UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                    FORM 10-Q

           (X)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2000.
                               --------------


           ( )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  333-38951
                       ----------


                               GFSI HOLDINGS, INC.
               (Exact name of registrant specified in its charter)


        Delaware                                                 74-2810744
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation               (I.R.S. Employer
        or organization)                                     Identification No.)

                              9700 Commerce Parkway
                              Lenexa, Kansas 66219
                    (Address of principal executive offices)

        Registrant's telephone number, including area code (913) 888-0445
                                                           --------------

Indicate by check mark whether the registrant (1) has 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.

                  (1)   Yes   (X)           No   (   )
                  (2)   Yes   (X)           No   (   )

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date:

Common stock, $0.01 par value per share - 2,000 shares issued and outstanding as
of May 1, 2000.

<PAGE>



                       GFSI HOLDINGS, INC. AND SUBSIDIARY
                          Quarterly Report on Form 10-Q
                      For the Quarter Ended March 31, 2000
                                      INDEX



                                                                            Page
                                                                            ----
PART I - FINANCIAL INFORMATION

         ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                  Consolidated Balance Sheets                                3
                  Consolidated Statements of Income                          4
                  Consolidated Statements of Cash Flows                      5
                  Notes to Consolidated Financial Statements                 6


         ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF
                    OPERATIONS                                               7

PART II - OTHER INFORMATION                                                 11

SIGNATURE PAGE                                                              12



                                        -2-

<PAGE>



<TABLE>
GFSI HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share data)

<CAPTION>
                                                                                       July 2,          March 31,
                                                                                        1999              2000
                                                                                     ----------        ---------
<S>                                                                                  <C>               <C>
ASSETS
Current assets:
     Cash & cash equivalents                                                          $  10,278         $  5,437
     Accounts receivable, net                                                            28,381           30,371
     Inventories, net                                                                    36,324           36,956
     Prepaid expenses and other current assets                                            1,041            1,395
     Deferred income taxes                                                                1,790            1,790
                                                                                      ---------         --------
Total current assets                                                                     77,814           75,949
Property, plant and equipment, net                                                       20,245           19,410
Other assets:
     Deferred financing costs, net                                                        7,616            6,730
     Other                                                                                    5                5
                                                                                       --------         --------
Total assets                                                                           $105,680         $102,094
                                                                                       ========         ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
     Accounts payable                                                                 $   8,289         $  5,355
     Accrued interest expense                                                             4,484            1,022
     Accrued expenses                                                                     7,948           11,128
     Income taxes payable                                                                    --              929
     Current portion of long-term debt                                                    6,550            6,972
                                                                                       --------          -------
Total current liabilities                                                                27,271           25,406
Deferred income taxes                                                                     1,183            1,183
Revolving credit agreement                                                                   --               --
Other long-term obligations                                                                 737              556
Long-term debt, less current portion                                                    235,312          230,270
Redeemable preferred stock                                                                4,545            4,802
Stockholders' equity (deficiency):
     Common stock, $.01 par value 2,105 shares authorized,
     2,000 shares issued at July 2, 1999 and March 31, 2000                                  --               --
     Additional paid-in capital                                                             200              200
     Accumulated deficiency                                                            (163,567)        (160,321)
     Treasury stock, at cost (7.5 and 33 series A shares at July 2, 1999
     and March 31, 2000, respectively)                                                       (1)              (2)
                                                                                       --------         --------
Total stockholders' equity (deficiency)                                                (163,368)        (160,123)
                                                                                       --------         --------
Total liabilities and stockholders' equity (deficiency)                                $105,680         $102,094
                                                                                       ========         ========

NOTE: The  consolidated  balance sheet at July 2, 1999 has been derived from the
audited  financial  statements  at that date,  but does not  include  all of the
information and footnotes required by generally accepted  accounting  principles
for complete financial statements.

                 See notes to consolidated financial statements.
</TABLE>


                                       -3-

<PAGE>



<TABLE>
GFSI HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands)
<CAPTION>

                                                   Quarter Ended                     Nine Months Ended
                                              ------------------------         ---------------------------
                                               April 2,      March 31,           April 2,        March 31,
                                                 1999           2000              1999             2000
                                              ---------      ---------         ----------       ----------
<S>                                           <C>            <C>               <C>              <C>
Net sales                                     $ 44,807       $  47,297         $  160,229       $  153,642
Cost of sales                                   26,170          28,501             93,897           92,947
                                              --------       ---------         ----------        ---------
Gross profit                                    18,637          18,796             66,332           60,695

Operating expenses:
     Selling                                     6,385           6,722             18,491           18,413
     General and administrative                  6,936           6,009             21,481           17,966
                                              --------       ---------         ----------        ---------
                                                13,321          12,731             39,972           36,379
                                              --------        --------         ----------        ---------
Operating income                                 5,316           6,065             26,360           24,316

Other income (expense):
     Interest expense                           (6,167)         (6,227)           (18,818)         (18,565)
     Other, net                                     82             (33)               141               97
                                              --------       ---------         ----------        ---------
                                                (6,085)         (6,260)           (18,677)         (18,468)
                                              --------       ---------         ----------        ---------
Income (loss) before income
taxes                                             (769)           (195)             7,683            5,848

Provision for income taxes
  (income tax benefit)                            (263)            (76)             3,129            2,285
                                              --------       ---------          ---------        ---------
Net income (loss)                                 (506)           (119)             4,554            3,563
Preferred stock dividends                         (107)           (105)              (319)            (317)
                                              --------       ---------          ---------        ---------
Net income (loss) attributable
   to common shareholders                     $   (613)      $    (224)         $   4,235        $   3,246
                                              ========       =========          =========        =========


                 See notes to consolidated financial statements.
</TABLE>


                                        -4-

<PAGE>


<TABLE>
GFSI HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<CAPTION>

                                                                                            Nine Months Ended
                                                                                       ---------------------------
                                                                                        April 2,         March 31,
                                                                                          1999              2000
                                                                                       ---------         ---------
<S>                                                                                    <C>               <C>
Cash flows from operating activities:
Net income                                                                             $   4,554         $   3,563
Adjustments to reconcile net income to net cash provided by
   operating activities:
     Depreciation                                                                          2,272             2,401
     Amortization of deferred financing costs                                                886               886
     Loss on sale or disposal of property, plant and equipment                                71                64
     Deferred income taxes                                                                  (112)               --
     Amortization of discount on long-term debt                                            4,724             5,259
Changes in operating assets and liabilities:
     Accounts receivable, net                                                             (1,583)           (1,990)
     Inventories, net                                                                     10,463              (632)
     Prepaid expenses, other current assets and other assets                                 544              (354)
     Income taxes payable                                                                     92               929
     Accounts payable, accrued expenses and other
        long-term obligations                                                             (2,994)           (3,396)
                                                                                      ----------         ---------
Net cash provided by operating activities                                                 18,917             6,730
                                                                                      ----------         ---------

Cash flows from investing activities
     Proceeds from sales of property, plant and equipment                                    183                52
     Purchases of property, plant and equipment                                           (1,337)           (1,516)
                                                                                      ----------         ---------
Net cash used in investing activities                                                     (1,154)           (1,464)
                                                                                      ----------         ---------

Cash flows from financing activities:
     Net changes to short-term borrowings and revolving credit agreement                  (5,600)               --
     Redemption of redeemable preferred stock                                                 --               (60)
     Treasury stock purchase                                                                  --                (2)
     Payments on long-term debt and capital lease obligations                             (3,488)          (10,045)
                                                                                      ----------         ---------
Net cash used in financing activities                                                     (9,088)          (10,107)
                                                                                      ----------         ---------

Net increase (decrease)  in cash and cash equivalents                                      8,675            (4,841)
Cash and cash equivalents at beginning of period                                           1,361            10,278
                                                                                      ----------         ---------
Cash and cash equivalents at end of period                                            $   10,036         $   5,437
                                                                                      ==========         =========
Supplemental cash flow information:
     Interest paid                                                                    $   16,213         $  15,375
                                                                                      ==========         =========
     Income taxes paid                                                                $    2,823         $     877
                                                                                      ==========         =========

Non-cash financing activities:
     Equipment purchased under capital lease                                          $        -         $     166
                                                                                      ==========         =========

Supplemental schedule of non-cash financing activities:
     Accrual of preferred stock dividends                                             $      319         $     317
                                                                                      ==========         =========


                 See notes to consolidated financial statements.
</TABLE>

                                        -5-

<PAGE>



                       GFSI HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                 March 31, 2000


1.   Basis of Presentation

     The  accompanying  unaudited  consolidated  financial  statements  of  GFSI
Holdings, Inc. ("Holdings" or the "Company") include the accounts of the Company
and the  accounts of its wholly  owned  subsidiary,  GFSI,  Inc.  ("GFSI").  All
intercompany  balances and  transactions  have been  eliminated.  The  unaudited
consolidated   financial  statements  have  been  prepared  in  accordance  with
accounting  principles  generally  accepted in the United  States of America for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X  promulgated  by the  Securities  and Exchange  Commission.
Accordingly,  they do not include all of the information and footnotes  required
by generally  accepted  accounting  principles  for annual  financial  statement
reporting purposes. In the opinion of management, all adjustments (consisting of
normal recurring accruals)  considered  necessary for a fair presentation of the
financial  position and operations of the Company have been included.  Operating
results for the interim  periods are not  necessarily  indicative of the results
that may be expected for the entire fiscal year. For further information,  refer
to the financial  statements  and  footnotes  thereto for the year ended July 2,
1999 included in the Company's Annual Report on Form 10-K.

     The  preparation  of financial  statements  in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.


2.   Reclassifications

     Certain reclassifications have been made to the fiscal year 1999 statements
of income amounts to conform to the fiscal year 2000 presentation.


3.   Commitments and Contingencies

     The Company,  in the normal course of business,  may be threatened  with or
named as a defendant in various  lawsuits.  It is not possible to determine  the
ultimate  disposition  of these matters,  however,  management is of the opinion
that there are no known  claims or known  contingent  claims  that are likely to
have  a  material  adverse  effect  on  the  results  of  operations,  financial
condition, or cash flows of the Company.


4.  New Accounting Standard

     Statement of Financial  Accounting  Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities" was issued in June 1998. This
statement   establishes   accounting  and  reporting  standards  for  derivative
instruments and for hedging  activities.  It requires an entity to recognize all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position and measure those instruments at fair value. This statement, as amended
by SFAS No. 137, is effective for all quarters of fiscal years  beginning  after
June 15,  2000.  The  Company is in the process of  determining  what impact the
adoption  of SFAS No. 133 will have on its  financial  position  and  results of
operations.


                                        -6-

<PAGE>



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

         The  discussions  set  forth  in  this  Form  10-Q  should  be  read in
conjunction  with the financial  information  included  herein and the Company's
Annual  Report  on Form  10-K  for the year  ended  July 2,  1999.  Management's
discussion  and analysis of financial  condition and results of  operations  and
other sections of this report  contain  forward-looking  statements  relating to
future results of the Company.  Such forward- looking  statements are identified
by use of  forward-looking  words such as  "anticipates",  "believes",  "plans",
"estimates", "expects", and "intends" or words or phrases of similar expression.
These forward-looking  statements are subject to various assumptions,  risks and
uncertainties,  including but not limited to,  changes in political and economic
conditions,  demand for the  Company's  products,  acceptance  of new  products,
developments  affecting  the  Company's  products and to those  discussed in the
Company's  filings with the  Securities  and Exchange  Commission.  Accordingly,
actual  results  could  differ   materially  from  those   contemplated  by  the
forward-looking statements.

         The  following  sets forth the amount and  percentage  of net sales for
each of the periods indicated (dollars in thousands):

<TABLE>
<CAPTION>

                                          Quarter Ended                                       Nine Months Ended
                            --------------------------------------------        ----------------------------------------------
                                 April 2, 1999          March 31, 2000             April 2, 1999             March 31, 2000
                            -------------------      -------------------        -------------------       --------------------
<S>                         <C>           <C>        <C>           <C>          <C>           <C>         <C>           <C>
Resort                      $ 12,629      28.2%      $ 13,136      27.8%        $ 45,161      28.2%       $  45,167      29.4%
Corporate                     16,487      36.8%        16,420      34.7%          57,690      36.0%          49,679      32.3%
College Bookstore              6,891      15.4%         8,122      17.2%          35,001      21.9%          35,481      23.1%
Sports Specialty               2,895       6.5%         3,391       7.2%           9,724       6.0%           9,726       6.3%
Event 1                        4,718      10.6%         4,492       9.5%           8,251       5.2%           8,307       5.4%
Other                          1,187       2.5%         1,736       3.6%           4,402       2.7%           5,282       3.5%
                            --------                 --------                   --------                   --------
Total                       $ 44,807                 $ 47,297                   $160,229                   $153,642
                            ========                 ========                   ========                   ========
</TABLE>


Results of Operations
---------------------

         The following table sets forth certain historical financial information
of the Company,  expressed as a  percentage  of net sales,  for the quarters and
nine month periods ended April 2, 1999 and March 31, 2000.

                            Quarter Ended                Nine Months Ended
                      ------------------------        ----------------------
                       April 2,      March 31,        April 2,    March 31,
                         1999          2000            1999         2000
                       -------       --------         ------      ---------
Net sales               100.0%        100.0%          100.0%        100.0%
Gross profit             41.6          39.7            41.4          39.5
EBITDA                   13.6          14.5            17.9          17.4
Operating income         11.9          12.8            16.5          15.8


                                        -7-

<PAGE>




         EBITDA represents  operating income plus depreciation and amortization.
While EBITDA should not be construed as a substitute  for operating  income or a
better  indicator of liquidity than cash flow from operating  activities,  which
are determined in accordance with accounting  principles  generally  accepted in
the United  States of  America,  it is  included  herein to  provide  additional
information  with  respect to the ability of the Company to meet its future debt
service, capital expenditure and working capital requirements.  In addition, the
Company  believes  that  certain  investors  find EBITDA to be a useful tool for
measuring  the  ability  of the  Company  to  service  its  debt.  EBITDA is not
necessarily a measure of the Company's  ability to fund its cash needs.  See the
Consolidated  Statements  of  Cash  Flows  of the  Company  herein  for  further
information.


Comparison of Operating Results for the Quarters and Nine Month
   Periods Ended March 31, 2000 and April 2, 1999.
---------------------------------------------------------------

         Net Sales.  Net sales for the third  quarter of fiscal 2000,  the three
months ended March 31, 2000,  increased 5.6% to $47.3 million from $44.8 million
in the third  quarter of fiscal  1999.  Net sales for the first  nine  months of
fiscal 2000  decreased  4.1% to $153.6  million from $160.2 million in the first
nine months of fiscal 1999.  The increase in net sales for the third  quarter of
fiscal 2000 is due to  increases in the  Company's  Resort,  College  Bookstore,
Sports  Speciality  and  Other  divisions  of  4.0%,  17.9%,  17.1%  and  46.3%,
respectively,  partially  offset by small decreases in sales at in the Company's
Corporate  Division and Event 1 subsidiary of 0.4% and 4.8%,  respectively.  The
decrease  in net sales for the nine  month  period is due to a  decrease  in net
sales for the nine  months  ended  March  31,  2000 at the  Company's  Corporate
division of 13.9% partially  offset by small  increases in the other  divisions.
The  decline  was   attributable  to  increased   competition  and  difficulties
attributable to the installation of the Company's  Enterprise  Resource Planning
System.  The  Corporate  division  has also  experienced  a shift in the  buying
patterns  of its  customers  from  outerwear  to  other  products,  and had some
vacancies  in its sales  representative  force  during  the first half of fiscal
2000.

         Gross  Profit.  Gross  profit  for the third  quarter  of  fiscal  2000
increased  0.9% to $18.8  million  from $18.6  million  in the third  quarter of
fiscal  1999.  Gross  profit for the first nine months of fiscal 2000  decreased
8.5% to $60.7  million  from $66.3  million  in the first nine  months of fiscal
1999.  The  decrease in gross profit is primarily a result of the decline in net
sales noted above and increases in production costs as a percent of sales due to
product mix changes  from  higher  priced  seasonal  outerwear  to lower  priced
products.  For the third quarter of fiscal 2000, gross profit as a percentage of
net sales  decreased to 39.7%  compared to 41.6% in the third  quarter of fiscal
1999. For the first nine months of fiscal 2000,  gross profit as a percentage of
net sales  decreased  to 39.5%  compared  to 41.4% in the first  nine  months of
fiscal 1999.

         Operating Expenses.  Operating expenses for the third quarter of fiscal
2000  decreased 4.2% to $12.7 million from $13.3 million in the third quarter of
fiscal  1999.  For the first  nine  months of fiscal  2000,  operating  expenses
decreased  8.9% to $36.4  million from $39.9 million in the first nine months of
fiscal 1999.  The decrease in operating  expenses is primarily  related to costs
incurred  in the  first  half of  fiscal  1999  associated  with  the  Company's
Enterprise  Resource  Planning  System  installation  that was  completed in the
fourth  quarter  of 1999  and to  management  cost  control  efforts.  Operating
expenses as a percentage of net sales decreased to 26.9% from 29.7% in the prior
year third quarter. For the first nine months of fiscal 2000, operating expenses
as a  percentage  of net sales  decreased  to 23.7% from 24.9% in the prior year
period.

         EBITDA.  EBITDA for the third quarter of fiscal 2000 increased 12.5% to
$6.9  million from $6.1  million in the third  quarter of fiscal  1999.  For the
first nine months of fiscal 2000,  EBITDA  decreased  6.8% to $26.7 million from
$28.7  million in the first nine months of fiscal  1999.  The increase in EBITDA
for the third  quarter is due to the net sales  increase and  operating  expense
decrease  discussed  above.  The decrease in EBITDA for the nine month period is
primarily  a result  of the  decrease  in net  sales and  related  gross  profit
described  above.  EBITDA as a percentage  of net sales  increased to 14.5% from
13.6% in the third  quarter of fiscal 1999.  For the first nine months of fiscal
2000, EBITDA as a percentage of sales decreased to 17.4% from 17.9% in the first
nine months of fiscal 1999.

                                        -8-

<PAGE>



         Operating Income. Operating income for the third quarter of fiscal 2000
increased 13.6% to $6.1 million from $5.3 million in the third quarter of fiscal
1999. For the first nine months of fiscal 2000,  operating income decreased 7.8%
to $24.3 million from $26.4 million in the first nine months of fiscal 1999. The
increase  in  operating  income  for the third  quarter  is due to the net sales
increase  and  operating  expense  decrease  discussed  above.  The  decrease in
operating  income for the nine month period is  attributable  to the decrease in
net sales and  related  gross  profit  described  above.  Operating  income as a
percentage of net sales  increased for the third quarter of fiscal 2000 to 12.8%
from 11.9% in fiscal 1999,  and  decreased to 15.8% for the first nine months of
fiscal 2000 from 16.5% in the first nine months of fiscal 1999.

         Other Income  (Expense).  Other expense for the third quarter of fiscal
2000  increased to $6.3 million from $6.1 million in the third quarter of fiscal
1999. For the first nine months of fiscal 2000, other expense decreased to $18.5
million from $18.7 million in the first nine months of fiscal 1999. The decrease
for the periods is primarily a result of decreased interest expenses  associated
with  borrowings  under the  Company's  $115  million  Credit  Agreement  due to
declining  balances  on  the  Company's   long-term  debt  partially  offset  by
increasing quarterly expense on the Discount Notes (as defined below).

         Income Taxes.  The effective income tax rates for the nine months ended
March 31, 2000 and April 2, 1999 were 39.1% and 40.7%, respectively.

         Net Income.  Net loss for the third quarter of fiscal 2000 was $119,000
compared to net loss of $506,000 in the third  quarter of fiscal  1999.  For the
first nine months of fiscal 2000,  net income was $3.6 million  compared to $4.6
million in the first nine months of fiscal 1999.


Liquidity and Capital Resources
-------------------------------

         Cash  provided  by  operating  activities  for the first nine months of
fiscal 2000 was $6.7 million  compared to $18.9 million in the first nine months
of fiscal 1999. The change in cash used in operating  activities between the two
periods was primarily  attributable  to increased use of cash to fund changes in
accounts  receivable and inventory  balances and decreased net income during the
first nine months of 2000 compared to the first nine months of 1999.

         Cash used by  investing  activities  in the first nine months of fiscal
2000 was $1.5 million compared to $1.2 million in the first nine months of 1999.
The cash used in both periods was related to acquisitions of property, plant and
equipment.

         Cash used in financing  activities  for the first nine months of fiscal
2000 was $10.1  million  compared  to $9.1  million in the first nine  months of
fiscal  1999.  In November  1999,  the  Company  made a $3.3  million  term debt
prepayment  due to fiscal  1999  Excess  Cash  Flows,  as  defined in the Credit
Agreement. On March 31, 2000 the Company made an additional term debt prepayment
of $2 million.  In the first six months of fiscal 1999,  the Company repaid $5.6
million  of  revolving   loan   balances.   The  Company   continues  to  review
opportunities  to prepay  portions of its outstanding  debt utilizing  available
cash.

         The  Company  believes  that cash flow from  operating  activities  and
borrowings  under the Credit  Agreement  will be adequate to meet the  Company's
short-term  and long-term  liquidity  requirements  prior to the maturity of its
credit  facilities  in 2007,  although no assurance can be given in this regard.
Under the Credit Agreement,  the revolving loan facility provides $50 million of
revolving credit availability (of which approximately $22.1 million was utilized
for outstanding commercial and stand-by letters of credit as of March 31, 2000).

         The Company is dependent  upon the cash flows of GFSI to provide  funds
to pay certain ordinary course expenses incurred on behalf of the Company and to
service the  indebtedness  represented  by the $50.0 million of 11.375% Series B
Senior Discount Notes due 2009 (the "Discount  Notes").  The Discount Notes will
accrete at a rate of 11.375%, compounded semi-annually to an aggregate principal
amount of $108.5 million at September 15, 2004.  Thereafter,  the Discount Notes
will accrue interest at the rate of 11.375% per annum, payable semi-annually, in
cash on March 15 and  September 15 of each year,  commencing  on March 15, 2005.
The  Company  will  be  dependent  on GFSI  to  provide  funds  to  service  the
indebtedness.  Additionally,  the remaining  cumulative  preferred  stock of the
Company (the "Preferred  Stock') will accrue  dividends  totaling  approximately
$425,000  annually.  The  Preferred  Stock  may  be  redeemed  at  stated  value
(approximately $3.6 million) plus accrued dividends with mandatory redemption in
2009.

                                        -9-

<PAGE>



Derivative and Market Risk Disclosure
-------------------------------------

     The   Company's   market  risk   exposure  is  primarily  due  to  possible
fluctuations in interest rates.  Derivative financial instruments,  including an
interest  rate swap  agreement are used by the Company to manage its exposure on
variable rate debt  obligations.  The Company  enters into such  agreements  for
hedging  purposes  and not  with a view  toward  speculating  in the  underlying
instruments.  The Company uses a balanced mix of debt maturities along with both
fixed  rate and  variable  rate debt to manage its  exposure  to  interest  rate
changes.  The fixed rate portion of the Company's  long-term  debt does not bear
significant  interest  rate risk.  The  variable  rate debt would be affected by
interest  rate  changes to the extent the debt is not  matched  with an interest
rate swap or cap agreement or to the extent, in the case of the revolving credit
agreement,  that  balances are  outstanding.  An immediate 10 percent  change in
interest  rates  would not have a material  effect on the  Company's  results of
operations  over the next fiscal year,  although there can be no assurances that
interest rates will not significantly change.


Seasonality and Inflation
-------------------------

         The  Company  experiences  seasonal   fluctuations  in  its  sales  and
profitability,  with  generally  higher  sales and gross profit in the first and
second quarters of its fiscal year. The  seasonality of sales and  profitability
is primarily due to higher volume at the College  Bookstore  division during the
first two  fiscal  quarters.  This  pattern  of sales  affects  working  capital
requirements and liquidity,  as the Company generally must finance higher levels
of inventory  during these periods prior to fully  receiving  payment from these
customers. Sales and profitability at the Company's Resort, Corporate and Sports
Specialty divisions typically show no significant  seasonal  variations.  As the
Company  continues to expand into other  markets in its Resorts,  Corporate  and
Sports Specialty divisions, seasonal fluctuations in sales and profitability are
expected  to  decline.  Cash  requirements  of  Event  1 are  anticipated  to be
seasonal,  with  increasing  sales and  profitability  in the  third and  fourth
quarters of fiscal years.

         The  impact  of  inflation  on the  Company's  operations  has not been
significant  to date.  However,  there can be no  assurance  that a high rate of
inflation  in the  future  would not have an  adverse  effect  on the  Company's
operating results.


                                       -10-

<PAGE>



PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

There has been no change to matters discussed in  Business-Legal  Proceedings in
the  Company's  Annual  Report on Form  10-K as filed  with the  Securities  and
Exchange Commission on September 30, 1999.


Item 2.  Changes in Securities

None.


Item 3.  Defaults Upon Senior Securities

None.


Item 4.  Submission of Matters to a Vote of Security Holders

None.


Item 5.  Other Information

None.


Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits.  The following exhibits are included with this report:

              Exhibit 27 - Financial Data Schedule (SEC Use Only)

         (b)  Reports on Form 8-K

              No reports on Form 8-K were filed by the Registrant during the
              reporting period.


                                       -11-

<PAGE>


SIGNATURES


Pursuant  to the  requirements  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.


GFSI HOLDINGS, INC.
May 12, 2000
                               /s/ ROBERT G. SHAW
                               ---------------------------------------
                               Robert G. Shaw, Sr. Vice President of Finance and
                               Principal Accounting Officer


                                      -12-