SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)
   X     QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
  ---    EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED OCTOBER 2, 1999


                                       OR

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

               Commission file numbers 333-42411 and 333-42411-01

                               GLENOIT CORPORATION
             (Exact name of registrant as specified in its charter)

Delaware                                                         13-3862561
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                            Identification Number)

                            GLENOIT ASSET CORPORATION
             (Exact name of registrant as specified in its charter)

Delaware                                                         51-0343206
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                            Identification Number)


                              111 West 40th Street
                            New York, New York 10018
                            Telephone: (212) 391-3915


(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

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 [ ]   No [X]


None of the voting securities of Glenoit Corporation or Glenoit Asset
Corporation is held by non-affiliates.

As of October 2, 1999, there were 1,000 shares of Glenoit Corporation common
stock outstanding.



                    DOCUMENTS INCORPORATED BY REFERENCE: NONE


                                       1
<PAGE>


PART 1 - FINANCIAL INFORMATION

Item 1.     Financial Statements

                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>


                                                                            January 2,    October 2,
                                                                                 1999          1999
                                                                           -----------  ------------
                                    ASSETS                                               (Unaudited)
Current assets:
<S>                                                                      <C>           <C>
     Cash and cash equivalents                                           $     339,700 $     760,749
     Receivables:
          Trade accounts receivable, net of allowance of $2,360,000 and     29,666,112    48,300,204
               $4,450,000 as of January 2, 1999 and October 2, 1999,
               respectively
          Other receivables                                                    364,996     4,852,327
     Inventories                                                            19,734,042    56,912,311
     Due from Holdings                                                              -        613,745
     Prepaid expenses and other current assets                               3,797,479     3,661,220
                                                                           -----------   -----------

                    Total current assets                                    53,902,329   115,100,556

Property, plant and equipment, net                                          49,108,311    70,521,258

Other assets:
     Notes receivable from related party                                       266,821       251,818
     Intangible assets, net of accumulated amortization of $1,735,000
          and $2,655,000 as of January 2, 1999 and October 2, 1999,
          respectively                                                      35,715,233    50,470,614
     Deferred loan costs and other, net of accumulated amortization of
          $1,181,000 and $2,337,000 as of January 2, 1999 and October 2,
          1999, respectively                                                 5,195,653     9,408,457
     Other assets                                                              510,716       957,017
                                                                           -----------   -----------

                    Total assets                                       $   144,699,063 $ 246,709,720
                                                                           ===========   ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.


                                       2
<PAGE>



                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                              January 2,            October 2,
                                                                                 1999                  1999
                                                                            ---------------       ---------------
          LIABILITIES AND STOCKHOLDER'S DEFICIT                                                    (Unaudited)
<S>                                                                    <C>                    <C>
Current liabilities:
     Accounts payable                                                  $         2,888,602    $       12,514,986
     Accrued expenses                                                           21,820,034            19,678,405
     Current maturities of long-term debt                                                -           161,325,000
     Due to Holdings                                                             1,752,143                     -
                                                                            ---------------       ---------------

                    Total current liabilities                                   26,460,779           193,518,391

Long-term debt less current maturities                                         160,707,499            95,000,000
Deferred income taxes                                                            3,382,058             6,433,618
Other long-term liabilities                                                        504,196             7,011,979
                                                                            ---------------       ---------------

                    Total liabilities                                          191,054,532           301,963,988
                                                                            ---------------       ---------------

Commitments and contingencies

Stockholder's deficit:
     Common stock, $.01 par value, 1,000 shares authorized, issued
         and outstanding as of January 2, 1999 and October 2, 1999                      10                    10
     Additional paid-in capital                                                  1,461,713             1,461,713
     Accumulated deficit                                                       (46,966,633)          (56,229,244)
     Accumulated other comprehensive loss                                         (850,559)             (486,747)
                                                                            ---------------       ---------------

                    Total stockholder's deficit                                (46,355,469)          (55,254,268)
                                                                            ---------------       ---------------

                    Total liabilities and stockholder's deficit        $       144,699,063    $      246,709,720
                                                                            ===============       ===============

</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.




                                       3

<PAGE>

                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
                  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
                                                        Three Months Ended                 Nine Months Ended
                                                ------------------------------    ------------------------------
                                                  October 3,        October 2,      October 3,        October 2,
                                                    1998               1999            1998             1999
                                                -------------    -------------    -------------    -------------
<S>                                          <C>                <C>               <C>              <C>
Net sales                                    $     45,126,817   $   85,978,312    $ 133,066,909    $ 222,134,884

Cost of sales                                      31,919,884       60,081,107       91,073,159      156,998,280
                                                -------------    -------------    -------------    -------------

          Gross profit                             13,206,933       25,897,205       41,993,750       65,136,604
                                                -------------    -------------    -------------    -------------

Operating expenses:
     Selling                                        3,910,112        6,494,976       11,173,760       17,944,465
     Administrative                                 2,011,487        7,992,445        6,951,888       26,325,896
     Research and development                         562,173        1,083,690        1,484,254        3,123,115
     Restructuring charge                                  --               --               --       13,100,000
                                                -------------    -------------    -------------    -------------
          Total operating expenses                  6,483,772       15,571,111       19,609,902       60,493,476
                                                -------------    -------------    -------------    -------------

Income from operations                              6,723,161       10,326,094       22,383,848        4,643,128
                                                -------------    -------------    -------------    -------------

Other income (expense):
     Interest expense                              (3,292,375)      (6,637,999)      (9,608,288)     (18,030,471)
     Amortization of deferred financing costs        (160,411)        (468,414)        (479,134)      (1,155,952)
     Other                                           (177,861)         (24,566)        (181,567)         180,786
                                                -------------    -------------    -------------    -------------
          Total other expense                      (3,630,647)      (7,130,979)     (10,268,989)     (19,005,637)
                                                -------------    -------------    -------------    -------------

Income (loss) before income taxes                   3,092,514        3,195,115       12,114,859      (14,362,509)

Income tax expense (benefit)                        1,120,985        1,389,788        4,444,038       (5,099,898)
                                                -------------    -------------    -------------    -------------

Income (loss) before extraordinary loss             1,971,529        1,805,327        7,670,821       (9,262,611)

Extraordinary loss on early extinguishment
   of debt net of tax benefit of $67,000              117,236                           117,236
                                                -------------    -------------    -------------    -------------


Net income (loss)                            $      1,854,293    $   1,805,327    $   7,553,585    $  (9,262,611)
                                                =============    =============    =============    =============
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.


                                        4

<PAGE>


                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
           CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIT (UNAUDITED)
                    FOR THE NINE MONTHS ENDED OCTOBER 2, 1999
<TABLE>
<CAPTION>
                                                                                      Accumulated
                      Shares of               Additional                              Other
                      Common      Common      Paid-in         Accumulated             Comprehensive
                      Stock       Stock       Capital         Deficit                 Loss                  Total
                      ----------  ----------  ------------    ------------------      ----------------      ----------------
<S>        <C>            <C>   <C>         <C>                   <C>                      <C>                <C>
Balance as of
   January 2, 1999        1,000     $  10    $ 1,461,713         $ (46,966,633)           $ (850,559)        $ (46,355,469)

Net loss                                                             (9,262,611)                                 (9,262,611)

Accumulated Other
   Comprehensive                                                                              363,812               363,812
   Income
                      ----------  ----------  ------------    ------------------      ----------------      ----------------

Balance as of
  October 2, 1999         1,000     $  10     $1,461,713         $ (56,229,244)           $ (486,747)        $ (55,254,268)
                      ==========  ==========  ============    ==================      ================      ================

          Consolidated Statement of Comprehensive Income (Unaudited)


                                                                           Nine Months Ended
                                                              ----------------------------------------
                                                                 October 3,             October 2,
                                                                    1998                   1999
                                                              ------------------      ----------------
Net income (loss)                                         $           7,553,585   $       (9,262,611)

Other comprehensive income (loss), net of tax:
   Currency translation adjustment                                     (693,581)             231,020
                                                              ------------------      ----------------

Comprehensive income (loss)                               $           6,860,004   $       (9,031,591)
                                                              ==================      ================

</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       5
<PAGE>

                     GLENOIT CORPORATION AND SUBSIDIARIES
              (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                            Nine Months Ended
                                                                                   -----------------------------------
                                                                                      October 3,         October 2,
                                                                                        1998               1999
                                                                                   ---------------    ----------------
<S>                                                                         <C>                            <C>
Cash flows from operating activities:
     Net income (loss)                                                               $  7,553,585       $  (9,262,611)
     Adjustments to reconcile net income (loss) to net cash
        used in operating activities:
          Loss on early extinguishment of debt                                            184,624                   -
          Depreciation and amortization                                                 4,298,878           9,019,764
          Restructuring Charge                                                                  -          13,100,000
          Stock compensation                                                              100,000                   -
          Loss (gain) on sale of property and equipment                                    19,183             (50,439)
          Effect of foreign currency exchange rate                                       (693,581)            363,812
          Changes in operating assets and liabilities:
             Trade and other receivables                                              (17,275,358)        (18,890,554)
             Inventories                                                               (2,142,465)        (19,139,861)
             Prepaid expenses and other assets                                           (317,118)           (807,403)
             Due to Holdings                                                            2,602,073          (2,365,888)
             Accounts payable                                                            (958,647)          4,533,231
             Accrued expenses and other liabilities                                     4,839,579            (970,492)
                                                                                   ---------------    ----------------
               Net cash used in operating activities                                   (1,789,247)        (24,470,441)
                                                                                   ---------------    ----------------

Cash flows from investing activities:
   Purchases of acquired businesses, net of cash acquired                             (54,428,203)        (59,548,691)
   Purchases of and additions to property, plant and equipment                        (13,168,031)         (6,448,271)
   Proceeds from sale of property and equipment and refunds of
          deposits                                                                         42,042             639,706
                                                                                   ---------------    ----------------
               Net cash used in investing activities                                  (67,554,192)        (65,357,256)
                                                                                   ---------------    ----------------

Cash flows from financing activities:
   Payments on capital lease obligations                                                 (516,222)                  -
   Proceeds from line of credit and issuance of debt, net                              77,707,499          95,617,501
   Dividends paid                                                                      (1,935,871)                  -
   Advances on notes receivable - related parties                                         (84,324)                  -
   Payments for financing costs                                                          (987,121)         (5,368,755)
   Purchase of senior subordinated notes                                               (4,950,000)                  -
                                                                                   ---------------    ----------------
               Net cash provided by financing activities                               69,233,961          90,248,746
                                                                                   ---------------    ----------------

               Net increase (decrease) in cash and cash equivalents                      (109,478)            421,049

Cash and cash equivalents at beginning of period                                        1,072,280             339,700
                                                                                   ---------------    ----------------

Cash and cash equivalents at end of period                                           $    962,802          $  760,749
                                                                                   ===============    ================
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       6
<PAGE>

                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.       SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
         of Glenoit Corporation and subsidiaries (collectively the "Company")
         have been prepared in accordance with generally accepted accounting
         principles for interim financial information. Accordingly, they do not
         include all of the information and footnotes required by generally
         accepted accounting principles for complete financial statements. In
         the opinion of management, all adjustments (consisting of only normal
         recurring adjustments) considered necessary for a fair presentation
         have been included. Operating results for the nine-month period ended
         October 2, 1999 are not necessarily indicative of the results that may
         be expected for the fiscal year ending January 1, 2000. The unaudited
         financial statements should be read in conjunction with the audited
         financial statements and footnotes thereto for the fiscal year ended
         January 2, 1999.

         CONSOLIDATION

         Prior to September 1997, the accompanying financial statements included
         the accounts of Glenoit Corporation and its wholly-owned subsidiaries
         Glenoit Mills, Inc. ("Mills"), Tarboro Properties, Inc. ("Tarboro"),
         and Glenoit Asset Corporation, Inc. ("Glenoit Asset Corporation"). In
         September 1997, Glenoit Corporation merged with Mills and Tarboro. In
         addition, Glenoit Corporation's newly formed wholly-owned subsidiary,
         Glenoit Corporation of Canada ("Glenoit Canada") acquired the assets of
         Collins & Aikman Canada Inc. On October 2, 1998, the Company acquired
         all the capital stock of American Pacific Enterprises, Inc. On February
         12, 1999, the Company acquired all the outstanding shares of capital
         stock of Ex-Cell Home Fashions, Inc. (See Note 7). Accordingly, at
         October 2, 1999, the accompanying financial statements include the
         accounts of Glenoit Corporation and its wholly-owned subsidiaries
         Glenoit Canada, American Pacific Enterprises, Inc., Glenoit Asset
         Corporation and Ex-Cell Home Fashions, Inc. The Company is a
         wholly-owned subsidiary of Glenoit Universal, Ltd. ("Holdings").





                                       7
<PAGE>

                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board ("FASB") issued
         Statement of Financial Accounting Standards No. 133, Accounting for
         Derivative Instruments and Hedging Activities ("SFAS No. 133"). SFAS
         No. 133 establishes standards related to the recording and reporting of
         derivative instruments. The FASB recently delayed the required
         implementation of SFAS No. 133 until fiscal year 2000. The Company
         recently entered into an interest rate hedge agreement but has yet to
         determine any future impact of SFAS No. 133.

2.       RELATED PARTY TRANSACTIONS

         In March 1998, the Company loaned an officer $100,000 and created an
         unsecured note receivable. During June 1998, Holdings sold three
         officers of the Company a total of 857.46 shares of Holdings' Class A
         common stock for approximately $158,000. Holdings loaned the officers
         an amount equal to the sales price and created full recourse notes
         receivable secured by the issued shares. In connection with the stock
         issuance, the Company recorded non-cash compensation expense of
         $100,000.

         In July 1998, Holdings settled a dispute regarding additional purchase
         price owed to a shareholder associated with the recapitalization in
         December 1995 discussed in Note 2 to the Consolidated Financial
         Statements as of January 2, 1999. Accordingly, Holdings paid
         approximately $1.9 million to the shareholder during July 1998. These
         funds were paid to Holdings by the Company as a dividend.

3.       INVENTORIES
<TABLE>
<CAPTION>
         Inventories are summarized as follows:
                                                                                  January 2,           October 2,
                                                                                     1999                 1999
                                                                               -----------------    -----------------
                                                                                                         (Unaudited)
<S>                                                                                  <C>                 <C>
        Raw Materials                                                                $2,843,387          $10,252,080
        Work-in-process                                                               1,933,812           10,382,284
        Finished goods                                                               14,956,843           36,277,947
                                                                               -----------------    -----------------

                  Total inventories                                                 $19,734,042          $56,912,311
                                                                               =================    =================
</TABLE>



                                       8
<PAGE>


                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 4.      LONG-TERM DEBT

         As of January 2, 1999 and October 2, 1999, long-term debt consisted of
         the following:

                                           January 2,     October 2,
                                             1999            1999
                                             ----            ----
                                                         (unaudited)
         Senior credit facility ......   $ 65,707,499   $161,325,000
         11% Senior subordinated notes     95,000,000     95,000,000
                                         ------------   ------------
              Total long-term debt ...    160,707,499    256,325,000
         Less current portion ........             -     161,325,000
                                         ------------   ------------
                                         $160,707,499   $ 95,000,000
                                         ============   ============

         On April 1, 1997, the Company issued $100,000,000 of senior
         subordinated notes (the "Senior Subordinated Notes") in a private
         placement bond offering. The Senior Subordinated Notes bear interest at
         a fixed rate of 11% and mature on April 15, 2007. The Company at its
         option, can prepay these notes at a price of 105.5% of the original
         principal amount, beginning on April 15, 2002. The premium declines by
         1.833% thereafter each year beginning on April 15 until reduced to the
         original principal amount. Additionally, prior to April 15, 2000, the
         Company may redeem in the aggregate up to 25% of the original aggregate
         principal amount with the proceeds of one or more Public Equity
         Offerings, as defined in the Indenture governing the Senior
         Subordinated Notes, at a redemption price of 110% of the original
         principal amount. Upon a Change of Control of the Company, as defined
         in the Indenture governing the Senior Subordinated Notes, the holder of
         a Senior Subordinated Note may require the Company to redeem the note
         at a price of 101% of the principal amount. Interest is payable
         semi-annually, and began on October 15, 1997.

         During September 1998, the Company acquired $5 million of the Senior
         Subordinated Notes in the open market. These notes were subsequently
         retired. In connection with this transaction, the Company recorded an
         extraordinary loss of approximately $117,000, net of a tax benefit,
         which consisted of the write off of a pro rata share of deferred
         financing costs associated with the issuance of the Senior Subordinated
         Notes.

         On April 1, 1997, the Company also entered into a $70 million senior
         credit facility (the "Facility") with a financial institution. Of the
         total commitment of $70 million under the Facility, $25 million is
         designated as an Acquisition Commitment and $45 million as a Working
         Capital Commitment, which is a revolving credit facility limited to the
         Borrowing Base as defined in the Facility. On October 2, 1998, the
         Facility was amended to increase the Acquisition Commitment to $76
         million. On October 2, 1998, in connection with the acquisition of
         American Pacific Enterprises, Inc., discussed in Note 7, the Company
         borrowed approximately $55.7 million under the Acquisition Commitment.


                                       9
<PAGE>

                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.         LONG TERM DEBT (CONTINUED)

         As further discussed in Note 7, the Company acquired all outstanding
         shares of capital stock of Ex-Cell Home Fashions, Inc. on February 12,
         1999. In connection with that acquisition, the Company amended and
         restated the Facility to increase the borrowing availability to $200
         million. The additional availability was reduced to $175 million in
         connection with the June, 1999 amendment discussed below and is
         currently comprised of (i) $65.0 million as the Working Capital
         Commitment, subject to the Borrowing Base as defined, (ii) $40.0
         million Term A loan and (iii) $70.0 million Term B loan. The borrowings
         under both the Working Capital Commitment and Term A loan, as amended,
         bear interest at the Base Rate plus 2.25% or the Eurodollar Rate plus
         3.50%. Advances under the Term B loan bear interest at the Base Rate
         plus 3.00% or the Eurodollar Rate plus 4.25%. Beginning in July 1999,
         the interest rate charged on the Term A and Working Capital Commitment
         borrowings could decrease by 1.0% if certain financial ratios are met.
         Principal payments on the Term A and Term B loans begin on September
         30, 1999 at a total of $1.7 million per quarter and increase over the
         lives of the loans. Borrowings under the Term A loan and Working
         Capital Commitment are required to be fully repaid by December 31, 2003
         and borrowings under the Term B loan are required to be fully repaid by
         June 30, 2004. On the date of the Ex-Cell acquisition, the Term A and
         Term B loans were fully drawn. The bank also extended up to a total of
         $5 million in letters of credit to the Company; however, the amount is
         limited to the amount of the unused Working Capital Commitment. At
         October 2, 1999, the Company had approximately $53.0 million
         outstanding under the Working Capital Commitment, and approximately
         $10.0 million available under the Working Capital Commitment.

         The Facility and Senior Subordinated Notes have various covenants, as
         well as cross-acceleration provisions, that require the Company to:
         maintain key financial ratios, restrict corporate borrowings, limit the
         Company's ability to pay dividends, limit the type and amount of
         certain investments which may be undertaken by the Company, limit the
         Company's disposition of assets, limit the Company's ability to enter
         into operating and capital leases, and restrict the Company's ability
         to issue shares of its stock.

         As of June 29, 1999, the Company's senior lenders waived the Company's
         requirement to maintain and meet certain financial covenants contained
         in the Facility for the period ending July 3, 1999. In connection with
         obtaining the waiver, the Working Capital Commitment was reduced from
         $90 million to $65 million and certain financial covenants were amended
         including an amendment to require monthly testing of the Company's
         total leverage and senior leverage ratios. The Company was not in
         compliance with these ratios for the month of July, 1999 and,
         accordingly, received a waiver for such non-compliance as well as
         amended the August, 1999 and September, 1999 covenants on August 20,
         1999. In connection with these waivers and amendments, the Company paid
         a fee to the banking group of $440,0000. As a result of a temporary
         shutdown of two facilities in Tarboro, N. C. caused by Hurricane Floyd
         during September, 1999, the Company was not in


                                       10
<PAGE>


                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.   LONG-TERM DEBT (CONTINUED)

         compliance with the revised covenants as of October 2, 1999 and
         received a waiver for such non-compliance as of October 29, 1999. On
         November 19, 1999, the Company received a waiver which eliminated the
         requirement to meet certain financial covenants for the month of
         October and amended existing covenants for November and December 1999
         as well as created monthly covenants for January and February 2000. The
         waiver also eliminated previous borrowing restrictions and reinstated
         the original Borrowing Base limitations. The Company paid a fee to the
         banking group of $440,000 in connection with obtaining these waivers
         and amendments. Based on the Company's operating results and current
         business environment, it is likely the Company will not be in
         compliance with existing financial covenants for the month ending April
         1, 2000. Therefore, in accordance with generally accepted accounting
         principles, all amounts outstanding under the Facility remain
         classified as current liabilities. The Company is seeking additional
         amendments to the Facility to conform the financial ratios contained
         therein to the Company's business plan. While the Company's
         relationship with its senior lenders has been good and discussions are
         ongoing, there can be no assurance that the Company will obtain the
         necessary amendments or as to the terms thereof. The failure to obtain
         the necessary amendments could have a material negative effect on the
         Company's liquidity as it would be forced to seek alternative financing
         and to consider additional strategic options. The Company is currently
         in compliance with the requirements of the indenture governing the
         Senior Subordinated Notes.

         During June 1999, the Company entered into an interest rate cap
         agreement which caps the maximum Eurodollar rate to be paid by the
         Company at 6.5% on an $82.5 million notional amount. The Company paid
         approximately $820,000 to enter into this agreement.

         Substantially all of the Company's assets and operations are pledged as
         collateral for the Facility. Holdings and Glenoit Asset Corporation
         have guaranteed the Company's obligations under the Facility. Holdings
         and Glenoit Asset Corporation have no substantive assets or operations
         and rely on the Company to fund their obligations.

         The Senior Subordinated Notes are fully and unconditionally guaranteed,
         on a joint and several basis, by Glenoit Asset Corporation, American
         Pacific Enterprises, Inc. and, as of February 12, 1999, Ex-Cell Home
         Fashions, Inc. (together the "Subsidiary Guarantors"). Glenoit Asset
         Corporation's operations consist solely of leasing certain trademarks
         and other intangibles to Glenoit Corporation. Accordingly, Glenoit
         Asset Corporation's assets and operations consist primarily of
         intercompany assets and operations with Glenoit Corporation. Glenoit
         Canada has not guaranteed the Senior Subordinated Notes. The financial
         information of the subsidiary guarantors for these periods has been
         excluded because management believes that this information is not
         material to investors. Prior to its acquisition, Glenoit Canada had no
         operations.


                                       11
<PAGE>

                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.   LONG-TERM DEBT (CONTINUED)

         The following tables present summarized balance sheet information of
         Glenoit Corporation, the Subsidiary Guarantors, and Glenoit Canada as
         of October 2, 1999 and the related summarized operating statement and
         cash flow statement information for the period then ended. The Company
         believes that separate financial statements and other disclosures
         regarding the Subsidiary Guarantors, are not material to investors.
         Summarized balance sheet information, in thousands, as of October 2,
         1999 is as follows (unaudited):
<TABLE>
<CAPTION>
                                         Glenoit  Subsidiary                           Glenoit
                                     Corporation  Guarantors  Eliminations Sub-total   Canada   Eliminations Consolidated


<S>                                        <C>           <C>                     <C>         <C>                      <C>
Cash and cash equivalents..........        $ (28)        723                     695         66                       761
Accounts and other receivables, net       25,512      23,858                  49,370      3,782                    53,152
Inventories........................       10,526      45,388                  55,914        998                    56,912
Other current assets...............        4,306        (61)            -      4,245         30            -        4,275
                                        --------    --------     --------   --------   --------     --------     --------
     Total current assets..........       40,316      69,908            0    110,224      4,876            0      115,100
Property, plant and equipment, net.       35,454      25,258                  60,712      9,809                    70,521
Other assets.......................      182,679      82,261     (190,520)    74,420        516      (13,847)      61,089
                                        --------    --------     --------   --------   --------     --------     --------
     Total assets..................      258,449     177,427     (190,520)   245,356     15,201      (13,847)     246,710
                                        ========    ========     ========   ========   ========     ========     ========

Accounts payable...................        5,977       5,947                  11,924        591                    12,515
Other current liabilities..........      163,066      16,713            -    179,779      1,224            -      181,003
                                        --------    --------     --------   --------   --------     --------     --------
     Total current liabilities.....      169,043      22,660                 191,703      1,815                   193,518
Long-term debt.....................      138,102                  (43,102)    95,000      3,871       (3,871)      95,000
Other long-term liabilities........        6,071       7,349                  13,420         26                    13,446
Stockholders equity (deficit)......     (54,767)     147,418     (147,418)   (54,767)     9,489       (9,976)     (55,254)
                                        --------    --------     --------   --------   --------     --------     --------
     Total liabilities and equity..      258,449     177,427     (190,520)   245,356     15,201      (13,847)     246,710
                                        ========    ========     ========   ========   ========     ========     ========

     Summarized operating statements information, in thousands, for the nine
months ended October 2, 1999 is as follows:


                                         Glenoit  Subsidiary                           Glenoit
                                     Corporation  Guarantors  Eliminations Sub-total   Canada   Eliminations Consolidated

Net sales..........................      $91,043     120,485                 211,528     10,607                   222,135
Cost of sales......................       66,673      82,234            -    148,907      8,091            -      156,998
                                        --------    --------     --------   --------   --------     --------     --------
Gross profit.......................       24,370      38,251            0     62,621      2,516            0       65,137
Operating expenses.................       31,624      27,854                  59,478      1,016                    60,494
Royalty income (expense)...........        5,822      (5,822)           -          0          -            -            -
                                        --------    --------     --------   --------   --------     --------     --------
Income (loss) from operations......      (13,076)     16,219            0      3,143      1,500            0        4,643
Interest expense (income)..........       19,303      (1,446)                 17,857        173                    18,030
Other expense (income).............      (10,872)        (58)      11,077        147        (56)         885          976
Income taxes(benefit)..............      (12,244)      6,646            -     (5,598)       498            -       (5,100)
                                        --------    --------     --------   --------   --------     --------     --------
     Net income(loss)..............       (9,263)     11,077      (11,077)    (9,263)       885         (885)      (9,263)
                                        ========    ========     ========   ========   ========     ========     ========
</TABLE>



                                       12
<PAGE>


                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.       LONG-TERM DEBT (CONTINUED)

     Summarized cash flow statement information, in thousands, for the nine
months ended October 2, 1999 is as follows:

<TABLE>
<CAPTION>

                                   Glenoit   Subsidiary                                Glenoit
                               Corporation   Guarantors    Eliminations   Sub-total     Canada  Eliminations  Consolidated
<S>                              <C>           <C>                         <C>          <C>                    <C>
Cashflows from operating
activities ...................   $(19,733)     (3,028)                     (22,761)     (1,710)                (24,471)
Cashflows used in investing ..    (63,767)     (1,488)                     (65,255)       (102)                (65,357)
Cashflows from financing
activities ...................     83,433       5,060                       88,493       1,756                  90,249
                                 --------    --------    --------         --------    -------- --------       --------
Net increase(decrease) in cash        (67)        544           0              477         (56)       0            421
Cash at beginning of period ..         39         179          --              218         122        -            340
                                 --------    --------    --------         --------    -------- --------       --------
Cash at end of period ........        (28)        723           0              695          66        0            761
                                 ========    ========    ========         ========    ======== ========       ========



     Summarized operating statements information, in thousands, for the nine
months ended October 3, 1998 is as follows:

                                                                       Consolidated
                                Glenoit   Glenoit Asset                  Domestic     Glenoit
                              Corporation Corporation   Eliminations    Operations    Canada   Eliminations Consolidated

Net sales ...............       123,895                                  123,895       9,172                 133,067
Cost of sales ...........        83,898           0           0           83,898       7,175        0         91,073
                               --------    --------    --------         --------    -------- --------       --------
Gross profit ............        39,997           0           0           39,997       1,997        0         41,994
Operating expenses ......        18,619          10                       18,629         981                  19,610
Royalty income (expense)         (7,874)      7,874           0                0           0        0              0
                               --------    --------    --------         --------    -------- --------       --------
Income from operations ..        13,504       7,864                       21,368       1,016        0         22,384
Interest expense (income)        11,252      (1,727)                       9,525          83                   9,608
Other expense (income) ..        (6,245)                  6,235              (10)        207      464            661
Income taxes ............           826       3,356           0            4,182         262        0          4,444
Extraordinary loss, net .           117           0           0              117           0        0            117
                               --------    --------    --------         --------    -------- --------       --------
Net income ..............         7,554       6,235      (6,235)           7,554         464     (464)         7,554
                               ========    ========    ========         ========    ======== ========       ========




Summarized cash flow statement information, in thousands, for the nine months
ended October 3, 1998 is as follows:

                                                                       Consolidated
                                Glenoit   Glenoit Asset                  Domestic     Glenoit
                              Corporation Corporation   Eliminations    Operations     Canada  Eliminations Consolidated

Cashflows from operating
activities .............        (11,583)      9,591                       (1,992)        203                  (1,789)
Cashflows used in
investing Activities ...        (64,618)                                 (64,618)     (2,936)                (67,554)
Cashflows from
financing activities ...         76,175      (9,583)          0           66,592       2,642        0         69,234
                               --------    --------    --------         --------    -------- --------       --------
Net increase (decrease)
in cash ................            (26)          8                          (18)        (91)                   (109)
Cash at beginning of
period .................            651          76           0              727         345        0          1,072
                               --------    --------    --------         --------    -------- --------       --------
Cash at end of period ..            625          84           0              709         254        0            963
                               ========    ========    ========         ========    ======== ========       ========
</TABLE>

                                       13
<PAGE>

                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5.       COMMITMENTS AND CONTINGENCIES

         Holdings is a holding company and as a result does not have any
         substantive assets or operations that generate revenues or cash flows.
         Accordingly, Holdings relies on the Company's distribution of dividends
         in order to fund its operations and meet its obligations, including its
         interest and principal payments.

         Holdings has obligations with a face amount of approximately $29.9
         million, bearing interest at stated rates between 5% to 12.5%, to
         shareholders ("Shareholder Notes") with principal due in 2004 and 2005.
         These obligations are not reflected in the Company's accompanying
         balance sheets or income statements. Subject to existing debt
         restrictions, Shareholder Notes with a face amount of approximately
         $9.7 million contain certain acceleration clauses. At the option of
         Holdings, subject to the Company's existing debt restrictions, the
         interest may be paid by the issuance of additional notes or in cash.

         However, Holdings must pay interest in cash on certain of the
         Shareholder Notes if defined levels of consolidated cash flows of
         Holdings are attained. Annual interest payments during the next five
         years are approximately $2.6 million per year, excluding interest on
         notes that may be issued to pay interest. Assuming Holdings makes all
         interest payments related to the Shareholder Notes with additional
         notes, the Company's ultimate distribution of dividends in order for
         Holdings to meet its existing debt obligations is expected to be
         approximately $63 million beginning December 2004 through December
         2005. However, the Company may be required to declare dividends in
         order for Holdings to fund certain of its obligations in cash as
         discussed above. Such amounts could approximate $3 million in the
         aggregate and are due through December 2004, if the defined levels of
         consolidated cash flow of Holdings are met.


6.       INCOME TAXES

         The Company and Holdings, have entered into a Tax Sharing Agreement
         whereby the Company will pay Holdings its respective pro rata share of
         the total consolidated tax liability or receive its respective pro rata
         share of the total consolidated tax refund, as set forth in the tax
         sharing agreement. Under the Tax Sharing Agreement, the Company and
         Holdings are treated as separate tax groups.



                                       14
<PAGE>


                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

7.       ACQUISITIONS

         On October 2, 1998, the Company acquired all the capital stock of
         American Pacific Enterprises, Inc. ("APE") for approximately $39.1
         million, including fees and expenses, subject to post-closing
         adjustments. In addition, approximately $16.6 million of indebtedness
         of APE was extinguished by the Company in connection therewith. The
         purchase agreement also includes additional payments to the former
         owners of APE if certain earning targets for APE's operations are met
         during 1998 and 1999. For fiscal 1998, approximately $12.3 million was
         paid to the former owners and current employees during April 1999. Of
         this amount, approximately $3.5 million was paid to current employees.
         The remaining $8.8 million was recorded as additional purchase price. A
         portion of any payments to be made related to 1999 earnings may be
         recorded as compensation expense during 1999. Through July 3, 1999, the
         Company has recorded approximately $1.7 million as compensation expense
         associated with APE's forecasted 1999 results. APE is a leading
         designer, importer and marketer of decorative textile home furnishings,
         principally quilts and specialty decorative bedding items. The
         acquisition has been accounted for as a purchase. The preliminary
         purchase price allocation attributed approximately $31.8 million to net
         working capital items, approximately $1.3 million to property, plant
         and equipment and approximately $22.6 million to goodwill. Goodwill is
         being amortized over 25 years.

         On February 12, 1999, the Company acquired all the outstanding shares
         of capital stock of Ex-Cell Home Fashions, Inc. ("Ex-Cell") in a single
         transaction for approximately $43.4 million, including fees and
         expenses, subject to post-closing adjustment. In addition,
         approximately $6.9 million of indebtedness of Ex-Cell was extinguished
         by the Company in connection therewith. The acquisition has been
         accounted for as a purchase. The preliminary purchase price allocation
         attributed approximately $14.7 million to net working capital items,
         approximately $23.3 million to property, plant and equipment, $7.1
         million to long term liabilities including deferred income taxes and
         approximately $19.4 million to goodwill. Goodwill is being amortized
         over 25 years.

         The following unaudited proforma summary of consolidated results of
         operations have been prepared as if the acquisitions of APE and Ex-Cell
         occurred at the beginning of the periods presented. In connection with
         the allocation of purchase price, the Company wrote up APE's inventory
         by approximately $3.4 million. This write-up of inventory negatively
         impacted gross margin during the Company's fourth quarter of 1998 as
         that inventory was sold. This one-time nonrecurring adjustment of $2.0
         million, net of tax, is not reflected in the proforma results presented
         below. In connection with the allocation of purchase price, the Company
         wrote up Ex-Cell's inventory by approximately $2.5 million. This
         write-up will negatively impact gross margin during the Company's first
         nine months of 1999. The impact of this write-up is not reflected in
         the proforma results presented below. Certain costs associated with the
         former shareholders of Ex-Cell are also excluded from the proforma
         results.



                                       15
<PAGE>


                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

7.       ACQUISITIONS (CONTINUED)

                                                    Nine Months Ended
                                           -------------------------------------
                                              October 3,         October 2,
                                                 1998               1999
                                                 ----               ----
                                                       (Unaudited)
                Net sales                       $243,900,000       $230,900,000
                                                ============       ============
                Net income                        10,000,000        (8,100,000)
                                                ============       ============


         These proforma results do not purport to be indicative of the results
         that would have actually been obtained if APE and Ex-Cell had been
         acquired as of January 4, 1998.

8.       RESTRUCTURING CHARGE

         On February 25, 1999, the Company's Board of Directors approved a plan
         to consolidate its manufacturing operations of the Fabric Division into
         its facilities located in North Carolina and Canada. In connection with
         this activity, the Company discontinued operations at its leased
         Tennessee facility and terminated substantially all of the associates
         at that facility. The Company ceased substantially all operations in
         the facility on or about May 28, 1999. During the first quarter of
         fiscal 1999, the Company recorded a restructuring charge totaling $13.1
         million of which $3.2 million related to the write-off of the goodwill,
         $1.8 milion to cover the write-down of machinery and equipment to fair
         market value and the remainder for the cost of operating leases and
         severance and other personnel costs related to the termination of
         approximately 225 associates. The components of the reserves for this
         facility are as follows (in thousands):
<TABLE>
<CAPTION>
                                                                Original Reserve         Usage      Remaining Reserve
                                                                ----------------         -----      -----------------

<S>                                                                       <C>           <C>                    <C>
               Anticipated    expenditures    related    to               $7,323        $(893)                 $6,430
               operating leases for plant and equipment
               Anticipated severance benefits                                850         (678)                    172
                                                                          ------      --------                 ------
                                                                          $8,173      $(1,571)                 $6,602
                                                                          ======      ========                 ======
</TABLE>

                                       16
<PAGE>


                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

9.       OPERATING SEGMENTS

         DESCRIPTION OF SEGMENTS

         Subsequent to the APE and Ex-Cell acquisitions, the Company has two
         operating divisions: (1) Decorative Home Furnishings, which
         manufactures, imports and distributes decorative textile home
         furnishings to all major specialty and broadline retail distribution
         channels and (2) Fabric Division ("Fabric"), manufacturer and
         distributor of fabric for the apparel, automotive and home furnishing
         industries. Decorative Home Furnishing products include specialty
         bedding items, shower curtains, household rugs, decorative pillows and
         table linens. All amounts shown below are in thousands.

                                          Third Quarter Ended
                                     ------------------------------
                                       October 3,        October 2,
                                          1998              1999
                                     -------------     ------------
Net sales
     Decorative Home Furnishings        $ 15,143          $ 63,801
     Fabric ....................          29,984            22,839
     Interdivisional ...........            --                (662)
                                     -----------       ------------
          Consolidated .........        $ 45,127          $ 85,978
                                     ===========       ============

Operating income (loss)
     Decorative Home Furnishings        $  2,594             7,340
     Fabric ....................           6,041             5,194
     Corporate/Other ...........          (1,912)           (2,208)
                                      ----------        -----------
          Consolidated .........        $  6,723          $ 10,326
                                      ==========        ===========
Depreciation and amortization
     Decorative Home Furnishings        $    217          $  1,704
     Fabric ....................             957               986
     Corporate/Other ...........             373               303
                                     -----------        -----------
          Consolidated .........        $  1,547          $  2,993
                                     ===========        ===========


                                       17
<PAGE>


                      GLENOIT CORPORATION AND SUBSIDIARIES
             (A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

9.       OPERATING SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
                                                                   Nine Months Ended
                                                   --------------------------------------------------
                                                               October 3,                 October 2,
                                                                     1998                       1999
                                                                     ----                       ----
<S>                                                               <C>                       <C>
           Net sales
                Decorative Home Furnishings                       $36,702                   $160,521
                Fabric...............................              96,365                     62,987
                Interdivisional.....................                    -                     (1,373)
                                                                 --------                   --------
                     Consolidated...................             $133,067                   $222,135
                                                                 ========                   ========
           Operating income (loss)
                Decorative Home Furnishings                        $6,023                    $14,717
                Fabric...............................              22,653                    (3,638)
                Corporate/Other...................                 (6,292)                    (6.436)
                                                                 --------                   --------
                     Consolidated...................              $22,384                     $4,643
                                                                 ========                   ========
           Depreciation and amortization
                Decorative Home Furnishings                          $623                     $4,243
                Fabric...............................               2,572                      3,213
                Corporate/Other...................                  1,104                      1,564
                                                                 --------                   --------
                     Consolidated...................               $4,299                     $9,020
                                                                 ========                   ========

                                                                     October 2,
                                                                        1999
                                                                     ----------
           Inventory and accounts receivable
                Decorative Home Furnishings                            $79,995
                Fabric...............................                   25,217
                                                                      --------
                     Consolidated...................                  $105,212
                                                                      ========
</TABLE>


     Note 4 identifies sales and assets of the Company's Canadian operation.
There were no other material sales or assets outside of the United States.

10.      FACTORING RECEIVABLES

         Under an agreement with a third party, Ex-Cell, subject to credit
         approval, assigns and sells substantially all its accounts receivable
         without recourse. In instances where credit approval has not been
         received prior to shipment, the risk of collectibility is retained by
         Ex-Cell.



                                       18
<PAGE>


         Item 2   Management's Discussion and Analysis of Financial Condition
                  and Results of Operations

OVERVIEW

On December 13,1995, Glenoit Universal, Ltd. ("Holdings") formed a wholly owned
subsidiary, Glenoit Corporation (the Company), formerly Glenoit Intermediate,
Inc. and exchanged all of the issued and outstanding stock of Glenoit Mills,
Inc. and subsidiary ("Mills") for all of the issued and outstanding shares of
common stock of Glenoit Corporation. During 1997, Mills was merged into the
Company. The Company has two operating segments: (i) Decorative Home Furnishings
which manufactures, imports and distributes decorative textile home furnishings
and (ii) a domestic manufacturer and marketer of specialty fabrics, primarily
for the apparel industry, known as "sliver-knit" pile fabrics ("Fabric
Division"). The Company's two most recent acquisitions, American Pacific
Enterprises and Ex-Cell Home Fashions, Inc., are part of the Decorative Home
Furnishings segment

RECENT DEVELOPMENTS

On October 2, 1998, the Company acquired all the capital stock of American
Pacific Enterprises, Inc. ("APE") for approximately $39.1 million, including
fees and expenses, subject to post-closing adjustment. In addition,
approximately $16.6 million of indebtedness of APE was extinguished by the
Company in connection therewith. In addition, the Company paid the former
shareholders approximately $8.8 million and certain employees approximately $3.5
million during April 1999 in connection with the acquisition agreement. APE is a
leading designer, importer and marketer of decorative textile home furnishings,
principally quilts and decorative bedding items. The Company believes that the
acquisition of APE will expand its current product offerings to large retailers,
further penetrate the specialty retailing segment and diversify product sourcing
capabilities beyond North America to include Chinese suppliers.

On February 12, 1999, the Company acquired all the outstanding shares of capital
stock of Ex-Cell Home Fashions, Inc. ("Ex-Cell") in a single transaction for
approximately $43.4 million, subject to post-closing adjustments. In addition,
approximately $6.9 million of debt of Ex-Cell was extinguished in connection
therewith. Ex-Cell is engaged in the design, manufacture, importation and
distribution of textile home furnishings, principally shower curtains, table
linens, and decorative pillows. As a result of these acquisitions, the Company
believes it has transformed itself from a specialty textile manufacturer focused
on profitable niche segments to a diversified manufacturer and distributor of
consumer goods, with the majority of its revenues derived from the home textile
market.

On February 25, 1999, the Company's Board of Directors approved a plan to
consolidate its manufacturing operations of the Fabric Division into its
facilities located in North Carolina and Canada. In connection with this
activity, the Company discontinued all operations at its leased Tennessee
facility and terminated substantially all of the associates at that facility.
During the first quarter of fiscal 1999, the Company recorded a restructuring
charge totaling $13.1 million to cover the estimated costs associated with the
closing of that facility including the cost of operating leases, the write-off
of the related goodwill, the write-down of machinery and equipment to fair
market value and severance and other personnel costs.


                                       19
<PAGE>

During September 1999, the Company's two Tarboro, North Carolina facilities were
temporarily shut down as a result of the extensive flooding caused by Hurricane
Floyd. While the facilities did not sustain damage, the shortage of
utilities and the dramatic impact to the local workforce resulted in work
stoppage and a delay in shipments for approximately ten days. The Company
continued to pay its affected employees during the shutdown.
Management estimates that the third quarter's net sales in the Decorative Home
Furnishings and Fabric segments were negatively impacted by approximately $3.0
million and $2.3 million, respectively. The negative impact to the Company's
operating performance has resulted in certain covenant violations under the
Company's senior credit facility. The Company is in the process of submitting a
claim with its insurance providers but did not record any anticipated receipts
as of October 2, 1999. See "Liquidity and Capital Resources" below.


RESULTS OF OPERATIONS

Net sales for the quarter ended October 2, 1999, increased to $86.0 million or
90.5 % compared to $45.1 million during the comparable quarter in the prior
year. The increase in net sales occurred in the Decorative Home Furnishings
segment which increased from $15.1 million in the third quarter of 1998 to $63.8
million in 1999. The increase in net sales is attributable to the acquisitions
of APE and Ex-Cell which generated combined sales of $50.7 million during the
third quarter of 1999. These increases in sales of home furnishing items were
slightly offset by a decline in sales of the Fabric Division to $22.8 million
from $30.0 million. This decrease was due to continued softness in the product
category as a result of unseasonably warm weather and the continued influx of
low priced apparel products, mainly from Asia.

Net sales for the nine months ended October 2, 1999 increased to $222.1 million
from $133.1 million in the nine months of 1998. The increase was the result of
the sales growth of the Decorative Home Furnishing segment. APE and Ex-Cell
generated a total of $120.5 million for that period. Year-to-date sales for the
Fabric Division declined to $63.0 million from $96.4 million in the first nine
months of 1998.

Gross profit for the quarter ended October 2, 1999 was $25.9 million or 30.1% of
net sales compared to $13.2 million or 29.3% of net sales for the same period
last year. The increase of $12.7 million relates to an increase in sales in the
Decorative Home Furnishings segment which benefited from the inclusion of APE
and Ex-Cell's operating results. Gross margin was negatively impacted by $.5
million of additional cost of sales related to the sale of Ex-Cell's inventory
that had been written up at the time of acquisition in accordance with generally
accepted accounting principles. The Fabric Division's results were negatively
impacted by the decreased sales volume which resulted in a decrease in gross
margin from $8.3 million to $7.5 million. However, as a result of the previously
discussed restructuring efforts, which reduced the division's manufacturing
overhead and streamlined operations, the Fabric Division's gross margin as a
percent of sales for the third quarter of 1999 increased to 32.7% from 27.8%
during the third quarter of 1998.



                                       20
<PAGE>



Gross profit for the first nine months of 1999 was $65.1 million as compared to
$42.0 million in 1998. The increase in gross profit was related to the
Decorative Home Furnishings segment and the acquisitions of APE and Ex-Cell.
Gross margin was negatively impacted by $2.2 million year-to-date October 2,
1999 as a result of Ex-Cell's inventory write-up. These gains were offset by the
decrease in gross profit in the Fabric Division to $16.5 million in 1999 from
$30.5 million for the first nine months of 1998.

Operating expenses for the quarter ended October 2, 1999, were $15.6 million
compared to $6.5 million in the third quarter of the prior year. Operating
expenses for the nine months ended October 2, 1999 totaled $60.5 million as
compared to $19.6 million for 1998. Dollar increases in 1999 relate to the
operating expenses of APE and Ex-Cell which totaled $9.1 million and $27.8
million for the third quarter and first nine months of 1999, respectively. These
expenses include $.5 million and $1.5 million, respectively, of goodwill
amortization specific to APE and Ex-Cell. During the third quarter, the Company
reversed $1 million of accrued compensation charges associated with the APE
acquisition agreement and expensed during the first quarter of 1999.
Year-to-date compensation expense for this agreement totals $ .7 million.
Operating expenses for 1999 include a $13.1 million restructuring charge
recorded in the first quarter related to the consolidation of manufacturing
facilities in the Fabric Division as discussed in "Recent Developments".

The Company reported operating income of $10.3 million for the third quarter
ended October 2, 1999 compared to operating income of $6.7 million in the prior
year. For the first nine months of 1999, the Company reported operating income
of $4.6 million as compared to income of $22.4 million in 1998.

Interest expense for the quarter ended October 2, 1999, was $6.6 million
compared to $3.3 million for the same period last year. Year-to-date interest
expense in 1999 was $18.0 million compared to $9.6 million in 1998. Interest
expense has increased due to higher levels of debt as a result of the APE and
Ex-Cell acquisitions.

Net income for the quarter ended October 2, 1999, was $ 1.8 million compared to
net income of $1.9 million the prior year. Net loss for the nine months ended
October 2, 1999 was $9.3 million compared to net income of $7.6 million the
prior year.


LIQUIDITY AND CAPITAL RESOURCES


The Company relies on internally generated cash flow from operations,
supplemented by borrowings under its senior credit facility and vendor financing
to meet its debt service requirements, capital expenditures and working capital
needs. The Company is highly leveraged.

On April 1, 1997, the Company issued $100 million of senior subordinated notes
(the "Notes"). Concurrently with the issuance of the Notes, the Company entered
into a $70 million senior credit facility ("the New Credit Facility") with a
syndicate of lenders led by BNP, pursuant to which the Company obtained
available credit (i) up to $45.0 million for working capital and general
corporate purposes (the "Working Capital Commitment"), subject to a Borrowing
Base, and (ii)


                                       21
<PAGE>

up to $25.0 million for acquisitions (the "Acquisition Commitment"). The Company
also prepaid all outstanding indebtedness under the Old Facility. On October 2,
1998, the new Credit Facility was amended to increase the Acquisition Commitment
to $76 million. On October 2, 1998, the Company borrowed approximately $55.7
million under the Acquisition Commitment in connection with the APE Acquisition.
In connection with the acquisition of Ex-Cell, the Company amended and restated
the New Credit Facility to increase its borrowing availability to $200 million.
This additional availability was reduced to $175 million in connection with the
June, 1999 amendment discussed below and is currently comprised of (i) $65
million as the Working Capital Commitment, subject to the Borrowing Base, as
defined, (ii) $40 million Term A loan, and (iii) $70 million Term B loan.
Principal payments under the Term A and Term B loans begin on September 30, 1999
at a total of $1.7 million per quarter and increase over the life of loans.
Borrowings under the Term A loan and Working Capital Commitment are required to
be fully repaid by December 31, 2003 and borrowings under the Term B loan are
required to be fully repaid by June 30, 2004. On the date of the Ex-Cell
acquisition, both the Term A and Term B loans were fully drawn. At October 2,
1999, there were borrowings of approximately $53.0 million under the Working
Capital Commitment and approximately $10.0 million available to borrow under the
Working Capital Commitment. A more detailed description of the senior
subordinated notes and the senior credit agreement may be found in the notes to
consolidated financial statements. Ex-Cell has a factoring arrangement whereby
substantially all of its accounts receivable are assigned and sold without
recourse.

As of June 29, 1999, the Company's senior lenders waived the Company's
requirement to maintain and meet certain financial covenants contained in the
New Credit Facility for the period ending July 3, 1999. In connection with
obtaining the waiver, the Working Capital Commitment was reduced from $90
million to $65 million and certain financial covenants were amended including an
amendment to require monthly testing of the Company's total leverage and senior
leverage ratios. The Company was not in compliance with these ratios for the
month of July, 1999 and, accordingly, received a waiver with respect to such
non-compliance as well as amended the August, 1999 and September, 1999 covenants
on August 20, 1999. As a result of the temporary shut down during September,
1999, the Company was not in compliance with the revised covenants as of October
2, 1999. The Company received a waiver for such non-compliance as of October 29,
1999. On November 19, 1999, the Company received a waiver which eliminated the
requirement to meet certain financial covenants for the month of October and
amended existing covenants for November and December 1999 as well as created
monthly covenants for January and February 2000. The waiver also eliminated
previous borrowing restrictions and reinstated the original Borrowing Base
limitations. Based on the Company's operating results and current business
environment, it is likely the Company will not be in compliance with existing
financial covenants for the month ending April 1, 2000. Therefore, in accordance
with generally accepted accounting principles, all amounts outstanding under the
New Credit Facility have been classified as current liabilities. The Company is
seeking additional amendments to the New Credit Facility to conform the
financial ratios contained therein to the Company's business plan. While the
Company's relationship with its senior lenders has been good and discussions are
ongoing, there can be no assurance that the Company will obtain the necessary
amendments or as to the terms thereof. The failure to obtain the necessary
amendments could have a material negative effect on the Company's liquidity as
it would be forced to seek alternative financing and to consider additional
strategic options. The Company is currently in compliance with the requirements
of the indenture


                                       22
<PAGE>

governing the Notes.

Principal and interest payments in respect of the Notes and the New Credit
Facility represent significant liquidity requirements for the Company. In
addition, the Company will be permitted (but will not be obligated) to make
certain payments to Holdings, including payments (i) in respect of principal and
interest of the Seller Notes, (ii) to cover certain administrative and operating
expenses of Holdings and (iii) to cover certain tax liabilities allocable to the
Company, subject in each case to certain conditions as described in the Notes
and the New Credit Facility.

Assuming the Company is able to obtain the modifications to the New Credit
Facility discussed above, the Company believes that cash generated from
operations, together with vendor financing and amounts available under the New
Credit Facility, will be adequate to meet its debt service requirements, capital
expenditures and working capital needs for the foreseeable future, although no
assurance can be given in this regard. The Company's future operating
performance and ability to service or refinance the Notes and to extend or
refinance its other indebtedness will be subject to future economic conditions
and to financial, business and other factors beyond the Company's control.

Holdings is a holding company and as a result does not have any substantive
assets or operations that generate revenues or cashflows. Accordingly, Holdings
relies on the Company's distribution of dividends to meet its obligations,
including interest and principal payments. As of October 2, 1999, Holdings has
obligations with a face amount of $29.9 million, bearing interest at stated
rates between 5% to 12.5%, to shareholders with principal due in 2004 and 2005.
For further discussion see Note 5 of the Unaudited Consolidated Financial
Statements.

In July 1998, Holdings settled a dispute regarding additional purchase price
owed to a shareholder associated with the recapitalization in December 1995
discussed in Note 2 to the Consolidated Financial Statements as of January 3,
1998. Accordingly, Holdings paid approximately $1.9 million to the shareholder
during July 1998. These funds were paid to Holdings by the Company as a
dividend.

During June 1999, the Company entered into an interest rate cap agreement which
caps the maximum Eurodollar rate to be paid by the Company at 6.5% on an $82.5
million notional amount. The Company paid approximately $820,000 to enter into
this agreement.

During the nine months ended October 2, 1999, net cash used in operating
activities was $24.5 million, which resulted from the Company increasing its
working capital to meet its seasonal requirements. Excluding the purchase of
Ex-Cell, receivables increased by $18.9 million and inventories and other assets
increased by $19.9 million. Accounts payable increased by $4.5 million related
to increased raw material purchases and operating costs.

CAPITAL IMPROVEMENTS

Capital expenditures for the nine months ended October 2, 1999 were $6.4
million. These additions were primarily in the Decorative Home Furnishings
division for advanced printing equipment and the purchase of machinery for the
start-up of the Company's decorative pillow


                                       23
<PAGE>
operations. Expenditures also were made for upgrades to management information
systems and expanded distribution systems.

SEASONALITY

The Company's business is seasonal in nature. Generally, there is increased
retail demand for the Company's products during the fall (back-to-school) and
holiday selling seasons. Consequently, demand for the Company's products is
generally higher during the Company's second and third fiscal quarters when such
products are produced and distributed for these selling seasons.

INFLATION

The Company believes that inflation has not had a material impact on the results
of operations presented.


IMPACT OF YEAR 2000 COMPLIANCE

     The Company has evaluated its Year 2000 risk in three separate categories,
information technology systems ("IT"), non-IT systems ("Non-IT") and third party
relationships in which the Company has a material relationship ("Third Party
Risk"). The Company has developed a plan in which the risks in each of these
categories are being addressed and reviewed by the appropriate level of
management as follows:

     Due to conversions already in progress to improve operating performance,
the Company believes that a failure of the IT system is unlikely and any
possible failure would not result in a material adverse effect. Management has
completed substantially all the conversions and the review of its IT systems and
did not identify any material deficiencies. Accordingly, a contingency plan for
IT risks has not been developed. However, should any remaining review or
conversions indicate a contingency plan is needed, the Company will react
accordingly.

     Non-IT systems involve embedded technologies such as microcontrollers or
microprocessors. Examples of Non-IT systems include telephones, security systems
and computer controlled manufacturing equipment. A malfunction in one of these
areas could result in the Company not being able to manufacture and ship product
on time to its customers. The Company has substantially completed its review of
Non-IT systems and management believes the Non-IT risks are minimal. Any costs
of addressing Non-IT risks are included in normal upgrade and replacement
expenditures which were planned outside of the Company's Year 2000 review. Since
these risks are believed to be minimal, a contingency plan for Non-IT risks has
not been developed. However, should any additional review indicate a contingency
plan is needed, the Company will react accordingly.

     The Company's review of its Third Party Risk includes detailed reviews of
critical relationships with suppliers and business partners, such as banking
institutions and key raw material suppliers. The Third Party Risk review is
ongoing and is expected to be completed by

                                       24
<PAGE>
December 1999. The Company presently does not expect the risk associated with or
costs of addressing the Company's Third Party Risk to be material.

     The Company's greatest Year 2000 risk would manifest itself in a critical
third party's system malfunction where the Company would suffer business
interruption until the supplier or customer corrected the problem or an
alternative supply was found. At this point in the Company's review, it is not
aware of any potential situations which may cause this scenario to occur, but
will formulate a contingency plan should its review indicate it is necessary to
do so.

     There can be no assurance that these conclusions will be achieved and
actual results could differ from those anticipated. Specific factors that might
cause differences include, but are not limited to, the ability of the third
parties with which the Company has material relationships to modify or convert
their systems to be Year 2000 compliant, the ability of the Company to complete
its conversions on schedule, and similar uncertainties.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain forward-looking statements concerning the
Company's operations, economic performance and financial condition, including in
particular, the likelihood of the Company's success in developing and expanding
its business and of maintaining financing on reasonable terms. These statements
are based upon a number of assumptions and estimates, which are inherently
subject to significant uncertainties and contingencies, many of which are beyond
the control of the Company, and reflect future business decisions which are
subject to change. Some of these assumptions inevitably will not materialize,
and unanticipated events will occur which will affect the Company's results. The
forward looking statements in this Form 10-Q are intended to be subject to the
safe harbor protection provided by Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Act of 1934 (the "Safe Harbor Acts").

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company's exposure to market risk relates to changes in interest rates and
foreign currency rates. The Company entered into an interest rate cap agreement
which caps the maximum Eurodollar rate to be paid by the Company at 6.5% on an
$82.5 million notional amount. The Company's borrowings under its New Credit
Facility bear interest rates based on either a floating Base Rate or the
Eurodollar Rate. As of October 2, 1999, the Company had $161.3 million
outstanding under its New Credit Facility. The Company's other borrowings
consist of $95.0 million of senior subordinated debt due on April 2007 at a
fixed rate of 11%. As of October 2, 1999, the average interest rate on the
borrowings under the New Credit Facility was 9.2%. The definite extent of the
Company's interest rate risk under the New Credit Facility is not quantifiable
or predictable because of the variability of future interest rates and borrowing
requirements.

The Company is exposed to foreign currency risk by virtue of its Canadian and
Chinese operations. However, less than 10% of its annual revenues are generated
by these subsidiaries. Both Canada and China have traditionally had a relatively
stable currency and therefore the Company feels its exposure to significant
adjustments to be minimal. Additionally, the Company's consolidated financial
statements are denominated in U. S. dollars and, accordingly,

                                       25
<PAGE>
changes in the exchange rate between U. S. dollars and these currencies affect
the operating results as well as stockholder's deficit. These adjustments, to
date, have not been material to the Company's consolidated balance sheet.


PART II - OTHER INFORMATION

ITEM 2:  LEGAL PROCEEDINGS

     There have been no material developments in legal proceedings involving the
     Company or its subsidiaries since the Company's Annual Report on Form 10-K
     for the year ended January 2, 1999.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

      3.1     Certificate of Incorporation of Glenoit Corporation is hereby
              incorporated by reference to Exhibit 3.1 to Glenoit Corporation's
              Registration Statement on Form S-4 (Registration No. 333-42411)
              filed on December 16, 1997.
      3.2     By-Laws of Glenoit Corporation are hereby incorporated by
              reference to Exhibit 3.2 to Glenoit Corporation's Registration
              Statement on Form S-4 (Registration No. 333-42411) filed on
              December 16, 1997.
      3.3     Certificate of Incorporation of Glenoit Asset Corporation is
              hereby incorporated by reference to Exhibit 3.3 of Amendment No. 1
              to Glenoit Asset Corporation's Registration Statement of Form S-4
              (Registration No. 333-42411-01) filed February 4, 1998.
      3.4     By-Laws of Glenoit Asset Corporation are hereby incorporated by
              reference to Exhibit 3.4 of Amendment No. 1 to Glenoit Asset
              Corporation's Registration Statement of Form S-4 (Registration No.
              333-42411-01) filed February 4, 1998.
      4.1     Indenture dated as of April 1, 1997 between Glenoit Corporation,
              the Subsidiary Guarantors (as defined therein) and United States
              Trust Company of New York is hereby incorporated by reference to
              Exhibit 4.1 to Glenoit Corporation's Registration Statement on
              Form S-4 (Registration No. 333-42411) filed on December 16, 1997.
      4.2     Purchase Agreement dated as of March 26, 1997 among Glenoit
              Corporation, the Subsidiary Guarantors (as defined therein),
              Salomon Brothers Inc. and CIBC Wood Gundy Securities Corp. is
              hereby incorporated by reference to Exhibit 4.2 to Glenoit
              Corporation's Registration Statement on Form S-4 (Registration No.
              333-42411) filed on December 16, 1997.
      4.3     Registration Agreement dated as of March 26, 1997 among Glenoit
              Corporation, the Subsidiary Guarantors (as defined therein),
              Salomon Brothers Inc. and CIBC Wood Gundy Securities Corp. is
              hereby incorporated by reference to Exhibit 4.3 to Glenoit
              Corporation's Registration Statement on Form S-4 (Registration No.
              333-42411) filed on December 16, 1997.

                                       26
<PAGE>
      10.1    Second Amended and Restated Credit Agreement dated as of April 1,
              1997 among Glenoit Corporation, the banks, financial institutions
              and other institutional lenders listed on the signature pages
              thereto as the Restatement Lenders, the Banque Nationale de Paris,
              as Administrative Agent for the Lender Parties (as defined
              therein) is hereby incorporated by reference to Exhibit 10.1 to
              Glenoit Corporation's Registration Statement on Form S-4
              (Registration No. 333-42411) filed on December 16, 1997.
      10.2    Supply Agreement dated February 1, 1997 by and between the Company
              and Sterling Fibers, Inc. is hereby incorporated by reference to
              Exhibit 10.2 of Amendment No. 1 to Glenoit Corporation's
              Registration Statement on Form S-4 (Registration No. 333-42411)
              filed on February 4, 1998.
      10.3    Employment Agreement dated October 28, 1997 by and among the
              Company, Glenoit Universal, Inc. and Thomas J. O'Gorman is hereby
              incorporated to reference to Exhibit 10.3 of Amendment No. 1 to
              Glenoit Corporation's Registration Statement on Form S-4
              (Registration No. 333-42411) filed on February 4, 1998.
      10.4    Employment Agreement dated August 5, 1996 by and between the
              Company and Lester D. Sears is hereby incorporated by reference to
              Exhibit 10.4 of Amendment No. 1 to Glenoit Corporation's
              Registration Statement on Form S-4 (Registration No. 333-42411)
              filed on February 4, 1998.
      10.5    Stockholders Agreement dated as of December 14, 1995 by and among
              Glenoit Universal, Inc., Citicorp Venture Capital, John Mowbray
              O'Mara, Banque Nationale de Paris, The Equitable Life Assurance
              Society of the United States, the Seller, Soannes Investment
              Corporation, Thomas J. O'Gorman and certain other parties thereto
              to is hereby incorporated by reference to Exhibit 10.5 of
              Amendment No. 1 to Glenoit Corporation's Registration Statement on
              Form S-4 (Registration No. 333-42411) filed on February 4, 1998.
      10.6    Second Amendment and Waiver to the Credit Agreement, dated October
              2, 1998, among Glenoit Corporation, the banks, financial
              institutions and other institutional lenders parties to the Credit
              Agreement and Banque Nationale de Paris as Agent is hereby
              incorporated by reference to Exhibit 4.1 of Glenoit Corporation's
              Form 8-K filed on October 16, 1998.
      10.7    Stock Purchase Agreement dated October 2, 1998 among Glenoit
              Corporation, American Pacific Enterprises, Inc., Steven J. Block,
              Jeffrey J. Block and Gregory D. Block is hereby incorporated by
              reference to Exhibit 2.1 of Glenoit Corporation's Form 8-K filed
              on October 16, 1998
      10.8    Third Amendment and Waiver to the Credit Agreement, dated October
              30, 1998, among Glenoit Corporation, the banks, financial
              institutions and other institutional lenders parties to the Credit
              Agreement and Banque Nationale de Paris as Agent is incorporated
              by reference to Exhibit 10.8 of Glenoit Corporation's Form 10-K
              filed on April 1, 1999.
      10.9    Third Amended and Restated Credit Agreement, dated February 12,
              1999, among Glenoit Corporation, the banks, financial institutions
              and other institutional lenders parties to the Credit Agreement
              and Banque Nationale de Paris as Agent is hereby incorporated by
              reference to Exhibit 4.1 of Glenoit Corporation's Form 8-K filed
              on February 26, 1999.

                                       27
<PAGE>
      10.10   Stock Purchase Agreement dated February 12, 1999, among Glenoit
              Corporation, Ex-Cell Home Fashions, Inc., Arnold Angerman, Irving
              Angerman, Samuel Samelson and two trusts is hereby incorporated by
              reference to Exhibit 2.1 of Glenoit Corporation's Form 8-K filed
              on February 26, 1999.
      10.11   Amendment No. 2 to the Third Amended and Restated Credit
              Agreement, dated as of June 29, 1999, among Glenoit Corporation,
              the banks, financial institutions and other institutional lenders
              and Banque Nationale de Paris as Agent is hereby incorporated by
              reference to Exhibit 10.11 of Glenoit Corporation's Form 10-Q
              filed on August 24, 1999.
      10.12   Amendment No. 3 to the Third Amended and Restated Credit
              Agreement, dated as of August 20, 1999, among Glenoit Corporation,
              the banks, financial institutions and other institutional lenders
              and Banque Nationale de Paris as Agent is hereby incorporated by
              reference to Exhibit 10.12 of Glenoit Corporation's Form 10-Q
              filed on August 24, 1999.
      10.13   Amendment No. 4 to the Third Amended and Restated Credit
              Agreement, dated as of October 29, 1999, among Glenoit
              Corporation, the banks, financial institutions and other
              institutional lenders and Banque Nationale de Paris as Agent.
      10.14   Amendment No. 5 to the Third Amended and Restated Credit
              Agreement, dated as of November 8, 1999, among Glenoit
              Corporation, the banks, financial institutions and other
              institutional lenders and Banque Nationale de Paris as Agent.
      21.1    Subsidiaries of Glenoit Corporation is hereby incorporated by
              reference to Exhibit 21.1 to Glenoit Corporation's Registration
              Statement on Form S-4 (Registration No. 333-42411) filed on
              December 16, 1997.
      27.1    Financial Data Schedule.
      27.2    Financial Data Schedule.


     (b) Reports on Form 8-K
         None

                                       28
<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.


Dated:   November 23, 1999
                                GLENOIT CORPORATION


                                By          /S/ LESTER D. SEARS
                                  -----------------------------
                                   Lester D. Sears
                                   Executive Vice President and
                                   Chief Financial Officer
                                   (On behalf of the Registrant and as Principal
                                   Financial and Accounting Officer)




                                   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.


Dated:   November 23, 1999
                                GLENOIT ASSET CORPORATION




                                By          /S/ LESTER D. SEARS
                                  -----------------------------
                                   Lester D. Sears
                                   Executive Vice President and
                                   Chief Financial Officer
                                   (On behalf of the Registrant and as Principal
                                   Financial and Accounting Officer)


                                       29