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

                                    FORM 10-K

                                   (Mark One)
                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                                     OF THE
               SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year
                            Ended December 30, 2000

              [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                                       OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                         For the transition period from
                     _________________ to _________________

                           Commission File No. 0-5680

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

                 (I.R.S. Employer Identification No.) 56-0506342

          State or other jurisdiction of incorporation or organization:
                                 North Carolina

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

               Registrant's telephone number, including area code:
                                  828 874-6341

           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 the 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
Form10-K.[ ]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant (computed by reference to the average bid and asked price on February
14, 2001) was $814,469.

Page 1 of 50
<PAGE>




The number of shares  outstanding of the registrant's only class of common stock
as of March 1, 2001 is 2,741,168 shares.


                       DOCUMENTS INCORPORATED BY REFERENCE

Portions  of the  Company's  proxy  statement  related to the annual  meeting of
shareholders  of the Company  scheduled  for May 29, 2001,  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 2 of 50
<PAGE>

                                BURKE MILLS, INC.
                                     PART I

ITEM 1 - BUSINESS
------------------
     (a) General  Development of Business - General business  development during
fiscal year ended December 30, 2000, consisted of changes in company management,
start-up and efficient  utilization of equipment purchased in 1999, and reacting
to competitive pricing pressures in a weakening textile economy.

     Between  May 2000  and  January  2001,  the  Company  made  changes  in its
management. The Company replaced its President, Vice President of Manufacturing,
Sewing Thread Business Manager, Plant Engineering Manager and Lab Manager.

     During 1999 there were major capital  expenditures  for the  acquisition of
dyeing equipment and dry processing machines. The majority of this equipment was
placed  into  production  during  the year,  with some  start-up  inefficiencies
experienced early in the year.

     Raw yarn prices and energy costs increased during the year with very little
of these cost increases passed on in increased sales prices.

     In the second half of the year the Company  experienced a weakening textile
economy  which  caused  lower  orders and an  increase  in  competitive  pricing
pressure.

     (b) Financial  Information  about Industry  Segments - The Company had only
one industry segment during the fiscal year ended December 30, 2000.

     (c)  Narrative  Description  of  Business  -  The  Company  is  engaged  in
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  markets  served by the Company are apparel,  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. Competitiveness of the Company's products is based
on 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  distribution  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,  Caribbean Basin, Mexico and Canada, with the bulk of the business being
primarily in the eastern United States,  through five salesmen employed directly
by the Company on salary and a number of  commissioned  sales agents  working on
various  accounts.  The Company  also  markets its  products in Mexico,  Central
America and South  America  through  its  fifty-percent  (50%) owned  affiliate,
Fytek, S.A. de C.V.

     The dollar  amount of backlog of  unshipped  orders as of December 31, 2000
was $2,641,000 and as of January 1, 2000 was $3,184,000.  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 3 of 50
<PAGE>

                             BURKE MILLS, INC.PART I

ITEM 1 - BUSINESS (continued)
------------------------------

      With respect to the practices of the Company  relating to working  capital
items, the Company generally carries enough inventory for approximately 72 days.
On average,  the Company  turns its  inventory  approximately  4 to 6 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 30, 2000,  approximately  4.0% of the Company's  sales were 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, except for one customer who went
out of  business  during  the year  causing a  $204,000  bad debt.  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  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 regulates  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 30, 2000 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 Environment and Natural Resources (DENR). DENR
required a Comprehensive Site Assessment that has been completed.  The Company's
outside engineering firm conducted testing and prepared a Corrective Action Plan
that was submitted to DENR. The Company has identified remediation issues and is
moving toward a solution of natural attenuation. The Company believes it made an
adequate  provision to earnings in 1997 to cover any future cost.  No additional
provision was made in 1999 or 2000.  The Company  believes this  situation  will
have no material impact on the capital  expenditures,  earnings,  or competitive
position of the Company.

     On,  February 20, 2001, the Company had 241  employees.  The Company's yarn
division is its only  division.  During the fiscal year ended December 30, 2000,
sales to Milliken  Company and Quaker  Fabrics  Corporation  each  exceeded  ten
percent of the Company's revenue for that year. The loss of these customers


Page 4 of 50
<PAGE>

                             BURKE MILLS, INC.PART I

ITEM 1 - BUSINESS (continued)
------------------------------

would have a material  diverse  effect on the Company in the short run,  but the
Company  believes  that it  would  be able to  replace  the  business  within  a
reasonable time.

     The Company owns 49.8% 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 Monterrey, 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.  The  Company  acquires  yarn  from  Fytek and uses  Fytek to market  and
distribute its dyed yarn in Mexico,  Central  America and South  America.  Fytek
began production in the fourth quarter of 1997.

     (d) Financial  Information about Foreign and Domestic Operations and Export
Sales - Company sales to Brazil,  Caribbean Basin, Canada and Mexico during 2000
accounted for  approximately  7% of total net sales.  During 1999 sales to these
countries were less than 4%, and such sales aggregated less than 8% in 1998.


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 an  approximate  nineteen-acre  tract of land
owned by the Company.  Seventeen  acres of this tract are  encumbered by a first
priority lien deed of trust held by First Union National Bank of North Carolina.
The  Company  also owns  approximately  18 acres  adjacent to the plant which is
undeveloped.  The main plant building used by the Company contains approximately
309,000  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.  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 receiving areas. The Company
utilizes  substantially all of the space in the auxiliary building for warehouse
and distribution purposes.

     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  30,  2000 are as
follows:

                                       Pounds/Year 2000
     Department                  Capacity         Utilization
     ----------                  --------         -----------
     Winding Machines           21,218,000           39%
     Texturing Machines          2,517,000           20%
     Dyeing Equipment           23,111,000           53%

     During the year the Company  phased out its friction  texturing  machinery.
Texturing capacity is the average capacity  available during 2000.  Capacity for
2001 will begin at approximately 1,883,000 pounds.



Page 5 of 50
<PAGE>

                             BURKE MILLS, INC.PART I

ITEM 3. LEGAL PROCEEDINGS
--------------------------

     The  Company  is one of eight  defendants  in a case  brought in the United
States District Court for the Southern District of Texas, Houston Division, by a
plaintiff individually and as next friend or a minor. The complaint alleges that
the minor  plaintiff was injured as a result of burns suffered when stripping on
the side of a pair of jeans  purchased by the minor caught fire.  The  complaint
alleges  that the Company  was one of two  manufacturers  providing  yarn to the
defendant who allegedly  manufactured  the stripping  sewn on to the jeans.  The
Company is defending the suit through  legal  counsel  provided by the Company's
products liability insurance carrier.  Based upon the facts known to the Company
at this time,  the Company does not believe that it will be  determined  to have
any  monetary  liability to the  plaintiffs  in this case.  The Company  further
believes that if the Company is determined to have any monetary liability to the
plaintiffs,  such liability will be covered by its products liability  insurance
policy.


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.


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 30, 2000, and
on the latest practicable date (as obtained from the NASDAQ Stock Market,  Inc.,
in Washington, DC) is as follows:

                  Quarter Ending
                     2000                  High Bid         Low Bid
                  ------------             --------         --------
                  March 31                  $2.25            $1.625
                  June 30                   $1.813           $1.313
                  September 30              $1.656           $1.125
                  December 31               $1.188           $.375

                  Quarter Ending
                    1999                   High Bid         Low Bid
                  ------------             --------         --------
                  March 31                  $3.00            $1.625
                  June 30                   $2.297           $1.375
                  September 30              $2.125           $1.563
                  December 31               $2.438           $1.50

                  February  14,   2001      $0.719           $0.688

     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 February  20, 2001 there were 385 holders of the common  stock of
the Company.

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


Page 6 of 50
<PAGE>

                            BURKE MILLS, INC.PART II

ITEM 6. SELECTED FINANCIAL DATA
--------------------------------
        The selected  financial  data set forth on the following  page,  for the
five years ended December 30, 2000 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.

                                    (in thousands except per share data)
                                                Years Ended
                                   ----------------------------------------
                                  Dec. 30   Jan. 1    Jan. 2   Jan. 3  Dec. 28
                                   2000     2000      1999     1998     1996
                                   ----     ----      ----     ----     ----
SELECTED INCOME STATEMENT DATA
  Net Sales                      $39,456   $42,840   $42,169  $41,156  $40,649
  Cost of Sales                   37,123    38,779    37,825   36,765   36,887
                                 -------   -------   -------  -------  -------
  Gross Profit                   $ 2,333   $ 4,061   $ 4,344  $ 4,391  $ 3,762
                                 -------   -------   -------   ------   ------
  Income (loss) before income
     taxes                       $(1,390)  $ (300)   $ 1,087  $ 1,059  $   869
  Income Taxes (credit)             (540)     (98)       383      433      284
                                 -------   -------   -------  -------  -------
  Net Income (loss)              $  (850)  $ (202)   $   704  $   626  $   585
                                 =======   =======   =======  =======  =======
  Per Share (Note A)
    Net income (loss)            $  (.31)  $ (.07)   $   .26  $   .23  $   .21
                                 ========  =======   =======  =======  =======
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           $   631   $ 4,640   $ 2,162  $ 1,343  $ 1,025
                                 =======   =======   =======  =======  =======
   Depreciation                  $ 2,332   $ 1,839   $ 1,744  $ 1,600  $ 1,508
                                 =======   =======   =======  =======  =======
  Cash provided by
    operating activities         $ 1,386   $    74   $ 1,926  $ 3,646  $ 1,527
                                 =======   =======   =======  =======  =======

                                 Dec. 30    Jan. 1    Jan. 2    Jan. 3   Dec.28
                                  2000       2000      1999      1998     1996
                                  ----       ----      ----      ----     ----
SELECTED BALANCE SHEET DATA
  Current assets                $ 9,161    $ 9,988   $11,213  $11,785   $ 9,905
  Current liabilities             3,503      4,381     3,383    3,378     1,738
                                  -----      -----     -----    -----     -----
  Working capital               $ 5,658    $ 5,607   $ 7,830  $ 8,407   $ 8,167
                                =======    =======   =======  =======   =======
  Current ratio                    2.62       2.28      3.31     3.49     5.70
                                   ====       ====      ====     ====     ====
  Total assets                  $23,994    $25,995   $24,311  $24,348   $22,554
                                =======    =======   =======  =======   =======
  Long-term debt                $ 5,241    $ 5,551   $ 4,563  $ 5,313   $ 6,000
                                =======    =======   =======  =======   =======
  Deferred income taxes         $ 2,159    $ 2,122   $ 2,221  $ 2,218   $ 2,003
                                =======    =======   =======  =======   =======
  Shareholders' equity          $13,091    $13,941   $14,144  $13,440   $12,813
                                =======    =======   =======  =======   =======
(A) Income per share has been computed  based on the weighted  average number of
common shares outstanding during each period.

Page 7 of 50
<PAGE>

                            BURKE MILLS, INC.PART II


ITEM 7. 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.


                                        Relationship to Total Revenue
                                             For the Year Ended
                                        -----------------------------
                                         Dec. 30  Jan. 1   Jan. 2
                                          2000     2000     1999
                                          ----     ----     ----
Net Sales                                 100.0%  100.0%   100.0%

Cost of Sales                              94.0    90.5     89.7

Gross profit margin                         6.0     9.5     10.3
                                         ------- -------  -------

Selling, general, administrative and
   factoring expenses                       8.2     9.8      7.1
                                         ------- -------  -------
Operating earnings/(loss)                  (2.2)   (0.3)     3.2

Other income                                0.3     0.6      0.4

Other expenses                             (1.9)   (1.3)    (1.3)
                                          ------  ------  -------
Income (loss) before income taxes
  and net equity in affiliates             (3.8)   (1.0)     2.3

Income taxes (credit)                      (1.3)   (0.2)     0.9
                                         ------- -------  -------
                                           (2.5)   (0.8)     1.4

Equity in Net Earnings
Of Affiliate                                0.3     0.3      0.3
                                         -------  ------  -------
Net income (loss)                          (2.2)%  (0.5)%    1.7%
                                         ======== ======= =======



Page 8 of 50
<PAGE>


                                BURKE MILLS, INC.
                                     PART II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------------------------

Results of Operations 2000 Compared to 1999
--------------------------------------------

Net Sales
----------

     Net sales for 2000 decreased to $39.5 million from $42.8 million in 1999 or
7.9%.  The  decline in sales was  primarily  due to the loss of a program in the
third quarter in the  automotive  portion of the  business,  a decline in sewing
thread sales due to the loss of a distributor  that went out of business,  and a
general decline in the textile economy.

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

     Cost of sales for 2000  decreased  to $37.1  million or 4.3% as compared to
$38.8 million in 1999.

     Material cost  decreased  $1,320,000 or 5.4% primarily as a result of lower
sales.  Material cost decreased only 5.4% while net sales  decreased by 7.9% due
to increased cost of polyester yarns.

     Direct  labor  decreased by 28.9%.  The  Company's  direct labor  decreased
primarily as a result of  increased  volume in direct yarns (there is no winding
process), more efficient utilization of labor, and lower sales volume.

     Overhead  cost  decreased by 2.5%.  Although the  Company's  overhead  cost
decreased,  depreciation  cost  in  overhead  increased  by  $493,000  or  26.8%
primarily due to the purchase of machinery.

     Inasmuch as net sales decreased by 7.9% and cost of sales only decreased by
4.3%, the 2000 gross margin decreased to 6.0%, compared to 9.5% in 1999.

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

     Selling,  general and  administrative  expenses  for 2000  aggregated  $3.1
million as compared to $4.1 million in 1999.  In 1999 the Company had a one time
cost of $1,186,000  related to the training and data  conversion for its new ERP
software.

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

     Factor's charges as a percentage of sales were .4% for 2000 and 1999. There
was no change in the factor's agreement.

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

     Interest  expense  increased  by  $162,000  as a result of an  increase  in
long-term debt.

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

     Interest income was approximately the same for 2000 and 1999.


Page 9 of 50
<PAGE>

                                BURKE MILLS, INC.
                                     PART II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------------------------

Results of Operations: 2000 Compared to 1999 (continued)
--------------------------------------------------------

Gain on Disposal of Equipment
-----------------------------

     In 1999 the Company  sold its  friction  texturing  equipment,  which had a
gross value of  $1,342,000  and a net book value of $230,000 for $446,000  (also
see Note 16 Commitments), resulting in a gain on disposal of $216,000.

     Also, the Company  replaced dyeing  equipment with a gross value of $86,000
and a net book value of $26,000, resulting in a loss on disposal of $26,000.

     These  were  the  major  transactions  that  netted a gain on  disposal  of
equipment in 1999.

Equity in Net Earnings of Affiliate
-----------------------------------

     The Company's  Mexican joint venture,  Fytek,  contributed  earnings to the
Company of $131,000 in 2000 compared to $135,000 in 1999. The joint venture only
began operations in November of 1997.

     Fytek  had  sales  in 2000 of $8.5  million  with  income  before  taxes of
$890,000,  and after tax income of  $262,000.  The balance at the end of 2000 in
Fytek's stockholders equity was $1,317,000. (See Note 10.)

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

     Provision  for income  taxes for 2000 was a credit of $540,000  compared to
tax credit of $97,705 in 1999.  The credit in the provision for income taxes was
primarily  due to a loss in 2000.  The  provision  for income taxes  includes an
amount which  represents the tax rate difference of approximately 1% between the
United States and Mexico as applied to the Company's share of undistributed  net
earnings of affiliate.


Page 10 of 50
<PAGE>


                                BURKE MILLS, INC.
                                     PART II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------------------------

Results of Operations 1999 Compared to 1998
--------------------------------------------

Net Sales
----------

     Net sales for 1999 increased to $42.8 million from $42.2 million in 1998 or
1.6%. Total pounds shipped increased by 2.1%.  Full-yarn sales dollars increased
by 2.0% and full-yarn  pounds  increased by 5.0%. Sales of commission yarns (the
dyeing and  processing  of customer  owned yarns)  decreased in both dollars and
pounds  by 7.1%  and  1.1%  respectively.  The  increase  in  sales  was  mainly
attributable to the  introduction of new products in 1998. In the fourth quarter
of 1998, the Company experienced a weakening market and pricing pressures. These
conditions forced reductions in prices to retain customers. After lowering sales
prices in the fourth  quarter of 1998,  the Company  experienced  a volatile raw
yarn market.  In the first half of 1999,  raw yarn prices  declined  forcing the
Company again to lower sales prices to its customers. Then in the second half of
1999,  raw yarn prices  increased and the Company began to increase sales prices
to its customers.


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

     Cost of sales for 1999  increased  to $38.8  million or 2.5% as compared to
37.8 million in 1998.

     Material  cost  decreased  $549,000 or 2.2%  primarily as a result of lower
yarn cost in the first half of 1999.

     Direct labor  increased by 13.3% and overhead cost increased by 11.0%.  The
increase in labor and overhead cost was primarily the result of the installation
and  start-up of the new ERP  software,  and  installation  and  start-up of new
dyehouse equipment which replaced a portion of older equipment.

     In the first half of 1999 the Company  experienced a lag from the time yarn
prices  declined to the time the Company  lowered  sales prices to the customer.
This lag increased the Company's profit margin on materials.  Conversely, in the
second  half of the year,  especially  the  fourth  quarter,  when  yarn  prices
increased, there was a lag in increasing the sales prices to the customers which
decreased the Company's profit margin on materials.

     Inasmuch  as net sales  increased  by 1.6% and cost of sales  increased  by
2.5%, the 1999 gross margin decreased to 9.5%, as compared to 10.3% in 1998.


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

     Selling,  general and  administrative  expenses  for 1999  aggregated  $4.1
million as compared to $2.8 million in 1998. The primary reason for the increase
was  $1,186,000  of cost  related to the  implementation  of the  Company's  ERP
software.

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

     Factor's charges decreased  slightly as the percentage of factored accounts
declined. There was no change in the factor's agreement during 1999.


Page 11 of 50
<PAGE>


                                BURKE MILLS, INC.
                                     PART II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------------------------
Results of Operations: 1999 Compared to 1998 (continued)
--------------------------------------------------------

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

     Interest  income  decreased to $76,000 from $164,000 in 1998.  The decrease
was primarily due to lower average  investment of cash during the year. The 1999
and 1998  interest  income was  primarily  interest  earned on  short-term  cash
equivalents invested with the Company's bank.


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

     Interest  expense  decreased  slightly due to lower average  long-term debt
during the year.


Gain on Disposal of Equipment
-----------------------------

     During 1999 the Company sold its friction texturing equipment,  which had a
gross value of  $1,342,000  and a net book value of $230,000 for $446,000  (also
see Note 16 Commitments), resulting in a gain on disposal of $216,000.

     Also, the Company  replaced dyeing  equipment with a gross value of $86,000
and a net book value of $26,000, resulting in a loss on disposal of $26,000.

     These  were  the  major  transactions  that  netted a gain on  disposal  of
equipment.


Equity in Net Earnings of Affiliate
-----------------------------------

     The Company's  Mexican joint venture,  Fytek,  contributed  earnings to the
Company of $135,000 in 1999 compared to $143,000 in 1998. The joint venture only
began operations in November of 1997.

     Fytek  had  sales  in 1999 of $7.6  million  with  income  before  taxes of
$709,000,  and after tax income of  $270,000.  The balance at the end of 1999 in
Fytek's stockholders equity was $934,000. (See Note 10.)

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

     Provision for income taxes for 1999 was a credit of $97,705 compared to tax
provision of $383,000 in 1998.  The credit in the provision for income taxes was
primarily  due to a loss in 1999.  The  provision  for income taxes  includes an
amount which  represents the tax rate difference of approximately 5% between the
United States and Mexico as applied to the Company's share of undistributed  net
earnings of affiliate.



Page 12 of 50
<PAGE>


                                BURKE MILLS, INC.
                                     PART II


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------------------------

Results of Operations 2000 - 1997 Sales Analysis
-------------------------------------------------

        The table below sets forth an  analysis  of sales  volume for the period
1997 to 2000, inclusive. It discloses that full yarn sales prices decreased from
a high of $3.24 per pound in 1997 to $3.01 in 2000.  Unit prices for  commission
sales have varied based on mix and market conditions.

        The  decrease in full yarn  average  sales prices is a result of a shift
from vertical  dyeing and winding yarn on cones to horizontal  dyeing and direct
shipping which began in 1996, and competitive  pressure on pricing.  The Company
expects in the future a larger portion of its sales will be from direct shipping
of yarn.

                                                  % of         Sales $
                                      % of        Pounds of    Per
                                    Net Sales     Yarn Sold    Pound
                                    ---------     ---------    -----

2000:
     Yarn sales                       96%            93%       $3.01
     Commission sales                  4              7         1.55
                                     ----           ----
            Total                    100%           100%
                                     ====           ====
1999:
     Yarn sales                       95%            92%       $3.13
     Commission sales                  5              8         1.94
                                     ----           ----
            Total                    100%           100%
                                     ====           ====
1998:
     Yarn sales                       95%            91%       $3.22
     Commission sales                  5              9         1.82
                                     ----           ----
            Total                    100%           100%
                                     ====           ====
1997:
     Yarn sales                       96%            93%       $3.24
     Commission sales                  4              7         1.87
                                     ----           ----
            Total                    100%           100%
                                     ====           ====


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 30, 2000,  the
Company had  $2,152,000  due from its  factor,  which will mature on January 22,
2001.  The  Company has the right to borrow up to 90% of the face amount of each
account sold to the factor.



Page 13 of 50
<PAGE>

                                BURKE MILLS, INC.
                                     PART II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------------------------

Liquidity and Capital Resources (continued)
-------------------------------------------

         The  Company  has an  equipment  line of credit from its bank and under
which the Company may borrow up to $3,000,000 for the  acquisition of production
machinery,  and a $1,750,000  Letter of Credit  facility.  The Company  borrowed
$3,000,000 from the Line of Credit and converted the Line of Credit to long-term
debt on February 29, 2000.

      The Company had  inventories  of $4,634,000  as of December 30, 2000.  The
Company's  average  inventories  aggregated  approximately  $4,658,000 for 2000,
representing  approximately 72 days inventory on hand. The Company's inventories
turn approximately 4 to 6 times each year.

      The  Company's  working  capital  increased by  approximately  $668,000 at
December  30,  2000,  from that of  January 1,  2000,  primarily  as a result of
proceeds from long-term  borrowing.  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:

                                      2000         1999        1998
                                      ----         ----        ----
     Working Capital               $5,658,000   $5,607,000   $7,830,000
     Working Capital Ratio          2.62 to 1    2.28 to 1    3.31 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 30, 2000 and January 1, 2000:

                                    December 30         January 1
                                       2000              2000
                                       ----              ----
     Cash, cash equivalents
           and receivables          $4,393,000        $4,388,000
     Current liabilities             3,503,000         4,381,000
                                     ---------         ---------

     Excess of quick assets
         over current liabilities   $  890,000        $    7,000
                                    ==========        ==========

     The aggregate  long-term  debt at December 30, 2000 and January 1, 2000 was
$6,419,642 and $6,562,500  respectively.  In order to finance the acquisition of
new property, plant and equipment of $6,372,000 in 1995, and $4,640,000 in 1999,
the Company incurred a long-term debt of $6,000,000 in 1996,  2,000,000 in 1999,
and  $1,000,000 in 2000 as more fully  described in Note 7 of Notes to Financial
Statements.  Pursuant  to an  agreement  with its bank,  the  obligation  had no
principal  maturities  until February 1998.  Thereafter,  principal  payments of
$62,500  are  payable  monthly  for  ninety-six  (96)  consecutive  months.  The
$3,000,000 obligation principal maturities will begin February 24, 2000, and are
payable at $35,714 monthly for eighty-four (84) consecutive months.

     The Company's  long-term debt to equity ratios aggregated 40.0% at December
30, 2000, 39.8% at January 1, 2000, and 32.3% at January 2, 1999.

     Capital  budget  expenditures  are  estimated for 2001 at  $1,200,000.  The
Company plans to finance its capital  needs from cash  provided from  operations
and bank financing.


Page 14 of 50
<PAGE>

                                BURKE MILLS, INC.
                                     PART II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------------------------


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

     During  the  year  2000,  the  Company  has  had  no  information  systems,
non-information systems, or supplier problems related to the year 2000.

     On May 29, 1999, the Company began using a new fully integrated system that
replaced  its  manufacturing  and  accounting  software.  The new  software  was
installed  to  improve  the  Company's  information  efficiencies  and bring the
Company into compliance for all critical applications affected by the year 2000.
During 1999,  the Company  experienced  an effect on earnings of $1,186,000  for
data conversion and training.

     The cost to bring the existing  software into  compliance  for year 2000 is
not known as the company planned to replace the software.

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 Environment and Natural Resources (DENR). DENR
required a Comprehensive Site Assessment that has been completed.  The Company's
outside engineering firm conducted testing and prepared a Corrective Action Plan
that was submitted to DENR. The Company has identified remediable issues, and is
moving  toward a solution of natural  attenuation.  The Company  believes it has
made an adequate  provision  to earnings  in 1997 to cover any future  cost.  No
additional  provision  was  made in 1999 or  2000.  The  Company  believes  this
situation will have no material impact on the capital expenditures,  earnings or
competitive position of the Company.

Inflation
----------

     The results of  operations  of the Company for the periods  discussed  have
been  affected by  inflation in its  polyester  yarns (the  Company's  major raw
material). Prices have increased steadily since mid-year 1999, and the suppliers
have said that  there is a  possibility  of  further  increases  in 2001.  Also,
natural gas costs have increased approximately 60% since 1999.

Forward Looking Statements
---------------------------

     Certain  statements  in  this  Management's   Discussion  and  Analysis  of
Financial  Condition  and  Results of  Operations,  and other  sections  of this
report,  contain  forward-looking  statements  within  the  meaning  of  federal
securities  laws  about  the  Company's   financial  condition  and  results  of
operations  that  are  based  on  management's  current  expectations,  beliefs,
assumptions,  estimates and  projections  about the markets in which the Company
operates. Words such as "expects", "anticipates", "believes", "estimates",


Page 15 of 50
<PAGE>


                                BURKE MILLS, INC.
                                     PART II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------------------------

Forward Looking Statements (continued)
--------------------------------------

and  variations  of such words and other  similar  expressions  are  intended to
identify such forward looking statements. These statements are not guarantees of
future performance and involve certain risks, uncertainties and assumptions that
are  difficult  to predict.  Therefore,  actual  outcomes and results may differ
materially  from what is  expressed  or  forecasted  in,  or  implied  by,  such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking  statements,  which reflect management's judgement only as
of the date hereof. The Company undertakes no obligations to update publicly any
of these forward-looking statements to reflect new information, future events or
otherwise.

     Factors that may cause actual outcome and results to differ materially from
those expressed in, or implied by, these forward-looking statements include, but
are not  necessarily  limited  to,  availability,  sourcing  and  pricing of raw
materials, pressures on sales prices due to competition and economic conditions,
reliance on and  financial  viability of  significant  customers,  technological
advancements,  employee relations,  changes in construction spending and capital
equipment  expenditures,  (including  those  related to  unforeseen  acquisition
opportunities),  the timely  completion of construction  and expansion  projects
planned or in process,  continued  availability of financial  resources  through
financing  arrangements and operations,  negotiations of new or modifications of
existing   contracts  for  asset  management  and  for  property  and  equipment
construction and acquisition, regulations governing tax laws, other governmental
and authoritative bodies,  policies and legislation,  and proceeds received from
the sale of  assets  held for  disposal.  In  addition  to these  representative
factors,  forward looking  statements  could be impacted by general domestic and
international  economic and industry conditions in the markets where the Company
competes,  such as changes in currency  exchange  rates,  interest and inflation
rates, recession and other economic and political factors over which the Company
has no control.


7A. Quantitative and Qualitative Disclosures about Market Risk
---------------------------------------------------------------

     The  Company  has  not  purchased  any  instruments  or  entered  into  any
arrangements resulting in market risk to the Company for trading purposes or for
purposes other than trading purposes.


Page 16 of 50
<PAGE>


                                BURKE MILLS, INC.
                                     PART II



305 Madison Avenue                                         72 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 Board of Directors of
Burke Mills, Inc.

We have  audited  the  accompanying  balance  sheets of Burke  Mills Inc.  as of
December 30, 2000 and January 1, 2000, and the related statements of operations,
changes in shareholders'  equity,  and cash flows for each of the three years in
the  period  ended  December  30,  2000.  These  financial  statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted  our audit in  accordance  with U.S.  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 30, 2000 and January 1, 2000, and the results of its operations and its
cash flows for each of the three years in the period ended December 30, 2000, in
conformity with U.S. generally accepted accounting principles.


Cole, Samsel & Bernstein LLC
Certified Public Accountants

Lodi, New Jersey
January 26, 2001

Page 17 of 50
<PAGE>


                                BURKE MILLS, INC.
                                     PART II
                                 BALANCE SHEETS

                                               December 30     January 1
                                                  2000           2000
                                                  ----           ----
             ASSETS
Current Assets
  Cash and cash equivalents                    $ 1,305,362    $   592,513
  Accounts receivable                            3,088,069      3,795,519
  Inventories                                    4,633,978      5,062,294
  Prepaid expenses, taxes, and other
    current assets                                 133,711        537,980
                                                ----------     ----------
Total Current Assets                             9,161,120      9,988,306
                                                ==========     ==========

Equity Investment in Affiliate                     586,728        455,728
                                                ----------     ----------

Property, plant & equipment - at cost           31,314,896     31,154,954
  Less: accumulated depreciation                18,018,018     16,078,440
                                                ----------     ----------
       Property, Plant and Equipment- Net       13,296,878     15,076,514
                                                ----------     ----------
Other Assets
  Deferred income taxes                            933,000        356,722
  Deferred charges                                  16,575        118,102
                                                ----------     ----------
Total Other Assets                                 949,575        474,824
                                                ----------     ----------
                                               $23,994,301    $25,995,372
                                               ===========    ===========


                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
  Current maturities of long-term debt         $ 1,178,571    $ 1,011,905
  Accounts payable                               1,897,308      2,929,217
  Accrued salaries and wages                       220,063        200,911
  Other liabilities and accrued expenses           207,300        239,437
  Income taxes payable                                   -              -
  --------------------                          ----------     ----------

        Total Current Liabilities                3,503,242      4,381,470

Long-Term Debt                                   5,241,071      5,550,595

Deferred Income Taxes                            2,158,500      2,121,800
                                                ----------     ----------
Total Liabilities                               10,902,813     12,053,865
                                                ----------     ----------

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                              8,170,968      9,020,987
                                                ----------     ----------
         Total Shareholders' Equity             13,091,488     13,941,507
                                                ----------     ----------
                                               $23,994,301    $25,995,372
                                               ===========    ===========

See notes to financial statements.
Page 18 of 50
<PAGE>


                                BURKE MILLS, INC.
                                     PART II
                            STATEMENTS OF OPERATIONS

                                            Years Ended
                                 ----------------------------------------
                                  December 30    January 1   January 2
                                     2000          2000        1999
                                     ----          ----        ----
Net Sales                       $39,456,009    $42,839,759   $42,169,106
                                -----------    -----------   -----------

Costs and Expenses
  Cost of Sales                 $37,122,514    $38,778,823   $37,825,038
  Selling, general and
    administrative expenses       3,067,594      4,062,367     2,813,137
  Factor's charges                  155,151        155,334       186,234
                                 ----------     ----------    ----------
  Total Costs and Expenses       40,345,259     42,996,524    40,824,409
                                 ----------     ----------    ----------
Operating Earnings (Loss)          (889,250)      (156,765)    1,344,697
                                 ----------     ----------    ----------
Other Income
  Interest income                    74,531         75,998       163,506
  Gain on disposal of
    property assets                  22,051        190,397             -
  Other, net                         23,058         11,815         3,209
                                 ----------     ----------    ----------
           Total Other Income       119,640        278,210       166,715
                                 ----------     ----------    ----------
Other Expenses
  Interest expense                  592,280        430,443       463,099
  Loss on disposal of
    property assets                       -              -           137
  Other, net                        158,707        126,127       103,702
                                 ----------     ----------    ----------

Total Other Expenses                750,987        556,570       566,938
                                 ----------     ----------    ----------

Income (Loss) Before Provision (credit)
   for income taxes and equity in
   net earnings of affiliate     (1,520,597)      (435,125)      944,474

Provision (Credit)
   for Income Taxes                (539,578)       (97,705)      383,125
                                 ----------     ----------    ----------
Income (Loss) Before Equity in
  Net Earnings of Affiliate        (981,019)      (337,420)      561,349

Equity in Net Earnings of
    Affiliate                       131,000        135,000       143,000
                                 ----------    -----------   -----------
Net Income (Loss)                $ (850,019)   $  (202,420)  $   704,349
                                 ===========   ============  ===========

Net Earnings (Loss) per share    $     (.31)   $      (.07)  $       .26
                                 ===========   ============  ===========

Weighted Average Common
  Shares Outstanding              2,741,168      2,741,168    2,741,168
                                 ===========    ===========  ===========
See notes to financial statements.
Page 19 of 50
<PAGE>


                                BURKE MILLS, INC.
                                    PART II
                 STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                    FOR THE THREE YEARS ENDED JANARY 1, 2000

                                  Common Stock
                                   No Par Value
                                   Stated Value
                                   $.66 Per Share
                                   5,000,000 Shares
                                     AUTHORIZED

                                                                    Total
                     Shares                 Paid-In     Retained   Shareholders
                     Issued     Amount      Capital     Earnings    Equity
                     ------     ------      -------     --------    ------

Balance at Jan. 3,
   1998              2,741,168 $1,809,171  $3,111,349  $8,519,058 $13,439,578

Net Income (loss)
   for the year ended
   Jan. 2, 1999            -           -         -        704,349     704,349
                     ---------- ---------- ----------  ----------  ----------

Balance at Jan. 2,
   1999              2,741,168 $1,809,171  $3,111,349  $9,223,407 $14,143,927

Net Income (loss) for
   the year ended
   Jan. 1, 2000            -           -         -       ($202,420) ($202,420)
                       ---------  ---------- ---------- ----------  ----------

Balance at Jan. 1,
   2000              2,741,168  $1,809,171 $3,111,349  $9,020,987  $13,941,507

Net Income (loss)
   for the year ended
   Dec. 30, 2000      -              -          -        (850,019)    (850,019)
                     ----------  ---------- ----------  ----------   ----------

Balance at
   Dec. 30, 2000    2,741,168  $1,809,171  $3,111,349  $8,170,968  $13,019,488
                    ========== ==========  ==========  ==========  ===========




See notes to financial statements.

Page 20 of 50
<PAGE>


                                BURKE MILLS, INC.
                                    PART II
                            STATEMENTS OF CASH FLOWS

                                                  Years Ended
                                            -----------------------------------
                                           December 30   January 1    January 2
                                              2000         2000         1999
                                              ----         ----         ----
Cash flows from operating activities:
  Net income (loss)                        $ (850,019)  $ (202,420)  $ 704,349
                                            ----------   ----------  ----------
  Adjustments to reconcile net income to
     net cash provided by operating activities:
  Depreciation                              2,331,632    1,838,995   1,743,524
  (Gain) loss on sales of plant and
     equipment, including loss on disposals   (22,051)    (190,397)        137
  Deferred income taxes                      (539,578)    (106,758)    315,236
  Equity  in  net  earnings  of  affiliate   (131,000)    (135,000)   (143,000)
Changes  in  assets  and  liabilities:
  Accounts receivable                         707,450     (335,212)    310,994
Inventories                                   428,316   (1,356,445)   (699,551)
Prepaid expenses, taxes & other
    current assets                            404,269     (224,108)   (275,040)
Other non-current assets                      101,527       48,975      26,239
    Accounts payable                       (1,031,909)     625,341     222,639
    Accrued salaries & wages                   19,152       40,049     (30,266)
    Other liabilities and accrued expenses    (32,137)     102,341    (280,725)
    Income taxes payable                           --      (31,600)     31,600
                                            ----------    ---------  ---------
        Total adjustments                   2,235,671      276,181   1,221,787
                                            ----------    ---------  ---------

Net cash provided by operating activities   1,385,652       73,761   1,926,136
                                            ----------    ---------  ---------

Cash flows from investing activities:
  Acquisition of property, plant
      and equipment                          (631,445)  (4,640,380) (2,161,837)
  Proceeds from sales of plant
      and equipment                           101,500      524,693       1,100
 Investment in affiliate                           --           --          --
                                            ----------   ----------  ----------

Net cash (used) by investing activities      (529,945)  (4,115,687) (2,160,737)
                                            ----------  -----------  ----------

Cash flows from financing activities:
  Proceeds from long-term bank note         1,000,000    2,000,000          --
  Principal payments of long-term debt     (1,142,858)    (750,000)   (687,500)
                                           -----------  -----------  ----------
Net cash provided (used) by financing
  activities                                 (142,858)   1,250,000    (687,500)
                                           -----------  -----------  ----------
Net increase (decrease) in cash and
  cash equivalents                            712,849   (2,791,926)   (922,101)
Cash & cash equivalents at beginning
  of year                                     592,513    3,384,439    4,306,540
                                           -----------  -----------  ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR   $1,305,362   $  592,513   $3,384,439
                                           ===========  ===========  ==========

See notes to financial statements.
Page 21 of 50
<PAGE>


                                BURKE MILLS, INC.
                                    PART II
                         NOTES TO FINANCIAL STATEMENTS


NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------

     Accounting  period - The Company's  fiscal year is the 52 or 53 week period
ending the Saturday  nearest to December 31. Fiscal years 2000,  1999,  and 1998
ended on December 30, 2000, January 1, 2000, and January 2, 1999,  respectively.
The three fiscal years consisted of 52 weeks.

     Revenue  recognition  -  Revenues  from  sales are  recognized  at the time
shipments are made to the customer.

     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
         Computer 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 - The  preparation  of
financial statements in conformity with generally accepted accounting principles
requires  management  to make  estimates  and  assumptions  that affect  certain
reported amounts and disclosures.  Accordingly, actual results could differ from
those estimates.


NOTE 2 - SEGMENTS OF BUSINESS ENTERPRISE
----------------------------------------

       The Company is engaged in  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.


Page 22 of 50
<PAGE>


                                BURKE MILLS, INC.
                                    PART II
                         NOTES TO FINANCIAL STATEMENTS


NOTE 2 - SEGMENTS OF BUSINESS ENTERPRISE (continued)
----------------------------------------------------

     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 had foreign sales as follows:

                    Country           2000             1999              1998
                    -------           ----             ----              ----

                    Mexico             .82%             .2%              1.0%
                    Canada            4.8%             4.3%              6.4%
                    Brazil             .0%              .3%               .3%
                    Honduras           .74%             .0%               .0%
                    Nicaragua          .09%             .0%               .0%
                    Barbados           .07%             .0%               .0%
                                      ----             ----              ----
       Total..........                6.52%            4.8%              7.7%

     Other than sales as shown above,  the Company had no other sales in foreign
markets during the three year period ended December 30, 2000. For the three year
period  ended  December  30,  2000,  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, no customers have exceeded 10%
of the Company's  sales during each of the three years ended  December 30, 2000.
One  customer  has  exceeded  10% in 1999  and  2000.  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 two customers:
                                                             % of
           2000                      Amount                 Net Sales
           ----                      ------                 ---------
         Customer 1                $5,608,000                 14.2%
         Customer 2                     *                      --
         Customer 3                 5,541,000                 14.0


                                                             % of
           1999                      Amount                 Net Sales
           ----                      ------                 ---------
         Customer 1                $8,012,000                 18.7
         Customer 2                 5,089,000                 11.9
         Customer 3                     *                      --


                                                             % of
           1998                      Amount                 Net Sales
           ----                      ------                 ---------
         Customer 1                     *                      --
         Customer 2                $5,793,000                 13.7
         Customer 3                     *                      --


*Less than 10%

Page 23 of 50
<PAGE>


                                BURKE MILLS, INC.
                                    PART II
                         NOTES TO FINANCIAL STATEMENTS


NOTE 3 - ACCOUNTS RECEIVABLE
--------------------------------

Accounts receivable comprise the following:

                                      December 30         January 1
                                        2000                2000
                                        ----                ----
     Due from factor on
          regular factoring account   $2,152,000         $2,271,000
     Non-factored accounts
          receivable                     936,000          1,525,000
                                      ----------          ---------
               Total                  $3,088,000         $3,796,000
                                      ==========         ==========

     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.  The
factor assumes the credit risks for these accounts and effects the collection of
the receivables.  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 of nonpayment by customers.

     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.  The Company  incurred no interest  costs during 2000 and 1999,
inasmuch as it borrowed no funds from its factor during these years.


     The Company's factor is collateralized  by the accounts  receivable sold to
the  factor,  and the  factor  has filed a UCC-1 to  evidence  ownership  of the
receivables and to separate the  receivables  from the company's  creditors.  No
interest in inventory, other than returned goods, has been granted to the factor
under the factoring contract.


NOTE 4 - INVENTORIES
-----------------------

  Inventories are summarized as follows:

                                     December 30,       January 1,
                                        2000              2000
                                        ----              ----
     Finished & in process          $3,103,000        $3,235,000
     Raw materials                   1,136,000         1,345,000
     Dyes & chemicals                  277,000           343,000
     Other                             118,000           139,000
                                    ----------        ----------
     Total                          $4,634,000        $5,062,000
                                    ==========        ==========




Page 24 of 50
<PAGE>


                                BURKE MILLS, INC.
                                    PART II
                         NOTES TO FINANCIAL STATEMENTS


NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
------------------------------------------

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

                                 December 30, 2000       January 1, 2000
                                 ------------------      ----------------
                                        Accumulated            Accumulated
                               Cost     Depreciation   Cost    Depreciation
                               ----     ------------   ----    ------------

Land                     $   156,425   $     --    $    86,565  $       --
Land improvements            182,913       94,653      182,913       88,335
  Building & improvements  6,382,541    4,539,462    6,427,129    4,384,047
  Plant machinery &
    equipment             22,960,405   12,344,171   22,854,112   10,721,424
  Office equipment         1,466,535      928,629    1,381,155      755,061
  Automotive equipment       166,077      111,103      223,080      129,573
                           ---------   ----------   ----------   ----------
Total                    $31,314,896  $18,018,018  $31,154,954  $16,078,440
                         ===========  ===========  ===========  ===========


NOTE 6 - LINE OF CREDIT LOAN
--------------------------------

     Pursuant to a loan agreement  dated March 29, 1996, and a second  amendment
dated  January 20,  2000,  the Company  secured an  Equipment  Loan  facility of
$3,000,000 and a $1,750,000 Letter of Credit facility.  The Equipment Loan shall
be  evidenced  by the  Equipment  Note,  and shall bear  interest at a rate that
varies  with  the  LIBOR  rate.  The  Equipment  Note  would  be  payable  in 84
installments.  The Company has  borrowed  $3,000,000  under this line of credit.
Also under the Company's factoring arrangement,  the Company may borrow from the
factor up to 90% of the face amount of each account  sold to the factor.  During
2000 the Company had no borrowings from its factor.


NOTE 7 - LONG-TERM DEBT
-----------------------

     On March 29, 1996, the Company  entered into a loan agreement with its bank
providing  for a term  loan of  $6,000,000.  The 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.

     Under the term loan  agreement,  interest  only was payable  monthly  until
February  1998.  Thereafter,  principal  maturities are payable in the amount of
$62,500 per month for ninety-six  (96)  consecutive  months plus interest at the
floating LIBOR rate plus 1.90%.



Page 25 of 50
<PAGE>


                                BURKE MILLS, INC.
                                    PART II
                         NOTES TO FINANCIAL STATEMENTS


NOTE 7 - LONG-TERM DEBT (continued)
-----------------------------------

     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 this long-term debt at December 30, 2000
are as follows:


                  Current portion                        $  750,000
                  2002                  750,000
                  2003                  750,000
                  2004                  750,000
                  2005                  750,000
                  Thereafter             62,500           3,062,500
                                       ---------          ---------
                                                         $3,812,500

     Under the loan  agreement,  the Equipment Line of Credit was converted to a
$3,000,000 long-term note payable in 84 installments of $35,714 plus interest at
the floating LIBOR rate plus 1.90%. The Company converted the Line of Credit and
began installments on February 29, 2000.

     The annual principal maturities of this long-term debt at December 30, 2000
based on the current amount owned are as follows:

                         Current Portion                 $  428,571
                         2002            $  428,571
                         2003               428,571
                         2004               428,571
                         2005               428,571
                         Thereafter         464,287       2,178,571
                                            -------       ---------
                                                         $2,607,142


NOTE 8 - OTHER LIABILITIES AND ACCRUED EXPENSES
----------------------------------------------

Other liabilities and accrued expenses consist of the following:

                                       December 30       January 1
                                         2000              2000
                                         ----              ----
Employee insurance                     $170,000        $120,000
Payroll taxes payable                    19,000         106,000
Other                                    18,000          13,000
                                        --------        --------
       Total                            $207,000        $239,000
                                        ========        ========


Page 26 of 50
<PAGE>

                                BURKE MILLS, INC.
                                    PART II
                         NOTES TO FINANCIAL STATEMENTS


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 that comprise deferred tax assets and liabilities are as follows:
                                               Dec. 30       Jan. 1
                                                2000          2000
                                                ----          ----
Deferred tax assets:
  Alternative minimum taxes paid            $  349,000     $  349,000
Net Operating Carryover                        570,000
Inventory capitalization                         5,500          6,020
Charitable contributions carryover               8,500          1,702
                                              ---------     ---------
                                            $  933,000     $  356,722
                                             ==========    ==========
Deferred tax liabilities:
  Accelerated depreciation for
     tax purposes                           $2,154,100     $2,100,700
  Undistributed earnings of foreign
     Affiliate, net of tax credit                4,400         21,100
  Other                                             -              -
                                             ---------       ---------
                                            $2,158,500     $2,121,800
                                            ==========     ===========
Provision for taxes consist of:
                                           Dec. 30       Jan. 1       Jan. 2
                                            2000          2000         1999
                                            ----          ----         ----
Current:
     Federal                              $  -         $    -        $ 49,445
     State                                   -              -          18,444
Deferred                                   (539,578)     (97,705)     315,236
                                           -------       -------      -------
     Total                                $(539,578)    ($97,705)    $383,125
                                          =========     =========    =========

     The  provision  for income  taxes on  historical  income  differs  from the
amounts computed by applying the applicable  Federal statutory rates, due to the
following:
                                                  Years Ended
                                    December 30    January 1     January 2
                                      2000           2000          1999
                                      ----           ----          ----
Income (loss) before income taxes
   (credit)                        $1,520,597     ($435,125)   $1,184,974
Federal income taxes                      34%            34%          34%
                                     --------      ----------    ---------

Computed taxes (credit) at maximum
   statutory tax rate                (517,003)    (147,943)       402,891
State income taxes (credit), net of
   Federal income tax benefits        (23,885)     (15,260)        56,098
Total adjustment for foreign
   affiliate earnings                   1,310       66,130        (81,770)
Prior year tax examination and
   other                                  -           (632)         5,906
                                     ---------    ---------     ---------
     Provision for income taxes    $ (539,578)    ($97,705)     $ 383,125
                                     =========    ==========    =========
Page 27 of 50
<PAGE>


                                BURKE MILLS, INC.
                                    PART II
                         NOTES TO FINANCIAL STATEMENTS

NOTE 9 - INCOME TAXES (continued)
---------------------------------
     The  net operating loss carryforward is $1,861,803, expiring 2019 and 2020.
The tax effect at  the   maximum tax rate would  be  $717,000.  Inasmuch  as the
Company has  paid and has set forth $349,000 for alternative minimum taxes paid,
which  may only  be  used to  offset normal income taxes that may be incurred in
future years, the Company has  provided a  valuation  allowance of approximately
$150,000 for the tax effect of this net operating loss carryforward.



NOTE 10 - INVESTMENT IN AFFILIATE AND RELATED PARTY TRANSACTIONS
-------------------------------------------------------------------

     The  company  owns  49.8%  of  Fytek,  S.A.  de  C.V.  (Fytek),  a  Mexican
corporation.  Fytek began  operation in the fourth  quarter of 1997. The company
accounts for the ownership using the equity method.  The Company had no sales to
Fytek in 2000 or 1999.  Purchases from Fytek in 2000 were $1,869,000 compared to
$1,441,000  in 1999.  At December  30,  2000 Fytek owed the Company  $49,000 for
leased equipment which will be paid in 2001. Fytek's financial information is as
follows:

                               Statement of Income
                         (In thousands of U.S. Dollars)
                                         2000        1999
                                         ----        ----
Net Sales                               $8,508      $7,623
Gross Profit                             1,419       1,262
Income from continuing operations          890         709
Income before income taxes                 890         709
Income taxes                               628         439
                                          ----        ----
Net income                              $  262      $  270
                                        ======      ======


                                  Balance Sheet
                          (In thousands of U.S. Dollars)

                                              2000           1999
                                              ----           ----
Current assets                               $4,175        $4,176
Non-current                                     166           144
                                               ----          ----
Total assets                                 $4,341        $4,320
                                             ======        ======

Current liabilities                          $3,024        $3,386
Non-current liabilities                         -0-           -0-
                                             ------        ------
Total liabilities                            $3,024        $3,386

Stockholder's equity                          1,317           934
                                             ------        ------
Total liabilities and stockholder's equity   $4,341        $4,320
                                             ======        ======

Page 28 of 50
<PAGE>


                                BURKE MILLS, INC.
                                    PART II
                         NOTES TO FINANCIAL STATEMENTS


NOTE 10 - INVESTMENT IN AFFILIATE AND RELATED PARTY TRANSACTIONS (continued)
----------------------------------------------------------------

     In 2000, the Company purchased  $739,000 of yarns from Nafees Cotton Mills,
Ltd. The Company paid for the yarn purchased by Letters of Credit at 120 and 180
days from bill of lading date.  Future purchases could reasonably be anticipated
if the Company receives orders for its Nafees yarns.

     Humayun N. Shaikh,  Chairman and CEO of  the Company,  is also  Director of
Nafees Cotton  Mills,  Ltd.    Aehsun Shaikh, Director of the Company, is also a
Director of Nafees Cotton Mills,  Ltd., since  1993 and  of Legler-Nafees  Denim
Mills,  Ltd., since 1999.


NOTE 11 - 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  $590,000  in 2000,  $446,000 in 1999 and  $470,000  in 1998.  The
Company had no cash payments  during 2000 for income taxes and received  $23,000
for a refund compared to $65,055 paid in 1999 and $33,500 in 1998.


NOTE 12 - RENTAL EXPENSES AND LEASE COMMITMENTS
-----------------------------------------------

       Rental  expenses under all lease  commitments  for the three fiscal years
ended December 30, 2000, aggregated $45,000,  $48,000, and $37,000 respectively.
Minimum commitments under terms of all non-cancelable leases, which consist only
of leased equipment, are as follows as of December 30, 2000:

                    2001                  $17,640
                    2002                   10,830
                                           ------
                                          $28,470
                                          =======


Page 29 of 50
<PAGE>

                                BURKE MILLS, INC.
                                    PART II
                         NOTES TO FINANCIAL STATEMENTS


NOTE 13 - QUARTERLY FINANCIAL DATA (UNAUDITED)
----------------------------------------------

                    (in thousands of dollars except for per share amounts)
                                                    QUARTER
                                      ------------------------------------

  2000                                 First     Second    Third     Fourth
  ----                                 -----     ------    ------    ------
  Net sales                           $11,058   $10,457   $ 9,279   $ 8,662
  Cost of sales                        10,361     9,681     8,958     8,123
  Gross profit                            697       776       321       539
  Net income (loss)                      (186)      (68)     (247)     (349)
  Net income (loss) per common share  $  (.07)  $  (.02)  $  (.09)  $  (.13)


  1999                                 First     Second     Third    Fourth
  ----                                 -----     ------     ------   ------
  Net sales                           $ 9,996   $10,796    $11,625  $10,423
  Cost of sales                         8,719     9,782     10,106   10,172
  Gross profit                          1,277     1,014      1,519      251
  Net income (loss)                       106        60         28     (396)
  Net income (loss) per common share  $   .04   $   .02    $   .01  $  (.14)

  1998
  ----
  Net sales                           $10,649   $10,023    $11,509  $ 9,988
  Cost of sales                         9,388     9,055      9,976    9,406
  Gross profit                          1,261       968      1,533      582
  Net income (loss)                       307       208        394     (205)
  Net income (loss) per common share  $   .11   $  .08     $   .14  $  (.07)


NOTE 14 - EMPLOYEE BENEFIT PLAN
-----------------------------------

     The Company is a participating  employer in the Burke Mills,  Inc., Savings
and Retirement  Plan and Trust that 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 but not to exceed  dollar limits set by law. The employer may
make a discretionary  contribution  for each employee out of current net profits
or accumulated  net profits in an amount the employer may from time to time deem
advisable. No provision was made for a discretionary contribution in 2000, 1999,
or 1998.


NOTE 15 - CONCENTRATIONS OF CREDIT RISK
--------------------------------------------

     Financial instruments that 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 21st to the 30th of the following  month.  At December 30,
2000,  the Company had  $2,152,000  due from its factor which matures on January
22, 2001. Upon maturity,  the funds are automatically  transferred by the factor
to the Company's bank.




Page 30 of 50
<PAGE>


                                BURKE MILLS, INC.
                                    PART II
                         NOTES TO FINANCIAL STATEMENTS


NOTE 16 - OTHER COMMITMENTS
------------------------------

       a) The Company entered into a supply agreement,  dated November 23, 1996,
with its joint venture company,  Fytek,  S.A. de C.V. to purchase twisted yarns.
The Company agrees to purchase approximately $1,800,000 of twisted yarn annually
for the five years beginning November 1997.

       b) The Company entered into a supply agreement,  dated November 19, 1996,
with Fibras Quimicas, S.A. to purchase yarn. The Company agrees to purchase yarn
based on the schedule below, beginning February 1, 1997, for a five year period.

                  Year 1            Approximately $2,600,000
                  Year 2            Approximately $6,400,000
                  Year 3            Approximately $7,100,000
                  Year 4            Approximately $7,700,000
                  Year 5            Approximately $7,700,000

       c) The Company and Titan Textile Company, Inc., signed an agreement which
became effective April 1, 1999,  whereby the Company sold its friction texturing
equipment  to Titan and in turn will  purchase  textured  yarns from Titan.  The
agreement  states that the Company will purchase  70,000 pounds per week as long
as the  Company  has a  requirement  for  textured  yarns.  When  the  Company's
requirements exceeds 140,000 pounds per week, the Company will purchase at least
50% of its requirements  from Titan. The textured yarn pricing structure will be
reviewed  every six months and when POY prices  increase  or  decrease  by 5% or
more.

       d) 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 Environment and Natural Resources (DENR). DENR
required a Comprehensive Site Assessment that has been completed.  The Company's
outside engineering firm conducted testing and prepared a Corrective Action Plan
that was submitted to DENR. The Company has identified remediation issues and is
moving  toward a solution of natural  attenuation.  The Company  believes it has
made an adequate  provision  to earnings  in 1997 to cover any future  cost.  No
additional provision was made in 1998, 1999, or 2000.  The Company believes this
situation will have no  material impact on the capital expenditures, earnings or
competitive position of the Company.

       e) On November 18, 1999, the Company  entered into a three year agreement
with Trio  Marketing  & Sales  Company,  LLC (Trio) to market and sell  imported
yarns. Under the agreement the Company will import yarns which would be marketed
and sold by Trio.  Trio will receive a commission  based on the net sales price.
The  commission  would be 4% during the first six months of the  contract and 3%
thereafter.  Trio would also receive 15% of the profits before taxes realized on
the sales of the yarns.

     (f) The Company is one of eight  defendants in a case brought in the United
States District Court for the Southern District of Texas, Houston Division, by a
plaintiff individually  and as  next friend for a minor.  The complaint  alleges
that the  minor  plaintiff  was  injured  as a  result of  burns  suffered when



Page 31 of 50
<PAGE>


                                BURKE MILLS, INC.
                                    PART II
                         NOTES TO FINANCIAL STATEMENTS


NOTE 16 - OTHER COMMITMENTS  (continued)
---------------------------

stripping on the side of a pair of jeans purchased by the minor caught fire. The
complaint alleges that the Company was one of two  manufacturers  providing yarn
to the defendant who allegedly  manufactured the stripping sewn on to the jeans.
The  Company  is  defending  the suit  through  legal  counsel  provided  by the
Company's  products liability  insurance carrier.  Based upon the facts known to
the  Company  at  this  time,  the  Company  does  not  believe  that it will be
determined to have any monetary  liability to the  plaintiffs in this case.  The
Company further  believes that if the Company is determined to have any monetary
liability  to the  plaintiffs,  such  liability  will be covered by its products
liability insurance policy.

NOTE 17 - RECLASSIFICATIONS
---------------------------

      The  deferred   income   tax   assets   for  January  1,  2000  have  been
reclassified  from  current   assets  to   non-current   assets to   conform  to
presentations utilized in the December 30, 2000, balance sheet.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
        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 fiscal
years.


                                    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  for the  annual  meeting  of  shareholders
scheduled  for May 29,  2001,  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 32 of 50
<PAGE>


                                BURKE MILLS, INC.
                                    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:

                  Independent auditors' report

                  Balance sheets
                    December 30, 2000
                    January 1, 2000

                  Statements of operations
                    Year ended December 30, 2000
                           Year ended January 1, 2000
                           Year ended January 2, 1999

                  Statements of changes in shareholders' equity
                    Year ended December 30, 2000
                           Year ended January 1, 2000
                           Year ended January 2, 1999

                  Statements of cash flows
                    Year ended December 30, 2000
                           Year ended January 1, 2000
                           Year ended January 2, 1999

                  Notes to financial statements

Page 33 of 50
<PAGE>



                                BURKE MILLS, INC.


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

     (a) 2. 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 35 of this
report.

     (b) During the last quarter of the period  covered by this report no report
on Form 8-K was filed.

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

     (d)  Exhibit  99  Audited  Financial  Statement  referred  to in Note 10 of
Financial Statements.




Page 34 of 50
<PAGE>



                                Burke Mills, Inc.
                            Financial Data Schedule

                    Pursuant to Item 601(c) of Regulation S-K

         THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
           FROM THE FINANCIAL STATEMENTS INCLUDED IN THE ANNUAL REPORT
  ON FORM 10K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
                STATEMENTS FOR THE YEAR ENDED DECEMBER 30,2000.


NUMBER              ITEM DESCRIPTION                                 AMOUNT

5-02(1)             cash & cash items                             $1,305,362
5-02(2)             marketable securities                                  0
5-02(3)(a)(1)       notes & accounts receivable-trade              3,088,069
5-02(4)             allowances for doubtful accounts                       0
5-02(6)             inventory                                      4,633,978
5-02(9)             total current assets                           9,161,120
5-02(13)            property, plant & equipment                   31,314,896
5-02(14)            accumulated depreciation                      18,018,018
5-02(18)            total assets                                  23,994,301
5-02(21)            total current liabilities                      3,503,242
5-02(22)            bonds, mortgages & similar debt                5,241,071
5-02(28)            preferred stock - mandatory redemption                 0
5-02(29)            preferred stock - no mandatory redemption              0
5-02(30)            common stock                                   1,809,171
5-02(31)            other stockholders' equity                    11,282,317
5-02(32)            total liabilities & stockholders' equity      23,994,301
5-03(b)1(a)         net sales of tangible products                39,456,009
5-03(b)1            total revenues                                39,456,009
5-03(b)2(a)         cost of tangible goods sold                   37,122,514
5-03(b)2            total costs & expenses applicable
                       to sales and revenues                      37,122,514
5-03(b)3            other costs & expenses                                 0
5-03(b)5            provision for doubtful accounts & notes                0
5-03(b)(8)          interest & amortization of debt discount         592,280
5-03(b)(10)         income (loss) before taxes & other items      (1,389,597)
5-03(b)(11)         income tax expense (credit)                   (539,578)
5-03(b)(14)         income (loss) continuing operations           (850,019)
5-03(b)(15)         discontinued operations                        0
5-03(b)(17)         extraordinary items                            0
5-03(b)(18)         cumulative effect - changes in accounting
                        principles                                 0
5-03(b)(19)         net income or loss                            (850,019)
5-03(b)(20)         earnings (loss) per share - primary           (.31)
5-03(b)(20)         earnings (loss) per share - fully diluted     (.31)




Page 35 of 50
<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 27, 2001                   BURKE MILLS, INC.

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


                                        By: Thomas I. Nail       /s
                                            -----------------------
                                            Thomas I. Nail
                                            President
                                           (Principal Financial Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.

Date: March 27, 2001                        By: Humayun N. Shaikh       /s
                                                ---------------------------
                                            Humayun N. Shaikh, Director


Date: March 27, 2001                        By: Aehsun Shaikh           /s
                                            ---------------------------
                                            Aehsun Shaikh, Director


Date: March 27, 2001                        By: Thomas I. Nail          /s
                                            ---------------------------
                                            Thomas I. Nail, Director


Date: March 27, 2001                        By: Robert P. Huntley       /s
                                            ---------------------------
                                            Robert P. Huntley, Director


Date: March 27, 2001                        By: William T. Dunn         /s
                                            ---------------------------
                                            William T. Dunn, Director
Page 36 of 50
<PAGE>