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 October 1, 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           (I.R.S. Employer Identification No.)
 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 - 1,992.5 shares issued and outstanding
as of November 1, 1999.


<PAGE>



                       GFSI HOLDINGS, INC. AND SUBSIDIARY
                          Quarterly Report on Form 10-Q
                      For the Quarter Ended October 1, 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                                               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 2,             October 1,
                                                                                         1999                 1999
                                                                                      ----------           ----------
<S>                                                                                       <C>                  <C>
Assets
Current assets:
     Cash & cash equivalents                                                          $   10,278            $     854
     Accounts receivable, net                                                             28,381               38,866
     Inventories, net                                                                     36,324               34,824
     Prepaid expenses and other current assets                                             1,041                  722
     Deferred income taxes                                                                 1,790                1,790
                                                                                      ----------            ---------
Total current assets                                                                      77,814               77,056
Property, plant and equipment, net                                                        20,245               20,430
Other assets:
     Deferred financing costs, net                                                         7,616                7,321
     Other                                                                                     5                    5
                                                                                      ----------           ----------
Total assets                                                                          $  105,680           $  104,812
                                                                                      ==========           ==========

Liabilities and stockholders' equity (deficiency) Current liabilities:
     Accounts payable                                                                 $    8,289           $    8,143
     Accrued interest expense                                                              4,484                1,456
     Accrued expenses                                                                      7,948                8,295
     Income taxes payable                                                                     --                  517
     Current portion of long-term debt                                                     6,550                6,930
                                                                                      ----------           ----------

Total current liabilities                                                                 27,271               25,341
Deferred income taxes                                                                      1,183                1,183
Revolving credit agreement                                                                    --                   --
Other long-term obligations                                                                  737                  574
Long-term debt, less current portion                                                     235,312              234,989
Redeemable preferred stock                                                                 4,545                4,652
Stockholders' equity (deficiency):
     Common stock, $.01 par value 2,105 shares authorized,
     2,000 shares issued at July 2, 1999 and October 1, 1999                                  --                   --
     Additional paid-in capital                                                              200                  200
     Accumulated deficiency                                                             (163,567)            (162,126)
     Treasury stock, at cost (7.5 series A shares at July 2, 1999 and
     October 1, 1999)                                                                         (1)                  (1)
                                                                                      ----------           -----------
Total stockholders' equity (deficiency)                                                 (163,368)            (161,927)
                                                                                      ----------           ----------
Total liabilities and stockholders' equity (deficiency)                               $  105,680           $  104,812
                                                                                      ==========           ==========

</TABLE>

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.


                                        3

<PAGE>



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

                                                            Quarter Ended
                                                     October 2,      October 1,
                                                        1998            1999
                                                     ----------      ----------

Net sales                                            $  60,045       $  54,839
Cost of sales                                           35,827          33,612
                                                     ---------       ---------
Gross profit                                            24,218          21,227

Operating expenses:
     Selling                                             6,422           6,424
     General and administrative                          7,199           6,188
                                                     ---------       ---------
                                                        13,621          12,612
                                                     ---------       ---------

Operating income                                        10,597           8,615

Other income (expense):
     Interest expense                                   (6,331)         (6,157)
     Other, net                                             35              96
                                                     ---------       ---------
                                                        (6,296)         (6,061)
                                                     ---------       ---------
Income before income taxes                               4,301           2,554

Provision for income taxes                               1,729           1,006
                                                     ---------       ---------

Net income                                               2,572           1,548
Preferred stock dividends                                (106)            (107)
                                                     --------        ---------

Net income attributable to common shareholders       $  2,466        $   1,441
                                                     ========        =========



See notes to consolidated financial statements.



                                        4

<PAGE>




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

<TABLE>
<CAPTION>

                                                                                                Quarter Ended
                                                                                           October 2,        October 1,
                                                                                              1998               1999
                                                                                           ----------        -----------
<S>                                                                                           <C>              <C>

Cash flows from operating activities:
Net income                                                                                 $  2,572           $  1,548
Adjustments to reconcile net income to net cash used in
   operating activities:
     Depreciation                                                                               765                795
     Amortization of deferred financing costs                                                   295                295
     Gain on sale or disposal of property, plant and equipment                                 (28)                (4)
     Deferred income taxes                                                                     (29)                 --
     Amortization of discount on long-term debt                                               1,418              1,695
 Changes in operating assets and liabilities:
     Accounts receivable, net                                                               (9,499)            (10,485)
     Inventories, net                                                                          892               1,499
     Prepaid expenses, other current assets and other assets                                   435                 319
     Income taxes payable                                                                    1,418                 517
     Accounts payable, accrued expenses and other
       long-term obligations                                                                (3,549)            (2,990)
                                                                                        ----------         ----------
Net cash used in operating activities                                                       (5,310)            (6,811)
                                                                                        ----------         ----------

Cash flows from investing activities
     Proceeds from sales of property, plant and equipment                                      183                  4
     Purchases of property, plant and equipment                                               (678)              (980)
                                                                                        ----------         ----------
Net cash used in investing activities                                                         (495)              (976)
                                                                                        ----------         ----------

Cash flows from financing activities:
     Net changes to short-term borrowings and revolving credit agreement                     9,300                 --
     Payments on long-term debt                                                             (1,265)            (1,637)
                                                                                        ----------         ----------
Net cash provided by (used in) financing activities                                          8,035             (1,637)
                                                                                        ----------         ----------

Net increase (decrease)  in cash and cash equivalents                                        2,230             (9,424)
Cash and cash equivalents at beginning of period                                             1,361             10,278
                                                                                       -----------         ----------
Cash and cash equivalents at end of period                                             $     3,591         $      854
                                                                                       ===========         ==========
Supplemental cash flow information:
     Interest paid                                                                     $     7,430         $    7,128
                                                                                       ===========         ==========
     Income taxes paid                                                                 $        33         $       10
                                                                                       ===========         ==========
Supplemental schedule of non-cash financing activities:
     Accrual of preferred stock dividends                                              $       106         $      107
                                                                                       ===========         ==========

See notes to consolidated financial statements.

</TABLE>


                                        5

<PAGE>



                       GFSI HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                 October 1, 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.   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 a Jordan Investor 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  $425,000
annually.   Holdings   Preferred   Stock  may  be  redeemed   at  stated   value
(approximately $3.6 million) plus accrued dividends with mandatory redemption in
2009.


3.   Reclassifications

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


4.   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.


5.   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.


                                        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 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):

                                              Quarter Ended
                              October 2, 1998               October 1, 1999
                         ------------------------     -------------------------
Resort                     17,256         28.7%       $  16,857          30.8%
Corporate                  19,257         32.1           14,990          27.3%
College Bookstore          18,193         30.3%          17,432          31.8%
Sports Specialty            3,270          5.4%           3,223           5.9%
Event 1                       178           .3%             832           1.5%
Other                       1,891          3.2%           1,505           2.7%
                         --------                      --------
Total                    $ 60,045                      $ 54,839
                         ========                      ========


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  ended
October 2, 1998 and October 1, 1999.


                                             Quarter Ended
                                  October 2,             October 1,
                                      1998                  1999
                                  ----------             ----------
Net sales                            100.0%                100.0%
Gross profit                          40.3                  38.7
EBITDA                                18.9                  17.2
Operating income                      17.7                  15.7




                                        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 Ended
October 2, 1999 and October 2, 1998
------------------------------------------------------

         Net Sales.  Net sales for the first  quarter of fiscal 2000,  the three
months ended October 1, 1999, decreased 8.7% to $54.8 million from $60.0 million
in the first  quarter  of  fiscal  1999.  The  decrease  in net sales  primarily
reflects  decreases in net sales at the  Company's  Resort,  Corporate,  College
Bookstore  and  Sports  Specialty  divisions  of 2.3%,  22.1%,  4.2%  and  1.4%,
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  vacancy in its sales  representative  force  during  the first  quarter of
fiscal 2000.  These decreases were partially  offset by a 367.4% increase in net
sales by the Company's Event 1 subsidiary.

         Gross  Profit.  Gross  profit  for the first  quarter  of  fiscal  2000
decreased  12.4% to $ 21.2  million from $24.2  million in the first  quarter of
fiscal 1999. The decrease in gross profit is primarily a result of the net sales
decrease  described above and a slight  increase in production  costs during the
first quarter of fiscal year 2000 as a percentage of sales compared to the first
quarter of fiscal 1999. For the first quarter of fiscal 2000,  gross profit as a
percentage  of net  sales  decreased  to 38.7%  compared  to 40.3% in the  first
quarter of fiscal 1999.

         Operating Expenses.  Operating expenses for the first quarter of fiscal
2000  decreased 7.4% to $12.6 million from $13.6 million in the first quarter of
fiscal 1999.  The decrease in operating  expenses is primarily  related to costs
incurred  in the first  quarter of fiscal  1999  associated  with the  Company's
Management  Information  System  installation  that was  completed in the fourth
quarter  of  fiscal  1999.  Operating  expenses  as a  percentage  of net  sales
increased to 23.0% from 22.7% in the prior year first quarter as a result of the
relatively fixed nature of certain operating expenses.

         EBITDA.  EBITDA for the first quarter of fiscal 2000 decreased 17.2% to
$9.4  million  from $11.4  million  in the first  quarter  of fiscal  1999.  The
decrease  for the period is  primarily a result of the decrease in net sales and
related  gross  profit  described  above.  EBITDA as a  percentage  of net sales
decreased to 17.2% from 18.9% in the first quarter of fiscal 1999.

         Operating Income. Operating income for the first quarter of fiscal 2000
decreased  18.7% to $8.6  million  from $10.6  million  in the first  quarter of
fiscal  1999.  The  decrease  is  attributable  to the  changes in gross  profit
described above.  Operating income as a percentage of net sales deceased for the
first quarter of fiscal 2000 to 15.7% from 17.7% in fiscal 1999.

         Other Income  (Expense).  Other expense for the first quarter of fiscal
2000  decreased to $6.1 million from $6.3 million in the first quarter of fiscal
1999 due to lower  revolving  loan  balances in the first quarter of fiscal 2000
and the effect of  scheduled  debt  payments  under the  Company's  $115 million
Credit  Agreement.  The effect of  derivative  financial  instruments  serves to
minimize unplanned changes in interest expense due to changes in interest rates.
As such,  interest rate  fluctuations  and their effect were  immaterial for the
periods  presented.  A reasonable likely change in the underlying rate, price or
index would not have a material impact on the financial position of the Company.

         Income  Taxes.  The effective  income tax rates for the quarters  ended
October 1, 1999 and October 2, 1998 were 39.4% and 40.2%, respectively.

         Net Income.   Net income for the first  quarter of fiscal 2000 was $1.5
million compared to $2.6 million in the first quarter of fiscal 1999.


                                        9

<PAGE>



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

          Cash used in operating activities for the first quarter of fiscal 2000
was $6.8 million  compared to $5.3 million in the first  quarter of fiscal 1999.
The change in cash  provided  by  operating  activities  between the two periods
resulted  from a decrease  in net  income for the period and  changes in working
capital account balances in the first quarter of fiscal year 2000 as compared to
the first quarter of fiscal 1999.

     Cash used by investing  activities  in the first quarter of fiscal 2000 was
$976,000  compared to $495,000  in the first  quarter of 1999.  The cash used in
both periods was related to acquisitions of property, plant and equipment.

     Cash  provided by (used in) financing  activities  for the first quarter of
fiscal 2000 was $(1.6) million  compared to $8.0 million in the first quarter of
fiscal  1999.  The change in cash used in financing  activities  was a result of
revolving loan borrowings in the first quarter of fiscal 1999 that did not occur
in the first quarter of fiscal 2000.

     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 Agreement of 2002 and the Senior  Subordinated Notes 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
$22.0 million was utilized for  outstanding  commercial and stand-by  letters of
credit as of October 1, 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.


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.


                                       10

<PAGE>



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. Management believes that all third party supplier Year 2000 issues will
be resolved in calendar 1999.

     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  complete  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. The Company expects to complete its
analysis and contingency planning by December 1999.


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

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

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


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<PAGE>



PART II - OTHER INFORMATION
---------------------------


Item 1.   Legal Proceedings

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

Item 2. Changes in Securities

None


Item 3. Defaults Upon Senior Securities

None


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

None


Item 5. Other Information

None


Item 6. Exhibits and Reports on Form 8-K

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

          Exhibit 27 - Financial Data Schedule (SEC Use Only)

     (b)  Reports on Form 8-K

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


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<PAGE>


SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


GFSI HOLDINGS, INC.
November 12 , 1999

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




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