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 31, 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 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 February 1, 2000.


                                        1

<PAGE>



                       GFSI HOLDINGS, INC. AND SUBSIDIARY
                          Quarterly Report on Form 10-Q
                     For the Quarter Ended December 31, 1999

                                      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                                                   12

SIGNATURE PAGE                                                                13



                                        2

<PAGE>



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

                                                                                       July 2,             December 31,
                                                                                        1999                   1999
                                                                                    ------------           ------------
<S>                                                                                 <C>                    <C>

Assets
Current assets:
     Cash & cash equivalents                                                          $  10,278            $    3,124
     Accounts receivable, net                                                            28,381                35,709
     Inventories, net                                                                    36,324                37,538
     Prepaid expenses and other current assets                                            1,041                   907
     Deferred income taxes                                                                1,790                 1,790
                                                                                      ----------            ---------
Total current assets                                                                     77,814                79,068
Property, plant and equipment, net                                                       20,245                19,933
Other assets:
     Deferred financing costs, net                                                        7,616                 7,026
     Other                                                                                    5                     5
                                                                                      ---------             ---------
Total assets                                                                          $ 105,680             $ 106,032
                                                                                      =========             =========

Liabilities and stockholders' equity (deficiency)
Current liabilities:
     Accounts payable                                                                 $   8,289             $   7,135
     Accrued interest expense                                                             4,484                 4,436
     Accrued expenses                                                                     7,948                 7,627
     Income taxes payable                                                                   -                   1,284
     Current portion of long-term debt                                                    6,550                 6,919
                                                                                       ---------            ---------
Total current liabilities                                                                27,271                27,401
Deferred income taxes                                                                     1,183                 1,183
Revolving credit agreement                                                                 -                     -
Other long-term obligations                                                                 737                   566
Long-term debt, less current portion                                                    235,312               232,083
Redeemable preferred stock                                                                4,545                 4,698
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                                                            (163,567)             (160,097)
     Treasury stock, at cost (7.5 and 33 series A shares at July 2, 1999
     and December 31, 1999, respectively)                                                    (1)                   (2)
                                                                                      ---------             ---------
Total stockholders' equity (deficiency)                                                (163,368)             (159,899)
                                                                                      ---------             ---------
Total liabilities and stockholders' equity (deficiency)                               $ 105,680             $ 106,032
                                                                                      =========             =========

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>




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

<TABLE>
<CAPTION>

                                              Quarter Ended                       Six Months Ended
                                    --------------------------------    -------------------------------------
                                      January 1,        December 31,        January 1,           December 31,
                                         1999               1999               1999                 1999
                                      ---------         ------------        ----------          -------------
<S>                                  <C>                 <C>                 <C>                 <C>

Net sales                             $  55,377           $  51,506           $ 115,422           $ 106,345
Cost of sales                            31,900              30,834              67,727              64,446
                                      ---------           ---------           ---------           ---------
Gross profit                             23,477              20,672              47,695              41,899

Operating expenses:
     Selling                              5,684               5,267              12,106              11,691
     General and administrative           7,348               5,769              14,547              11,957
                                      ---------           ---------           ---------           ---------
                                         13,032              11,036              26,653              23,648
                                      ---------           ---------           ---------           ---------
Operating income                         10,445               9,636              21,042              18,251

Other income (expense):
     Interest expense                    (6,320)             (6,181)            (12,651)            (12,338)
     Other, net                              25                  34                  60                 130
                                      ---------           ---------           ---------           ---------
                                         (6,295)             (6,147)            (12,591)            (12,208)
                                      ---------           ---------           ---------           ---------
Income before income taxes                4,150               3,489               8,451               6,043
Provision for income taxes                1,662               1,355               3,391               2,361
                                      ---------           ---------           ---------           ---------
Net income                                2,488               2,134               5,060               3,682
Preferred stock dividends                  (106)               (105)               (212)               (212)
                                      ---------           ---------           ---------           ---------
Net income attributable to
     common shareholders              $   2,382           $   2,029           $   4,848           $   3,470
                                      =========           =========           =========           =========


See notes to consolidated financial statements.

</TABLE>


                                        4

<PAGE>




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

<TABLE>
<CAPTION>

                                                                                            Six Months Ended
                                                                                      -----------------------------
                                                                                       January 1,      December 31,
                                                                                          1999             1999
                                                                                       ---------       ------------
<S>                                                                                    <C>              <C>

Cash flows from operating activities:
Net income                                                                             $   5,060         $   3,682
Adjustments to reconcile net income to net cash provided by
   operating activities:
     Depreciation                                                                          1,516             1,605
     Amortization of deferred financing costs                                                591               591
     (Gain) loss on sale or disposal of property, plant and equipment                         71               (16)
     Deferred income taxes                                                                  (112)             -
     Amortization of discount on long-term debt                                            3,064             3,469
Changes in operating assets and liabilities:
     Accounts receivable, net                                                             (7,553)           (7,327)
     Inventories, net                                                                      8,379            (1,214)
     Prepaid expenses, other current assets and other assets                                 491               133
     Income taxes payable                                                                    847             1,284
     Accounts payable, accrued expenses and other
        long-term obligations                                                               (851)           (1,694)
                                                                                        --------          --------
Net cash provided by operating activities                                                 11,503               513
                                                                                        --------          --------

Cash flows from investing activities
     Proceeds from sales of property, plant and equipment                                    183                43
     Purchases of property, plant and equipment                                           (1,077)           (1,154)
                                                                                        --------          --------
Net cash used in investing activities                                                       (894)           (1,111)
                                                                                        --------          --------

Cash flows from financing activities:
     Net changes to short-term borrowings and revolving credit agreement                  (4,600)             -
     Redemption of preferred stock                                                          -                  (60)
     Treasury stock purchase                                                                -                   (2)
     Payments on long-term debt                                                           (2,227)           (6,494)
                                                                                        --------          --------
Net cash used in financing activities                                                     (6,827)           (6,556)
                                                                                        --------          --------

Net increase (decrease)  in cash and cash equivalents                                      3,782            (7,154)
Cash and cash equivalents at beginning of period                                           1,361            10,278
                                                                                       ---------          --------
Cash and cash equivalents at end of period                                             $   5,143          $  3,124
                                                                                       =========          ========
Supplemental cash flow information:
     Interest paid                                                                     $   9,076          $  8,199
                                                                                       =========          ========
     Income taxes paid                                                                 $   2,346          $    597
                                                                                       =========          ========
Supplemental schedule of non-cash financing activities:
     Accrual of preferred stock dividends                                              $     212          $    212
                                                                                       =========          ========
Non-cash financing activities:
     Equipment purchased under capital lease                                                -             $    166
                                                                                                          ========

See notes to consolidated financial statements.
</TABLE>


                                        5

<PAGE>



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

     Certain  reclassifications have been made to the fiscal year 1999 statement
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  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                                       Six Months Ended
                            ------------------------------------------      ----------------------------------------------
                             January 1, 1999       December 31, 1999          January 1, 1999           December 31, 1999
                            -----------------     --------------------      -------------------       --------------------
<S>                         <C>                   <C>                         <C>                     <C>

Resort                      $ 15,276    27.6%      $ 15,174     29.5%       $  32,532     28.2%       $  32,031      30.1%
Corporate                     21,946    39.6%        18,269     35.5%          41,203     35.7%          33,259      31.3%
College Bookstore              9,917    17.9%         9,927     19.2%          28,110     24.4%          27,359      25.7%
Sports Specialty               3,559     6.4%         3,112      6.0%           6,829      5.9%           6,335       6.0%
Event 1                        3,355     6.1%         2,983      5.8%           3,533      3.1%           3,815       3.6%
Other                          1,324     2.4%         2,041      4.0%           3,215      2.7%           3,546       3.3%
                            --------               --------                  ---------                 --------
Total                       $ 55,377               $ 51,506                  $ 115,422                 $106,345
                            ========               ========                  =========                 ========
</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 January 1, 1999 and December 31, 1999.

                                Quarter Ended             Six Months Ended
                           ------------------------   ------------------------
                           January 1,  December 31,   January 1,   December 31,
                             1999          1999         1999           1999
                           ---------   ------------   ----------   ----------

Net sales                   100.0%        100.0%        100.0%        100.0%
Gross profit                 42.4          40.1          41.3          39.4
EBITDA                       20.2          20.3          19.5          18.7
Operating income             18.9          18.7          18.2          17.2



                                        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 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 2000, the three
months  ended  December  31, 1999,  decreased  7.0% to $51.5  million from $55.4
million in the second quarter of fiscal 1999. Net sales for the first six months
of fiscal 2000 decreased 7.9% to $106.3 million from $115.4 million in the first
six  months  of fiscal  1999.  The  decrease  in net  sales  primarily  reflects
decreases  in net  sales  for the six  months  ended  December  31,  1999 at the
Company's Corporate, Sports Specialty and College Bookstore divisions of 19%, 7%
and 3% respectively.  These declines were 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.  These decreases in net sales were partially  offset by an increase in net
sales in the Event 1  subsidiary  of 8% for the six months  ended  December  31,
1999.

         Gross  Profit.  Gross  profit  for the second  quarter  of fiscal  2000
decreased  11.9% to $20.7  million from $23.5  million in the second  quarter of
fiscal  1999.  Gross  profit for the first six months of fiscal  2000  decreased
12.2% to $41.9  million  from  $47.7  million  in the first six 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 second quarter of fiscal 2000, gross profit as a percentage of
net sales  decreased to 40.1%  compared to 42.4% in the second quarter of fiscal
1999.  For the first six months of fiscal 2000,  gross profit as a percentage of
net sales decreased to 39.4% compared to 41.3% in the first six months of fiscal
1999.

         Operating Expenses. Operating expenses for the second quarter of fiscal
2000  decreased  15.3% to $11.0 million from $13.0 million in the second quarter
of fiscal 1999. For the first six months,  operating expenses decreased 11.3% to
$23.6  million from $26.7  million in the first six 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 21.4% from 23.5% in the prior year second  quarter.  For
the first six months of fiscal 2000,  operating  expenses as a percentage of net
sales decreased to 22.2% from 23.1 % in the prior year period.

         EBITDA.  EBITDA for the second quarter of fiscal 1999 decreased 6.7% to
$10.4 million from $11.2 million in the second  quarter of fiscal 1999.  For the
first six months,  EBITDA decreased 12.0% to $19.9 million from $22.6 million in
the first six months of fiscal 1999.  The decrease for both periods 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 20.3% from 20.2% in the second
quarter of fiscal  1999.  For the first six months of fiscal  2000,  EBITDA as a
percentage  of sales  decreased  to 18.7%  from 19.5% in the first six months of
fiscal 1999.

         Operating Income.   Operating  income for the second  quarter of fiscal
2000  decreased 7.7% to $9.6 million from $10.5 million in the second quarter of
fiscal 1999. For the first six months, operating income decreased 13.3% to $18.3
million from $21.0 million in the first six months of fiscal 1999.  The decrease
is attributable to the decrease in net sales and related gross profit  described
above.  Operating  income as a percentage of net sales  decreased for the second
quarter of fiscal 2000 to 18.7% from 18.9% in fiscal 1999,  and to 17.2% for the
first six  months of fiscal  2000 from  18.2% in the first six  months of fiscal
1999.

                                        8

<PAGE>



         Other Income (Expense).  Other expense for the second quarter of fiscal
2000 decreased to $6.2 million from $6.3 million in the second quarter of fiscal
1999. For the first six months of fiscal 2000, other expense  decreased to $12.2
million from $12.6 million in the first six 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 Holdings Discount Notes.

         Income Taxes.  The effective  income tax rates for the six months ended
December 31, 1999 and January 1, 1999 were 39.0% and 40.1%, respectively.

         Net Income.  Net income for the second  quarter of fiscal 2000 was $2.1
million  compared to $2.5 million in the second  quarter of fiscal 1999. For the
first six months of fiscal 2000,  net income was $3.7  million  compared to $5.1
million in the first six months of fiscal 1999.


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

     Cash  provided by operating  activities  for the first six months of fiscal
2000 was  $513,000  compared to $11.5  million in the first six 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 inventory
balances during the first six months of 2000 compared to the first six months of
1999 and decreased income for the six months ended December 31, 1999 compared to
the six months ended January 1, 1999.

     Cash used by  investing  activities  in the first six months of fiscal 2000
was $1.1 million  compared to $894,000 in the first six 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 six months of fiscal 2000
was $6.6  million  compared  to $6.8  million  in the first six months of fiscal
1999. In November 1999, the Company made a $3.3 million term debt prepayment due
to Excess Cash Flows, as defined in the Credit Agreement,  in 1999. In the first
six months of fiscal 1999,  the Company  repaid $4.6  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  Revolver  provides  $50 million of  revolving
credit  availability  (of which  approximately  $18.0  million was  utilized for
outstanding commercial and stand-by letters of credit as of December 31, 1999).

     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  $425,000  annually.   Holdings
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.

Year 2000 Compliance
--------------------

          The  Company  continues  to assess the impact  that the year 2000 will
have on its internal  computer  systems,  facilities and  production  equipment,
critical business partners and business-critical third parties.

     The Company has a program to identify,  evaluate and  implement  changes to
all of its  internal  computer  systems as  necessary  to address  the Year 2000
issue.  As part of the program,  in fiscal year 1999,  the Company  upgraded and
implemented its Enterprise Resource Planning System ("ERP"), including Year 2000
functionality,  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.  It is not practical to
segregate the cost of the Year 2000  functionality  from the cost of the upgrade
and implementation of the ERP.

     All of the Company's  production and operations  departments have completed
their   inventory,   assessment  and  remediation   efforts  in  regard  to  all
non-information   technology  systems  which  include  hardware,   software  and
associated  embedded computer  technologies that are used to operate the Company
facilities and equipment.

     The Company has  identified,  prioritized  and is continuing to communicate
with all critical  business  partners,  including all  third-party  suppliers of
goods and  services,  to  ascertain  the  status of their  Year 2000  compliance
programs.  The Company  intends to monitor the progress of these  critical third
parties.

     The  Company  does not  anticipate  that the Year 2000  issues  related  to
internally-controllable  systems will significantly  impact the overall business
operations or financial results of the Company.  However, the Company could face
significant  disruptions in business  operations and financial losses if certain
business- critical, third parties, such as utility providers,  telecommunication
systems, transportation service providers or certain government entities, do not
successfully  continue  their  Year  2000  remediation  plans.  The  Company  is
currently in the process of identifying and developing contingency plans for the
most  reasonable  likely  worst case  scenarios.  To date,  The  Company has not
experienced any significant disruptions due to Year 2000 issues.

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.


                                       10

<PAGE>

     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 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 4.1(b) - First Supplemental Indenture, dated as of
          October 11, 1999, among GFSI Holdings, Inc. and State Street
          Bank and Trust Company as Trustee.

          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.


                                       12

<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 11 , 2000
                               /s/ ROBERT G. SHAW
                               ---------------------------------------
                               Robert G. Shaw, Sr. Vice President of Finance and
                               Principal Accounting Officer



                                       13

<PAGE>


                                                               EXHIBIT 4.1(b)

                    ========================================



                               GFSI Holdings, Inc.





                              SERIES A AND SERIES B

                     11-3/8% Senior Discount Notes due 2009




                          FIRST SUPPLEMENTAL INDENTURE


                          DATED AS OF OCTOBER 11, 1999





                       State Street Bank and Trust Company

                                     Trustee



                    ========================================


<PAGE>


         This  SUPPLEMENTAL  INDENTURE,  dated as of October__,  1999 among GFSI
Holdings,  Inc., a Delaware  corporation (the "Company"),  and State Street Bank
and Trust Company, as trustee (the "Trustee").

                                    RECITALS

         WHEREAS,  the Company and the Trustee entered into an Indenture,  dated
as of September 17, 1997 (the "Indenture"), pursuant to which the Company issued
its 11 3/8% Senior Discount Notes due 2009 (the "Notes"); and

         WHEREAS, Section 9.01(a) of the Indenture provides that the Company and
the  Trustee  may  amend  or  supplement  the  Indenture  in  order  to cure any
ambiguity,  defect or  inconsistency  without  the consent of the Holders of the
Notes; and

         WHEREAS,   a  definition   of  the  term  "Senior   Indebtedness"   was
inadvertently  omitted from the Indenture  notwithstanding  the continued use of
that term in several provisions of the Indenture; and

         WHEREAS,  several other  amendments  to the  Indenture  relating to the
omission  of  the  definition  of  the  term  "Senior  Indebtedness",  or  other
ambiguities, defects and inconsistencies, are desirable;

         WHEREAS, all acts and things prescribed by the Indenture, by law and by
the  Certificate  of  Incorporation  and the  Bylaws of the  Company  and of the
Trustee necessary to make this Supplemental Indenture a valid instrument legally
binding on the Company and the Trustee,  in accordance with its terms, have been
duly done and performed;

          NOW, THEREFORE,  to comply with the provisions of the Indenture and in
consideration  of the above premises,  the Company and the Trustee  covenant and
agree for the equal and proportionate  benefit of the respective  Holders of the
Notes as follows:

                                    ARTICLE 1

         SECTION  1.01.  This  Supplemental  Indenture  is  supplemental  to the
Indenture and does and shall be deemed to form a part of, and shall be construed
in connection with and as part of, the Indenture for any and all purposes.

         SECTION  1.02.  This  Supplemental  Indenture  shall  become  effective
immediately  upon its  execution  and  delivery  by each of the  Company and the
Trustee.


                                        2

<PAGE>



                                    ARTICLE 2

         SECTION  2.01.  ARTICLE I, Section 1.01 of the  Indenture is amended by
adding the following definition of "Senior Indebtedness":

                  "Senior  Indebtedness"  means, with respect to any person, (i)
         all Indebtedness of such person outstanding under the Credit Facilities
         and all  Hedging  Obligations  with  respect  thereto,  (ii) any  other
         Indebtedness of such person permitted to be incurred under the terms of
         the Indenture,  provided,  however,  that Senior Indebtedness shall not
         include any Indebtedness which by the terms of the instrument  creating
         or evidencing the same is subordinated or junior in right of payment to
         the Notes in any respect, and (iii) all Obligations with respect to the
         foregoing,  in  each  case  whether  outstanding  on the  date  of this
         Indenture  or  thereafter  incurred.  Notwithstanding  anything  to the
         contrary in the foregoing, Senior Indebtedness will not include (w) any
         liability  for  federal,  state,  local or other taxes owed or owing by
         Holdings,   (x)  any   Indebtedness  of  such  person  to  any  of  its
         Subsidiaries or other Affiliates (other than Indebtedness arising under
         the Credit  Facilities),  (y) any trade payables or other  liability to
         trade creditors  arising in the ordinary course of business  (including
         guarantees  thereof or instruments  evidencing such  liabilities or (z)
         any Indebtedness that is incurred in violation of this Indenture.".

         SECTION 2.02.  Clause (iii) (B) of the  definition of "Other  Permitted
Indebtedness  in ARTICLE 1, Section 1.01 of the  Indenture is amended to provide
as follows:

                  "(B)  does not  apply to  Refinancing  Indebtedness  of Senior
         Indebtedness of Holdings or a Restricted Subsidiary, and".

         SECTION 2.03.  Clause (i) of the  definition  of  "Permitted  Liens" in
ARTICLE 1, Section 1.01 of the Indenture is amended to provide as follows:

                  "(i) Liens  securing  Senior  Indebtedness  of Holdings or any
         Restricted  Subsidiary  that was  permitted  by the  terms  of  Section
         4.07(b)(i) or (iii) of this Indenture to be incurred;".

         SECTION 2.04.  Clause (xvii) of the definition of "Permitted  Liens" in
ARTICLE I, Section 1.01 of the Indenture is amended to provide as follows:

                  " (xvii) any Lien granted to the Trustee and any substantially
         equivalent Lien granted to any trustee or similar institution under any
         indenture  for  Senior   Indebtedness   of  Holdings  or  a  Restricted
         Subsidiary permitted by the terms of the Indenture;".


                                        3

<PAGE>



         SECTION 2.05. The definition of "Pro Forma Basis" in ARTICLE I, Section
1.01 of the  Indenture  is amended by changing  the  reference  to Section 4.16
therein to Section 4.15.

         SECTION  2.06.  Clause  (C)(2) in ARTICLE 4, Section  4.05(a) of the
Indenture is amended to provide as follows:

                  "(2)  100% of the  aggregate  net cash  proceeds  and the fair
         market value of any property or securities,  as determined by the Board
         of  Directors  in good faith,  received by Holdings or the Company from
         the issue or sale of Equity  Interests  of  Holdings or the Company (to
         the extent contributed to Holdings)  subsequent to the date of original
         issuance of the Notes (other than (x) Equity  Interests  issued or sold
         to a Restricted Subsidiary and (y) Disqualified Stock); plus".

         SECTION  2.07.  Clause  (C)(4) in  ARTICLE  4,  Section  4.05(a) of the
Indenture is amended to provide as follows:

                  "(4) the  amount  by which  the  principal  amount  of and any
         accrued  interest  on  Indebtedness  of any  Restricted  Subsidiary  is
         reduced on Holdings'  consolidated balance sheet upon the conversion or
         exchange (other than by a Restricted Subsidiary) subsequent to the date
         of original issuance of the Notes of any Indebtedness of any Restricted
         Subsidiary  (not held by Holdings  or any  Restricted  Subsidiary)  for
         Equity Interests (other than Disqualified  Stock) of Holdings (less the
         amount of any cash,  or the fair market value of any other  property or
         securities  (as  determined  by the Board of  Directors in good faith),
         distributed by Holdings or any Restricted  Subsidiary (to Persons other
         than Holdings or any other Restricted  Subsidiary) upon such conversion
         or exchange);".

         SECTION  2.08.  Clause  (iii) in  ARTICLE  4,  Section  4.05(b)  of the
Indenture is amended to provide as follows:

                  "(iii) the repurchase,  redemption,  retirement or acquisition
         of Equity  Interests  of Holdings or the Company  from the  executives,
         management,  employees  or  consultants  of Holdings or its  Restricted
         Subsidiaries in an aggregate amount not to exceed $10.0 million;".

         SECTION 2.09. Clause (v) in ARTICLE 4, Section 4.05(b) of the Indenture
is amended to provide as follows:

                  "(v) the purchase, redemption, retirement or other acquisition
         of the Notes pursuant to Sections 3.08, 4.13 or 4.14;".


                                        4

<PAGE>



         SECTION 2.10. ARTICLE 4, Section 4.11(b) of the Indenture is amended to
provide as follows:

                  " (b) Nothing contained in Section 4.11 shall prevent Holdings
         or any  Restricted  Subsidiary  from  entering  into any  agreement  or
         instrument   providing  for  the  incurrence  of  Permitted   Liens  or
         restricting  the sale or other  disposition  of  property  or assets of
         Holdings  or any of its  Restricted  Subsidiaries  that are  subject to
         Permitted Liens. ".

         SECTION 2.11. Clause (d) of ARTICLE 4, Section 4.14(a) of the Indenture
is amended to provide as follows:

                  "(d) the permanent purchase, redemption or other prepayment or
         repayment  of   outstanding   Indebtedness   of  Holdings'   Restricted
         Subsidiaries (with a corresponding reduction in any commitment relating
         thereto)  on or  prior  to the  365th  day  following  the  Asset  Sale
         Disposition Date or".


                                    ARTICLE 3

         SECTION 3.01. Except as specifically modified herein, the Indenture and
the Notes are in all respects  ratified and  confirmed  (mutatis  mutandis)  and
shall  remain in full force and effect in  accordance  with their terms with all
capitalized  terms used herein  without  definition  having the same  respective
meanings ascribed to them as in the Indenture.

         SECTION 3.02. Except as otherwise expressly provided herein, no duties,
responsibilities  or  liabilities  are  assumed,  or  shall be  construed  to be
assumed,  by  the  Trustee  by  reason  of  this  Supplemental  Indenture.  This
Supplemental  Indenture is executed  and accepted by the Trustee  subject to all
the terms and  conditions  set forth in the  Indenture  with the same  force and
effect as if those terms and conditions  were repeated at length herein and made
applicable to the Trustee with respect hereto.

         SECTION  3.03.  The laws of the  State of New York  shall  govern  this
Supplemental  Indenture  without  regard  to the  conflict  of  laws  provisions
thereof.  The Trustee and the Company agree to submit to the jurisdiction of the
courts of the State of New York in any action or  proceeding  arising  out of or
relating to this Supplemental Indenture.

         SECTION  3.04.  The  parties  may sign any  number  of  copies  of this
Supplemental  Indenture.  Each signed copy shall be an original, but all of such
executed copies together shall represent the same agreement.


                                        5

<PAGE>


          IN WITNESS WHEREOF,  the parties hereto have caused this  Supplemental
Indenture to be duly executed, all as of the date first written above.

                                        GFSI Holdings, Inc.


                                        By:_________________________________
                                           Name:
                                           Title:



                                        State Street Bank and Trust Company,
                                          as trustee


                                        By:________________________________
                                           Name:
                                           Title:




                                       6