UNITED STATES
		  SECURITIES AND EXCHANGE COMMISSION
			Washington, D.C. 20549

			       FORM 10-K

	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF 
	       THE SECURITIES EXCHANGE ACT OF 1934
	   For the Fiscal Year ended December 28, 1996


		      Commission File No. 0-5680

			   BURKE MILLS, INC.
	(Exact name of registrant as specified in its charter)

State or other jurisdiction               56-0506342
of incorporation or            (I.R.S. Employer Identification No.)
organization:  North Carolina

     191 Sterling Street, N.W.
     Valdese, North Carolina                             28690
     (Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code:  704 874-2261

Securities registered pursuant to Section 12(g) of the Act:

     Common Stock No Par Value (Stated Value of $0.66 Per Share)
			   (Title of Class)

     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.  Yes  X   No    

     Indicate by check mark if a disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [  ] 

     The aggregate market value of the voting stock held by non-
affiliates of the registrant (computed by reference to the closing
price on February 21, 1997) was $2,605,660.

<PAGE>
								  
     The number of shares outstanding of the registrant's only
class of common stock as of March 1, 1997 is 2,741,168 shares.

		  DOCUMENTS INCORPORATED BY REFERENCE

	Portions of the Company's proxy statement, which is to be filed 
pursuant to Regulation 14A not later than 120 days after the end of the 
fiscal year covered by this report, are incorporated by reference in 
Part III of this report.

<PAGE>

				PART I

ITEM 1.  BUSINESS

     (a)  General Development of Business.  The  general 
development of the business of Burke Mills, Inc. ("the Company") 
during the fiscal year ended December 28, 1996 was marked by the 
efforts of the Company to concentrate on maintaining its existing 
products and its existing markets. The Company continued its 
efforts to operate as efficiently and cost-effectively as possible 
while maintaining product quality.

     (b)  Financial Information About Industry Segments.  The
Company had only one industry segment during the fiscal year ended
December 28, 1995.

     (c)  Narrative Description of Business.  The Company is
engaged in twisting, texturing, winding, dyeing, processing and
selling of filament, novelty and spun yarns and in the dyeing and
processing of these yarns for others on a commission basis.

     The principal market served by the Company are upholstery and
industrial uses through the knitting and weaving industry.

     The Company's products are sold in highly competitive markets
primarily throughout the United States.  Competition in the
Company's products is on the basis of combination of price, service
and product quality.  Many of the Company's competitors are
divisions or segments of larger, diversified firms with greater
financial resources than those of the Company.

     The methods of distributions of the Company's products consist
of the efforts of the Company's sales force which makes contact
with existing and prospective customers.  The Company markets its
products throughout the United States, with the bulk of business
being primarily in the eastern United States, through two salesmen
employed directly by the Company on salary and a number of
commissioned sales agents working on various accounts.

     The dollar amount of backlog of unshipped orders as of 
December 28, 1996 was $4,833,694 and as of December 30, 1995 was 
$3,377,000. Generally, all orders in backlog at the end of a year 
are shipped the following year.  The backlog has been calculated by 
the Company's normal practice of including orders which are 
deliverable over various periods and which may be changed or 
canceled in the future.

     The most important raw materials used by the Company are
unprocessed raw yarn, dyes and chemicals.  The Company believes 
that its sources of supply for these materials are adequate for its
needs and that it is not substantially dependent upon any one
supplier.

<PAGE>

     With respect to the practices of the Company relating to 
working capital items, the Company generally carries enough 
inventory for approximately 47 days.  On the average, the Company 
turns its inventory approximately 6 to 8 times each year.  The 
Company has been able to meet its delivery schedules and has been 
able to enjoy a ready supply of raw materials from suppliers.  
For the fiscal year ended December 28, 1996, approximately 5.9% of the 
Company's sales was from dyeing and processing of yarn for 
customers who supplied the yarn.  The Company does not allow 
customers the right to return merchandise except where the 
merchandise is defective.  The Company rarely allows payment terms 
to its customers beyond sixty (60) days, and the Company has 
experienced no significant problems in collecting its accounts 
receivable.  The Company believes that industry practices are very 
similar to that of the Company in regard to these matters.
     
     Substantially all of the Company's manufacturing operations are 
run by electrical energy purchased from local utility companies and its 
premises are heated with oil and gas.  The Company has not experienced 
any shortages in electricity, oil or gas during the fiscal year.  
The Company has made no arrangements for alternate sources of energy.  
While energy related difficulties are not expected to prevent the 
Company from achieving desired production levels, energy shortages 
of extended duration could have an adverse impact on the Company's 
operations.

    The Company has established a recycling program for its major 
waste items:  yarn, cardboard, plastic tubes and cleaning fluid.

    The Company has made various changes in its plant that regulate 
the discharge of materials into the environment.  The Company believes 
its manufacturing operations are in compliance with all presently 
applicable federal, state and local legislative and administrative 
regulations concerning environmental protection; and, although it 
cannot predict the effect that future changes in such regulations 
may have, particularly as such changes may require capital expenditures 
or affect earnings, it does not believe that any competitor subject 
to the same or similar regulations will gain any significant and 
competitive advantages as a result of any such changes.  Compliance 
by the Company during the fiscal year ended December 28, 1996 with 
federal, state and local environmental protection laws had no 
material effect on capital expenditures, earnings or the competitive 
position of the Company.

    During 1996 in connection with a bank loan to the Company secured 
by real estate, the Company had a Phase I Environmental Site Assessment 
conducted on its property.  The assessment indicated the presence of 
a contaminant in the groundwater under the Company's property.  The 
contaminant was a solvent used by the Company in the past, but no 
longer used.  The contamination was reported to the North Carolina 
Department of Health, Environment and Natural Resources (DEHNR).  
DEHNR required a Comprehensive Site Assessment, which has been 
completed.  The Company has retained an environmental engineering 
firm to conduct testing and to prepare a Corrective Action Plan 
for submission to DEHNR.  The Company is informed that because 
the levels of groundwater contamination are low and no sources 
of drinking water are affected, remediation may not be required. 
If contamination has moved off-site, the groundwater may have to 
be pumped out of the ground and into the municipal sewer system 
for treatment.  

<PAGE>

The Company's environmental engineering firm has estimated at this 
time a maximum remediation expense of $250,000.00 if extensive 
remediation is necessary.

    On March 1, 1997, the Company had 295 employees. 

    The Company's yarn division is its only division.

    During the fiscal year ended December 28, 1996, sales to 
CMI Industries, Inc. and sales to Milliken and Company exceeded 
ten percent of the Company's revenue for that year.  The loss 
of either customer would have a material adverse effect on the 
Company in the short run; and, the Company believes that it 
would be able to replace the business within a reasonable time.

    The Company owns 49% of the stock and 50% of the voting control 
of FYTEK, S.A. de C.V. ("FYTEK"), a Mexican corporation with its 
principal place of business in Monterey, Mexico.  The other 
shareholder in FYTEK is Fibras Quimicas, S.A., a Mexican 
Corporation.  The purpose of FYTEK is the manufacture and 
marketing of yarns.  FYTEK is not yet in production.  When 
FYTEK is in production, it is contemplated that the Company 
will acquire yarn from FYTEK.  It is also contemplated that 
the Company will use FYTEK to market and distribute its dyed 
yarn in Mexico, Central America and South America.

    (d)  Financial Information About Foreign and Domestic 
Operations and Export Sales.  The Company had no material amounts 
of sales in foreign markets during the last three fiscal years.  
The Company had sales to customers in Mexico and Canada during 
1994 and 1995 which amounted to less than three percent of total 
sales in each year for each country.   During the last fiscal year, 
sales to customers in Mexico and Canada were less than five percent 
of total sales in each year for each country. 


ITEM 2.  PROPERTIES

    The executive offices and manufacturing plant of the Company 
are located at Valdese, North Carolina, which is 75 miles northwest 
of Charlotte, North Carolina, and 60 miles east of Asheville, 
North Carolina.  The main plant and executive offices are located 
on a sixteen acre tract of land owned by the Company.  Eleven 
acres of this tract are encumbered by a first priority lien deed 
of trust held by First Union National Bank of North Carolina.  
The main plant building used by the Company contains approximately 
308,928 square feet.  The Company also owns an auxiliary building 
containing 36,600 square feet located adjacent to its  main plant.  
This latter building is currently used for warehousing yarn and as 
a distribution center.

    The plant buildings are steel and brick structures protected 
by automatic sprinkler systems. The various departments, with the 
exception of the production dyehouse, are heated, cooled and humidified.


<PAGE>

The Company considers all its properties and manufacturing equipment 
to be in a good state of repair, well maintained and adequate for 
its present needs.

    The Company utilizes substantially all of the space in its main 
plant for its offices, machinery and equipment, storage and shipping 
and receiving areas.  The Company utilizes about half of the space 
in the auxiliary building and plans to utilize all of this building 
for warehouse and distribution purposes in the near future.

    The approximate maximum capacity in pounds per year of the 
Company's machinery and equipment, based upon operating the 
machinery and equipment seven (7) days per week fifty (50) weeks 
per year, and the approximate percentage of utilization thereof 
during the fiscal year ended December 28, 1996 are as follows:  

			 Pounds/Year               1996
    Department             Capacity             Utilization

Twisting Machines         2,500,000                 56%

Winding Machines         20,000,000                 62%

Texturing Machines        4,835,000                 54%

Dyeing Equipment         20,000,000                 53%


	
ITEM 3.  LEGAL PROCEEDINGS

    The Company is not a party and its property is not subject to 
any material pending legal proceedings other than ordinary routine 
litigation incidental to the business.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    No matters were submitted to a vote of security holders 
during the fourth quarter of the fiscal year covered by this report.

<PAGE>
				
				PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY
	 AND RELATED STOCKHOLDER MATTERS          


    (a)  The principal United States (or other) market on 
which the Company's common stock is being traded is the United 
States over-the-counter market.  The range of high and low bid 
quotations for the Company's common stock for each quarterly 
period during the past two fiscal years ended December 28, 1996 
(as obtained from the office of Merrill Lynch Pierce Fenner & Smith 
in Charlotte, North Carolina) is as follows:

<PAGE>

  Quarter Ending        High Bid       Low Bid
  --------------        --------       -------
      1995

   March 31              $6.875         $3.75
   June 30               $6.00          $3.50
   September 30          $4.125         $3.125
   December 31           $4.125         $2.375


     1996

   March 31              $3.50          $2.625
   June 30               $3.00          $2.00
   September 30          $4.00          $2.25 
   December 31           $4.00          $2.875

    Such over-the-counter market quotations reflect inter-dealer 
prices, without retail mark-up, mark-down or commission and may 
not necessarily represent actual transactions.

    (b)  As of March 3, 1997 there were  481 holders of the common 
    stock of the Company.

    (c)  The Company has declared no dividends on its common stock 
    during the past two years.

ITEM 6.  SELECTED FINANCIAL DATA

    The selected financial data set forth on the following 
page, for the five years ended December 28, 1996 have been 
derived from the audited financial statements of the Company.  
The data should be read in conjunction with "Management's 
Discussion and Analysis of Financial Condition and Results of 
Operations" and the audited financial statements and related 
notes thereto and other financial information included therein.

<PAGE>

<TABLE>
   BURKE MILLS, INC. - ITEM 6. SELECTED FINANCIAL DATA
       (in thousands except per share data)
<CAPTION>

		    Year Ended

                         				   December 28, December 30, December 31, January 1, January 2,
                          				     1996         1995         1994         1994       1993
<S>                              <C>          <C>          <C>          <C>        <C>
SELECTED INCOME STATEMENT DATA
 Net sales                       $40,649      $34,148      $36,194      $26,835    $22,072
 Cost of sales                    36,887       30,666       30,928       24,292     19,861
				                             -------      -------      -------      -------    -------
 Gross profit                    $ 3,762      $ 3,482      $ 5,266      $ 2,543    $ 2,211
				                             =======      =======      =======      =======    =======

 Income before income taxes      $   869      $ 1,156      $ 3,376      $   690    $   620
 Income taxes                        284          212          867          316        211
				                             -------      -------      -------      -------    -------
 Net income                      $   585      $   944      $ 2,509      $   374     $  409
				                             =======      =======      =======      =======    =======
 Per Share (Note A)
  Net Income                     $   .21      $   .34      $   .92      $   .14    $   .15

  Cash dividends declared per
   common share                    None         None         None         None       None
  Weighted average number of                                               
   common shares outstanding       2,741        2,741         2,741       2,741      2,741

SELECTED CASH FLOW DATA
 Capital expenditures            $ 1,025      $ 6,372      $ 1,541      $ 1,374    $ 1,257

 Depreciation                    $ 1,508      $ 1,052      $ 1,006      $   903    $   849

 Cash provided by
  operating activities           $ 1,527      $ 2,004      $ 2,186      $   985    $ 3,219
	
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

               				   December 28, December 30, December 31, January 1, January 2,
				                       1996         1995         1994         1994       1993
				                  ------------ ------------ ----------   ---------- ------------
<S>                       <C>          <C>          <C>         <C>        <C>
SELECTED BALANCE SHEET DATA

 Current assets           $ 9,905      $ 7,641      $ 8,814    $ 7,382    $ 6,082
 Current liabilities        1,738        2,171        2,944      2,923      2,173
                  				    -------      -------      -------    -------    -------
 Working capital          $ 8,167      $ 5,470      $ 5,870    $ 4,459    $ 3,909
                  				    =======      =======      =======    =======    =======

 Current ratio               5.70         3.52         2.99       2.53       2.80

 Total assets             $22,554      $20,769      $16,621    $14,655     $13,086

 Long-term debt           $ 6,000      $ 4,964      $   995    $ 1,645     $ 1,765

 Deferred income taxes    $ 2,003      $ 1,406      $ 1,399    $ 1,312     $   748

 Shareholders' equity     $12,813      $12,228      $11,284    $ 8,775     $ 8,401
</TABLE>

(A)  Income per share has been computed based on the weighted average
number of common shares outstanding during each period.


<PAGE>

ITEM 7.            BURKE MILLS, INC.
   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	  CONDITION AND RESULTS OF OPERATIONS


The following table sets forth selected operating data of the Company
as percentages of net sales for the periods indicated.

<TABLE>
			    Relationship to Total Revenue

                           				For the Year Ended                    Period to Period
                    			    -----------------------------             ----------------
<CAPTION>
                    			December 28,  December 30,  December 31,     Increase (Decrease)
                    			   1996          1995          1994         1995-1996   1994-1995
                    			  ------        ------        ------        ---------   ---------
<S>                       <C>           <C>           <C>              <C>       <C>
Net sales                 100.0%        100.0%        100.0%           19.0%     (  5.7%)
Cost of sales              90.7          89.8          85.5            20.3      (  0.8)
              			        ------        ------        ------        ---------   ---------
Gross profit margin         9.3          10.2          14.5             8.0       (33.9)

Selling, general,
 administrative and
 factoring expenses         6.3           6.2           5.0            19.2        15.9
                    			  ------        ------        ------        ---------   ---------
Operating earnings          3.0           4.0           9.5          (  9.4)      (60.4)
Other income                0.3           0.2           0.3            67.5       (21.3)

Other expenses           (  1.2)       (  0.8)       (  0.5)           75.6        77.6
                    			  ------        ------        ------        ---------   ---------
Income before income taxes  2.1           3.4           9.3           (24.8)      (65.7)
Income taxes                0.7           0.6           2.4            33.8       (75.5)
                    			  ------        ------        ------        ---------   ---------
Net income                  1.4%          2.8%          6.9%         ( 38.0%)    ( 62.4%)
                    			  ======        ======        ======        =========   =========
</TABLE>
<PAGE>


		   BURKE MILLS, INC.
   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	  CONDITION AND RESULTS OF OPERATIONS
		     (Continued)

Results of Operations
---------------------

1996 Compared to 1995
---------------------


Net Sales
---------

    Net sales for the 1996 year aggregated $40.6 million, representing 
an increase of $6.5 million, as compared to net sales volume of $34.1 
million recorded by the Company for 1995.  Net sales dollars increased 
by 19.0% and total pounds shipped increased by 33.9% over those of 1995.  
Full yarn sales dollars increased 38.5% and full yarn pounds shipped 
increased by 52.4%.  Sales from commission yarn sales (the dyeing and 
processing of customer owned yarns) decreased in both dollars and pounds 
by 36.3% and 34.1%, respectively in 1996 compared with 1995.

Cost of Sales and Gross Margin
------------------------------

    Cost of sales which aggregated $36.9 million for 1996 increased by 
$6.2 million, or 20.3%, as compared to 1995.

    Material cost increased by $5.4 million, or 29.1%, as a result 
of the increase in full yarn sales of 38.5%.

    Labor costs increased by 0.3% and manufacturing overhead increased 
by 13.4%, primarily as a result of continuing costs incurred for the 
time and overhead spent in the new technology undertaken by the Company 
in 1995.

    Inasmuch as net sales for 1996 as compared to 1995, increased by 
19.0%, while costs of sales increased by 20.3%, the 1996 gross margin 
decreased to 9.3% as compared to 10.2% recorded in 1995.

Selling, General and Administrative Expenses
--------------------------------------------

    Selling, general and administrative expenses for 1996 aggregated 
$2.3 million, as compared to $1.9 million in 1995, representing for 
each year 5.7% of net sales.

Factor's Charges
----------------

    Factor's charges for 1996 aggregated $194,000, or 0.5% of net 
sales, as compared to $178,000 in 1995, representing a like 0.5% of 
net sales in 1995.  The ratio of sales made to factored accounts 
versus nonfactored accounts for 1996 remained approximately the same 
as 1995.



<PAGE>

		   BURKE MILLS, INC.
   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	  CONDITION AND RESULTS OF OPERATIONS
		     (Continued)


Results of Operations (Continued)
---------------------------------

1996 Compared to 1995 (Continued)
---------------------------------

Operating Margins
-----------------

    As a result of the discussion above with respect to the 1996 
increase in net sales with the reduction in gross profit percentage, 
coupled with the almost identical percentage to net sales of selling, 
general and administrative expenses, the Company reported operating 
earnings of $1.2 million in 1996, compared to operating earnings of 
$1.4 million in 1995.


Interest Income
---------------

    Interest income for 1996 was $36,000 as compared to $68,000 in 1995.
The 1996 interest income was primarily interest earned on short-term cash
equivalents held in the Company's bank.

Interest Expense
----------------

    Interest expense for the year ended December 28, 1996 
increased to $495,000 as compared to $282,000 in 1995.  Interest 
expense for 1996 and 1995 resulted primarily from interest on the 
Company's long-term debt.  The increase resulted from additional 
long-term debt incurred to fund the acquisition of property.


<PAGE>
		   
		   BURKE MILLS, INC.
   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	  CONDITION AND RESULTS OF OPERATIONS
		     (Continued)

Results of Operations (Continued)
---------------------------------

1995 Compared to 1994
---------------------

Income Before Provision for Income Taxes
----------------------------------------

    Income before provision for income taxes for  1996 was $869,000, 
as compared to $1,156,000 for 1995.  The 1996 decrease of $287,000 
resulted from the reduction in gross profit margin, increased selling, 
general and administrative expenses and interest costs.

Provision for Income Taxes
--------------------------

    The increase in 1996 income taxes on pre-tax income of $869,000, 
compared with income taxes on pre-tax income of $1,156,000 in 1995, 
arose from the overaccrual of 1994 income taxes resulting in a 
reduction of 1995 income taxes and by a 1995 upward adjustment of
alternative minimum taxes available.

<PAGE>

		   BURKE MILLS, INC.
   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	  CONDITION AND RESULTS OF OPERATIONS
		     (Continued)

Results of Operations
---------------------

1995 Compared to 1994
---------------------

Net Sales
---------

    Net sales for the 1995 year aggregated $34.1 million, representing 
a decrease of $2.0 million, or 5.7%, as compared to net sales volume 
of $36.2 million recorded by the Company for 1994.  Although net 
sales dollars decreased by 5.7%, total pounds shipped decreased by 
12.8%.  Full yarn sales made by the Company were almost equivalent 
in both dollar and pounds shipped for both 1995 and 1994.  Sales 
from commission yarn sales (the dyeing and processing of customer 
owned yarns) decreased both in dollars and pounds by 33.9% and 41.6%, 
respectively, in 1995 compared with 1994.

Cost of Sales and Gross Margin
------------------------------

    Cost of sales which aggregated $30.7 million for 1995 only 
decreased by $262,000 or 0.8%, as compared to 1994.

    In spite of the decline in net sales dollars, material costs 
only decreased by 1.4% compared to 1994, inasmuch as full yarn sales 
for 1995 were almost equivalent in dollars and pounds with the 1994 year.

    Labor costs decreased by 0.3% and manufacturing overhead actually 
increased by 3.0%, as a result of costs incurred for the time and 
overhead spent in absorbing the new technology undertaken by the Company 
in 1995.

    Inasmuch as net sales for 1995, as compared to 1994, decreased 
by 5.7%, while costs of sales decreased by only 0.8%, the 1995 gross 
margin decreased to 10.2%, as compared to 14.5% recorded in 1994.

Selling, General and Administrative Expenses
--------------------------------------------

    Selling, general and administrative expenses for 1995 aggregated 
$1.9 million, or 5.7%, of net sales, as compared to $1.6 million, or 
4.4%, of net sales in 1994.  The increase resulted primarily from 
management salaries and fringe costs, travel costs, professional 
services, stockholders' informational data, commissions, and employee 
benefits.

Factor's Charges
----------------

    Factor's charges for 1995 aggregated $178,000, or 0.5% of net 
sales, as compared to $235,000, representing 0.6% of net sales in 
1994.  The ratio of sales made to factored accounts versus nonfactored 
accounts for 1995 remained approximately the same as 1994.  However, 
the factoring rate paid to the factor was reduced during 1995.


<PAGE>


		   BURKE MILLS, INC.
   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	  CONDITION AND RESULTS OF OPERATIONS
		     (Continued)

Results of Operations
---------------------

1995 Compared to 1994 (Continued)
---------------------------------

Operating Margins
-----------------

    As a result of the discussion above with respect to the 1995 
decrease in net sales with the concurrent reduction in gross profit 
percentage, together with the increase in the percentage to net 
sales of selling, general and administrative expenses, the Company 
reported operating earnings of $1.4 million in 1995, compared to 
operating earnings of $3.4 million in 1994.

Interest Income
---------------

    Interest income for 1995 was $68,000 as compared to $84,000 in 1994.
The 1996 interest income was primarily interest earned from matured 
funds held by the Company's factor and funds held in a money market 
account with the Company's bank.

Sundry Other Income
-------------------

    Sundry other income increased to $12,000 in 1995, as compared to 
$6,000 in 1994.

    The increase of $6,000 was primarily due to additional revenue 
from scrap parts sales.

Interest Expense
----------------

    Interest expense for the year ended December 30, 1995 increased 
to $282,000, as compared to $159,000 in 1994.  Interest expense for 
1995 and 1994 resulted primarily from interest on the Company's 
long-term debt.  The increase resulted from additional long-term 
debt incurred to fund the acquisition of property, plant and 
equipment which aggregated $6,372,000 in 1995.

Income Before Provision for Income Taxes
----------------------------------------

    Income before provision for income taxes for 1995 was $1,156,000, 
as compared to $3,376,000 for 1994.  The 1995 decrease of $2,220,000 
resulted from the reduction in sales for 1995, coupled with the 
reduction in gross profit margin, increased selling, general and 
administrative expenses and interest costs.

<PAGE>

		   BURKE MILLS, INC.
   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	  CONDITION AND RESULTS OF OPERATIONS
		     (Continued)

Results of Operations
---------------------

1995 Compared to 1994 (Continued)
---------------------------------

Provision for Income Taxes
--------------------------

    Provision for income taxes in 1995 was impacted by an upward 
adjustment of the alternative minimum taxes available and by the 
overaccrual of 1994 income taxes, resulting in a reduction in 1995 
income taxes.  In 1994, the income tax provision was reduced as a result 
of the overaccrual in 1993 of a valuation allowance on deferred tax 
assets.  The following table represents an analysis of the tax provisions 
for 1995 and 1994:

                               					      1995             1994
			                               		      ----             ----
 Provision for income taxes             $446,429        $1,322,200
   Less:  Overaccrual of 1994
    income taxes and adjustment of
    alternative minimum taxes
   	available as a credit                234,219              -

     Overaccrual of 1993 valuation
	allowance on deferred tax assets           -              455,400
                                 					   --------         ----------
                               					   $212,210         $  866,800


    For 1995, the provision for income taxes of $446,429 would represent a
tax provision of 38.6% rather than 18.4%.  Earnings per share would be
reduced by $.09 per share to $.26 rather than the $.34 shown in the
statement of income.

    For 1994, the provision for income taxes of $1,322,200 would represent
a tax provision of 39.2% rather than the 25.7%.

<PAGE>


		   BURKE MILLS, INC.
   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	  CONDITION AND RESULTS OF OPERATIONS
		     (Continued)

Results of Operations
---------------------

1996 - 1993 Sales Analysis
--------------------------

    The table below sets forth an analysis of sales volume for the 
period 1993 to 1996, inclusive.  The table below discloses that full 
yarn sales prices decreased from the high of $3.64 per pound in 1993 
to $3.58 in 1994, $3.60 in 1995 and $3.29 in 1996.  Unit prices for 
commission sales increased from $1.43 in 1993 to $1.60 in 1994, $1.82 
in 1995 and $1.74 in 1996.

                            				     % of      Sales $
                    			 % of      Pounds of      Per
             		       Net Sales   Yarn Sold     Pound
             		       ---------   ---------     -----
1996:
Yarn sales                94%         89%       $3.29
Commission sales           6          11         1.74
             		       ---------   ---------     -----
    Total                100%        100%
             		       ---------   ---------

1995:
  Yarn sales              88%         79%       $3.60
  Commission Sales        12          21         1.82
             		       ---------   ---------     -----
    Total                100%        100%
             		       ---------   ---------

1994:
  Yarn sales              83%         69%       $3.58
  Commission Sales        17          31         1.60
             		       ---------   ---------     -----
    Total                100%        100%
             		       ---------   ---------

1993:
  Yarn sales              82%         64%       $3.64
  Commission Sales        18          36         1.43
             		       ---------   ---------     -----
    Total                100%        100%
             		       ---------   ---------

<PAGE>


		   BURKE MILLS, INC.
   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	  CONDITION AND RESULTS OF OPERATIONS
		     (Continued)


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

    The Company sells a substantial portion of its accounts 
receivable to a commercial factor so that the factor assumes the 
credit risk for these accounts and effects the collection of the 
receivables.  As of December 28, 1996, the Company had $3,033,000 
due from its factor, all of which matured on January 17, 1997. 

    The Company has a line of credit loan from its bank under 
which the Company may borrow the lesser of $2,000,000 and the 
borrowing base (as defined).  Credit balances due the Company under 
its factoring contract have been assigned to the bank as collateral 
for loans under this line of credit.

    The Company had inventories of $3,451,000 as of December 28, 1996.  
The Company's average inventories aggregated approximately $3,177,000 
for 1996, representing approximately 47 days inventory on hand.  
The Company's inventories turn approximately 6 to 8 times each year.

    The Company's working capital increased by approximately $2,697,000 
at December 28, 1996 from that of December 30, 1995, primarily as a 
result of 1996 earnings, and an increase in long-term debt.  The 
working capital of the Company and its line of credit with its bank 
are deemed adequate for the operational needs of the Company.  The 
following table sets forth the Company's working capital and working 
capital ratios as of the close of the last three years:

                     			      1996          1995          1994
                     			      ----          ----          ----
Working capital            $8,166,976    $5,469,831    $5,870,156
Working capital ratio        5.7 to 1      3.5 to 1      3.0 to 1

    As a measure of current liquidity, the Company's quick position 
(cash, cash equivalents and receivables over current liabilities) 
discloses the following at December 28, 1996 and December 30, 1995:

                            				   December 28,   December 30,
                             				      1996           1995
Cash, cash equivalents
 and receivables                    $5,355,639     $3,808,934
Current liabilities                  1,737,646      2,171,155
                            				    ----------     ----------
Excess of quick assets
 over current liabilities           $3,617,993     $1,637,779
                            				    ==========     ==========

<PAGE>

		   BURKE MILLS, INC.
   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	  CONDITION AND RESULTS OF OPERATIONS
		     (Continued)

Liquidity and Capital Resources: (Continued)
--------------------------------------------

    The aggregate long-term debt, at December 28, 1996 was $6,000,000, 
compared to $5,179,678 at December 30 1995.  In order to finance the 
acquisition of new property, plant and equipment of $6,371,819 in 1995, 
and $1,024,598 in 1996, the Company incurred a new long-term debt of 
$6,000,000, as more fully described in Note 7 of Notes to Financial 
Statements.  Pursuant to an agreement with its bank, the new obligation 
will have no principal maturities until February 1998.  Thereafter, 
principal payments of $62,500 will be payable monthly for 96 consecutive 
months.

    The Company's long-term debt to equity ratios aggregated 46.8% 
at December 28, 1996, 40.6% at December 30, 1995 and 8.8% at 
December 31, 1994.

    Capital budget expenditures approved for 1997 aggregate $531,000; 
however, capital expenditures for 1997 may aggregate approximately 
$1,000,000.

Environmental Matters
---------------------

    During 1996 in connection with a bank loan to the Company 
secured by real estate, the Company had a Phase I Environmental 
Site Assessment conducted on its property.  The assessment indicated 
the presence of a contaminant in the groundwater under the Company's 
property.  The contaminant was a solvent used by the Company in the 
past, but no longer used.  The contamination was reported to the 
North Carolina Department of Health, Environment and Natural Resources 
(DEHNR).  DEHNR required a Comprehensive Site Assessment, which has 
been completed.  The Company has retained an environmental engineering 
firm to conduct testing and to prepare a Corrective Action Plan for 
submission to DEHNR.  The Company is informed that because the levels 
of groundwater contamination are low and no sources of drinking water 
are affected, remediation may not be required.  If contamination has 
moved off site, the groundwater may have to be pumped out of the ground 
and into the municipal sewer system for treatment.  The Company's 
environmental engineering firm has estimated at this time a maximum 
remediation expense of $250,000 if extensive remediation is necessary.

Inflation
---------

    In spite of raw material price increases in 1994, 1995 and 1996, 
the Company does not believe that operations for the periods discussed 
have been significantly affected by inflation.  Further, the Company's 
performance in maintaining control over elements of overhead, in 
conjunction with the infusion of state of the art dyeing technology, 
have enabled it to remain competitive with its competition.



<PAGE>

	  COLE, SAMSEL & BERNSTEIN LLC
	  Certified Public Accountants

305 Madison Avenue                                    2 Essex Street
New York, NY 10165                                    Lodi, NJ  07644
(212) 972-9600                                        (201) 368-9300
FAX: (212) 972-9605                                   FAX: (201) 368-9069

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


Independent Auditors' Report


To the Stockholders and Board of Directors of Burke Mills, Inc.

    We have audited the accompanying balance sheets of Burke Mills, Inc. 
as of December 28, 1996 and December 30, 1995, and the related statements
of operations, changes in shareholders' equity, and cash flows for each 
of the three years in the period ended December 28, 1996.  Our audits 
also included the financial statement schedule listed in the index at 
Item 14(a).  These financial statements and financial statement schedule 
are the responsibility of the Company's management.  Our responsibility 
is to express an opinion on these financial statements and financial 
statement schedule based on our audits.

    We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are 
free of material misstatement.  An audit includes examining, on a test 
basis, evidence supporting the amounts and disclosures in the financial 
statements.  An audit also includes assessing the accounting principles 
used and significant estimates made by management, as well as evaluating 
the overall financial statement presentation.  We believe that our audits 
provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present 
fairly, in all material respects, the financial position of 
Burke Mills, Inc. as of December 28, 1996 and December 30, 1995, and 
the results of its operations and its cash flows for each of the three 
years in the period ended December 28, 1996, in conformity with generally 
accepted accounting principles.  Also, in our opinion, the related 
financial statement schedule, when considered in relation to the basic 
financial statements taken as a whole, presents fairly in all material 
respects the information set forth therein.



		/s Cole, Samsel & Bernstein LLC
		Certified Public Accountants

Lodi, New Jersey
January 24, 1997

<PAGE>

			   BURKE MILLS, INC.

			    BALANCE SHEETS

                                           					  December 28,  December 30,
                                           						     1996          1995
                                           					  ------------  ------------
     ASSETS
Current Assets
 Cash and cash equivalents                         $ 2,157,428   $   834,833
 Accounts receivable                                 3,198,211     2,974,101
 Inventories                                         3,450,805     2,869,939
 Prepaid expenses and other current assets              94,028        92,667
 Prepaid income taxes                                  129,340       289,846
 Deferred income taxes                                 874,810       579,600
                                             			  ------------  ------------
      Total Current Assets                           9,904,622     7,640,986
                                          						  ------------  ------------
Property, Plant and Equipment                       26,194,241    25,186,871
 Less:  Accumulated depreciation                    13,550,436    12,059,241
                                          						  ------------  ------------
 Property, Plant and Equipment - Net                12,643,805    13,127,630
                                          						  ------------  ------------
Other Assets
 Investment                                              5,993        -
                                           					  ------------  ------------
                                          						   $22,554,420   $20,768,616
                                          						  ============  ============


    LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
 Current maturities of long-term debt              $     -      $   215,990
 Accounts payable                                    1,436,054    1,508,476
 Accrued salaries and wages                            129,952      123,637
 Other liabilities and accrued expenses                171,640      323,052
                                           					  ------------  ------------
    Total Current Liabilities                        1,737,646    2,171,155

Long-Term Debt                                       6,000,000    4,963,688

Deferred Income Taxes                                2,003,300    1,405,700
                                          						  ------------  ------------
   Total Liabilities                                 9,740,946    8,540,543
                                          						  ------------  ------------

Shareholders' Equity
 Common stock, no par value (stated value, $.66)
  Authorized - 5,000,000 shares
  Issued and outstanding - 2,741,168 shares          1,809,171     1,809,171
 Paid-in capital                                     3,111,349     3,111,349
 Retained earnings                                   3,892,954     7,307,553
                                               	  ------------  ------------
    Total Shareholders' Equity                      12,813,474    12,228,073
                                          						   $22,554,420   $20,768,616
                                          						  ------------  ------------

[FN]
See notes to financial statements.

<PAGE>


		   BURKE MILLS, INC.

	       STATEMENTS OF OPERATIONS


                                          						    Year Ended
                                          						    ----------
                            				      December 28,  December 30, December 31,
                                   					  1996         1995         1994
                            				      -----------   -----------  -----------
Net Sales                             $40,648,920   $34,148,493   $36,193,757
                            				      -----------   -----------  -----------
Costs and Expenses
 Cost of sales                         36,887,077    30,666,567    30,928,103
 Selling, general and administrative
  expenses                              2,337,450     1,945,951     1,597,829
 Factor's charges                         194,427       177,901       235,253
                            				      -----------   -----------  -----------
   Total Costs and Expenses            39,418,954    32,790,419    32,761,185
                            				      -----------   -----------  -----------

Operating Earnings                      1,229,966     1,358,074    3,432,572
                            				      -----------   -----------  -----------

Other Income
 Interest income                           35,567        67,966       84,306
 Gain on sale of property assets           93,940          -          11,680
 Other, net                                 4,891        12,275        5,919
                            				      -----------   -----------  -----------
   Total Other Income                     134,398        80,241      101,905
                            				      -----------   -----------  -----------

Other Expenses
 Interest expense                         495,009       281,752      158,669
 Loss on disposal of property assets         -              112         -   
                             				      -----------   -----------  -----------
   Total Other Expenses                   495,009       281,864      158,669
                            				      -----------   -----------  -----------

Income Before Provision for
 Income Taxes                             869,355     1,156,451    3,375,808
Provision for Income Taxes                283,954       212,210      866,800
                             			      -----------   -----------  -----------
Net Income                             $  585,401    $  944,241   $2,509,008
                            				      ===========   ===========  ===========

Net Earnings Per Share                 $      .21    $      .34   $      .92
                            				      ===========   ===========  ===========

Weighted Average Common Shares
 Outstanding                            2,741,168     2,741,168    2,741,168
                            				      ===========   ===========  ===========

[FN]
See notes to financial statements.

<PAGE>

<TABLE>

		   BURKE MILLS, INC.

      STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

       FOR THE THREE YEARS ENDED DECEMBER 28, 1996
<CAPTION>

				   Common Stock
				   No Par Value
			    Stated Value $.66 Per Share
  				 5,000,000 Shares
			    Authorized
       ----------------------   
                            				Shares       Paid-in     Retained   Shareholders'   Total
                             			Issued       Amount      Capital      Earnings      Equity
                     			       ---------   ----------   ----------   ----------  -----------

<S>                            <C>          <C>          <C>          <C>          <C>
Balance at January 1, 1994     2,741,168    1,809,171    3,111,349    3,854,304    8,774,824
Net income for the
 year ended December 31, 1994      -            -            -        2,509,008    2,509,008
                       	       ---------   ----------   ----------   ----------  -----------
Balance at December 31, 1994   2,741,168    1,809,171    3,111,349    6,363,312   11,283,832
Net income for the year ended   
December 30, 1995                  -            -            -          944,241      944,241
                     			       ---------   ----------   ----------   ----------  -----------
Balance at December 30, 1995   2,741,168   $1,809,171   $3,111,349   $7,307,553  $12,228,073
Net income for the year ended   
December 28, 1996                  -            -            -          585,401      585,401
                     			       ---------   ----------   ----------   ----------  -----------
Balance at December 28, 1996   2,741,168   $1,809,171   $3,111,349   $7,892,954  $12,813,474
                     			       =========   ==========   ==========   ==========  ===========

<FN>
See notes to financial statements.
</TABLE>
<PAGE>


<TABLE>
		   BURKE MILLS, INC.

	       STATEMENTS OF CASH FLOWS
<CAPTION>
                                                 							      Year Ended
                                            				---------------------------------------
                                          						December 28,  December 30,  December 31,
                                           						   1996          1995           1994
                                           					------------  ------------   ----------
<S>                                             <C>            <C>            <C>
Cash flows from operating activities:
 Net income                                     $   585,401    $  944,241     $2,509,008
                                          						------------  ------------   ----------
 
 Adjustments to reconcile net income to net
  cash provided by operating activities:
  Depreciation                                   1,508,423      1,051,529     1,006,448
  (Gain) loss on sales of plant and equipment,
   including losses on disposals                   (93,940)           112       (11,680)
  Deferred income taxes                            302,390          2,800        24,300
  Changes in assets and liabilities:
   (Increase) decrease in accounts receivable     (224,110)       318,055       (922,279)
   (Increase) decrease in inventories             (580,866)        54,255       (356,612)
   (Increase) in prepaid expenses, taxes
      and other current assets                     159,145       (194,561)      (160,430)
   Decrease in other noncurrent assets              (5,933)          -              -
   Increase (decrease) in accounts payable         (72,422)       595,200      (158,836)
   Increase (decrease) in income taxes payable        -          (581,267)      320,034
   Increase (decrease) in accrued salaries
     and wages                                       6,315       (247,036)      167,953
   Increase (decrease) in other liabilities
     and accrued expenses                          (57,472)        60,554      (232,301)
	                                          					------------  ------------   ----------
	   Total Adjustments                              941,470       1,059,641      (323,403)
                                          						------------  ------------   ----------
Net cash provided by operating activities        1,526,871      2,003,882     2,185,605
                                           					------------  ------------   ----------
Cash flows from investing activities:
 Acquisition of property, plant and equipment   (1,024,598)    (6,371,819)   (1,540,952)
 Proceeds from sales of plant and equipment          -              -            11,680
                                             			------------  ------------   ----------
Net cash (used) by investing activities         (1,024,598)    (6,371,819)    (1,529,272)
                                            				------------  ------------   ----------
Cash flow from financing activities:
 Proceeds from long-term bank note               1,670,663      4,180,957       148,380
 Principal payments of long-term debt             (850,341)      (812,176)     (874,455)
                                          						------------  ------------   ----------
Net cash provided (used) by financing activities   820,322      3,368,781      (726,075)
                                          						------------  ------------   ----------
Net (decrease) in cash and cash equivalents      1,322,595      (999,156)       (69,742)
Cash and cash equivalents at beginning of year     834,833     1,833,989      1,903,731
                                           					------------  ------------   ----------

CASH AND CASH EQUIVALENTS AT END OF YEAR        $2,157,428    $  834,833     $1,833,989
                                          						============  ============   ==========

<FN>
See notes to financial statements.
</TABLE>
<PAGE>


		   BURKE MILLS, INC.

	     NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

    Accounting period - The Company's fiscal year is the 52 or 53 
period ending the Saturday nearest to December 31.  Fiscal years 
1996, 1995 and 1994 ended on December 28, 1996, December 30, 1995 
and December 31, 1994, respectively.  The fiscal years ended 
December 28, 1996, December 30, 1995 and December 31, 1994 all 
consisted of 52 weeks.

    Statement of cash flows - For the purposes of the statements of 
cash flows, the Company considers cash and cash equivalents to include 
cash on hand, deposits in banks, interest bearing demand matured funds 
on deposit with factor, and all highly liquid debt instruments with a 
maturity of three months or less when purchased.

    Inventories - Inventories are stated at the lower of cost 
(first-in, first-out) or market.  Cost elements included in work 
in process and finished goods inventories are raw materials, direct 
labor and manufacturing overhead.  Market is considered to be net 
realizable value.

    Property, plant and equipment - Property, plant and equipment 
are stated at cost.

Depreciation and amortization of the property accounts are provided 
over the estimated useful lives of the assets.  For financial 
reporting purposes, depreciation on plant and equipment is provided 
primarily at straight-line rates.  For income tax purposes, 
depreciation has been provided at straight-line rates for all 
property, plant and equipment acquired  prior to 1981 and the 
accelerated and modified accelerated cost recovery system for property 
assets acquired subsequent to December 31, 1980.  The estimated useful 
lives used for computing depreciation for financial reporting purposes 
are generally:

	Buildings and improvements      5 - 45 years
	Plant machinery and equipment   5 - 17 years
	Office equipment                5 - 10 years
	Automotive equipment            3 -  5 years

    Earnings per share - Earnings per share are based on the net 
income divided by the weighted average number of common shares 
outstanding during the respective periods.

    Use of Estimates in Preparing Financial Statements -In preparing 
financial state-ments in conformity with generally accepted accounting 
principles, management is required to make estimates and assumptions 
that affect the reported amounts of assets and liabilities and the 
disclosure of contingent assets and liabilities at the date of the 
financial statements and revenues and expenses during the reporting 
period.  Actual results could differ from those estimates.

<PAGE>


		   BURKE MILLS, INC.

	     NOTES TO FINANCIAL STATEMENTS


NOTE 2 - SEGMENTS OF BUSINESS ENTERPRISE

    The Company is engaged in twisting, texturing, winding, dyeing, 
processing and selling of filament, novelty and spun yarns and in the 
dyeing and processing of these yarns for others on a commission basis.

    With respect to its operations, the Company's products and its 
services for others on a commission basis, are sold and/or performed 
for customers primarily located in the territorial limits of the 
United States.  The Company did have sales to customers in Mexico, 
during the three fiscal years ended December 28, 1996, which amounted 
to 4.2% in 1996, 0.5% in 1995 and 2.6% in 1994.  Additionally, sales 
to customers in Canada in 1996, 1995 and 1994 aggregated 2.8%, 1.2% 
and 1%, respectively.  Other than sales to Mexico and Canada, as 
discussed above, the Company had no other sales in foreign markets 
during the three year period ended December 28, 1996.  For  the three 
year period ended December 28, 1996, the Company has operated within a 
single industry segment with classes of similar products.  The principal 
markets served by the Company are upholstery and industrial uses through 
the knitting and weaving industry.

    In connection with sales to major customers, only one customer 
has exceeded 10% of the Company's sales during each of the three years 
ended December 28, 1996.  One other customer has exceeded 10% in 1996 
and 1994, and a third customer has exceeded 10% of aggregate sales in 1995.  
For the purpose of this determination, sales to groups of companies under 
common control have been combined and accounted for as sales to individual 
companies.  The following table gives information with respect to these 
three customers:

			 Percentage of
		Amount     Net Sales
1996
----
Customer 1    $5,387,000     13.3%
Customer 2     4,074,000     10.0%
Customer 3         *


<PAGE>

		   BURKE MILLS, INC.

	     NOTES TO FINANCIAL STATEMENTS


NOTE 2 - SEGMENTS OF BUSINESS ENTERPRISE (Continued)

1995
----
Customer 1   $3,706,000      10.9%
Customer 2        *
Customer 3    3,534,000      10.3%

1994
----
Customer 1   $4,653,000      12.9%
Customer 2    3,929,000      10.9%
Customer 3        *

*Less than 10%.

NOTE 3 - ACCOUNTS RECEIVABLE

Accounts receivable comprise the following:


                             			  December 28,  December 30,
                             				     1996          1995
                            				  ------------  ------------
Account current - factor
    Due from factor on regular
      factoring account            $3,032,655    $2,808,790
Non-factored accounts receivable      165,556       165,311
                           				  ------------  ------------
	Total                             $3,198,211    $2,974,101

    Pursuant to a factoring agreement, the Company sells substantial 
portions of its accounts receivable to a commercial factor without 
recourse, up to maximum credit limits established by the factor for 
individual accounts.  Amounts invoiced to customers on accounts 
receivable factored in excess of the established maximum credit 
limits are sold to the factor with recourse in the event off 
nonpayment by customers.

<PAGE>


		   BURKE MILLS, INC.

	     NOTES TO FINANCIAL STATEMENTS

NOTE 3 - ACCOUNTS RECEIVABLE (Continued)

    The Company pays a service charge to its factor to cover credit 
checking, assumption of credit risk, record keeping and similar 
services.  In addition, if the Company takes advances from its factor 
prior to the average maturity of the receivables sold (as defined), 
it is required to pay interest to the factor on these advances.  In 
connection with such advances from its factor, the Company incurred 
interest costs of only $5,442 in 1996 and $4,929 in 1995.  The Company 
incurred no interest costs during the 1994 year, inasmuch as it 
borrowed no funds from its factor during that year.

    The Company's factor is collateralized by the accounts receivable 
sold to the factor.  No interest in inventory, other than returned 
goods, has been granted to the factor under the factoring contract.

    The following represents a summary of advances on receivables 
received from the Company's factor prior to the average maturity of 
the receivables for the year ended December 28, 1996:

	Balance at end of year                 $       215
	Maximum outstanding at any month end       397,952
	Average amount outstanding during 
	    the year                                56,399
	Weighted average interest rate                8.75%

		   BURKE MILLS, INC.

	     NOTES TO FINANCIAL STATEMENTS

NOTE 4 - INVENTORIES

    Inventories are summarized as follows:


                     			      December 28,  December 30,
                             				 1996          1995
                     			      ------------  ------------

Finished and in process        $2,191,957    $1,918,400
Raw materials                     709,099       447,691
Dyes and chemicals                394,335       378,528
Other                             155,414       125,320
                     			      ------------  ------------
   Total                       $3,450,805    $2,869,939

<PAGE>


		   BURKE MILLS, INC.

	     NOTES TO FINANCIAL STATEMENTS

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT

    Major classifications of property, plant and equipment are as follows:

			    December 28, 1996         December 30, 1995
			   -------------------       -------------------
                       				   Accumulated               Accumulated
                     			    Cost   Depreciation       Cost   Depreciation
               		       ----------  ---------     ----------   ---------

Land                   $   78,032  $    -        $   78,032   $    -
Land improvements         136,504     73,954        136,504      71,053
Buildings and 
  improvements          6,204,501  3,910,833      6,141,537  3,735,393
Plant machinery and 
  equipment            18,447,105  8,973,505     18,042,785   7,761,106
Office equipment        1,205,764    488,245        670,658     379,893
Automotive equipment      122,335    103,899        117,355     111,796
              		       ----------  ---------     ----------   ---------
     Total            $26,194,241 $13,550,436   $25,186,871  $12,059,241
              		      =========== ===========   ===========  ===========



<PAGE>


		   BURKE MILLS, INC.

	     NOTES TO FINANCIAL STATEMENTS

NOTE 6 - LINE OF CREDIT LOAN

    Pursuant to a loan agreement dated March 29, 1996, the Company 
secured a line of credit facility from its bank wherein it may borrow, 
repay and reborrow amounts from the line of credit facility for 
short-term working capital needs.  The aggregate principal amount 
outstanding at any time under this loan may not exceed the lesser 
of $2,000,000 and the borrowing base (as defined).  Interest on this 
loan facility is at a rate that varies with the Libor Rate and is 
payable on the last day of each month.  The line of credit loan has 
an initial maturity of April 30, 1997, unless extended by the bank in 
its sole discretion.

    The following represents a summary of borrowings on the line of 
credit loan during 1996:

	Balance at end of year               $      NONE
	Maximum outstanding during the year     1,195,000
	Average outstanding during the year       435,000
	Weighted average interest rate                7.7%

NOTE 7 - LONG-TERM DEBT
    On March 29, 1996, the Company entered into a new loan agreement 
with its bank providing for a term loan of $6,000,000 and, as discussed 
in Note 6 above, a line of credit facility of $2,000,000 for ongoing, 
short-term working capital needs.  The new term loan refinanced the 
two formerly existing term loans, and accordingly, all term 
obligations were consolidated into the one $6,000,000 obligation.  
This new loan is secured by (1) a first Deed of Trust on property 
and buildings located at the Company's manufacturing sites in 
North Carolina, (2) a first lien position on the new equipment 
and machinery installed at these manufacturing sites and (3) a first 
lien position on the existing machinery and equipment located at 
the Company's manufacturing sites.

<PAGE>

		   BURKE MILLS, INC.

	     NOTES TO FINANCIAL STATEMENTS

NOTE 7 - LONG-TERM DEBT (Continued)

    Under the new term loan agreement, interest only will be payable
monthly until February, 1998.  Thereafter, principal maturities will 
be payable in the amount of $62,500 per month for ninety-six 
consecutive months plus interest at the fixed rate of 8.06%.  
In order to effect this fixed interest rate, the bank converted 
its interest rate cap into a fixed rate loan by entering into a 
fixed rate hedge contract with the Company.  Under this fixed rate 
hedge contract, the Company will pay the bank 8.06% for the term of 
the contract.  The floating rate (LIBOR plus 1.9%) that the Company 
will pay the bank will be equal to the floating rate that the bank's 
capital markets will pay to the Company.  Whether LIBOR RATES rise or 
fall over the life of the loan agreement, the Company will continue to 
pay the bank a fixed rate of 8.06% for the life of the contract, thereby 
creating a fixed rate loan.

    Among other things, covenants include a debt service coverage 
ratio, a limit on annual property asset acquisitions exclusive of 
property acquired with the loan proceeds under this new loan agreement, 
the retirement or acquisition of the Company's capital stock in excess 
of a stated amount, the maintenance of a minimum tangible net worth 
which shall increase by a stated amount annually, a minimum quick 
ratio, and a maximum debt to tangible net worth ratio.

    The annual principal maturities of the long-term debt at 
December 28, 1996 are as follows:
Current portion                         $     -
1998                   $  687,500
1999                      750,000
2000                      750,000
2001                      750,000
Thereafter              3,062,500        6,000,000
              		       ----------       ----------
                                   					$6,000,000
                                   					==========
<PAGE>

		   BURKE MILLS, INC.

	     NOTES TO FINANCIAL STATEMENTS

NOTE 8 - OTHER LIABILITIES AND ACCRUED EXPENSES

Other liabilities and accrued expenses consist of the following:

                                  					   December 28, December 30,
                                   					       1996          1995
                                   					   -----------  ------------
Employee health insurance                  $     -       $   11,920
Payroll taxes payable                          44,716        39,971
Utilities payable                              90,669        80,768
Accrued interest                               12,125        31,918
Deferred credit                                  -           93,940
Other                                          24,130        64,535
                                   					   -----------  ------------
              		       Total                 $171,640      $323,052
                                   					   ===========  ============

NOTE 9 - INCOME TAXES

    The Company uses the liability method as required by FASB 
Statement 109 "Accounting for Income Taxes".  Under this method, 
deferred tax assets and liabilities are determined based on the 
differences between financial reporting and tax bases of assets 
and liabilities and are measured using the enacted tax rates and laws.

    The items which comprise deferred tax assets and liabilities are as 
follows:

                           					December 28,     December 30,
                            					   1996             1995
                           					------------     ------------
Deferred Tax Assets:
Alternative minimum taxes paid     $608,825         $573,400
	Net operating loss carryforward    246,100             -
	Inventory capitalization             8,300            6,200
	Business credits                    11,585             -
                            				------------     ------------
                            					  $874,810         $579,600
                           					============     ============
Deferred Tax Liabilities:
   Accelerated depreciation for
       tax purposes              $2,003,300       $1,405,700
                               	============     ============

<PAGE>


		   BURKE MILLS, INC.

	     NOTES TO FINANCIAL STATEMENTS

NOTE 9 - INCOME TAXES (Continued)

     Provision for income taxes consists of:

                                          						 Year Ended
                               	   --------------------------------------
                            				   December 28,  December 30,  December 31,
                               	      1996          1995          1994
                            				      ----          ----          ----
Current
 Federal                            $   -         $120,978      $674,100
 State                                  -           88,432       168,400
Deferred                             283,954         2,800        24,300
                             			    --------      --------      --------
  Total                             $283,954      $212,210      $866,800
                              		    ========      ========      ========



    The provision for income taxes on historical income differs from 
the amounts computed by applying the applicable Federal statutory rates, 
due to the following:

                                           						 Year Ended
                               			   --------------------------------------
                             				   December 28,  December 30,  December 31,
                             				      1996          1995          1994
                             				      ----          ----          ----
Income before income taxes            $869,355    $1,156,451  $3,375,808
Federal income tax rate                    34%           34%         34%
                             				    ----------    ----------    --------
Computed taxes at maximum
  statutory income tax rate            295,581       393,193   1,147,775
	State income taxes, net of
	  Federal income tax benefit           44,468        60,205     174,425
   Adjustment for deferred
    income taxes                       (20,670)          -           -
   Alternative minimum tax adjustment  (35,425)     (174,883)        -
   Overaccrual of prior year
    income taxes                           -         (59,336)        -
   Other                                   -          (6,969)        -
   Overaccrual of prior year
    valuation allowance on
    deferred tax assets                    -             -      (455,400)
                               		    ----------    ----------    --------
       Provision for Income Taxes   $  283,954    $  212,210    $866,800
                             				    ==========    ==========    ========


<PAGE>

		   BURKE MILLS, INC.

	     NOTES TO FINANCIAL STATEMENTS

NOTE 10 - STATEMENTS OF CASH FLOWS

FASB No. 95 requires that the following supplemental disclosures to the 
statements of cash flows be provided in related disclosures. Cash paid 
for interest was $514,802 in 1996, $257,533 in 1995 and $159,750 in 1994.
Cash paid for income taxes aggregated $6,159 in 1996, $1,080,668 in 1995 
and $522,466 in 1994.

NOTE 11 - RENTAL EXPENSES AND LEASE COMMITMENTS

Rental expenses under all lease commitments for the three fiscal years ended
December 28, 1996, aggregated $39,635, $46,153 and $34,159, respectively.
Minimum lease commitments under terms of all noncancelable leases, which
consist only of leased equipment, are as follows as of December 28, 1996:

1997              $41,668
1998               27,091
1999               11,908
2000                8,352
2001                8,352
               		---------
              		  $97,371


NOTE 12 -  QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands of dollars except for per share amounts)

                                          						Quarter
                           				First      Second      Third      Fourth
1996
Net sales                     $9,905      $10,304    $10,225     $10,215
Cost of sales                  9,215        9,519      9,122       9,031
Gross profit                     690          785      1,103       1,184
Net income (loss)               (40)           26        285         314
Net income (loss) per
    common share              $ (.02)     $   .01    $   .11     $   .11

1995
Net sales                      $9,545      $8,586     $7,385      $8,632
Cost of sales                   8,364       7,488      7,127       7,687
Gross profit                    1,181       1,098        258         945
Net income (loss)                 396         369       (173)        352
Net income (loss) per
 common share                 $  0.14     $  0.14   ($  0.06)    $  0.12

1994
Net sales                      $8,787      $9,075     $9,521       $8,811
Cost of sales                   7,572       7,779      8,198        7,379
Gross profit                    1,215       1,296      1,323        1,432
Net income                        465         889        524          631
Net income per
 common share                 $  0.17     $  0.32    $  0.19      $  0.24

<PAGE>


		   BURKE MILLS, INC.

	     NOTES TO FINANCIAL STATEMENTS

NOTE 13 -  EMPLOYEE BENEFIT PLAN

    The Company is a participating employer in the Burke Mills, Inc. 
Savings and Retirement Plan and Trust which has been qualified under 
Section 401(k) of the Internal Revenue Code.  This plan allows eligible 
employees to contribute a salary reduction amount of not less than 1% 
nor greater than 25% of the employee's salary.  The salary reduction 
percentage must equal an increment of 1%.  The employer may make a 
matching contribution for each employee out of current net profits 
or accumulated net profits (as defined), in an amount the employer 
may from time to time deem advisable.  Based on the Company's profit 
sharing formula, no provision was required for matching contributions 
in 1996.  Matching contributions of $94,176 and $303,504 were made for 
1995 and 1994, respectively.

NOTE 14 - CONCENTRATIONS OF CREDIT RISK

    Financial instruments which potentially subject the Company to 
concentration of credit risk consist principally of occasional 
temporary cash investments and amounts due from the factor on 
receivables sold to the factor on a non-recourse basis.  The 
receivables sold to the factor during a month generally have a 
maturity date on the 25th to the 30th of the following month.  
At December 28, 1996, the Company had $3,032,655 due from its factor 
with a maturity date of January 17, 1997.  Upon maturity, the funds 
are automatically transferred by the factor to the Company's bank.

NOTE 15 - OTHER COMMITMENTS

    (a)  The Company was committed to an outstanding irrevocable 
import letter of credit of $170,300 on December 28, 1996 covering 
machinery purchases of approximately $174,000.  The machinery is to 
have a latest shipment date of May 30, 1997, and the letter of credit 
expires June  15, 1997.  The differential between the letter of credit 
and the purchase price is to be covered by a single invoice issued by 
the vendor to the Company.

    (b)  In addition to the foregoing, as at December 28, 1996, the 
Company had executed purchase orders for capital projects totaling 
$230,000.

    (c)  During 1996, in connection with a bank loan to the Company 
secured by real estate, the Company had a Phase I Environmental Site 
Assessment conducted on its property.  The assessment indicated the 
presence of a contaminant in the groundwater under the Company's 
property.  The contaminant was a solvent used by the Company in the 
past, but no longer used. The contamination was reported to the North 
Carolina Department of Health, Environment and Natural Resources 
(DEHNR). DEHNR required a Comprehensive Site Assessment, which has 
been completed.  The Company has retained an environmental engineering 
firm to conduct testing and to prepare a Corrective Action Plan for 
submission to DEHNR. The Company has been informed that because the 
levels of groundwater contamination are low and no sources of drinking 
water are affected, remediation may not be required.  If contamination 
has moved off site, the  groundwater  may have to  be pumped  out  of  
the   ground   and into the municipal sewer system for treatment.The 
Company's environmental engineering firm has estimated at this time a 
maximum remediation expense of $250,000 if extensive remediation is 
necessary.

<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
	       ON ACCOUNTING AND FINANCIAL DISCLOSURE            

    There have been no changes in nor disagreements with accountants 
on accounting and financial disclosure during the Company's two most 
recent fiscal years or during any subsequent interim period.  
The current accounting firm for the Company, Cole, Samsel & 
Bernstein LLC of New York, New York, and Lodi, New Jersey, has 
served as accountants for the Company during the last two most 
recent fiscal years.  

<PAGE>
	

			       PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information required for Part III of this report 
(Items 10-13) is incorporated by reference from the Company's 
definitive proxy statement to be filed pursuant to Regulation 
14A, involving the election of directors, which is expected to 
be filed not later than 120 days after the end of the fiscal year 
covered by this report.

<PAGE>

	PART IV
  
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT
		SCHEDULES AND REPORTS ON FORM 8-K

     (a) The following documents are filed as a part of this report.

	(a)1.  Report of Independent Certified Public Accountants.

	The following financial statements of Burke Mills, Inc. and 
	the related auditors' report required to be included in 
	Part II Item 8, are listed below:

		Auditors' report

		Balance sheets
		   December 28, 1996
		   December 30, 1995    

		Statements of operations
		   Year ended December 28, 1996
		   Year ended December 30, 1995    
		   Year ended December 31, 1994

		Statements of changes in shareholders' equity
		   Year ended December 28, 1996
		   Year ended December 30, 1995
		   Year ended December 31, 1994

		Statements of cash flows
		   Year ended December 28, 1996
		   Year ended December 30, 1995
		   Year ended December 31, 1994

			Notes to financial statements

	(a)2.  The financial statement schedules required to be filed by 
Item 8 of this form and by paragraph (d) of Item 14 are included in 
Part IV of this report and are as follows:

	Schedule II - Valuation and qualifying accounts
		   Year ended December 28, 1996
		   Year ended December 30, 1995
		   Year ended December 31, 1994



<PAGE>

    All other financial statement schedules have been omitted since 
the required information is not present in amounts sufficient to 
require submission of the schedule, or because the required information 
is included in the financial statements or the notes thereto.

    (a)3.  The exhibits required by Item 601 of Regulation S-K 
and paragraph (c) of Item 14 are the articles of incorporation 
and by-laws of the Company which are incorporated herein by reference 
from the Amendment on Form 8 to the annual report on Form 10-K of the 
Company for the fiscal year ended January 2, 1982 previously filed 
with the Commission.  The exhibit required by Item 601(c) of 
Regulation SK, Financial Data Schedule, is set forth on page 39 of 
this report.

    (b)  During the last quarter of the period covered by this 
report one report on Form 8-K was filed.  The only item reported 
was Item 5 (Other Events).  No financial statements were filed. 
The date of the report was December 5, 1996.  

    (c)  See sub-Item (a)3 above.

    (d)  See sub-Item (a)2 above.


<PAGE>



			      SCHEDULE II

		   VALUATION AND QUALIFYING ACCOUNTS

	      FOR THE THREE YEARS ENDED DECEMBER 28, 1996


Column A                       Column B    Column C    Column D     Column E
                           		 Balance at                           Balance at
                           		beginning of                            end of
Description                     period     Additions  Deductions     period
-----------                  ------------  ---------  ----------    ----------
Valuation Allowance on
Deferred Income Tax Assets:

Year Ended December 28, 1996  $    -       $    -      $    -       $     -

Year Ended December 30, 1995       -            -           -             -

Year Ended December 31, 1994   623,309          -       623,309(a)        -

    a.  For the year ended January 1, 1994, the Company recorded 
deferred tax assets of $1,136,409, representing possible future 
realization of these deferred tax assets.  In accordance with the 
provisions of FASB No. 109, a valuation allowance of $623,309 was 
deemed adequate for that portion of the deferred tax assets which 
might not be probable of realization.

    For the year ended December 31, 1994, $167,909 of the valuation 
allowance was utilized in the realization of the deferred tax assets 
provided for the year ended January 1, 1994.  Inasmuch as no further 
valuation allowance was deemed necessary as of December 31, 1994, 
$455,400 was credited to the provision for income taxes for the year 
ended December 31, 1994.  Accordingly, the Company believes that its 
deferred tax assets as of December 31, 1994 will be realized and no 
valuation allowance was required as of December 31, 1994.

<PAGE>

	  SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) 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.


Date:     March 28, 1997         BURKE MILLS, INC.

By:   /s Humayun N. Shaikh
      Humayun N. Shaikh, Chairman of the Board
      (Principal Executive Officer)

By:   /s Richard F. Whisenant
      Richard F. Whisenant
      President
      (Principal Financial Officer)

By:   /s David E. Truscott
      David E. Truscott
      Accounting Manager
      (Principal Accounting Officer)
				
			
    Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on behalf of 
the registrant and in the capacities and on the dates indicated.


Date:    March 28, 1997       /s Humayun N. Shaikh
			      Humayun N. Shaikh, Director


Date:    March 28, 1997       /s Richard F. Whisenant
			      Richard F. Whisenant, Director


Date:    March 28, 1997       /s Ahmed H. Shaikh
			      Ahmed H. Shaikh, Director


<PAGE>