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 APRIL 3, 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 [X] No [ ]


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

As of April 3, 1999, there were 1,000 shares of Glenoit Corporation common stock
outstanding.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

<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,     April 3,
                                                                          1999          1999
                                                                      ------------- -------------
                             ASSETS                                                 (Unaudited)

<S>                                                                 <C>                <C>
Current assets:
     Cash and cash equivalents                                      $      339,700 $   1,458,007
     Receivables:
          Trade accounts receivable, net of allowance of $2,360,000     29,666,112    33,021,511
               and $3,001,000 as of January 2, 1999 and April 3,
               1999, respectively
          Other receivables                                                364,996     1,880,052
     Inventories                                                        19,734,042    46,523,026
     Due from Holdings                                                           -     3,938,582
     Prepaid expenses and other current assets                           3,797,479     3,067,357
                                                                      ------------- -------------

                    Total current assets                                53,902,329    89,888,535

Property, plant and equipment, net                                      49,108,311    71,407,646

Other assets:
     Notes receivable from related party                                   266,821       261,818
     Intangible assets, net of accumulated amortization of $1,735,000   35,715,233    51,581,175
          and $1,598,000 as of January 2, 1999 and April 3, 1999,
          respectively
     Deferred loan costs and other, net of accumulated amortization of   5,195,653     9,096,688
          $1,181,000 and $1,473,000 as of January 2, 1999 and April 3,
          1999, respectively
     Other assets                                                          510,716     1,013,674
                                                                      ------------- -------------
                    Total assets                                    $  144,699,063 $ 223,249,536
                                                                      ============= =============
</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,         April 3,
                                                                  1999              1999
                                                               ------------      ------------
          LIABILITIES AND STOCKHOLDER'S DEFICIT                                  (Unaudited)

<S>                                                           <C>               <C>
Current liabilities:
     Accounts payable                                         $  2,888,602      $  9,570,145
     Accrued expenses                                           21,820,034        29,988,037
     Current maturities of long-term debt                                -         5,025,000
     Due to Holdings                                             1,752,143                 -
                                                               ------------      ------------
                    Total current liabilities                   26,460,779        44,583,182

Long-term debt less current maturities                         160,707,499       219,558,168
Deferred income taxes                                            3,382,058        10,283,112
Other long-term liabilities                                        504,196         6,513,322
                                                               ------------      ------------
                    Total liabilities                          191,054,532       280,937,784
                                                               ------------      ------------
Commitments and contingencies

Stockholder's deficit:
     Common stock, $.01 par value, 1,000 shares authorized,
          issued and outstanding as of January 2, 1999 and
          April 3, 1999                                                 10                10
     Additional paid-in capital                                  1,461,713         1,461,713
     Accumulated deficit                                     (  46,966,633  )  (  58,488,080 )
     Accumulated other comprehensive loss                    (     850,559  )  (     661,891 )
                                                               ------------      ------------
                    Total stockholder's deficit              (  46,355,469  )  (  57,688,248 )
                                                               ------------      ------------
                    Total liabilities and stockholder's
                      deficit                                 $144,699,063      $223,249,536
                                                              ============      ============
</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
                                               ------------------------------------
                                                  April 4,            April 3,
                                                    1998                1999
                                               ---------------     ----------------
<S>                                            <C>                 <C>
Net sales                                      $   38,779,918      $    54,882,318

Cost of sales                                      27,236,963           40,457,537
                                               ---------------     ----------------
          Gross profit                             11,542,955           14,424,781
                                               ---------------     ----------------
Operating expenses:
     Selling                                        3,420,050            4,885,364
     Administrative                                 2,385,065            8,731,456
     Research and development                         427,977              640,315
     Restructuring charge                                   -           13,100,000
                                               ---------------     ----------------
          Total operating expenses                  6,233,092           27,357,135
                                               ---------------     ----------------
Income (loss) from operations                       5,309,863      (    12,932,354 )
                                               ---------------     ----------------
Other income (expense):
     Interest expense                          (    3,003,349 )    (     5,122,613 )
     Amortization of deferred financing costs  (      158,746 )    (       291,819 )
     Other                                             16,663               46,641
                                               ---------------     ----------------
          Total other expense                  (    3,145,432 )    (     5,367,791 )
                                               ---------------     ----------------
Income (loss) before income taxes                   2,164,431      (    18,300,145 )

Income tax expense (benefit)                          778,626      (     6,778,698 )
                                               ---------------     ----------------
Net income (loss)                              $    1,385,805     $(    11,521,447 )
                                               ===============    =================
</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 three months ended April 3, 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>
Balance as of
   January 2, 1999   1,000    $     10   $1,461,713   $( 46,966,633 )  $ ( 850,559 )   $( 46,355,469 )

Net loss                                               ( 11,521,447 )                   ( 11,521,447 )

Accumulated Other
   Comprehensive
   Income                                                                  188,668           188,668
                   --------   ---------   ----------     -----------       --------       -----------
Balance as of
   April 3, 1999     1,000    $     10   $1,461,713   $( 58,488,080 )  $ ( 661,891 )   $( 57,688,248 )
                   ========   =========   ==========     ===========       ========       ===========
</TABLE>


           CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

                                                       Three Months Ended
                                                ------------------------------
                                                   April 4,       April 3,
                                                     1998           1999
                                                ------------- ----------------
Net income (loss)                               $  1,385,805  $ ( 11,521,447 )

Other comprehensive income, net of tax:
   Currency translation adjustment                    34,503         116,974
                                                ------------- ----------------
Comprehensive income                            $  1,420,308  $ ( 11,404,473 )
                                                ============= ================


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>
                                                                          Three Months Ended
                                                                    ------------------------------
                                                                      April 4,         April 3,
                                                                        1998             1999
                                                                    -------------    -------------
<S>                                                                 <C>              <C>
Cash flows from operating activities:
     Net income (loss)                                              $  1,385,805    $( 11,521,447 )
     Adjustments to reconcile net income to net cash
        used in operating activities:
          Depreciation and amortization                                1,289,538        2,816,585
          Restructuring charge                                                 -       13,100,000
          Loss on sale of property and equipment                    (      4,778 )              -
          Effect of foreign currency exchange rate                        34,503          188,668
          Changes in operating assets and liabilities:
             Trade and other receivables                            ( 13,804,427 )   (    639,586 )
             Inventories                                            (  2,861,703 )   (  8,750,576 )
             Prepaid expenses and other assets                      (    593,091 )   (    280,197 )
             Due to Holdings                                             390,000     (  5,690,725 )
             Accounts payable                                          3,321,301        1,588,390
             Accrued expenses and other liabilities                    3,372,312        3,513,311
                                                                    -------------    -------------
               Net cash (used in) operating activities              (  7,470,540 )   (  5,675,577 )
                                                                    -------------    -------------
Cash flows from investing activities:
   Purchases of acquired businesses, net of cash acquired                      -     ( 50,279,944 )
   Purchases of and additions to property, plant and equipment      (  6,230,777 )   (  2,608,987 )
   Proceeds from sale of property and equipment and refunds of
          deposits                                                        11,500                -
                                                                    -------------    -------------
               Net cash used in investing activities                (  6,219,277 )   ( 52,888,931 )
                                                                    -------------    -------------
Cash flows from financing activities:
   Payments on capital lease obligations                            (    167,386 )              -
   Proceeds from line of credit and issuance of debt, net             13,000,000       63,875,669
   Advances on notes receivable - related parties                   (    100,000 )              -
   Payments for financing costs                                               --     (  4,192,854 )
                                                                    -------------    -------------
               Net cash provided by financing activities              12,732,614       59,682,815
                                                                    -------------    -------------
               Net increase (decrease) in cash and cash equivalents (    957,203 )      1,118,307

Cash and cash equivalents at beginning of period                       1,072,280          339,700
                                                                    -------------    -------------
Cash and cash equivalents at end of period                          $    115,077     $  1,458,007
                                                                    =============    =============
</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 three-month period ended April
        3, 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 April
        3, 1999, the accompanying financial statements include the accounts of
        Glenoit Corporation and it's 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 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. Since the Company does not hold any derivative
        instruments, SFAS No. 133 does not have any impact on the Company's
        results from operation or financial position.

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 collateralized 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

        Inventories are summarized as follows:
                                              January 2,        April 3,
                                                 1999             1999
                                             --------------   --------------
                                                                (Unaudited)

       Raw Materials                            $2,843,387       $9,037,471
       Work-in-process                           1,933,812        8,574,432
       Finished goods                           14,956,843       28,911,123
                                             --------------   --------------

                 Total inventories             $19,734,042      $46,523,026
                                             ==============   ==============


                                       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 April 3, 1999, long-term debt consisted of the
following:
                                                      January 2,       April 3,
                                                        1999             1999
                                                        ----             ----
                                                                     (unaudited)
           Senior credit facility.................    $65,707,499   $129,583,168
           11% Senior subordinated notes .........     95,000,000     95,000,000
                                                    -------------   ------------
               Total long-term debt...............    160,707,499    224,583,168
           Less current portion ..................              -      5,025,000
                                                    -------------   ------------
                                                     $160,707,499   $219,558,168
                                                    =============   ============

        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 was
        designated as an Acquisition Commitment and $45 million as a Working
        Capital Commitment, which was 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. This additional availability is comprised of (i) $90.0 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 bear interest, as further amended, 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 April 3, 1999, the Company had $19.6
        million outstanding under the Working Capital Commitment, and
        approximately $26.4 million available under the Working Capital
        Commitment.

        The Facility and Senior Subordinated Notes have various covenants 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.

        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.


                                       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)

        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 September 1997, Glenoit Canada had no operations.

        The following tables present summarized balance sheet information of
        Glenoit Corporation, the Subsidiary Guarantors, and Glenoit Canada as of
        April 3, 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 April 3, 1999
        is as follows (unaudited):

<TABLE>
<CAPTION>
                                          Glenoit    Subsidiary
                                        Corporation  Guarantors   Elimination  Sub-total    Canada   Eliminations  Consolidated
                                        -----------  ---------    -----------  ---------    ------   -----------  ------------
<S>                                     <C>            <C>         <C>           <C>           <C>     <C>            <C>
Cash and cash equivalents                   $ 288       $1,015                   $1,303      $ 155                   $ 1,458
Accounts and other receivables, net        19,177       13,771                   32,948      1,954                    34,902
Inventories                                 9,702       35,920                   45,622        901                    46,523
Other current assets                        5,056        1,917                    6,973         33                     7,006
                                         --------     --------                 --------    -------                  --------
  Total current assets                     34,223       52,623                   86,846      3,043                    89,889
Property, plant and equipment, net         46,586       16,718                   63,304      8,104                    71,408
Other assets                              157,486      101,818     $(186,510)    72,794        382    $(11,223)       61,953
                                         --------     --------     ---------   --------    -------    --------      --------
  Total assets                           $238,295     $171,159     $(186,510)  $222,944    $11,529    $(11,223)     $223,250
                                         ========     ========     =========   ========    =======    ========      ========
Accounts payable                         $  4,213     $  4,861                 $  9,074        496                  $  9,570
Other current liabilities                  10,417       24,150             -     34,567        446                    35,013
                                         --------     --------     ---------   --------    -------                  --------
  Total current liabilities                14,630       29,011                   43,641        942                    44,583
Long-term debt                            267,778                 $  (48,220)   219,558      2,081    $ (2,081)      219,558
Other long-term liabilities                12,913        3,858                   16,771         26                    16,797
Stockholders equity (deficit)             (57,026)     138,290      (138,290)   (57,026)     8,480      (9,142)      (57,688)
                                         --------     --------     ---------   --------    -------    --------      --------
  Total liabilities and equity           $238,295     $171,159     $(186,510)  $222,944    $11,529    $(11,223)     $223,250
                                         ========     ========     =========   ========    =======    ========      ========
</TABLE>

                                       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)

    Summarized operating statements information, in thousands, for the three
months ended April 3, 1999 is as follows:

<TABLE>
<CAPTION>
                              Glenoit    Subsidiary                           Glenoit
                            Corporation  Guarantors  Eliminations  Sub-total   Canada   Eliminations  Consolidated
                            -----------  ----------  ------------  ---------   ------   ------------  ------------
<S>                           <C>          <C>          <C>         <C>        <C>          <C>          <C>
Net Sales                     $24,765      $27,948                  $52,713    $2,169                    $54,882
Cost of sales                  19,883       18,793                   38,676     1,782                     40,458
                             --------      -------      -------     -------    ------                   --------
Gross profit                    4,882        9,155                   14,037       387                     14,424
Operating expenses             18,732        8,316                   27,048       309                     27,357
Royalty income (expenses)      (1,705)       1,705                        -         -                          -
                             --------      -------      -------     -------    ------                   --------
Income from operations        (15,555)       2,544                  (13,011)       78                    (12,933)
Interest expense (income)       5,641         (557)                   5,084        39                      5,123
Other expense (income)         (1,719)                  $ 1,954         235       (42)        51             244
Income taxes                   (7,956)       1,147            -      (6,809)       30          -          (6,779)
                             --------      -------      -------     -------    ------       ----        --------
     Net income              $(11,521)     $ 1,954      $(1,954)   $(11,521)   $   51       $(51)       $(11,521)
                             ========      =======      =======     =======    ======       ====        ========
</TABLE>

    Summarized cash flow statement information, in thousands, for the three
months ended April 3, 1999 is as follows:

<TABLE>
<CAPTION>
                                       Glenoit    Subsidiary                           Glenoit
                                     Corporation  Guarantors  Eliminations  Sub-total   Canada   Eliminations  Consolidated
                                     -----------  ----------  ------------  ---------   ------   ------------  ------------
<S>                                    <C>          <C>          <C>         <C>        <C>          <C>          <C>
Cashflows from operating activities    $(7,323)     $1,395                   $(5,928)    $252                    $(5,676)
Cashflows used in investing activities (52,203)       (501)                  (52,704)    (185)                   (52,889)
Cashflows from financing activities     59,775         (58)                   59,717      (34)                    59,683
                                       -------      ------                   -------     ----                    -------
Net increase (decrease) in cash            249         836                     1,085       33                      1,118
Cash at beginning of period                 39         179                       218      122                        340
                                       -------      ------                   -------     ----                    -------
Cash at end of period                  $   288      $1,015                   $ 1,303     $155                    $ 1,458
                                       =======      ======                   =======     ====                    =======
</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 operating statements information, in thousands, for the three
months ended April 4, 1998 is as follows:


<TABLE>
<CAPTION>

                                          Glenoit                Consolidated
                              Glenoit      Asset                   Domestic    Glenoit
                            Corporation  Corporation Eliminations Operations   Canada   Eliminations  Consolidated
                            -----------  ----------  ------------  ---------   ------   ------------  ------------
<S>                           <C>          <C>          <C>         <C>        <C>          <C>          <C>
Net Sales                     $35,531                               $35,531    $3,249                    $38,780
Cost of sales                  24,792            0            0      24,792     2,445          0          27,237
                             --------      -------      -------     -------    ------       ----        --------
Gross profit                   10,739            0            0      10,739       804                     11,543
Operating expenses              5,959            3                    5,962       271                      6,233
Royalty income (expenses)      (1,935)     $ 1,935            0           0         0          0               0
                             --------      -------      -------     -------    ------       ----        --------
Income from operations          2,845        1,932                    4,777       533          0           5,310
Interest expense (income)       3,534         (525)                   3,009        (6)                     3,003
Other expense (income)         (1,797)                  $ 1,597        (200)       (7)     $ 349             142
Income taxes                     (278)         860            0         582       197          0             779
                             --------      -------      -------     -------    ------       ----        --------
     Net income              $  1,386      $ 1,597      $(1,597)    $ 1,386    $  349      $(349)        $ 1,386
                             ========      =======      =======     =======    ======       ====        ========
</TABLE>

Summarized cash flow statement information, in thousands, for the three months
ended April 4, 1998 is as follows:

<TABLE>
<CAPTION>
                                                   Glenoit                Consolidated
                                       Glenoit      Asset                   Domestic    Glenoit
                                     Corporation  Corporation Eliminations Operations   Canada   Eliminations  Consolidated
                                     -----------  ----------- ------------  ---------   ------   ------------  ------------
<S>                                    <C>          <C>          <C>         <C>        <C>          <C>          <C>
Cashflows from operating activities    (10,617)      2,455                    (8,162)     691                     (7,471)
Cashflows used in investing activities  (5,344)                               (5,344)    (875)                    (6,219)
Cashflows from financing activities     15,024      (2,457)          0        12,567      166          0          12,733
                                       -------      ------       -----       -------     ----      -----         -------
Net increase (decrease) in cash           (937)         (2)                     (939)     (18)                      (957)
Cash at beginning of period                651          76           0           727      345          0           1,072
                                       -------      ------       -----       -------     ----      -----         -------
Cash at end of period                     (286)         74           0          (212)     327          0             115
                                       =======      ======       =====       =======     ====      =====         =======
</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 $29.4
        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 $12.0 million will
        be paid to the former owners and current employees. Of this amount, $3.5
        million representing the amount to be paid to current employees was
        recognized as compensation expense during the Company's fourth quarter
        of 1998. The remaining $8.5 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. 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 adjustments. 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
        and second quarter 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 which will not occur in the future
        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)

                                                   Three Months Ended
                                                ----------------------------
                                                April 3,        April 3,
                                                  1998            1999
                                                       (Unaudited)
             Net sales                          $70,260,000     $63,700,000
                                                ===========     ===========
             Net income(loss)                     1,000,000    (11,400,000)
                                                    =======    ============


        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 will be discontinuing operations at its
        leased Tennessee facility and will terminate substantially all of the
        associates at that facility. The Company intends to cease 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 to cover the estimated costs associated with the closing of that
        facility including the estimated present value 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
        related to the termination of approximately 225 associates. The
        components of the reserves for this facility are as follows (in
        thousands):

                                                                Original Reserve
                                                                ----------------
          Estimated  losses  associated  with the disposal of         
          machinery and equipment                                     $1,760
          Write-off of goodwill                                        3,167
          Estimated  expenditures related to operating leases        
          for plant and equipment                                      7,323
          Estimated severance benefits                                   850
                                                                     -------
                                                                     $13,100
                                                                     =======

9.      OPERATING SEGMENTS

        DESCRIPTION OF SEGMENTS

        Subsequent to the APE and Ex-Cell acquisitions, the Company has two
        operating divisions: (1) Fabric Division ("Fabric"), manufacturer and
        distributor of fabric for the apparel, automotive and home furnishing
        industries and (2) Decorative Home Furnishings,


                                       16
<PAGE>

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

9.      OPERATING SEGMENTS (CONTINUED)

        which manufactures, imports and distributes decorative textile home
        furnishings to all major specialty and broadline retail distribution
        channels. Decorative Home Furnishings products include specialty bedding
        items, shower curtains, household rugs, decorative pillows and table
        linens.


                                                      Three Months
                                                  April 4,     April 3,
                                                    1998         1999
                                                  --------     ---------
         Net Sales
              Fabric.......................        $28,521      $14,517
              Decorative Home Furnishings..         10,259       40,365
                                                   -------       ------
              Consolidated.................        $38,780      $54,882
                                                   =======      =======

         Operating income (loss)
              Fabric.......................         $6,083     $(13,350)
              Decorative Home Furnishings..          1,482        3,037
              Corporate/Other..............         (2,255)      (2,619)
                                                   -------       ------
              Consolidated.................         $5,310     $(12,932)
                                                   =======      =======

         Depreciation and
         amortization
              Fabric.......................           $724       $1,167
              Decorative Home Furnishings..            201          938
              Corporate/Other..............            365          712
                                                   -------       ------
              Consolidated.................         $1,290       $2,817
                                                   =======      =======

                                                  April 3,
                                                    1999
                                                    ----
         Inventory and accounts
         receivable
              Fabric.......................        $18,550
              Decorative Home Furnishings..         60,995
                                                   -------
              Consolidated.................        $79,545
                                                   =======



                                       17
<PAGE>

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


        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. As of April 3, 1999, there were no factored receivables with
        recourse.


                                       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) a domestic manufacturer and
marketer of specialty fabrics known as "sliver-knit" pile fabrics ("Fabric
Division"), and (ii) Decorative Home Furnishings which consist of a domestic
manufacturer of household rugs ("Consumer Products Divisions"), a designer,
importer and marketer of decorative textile home furnishings ("American Pacific
Enterprises, Inc.") and, through its recently acquired subsidiary, Ex-Cell Home
Fashions, Inc., a manufacturer and distributor of textile home furnishings.

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 $8.5 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 the large
retailers, further penetrate the specialty retailing segment and diversify
product sourcing capabilities beyond North America.

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 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 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 will be discontinuing operations at its leased Tennessee
facility and will terminate 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>

RESULTS OF OPERATIONS

Net sales for the quarter ended April 3, 1999, increased to $54.9 million or
41.5% compared to $38.8 million during the comparable quarter in the prior year.
The increase in net sales is directly attributable to the acquisitions of APE
and Ex-Cell. APE generated sales of $17.3 million for the first quarter of 1999
and Ex-Cell's net sales totaled $10.6 million since its acquisition on February
12, 1999. Net sales in the Consumer Products Division increased approximately
20.9% to $12.4 million during the first quarter of 1999 compared to 1998 as a
result of increased unit volume and average selling price. These increases in
sales were offset by a decline in sales of the Fabric Division to $14.5 million
from $28.5 million. This decrease was due to continued softness in the product
category as a result of unseasonably warm weather and the influx of low priced
apparel products, mainly from Asia.

Gross profit for the quarter ended April 3, 1999 was $14.4 million or 26.3% of
net sales compared to $11.5 million or 29.8% of net sales for the same period
last year. The increase relates to the inclusion of APE and Ex-Cell's operating
results which combined contributed $9.2 million of gross profit in the first
quarter of 1999. Ex-Cell's gross margin was negatively impacted by $ .6 million
of additional cost of sales related to the sale of inventory that had been
written up at the time of acquisition in accordance with generally accepted
accounting principles. The Consumer Products Division gross margin increased
29.9% to $3.9 million as a result of the increased unit volume. As a result of
the significant decline in sales, the Fabric Division's gross margin decreased
to $1.7 million from $8.5 million. The Fabric Division's results were negatively
impacted by the decreased volume which resulted in a low absorption of overhead
costs.

Operating expenses for the quarter ended April 3, 1999, were $27.4 million
compared to $6.2 million in the first quarter of the prior year. Operating
expenses for 1999 include a $13.1 million restructuring charge related to the
consolidation of manufacturing facilities in the Fabric Division as discussed in
"Recent Developments". In addition to the restructuring charge, dollar increases
in 1999 relate to the operating expenses of APE and Ex-Cell which totaled $8.3
million. These expenses include $ .4 million of goodwill amortization specific
to APE and Ex-Cell as well as $1.0 million of incentive compensation charges
directly attributable to the APE acquisition agreement.

The Company reported an operating loss of $12.9 million for the quarter ended
April 3, 1999 compared to operating income of $5.3 million in the prior year as
a result of factors described above.

Interest expense for the quarter ended April 3, 1999, was $5.1 million compared
to $3.0 million for the same period last year. Interest expense has increased
due to higher levels of debt as a result of the APE and Ex-Cell acquisitions.

Net loss for the quarter ended April 3, 1999, was $11.5 million compared to net
income of $1.4 million the prior year.


                                       20
<PAGE>

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) 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 is
comprised of (i) $90 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 April
3, 1999, there were borrowings of $19.6 million under the Working Capital
Commitment and approximately $26.4 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.

Principal and interest payments in respect of the Notes and the New Credit
Facility will 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.

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.

                                       21
<PAGE>

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 April 3, 1999, Holdings has
obligations with a face amount of $29.4 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 the three months ended April 3, 1999, net cash used in operating
activities was $5.7 million, which resulted from the Company increasing its
working capital to meet its seasonal requirements. Excluding the purchase of
Ex-Cell, receivables increased by $.6 million, inventories and other assets
increased by $9.0 million. Accrued liabilities increased by $3.5 million, due
primarily to sales and compensation related costs. Accounts payable increased by
$1.6 million related to increased raw material purchases and tax related
accruals decreased $5.7 million.


CAPITAL IMPROVEMENTS

Capital expenditures for the three months ended April 3, 1999 were $2.6 million.
These additions were primarily in the Consumer Products Divisions for advanced
printing equipment and the purchase of machinery for the start-up of the
Company's decorative pillow operations. Expenditures were made for upgrades to
management information 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.


                                       22
<PAGE>

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 expects the
conversions and the review of its IT systems to be completed by June 1999 and,
accordingly, a contingency plan for IT risks has not been developed. However,
should the remaining review 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's review of Non-IT systems is ongoing with
expected completion by June 1999. To date, 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 the remaining 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 June 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.


                                       23
<PAGE>

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. 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").


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.


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<PAGE>

     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.
     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


                                       25
<PAGE>

     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.
     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.
     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.



     (b)    Reports on Form 8-K

            On February 26, 1999, the Company filed on Form 8-K information
            regarding the acquisition of the capital stock of Ex-Cell Home
            Fashions, Inc. which occurred on February 12, 1999. In addition, on
            April 27, 1999, the Company filed an amendment to this Form 8-K to
            include requried financial information related to the acquisition.


                                       26
<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:  May 17, 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:  May 17, 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)


                                     27