<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 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 June 30, 2001

                                       OR

[ ]  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 0-21940


                                 Donnkenny, Inc.
                                 ---------------
             (Exact name of registrant as specified in its charter)


                 Delaware                          51-0228891
                 --------                          ----------
       (State or jurisdiction of               (I.R.S. Employer
     incorporation or organization)           Identification No.)


                        1411 Broadway, New York, NY 10018
                        ---------------------------------
                         (Address of principal executive
                               offices) (Zip Code)

        Registrant's telephone number, including area code (212) 790-3900
                                                           -----------------

                                 NOT APPLICABLE
                                 --------------
              (Former name, former address and former fiscal year,
                         if changed since last report.)

     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), Yes [X] No [ ] and (2) has been
the subject to such filing requirements for the past 90 days. 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                       4,367,417
     ----------------------------            --------------------------------
              (Class)                        (Outstanding at August 10, 2001)


<PAGE>

                         DONNKENNY, INC AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (FORM 10-Q)

PART I - FINANCIAL INFORMATION                                           Page
                                                                         ----

Consolidated financial statements:

   Independent Accountants' Report

   Balance sheets as of June 30, 2001 (unaudited) and December 31, 2000...I-1

   Statements of operations for the three and six months ended
   June 30, 2001 and 2000 (unaudited).....................................II-1

   Statements of cash flows for the six months ended
   June 30, 2001 and 2000 (unaudited).....................................III-1

   Notes to Consolidated Financial Statements (unaudited)  ...............IV-1-3

   Management's Discussion and Analysis of Financial Condition and
   Results of Operations..................................................V-1-4

PART II - OTHER INFORMATION

   Legal Proceedings and Other Information................................VI-1-2

   Exhibits and Reports on Form 8-K.......................................VI-2

   Signatures.............................................................VI-3


<PAGE>

                         INDEPENDENT ACCOUNTANTS' REPORT

To the Board of Directors and Stockholders of Donnkenny, Inc.

We have reviewed the accompanying consolidated balance sheet of Donnkenny, Inc.
and subsidiaries as of June 30, 2001, and the related consolidated statements of
operations for the three-month and six-month periods ended June 30, 2001 and
2000 and cash flows for the six-month periods ended June 30, 2001 and 2000.
These financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Donnkenny, Inc. and subsidiaries as of December 31, 2000, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended (not presented herein); and in our report dated March 21,
2001 (March 28, 2001 as to note 6), we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of December 31, 2000 is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.

DELOITTE & TOUCHE LLP

New York, New York

August 10, 2001


<PAGE>

                        DONNKENNY, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets

                      (In thousands, except per share data)


<TABLE>
<CAPTION>
                                                            June 30,        December 31,
                                                              2001              2000
                                                            --------          --------
                                                           (Unaudited)
<S>                                                         <C>               <C>
CURRENT ASSETS
     Cash ...........................................       $    124          $     65
     Accounts receivable - net of allowances of
      $99 and $109, respectively ....................         25,073            30,968
     Recoverable income taxes .......................            143               155
     Inventories ....................................         30,478            19,730
     Deferred tax assets ............................          1,482             1,482
     Prepaid expenses and other current assets ......          1,276             1,177
     Assets held for sale ...........................          1,163             1,206
                                                            --------          --------
     Total current assets ...........................         59,739            54,783
PROPERTY, PLANT AND EQUIPMENT, NET ..................          5,687             5,076
OTHER ASSETS ........................................            420               430
INTANGIBLE ASSETS ...................................         30,309            31,054
                                                            --------          --------
TOTAL ...............................................       $ 96,155          $ 91,343
                                                            ========          ========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
       Current portion of long-term debt ............       $  1,433          $  1,523
       Accounts payable .............................         16,095            11,751
       Accrued expenses and other current liabilities          1,662             2,310
                                                            --------          --------
          Total current liabilities .................         19,190            15,584
                                                            --------          --------
LONG-TERM DEBT ......................................         42,905            40,624
DEFERRED TAX LIABILITIES ............................          1,482             1,482

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
    Preferred stock $.01 par value; authorized 500
      shares, issued none ...........................           --                --
    Common stock, $.01 par value. Authorized 10,000
      shares, issued and outstanding 4,367
      shares in 2001 and 2000 .......................             44                44
    Additional paid-in capital ......................         50,449            50,449
    Deficit .........................................        (17,915)          (16,840)
                                                            --------          --------
   Total Stockholders' Equity .......................         32,578            33,653
                                                            --------          --------
TOTAL ...............................................       $ 96,155          $ 91,343
                                                            ========          ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      I - 1

<PAGE>

                 DONNKENNY, INC. AND SUBSIDIARIES
               Consolidated Statements of Operations
          (In thousands, except share and per share data)
                            (Unaudited)

<TABLE>
<CAPTION>
                                                            Three Months Ended                  Six Months Ended
                                                      -----------------------------       -----------------------------
                                                     June 30, 2001     June 30, 2000     June 30, 2001     June 30, 2000
                                                      -----------       -----------       -----------       -----------
<S>                                                 <C>               <C>               <C>               <C>
NET SALES ......................................      $    30,539       $    27,733       $    67,847       $    70,127
COST OF SALES ..................................           23,968            22,262            52,422            58,073
                                                      -----------       -----------       -----------       -----------
     Gross profit ..............................            6,571             5,471            15,425            12,054

OPERATING EXPENSES:
    Selling, general and administrative expenses            6,466             6,224            13,239            14,395
    Amortization of goodwill and other related
     acquisition costs .........................              372               347               745               695
    Restructuring charge .......................                                                                    500
                                                      -----------       -----------       -----------       -----------
        Operating profit (loss) ................             (267)           (1,100)            1,441            (3,536)

INTEREST EXPENSE ...............................            1,120             1,081             2,426             2,122
                                                      -----------       -----------       -----------       -----------
        Loss before income taxes ...............           (1,387)           (2,181)             (985)           (5,658)

INCOME TAXES ...................................               45                58                90                83
                                                      -----------       -----------       -----------       -----------
      NET LOSS .................................      $    (1,432)      $    (2,239)      $    (1,075)      $    (5,741)
                                                      ===========       ===========       ===========       ===========

Basic (loss)  per common share .................      $     (0.33)      $     (0.62)      $     (0.25)      $     (1.60)
                                                      ===========       ===========       ===========       ===========
Shares used in the calculation of basic (loss)
    per common share ...........................        4,367,417         3,616,098         4,367,417         3,586,758
                                                      ===========       ===========       ===========       ===========
Diluted (loss) per common share ................      $     (0.33)      $     (0.62)      $     (0.25)      $     (1.60)
                                                      ===========       ===========       ===========       ===========
Shares used in the calculation of diluted (loss)
   per common share ............................        4,367,417         3,616,098         4,367,417         3,586,758
                                                      ===========       ===========       ===========       ===========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                     II - 1
<PAGE>

                 DONNKENNY, INC. AND SUBSIDIARIES
               Consolidated Statements of Cash Flows
                          (In thousands)
                            (Unaudited)

<TABLE>
<CAPTION>
                                                                                SIX MONTHS ENDED
                                                                       -----------------------------------
                                                                         June 30,              June 30,
                                                                           2001                  2000
                                                                       ------------          ------------
<S>                                                                    <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .....................................................         $     (1,075)         $     (5,741)
Adjustments to reconcile net cash provided by (used in)
  operating activities:

     Depreciation and amortization of fixed assets ...........                  509                   399
     Write down of fixed assets ..............................                 --                     200
     Net loss on disposal of fixed assets ....................                    2                  --
     Amortization of intangibles and other assets ............                  745                   695
     Provision for losses on accounts receivable .............                   10                    10
Changes in assets and liabilities:
     Decrease in accounts receivable .........................                5,885                 8,140
     Decrease in recoverable income taxes ....................                   12                   115
     (Increase) decrease in inventories ......................              (10,748)                7,459
     Increase in prepaid expenses and
     other current assets ....................................                  (99)                 (459)
     Decrease in other non-current assets ....................                   10                    33
     Increase (decrease) in accounts payable .................                4,344                  (177)
     Decrease in accrued expenses and
        other current liabilities ............................                 (648)               (1,626)
                                                                       ------------          ------------
           Net cash provided by (used in) operating activities               (1,053)                9,048
                                                                       ------------          ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of fixed assets ................................               (1,079)                 (218)
     Proceeds from sale of fixed assets ......................                 --                     181
                                                                       ------------          ------------
          Net cash used in investing activities ..............               (1,079)                  (37)
                                                                       ------------          ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Repayment of long-term debt .............................                 (806)                 (582)
     Borrowings under revolving credit line ..................               77,298                71,356
     Repayments under revolving credit line ..................              (74,301)              (79,920)
                                                                       ------------          ------------
          Net cash provided by (used in) financing activities                 2,191                (9,146)
                                                                       ------------          ------------

NET INCREASE (DECREASE) IN CASH ..............................                   59                  (135)
CASH, AT BEGINNING OF PERIOD .................................                   65                   180
                                                                       ------------          ------------
CASH, AT END OF PERIOD .......................................         $        124          $         45
                                                                       ============          ============

SUPPLEMENTAL DISCLOSURES

Income taxes paid ............................................         $         77          $         23
                                                                       ============          ============
Interest paid ................................................         $      2,437          $      1,953
                                                                       ============          ============

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES

Issuance of common stock .....................................         $       --            $        705
                                                                       ============          ============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                     III - 1

<PAGE>

                        DONNKENNY, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the Rules of the Securities and Exchange
Commission ("SEC") and, in the opinion of management, include all adjustments
(consisting of normal recurring accruals) necessary for the fair presentation of
financial position, results of operations and cash flows. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such SEC rules. The Company believes the disclosures made
are adequate to make such financial statements not misleading. The results for
the interim periods presented are not necessarily indicative of the results to
be expected for the full year. These financial statements should be read in
conjunction with the Company's Report on Form 10-K for the year ended December
31, 2000. Balance sheet data as of December 31, 2000 have been derived from
audited financial statements of the Company.

NOTE 2 - INVENTORIES

Inventories consist of the following:

                                           June 30,   December 31,
                                             2001        2000
                                             ----        ----
                                              (In thousands)
Raw materials ........................    $   1,902   $    1,719
Work-in-process.......................        1,225          936
Finished goods........................       27,351       17,075
                                          ---------   ----------
                                          $  30,478   $   19,730
                                          =========   ==========

NOTE 3 -  DEBT

     On June 29, 1999, the Company and its operating subsidiaries signed a
three-year credit agreement (the "Credit Agreement") with CIT Group/Commercial
Services. The Credit Agreement provides the Company with a $75 million facility
comprised of a $72 million revolver with sublimits up to $52 million for direct
borrowings, $35 million for letters of credit, certain overadvances and a $3
million term loan.

     Borrowings under the Credit Agreement as amended (see below) bear interest
at the prime rate plus two percent (8.75% at June 30, 2001). The Credit
Agreement provides for advances of (i) up to 90% of eligible accounts receivable
plus (ii) up to 60% of eligible inventory plus (iii) up to 60% of the undrawn
amount of all outstanding letters of credit plus (iv) allowable overadvances.
The term loan requires quarterly payments of $0.250 million plus all accrued and
unpaid interest beginning September 30, 1999 through June 30, 2002. The Credit
Agreement as amended expires on June 30, 2004.

     Collateral for the Credit Agreement includes a first priority lien on all
accounts receivable, machinery, equipment, trademarks, intangibles and
inventory, a first mortgage on all real property and a

                                      IV-1

<PAGE>

pledge of the Company's stock interest in the Company's operating subsidiaries,
Donnkenny Apparel, Inc. and Beldoch Industries Corporation.

     The Credit Agreement contains numerous financial and operational covenants,
including limitations on additional indebtedness, liens, dividends, stock
repurchases and capital expenditures. In addition, the Company is required to
maintain specified levels of tangible net worth and comply with a minimum
earnings before depreciation, amortization, interest and taxes (EBITDA) and a
minimum interest coverage ratio.

     During Fiscal 1999 and Fiscal 2000, the Company entered into various
amendment and waiver agreements to waive the Company's noncompliance with
financial covenants on certain dates and to reset overadvance amounts and
covenants. These amendment agreements also increased the interest rate on
borrowings.

     On July 6, 2000, the Company entered into an Amendment to finance the
acquisition of the Ann Travis business (see note 6) by the issuance of an
additional $1.3 million term loan. The new term loan bears interest at the prime
rate plus 2.0 % and is repayable over thirty six months commencing January 1,
2001. A fee of $100,000 was paid for the Amendment.

     On March 28, 2001, the Company entered into an Amendment and Waiver
Agreement to extend the Final Maturity Date of the original agreement to June
30, 2004, to waive existing events of default under the Credit Agreement as of
December 31, 2000 with respect to the Company's non-compliance with covenants
related to minimum interest coverage, EBITDA and Tangible Net Worth, and to
amend certain other provisions of the Credit Agreement including covenants and
the level of allowable Overadvances to support the Company's 2001 business plan.
Pursuant to this amendment, the interest rate on borrowings was increased to
2.0% above the prime rate effective January 1, 2001. A fee of $200,000 was paid
in connection with the Amendment and Waiver.

     The Company also has a factoring agreement with CIT. The factoring
agreement provides for a factoring commission equal to .45% of gross sales, plus
certain customary charges. On November 27, 2000, the factoring agreement was
amended to lower the commission rate effective September 1, 2000 to .35% of
gross sales and to extend the agreement through December 31, 2001.

NOTE 4 -  RESTRUCTURING CHARGE

     The restructuring charge of $0.5 million in the six months ended June 30,
2000 is related to the Company's closure of all of its domestic manufacturing
facilities.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

     a.  On April 27, 1998, an action was commenced against the Company in the
         United States District Court for the Western District of Virginia by
         Wanda King, a former employee of the Company. In her complaint, the
         Plaintiff seeks damages in excess of $8.0 million, claiming that she
         was constructively discharged by reason of the fact that she resigned
         from her position rather than follow alleged improper and illegal
         instructions from her supervisors and superiors. The Company has
         interposed an answer to the Complaint denying the material allegations.
         Pretrial discovery is now taking place and a trial is scheduled for
         October 1, 2001.

     b.  The Company is also a party to legal proceedings arising in the
         ordinary course of its business. Management believes that the ultimate
         resolution of these proceedings will not, in

                                      IV-2
<PAGE>

         the aggregate, have a material adverse effect on financial condition,
         results of operations, liquidity or business of the Company.

NOTE 6 - ANN TRAVIS ACQUISITION

     On July 1, 2000 the Company acquired certain assets of Ann Travis Inc.
("Ann Travis") for $1.5 million, including costs incurred in the acquisition of
$0.3 million. Ann Travis designs, imports, and markets women's sportswear.
Assets acquired included $0.5 million of certain merchandise inventory, the Ann
Travis and Decade Designs trademarks and the license rights for sales of women's
apparel under the Delta Burke trademark. The purchase was funded by CIT under a
new $1.3 million term loan which requires payments in equal installments over
three years commencing January 1, 2001 (see note 3). Goodwill of $1.0 million
was recorded in connection with this acquisition and is being amortized over ten
years. The acquisition was accounted for as a purchase.

NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board ("FASB") issued two
new pronouncements: Statement of Financial Accounting Standards ("SFAS") No.
141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets.

     SFAS No. 141 addresses financial accounting and reporting for business
combinations and supersedes APB No. 16 "Business Combinations" and FASB
Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased
Enterprises". All business combinations in the scope of this Statement are to be
accounted for using one method, the purchase method. SFAS 141 is effective as
follows: a) use of the pooling-of-interest method is prohibited for business
combinations initiated after June 30, 2001; and b) the provisions of SFAS 141
also apply to all business combinations accounted for by the purchase method
that are completed after June 30, 2001 (that is, the date of the acquisition is
July 2001 or later). The Company has determined that the adoption of this
statement will not have an impact on the consolidated financial statements.

     SFAS No. 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB No. 17, "Intangible
Assets". It changes the accounting for goodwill from an amortization method to
an impairment only approach. SFAS 142 is effective for fiscal years beginning
after December 15, 2001 to all goodwill and other intangible assets recognized
in an entity's statement of financial position at that date, regardless of when
those assets were initially recognized. The Company will cease the amortization
of goodwill, which was recorded in past business combinations on December 31,
2001, as required by SFAS No. 142. Amortization expense was $1.4 million during
fiscal 2000. The Company is currently evaluating the impact of adopting this
pronouncement on its consolidated financial statements.


                                      IV-3
<PAGE>

                        DONNKENNY, INC. AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2001 AND 2000
-----------------------------------------------------

     Net sales decreased by $2.3 million, or 3.3% from $70.1 million in the
first half of 2000 to $67.8 million in the first half 2001. The decrease in the
Company's net sales was primarily due to decreases in the Victoria Jones line of
$6.9 million and the Casey & Max line of $12.2 million. The decreases were
partially offset by increases in the Donnkenny Apparel line of $2.1 million,
Pierre Cardin Knits line of $3.2 million, and increases in the company's new
lines, Pierre Cardin Options of $4.3 million and Ann Travis of $7.2 million
(acquired in July 2000).

     Gross profit for the first half of 2001 was $15.4 million, or 22.7% of net
sales, compared to $12.1 million, or 17.2% of net sales, during the first half
of 2000. The increase in gross profit in dollars and as a percentage of net
sales was primarily attributable to the Company's Pierre Cardin Options and Ann
Travis lines, decreases in sales of non-current inventory due to lower
non-current inventory levels on hand, the favorable impact of the plant closures
in Fiscal 2000 and improved sourcing.

     Selling, general and administrative expenses decreased $1.2 million from
$14.4 million in the first half of 2000 to $13.2 million in the first half of
2001. The decrease in selling, general and administrative expenses was primarily
due to reductions in headcount, offset by increased design costs attributable to
new product lines and depreciation expense.

     Net interest expense increased from $2.1 million during the first half of
2000 to $2.4 million during the first half of 2001. The increase is attributable
to an increase in direct borrowings under the loan agreement to finance
inventory purchases.

COMPARISON OF QUARTERS ENDED JUNE 30, 2001 AND 2000
---------------------------------------------------

     Net sales increased by $2.8 million, or 10.1% from $27.7 million in the
second quarter of 2000 to $30.5 million in the second quarter 2001. The increase
in the Company's net sales was primarily due to increases in the Donnkenny
Apparel line of $1.0 million, the Pierre Cardin Knits line of $4.5 million, the
Pierre Cardin Options line of $2.0 million and the Ann Travis line of $2.9
million (acquired in July 2000). The increases were partially offset by
decreases in the Victoria Jones line of $2.3 million and the Casey & Max line of
$5.3 million.

     Gross profit for the second quarter of 2001 was $6.6 million, or 21.6% of
net sales, compared to $5.5 million, or 19.7% of net sales, during the second
quarter of 2000. The increase in gross profit in dollars and as a percentage of
net sales was primarily attributable to the Company's new Pierre Cardin Options
and Ann Travis lines, decreases in the sales of non-current inventory due to
lower non-current inventory levels on hand, the favorable impact of the plant
closures in Fiscal 2000 and improved sourcing.

     Selling, general and administrative expenses increased $0.3 million from
$6.2 million in the second quarter of 2000 to $6.5 million in the second quarter
of 2001. The increase in selling, general and administrative expenses was
primarily due to design costs attributable to new product lines and depreciation
expense.

                                      V-1
<PAGE>

     Net interest expense was $1.1 million during the second quarters of 2000
and 2001.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     The Company's liquidity requirements arise from the funding of working
capital needs, primarily accounts receivable, inventory and the interest and
principal payments related to certain indebtedness. The Company's borrowing
requirements for working capital fluctuate throughout the year.

     On June 29, 1999, the Company and its operating subsidiaries signed a three
year credit agreement (the "Credit Agreement") with CIT Group/Commercial
Services to replace the existing $75 million credit facility. The Credit
Agreement provides the Company with a $75 million facility comprised of a $72
million revolver with sublimits up to $52 million for direct borrowings, $35
million for letters of credit, certain overadvances and a $3 million term loan.

     Borrowings under the Credit Agreement as amended (see below) bear interest
at the prime rate plus two percent (8.75% at June 30, 2001). The Credit
Agreement provides for advances of (i) up to 90% of eligible accounts receivable
plus (ii) up to 60% of eligible inventory plus (iii) up to 60% of the undrawn
amount of all outstanding letters of credit plus (iv) allowable overadvances.
The term loan requires quarterly payments of $0.250 million plus all accrued and
unpaid interest beginning September 30, 1999 through June 30, 2002. The Credit
Agreement as amended expires on June 30, 2004.

     Collateral for the Credit Agreement includes a first priority lien on all
accounts receivable, machinery, equipment, trademarks, intangibles and
inventory, a first mortgage on all real property and a pledge of the Company's
stock interest in the Company's operating subsidiaries, Donnkenny Apparel, Inc.
and Beldoch Industries Corporation.

     The Credit Agreement contains numerous financial and operational covenants,
including limitations on additional indebtedness, liens, dividends, stock
repurchases and capital expenditures. In addition, the Company is required to
maintain specified levels of tangible net worth and comply with minimum earnings
before depreciation, amortization, interest and taxes (EBITDA) and a minimum
interest coverage ratio.

     During Fiscal 1999 and Fiscal 2000, the Company entered into various
amendment and waiver agreements to waive the Company's noncompliance with
financial covenants on certain dates and to reset overadvance amounts and
covenants. These amendment agreements also increased the interest rate on
borrowings.

     On July 6, 2000, the Company entered into an Amendment and Waiver Agreement
to finance the acquisition of the Ann Travis business (see note 6) by the
issuance of an additional $1.3 million term loan. The new term loan bears
interest at the prime rate plus 2.0% and is repayable over thirty six months
commencing January 1, 2001. A fee of $100,000 was paid for the Amendment.

     On March 28, 2001, the Company entered into an Amendment and Waiver to
extend the Final Maturity Date of the original agreement to June 30, 2004; to
waive existing events of default under the Credit Agreement as of December 31,
2000 with respect to the Company's non-compliance with covenants related to
minimum interest coverage, EBITDA and Tangible Net Worth; and to amend certain
other provisions of the Credit Agreement including covenants and the level of
allowable overadvances to support the Company's 2001 business plan. Pursuant to
this amendment, the interest rate on borrowings was increased to 2.0% above the
prime rate effective January 1, 2001. A fee of $200,000 was paid in connection
with the Amendment and Waiver.

                                      V-2
<PAGE>

     The Company also has a factoring agreement with CIT. The factoring
agreement provides for a factoring commission equal to .45% of gross sales, plus
certain customary charges. On November 27, 2000, the factoring agreement was
amended to lower the commission rate effective September 1, 2000 to .35% of
gross sales and to extend the agreement through December 31, 2001.

     As of June 30, 2001, borrowings under the Credit Agreement amounted to
$42.3 million compared to $31.5 million as of June 30, 2000. As of June 30,
2001, the term loan amounted to $2.1 million.

     During the first half of 2001, the Company's operating activities used cash
of $1.1 million principally as a result of increases in inventory levels related
to anticipated third quarter sales partially offset by decreases in accounts
receivable and increases in accounts payable. During the first half of 2000, the
Company's operating activities provided cash principally as a result of
decreases in inventory and accounts receivable offset by decreases in accounts
payable and accrued expenses. Cash used in investing activities in the first
half of 2001 amounted to $1.1 million primarily relating to the upgrades in the
Company's computer systems. Cash used in investing activities in the first half
of 2000 amounted to $0.04 million primarily relating to the upgrades in the
Company's computer systems. Cash provided by financing activities in the first
half of 2001 amounted to $2.2 million, primarily relating to borrowings under
the loan agreement. Cash used in financing activities amounted to $9.1 million
in the first half of 2000 primarily relating to repayment of borrowings under
the loan agreement.

     The Company believes that cash flows from operations and amounts available
under the credit agreement will be sufficient for its operating needs in the
foreseeable future.

SEASONALITY OF BUSINESS AND FASHION RISK
----------------------------------------

     The Company's principal products are organized into seasonal lines for
resale at the retail level during the Spring, Summer, Transition, Fall and
Holiday Seasons. Typically, the Company's products are designed as much as one
year in advance and manufactured approximately one season in advance of the
related retail selling season. Accordingly, the success of the Company's
products is often dependent on the ability to successfully anticipate the needs
of retail customers and the tastes of the ultimate consumer up to a year prior
to the relevant selling season.

RESTRUCTURING CHARGE
---------------------

     The restructuring charge of $0.5 million in the six months ended June 30,
2000 related to the Company's closure of all of its domestic manufacturing
facilities.

RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------

     In June 2001, the Financial Accounting Standards Board ("FASB") issued two
new pronouncements: Statement of Financial Accounting Standards ("SFAS") No.
141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets.

     SFAS No. 141 addresses financial accounting and reporting for business
combinations and supersedes APB No. 16 "Business Combinations" and FASB
Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased
Enterprises". All business combinations in the scope of this Statement are to be
accounted for using one method, the purchase method. SFAS 141 is effective as
follows: a) use of the pooling-of-interest method is prohibited for business
combinations initiated

                                      V-3
<PAGE>

after June 30, 2001; and b) the provisions of SFAS 141 also apply to all
business combinations accounted for by the purchase method that are completed
after June 30, 2001 (that is, the date of the acquisition is July 2001 or
later). The Company has determined that the adoption of this statement will not
have an impact on the consolidated financial statements.

     SFAS No. 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB No. 17, "Intangible
Assets". It changes the accounting for goodwill from an amortization method to
an impairment only approach. SFAS 142 is effective for fiscal years beginning
after December 15, 2001 to all goodwill and other intangible assets recognized
in an entity's statement of financial position at that date, regardless of when
those assets were initially recognized. The Company will cease the amortization
of goodwill, which was recorded in past business combinations on December 31,
2001, as required by SFAS No. 142. Amortization expense was $1.4 million during
fiscal 2000. The Company is currently evaluating the impact of adopting this
pronouncement on its consolidated financial statements.











                                       V-4
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.  Legal Proceedings

     a.  On April 27, 1998, an action was commenced against the Company in the
         United States District Court for the Western District of Virginia by
         Wanda King, a former employee of the Company. In her complaint, the
         Plaintiff seeks damages in excess of $8.0 million, claiming that she
         was constructively discharged by reason of the fact that she resigned
         from her position rather than follow alleged improper and illegal
         instructions from her supervisors and superiors. The Company has
         interposed an answer to the Complaint denying the material allegations.
         Pretrial discovery is now taking place and a trial is scheduled for
         October 1, 2001.

     b.  The Company is also a party to legal proceedings arising in the
         ordinary course of its business. Management believes that the ultimate
         resolution of these proceedings will not, in the aggregate, have a
         material adverse effect on financial condition, results of operations,
         liquidity or business of the Company.

ITEM 2.  Not Applicable

ITEM 3.  Not Applicable

ITEM 4.  Not Applicable

ITEM 5.  Other Events

         Beverly Eichel resigned as Chief Financial Officer of the Company
         effective June 30, 2001. On June 1, 2001, Maureen d. Schimmenti, the
         Corporate Controller, was appointed Vice President/Chief Financial
         Officer.

         On June 18, 2001 Harry A. Katz, a Director of the Company, joined the
         Company as the Executive Vice President/Chief Administrative Officer.

         On August 6, 2001, Robert A. Kasenter was elected to the Company's
         Board of Directors.

                                      VI-1

<PAGE>

ITEM 6.  Exhibits and Reports on Form 8-K

         None

         (a) Reports on Form 8-K

             The Company filed no reports on Form 8-K during the second quarter
             ended June 30, 2001.








                                      VI-2
<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.

                                           Donnkenny, Inc.
                                           Registrant

Date: August 14, 2001                      /s/ Daniel H. Levy
                                           -----------------------------------
                                           Daniel H. Levy
                                           Chairman of the Board,
                                           Chief Executive Officer


Date: August 14, 2001                      /s/ Maureen d. Schimmenti
                                           -----------------------------------
                                           Maureen d. Schimmenti
                                           Vice President
                                           and Chief Financial Officer,
                                           (Principal Financial Officer)












                                      VI-3