<PAGE>
<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                For the quarterly period ended September 30, 1997

                                       or

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

                For the transition period from _______ to _______

COMMISSION FILE NUMBER 0-19737

                                NOEL GROUP, INC.
             (Exact name of registrant as specified in its charter)

              Delaware                                  13-2649262
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

667 Madison Avenue, New York, New York                                10021-8029
(Address of principal executive offices)                              (Zip Code)

                                 (212) 371-1400
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

                               Yes X        No_____

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

             Class                              Outstanding at November 13, 1997
-----------------------------                   --------------------------------
Common Stock - $.10 Par Value                             20,567,757




<PAGE>
<PAGE>


                        NOEL GROUP, INC. AND SUBSIDIARIES

                                      INDEX

<TABLE>
<CAPTION>
                                                                                              Page No.
<S>               <C>                                                                            <C>
PART I - FINANCIAL INFORMATION

Item 1.           Statement of Net Assets in Liquidation (Liquidation Basis)
                  September 30, 1997                                                              3

                  Statement of Changes in Net Assets in Liquidation (Liquidation Basis)
                  Three and Six Months Ended September 30, 1997                                   4

                  Consolidated Balance Sheet (Going-Concern Basis)
                  December 31, 1996                                                               5

                  Consolidated Statements of Operations (Going-Concern Basis)
                  Three Months Ended March 31, 1997 and 1996                                      6

                  Condensed Consolidated Statements of Cash Flows (Going-Concern
                  Basis) Three Months Ended March 31, 1997 and 1996                               7

                  Notes to Financial Statements                                                   8

Item 2.           Management's Discussion and Analysis of Financial Condition and
                  Results of Operations                                                           18

PART II - OTHER INFORMATION

Item 1.           Legal Proceedings                                                               22

Item 3.           Defaults upon Senior Securities                                                 22

Item 6.           Exhibits and Reports on Form 8-K                                                22
</TABLE>

                                        2



<PAGE>
<PAGE>


                         PART 1 - FINANCIAL INFORMATION

ITEM 1. - FINANCIAL STATEMENTS

                                NOEL GROUP, INC.
           STATEMENT OF NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS)
           (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                           September 30,
                                                               1997
                                                           -------------
<S>                                                        <C>        
Assets
------
Cash and cash equivalents                                       $4,362
Short-term investments                                           8,047
                                                           -----------
Total cash and short-term investments                           12,409

Investments (Note 2)                                            87,878

Income taxes (Note 4)                                            5,244

Other assets                                                     1,900
                                                            ----------
Total assets                                                   107,431
                                                            ----------
Liabilities
-----------
Accounts payable                                                    58
Accrued expenses (Note 5)                                        8,357
                                                            ----------

Total liabilities                                                8,415
                                                            ----------
Net assets in liquidation (Note 9)                             $99,016
                                                            ==========

Number of common shares outstanding                         20,567,757
                                                            ==========
Net assets in liquidation per outstanding share (Note 9)         $4.81
                                                            ==========
</TABLE>


    The accompanying notes are an integral part of this financial statement.

                                        3



<PAGE>
<PAGE>


                                NOEL GROUP, INC.
      Statement of Changes in Net Assets in Liquidation (Liquidation Basis)
                           Three and Six Months Ended
                               September 30, 1997
                        (Unaudited, dollars in thousands)
<TABLE>

<S>                                                                            <C>      
Net assets in liquidation at April 1 (Note 6)                                   $158,353
Changes in estimated liquidation values of assets and liabilities (Note 3)         3,375
Distribution to shareholders (Note 9)                                            (53,973)
                                                                                --------
Net assets in liquidation at June 30                                             107,755
Changes in estimated liquidation values of assets and liabilities (Note 3)        (8,739)
                                                                                --------
Net assets in liquidation at September 30                                       $ 99,016
                                                                                ========
</TABLE>


    The accompanying notes are an integral part of this financial statement.

                                        4



<PAGE>
<PAGE>


                        NOEL GROUP, INC. AND SUBSIDIARIES
                CONSOLIDATED BALANCE SHEET (GOING-CONCERN BASIS)
                    (DOLLARS IN THOUSANDS, EXCEPT PAR VALUES)

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                                         1996
                                                                                    ------------
<S>                                                                                  <C>      
Assets
------
Current Assets:
  Cash and cash equivalents                                                           $  1,117
  Short-term investments                                                                 8,983
  Accounts receivable, less allowance of $3,718                                         24,023
  Inventories                                                                           34,157
  Other current assets                                                                   4,232
                                                                                      --------
Total Current Assets                                                                    72,512

Equity investments                                                                      68,026
Other investments                                                                          639
Property, plant and equipment, net                                                      37,671
Intangible assets, net                                                                  46,015
Other assets                                                                             5,658
                                                                                      --------
Total Assets                                                                          $230,521
                                                                                      ========

Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:

  Current portion of long-term debt                                                   $  4,719
  Trade accounts payable                                                                13,226
  Accrued compensation and benefits                                                      5,567
  Net liabilities of discontinued operations                                             3,597
  Other current liabilities                                                              8,417
                                                                                      --------
Total Current Liabilities                                                               35,526

Long-term debt                                                                          60,983
Other long-term liabilities                                                             29,085
Minority interest                                                                        7,567
                                                                                      --------
Total Liabilities                                                                      133,161
                                                                                      --------

Stockholders' Equity:

  Preferred stock, $.10 par value, 2,000,000 shares authorized, none outstanding          --
  Common stock, $.10 par value, 48,000,000 shares authorized,  20,222,642 issued         2,022
  Capital in excess of par value                                                       211,633
  Accumulated deficit                                                                 (115,123)
  Cumulative translation adjustment                                                       (481)
  Treasury stock at cost, 34,937 shares                                                   (691)
                                                                                      --------
Total Stockholders' Equity                                                              97,360
                                                                                      --------
Total Liabilities and Stockholders' Equity                                            $230,521
                                                                                      ========
</TABLE>


    The accompanying notes are an integral part of this financial statement.


                                        5



<PAGE>
<PAGE>



                        NOEL GROUP, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF OPERATIONS (GOING-CONCERN BASIS)
                          THREE MONTHS ENDED MARCH 31,
                                   (UNAUDITED)
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                     1997              1996
                                                                 ------------      ------------
<S>                                                              <C>               <C>         
Sales                                                                 $38,473           $43,119

Cost and Expense Items:
  Cost of sales                                                        20,711            24,595
  Selling, general, administrative and other expenses                  17,201            16,716
  Depreciation and amortization                                           862               984
                                                                   ----------        ----------
                                                                       38,774            42,295
                                                                   ----------        ----------
 Operating income  (loss)                                                (301)              824
                                                                   ----------        ----------

Other Income (Expense):
  Gain on sale of investment                                           15,098              --
  Loss on disposal of Carlyle's thread division                        (4,364)             --
  Other income                                                            218               259
  Income from equity investments                                         (354)            1,369
  Interest expense                                                     (1,670)           (1,935)
  Minority interest                                                       501              (173)
                                                                   ----------        ----------
                                                                        9,429              (480)
                                                                   ----------        ----------

Income from continuing operations before income taxes                   9,128               344
Provision for income taxes                                            (10,437)             (641)
                                                                   ----------        ----------
Loss from continuing operations                                        (1,309)             (297)
Income from discontinued operations                                      --                  42
                                                                   ----------        ----------
Net loss                                                              ($1,309)            ($255)
                                                                   ==========        ==========

Earnings (Loss) per common and common equivalent share from:

  Continuing operations                                                ($0.06)           ($0.01)
  Discontinued operations                                                0.00              0.00
                                                                   ----------        ----------
  Net loss                                                             ($0.06)           ($0.01)
                                                                   ==========        ==========

Weighted average common and common equivalent shares               20,421,039        20,192,233
                                                                   ==========        ==========
</TABLE>



   The accompanying notes are an integral part of these financial statements.

                                       6



<PAGE>
<PAGE>


                        NOEL GROUP, INC. AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (GOING-CONCERN BASIS)
                                   (UNAUDITED)
                          THREE MONTHS ENDED MARCH 31,
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   1997         1996
                                                                ---------     --------
<S>                                                             <C>           <C>      
Net cash used for operating activities                           ($5,973)      ($4,508)

Cash Flows from Investing Activities:
  Sales (Purchases) of short-term investments, net                (2,752)        4,582
  Sales (Purchases) of investments                                26,400        (3,922)
  Proceeds from sale of Carlyle's thread division                 51,924          --
  Purchases of property, plant and equipment                        (722)         (667)
  Other, net                                                        (148)         (706)
                                                                --------      --------
Net cash provided from (used for) investing activities            74,702          (713)
                                                                --------      --------

Cash Flows from Financing Activities:
  Borrowings from revolving credit line and long-term debt        41,146        32,107
  Repayments under revolving credit line and long-term debt      (76,659)      (30,329)
  Reductions of long-term liabilities                                (37)         (229)
  Issuance of common stock, net                                      886          --
                                                                --------      --------
Net cash provided from (used for) financing activities           (34,664)        1,549
Effect of exchange rates on cash                                     (11)           (3)
                                                                --------      --------
Net increase (decrease) in cash and cash equivalents             $34,054       ($3,675)
                                                                ========      ========

Supplemental Disclosure of Cash Flow Information:

   Interest paid                                                  $1,993        $2,178
                                                                ========      ========
   Taxes paid                                                        $43          $600
                                                                ========      ========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                        7



<PAGE>
<PAGE>



                          NOTES TO FINANCIAL STATEMENTS
                            AS OF SEPTEMBER 30, 1997
                                   (UNAUDITED)

LIQUIDATION BASIS STATEMENTS

         This Quarterly Report on Form 10-Q contains, in addition to historical
information, certain forward-looking statements, including those regarding
valuation of the assets and liabilities. Such statements, including, as more
fully set forth below, those relating to management's estimates of the net value
of the Company's assets in liquidation, involve certain risks and uncertainties,
including, without limitation, those risks and uncertainties discussed below.
Should one or more of these risks or uncertainties materialize, actual outcomes
may vary materially from those indicated.

1.       PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION:

         On March 19, 1997, the shareholders of Noel Group, Inc. ("Noel")
approved a Plan of Complete Liquidation and Dissolution (the "Plan"), which was
adopted by Noel's Board of Directors on May 21, 1996. Under the Plan, Noel is
being liquidated (i) by the sale of such of its assets as are not to be
distributed in kind to its shareholders, and (ii) after paying or providing for
all its claims, obligations and expenses, by cash and in-kind distributions to
its shareholders pro rata and if required by the Plan or deemed necessary by the
Board of Directors, by distributions of its assets from time to time to one or
more liquidating trusts established for the benefit of the then shareholders, or
by a final distribution of its then remaining assets to a liquidating trust
established for the benefit of the then shareholders.

         As a result of the adoption of the Plan by the shareholders, Noel
adopted the liquidation basis of accounting as of March 31, 1997. Under the
liquidation basis of accounting, assets are stated at their estimated net
realizable values and liabilities are stated at their anticipated settlement
amounts. See Note 2 for a specific discussion of the methods used to determine
estimated net realizable values of investments.

         The valuation of assets and liabilities necessarily requires many
estimates and assumptions and there are substantial uncertainties in carrying
out the provisions of the Plan. The actual value of any liquidating
distributions will depend upon a variety of factors including, but not limited
to, the actual market prices of any securities distributed in-kind when they are
distributed, the actual proceeds from the sale or other disposition of any of
Noel's assets, the ultimate settlement amounts of Noel's liabilities and
obligations, actual costs incurred in connection with carrying out the Plan,
including administrative costs during the liquidation period, the amount of
income earned on Noel's cash and cash equivalents and short-term investments
during the liquidation period, and the actual timing of distributions.

         The valuations presented in the accompanying Statement of Net Assets in
Liquidation represent management's estimates, based on present facts and
circumstances, of the net realizable values of assets and costs associated with
carrying out the provisions of the Plan based on the assumptions set forth in
the accompanying notes, which assumptions management believes

                                        8



<PAGE>
<PAGE>


to be reasonable, based on present facts and circumstances. The actual values
and costs are expected to differ from the amounts shown herein and could be
higher or lower than the amounts recorded. Accordingly, it is not possible to
predict the aggregate net values ultimately distributable to shareholders and no
assurance can be given that the amount to be received in liquidation will equal
or exceed the price or prices at which the Common Stock has generally traded or
is expected to trade in the future.

2.       INVESTMENTS:

         Investments are recorded at their estimated net realizable value in
liquidation. For investments where a public market exists, and the entity is
subject to the periodic reporting requirements of the Securities Exchange Act of
1934, as amended, the estimated liquidation-basis amount is calculated by
multiplying the market price by the number of shares owned without adjustment
for whether the shares owned are registered for sale, any other restriction on
transfer, control premiums, or whether the market has sufficient liquidity to
support the sale of the volume of securities owned at the quoted prices.

         This valuation may not be reflective of actual amounts obtained when
and if these investments are distributed or of prices that might be obtained in
actual future transactions. Because of the inherent uncertainty of the valuation
of securities both where a public market exists and where it does not exist, the
amounts shown may materially differ from the actual amounts which may be
received in the future.

         Noel's holding of the common shares of Carlyle Industries, Inc.
("Carlyle"), Lincoln Snacks Company ("Lincoln") and Staffing Resources, Inc.
("Staffing") are unregistered except for 421,000 shares of Lincoln which are
subject to restrictions under Rule 144.

         HealthPlan Services Corporation ("HPS") and Carlyle trade on the New
York Stock Exchange under the symbols HPS and CRL, respectively. Lincoln trades
on the Nasdaq Stock Market's Small Cap Market under the symbol SNAX.

                                       9



<PAGE>
<PAGE>



<TABLE>
<CAPTION>
                                                           Common                             Estimated Liquidation-
                                                           Shares            Price Per             Basis Amount
                                                           Owned               Share             September 30,1997
                                                           -----               -----             -----------------
                                                             (Dollars in thousands, except per share amounts)
<S>                                                       <C>                   <C>                     <C>  
Carlyle preferred stock(a)                                                                            $22,640
Carlyle common stock(b)                                   2,205,814             2.000                   4,412
Staffing(c)                                               2,026,104            11.000                  22,287
Curtis Industries, Inc.(d)                                                                             14,700
HPS(e)                                                      412,601            21.157                   8,729
Ferrovia Novoeste, S.A.(f)                                                                              8,000
Lincoln(b)                                                3,769,755             1.500                   5,655
Other holdings                                                                                          1,455
                                                                                                      -------
Estimated liquidation-basis amount                                                                    $87,878
                                                                                                      =======
</TABLE>

(a)      Recorded at the liquidation preference of the preferred shares which
         includes accumulated, unpaid dividends of $3,327,000 through September
         30, 1997. This recorded value is based upon the assumption that the
         Carlyle preferred stock will be realized at its liquidation preference
         in connection with the execution of the Plan. However, no assurance can
         be given that this assumption will prove to be correct, and for various
         reasons, including those stated below, there may be delays in realizing
         Noel's holding of Carlyle preferred stock and the eventual realization
         may be substantially less than its recorded value.

         Carlyle is currently in default on its obligations to redeem its
         preferred stock to the extent of its legally available funds. Noel and
         Carlyle have recently begun discussions concerning the Carlyle
         preferred stock and Carlyle has informed Noel that Carlyle intends to
         fulfill its obligations to its preferred stockholders. Carlyle has also
         informed Noel that its ability to make payments on account of the
         preferred stock in the future may depend on Carlyle's future cash flow,
         the timing of the settlement of certain of its liabilities, the outcome
         of its current negotiations with Noel and the ability of Carlyle to
         obtain additional financing. The Carlyle board of directors is in the
         process of reviewing Carlyle's strategic alternatives, including, among
         other things, the sale of Carlyle through merger, sale of stock or
         otherwise, possible acquisitions by Carlyle and possible refinancing.
         Any such transaction and/or the discussions between the companies may
         result in the modification of the terms of the preferred stock or in
         the acceleration of the redemption of the preferred stock and/or the
         reduction in the total amounts eventually received by Noel for its
         holdings of Carlyle preferred stock.

                                       10



<PAGE>
<PAGE>


         In addition, as Carlyle has agreed to notify the Pension Benefits
         Guarantee Corporation ("PBGC") prior to making any dividend or
         redemption payments, Carlyle's decision to make any payments on the
         preferred stock may depend on the successful resolution of any issues
         which may arise with the PBGC relating to Carlyle's defined benefit
         plan.

(b)      Recorded based on the closing market price of the common stock on
         September 30, 1997. Using the closing market prices on November 7,
         1997, these investments would have been valued as follows (dollars in
         thousands except per share amounts):

                               Closing Market           Estimated
                                   Price         Liquidation-Basis Amount
                              November 7, 1997       November 7, 1997
                              ----------------       ----------------
           Carlyle                  $1.875                $4,136
           Lincoln                   1.719                 6,480

         Noel currently expects to distribute its 2,205,814 shares of Carlyle
         common stock to Noel shareholders by December 31, 1997, depending on
         market and other conditions, although no assurances can be given that
         such a distribution will be effectuated.

(c)      Recorded based upon Noel's review of an analysis completed by Staffing
         and its independent advisors. This analysis determined Staffing's value
         based upon actual and projected results in relation to comparable
         companies. Compared to the quoted price on the limited trading market
         for Staffing shares, Noel believes that, at the present time, this
         analysis is a better estimate of the value in liquidation of its
         Staffing shares at September 30, 1997, because the trading market for
         Staffing is so limited, Staffing is not subject to periodic reporting
         requirements under the Securities Exchange Act of 1934, as amended and
         Noel's shares of Staffing are not registered to trade in this market.
         This valuation may not be reflective of actual amounts obtained when
         and if this investment is distributed or of prices that might be
         obtained in an actual future transaction. The closing over-the-counter
         bid price on September 30, 1997 and November 7, 1997, was $8.00 per
         common share of Staffing.

         On October 2, 1997, Staffing signed a letter of intent to acquire via
         merger Career Blazers Personnel Services, Inc. and affiliated companies
         ("Career Blazers"), Career Blazers is a New York based family of
         companies that provide staffing and computer training services in the
         northeast and is a licenser and franchiser of learning centers
         throughout the U.S. and Canada. The transaction is contingent upon the
         execution of definitive documentation and regulatory and shareholder
         approval and is expected to close by the end of 1997, however, there
         can be no assurance that this transaction will be consummated.

         Noel is assessing the most advantageous way to realize on its
         investment in Staffing, and currently does not expect to realize its
         investment until the second half of 1998.

                                       11



<PAGE>
<PAGE>


(d)      Recorded based upon the terms of an Agreement and Plan of Merger (the
         "Agreement") signed on November 6, 1997, to merge Curtis with a
         subsidiary of Paragon Corporate Holdings, Inc. Under the Agreement,
         Curtis shareholders will receive a total of $22,200,000 for all of the
         outstanding shares of Curtis preferred and common stock, comprising
         cash totaling $6,500,000 and two year, 7% interest bearing notes in the
         aggregate principal amount of $15,700,000 which will be secured by
         letters of credit. Under the Agreement, Noel will receive approximately
         $4,300,000 in cash and a note for approximately $10,400,000 for a total
         of $14,700,000 for its entire holding of Curtis. Noel expects to be
         able to monetize the note at approximately face value after the closing
         of the transaction, but there can be no assurance that a lesser amount
         will not be realized. The merger transaction is expected to close
         before the end of November, and is subject to certain closing
         conditions, however, there can be no assurance that the transaction
         will be consummated.

(e)      Recorded based upon the mean high and low sale prices of HPS on October
         6, 1997, the date of Noel's distribution of these shares to its
         shareholders. See Note 9.

(f)      Recorded at cost. This investment was made in March and June of 1996.
         Ferrovia Novoeste, S.A., ("Novoeste") was organized to acquire a
         railroad in Brazil via a privatization transaction. In the absence of a
         ready market, Noel management believes that cost is the best indicator
         of the value of this investment. Realization of this investment is
         dependent upon establishing successful operations in Brazil and a sale
         by Noel of its interest in Novoeste and is subject to the risks of
         operations in Brazil, including foreign currency risk. The actual
         amount realized for this investment could be lower or higher than the
         amount recorded.

3.       CHANGES IN NET ASSETS IN LIQUIDATION:

        The changes in the estimated liquidation values of assets and
liabilities were as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                  Three Months Ended        Six Months Ended
                                                  September 30, 1997        September 30, 1997
                                                  ------------------        ------------------
<S>                                                   <C>                      <C>      
To adjust investments to estimated
  liquidation value, net                               $(2,372)                  $ 2,173
To adjust estimated accrued expenses                      (841)                   (1,270)
To adjust estimated income taxes                         1,679                       934
To adjust other assets                                       5                         9
                                                      --------                 ---------
Total adjustments                                       (1,529)                    1,846
To reflect impact of settlement of options
  and warrants (Note 7)                                 (7,210)                   (7,210)
                                                      --------                  --------
                                                       $(8,739)                  $(5,364)
                                                      ========                  ========
</TABLE>


                                       12



<PAGE>
<PAGE>


4.      INCOME TAXES:

        The income tax asset at September 30, 1997, reflects the liquidation
basis of accounting. Estimated income taxes are calculated at a 35% rate on the
taxable income and losses which would be generated if the assets were realized
and liabilities settled at the amounts shown. The estimate is subject to
significant variation if, among other things, the actual values of assets
distributed, sold or otherwise disposed of varies from current estimates. The
net income tax asset is projected to be realized in part through the filing of
the 1998 tax return. The timing of the realization of the asset will depend on
the timing of the distribution, sale or other disposition of Noel's assets.

        The components of the net income tax asset at September 30, 1997, are as
follows (dollars in thousands):

                  Net unrealized capital loss               $  8,031
                  Net realized capital gain                  (23,871)
                  Net operating loss carryforwards             3,574
                  Net operating loss projected                 7,780
                                                            --------
                  Net income tax liability                    (4,486)
                  Estimated taxes paid in 1997                 9,730
                                                            --------
                  Net income tax asset                      $  5,244
                                                            ========

5.      ACCRUED EXPENSES:

        Accrued expenses include estimates of costs to be incurred in carrying
out the Plan and provisions for known liabilities. These costs include a
provision for costs to be incurred in connection with the distribution, sale or
other disposition of Noel's investments including legal and investment banking
fees and salaries and related expenses of officers and employees assigned to
effect the distribution, sale or other disposition of specific investments.

        The actual costs incurred could vary significantly from the related
accrued expenses due to uncertainty related to the length of time required to
complete the Plan, the exact method by which each of Noel's assets will be
realized and contingencies. Projected operating costs through the completion of
Noel's final liquidation are included in accrued expenses, net of estimated
interest income of $240,000 on Noel's cash and cash equivalents and short-term
investments. However, reductions in interest rates, the timing of any future
cash distributions and other factors may reduce the amount of interest and
investment income such that an additional accrual for operating expenses may be
required in the future.

                                       13



<PAGE>
<PAGE>


        For the three and six months ended September 30, 1997, the return on
Noel's cash and cash equivalents and short-term investments was exceeded by cash
operating expenses by $1,186,000 and $2,457,000, respectively. Cash operating
expenses exclude payments made to settle preexisting contractual obligations
which have been accrued for. These obligations primarily include employee
benefit programs and consulting arrangements, payments for which total $157,000
and $289,000 for the three and six months ended September 30, 1997,
respectively.

        Noel's cash operating expenses for the periods were as follows (dollars
in thousands):

                                       Three Months Ended    Six Months Ended
                                       September 30, 1997   September 30, 1997
                                       ------------------   ------------------
     Salaries and benefits                   $  750               $1,272
     Rent and other office expenses             502                  990
     Insurance                                   24                  565
     Professional fees                          209                  386
                                             ------               ------
                                             $1,485               $3,213
                                             ======               ======
                                                        
6.      ADJUSTMENTS FROM GOING-CONCERN TO LIQUIDATION BASIS OF ACCOUNTING:

   Stockholders' equity at March 31, 1997, (Going-Concern Basis)      $98,603
                                                                     --------
   To increase investments to estimated net realizable values          71,307
   
   To increase liabilities to anticipated settlement amounts           (8,939)
   
   To adjust other assets                                              (2,618)
                                                                     --------
   Total adjustments                                                   59,750
                                                                     --------
   Net assets in liquidation at March 31, 1997 (Liquidation Basis)   $158,353
                                                                     ========

7.       OPTIONS AND WARRANTS:

         On July 7, 1997, as authorized by the Stock Option and Compensation
Committee of the Board of Directors, Noel settled 2,840,107 options and warrants
outstanding for the purchase of Noel Common Stock. As a result of the settlement
and exercise of the options and warrants, Noel issued 146,718 shares of Noel
Common Stock, transferred 108,570 shares of HPS common stock, paid $10,121,000
in cash for payroll taxes and settlement amounts and received $722,000 in cash
exercise proceeds. Noel's federal income tax benefit for the compensation
expense related to the settlement was $4,218,000.

                                       14




<PAGE>
<PAGE>


8.       COMMITMENTS AND CONTINGENCIES:

         Certain of Noel's holdings are involved in various legal proceedings
generally incidental to their businesses. While the result of any litigation
contains an element of uncertainty, management believes that the outcome of any
known, pending or threatened legal proceeding or claim, or all of them combined,
will not have a material adverse effect on Noel's financial position.

9.       DISTRIBUTIONS:

         Pursuant to the Plan, on October 6, 1997, Noel distributed 412,601
shares of HPS common stock valued at $21.157 per share for a total value of
$8,729,000 to shareholders of record on September 29, 1997. The distribution
rate was 0.02006 share of HPS common stock per share of Noel Common Stock and
the value of the distribution was $.42 per share of Noel Common Stock.

         On April 25, 1997, Noel distributed 3,754,675 shares of HPS common
stock valued at $14.375 per share for a total value of $53,973,000 to
shareholders of record on April 18, 1997. The distribution rate was 0.1838631
share of HPS common stock per share of Noel Common Stock and the value of the
distribution was $2.64 per share of Noel Common Stock.

GOING CONCERN BASIS STATEMENTS

10.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

GENERAL

         The consolidated financial statements included in this Form 10-Q have
been prepared by Noel without audit. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
It is recommended that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in Noel's 1996 annual report. In the opinion of management, the
information furnished reflects all adjustments which are necessary to present
fairly such information. These adjustments, except as otherwise disclosed,
consist only of normal recurring adjustments.

CONSOLIDATION

         The consolidated financial statements include the accounts of Noel and
its subsidiaries, Carlyle, Curtis, and Lincoln, after the elimination of
significant intercompany transactions.

SEASONALITY

         The results of operations for the three months ended March 31, 1997,
may not be indicative of the operating results for the full year. Lincoln's
business is seasonal, with the third and fourth calendar quarters historically
showing higher sales.

                                       15



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EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE

         Earnings (Loss) per share is computed based on the weighted average
number of shares of Noel Common Stock and dilutive equivalents outstanding
during the respective periods. When dilutive, stock options and warrants are
included as share equivalents using the treasury stock method. In computing
dilutive equivalents under the treasury stock method, the average price of
common stock during the period is used for primary earnings per share and the
period-end price is used for fully diluted earnings per share. For the three
months ended March 31, 1997 and 1996, earnings per share is based on outstanding
shares since the effect of common stock equivalents is antidilutive.

11.      SUBSIDIARIES AND INVESTMENTS:

         On March 26, 1997, pursuant to an asset purchase agreement dated as of
December 12, 1996, Carlyle sold its thread division to Hicking Pentecost PLC for
aggregate cash consideration of approximately $54,900,000, of which
approximately $3,000,000 was placed in escrow subject to certain post-closing
adjustments. The loss on disposal on the sale of this division was $4,364,000.
In connection with this sale, Carlyle repaid all of its outstanding bank debt
using proceeds received in the transaction. No penalties were incurred by
Carlyle in connection with this prepayment. In addition, Carlyle will be
obligated to pay approximately $8,500,000 of income taxes related to the tax
gain resulting from this transaction. Nondeductible goodwill associated with the
thread division amounting to approximately $18,000,000 was written off as of the
date of sale.

         On February 7, 1997, pursuant to an agreement dated December 18, 1996,
by and among Noel, Automated Data Processing, Inc. ("ADP") and HPS, Noel sold to
ADP 1,320,000 shares of common stock of HPS for an aggregate purchase price of
$26,400,000 in cash. Following the transaction, Noel's ownership percentage of
HPS dropped to approximately 26%.

         Summarized income statement information for HPS for the three months
ended March 31, 1997 and 1996 is as follows (dollars in thousands):

                                              1997         1996
                                             ------       -----
          Revenue from services              $73,593     $31,008
                                             =======     =======
          Operating costs and expenses       $67,355     $25,527
                                             =======     =======
          Net income                          $2,799      $3,334
                                             =======     =======


                                       16



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         Summarized income statement information for Novoeste for the three
months ended March 31, 1997 is as follows (dollars in thousands):

                   Revenue                          $ 6,858
                                                    =======
                   Operating costs and expenses     $ 7,877
                                                    =======
                   Net loss                         $(2,705)
                                                    =======

         Summarized income statement information for Staffing for the three
months ended March 31, 1997 is as follows (dollars in thousands):

                   Revenue                          $ 73,711
                                                    ========
                   Operating costs and expenses     $ 74,370
                                                    ========
                   Net loss                         $ (1,527)
                                                    ========

                                       17




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

         This Quarterly Report on Form 10-Q contains, in addition to historical
information, certain forward-looking statements regarding future financial
condition and results of operations. Such statements involve certain risks and
uncertainties, including, without limitation, those risks and uncertainties
discussed below and in the footnotes to the liquidation basis financial
statements previously discussed. Should one or more of these risks or
uncertainties materialize, actual outcomes may vary materially from those
indicated.

LIQUIDITY AND CAPITAL RESOURCES

Noel Group, Inc.

         On September 30, 1997, Noel had cash and cash equivalents and
short-term investments of $12.4 million. The future cash needs of Noel will be
dependent on the implementation of the Plan. It is management's intention that
Noel's liquidity will be available to fund Noel's working capital requirements
and to meet its other obligations.

         Pursuant to the Plan, subject to the payment or the provision for
payment of the Company's indebtedness and other obligations, the cash proceeds
of any asset sales together with other available cash will be distributed from
time to time pro rata to the holders of the Common Stock on record dates
selected by the Board of Directors with respect to each such distribution.

         Noel believes that its cash and cash equivalents and short-term
investments are sufficient to fund its working capital requirements through the
completion of the Plan. Noel expects that its operating subsidiaries will be
able to meet their own working capital requirements, including debt service.

         Sources of potential liquidity include the sale or refinancing of
current holdings, dividends and preferred stock redemptions from current
holdings. Noel does not currently receive, nor expect to receive in the
immediate future, cash dividends from any of its subsidiaries. Except for
Carlyle Industries, Inc. ("Carlyle"), Noel's subsidiaries are currently
prohibited from paying dividends by existing borrowing agreements. All of Noel's
subsidiaries are subject to the requirements of applicable corporate law which
permit the payment of dividends to the extent of legally available funds.
Carlyle's ability to pay dividends may be adversely affected by an agreement
with the Pension Benefit Guarantee Corporation, which requires at least 30 days
advance notice of any proposed dividend, stock redemption, stockholder buyback
or other distribution to shareholders at any time prior to March 31, 2002.

RESULTS OF OPERATIONS

General

         The results of operations for the three months ended March 31, 1997,
may not be indicative of the operating results for the full year. The business
of Lincoln Snacks Company ("Lincoln") is seasonal, with the third and fourth
calendar quarters historically showing higher sales.

                                       18



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<PAGE>




         HealthPlan Services Corporation ("HPS"), Ferrovia Novoeste, S.A.
("Novoeste") and Staffing Resources, Inc. ("Staffing") have no impact on the
Company's liquidity and capital resources, since Noel has no obligation to fund
their operations and they do not anticipate paying cash dividends in the
foreseeable future. While these companies are included in the Company's
financial statements on the equity method of accounting, the Company will record
its proportional share of their income or loss. Noel's share of the income or
losses for HPS, Novoeste and Staffing for the three months ended March 31, 1997
were $1.0 million, $.9 million and $.4 million, respectively.

         Noel and each of its subsidiaries file a separate federal income tax
return. As a result, the income tax provisions recorded by certain subsidiaries
cannot be offset by the losses reported by other entities on the Company's
consolidated financial statements.

THREE MONTHS ENDED MARCH 31, 1997 VERSUS MARCH 31, 1996

         Sales decreased by $4.6 million to $38.5 million primarily due to
increased sales at Curtis Industries, Inc. ("Curtis") of $2.7 million offset by
decreased sales at Carlyle of $7.4 million. Cost of sales decreased by $3.9
million to $20.7 million from $24.6 million in 1996, primarily due to increased
cost of sales at Curtis of $1.5 million offset by decreased cost of sales at
Carlyle of $5.5 million. Selling, general, administrative and other expenses
increased by $.5 million to $17.2 million in 1997 from $16.7 million in 1996.
Other income increased by $16.6 million primarily due to a gain recognized by
Noel in 1997 on the sale of 1.3 million shares of HPS. Provision for income
taxes increased $9.8 million due to increased tax provisions at Noel and Carlyle
of $4.6 million and $5.2 million, respectively.

COMPARISON OF SEGMENTS:

GENERAL

         Noel and its subsidiaries are collectively referred to as the
"Company". The discussion which follows analyzes the results for each of the
Company's segments.

THREE MONTHS ENDED MARCH 31, 1997 VERSUS MARCH 31, 1996

INDUSTRIAL THREADS AND BUTTONS (CARLYLE)

         As a result of the sale of Carlyle's thread division (See Note 10) on
March 26, 1997, only two months of operating results from Carlyle's thread
division are included in the first quarter results of operations in 1997 as
compared to three full months during this same period in 1996.

         Sales during the first quarter of 1997 totaled $14.7 million as
compared with $22.0 million during the first quarter of 1996. Sales in the
consumer product segment decreased to $8.3 million as compared with $11.7 during
the same period in 1996. Sales in the industrial product segment totaled $6.3
million as compared with $10.3 million during the first quarter of 1996. The
decrease in both segment's sales was attributable to the sale of the thread
division.

                                       19



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         The gross margin during the first quarter of 1997 totaled $4.2 million
or 29.0% as compared with $6.1 million or 27.7% during the first quarter of
1996. Gross margin in the consumer product segment totaled $3.1 million or 36.9%
as compared to $3.7 million or 31.5% in the first quarter of 1996. Gross margin
in the industrial product segment totaled $1.2 million or 18.5% during the first
quarter of 1997 as compared with $2.4 million or 23.4% during the first quarter
of 1996. The decrease in both segment's gross margin dollars was primarily
attributable to the sale of the thread division.

         Selling, general, and administrative expenses totaled $2.6 million as
compared with $3.6 million during the same period in 1996. Selling, general, and
administrative expenses in the consumer product segment totaled $1.1 million
during the first quarter of 1997 as compared with $1.2 million during the first
quarter of 1996. Selling, general and administrative expenses in the industrial
product segment totaled $1.5 million during the first quarter of 1997 as
compared with $2.5 million during the first quarter of 1996. The decrease in
these expenses was primarily attributable to the sale of Carlyle's thread
division.

FASTENERS AND SECURITY PRODUCTS DISTRIBUTION (CURTIS)

         On May 13, 1996, Curtis acquired the Mechanics Choice business of
Avnet, Inc. for $6.5 million. Mechanics Choice is a distributor, selling
industrial maintenance and repair operations products similar to the existing
Curtis product line offering.

         Sales for the first quarter of 1997 increased $2.7 million or 15.8% to
$19.5 million from $16.8 million in the first quarter of 1996. Sales from the
Mechanics Choice division accounted for approximately $3 million of the
increase.

         The gross margin percentage decreased to 64.6% in 1997 from 68.9% in
1996. Lower margins incurred by the Mechanics Choice division are responsible
for the majority of the first quarter decline.

         For the first quarter of 1997, selling, general and administrative
expenses, net of the IRS settlement discussed below, increased $.9 million from
the comparable 1996 quarter. The majority of the first quarter increase is due
to the added selling and distribution costs of the Mechanics Choice division.

         Following a field examination in 1995, the Internal Revenue Service
("IRS") alleged that as a result of certain tax law changes enacted in 1989 and
1991 Curtis' expense reimbursement policy for the field sales force did not meet
the definition of an accountable plan, and thus contended all reimbursed expense
for 1993 and 1994 should be treated as taxable wages. In April 1997, Curtis
reached a settlement with the IRS in connection with the expense reimbursement
policy requiring the payment of $1.0 million of taxes for 1993 through 1996. A
$.9 million charge to record this settlement, net of reserves, was recorded in
the first quarter of 1997.

                                       20



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SNACK FOODS (LINCOLN)

         On June 6, 1995, Lincoln entered into an exclusive distribution
agreement with Planters Company, a division of Nabisco, Inc., ("Planters"),
commencing on July 17, 1995, for the sales and distribution of Fiddle Faddle'r'
and Screaming Yellow Zonkers'r' ("the Products"). Under the agreement, Planters
is required to purchase a minimum number of cases during each year ending on
June 30.

         On February 28, 1997, this agreement was amended, extending the term
until December 31, 1997, at which time the distribution arrangement will
terminate. Under the amendment, Lincoln will resume sales and distribution of
Screaming Yellow Zonkers on May 1, 1997. Although the amendment and extension
contain provisions designed to effect a smooth transfer of the distribution
business back to Lincoln, there can be no assurance as to the long-term effects
of this transition.

         Sales of $4.3 million for the quarter ended March 31, 1997 were equal
to sales in the corresponding period of 1996. Sales to Planters represented
approximately 68% and 64% of sales for the quarter ended March 31, 1997 and
1996, respectively.

         Gross profit decreased $.1 million to $.9 million for the three months
of 1997 versus $1.0 million in the corresponding period of 1996 due to the mix
of products sold.

         Selling, general, and administrative expenses decreased approximately
13% or $.2 million to $.8 million in the quarter versus $1.0 million in the same
period in 1996. These expenses decreased during this period primarily due to
lower variable selling expenses relating to the mix of products sold.

                                       21



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                           PART II - OTHER INFORMATION

Item 1. - Legal Proceedings

         There are no pending material legal proceedings to which Noel or its
subsidiaries is a party or to which any of their property is subject, other than
ordinary routine litigation incidental to their respective businesses, other
than as disclosed in Noel's Form 10-K for the year ended December 31, 1996.

Item 3. - Defaults upon Senior Securities

a)       None

b)       Noel is the holder of 19,312,837.5 shares (approximately 93%) of Series
         B Preferred Stock of Carlyle. Carlyle is in default of its mandatory
         redemption obligations to the holders of such Preferred Stock to the
         extent of its legally available funds. As of September 30, 1997, the
         accrued but unpaid dividends amounted to $3,810,000.

Item 6. - Exhibits and Reports on Form 8-K

a)       Exhibits
<TABLE>
<CAPTION>

Item No.  Item Title                                                                        Exhibit No.
--------  ----------                                                                        -----------
<S>       <C>                                                                                 <C>
(2)       Plan of Complete Liquidation and Dissolution of Noel Group, Inc.                     (a)

(3)       Articles of Incorporation and By-Laws.

          (A)      Certificate of Incorporation, as amended.                                   (b)

          (B)      Composite copy of the Certificate of Incorporation,                         (c)
                   as amended.

          (C)      By-Laws, as amended and restated.                                           (d)

(4)       Instruments defining the rights of security holders, including indentures.

          (A)      Excerpts from Certificate of Incorporation, as amended.                     (b)

          (B)      Excerpts from By-Laws, as amended and restated.                             (d)

(10)      None.

(11)      Statement re: computation of per share earnings is not required
          because the relevant computations can be clearly determined from
          the material contained in the financial statements included herein.
</TABLE>

                                       22



<PAGE>
<PAGE>


<TABLE>
<S>      <C>
(15)     None.

(18)     None.

(19)     None.

(22)     None.

(23)     None.

(24)     None.

(27)     Financial Data Schedule.

(99)     None.
</TABLE>

-------------------------

    (a)  This exhibit was filed as an exhibit to Noel's Proxy Statement
         for the Special Meeting of Shareholders held on March 19,
         1997.

    (b)  These exhibits were filed as exhibits to Noel's Registration
         Statement on Form S-1, Registration No. 33-44178, effective
         January 29, 1992, and are incorporated herein by reference.

    (c)  This exhibit was filed as an exhibit to Noel's Annual Report
         on Form 10-K for the fiscal year ended December 31, 1992, and
         is incorporated herein by reference.

    (d)  These exhibits were filed as exhibits to Noel's Annual Report
         on Form 10-K for the fiscal year ended December 31, 1994, and
         are incorporated herein by reference.

b)   Reports on Form 8-K

     None.

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                   Signature

                                   NOEL GROUP, INC.

                                   Date: November 13, 1997

                                   By:   \s\  Todd K. West
                                         ---------------------------------------
                                         Todd K. West
                                         Vice President - Finance and
                                         Secretary (As both a duly authorized
                                         officer of Registrant and as chief
                                         financial officer of Registrant).


                            STATEMENT OF DIFFERENCES
                            ------------------------
            The registered trademark symbol shall be expressed as....'r'


                                       23

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