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 April 2, 1999.

           ( )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            (I.R.S. Employer Identification No.)
 of incorporation or organization)

                              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 - 1,997.5 shares issued and outstanding
as of May 3, 1999.



<PAGE>



                       GFSI HOLDINGS, INC. AND SUBSIDIARY
                          Quarterly Report on Form 10-Q
                       For the Quarter Ended April 2, 1999
                                      INDEX



                                                                       Page
PART I - FINANCIAL INFORMATION

         ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                  Consolidated Balance Sheets                            3
                  Consolidated Statements of Income (Loss)               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

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>


                                                                                         July 3,              April 2,
                                                                                          1998                 1999
                                                                                       ---------              --------
<S>                                                                                         <C>                   <C>


Assets
Current assets:
     Cash & cash equivalents                                                         $     1,361            $   10,036
     Accounts receivable, net of allowance for doubtful accounts of $636                  27,664                29,250
      and $1,163, respectively
     Inventories, net                                                                     44,298                33,835
     Prepaid expenses and other current assets                                             1,484                   936
     Deferred income taxes                                                                 1,679                 1,899
                                                                                       ---------             ---------
Total current assets                                                                      76,486                75,956
Property, plant and equipment, net                                                        21,243                20,053
Other assets:
     Deferred financing costs, net                                                         8,798                 7,912
     Other                                                                                     5                    10
                                                                                       ---------             ---------
Total assets                                                                           $ 106,532             $ 103,931
                                                                                       =========             =========

Liabilities and stockholders' equity (deficiency
)Current liabilities:
     Accounts payable                                                                 $    8,409             $   8,931
     Accrued interest expense                                                              4,521                 1,395
     Accrued expenses                                                                      8,918                 8,400
     Income taxes payable                                                                     --                    92
     Current portion of long-term debt                                                     5,050                 6,174
                                                                                       ---------             ---------
Total current liabilities                                                                 26,898                24,992
Deferred income taxes                                                                      1,234                 1,342
Revolving credit agreement                                                                 5,600                    --
Other long-term obligations                                                                  300                   150
Long-term debt, less current portion                                                     235,179               235,572
Redeemable preferred stock                                                                 4,136                 4,455
Stockholders' equity (deficiency):
     Common stock, $.01 par value, 2,000 shares authorized, issued
         and outstanding at July 3, 1998 and April 2, 1999                                    --                    --
     Additional paid-in capital                                                              200                   200
     Accumulated deficiency                                                             (167,015)             (162,780)
                                                                                       ---------             ---------
Total stockholders' equity (deficiency)                                                 (166,815)             (162,580)
                                                                                       ---------             ---------
Total liabilities and stockholders' equity (deficiency)                                $ 106,532             $ 103,931
                                                                                       =========             =========
</TABLE>


NOTE: The  consolidated  balance sheet at July 3, 1998 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 (LOSS)
(UNAUDITED)
(In thousands)

<TABLE>
<CAPTION>



                                                      Quarter Ended                       Nine Months Ended
                                                April 3,           April 2,           April 3,           April 2,
                                                 1998               1999               1998               1999
                                               ---------          ---------          ---------         ----------
<S>                                               <C>                <C>                <C>                <C>


Net sales                                       $48,574           $ 44,807           $165,477          $ 160,229
Cost of sales                                    26,441             24,765             92,728             89,533
                                               ---------          ---------          ---------         ----------
Gross profit                                     22,133             20,042             72,749             70,696

Operating expenses:
     Selling                                      6,230              6,388             18,076             18,518
     General and administrative                   8,072              8,338             22,412             25,818
                                               ---------          ---------          ---------         ----------
                                                 14,302             14,726             40,488             44,336
                                               ---------          ---------          ---------         ----------
Operating income                                  7,831              5,316             32,261             26,360

Other income (expense):
     Interest expense                            (6,046)            (6,167)           (18,079)           (18,818)
     Other, net                                       6                 82                (11)               141
                                               ---------          ---------          ---------         ----------
                                                 (6,040)            (6,085)           (18,090)           (18,677)
                                               ---------          ---------          ---------         ----------
Income (loss) before income
    taxes & extraordinary item                    1,791               (769)            14,171              7,683
Provision for income taxes
     (income tax benefit)                           760               (263)             5,839              3,129
                                               ---------          ---------          ---------         ----------
Income (loss) before
extraordinary  item                               1,031               (506)             8,332              4,554
Extraordinary item, net of tax
     benefit of $135                                --                 --                 203                --
                                               ---------          ---------          ---------         ----------
Net income (loss)                                 1,031               (506)             8,129              4,554
Preferred stock dividends                          (106)              (107)            (1,224)              (319)
                                               ---------          ---------          ---------         ----------
Net income (loss) attributable to
     common shareholders                       $    925           $   (613)           $ 6,905            $ 4,235
                                               =========          =========          =========         ==========
</TABLE>


See notes to consolidated financial statements.







                                        4

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

<TABLE>
<CAPTION>


                                                                                             Nine Months Ended
                                                                                         April 3,          April 2,
                                                                                          1998              1999
                                                                                       -----------        ----------
<S>                                                                                         <C>               <C>

Cash flows from operating activities:
Net income                                                                                $ 8,129           $ 4,554
Adjustments to reconcile net income to net cash provided by
   operating activities:
     Depreciation                                                                           2,185             2,272
     Amortization of deferred financing costs                                                 889               886
     Loss on sale or disposal of property, plant and equipment                                 15                71
     Deferred income taxes                                                                    104              (112)
     Amortization of discount on long-term debt                                             2,805             4,724
     Extraordinary loss on early extinguishment of debt                                       338                --
Changes in operating assets and liabilities:
     Accounts receivable, net                                                              (7,568)            (1,583)
     Inventories, net                                                                       2,808             10,463
     Prepaid expenses, other current assets and other assets                                  249                544
     Income taxes payable                                                                    (128)                92
     Accounts payable, accrued expenses and other
        long-term obligations                                                              (2,272)            (2,994)
                                                                                       -----------         ----------
Net cash provided by operating activities                                                   7,554             18,917
                                                                                       -----------         ----------

Cash flows from investing activities
     Proceeds from sales of property, plant and equipment                                     323                183
     Purchases of property, plant and equipment                                            (1,968)            (1,337)
                                                                                       -----------        ----------
Net cash used in investing activities                                                      (1,645)            (1,154)
                                                                                       -----------        ----------

Cash flows from financing activities:
     Net changes to short-term borrowings and revolving credit agreement                   (3,000)            (5,600)
     Payments on long-term debt                                                            (3,375)            (3,488)
     Cash paid for financing costs                                                           (317)                --
     Redemption of note receivable from sale of stock                                         788                 --
                                                                                       -----------        ----------
Net cash used in financing activities                                                      (5,904)            (9,088)
                                                                                       -----------        ----------
Net increase (decrease)  in cash and cash equivalents                                           5              8,675
Cash and cash equivalents at beginning of period                                            1,117              1,361
                                                                                       -----------        ----------
Cash and cash equivalents at end of period                                               $  1,122         $   10,036
                                                                                       ===========        ==========
Supplemental cash flow information:
     Interest paid                                                                       $ 17,645         $   16,213
                                                                                       ===========        ==========
     Income taxes paid                                                                  $   5,694         $    2,823
                                                                                       ===========        ==========
Supplemental schedule of non-cash financing activities:
     Accrual of preferred stock dividends                                               $   1,224         $      319
                                                                                       ===========        ==========
     Exchange of subordinated notes and preferred stock for discount notes              $  50,000
                                                                                       ===========
</TABLE>

See notes to consolidated financial statements.





                                        5

<PAGE>




                       GFSI HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  April 2, 1999

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 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 3, 1998  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.   Recapitalization Transaction

     On October 31, 1996, the Board of Directors of Winning Ways, Inc. ("Winning
Ways")  executed a letter of intent to enter into a transaction  with The Jordan
Company. The Transaction included the formation of Holdings,  and GFSI, a wholly
owned  subsidiary  of Holdings,  to effect the  acquisition  of Winning Ways. On
February  27, 1997,  pursuant to the  acquisition  agreement,  Holdings and GFSI
acquired all of the issued and  outstanding  capital stock of Winning Ways,  and
immediately  thereafter  merged Winning Ways with and into GFSI with GFSI as the
surviving entity.  All of the capital stock of Winning Ways acquired by Holdings
in  connection  with the  acquisition  was  contributed  to GFSI  along with the
balance of the Equity Contribution, as described below.

     The  aggregate   purchase  price  for  Winning  Ways  was  $242.3  million,
consisting of $173.1 million in cash at closing, a post closing payment at April
30, 1997 of $10.0  million and the  repayment of $59.2  million of Winning Ways'
existing indebtedness. To finance the Acquisition, including approximately $11.5
million of related fees and expenses: (i) The Jordan Company, its affiliates and
JZEP PLC  (collectively  the  "Jordan  Investors")  invested  $52.2  million  in
Holdings  and  Holdings  contributed  $51.4  million of this amount to GFSI (the
"Equity  Contribution");  (ii) GFSI entered into a credit agreement (the "Credit
Agreement")  which  provides for  borrowings of up to $115.0  million,  of which
approximately  $68.0 million was outstanding at closing and approximately  $22.9
million was  utilized  to cover  outstanding  letters of credit at closing;  and
(iii) GFSI  issued  $125.0  million of Senior  Subordinated  Notes (the  "Senior
Subordinated  Notes") which were purchased by institutional  investors through a
Rule 144A private  placement.  The Equity  Contribution  was  comprised of (i) a
contribution of $13.6 million from the Jordan  Investors to Holdings in exchange
for the  cumulative  non-cash  preferred  stock  issued by  Holdings  ("Holdings
Preferred Stock") and approximately 50% of the Common Stock of Holdings;  (ii) a
contribution  of $13.6  million  from the  Management  Investors  to Holdings in
exchange for Holdings  Preferred Stock and approximately 50% of the Common Stock
of Holdings, and (iii) a contribution of $25.0 million from JZEP PLC to Holdings
in exchange  for  subordinated  notes of Holdings  (the  "Holdings  Subordinated
Notes").  Approximately  $0.8 million of the  contribution  from the  Management
Investors was financed by loans from Holdings.

                                        6

<PAGE>



     Subsequent  to the  recapitalization  transactions  described  above,  GFSI
became a wholly owned  subsidiary  of Holdings.  Holdings is dependent  upon the
cash flows of the GFSI to provide funds to enable  Holdings to pay  consolidated
income  taxes,  fees payable  under a  consulting  agreement  and certain  other
ordinary  course  expenses  incurred  on behalf of GFSI and to provide  funds to
service the  indebtedness  represented by the $50.0 million of Holdings Series B
Senior Discount Notes due 2009.  Holdings Series B Discount Notes do not have an
annual cash flow requirement until 2005. Additionally,  the remaining cumulative
Holdings Preferred Stock will accrue dividends totaling  approximately  $427,000
annually.   Holdings   Preferred   Stock  may  be  redeemed   at  stated   value
(approximately $3.6 million) plus accrued dividends with mandatory redemption in
2009.

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.

     Various state and local taxing  authorities  have  examined,  or are in the
process of examining  the  Company's  sales and use tax returns.  The Company is
currently  reviewing the status and the results of such examinations,  including
the methods used by certain state taxing  authorities in  calculating  the sales
tax assessments and believes that it has accrued an amount adequate to cover the
assessments.

4.   New Accounting Standards

     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  is
effective for all quarters of fiscal years  beginning  after June 15, 1999.  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.

     In March 1998,  the  American  Institute of  Certified  Public  Accountants
("AICPA") issued Statement of Position ("SOP") 98-1 "Accounting for the Costs of
Computer  Software  Developed or Obtained for Internal  Use." SOP 98-1  provides
guidance  on  accounting  for the costs of  internal  use  computer  software at
various stages of development.  This SOP is effective for fiscal years beginning
after December 15, 1998. The Company does not expect the  implementation of this
SOP to have a material impact on the Company's financial statements.



                                        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  July 3,  1998.  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 the fiscal year 1998 data to conform to the 1999 presentation:
<TABLE>
<CAPTION>


                                           Quarter Ended                                       Nine Months Ended
                               April 3, 1998             April 2, 1999               April 3, 1998                April 2, 1999
                            -------------------      --------------------       ---------------------       ----------------------
<S>                            <C>         <C>          <C>          <C>           <C>           <C>           <C>            <C>


Resort                      $ 14,048      28.9%      $ 10,959       24.5%       $ 48,476        29.3%       $ 43,491         27.1%
Corporate                     18,328      37.7%        16,487       36.8%         56,614        34.2%         57,690         36.0%
College Bookstore              7,316      15.1%         6,891       15.4%         37,304        22.5%         35,001         21.9%
Sports Specialty               3,164       6.5%         4,565       10.2%         10,614         6.4%         11,394          7.1%
Event 1                        3,721       7.7%         4,718       10.6%          6,888         4.2%          8,251          5.2%
Other                          1,997       4.1%         1,187        2.5%          5,581         3.4%          4,402          2.7%
                            --------      -----      --------       -----      ---------        -----      ---------         -----
Total                       $ 48,574                 $ 44,807                  $ 165,477                   $ 160,229
                            ========                 ========                  =========                   =========
</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 3, 1998 and April 2, 1999.


                              Quarter Ended             Nine Months Ended
                           April 3,    April 2,      April 3,       April 2,
                            1998         1999         1998           1999
                          ---------   ---------     ---------      ---------

Net sales                  100.0%       100.0%        100.0%         100.0%
Gross profit                45.6         44.7          44.0           44.1
EBITDA                      17.6         13.6          20.8           17.9
Operating income            16.1         11.9          19.5           16.5



                                        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 Nine Month  Periods Ended
April 2, 1999 and April 3, 1998.

     Net Sales. Net sales for the third quarter of fiscal 1999, the three months
ended April 2, 1999,  decreased  7.8% to $44.8 million from $48.6 million in the
third quarter of fiscal 1998. Net sales for the first nine months of fiscal 1999
decreased 3.2% to $160.2 million from $165.5 million in the first nine months of
fiscal 1998. The decrease in net sales primarily reflects decreases in net sales
for the nine  months  ended  April 2, 1999 at the  Company's  Resort and College
Bookstore  divisions of 10.3% and 6.2%,  respectively.  Management  believes the
decreases  in net  sales at the  Resort  and  College  Bookstore  divisions  are
primarily attributable to unseasonably warm fall and winter temperatures in most
of the  country.  These  decreases  in net  sales  were  partially  offset by an
increase  in net sales in the Event 1  subsidiary  of 19.8% for the nine  months
ended April 3, 1999.

     Gross Profit.  Gross profit for the third quarter of fiscal 1999  decreased
9.4% to $20.0  million from $22.1  million in the third  quarter of fiscal 1998.
Gross  profit for the first nine months of fiscal 1999  decreased  2.8% to $70.7
million from $72.7 million in the first nine months of fiscal 1998. The decrease
in gross profit is primarily a result of the sales  decreases  noted above.  For
the third  quarter of fiscal 1999,  gross  profit as a  percentage  of net sales
decreased to 44.7%  compared to 45.6% in the third  quarter of fiscal 1998.  For
the first nine months of fiscal 1999,  gross profit as a percentage of net sales
increased to 44.1% compared to 44.0% in the first nine months of fiscal 1998.

     Operating Expenses. Operating expenses for the third quarter of fiscal 1999
increased  3.0% to $14.7  million  from $14.3  million  in the third  quarter of
fiscal 1998.  For the first nine months,  operating  expenses  increased 9.5% to
$44.3  million  from  $40.5  million in the first  nine  months of fiscal  1998.
Increases in operating expenses are primarily attributable to increased staffing
levels and licensing and site fees associated  with Event 1. Operating  expenses
as a  percentage  of net sales  increased  to 32.9% from 29.4% in the prior year
third quarter. For the first nine months,  operating expenses as a percentage of
net sales increased to 27.7% from 24.5% in the prior year period.

     EBITDA. EBITDA for the third quarter of fiscal 1999 decreased 28.5% to $6.1
million  from $8.5 million in the third  quarter of fiscal  1998.  For the first
nine months,  EBITDA  decreased 16.8% to $28.7 million from $34.4 million in the
first nine months of fiscal  1998.  The decrease for both periods is primarily a
result of the  decrease  in net sales and the  increase  in  operating  expenses
described  above.  EBITDA as a percentage  of net sales  decreased to 13.6% from
17.6% in the third  quarter of fiscal  1998.  For the nine  months,  EBITDA as a
percentage  of sales  decreased  to 17.9% from 20.8% in the first nine months of
fiscal 1998.

     Operating  Income.  Operating  income for the third  quarter of fiscal 1999
decreased 32.1% to $5.3 million from $7.8 million in the third quarter of fiscal
1998.  For the first nine  months,  operating  income  decreased  18.3% to $26.4
million from $32.3 million in the first nine months of fiscal 1998. The decrease
is  attributable  to the  decrease in net sales and the  increase  in  operating
expenses  described  above.  Operating  income  as a  percentage  of  net  sales
decreased  for the third  quarter  of fiscal  1999 to 11.9% from 16.1% in fiscal
1998,  and to 16.5% for the nine month  period of fiscal  1999 from 19.5% in the
first nine months of fiscal 1998.



                                        9

<PAGE>




     Other Income (Expense).  Other expense for the third quarter of fiscal 1999
increased to $6.1 million from $6.0 million in the third quarter of fiscal 1998.
For the first nine  months of fiscal  1999,  other  expense  increased  to $18.7
million from $18.1 million in the first nine months of fiscal 1998. The increase
for the nine month  period is primarily a result of the issuance of the Holdings
Discount Notes in October 1997.

     Income  Taxes.  The  effective tax rates for the nine months ended April 2,
1999 and April 3, 1998 were 41.2% and 40.7%, respectively.

     Net Income (Loss). Net loss income for the third quarter of fiscal 1999 was
$.5  million  compared  to net income of $1.0  million  in the third  quarter of
fiscal  1998.  For the first  nine  months of fiscal  1999,  net income was $4.6
million compared to $8.1 million in the first nine months of fiscal 1998.


Liquidity and Capital Resources

     Cash provided by operating  activities  for the first nine months of fiscal
1999 was $18.9  million  compared  to $7.6  million in the first nine  months of
fiscal  1998.  The change in cash used in operating  activities  between the two
periods primarily resulted from a larger decline in the inventory balance during
the first nine months of fiscal 1999 compared to the first nine months of fiscal
1998.

     Cash used by investing  activities  in the first nine months of fiscal 1999
was $1.2 million  compared to $1.6 million in the first nine months of 1998. 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 1999
was $9.1  million  compared  to $5.9  million in the first nine months of fiscal
1998. The increase in cash used in financing activities in the first nine months
of  fiscal  1999  is  primarily  attributable  to  increased  repayments  of the
revolving credit agreement balances over the prior period.

     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  $50 million of  revolving
credit  availability  (of  which  none was  outstanding  as of April 2, 1999 and
approximately $15.4 million was utilized for outstanding commercial and stand-by
letters of credit).

     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  $427,000  annually.   Holdings
Preferred  Stock may be redeemed at stated value  (approximately  $3.6  million)
plus accrued dividends with mandatory redemption in 2009.




                                       10

<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 and an interest rate cap 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.



Year 2000 Compliance

     The Company has a program to identify,  evaluate and  implement  changes to
its computer systems as necessary to address the Year 2000 issue. As part of the
program, the Company is currently upgrading its existing management  information
system ("MIS") with a new system  designed to improve the overall  efficiency of
the  Company's  operations  and to enable  management  to more closely track the
financial  performance  of each of its  sales  and  operating  areas.  Based  on
management's best estimates,  the new MIS will be operational during fiscal year
ending July 2, 1999. The costs  associated with the new MIS  implementation  are
not  expected to be material to the Company and are being  expensed as incurred.
Any difficulty with the installation,  initial operation or untimely  resolution
of such issues associated with the new MIS may present an uncertainty that would
be reasonably likely to affect the Company's inventory purchasing control, sales
and customer  service which could  materially and adversely impact the Company's
future financial results, or cause its reported financial  information not to be
necessarily   indicative  of  future  operating   results  or  future  financial
condition.  The Company will  continue to consider the  likelihood of a material
business  interruption due to the Year 2000 issue, and, if necessary,  implement
appropriate contingency plans.

     Also as part of the Company's Year 2000 program,  the Company has initiated
communications  with suppliers with which it interacts to determine  their plans
for addressing Year 2000 concerns.  Based upon management's best estimates,  all
Year 2000 issues will be resolved in 1999. However,  the Company cannot make any
assurances that its computer  systems,  or the computer systems of its suppliers
will be Year 2000 ready on schedule, or that management's cost estimates will be
achieved.



Seasonality and Inflation

     The   Company   experiences   seasonal   fluctuations   in  its  sales  and
profitability,  with  generally  higher  sales and gross profit in the first and
third 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.

                                       11

<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 25, 1998.

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.


                                       13

<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 14, 1999
                             /s/ ROBERT G. SHAW
                             ---------------------------------------
                             Robert G. Shaw, Sr. Vice President of Finance and
                             Principal Accounting Officer

                                       14