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 December 29, 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 - 1,910 shares issued and outstanding as
of February 1, 2001.





                                        1

<PAGE>



                       GFSI HOLDINGS, INC. AND SUBSIDIARY
                          Quarterly Report on Form 10-Q
                     For the Quarter Ended December 29, 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                                                     8

    ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
               ABOUT MARKET RISK                                             11

PART II - OTHER INFORMATION                                                  12


SIGNATURE PAGE                                                               13



                                        2

<PAGE>



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

<TABLE>
<CAPTION>

                                                                                       June 30,       December 29,
                                                                                         2000             2000
                                                                                       --------       ------------
<S>                                                                                    <C>            <C>
Assets
Current assets:
     Cash & cash equivalents                                                           $   1,461         $  9,865
     Accounts receivable, net                                                             29,801           32,753
     Inventories, net                                                                     40,140           32,561
     Prepaid expenses and other current assets                                             1,117            1,333
     Deferred income taxes                                                                 1,122            1,122
                                                                                       ---------          -------
Total current assets                                                                      73,641           77,634
Property, plant and equipment, net                                                        19,356           18,659
Other assets:
     Deferred financing costs, net                                                         6,434            6,029
     Other                                                                                     5                7
                                                                                       ---------         --------
Total assets                                                                           $  99,436         $102,329
                                                                                       =========         ========

Liabilities and stockholders' equity (deficiency)
Current liabilities:
     Accounts payable                                                                  $   5,317         $  6,726
     Accrued interest expense                                                              4,000            3,995
     Accrued expenses                                                                      7,668            7,544
     Income taxes payable                                                                    308              431
     Current portion of long-term debt                                                     6,953            7,823
                                                                                       ---------         --------
Total current liabilities                                                                 24,246           26,519
Deferred income taxes                                                                      1,049            1,049
Revolving credit agreement                                                                    --               --
Other long-term obligations                                                                  552              531
Long-term debt, less current portion                                                     228,474          228,098
Redeemable preferred stock                                                                 4,907            4,969
Stockholders' equity (deficiency):
     Common stock, $.01 par value 2,105 shares authorized,
     2,000 shares issued at July 2, 1999 and December 31, 1999                                --               --

     Additional paid-in capital                                                              200              200
     Accumulated deficiency                                                             (159,990)        (159,031)

     Treasury stock, at cost (33 and 90 series A shares at June 30, 2000
     and December 29, 2000, respectively)                                                     (2)              (6)
                                                                                        ---------        --------
Total stockholders' equity (deficiency)                                                  (159,792)       (158,837)
                                                                                        ---------        --------
Total liabilities and stockholders' equity (deficiency)                                 $  99,436        $102,329
                                                                                        =========        ========

</TABLE>

NOTE: The consolidated  balance sheet at June 30, 2000 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.



                                        3

<PAGE>




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

<TABLE>
<CAPTION>

                                                          Quarter Ended                               Six Months Ended
                                                ---------------------------------          -----------------------------------------
                                                December 31,         December 29,           December 31,           December 29,
                                                   1999                 2000                   1999                   2000
                                                ------------         ------------           ------------           ------------
<S>                                             <C>                   <C>                    <C>                    <C>

Net sales                                         $ 51,506             $  50,136              $ 106,345              $ 102,586
Cost of sales                                       30,834                30,825                 64,446                 63,152
                                                  --------             ---------              ---------              ---------
Gross profit                                        20,672                19,311                 41,899                 39,434

Operating expenses:
     Selling                                         5,267                 5,707                 11,691                 11,732
     General and administrative                      5,769                 6,972                 11,957                 13,542
                                                  --------             ---------               --------               --------
                                                    11,036                12,679                 23,648                 25,274
                                                  --------             ---------               --------               --------
Operating income                                     9,636                 6,632                 18,251                 14,160

Other income (expense):
     Interest expense                               (6,181)               (6,285)               (12,338)               (12,400)
     Other, net                                         34                   106                    130                    156
                                                  --------             ---------               --------               ---------
                                                    (6,147)               (6,179)               (12,208)               (12,244)
                                                  --------             ---------               --------               --------
Income before income taxes                           3,489                   453                  6,043                  1,916
Provision for income taxes                           1,355                   176                  2,361                    747
                                                  --------             ---------               --------               --------
Net income                                           2,134                   277                  3,682                  1,169
Preferred stock dividends                             (105)                 (104)                  (212)                  (210)
                                                  --------             ---------               --------               --------
Net income attributable to
     common shareholders                          $  2,029             $     173               $  3,470               $    959
                                                  ========             =========               ========               ========
</TABLE>


See notes to consolidated financial statements.


                                        4

<PAGE>




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

<TABLE>
<CAPTION>

                                                                                           Six Months Ended
                                                                                    December 31,     December 29,
                                                                                        1999             2000
                                                                                    ------------     ------------
<S>                                                                                 <C>              <C>

Cash flows from operating activities:
Net income                                                                          $   3,682          $  1,169
Adjustments to reconcile net income to net cash provided by
   operating activities:
     Depreciation                                                                       1,605             1,603
     Amortization of deferred financing costs                                             591               596
     (Gain) loss on sale or disposal of property, plant and equipment                     (16)              (55)
     Amortization of discount on long-term debt                                         3,469             3,874
Changes in operating assets and liabilities:
     Accounts receivable, net                                                          (7,327)           (2,952)
     Inventories, net                                                                  (1,214)            7,578
     Prepaid expenses, other current assets and other assets                              133              (217)
     Income taxes payable                                                               1,284               123
     Accounts payable, accrued expenses and other
        long-term obligations                                                          (1,694)            1,256
                                                                                    ---------           -------
Net cash provided by operating activities                                                 513            12,975
                                                                                    ---------           -------

Cash flows from investing activities
     Proceeds from sales of property, plant and equipment                                  43               140
     Purchases of property, plant and equipment                                        (1,154)             (897)
                                                                                    ---------           -------
Net cash used in investing activities                                                  (1,111)             (757)
                                                                                    ---------           -------

Cash flows from financing activities:
     Deferred financing costs                                                              --              (190)
     Redemption of preferred stock                                                        (60)             (147)
     Treasury stock purchase                                                               (2)               (4)
     Payments on long-term debt                                                        (6,494)           (3,473)
                                                                                     --------           -------
Net cash used in financing activities                                                  (6,556)           (3,814)
                                                                                     --------           -------

Net increase (decrease)  in cash and cash equivalents                                  (7,154)            8,404
Cash and cash equivalents at beginning of period                                       10,278             1,461
                                                                                     --------           -------
Cash and cash equivalents at end of period                                           $  3,124           $ 9,865
                                                                                     ========           =======
Supplemental cash flow information:
     Interest paid                                                                   $  8,199           $ 8,518
                                                                                     ========           =======
     Income taxes paid                                                               $    597           $   623
                                                                                     ========           =======
Supplemental schedule of non-cash financing activities:
     Accrual of preferred stock dividends                                            $    212           $   210
                                                                                     ========           =======
Non-cash financing activities:
     Equipment purchased under capital lease                                         $    166           $    94
                                                                                     ========           =======

</TABLE>

See notes to consolidated financial statements.



                                        5

<PAGE>



                       GFSI HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                December 29, 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
generally accepted accounting  principles 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 results of
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  generally
accepted  accounting  principles  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.  CREDIT AGREEMENT AMENDMENT

     On December 1, 2000, the Company entered into Amendment No. 2 to the Credit
Agreement, dated February 27, 1997, by and among the Company, Bank One (formerly
the First National Bank of Chicago),  and the other lenders  parties thereto (as
amended,  the "Credit  Agreement").  The  Amendment  reduces the secured line of
credit to $40 million from $50  million,  adjusts  some of the  financial  ratio
covenants and  increases the interest rate margins 1.5% on borrowings  under the
Credit  Agreement.  At December 29, 2000,  interest  rates on the Company's Term
loan A and Term loan B were 10.0% and 10.5%,  respectively.  In connection  with
the Amendment, the Company recorded $189,922 in deferred financing charges which
will be amortized over the remaining life of the Credit Agreement.


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 STANDARDS

     During the first quarter of fiscal 2001, the Company adopted the provisions
of Statement of Financial  Accounting Standards ("SFAS") No. 133 "Accounting for
Derivative  Instruments and Hedging Activities".  This statement,  as amended by
SFAS No. 137 and SFAS No. 138,  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.   The
implementation of this statement did not have a material impact on the Company's
financial position, results of operations or cash flows.

     In December  1999,  the staff of the  Securities  and  Exchange  Commission
issued Staff Accounting  Bulletin No. 101 entitled  "Revenue  Recognition".  The
bulletin,  as  amended,  is to be adopted,  if needed,  no later than the fourth
fiscal  quarter  of fiscal  years  commencing  after  December  15,  1999,  with
retroactive  adjustment to the first fiscal quarter of that year. The effect, if
any, of complying  with the  accounting  described in this bulletin has not been
determined by management.


                                        6

<PAGE>



In September  2000, the FASB's Emerging Issues Task Force released its consensus
on EITF Issue No. 00- 10, "Accounting for Shipping and Handling Fees and Costs".
EITF No. 00-10 sets forth  guidance on how a seller of goods should  classify in
the income statement: (a) amounts billed to a customer for shipping and handling
and (b) costs  incurred  for  shipping  and  handling.  Currently,  the  Company
includes  both the  amounts  billed  to  customers  and the costs  incurred  for
shipping and handling as operating expenses.  Under the EITF, the amounts billed
to customers for shipping and handling must be reported as revenues.  Management
intends to implement this EITF no later than the fourth quarter of fiscal 2001.


                                        7

<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  June 30,  2000.  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).  Certain reclassifications
have been made to fiscal  year 2000  amounts to conform to the fiscal  year 2001
presentation:

<TABLE>
<CAPTION>

                                        Quarter Ended                                  Six Months Ended
                            ---------------------------------------       -----------------------------------------
                            December 31, 1999     December 29, 2000       December 31, 1999       December 29, 2000
                            -----------------     -----------------       -----------------       -----------------
<S>                         <C>                    <C>                     <C>                    <C>

Licensed Apparel            $ 15,585    30.3%     $ 15,484    30.9%       $ 38,713    36.4%       $  36,859    35.9%
Resort                        12,626    24.5%       11,349    22.6%         27,010    25.4%          24,360    23.7%
Corporate                     18,268    35.5%       18,453    36.8%         33,258    31.3%          34,835    34.0%
Event 1                        2,983     5.7%        3,023     6.0%          3,815     3.6%           3,173     3.1%
Other                          2,044     4.0%        1,827     3.7%          3,549     3.3%           3,359     3.3%
                            --------              --------                --------                 --------
Total                       $ 51,506              $ 50,136                $106,345                 $102,586
                            ========              ========                ========                 ========
</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 six
month periods ended December 31, 1999 and December 29, 2000.


                              Quarter Ended               Six Months Ended
                      -----------------------------   --------------------------
                      December 31,  December 29,      December 31,  December 29,
                          1999          2000            1999           2000
                      ------------  ------------      -----------   ------------

Net sales                 100.0%       100.0%           100.0%         100.0%
Gross profit               40.1         38.5             39.4           38.4
EBITDA                     20.3         14.8             18.7           15.4
Operating income           18.7         13.2             17.2           13.8



                                        8

<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 generally accepted accounting  principles,  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 SIX MONTH PERIODS ENDED
DECEMBER 31, 1999 AND JANUARY 1, 1999.

         Net Sales.   Net sales for the second quarter of fiscal 2001, the three
months  ended  December  29, 2000,  decreased  2.7% to $50.1  million from $51.5
million in the second quarter of fiscal 2000. Net sales for the first six months
of fiscal 2001 decreased 3.5% to $102.6 million from $106.3 million in the first
six  months  of fiscal  2000.  The  decrease  in net  sales  primarily  reflects
decreases  in net  sales  for the six  months  ended  December  29,  2000 at the
Company's Resort and Licensed Apparel  divisions of 9.8% and 4.8%  respectively,
which  were  partially  offset by a 4.7%  increase  at the  Company's  Corporate
division.

         Gross Profit.   Gross  profit  for the second  quarter  of fiscal  2001
decreased  6.6% to $19.3  million  from $20.7  million in the second  quarter of
fiscal 2000. Gross profit for the first six months of fiscal 2001 decreased 5.9%
to $39.4 million from $41.9 million in the first six months of fiscal 2000.  The
decrease in gross profit is primarily a result of the decline in net sales noted
above and  increases in overhead  costs as a percent of sales due to product mix
changes from higher priced seasonal outerwear to lower priced products.  For the
second  quarter  of  fiscal  2001,  gross  profit as a  percentage  of net sales
decreased to 38.5%  compared to 40.1% in the second  quarter of fiscal 2000. For
the first six months of fiscal 2001,  gross profit as a percentage  of net sales
decreased to 38.4% compared to 39.4% in the first six months of fiscal 2000.

         Operating Expenses. Operating expenses for the second quarter of fiscal
2001  increased  14.9% to $12.7 million from $11.0 million in the second quarter
of fiscal 2000. For the first six months,  operating  expenses increased 6.9% to
$25.3  million  from  $23.6  million  in the  first six  months of fiscal  2000.
Operating expenses as a percentage of net sales increased to 25.3% from 21.4% in
the  prior  year  second  quarter.  For the first  six  months  of fiscal  2001,
operating expenses as a percentage of net sales increased to 24.6% from 22.2% in
the prior year  period.  The  increase in  operating  expenses in fiscal 2001 is
attributable to the fall of fiscal 2000  benefiting  from one-time  reversals of
operating expenses due to changes in estimates of those expenses.

         EBITDA. EBITDA for the second quarter of fiscal 2001 decreased 29.0% to
$7.4 million from $10.4  million in the second  quarter of fiscal 2000.  For the
first six months,  EBITDA decreased 20.6% to $15.8 million from $19.9 million in
the first six months of fiscal 2000.  The decrease for both periods is primarily
a result of the decrease in net sales and related  gross profit and the increase
in operating  expenses  described  above.  EBITDA as a  percentage  of net sales
decreased  to 14.8%  from 20.3% in the second  quarter of fiscal  2000.  For the
first six months of fiscal 2001,  EBITDA as a percentage  of sales  decreased to
15.4% from 18.7% in the first six months of fiscal 2000.

         Operating Income.   Operating  income for the second  quarter of fiscal
2001 decreased  31.2% to $6.6 million from $9.6 million in the second quarter of
fiscal 2000. For the first six months, operating income decreased 22.4% to $14.2
million from $18.3 million in the first six months of fiscal 2000.  The decrease
is  attributable  to the  decrease  in net sales and  related  gross  profit and
increase in operating expenses described above. Operating income as a percentage
of net sales decreased for the second quarter of fiscal 2001 to 13.2% from 18.7%
in fiscal 2000,  and to 13.8% for the first six months of fiscal 2001 from 17.2%
in the first six months of fiscal 2000.

         Other Income (Expense).  Other expense for the second quarter of fiscal
2001 was consistent with the second quarter of fiscal 2000 at $6.2 million.  For
the first six months of fiscal 2001, other expense was consistent with the first
six months of fiscal 2000 at $12.2 million.

         Income  Taxes.  The  effective  income  tax rates for the three and six
month periods ended  December 29, 2000 and December 31, 1999 were  consistent at
39.0%.

                                        9

<PAGE>


      Net Income.  Net income for the second quarter of fiscal 2001 was $277,000
compared to $2.1 million in the second quarter of fiscal 2000. For the first six
months of fiscal 2001,  net income was $1.2 million  compared to $3.7 million in
the first six months of fiscal  2000.  The  decreases in net income were for the
reasons discussed above.


LIQUIDITY AND CAPITAL RESOURCES

      Cash provided by operating  activities  for the first six months of fiscal
2001 was $13.0  million  compared  to $513,000 in the first six months of fiscal
2000.  The change in cash  provided  by  operating  activities  between  the two
periods was  primarily  attributable  to declining  inventory  balance and other
operating  asset  changes  during the first six months of 2001  compared  to the
first six months of 2000.

      Cash used by investing  activities  in the first six months of fiscal 2001
was $757,000  compared to $1.1 million in the first six months of 2000. The cash
used in both  periods  was  related  to  acquisitions  of  property,  plant  and
equipment.

      Cash used in financing  activities for the first six months of fiscal 2001
was $3.8  million  compared  to $6.6  million  in the first six months of fiscal
2000. Scheduled debt repayments were paid in the first six months of fiscal 2001
whereas  debt  payments  in the first six months of fiscal  2000  included  both
scheduled debt payments and prepayments.

      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  Revolver  provides  $40 million of  revolving
credit  availability  (of which  approximately  $9.3  million was  utilized  for
outstanding commercial and stand-by letters of credit as of December 29, 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 Holdings Preferred Stock
will  accrue  dividends  totaling  approximately  $407,000  annually.   Holdings
Preferred  Stock may be redeemed at stated value  (approximately  $3.4  million)
plus accrued dividends with mandatory redemption in 2009.

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 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>



                 ITEM 3.  QUANTITATIVE AND QUALITATIVE
                          DISCLOSURES ABOUT MARKET RISK


         The  Company's  market  risk  exposure  is  primarily  due to  possible
fluctuations in interest rates. Derivative financial instruments 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.  No such agreements were outstanding
at December 29, 2000. 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.





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<PAGE>



PART II - OTHER INFORMATION


Item 1.   Legal Proceedings
-------   ------------------

There has been no change to matters discussed in  Business-Legal  Proceedings in
Holdings'  Form 10-K as filed with the  Securities  and Exchange  Commission  on
September 29, 2000.


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 10.1(c) - Amendment No. 2 dated as of December 1, 2000
                            to Credit Agreement.

     (b)  Reports on Form 8-K. The Company filed a Current Report on Form 8-K on
          December 27, 2000 to report the replacement of its independent  public
          accountants.




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<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.
February 13, 2001
                               /s/ ROBERT G. SHAW
                               ---------------------------------------
                               Robert G. Shaw, Sr. Vice President of Finance and
                               Principal Accounting Officer






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