Committee's subjective evaluation of the annual
and long-term performance of Sport-Haley, the individual performance of the
Chairman and Chief Executive Officer particularly with respect to leadership and
strategic vision, and the cash resources and needs of Sport-Haley. The Committee
believes that Mr. Tomlinson's leadership has been essential in growing
Sport-Haley's revenues almost seven fold from 1994 to 1999. The Compensation
Committee noted that Mr. Tomlinson had made a voluntary decision to reduce his
base salary and commended that action as a demonstration of his continued
leadership and administration of resources. In fiscal 1999, raises or cash
bonuses were awarded to Mr. Tomlinson and no new options were granted to him,
but all 60,000 of his existing options were repriced. Mr. Tomlinson's voluntary
reduction in his salary has continued into fiscal 2000 and he is currently being
paid at an annual rate of $170,000, rather than the $220,000 to which he is
entitled under his employment agreement.

         The Compensation Committee believes that the concepts discussed above
further the shareholders' interests and that officer compensation encourages
responsible management of Sport-Haley. The Compensation Committee considers the
effect of management compensation on shareholder interests. In the past, the
Board of Directors based its review in part on the experience of its own members
and on information requested from management personnel. These same factors will
be used in the future in determining officer compensation.

       This report was furnished by Mark J. Stevenson, Ronald J. Norick and
James H. Everest, all of the members of the Compensation Committee.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         All of the Compensation Committee members are independent directors of
Sport-Haley. None of these members have ever been an officer or employee of
Sport-Haley or its Subsidiary nor have any of them had a relationship which
would require disclosure under the "Certain Relationship and Related
Transactions" captions of any of Sport-Haley's filings with the Commission
during the past three fiscal years.


                                      -28-
<PAGE>

PERFORMANCE GRAPH

         Notwithstanding anything to the contrary set forth in any of the
previous filings made by Sport-Haley under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, that might
incorporate future filings, including, but not limited to, this Report on Form
10-K, in whole or in part, the following performance graph shall not be deemed
to be incorporated by reference into any such future filings.

         Set forth below is a line graph prepared by Media General Financial
Services comparing the yearly percentage change in Sport-Haley's cumulative
total shareholder return (share price appreciation plus dividends) on
Sport-Haley's Common Stock with the cumulative total return of (i) a Nasdaq
Market Index and (ii) the stocks of apparel manufacturers having Standard
Industrial Classification codes from industry group numbers 231 through 235,
which is deemed as a market weighted index of publicly traded peers, for the
period from June 30, 1994 through June 30, 1999 (the "Measurement Period"). The
graph assumes that $100 is invested in each of Sport Haley's Common Stock, the
Nasdaq Market Index and the publicly traded peers on June 30, 1994 and that all
dividends were reinvested (there were no dividends paid by Sport-Haley during
the Measurement Period). Sport-Haley's shareholder return is calculated by
dividing (i) the difference between Sport-Haley's share price at June 30, 1994
and at each June 30 of the Measurement Period by (ii) the share price at the
beginning of the Measurement Period.


<TABLE>
<CAPTION>
                                             FISCAL YEAR ENDING JUNE 30,
                                 ----------------------------------------------------------
                                 1994       1995       1996       1997       1998       1999
                                 ----       ----       ----       ----       ----       ----
<S>                             <C>        <C>        <C>        <C>        <C>        <C>
Sport-Haley, Inc.               100.00     145.10     229.41     262.75     205.88      75.49
Industry Peer Group Index       100.00     101.64     141.28     166.47     197.85     177.83
Nasdaq Market Index             100.00     117.28     147.64     177.85     235.75     330.37
</TABLE>



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding beneficial
ownership of Sport-Haley's Common Stock as of September 24, 1999 by (i) each
person known by Sport-Haley to own beneficially more than 5% of the outstanding
Common Stock, (ii) each director or nominee, and (iii) all executive officers
and directors as a group. The information with respect to institutional
investors is derived solely from statements filed with the Commission under
Section 13(d) or 13(g) of the Securities Exchange Act. Each


                                      -29-
<PAGE>

person has sole voting and sole investment or dispositive power with respect to
the shares shown except as noted.


<TABLE>
<CAPTION>
                                                                               SHAREHOLDINGS ON SEPTEMBER 24, 1999
                                                                          ------------------------------------------
     NAME AND ADDRESS (1)                                                 NUMBER OF SHARES (2) PERCENT OF CLASS (3)
--------------------------                                                -------------------- ---------------------
<S>                                                                       <C>                  <C>
Robert G. Tomlinson(4)...................................................        138,000                3.5%
Robert W. Haley(5).......................................................         54,950                1.4
Steve S. Auger(6)........................................................          6,100                *
Catherine Blair(7).......................................................         17,500                *
Kevin M. Tomlinson(8)....................................................         45,000                1.2
William L. Blair(8)......................................................          6,667                *
Mark J. Stevenson(8).....................................................         16,667                *
Ronald J. Norick(9)......................................................         81,367                2.1
James H. Everest(10).....................................................         56,667                1.5
U.S. Bancorp(11).........................................................        382,620                9.9
     601 Second Avenue South
     Minneapolis, Minnesota 55402
Delaware Management Holdings, Inc........................................        236,900                6.1
     2005 Market Street
     Philadelphia, Pennsylvania 19103
Sandera Partners, L.P.(12)
     1601 Elm Street, Suite 4000
     Dallas, Texas 75201.................................................        240,285                6.2
Newcastle Partners, L.P.(12)
     4020 Windsor Avenue
     Dallas, Texas 75205.................................................        245,285                6.4
All directors and officers as a group
(Nine persons)(13).......................................................        422,918               10.4

</TABLE>

-------------------
* Less than 1%
(1)      Except as noted above, the address for all persons listed is 4600 E.
         48th Avenue, Denver, Colorado 80216.
(2)      Ownership includes both outstanding Common Stock and shares issuable
         upon exercise of options that are currently exercisable or will become
         exercisable within 60 days after the date hereof.
(3)      All percentages are calculated based on the number of outstanding
         shares in addition to shares which a person or group has the right to
         acquire within 60 days of September 28, 1999.
(4)      Includes 50,000 shares subject to currently exercisable options.
(5)      Includes 33,334 shares subject to currently exercisable options or
         options which will become exercisable within 60 days after the date
         hereof.
(6)      Includes 5,000 shares subject to currently exercisable options.
(7)      Includes 15,000 shares subject to currently exercisable options or
         options which will become exercisable within 60 days after the date
         hereof.
(8)      Consists solely of shares subject to currently exercisable options.
(9)      Includes 25,000 shares subject to currently exercisable options.
(10)     Includes 16,667 shares subject to currently exercisable options.
(11)     U.S. Bancorp is a parent holding company which beneficially owns shares
         owned of record by The Regional Equity Fund, a mutual fund of the First
         American Investment Funds, Inc., an open-end investment company.


                                      -30-
<PAGE>

(12)     The sole general partner of Newcastle Partners, L.P. may be deemed a
         control person related to Sandera Partners, L.P. and the 240,285 shares
         shown as beneficially owned by Newcastle Partners, L.P. are the shares
         owned by Sandera Partners, L.P.
(13)     Includes 213,335 shares of Common Stock subject to currently
         exercisable options. Excludes shares of Common Stock as to which
         officers and directors disclaim beneficial ownership.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Sport-Haley has adopted a policy pursuant to which material
transactions between Sport-Haley and its executive officers, directors and
principal shareholders (i.e. shareholders owning beneficially 5% or more of the
outstanding voting securities of Sport-Haley) shall be submitted to the Board of
Directors for approval by a disinterested majority of the directors voting with
respect to the transaction. For this purpose, a transaction is deemed material
if such transaction, alone or together with a series of similar transactions
during the same fiscal year, involves an amount which exceeds $60,000. No such
transactions occurred in fiscal 1999.


                                      -31-
<PAGE>

                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         (a)  EXHIBITS, FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

         The following documents are filed herewith or have been included as
exhibits to previous filings with the Securities and Exchange Commission and are
incorporated herein by this reference:

         (1) FINANCIAL STATEMENTS

         Report of Independent Certified Public Accountants
         Consolidated Balance Sheets - June 30, 1999 and 1998
         Consolidated Statements of Income and Comprehensive Income for the
         years ended June 30, 1999, 1998 and 1997 Consolidated Statement of
         Shareholders' Equity for the years ended June 30, 1999, 1998 and 1997
         Consolidated Statements of Cash Flows for the years ended June 30,
         1999, 1998 and 1997 Notes to Consolidated Financial Statements for the
         years ended June 30, 1999, 1998 and 1997

         (2) FINANCIAL STATEMENT SCHEDULES

         None

         (3) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.                DOCUMENT
-----------               -----------
<S>            <C>
-      3.1.2   Amended and Restated Articles of Incorporation of
               Sport-Haley as filed on March 7, 1994 with the Secretary of
               State of the State of Colorado.

--    3.2.3    Amended and Restated By-laws of Sport-Haley as adopted January
               10, 1996.

-     4.1      Form of Specimen Certificate for Common Stock of Sport-Haley.

++    10.1.3   1993 Stock Option Plan, effective March 1993, as amended.

x     10.2.1   Employment Agreement, dated January 1, 1997, by and
               between Robert G. Tomlinson and Sport-Haley.

x     10.2.4   Employment Agreement, dated July 1, 1997, by and betwee
               Catherine B. Blair and Sport Haley.

x     10.2.5   Employment Agreement, dated January 1, 1997, by and between
               Robert W. Haley and Sport- Haley.

x     10.2.10  Form of standard Endorsement Agreement by and between
               various golf professionals and SportHaley.

++++  10.3.2   Business Loan Agreement, dated November 5, 1998, by and
               between U.S. Bank National Association,  Sport-Haley and
               B&L Sportswear, Inc..


                                      -32-
<PAGE>

++    10.4.1   Lease Agreement, dated July 29, 1994, by and among Thomas J.
               Hilb, individually, Thomas J. Hilb, as Trustee of the Connie
               Hilb Trust, and Sport-Haley.

--    10.4.2   Amendment to Lease Agreement, dated January 12, 1996, by and
               among Thomas J. Hilb, individually, Thomas J. Hilb, as
               Trustee of the Connie Hilb Trust, and Sport-Haley.

+     10.4.4   Laughlin Factory Outlet Store Lease, dated March 10, 1995,
               between Horizon Outlet Centers Limited Partnership and
               Sport-Haley.

**    10.4.5   Lease Agreement, dated April, 1998, between Larry M. Jones
               and Roberta C. Jones, and B&L Sportswear, Inc.

-     10.5     Form of Independent Sales Representative Agreement.

+     10.7     Trademark Registrations, dated February 21, 1995, issued by
               the United States Patent and Trademark Office to Sport-Haley.

--    10.10    Trademark Licensing Agreement, dated October 14, 1995, by
               and between W.L. Gore & Associates, Inc. and Sport-Haley.

xx    10.16    Stock Purchase Agreement among Sport-Haley, Marvin Urquhart,
               Larry M. Jones and Roberta C. Jones, and B&L Sportswear, Inc.

***   11       Schedule Computing Net Income Per Common Share

**    21       Subsidiaries of the Registrant

***   23.      Consent of Levine Hughes & Mithuen, Inc.,
               independent certified public accountants for
               Sport-Haley.

***   27.      Financial Data Schedule.
</TABLE>

*     Incorporated by reference from Sport-Haley's Registration Statement on
      Form SB-2 (File No. 333-1214).
-     Incorporated by reference from Sport-Haley's Registration Statement on
      Form SB-2 (File No. 33-74876-D).
+     Incorporated by reference from Sport-Haley's Form 10-KSB filed October 6,
      1995 (File No. 1-12888).
++    Incorporated by reference from Sport-Haley's Form 10-KSB filed September
      14, 1994 (File No. 1-12888).
++    Incorporated by reference from Sport-Haley's Form 10-QSB filed November
      14, 1995 (File No. 1-12888).
--    Incorporated by reference from Sport-Haley's Form 10-QSBA/1 filed
      February 2, 1996 (File No. 1-12888).
+     Incorporated by reference from Sport-Haley's Form 10-KSB filed on October
      11, 1996.
++    Incorporated by reference from Sport-Haley's Form 10-QSB filed on May 12,
      1997 (File No. 1-12888).
x     Incorporated by reference from Sport-Haley's Form 10-KSB filed on
      September 29,1997 (File No. 1-12888).
xx    Incorporated by reference from Sport-Haley's Form 8-K filed on April 27,
      1998 (File No. 1-12888).
**    Incorporated by reference from Sport-Haley's Form 10-K filed on September
      28,1998 (File No. 1-12888).
++++  Incorporated by reference from Sport-Haley's Form 10-Q filed on February
      16, 1999(File No. 333-18831).
***   Filed herewith.

         (b)      REPORTS ON FORM 8-K

         A report on Form 8-K was filed on May 10, 1999 reporting an increase in
Sport-Haley's repurchase program under Item 5 of such Form.


                                      -33-
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                           SPORT-HALEY, INC.



September 27, 1999          By:  /s/ ROBERT G. TOMLINSON
                                 -----------------------------------------
                                 Robert G. Tomlinson, Chairman of the Board


         Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
   SIGNATURE                                     TITLE                                                DATE
   ---------                                     -----                                                ----
<S>                                   <C>                                                      <C>
  /s/ ROBERT G. TOMLINSON             Chairman of the Board and Chief Executive                September 27, 1999
----------------------------          Officer (Principal Executive Officer)
      Robert G. Tomlinson


/s/  ROBERT W. HALEY                  President and Director                                   September 27, 1999
----------------------------
      Robert W. Haley


  /s/ STEVE S. AUGER                  Treasurer (Principal Financial and                       September 27, 1999
----------------------------          Accounting Officer)
      Steve S. Auger


                                      Director
----------------------------
      Mark J. Stevenson


  /s/ RONALD J. NORICK                Director                                                 September 27, 1999
----------------------------
      Ronald J. Norick


  /s/ JAMES H. EVEREST                Director                                                 September 27, 1999
----------------------------
      James H. Everest
</TABLE>


                                      -34-
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS





Shareholders
Sport-Haley, Inc.
Denver, Colorado

We have audited the accompanying consolidated balance sheets of Sport-Haley,
Inc. as of June 30, 1999 and 1998 and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three years in the
period ended June 30, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits of the financial statements provide a reasonable
basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Sport-Haley, Inc. as of June 30, 1999 and 1998, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended June 30, 1999, in conformity with generally accepted accounting
principles.



                         Levine, Hughes, & Mithuen Inc.


Englewood, Colorado
September 7, 1999


                                      F-1
<PAGE>

                                SPORT-HALEY, INC.
                           CONSOLIDATED BALANCE SHEETS
                             JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
                                    ASSETS
                                                                                1999                1998
                                                                            ------------       ---------------
<S>                                                                         <C>                <C>
Current assets:
    Cash and cash equivalents                                               $    8,581,250     $    6,501,568
    Short-term investments and marketable securities                                   625             12,920
    Accounts receivable, net of allowance of $86,704
          and $155,231, respectively                                             5,670,577          6,553,684
    Inventories                                                                 13,282,962         17,577,086
    Prepaid expenses                                                             1,585,447          1,285,171
    Deferred taxes                                                                 124,425            118,649
                                                                            --------------     --------------

         Total current assets                                                   29,245,286         32,049,078

Property and equipment, net                                                      2,467,983          2,303,747
Net assets of discontinued operations                                              305,635            756,360
Goodwill, net of amortization of $9,359 at June 30, 1999                            84,231             93,590
Deferred taxes                                                                      50,851                  -
Other assets                                                                       313,048             33,706
                                                                            --------------     --------------
                                                                            $   32,467,034     $   35,236,481
                                                                            --------------     --------------
                                                                            --------------     --------------

                                     LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Capital lease obligations maturing within one year                      $            -     $          454
    Note payable                                                                   600,000            500,000
    Accounts payable                                                               788,331          1,861,538
    Accrued income taxes                                                                 -            317,538
    Accrued commissions and other expenses                                         769,378          1,027,449
                                                                            --------------     --------------
         Total current liabilities                                               2,157,709          3,706,979
                                                                            --------------     --------------
Long-term liabilities:
    Deferred taxes                                                                       -              4,060
                                                                            --------------     --------------
                                                                                         -              4,060
                                                                            --------------     --------------
                                                                                 2,157,709          3,711,039
                                                                            --------------     --------------
Commitments and contingencies  (Notes 10, 13, 14, 19, 20 and 22)
Minority interest                                                                 (191,193)            60,111
                                                                            --------------     --------------
Shareholders' equity:
    Preferred stock, no par value; authorized 1,500,000
         shares; none issued and outstanding                                             -                  -
    Common stock, no par value; 15,000,000 shares
         authorized; 4,257,552 and 4,512,962 shares
         issued and outstanding, respectively                                   16,355,097         18,416,463
    Additional paid-in capital                                                     879,478            597,669
    Retained earnings                                                           13,265,943         12,451,199
                                                                            --------------     --------------
         Total shareholders' equity                                             30,500,518         31,465,331
                                                                            --------------     --------------

                                                                            $   32,467,034     $   35,236,481
                                                                            --------------     --------------
                                                                            --------------     --------------
</TABLE>


See audit report of independent acccountants and notes to consolidated financial
statements.


                                      F-2
<PAGE>

                                 SPORT-HALEY, INC.
            CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                 FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                     1999             1998               1997
                                                               --------------     -------------     --------------
<S>                                                            <C>                <C>               <C>
Net sales                                                      $   27,531,089     $  30,461,722     $   28,613,318

Cost of goods sold                                                 19,261,422        17,935,490         16,630,684
                                                               --------------     -------------     --------------
Gross profit                                                        8,269,667        12,526,232         11,982,634

Selling, general and administrative expenses                        7,218,725         7,481,406          6,709,775
                                                               --------------     -------------     --------------
Income from operations                                              1,050,942         5,044,826          5,272,859
                                                               --------------     -------------     --------------
Other income and (expense):
     Interest income                                                  283,701           438,461            410,611
     Other income                                                     173,921           180,743            338,846
     Other expense                                                    (63,263)         (317,177)          (360,174)
                                                               --------------     -------------     --------------
                                                                      394,359           302,027            389,283
                                                               --------------     -------------     --------------
Income from operations before minority
   interest and provision for income taxes                          1,445,301         5,346,853          5,662,142

Minority interest benefit                                             251,304             6,259                  -

Provision for income taxes                                           (609,482)       (1,204,639)        (1,636,693)
                                                               --------------     -------------     --------------
Income from continuing operations                                   1,087,123         4,148,473          4,025,449
                                                               --------------     -------------     --------------
Discontinued operations:
   Income (loss) from discontinued operations, net
     of income tax benefit (provision) of $39,895,
     $(33,639) and $46,945, respectively                              (72,170)          115,868           (115,495)
   Loss on disposal of assets, net of income tax benefit
     of $110,674                                                     (200,209)                -                  -
                                                               --------------     -------------     --------------
Income (loss) from discontinued operations                           (272,379)          115,868           (115,495)

Net income                                                            814,744         4,264,341          3,909,954
                                                               --------------     -------------     --------------
Other comprehensive income:
   Unrealized loss on available for
     sale securities                                                       -                 -             65,750
                                                               --------------     -------------     --------------

Comprehensive income                                           $      814,744     $   4,264,341     $    3,844,204
                                                               --------------     -------------     --------------
                                                               --------------     -------------     --------------
Income per share:
   Basic:
     Income from continuing operations                         $          .25     $         .91     $         .86
     Net income                                                $          .18     $         .93     $         .84
   Diluted:
     Income from continuing operations                         $          .25     $         .90     $         .86
     Net income                                                $          .18     $         .93     $         .83

Weighted average shares outstanding     - basic                     4,408,189         4,564,355          4,658,796
                                        - diluted                   4,408,189         4,592,751          4,689,713
</TABLE>


See audit report of independent accountants and notes to consolidated financial
statements.


                                      F-3
<PAGE>


                                       SPORT-HALEY, INC.
                        CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                       FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
                                                                                            UNREALIZED
                                                                  ADDITIONAL                  LOSS ON          TOTAL
                                       COMMON STOCK                PAID-IN      RETAINED    MARKETABLE     SHAREHOLDERS'
                                  SHARES           AMOUNT          CAPITAL      EARNINGS    SECURITIES         EQUITY
                               -----------      ------------    ----------   ------------   ------------   ------------
<S>                            <C>              <C>             <C>          <C>            <C>            <C>
Balance at June 30, 1996         4,419,271      $ 20,166,106    $   62,661   $  4,276,904   $   (140,273)  $ 24,365,398

Stock options exercised            319,905         1,657,967             -              -              -      1,657,967

Warrants exercised                  39,187           240,865             -              -              -        240,865

Repurchase of common stock        (127,290)       (1,625,429)            -              -              -     (1,625,429)

Stock option compensation                -                 -       223,015              -              -        223,015

Unrealized loss on securities
     available for sale                  -                 -             -              -        (65,750)       (65,750)

Net income                               -                 -             -      3,909,954                     3,909,954
                               -----------      ------------    ----------   ------------   ------------   ------------

Balance at June 30, 1997         4,651,073        20,439,509       285,676      8,186,858       (206,023)    28,706,020

Stock options exercised             73,326           469,731             -              -              -        469,731

Warrants exercised                  28,563           218,160             -              -              -        218,160

Repurchase of common stock        (240,000)       (2,710,937)            -              -              -     (2,710,937)

Stock option compensation                -                 -       311,993              -              -        311,993

Change in unrealized loss on
   securities available for sale         -                 -             -              -        206,023        206,023

Net income                               -                 -             -      4,264,341              -      4,264,341
                               -----------      ------------    ----------   ------------   ------------   ------------

Balance at June 30, 1998         4,512,962        18,416,463       597,669     12,451,199              -     31,465,331

Stock options exercised              9,340            60,572             -              -              -         60,572

Warrants exercised                  22,250           144,625             -              -              -        144,625

Repurchase of common stock        (287,000)       (2,266,563)            -              -              -     (2,266,563)

Stock option compensation                -                 -       281,809              -              -        281,809

Net income                               -                 -             -        814,744              -        814,744
                               -----------      ------------    ----------   ------------   ------------   ------------

Balance at June 30, 1999         4,257,552      $ 16,355,097    $  879,478   $ 13,265,943   $          -   $ 30,500,518
                               -----------      ------------    ----------   ------------   ------------   ------------
                               -----------      ------------    ----------   ------------   ------------   ------------
</TABLE>


See audit report of independent accountants and notes to consolidated financial
statements.


                                      F-4
<PAGE>

                                        SPORT-HALEY, INC.
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
                                                                           1999             1998              1997
                                                                     --------------    --------------    --------------
<S>                                                                  <C>               <C>               <C>
Cash flows from operating activities:
     Net income                                                      $      814,744    $    4,264,341    $    3,909,954
     Adjustments to reconcile net income to net cash
       provided by operating activities:
        Depreciation and amortization                                       646,853           577,274           449,862
        Deferred taxes, and other                                           (60,687)          (78,918)          (64,800)
        Provision for doubtful accounts                                     120,000            53,000           154,000
        Loss on disposal of assets                                          109,384           334,230                 -
        Amortization of investment premiums                                       -            21,420           126,747
        Stock option compensation                                           281,809           311,993           223,015

     Cash provided (used) due to changes in assets and
     liabilities net of B&L Sportswear, Inc., acquisition:
        Accounts receivable                                                 763,107          (632,752)       (1,361,250)
        Inventory                                                         4,609,648        (7,896,453)       (2,265,133)
        Prepaid expenses                                                   (300,276)         (224,649)            1,549
        Other assets                                                       (279,342)           33,555           (35,617)
        Accounts payable                                                 (1,073,208)          557,931          (822,300)
        Accrued commissions and other expenses                             (258,070)          141,235           149,454
        Accrued income taxes                                               (317,538)          317,538          (464,483)
        Minority interest                                                  (251,304)           (6,259)                -
                                                                     --------------    --------------    --------------
              Net cash provided (used) by operating activities            4,805,120        (2,226,514)              998
                                                                     --------------    --------------    --------------
Cash flows from investing activities:
     Purchase of B&L Sportswear, Inc., net of cash acquired                       -          (151,694)                -
     Purchase of fixed assets                                              (788,338)         (838,844)       (1,158,750)
     Maturities of short-term investments and marketable securities               -         1,270,000                 -
     Sale of short-term investments and marketable securities                     -                 -         2,511,439
     Proceeds from the disposal of fixed assets                              24,720            21,078                 -
                                                                     --------------    --------------    --------------
              Net cash provided (used) by investing activities             (763,618)          300,540         1,352,689
                                                                     --------------    --------------    --------------
Cash flows from financing activities:
     Principal payments on capital lease obligations                           (454)           (2,221)           (1,360)
     Advances on notes payable                                              100,000           179,343                 -
     Proceeds from exercised stock options and warrants                     205,197           687,891         1,898,832
     Repurchase of common stock                                          (2,266,563)       (2,710,937)       (1,625,429)
                                                                     --------------    --------------    --------------
              Net cash provided (used) by financing activities           (1,961,820)       (1,845,924)          272,043
                                                                     --------------    --------------    --------------

     Net increase (decrease) in cash and cash equivalents                 2,079,682        (3,771,898)        1,625,730

Cash and cash equivalents, beginning of year                              6,501,568        10,273,466         8,647,736
                                                                     --------------    --------------    --------------

Cash and cash equivalents, end of year                               $    8,581,250    $    6,501,568    $   10,273,466
                                                                     --------------    --------------    --------------
                                                                     --------------    --------------    --------------

Supplemental cash flow information:
     Cash paid during the year for:
        Interest                                                     $       43,885    $       35,476    $        7,594
                                                                     --------------    --------------    --------------
                                                                     --------------    --------------    --------------
        Taxes                                                        $    1,154,751    $    983,000      $    2,130,562
                                                                     --------------    --------------    --------------
                                                                     --------------    --------------    --------------
</TABLE>

See audit report of independent accountants and notes to consolidated financial
statements.


                                   F-5
<PAGE>

                                SPORT-HALEY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  ORGANIZATION AND NATURE OF OPERATIONS

        Organization and Nature of Operations:

        Sport-Haley designs, markets, and contracts for the manufacture of
        quality men's and women's fashion golf apparel under the distinctive
        Haley-Registered Trademark- label. The Company's fashion golf apparel
        is known for its innovative styling, high quality fabrics, generous
        it and classic appearance. The Company's apparel is sold in the
        remium and mid-price market through a network of independent ales
        representatives and distributors to primarily golf rofessional shops,
        country clubs and resorts throughout the nited States and
        internationally. The Company also sells to ollege, university and
        corporate markets. The Company was rganized as a Colorado corporation
        on January 1, 1991.

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        PRINCIPLES OF CONSOLIDATION:

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

        INVENTORIES:

        Inventories are stated at the lower of cost (first-in, first-out) or
        market. The Company maintains a perpetual inventory system and
        adjusts inventories annually based upon the results of its physical
        inventory taken at its fiscal year end. Cost includes materials,
        labor and manufacturing overhead. Generally, slow moving inventories
        are written down to market value during the current fiscal year.

        BAD DEBTS:

        Bad debts are provided for using the allowance method based on
        historical experience and evaluation of outstanding accounts
        receivable at year-end.

        DEPRECIATION AND AMORTIZATION:

        Furniture, fixtures and equipment are stated at cost. Depreciation is
        provided over the estimated useful lives of the assets ranging from
        three to twelve years using the straight-line method of depreciation.
        Depreciation and amortization expense at June 30, 1999, 1998 and 1997
        was $646,853, $577,274 and $449,862, respectively.

        Leasehold improvements are stated at cost and amortized over the
        remaining life of the lease, using the straight-line method.

        Upon disposing of assets, the related cost and accumulated
        depreciation are removed from the books and the resulting gain or
        loss, if any, is recognized in the year of the disposition.


                                      F-6
<PAGE>

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        LONG-LIVED ASSETS:

        The Company periodically evaluates the recoverability of its
        long-lived assets based upon the estimated undiscounted future
        cash flows from the related asset. Impairment would be recognized
        in operations if permanent diminution in value occurs.

        REVENUE RECOGNITION:

        The Company recognizes revenue upon shipment of its products.
        Generally, both risk and title pass to the Company's customers at
        date of shipment via common carrier.

        DEFERRED TAXES:

        Deferred income taxes are recognized for the tax consequences in
        future years of differences between the tax bases of assets and
        liabilities and their financial reporting amounts at each year
        end, based on enacted tax laws and statutory tax rates applicable
        to the periods in which the differences are expected to affect
        taxable income. Valuation allowances are established when
        necessary to reduce deferred tax assets to the amount expected to
        be realized. Income tax expense is the tax payable for the period
        and the change during the period in deferred tax assets and
        liabilities.

        USE OF ESTIMATES:

        The preparation of financial statements in conformity with
        generally accepted accounting principles requires management to
        make estimates and assumptions that affect certain reported
        amounts and disclosures. Accordingly, actual results could differ
        from those estimates.

        CERTAIN RISKS AND CONCENTRATIONS:

        The Company's operations consist of the design, manufacture and
        wholesale of golf apparel for men and women. The Company's
        headquarters are located in Colorado and its customers are located
        throughout the United States and abroad. As of June 30, 1999 and
        1998 the majority of the Company's receivables are from companies
        in the golfing industry. The Company maintains adequate allowance
        for potential credit losses and performs on-going credit
        evaluations.

        EXCESS COST OVER NET ASSETS ACQUIRED:

        The excess cost over the net assets acquired of B&L Sportswear,
        Inc. is being amortized on a straight-line basis over ten years.

        STATEMENT OF CASH FLOWS:

        For purposes of the statement of cash flows, the Company considers
        all highly liquid instruments purchased with an original maturity
        of three months or less, that are readily convertible to known
        amounts of cash and present an insignificant risk of change in
        value because of changes in interest rate, to be cash equivalents


                                      F-7
<PAGE>

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        RECENT PRONOUNCEMENTS:

        In June 1997, the Financial Accounting Standards Board (FASB)
        issued Statement No. 130 (SFAS 130), REPORTING COMPREHENSIVE
        INCOME, which establishes standards for reporting and display of
        comprehensive income and its components (net revenues, expenses,
        gains and losses) in a full set of general-purpose financial
        statements. The Company has adopted SFAS 130 in fiscal year 1999.

        In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT
        SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which changes
        the way public companies report information about operating
        segments. SFAS No. 131, which is based on the management approach
        to segment reporting, establishes requirements to report selected
        segment information quarterly and to report entity-wide
        disclosures about products and services, major customers and the
        countries in which the entity holds assets and report revenues.
        The Company has adopted SFAS No. 131 in fiscal year 1999.

        RECLASSIFICATIONS:

        Certain reclassifications have been made to the 1998 and 1997
        amounts to conform to the current year presentation.

        FINANCIAL INSTRUMENTS:

        The Company periodically maintains cash balances at a commercial
        bank in excess of the Federal Deposit Insurance Corporation
        insurance limit of $100,000.

NOTE 3  FAIR VALUE OF FINANCIAL INSTRUMENTS

        The estimated fair value of the Company's financial instruments
are as follows:


<TABLE>
<CAPTION>
                                                             1999                            1998
                                                ---------------------------     -----------------------------
                                                 CARRYING          FAIR         CARRYING           FAIR
                                                 AMOUNT            VALUE        AMOUNT             VALUE
                                                ------------  -------------    --------------   -------------
               <S>                              <C>           <C>               <C>             <C>
               Cash and cash equivalents        $  8,581,250  $   8,581,250     $   6,501,568   $   6,501,568

               Short-term investments
                  and marketable securities              625            625           12,290           12,290
</TABLE>


               The carrying amount of cash and cash equivalents and short-term
               investments and marketable securities approximates fair value.

               The carrying value of all other financial instruments potentially
               subject to valuation risk, principally consisting of accounts
               receivable and accounts payable, also approximate fair value.


                                      F-8
<PAGE>

NOTE 4         CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>
               Cash and cash equivalents consist of the following at June 30:


                                                               1999                  1998
                                                           --------------      ---------------
                            <S>                            <C>                 <C>
                            Cash in banks                  $    3,619,343      $     2,522,942
                            Short-term securities               4,961,907            3,978,626
                                                           --------------      ---------------
                                                           $    8,581,250      $     6,501,568
                                                           --------------      ---------------
                                                           --------------      ---------------
</TABLE>


NOTE 5         ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS

<TABLE>
<CAPTION>
               A summary of the allowance for uncollectible accounts at June 30:

                                                              1999              1998             1997
                                                          -------------    -------------     ------------
               <S>                                        <C>              <C>               <C>
               Balance at July 1                          $     155,231    $      71,157     $     90,243
               Provision for uncollectible accounts             120,000           53,000          154,000
               Charge-offs                                     (405,060)        (293,462)        (213,240)
               Recoveries                                       216,533          324,536           40,154
                                                          -------------    -------------     ------------

               Balance at June 30                         $      86,704    $     155,231     $     71,157
                                                          -------------    -------------     ------------
                                                          -------------    -------------     ------------

</TABLE>


NOTE 6         INVESTMENTS AND MARKETABLE SECURITIES

               The Company's investments in marketable equity securities are
               held for an indefinite period and are classified as "available
               for sale." The fair value of these securities at June 30, 1999
               and 1998 was $625 and $12,920, respectively. The Company
               recognized a permanent decline in the fair value of these
               securities of $12,295 and $221,153 for the years ended June 30,
               1999 and 1998, respectively.

NOTE 7         INVENTORIES

               Inventories consist of the following at June 30:


<TABLE>
<CAPTION>
                                                                           1999                  1998
                                                                      --------------      ---------------
                            <S>                                       <C>                 <C>
                            Component inventory                       $    5,424,298      $     6,963,746
                            Finished goods                                 7,858,664           10,613,340
                                                                      --------------      ---------------
                                                                      $   13,282,962      $    17,577,086
                                                                      --------------      ---------------
                                                                      --------------      ---------------
</TABLE>


NOTE 8         ADVERTISING

               The Company expenses the production costs of advertising the
               first time the advertising takes place, except for
               direct-response advertising, which is capitalized and amortized
               over its expected period of future benefits.

               Direct-response advertising consists primarily of future
               advertising costs incurred in association with the Company's
               independent sales representatives. These capitalized costs are
               amortized over the future selling seasons, generally five to
               seven months, the period in which the revenue is recognized. At
               June 30, 1999 and 1998, approximately $370,592 and $438,842 of
               advertising was capitalized. Advertising expense was $653,056,
               $413,981 and $457,542 for the years ended June 30, 1999, 1998 and
               1997, respectively.


                                      F-9
<PAGE>

NOTE 9         PROPERTY AND EQUIPMENT

               Property and equipment are recorded at cost and are comprised of
               the following at June 30:

<TABLE>
<CAPTION>
                                                                                        1999             1998
                                                                                    -------------   --------------

                            <S>                                                    <C>             <C>
                            Plant equipment                                         $   1,845,820   $    1,769,864
                            Furniture and equipment                                     1,817,484        1,443,049
                            Leasehold improvements                                        416,296          432,233
                            Transportation equipment                                       34,106           35,597
                            Property held under capital lease                                   -            6,685
                                                                                    -------------   --------------
                                                                                        4,113,706        3,687,428
                            Less, accumulated depreciation
                               and amortization                                         1,645,723        1,383,681
                                                                                    -------------   --------------
                                                                                    $   2,467,983   $    2,303,747
                                                                                    -------------   --------------
                                                                                    -------------   --------------
</TABLE>


NOTE 10        LINE OF CREDIT AGREEMENT

               The Company has two separate revolving line of credit agreements
               with the same bank. These revolving line of credit agreements,
               which have been renewed through November 5, 2000, provide for
               interest at 1/2% below the bank's prime rate. One agreement
               provides for a maximum loan amount of $9.0 million to the Company
               secured by a lien on substantially all of the Company's assets
               and the other agreement provides for a maximum loan amount of
               $1.0 million to its Subsidiary secured by a lien on substantially
               all of the Subsidiary's assets. The Company generally maintains
               its line of credit solely to facilitate the issuance of letters
               of credit for inventory purchases from offshore suppliers and to
               fund any temporary working capital needs. The Subsidiary has a
               balance due of $600,000 on its line of credit at June 30, 1999.

NOTE 11        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 $165,498 in cash to
               acquire its 52% ownership interest of B&L. Effective July 1,
               1999, the Company increased its ownership in B&L to a 93%
               interest by exchanging debt owed by B&L to Sport-Haley for
               additional equity in B&L. The Company and
               remaining shareholders entered into a buy-sell agreement
               restricting transfer of their shares of B&L and granted 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.

               B&L, headquartered in Four Oaks, North Carolina, operates as a
               cutting and sewing contractor. Since the time of acquisition,
               they manufacture the Company's products on an exclusive basis.
               The Company's management believes that the acquisition of a
               controlling interest in B&L will enhance the Company's ability to
               control 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.


                                      F-10
<PAGE>

NOTE 12        INCOME TAXES

<TABLE>
<CAPTION>
               The components of income tax expense are as follows at June 30:

                                                                         1999           1998            1997
                                                                     -------------  -------------  -------------
               <S>                                                   <C>            <C>            <C>
               Continuing operations:
                   Current
                       Federal                                       $     577,921  $   1,114,624  $   1,463,776
                       State                                                92,248        168,933        234,069
                                                                     -------------  -------------  -------------
                                                                           670,169      1,283,557      1,697,845
                                                                     -------------  -------------  -------------
                   Deferred
                       Federal                                             (52,512)       (68,800)       (53,312)
                       State                                                (8,175)       (10,118)        (7,840)
                                                                     -------------  -------------  -------------
                                                                           (60,687)       (78,918)       (61,152)
                                                                     -------------  -------------  -------------
                                                                           609,482      1,204,639      1,636,693
                                                                     -------------  -------------  -------------
               Discontinued operations:
                   Current
                       Federal                                            (122,529)        29,266        (40,842)
                       State                                               (28,040)         4,373         (6,103)
                                                                     -------------  -------------  -------------
                                                                          (150,569)        33,639        (46,945)
                                                                     -------------  -------------  -------------
                   Grand total                                       $     458,913  $   1,238,278  $   1,589,748
                                                                     -------------  -------------  -------------
                                                                     -------------  -------------  -------------
</TABLE>


<TABLE>
<CAPTION>
               The difference between the U.S. Federal statutory rate and the
               Company's effective rate is as follows at June 30:

                                                                         1999           1998            1997
                                                                     -------------  -------------  -------------
                  <S>                                                 <C>            <C>            <C>
                   U.S. Federal statutory rate                                34.0%          34.0%          34.0%
                   State income taxes, net of federal benefits                 5.1            3.3            4.1
                   Increase (decrease) in deferred taxes                      (4.8)          (1.4)          (1.1)
                   Stock options                                               6.0          (15.1)          (4.5)
                   Other                                                      (4.7)           1.7           (3.6)
                                                                     -------------  -------------  -------------
                   Effective tax rate                                         35.6%          22.5%          28.9%
                                                                     -------------  -------------  -------------
                                                                     -------------  -------------  -------------
</TABLE>


               The components of the net deferred tax asset and net deferred tax
               liability recognized in the accompanying balance sheets are as
               follows at June 30:


<TABLE>
<CAPTION>
                                                                         1999                      1998
                                                              ------------------------   -------------------------
                                                              Current        Long-Term   Current         Long-Term
                                                              ----------  -------------  ----------- -------------
                   <S>                                        <C>         <C>            <C>         <C>
                   Deferred tax liability                     $        -  $   (201,146)  $        -  $    (167,815)
                   Deferred tax asset                            124,425       251,997      118,649        163,755
                                                              ----------  ------------   ----------  -------------
                                                              $  124,425  $     50,851   $  118,649  $      (4,060)
                                                              ----------  ------------   ----------  -------------
                                                              ----------  ------------   ----------  -------------
</TABLE>


              The types of temporary differences between the tax bases of assets
              and liabilities and their financial reporting amounts that give
              rise to a significant portion of the deferred tax asset and
              liability and their appropriate tax effects are as follows at June
              30:
<TABLE>
<CAPTION>
                                                          1999                                   1998
                                         --------------------------------------- -------------------------------------
                                                        Tax Effect                               Tax Effect
                                         Temporary                               Temporary
                                         Difference   Current       Long-Term    Difference    Current       Long-Term
                                         ----------  -----------  -------------  ----------   ----------  ------------
 <S>                                     <C>          <C>          <C>           <C>          <C>         <C>
               Allowance for doubtful
                  accounts               $    86,704  $    33,425  $           - $   155,231  $   32,449  $          -
               Accumulated
                  depreciation               573,169            -       (201,146)    430,294           -      (167,815)
               Stock options                 660,154            -        251,997     419,884           -       163,755
               Loss on stock                 233,448       91,000              -     221,153      86,200             -
                                                      -----------  -------------              ----------  ------------
                                                      $   124,425  $      50,851              $  118,649  $     (4,060)
                                                      -----------  -------------              ----------  ------------
                                                      -----------  -------------              ----------  ------------


</TABLE>


                                      F-11
<PAGE>

NOTE 13        OPERATING LEASES

               The Company leases its corporate offices, production and
               warehouse facilities under an operating lease, which expires in
               fiscal year 2001. During January 1996, the Company amended this
               facilities lease agreement to provide for additional space,
               located within the Company's premises, which consists of 15,860
               square feet. The lease term and expiration of the additional
               space will run concurrent with the original lease dated July 29,
               1994.

               During March 1995, the Company entered into a lease for a factory
               outlet store located in Laughlin, Nevada. The leased facility
               consists of approximately 2,200 square feet and is leased for a
               term of seven years, with an option to extend the lease for an
               additional five year period following the initial term. The store
               opened in June 1996. The lease provides for a base rental of
               $44,000 per year in the first three years of the lease and
               $48,400 per year in the last four years of the lease.

               In April 1998, the Company's subsidiary entered into a lease for
               the operating facilities of the subsidiary located in Four Oaks,
               North Carolina with the minority shareholders of the subsidiary.
               The leased facility consists of approximately 22,000 square feet
               and has an initial term of ten years and may be extended for two
               additional five-year periods following the initial term. The
               lease provides for base rental of $64,991 annually.

               Rent expense for the years ended June 30, 1999, 1998 and 1997 was
               $312,227, $267,168 and $289,909, respectively.

               The future minimum lease payments under non-cancelable leases
               with initial terms of one year or more as of June 30, 1999 are as
               follows:
<TABLE>
<CAPTION>
                                                                    ANNUAL
                    YEARS ENDED JUNE 30,                           PAYMENTS
                  -----------------------                          ----------
                  <S>                                         <C>
                             2000                               $     319,600
                             2001                                     319,600
                             2002                                     178,800
                             2003                                     113,400
                             2004                                      65,000
                             Thereafter                               244,000
                                                                -------------
                                                                $   1,240,400
                                                                -------------
                                                                -------------
</TABLE>

NOTE 14        COMMITMENTS

               EMPLOYMENT AGREEMENTS:

               Effective January, 1997 the Company, with the approval of its
               Board of Diectors, entered into an Employment Agreement (the
               "Agreement") with Robert G. Tomlinson ("Tomlinson"). Pursuant to
               the terms of the Agreement, Tomlinson will serve as the Company's
               Chief Executive Officer through December 31, 2000. The agreement
               is subject to automatic one year extensions. Annual bonuses, if
               any, will be determined by the Company's Board of Directors.

               Effective January, 1997 the Company, with the approval of its
               Board of Directors, entered into an Employment Agreement (the
               "Agreement") with Robert W. Haley ("Haley"). Pursuant to the
               terms of the Agreement, Haley will serve as the Company's
               President through December 31, 1999. The agreement is subject to
               automatic one year extensions. Annual bonuses, if any, will be
               determined by the Company's Board of Directors.


                                      F-12
<PAGE>

NOTE 14        COMMITMENTS (CONTINUED)

               Effective July 1, 1997 the Company with the approval of its Board
               of Directors, entered into an Employment Agreement (the
               "Agreement") with Catherine B. Blair ("Blair"). Pursuant to the
               terms of the Agreement, Blair will serve as the Company's
               Vice-President of Merchandising and Design through June 30, 2000.
               The agreement is subject to automatic one year extensions. Annual
               bonuses, if any, will be determined by the Company's Board of
               Directors.

               Effective October 1, 1997 the Company with the approval of its
               Board of Directors, entered into an employment agreement (the
               "Agreement") with Kevin M. Tomlinson ("Tomlinson"). Pursuant to
               the terms of the Agreement, Tomlinson will serve as the Company's
               Executive Director through September 30, 1999. Subsequently,
               Tomlinson was appointed Chief Operating Officer and Executive
               Vice President of Operations. The agreement is subject to
               automatic one year extensions. Annual bonuses, if any, will be
               determined by the Company's Board of Directors. Mr. Tomlinson is
               the son of Robert G. Tomlinson, the Chairman and Chief Executive
               Officer of the Company.

               Effective March 2, 1998 the Company with the approval of its
               Board of Directors, entered into an employment agreement (the
               "Agreement") with William L. Blair ("Blair"). Pursuant to the
               terms of the Agreement, Blair will serve as the Company's
               Vice-President of corporate sales through March 1, 2001. The
               agreement is subject to automatic one year extensions. Annual
               bonuses, if any, will be determined by the Company's Board of
               Directors.

               CONSULTING AGREEMENT:

               During May 1996, the Company entered into a consulting agreement
               (the "Agreement") with Nancy Haley ("Ms. Haley") who formerly
               served as an officer and director of the Company. The Agreement
               provided for certain consulting services to be rendered in the
               areas of product design, advertising and public relations. The
               Agreement commenced June 1, 1996 with annual compensation of
               $90,000 per year for three years, payable in equal monthly
               installments of $7,500. The Agreement could be terminated by Ms.
               Haley at any time after the first ninety (90) days of the
               Agreement by giving written notice at least ten (10) days prior
               to the date of termination. The Agreement provided for certain
               covenants by Ms. Haley during the term of the Agreement, which
               included among other things, a covenant not to compete. On April
               2, 1997, Ms. Haley gave her notice to terminate the Agreement. No
               fees were paid or incurred during the years ended June 30, 1999
               and 1998. Total fees paid at June 30, 1997 were $70,500.

               AGREEMENT FOR PROFESSIONAL SERVICES:

               During May 1996, the Company entered into an agreement for
               professional services (the "Agreement") with CLS & Associates,
               Inc. ("CLS"). Pursuant to the terms of the Agreement, CLS
               provided certain engineering and consulting services related to
               the startup of the Company's headwear division. The Agreement
               provided for a term of 125 working days commencing on or about
               June 1, 1996, for a total fee of $93,750. No fees or reimbursed
               expenses were paid or incurred during the years ended June 30,
               1999 and 1998. Total fees and reimbursed expenses paid at June
               30, 1997 were $108,952.

               ENDORSEMENT AGREEMENTS WITH PGA PROFESSIONALS:

               The Company has endorsement agreements with certain PGA
               professionals. Under the terms of these agreements, the Company
               is obligated to pay cash compensation and/or provide apparel.


                                      F-13
<PAGE>

NOTE 14        COMMITMENTS (CONTINUED)

               OUTSTANDING LETTERS OF CREDIT:

               The Company, in the ordinary course of business, has entered into
               a letter of credit arrangement with a bank to facilitate the
               purchase of inventory and fabric from various offshore suppliers.
               At June 30, 1999 the Company had no outstanding letters of
               credit.

NOTE 15        SHAREHOLDERS' EQUITY

               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. Through June 30, 1999, the
               Company's Board of Directors have authorized further increases in
               the total number of shares of common stock that the Company may
               repurchase from the 150,000 shares to a total of 1,050,000
               shares. Through June 30, 1999, the Company has repurchased a
               total of 687,000 shares of its common stock at a cost of
               approximately $7.0 million.

               The repurchase of the Company's common stock is based upon the
               Board of Directors' belief the Company's common stock is under
               priced, given its earnings, book value, working capital and
               prospects for future operations. The shares may be purchased from
               time to time in open market transactions at prevailing market
               prices or privately negotiated transactions. The Company has no
               commitment or obligation to purchase all or any portion of the
               shares. All shares purchased by the Company will be canceled and
               returned to the status of authorized but unissued common stock.

               Subsequent to June 30, 1999, the Company's Board of Directors
               authorized an additional increase of 450,000 shares the Company
               can repurchase under its repurchase program. From July 1, 1999
               through September 8, 1999, the Company repurchased an additional
               415,000 shares of its common stock at a cost of approximately
               $1.7 million.

               COMMON STOCK OPTIONS:

               In March 1993, the Company, adopted a Stock Option Plan (the
               "Plan"). The Plan, as originally adopted, provided for the
               reservation of 750,000 shares of the Company's common stock for
               issuance pursuant to the Plan. In January 1995, February 1997 and
               February 1998, the shareholders approved increasing the number of
               shares reserved for issuance under the Plan to the current
               authorization of 1,350,000 shares. In March 1995, the Board of
               Directors approved a restatement of the Plan to provide
               clarification regarding the terms, conditions and administration
               of the Plan. In February 1997, the shareholders of the Company
               voted to amend and restate the Plan to simplify administration of
               the Plan in accordance with revisions to Section 16 of the
               Securities Exchange Act of 1934, as amended.

               Under the Plan, the Company may grant options to purchase common
               stock to employees, directors and consultants of the Company and
               any subsidiary thereof. Generally, the options vest over three
               years, are granted at fair market value on the date of grant,
               expire ten years from that date, are non-transferrable and cannot
               be exercised for a period of six (6) months from the date
               granted. The Plan, as restated, is administered by the
               Compensation Committee, which, at its discretion, determines the
               optionees, number of options granted and exercise periods.

               The Company has registered the common stock reserved for issuance
               under the Plan with the Securities and Exchange Commission.


                                      F-14
<PAGE>

NOTE 15        SHAREHOLDERS' EQUITY (CONTINUED)

               At June 30, 1999, the Company has outstanding options to purchase
               402,214 shares of common stock at prices ranging from $2.50 to
               $10.63 with expiration dates between March 15, 2002 and January
               4, 2009. The Company had outstanding options of 421,999 and
               367,553 at June 30, 1998 and 1997, respectively. During fiscal
               years 1999, 1998 and 1997 option holders exercised and purchased
               9,340, 73,326 and 319,905 shares of the Company's common stock
               and the Company realized gross proceeds of approximately $60,500,
               $469,700 and $1.657 million, respectively.

               During October 1998, the Compensation Committee of the Board of
               Directors authorized the re-pricing of certain stock options,
               previously granted under the Company's stock option plan, that
               were deemed to be "out of the money" based upon the prevailing
               quoted market prices of the Company's common stock.

               Included in the Company's net income for the year ended June 30,
               1999 is a charge of approximately $282,000, which is a result of
               applying the Statement of Financial Accounting Standards No. 123,
               ACCOUNTING FOR STOCK BASED COMPENSATION.

               The activity under the Company's Plan is set forth below:

<TABLE>
<CAPTION>
                                                                       Outstanding Options
                                                  --------------------------------------------------------------------
                                                                                       Aggregate       Weighted Average
                                                  Number of          Range              Exercise        Exercise Price
                                                   Options         Per Share              Price            Per Share
                                                 ----------     -------------       -------------        --------------
                   <S>                              <C>         <C>                <C>                 <C>
                   Balances, June 30, 1996          423,940     $ 1.60 -12.75       $   2,248,906        $         5.30
                   Options granted                  309,319       5.00 -14.25           3,224,627                 10.42
                   Options canceled                 (15,892)     5.00 -  7.75            (104,913)                (6.56)
                   Options repurchased              (29,909)     2.50 -  7.75            (100,420)                (3.36)
                   Options exercised               (319,905)      1.60 -12.12          (1,589,081)                (4.97)
                                                 ----------     -------------       -------------        --------------

                   Balances, June 30, 1997          367,553       2.50 -14.25           3,679,119                 10.01
                   Options granted                  162,001       6.50 -10.63           1,673,135                 10.33
                   Options canceled                 (34,229)      6.50 -14.25            (307,073)                (8.89)
                   Options repurchased                    -                 -                   -                     -
                   Options exercised                (73,326)     6.50 -  7.75            (469,918)                (6.41)
                                                 ----------     -------------       -------------        --------------

                   Balances, June 30, 1998          421,999       2.50 -14.25           4,575,263                 10.85
                   Options granted                   49,000       8.50 -12.06             499,220                 10.19
                   Options canceled                 (59,445)      7.75 -12.75            (673,272)               (11.33)
                   Options canceled related
                      to repricing                 (282,001)     10.25 -14.25          (3,458,948)               (12.27)
                   Options issued related
                      to repricing                  282,001              8.63           2,432,259                  8.63
                   Options repurchased                    -                 -                   -                     -
                   Options exercised                 (9,340)     2.50 -  7.75             (60,572)                (6.49)
                                                 ----------     -------------       -------------        --------------

                   Balances, June 30, 1999          402,214     $ 2.50 -10.63       $   3,313,950        $         8.25
                                                 ----------     -------------       -------------        --------------
                                                 ----------     -------------       -------------        --------------
</TABLE>


               The weighted average fair value of options granted during fiscal
               1999, 1998 and 1997 was $10.19, $10.33 and $10.42 per share
               respectively.

               The Company adopted the provisions of Statement of Financial
               Accounting Standards No. 123 (SFAS 123), Accounting
               for Stock Based Compensation effective for fiscal year 1997 for
               all issuances of stock options to non-employees of the Company.
               The Company will continue to apply APB Opinion No. 25
               (Opinion 25), Accounting for Stock Issued to Employees for all
               issuances


                                      F-15
<PAGE>

NOTE 15        SHAREHOLDER'S EQUITY (CONTINUED)

               stock options to its employees. Generally, all stock options
               issued to the Company's employees, pursuant to the Plan, are not
               compensatory. No compensation cost has been recognized for fiscal
               1999, 1998 and 1997 under the Plan. Had compensation cost for the
               Plan been determined based upon the fair value at the grant date
               for options granted consistent with the provisions of SFAS 123,
               the Company's net income and net income per share would have been
               reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                        1999            1998              1997
                                                                 -----------------  -------------   ---------------
                       <S>                                       <C>               <C>             <C>
                       Net income - as reported                  $    814,744      $   4,264,341   $   3,909,954
                       Net income - pro forma                    $    656,852      $   4,219,146   $   3,611,462
                       Earnings per share - as reported          $        .18      $         .93   $         .84
                       Earnings per share - pro forma            $        .15      $         .92   $         .78
</TABLE>


               The fair value of each option grant under the Plan is estimated
               on the date of grant using the Black-Scholes option-pricing model
               with the following assumptions:

                       Risk-free interest                       5.5% - 6.0%
                       Expected life                            3 years
                       Expected volatility                      32% - 35%
                       Expected dividend                        $0


               The expected life was determined based on the Plan's vesting
               period and exercise behavior of the employees.

               The following table summarizes the stock options outstanding at
               June 30, 1999:

<TABLE>
<CAPTION>
                                                    Options Outstanding                       Options Exercisable
                                        -----------------------------------------------  ---------------------------
                                                     Weighted Average       Weighted                      Weighted
                  Range of                 Number       Remaining           Average        Number         Average
                  Exercise Prices       Outstanding   Contractual Life   Exercise Price  Exercisable   Exercise price
                  ---------------       -----------   ----------------   --------------  -----------   --------------
                 <S>                   <C>             <C>               <C>            <C>            <C>
                  $       2.50             26,843          4            $       2.50       26,843       $      2.50
                          6.50              5,000          5                    6.50        5,000              6.50
                   7.75 - 8.63            323,871          6.5                  8.56      252,540              8.54
                   9.25 -10.63             46,500          8                    9.58       19,167              9.43
                                       ----------                                      ----------
                                          402,214                                         303,550
                                       ----------                                      ----------
                                       ----------                                      ----------
</TABLE>


NOTE 16        UNDERWRITER'S WARRANTS

               The Company, in connection with its initial public offering, sold
               to the underwriter for a nominal amount, warrants to purchase up
               to 70,000 shares of the Company's common stock at $6.50 per
               share. The underwriter's warrants were exercisable until April 4,
               1999. In December 1996, the holders of the underwriter's warrants
               utilized their demand registration rights and the Company filed a
               registration statement on Form S-3 to register the underlying
               shares. Such registration statement became effective in January
               1997. During January 1999 the Company filed a registration
               statement on Form S-3 to register 22,250 warrants issued to
               underwriters. During the fiscal year ended June 30, 1999, the
               Company realized gross proceeds of $144,625 from the exercise of
               22,250 warrants. At June 30, 1999, all warrants were exercised.


                                      F-16
<PAGE>

NOTE 17        PREFERRED STOCK

               The Articles of Incorporation of the Company authorize issuance
               of a maximum of 1,500,000 shares of preferred stock. The Articles
               of Incorporation vest the Board of Directors of the Company with
               authority to divide the class of preferred stock into series and
               to fix and determine the relative rights and preferences of the
               shares of any such series so established to the full extent
               permitted by the laws of the State of Colorado and the Articles
               of Incorporation. As of June 30, 1999, the Company had no
               preferred stock issued or outstanding.

NOTE 18        INVESTMENT BANKING AGREEMENT

               During July 1995, the Company entered into an investment banking
               agreement with an investment banking firm. The agreement provided
               the investment banking firm would serve as the Company's
               exclusive financial advisor for 12 months. The Company issued to
               that firm "Advisor's Warrants" to purchase 20,000 shares of the
               Company's common stock. The Advisor's Warrants were exercisable
               until July 1998 at an exercise price of $8.125 per share. The
               Advisor's Warrants carried piggyback registration rights and the
               underlying shares were registered on Form S-3, which became
               effective during January 1997. As of June 30, 1998 all of the
               Advisor Warrants had been exercised and the Company has realized
               gross proceeds of $162,500.

NOTE 19        AGREEMENTS WITH SALES REPRESENTATIVES

               The Company has entered into Sales Representative Agreements (the
               "Agreements") with various individuals whereby, among other
               things, the Company has established an independent contractor
               relationship with its sales representatives. Pursuant to the
               terms of the Agreements the sales representatives' income from
               the Company is derived primarily from commissions paid by the
               Company from sales generated directly or indirectly by the sales
               representatives. The sales representatives are responsible for
               and assume all income tax liabilities on commissions and other
               payments received from the Company and further agree to hold the
               Company harmless and to indemnify the Company for any or all
               claims that may arise from the sales representative's actions or
               inactions. The Agreements provide no present or future guarantee
               of income. The sales representatives are paid a commission of up
               to 10% of the sales price of Company products, generated by the
               sales representatives and delivered to the customer. The Company
               reserves the right to amend the commission terms from time to
               time. Total commission expense for fiscal years 1999, 1998 and
               1997 was $1,999,436, $2,389,940 and $2,289,494, respectively.

NOTE 20        LITIGATION

               The Company is named as defendant in counterclaims to a complaint
               filed by the Company. The Company is denying the counterclaim
               allegations and intends to vigorously defend itself against them.
               Although the eventual outcome cannot be predicted, management
               believes that neither the Company's financial position nor
               results of its operations will be materially affected by this
               legal proceeding.

NOTE 21        NET INCOME PER SHARE

               The Company adopted the provisions of Statement of Financial
               Accounting Standards No. 128, Earnings Per Share (SFAS 128),
               effective with the year ended June 30, 1998. SFAS 128 requires
               the presentation of basic and diluted net income per share. Basic
               net income per share is computed by dividing income available to
               common stockholders by the weighted average number of common
               shares outstanding for that period. Diluted net income per share
               is computed giving effect to all dilutive potential common shares
               that were outstanding during the period. Dilutive potential


                                      F-17
<PAGE>

NOTE 21        NET INCOME PER SHARE (CONTINUED)

               common shares consist of incremental common shares issuable upon
               exercise of stock options and warrants for all periods. All prior
               period net income per-share amounts have been restated to comply
               with SFAS 128.

               In accordance with the disclosure requirements of SFAS 128, a
               reconciliation of the numerator and denominator of basic and
               diluted net income per share is provided as follows:

<TABLE>
<CAPTION>
                    YEARS ENDED JUNE 30,                       1999                   998            1997
                    ---------------------------------------------------------------------------------------
                    <S>                                        <C>               <C>             <C>
                    Basic and diluted income from
                      continuing operations:
                           (numerator)                          $   1,087,123    $   4,148,473   $   4,025,449

                    Basic and diluted discontinued operations:
                           Income (loss) from operations
                           (numerator)                                (72,170)         115,868        (115,495)
                           Loss on disposal of assets
                           (numerator)                               (200,209)               -               -
                                                                -------------    -------------   -------------

                    Basic and diluted net income
                           (numerator)                          $     814,744    $   4,264,341   $   3,909,954
                                                                -------------    -------------   -------------
                                                                -------------    -------------   -------------
                    Shares used in basic net income
                       per-share calculations
                           (denominator):
                    Weighted average shares of
                       common stock outstanding                     4,408,189        4,564,355       4,658,796
                                                                -------------    -------------   -------------
                                                                -------------    -------------   -------------
                    Shares used in diluted net income
                       per-share calculations
                           (denominator):
                    Weighted average shares of
                       common stock outstanding                     4,408,189        4,564,355       4,658,796
                    Dilutive effect of stock options                        -           28,396          30,917
                                                                -------------    -------------   -------------
                                                                    4,408,189        4,592,751       4,689,713
                                                                -------------    -------------   -------------
                                                                -------------    -------------   -------------

                    Earnings (loss) per common share:
                           Basic:
                               Continuing operations            $         .25    $         .91    $        .86
                               Discontinued operations:
                                 Income (loss) from operations           (.02)             .02            (.02)
                                 Loss on disposal of assets              (.05)               -               -
                                                                -------------    -------------   -------------

                               Net income                       $         .18    $         .93    $        .84
                                                                -------------    -------------   -------------
                                                                -------------    -------------   -------------

                           Diluted:
                               Continuing operations            $         .25    $         .90    $        .86
                               Discontinued operations:
                                 Income (loss) from operations           (.02)             .03            (.03)
                                 Loss on disposal of assets              (.05)               -               -
                                                                -------------    -------------   -------------

                               Net income                       $         .18    $         .93    $        .83
                                                                -------------    -------------   -------------
                                                                -------------    -------------   -------------
</TABLE>


                                      F-18
<PAGE>

NOTE 21        NET INCOME PER SHARE (CONTINUED)

               The diluted weighted average shares outstanding computation
               excludes 382,120 and 200,000 anti-dilutive shares in 1999 and
               1998, respectively. There were no anti-dilutive shares
               outstanding in 1997.

NOTE 22        RETIREMENT PLAN

               In January 1996, the Company adopted a defined contribution
               savings plan ( the "401(k) Plan") to provide retirement income to
               employees of the Company. The 401(k) Plan is intended to be
               qualified under Section 401(a) of the Internal Revenue Code of
               1986, as amended. The 401(k) Plan covers all employees who are at
               least age 18 and have been employed at least three months. It is
               funded by voluntary pre-tax contributions from employees up to a
               maximum amount equal to 15% of annual compensation. During 1999,
               1998 and 1997, the Company matched $.25 for each dollar
               contributed by employees, up to the first 5% of each employee's
               compensation contributed to the plan. Upon leaving the Company,
               each participant is 100% vested with respect to the participant's
               contributions and is vested based upon years of service with
               respect to the Company's matching contributions. Contributions
               are invested as directed by the participant in investment funds
               available under the 401(k) Plan. Full retirement benefits are
               payable to each participant in a single cash payment or an
               actuarial equivalent form of annuity on the first day of the
               month following the participant's retirement. For the years ended
               June 30, 1999, 1998 and 1997 the Company contributed $14,426,
               $14,019 and $13,257, respectively, to the 401(k) Plan on behalf
               of Company employees. The Company has no defined benefit pension
               plan nor any other post-retirement or post-employment benefit
               plan.

NOTE 23        SEGMENT INFORMATION

               The Company adopted Statement of Financial Accounting Standards
               (SFAS) No. 131 DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
               RELATED INFORMATION, effective May 1, 1998. Reportable segments
               are based on products and services, geography, legal structure,
               management structure, and any other method in which management
               disaggregates a company. Based on the management approach model,
               the Company has determined its business operations are classified
               into two principal reporting segments. Separate management of
               each segment is required because each business unit is subject to
               different marketing, sales, and implementation strategies.

               Reportable Segment 1, the Company's apparel segment, derives its
               revenues from the sales of men's and women's golfing apparel.
               Segment 2, the Company's headwear segment, derives its revenues
               from sales of men's and women's headwear. The headwear segment
               does not meet the separate disclosure criteria pursuant to SFAS
               131, however, the Company accounts separately for the assets and
               operating revenues and has elected to disclose certain operating
               information regarding the segment. Gross revenues for the segment
               were $420,435 and $811,136 for the fiscal years ended June 30,
               1999 and 1998, respectively. The gross operating loss for fiscal
               1999 was $112,065 and the gross profit in fiscal 1998 was
               $149,507. Assets, comprised principally of inventory and fixed
               assets, attributable to the headwear segment were $395,673 and
               $828,029 at June 30, 1999 and 1998, respectively.

NOTE 24        DISCONTINUED OPERATIONS

               On May 28, 1999 the Company adopted a formal plan to discontinue
               its headwear product line and cease headwear production
               operations. The assets of the headwear segment to be sold consist
               primarily of inventory and property and equipment.


                                      F-19
<PAGE>

NOTE 24        DISCONTINUED OPERATIONS (CONTINUED)

               The Company's headwear operations incurred an operating loss of
               approximately $112,000 in fiscal 1999. The Company incurred a
               loss on disposal of its headwear manufacturing equipment of
               approximately $92,000 and recognized a $218,000 write-down on its
               headwear component and finished goods inventories. Net sales of
               the headwear segment for fiscal years 1999, 1998 and 1997 were
               $420,435, $837,286 and $287,032, respectively. These amounts are
               not included in net sales in the accompanying income statements.

NOTE 25        SELECTED FINANCIAL INFORMATION (UNAUDITED):

               The following summarizes selected quarterly financial information
               for each of the two years in the period ended June 30, 1999:

<TABLE>
<CAPTION>
               (IN THOUSANDS, EXCEPT PER SHARE DATA)              First      Second     Third      Fourth         Year
               -------------------------------------------------------------------------------------------------------
               <S>                                             <C>       <C>         <C>        <C>         <C>
               1999
               Net sales, including discontinued operations    $  7,496  $    5,640  $  8,000   $   6,816   $   27,952
               Gross profit                                       2,887       1,927     2,386       1,193        8,393
               Net income                                           827         272       405        (690)         814
               Net income per common share- basic                   .18         .07       .08        (.15)         .18
               Net income per common share- diluted                 .18         .07       .08        (.15)         .18

               1998
               Net sales, including discontinued operations    $  6,835  $    6,464  $  8,610   $   9,390   $   31,299
               Gross profit                                       2,577       2,405     3,614       4,297       12,893
               Net income                                           752         789     1,359       1,364        4,264
               Net income per common share- basic                   .16         .17       .30         .30          .93
               Net income per common share- diluted                 .16         .17       .30         .30          .93


</TABLE>

               The following summarizes selected financial information for each
               of the five years in the period ended June 30, 1999:


<TABLE>
<CAPTION>

               (IN THOUSANDS, EXCEPT PER SHARE DATA)          1999       1998       1997         1996          1995
                                                              -----------------------------------------------------
               <S>                                         <C>        <C>         <C>         <C>         <C>
               SUMMARY OF OPERATIONS:
               Net sales                                   $ 27,531   $ 30,462    $  28,613   $  20,287   $   12,567
               Cost of goods sold                            19,261     17,936       16,630      11,719        7,465
               Selling, general and administrative            7,219      7,481        6,710       4,995        3,361
               Total operating expenses                      26,480     25,417       23,340      16,714       10,826
               Operating income                               1,051      5,045        5,273       3,573        1,741
               Other income - net                               394        302          389         352          279
               Income before income taxes                     1,445      5,347        5,662       3,925        2,020
               Income tax expense                               609      1,205        1,637       1,453          743
               Income from continuing operations              1,087      4,148        4,025       2,472        1,277
               Per share of common stock:
                  Basic                                         .18        .93          .84         .66          .40
                  Diluted                                       .18        .93          .84         .65          .40
               Income from continuing operations as a
                  percentage of net sales                       3.9%      13.6%        14.1%       12.2%        10.2%

               FINANCIAL POSITION:
               Working capital                               27,088     28,342       26,251      21,427       10,786
               Properties - net                               2,468      2,304        2,409       1,700        1,198
               Total assets                                  32,467     35,236       30,922      27,766       14,211
               Long-term debt                                     -          -            -          68           57
               Shareholders' equity                          30,501     31,465       28,706      24,365       11,942
               Net book value per share of common stock        7.17       6.97         6.17        5.51         3.83

               OTHER INFORMATION:
               Gross profit                                   8,393     12,893       12,080       8,568        5,102
               Capital expenditures                             788        839        1,159         834          900
               Depreciation, depletion and amortization         647        577          450         325          192
               Market price range of common stock:
                    High                                     13 3/4     18 1/8       20 1/8      16 7/8        9 1/2
                    Low                                     3 15/16          9       10 7/8       8 7/8        5 7/8
</TABLE>


                                      F-20