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      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;&lt;b&gt;Note

      1 &amp;#8211; Basis of Presentation&lt;/b&gt;&lt;/font&gt;

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      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;The

      accompanying unaudited condensed consolidated financial

      statements of Hampshire Group, Limited and its subsidiaries

      (the &amp;#8220;Company&amp;#8221; or &amp;#8220;Hampshire&amp;#8221;) have

      been prepared in accordance with accounting principles

      generally accepted in the United States of America

      (&amp;#8220;GAAP&amp;#8221;) for interim financial information and

      according to instructions from the United States Securities

      and Exchange Commission (&amp;#8220;SEC&amp;#8221;) for Form 10-Q and

      Article&amp;#160;10 of Regulation&amp;#160;S-X. Accordingly, they do

      not include all of the information and notes required by GAAP

      for complete financial statements and should be read in

      conjunction with the audited financial statements included in

      the Company&amp;#8217;s Annual Report on Form 10-K (&amp;#8220;Form

      10-K&amp;#8221;) for the fiscal year ended December 31,

      2012.&lt;/font&gt;

    &lt;/p&gt;&lt;br/&gt;&lt;p style="TEXT-ALIGN: left; LINE-HEIGHT: 1.25; MARGIN: 0pt" id="PARA750"&gt;

      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;The

      information included herein is not necessarily indicative of

      the annual results that may be expected for the year ending

      December&amp;#160;31, 2013, but does reflect all adjustments

      (which are of a normal and recurring nature) considered, in

      the opinion of management, necessary for a fair presentation

      of the results for the interim periods presented. The

      preparation of financial statements in accordance with GAAP

      requires management to make estimates and assumptions that

      affect the amounts reported in the financial statements.

      Actual results may differ from these estimates and

      assumptions. In addition, the Company&amp;#8217;s revenues are

      subject to the seasonality of the apparel industry and may

      exhibit fluctuations in financial results for interim

      periods.&lt;/font&gt;

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      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;&lt;b&gt;&lt;u&gt;Discontinued

      Operations&lt;/u&gt;&lt;/b&gt;&lt;/font&gt;

    &lt;/p&gt;&lt;br/&gt;&lt;p style="TEXT-ALIGN: left; LINE-HEIGHT: 1.25; MARGIN: 0pt" id="PARA753"&gt;

      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;On

      June 7, 2013, the Company sold certain assets of the scott

      james clothing brand and line. In 2011, the Company sold

      certain assets of its women&amp;#8217;s businesses, Hampshire

      Designers, Inc. (&amp;#8220;Hampshire Designers&amp;#8221;) and

      Item-Eyes, Inc. (&amp;#8220;Item-Eyes&amp;#8221;). In accordance with

      GAAP, the financial position and results from operations for

      these businesses have been presented as discontinued

      operations. See Note 9 &lt;i&gt;&amp;#8211; Dispositions and

      Discontinued Operations&lt;/i&gt;.&lt;/font&gt;

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      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;&lt;b&gt;&lt;u&gt;Lease

      Litigation Settlement&lt;/u&gt;&lt;/b&gt;&lt;/font&gt;

    &lt;/p&gt;&lt;br/&gt;&lt;p style="TEXT-ALIGN: left; LINE-HEIGHT: 1.25; MARGIN: 0pt" id="PARA756"&gt;

      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;On

      June 10, 2013, the Civil Court of the City of New York ruled

      that the Company was entitled to rent abatement for all but

      approximately $0.2 million of the $7.1 million claim by the

      receiver of the landlord of the Company&amp;#8217;s New York

      Office lease. The Company had accrued approximately $6.3

      million for disputed unpaid rent and reversed approximately

      $6.1 million of the accrual in the quarter ended June 29,

      2013, which is reflected in &lt;i&gt;Lease litigation

      settlement&lt;/i&gt; on the Unaudited Condensed Consolidated

      Statements of Operations&lt;b&gt;.&lt;/b&gt; See Note 7 - &lt;i&gt;Commitments

      and Contingencies&lt;/i&gt;.&lt;/font&gt;

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      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;&lt;b&gt;&lt;u&gt;Subsequent

      Events&lt;/u&gt;&lt;/b&gt;&lt;/font&gt;

    &lt;/p&gt;&lt;br/&gt;&lt;p style="TEXT-ALIGN: left; LINE-HEIGHT: 1.25; MARGIN: 0pt" id="PARA759"&gt;

      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;The

      Company has evaluated subsequent events from the date of the

      unaudited condensed consolidated balance sheet through the

      date that the financial statements were issued. During this

      period, no material recognizable subsequent events were

      identified, except as disclosed in Note 2 &lt;i&gt;&amp;#8211;

      Acquisitions,&lt;/i&gt; Note 8 &amp;#8211; &lt;i&gt;Taxes,&lt;/i&gt; Note 12

      &lt;i&gt;&amp;#8211; Related Party Transactions&lt;/i&gt; and Note 13 -

      &lt;i&gt;Stock Plan&lt;/i&gt;. &lt;b&gt;&lt;/b&gt;&lt;/font&gt;

    &lt;/p&gt;&lt;br/&gt;&lt;p style="TEXT-ALIGN: left; LINE-HEIGHT: 1.25; MARGIN: 0pt" id="PARA761"&gt;

      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;&lt;b&gt;&lt;u&gt;Recent

      Accounting Standards&lt;/u&gt;&lt;/b&gt;&lt;/font&gt;

    &lt;/p&gt;&lt;br/&gt;&lt;p style="TEXT-ALIGN: left; LINE-HEIGHT: 1.25; MARGIN: 0pt" id="PARA762"&gt;

      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;No

      new accounting pronouncements, issued or effective during

      2013, have had or are expected to have a significant impact

      on the Company&amp;#8217;s consolidated financial

      statements.&lt;/font&gt;

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