UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

     (Mark One)
     [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                    For the fiscal year ended March 25, 2000

                                       OR

     [_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

          For the transition period from _____________ to _____________

                         Commission File Number 0-23938

                      SAFETY COMPONENTS INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

             DELAWARE                                         33-0596831
 (State or other jurisdiction of                            (I.R.S. Employer
  incorporation or organization)                          Identification No.)

Corporate Center, 40 Emery Street
    Greenville, South Carolina                                  29605
      (Address of principal                                   (Zip Code)
        executive offices)


        Registrant's telephone number, including area code (864) 240-2600

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                     Common Stock, par value $.01 per share
                                (Title of Class)

              10 1/8% Senior Subordinated Notes due 2007, Series B
                                (Title of Class)

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

                             Yes _X_     No ___

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation  S-K  (ss.229.405)  is not contained  herein,  and will not be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [ ].

     The  aggregate  market value of the common stock held by persons other than
affiliates of the registrant, as of July 7, 2000, was approximately $250,000

     The number of shares  outstanding of the  registrant's  common stock, as of
July 7, 2000, is as follows:

--------------------------------------------------------------------------------
         Class                                                  Number of Shares
--------------------------------------------------------------------------------
Common Stock, par value $.01 per share                                 5,136,316
--------------------------------------------------------------------------------

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None


<PAGE>


                                     PART I

ITEM 1. BUSINESS

The Company

     Safety   Components   International,   Inc.   (the   "Company"  or  "Safety
Components"),  a Delaware  corporation which was formed on January 12, 1994 as a
wholly-owned  subsidiary  of  Valentec  International  Corporation,  a  Delaware
corporation  (currently  known as  Valentec  International  Corporation,  LLC as
successor in interest by operation of law, "Valentec"),  is a leading, low-cost,
independent  supplier of automotive airbag fabric and cushions,  with operations
in North America and Europe.  The Company's  1997  acquisition,  through  Safety
Components Fabric Technologies,  Inc., a wholly-owned subsidiary of the Company,
of  all of  the  assets  and  assumption  of  certain  liabilities  of  the  Air
Restraint/Technical  Fabrics Division (the "Division") of JPS Automotive L.P., a
subsidiary  of  Collins  &  Aikman   Corporation   (the  Division  is  sometimes
hereinafter  referred to as "SCFTI") was a further step in the Company's  airbag
growth  strategy  because it has enabled the Company to combine  SCFTI's weaving
operations  and strong  market  position  in airbag  fabric with its cut and sew
operations and strong market  position in airbag  cushions to exploit  worldwide
growth in demand for airbag module systems ("airbags" or "airbag modules").

     The Company sells airbag fabric  domestically and cushions worldwide to all
of the major airbag module integrators that outsource such products. The Company
believes it produces  approximately 50% of all outsourced airbag fabric utilized
in North America,  and that it manufactures  approximately 50% of all outsourced
airbag  cushions in North  America and Europe.  The Company  believes that it is
also a leading  manufacturer of value-added  technical fabrics used in a variety
of niche industrial and commercial  applications such as ballistics material for
luggage,  filtration,  aircraft  escape slides,  military tents and fire service
apparel.

     Sales of automotive  fabric,  airbag cushions and technical fabric products
(the  "automotive  and fabrics"  business or "core  operations")  accounted  for
approximately $194.7 million or 85.3% of consolidated fiscal 2000 net sales. For
purposes hereof,  fiscal 2000 means the fiscal year ended March 25, 2000, fiscal
1999 means the fiscal year ended March 27, 1999 and fiscal 1998 means the fiscal
year ended  March 28,  1998.  Sales of  automotive  and  fabrics  accounted  for
approximately  $178.3 million or 81.0% and approximately $129.7 million or 78.1%
of the  Company's  fiscal  1999 and 1998 net  sales,  respectively.  The  unique
ability to  interchange  airbag and specialty  technical  fabrics using the same
equipment  and  similar  manufacturing  processes  allows  the  Company  to more
effectively utilize its manufacturing  assets and lower per unit overhead costs.
The Company also produces automotive metal components, defense related products,
primarily  projectiles  and other  metal  components  (the  "metal and  defense"
business or  "non-core  operations")  for small to medium  caliber  training and
tactical  ammunition and continues as a systems  integrator and manufacturer for
ordnance  programs,  which accounted for $33.6 million or 14.7% of the Company's
consolidated  fiscal 2000 net sales and $41.6 million or 18.9% and $36.4 million
or 21.9% of the Company's fiscal 1999 and 1998 net sales, respectively.

     The Company  announced  in November  1999 that  management  had  identified
certain  errors  relating  to  the  Company's   previously  issued  consolidated
financial  statements  for fiscal  1999 and fiscal 1998 which  required  further
investigation and restatement of the financial  statements for those periods, as
well as the financial  statements for the twenty-six  weeks ended  September 25,
1999. The audit  committee,  consisting  only of outside members of the Board of
Directors,  with the  assistance of special  counsel and an  independent  public
accounting  firm,  conducted  a  thorough  investigation  of these  matters  and
determined that the restatement  related  primarily to two items. The first item
required  the  reversal  of a  duplicate  booking  of a  sale  and  the  related
receivable in the Company's  defense  operations.  It was determined that a sale
and related  receivable  in the  Company's  non-core  defense  operations in the
aggregate  amount  of $4.6  million  (before  a related  tax  provision  of $1.8
million)  had been  recorded  twice.  The second item  required  the reversal of
certain  items  totaling  $772,000  (before a related tax provision of $297,000)
incorrectly  recorded  in  income in  connection  with a loan  transaction.  The
restatement  for fiscal  1998,  reduced  previously  reported  net sales by $4.2
million to net sales of $166.1  million and  previously  reported  net income by
$2.7 million to a net income of $3.3


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<PAGE>


million.  The restatement for fiscal 1999, reduced previously reported net sales
by $1.3 million to net sales of $220.0 million and increases previously reported
net loss by $797,000 to a loss of $13.7 million.

     The deterioration in the Company's  financial condition that became evident
in fiscal 1999, arising from a confluence of negative developments, particularly
in  the  non-core  businesses,   caused  it  to  experience  material  liquidity
constraints.  In addition,  following the Company's  restatement of its earnings
and a default with respect to obligations  under its credit  agreement,  KeyBank
and Fleet Bank,  the "Senior  Lenders",  notified the trustee for the  Company's
10.125% Senior  Subordinated Notes (the "Notes") that they were exercising their
rights to block a scheduled interest payment due on January 18, 2000.

     On February 18, 2000, the common stock of the Company was delisted from the
NASDAQ stock market.

     The  Company  and an  informal  committee  comprised  of  holders  of  over
two-thirds  in aggregate  dollar amount of the Notes began  negotiations  and in
early April 2000 reached an agreement (the "Restructuring Agreement") that would
be effected  through a voluntary  filing under  Chapter 11 of the United  States
Bankruptcy  Code.  Pursuant to the  Restructuring  Agreement,  the claims of the
holders of the  Company's  Senior  Subordinated  Notes  ("Noteholders")  will be
converted in the right to receive 96.8% of the Company's equity after it emerges
from Chapter 11. The current shareholders, excluding Robert Zummo, the Company's
Chairman and Chief  Executive  Officer,  will receive 3.2% of the Company's post
bankruptcy equity and warrants to acquire 12% of such equity.

     In addition to the  Restructuring  Agreement,  the Company  also reached an
agreement with the Senior Lenders subject to a paydown,  to replace their credit
agreement  with  a  post-petition  subordinated   debtor-in-possession   ("DIP")
financing facility.

     On April 10, 2000 (the "Petition Date"), the Company and certain of its U.S
subsidiaries   (including  Safety  Components  Fabric  Technologies,   Inc.  and
Automotive  Safety  Components  International,   Inc.,  but  excluding  Valentec
International  Corporation,   LLC,  Valentec  Systems  Inc.  and  Galion,  Inc.,
collectively, "Safety Filing Group," filed a voluntary petition under Chapter 11
of the Bankruptcy Code with the United States  Bankruptcy Court for the District
of Delaware (the "Chapter 11 Bankruptcy Petition").

     On April  26,  2000,  in  conjunction  with the  filing of the  Chapter  11
Bankruptcy Petition,  the Safety Filing Group received Bankruptcy Court approval
of a $30.6 million senior DIP financing  facility that it had executed with Bank
of America,  N.A.  The senior DIP  financing  is  expected  to provide  adequate
funding  for all post  petition  trade and  employee  obligations,  the  partial
paydown of the  pre-petition  secured  debt,  as well as the  Company's  ongoing
operating needs during the restructuring process. Upon closing of the senior DIP
financing  facility  on May 9, 2000,  the Senior  Lenders  received a  principal
paydown of  approximately  $17 million and retained the remaining  approximately
$20.9 million portion of their  indebtedness  as an 11% per annum  post-petition
subordinated  DIP  facility  as  a  replacement  of  their  pre-petition  credit
facility.

     On May 19,  2000,  Safety  Filing  Group filed its  Statement  of Financial
Affairs and Schedules of Assets and Liabilities  and, on May 24, 2000, the Court
entered  an order  setting  July 7,  2000 as the  general  filing  deadline  for
creditors, to file their proof of claims.

     On June 12,  2000,  the Safety  Filing  Group filed with the United  States
Bankruptcy Court its Joint Plan of Reorganization  (the "Plan") pursuant to Rule
3016  (b),  and  its  Disclosure  Statement  pursuant  to  Section  1125  of the
Bankruptcy Code. A hearing will be held on July 19, 2000 to consider approval of
the Disclosure Statement.  The Plan and the Disclosure Statement,  both of which
are subject to revision by the Company prior to the Court hearing date,  reflect
a time-phased,  payout of 100% all pre-petition  claims of all creditors.  Under
the Plan,  new shares of common and preferred  stock would be authorized and new
common  stock  would be  issued.  All  Noteholder  claims  in the  approximately
aggregate  amount of $96.4  million  will be  completely  satisfied  through the
ratably proportionate distribution of common stock.

     On March 31, 1999,  the Company  entered into an Investment  Agreement (the
"Brera  Investment  Agreement")  with Brera  Capital  Partners,  LLC, a Delaware
limited liability  company,  and Brera Capital Partners Limited  Partnership,  a
Delaware limited partnership,  through a newly-formed Delaware limited liability
company,  Brera SCI, LLC ("Brera"),  which  provided for, among other things,  a
$28.0 million convertible preferred stock investment by


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<PAGE>


Brera in the Company.  On May 4, 1999, the Company and Brera mutually  agreed to
terminate the Brera Investment Agreement.

Core Operations

Structure of the Airbag Industry

     Airbag  systems  consist  of an airbag  module  and an  electronic  control
module,  which are currently  integrated by  auto-makers  into their  respective
vehicles. Airbag modules consist of inflators, cushions, housing and trim covers
and are  assembled  by  module  integrators,  most of whom  produce  most of the
components required for a complete module. However, as the industry has evolved,
module integrators have increasingly outsourced  non-proprietary components such
as cushions to those  companies  specializing  in the  production  of individual
components.  The Company  believes  that its module  integrator  customers  will
continue to outsource the majority of their cushion  requirements  as they focus
on the  development of proprietary  technologies  such as inflators and sensors.
Only one of the module  integrators  currently  weaves its own airbag fabric and
the remainder purchase fabric from airbag fabric producers such as the Company.

     A  characteristic  of the  industry  is that  certain  customers  of airbag
cushion suppliers are also competitors.  The Company supplies airbag cushions to
module  integrators,  most of which  also  produce  a portion  of their  cushion
requirements  internally.  While none of the module  integrators  produce airbag
cushions for third parties, the Company may compete with its customers to supply
their  own  internal  cushion  requirements.  However,  most  of  the  Company's
suppliers  do not produce  cushions for the same  car/truck  model for which the
Company produces cushions.

     Another characteristic of the airbag industry is the existence of potential
barriers to entry.  New entrants that wish to produce and supply airbag cushions
or airbag fabric must undergo a rigorous  qualification  process, which can take
as long as two years.  The Company  believes  that in addition to deterring  new
entrants, the existence of this qualification process represents switching costs
for module  integrators  that are required to assist the new supplier in meeting
auto-makers' requirements. Additionally, the Company believes module integrators
are, like their auto-maker customers, trying to limit the number of suppliers.

Products

     The Company's automotive products include passenger,  driver side, head and
thorax protection  curtains,  side impact and knee airbag cushions  manufactured
for  installation in over 50 car and truck models sold worldwide;  airbag fabric
for sale to airbag  manufacturers;  and stamped and machined  components used in
airbag  modules,  including  passenger  airbag  retainers that attach the airbag
cushion to the module's reaction can, as well as driver side module products and
components used in airbag inflators. Sales of airbag related products (inclusive
of sales of airbag  fabric) for fiscal  year 2000  accounted  for  approximately
74.5% of the  Company's  consolidated  fiscal  2000 net  sales.  Sales of airbag
related  products for fiscal  years 1999 and 1998  accounted  for  approximately
70.2% and 67.6% of the  Company's  consolidated  fiscal 1999 and 1998 net sales,
respectively.

     The Company also  manufactures a wide array of specialty  technical fabrics
for consumer and industrial uses.  These fabrics  include:  (i) high-end luggage
fabrics,  including  "ballistics"  fabric  used in  Hartman  and Tumi  brands of
luggage; (ii) filtration fabrics used in aluminum, coal, steel, cement, clay and
brewing  industries;  (iii)  woven  fabrics for use by  manufacturers  of coated
products; (iv) specialty fabrics used in police jackets, protective apparel worn
by  firefighters,  fuel cells,  bomb and cargo chutes,  oil  containment  booms,
aircraft escape slides, and gas diaphragms;  and (v) release liners used in tire
manufacturing.  Sales are made against purchase orders,  pursuant to releases on
open purchase orders, or pursuant to short-term supply contracts of up to twelve
months. Sales of technical related products accounted for approximately 10.8% of
the Company's  consolidated  fiscal 2000 net sales.  Sales of technical  related
products for fiscal years 1999 and 1998  accounted for  approximately  10.9% and
10.5% of the Company's consolidated net sales, respectively.  The market for the
Company's  technical  related  products  is highly  segmented  by product  line.
Marketing and sales of the Company's  technical related products is conducted by
the Company's  marketing and sales staff based in  Greenville,  South  Carolina.
Manufacturing of these products occurs at the South Carolina facility, using


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the same  equipment and  manufacturing  process that the Company uses to produce
airbag fabric which enables the Company to take advantage of demand requirements
for the various  products  with minimal  expenditures  on  production  retooling
costs.  By  manufacturing  technical  products with the same machines that weave
airbags fabric, the Company is able to more effectively  utilize capacity at its
South Carolina plant and lower per unit overhead costs.

Customers

     Sales of airbag related  products to TRW,  Autoliv and Petri  accounted for
approximately  27%, 19% and 17%,  respectively,  of the  Company's  consolidated
fiscal  2000 net  sales.  The loss of any such  customer  could  have a material
adverse effect on the Company. See Note 8 to the Company's Notes to Consolidated
Financial  Statements  included  elsewhere in this Report for certain disclosure
regarding the Company's industry segments.

     The Company  sells its airbag  cushions to airbag  module  integrators  for
inclusion in specified model cars generally pursuant to requirements  contracts.
Certain of these customers also manufacture  airbag cushions to be used in their
production of airbag modules.

     The Company's  largest airbag cushion  customers  include TRW,  Autoliv and
Petri and the Company's largest airbag fabric customers include TRW, Autoliv and
Delphi.  The  Company  also sells  airbag  fabric to Reeves,  Bradford,  ABC and
Mexican  Industries.  The Company sells its fabric  either  directly to a module
integrator or, in some cases, to a fabricator (such as the Company), which sells
a sewn airbag to the module integrator.  Because driver-side fabric historically
has been coated (to prevent the driver's exposure to high  temperatures)  before
fabrication  into airbags,  the Company also sells fabric to coating  companies,
which then  resell the coated  fabric to either an airbag  fabricator  or module
integrator.  Sales are either made against purchase orders, pursuant to releases
on open purchase orders,  or pursuant to short-term  supply contracts  generally
having a duration of up to twelve months.

     The following  describes the Company's  contractual  relationship  with its
significant  customers,  the loss of one or more of which  could have a material
adverse effect on the Company.

     TRW. The Company has a global supply agreement with TRW with respect to the
supply of airbag fabric, airbag cushions and airbag metal components. The global
supply agreement  includes price and cost reduction  targets by the Company,  as
well as sales growth  targets to the Company,  although TRW is not  obligated to
purchase  such  amounts  under the  global  supply  agreement.  If price or cost
reduction  targets or sales growth targets are not met, TRW and the Company have
agreed to renegotiate pricing or sales volume targets, as applicable.

     Autoliv.  The Company supplies airbag cushions and airbag fabric to Autoliv
based upon releases from formal purchase orders,  which typically cover a period
of twelve months and are  negotiated  prior to commitment  with respect to price
and quantity.  No contractual  obligation to enter into annual supply agreements
with the Company exists with this customer.

     Petri. The Company's  "evergreen"  agreement with Petri provides that prior
to the  commencement  of each calendar year,  the parties will negotiate  price,
quantity and other relevant terms of the airbag cushion supply contract for such
calendar  year.  Petri is under no  contractual  obligation  to enter  into such
annual supply agreements with the Company.

Suppliers

     The Company's  principal airbag cushion fabric customers  generally approve
all suppliers of major airbag components or airbag fabric raw materials,  as the
case  may  be.  These  suppliers  are  approved  after   undergoing  a  rigorous
qualification process on their products and manufacturing capabilities.  In many
cases, only one approved source of supply exists for certain airbag  components.
In the event that a sole source supplier experiences prolonged delays in product
shipments or no longer qualifies as a supplier,  the Company would work together
with its  customers to identify  another  qualified  source of supply.  Although
alternative  sources of supply exist,  a prolonged  delay in the approval by the
Company's  customers of any such  alternative  sources of supply could adversely
affect the Company's


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operating  results.  Under the  Company's  agreements  with its  customers,  any
changes in the cost of major components are passed through to the customers.

     The raw materials for the Company's  fabric  operations  largely consist of
synthetic yarns provided by DuPont,  AZKO,  Breed,  Unifi and Hoechst  Celanese,
among others.  The primary yarns include nylon,  polyester and Nomex.  DuPont is
the leading  supplier of airbag  fabric yarn to both the market and the Company.
Approximately  90.0% of the  nylon  yarn  used in the  Company's  airbag  fabric
operations is supplied by DuPont pursuant to purchase orders or releases on open
purchase orders.  The loss of DuPont as a supplier could have a material adverse
affect on the Company.

Capacity

     The Company's Mexican and European facilities manufactured and shipped over
14  million  airbag  cushions  to the  Company's  North  American  and  European
customers during fiscal 2000 and the Company  believes it has adequate  capacity
to manufacture its fiscal 2001 budget requirements.

     The Company's South Carolina facility has a current capacity to manufacture
approximately   30.0  million   yards  of  fabric  per  year  and   manufactured
approximately  26.4  million  yards of fabric in fiscal  year 2000.  The Company
utilizes rapier weaving  machines that are versatile in their ability to produce
a broad  array of  specialty  technical  fabrics  for use in a large  number  of
applications.  In addition,  the  Company's  machinery  and  equipment  have the
capability  to weave all types of yarns and fabrics  specified by airbag  module
integrators  as well as a broad  variety of  technical  fabrics.  The ability to
easily interchange the machines between air restraint fabric and other specialty
technical fabrics allows the Company to maximize returns on plant assets.

Sales and Marketing

     The Company markets and sells airbag cushions and airbag fabric through its
direct  marketing and sales forces based in Mexico,  California,  South Carolina
and Germany. Prior to fiscal year 1998, the Company conducted its airbag cushion
sales and marketing  through the efforts of its management and through  Champion
Sales & Service  Co.  ("Champion"),  an outside  marketing  firm  engaged by the
Company since May 1992.  Champion and Mr. Zummo,  the Company's  Chairman of the
Board,  President and Chief Executive Officer, were instrumental in establishing
the Company's relationship with TRW. The Company was obligated to pay Champion a
commission of 2% on all sales of airbag  cushions and airbag related  components
to TRW in North America.  The Company and the  shareholders of Champion  entered
into a definitive  agreement,  dated as of December 22, 1997, pursuant to which,
the Company acquired all of the issued and outstanding capital stock of Champion
for an aggregate  purchase price of $3.4 million plus certain amounts previously
paid to Champion and the shareholders of Champion (the "Champion  Transaction").
In  connection  with the Champion  Transaction,  the Company also entered into a
definitive Put Agreement (the "Put  Transaction")  with an associate of Champion
(the "Associate") who had the right to a portion of any of the  above-referenced
commissions actually received by Champion. Pursuant to the Put Transaction,  the
Associate had the option to put to the Company,  subject to certain  conditions,
all of the issued and outstanding capital stock of Duchi & Associates,  Inc., an
entity  affiliated with Champion,  for a put price of $740,000.  The exercise of
such put option was consummated as of January 13, 1999. The Champion Transaction
and the Put  Transaction  include a twenty-year  management  services  agreement
between the Company and each of the  Champion  shareholders  and the  Associate,
respectively. The terms of each such management services agreement prohibits the
Champion shareholders, or the Associate, as the case may be, from competing with
certain  businesses  of the  Company  for a  period  of five  years.  Each  such
management  services agreement also provides that the Company has the option, in
its sole discretion,  to extend the non-competition  period for three successive
five-year  periods,  upon payment of a nominal  extension fee. See Note 1 to the
Company's Notes to Consolidated  Financial Statements included elsewhere in this
report.

Competition

     The Company competes with several independent  suppliers of airbag cushions
in the United  States and Europe  for sales to airbag  module  integrators.  The
Company also competes with its airbag module integrator customers, which produce
a substantial  portion of their own airbag  cushions for their own  consumption,
but do not generally  manufacture


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airbag cushions for the same vehicle models that the Company manufactures.  Most
airbag module integrators subcontract a portion of their requirements for airbag
cushions.  The Company  believes  that its good  working  relationship  with its
customers,  the Company's high volume and low-cost  manufacturing  capabilities,
consistency and level of quality products,  the agreements or relationships with
its module integrator  customers,  the lengthy process necessary to qualify as a
supplier to an automobile  manufacturer and the costs in the automotive industry
associated  with changes in established  suppliers  create  certain  barriers to
entry for potential competitors.

     In 1999, the total North American  airbag fabric market totaled over $150.0
million. The Company shares this market with another major competitor, Milliken,
and three smaller fabric  manufacturers.  In addition,  Takata, an airbag module
integrator, produces fabric for its airbag cushions. Barriers to entry into this
market  include the  substantial  capital  requirements  and lengthy  lead-times
required for certification of a new participant's fabrics by buyers.

     The automotive airbag cushion,  airbag fabric and airbag module markets are
highly competitive. Some of the Company's current and potential competitors have
greater  financial and other  resources than the Company.  The Company  competes
primarily  on  the  basis  of  its  price,  product  quality,  reliability,  and
capability to produce a high volume of many models of passenger  side and driver
side airbags.  In addition,  SCFTI has provided the Company with some measure of
vertical integration,  enhancing its ability to compete in the automotive airbag
industry.  Increased competition, as well as price reductions of airbag systems,
would adversely affect the Company's revenues and profitability.

Technical Center

     The European  Operations have recently  restructured the Engineering Group.
Lead  Engineers  have been  assigned as key customer  manager,  each engineer is
responsible  for a given  customer.  Supporting each of these lead engineers are
technical  specialist,  quality  engineers  and  manufacturing  engineers.  This
arrangement  allows the same team to take  responsibility  for the product  from
cradle  to  grave,   assuring  robust  quotes,  smooth  launches  and  efficient
production.

     Additionally,   the  Company  has  formalized  development  initiatives  by
creating a Technical Center in Hildesheim,  Germany.  The center has the ability
to conduct static  deployment and analysis using high speed video equipment.  In
October 2000,  the Company is scheduled to add pendulum test  capability.  There
also  exists  a  full  sample  shop  with  manual  and  CNC  sewing   equipment,
production-style laser cutter, volume measurement and analysis,  textile welding
and other non-sewn fastening equipment. The Technical Center also has a complete
materials   laboratory,   managed   by  an   experienced   materials   engineer.
Additionally,  the Technical  Center  utilizes the services and expertise of the
laboratory  and  textile  experts  in  Greenville.   There  are  also  satellite
engineering functions in Wales, United Kingdom.

Qualification and Quality Control

     The Company  successfully  completed the process of qualifying as an airbag
supplier,  with the  customer  base now  including  Autoliv,  Bradford,  Dalphi,
Delphi,  Petri,  TG and TRW. Each of the customers  requires the Company to meet
specific  requirements for design validation.  The customer  participates in the
design and process  validations  and must be satisfied with the  reliability and
performance  prior to  awarding a purchase  order.  The  Company  satisfies  all
standards and requirements relating to product performance, which then qualifies
the Company to be a supplier.

     The Company has extensive  quality control and quality assurance systems in
its facilities  including  inspection and testing of all products and is QS 9000
and ISO 9002 certified. The Company also performs process capability studies and
design of  experiments  to determine  that the  manufacturing  process's meet or
exceed the quality levels required by each customer.

     The  Company's  overseas  facilities  also operate  under  similar  quality
systems that meet ISO 9000, ISO 9001 and ISO 9002,  which are the  international
standards  for  quality.  As is the case  with  U.S.  customers  the  automobile
manufacturers  may conduct their own design and process  testing,  however,  the
Company is Technical  Center located in  Hildesheim,  Germany has the ability to
conduct similar design and testing.


                                       7
<PAGE>


     The Companies  airbag fabric  operations also maintain the highest level of
quality  through  each and  every  process.  The  fabric  operations  have  been
certified as approved suppliers by all of its automotive customers.  In addition
the fabric operations laboratories have obtained accreditation against ISO Guide
25,  ASTM,  DIN, JIS and A2LA as well as UL  accreditation.  The Company was the
first  airbag  fabric  manufacture  to have its  entire  business  (not just its
manufacturing facility) certified under QS 9000.

Governmental Regulations

     Airbag  systems  installed in  automobiles  sold in the United  States must
comply with certain  government  regulations,  including  Federal  Motor Vehicle
Safety   Standard  208,   promulgated   by  the  United  States   Department  of
Transportation. The Company's customers are required to self-certify that airbag
systems   installed  in  vehicles  sold  in  the  United  States  satisfy  these
requirements.  The Company's  operations  are subject to various  environmental,
employee safety and wage and  transportation  related  statutes and regulations.
The Company believes that it is in substantial compliance with existing laws and
regulations and has obtained or applied for the necessary permits to conduct its
business operations.

Product Liability

     The  Company is engaged in a business  which  could  expose it to  possible
claims for injury  resulting  from the  failure of  products  sold by it. In the
past,  there has been  increased  public  attention  to  injuries  and deaths of
children and small adults due to the force of the inflation of airbags. To date,
however,  the Company has not been named as a defendant in any product liability
lawsuit nor  threatened  with any such lawsuit.  The Company  maintains  product
liability insurance coverage which management believes to be adequate.  However,
a successful claim brought against the Company  resulting in a final judgment in
excess of its insurance  coverage  could have a material  adverse  effect on the
Company.

Non-Core Operations

     The Company is a supplier and systems  integration of military ordnance and
other related  products as well as of projectiles and other metal components for
small to medium  caliber  training and tactical  ammunition.  Sales of metal and
defense related  products  accounted for $33.6 million or 14.7% of the Company's
consolidated fiscal 2000 net sales and $41.6 million or 18.9%, and $36.4 million
or 21.9% of the Company's fiscal 1999 and 1998 net sales, respectively. See Note
8 to the Company's Notes to Consolidated Financial Statements included elsewhere
in this Report for certain disclosure regarding the Company's industry segments.

     On June 27, 2000,  Valentec  Systems,  Inc. received from the Department of
the Army a Notice of Partial  Termination for Production of 120mm Fin Assemblies
(the  "Partial  Termination").  The Company has  reserved an amount at March 25,
2000 that management believes is adequate based on the information available and
on advisement from legal counsel. The Company is reviewing the process to appeal
the Partial  Termination,  however,  there can be no  assurances as to the final
decision by the Department of the Army.

     As discussed in Note 2 to the consolidated financial statements, management
of the  Company  continually  evaluates  the  recoverability  of its  long-lived
assets. Among other factors considered in such evaluation are the historical and
projected  operating  performance of business  operations.  Operating results of
Valentec  deteriorated during fiscal 2000 arising from the loss of business with
a major  customer.  Valentec was unable to offset this loss with increased sales
with other customers.  Accordingly,  management concluded that intangible assets
in the  amount  of $17.7  million  were no  longer  recoverable  through  future
operations and such amount was written-off during fiscal 2000.


                                       8
<PAGE>


Systems Contract

     In September  1994, the Company was awarded a contract by the United States
Army (the "Systems Contract").  The Systems Contract backlog was $5.1 million at
March 27, 1999, and the Company has  eliminated  such backlog at March 25, 2000.
The mortar  cartridges sold by the Company to the United States Army pursuant to
the Systems  Contract will be utilized in free  standing,  long-range  artillery
weapons in support of infantry units. As a systems integrator,  the Company does
not  manufacture  the  mortar  cartridges  itself,  but is a  prime  contractor,
coordinating  the manufacture and assembly of the product  components by various
subcontractors.  As the  prime  contractor,  the  Company  was  responsible  for
conducting  quality  control  inspections  and  ensuring  that the  contract was
fulfilled in a timely and efficient manner.

     The deliveries of completed  mortar  cartridges were initially  expected to
begin in September  1995, and the Systems  Contract was expected to be completed
by September 1996. Due to a delay by one of its subcontractors,  the Company has
experienced  delays in the  shipment of mortar  cartridges  against the original
shipment  schedule.  The delay relates to matters between such subcontractor and
the United States Army. As a result of these issues,  the United States Army had
extended the time for delivery under the Systems  Contract.  The Company resumed
shipments in February 1998 and such shipments have been completed  during fiscal
2000.

Other

     The Company  manufactures metal airbag module components for the automotive
airbag  industry,  projectiles  and  other  metal  components  primarily  for 20
millimeter ammunition and to a lesser extent for 25 and 30 millimeter ammunition
used by the United  States  Armed  Forces.  This  ammunition  is fired from guns
mounted on aircraft,  naval vessels and armored  vehicles.  The metal components
manufactured by the Company are shipped to a loading  facility,  operated either
by the United States Government or a prime defense  contractor,  which loads the
explosives,  assembles  the rounds and  packages  the  ammunition  for use.  The
Company  primarily  manufactures  components  that are used in training  rounds,
which are similar to tactical  rounds but do not contain the same  explosive  or
incendiary  devices contained in tactical rounds.  Because of the continuous use
of  training  ammunition,  the  majority of the rounds  purchased  by the United
States Armed Forces are training  rounds.  In the past the Company has regularly
received  replenishment  orders  from the  United  States  Armed  Forces for its
inventory of training ammunition.

Markets and Customers

     The  Company's  defense  related  sales are made to the United States Armed
Forces, certain prime defense contractors for the United States Armed Forces and
foreign  governments or contractors  for foreign  governments.  The Company is a
principal or sole source  supplier for many of the  projectiles  and other metal
components  it  manufactures.  There can be no  assurance,  however,  that other
companies will not begin to manufacture  such products in the future and replace
part or all of the sales by the Company of these products.

Manufacturing and Production

     The Company  manufactures metal airbag module components for the automotive
airbag  industry  and  other  metal  components  at its Costa  Mesa,  California
operation and projectiles  and other metal  components for inclusion in small to
medium caliber ammunition  utilizing  primarily  multi-spindle screw machines at
its manufacturing  facility in Galion, Ohio. The manufacturing  process includes
the impact  extrusion of steel bars to form the blank or rough form shape of the
metal  components,  the  machining  of the  inside  and  outside  of  the  metal
components to form their final shape,  various heat and phosphate treatments and
painting. The Company believes that its manufacturing  equipment,  machinery and
processes  are  sufficient  for its  current  needs  and for  its  needs  in the
foreseeable future, with minimal preventive maintenance.

Suppliers

     The Company  believes that adequate  supplies of the raw materials  used in
the  manufacture  of its small to medium  caliber  products are  available  from
existing  and,  in most  cases,  alternative  sources,  although  the Company is

                                       9
<PAGE>


frequently  limited to procuring  such  materials  and  components  from sources
approved by the United States Government.

Quality Control

     The  Company's  defense  operations  employ  Statistical  Process  Controls
extensively throughout its manufacturing process to ensure that required quality
levels are  maintained  and that products are  manufactured  in accordance  with
specifications.  The Company  satisfies  the United  States  Government  quality
control standard  Million-Q-9858A and ISO-9002.  Under the Systems Contract, the
Company is responsible for conducting  inspections of the subcontractors for the
program to ensure that they meet these same standards.

Competition

     The Company competes for contracts with other potential  suppliers based on
price and the  ability to  manufacture  superior  quality  products  to required
specifications  and  tolerances.  The  Company  believes  that  it  has  certain
competitive advantages including its high volume,  cost-efficient  manufacturing
capability,  its  co-development  of new products  with its  customers,  and the
United  States  Government's  inclination  to  remain  with  long-term  reliable
suppliers.  Since the Company's processes do not include a significant amount of
proprietary information, however, there can be no assurance that other companies
will not, in time, be able to duplicate the Company's manufacturing processes.

United States Government Contracts

     Virtually all of the Company's  defense  related  contracts,  including the
Systems  Contract,  are negotiated as firm fixed price contracts with the United
States   Government  or  certain  of  the  United  States   Government's   prime
contractors.   These  contracts  are  subject  to  audit  and  may  be  adjusted
accordingly.

     A majority of the Company's manufacturing agreements with the United States
Armed  Forces  and its  prime  defense  contractors  are for  the  provision  of
components for a one year term (two years in the case of the Systems  Contract),
subject, in certain cases, to the right of the United States Government to renew
the  contract  for an  additional  term.  Renewals of United  States  Government
contracts  depend  upon  annual  Congressional  appropriations  and the  current
requirements  of the  United  States  Armed  Forces.  United  States  Government
contracts and contracts with defense contractors are, by their terms, subject to
termination  by the United States  Government for its  convenience.  Fixed price
contracts  provide for  payment  upon  termination  for items  delivered  to and
accepted  by the  United  States  Government,  and,  if the  termination  is for
convenience,  for payment of the contractor's costs incurred through the date of
termination  plus  the  costs  of  settling  and  paying  claims  by  terminated
subcontractors,  other settlement  expenses and a reasonable profit on the costs
incurred.

Seasonality

     The Company's  airbag cushions and airbag fabric business is subject to the
seasonal  characteristics of the automotive industry in which there are seasonal
plant shutdowns in the third and fourth quarters of each calendar year. Although
the  Systems  Contract  is not  seasonal  in  nature,  there  have been and will
continue to be variations in revenues from the Systems Contract based upon costs
incurred by the Company in fulfilling the Systems Contract in each quarter.  The
majority  of the metal and  defense  ordnance  manufacturing  for United  States
Government and prime defense contractors has historically  occurred from January
through  September  and there is  generally a lower level of  manufacturing  and
sales during the fourth quarter of the calendar year.

Backlog

     The Company does not reflect an order for airbag  cushions or airbag fabric
in backlog  until it has  received a purchase  order and a material  procurement
release  which  specifies  the  quantity  ordered and specific  delivery  dates.
Generally, these orders are shipped within four to eight weeks of receipt of the
purchase order and material release.  As a result,  the Company does not believe
backlog is a reliable measure of future airbag sales.


                                       10
<PAGE>


     As of  March  25,  2000,  the  Company  had a  defense-related  backlog  of
approximately $11.3 million all of which is expected to be eliminated before the
end of fiscal year 2001. As of March 27, 1999, the Company had a defense-related
backlog of approximately $10.8 million.

Risks of Foreign Operations

     Certain of the Company's  consolidated  sales are generated  outside of the
United States.  Foreign operations and exports to foreign markets are subject to
a number of special risks, including,  but not limited to, risks with respect to
fluctuations in currency exchange rates, economic and political destabilization,
other disruption of markets, restrictive actions by foreign governments (such as
restrictions on transfer of funds, export duties and quotas, foreign customs and
tariffs and unexpected changes in regulatory  environments),  changes in foreign
laws regarding trade and investment,  difficulty in obtaining  distribution  and
support,  nationalization,  the laws and policies of the United States affecting
trade,  foreign  investment  and loans,  and foreign  tax laws.  There can be no
assurance  that one or a  combination  of these factors will not have a material
adverse  effect on the  Company's  ability to increase  or maintain  its foreign
sales or on its results of operations.

     In  addition,  the  Company has  significant  manufacturing  operations  in
foreign  countries  and  purchases a portion of its raw  materials  from foreign
suppliers.  The production costs, profit margins and competitive position of the
Company are affected by the  strength of the  currencies  in countries  where it
manufactures  or purchases  goods  relative to the strength of the currencies in
countries where its products are sold.

     Certain of the Company's  operations  generate net sales and incur expenses
in foreign  currencies.  The  Company's  financial  results  from  international
operations may be affected by fluctuations in currency  exchange rates.  Certain
exchange  rate risks to the Company are  limited by  contractual  clauses in the
Company's agreement with TRW for European supply of airbags. Future fluctuations
in  certain  currency  exchange  rates  could  adversely  affect  the  Company's
financial results.

Employees

     At March 25, 2000, the Company employed approximately 2,778 employees.  The
Company's  hourly  employees  in Mexico are  entitled  to a  federally-regulated
minimum  wage,  which is adjusted,  at minimum,  every two years.  The Company's
employees at its Mexican facility and certain  employees of Valentec Systems are
unionized. In addition, Automotive Safety Components International GmbH & Co. KG
(formerly known as Phoenix Airbag GmbH & Co. KG "Phoenix Airbag"), the Company's
wholly-owned  German  subsidiary,  has a  workers'  council  pursuant  to German
statutory  labor law and a vast majority of the employees of Phoenix  Airbag are
members of a labor union. The employees at the Company's  facilities in the U.K.
are also represented by a workers' council.  The Company has not experienced any
work  stoppages  related to its work force and considers its relations  with its
employees and the unions currently representing any of its employees to be good.

Environmental Matters

     Like similar companies, the Company's operations and properties are subject
to a wide variety of increasingly  complex and stringent  federal,  state, local
and  international  laws and  regulations,  including  those  governing the use,
storage,  handling,  generation,  treatment,  emission,  release,  discharge and
disposal  of certain  materials,  substances  and  wastes,  the  remediation  of
contaminated  soil and  groundwater,  and the  health  and  safety of  employees
(collectively,  "Environmental  Laws"). Such laws, including but not limited to,
those  under  CERCLA may impose  joint and  several  liability  and may apply to
conditions at properties presently or formerly owned or operated by an entity or
its  predecessor as well as to conditions of properties at which wastes or other
contamination  attributable  to an entity or its  predecessor  have been sent or
otherwise come to be located.  The nature of the Company's operations exposes it
to the risk of claims with respect to such matters and there can be no assurance
that  violations  of such  laws  have not  occurred  or will  not  occur or that
material  costs or  liabilities  will not be  incurred in  connection  with such
claims.  Based upon its experience to date, the Company believes that the future
cost of  compliance  with  existing  Environmental  Laws and


                                       11
<PAGE>


liability for known  environmental  claims pursuant to such Environmental  Laws,
will not have a material adverse effect on the Company's  financial  position or
results of  operations  and cash  flows.  However,  future  events,  such as new
information, changes in existing Environmental Laws or their interpretation, and
more  vigorous  enforcement  policies of regulatory  agencies,  may give rise to
additional expenditures or liabilities that could be material.

     The Company has identified two areas of  underground  contamination  at the
Company's  facility  in Galion,  Ohio.  One area  involves a  localized  plating
solution  spill.  The second area  involves a  chlorinated  solvent spill in the
vicinity of a former  above  ground  storage  area.  The  Company  has  retained
environmental   consultants  to  quantify  the  extent  of  this  problem.  Such
environmental   consultants  estimate  that  the  Company's  voluntary  plan  of
remediation  could take three to five years to implement,  followed up by annual
maintenance.  The  consultants  also  estimate  that  remediation  costs will be
approximately  $250,000,  for which the Company had accrued prior to fiscal year
1998 and is included in other long-term  liabilities at March 25, 2000 and March
27, 1999.  However,  depending on the actual  extent of impact to the Company or
more stringent regulatory criteria,  these costs could be higher.  Additionally,
an underground  contamination  involving machinery fluids exists at the Valentec
facility in Costa Mesa, California and a site remediation plan has been approved
by the Regional Water Quality  Control  Board.  The  remediation  plan currently
involves  the  simultaneous  operation  of a  groundwater  and vapor  extraction
system.  Such  plan  will  take  approximately  five  years to  implement  at an
estimated cost of approximately  $368,000,  for which the Company had accrued as
part of  accrued  liabilities.  To date,  the  Company  has spent  approximately
$325,000 on implementing such plan. In addition, SCFTI has been identified along
with numerous other parties as a Potentially  Responsible  Party at the Aquatech
Environmental, Inc. Superfund Site. The Company believes that it is a de minimis
party with respect to the site and that future  clean-up  costs  incurred by the
Company will not be material.

     A Phase II study revealed limited organic groundwater  contamination at the
Company's  converter  facility in South  Carolina.  At the time of the Company's
purchase of such facility,  $185,000 of the purchase price thereof was placed in
escrow to pay for, if necessary,  environmental  remediation  and  monitoring at
such facility.  Based on the results of the groundwater  monitoring that already
has been  conducted,  and on the Company's  discussions  with the South Carolina
Department of Health and Environmental  Control ("DHEC"), it appears likely that
no further work will be required.

     Low levels of VOCs were found at the Company's Automotive facility in South
Carolina during groundwater  sampling. In February 1999, the facility received a
notice letter from DHEC  regarding  the  groundwater  contamination.  While DHEC
acknowledges  that there does not appear to be an active source for  groundwater
impact at the  facility,  it required  the  facility to perform  sampling of two
existing  monitoring wells located on the Automotive parcel for VOCs. Low levels
of VOCs  again  were  detected.  A meeting  was held with  DHEC to  discuss  the
sampling  results.  DHEC has  requested  that the Company  (i)  confirm  that no
residential wells exist in the area, (ii) perform additional sampling, and (iii)
propose a program in-site remediation of the groundwater, involving injection of
nutrients to biodegrade  to organic  compounds in the  groundwater.  The Company
does not at this time  believe  that these costs will be  material.  The Company
cannot evaluate the likelihood of further DHEC requirements at this time.

     In the opinion of management, no material expenditures will be required for
its  environmental  control  efforts and the final outcome of these matters will
not have a material  adverse  effect on the  Company's  results of operations or
financial position. The Company believes that it currently is in compliance with
applicable  environmental  regulations  in all material  respects.  Management's
opinion is based on the advice of an  independent  consultant  on  environmental
matters.

Patents

     The Company holds twelve  patents and six  additional  patents are pending.
Sixteen of such patents  relate to technical  improvements  for  enhancement  of
product  performance with respect to the Company's airbag,  fabric and technical
related  products and two relate to  automotive  products at Valentec.  Provided
that all requisite  maintenance  fees are paid, three of the patents held by the
company  expire in 2014,  two expire in 2016,  one  expires in 2017,  three more
expire in 2018, one expires in 2019, and two expire in 2020.


                                       12
<PAGE>


Engineering, Research & Development

     The Company's  fabric and airbag  cushions  operations  have  maintained an
active design and  development  effort focused toward new and enhanced  products
and manufacturing  processes. The Company specifically designs and engineers its
fabrics  to meet its  customers'  applications  and  needs.  While  most  design
requirements  are  originated  by the  component  manufacturer,  the  Company is
dedicated to improving the quality of existing  products,  as well as developing
new products for all applications.  Costs associated with design and development
for fabric and airbag cushions were  approximately  $665,000 during fiscal 2000.
In addition,  the Company incurred  approximately $278,000 during fiscal 2000 in
connection  with the  development  of  proprietary  products for the  automotive
industry.  Valentec has developed a high performance  exhaust system,  under its
Zummo  Performance  Products  business unit,  which is intended for sale through
retail and wholesale channels,  although no formal marketing plans have yet been
developed.

Related Parties

     The  Company  established  a reserve in the  amount of $0.6  million in the
second  quarter of fiscal  2000  against its  receivable  of $1.2  million  from
Valentec  International  Ltd.  ("VIL"),  an  affiliated  party,  as a result  of
uncertainty as to the affiliate's  ability to generate  sufficient cash to repay
such  amount.  An  agreement  was signed in January 2000 between the Company and
Robert A. Zummo, the Chief Executive  Officer of the Company,  whereby Mr. Zummo
pledged to the  Company  his stock in the  Company as  collateral  against  such
indebtedness.  Mr. Zummo is the principal shareholder of VIL. Further, Mr. Zummo
agreed to direct VIL to remit to the Company,  in  satisfaction  of a portion of
the receivable,  $564,000 to be received from a foreign customer.  In connection
with the  restructuring  agreement  signed in April 2000,  discussed  below, the
pledged  collateral has diminished in value,  and Mr. Zummo has agreed to reduce
future  payments to him under his employment  agreement to cover such receivable
in the event the cash is not received from the foreign customer by July 1, 2001.
In  addition,  the  Company  has agreed to release  VIL from any  amounts due in
excess of such receivable.


                                       13
<PAGE>


ITEM 2. PROPERTIES

     The Company relocated its corporate  headquarters from Fort Lee, New Jersey
to  Greenville,  South  Carolina  during fiscal 2000.  The Company  manufactures
automotive and industrial products in seven locations,  with total plant area of
approximately 1,373,000 square feet (including  administrative,  engineering and
research and development  areas housed at plant sites).  Below is an overview of
the Company's  manufacturing and office facilities as of June 23, 2000. See Note
5 to the Company's Notes to Consolidated Financial Statements included elsewhere
in  this  Report  for  more  information  regarding  certain  of  the  Company's
obligations  that are secured by certain  assets of the Company,  including  its
owned facilities.

<TABLE>
<CAPTION>
                                                     Floor Area           Owned/        Lease
                 Location                             (Sq. Ft.)          Leased      Expiration
                 --------                             ---------          ------      ----------
<S>                                                   <C>                 <C>           <C>
Airbag and Technical Fabrics Related Products
  Ensenada, Mexico (airbag cushions) ..............    97,000(1)          Leased         2003(2)
  Greenville, South Carolina (airbag and
    technical related fabrics; warehouse and ......                       Owned          NA
  corporate offices) ..............................   826,040(1)
  Bavendstedt, Germany (airbag cushions) ..........    70,000(1)          Owned          NA
  Czech Republic (airbag cushions) ................   100,000(3)          Owned          NA
  Gwent, Wales (airbag cushions) ..................    60,000(3)          Leased         2003
  Carlsbad, California (airbag cushions) ..........     2,840(4)          Leased         2004
  Otay Mesa, California (warehouse) ...............    15,700(5)          Leased         2003
  Fort Lee, New Jersey (former corporate office) ..     4,685(4)          Leased         2007

Metal and Defense
  Costa Mesa, California (metal ...................   129,000(3)(6)       Leased         2009
    components and defense products)
  Mount Arlington, New Jersey (defense
    systems) ......................................     3,600(4)          Leased         Sept. 2000
  Galion, Ohio (defense products) .................    97,000(3)          Owned          NA
</TABLE>

----------
(1)  Office, manufacturing and research and development space.

(2)  Lease is subject to two one-year renewal options.

(3)  Manufacturing and office space.

(4)  Office space.

(5)  Finished goods distribution center.

(6)  Consists of two facilities.


                                       14
<PAGE>


ITEM 3. LEGAL PROCEEDINGS

     After the Company's  announcement of the restatements in November 1999, the
Company and several of its present or former  officers and directors  were named
defendants in a class action litigation commenced by shareholders of the Company
in the United  States  District  Court for the  District  of New  Jersey.  Eight
separate  lawsuits were filed,  alleging  violations  of the federal  securities
laws, and all have been consolidated into one action.  The parties are currently
negotiating a settlement of the litigation,  which will require  approval by the
District Court, as well as the federal  bankruptcy  court in which the Company's
Chapter 11 petition is currently pending.  Management does not presently believe
that a resolution  consistent  with present  negotiations  would have a material
effect on the financial statements.

     Valentec,  which was  acquired  by the  Company  in May 1997,  has been the
subject of an investigation by the Department of Justice regarding a bid-rigging
and  kickbacks  scheme  alleged  to have  occurred  between  1988 and 1992.  The
Department of Justice Antitrust Division has contended that former  subsidiaries
or divisions of the former  Valentec  participated  in such  misconduct  in part
through the actions of a former marketing agent and former  employees,  in order
to obtain certain  government  subcontracts  awarded by Martin Marietta Ordnance
Systems (the  predecessor-in-interest  to Lockheed Martin).  The Government also
contended that Valentec was liable for the acts of its  predecessors on a theory
of successor  corporate criminal  liability.  The Government  contended that the
alleged  kickbacks  were made  through the former  Valentec  Kisco and  Valentec
Galion  operations  while those operations were owned and operated by the former
Valentec from the late 1980's through 1992, prior to the 1993 leveraged  buy-out
of Valentec by Robert A. Zummo, the President and Chief Executive Officer of the
Company.  No officer or director of the Company or its  subsidiaries was alleged
to have  participated  in, or known  about,  such  conduct.  The  Company has no
recourse  against the entity  which owned  Valentec  during the  operative  time
period due to contractual  restrictions  in the purchase  agreement  between Mr.
Zummo and such entity.  The Company  determined that it was in its best interest
to settle  such matter in order to avoid the costs and  distractions  associated
with  contesting  the  Department  of  Justice's  legal  theories  on  successor
liability.  Therefore,  a plea  agreement  was  negotiated  with  the  Antitrust
Division of the Department of Justice (the "Plea Agreement"),  pursuant to which
Valentec  entered  a  plea,  as the  successor  to the  former  Valentec  Galion
division,  to a one-count criminal information of participating in a combination
and  conspiracy to suppress  competition  in violation of the Sherman  Antitrust
Act, 15  U.S.C.ss.1,  and agreed to pay a $500,000  fine,  all of which was paid
during fiscal year 1999.  The Plea  Agreement  also includes an agreement by the
Government not to further criminally prosecute the Company, its subsidiaries, or
any of their  respective  officers,  directors  or  employees  as to the alleged
bid-rigging and kickback scheme. The Plea Agreement does not release the Company
or Valentec  from  potential  civil  claims that might be asserted by the United
States  Department of Justice Civil Division against Valentec arising out of the
Government's  investigation  of conduct that is alleged to have  occurred in the
time frame prior to Mr. Zummo's 1993 leveraged buy-out of Valentec.  The Company
has had  discussions  with the Civil  Division  regarding the resolution of such
potential civil claims.  As of the date hereof no understanding had been reached
with the Civil  Division as to such potential  civil claims.  The Company denies
that it is liable for any such potential civil claims.  In early 1999,  Lockheed
Martin named  Valentec as a defendant in a civil action  already  pending in the
United  States  District  Court for the  Western  District  of  Tennessee  ("the
Court").   Lockheed   Martin   asserts   that   Valentec,   as   the   corporate
successor-in-interest  to the  former  Valentec  International  Corporation,  is
civilly liable to Lockheed Martin under antitrust,  breach of contract and other
theories of liability for damages. Lockheed Martin claims that it sustained such
civil damages in part as a consequence of the  bid-rigging  and kickback  scheme
said to have  occurred in  connection  with  subcontracts  awarded to the former
Valentec Galion by Lockheed  Martin's  predecessor-in-interest,  Martin Marietta
Ordnance  Systems,  Inc.  between  1988 and 1992.  Lockheed  Martin also seeks a
declaratory  judgment that Valentec and the other named defendants shall be held
liable and shall indemnify  Lockheed Martin to the extent that the United States
Government  makes and establishes  civil claims against  Lockheed Martin arising
out of such purported  antitrust and bid-rigging  scheme. Such civil claims have
been  established  at  $270,000.  Valentec  denies  that  Valentec  has any such
liability  to Lockheed  Martin and,  accordingly,  has moved to dismiss all such
claims.  On  February  29,  2000,  the Court  dismissed  and  otherwise  entered
judgement in  Valentec's  favor in all causes of action of the  Lockheed  Martin
case.  However,  Lockheed Martin's claim for indemnification for civil claims of
the U.S. Government was not dismissed. Accordingly, Lockheed Martin has filed an
amended  complaint  against  Valentec  and the other  defendants  for  $340,000,
representing $270,000 paid by Lockheed Martin to the U.S. Government and $70,000
in legal fees. A settlement  offer has been  proffered by Lockheed  Martin at an
amount for which the Company is adequately reserved.


                                       15
<PAGE>


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

     The Company held its 1999 Annual  Meeting of  Stockholders  on December 13,
1999.

     At the Annual  Meeting,  Joseph J. DioGuardi and John C. Corey were elected
Class I directors of the Company.  The number of shares of the Company's  common
stock  voted in favor of the  election  of  Messrs.  DioGuardi  and  Corey  were
3,056,139 and 3,388,390,  respectively,  and the number of such shares  withheld
were 708,741 and 376,490.  In addition,  the following other directors continued
as such after the Annual Meeting: Robert J. Torok and Robert A. Zummo.

     At the Annual Meeting,  the Company's  stockholders  also voted in favor of
the approval of an amendment to the Company's  1994 Stock Option Plan (the "1994
Plan")  to i)  increase  the  number of shares  of the  Company's  common  stock
issuable  under the 1994 Plan to officers,  key employees and  consultants  from
935,000  shares  in the  aggregate  to  1,375,000  shares in  aggregate  and ii)
increase the number of shares issuable to non-employee  directors under the 1994
Plan from 75,000 shares in the aggregate to 125,000 shares in the aggregate. The
vote of approval for such  amendment was 1,340,671  FOR,  520,378  AGAINST,  and
9,135 ABSTAINING


                                       16
<PAGE>

                                     PART II


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

     The Common Stock was listed on the Nasdaq  National  Market (Nasdaq symbol:
ABAGE) until February 18, 2000, at which time the common stock was delisted from
the Nasdaq Stock Market).  The following  table sets forth the range of high and
low bid  information  for reported sale prices of the Common Stock for each full
quarterly period within the two most recent fiscal years.

                                                    High             Low
                                                    ----             ---
Year Ended March 25, 2000
     First Quarter                                 $ 8.94           $ 4.50
     Second Quarter                                $ 6.25           $ 2.69
     Third Quarter                                 $ 3.94           $ 1.00
     Fourth Quarter                                $ 1.88           $ 0.50

Year Ended March 27, 1999
     First Quarter                                 $19.00           $13.63
     Second Quarter                                $18.25           $ 9.38
     Third Quarter                                 $17.25           $10.00
     Fourth Quarter                                $15.88           $ 5.50


     As of July 7, 2000 there were  approximately  131  holders of record of the
Common Stock.

     The Company has, to date, not paid any cash  dividends to its  stockholders
and  presently  intends to  continue  its policy of  retaining  its  earnings to
support the growth and  development  of its  business.  The  Company's  existing
credit agreement restricts the Company's ability to pay dividends.


                                       17
<PAGE>


Item 6. Selected Financial Data

     The selected  financial data as of and for the fiscal years ended March 25,
2000,  March 27, 1999,  March 28, 1998,  and March 31, 1997 and 1996 are derived
from the  consolidated  financial  statements of the Company.  The  consolidated
financial  statements  of the  Company as of and for the years  ended  March 25,
2000,  March 27,  1999 and March 28, 1998 have been  audited by Arthur  Andersen
LLP,  independent  accountants.  The  consolidated  financial  statements of the
Company for the fiscal  years ended March 31, 1997 and 1996 have been audited by
PricewaterhouseCoopers LLP, independent accountants.

     Management  discovered certain matters relating to the Company's  financial
statements for fiscal 1999 and fiscal 1998 which required further  investigation
and  restatement of the financial  statements for those periods,  as well as the
financial  statements  for the  twenty-six  weeks ended  September 25, 1999. The
audit  committee  consisting  only of outside members of the Board of Directors,
with the  assistance of special  counsel and an  independent  public  accounting
firm,  conducted a thorough  investigation  of these matters and determined that
the  restatement  related  primarily to two items.  The first item  required the
reversal of a  duplicate  booking of a sale and the  related  receivable  in the
Company's  defense  operations  and the second  item  required  the  reversal of
certain  items  incorrectly  recorded  in  income  in  connection  with  a  loan
transaction.  The  restatement  for the fiscal year ended March 28, 1998 reduces
previously reported net sales by $4.2 million to net sales of $166.1 million and
previously  reported net income by $2.7 million to a net income of $3.3 million.
The  restatement  for the fiscal year ended March 27,  1999  reduces  previously
reported net sales by $1.3 million to net sales of $220.0  million and increases
previously  reported  net  loss by  $797,000  to a loss of  $13.7  million.  The
cumulative  effect on retained  earnings was $2.7 million and $3.5 million as of
March 28, 1998 and March 27, 1999, respectively.

     During  fiscal 2000,  the Company  incurred  approximately  $4.0 million of
costs  associated  with  the  investigation  and  restatement  of the  Company's
financial  statements  for fiscal 1998 and 1999,  and the  restructuring  of the
Company's balance sheet.

     During the third  quarter of fiscal 2000 the Company  recognized a goodwill
impairment  charge of $17.7 million,  related to the Valentec  acquisition.  The
operating results of Valentec deteriorated during the year arising from the loss
of business with a major customer.  Valentec was unable to offset this loss with
increased sales with other customers.  Management  concluded that the intangible
assets were no longer recoverable through operations and such amount was written
off in the financial statements during the third quarter of fiscal 2000.

     During fiscal 1999,  after  exploring a variety of strategic  alternatives,
the Company entered into the Brera Investment  Agreement.  The Company and Brera
subsequently reached a mutual agreement to terminate such agreement. The Company
incurred  approximately  $2.5  million of fees and expenses  during  fiscal 1999
related to the Brera  Investment  Agreement  and its  termination.  This  charge
included a reimbursement to Brera for fees and expenses incurred by it.

     During fiscal 1999 and fiscal 1998, the Company incurred approximately $2.4
million  ($1.2  million,  net of tax benefit of $1.2  million)  and $1.8 million
($1.2  million  net of tax benefit of  $600,000)  of costs  associated  with the
reorganization  and relocation of its foreign  operations,  respectively.  These
costs were  investments  toward  consolidating  production  within the Company's
foreign operations to its low-cost facilities located within the foreign market.

     During fiscal 1997,  the Company  changed its accounting for product launch
costs from the deferral  method to the expense as incurred  method.  The Company
recorded the  cumulative  effect of this change in  accounting  principle in the
amount of $1.3 million,  net of income taxes, or $0.25 per share.  During fiscal
year 1997, $1.8 million ($1.1 million net of tax benefit of $704,000) of product
launch costs were expensed. In addition, in connection with a new loan agreement
with Bank of America National Trust and Savings Association,  which replaced the
revolving  credit with Citicorp US, Inc., the Company  recorded an extraordinary
loss of  $383,000,  net of income  taxes,  or $0.08 per share,  relating  to the
write-off of deferred financing costs incurred for the previous credit facility.


                                       18
<PAGE>


     The  information  set  forth  below  should  be  read in  conjunction  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and the Company's  consolidated  financial  statements and the notes
thereto, included elsewhere in this Report.


INCOME STATEMENT DATA (in thousands, except per share data and footnotes)

<TABLE>
<CAPTION>
                                                                            Restated        Restated
                                                           Year Ended      Year Ended      Year Ended           Years Ended
                                                            March 25        March 27,       March 28,             March 31,
                                                          -------------------------------------------------------------------------
                                                             2000(1)         1999(1)         1998(1)        1997(1)         1996(1)
                                                          -------------------------------------------------------------------------
<S>                                                        <C>             <C>             <C>            <C>             <C>
Net sales                                                  $ 228,266       $ 219,981       $ 166,074      $  83,958       $  94,942
Cost of goods sold                                           200,185         196,760         138,767         67,934          81,908
                                                           ---------       ---------       ---------      ---------       ---------
Gross profit                                                  28,081          23,221          27,307         16,024          13,034
Selling, general and administrative
     Expenses                                                 16,353          16,030          10,796          7,072           5,430
Research and development expenses                                943           1,090             357             --              --
Terminated investment agreement costs                             --           2,500              --             --              --
Amortization                                                   2,078           2,362           1,742            348              --
Relocation and reorganization costs                               --           3,238           1,789             --              --
Goodwill impairment charge                                    17,676              --              --             --              --
Restructuring and restatement                                  3,969              --              --             --              --
                                                           ---------       ---------       ---------      ---------       ---------
Operating (loss) income                                      (12,938)         (1,999)         12,623          8,604           7,604
Other expense (income)                                         1,937           2,197            (397)           208            (807)
Interest expense                                              14,116          12,788           7,747          1,555             381
                                                           ---------       ---------       ---------      ---------       ---------
Income (loss) before income taxes                            (28,991)        (16,984)          5,273          6,841           8,030
Income tax (benefit) provision                                 6,154          (3,321)          1,927          2,995           3,116
                                                           ---------       ---------       ---------      ---------       ---------
(Loss) income before extraordinary
  item and cumulative effect of
     accounting change                                       (35,145)        (13,663)          3,346          3,846           4,914
Extraordinary item-deferred
  financing costs (less tax benefit of $225)                      --              --              --           (383)             --
Cumulative effect of change in accounting
  for deferred product launch costs (less
     tax benefit of $718)                                         --              --              --         (1,259)             --
                                                           ---------       ---------       ---------      ---------       ---------
Net (loss) income                                          $ (35,145)      $ (13,663)      $   3,346      $   2,204       $   4,914
                                                           =========       =========       =========      =========       =========
</TABLE>


                                       19
<PAGE>


PER SHARE DATA(2)

<TABLE>
<CAPTION>
                                                                              Restated     Restated
                                                               Year Ended    Year Ended   Year Ended             Years Ended
                                                                March 25,     March 27,    March 28,               March 31,
                                                                 2000(1)       1999(1)      1998(1)          1997(1)        1996(1)
                                                               --------------------------------------------------------------------
<S>                                                            <C>           <C>           <C>             <C>             <C>
Basic per share data:
Income (loss) before extraordinary item and
  Cumulative effect of accounting change                       $   (6.84)    $   (2.67)    $    0.67       $    0.77       $    0.99
Extraordinary item                                                                  --            --           (0.08)             --
Cumulative effect of change in accounting
  for deferred product launch costs                                   --            --            --           (0.25)             --
                                                               ---------     ---------     ---------       ---------       ---------
Net income (loss) per share, basic                             $   (6.84)    $   (2.67)    $    0.67       $    0.44       $    0.99
                                                               =========     =========     =========       =========       =========

Diluted per share data:
Income (loss) before extraordinary item and
  Cumulative effect of accounting change                       $   (6.84)    $   (2.67)    $    0.65       $    0.76       $    0.97
Extraordinary item                                                                  --            --           (0.08)             --
Cumulative effect of change in accounting
  for deferred product launch costs                                   --            --            --           (0.25)             --
                                                               ---------     ---------     ---------       ---------       ---------
Net income (loss) per share, assuming                          $   (6.84)    $   (2.67)    $    0.65       $    0.43       $    0.97
                                                               =========     =========     =========       =========       =========
dilution


Income before extraordinary item and
  Cumulative effect of accounting change                                            --            --       $   3,846              --
                                                                                                           =========
Earnings per common share                                                           --            --       $    0.77              --
                                                                                                           =========

Net (loss) income                                              $ (35,145)    $ (13,663)    $   3,346       $   2,204       $   4,914
                                                               =========     =========     =========       =========       =========
Net (loss) income per share, basic                             $   (6.84)    $   (2.67)    $    0.67       $    0.44       $    0.99
                                                               =========     =========     =========       =========       =========
Net (loss) income per share, assuming                          $   (6.84)    $   (2.67)    $    0.65       $    0.43       $    0.97
                                                               =========     =========     =========       =========       =========
dilution

Weighted average common shares
  Outstanding, basic                                               5,136         5,112         5,027           5,027           4,981
                                                               =========     =========     =========       =========       =========
Weighted average common shares
  Outstanding, assuming dilution                                   5,136         5,112         5,147           5,050           5,083
                                                               =========     =========     =========       =========       =========
</TABLE>

BALANCE SHEET DATA
(in thousands)

<TABLE>
<CAPTION>
                                                                            Restated       Restated
                                                           March 25,        March 27,       March 28,            March 31,
                                                             2000             1999            1998           1997           1996
                                                          ---------        ---------       ---------       ---------       ---------
<S>                                                       <C>              <C>             <C>             <C>             <C>
Senior subordinated debt                                  $  90,000        $  90,000       $  90,000       $      --       $      --
Working capital                                            (100,150)          35,274          25,304          11,755          25,050
Total assets                                                175,560          217,970         194,633          73,407          49,831
Long-term debt, net of current portion                       15,736           53,700          24,739          21,296           3,087
Stockholders' (deficit) equity                              (14,440)          22,456          36,532          35,274          35,344
</TABLE>


----------
Notes to Selected Financial Data:

(1)  The Company did not declare dividends during fiscal years 2000, 1999, 1998,
     1997 or 1996.

(2)  The weighted  average  number of common shares  outstanding as of March 31,
     1996,  includes  the  weighted  average  of the pro forma  number of shares
     assumed issued prior to the Company's  initial public  offering in May 1994
     to retire inter-company and other indebtedness.


                                       20
<PAGE>


ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Overview

     The Company is a leading low-cost independent supplier of automotive airbag
fabric and cushions,  with  operations  in North America and Europe.  Due to the
Company's   historical  and  anticipated   growth,  the  Company  believes  that
period-to-period  comparisons  of its  financial  results  are  not  necessarily
meaningful and should not be relied upon as an indication of future performance.
The  following  discussion  should  be read in  conjunction  with the  Company's
consolidated financial statements and notes thereto, appearing herein.

     Management  discovered certain matters relating to the Company's  financial
statements for fiscal 1999 and fiscal 1998 which required further  investigation
and  restatement of the financial  statements for those periods,  as well as the
financial  statements  for the  twenty-six  weeks ended  September 25, 1999. The
audit  committee  consisting  only of outside members of the Board of Directors,
with the  assistance of special  counsel and an  independent  public  accounting
firm,  conducted a thorough  investigation  of these matters and determined that
the  restatement  related  primarily to two items.  The first item  required the
reversal of a  duplicate  booking of a sale and the  related  receivable  in the
Company's  defense  operations  and the second  item  required  the  reversal of
certain  items  incorrectly  recorded  in  income  in  connection  with  a  loan
transaction.  The  restatement  for the fiscal year ended March 28, 1998 reduces
previously reported net sales by $4.2 million to net sales of $166.1 million and
previously  reported net income by $2.7 million to a net income of $3.3 million.
The  restatement  for the fiscal year ended March 27,  1999  reduces  previously
reported net sales by $1.3 million to net sales of $220.0  million and increases
previously  reported  net  loss by  $797,000  to a loss of  $13.7  million.  The
cumulative  effect on retained  earnings was $2.7 million and $3.5 million as of
March 28, 1998 and March 27, 1999, respectively.

     During the third  quarter of fiscal 2000 the Company  recognized a goodwill
impairment  charge of $17.7 million,  related to the Valentec  acquisition.  The
operating results of Valentec deteriorated during the year arising from the loss
of business with a major customer.  Valentec was unable to offset this loss with
increased sales with other customers.  Management  concluded that the intangible
assets were no longer recoverable through operations and such amount was written
off in the financial statements during the third quarter of fiscal 2000.

     During  fiscal 2000,  the Company  incurred  approximately  $4.0 million of
costs  associated  with  the  investigation  and  restatement  of the  Company's
financial  statements  for fiscal 1998 and 1999,  and the  restructuring  of the
Company's balance sheet.  Such costs were necessary for the financial  stability
of the Company for the future.

     During  the  third  quarter  of fiscal  1999 the  Company  reevaluated  its
strategic decision to exit the manufacturing of airbags in Hildesheim,  Germany.
The original plan  developed in December 1996 called for the closure and move of
the entire  manufacturing  operation to the Company's  Czech Republic and United
Kingdom  production  facilities.   During  fiscal  1999,  the  Company  incurred
approximately $2.4 million ($1.2 million net of tax benefit of $1.2 million,  or
$0.23 per share) of costs associated with the relocation of substantially all of
its  labor-intensive  passenger airbags operations to its lower labor cost Czech
Republic facility.  During fiscal 1998, the Company incurred  approximately $1.8
million  ($1.2  million net of tax benefit of  $600,000,  or $0.23 per share) of
costs, which were charged to operations,  associated with the reorganization and
relocation  of its  foreign  operations.  These  costs were  investments  toward
consolidating labor-intensive production within the Company's foreign operations
to its lower cost  facilities  located  within  the  foreign  market.  While the
Company  accomplished  the  move  of  substantially  all of its  labor-intensive
passenger  airbag  operations,  the Company  decided  not to move the  remaining
automated airbag operations, primarily driver and side impact bags. The decision
to continue  manufacturing  in Germany was based on the existing and anticipated
program  delivery   commitments.   The  Company  purchased  a  new  facility  in
Bavendstedt,  Germany near the existing facility and completed its move into the
new  facility  during the second  quarter  of fiscal  year 2000.  The new German
facility has allowed the Company to conduct its  operations in Germany in a more
efficient and cost effective manner.


                                       21
<PAGE>


Results of Operations

     The following table sets forth certain operating results as a percentage of
net sales for the periods indicated:

                                                         Years Ended
                                                ------------------------------
                                                           Restated    Restated
                                                March 25,  March 27,   March 28,
                                                  2000       1999        1998
                                                ---------  ---------   ---------
Net sales                                        100.0%     100.0%     100.0%
Cost of goods sold                                87.7       89.4       83.6
Gross profit                                      12.3       10.6       16.4
Selling, general and administrative expense        7.2        7.3        6.5
Income (loss) from operations                     (5.7)      (0.9)       7.6
Interest expense, net                              6.2        5.8        4.7
Net income (loss)                                (15.4)      (6.2)       2.0

Year Ended March 25, 2000, Compared to Year Ended March 27, 1999, as restated

     Net Sales. Net sales increased by $8.3 million or 3.8% to $228.3 million in
fiscal 2000 compared to fiscal 1999. The increase was primarily  attributable to
increased  sales volume from new awards from existing  customers in the U.S. and
European  core  operations,  offset by lower sales in the  non-core  operations.
North  American  core  operations  showed  increased  sales of 11.3% for air bag
cushions and related fabric  products over the prior fiscal year.  European core
operations had increased sales of 6.1% over the prior fiscal year,  despite such
sales having been adversely  impacted  (approximately  4.7%) by foreign currency
translation rates. With respect to fabric sales, technical fabrics increased $.7
million or 2.9% over the prior fiscal year,  while airbag fabric sales decreased
by $1.5  million or 3.2%  although  the  decrease in external  sales  volume was
accompanied by a much greater increase in internal sales volume to the Company's
Enseneda,  Mexico  airbag  plant in  support of their  higher  demand for airbag
cushions.  The  non-core  operations  had a decrease in sales of $8.0 million or
19.3% below the prior fiscal year; such decreases were attributable primarily to
lower volume at all of the non-core  operations,  including  specifically  lower
sales for the M16 links and 120 MM mortar system which were significantly  below
the prior year due to the phase out of those contracts.

     Gross  Profit.  Gross  profit  increased  by $4.9 million or 21.1% to $28.1
million  compared to the prior  fiscal year.  Approximately  $6.9 million of the
increase was  attributable to margin gains in the core  operations  arising from
efficiency  improvements and related successes in the Lean Manufacturing program
which the Company  began  implementing  since the  beginning  of fiscal 2000 and
favorable  product mix.  Non-core  operations  adversely  impacted overall gross
profit  by $2.0  million  due to  decreased  sales  volumes.  Gross  profit as a
percentage of sales  increased to  approximately  12.3% from 10.6% for the prior
fiscal  year.  The  increase  as a  percentage  of  sales  was due to the  items
discussed above.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  of $16.4  million  increased  by $0.3  million or 2.0%
compared to the prior fiscal year.  The prior fiscal year  included the writeoff
of $1.5  million  of  receivables  associated  with a  contract  dispute  with a
significant customer of Valentec.  Selling,  general and administrative expenses
as a percentage of sales  decreased to 7.2% in the current fiscal year from 7.3%
for the prior fiscal year due to the above-referenced items.

     Research  and  Development  Expenses.  Research  and  development  expenses
decreased by $0.2 million or 13.5% to $0.9 million  compared to the prior fiscal
year. The majority of the research and development  costs were incurred at SCFTI
in its technical fabrics division,  in Europe for airbag related products and at
Valentec in connection  with the  development  of  proprietary  products for the
automotive industry.

     Terminated  Investment Agreement Costs. The Company expensed  approximately
$2.5  million of fees and  expenses  during the  fourth  quarter of fiscal  1999
related to the Brera Investment Agreement and its termination.

     Reorganization and Relocation Costs.  Within the European  operations,  the
Company incurred approximately $2.4 million of costs associated with the move of
labor intensive passenger airbag lines from the Company's German facility to its
lower labor cost Czech Republic  facility.  These costs  included,  but were not
limited to, contract laborers,  duplicate  personnel,  increased scrap costs and
freight costs. The Company also expensed  approximately  $0.3 million associated
with the  closure  of the China  facility,  as part of an effort to  consolidate
manufacturing operations within Europe and maximize the capacity of the European
operations.  During the fiscal  1998 the  Company  incurred  approximately  $1.8
million  of costs  associated  with the  reorganization  and  relocation  of its
foreign operations.  The Company also expensed approximately $0.5 million during
the fourth quarter of fiscal 1999 related to the  anticipated  relocation of its
corporate office into its South Carolina facility.

     Goodwill  Impairment Charge.  The Company recognized a goodwill  impairment
charge of $17.7  million with no  associated  tax  benefit,  related to the 1997
acquisition  of  Valentec.  Operating  results of Valentec  deteriorated  during
fiscal  2000  arising  from  the loss of  business  with a major  customer.  The
subsidiary  was  unable to offset  this loss with  increased  sales  with  other
customers.  Accordingly,  management  concluded  that  intangible  assets in the
amount of


                                       22
<PAGE>


$17.7  million was no longer  recoverable  through  future  operations  and such
amount was  written-off  in the Company's  financial  statements for the quarter
ended December 25, 1999.

     Restatement and  Restructuring  Costs. The Company  incurred  approximately
$4.0 million of legal,  professional and  re-financing  related costs associated
with the  investigation  and restatement of its financial  statements for fiscal
years  1998 and 1999,  and its  restructuring  efforts  leading up to its filing
under Chapter 11 on April 10, 2000.

     Operating  Income/Loss.  Operating loss increased by $11.0 million to $13.0
million or 550.0%  compared to the prior fiscal year. The decrease was primarily
attributable to the items discussed above.

     Other  Expense.  Other  expense in fiscal  2000  consisted  primarily  of a
write-off of obsolete fixed assets of approximately $0.7 million and crystalized
and uncrystalized exchange losses of $0.8 million. Other expenses in fiscal 1999
consisted  primarily of a write-off of investments of approximately $0.5 million
during the third  quarter of fiscal 1999, a write-down  of fixed assets held for
sale of approximately  $0.7 million during the third quarter of fiscal 1999, and
a write-down of fixed assets held for sale or approximately  $0.8 million during
the fourth quarter of fiscal 1999. The investment,  made in early fiscal 1997 in
an unaffiliated company,  related to a specific type of airbag fabric, which the
Company no longer believes will yield any future benefits.  The write-down of an
asset held for sale,  purchased  in fiscal 1998,  related to a specific  line of
business  at  Valentec  for  which  sales  did not  materialize  resulting  in a
determination by the Company to sell the related assets.  The write-down  during
the fourth quarter related to the disposal of China assets of approximately $0.2
million  and   revaluation  of  fixed  assets  held  for  sale  at  Valentec  of
approximately $0.6 million.

     Interest  Expense.  Interest  expense  increased  $1.3  million to $14.1 as
compared to the prior year.  The increase is primarily  due to higher  revolving
credit balances during the year and the mortgage for the new German facility.

     Income Taxes. Income taxes for fiscal 2000 reflect adjustments for deferred
tax  valuation  allowances  established  against  deferred  tax  assets  and the
non-deductibility of the Valentec goodwill impairment charge discussed above.

     Net Loss.  Net loss of $35.1 million in fiscal 2000 compared to the loss of
$13.7 million for fiscal 1999.  This decrease  resulted from the items discussed
above.

Year Ended March 27, 1999,  as restated,  Compared to Year Ended March 28, 1998,
as restated

     Net Sales.  Net sales increased by $53.9 million or 32.5% to $220.0 million
in fiscal 1999 compared to fiscal 1998. The increase was primarily  attributable
to the  inclusion  of the  operations  of  SCFTI  for the  entire  fiscal  1999,
increased sales volume in Europe, and increased sales in the defense operations,
offset by lower  sales at  Valentec.  SCFTI was  acquired  on July 24,  1997 and
included in the Company's  entire  fiscal year 1999,  whereas SCFTI was included
for approximately  eight months during fiscal 1998. This resulted in an increase
in sales of approximately $22.3 in fiscal 1999 compared to fiscal 1998. Valentec
was acquired  effective as of May 22, 1997 and included in the Company's  entire
fiscal 1999,  whereas Valentec was included for  approximately ten months during
fiscal  1998.  Sales at Valentec  decreased  approximately  $3.8 million for the
entire fiscal 1999 as compared to the ten months of fiscal 1998. The decrease in
sales at Valentec was primarily the result of contract  disputes and  subsequent
loss of such  contracts,  offset by the inclusion of Valentec for the additional
two months.  European automotive operations sales increased  approximately $27.0
million in fiscal 1999 due to increased  volumes.  The European  operations grew
59% during  fiscal 1999 as compared  to fiscal  1998 due to  significant  airbag
cushion awards from existing  customers.  Defense sales increased  approximately
$12.9  million in fiscal 1999  compared  to fiscal  1998,  primarily  due to the
resumption  in  delivery  under the  Company's  120  millimeter  mortar  systems
contract with the U.S.  Army. The increase in airbag sales was offset in part by
the effects of the General Motors strike during fiscal 1999 and price  decreases
to  the  Company's  customers.  Sales  of  airbag  fabric,  cushions  and  metal
components  to suppliers of General  Motors were  significantly  reduced  during
fiscal 1999.  The total impact on sales of the GM strike  during fiscal 1999 was
approximately $4.5 million.

     Gross  Profit.  Gross  profit  decreased  by $4.1  million  or 15% to $23.2
million in fiscal 1999  compared to fiscal 1998.  Approximately  $2.0 million of
the decrease was attributable to the European operations, and approximately $3.0
million to the decrease in sales at Valentec.  The decrease was partially offset
by the  inclusion of the  operations  of


                                       23
<PAGE>


SCFTI for the entire fiscal 1999. The European operating margins suffered during
fiscal 1999 due to the initial ramp up phase of new programs,  compounded by one
of the Company's European customers  experiencing  internal production problems.
The production problem our customer experienced caused it to temporarily curtail
orders,  while the Company  maintained its facilities to enable it to produce at
historical  production rates.  Valentec's gross profit decreased  primarily as a
result of lost margin on lost sales during  fiscal 1999 due to certain  contract
disputes  and  the  loss  of such  contracts.  The  Company  has  implemented  a
substantial  cost  reduction  program to return  Valentec to higher gross profit
margins. SCFTI contributed additional gross profit of approximately $2.4 million
in fiscal  1999 as  compared  to fiscal  1998.  Additionally,  the impact of the
General  Motors  strike on gross  profit of the Company was  approximately  $1.3
million during fiscal 1999. The strike resulted in the loss of gross margin from
lost sales during the period, and the costs of additional personnel who had been
hired for the ramp up of certain programs that were delayed. These newly trained
employees  were not laid off because the Company  anticipated a timely ending to
the strike.

     Gross profit as a percentage of sales decreased to approximately  10.6% for
fiscal 1999 from 16.4% for fiscal 1998.  The  decrease as a percentage  of sales
was due to the items discussed above.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased by $5.2 million or 48.5% to $16.0 million in
fiscal  1999   compared  to  fiscal  1998.   Increased   selling,   general  and
administrative  expenses  resulted  primarily  from the  inclusion  of SCFTI and
Valentec for the entire period  during  fiscal 1999.  The Company also wrote off
$1.5  million  of  receivables   associated  with  a  contract  dispute  with  a
significant customer of Valentec.  Selling,  general and administrative expenses
as a percentage  of sales  increased to 7.3% in fiscal 1999 from 6.5% for fiscal
1998 due to the above-referenced items.

     Research  and  Development  Expenses.  Research  and  development  expenses
increased by $0.7  million or 205.3% to $1.1 million in fiscal 1999  compared to
fiscal 1998.  Research and  development  costs at Valentec during fiscal 1999 of
approximately  $0.6 million were incurred in connection  with the development of
proprietary products for the automotive industry.  Valentec has developed a high
performance exhaust system,  under its Zummo Performance  Products business line
anticipated  to be sold  through  retail and  wholesale  channels.  The  Company
believes the margins for these products will be in excess of existing historical
margins at  Valentec,  although  sales for fiscal  2000 are not  expected  to be
material. The remaining research and development costs were incurred at SCFTI in
its technical fabrics division.

     Terminated  Investment Agreement Costs. The Company expensed  approximately
$2.5  million of fees and  expenses  during the  fourth  quarter of fiscal  1999
related to the Brera Investment Agreement and its termination.

     Reorganization and Relocation Costs.  Within the European  operations,  the
Company incurred approximately $2.4 million of costs associated with the move of
labor intensive passenger airbag lines from the Company's German facility to its
lower labor cost Czech Republic  facility.  These costs  included,  but were not
limited to, contract laborers,  duplicate  personnel,  increased scrap costs and
freight costs. The Company also expensed  approximately  $0.3 million associated
with the  closure  of the China  facility,  as part of an effort to  consolidate
manufacturing operations within Europe and maximize the capacity of the European
operations.  During the fiscal  1998 the  Company  incurred  approximately  $1.8
million  of costs  associated  with the  reorganization  and  relocation  of its
foreign operations.  The Company also expensed approximately $0.5 million during
the fourth quarter of fiscal 1999 related to the  anticipated  relocation of its
corporate office into its South Carolina facility.

     Operating  Income/Loss.  Operating  income  decreased  by $14.6  million or
115.8% to a loss of $2.0  million in fiscal 1999  compared to fiscal  1998.  The
decrease was primarily attributable to the items discussed above.

     Other  Expense.  Other  expenses in fiscal 1999  consisted  primarily  of a
write-off of investments of approximately  $0.5 million during the third quarter
of fiscal 1999, a write-down of fixed assets held for sale of approximately $0.7
million  during the third  quarter of fiscal  1999,  and a  write-down  of fixed
assets held for sale of approximately  $0.8 million during the fourth quarter of
fiscal  1999.  The  investment,  made in early  fiscal  1997 in an  unaffiliated
company,  related  to a specific  type of airbag  fabric,  which the  Company no
longer believed will yield any future benefits.  The write-down of an asset held
for sale,  purchased in fiscal 1998,  related to a specific  line of business at
Valentec for which sales did not materialize resulting in a determination by the
Company to sell the related  assets.  The  write-down  during the fourth quarter
related to the  disposal  of China  assets of  approximately  $0.2  million  and
revaluation  of fixed  assets held for sale at Valentec  of  approximately  $0.6
million.


                                       24
<PAGE>


     Interest Expense.  Interest expense increased $5.0 million to $12.8 million
in fiscal 1999 compared to fiscal 1998. This increase was primarily attributable
to the issuance of the Company's 10 1/8% Senior Subordinated Notes, the proceeds
of which were used primarily for the  acquisition of SCFTI,  outstanding  for an
additional  four  months  during  fiscal  1999.  Debt also  increased  under the
Company's  revolving credit facility to fund operations and the Master Equipment
Lease  Agreement,  dated as of July 10,  1998,  between  KeyCorp,  a division of
KeyCorporate Capital Inc. and the Company.

     Income Taxes.  The effective  income tax rate on pre-tax loss was 19.6% for
fiscal 1999 compared to an effective  income tax rate of 36.5% on pre-tax income
for fiscal  1998.  The tax benefit  rate was lower  during  fiscal 1999 due to a
valuation  reserve  established  against  deferred  tax  assets of $1.7  million
related  to  Valentec  net  operating  losses  incurred  prior to the  Company's
acquisition of Valentec.  Additionally, the Company had income at higher foreign
tax rates,  while losses were at lower domestic rates.  Lastly, the tax rate was
impacted by the non-deductible goodwill amortization at Valentec.

     Net (Loss) Income Net income decreased to a loss of $13.7 million in fiscal
1999 compared to income of $3.3 million for fiscal 1998. This decrease  resulted
from the items discussed above.

Liquidity and Capital Resources

     The Company's  equipment and working capital  requirements will continue to
increase as a result of the  anticipated  growth of the  Automotive  and Fabrics
operations.  This growth is expected to be funded  through a combination of cash
flows from operations, equipment financing, and through the use of amended lines
of credit with the  Company's  Senior  Lenders,  as discussed  in the  following
paragraphs.

     On April  26,  2000,  in  conjunction  with the  filing of the  Chapter  11
Bankruptcy Petition,  the Safety Filing Group received Bankruptcy Court approval
of a $30.6 million senior DIP financing  facility that it had executed with Bank
of America,  N.A.  The senior DIP  financing  is  expected  to provide  adequate
funding  for all post  petition  trade and  employee  obligations,  the  partial
paydown of the  pre-petition  secured  debt,  as well as the  Company's  ongoing
operating needs during the restructuring process. Upon closing of the senior DIP
financing  facility  on May 9, 2000,  the Senior  Lenders  received a  principal
paydown of  approximately  $17 million and retained the remaining  approximately
$20.9 million portion of their  indebtedness  as an 11% per annum  post-petition
subordinated  DIP  facility  as  a  replacement  of  their  pre-petition  credit
facility.

     The Company is in the process of negotiating  with potential exit financing
lenders to review its options of funding of Post Bankruptcy  needs,  although no
commitment has been received so far.

     The  Company  and an  informal  committee  comprised  of  holders  of  over
two-thirds  in aggregate  dollar amount of the Notes began  negotiations  and in
early April 2000 reached an agreement (the "Restructuring Agreement") that would
be effected  through a voluntary  filing under  Chapter 11 of the United  States
Bankruptcy  Code.  Pursuant to the  Restructuring  Agreement,  the claims of the
holders of the  Company's  senior  subordinated  notes  ("Noteholders")  will be
converted in the right to receive 96.8% of the Company's equity after it emerges
from Chapter 11. The current shareholders, excluding Robert Zummo, the Company's
Chairman and Chief  Executive  Officer,  will receive 3.2% of the Company's post
bankruptcy equity and warrants to acquire 12% of such equity.

Credit Agreement

     The  Company,  ASCI GmbH and  Automotive  Safety  Components  International
Limited,  a wholly-owned  subsidiary of the Company  organized under the laws of
the United Kingdom, entered into an agreement with KeyBank National Association,
as administrative agent ("KeyBank"), dated as of May 21, 1997 as amended to date
(the  "Credit  Agreement").  The Credit  Agreement  consists of a $40.0  million
revolving credit facility for a five year term ($37.9 million  outstanding as of
March 25,  2000),  bearing  interest at LIBOR  (6.13% as of March 25, 2000) plus
3.0% with a commitment fee of 1.0% per annum for any unused portion. The initial
proceeds from KeyBank were used to repay the Bank of America NT&SA term loan and
revolving  credit facility.  KeyBank was  subsequently  repaid with the proceeds
from the Offering. The Company incurred approximately $470,000 of financing fees
and related  costs.  These  costs have been  deferred  and are being  charged to
operations over the expected term of the Credit Agreement not to exceed 5 years.
The  Credit  Agreement  contains  certain  restrictive   covenants  that  impose
limitations  upon,  among  other  things,  the  Company's  ability to change its
business;  merge;  consolidate or dispose of assets; incur liens; make loans and
investments; incur indebtedness;  pay dividends and other distributions;  engage
in  certain  transactions  with  affiliates;   engage  in  sale  and  lease-back
transactions; enter into lease agreements; and make capital expenditures.

     On October 9, 1998, the Company  entered into Amendment No. 4 to the Credit
Agreement,  which increased the revolving  credit facility from $27.0 million to
$40.0 million,  and added Fleet Bank as a member of the bank syndicate.  KeyBank
and Fleet Bank each provide fifty percent of the financing  available  under the
Credit Agreement and KeyBank remains as acting agent.

     On June 24, 1999,  the Company  entered into  Amendment No. 6 to the Credit
Agreement,  which  among  other  covenants  requires  the  Company to earn $30.0
million of EBITDA (as such term is  defined in the Credit  Agreement)  in fiscal
year 2000. Such covenant is tested monthly based upon cumulative targets for the
year.  Covenants for Fixed Charge  Coverage,  Interest  Coverage and Minimum Net
Income are also based on the $30.0  million  EBITDA  target.  In


                                       25
<PAGE>


addition,  the interest rate was increased to LIBOR plus 3.0% and the commitment
fee was increased to 1.0%. The Company issued to the Lenders  ten-year  warrants
to acquire  20,000 shares of the Company's  common stock at current market value
per share. Additionally,  the Company will be subject, as of June 24, 2000, to a
Senior  Funded  Debt  to  EBITDA  ratio  covenant  of 1.5 to 1.0  and a  Minimum
Consolidated  Net Worth  covenant.  In addition,  under  Amendment  No. 6 to the
Credit  Agreement the Lenders  waived  certain  financial  covenants for periods
through  the  date  of  such  amendment.  As of  March  25,  2000  there  was no
availability  under the  Credit  Agreement  and the  Company  was in  default of
certain financial  covenants.  Consequently,  obligations  outstanding under the
Credit  Agreement are classified as current  liabilities as of March 25, 2000 in
the consolidated  balance sheet. The indebtedness  under the Credit Agreement is
secured by substantially all the assets of the Company.

Senior Subordinated Notes

     On July 24, 1997,  the Company  issued $90.0  million  aggregate  principal
amount of its 10 1/8%  Senior  Subordinated  Notes due 2007,  Series A (the "Old
Notes")  to BT  Securities  Corporation,  Alex.  Brown & Sons  Incorporated  and
BancAmerica  Securities,   Inc.  in  a  transaction  not  registered  under  the
Securities  Act of 1933, as amended,  in reliance  upon an exemption  thereunder
(the "Debt  Offering").  On September 2, 1997, the Company commenced an offer to
exchange (the "Exchange Offer", together with the Debt Offering, the "Offering")
the Old Notes for $90.0 million aggregate principal amount of its 10 1/8% Senior
Subordinated  Notes due 2007, Series B (the "Exchange Notes",  together with the
Old Notes,  the "Notes").  All of the Old Notes were  exchanged for the Exchange
Notes pursuant to the terms of the Exchange  Offer,  which expired on October 1,
1997.  Interest  on the  Notes  accrues  from  July  24,  1997  and  is  payable
semi-annually  in arrears  on each of  January 15 and July 15 of each year.  The
Company  has  accrued  as of March 25,  2000,  as part of  accrued  liabilities,
approximately $6.5 million of interest.  The Company incurred approximately $3.9
million  of fees and  expenses  related  to the  Offering.  Such  fees have been
deferred  and are being  charged to  operations  over the  expected  term of the
Notes,  not to exceed 10 years. The Notes are general  unsecured  obligations of
the Company and are  subordinated in right of payment to all existing and future
Senior  Indebtedness  (as defined in the  Indenture  pursuant to which the Notes
were  issued)  and to all  existing  and future  indebtedness  of the  Company's
subsidiaries  that are not Guarantors.  All of the Company's direct and indirect
wholly-owned domestic subsidiaries are Guarantors (Note 14).

     On January 18, 2000, the Company did not make a scheduled  interest payment
on its 10.1/8% Senior  Subordinated  Notes (the "Notes").  The senior lenders of
the Company had  previously  notified the trustee for the  Company's  Notes that
they were exercising their rights to block such interest payment.

Other

     On July 10,  1998,  the  Company  entered  into a $10.0  million  financing
arrangement  with  KeyCorp  Leasing,  a division of Key  Corporate  Capital Inc.
("KeyCorp").  The  Company  applied the entire  proceeds to satisfy  outstanding
indebtedness under the KeyBank revolving credit facility, thereby increasing the
availability  under  the  revolving  credit  facility.   The  KeyCorp  financing
agreement has a seven-year  term, bears interest at a fixed rate of 7.09% via an
interest swap agreement,  and requires monthly payments of $150,469,  secured by
certain  equipment  located at SCFTI. The rate swap is considered  immaterial to
the Company's financial position at March 25, 2000.

     On April 1, 1999, the Company secured a $2.9 million mortgage note facility
with Deutsche Bank to purchase a facility in Bavendstedt,  Germany.  The note is
secured by the real  estate in Germany  acquired  through  the  mortgage  and is
further secured by a guarantee  issued by the Company.  In July 1999 the Company
refinanced the note and reduced the  outstanding  indebtedness  to $2.1 million.
The new German  facility  has allowed the Company to conduct its  operations  in
Germany in a more efficient and cost effective manner.

     During fiscal year 2000, net cash provided by operations was $11.2 million.
Such cash  provided was primarily by the  reduction of accounts  receivable  and
inventories from the prior year.  Additionally,  the Company  incurred  non-cash
charges of approximately $17.7 million, which related to the goodwill impairment
charge during the third quarter of fiscal year 2000 at Valentec and $8.8 million
of depreciation.  Cash used by investing  activities was $9.8 million,  of which
$7.7 million was used for the acquisition of additional  equipment to expand the
Company's  production  capacity  worldwide.  The  Company  also  paid the  final
consideration  in connection with the acquisition of ASCI GmbH,  which consisted
of a $2.0 million earn-out accrued at the end of fiscal year 1999. Net cash used
in financing activities in fiscal year 2000 was


                                       26
<PAGE>


$1.5 million,  which was primarily from the Company's repayments on various debt
instruments.  These  repayments  were  offset by  borrowings  of $700,000 on the
Credit Agreement and a $2.9 million  mortgage on the German facility.  The above
activities, in conjunction with the effect of foreign exchange rates resulted in
a net decrease in cash of $343,000 in fiscal year 2000.

New Accounting Pronouncements

     The  Financial  Accounting  Standards  Board issued  Statement of Financial
Accounting  Standards ("SFAS") 133,  "Accounting for Derivative  Instruments and
Hedging Activities,"  effective,  as amended, for years beginning after June 15,
2000.  This new standard  requires  recognition  of all  derivatives,  including
certain derivative instruments embedded in other contracts,  as either assets or
liabilities  in the  statement of financial  position and  measurement  of those
instruments  at fair  value.  The  Company is in the  process of  reviewing  the
effect, if any, that SFAS 133 will have on the Company's  consolidated financial
statements and disclosures.

Seasonality and Inflation

     The   Automotive   Operation's   business   is  subject  to  the   seasonal
characteristics  of the  automotive  industry in which there are seasonal  plant
shutdowns in the third and fourth calendar  quarters of each year.  Although the
Systems Contract is not seasonal in nature, there will be variations in revenues
from the Systems Contract based upon costs incurred by the Company in fulfilling
the Systems  Contract in each quarter.  The majority of the Defense  Operation's
ordnance  manufacturing for U.S. Government and prime defense contractors occurs
from  January  through  September  and  there  is  generally  a lower  level  of
manufacturing and sales during the fourth calendar quarter. The Company does not
believe that its operations to date have been materially affected by inflation.

Year 2000 Compliance

     The year 2000 issue is the result of computer  programs  written  using two
digits  rather than four to define the  applicable  year.  Any of the  Company's
computer programs that have  date-sensitive  software may recognize a date using
"00" as the year 1900 rather than the year 2000.  This could  result in a system
failure or miscalculations causing disruptions of operations,  including,  among
other things, a temporary  inability to process  transactions,  send invoices or
engage in similar normal business activities.

     The Company  relies on systems  developed by other parties in regard to its
business,  accounting and operational  software.  Based on its  evaluation,  the
Company  believes  that its  significant  business,  accounting  and  operations
hardware and software are year 2000 compliant. To date, no problems have arisen,
and the Company  expects none.  There can be no assurance  that future  problems
will not arise.


                                       27
<PAGE>


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     To the  extent  that  amounts  borrowed  under  the  Credit  Agreement  are
outstanding,  the Company has market risk  relating to such amounts  because the
interest rates under the Credit Agreement are variable.

     The Company's  operations in Germany,  the UK and the Czech Republic expose
the Company to currency  exchange rates risks.  Currently,  the Company does not
enter into any hedging arrangements to reduce this exposure.  The Company is not
aware  of any  facts or  circumstances  that  would  significantly  impact  such
exposures in the near-term.  If, however, there was a sustained decline of these
currencies versus the U.S. dollar,  then the consolidated  financial  statements
could be materially effected.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The response to this item appears in Item 14(a)(1) and (2) of this Report.

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

     Not Applicable.


                                       28
<PAGE>


                                    PART III

ITEMS     10, 11, 12 AND 13.

     The  information  called  for by Items 10,  11, 12 and 13 of this Form 10-K
will be filed by amendment within the allotted time period.

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

(a)(1)    The  financial  statements,  related  notes  thereto  and  reports  of
          independent  accountants  required  by Item 8 are  listed  on page F-1
          herein.

(2)       Unless  otherwise  attached,  all  financial  statement  schedules are
          omitted because they are not applicable or the required information is
          shown in the Company's  consolidated financial statements or the notes
          thereto.

(3)       Exhibits:


          2.3       Joint Plan of Reorganization  of Safety  Components  Debtors
                    Under Chapter 11 Bankruptcy Code dated June 12, 2000.

          3.1(1)    Certificate    of    Incorporation    of   Safety    Systems
                    International, Inc.

          3.2(1)    Amended and Restated  Certificate of Incorporation of Safety
                    Systems International, Inc.

          3.3(1)    Certificate   of  Amendment  of  the  Amended  and  Restated
                    Certificate    of    Incorporation    of   Safety    Systems
                    International, Inc.

          3.4(11)   Certificate   of  Amendment  to  the  Amended  and  Restated
                    Certificate of Safety  Components  International,  Inc. (the
                    "Company" or "Safety Components")

          3.5(1)    By-laws of Safety Components

          4.1(2)    Warrant  Agreement,   dated  as  of  May  13,  1994  between
                    Hampshire Securities Corporation and Safety Components

          4.2(15)   Registration Rights Agreement,  dated as of May 22, 1997, by
                    and among  Safety  Components,  Robert A. Zummo,  Francis X.
                    Suozzi and the Valentec  International  Corporation Employee
                    Stock Ownership Plan

          4.4(18)   Form of  Indenture,  dated as of July 24, 1997, by and among
                    Safety Components,  the Subsidiary  Guarantors named therein
                    and IBJ Schroder Bank & Trust Company.

          4.5(18)   Registration Rights Agreement,  dated as of July 24, 1997 by
                    and among Safety  Components,  the guarantors named therein,
                    BT Securities  Corporation,  Alex Brown & Sons  Incorporated
                    and BancAmerica Securities, Inc.

          4.6(18)   Form of 10 1/8% Senior Subordinated Note Due 2007, Series A,
                    including Form of Guarantee

          4.7(18)   Form of 10 1/8 % Senior  Subordinated  Note Due 2007, Series
                    B, including Form of Guarantee

          4.11(26)  Restructuring  Agreement  dated April 6, 2000 between Safety
                    Components,  Robert  A.  Zummo  and the  consenting  holders
                    signatory thereto.

          4.12(27)  First Amendment to  Restructuring  Agreement dated as of May
                    10,  2000  between  Safety  Components  and  the  consenting
                    holders signatory thereto.

          10.2(3)   Airbag Purchase  Agreement by and between TRW Vehicle Safety
                    Systems,   Inc.  and  Valentec   International   Corporation
                    ("Valentec")  dated March 31, 1993  (confidential  treatment
                    granted as to part)

          10.3(3)   Long-Term  Contract for the Supply of Airbags by and between
                    TRW REPA GmbH and Valentec  International  Limited  ("VIL"),
                    dated September 20, 1993 (confidential  treatment granted as
                    to part)

          10.4(2)   Representation  Agreement,  effective as of May 13, 1994, by
                    and between Automotive Safety Components International, Inc.
                    ("Automotive  Safety")  and  Champion  Sales and Service Co.
                    ("Champion")


                                       29
<PAGE>


          *10.5(4)  Employment Agreement,  effective as of May 13, 1994, between
                    Safety Components and Robert A. Zummo

          *10.7(4)  Stock Option Plan of Safety Components

          10.10(9)  Corporate  Services  Agreement,  dated as of April 1,  1995,
                    between  Valentec   International   Corporation  and  Safety
                    Components

          10.11(2)  Facility  Agreement,  dated May 13, 1994,  between  Valentec
                    International Corporation and Automotive Safety

          10.12(2)  Facility  Agreement,  dated May 13,  1994,  between  VIL and
                    Automotive   Safety   Components   International,    Limited
                    ("Automotive Limited")

          10.13(2)  Representation  Agreement,  effective as of May 13, 1994, by
                    and between Automotive Limited and Champion

          10.14(5)  Form of Sublease Agreement,  dated May 13, 1994, between VIL
                    and Automotive Limited

          10.16(7)  Contract  DAAA09-94-C-0532 between Safety Components and the
                    U.S. Army (the "Systems Contract")

          10.18(8)  Lease Agreement, dated February 15, 1995 between Inmobiliara
                    Calibert,  S.A. de C.V.  and  Automotive  Safety  Components
                    International SA. de C.V.

          10.19(16) Credit  Agreement,  dated as of March 15, 1996, among Safety
                    Components,  Automotive  Safety,  Galion,  Valentec Systems,
                    Inc. and CUSA

          10.20(16) Pledge and Security  Agreement,  dated as of March 15, 1996,
                    made by Safety Components,  Automotive Safety,  Galion, Inc.
                    and Valentec Systems, Inc. in favor of CUSA

          10.22(10) Underwriting  Agreement,  dated  June  15,  1995,  among  BT
                    Securities   Corporation,   Prime   Charter   Ltd.,   Safety
                    Components, Valentec International Corporation and the other
                    selling stockholders named therein

          10.23(14) TRW/SCI Multi Year Agreement dated as of April 1, 1996 among
                    TRW Vehicle  Safety  Systems,  Inc.,  TRW,  Inc.  and Safety
                    Components.  Confidential  treatment requested as to certain
                    portions of this exhibit. Such portions have been redacted

          10.31(17) Asset Purchase Agreement, dated as of June 30, 1997, between
                    Safety Components and JPS Automotive L.P.

          10.39(19) Consulting  Agreement,  dated  as of May 14,  1998,  between
                    Safety Components and Thomas W. Cresante

         *10.41(19) Safety Components Senior Management Incentive Plan

         *10.42(19) Safety Components Management Incentive Plan

         *10.43(19) Safety Components Stock Appreciation Rights Award Plan

          10.44(20) Safety Components 1994 Stock Option Plan, as amended

         *10.49(21) Form of  Employment  Agreement,  dated  as of  June 1,  1998
                    between Safety Components and Stephen Duerk.

          10.50(21) Form of Master Equipment Lease  Agreement,  dated as of July
                    10,  1998,  between  KeyCorp  Leasing,  a  division  of  Key
                    Corporate Capital Inc. and Safety Components.

          10.56(22) Investment  Agreement,  dated as of March 31, 1999,  between
                    Brera SCI, LLC and Safety Components.

          10.57(22) Termination  Agreement,  dated  as of May 4,  1999,  between
                    Brera  SCI,  LLC,  Brera  Capital  Partners,  LLC and Safety
                    Components

          10.59(23) Warrant  Agreement,  dated as of June 23, 1999, by and among
                    Safety  Components  International,  Inc.,  KeyBank  National
                    Association and Fleet Bank.

          10.60(24) Credit  Agreement,  dated as of April 1, 1999,  by and among
                    Automotive Safety Components International GmbH & Co. KG and
                    Deutsche Bank.

         *10.61(24) Severance  Agreement  dated as of August 31,  1999,  between
                    Safety Components International, Inc. and Jeffrey J. Kaplan.

          10.62(24) Consulting  Agreement  dated as of August 12, 1999,  between
                    Safety Components International, Inc. and Francis X. Suozzi.

          10.63(24) Stock Option Agreement,  dated as of July 23, 1999,  between
                    Safety Components International, Inc. and Francis X. Suozzi.

          10.64(24) Letter Agreement,  dated as of July 12, 1999, between Safety
                    Components International, Inc. and Francis X. Suozzi.

          10.65(25) Pledge  Agreement,  dated  January  31,  2000 by and between
                    Safety Components International, Inc. and Robert A. Zummo.


                                       30
<PAGE>


          10.66     Subordinated  Secured   Superpriority   Debtor-In-Possession
                    Credit  Agreement  dated as of April  7,  2000 by and  among
                    Safety  Components,  Automotive  Limited,  Automotive Safety
                    Components  International  GmbH & Co. K.G.,  the  guarantors
                    named   therein  and  Keybank   National   Association,   as
                    administrative  agent,  and the  lending  institutions  name
                    therein.

          10.67     Senior Secured Superpriority  Debtor-In-Possession  Loan and
                    Security  Agreement  dated as of April 7,  2000 by and among
                    Safety   Components,   the  subsidiaries  named  therein  as
                    borrowers, the guarantors named therein and Bank of America,
                    N.A., as agent.

          21.1      Subsidiaries of Safety Components

          23.0      Consent of Arthur Andersen LLP dated July 10, 2000

          27        Financial Data Schedule


(b)       Reports on Form 8-K.

          April 10, 2000 - Current Report on Form 8-K

          May 10, 2000 - Current Report on Form 8-K


*         Indicates exhibits relating to executive compensation.

          (1)       Incorporated  by  reference  to the  Company's  Registration
                    Statement  on Form S-1 (the "1994  Registration  Statement")
                    filed  with the  Securities  and  Exchange  Commission  (the
                    "Commission") on February 11, 1994.

          (2)       Incorporated by reference to the Company's  Annual Report on
                    Form 10-K for the fiscal  year ended March 31,  1994,  filed
                    with the Commission.

          (3)       Incorporated  by reference  to  Amendment  No. 2 to the 1994
                    Registration  Statement,  filed with the Commission on March
                    18, 1994.

          (4)       Incorporated  by reference  to  Amendment  No. 3 to the 1994
                    Registration  Statement,  filed with the Commission on April
                    20, 1994.

          (5)       Incorporated  by reference  to  Amendment  No. 4 to the 1994
                    Registration Statement,  filed with the Commission on May 3,
                    1994.

          (7)       Incorporated by reference to the Company's  Quarterly Report
                    on Form 10-Q for the quarter ended December 31, 1994,  filed
                    with the Commission.

          (8)       Incorporated by reference to the Company's  Annual Report on
                    Form 10-K for the fiscal year ended March 31, 1995.

          (9)       Incorporated   by  reference  to  Amendment  No.  1  to  the
                    Company's Registration Statement on Form S-1, filed with the
                    Commission on May 19, 1995.

          (10)      Incorporated by reference to the Company's  Quarterly Report
                    on Form 10-Q for the quarter ended June 30, 1995.

          (11)      Incorporated by reference to the Company's  Quarterly Report
                    on Form 10-Q for the quarter ended September 30, 1995.

          (14)      Incorporated by reference to the Company's  Quarterly Report
                    on Form 10-Q for the quarter ended December 31, 1996.

          (15)      Incorporated by reference to the Company's Current Report on
                    Form 8-K, filed with the Commission on June 6, 1997.

          (16)      Incorporated by reference to the Company's  Annual Report on
                    Form 10-K, for the fiscal year ended March 31, 1997.

          (17)      Incorporated by reference to the Company's Current Report on
                    Form 8-K, filed with the Commission on August 4, 1997.

          (18)      Incorporated  by  reference  to the  Company's  Registration
                    Statement on Form S-4,  filed with the  Commission on August
                    12, 1997.

          (19)      Incorporated by reference to the Company's  Annual Report on
                    Form 10-K for the fiscal year ended March 28, 1998.

          (20)      Incorporated by reference to the Company's  Quarterly Report
                    on Form 10-Q for the quarter ended June 27, 1998.


                                       31
<PAGE>


          (21)      Incorporated by reference to the Company's  Quarterly Report
                    on Form 10-Q for the quarter ended September 26, 1998.

          (22)      Incorporated by reference to the Company's  Annual Report on
                    Form 10-K for the fiscal year ended March 27, 1999.

          (23)      Incorporated by reference to the Company's  Quarterly Report
                    on Form 10-Q for the quarter ended June 26, 1999.

          (24)      Incorporated by reference to the Company's  Quarterly Report
                    on Form 10-Q for the quarter ended September 25, 1999.

          (25)      Incorporated by reference to the Company's  Quarterly Report
                    on Form 10-Q for the quarter ended December 25, 1999.

          (26)      Incorporated by reference to the Company's Current Report on
                    Form 8-K, filed with the Commission on April 13, 2000.

          (27)      Incoporated by reference to the Company's  Current Report on
                    Form 8-K, filed with the Commission on May 19, 2000.


                                       32
<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.



                                           SAFETY COMPONENTS INTERNATIONAL, INC.


                                           By:      /s/ Robert A. Zummo
                                                    --------------------------
                                                    Robert A. Zummo
                                                    Chairman of the Board and
                                                    Chief Executive Officer

                                           Date:    July 10, 2000

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


<TABLE>
<CAPTION>
Name and Signature                   Title                                       Date
------------------                   -----                                       ----

<S>                                  <C>                                         <C>
/s/ Robert A. Zummo                  Chairman of the Board and                   July 10, 2000
---------------------------
Robert A. Zummo                      Chief Executive Officer
                                     (Principal Executive Officer)

/s/ John C. Corey                    President, Chief Operating Officer          July 10, 2000
---------------------------
John C. Corey                        and Director

/s/ Brian P. Menezes                 Vice President, Chief Financial             July 10, 2000
---------------------------
Brian P. Menezes                     Officer (Principal Financial Officer)

/s/ Marston D. Anderson              Corporate Controller                        July 10, 2000
---------------------------
Marston D. Anderson                  (Principal Accounting Officer)

/s/ Joseph J. DioGuardi              Director                                    July 10, 2000
---------------------------
Joseph J. DioGuardi

/s/ Robert J. Torok                  Director                                    July 10, 2000
---------------------------
Robert J. Torok
</TABLE>


                                       33
<PAGE>


SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE


<TABLE>
<CAPTION>
                                                                           Page Number
<S>                                                                             <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                        F-2

CONSOLIDATED FINANCIAL STATEMENTS  (1999 and 1998 as restated, (Note 1))

Consolidated Balance Sheets as of March 25, 2000 and March 27, 1999             F-3

Consolidated Statements of Operations for the Years ended March 25, 2000,
   March 27, 1999 and March 28, 1998                                            F-4

Consolidated Statements of Stockholders' (Deficit) Equity for the Years ended
   March 28, 1998, March 27, 1999 and March 25, 2000                            F-5

Consolidated Statements of Cash Flows for the Years ended March 25, 2000,
   March 27, 1999 and March 28, 1998                                            F-6

Notes to Consolidated Financial Statements                                      F-7


SUPPLEMENTAL SCHEDULE:

II  Valuation and Qualifying Accounts                                           F-39
</TABLE>


                                      F-1
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders of
Safety Components International, Inc.:


We  have  audited  the  accompanying   consolidated  balance  sheets  of  Safety
Components  International,  Inc. (a Delaware corporation) and subsidiaries as of
March 25, 2000 and March 27, 1999 (1999 as restated,  (Note 1)), and the related
consolidated  statements of operations,  stockholders' (deficit) equity and cash
flows for each of the three  fiscal  years in the period  ended  March 25,  2000
(1999 and 1998 as  restated,  (Note  1)).  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all   material   respects,   the   financial   position  of  Safety   Components
International,  Inc.  and  subsidiaries  as of March 25, 2000 and March 27, 1999
(1999 as restated, (Note 1)), and the results of their operations and their cash
flows for each of the three  fiscal  years in the period  ended  March 25,  2000
(1999 and 1998 as restated,  (Note 1)) in conformity with accounting  principles
generally accepted in the United States.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, on April 10, 2000, the Company and certain of
its U.S.  subsidiaries each filed a voluntary  petition for relief under Chapter
11 of the United States Bankruptcy Code. On June 12, 2000, the Company filed its
plan of  reorganization  and disclosure  statement,  which detailed  information
including  management's  turnaround business strategy. In addition,  the Company
has suffered  recurring  losses from  operations and at March 25, 2000 had a net
working capital deficit and shareholders' deficit.  Continuation of the business
is dependent upon the confirmation of a plan of reorganization, the confirmation
of a  disclosure  statement  (court  hearing  scheduled on July 19,  2000),  the
ability  to secure  on-going  debtor-in-possession  and exit  financing  and the
ability   to    achieve    successful    future    operations.    The    current
debtor-in-possession  status of the  Company,  along with the factors  indicated
above,  raise  substantial  doubt about the  Company's  ability to continue as a
going concern.  Management's plans in regard to these matters are also described
in Note 1. The consolidated  financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements  taken as a whole.  The schedule  listed in the index to consolidated
financial  statements is presented for purposes of complying with the Securities
and  Exchange  Commission's  rules  and  is not  part  of  the  basic  financial
statements.  This schedule has been subjected to the auditing procedures applied
in the audit of the basic  financial  statements  and,  in our  opinion,  fairly
states in all material  respects  the  financial  data  required to be set forth
therein in relation to the basic financial statements, taken as a whole.


/S/  ARTHUR ANDERSEN LLP

ARTHUR ANDERSEN LLP

New York, New York

June 30, 2000



                                      F-2
<PAGE>


                     SAFETY COMPONENTS INTERNATIONAL, INC.

                          CONSOLIDATED BALANCE SHEETS

                    As of March 25, 2000, and March 27, 1999

                           (1999 as restated (Note 1))

                (in thousands, except share and per share data)


<TABLE>
<CAPTION>
                                                                                               Restated
                                                                                        2000              1999
                                                                                     ---------          ---------
<S>                                                                                  <C>                   <C>
ASSETS

Current assets:
           Cash and cash equivalents ...........................................     $  10,264          $  10,607
           Accounts receivable, net (Notes 2 and 3) ............................        41,281             42,671
           Receivable from affiliate, net  (Note 4) ............................           564              4,554
           Inventories, net (Notes 2 and 3) ....................................        14,826             21,445
           Prepaid and other (Note 6) ..........................................         2,898              6,296
                                                                                     ---------          ---------
                        Total current assets ...................................        69,833             85,573

Property, plant and equipment, net (Notes 2 and 3) .............................        65,779             68,697
Intangible assets, net (Note 2) ................................................        35,391             57,606
Other assets (Notes 2 and 6) ...................................................         4,557              6,094
                                                                                     ---------          ---------
                        Total assets ...........................................     $ 175,560          $ 217,970
                                                                                     =========          =========


LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current liabilities:
           Accounts payable ....................................................     $  22,373          $  28,093
           Earnout payable (Note 1) ............................................            --              2,111
           Accrued liabilities .................................................        16,023             16,107
           Current portion of long-term obligations and
                 senior subordinated debt (Notes 1 and 5) ......................       131,587              3,988
                                                                                     ---------          ---------
                        Total current liabilities ..............................       169,983             50,299

Long-term obligations (Notes 1 and 5) ..........................................        15,736             53,700
Senior subordinated debt (Notes 1 and 5) .......................................            --             90,000
Other long-term liabilities (Note 6) ...........................................         4,281              1,515
                                                                                     ---------          ---------
                        Total liabilities ......................................       190,000            195,514
                                                                                     ---------          ---------

Commitments and contingencies (Note 7)

Stockholders' (deficit) equity (Notes 1 and 10):
           Preferred stock:  $.10 par value per share - 2,000,000 shares
                  authorized and unissued ......................................            --                 --
           Common stock:  $.01 par value per share - 10,000,000 shares
                  authorized; 6,629,008 shares issued ..........................            66                 66
           Common stock warrants ...............................................            51                  1
           Additional paid-in-capital ..........................................        45,168             45,168
           Treasury stock:  1,492,692 shares, at cost ..........................       (15,439)           (15,439)
           Accumulated deficit .................................................       (36,279)            (1,134)
           Cumulative translation adjustment (Notes 2, 6 and 12) ...............        (8,007)            (6,206)
                                                                                     ---------          ---------
                        Total stockholders' (deficit) equity ...................       (14,440)            22,456
                                                                                     ---------          ---------
                        Total liabilities and stockholders' (deficit) equity ...     $ 175,560          $ 217,970
                                                                                     =========          =========
</TABLE>

                See notes to consolidated financial statements.

                                      F-3
<PAGE>


                     SAFETY COMPONENTS INTERNATIONAL, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

    For the Years Ended March 25, 2000, and March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))

                      (in thousands, except per share data)


<TABLE>
<CAPTION>
                                                                                                     Restated         Restated
                                                                                      2000             1999             1998
                                                                                   ---------        ---------        ---------
<S>                                                                                <C>              <C>              <C>
Net sales (Notes 2 and 4) ..................................................       $ 228,266        $ 219,981        $ 166,074

Cost of sales, excluding depreciation (Note 2) .............................         191,376          189,032          133,766

Depreciation ...............................................................           8,809            7,728            5,001
                                                                                   ---------        ---------        ---------

              Gross profit .................................................          28,081           23,221           27,307

Selling and marketing expenses .............................................           3,803            3,122            1,686

General and administrative expenses ........................................          12,550           12,908            9,110

Research and development expenses ..........................................             943            1,090              357

Terminated investment agreement costs (Note 1) .............................              --            2,500               --

Amortization of intangible assets (Note 2) .................................           2,078            2,362            1,742

Relocation and reorganization costs (Note 1) ...............................              --            3,238            1,789

Goodwill impairment charge (Note 2) ........................................          17,676               --               --

Restructuring and restatement (Note 1) .....................................           3,969               --               --
                                                                                   ---------        ---------        ---------

              (Loss) income from operations ................................         (12,938)          (1,999)          12,623

Other expense (income), net ................................................           1,937            2,197             (397)

Interest expense, net ......................................................          14,116           12,788            7,747
                                                                                   ---------        ---------        ---------

              (Loss) income before income taxes ............................         (28,991)         (16,984)           5,273

Provision (benefit) for income taxes (Note 6) ..............................           6,154           (3,321)           1,927
                                                                                   ---------        ---------        ---------

Net (loss) income ..........................................................       $ (35,145)       $ (13,663)       $   3,346
                                                                                   =========        =========        =========


(Loss) earnings per common share, basic (Note 2) ...........................       $   (6.84)       $   (2.67)       $    0.67
                                                                                   =========        =========        =========

Weighted average number of shares outstanding, basic .......................           5,136            5,112            5,027
                                                                                   =========        =========        =========


(Loss) earnings per common share, assuming dilution (Notes 2 and 11) .......       $   (6.84)       $   (2.67)       $    0.65
                                                                                   =========        =========        =========

Weighted average number of shares outstanding, assuming dilution ...........           5,136            5,112            5,147
                                                                                   =========        =========        =========
</TABLE>

                See notes to consolidated financial statements.

                                      F-4
<PAGE>


                     SAFETY COMPONENTS INTERNATIONAL, INC.

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY

     For the Years Ended March 28, 1998, March 27, 1999, and March 25, 2000

                      (1999 and 1998 as restated, (Note 1))

                         (in thousands, except shares )

<TABLE>
<CAPTION>

                                                  Common        Common      Common      Additional
                                                  Stock         Stock        Stock       Paid -in
                                                  Shares        Amount      Warrants      Capital
                                                ----------    ----------   ----------   ----------
<S>                                             <C>           <C>          <C>          <C>
Balance at March 31, 1997 ...................    5,025,383    $       51   $        1   $   30,062
      Issuance of common stock ..............    1,399,200            14           --       13,978
      Acquisition of treasury stock .........   (1,379,200)           --           --           --
      Net income for the year ended
         March 28, 1998 .....................           --            --           --           --
      Foreign currency translation adjustment           --            --           --           --
                                                ----------    ----------   ----------   ----------
Balance at March 28, 1998 (restated) ........    5,045,383            65            1       44,040
      Issuance of common stock ..............       90,933             1           --        1,128
      Net loss for the year ended
         March 27, 1999 .....................           --            --           --           --
      Foreign currency translation adjustment           --            --           --           --
                                                ----------    ----------   ----------   ----------
Balance at March 27, 1999 (restated) ........    5,136,316            66            1       45,168
      Issuance of common stock warrants .....           --            --           50           --
      Net loss for the year ended
         March 25, 2000 .....................           --            --           --           --
      Foreign currency translation adjustment           --            --           --           --
                                                ----------    ----------   ----------   ----------
Balance at March 25, 2000 ...................    5,136,316    $       66   $       51   $   45,168
                                                ==========    ==========   ==========   ==========

<CAPTION>
                                                              Retained
                                                              Earnings        Other
                                                Treasury    (Accumulated   Comprehensive
                                                  Stock        Deficit)       Income
                                               ----------    ----------    ----------
<S>                                            <C>           <C>           <C>
Balance at March 31, 1997 ...................  $   (1,647)   $    9,183    $   (2,376)
      Issuance of common stock ..............          --            --            --
      Acquisition of treasury stock .........     (13,792)           --            --
      Net income for the year ended
         March 28, 1998 .....................          --         3,346            --
      Foreign currency translation adjustment          --            --        (2,288)
                                               ----------    ----------    ----------
Balance at March 28, 1998 (restated) ........     (15,439)       12,529        (4,664)
      Issuance of common stock ..............          --            --            --
      Net loss for the year ended
         March 27, 1999 .....................          --       (13,663)           --
      Foreign currency translation adjustment          --            --        (1,542)
                                               ----------    ----------    ----------
Balance at March 27, 1999 (restated) ........     (15,439)       (1,134)       (6,206)
      Issuance of common stock warrants .....          --            --            --
      Net loss for the year ended
         March 25, 2000 .....................          --       (35,145)           --
      Foreign currency translation adjustment          --            --        (1,801)
                                               ----------    ----------    ----------
Balance at March 25, 2000 ...................  $  (15,439)   $  (36,279)   $   (8,007)
                                               ==========    ==========    ==========
</TABLE>


                See notes to consolidated financial statements.


                                      F-5
<PAGE>


                     SAFETY COMPONENTS INTERNATIONAL, INC.

                     CCONSOLIDATED STATEMENTS OF CASH FLOWS

      For the Years Ended March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))

                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                                      Restated       Restated
                                                                                        2000            1999           1998
                                                                                      --------        --------        --------
<S>                                                                                   <C>             <C>             <C>
Cash Flows From Operating Activities:
        Net income (loss) ......................................................      $(35,145)       $(13,663)       $  3,346
           Adjustments to reconcile net income (loss) to net cash
            provided by (used in) operating activities:
             Depreciation ......................................................         8,809           7,728           5,001
             Goodwill Impairment Charge ........................................        17,676              --              --
             Amortization ......................................................         2,078           2,362           1,742
             Provision for bad debts ...........................................           780           1,600             245
             Loss on disposal and write-off of fixed assets and investments ....           870           2,339              --
             Deferred taxes ....................................................         6,154          (4,162)           (738)
             Changes in operating assets and liabilities:
                 Accounts receivable and receivable from affliate ..............         4,029         (12,367)        (11,237)
                 Inventories ...................................................         6,619          (1,824)         (2,799)
                 Prepaid and other current assets ..............................            (8)            638          (1,114)
                 Other assets ..................................................         2,782             778             (62)
                 Accounts payable ..............................................        (5,096)          4,998           7,917
                 Accrued liabilities ...........................................         1,659           1,853          (1,736)
                                                                                      --------        --------        --------
                  Net cash provided by (used in) operating activities ..........        11,207          (9,720)            565
                                                                                      --------        --------        --------
Cash Flows From Investing Activities:
             Additions to property, plant and equipment, net ...................        (7,741)        (13,854)        (13,715)
             Acquisition costs and advances to Valentec ........................            --            (502)         (2,522)
             Acquisition of Champion ...........................................            --             (86)         (3,398)
             Acquisition of  SCFTI .............................................            --            (242)        (58,768)
             Acquisition of Phoenix Airbag, net of cash acquired ...............        (2,061)         (1,958)         (2,455)
                                                                                      --------        --------        --------
                  Net cash used in  investing activities .......................        (9,802)        (16,642)        (80,858)
                                                                                      --------        --------        --------
Cash Flows From Financing Activities:
             Net proceeds from Notes ...........................................            --              --          86,053
             Net proceeds from sale of common stock ............................            --           1,056             230
             Repayment of term notes ...........................................            --              --         (16,812)
             Net proceeds from A.I. Credit Corp. note ..........................            --             724              --
             (Repayments) borrowings of debt and long-term obligations .........        (5,115)         10,000         (11,849)
             Net borrowing on revolving credit facility ........................           700          23,024          11,245
             Proceeds from (repayments of) mortgage and financing notes ........         2,907          (3,174)          9,500
                                                                                      --------        --------        --------
                  Net cash (used in) provided by financing activities ..........        (1,508)         31,630          78,367
                                                                                      --------        --------        --------
Effect of exchange rate changes on cash ........................................          (240)           (710)           (345)
                                                                                      --------        --------        --------
Change in cash and cash equivalents ............................................          (343)          4,558          (2,271)
Cash and cash equivalents, beginning of period .................................        10,607           6,049           8,320
                                                                                      --------        --------        --------
Cash and cash equivalents, end of period .......................................      $ 10,264        $ 10,607        $  6,049
                                                                                      ========        ========        ========

Supplemental  disclosure of cash flow  information:
    Cash paid during the period for:
             Interest ..........................................................      $  9,191        $ 12,144        $  4,790
             Income taxes ......................................................            35             391           1,665
Supplemental disclosure of non-cash transactions:
        Equipment acquired under capital lease obligations .....................      $  1,085        $     --        $     --
</TABLE>


                See notes to consolidated financial statements.


                                      F-6
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


     Note 1 Organization and Business

     Safety  Components  International,  Inc.  (the  "Company"  or  "SCI")  is a
leading,  low-cost,   independent  supplier  of  automotive  airbag  fabric  and
cushions,  technical  fabrics,  metal  airbag  components  and  defense  related
products, with operations in North America and Europe.

Restructuring and Chapter 11 Bankruptcy Petition

     The deterioration in the Company's  financial condition that became evident
in fiscal 1999, arising from a confluence of negative developments, particularly
in  the  non-core  businesses,   caused  it  to  experience  material  liquidity
constraints.  In addition,  following the Company's  restatement of its earnings
and a default with respect to obligations  under its credit  agreement,  KeyBank
and Fleet Bank, the "Senior Lenders",  notified the trustee for the Company's 10
1/8% Senior  Subordinated  Notes (the "Notes") that they were  exercising  their
rights to block a scheduled interest payment due on January 18, 2000.

     On February 18, 2000 the common stock of the Company was delisted  from the
NASDAQ stock market.

     The  Company  and an  informal  committee  comprised  of  holders  of  over
two-thirds  in aggregate  dollar amount of the Notes began  negotiations  and in
early April 2000 reached an agreement (the "Restructuring Agreement") that would
be effected  through a voluntary  filing under  Chapter 11 of the United  States
Bankruptcy  Code.  Pursuant to the  Restructuring  Agreement,  the claims of the
holders of the Notes  ("Noteholders")  will be converted in the right to receive
96.8% of the  Company's  equity  after it emerges  from  Chapter 11. The current
shareholders, excluding Robert Zummo, the Company's Chairman and Chief Executive
Officer,  will receive 3.2% of the Company's post bankruptcy equity and warrants
to acquire 12% of such equity. In addition to the Restructuring  Agreement,  the
Company also reached an agreement with the Senior Lenders  subject to a paydown,
to  replace   their  credit   agreement   with  a   post-petition   subordinated
debtor-in-possession ("DIP") financing facility.

     On April 10, 2000 (the "Petition Date"), the Company and certain of its U.S
subsidiaries   (including  Safety  Components  Fabric  Technologies,   Inc.  and
Automotive  Safety  Components  International,   Inc.,  but  excluding  Valentec
International  Corporation,  LLC,  Valentec  Systems  Inc.  and  Galion,  Inc.);
collectively, "Safety Filing Group," filed a voluntary petition under Chapter 11
of the Bankruptcy Code with the United States  Bankruptcy Court for the District
of Delaware (the "Chapter 11 Bankruptcy  Petition").  Since the filing date, the
Safety  Filing  Group  has  been  operating  their   businesses  as  debtors  in
possession.

     On April  26,  2000,  in  conjunction  with the  filing of the  Chapter  11
Bankruptcy Petition,  the Safety Filing Group received Bankruptcy Court approval
of a $30.6 million senior DIP financing  facility that it had executed with Bank
of America,  N.A.  The senior DIP  financing  is  expected  to provide  adequate
funding  for all  post-petition  trade and  employee  obligations,  the  partial
paydown of the  pre-petition  secured  debt,  as well as the  Company's  ongoing
operating needs during the restructuring process. Upon closing of the senior DIP
financing  facility  on May 9, 2000,  the Senior  Lenders  received a  principal
paydown of  approximately  $17 million and retained the remaining  approximately
$20.9 million portion of their  indebtedness  as an 11% per annum  post-petition
subordinated  DIP  facility  as  a  replacement  of  their  pre-petition  credit
facility.  The  Company is in the process of  negotiating  with  potential  exit
financing  lenders to review its  options of funding of Post  Bankruptcy  needs,
although no commitment has been received so far.

     On May 19,  2000,  Safety  Filing  Group filed its  Statement  of Financial
Affairs and Schedules of Assets and Liabilities  and, on May 24, 2000, the Court
entered  an order  setting  July 7,  2000 as the  general  filing  deadline  for
creditors, to file their proof of claims. In Chapter 11 cases, substantially all
liabilities  of the Safety Filing Group as of the Petition  Date  (approximately
$166.6 million) are subject to compromise under a plan of reorganization.


                                      F-7
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


     On June 12,  2000,  the Safety  Filing  Group filed with the United  States
Bankruptcy Court its Joint Plan of Reorganization  (the "Plan") pursuant to Rule
3016  (b),  and  its  Disclosure  Statement  pursuant  to  Section  1125  of the
Bankruptcy Code. A hearing will be held on July 19, 2000 to consider approval of
the Disclosure Statement.  The Plan and the Disclosure Statement,  both of which
are subject to revision by the Company prior to the Court hearing date,  reflect
a time-phased,  payout of 100% all pre-petition  claims of all creditors.  Under
the Plan,  new shares of common and preferred  stock would be authorized and new
common  stock  would be  issued.  All  Noteholder  claims  in the  approximately
aggregate  amount of $96.4  million  will be  completely  satisfied  through the
ratably proportionate distribution of common stock.

     As  reflected  in the  Company's  consolidated  financial  statements,  the
Company  incurred   approximately  $4.0  million  of  legal,   professional  and
re-financing  related costs associated with the investigation and restatement of
its financial  statements for fiscal years 1998 and 1999, and its  restructuring
efforts leading up to its filing under Chapter 11 on April 10, 2000.  During the
Chapter 11 proceedings, the Company will continue to incur such costs associated
with its  restructuring  efforts.  The Company's  ability to continue as a going
concern is dependent  upon the  confirmation  of a plan of  reorganization,  the
ability to secure  on-going  debtor in  possession  and exit  financing  and the
ability to achieve  successful  future  operations.  The consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

Restatement of Previously Issued Financial Statements

     Subsequent  to  the  issuance  of  the  Company's   consolidated  financial
statements  for the fiscal  years ended March 27, 1999 and March 28,  1998,  the
Company determined that the reported results for those years were misstated. The
Company  with the  assistance  of  independent  counsel and other  professionals
conducted an investigation and determined that the restatement related primarily
to two items as further  discussed  herein.  It was  determined  that a sale and
related  receivable in the Company's defense  operations in the aggregate amount
of $4.6 million (before a related tax provision of $1.8 million), which had been
appropriately  recorded in fiscal years ended March 31, 1996, 1997 and March 28,
1998 at a  subsidiary  level,  was also  recorded in fiscal 1998 and 1999 at the
parent  company  level.   Additionally  in  fiscal  1999,   certain  items  were
incorrectly  recorded in income in connection  with a loan  transaction  of $772
(before a related tax  provision  of $297).  On  November  3, 1998,  the Company
entered  into  an  unsecured  note  facility  with  A.I.  Credit  Corp.  of $772
(including  transaction and other fees),  which requires monthly payments of $29
and  bears a stated  interest  rate of 7.57% per  annum.  Such  transaction  had
originally  been  recorded  incorrectly  as an insurance  contract with the cash
proceeds reflected in income. Certain other less significant items were restated
in both fiscal years. The accompanying  consolidated  financial  statements,  as
restated as of March 27, 1999 and March 28,  1998,  and for the two fiscal years
in the period ended March 27, 1999, present the restated results.


                                      F-8
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


     A summary of the effects of the restatement  follows (in thousands,  except
per share data):


CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                         For Fiscal Year Ended             For Fiscal Year Ended
                                                                             March 27, 1999                    March 28, 1998
                                                                      ----------------------------      ----------------------------
                                                                      As Previously                     As Previously
                                                                        Reported        As Restated       Reported       As Restated
                                                                        --------        -----------       --------       -----------
<S>                                                                     <C>              <C>              <C>             <C>
Net sales .......................................................       $ 221,279        $ 219,981        $ 170,310       $ 166,074
Cost of sales, excluding depreciation ...........................         188,804          189,032          133,358         133,766
Depreciation ....................................................           7,728            7,728            5,001           5,001
                                                                        ---------        ---------        ---------       ---------
     Gross profit ...............................................          24,747           23,221           31,951          27,307
                                                                        ---------        ---------        ---------       ---------
Selling and marketing expenses ..................................           3,122            3,122            1,686           1,686
General and administrative expenses .............................          12,976           12,908            8,900           9,110
Research and development expenses ...............................           1,090            1,090              357             357
Terminated investment agreement costs ...........................           2,500            2,500               --              --
Amortization of intangible assets ...............................           2,362            2,362            1,742           1,742
Relocation and reorganization costs .............................           3,238            3,238            1,789           1,789
                                                                        ---------        ---------        ---------       ---------
     (Loss) income from operations ..............................            (541)          (1,999)          17,477          12,623
                                                                        ---------        ---------        ---------       ---------
Other expense (income), net .....................................           2,397            2,197               33            (397)
Interest expense ................................................          12,750           12,788            7,747           7,747
                                                                        ---------        ---------        ---------       ---------
     (Loss) income before income taxes ..........................         (15,688)         (16,984)           9,697           5,273
(Benefit) provision for income taxes ............................          (2,822)          (3,321)           3,689           1,927
                                                                        ---------        ---------        ---------       ---------
Net (loss) income ...............................................       $ (12,866)       $ (13,663)       $   6,008       $   3,346
                                                                        =========        =========        =========       =========
Net (loss) income per share, basic ..............................       $   (2.52)       $   (2.67)       $    1.20       $    0.67
                                                                        =========        =========        =========       =========
Weighted average number of shares outstanding, basic ............           5,112            5,112            5,027           5,027
                                                                        =========        =========        =========       =========
Net (loss) income per share, assuming dilution ..................       $   (2.52)       $   (2.67)       $    1.17       $    0.65
                                                                        =========        =========        =========       =========
Weighted average number of shares outstanding,
assuming dilution ...............................................           5,112            5,112            5,147           5,147
                                                                        =========        =========        =========       =========
</TABLE>


                                      F-9
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                        As of March 27,1999                As of March 28,1998
                                                                        -------------------                -------------------
                                                                  As Previously                      As Previously
                                                                    Reported         As Restated        Reported         As Restated
                                                                 -------------------------------------------------------------------
<S>                                                                 <C>               <C>               <C>               <C>
ASSETS
Current Assets:
     Cash and cash equivalents .............................        $  10,607         $  10,607         $   6,049         $   6,049
     Accounts receivable, net ..............................           47,284            42,671            39,208            35,327
     Receivable from affiliate .............................            4,583             4,554                --                --
     Inventories ...........................................           21,445            21,445            19,935            19,792
     Prepaid and other .....................................            6,296             6,296             4,196             4,196
                                                                    ---------         ---------         ---------         ---------
Total current assets .......................................           90,215            85,573            69,388            65,364
                                                                    ---------         ---------         ---------         ---------
     Property,  plant and equipment, net ...................           68,747            68,697            66,279            66,229
     Receivable from affiliate .............................               --                --             1,206             1,206
     Intangible assets, net ................................           57,796            57,606            55,923            55,733
     Other assets ..........................................            6,094             6,094             6,101             6,101
                                                                    ---------         ---------         ---------         ---------
Total assets ...............................................        $ 222,852         $ 217,970         $ 198,897         $ 194,633
                                                                    =========         =========         =========         =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable ......................................        $  28,093         $  28,093         $  23,009         $  23,009
     Earnout payable .......................................            2,111             2,111             1,958             1,958
     Accrued liabilities ...................................           15,993            16,107            12,558            12,718
     Current portion of long-term obligations ..............            3,769             3,988             2,375             2,375
                                                                    ---------         ---------         ---------         ---------
Total current liabilities ..................................           49,966            50,299            39,900            40,060
                                                                    ---------         ---------         ---------         ---------
     Long-term obligations .................................           53,195            53,700            24,739            24,739
     Senior subordinated debt ..............................           90,000            90,000            90,000            90,000
     Other long-term liabilities ...........................            3,776             1,515             5,064             3,302
                                                                    ---------         ---------         ---------         ---------
Total liabilities ..........................................          196,937           195,514           159,703           158,101
                                                                    ---------         ---------         ---------         ---------
Stockholders' equity
     Preferred stock: ......................................               --                --                --                --
     Common stock ..........................................               66                66                65                65
     Common stock warrants .................................                1                 1                 1                 1
     Additional paid-in-capital ............................           45,168            45,168            44,040            44,040
     Treasury stock ........................................          (15,439)          (15,439)          (15,439)          (15,439)
     Retained earnings (accumulated deficit) ...............            2,325            (1,134)           15,191            12,529
     Cumulative translation adjustment .....................           (6,206)           (6,206)           (4,664)           (4,664)
                                                                    ---------         ---------         ---------         ---------
Total stockholders' equity .................................           25,915            22,456            39,194            36,532
                                                                    ---------         ---------         ---------         ---------
Total liabilities and stockholders' equity .................        $ 222,852         $ 217,970         $ 198,897         $ 194,633
                                                                    =========         =========         =========         =========
</TABLE>


                                      F-10
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


Acquistions

     On August 6, 1996,  Automotive  Safety  Components  International,  Inc., a
wholly-owned subsidiary of the Company,  acquired 80% of the outstanding capital
stock of  Automotive  Safety  Components  International  GmbH & Co. KG (formerly
known as Phoenix  Airbag GmbH & Co. KG, "ASCI GmbH").  The purchase from Phoenix
Aktiengesellschaft  ("Phoenix  AG") was made in  accordance  with the  terms and
conditions of the Agreement  Concerning  the Sale and Transfer of all the Shares
in Phoenix  Airbag GmbH dated June 6, 1996,  as amended  (the  "Agreement").  In
accordance  with the terms of the  Agreement,  the Company  was  required to pay
additional  purchase  price  to  Phoenix  AG if ASCI  GmbH  met  certain  annual
performance  targets for calendar years 1996,  1997 and 1998.  ASCI GmbH met its
performance  targets and has paid $6.3 million of contingent  purchase price. No
amount was accrued as of March 25, 2000 as the earnout period has ended.

     The ASCI GmbH  acquisition  was accounted for as a purchase.  ASCI acquired
the remaining 20% interest  effective December 31, 1998 and was entitled to 100%
of the income or losses,  risks and rewards of Phoenix  Airbag  since  August 6,
1998. Accordingly all assets and liabilities were reflected at fair value at the
date of acquisition,  and no minority  interest was recorded in the accompanying
consolidated  financial  statements  for Phoenix AG's  remaining  20%  interest.
Through March 27, 1999, the cumulative  purchase price amounted to approximately
$28.6 million, including $3.4 million of direct acquisition costs. Management of
the Company allocated the purchase  consideration for Phoenix Airbag assets, net
of  liabilities  assumed,  at fair market  value,  with the excess  allocated to
goodwill. Goodwill of $16.5 million is being amortized over twenty-five years on
a straight-line basis.

     During the third  quarter of fiscal year 1999 the Company  reevaluated  its
strategic  decision  to exit the  manufacturing  of airbags  within  Hildesheim,
Germany.  The  original  plan called for the  closure and move of the  Company's
entire  manufacturing  operation in Hildesheim,  Germany to the Company's  Czech
Republic and United Kingdom production facilities.  During the 1999 fiscal year,
the Company  incurred  approximately  $2.4  million,  which was recorded  within
relocation and  reorganization  expense ($1.2 million net of tax benefit of $1.2
million),  of costs associated with the relocation of  substantially  all of the
labor-intensive  passenger  airbags.  During the 1998 fiscal  year,  the Company
incurred  approximately  $1.8  million  ($1.2  million  net  of tax  benefit  of
$600,000) of costs  associated  with the  reorganization  and  relocation of its
foreign   operations.   These  costs  were  investments   toward   consolidating
labor-intensive  production  within  the  Company's  foreign  operations  to its
low-cost  facilities  located  within  the  foreign  market.  While the  Company
accomplished  the move of  substantially  all of the  labor-intensive  passenger
airbags,  the Company had decided  not to move the  remaining  automated  airbag
operations,  primarily  driver and side impact  bags.  The decision to remain in
Germany was based on current and  anticipated  program  delivery  commitments at
that time. The Company purchased a new facility in Bavendstedt, Germany near the
existing facility and completed its move into the new facility during the second
quarter of fiscal year 2000. The new German  facility has allowed the Company to
conduct its operations in Germany in a more efficient and cost effective manner.

     Effective as of May 22, 1997, the Company  acquired all of the  outstanding
capital  stock of Valentec  International  Corporation  (Valentec) in a tax free
stock-for-stock exchange (the "Valentec Acquisition"). Valentec is a high-volume
manufacturer  of stamped and  precision-machined  products  for the  automotive,
commercial  and  defense   industries.   Valentec  was  the  Company's   largest
shareholder  immediately prior to the Valentec Acquisition.  The acquisition was
accounted for as a purchase.  The purchase price aggregated  approximately $15.1
million,  including  estimated direct  acquisition  costs of approximately  $1.3
million. In addition,  the Company advanced Valentec  approximately $1.3 million
for the purpose of funding  operations  prior to the Valentec  Acquisition.  The
operations of Valentec are included in the accounts of the Company  beginning on
May 22, 1997. Management of the Company allocated the purchase consideration for
Valentec  assets,  net of liabilities  assumed,  at fair market value,  with the
excess  allocated to goodwill.  The net  remaining  balance of $17.7  million of
goodwill was written off in the third quarter of fiscal year 2000 (See Note 2).

     On  July  24,  1997,  the  Company,  through  a newly  formed  wholly-owned
subsidiary,  Safety Components Fabric  Technologies,  Inc.  ("SCFTI"),  acquired
("the JPS Acquisition") all of the assets and assumed certain liabilities of the
Air   Restraint/Technical   Fabrics   Division  of  JPS  Automotive   L.P.  (the
"Division").  SCFTI is a leading,  low-cost  supplier of airbag  fabric in North
America and is also a leading manufacturer of value-added technical fabrics used
in  a


                                      F-11
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


variety of niche industrial and commercial applications. The JPS Acquisition was
accounted for as a purchase.  The purchase price aggregated  approximately $58.9
million,  after giving effect to  post-closing  adjustments.  The  operations of
SCFTI are included in the accounts beginning on July 24, 1997. Management of the
Company  allocated  the  purchase   consideration  for  SCFTI  assets,   net  of
liabilities  assumed,  at fair  market  value,  with  the  excess  allocated  to
goodwill. Goodwill of $19.2 million is being amortized over forty years based on
a straight line method.

     Additionally,  on December 22, 1997, the Company acquired all of the issued
and outstanding capital stock of Champion Sales and Service Company ("Champion")
for an aggregate amount of $3.4 million  including direct  acquisition  costs of
approximately  $125,000 (the "Champion  Transaction").  In conjunction  with the
Champion  Transaction,  the Company entered into management  services agreements
with the former  shareholders  of  Champion.  The terms of each such  management
services  agreement  prohibits the Champion  shareholders  from  competing  with
certain  businesses  of the  Company  for a  period  of five  years.  Each  such
management  services agreement also provides that the Company has the option, at
its sole discretion,  to extend the non-competition  period for three successive
five year periods,  upon payment of a nominal  extension fee.  Accordingly,  the
Company  has  allocated  the  purchase   consideration   to  these   non-compete
agreements.  The Company also entered into a definitive  Put Agreement (the "Put
Transaction")  with an associate of Champion (the "Associate") who had the right
to a portion of any of the sales  commissions  actually  received  by  Champion.
Pursuant  to the Put  Transaction,  the  Associate  had the option to put to the
Company,  subject to  certain  conditions,  all of the  issued  and  outstanding
capital stock of Duchi & Associates, Inc., an affiliated entity, for a put price
of $740,000.  The Put Transaction  included (as a condition to its exercise),  a
twenty year management  services  agreement and non-compete  between the Company
and the  Associate.  The Company  recorded  $740,000 as an intangible  asset and
accrued  for  the  Put  Transaction  at  March  28,  1998  as  part  of  accrued
liabilities. The exercise of such option was consummated as of January 13, 1999.

     During   fiscal  year  1999,   after   exploring  a  variety  of  strategic
alternatives,  the Company  entered  into an  Investment  Agreement  ("the Brera
Investment  Agreement")  with Brera Capital  Partners,  LLC, a Delaware  limited
liability company,  and Brera Capital Partners Limited  Partnership,  a Delaware
limited partnership,  through a newly-formed Delaware limited liability company,
Brera SCI, LLC  ("Brera"),  which  provided  for,  among other  things,  a $28.0
million  convertible  preferred stock investment by Brera in the Company. On May
4, 1999, the Company and Brera reached a mutual agreement to terminate the Brera
Investment  Agreement.  The Company expensed  approximately $2.5 million of fees
and  expenses  during the  fourth  quarter  of fiscal  year 1999  related to the
agreement and its subsequent  termination.  This charge included a reimbursement
to Brera for fees and expenses  incurred by it. The Company  paid  approximately
$2.0 million of the fees and expenses in fiscal year 2000.

     The  unaudited  pro forma  revenues,  net  income and net income per common
share, assuming: (i) the Valentec Acquisition;  (ii) the JPS Acquisition;  (iii)
the  completion of the debt offering  (Note 5) and  application  of the proceeds
therefrom;  (iv) the Phoenix  Acquisition;  and (v) the Champion Transaction was
consummated  on April 1, 1996 are as  follows  below (in  thousands,  except per
share  data).  The  Unaudited  Pro  Forma  Financial  Data does not  purport  to
represent what the Company's  results of operations  actually would have been if
those transactions had been consummated on the date or for the period indicated,
or what such results will be for any future date or for any future period.

                                                   Pro Forma Restated Year Ended
                                                         March 28, 1998
                                                         --------------
Revenues                                                  $   190,399
                                                          ===========
Net income                                                $     2,758
                                                          ===========
Net income per common share, basic                        $      0.55
                                                          ===========
Net income per common share, assuming dilution            $      0.54
                                                          ===========

                                      F-12
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


Note 2 Summary of Significant Accounting Policies

Principles of consolidation

     The accompanying  consolidated financial statements include the accounts of
the  wholly  owned  and   majority-owned   subsidiaries  of  Safety   Components
International,   Inc.  All  significant  intercompany   transactions  have  been
eliminated.

Revenue recognition

     The Company  recognizes  revenue from product sales when it has shipped the
goods or ownership has been transferred to the customer for goods to be held for
future shipment at the customer's request.

     The Company  accounts  for  long-term  contracts  under the  percentage  of
completion method,  whereby progress toward contract completion is measured on a
cost incurred basis (including  direct labor,  materials and allocable  indirect
manufacturing   overhead  and  general  and  administrative  costs).  Losses  on
long-term   contracts  are  recognized  in  the  period  when  such  losses  are
identified.  On certain  contracts  with the U.S.  Government,  contract  costs,
including  indirect  costs,  are subject to audit and adjustment by negotiations
between the Company and government representatives.  Contract revenues have been
recorded in amounts  which are  expected to be  realized  upon final  settlement
based on historical results.

Annual revenues from major customers

     The  Company had sales to three  customers  in its  automotive  and fabrics
operating segment in fiscal year 2000 aggregating approximately 27%, 19% and 17%
of net  revenues,  respectively.  The Company had sales to two  customers in its
automotive  and  fabrics  operating  segment  in fiscal  year  1999  aggregating
approximately  27% and 17% of net revenues,  respectively.  In fiscal year 1998,
the Company had sales to two customers,  in its automotive and fabrics operating
segment aggregating approximately 37% and 16% of net revenues, respectively.

Concentration of credit risk

     The Company is subject to a concentration  of credit risk consisting of its
trade   receivables.   At  March  25,  2000,   three  customers   accounted  for
approximately 28%, 24% and 21% of its trade receivables,  respectively; at March
27, 1999,  two  customers  accounted  for 23% and 11% of its trade  receivables,
respectively.  The Company performs ongoing credit  evaluations of its customers
and  generally  does not require  collateral.  The Company  evaluates  potential
losses  for  uncollectible  accounts  and such  losses  have  historically  been
immaterial and within management's expectations.

Environmental expenditures

     Environmental  expenditures that result from the remediation of an existing
condition  caused by past  operations  that will not  contribute  to  current or
future revenues are expensed.  Expenditures which extend the life of the related
property  or  prevent  future   environmental   contamination  are  capitalized.
Liabilities are recognized for remedial  activities when the cleanup is probable
and the cost can be reasonably estimated.

Inventories

     Inventories  represent direct labor,  materials and overhead costs incurred
for products not yet  delivered  and are stated at the lower of cost  (first-in,
first-out) or market.


                                      F-13
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


Property, plant and equipment

     Property,   plant  and  equipment  are  stated  at  cost.  Depreciation  is
calculated using the straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized over the shorter of their estimated
useful  lives or the term of the  underlying  lease.  Estimated  useful lives by
class of assets are as follows:

    Machinery and Equipment........................            5 - 10 years
    Furniture and Fixtures.........................            3 -  5 years
    Buildings......................................           25 - 40 years
    Leasehold improvements.........................       Lesser of useful life
                                                              or lease term

     Expenditures  for  repairs  and  maintenance  are  charged  to  expense  as
incurred. Renewals or betterments of significant items are capitalized.

     The Company assesses the recoverability of long-lived assets  periodically.
If  there  is an  indication  of  impairment  of  such  assets,  the  amount  of
impairment,  if any, is charged to operations in the period in which  impairment
is determined by management.  The methodology that management is expected to use
to project  results of operations will be based on projected  undiscounted  cash
flows  generated  from the assets in service.  No  impairment  of assets will be
recorded below their estimated net realizable value.

Intangible assets

     Intangible and other assets  primarily  consist of patents and goodwill and
non-compete agreements associated with the Company's acquisitions and are stated
at cost less accumulated amortization.  Intangible assets are amortized over the
expected  periods  to be  benefited,  which have been  determined  to have lives
between 15 and 40 years.  Accumulated  amortization  at March 25, 2000 and March
27, 1999 was approximately $4.9 million and $4.8 million, respectively.

     The Company  periodically  assesses the recoverability of intangible assets
by determining  whether the amortization of the balances over its remaining life
can be recovered  through  projected  undiscounted  cash flows,  considering the
historical  and projected  operating  performance  of business  operations.  Any
impairment  is  charged  to  operations  in the  period in which  impairment  is
determined by management.

     At December 1999, the Company  recognized a goodwill  impairment  charge of
$17.7 million with no associated tax benefit, related to the 1997 acquisition of
Valentec.  Operating results of Valentec deteriorated during fiscal 2000 arising
from the loss of business with a major customer.  The subsidiary has been unable
to offset  this loss with  increased  sales with other  customers.  Accordingly,
management has concluded that  intangible  assets in the amount of $17.7 million
are no  longer  recoverable  through  future  operations  and such  amount  were
written-off in the Company's financial statements for the quarter ended December
25,  1999.  In  determining  the amount of the  impairment  charge,  the Company
evaluated the  recoverability  of the long-lived assets pursuant to SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed  Of".  The  Company  determined  that  Valentec's  estimated  future
undiscounted  cash flows were below the carrying  value of Valentec's  goodwill.
Accordingly,  during the third quarter of Fiscal 2000, the Company  adjusted the
carrying value of Valentec's goodwill to its estimated fair value. The estimated
fair  value was based on  anticipated  future  cash flows  discounted  at a rate
commensurate with the risk involved.  The Company believes that its projections,
based on recent  historical  trends and current market  conditions,  is its best
estimate of Valentec's future  performance,  although there can be no assurances
that such estimates will be indicative of future results.


                                      F-14
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


Product launch costs

     Product launch costs are expensed as incurred.

Foreign currency translation

     The Company  follows the  principles  of Statement of Financial  Accounting
Standards No. 52, "Foreign Currency  Translation," ("SFAS 52") in accounting for
foreign operations. The financial statements of the Company's subsidiaries whose
functional  currency is the local  currency,  except the accounts of the Mexican
subsidiary,  whose functional  currency is the U.S. dollar, have been translated
into U.S. dollars.  Accordingly,  all assets and liabilities  outside the United
States are  translated to U.S.  dollars at the rate of exchange in effect at the
balance  sheet date.  Income and expense  items are  translated  at the weighted
average exchange rate prevailing during the period.  Translation adjustments are
recorded as a separate component of stockholders' equity. During the years ended
March  25,  2000,  and  March  27,  1999,  translation  adjustments,   primarily
attributable to the Company's German and Czech Republic subsidiaries,  accounted
for  substantially  all of  the  change  in  cumulative  translation  adjustment
activity as reflected in the accompanying consolidated financial statements.

     The  financial  statements of the  Company's  subsidiary  in Mexico,  whose
functional  currency  is the U.S.  dollar,  are  remeasured  into U.S.  dollars.
Accordingly,  monetary  assets and  liabilities  are  translated  at the rate of
exchange  in  effect at the  balance  sheet  date and  non-monetary  assets  and
liabilities  at historical  rates.  Income and expense items are translated at a
weighted  average  exchange rate prevailing  during the period,  except expenses
related  to  non-monetary   assets  and  liabilities  which  are  translated  at
historical  rates. The effect of foreign currency  adjustment for this entity is
included in the results of operations.  During the reported periods herein, such
amounts were not significant.

     Foreign currency  transaction  gains or losses are reflected in operations.
During  the years  ended  March 25,  2000,  March  27,  1999 and March 28,  1998
transaction  losses  charged to  operations  amounted to $358,000,  $107,000 and
$72,000, respectively.

Cash equivalents

     The  Company  considers  all highly  liquid  investments  with an  original
maturity of three months or less to be cash equivalents.

Fair value of financial instruments

     The consolidated financial statements include financial instruments whereby
the fair market value of such instruments may differ from amounts reflected on a
historical basis. Financial instruments of the Company consist of cash deposits,
accounts receivable,  advances to affiliates,  accounts payable, certain accrued
liabilities,  long-term  debt and capital  leases.  The  carrying  amount of the
Company's  long term debt  approximates  fair market  value based on  prevailing
market rates. The Company's other financial  instruments  generally  approximate
their fair values at March 25, 2000, and March 27, 1999, based on the short-term
nature  of  these   instruments.   Advances  to   affiliates   have  no  readily
ascertainable fair market value.

Deferred financing costs

     Costs  incurred  in  connection  with  financing  activities  (Note 5), are
capitalized and amortized using the straight-line  method which approximates the
effective  interest method,  and charged to interest expense in the accompanying
consolidated  statements of operations.  Total costs deferred and included under
other assets in the


                                      F-15
<PAGE>

                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


accompanying  consolidated  balance  sheets at March 25, 2000 and March 27, 1999
were $3.7 million and $3.9 million,  respectively. As a result of the bankruptcy
filing  discussed  in Note 1 these  costs are  expected to be written off as the
debt is refinanced.

Earnings per share

     Earnings per share amounts have been computed using  Statement of Financial
Accounting  Standards  No. 128,  "Earnings  per Share"  ("SFAS  128").  SFAS 128
establishes  standards for computing and presenting  earnings per share ("EPS").
Basic EPS  excludes  dilution  and is computed by dividing  income  available to
common stockholders by the weighted-average  number of common shares outstanding
for  the  period.  It  also  requires  a  reconciliation  of the  numerator  and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.  Diluted EPS includes  unexercised  stock options using
the treasury stock method. (See Note 11).

Use of estimates

     The consolidated financial statements have been prepared in conformity with
generally  accepted  accounting  principles,  which  require  management to make
estimates and assumptions  that affect the amounts and  disclosures  reported in
the financial statements and accompanying notes.  Significant  estimates made by
management  include  allowances for doubtful accounts  receivable,  reserves for
inventories,  legal actions and environmental  issues,  and costs to complete on
long term contracts. Actual results could differ from those estimates.

Research and Development Costs

     Research and development  costs are charged to operations when incurred and
are included in operating  expenses.  The amounts  charged in fiscal years 2000,
1999 and 1998 were $943,000, $1.1 million and $357,000, respectively.

Fiscal year

     Effective in fiscal year 1998,  the Company  changed its fiscal year to end
on the last Saturday of March.

Reclassifications

     Certain  reclassifications  have  been made to the  consolidated  financial
statements for prior periods to conform to the March 25, 2000 presentation.


                                      F-16
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


Note  3  Composition  of  Certain  Consolidated  Balance  Sheet  Components
         (in thousands)


<TABLE>
<CAPTION>
                                                                                         Restated
                                                                     March 25, 2000   March 27, 1999
                                                                     --------------  --------------
<S>                                                                       <C>            <C>
Accounts receivable:
      Billed receivables, net of reserves of $219 and $500 at
          March 25, 2000 and March 27, 1999, respectively                 $ 36,151       $ 38,899
      Unbilled receivables (net of unliquidated progress payments of
         $0 and $472 at March 25, 2000, and March 27, 1999,
          respectively)                                                      4,152          2,690
      Other                                                                    978          1,082
                                                                          --------       --------
                                                                          $ 41,281       $ 42,671
                                                                          ========       ========

Inventories:
      Raw materials                                                       $  6,189       $  6,805
      Work-in-process                                                        5,988          6,973
      Finished goods                                                         2,649          7,667
                                                                          --------       --------
                                                                          $ 14,826       $ 21,445
                                                                          ========       ========

Property, plant and equipment:
      Land and building                                                   $ 13,901       $ 10,583
      Machinery and equipment                                               70,225         66,507
      Furniture and fixtures                                                 3,299          2,608
      Construction in process                                                  984          4,994
                                                                          --------       --------
                                                                            88,409         84,692
      Less -  accumulated depreciation and amortization                    (22,630)       (15,995)
                                                                          --------       --------
                                                                          $ 65,779       $ 68,697
                                                                          ========       ========
</TABLE>

Note 4 Related Party Transactions

     The Company sold certain  components to and performed  certain services for
affiliates.  Sales to affiliates  totaled  $566,000 for the year ended March 28,
1998.  Included in sales to affiliates in fiscal year 1998 is a $500,000 fee for
services  rendered to Valentec  International  Limited ("VIL"),  a U.K. company,
majority owned by Robert A. Zummo,  the Chief Executive  Officer and Chairman of
the  Board of the  Company.  The  Company  served as a sales  representative  in
procuring a defense contract for VIL and arranging its  sub-contractors.  During
fiscal year 1999,  the  Company  incurred  additional  costs on behalf of VIL in
connection with the defense  contract  procured for VIL during fiscal year 1998.
These additional costs,  approximately $3.4 million, were collected in May 1999.
The Company  established  a reserve in the amount of $0.6  million in the second
quarter of the fiscal year ending March 25, 2000 against its  receivable of $1.2
million from VIL, an  affiliated  party,  as a result of  uncertainty  as to the
affiliate's  ability  to  generate  sufficient  cash to repay  such  amount.  An
agreement  has been signed in January  2000  between the Company and Mr.  Zummo,
whereby  Mr.  Zummo has  pledged  to the  Company  his stock in the  Company  as
collateral  against such indebtedness.  Further,  Mr. Zummo has agreed to direct
VIL to remit to the  Company in  satisfaction  of a portion  of the  receivable,
$564,000  to be  received  from a  foreign  customer.  In  connection  with  the
restructuring  agreement signed in April 2000,  discussed in Note 1, the pledged
collateral  has  diminished in value,  and Mr. Zummo has agreed to reduce future
payments to him under his employment  agreement to cover such  receivable in the
event the cash is not  received  from the foreign  customer by July 1, 2001.  In
addition,  the  Company has agreed to release VIL from any amounts due in excess
of such receivable. There were no sales to VIL during fiscal 2000.

     The  Company   subleased  space  from  VIL  for  its  European   automotive
operations, until April 1998, at which time the Company assumed the entire lease
agreement.  Sublease  payments for the year ended March 28, 1998, were


                                      F-17
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


$195,000.  In addition,  prior to the assumption of the entire lease  agreement,
the Company has been  allocated  its pro-rata  portion of certain  manufacturing
overhead  expenses  based on square  footage,  as well as a pro-rata  portion of
shared general and administrative  expenses. Such costs totaled $570,000 for the
year ended March 28, 1998.

     The Company purchases from Valentec certain components that are used in its
products.  Prior to the Valentec Acquisition  purchases totaled $405,000 for the
year ended March 28, 1998.

     In connection with the Valentec  Acquisition,  the Company assumed a demand
note payable to VIL of $800,000 and a five-year term note payable to VIL of $2.0
million. The Company paid all amounts related to these notes during fiscal 1998.

Note 5 Long-Term Obligations (in thousands)


<TABLE>
<CAPTION>
                                                                                                               Restated
                                                                                           March 25, 2000   March 27, 1999
                                                                                           --------------   --------------
<S>                                                                                          <C>                 <C>
Senior Subordinated Notes due July 15, 2007, bearing
     interest at 10 1/8%                                                                     $  90,000           $  90,000

KeyBank revolving credit facility due May 05, 2002, bearing
     interest at 3.0% over LIBOR                                                                37,850              37,200

KeyCorp equipment note due July 10, 2005, bearing interest at 7.09%                              8,074               9,210

Bank Austria mortgage note, due March 31, 2007, bearing
     interest at 1.0% over LIBOR                                                                 5,625               6,375

Deutsche Bank mortgage note, $801 due June 30, 2009 and $1,335 due
     June 30, 2019, bearing interest at 4.05% and 3.75%, respectively                            2,136                   0

Note payable,  principal due in annual  installments of $212 Beginning  January
     12,  1999 to  January 12, 2002,  with  interest  at 7.22% in  semiannual
     installments, secured by assets of the
     Company's United Kingdom subsidiary                                                           398                 608

A.1  Credit Corp note, due in monthly  installments of $29 beginning January 3,
     1999 to November 3, 2001, bearing interest at 7.57%
     (See Note 1)                                                                                 526                 724

Capital equipment notes payable,  due in monthly  installments  with interest at
      8.02% to 16.0% maturing at various rates
      Through June 2002, secured by machinery and equipment                                      2,714               3,571
                                                                                             ---------           ---------
                                                                                               147,323             147,688
Less - Current portion                                                                        (131,587)             (3,988)
                                                                                             ---------           ---------
                                                                                             $  15,736           $ 143,700
                                                                                             =========           =========
</TABLE>


Senior Subordinated Notes

     On July 24, 1997,  the Company  issued $90.0  million  aggregate  principal
amount of its 10 1/8%  Senior  Subordinated  Notes due 2007,  Series A (the "Old
Notes")  to BT  Securities  Corporation,  Alex.  Brown & Sons  Incorporated  and
BancAmerica  Securities,   Inc.  in  a  transaction  not  registered  under  the
Securities  Act of 1933, as amended,  in reliance  upon an exemption  thereunder
(the "Debt  Offering").  On September 2, 1997, the Company commenced an offer to
exchange (the "Exchange Offer", together with the Debt Offering, the "Offering")
the Old


                                      F-18
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


Notes  for  $90.0  million  aggregate  principal  amount  of its 10 1/8%  Senior
Subordinated  Notes due 2007, Series B (the "Exchange Notes",  together with the
Old Notes,  the "Notes").  All of the Old Notes were  exchanged for the Exchange
Notes pursuant to the terms of the Exchange  Offer,  which expired on October 1,
1997.  Interest  on the  Notes  accrues  from  July  24,  1997  and  is  payable
semi-annually  in arrears  on each of  January 15 and July 15 of each year.  The
Company  has  accrued  as of March 25,  2000,  as part of  accrued  liabilities,
approximately $6.5 million of interest.  The Company incurred approximately $3.9
million  of fees and  expenses  related  to the  Offering.  Such  fees have been
deferred  and are being  charged to  operations  over the  expected  term of the
Notes,  not to exceed 10 years. The Notes are general  unsecured  obligations of
the Company and are  subordinated in right of payment to all existing and future
Senior  Indebtedness  (as defined in the  Indenture  pursuant to which the Notes
were  issued)  and to all  existing  and future  indebtedness  of the  Company's
subsidiaries  that are not Guarantors.  All of the Company's direct and indirect
wholly-owned domestic subsidiaries are Guarantors (See Note 14).

     On January 18, 2000, the Company did not make a scheduled  interest payment
on its 10 1/8% Senior  Subordinated  Notes (the "Notes").  The senior lenders of
the Company had  previously  notified the trustee for the  Company's  Notes that
they were exercising  their rights to block such interest  payment.  As of March
25, 2000, the Notes were in default and classified as current liabilities in the
accompanying  consolidated  balance sheet. See description of the  Restructuring
Agreement in Note 1.

Credit Agreement

     The  Company,  ASCI GmbH and  Automotive  Safety  Components  International
Limited,  a wholly-owned  subsidiary of the Company  organized under the laws of
the United Kingdom, entered into an agreement with KeyBank National Association,
as administrative agent ("KeyBank"), dated as of May 21, 1997 as amended to date
(the  "Credit  Agreement").  The Credit  Agreement  consists of a $40.0  million
revolving credit facility for a five year term ($37.9 million  outstanding as of
March 25,  2000),  bearing  interest at LIBOR  (6.13% as of March 25, 2000) plus
3.0% with a commitment fee of 1.0% per annum for any unused portion. The initial
proceeds from KeyBank were used to repay the Bank of America NT&SA term loan and
revolving  credit facility.  KeyBank was  subsequently  repaid with the proceeds
from the Offering. The Company incurred approximately $470,000 of financing fees
and related  costs.  These  costs have been  deferred  and are being  charged to
operations over the expected term of the Credit Agreement not to exceed 5 years.
The  Credit  Agreement  contains  certain  restrictive   covenants  that  impose
limitations  upon,  among  other  things,  the  Company's  ability to change its
business;  merge;  consolidate or dispose of assets; incur liens; make loans and
investments; incur indebtedness;  pay dividends and other distributions;  engage
in  certain  transactions  with  affiliates;   engage  in  sale  and  lease-back
transactions; enter into lease agreements; and make capital expenditures.

     On October 9, 1998, the Company  entered into Amendment No. 4 to the Credit
Agreement,  which increased the revolving  credit facility from $27.0 million to
$40.0 million,  and added Fleet Bank as a member of the bank syndicate.  KeyBank
and Fleet Bank each provide fifty percent of the financing  available  under the
Credit Agreement and KeyBank remains as acting agent.

     On June 24, 1999,  the Company  entered into  Amendment No. 6 to the Credit
Agreement,  which  among  other  covenants  requires  the  Company to earn $30.0
million of EBITDA (as such term is  defined in the Credit  Agreement)  in fiscal
year 2000. Such covenant is tested monthly based upon cumulative targets for the
year.  Covenants for Fixed Charge  Coverage,  Interest  Coverage and Minimum Net
Income are also based on the $30.0  million  EBITDA  target.  In  addition,  the
interest  rate was  increased  to LIBOR  plus  3.0% and the  commitment  fee was
increased  to 1.0%.  The  Company  issued to the  Lenders  ten-year  warrants to
acquire 20,000 shares of the Company's  common stock at current market value per
share.  Additionally,  the Company will be subject,  as of June 24,  2000,  to a
Senior  Funded  Debt  to  EBITDA  ratio  covenant  of 1.5 to 1.0  and a  Minimum
Consolidated  Net Worth  covenant.  In addition,  under  Amendment  No. 6 to the
Credit  Agreement the Lenders  waived  certain  financial  covenants for periods
through  the  date  of  such  amendment.  As of  March  25,  2000  there  was no
availability  under the  Credit  Agreement  and the  Company  was in  default of
certain financial  covenants.  Consequently,  obligations  outstanding under the
Credit  Agreement are


                                      F-19
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


classified  as  current  liabilities  as of March 25,  2000 in the  consolidated
balance  sheet.  The  indebtedness  under the  Credit  Agreement  is  secured by
substantially   all  the  assets  of  the  Company.   See   description  of  the
Restructuring Agreement in Note 1.

Other Long-term Obligations

     On July 10,  1998,  the  Company  entered  into a $10.0  million  financing
arrangement  with  KeyCorp  Leasing,  a division of Key  Corporate  Capital Inc.
("KeyCorp").  The  Company  applied the entire  proceeds to satisfy  outstanding
indebtedness under the KeyBank revolving credit facility, thereby increasing the
availability  under  the  revolving  credit  facility.   The  KeyCorp  financing
agreement has a seven-year  term, bears interest at a fixed rate of 7.09% via an
interest swap agreement,  and requires monthly payments of $150,469,  secured by
certain  equipment  located at SCFTI. The rate swap is considered  immaterial to
the Company's financial position at March 25, 2000.

     On June 4, 1997, the Company secured a $7.5 million  mortgage note facility
with  Bank of  Austria.  The note is  payable  in  semi-annual  installments  of
$375,000  through March 31, 2007 and bears interest at 1.0% over LIBOR. The note
is secured by the assets of the Company's Czech Republic  facility.  The Company
incurred approximately $437,000 of financing fees and related costs. These costs
have been deferred and will be charged to  operations  over the expected term of
the note not to exceed 5 years.

     On November 3, 1998,  the Company  entered into an unsecured  note facility
with A.1 Credit Corp. of $772,000 (including  transaction and other fees), which
requires  monthly  payments of $29,000 and bears  stated  interest at 7.57% (see
Note 1).

     On April 1, 1999, the Company secured a $2.9 million mortgage note facility
with Deutsche Bank to purchase a facility in Bavendstedt,  Germany.  The note is
secured by the real  estate in Germany  acquired  through  the  mortgage  and is
further secured by a guarantee issued by the Company.  In July 1999, the Company
refinanced the note and reduced the  outstanding  indebtedness  to $2.1 million.
The new German  facility has allowed the Company to conduct its  operations in a
more efficient and cost effective manner.

     Future annual minimum  principal  payments at March 25, 2000 are due in the
following fiscal years (amounts are in thousands):


      2001                         $131,587
      2002                            3,629
      2003                            2,796
      2004                            2,295
      2005                            2,776
      Thereafter                      4,240
                                   --------
                                   $147,323
                                   ========


                                      F-20
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))



Note 6 Income Taxes

The  provision  (benefit)  for income taxes is comprised  of the  following  (in
thousands):

                                                  Year ended
                               -------------------------------------------------
                                                   Restated          Restated
                               March 25, 2000    March 27, 1999   March 28, 1998
                               --------------    --------------   --------------
Current taxes:
     Federal                           --          $  (930)         $ 1,313
     State                             --              110              204
     Foreign                           --             (138)             (48)

Deferred taxes:
     Federal                        5,280           (2,845)            (518)
     State                            450               45             (128)
     Foreign                          424              437            1,104
                                  -------          -------          -------
                                  $ 6,154          $(3,321)         $ 1,927
                                  =======          =======          =======


     The provision  (benefit) for income taxes differs from the amount  computed
by  applying  the  federal  income  tax rate to income  before  income  taxes as
follows:

                                                          Year ended
                                                --------------------------------
                                                            Restated   Restated
                                                March 25,   March 27,  March 28,
                                                  2000       1999        1998
                                                ---------   ---------  ---------
Expected taxes at federal statutory rate           (34%)      (34%)       34%
State income taxes, net of federal benefits         --         --          3
Foreign earnings taxed at different rates           (2)         1          3
Reversal of  foreign contingency reserve            --         --         (4)
Valuation allowance on deferred tax assets          35         11         --
Non-deductible intangibles and other, net           22          2          1
                                                   ---        ---        ---
                                                    21%       (20%)       37%
                                                   ===        ===        ===

     The primary  components of net current  deferred tax assets of $1.6 million
and $2.5 million  included in other  current  assets at March 25, 2000 and March
27,  1999,  respectively,  net  non-current  deferred tax assets of $1.5 million
included  in other  non-current  assets at March  27,  1999,  and net  long-term
deferred tax  liabilities of $3.1 million and $0.6 million which are included in
other long-term liabilities at March 25, 2000 and March 27, 1999,  respectively,
in the accompanying consolidated balance sheet, are as follows (in thousands):

                                                                       Restated
                                                        March 25,      March 27,
                                                          2000           1999
                                                        --------       --------
Deferred tax assets (liabilities):
      Accrued liabilities                               $  1,032       $    486
      Inventory                                              519            625
      Property, plant and equipment                       (6,240)        (5,956)
      Intangibles                                         (2,851)        (1,638)
      Net operating loss acquired from Valentec            1,674          1,674
      Federal net operating loss                          15,537          8,179
      Foreign net operating loss                             622          1,455
      Other                                                  (38)           325
                                                        --------       --------
           Net deferred tax (liabilities) assets
             before valuation allowances:                 10,255          5,150
      Valuation allowance on deferred tax assets         (11,797)        (1,674)
                                                        --------       --------
           Net deferred tax (liabilities) assets:       $ (1,542)      $  3,476
                                                        ========       ========

     In  addition,  net tax  benefits of $708,000 and $668,000 at March 25, 2000
and March 27, 1999, respectively,  were recorded directly through equity as part
of the  cumulative  translation  adjustment  account.  These  amounts  relate


                                      F-21
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


to translation losses resulting from inter-company note receivable balances from
Phoenix Airbag to one of the Company's domestic subsidiaries.

     No taxes  have been  provided  relating  to the  possible  distribution  of
approximately   $8.4  million  of  undistributed   earnings   considered  to  be
permanently  reinvested  in foreign  operations.  No  additional  taxes would be
payable at March 25, 2000 if such earnings were distributed due to the Company's
net operating loss position.

Note 7 Commitments and Contingencies

     On June 27, 2000,  Valentec  Systems,  Inc. received from the Department of
the Army a Notice of Partial  Termination for Production of 120mm Fin Assemblies
(the "Partial Termination").  Management has estimated that the upper end of the
range for potential loss resulting from the Partial Termination could be as high
as $3.3  million.  The  Company  has  reserved  an amount at March 25, 2000 that
management  believes  is  adequate  based on the  information  available  and on
advisement  from legal  counsel.  The Company is reviewing the process to appeal
the Partial  Termination,  however  there can be no  assurances  as to the final
decision by the Department of the Army.

Operating leases

     The Company has  non-cancelable  operating  leases for equipment and office
space that expire at various dates through 2009.  Certain of the lease  payments
are subject to adjustment  for inflation.  The Company  incurred rent expense of
$2.9 million,  $2.6 million and $1.6 million for the years ended March 25, 2000,
March 27, 1999 and March 28, 1998, respectively.

     Future  annual  minimum  lease  payments for all  non-cancelable  operating
leases as of March 25, 2000 are as follows (in thousands):

            2001                          $ 2,328
            2002                            2,274
            2003                            2,227
            2004                            1,261
            2005                            1,201
            Thereafter                      5,797
                                          -------
                                          $15,088
                                          =======


                                      F-22
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


Environmental issues

     The Company has identified two areas of  underground  contamination  at the
Company's  facility  in Galion,  Ohio.  One area  involves a  localized  plating
solution  spill.  The second area  involves a  chlorinated  solvent spill in the
vicinity of a former  above  ground  storage  area.  The  Company  has  retained
environmental   consultants  to  quantify  the  extent  of  this  problem.  Such
environmental   consultants  estimate  that  the  Company's  voluntary  plan  of
remediation  could take three to five years to implement,  followed up by annual
maintenance.  The  consultants  also  estimate  that  remediation  costs will be
approximately  $250,000,  for which the Company had accrued prior to fiscal year
1998 and is included in other long-term  liabilities at March 25, 2000 and March
27, 1999.  However,  depending on the actual  extent of impact to the Company or
more stringent regulatory criteria,  these costs could be higher.  Additionally,
an underground  contamination  involving machinery fluids exists at the Valentec
facility in Costa Mesa, California and a site remediation plan has been approved
by the Regional Water Quality  Control  Board.  The  remediation  plan currently
involves  the  simultaneous  operation  of a  groundwater  and vapor  extraction
system.  Such  plan  will  take  approximately  five  years to  implement  at an
estimated cost of approximately  $368,000,  for which the Company had accrued as
part of  accrued  liabilities.  To date,  the  Company  has spent  approximately
$325,000 on implementing such plan. In addition, SCFTI has been identified along
with numerous other parties as a Potentially  Responsible  Party at the Aquatech
Environmental, Inc. Superfund Site. The Company believes that it is a de minimis
party with respect to the site and that future  clean-up  costs  incurred by the
Company will not be material.

     A Phase II study revealed limited organic groundwater  contamination at the
Company's  converter  facility in South  Carolina.  At the time of the Company's
purchase of such facility,  $185,000 of the purchase price thereof was placed in
escrow to pay for, if necessary,  environmental  remediation  and  monitoring at
such facility.  Based on the results of the groundwater  monitoring that already
has been  conducted,  and on the Company's  discussions  with the South Carolina
Department of Health and Environmental  Control ("DHEC"), it appears likely that
no further work will be required.

     Low levels of VOCs were found at the Company's Automotive facility in South
Carolina during groundwater  sampling. In February 1999, the facility received a
notice letter from DHEC  regarding  the  groundwater  contamination.  While DHEC
acknowledges  that there does not appear to be an active source for  groundwater
impact at the  facility,  it required  the  facility to perform  sampling of two
existing  monitoring wells located on the Automotive parcel for VOCs. Low levels
of VOCs  again  were  detected.  A meeting  was held with  DHEC to  discuss  the
sampling  results.  DHEC has  requested  that the Company  (i)  confirm  that no
residential wells exist in the area, (ii) perform additional sampling, and (iii)
propose a program in-site remediation of the groundwater, involving injection of
nutrients to biodegrade  to organic  compounds in the  groundwater.  The Company
does not at this time  believe  that these costs will be  material.  The Company
cannot evaluate the likelihood of further DHEC requirements at this time.

     In the opinion of management, no material expenditures beyond those accrued
at March 25, 2000 will be required for its environmental control efforts and the
final  outcome of these matters will not have a material  adverse  effect on the
Company's results of operations or financial position. The Company believes that
it currently is in compliance with applicable  environmental  regulations in all
material respects. Management's opinion is based on the advice of an independent
consultant on environmental matters.

Legal proceedings

     After the Company's  announcement of the restatements in November 1999, the
Company and several of its present or former  officers and directors  were named
defendants in a class action litigation commenced by shareholders of the Company
in the United  States  District  Court for the  District  of New  Jersey.  Eight
separate  lawsuits were filed,  alleging  violations  of the federal  securities
laws, and all have been consolidated into one action.  The parties are currently
negotiating a settlement of the litigation,  which will require  approval by the
District Court, as well as the federal  bankruptcy  court in which the Company's
Chapter 11 petition is currently pending.  Management does not


                                      F-23
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


presently believe that a resolution  consistent with present  negotiations would
have a material effect on the financial statements.

     Valentec,  which was  acquired  by the  Company  in May 1997,  has been the
subject of an investigation by the Department of Justice regarding a bid-rigging
and  kickbacks  scheme  alleged  to have  occurred  between  1988 and 1992.  The
Department of Justice Antitrust Division has contended that former  subsidiaries
or divisions of the former  Valentec  participated  in such  misconduct  in part
through the actions of a former marketing agent and former  employees,  in order
to obtain certain  government  subcontracts  awarded by Martin Marietta Ordnance
Systems (the  predecessor-in-interest  to Lockheed Martin).  The Government also
contended that Valentec was liable for the acts of its  predecessors on a theory
of successor  corporate criminal  liability.  The Government  contended that the
alleged  kickbacks  were made  through the former  Valentec  Kisco and  Valentec
Galion  operations  while those operations were owned and operated by the former
Valentec from the late 1980's through 1992, prior to the 1993 leveraged  buy-out
of Valentec by Robert A. Zummo, the President and Chief Executive Officer of the
Company.  No officer or director of the Company or its  subsidiaries was alleged
to have  participated  in, or known  about,  such  conduct.  The  Company has no
recourse  against the entity  which owned  Valentec  during the  operative  time
period due to contractual  restrictions  in the purchase  agreement  between Mr.
Zummo and such entity.  The Company  determined that it was in its best interest
to settle  such matter in order to avoid the costs and  distractions  associated
with  contesting  the  Department  of  Justice's  legal  theories  on  successor
liability.  Therefore,  a plea  agreement  was  negotiated  with  the  Antitrust
Division of the Department of Justice (the "Plea Agreement"),  pursuant to which
Valentec  entered  a  plea,  as the  successor  to the  former  Valentec  Galion
division,  to a one-count criminal information of participating in a combination
and  conspiracy to suppress  competition  in violation of the Sherman  Antitrust
Act, 15  U.S.C.ss.1,  and agreed to pay a $500,000  fine,  all of which was paid
during fiscal year 1999.  The Plea  Agreement  also includes an agreement by the
Government not to further criminally prosecute the Company, its subsidiaries, or
any of their  respective  officers,  directors  or  employees  as to the alleged
bid-rigging and kickback scheme. The Plea Agreement does not release the Company
or Valentec  from  potential  civil  claims that might be asserted by the United
States  Department of Justice Civil Division against Valentec arising out of the
Government's  investigation  of conduct that is alleged to have  occurred in the
time frame prior to Mr. Zummo's 1993 leveraged buy-out of Valentec.  The Company
has had  discussions  with the Civil  Division  regarding the resolution of such
potential civil claims.  As of the date hereof no understanding had been reached
with the Civil  Division as to such potential  civil claims.  The Company denies
that it is liable for any such potential civil claims.  In early 1999,  Lockheed
Martin named  Valentec as a defendant in a civil action  already  pending in the
United  States  District  Court for the  Western  District  of  Tennessee  ("the
Court").   Lockheed   Martin   asserts   that   Valentec,   as   the   corporate
successor-in-interest  to the  former  Valentec  International  Corporation,  is
civilly liable to Lockheed Martin under antitrust,  breach of contract and other
theories of liability for damages. Lockheed Martin claims that it sustained such
civil damages in part as a consequence of the  bid-rigging  and kickback  scheme
said to have  occurred in  connection  with  subcontracts  awarded to the former
Valentec Galion by Lockheed  Martin's  predecessor-in-interest,  Martin Marietta
Ordnance  Systems,  Inc.  between  1988 and 1992.  Lockheed  Martin also seeks a
declaratory  judgment that Valentec and the other named defendants shall be held
liable and shall indemnify  Lockheed Martin to the extent that the United States
Government  makes and establishes  civil claims against  Lockheed Martin arising
out of such purported  antitrust and bid-rigging  scheme. Such civil claims have
been  established  at  $270,000.  Valentec  denies  that  Valentec  has any such
liability  to Lockheed  Martin and,  accordingly,  has moved to dismiss all such
claims.  On  February  29,  2000,  the Court  dismissed  and  otherwise  entered
judgement in  Valentec's  favor in all causes of action of the  Lockheed  Martin
case.  However,  Lockheed Martin's claim for indemnification for civil claims of
the U.S. Government was not dismissed. Accordingly, Lockheed Martin has filed an
amended  complaint  against  Valentec  and the other  defendants  for  $340,000,
representing $270,000 paid by Lockheed Martin to the U.S. Government and $70,000
in legal fees. A settlement  offer has been  proffered by Lockheed  Martin at an
amount for which the Company is adequately reserved.

     From time to time,  the Company is a defendant in legal  actions  involving
claims arising in the normal course of business.  The Company believes that as a
result of its legal defenses none of these actions presently pending, if


                                      F-24
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


decided  adversely,  would  have a  material  adverse  effect  on its  financial
position,  results of operations or cash flows,  either  individually  or in the
aggregate.

     During fiscal year 1998 the Company  settled a separate  matter relating to
Valentec,  which arose prior to the Valentec Acquisition,  for $600,000.  During
fiscal years 1998, 1999 and 2000,  $400,000 was paid by the Company. As of March
25, 2000, $200,000 remains in accrued liabilities.

Note 8 Business Segment Information

     The  Company  adopted  SFAS No.  131,  "Disclosures  about  Segments  of an
Enterprise  and  Related   Information"  in  fiscal  year  1999.  The  Company's
operations have been classified into two operating segments:  (i) Automotive and
Fabric - The Company  manufactures  fabrics and  automotive  airbags for several
domestic and foreign automobile  manufacturers under contracts with major airbag
systems  integrators.  Included in Automotive  and Fabric are  technical  fabric
products,  which are produced using similar  production  processes as for airbag
fabric;  and (ii) Metal and Defense - The Company  acts as a systems  integrator
for the U.S.  Army,  coordinating  the  manufacture  and assembly of  components
supplied by various subcontractors.  Included in the Metal and Defense are metal
components  manufactured  for  commercial  purposes,  which are  produced  using
similar  production  processes as other metal components.  The Company's Defense
Operations also manufactures projectiles and other metal components for small to
medium  caliber  training and tactical  ammunition for the U.S. Armed Forces and
contractors within the defense business.

     In the second quarter of fiscal year 2000,  management  determined that the
Company's reportable operating segments,  disclosed in previous filings, were no
longer  consistent  with the manner in which  management  reviews the  Company's
business  operations and assesses the  performance of its various product lines.
Accordingly, the Company has realigned its reportable operating segments to more
appropriately  reflect  management's  current  practice.  The Company  evaluates
performance and allocates  resources based on earnings (operating income) before
interest,   taxes,   depreciation  and  amortization   (EBITDA).  The  Company's
reportable  segments are differentiated by product and production  process.  The
reportable  segments  are  each  managed  separately  because  they  manufacture
distinct products with different production processes.  Amounts for fiscal years
1999 and 1998  have been  reclassified  to  conform  with  management's  revised
approach to managing the business.  Summarized financial information by business
segment follows (in thousands).


<TABLE>
<CAPTION>
                                                       Restated          Restated
                                    March 25, 2000   March 27, 1999   March 28, 1998
                                    --------------   --------------   --------------
<S>                                    <C>             <C>             <C>
Revenues from external customers:
      Airbag cushions                  $ 123,838       $ 106,644       $  75,573
      Airbag fabric                       46,205          47,768          36,681
      Technical fabric                    24,624          23,936          17,400
                                       ---------       ---------       ---------
        Automotive and fabrics         $ 194,667       $ 178,348       $ 129,654
                                       =========       =========       =========

      Systems integrator               $  16,384       $  22,621       $  11,313
      Metal components                    17,215          19,012          25,107
                                       ---------       ---------       ---------
        Metal and defense              $  33,599       $  41,633       $  36,420
                                       =========       =========       =========

EBITDA:
      Automotive and fabrics           $  25,263       $  16,805       $  17,138
      Metal and defense                     (160)           (500)          5,969
      Corporate                           (9,568)         (8,214)         (3,741)
                                       ---------       ---------       ---------
                                       $  15,535       $   8,091       $  19,366
                                       =========       =========       =========
</TABLE>


                                      F-25
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


<TABLE>
<CAPTION>
                                                                                               Restated            Restated
                                                                       March 25, 2000       March 27, 1999      March 28, 1998
                                                                       --------------       --------------      --------------
<S>                                                                        <C>                 <C>                 <C>
Unusual items:
      Automotive and fabrics
            Effect of General Motors strike                                $     --            $  1,300            $     --
            Relocation and Reorganization                                        --               2,400               1,789
                                                                           --------            --------            --------
                                                                                 --            $  3,700            $  1,789
                                                                           ========            ========            ========
      Corporate
            Reorganization and restatement                                 $  3,969            $     --
            Terminated investment agreement                                      --               2,500            $     --
            Relocation and Reorganization                                        --                 838                  --
                                                                           --------            --------            --------
                                                                           $  3,969            $  3,338            $     --
                                                                           ========            ========            ========
Write-down of impaired long-lived assets and goodwill:
      Automotive and fabrics                                               $     --            $  1,839            $     --
      Metal and defense                                                      17,676                  --                  --
      Corporate                                                                  --                 500            $     --
                                                                           --------            --------            --------
                                                                           $ 17,676            $  2,339            $     --
                                                                           ========            ========            ========
Total assets at fiscal year end:
      Automotive and fabrics                                               $149,388            $163,076            $138,166
      Metal and defense                                                      19,058              43,826              47,625
      Corporate                                                               7,114              11,068               8,842
                                                                           --------            --------            --------
                                                                           $175,560            $217,970            $194,633
                                                                           ========            ========            ========
Capital expenditures:
      Automotive and fabrics                                               $  7,974            $ 12,130            $ 13,159
      Metal and defense                                                         740               1,488                 556
      Corporate                                                                 112                 236                  --
                                                                           --------            --------            --------
                                                                           $  8,826            $ 13,854            $ 13,715
                                                                           ========            ========            ========
</TABLE>


     The Company  attributes its revenues from external customers and long-lived
assets to a particular  country  based on the location of each of the  Company's
production facilities. Summarized financial information by geographic area is as
follows:

<TABLE>
<CAPTION>
                                                          Restated        Restated
                                       March 25, 2000  March 27, 1999  March 28, 1998
                                       --------------  --------------  --------------
<S>                                         <C>           <C>           <C>
Revenues from external customers:

      United States                         $104,428      $113,337      $ 90,501

      Mexico                                  46,651        33,888        29,770

      Germany                                 54,222        58,697        35,133

      Total Europe                            77,187        72,756        45,803

Long-lived assets excluding goodwill
   and other intangibles at period end:

      United States                         $ 39,672      $ 43,911      $ 43,844

      Mexico                                   1,093         1,130           970

      Germany                                  9,905         7,796         8,108

      Total Europe                            15,109        15,860        13,307
</TABLE>


                                      F-26
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


Note 9 Employee Benefit Plans

     The Company had two defined  contribution  plans  qualified  under  Section
401(k) of the Internal Revenue Code for eligible  employees.  Both plans provide
for  discretionary  employer  contributions.  One plan,  referred to as the "SCI
Plan", had been Valentec's prior to the Valentec acquisition;  the other plan is
the  "Galion  Plan." The SCI Plan and the "Galion  Plan",  provide for a company
match equal to 50% of the  employee's  contribution  up to 6% of the  employee's
salary.  Employer  contributions  become 100%  vested  after two years of vested
service.  Effective  January 1, 2000,  the Galion Plan merged into the SCI Plan.
The Company  contributed an aggregate of  approximately  $403,000,  $398,000 and
$140,000 during fiscal years 2000, 1999 and 1998, respectively,  to the SCI Plan
and Galion Plan.

Note 10 Common Stock and Stock Options

Common Stock

     During fiscal year 1999,  the Company  issued an aggregate of 90,933 shares
of Common Stock from stock option agreements exercised. During fiscal year 1998,
the Company acquired an aggregate of 1,379,200 shares of Common Stock and issued
an aggregate of 1,369,200  shares of Common Stock,  each in connection  with the
Valentec  Acquisition  (Note 1). The  remainder of shares of Common Stock issued
during fiscal year 1998 were from stock option agreements  exercised.  There was
no activity in the Company's common stock for fiscal year 2000.

Stock Options

     The  Company's  stock option plan  ("Plan"),  as amended,  provides for the
issuance of options to purchase up to an aggregate of 1,500,000  shares of SCI's
Common Stock to key officers, employees of SCI or its affiliates,  directors and
consultants.  The options granted vest in three equal  installments on the first
three  anniversary  dates  of  the  grant.  Each  award  is  determined  by  the
Compensation  Committee of the Board of Directors on an individual basis, except
for awards to non-officer directors, which are determined pursuant to a formula.
The Company accounts for these plans under  Accounting  Principles Board Opinion
No. 25, under which no compensation cost has been recognized.

     Had compensation cost for these plans been determined  consistent with FASB
Statement  No. 123, the  Company's  net income and earnings per share would have
been reduced to the following pro forma amounts (in thousands,  except per share
data):

<TABLE>
<CAPTION>
                                                                           Restated          Restated
                                                         March 25, 2000  March 27, 1999   March 28, 1998
                                                         --------------  --------------   --------------
<S>                                       <C>              <C>            <C>              <C>
Net (loss) income:                        As Reported      $   (35,145)   $   (13,663)     $     3,346
                                                           ===========    ===========      ===========
                                          Pro Forma        $   (35,886)   $   (14,496)     $     2,728
                                                           ===========    ===========      ===========

Net (loss) income per share, basic:       As Reported      $     (6.84)   $     (2.67)     $      0.67
                                                           ===========    ===========      ===========
                                          Pro Forma        $     (6.99)   $     (2.84)     $      0.54
                                                           ===========    ===========      ===========
</TABLE>


                                      F-27
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


     A summary of the status of the  Company's  stock  option  plan at March 25,
2000,  March 27, 1999 and March 28, 1998 and changes during the years then ended
is presented in the table and narrative below:


<TABLE>
<CAPTION>
                                                                                Restated                   Restated
                                                   March 25, 2000            March 27, 1999             March 28, 1998
                                             -----------------------     ----------------------     ------------------------
                                                           Weighted                    Weighted                    Weighted
                                              Number       Average        Number       Average        Number       Average
                                                of         Exercise         Of         Exercise         of         Exercise
                                              Shares        Price         Shares        Price         Shares        Price
                                            ----------    ----------    ----------   ----------     ----------    ----------
<S>                                            <C>             <C>       <C>             <C>           <C>            <C>
Outstanding at beginning of year               878,267         12.56     1,079,933       $12.16        531,999        $12.57
Granted                                        592,500          5.78        53,000        14.96        611,500         11.86
Exercised                                           --            --       (75,933)       10.83        (23,000)        10.00
Forfeited                                     (230,600)        11.41      (178,733)       11.63        (40,566)        14.11
                                            ----------    ----------    ----------   ----------     ----------    ----------
Outstanding at end of year                   1,240,167          9.53       878,267        12.56      1,079,933         12.16
                                            ==========    ==========    ==========   ==========     ==========    ==========
Exercisable at end of year                     548,406         12.34       516,000        12.30        312,865         12.43
                                            ==========    ==========    ==========   ==========     ==========    ==========
Weighted average fair value
        of options granted                       $3.10                       $5.96                       $4.61

</TABLE>


     Of the  1,240,167  options  outstanding  at March 25,  2000,  437,000  have
exercise prices between $2.59 and $6.00 with a weighted  average  exercise price
of $5.25 and a weighted average  remaining  contractual life of 9.19 years; none
of these options are currently  exercisable.  An additional 214,000 options have
exercise prices between $8.50 and $10.00, with a weighted average exercise price
of $9.30 and a weighted average remaining contractual life of 7.08 years; 97,350
of these  options are currently  exercisable  with a weighted  average  exercise
price of $10.00.  An additional  283,167  options have exercise  prices  between
$10.25  and  $11.50  with a  weighted  average  exercise  price of $11.05  and a
weighted  average  remaining  contractual  life of 7.16 years;  232,985 of these
options are currently  exercisable  with a weighted  average  exercise  price of
$11.12.  An additional  259,500  options have exercise prices between $12.13 and
$14.88 with a weighted  average  exercise price of $13.54 and a weighted average
remaining contractual life of 7.67 years; 179,575 of these options are currently
exercisable  with a weighted  average  exercise  price of $13.57.  The remaining
46,500  options have exercise  prices  between $15.88 and $21.73 with a weighted
average  exercise price of $19.30 and a weighted average  remaining  contractual
life of 6.02 years;  38,496 of these  options are currently  exercisable  with a
weighted average  exercise price of $20.01.  The fair value of each option grant
is estimated on the date of grant using the  Black-Scholes  option pricing model
with the following  weighted-average  assumptions  used for grants in 2000, 1999
and 1998, respectively: risk-free interest rates ranged from 5.0 to 6.7 percent;
zero percent dividends for all years; expected lives of 6.0, 5.0, and 5.0 years;
and expected volatility of 51.0, 35.6, and 31.4 percent.



                                      F-28
<PAGE>



                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


Note 11 - Reconciliation to Diluted Earnings Per Share (in thousands)

     The  following  data show the amounts used in computing  earnings per share
and the effect on income and the weighted  average  number of shares of dilutive
potential common stock.


<TABLE>
<CAPTION>
                                                                       Restated       Restated
                                                   March 25, 2000   March 27, 1999  March 28,1998
                                                   --------------   --------------  -------------
<S>                                                    <C>            <C>              <C>
Net (loss) income                                      $(35,145)      $(13,663)        $3,346
                                                       ========       ========       ========

Weighted average number of common shares used
  in basic earnings per share                             5,136          5,112          5,027
Effect of dilutive securities:
  Stock options                                              --             --            117
  Warrants                                                   --             --              3
                                                       --------       --------       --------
Weighted average number of common shares and
  Dilutive potential common stock used in diluted
  Earnings per share                                      5,136          5,112          5,147
                                                       ========       ========       ========
</TABLE>


     At March 25, 2000, options on 1,240,167 shares of common stock and warrants
for 124,400 shares of common stock were  considered  antidulitive  and therefore
were not included in computing diluted earnings per share. These constituted all
common stock  equivalents at year-end.  Options on 878,267 and 285,500 shares of
common stock were not included in computing  diluted earnings per share at March
27,  1999,  and  March  28,  1998,  respectively,  because  their  effects  were
antidilutive.  Warrants for 104,400  shares of common stock were not included in
computing  diluted  earnings per share at March 27, 1999,  because their effects
were antidilutive.

Note 12 - Comprehensive Income (in thousands)

     During the first quarter of fiscal year 1999, the Company  adopted SFAS No.
130, "Reporting  Comprehensive  Income", which became effective for fiscal years
beginning  after  December 15,  1997.  This  Statement  requires  disclosure  of
comprehensive income, defined as the total of net income and all other non-owner
changes in equity,  which under generally accepted  accounting  principles,  are
recorded  directly  to the  stockholders'  equity  section  of the  consolidated
balance sheet. In SCI's case, the non-owner  changes in equity relate to foreign
currency translation adjustments. Comprehensive income is as follows:


<TABLE>
<CAPTION>
                                                            Restated        Restated
                                          March 25, 2000  March 27, 1999  March 28, 1998
                                          --------------  --------------  --------------
<S>                                          <C>            <C>              <C>
Net (loss) income                            $(35,145)      $(13,663)        $3,346
Foreign currency translation adjustment        (1,801)        (1,542)        (2,288)
                                             --------       --------       --------
Comprehensive (loss) income                  $(36,946)      $(15,205)        $1,058
                                             ========       ========       ========
</TABLE>



                                      F-29
<PAGE>

                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


Note 13 Unaudited Quarterly Results

     Unaudited quarterly financial information for fiscal years 2000 and 1999 is
set forth below. All dollar amounts are in thousands except per share data.

<TABLE>
<CAPTION>
                                        ------------------------------------------------------
                                                            Quarter Ended
                                        ------------------------------------------------------
                                        Restated       Restated
                                         June 26,     September 25,   December 25,   March 25,
                                          1999           1999           1999            2000
                                         --------      --------       --------       --------
<S>                                      <C>           <C>            <C>            <C>
Fiscal 2000
 Revenues                                $ 63,845      $ 53,391       $ 55,254       $ 55,776
 Income (loss) from operations           $  4,496      $  1,410       $(16,404)      $ (2,440)
 Net income (loss)                       $    641      $ (1,431)      $(19,238)      $(15,117)
 Net income (loss) per share, basic      $   0.12      $  (0.28)      $  (3.75)      $  (2.94)
 Net income (loss) per share,            $   0.12      $  (0.28)      $  (3.75)      $  (2.94)
    assuming dilution

<CAPTION>
                                         ------------------------------------------------------
                                                       Quarter Ended (Restated)
                                         ------------------------------------------------------
                                          June 27,   September 26,   December 26,    March 27,
                                           1998          1998           1998           1999
                                         --------      --------       --------       --------
<S>                                      <C>           <C>            <C>            <C>
Fiscal 1999, as restated
 Revenues                                $ 51,065      $ 52,301       $ 60,900       $ 55,715
 Income (loss) from operations           $  4,417      $  2,759       $ (1,599)      $ (7,576)
 Net income (loss)                       $    889      $   (320)      $ (3,699)      $(10,533)
 Net income (loss) per share, basic      $   0.18      $   (.06)      $  (0.72)      $  (2.06)
 Net income (loss) per share,            $   0.17      $   (.06)      $  (0.72)      $  (2.06)
    assuming dilution
</TABLE>


                                      F-30
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


Note 14 - Supplemental Guarantor Condensed Consolidating Financial Statements

     In connection with the Offering (see Note 5), the Notes are guaranteed on a
senior  unsecured  basis,  jointly  and  severally,  by  each  of the  Company's
principal  wholly-owned  domestic  operating  subsidiaries  and  certain  of its
indirect   wholly-owned   subsidiaries   (the   "Guarantors").   The   condensed
consolidating  financial  statements  of the  Guarantors  are  presented  below.
Management believes the condensed  consolidating  financial statements presented
are meaningful in understanding  the financial  position,  results of operations
and cash flows of the Guarantor subsidiaries.

<TABLE>
<CAPTION>
CONSOLIDATING BALANCE SHEETS

                                                                                         March 25, 2000

                                                                    Guarantor   Non-Guarantor   Parent     Elimination  Consolidated
                                                                  Subsidiaries   Subsidiaries Corporation     Entries       Total
                                                                 -------------------------------------------------------------------
<S>                                                                 <C>          <C>          <C>          <C>          <C>
ASSETS
Current Assets:
     Cash and cash equivalents ..................................   $     250    $   5,209    $   4,805           --    $  10,264
     Accounts receivable,  net ..................................      28,543       12,738           --           --       41,281
     Receivable from affiliate ..................................          --           --          564           --          564
     Inventories ................................................      11,670        3,156           --           --       14,826
     Prepaid and other ..........................................         515          930        1,453           --        2,898
                                                                    ---------    ---------    ---------    ---------    ---------
Total current assets ............................................      40,978       22,033        6,822           --       69,833
                                                                    ---------    ---------    ---------    ---------    ---------
     Property,  plant and equipment, net ........................      39,003       26,107          669           --       65,779
     Intangible assets, net .....................................      21,223       14,168           --           --       35,391
     Other assets ...............................................       5,844           58        7,020       (8,365)       4,557
                                                                    ---------    ---------    ---------    ---------    ---------

Total assets ....................................................   $ 107,048    $  62,366    $  14,511    $  (8,365)   $ 175,560
                                                                    =========    =========    =========    =========    =========

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
     Accounts payable ...........................................   $  14,588    $   6,194    $   1,591           --    $  22,373
     Earnout payable ............................................          --           --           --           --           --
     Accrued liabilities ........................................       4,098        2,949        8,976           --       16,023
     Intercompany accounts short term ...........................      12,831       12,213      (25,044)          --           --
     Current portion of long-term obligations ...................         834          511      130,242           --      131,587
                                                                    ---------    ---------    ---------    ---------    ---------
Total current liabilities .......................................      32,351       21,867      115,765                   169,983
                                                                    ---------    ---------    ---------    ---------    ---------
     Long-term obligations ......................................         928        2,975       11,833           --       15,736
     Senior subordinated debt ...................................          --           --           --           --           --
     Intercompany accounts long term ............................     105,403       25,582     (130,985)          --           --
     Other long-term liabilities ................................         352        3,185          744           --        4,281
                                                                    ---------    ---------    ---------    ---------    ---------
Total liabilities ...............................................     139,034       53,609       (2,643)          --      190,000
                                                                    ---------    ---------    ---------    ---------    ---------
Commitments and contingencies                                              --           --           --           --           --
Stockholders' (deficit) equity
     Preferred stock: $.10 par value per share 2,000,000
     Shares authorized; no shares outstanding
           at March 25, 2000 ....................................          --           --           --           --           --
     Common stock: $.01 par value per share -10,000,000
     Shares authorized; 6,629,008 issued at March 25, 2000 ......         (16)       5,580           60       (5,558)          66
     Common stock warrants ......................................          --           --           51           --           51
     Additional paid-in-capital .................................          --        2,807       45,168       (2,807)      45,168
     Treasury stock, 1,492,692 shares
           at March 25, 2000, at cost ...........................          --           --      (15,439)          --      (15,439)
     Retained earnings (accumulated deficit) ....................     (31,970)       8,377      (12,686)          --      (36,279)
     Cumulative translation adjustment ..........................          --       (8,007)          --           --       (8,007)
                                                                    ---------    ---------    ---------    ---------    ---------
Total stockholders' (deficit) equity ............................     (31,986)       8,757       17,154       (8,365)     (14,440)
                                                                    =========    =========    =========    =========    =========
Total liabilities and stockholder's (deficit) equity ............   $ 107,048    $  62,366    $  14,511    $  (8,365)   $ 175,560
                                                                    =========    =========    =========    =========    =========
</TABLE>



                                      F-31
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


CONSOLIDATING BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                      March 27, 1999, as restated

                                                                  Guarantor     Non-Guarantor   Parent     Elimination  Consolidated
                                                                 Subsidiaries   Subsidiaries  Corporation    Entries        Total
                                                                 -------------------------------------------------------------------
<S>                                                                <C>          <C>          <C>          <C>          <C>
ASSETS
Current Assets:
     Cash and cash equivalents .................................   $     379    $   7,230    $   2,998    $      --    $  10,607
     Accounts receivable,  net .................................      30,033       12,618           20           --       42,671
     Receivable from affiliate .................................       4,554           --           --           --        4,554
     Inventories ...............................................      17,674        3,771           --           --       21,445
     Prepaid and other .........................................         565          883        4,848           --        6,296
                                                                   ---------    ---------    ---------    ---------    ---------
Total current assets ...........................................      53,205       24,502        7,866           --       85,573
                                                                   ---------    ---------    ---------    ---------    ---------
     Property,  plant and equipment, net .......................      42,938       24,787          972           --       68,697
     Intangible assets, net ....................................      40,492       17,114           --           --       57,606
     Other assets ..............................................       7,133           53        8,255       (9,347)       6,094
                                                                   ---------    ---------    ---------    ---------    ---------

Total assets ...................................................   $ 143,768    $  66,456    $  17,093    $  (9,347)   $ 217,970
                                                                   =========    =========    =========    =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable ..........................................   $  15,299    $   9,862    $   2,932    $      --    $  28,093
     Earnout payable ...........................................          --        2,111           --           --        2,111
     Accrued liabilities .......................................       5,353        4,737        6,017           --       16,107
     Intercompany accounts short term ..........................       9,492       10,167      (19,659)          --           --
     Current portion of long-term obligations ..................       1,138          658        2,192           --        3,988
                                                                   ---------    ---------    ---------    ---------    ---------
Total current liabilities ......................................      31,282       27,535       (8,518)          --       50,299
                                                                   ---------    ---------    ---------    ---------    ---------
     Long-term obligations .....................................       1,421          962       51,317           --       53,700
     Senior subordinated debt ..................................          --           --       90,000           --       90,000
     Intercompany accounts long term ...........................     112,346       26,347     (138,693)          --           --
     Other long-term liabilities ...............................      (1,639)       2,779          375           --        1,515
                                                                   ---------    ---------    ---------    ---------    ---------

Total liabilities ..............................................     143,410       57,623       (5,519)          --      195,514
                                                                   ---------    ---------    ---------    ---------    ---------
Commitments and contingencies
Stockholders' equity
     Preferred stock: $.10 par value per share 2,000,000
     Shares authorized; no shares outstanding
           at March 27,  1999 ..................................          --           --           --           --           --
     Common stock: $.01 par value per share -10,000,000
     Shares authorized; 6,629,008 issued
          at March 27, 1999 ....................................          --        5,580           66       (5,580)          66
     Common stock warrants .....................................          --           --            1           --            1
     Additional paid-in-capital ................................          --        2,807       45,168       (2,807)      45,168
     Treasury stock, 1,492,692 shares
           at March 27,  1999, at cost .........................          --           --      (15,439)          --      (15,439)
     Retained earnings (accumulated deficit) ...................         358        6,652       (7,184)        (960)      (1,134)
     Cumulative translation adjustment .........................          --       (6,206)          --           --       (6,206)
                                                                   ---------    ---------    ---------    ---------    ---------
Total stockholders' equity .....................................         358        8,833       22,612       (9,347)      22,456
                                                                   ---------    ---------    ---------    ---------    ---------
Total liabilities and stockholder's equity .....................   $ 143,768    $  66,456    $  17,093    $  (9,347)   $ 217,970
                                                                   =========    =========    =========    =========    =========
</TABLE>


                                      F-32
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


CONSOLIDATING STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                            For the Year Ended March 25, 2000

                                                       Guarantor      Non-Guarantor      Parent         Elimination     Consolidated
                                                     Subsidiaries     Subsidiaries     Corporation        Entries          Total
                                                     ------------------------------------------------------------------------------
<S>                                                    <C>              <C>             <C>              <C>              <C>
Net sales ......................................       $ 151,079        $  86,142       $      --        $  (8,955)       $ 228,266
Cost of sales, excluding depreciation ..........         128,998           70,827              --           (8,449)         191,376
Depreciation ...................................           5,518            3,245             229             (183)           8,809
                                                       ---------        ---------       ---------        ---------        ---------
     Gross profit ..............................          16,563           12,070            (229)            (323)          28,081
                                                       ---------        ---------       ---------        ---------        ---------
Selling and marketing expenses .................           2,643            1,108              52               --            3,803
General and administrative expenses ............           4,266            3,622           5,549             (887)          12,550
Research and development expenses ..............             705              238              --               --              943
Terminated investment agreement costs ..........              --               --              --               --               --
Amortization of goodwill .......................          18,738              661             355               --           19,754
Restructuring and restatement costs ............              --               --           3,969               --            3,969
                                                       ---------        ---------       ---------        ---------        ---------
     Income (loss) from operations .............          (9,789)           6,441         (10,154)             564          (12,938)
                                                       ---------        ---------       ---------        ---------        ---------
Other expense ..................................          22,736            1,414         (22,099)            (114)           1,937
Interest expense ...............................          (1,386)           2,762          12,740               --           14,116
                                                       ---------        ---------       ---------        ---------        ---------
     Income (loss) before income taxes .........         (31,139)           2,265            (795)             678          (28,991)
(Benefit) provision for income taxes ...........              --              485           5,960             (291)           6,154
                                                       ---------        ---------       ---------        ---------        ---------
Net (loss) income ..............................       $ (31,139)       $   1,780       $  (6,755)       $     969        $ (35,145)
                                                       =========        =========       =========        =========        =========
</TABLE>


                                      F-33
<PAGE>



                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))



CONSOLIDATING STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                      For the Year Ended March 27, 1999, as restated

                                                      Guarantor       Non-Guarantor      Parent        Elimination      Consolidated
                                                     Subsidiaries     Subsidiaries     Corporation       Entries           Total
                                                    --------------------------------------------------------------------------------
<S>                                                    <C>              <C>             <C>              <C>              <C>
Net sales ......................................       $ 147,225        $  81,469       $      --        $  (8,713)       $ 219,981
Cost of sales, excluding depreciation ..........         125,994           70,121             226           (7,309)         189,032
Depreciation ...................................           5,008            2,774             222             (276)           7,728
                                                       ---------        ---------       ---------        ---------        ---------
     Gross profit ..............................          16,223            8,574            (448)          (1,128)          23,221
                                                       ---------        ---------       ---------        ---------        ---------
Selling and marketing expenses .................           2,808              271              43               --            3,122
General and administrative expenses ............           6,796            2,168           4,607             (663)          12,908
Research and development expenses ..............           1,090               --              --               --            1,090
Terminated investment agreement costs ..........              --               --           2,500               --            2,500
Amortization of goodwill .......................           1,316              681             365               --            2,362
Relocation and reorganization costs ............              --            2,400             838               --            3,238
                                                       ---------        ---------       ---------        ---------        ---------
     Income (loss) from operations .............           4,213            3,054          (8,801)            (465)          (1,999)
                                                       ---------        ---------       ---------        ---------        ---------
Other expense ..................................          16,749               70         (14,489)            (133)           2,197
Interest expense ...............................          (1,250)           2,549          11,491               (2)          12,788
                                                       ---------        ---------       ---------        ---------        ---------
     Income (loss) before income taxes .........         (11,286)             435          (5,803)            (330)         (16,984)
(Benefit) provision for income taxes ...........          (1,888)             255          (1,533)            (155)          (3,321)
                                                       ---------        ---------       ---------        ---------        ---------

Net (loss) income ..............................       $  (9,398)       $     180       $  (4,270)       $    (175)       $ (13,663)
                                                       =========        =========       =========        =========        =========
</TABLE>


                                      F-34
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


CONSOLIDATING STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                      For the Year Ended March 28, 1998, as restated

                                                       Guarantor       Non-Guarantor      Parent         Elimination    Consolidated
                                                     Subsidiaries      Subsidiaries     Corporation        Entries         Total
                                                     -------------------------------------------------------------------------------
<S>                                                    <C>              <C>             <C>              <C>              <C>
Net sales ......................................       $ 120,271        $  52,895       $      --        $  (7,092)       $ 166,074
Cost of sales, excluding depreciation ..........          98,844           40,922              --           (6,000)         133,766
Depreciation ...................................           3,440            1,601              86             (126)           5,001
                                                       ---------        ---------       ---------        ---------        ---------
     Gross profit ..............................          17,987           10,372             (86)            (966)          27,307
                                                       ---------        ---------       ---------        ---------        ---------
Selling and marketing expenses .................           1,335              126              --              225            1,686
General and administrative expenses ............           3,634            2,555           3,741             (820)           9,110
Research and development expenses ..............             357               --              --               --              357
Amortization of goodwill .......................             926              542             274               --            1,742
Relocation and reorganization costs ............             655            1,134              --               --            1,789
                                                       ---------        ---------       ---------        ---------        ---------
     Income (loss) from operations .............          11,080            6,015          (4,101)            (371)          12,623
                                                       ---------        ---------       ---------        ---------        ---------
Other expense ..................................           8,574              533          (9,463)             (41)            (397)
Interest expense ...............................            (680)           2,099           6,328               --            7,747
                                                       ---------        ---------       ---------        ---------        ---------
     Income (loss) before income taxes .........           3,186            3,383            (966)            (330)           5,273
Provision (benefit) for income taxes ...........           1,419            1,056            (438)            (110)           1,927
                                                       ---------        ---------       ---------        ---------        ---------

Net income (loss) ..............................       $   1,767        $   2,327       $    (528)       $    (220)       $   3,346
                                                       =========        =========       =========        =========        =========
</TABLE>


                                      F-35
<PAGE>




                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


CONSOLIDATING STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                            For the Year Ended March 25, 2000

                                                          Guarantor       Non-Guarantor      Parent       Elimination   Consolidated
                                                         Subsidiaries     Subsidiaries     Corporation      Entries         Total
                                                         ---------------------------------------------------------------------------
<S>                                                         <C>            <C>            <C>            <C>               <C>
Net cash provided by (used in)
       Operating activities ..........................      $    480       $  3,794       $  6,933       $         --      $ 11,207

Cash Flows from Investing Activities:
     Additions to property, plant
           and equipment .............................        (1,488)        (6,217)           (36)                --        (7,741)
     Acquisition costs, net of cash
            acquired .................................            --         (2,061)            --                 --        (2,061)
                                                            --------       --------       --------       ------------      --------

     Net cash used in investing Activities ...........        (1,488)        (8,278)           (36)                --        (9,802)
                                                            --------       --------       --------       ------------      --------

Cash Flows from Financing Activities:

     Net proceeds from issuance of
          stock ......................................            --             --             --                 --            --
     (Repayments) borrowing of
          debt and long-term obligations .............        (1,290)        (1,669)        (2,156)                --        (5,115)
     Net borrowing on revolving
          credit facility ............................            --             --            700                 --           700
     Proceeds from mortgage and
          financing notes ............................            --          2,907             --                 --         2,907
     Change in investment in
          subsidiary .................................            --             --             --                 --            --
     Changes in intercompany
          accounts ...................................         2,168          1,466         (3,634)                --            --
                                                            --------       --------       --------       ------------      --------
     Net cash provided by financing
          activities .................................           878          2,704         (5,090)                --        (1,508)
                                                            --------       --------       --------       ------------      --------

Effect of exchange rate changes
     on cash .........................................            --           (240)            --                 --          (240)
                                                            --------       --------       --------       ------------      --------

Change in cash and cash
     equivalents .....................................          (130)        (2,020)         1,807                 --          (343)

Cash and cash equivalents,
     beginning of period .............................           380          7,229          2,998                 --        10,607
                                                            --------       --------       --------       ------------      --------

Cash and cash equivalents,
     end of period ...................................      $    250       $  5,209       $  4,805       $         --      $ 10,264
                                                            ========       ========       ========       ============      ========
</TABLE>


                                      F-36
<PAGE>


                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))



CONSOLIDATING STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                      For the Year Ended March 27, 1999, as restated

                                                          Guarantor       Non-Guarantor      Parent       Elimination   Consolidated
                                                         Subsidiaries     Subsidiaries     Corporation      Entries         Total
                                                         ---------------------------------------------------------------------------
<S>                                                        <C>             <C>             <C>             <C>             <C>
Net cash provided by (used in)
       Operating activities ........................       $ (4,821)       $  3,443        $ (7,889)       $   (453)       $ (9,720)

Cash Flows from Investing Activities:
     Additions to property, plant
           and equipment ...........................         (8,040)         (5,848)           (236)            270         (13,854)
     Acquisition costs, net of cash
            acquired ...............................           (744)         (1,958)            (86)             --          (2,788)
                                                           --------        --------        --------        --------        --------

     Net cash used in investing Activities .........         (8,784)         (7,806)           (322)            270         (16,642)
                                                           --------        --------        --------        --------        --------

Cash Flows from Financing Activities:

     Net proceeds from issuance of
          stock ....................................             --              --           1,056              --           1,056
     (Repayments) borrowing of
          debt and long-term obligations ...........            724              --          10,000              --          10,724
     Net borrowing on revolving
          credit facility ..........................             --              --          23,024              --          23,024
     Proceeds from mortgage and
          financing notes ..........................         (1,291)           (331)         (1,552)             --          (3,174)
     Change in investment in
          subsidiary ...............................           (183)             --              --             183              --
     Changes in intercompany
          accounts .................................         13,940           7,462         (21,402)             --              --
                                                           --------        --------        --------        --------        --------
     Net cash provided by financing
          activities ...............................         13,190           7,131          11,126             183          31,630
                                                           --------        --------        --------        --------        --------

Effect of exchange rate changes
     on cash .......................................             --            (710)             --              --            (710)
                                                           --------        --------        --------        --------        --------

Change in cash and cash
     equivalents ...................................           (415)          2,058           2,915              --           4,558

Cash and cash equivalents,
     beginning of period ...........................            794           5,172              83              --           6,049
                                                           --------        --------        --------        --------        --------

Cash and cash equivalents,
     end of period .................................       $    379        $  7,230        $  2,998        $     --        $ 10,607
                                                           ========        ========        ========        ========        ========
</TABLE>


                                      F-37
<PAGE>



                      SAFETY COMPONENTS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                March 25, 2000, March 27, 1999 and March 28, 1998

                      (1999 and 1998 as restated, (Note 1))


CONSOLIDATING STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                      For the Year Ended March 28, 1998, as restated

                                                          Guarantor       Non-Guarantor      Parent       Elimination   Consolidated
                                                         Subsidiaries     Subsidiaries     Corporation      Entries         Total
                                                         ---------------------------------------------------------------------------
<S>                                                         <C>              <C>              <C>              <C>         <C>
Net cash provided by (used in)
     operating activities ..........................        $ (5,559)        $  4,312         $  1,812         $ --        $    565

Cash Flows from Investing
     Activities:
     Additions to property, plant
           and equipment ...........................          (6,244)          (6,796)            (675)          --         (13,715)
     Acquisition costs,
           net of cash acquired ....................         (64,688)          (2,455)              --           --         (67,143)
                                                            --------         --------         --------         ----        --------

     Net cash used in investing
           Activities ..............................         (70,932)          (9,251)            (675)          --         (80,858)
                                                            --------         --------         --------         ----        --------

Cash Flows from Financing
     Activities:

     Proceeds from notes ...........................              --               --           86,053           --          86,053
     Net proceeds from issuance of
          stock ....................................              --               --              230           --             230
     (Repayments) proceeds from
          term notes ...............................         (16,812)              --               --           --         (16,812)
     (Repayments) borrowing of
          debt and long-term obligations ...........          (1,117)            (732)         (10,000)          --         (11,849)
     Net borrowing on revolving
          credit facility ..........................              --           (1,230)          12,475           --          11,245
     Proceeds from mortgage and
          financing notes ..........................           2,000               --            7,500           --           9,500
     Change in investment in
          subsidiary ...............................              (1)              --                1           --              --
     Changes in intercompany accounts ..............          93,151            4,170          (97,321)          --              --
                                                            --------         --------         --------         ----        --------
     Net cash provided by
          financing activities .....................          77,221            2,208           (1,062)          --          78,367
                                                            --------         --------         --------         ----        --------

Effect of exchange rate changes
     on cash .......................................              --             (345)              --           --            (345)
                                                            --------         --------         --------         ----        --------

Change in cash and cash
     equivalents ...................................             730           (3,076)              75           --          (2,271)

Cash and cash equivalents,
     beginning of period ...........................              13            8,250               57           --           8,320
                                                            --------         --------         --------         ----        --------

Cash and cash equivalents, end of period ...........        $    743         $  5,174         $    132         $ --        $  6,049
                                                            ========         ========         ========         ====        ========
</TABLE>


                                      F-38
<PAGE>


                 Schedule II - Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
                                                                             Additions
                                                                            Charged to
                                                            Beginning        Costs and      Deductions        Ending
                                                             Balance         Expenses      Write-Offs        Balance
                                                             -------         --------      ----------        -------
<S>                                                          <C>             <C>             <C>             <C>
For the year ended March 28, 1998:
    Allowance for doubtful  accounts                         $    --         $   245         $    --         $   245
    European relocation & reorganization reserve                  --           3,603           1,103           2,500
                                                             =======         =======         =======         =======
                                                             $    --         $ 3,848         $ 1,103         $ 2,745
                                                             =======         =======         =======         =======

For the year ended March 27, 1999:
    Allowance for doubtful accounts                          $   245         $ 1,855         $ 1,600         $   500
    European relocation & reorganization reserve               2,500              --           1,243           1,257
    Relocation & reorganization                                   --             500              --             500
    Reserve on deferred tax assets                                --           1,674              --           1,674
                                                             -------         -------         -------         -------
                                                             $ 2,745         $ 4,029         $ 2,843         $ 3,931
                                                             =======         =======         =======         =======

For the year ended March 25, 2000:
    Allowance for doubtful accounts                          $   500         $   156         $   437         $   219
    European relocation & reorganization reserve               1,257              --           1,257              --
    Relocation & reorganization                                  500              23             147             376
    Reserve for receivable from affiliate                         --             600              --             600
    Reserve on deferred tax assets                             1,674          10,123              --          11,797
                                                             -------         -------         -------         -------
                                                             $ 3,931         $10,902         $ 1,841         $12,992
                                                             =======         =======         =======         =======
</TABLE>



                                      F-39