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

                                    FORM 10-K

         (Mark One)
            [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2005
                                       OR
            [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                For the transition period from _______ to _______.
                         Commission File Number 0-23938

                      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.)

               41 Stevens Street
           Greenville, South Carolina                              29605
    (Address of principal executive offices)                    (Zip Code)

        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)

      Indicate by check mark if the registrant is a well-known  seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

      Indicate by check mark if the  registrant  is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

      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 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. [X]

      Indicate  by check mark  whether  the  registrant  is a large  accelerated
filer,  an accelerated  filer,  or a  non-accelerated  filer.  See definition of
"accelerated  filer and large  accelerated  filer" in Rule 12b-2 of the Exchange
Act. (Check one):
   Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]

      Indicate  by check mark  whether  the  registrant  is a shell  company (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

      The aggregate  market value of the common stock held by persons other than
affiliates of the registrant  (based upon the  assumption,  for purposes of this
computation only, that Zapata Corporation and all of the registrant's  directors
and executive officers were affiliates),  as of June 30, 2005, was approximately
$12,835,000.

      Indicate by check mark whether the  registrant has filed all documents and
reports  required  to be filed by  Section  12,  13, or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court Yes [X] No [ ].

      As of March 1, 2006,  there were 5,405,147  shares of the Company's common
stock, par value $0.01 per share, outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      NONE

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         Cautionary Statement Pursuant to Safe Harbor Provisions of the
                Private Securities Litigation Reform Act of 1995

      The following  discussion and analysis should be read in conjunction  with
the Consolidated  Financial Statements,  including the Notes thereto,  appearing
elsewhere  herein.  Statements  in this Annual  Report on Form 10-K that reflect
projections or expectations of future  financial or economic  performance of the
Company,  and  statements  of the  Company's  plans and  objectives  for  future
operations,  including without  limitation those contained in "Business," "Legal
Proceedings,"  "Management's  Discussion and Analysis of Financial Condition and
Results of  Operations,"  and  "Quantitative  and Qualitative  Disclosure  about
Market Risk," or relating to the Company's outlook for fiscal year 2006, overall
volume and pricing  trends or  strategies  and their  anticipated  results,  are
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Words such as "expects," "anticipates,"  "approximates," "believes,"
"estimates,"  "intends,"  and "hopes" and  variations  of such words and similar
expressions  are  intended  to  identify  such  forward-looking  statements.  No
assurance can be given that actual results or events will not differ  materially
from  those   projected,   estimated,   assumed  or   anticipated  in  any  such
forward-looking  statements.   Important  factors  that  could  result  in  such
differences,  in addition to the other factors  noted with such  forward-looking
statements, include (but are not limited to) those factors described under "Item
1A. Risk Factors" below and other factors that  generally  affect the automotive
industry.  Except as may be required by law, the Company expressly disclaims any
obligation  to update  these  forward-looking  statements  to reflect  events or
circumstances after the date of this Annual Report on Form 10-K.

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                                     PART I

ITEM 1. BUSINESS

The Company

      Safety  Components  International,   Inc.  (including,  when  the  context
requires, its consolidated  subsidiaries,  the "Company" or "Safety Components")
was  incorporated  in Delaware in 1994.  It is a leading  low-cost,  independent
supplier of automotive  airbag  fabric and cushions and  technical  fabrics with
operations in North America, Europe, South Africa and China. The Company entered
into joint  ventures  to  produce  products  in China and South  Africa in 2004.
Commercial  production  has not yet commenced in South Africa and has just begun
in the fourth  quarter of 2005 in China.  In 2005,  the Company also  acquired a
minority  interest in a U.S.-based  partnership which develops new airbag module
inflation technology.  The Company sells airbag fabric domestically and cushions
worldwide to the major airbag module  integrators  that outsource such products.
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 fire service apparel,  ballistics material,  filtration and
military  fabrics.  The 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 its per
unit overhead costs.

      Net sales of automotive airbag cushions,  automotive fabrics and technical
fabrics products (the "automotive  airbag and fabrics  products"  business) were
approximately  $220.1  million,  $247.9  million and $183.7 million in the years
ended  December  31, 2005 and  December  31, 2004 and the nine month period from
March 30, 2003 to December 31, 2003, respectively. Subsequent to the 2003 Change
of Control  (described below), the Company changed its fiscal year to a calendar
year end to coincide with the fiscal year end of Zapata Corporation  ("Zapata"),
the Company's  former majority owner.  The Company's  operations were previously
based on a fifty-two  or  fifty-three  week  fiscal year ending on the  Saturday
closest to March 31. As such,  the period from March 30,  2003 to  December  31,
2003 consists of nine months of  operations.  The years ended  December 31, 2005
and December 31, 2004 each consisted of twelve months of operations.

2005 Change of Control

      On September 23, 2005, Zapata entered into a Stock Purchase Agreement with
WLR Recovery Fund III, L.P.  ("WLR III") to sell to WLR III all of its 4,162,394
shares of the Company's common stock. On September 26, 2005, Zapata, WLR III and
WLR Recovery Fund II, L.P. ("WLR II" and collectively  with WLR III, referred to
as the "WLR Recovery Funds") entered into Amendment No. 1 and Joinder  Agreement
which joined WLR II as a party to the Stock  Purchase  Agreement.  The Amendment
No. 1 provided  that WLR II and WLR III would  purchase  241,419  and  3,920,975
shares of the Company's common stock, respectively. The purchase price of $12.30
per share,  or $51,197,446 in the aggregate,  was paid in immediately  available
funds at the closing of the  transaction  on December 2, 2005.  The WLR Recovery
Funds are affiliates of Mr. Wilber L. Ross, Jr., and W. L. Ross and Co. LLC.

      As provided in the Stock  Purchase  Agreement and after the closing of the
transaction,  the Company's Board of Directors elected three WLR Recovery Funds'
nominees  to the  Company's  board of  directors  and Zapata then caused its own
representatives  to resign as directors of the Company.  The WLR Recovery Funds'
nominees to the Company's board of directors are Wilbur L. Ross, Jr., Michael J.
Gibbons and David H. Storper.

      As a result of the  foregoing  transactions,  a change of  control  of the
Company occurred (the "2005 Change of Control").

      Upon closing of the stock purchase transaction, and in lieu of any special
change  of  control  bonus  that was or might  have  been  payable  pursuant  to
employment agreements between the Company and each of John Corey, then President
and  Chief  Executive  Officer,  and Brian  Menezes,  Vice  President  and Chief
Financial  Officer,  the  Company  paid a bonus of  $994,000  to Mr.  Corey  and
$406,000 to Mr. Menezes.

      In addition, upon closing of the stock purchase transaction, Zapata made a
capital  contribution to the Company in the aggregate amount of $1.0 million for
the purpose of the Company  paying bonuses to the Company's  executive  officers
and other key employees  for their  efforts in  connection  with the attempts to
sell the Company and to provide

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management  with an appropriate  incentive to remain with the Company during the
pendency of the stock purchase  transaction.  The Compensation  Committee of the
Company's Board of Directors  determined that this $1.0 million aggregate amount
be  distributed  as follows:  $400,000  to John C.  Corey,  $214,500 to Brian P.
Menezes,  $75,000 to Stephen B.  Duerk,  Vice  President  and  president  of the
Company's  North  American  Automotive  Group,  and  $50,000  to  Vick  Crowley,
Treasurer,  with the remainder of $260,500 distributed among other key employees
of the Company as  recommended  by the Company's  President and Chief  Executive
Officer.  These  bonus  amounts  payable to Messrs.  Corey and  Menezes  were in
addition  to the  amounts  paid to them that are  described  in the  immediately
preceding   paragraph.   In  addition,   the  Company  recognized   expenses  of
approximately  $600,000 related to this stock purchase  transaction.  All of the
bonus amounts and purchasing expenses have been included in the Company's income
statement in expenses associated with changes of control.

2003 Change of Control

      On September 29, 2003,  Zapata filed a Schedule 13D with the United States
Securities and Exchange  Commission (the "SEC")  indicating that as of September
18, 2003 it had acquired  2,663,905  shares of the Company's  common stock which
then  constituted  approximately  53.7% of the issued and outstanding  shares of
such common  stock.  As a result,  a change of control of the Company (the "2003
Change of Control")  occurred.  On October 6, 2003, Zapata filed an amendment to
its Schedule  13D with the SEC,  indicating  that it had acquired an  additional
1,498,489 shares of the Company's  common stock which,  together with the shares
previously  acquired,  then  constituted  approximately  83.9% of the issued and
outstanding common stock of the Company.

      The 2003 Change of Control triggered  certain  provisions of the Company's
Stock Option Plan,  including  immediate vesting of all options and an automatic
change in the  exercise  price of a portion  of the  options to $0.01 per share.
This change in exercise  price  constituted a  modification  of the Stock Option
Plan and the  Company  was  required  to  recognize  a  one-time,  non-recurring
compensation  cost of $1.4 million for the modified  options for 126,900 shares,
for the nine months ended December 31, 2003. Additionally, in lieu of re-pricing
their Class A stock options, the employment agreements of certain key executives
included a  provision  for a bonus  payable in the event of a change of control.
The aggregate  bonus paid under these  provisions  in  connection  with the 2003
Change of Control  was $1.4  million  and was also  recognized  as an expense in
2003.

      Following the 2003 Change of Control,  the Company's  Audit  Committee and
Board of Directors  determined  that it was in the  Company's  best  interest to
change the  Company's  fiscal  year end from the last  Saturday  in the month of
March to a calendar-based year ending December 31 to coincide with Zapata's year
end. This change was  effective as of the quarter ended  December 31, 2003. At a
meeting on January 26, 2004,  the  Company's  Board of Directors  appointed  two
designees  of  Zapata,  Avram  Glazer  and  Leonard  DiSalvo,  as members of the
Company's Board of Directors.

      As a result of the above transactions, the consolidated federal income tax
group of the Company that existed  prior to these  transactions  terminated  and
Safety  Components  and its  subsidiaries  became  members  of the  consolidated
federal income tax group of Zapata. In the first quarter of 2004, Zapata and the
Company  entered  into a Tax Sharing and  Indemnity  Agreement  to define  their
respective rights and obligations relating to federal, state and other taxes for
taxable  periods  attributable  to the filing of consolidated or combined income
tax returns as part of the Zapata consolidated federal income tax group.

      Due to exercises of options to purchase common stock of the Company, on or
about March 31, 2004, the number of shares of common stock outstanding increased
and, as a result,  Zapata's  ownership was reduced to less than 80%. As a result
of Zapata's  ownership of the company's  outstanding  common stock falling below
80%, Zapata could not consolidate the Company into Zapata's  consolidated income
tax returns for periods  subsequent to the first quarter of 2004.  Under The Tax
Sharing and Indemnity Agreement,  the Company was consolidated into Zapata's tax
filing  group for the fourth  calendar  quarter  of 2003 and the first  calendar
quarter of 2004. On January 4, 2005, the Company received  notification from the
Internal  Revenue  Service  that  its  plan to  return  to the  taxpayer  status
consistent to the periods prior to the 2003 Change of Control had been approved.

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The Woodville Acquisition

      On November 2, 2001,  the Company's  U.K.  subsidiary,  Automotive  Safety
Components  International  Limited  ("ASCIL"),   acquired  the  airbag  business
(operated under the name of Woodville Airbag  Engineering and hereafter referred
to as  "Woodville")  of TISPP UK Limited,  a subsidiary  of Smiths Group PLC, to
expand its European operations.  This acquisition contributed approximately $7.8
million in sales and had a negative impact of approximately $1.1 million on cost
of sales,  including  depreciation and a negative impact of  approximately  $1.5
million on  operating  income for the period from  November 3, 2001 to March 30,
2002.  The management  and business  activities of the Woodville  operation were
consolidated  into the ASCIL  operation  during the quarter ended June 28, 2003.
The  manufacturing  process and production assets have been transferred to other
European  operations of the Company primarily in lower labor cost facilities and
countries.

Discontinuation of Munitions and Metal Components Business

      On December 23, 2002, the Company completed the disposal of all operations
that it had classified as "discontinued operations".  The Company's discontinued
operations  supplied  projectiles and other metal  components for medium caliber
training and tactical  ammunition  used by the United States Armed  Forces.  The
metal components manufactured by the Company were shipped to a loading facility,
operated either by the United States  government or a prime defense  contractor,
which loaded the  explosives,  assembled the rounds and packaged the  ammunition
for use. Additionally,  the Company's discontinued operations manufactured small
quantities of metal airbag module components for the automotive airbag industry.

The 2001 Restructuring

      On April 10, 2000 (the  "Petition  Date"),  the Company and certain of its
U.S. subsidiaries  (collectively,  the "Safety Filing Group"), filed a voluntary
petition  under Chapter 11 of the United States  Bankruptcy  Code ("Chapter 11")
with the United  States  Bankruptcy  Court for the  District  of  Delaware  (the
"Bankruptcy  Court").  On October 11, 2000 (the  "Emergence  Date"),  the Safety
Filing Group emerged from Chapter 11 pursuant to the Plan of Reorganization (the
"Plan") confirmed by the Bankruptcy Court. Pursuant to the Plan, upon emergence,
all of the Company's  10-1/8%  Senior Notes due 2007 (the "Notes") (an aggregate
of approximately $96.8 million, including accrued interest to the Petition Date)
were  converted into 4,840,774  shares of the Company's  post-bankruptcy  common
stock, and the  pre-bankruptcy  common stock,  excluding stock held by Robert A.
Zummo  (former  Chairman  and  Chief  Executive  Officer  of the  Company),  was
converted  into 159,226  shares of the Company's  post-bankruptcy  common stock,
including 39,619 shares of treasury stock, and warrants to acquire an additional
681,818  shares of such common  stock  (these  warrants  expired as of April 10,
2003).  Immediately  upon emergence,  the Company had 5,000,000 shares of common
stock issued and 4,960,381 shares  outstanding and, other than shares underlying
the warrants, no shares of common stock were reserved for issuance in respect of
claims and interests  filed and allowed under the Plan. In addition,  the Safety
Filing Group's trade suppliers and other  creditors were paid in full,  pursuant
to the terms of the Plan, within 90 days of the Emergence Date.

Automotive Airbag and Fabrics Products

Structure of the Automotive Airbag Industry

      Airbag systems consist of various airbag modules and an electronic control
module,  which are  currently  integrated by  automakers  into their  respective
vehicles. Airbag modules generally consist of inflators,  cushions,  housing and
possibly  trim  covers and are  assembled  by module  integrators,  most of whom
produce a majority of the  components  required  for a complete  module.  As the
industry has evolved,  module  integrators  have outsourced  varying portions of
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  a portion of their  cushion
requirements  as they focus on the  development of proprietary  technologies.  A
majority of the module integrators  purchase fabric from airbag fabric producers
such as the Company.

      Characteristic  of the industry,  the Company  supplies airbag cushions to
module  integrators,  most of which  also  produce  a portion  of their  cushion
requirements internally.  As a result, the Company may compete with those of its

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customers that supply their own internal cushion requirements.  However, in most
cases the  Company's  customers  do not produce the same  cushions  for the same
car/truck models for which the Company produces cushions.

      Another characteristic of the airbag industry is the qualification process
for new suppliers. New suppliers that wish to produce and supply airbag cushions
or airbag fabric must undergo a rigorous  qualification  process, which can take
in  excess  of  a  year.  The  Company  believes  that  the  existence  of  this
qualification  process  can  result in  significant  re-qualification  costs for
module  integrators  which are  required  to assist any new  supplier in meeting
automakers' requirements.  Additionally, the Company believes module integrators
are, like their automaker customers,  trying to reduce overall industry costs by
limiting the number of suppliers.

Establishment of Joint Ventures

      On  November  30,  2004,  the  Company  announced  that it had  signed  an
agreement to form a joint venture with KAP Textile Holdings SA Ltd. ("Gelvenor")
which,  through  its  Gelvenor  textiles  divisions,  produces  high  technology
industrial, technical and specialized fabrics in South Africa (the "South Africa
Joint  Venture").  The Company  anticipates that the South Africa Joint Venture,
which has not yet  commenced  commercial  production,  will  produce  automotive
airbag cushions in South Africa utilizing the fabrics produced by Gelvenor.  The
initial  production  is intended to satisfy the South African  domestic  market,
with additional  production  capacity available to support the Company's growing
worldwide  customer base by the end of 2006.  The Company owns 75% of the entity
formed to conduct the operations of the South Africa Joint Venture.

      On January 4, 2005,  the Company  announced  it had signed an agreement to
form a joint venture with Kingsway  International  Limited, an entity associated
with Huamao (Xiamen)  Technical Textile Co., Ltd.  ("Huamao") which manufactures
airbag,  industrial and technical fabrics, in China (the "China Joint Venture").
The Company anticipates that the China Joint Venture, which commenced commercial
production  in the  fourth  quarter  of 2005,  will  produce  automotive  airbag
cushions in China utilizing fabrics produced by Huamao. Pursuant to a technology
transfer  and joint  venture  agreement,  the  Company  will  provide  technical
assistance to its partner in the  development of airbag  fabrics.  Production is
intended to satisfy the Chinese  domestic  market.  The Company  owns 65% of the
entity formed to conduct the operations of the China Joint Venture.

      The  Company  has  certain  financial  commitments  related to these joint
ventures  as  described  in  "Liquidity  and  Capital  Resources  -  Contractual
Obligations" below.

NxGen Partnership

      On September 1, 2005 the Company exercised an option to acquire 49% of the
ownership  interests  of  NxGen  Technologies,  LLC  ("NxGen"),  which is in the
business of designing  airbags,  airbag systems and inflator units.  The Company
exercised  this  option in  connection  with  NxGen's  entry into a License  and
Consulting Agreement with a major automotive supplier  ("Supplier")  pursuant to
which NxGen granted Supplier an exclusive, worldwide, royalty-bearing license to
certain  of  NxGen's  patents  and  patent   know-how.   The  Company  waived  a
right-of-first-refusal  with  respect  to the  license.  Supplier  paid NxGen an
initial  license  fee and will owe it two  additional  payments,  which  will be
treated as prepaid  royalties for subsequent  sales,  if and when validation and
sales targets are met. If sales exceed the volume  corresponding  to the prepaid
royalties,  Supplier will pay NxGen an additional royalty for each airbag system
sold  using  the  licensed   patents  and  know-how.   The  Company   recognized
approximately  $754,000  (net of income taxes of $448,000) in equity in earnings
of  unconsolidated  affiliate in connection  with the exercise of the option and
the allocation of the Company's  proportionate  share of NxGen's income from the
receipt of the initial  license fee from Supplier.  As a result of the above and
also the Company's receipt of a distribution from NxGen, the Company recorded an
asset of  approximately  $237,000  (which  represents  the  Company's  ownership
interest in this affiliate's  equity) in the Company's balance sheet at December
31, 2005 in investment in unconsolidated affiliate. The Company will participate
in NxGen's  subsequent profits and losses pro rata in accordance with its equity
ownership.

Products

      The  Company's  automotive  products  include  passenger,  driver and side
impact airbag cushions,  side protection curtains,  knee protection cushions and
related  parts  and  accessory  components   manufactured  for  installation  in
approximately 200 car and truck models sold worldwide and airbag fabric for sale
to airbag manufacturers. Sales of

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airbag  related  products  (inclusive of sales of airbag  fabric)  accounted for
approximately  88.3% and 88.5% of the  Company's  consolidated  net sales in the
fiscal years ended  December 31, 2005 and  December 31, 2004,  respectively  and
approximately  89.8% of the Company's  consolidated  net sales in the nine month
period from March 30, 2003 to December 31, 2003.

      The Company also manufactures a wide array of specialty  technical fabrics
for consumer and industrial uses. These fabrics include, but are not limited to:
(i) protective apparel worn by firefighters; (ii) filtration fabrics used in the
aluminum, coal, steel, cement, clay and brewing industries;  (iii) woven fabrics
for use by manufacturers of coated products; (iv) specialty fabrics used in fuel
cells, bomb and cargo chutes,  oil containment  booms and gas diaphragms,  among
other  uses;  and  (v)  release  liners  used in tire  manufacturing.  Sales  of
technical related products  accounted for  approximately  11.7% and 11.5% of the
Company's consolidated net sales in the fiscal years ended December 31, 2005 and
December  31,  2004,  respectively  and  approximately  10.2%  of the  Company's
consolidated  net sales in the nine month period from March 30, 2003. 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 the same  equipment and  manufacturing  processes that the Company uses to
produce  airbag  fabric,  enabling  the  Company  to take  advantage  of  demand
requirements  for  the  various  products  by  leveraging  its  expenditures  on
production  retooling costs. By manufacturing  technical products using the same
machines  that weave  airbag  fabric,  the  Company is able to more  effectively
utilize capacity at its South Carolina plant and lower per unit overhead costs.

      See  Note  7 to  the  Consolidated  Financial  Statements  for  additional
financial  information by product type, which information is incorporated herein
by reference

Customers

      The  Company  sells  its  airbag  cushions  to airbag  module  integrators
globally for inclusion in specified model cars,  generally  pursuant to contract
requirements.  Certain of these customers also manufacture airbag cushions to be
used in their production of airbag modules. The Company markets and sells airbag
cushions  through its direct marketing and sales forces based in South Carolina,
California, Mexico, Germany and China.

      The Company sells its airbag fabric in North America either  directly to a
module  integrator or to a fabricator  (such as the  Company's own  operations),
which sells a sewn airbag to the module integrator.  In some cases, particularly
when the cushion  requires lower air  permeability  to facilitate  more rapid or
prolonged  inflation,  and to eliminate  particulate  burn-through caused by hot
inflators,  the fabric must be coated before fabrication into airbags.  For such
requirements,  the Company sells fabric to coating companies,  which then resell
the coated fabric to either an airbag cushion fabricator (including the Company)
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 durations of up to twelve months.

      The Company has  contractual  relationships  with  several  large,  global
module  integrators,  the most  significant  being Autoliv,  Key Safety Systems,
Takata and TRW,  listed in  alphabetical  order.  The  Company  supplies  airbag
cushions  and/or  airbag fabric to each of these  customers  based upon releases
from formal  purchase  orders,  which  typically  cover  periods of up to twelve
months  and are  subject  to  periodic  negotiation  with  respect  to price and
quantity.  Sales to these four customers  together  approximate  60-68% of total
sales  for the  past  three  fiscal  periods.  The  loss  of any of its  largest
customers could have a material adverse effect on the Company. See Note 2 of the
Consolidated   Financial  Statements  for  further  information   regarding  the
Company's customers, which information is incorporated herein by reference.

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Suppliers

      The Company's  principal customers generally require that they 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  generally exist, a prolonged delay in securing an alternative
supply or in  obtaining  the  approval by the  Company's  customers  of any such
alternative  sources of supply could  adversely  affect the Company's  operating
results.

      The raw materials for the Company's fabric  operations  largely consist of
synthetic  yarns  provided  by  Invista,  Pharr  Yarns,  DuPont,  Polymide  High
Performance  ("PHP"),  and Unifi, among others. The primary yarns include nylon,
polyester and Nomex.  Invista and PHP are the leading suppliers of airbag fabric
yarn to both the  market and the  Company.  Invista  supplies a majority  of the
nylon yarn used in the Company's airbag fabric  operations  pursuant to purchase
orders or releases on open  purchase  orders.  The loss of Invista as a supplier
could have a material adverse effect on the Company.

      In addition,  in connection with its European operations,  the Company has
entered  into an  agreement  with a German  industrial  sewing  company  and its
Romanian   subsidiary   under  which  the  Romanian   subsidiary   serves  as  a
manufacturing  subcontractor  for  airbag  cushions.  Under  the  terms  of this
agreement,  the  Company  provides  and  retains  control  of the  manufacturing
equipment,  processes and production  materials and the  subcontractor  provides
sewing services for a price per standard minute of acceptable units basis.

      Significant   problems   with,  or  the  loss  of,  any  key  supplier  or
subcontractor  (see also "Risks  Resulting  from Foreign  Operations"  below for
further  information) may adversely affect the Company's  operating  results and
ability to meet customer contracts.

Capacity

      The Company manufactured and shipped over 26.3 million airbag cushions and
related  components to the  Company's  global  customers  during the fiscal year
ended  December 31, 2005.  The Company  believes it has adequate  airbag cushion
manufacturing  capacity for its  anticipated  customer  requirements in its 2006
fiscal year.

      The Company's South Carolina facility produced  approximately 14.9 million
yards of fabric in the fiscal year ended December 31, 2005. The Company believes
it has adequate airbag fabric capacity for its anticipated customer requirements
in fiscal 2006.  The Company  utilizes  weaving  machines  that are versatile in
their ability to produce a broad array of air restraint and specialty  technical
fabrics for use in a large number of  applications.  The ability to  interchange
the machines between air restraint fabric and other specialty  technical fabrics
allows the Company to leverage  its  utilization  of plant  assets.  In 2005 the
Company  placed in  service 21  state-of-the-art  water jet looms as part of its
continuous improvement and technology program.

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  plants  owned  by its  airbag  module  integrator
customers,  which produce a substantial portion of airbag cushions for their own
consumption, although they do not generally manufacture the same airbag cushions
for the same  vehicle  models for which the  Company  manufactures.  Most airbag
module  integrators  subcontract  a portion  of their  requirements  for  airbag
cushions.  However,  decreased  overall  demand  in the  automotive  market  can
increase the likelihood of decisions by module  integrator  customers to curtail
outsourcing and begin  production of certain programs using their own facilities
so they can maintain full utilization of their own facilities  during downturns.
The Company believes that it has good working  relationships  with its customers
due to its high volume, high quality and low-cost manufacturing capabilities and
consistency of products and service.

                                        8

<PAGE>

      The Company shares the North American airbag fabric market  primarily with
Milliken, Takata-Highland,  Mastex, Key Safety and Autoliv. Takata-Highland, Key
Safety and Autoliv,  all airbag module integrators,  produce a portion or all of
their airbag fabric for use in their own airbag cushions.

      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  and some are more
diversified than the Company. The Company competes primarily on the basis of its
price,  product  quality,  reliability,  flexibility and capability to produce a
wide range of models of  passenger  and driver  airbag  cushions and side impact
airbag curtains and cushions. In addition,  the Company's weaving plant in South
Carolina has provided it 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,  could  adversely  affect  the
Company's revenues and profitability.

Technical Centers

      The Company has technical centers in Greenville, South Carolina; Ensenada,
Mexico;  and  Hildesheim,  Germany.  The center in  Hildesheim,  Germany has the
ability to conduct  static and dynamic  deployment  testing and  analysis  using
high-speed video equipment and includes  pendulum-testing  capability,  a sample
shop with manual and CNC sewing  equipment,  a  production-style  laser  cutter,
volumetric  measurement  and  analysis  equipment,  textile  welding  and  other
non-sewn fastening equipment.  The center also has a materials  laboratory,  and
can access the services of  laboratory  and textile  personnel at the  Company's
facility in Greenville, South Carolina. In North America, the module integrators
customarily  perform the majority of advanced  cushion testing;  therefore,  the
Company has not seen a need for an  advanced  technical  center for  cushions in
North America. However, all necessary validation testing and process development
testing is performed in Ensenada,  Mexico. The Ensenada, Mexico technical center
consists of a testing  laboratory and dedicated  prototype cells,  complete with
separate staff and equipment.

      Through its textile laboratory located in Greenville,  South Carolina, the
Company has the  ability to test and analyze a wide range of fabrics  (airbag or
other) under  internationally  accepted testing  standards,  including  US-ASTM,
Europe-DIN  and ISO,  Asian-JIS and  Underwriters  NFPA.  The laboratory is A2LA
accredited  (ISO 17025) and  certified  with ISO/TS  16949 - the most  important
certifications  for the industry.  All validation testing and analytical testing
of fabric is performed at this laboratory. Additionally, the Greenville facility
has prototype-manufacturing capabilities.

Qualification and Quality Control

      The Company's customers require the Company to meet specific  requirements
for design  validation.  The Company and its customers  jointly  participate  in
design and process  validations and customers must be satisfied with reliability
and  performance   prior  to  awarding  a  purchase  order.  All  standards  and
requirements relating to product performance are required to be satisfied before
the Company is qualified as a supplier by its customers.

      The Company  maintains  extensive  quality  control and quality  assurance
systems in its North  American and  European  automotive  facilities,  including
inspection  and  testing  of all  products,  and is TS 16949  and ISO 9001  9002
certified.  The more stringent TS 16949 replaces the Company's  previous QS 9000
certification.  The Company is currently in the process of certification  for TS
16949 for the South  Africa  Joint  Venture  and the China  Joint  Venture,  and
expects  completion  during 2006. The Company also performs  process  capability
studies and designs  experiments to determine that the  manufacturing  processes
meet or exceed the quality levels required by each customer.

      The fabric  operation's  laboratories  have ISO 17025  (A2LA,  certificate
number 0548.01) and UL  accreditation.  The Company's  fabric  operation is also
certified  under the  environmental  and energy  quality  system ISO 14001.  The
Company was the first airbag  fabric  manufacturer  to have its entire  business
(not just its manufacturing facility) certified under QS 9000.

                                        9

<PAGE>

Governmental Regulations

      The  Company's   operations  are  subject  to  various   product   safety,
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  that 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 automotive product
liability lawsuit, nor has it been 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
product recall  program or a final judgment in excess of its insurance  coverage
could have a material adverse effect on the Company.

Seasonality

      The Company's airbag cushions and airbag fabric business is subject to the
seasonal characteristics of the automotive industry, in which, generally,  there
are seasonal plant  shutdowns in the third and fourth  quarters of each 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  that  specifies  the  quantity  ordered and  specific  delivery  dates.
Generally,  these orders are shipped within two to eight weeks of receipt of the
purchase order and material release.  As a result,  the Company does not believe
its backlog is a reliable measure of future airbag sales.

Risks Resulting from Foreign Operations

      Certain of the Company's  consolidated net sales are generated outside 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
and 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 future results of operations.

      In addition,  the Company has a significant  portion of its  manufacturing
operations in foreign countries and therefore purchases a significant 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.  Future
fluctuations  in certain  currency  exchange  rates could  adversely  affect the
Company's  financial results.  The Company monitors its risk associated with the
volatility of certain foreign  currencies against its functional  currency,  the
U.S.  dollar.  The impact of changes in the  relationship of other currencies to
the U.S.  dollar in the fiscal year ended  December 31, 2005 has resulted in the
recognition of other expense,  net of  approximately  $917,000.  However,  it is
unknown what the effect of foreign currency rate  fluctuations  will have on the
Company's  financial position or results of operations in the future. In certain
situations,  the Company utilizes derivative financial instruments designated as
cash  flow  hedges to reduce  exposures  to  volatility  of  foreign  currencies
impacting the operation of its business. See

                                       10

<PAGE>

Item 7A,  "Quantitative and Qualitative  Disclosures about Market Risk" and Note
11  to  the  Consolidated   Financial   Statements  for  information   regarding
derivatives and hedging.

      See  Note  7 to  the  Consolidated  Financial  Statements  for  additional
financial  information by geographic  area,  which  information is  incorporated
herein by reference.

Employees

      At December 31, 2005, the Company employed  approximately 2,900 employees.
The Company's  hourly  employees in Mexico,  the Czech Republic and South Africa
are entitled to a federally  regulated minimum wage, which is adjusted from time
to time.  The Company seeks to set wages for its hourly  employees in China at a
level designed to compete for skilled  workers in its economic zone market.  The
Company's employees at its Mexican and Czech Republic facility are unionized. In
addition,  the Company's  wholly owned German  subsidiary has a workers' council
pursuant to German statutory labor law. The Company has not experienced any work
stoppages  related  to its work  force  and  considers  its  relations  with its
employees and all unions currently representing 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 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 liability for known environmental claims pursuant to such Environmental
Laws,  will  not have a  material  adverse  effect  on the  Company's  financial
position,  results of operations or 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.

      An undiscounted  reserve of $277,000 has been included in "other long-term
liabilities"  on the  accompanying  consolidated  balance  sheets for  estimated
future   environmental   expenditures  related  to  the  Company's  facility  in
Greenville,  South Carolina (the "Greenville  facility") for conditions existing
prior to the Company's  ownership of the facility.  Such reserve was established
at the time the Company acquired the facility,  and the amount was determined by
reference  to the  results  of a Phase  II  study  performed  at the  Greenville
facility.  In addition,  the Greenville  facility has been identified along with
numerous  other  parties  as a  Potentially  Responsible  Party  ("PRP")  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 with respect to the site will not be material.

      The U.S.  Environmental  Protection  Agency (the "EPA") has  notified  the
Company that it believes Valentec Wells, LLC ("Valentec"), as a successor to one
or  more  other  companies,  is one of the 73  largest  Potentially  Responsible
Parties  ("PRPs")  with  responsibility  for the RRG Clayton  Chemical Site (the
"Site") in  Sauget,  Illinois  under the  Comprehensive  Environmental  Response
Compensation and Liability Act ("CERCLA"). Valentec is an inactive subsidiary of
the Company.  Valentec has entered into a Participation  Agreement with a number
of other  companies that also have been named PRPs concerning the performance of
limited response  activities at the Site under an EPA Administrative  Settlement
Agreement  and  Order  on  Consent  for  Removal  Action  (the   "Administrative
Settlement").  Along with these other companies,  the Company has become a party
to the  Administrative  Settlement  and  estimated  costs  of  this  matter  are
currently considered de minimis.  There can be no assurance,  however,  that the
Company's entry into the Administrative  Settlement will limit any costs imposed
on the Company as proposed in the  Administrative  Settlement because compliance
with the Administrative Settlement does not release the Company from all further
liability, and if costs were greater than the Company's estimates, they could be
material to the Company; however the Company does not believe that under current
circumstances, such costs could be material to the Company.

                                       11

<PAGE>

      Although  no  assurances  can be given in this  regard,  in the opinion of
management,  no material  expenditures  beyond those  accrued are expected to be
required for the Company's  environmental control efforts and the final outcomes
of these  matters  are not  expected  to have a material  adverse  effect on the
Company's  financial  position  or results  of future  operations.  The  Company
believes  that it  currently  is in  compliance  with  applicable  environmental
regulations in all material respects.  Management's  opinion is based in part on
the advice of independent consultants on environmental matters.

Intellectual Property

      The Company holds  thirty-five  patents and approval for eight  additional
patents  are  pending.   All  patents  relate  to  technical   improvements  for
enhancement of product performance with respect to the Company's airbag,  fabric
and technical related products. Provided that all requisite maintenance fees are
paid,  the patents  held by the Company  will expire  between the years 2011 and
2021.

      The Company also owns 49% of NxGen Technologies,  LLC, which has granted a
major  automotive  supplier an exclusive  world-wide  royalty bearing license to
certain  of  NxGen's  patents  and patent  know-how.  See "The  Company -- NxGen
Partnership."

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 designs and engineers its fabrics to
meet its  customers'  specific  applications  and  needs.  While  the  component
manufacturer originates most design requirements,  the Company remains 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  $3.1 million,  $1.5 million and
$1.2 million in the years ended  December 31, 2005 and December 31, 2004, and in
the nine month period from March 30, 2003 to December 31, 2003, respectively.

ITEM 1A. RISK FACTORS

Downturns  in the  automotive  industry,  such as recent  downturns in the North
American automotive  industry,  usually reduce demand for the Company's products
and therefore its revenues and income.

      Demand for the  Company's  products  is  generally  tied to the demand for
automobiles  (which  term  includes  light  trucks  and SUVs  unless  explicitly
indicated   otherwise).   The  Company  sells  its  products  to  airbag  module
manufacturers   which  in  turn  sell  their   modules  to  various   automotive
manufacturers. The automotive manufacturers have, from time to time, experienced
rising  inventories  of unsold  automobiles  resulting in reduced  production in
order to balance inventory levels with sales. Sustained reductions in automotive
production  reduce  demand for the Company's  products and therefore  reduce its
revenues and profitability.

      For example, the Company has recently experienced a decline in sales since
the third quarter of 2005 in part as a result of downturns in the North American
automotive  industry.  General  Motors and Ford  Motor  Company  have  announced
workforce  reductions and plant closings and  experienced  rising cost pressures
including, but not limited to increasing costs of worker healthcare. The Company
is not able to predict  how long these  industry  trends  will  continue,  but a
sustained downturn could have a material adverse affect on the Company's results
of operations, cash flows and financial position.

      The  Company's  results of  operations  are also subject to the effects of
work stoppages  within the automotive  industry as a whole.  In particular,  the
Company's sales of airbag products are vulnerable to  interruptions  as a result
of work  stoppages  of labor  forces of the  Company's  customers  and/or  major
automotive  manufacturers  whose unionized workers may strike from time to time.
The  Company  has  historically  experienced  these  interruptions  in sales and
believes it has the  financial  resources to withstand  brief  interruptions  in
sales  caused by these types of work  stoppages.  However,  the  Company  cannot
provide  assurance that future  interruptions in sales would not have a material
adverse affect on its results of operations, cash flows and financial position.

                                       12

<PAGE>

Industry consolidation could reduce competition, decrease sales prices and drive
down demand for the Company's products.

      Automotive  suppliers,  such as the  Company's  customers,  are  currently
subject to the cost  pressures in the  automotive  industry as described  above.
Consolidation  within the automotive  industry could result in further  vertical
integration  of its  customers,  with the  potential  effect of decreased  sales
prices and demand for the Company's  products.  Such consolidation  could have a
potentially  adverse effect on the Company's  results of operations,  cash flows
and financial position.

New competition in North America market could reduce sales prices and demand for
the Company's products.

      Automotive  suppliers,  such as the  Company's  customers,  are  currently
subject to the cost  pressures in the  automotive  industry as described  above.
Such  cost  pressures  increase  the  possibility  for a  customer  to assist in
developing new suppliers in the North America  market,  with the  possibility of
decreased  sales prices and demand for the  Company's  products.  New  suppliers
could be existing  U.S.  companies in similar or related  businesses or existing
foreign  competition  expanding into the North America market. New suppliers and
competition  could have a material  adverse  effect on the  Company's  customers
and/or  suppliers  resulting in a  potentially  adverse  effect on the Company's
results of operations, cash flows and financial position.

Nearly two-thirds of the Company's sales are with three customers.

      Characteristic  of the  industry,  the  Company's  customer base is highly
concentrated.  The Company's net sales to its three largest customers aggregated
approximately  30%, 21% and 9% of net sales in the year ended December 31, 2005.
Net sales to these same three  customers were  approximately  30%, 24% and 8% of
net sales,  respectively,  in the year ended December 31, 2004 and approximately
32%, 23% and 13%, respectively,  in the nine months ended December 31, 2003. The
loss of any of these three customers could have a material adverse effect on the
Company's results of operations, cash flows and financial position.

The Company's credit risk is concentrated in three customers.

      The Company is subject to a  concentration  of credit risk relating to its
trade  receivables.   At  December  31,  2005,  three  customers  accounted  for
approximately 29%, 16% and 15% of the Company's trade  receivables.  At December
31, 2004, these same three customers  accounted for  approximately  36%, 11% and
10%,  and at December 31, 2003 for  approximately  36%, 15% and 5%, of its trade
receivables.  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. However, if such losses were to
become  material,  the Company could experience an adverse affect on its results
of operations, cash flows and financial position.

The Company's customers are also some of its primary competitors.

      Characteristic  of the industry,  the Company  supplies airbag cushions to
airbag module integrators, most of which also produce a portion of their cushion
requirements themselves.  As a result, the Company competes with many of its own
customers;  however,  in most cases the  Company's  customers do not produce the
same  cushions  for the same  automobile  models for which the Company  produces
cushions.  The Company's  customers from time to time decide to bring production
of  their  airbag  cushions  back  in-house  (in-sourcing).   This  occurs  more
frequently  during  downturns  in the  automotive  industry  such as the current
downturn in the North American automotive industry described above. Decreases in
demand for  automobiles  in both the  European  and the North  American  markets
resulted in decisions by certain  customers in 2005 to curtail  outsourcing  and
begin  production of certain  programs using their own facilities which resulted
in reduced sales for the Company.  If consolidation  continues in the automotive
supplier  market,  the  adverse  effect on the Company of a decision by a single
customer  to  increase  in-sourcing  its  airbag  cushion  production  would  be
magnified.  The result of in-sourcing  decisions made by the Company's customers
could  materially  adversely  affect the Company's  results of operations,  cash
flows and financial position.

                                       13

<PAGE>

The Company is dependant on a major nylon yarn supplier.

      The raw materials for the Company's fabric  operations  largely consist of
synthetic  yarns  provided  by  Invista,  Pharr  Yarns,  DuPont,  Polymide  High
Performance  ("PHP"),  and Unifi, among others. The primary yarns include nylon,
polyester and Nomex.  Invista and PHP are the leading suppliers of airbag fabric
yarn to both the  market and the  Company.  Invista  supplies a majority  of the
nylon yarn used in the Company's airbag fabric  operations  pursuant to purchase
orders or releases on open  purchase  orders.  The loss of Invista as a supplier
could have a material adverse effect on the Company.

The Company is experiencing  increases in prices for raw materials which may not
be able to be passed along to customers.

      During 2004 and 2005, one of the Company's largest raw materials suppliers
implemented  price increases of approximately 11% and 4%,  respectively,  on raw
material yarn  purchased for the Company's  North America  airbag fabric weaving
facility.  The Company's negotiations with its airbag cushion customers in North
America to increase  prices of certain of its  products in order to preserve the
Company's  profit margins on these  products were only partially  successful and
resulted  in a variety of  agreements  where such price  increases  were  either
agreed to or  future  sales  price  reductions  were  deferred.  Management  has
estimated  that the  impact  of  currently  known  increases  in the cost of raw
material  purchases  will be to  increase  cost of sales by  approximately  $2.0
million on an annual  basis.  If such price  increases  continue,  the Company's
results of  operations,  cash flows and financial  position  could be materially
adversely affected.

The Company has  substantial  operations  in Mexico,  Europe,  South  Africa and
China, which are subject to a variety of risks.

      A  significant  portion  of  the  Company's  consolidated  net  sales  are
generated  outside the United  States.  Foreign  operations and sales in 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 and 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 future  results of  operations,
cash flows and financial position.

Currency  fluctuations  may  adversely  affect  our  results of  operations  and
financial position.

      The Company's operations in Mexico, Germany, the United Kingdom, the Czech
Republic,  China and South Africa  expose the Company to currency  exchange rate
risks associated with the volatility of the relevant foreign  currencies against
its functional currency,  the U.S. dollar. The Company has a significant portion
of its  manufacturing  operations  in these  foreign  countries  and purchases a
significant portion of its raw materials from foreign suppliers.  Certain of the
Company's  operations  also  generate  net sales and incur  expenses  in foreign
currencies.  The  Company's  primary  foreign  market for sales is  Europe.  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.  Changes in foreign currency exchange rates can therefore
affect our competitive position, selling prices and manufacturing costs.

      Financial  statements  of  substantially  all  of  the  Company's  foreign
operations are prepared  using the local  currency as the  functional  currency.
Translation  of these foreign  operations to United States  dollars occurs using
the current  exchange rate as of the date of the balance sheet for balance sheet
accounts and a weighted average exchange rate for results of foreign operations.
Translation gains or losses are recognized in "accumulated  other  comprehensive
income" as a component of stockholders' equity in the accompanying  consolidated
balance  sheets.  A stronger  U.S.  dollar leads to less  favorable  translation
results and a weaker U.S. dollar leads to more favorable translation results.

      In the fiscal year ended  December 31, 2005,  the impact of changes in the
relationship of other  currencies to the U.S. dollar resulted in the recognition
of other  expense,  net of  approximately  $917,000.  In the  fiscal  year ended

                                       14

<PAGE>

December  31, 2004 and the nine month period from March 30, 2003 to December 31,
2003, the impact of changes in the  relationship of other currencies to the U.S.
dollar  resulted  in the  recognition  of  other  income,  net of  approximately
$677,000  and $2.0  million,  respectively.  It is unknown  what effect  foreign
currency  rate  fluctuations  will have on the Company's  financial  position or
results of operations in the future. If, however, there were a sustained decline
of the relevant  currencies  versus the U.S.  dollar,  the  Company's  financial
position and results of operations could be materially adversely affected.

      From time to time, the Company utilizes derivative  financial  instruments
to reduce its exposures to volatility of foreign  currencies.  Certain operating
expenses at the  Company's  Mexican  facilities  are paid in Mexican  pesos.  To
reduce  exposure to  fluctuations  in the U.S.  dollar and Mexican peso exchange
rates,  the Company  periodically  enters into forward  contracts to buy Mexican
pesos.   Certain   intercompany  sales  at  the  Company's  Czech  facility  are
denominated  and settled in Euros. To reduce exposure to fluctuation in the Euro
and Czech Koruna exchange rates,  the Company  periodically  enters into forward
contracts to buy Czech Korunas with Euros.  The Company will either gain or lose
money on the forward contracts depending on how actual exchange rates compare to
the  purchase  prices of the  forward  contracts,  though by locking in purchase
prices with the forward  contracts  the Company  limits its exposures to adverse
changes in exchange  rates to the extent of the  amounts  subject to the hedges.
For further  information  on the  Company's  risks  related to such hedging see,
"Item 7A. Quantitative and Qualitative Disclosures About Market Risk."

      The Company expects exchange rate fluctuations to continue to impact costs
and  revenues;  however,  we cannot  predict the  magnitude or direction of this
effect for any period,  and there can be no  assurance  that the future  effects
will be similar to the effects described in this risk factor.

The Company's primary credit facility matures on October 8, 2006.

      The Company's  credit facility with Wachovia Bank,  N.A., which includes a
$35 million  revolving line of credit and two term loan  facilities,  matures on
October 8, 2006. At December 31, 2005,  $2.3 million was  outstanding  under the
revolver, $521,000 was utilized under a letter of credit sub-facility,  and $1.5
million was outstanding under one of the term loans.  Although no assurances can
be provided in this regard, the Company's  management currently believes that it
will  be able  to  renegotiate  or  replace  these  facilities  prior  to  their
expiration and maturity with amended or new facilities on comparable  terms. The
inability to secure such financing could adversely affect the Company's  ability
to procure  inventory  and fund  other  working  capital  needs and could have a
material  adverse  effect on the  Company's  financial  position  and results of
operations.  See "Liquidity and Capital  Resources -- Credit  Facilities"  under
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of  Operations,"  and  Note  4 to  the  Consolidated  Financial  Statements  for
additional information regarding the Company's credit facilities.

Changes in existing  environmental laws or their  interpretation,  more vigorous
enforcement  by  regulatory  agencies  or the  discovery  of  currently  unknown
conditions could have a material adverse affect.

      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"). See "Environmental  Matters" in Item 1 of
this annual report on Form 10-K for more information.  Based upon its experience
to date, the Company  believes that the future cost of compliance  with existing
Environmental Laws and liability for known environmental claims pursuant to such
Environmental  Laws will not have a  material  adverse  effect on the  Company's
results  of  operations,  cash flows or  financial  condition.  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 result in a
material adverse effect on the Company's  results of operations,  cash flows and
financial position.

The Company is engaged in a business that is prone to product liability claims.

      The  Company is engaged in a  business  that 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 automotive product
liability lawsuit, nor has it been threatened with any such lawsuit. The Company

                                       15

<PAGE>

maintains product liability insurance coverage,  which management believes to be
adequate. However, a successful claim brought against the Company resulting in a
product recall  program or a final judgment in excess of its insurance  coverage
could have a material  adverse effect on the Company,  and any successful  claim
against the Company  could result in increases  in premiums  for, and  potential
difficulties in securing, product liability insurance.

Affiliates  of W.L.  Ross & Co.  LLC own  approximately  77.0% of the  Company's
common  stock and hold three of the four  positions  on the  Company's  board of
directors.

      WLR  Recovery  Fund II, L.P. and WLR Recovery  Fund III,  L.P.,  which are
affiliates of W.L. Ross & Co. LLC,  collectively own approximately  77.0% of the
Company's  outstanding  common stock.  Wilbur L. Ross, Jr., David H. Storper and
Michael J.  Gibbons,  each of whom is an officer of W.L.  Ross & Co.  LLC,  hold
three  of  the  four  currently-filled  positions  on  the  Company's  board  of
directors.  W.L. Ross & Co. LLC and its affiliates  can therefore  determine the
outcome of most if not all votes of the board of directors and  stockholders  of
the Company. W.L. Ross & Co. LLC has informed the Company that circumstances may
occur in which it and its  affiliated  major  investors  may have an interest in
pursuing acquisitions, divestitures or other transactions, including among other
things,  taking  advantage of certain  corporate  opportunities  that,  in their
judgment,  could enhance their  investment in the Company or another  company in
which they invest. These transactions might involve risks to the Company's other
holders of common stock or adversely affect the Company or other investors.

There is a limited market for the Company's common stock.

      The  Company's  common  stock is not  listed  on any  national  securities
exchange,   but  rather   trades  on  the   Over-The-Counter   Bulletin   Board.
Approximately  77.0% of the Company's  common stock is held by WLR Recovery Fund
II, L.P. and WLR Recovery Fund III,  L.P.,  which are  affiliates of W.L. Ross &
Co. LLC. There is a limited market for the Company's  common stock and there can
be no assurance as to the liquidity of an  investment  in the  Company's  common
stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

      Not applicable.

                                       16

<PAGE>

ITEM 2.      PROPERTIES

      The Company's  corporate  headquarters  are located in  Greenville,  South
Carolina in a facility owned by the Company,  adjacent to its Safety  Components
Fabric Technologies,  Inc.  manufacturing  facility.  The Company owns or leases
eight facilities in which it manufactures  airbag and technical  fabrics related
products,  with total  plant  area of  approximately  1.3  million  square  feet
(including administrative,  warehouse,  engineering and research and development
areas housed at Company  locations).  We believe that our plants,  which vary in
size and age, are in good  condition  and are suitable  for our  operations  and
believe our operating  facilities have sufficient capacity to meet our needs for
the  foreseeable  future.  Below is an  overview  of the  Company's  airbag  and
technical fabrics related products facilities as of December 31, 2005.

<TABLE>
<CAPTION>
                                                                Floor Area     Owned/       Lease
                    Location                                    (Sq. Ft.)      Leased     Expiration
                    --------                                    ----------     ------     ----------
<S>                                                             <C>            <C>        <C>
Ensenada, Mexico (airbag cushions)                                  97,000     Leased        2008    (1)
Ensenada, Mexico (airbag cushions)                                  43,000     Leased        2007    (1) (2) (6)
Greenville, South Carolina (airbag and technical fabrics)          826,000      Owned         N/A    (1) (3) (6) (11)
Hildesheim, Germany (airbag cushions)                               70,000      Owned         N/A    (1) (6) (11)
Jevicko, Czech Republic (airbag cushions)                          100,000      Owned         N/A    (4) (12)
Jevicko, Czech Republic (airbag cushions)                           38,000     Leased        2008    (4) (7)
Otay Mesa, California (airbag cushions)                             16,000     Leased        2006    (5) (6) (9)
Durban, South Africa (airbag cushions)                              14,000     Leased        2008    (1) (10)
Changshu, China (airbag cushions)                                   58,000     Leased        2009    (1) (6) (8)
</TABLE>

----------
(1)   Manufacturing, research and development and office space

(2)   Lease also provides for five-year renewal option

(3)   Location of corporate offices

(4)   Manufacturing and office space

(5)   Finished goods distribution center and office space

(6)   Location of marketing and sales offices

(7)   Lease also provides for two-year renewal option

(8)   Lease also provides for five (5) three-year renewal options

(9)   Lease is expected to be extended for 3 years

(10)  Lease also provides for annual renewal options

(11)  This property is collateral  under the Wachovia  Facilities.  See "Item 7.
      Management's Discussion and Analysis of Financial Condition and Results of
      Operations - Liquidity and Capital Resources - Credit Facilities."

(12)  This property is collateral  under a mortgage  which expires in 2007.  See
      "Item 7. Management's  Discussion and Analysis of Financial  Condition and
      Results of Operations - Liquidity and Capital  Resources - Other Long-Term
      Obligations."

ITEM 3.      LEGAL PROCEEDINGS

      As  described  in "The  Company - The 2001  Restructuring"  in Item 1, the
Company  emerged from  bankruptcy on October 11, 2000, and an order entering the
final  decree and closing the Chapter 11 cases was signed on November  21, 2003.
The final decree was subject to a "Limited  Reservation of  Jurisdiction"  for a
"Reporting/Fee Dispute" with the U.S. Trustee Office over administrative matters
associated  with the  cases.  During the fourth  quarter  of 2005,  the  Company
resolved this matter with the U.S.  Trustee Office for $158,000,  an amount less
than previously reserved by the Company.

      By letter  dated  November  2, 2004,  a division  employee,  at the time a
controller for the Company's North American  Automotive Group, filed a complaint
with the U.S. Department of Labor,  Occupational Safety & Health  Administration
("OSHA"),   pursuant  to  Section  806  of  the  Corporate  and  Criminal  Fraud
Accountability  Act of 2002, Title VIII of the  Sarbanes-Oxley  Act of 2002 (the
"Act"), alleging that a change in his duties in September 2004 resulted from his
allegations  of  improprieties  in  the  Company's   operations  in  Mexico  and
California. Neither numerous internal investigations conducted by various levels
of the Company's management nor the ensuing external

                                       17

<PAGE>

investigation  conducted by a forensic  accounting firm engaged by the Company's
Audit  Committee  following  notification  by  management  of the issues  raised
substantiated  any of the  allegations.  Due to  circumstances  unrelated to the
investigation or the complaint,  the Company terminated the employee on December
15, 2004. By letter dated  December 15, 2004,  the former  employee  amended his
complaint  to  allege  that  his  termination  was also in  retaliation  for his
allegations. By letter dated February 14, 2005, the Company was notified by OSHA
that it had  completed its  investigation  and found that there is no reasonable
cause to believe  that the Company  violated  the Act. On November 3, 2005,  the
former  employee  filed a complaint  against  the  Company and its  subsidiaries
Safety  Components Fabric  Technologies,  Inc., and Automotive Safety Components
International, Inc., ("ASCI") in U.S. District Court, District of South Carolina
(the "Complaint") alleging five causes of action: violation of the Act, wrongful
discharge in violation of public policy, breach of contract,  breach of contract
accompanied by a fraudulent act and promissory estoppel.  In the Complaint,  the
former  employee seeks  compensatory  and punitive  damages as well as costs and
attorney's fees. The Company believes the former  employee's  claims are without
merit and is vigorously defending the case. ASCI has asserted a counterclaim for
damages related to expenses incurred in investigating  unreasonable  allegations
of financial irregularities made by the plaintiff.

      See   "Environmental   Matters"   in  Item  1  with   respect  to  certain
environmental   proceedings   involving   the  Company,   which   discussion  is
incorporated herein by reference.

      The Company,  from time to time,  becomes party to legal  proceedings  and
administrative  actions, which are of an ordinary or routine nature,  incidental
to the  operations  of the  Company.  Although  it is  difficult  to predict the
outcome of any legal  proceeding,  in the opinion of the  Company's  management,
such proceedings and actions should not, individually or in the aggregate,  have
a material adverse effect on the Company's  financial  condition,  operations or
cash flow.

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

      No matters were  submitted to a vote of the  security  holders  during the
quarter ended December 31, 2005.

                                       18

<PAGE>

                                     PART II

ITEM 5.      MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
             MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

      The  Company's  common  stock is not  listed  on any  national  securities
exchange,  but  rather  trades  on  the  Over-The-Counter  Bulletin  Board.  The
following table sets forth the range of high and low prices for reported bids of
the common  stock during the twelve month  periods  ended  December 31, 2005 and
December 31, 2004,  respectively  (the  Company's two most recent fiscal years).
The prices quoted for the  Over-The-Counter  Bulletin Board reflect inter-dealer
prices, without retail mark-up,  mark-down or commission,  and may not represent
actual transactions.

                                               High                 Low
                                             --------             -------
Year Ended December 31, 2004
      First Quarter                          $  17.00             $ 12.00
      Second Quarter                            13.50               12.00
      Third Quarter                             13.40               12.75
      Fourth Quarter                            14.00               12.75

Year Ended December 31, 2005
      First Quarter                          $  17.55             $ 13.40
      Second Quarter                            17.00               12.70
      Third Quarter                             14.75               12.90
      Fourth Quarter                            15.20               14.00

      As of March 1, 2006, there were approximately 161 holders of record of the
Company's common stock.

      To date, the Company has not paid any cash  dividends to its  stockholders
and does not currently have plans to do so in the future.  Further, the Wachovia
Facilities (as defined below)  restrict the Company's  ability to pay dividends.
See the discussion of the Wachovia Facilities under "Management's Discussion and
Analysis of  Financial  Condition  and  Results of  Operations  - Liquidity  and
Capital  Resources"  below.  During the three months ended December 31, 2005 the
Company did not repurchase  any equity  securities  that were  registered by the
Company pursuant to Section 12 of the Exchange Act.

      The information under "Item 12. Security  Ownership of Certain  Beneficial
Owners and Management  and Related  Stockholder  Matters -- Equity  Compensation
Plan Information" is incorporated herein by reference.

                                       19

<PAGE>

ITEM 6.      SELECTED FINANCIAL DATA

      The following table presents selected  consolidated  historical  financial
data for the Company as of the dates and for the fiscal periods  indicated.  The
selected historical  financial data for the fiscal years ended December 31, 2005
and December 31, 2004, the nine month period from March 30, 2003 to December 31,
2003,  and the fiscal  years  ended  March 29, 2003 and March 30, 2002 have been
derived from the audited  Consolidated  Financial  Statements of the Company for
such periods.  The presentation of certain previously  reported amounts has been
reclassified to conform to the current  presentation and to reflect discontinued
operations  of the  non-core  businesses  (metal  and  defense).  The  following
information  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.

In thousands, except per share data and footnotes
(see Notes  to Selected Financial Data)

<TABLE>
<CAPTION>
                                                               ---------------------------------------------------------------
                                                               Fiscal Year  Fiscal Year  Period from  Fiscal Year  Fiscal Year
                                                                  Ended        Ended     3/30/03 to      Ended        Ended
                                                                12/31/05     12/31/04     12/31/03      3/29/03      3/30/02
                                                               (12 Months)  (12 Months)  (9 Months)   (12 Months)  (12 Months)
                                                               ---------------------------------------------------------------
<S>                                                            <C>          <C>          <C>          <C>          <C>
INCOME STATEMENT DATA (1):
Net sales (2)                                                   $220,114     $247,883     $183,666     $244,338     $203,323
Cost of sales, including depreciation                            196,693      212,167      158,469      215,003      177,257
                                                               ---------------------------------------------------------------
Gross profit                                                      23,421       35,716       25,197       29,335       26,066
Selling, general and administrative
      expenses, excluding amortization                            15,991       20,104       12,995       15,032       12,054
Expenses associated with changes of control (3)                    2,965           --        2,797           --           --
Amortization of intangible assets (4)                                154          153          106          124          900
                                                               ---------------------------------------------------------------
Operating income                                                   4,311       15,459        9,299       14,179       13,112
Other expense (income), net                                          538       (1,467)      (2,275)      (3,446)      (1,034)
Interest expense                                                     682          946        1,664        3,616        4,143
                                                               ---------------------------------------------------------------
Income  from  continuing   operations  before  income taxes,
      minority interest and equity in earnings from
      unconsolidated affiliate, net of tax                         3,091       15,980        9,910       14,009       10,003
Income tax provision                                                 907        5,771        3,808        6,120        3,397
Minority interest in loss of consolidated subsidiaries (6)          (605)         (39)          --           --           --
Equity in  earnings from unconsolidated  affiliate,
      net of tax (5)                                                (754)
                                                               ---------------------------------------------------------------
Income from continuing operations                                  3,543       10,248        6,102        7,889        6,606
Discontinued operations, net of taxes:
      Loss on  disposition of discontinued operations (7)             --           --           --        2,023        2,517
Cumulative effect of change in accounting method (8)                  --           --           --      (14,651)          --
                                                               ---------------------------------------------------------------
Net income (loss)                                               $  3,543     $ 10,248     $  6,102     $ (8,785)    $  4,089
                                                               ===============================================================
PER SHARE DATA, BASIC(1):
Income from continuing operations                               $   0.66     $   1.97     $   1.23     $   1.59     $   1.33
Loss from discontinued operations                                     --           --           --        (0.41)       (0.51)
Cumulative effect of change in accounting method                      --           --           --        (2.95)          --
                                                               ---------------------------------------------------------------
Net income (loss) per common share                              $   0.66     $   1.97     $   1.23     $  (1.77)        0.82
                                                               ===============================================================
PER SHARE DATA, DILUTED:
Income from continuing operations                               $   0.65     $   1.94     $   1.19     $   1.59     $   1.33
Loss from discontinued operations                                     --           --           --        (0.41)       (0.51)
Cumulative effect of change in accounting method                      --           --           --        (2.95)          --
                                                               ---------------------------------------------------------------
Net income (loss) per common share                              $   0.65     $   1.94     $   1.19     $  (1.77)    $   0.82
                                                               ===============================================================
Weighted average number of shares outstanding, basic               5,370        5,206        4,973        4,960        4,960
                                                               ===============================================================
Weighted   average  number  of  shares   outstanding, diluted      5,447        5,294        5,119        4,960        4,960
                                                               ===============================================================
BALANCE SHEET DATA:
                                                               ---------------------------------------------------------------
                                                                12/31/05     12/31/04     12/31/03      3/29/03      3/30/02
                                                               ---------------------------------------------------------------
Working capital (9)                                             $ 40,150     $ 38,124     $ 27,166     $  8,025     $  3,609
Total assets                                                     118,354      127,526      123,326      134,064      125,271
Long term debt, net of current maturities                            810        3,729       11,817        7,363       12,182
Stockholders' equity                                              80,669       80,524       64,029       51,913       55,838
</TABLE>

                                       20

<PAGE>

Notes to Selected Financial Data:

(1)   The Company did not declare  dividends during any of the periods or fiscal
      years presented.

(2)   The growth in net sales between fiscal years 2002 and 2003 is attributable
      in part to the Woodville acquisition on November 2, 2001.

(3)   During  the nine  months  ended  December  31,  2003,  Zapata  Corporation
      acquired  shares of the  Company's  common  stock that at the time of such
      acquisition represented approximately 83.9% of the then outstanding shares
      of the  Company's  common  stock,  resulting in the 2003 Change of Control
      described  above in "The  Company - 2003 Change of Control" in Item 1. The
      2003 Change of Control triggered certain provisions of the Company's Stock
      Option Plan,  including  immediate vesting of all options and an automatic
      change in the exercise  price of a portion of the options.  This change in
      exercise price constituted a modification of the Stock Option Plan and the
      Company was  required to  recognize  a  one-time,  non-recurring  non-cash
      compensation cost of $1.4 million for the modified options.  Additionally,
      the employment  agreements of certain key executives  included a provision
      for a bonus  payable in the event of a change of  control.  The  aggregate
      bonus,  payable  following  the 2003 Change of Control,  was $1.4 million.
      During the year ended  December 31, 2005,  the WLR Recovery Funds acquired
      shares of the Company's  common stock that at the time of such acquisition
      represented approximately 77.3% of the outstanding shares of the Company's
      common stock,  resulting in the 2005 Change of Control  described above in
      "The  Company - 2005  Change of  Control"  in Item 1. Upon  closing of the
      stock purchase  transaction,  and in lieu of any special change of control
      bonus  that  was  or  might  have  been  payable  pursuant  to  employment
      agreements  between the Company and each of John Corey, then President and
      Chief  Executive  Officer,  and Brian  Menezes,  Vice  President and Chief
      Financial  Officer,  the Company paid a bonus of $994,000 to Mr. Corey and
      $406,000 to Mr. Menezes.  Additionally,  Zapata Corporation contributed $1
      million of capital to the Company to pay additional bonuses to certain key
      employees  in  association  with the 2005  Change of  Control.  Also,  the
      Company  recognized  expenses of  approximately  $600,000  related to this
      stock purchase transaction.

(4)   The adoption of SFAS No. 142, "Goodwill and Other Intangible  Assets",  as
      of March 31, 2002,  the beginning of fiscal 2003,  required the Company to
      cease  amortization  of the Company's  "reorganization  value in excess of
      amounts allocable to identifiable  assets" and goodwill,  resulting in the
      reduction  of  approximately  $791,000 in  amortization  costs from fiscal
      2002.

(5)   On September 1, 2005 the Company exercised an option to acquire 49% of the
      ownership interests of NxGen Technologies,  LLC ("NxGen"), which is in the
      business of designing  airbags,  airbag systems and inflator units.  NxGen
      has a License and Consulting  Agreement with a major  automotive  supplier
      ("Supplier")  which paid NxGen an initial  license  fee for use of NxGen's
      technology. Accordingly, the Company recognized approximately $754,000 net
      of tax and  recorded  an asset at  December  31,  2005 of  $237,000  which
      represents its interest in NxGen's equity.

(6)   On  November  30,  2004,  the  Company  announced  that it had  signed  an
      agreement  to form the South Africa Joint  Venture for the  production  in
      South Africa of automotive  airbag cushions.  As of December 31, 2005, the
      South Africa Joint Venture had not begun commercial production. On January
      4, 2005, the Company announced that it had signed an agreement to form the
      China  Joint  Venture for the  production  in China of  automotive  airbag
      cushions.  The China Joint  Venture  began  producing  and selling  airbag
      cushions in October 2005.  Minority interest represents the amount of loss
      attributable to the Company's unaffiliated joint venture partners.

(7)   On December 23, 2002, the Company completed the disposal of all operations
      that it had classified as  "discontinued  operations".  Net Sales of metal
      and defense related products were  approximately  $0, $0, $0, $5.4 million
      and $10.5  million in the years  ended  December  31,  2005 and 2004,  the
      period from March 30, 2003 to December  31, 2003 and the years ended March
      29,  2003  and  March  30,  2002,   respectively,   for  the  discontinued
      operations.

(8)   The  adoption of SFAS No. 142,  "Goodwill  and Other  Intangible  Assets",
      required  the  Company  to assess its  "reorganization  value in excess of
      amounts  allocable to  identifiable  assets",  arising from the  valuation
      performed upon its emergence from Chapter 11 in October 2000, and goodwill
      as of March 31, 2002.  The excess  reorganization  value and goodwill were
      determined to be impaired and, under the  transition  guidance of SFAS No.
      142, the impairment was charged to earnings as the cumulative  effect of a
      change in method of  accounting.  No tax effect was  recognized,  as these
      items  were not  deductible  for income  tax  purposes.  See Note 2 to the
      Consolidated Financial Statements.

(9)   The low amount reported in working capital at March 29, 2003 and March 30,
      2002 was principally due to the  classification  of the Wachovia  Facility
      (as defined  below) and/or a subordinated  secured note,  each due October
      2003, with an outstanding  balance of $28.5 and $18.9 million at March 29,
      2003 and March 30, 2002, respectively, as a current liability at March 29,
      2003 and March 30, 2002, respectively. The Company refinanced the Wachovia
      Facility  and  repaid  the  subordinated   secured  note  prior  to  their
      maturities  in  October  2003.  See Note 4 to the  Consolidated  Financial
      Statements.

                                       21

<PAGE>

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

      The  Company is a leading  low-cost  independent  supplier  of  automotive
airbag fabric and cushions,  with  operations in North  America,  Europe,  South
Africa and China.  The following  discussion  should be read in conjunction with
the Company's  Consolidated  Financial  Statements and Notes thereto,  appearing
elsewhere  in this  report.  Except  for the  historical  information  contained
herein,  the  discussions in this document  contain  forward-looking  statements
within the meaning of the Private  Securities  Litigation Reform Act of 1995 and
involve  risks and  uncertainties.  The  Company's  actual  results could differ
materially from those  forward-looking  statements.  Factors that could cause or
contribute to such differences  include, but are not limited to, those discussed
under "Item 1A. Risk Factors"  and,  from time to time,  in the Company's  other
filings with the SEC and other  factors  that  generally  affect the  automotive
industry.

      The following  discussion and analysis of financial  condition and results
of operations is based on the Company's  Consolidated  Financial  Statements.  A
summary  of  significant  accounting  policies  is  disclosed  in  Note 2 to the
Consolidated Financial Statements.

Outlook

      As the automotive  airbag industry has evolved,  module  integrators  have
outsourced varying portions of non-proprietary  components, such as cushions, to
companies  such as the Company  specializing  in the  production  of  individual
components.  The Company  believes  that its module  integrator  customers  will
continue to outsource a portion of their cushion  requirements  as they focus on
the  development of proprietary  technologies.  The Company also believes that a
majority of the module  integrators  will  purchase  fabric  from airbag  fabric
producers  such  as  the  Company.  However,  decreased  overall  demand  in the
automotive  market may increase the likelihood of decisions by module integrator
customers to curtail  outsourcing and begin production of certain programs using
their own facilities to better utilize their own in-house capacity.

      Like the automotive  supply industry  generally,  the Company continues to
experience  significant   competitive  pressure.  The  Company  supplies  airbag
cushions and/or airbag fabric based upon releases from formal  purchase  orders,
which are subject to periodic negotiation with respect to price and quantity. It
will be necessary for the Company to pass along raw material price increases for
it to maintain  its levels of  profitability.  The Company  expects that it will
continue to  experience  competitive  pressures and although it believes that it
has good  working  relationships  with its  customers  due to its  manufacturing
capabilities,  quality  products and  service,  it cannot give  assurances  that
purchases  by its module  integrator  customers  will  continue at or near their
current levels.

      The  Company's  customers  supply  airbag  modules to  various  automotive
manufacturers. The automotive manufacturers have, from time to time, experienced
rising  inventories  of unsold  automobiles  and  trucks  resulting  in  reduced
production in 2005 in order to balance  inventory  levels with sales. The impact
of any further  sustained  reductions in production,  for any reason,  cannot be
predicted but may impact the Company's  results of operations  and/or  financial
position adversely.

      The Company  experienced a reduction in sales and operating  profit in the
second  half  of 2005  due to the  events  noted  in the  immediately  preceding
paragraphs  plus  the  expenses  associated  with the 2005  Change  of  Control.
Management  is unable to determine  the duration of the reduced  production,  if
any,  in the  domestic  and  foreign  automotive  industry  or its effect on the
Company's results of operations and/or financial position.

Results of Operations

      OVERVIEW. During 2004 and 2005, one of the Company's largest raw materials
suppliers  implemented  significant price increases of approximately 11% and 4%,
respectively,  on raw material yarn  purchased  for the Company's  North America
airbag  fabric  weaving  facility.  The Company's  negotiations  with its airbag
cushion customers in North America to increase prices of certain of its products
in order to preserve the Company's  profit  margins on these  products were only
partially  successful  and resulted in a variety of agreements  where such price
increases were either agreed to or future sales price  reductions were deferred.
Management  has  estimated  that  the

                                       22

<PAGE>

impact of increases in the cost of raw  material  purchases  will be to increase
cost of sales by approximately $2.0 million on an annual basis.

      During 2005 the  Company's  joint  venture  facilities in South Africa and
China  continued  progress  towards  the  commercial  production  of  automotive
airbags.  The China Joint Venture began commercial  production in October,  2005
and  continues  its efforts to build its  customer  and product  base.  Sales as
reported for the China Joint Venture were  insignificant  for 2005.  The Company
recognized  approximately  $1.5 million in  pre-production  activities  in South
Africa and China associated with its joint ventures.  Pre-production expenses on
a significantly  lesser scale are expected to continue at the South Africa Joint
Venture until commercial production begins in mid-2006.

      On September 1, 2005 the Company exercised an option to acquire 49% of the
ownership  interests  of  NxGen  Technologies,  LLC  ("NxGen"),  which is in the
business of designing  airbags,  airbag systems and inflator units.  The Company
exercised  this  option in  connection  with  NxGen's  entry into a License  and
Consulting Agreement with a major automotive supplier  ("Supplier")  pursuant to
which NxGen granted Supplier an exclusive, worldwide, royalty-bearing license to
certain  of  NxGen's  patents  and  patent   know-how.   The  Company  waived  a
right-of-first-refusal  with  respect  to the  license.  Supplier  paid NxGen an
initial  license  fee and will owe it two  additional  payments,  which  will be
treated as prepaid  royalties for subsequent  sales,  when  validation and sales
targets  are met.  If sales  exceed  the  volume  corresponding  to the  prepaid
royalties,  Supplier will pay NxGen an additional royalty for each airbag system
sold  using  the  licensed   patents  and  know-how.   The  Company   recognized
approximately   $754,000  (net  of  income  taxes)  in  equity  in  earnings  of
unconsolidated  affiliate in connection  with the exercise of the option and the
allocation  of the  Company's  proportionate  share of NxGen's  income  from the
receipt of the initial  license fee from Supplier.  As a result of the above and
also the Company's receipt of a distribution from NxGen, the Company recorded an
asset of  approximately  $237,000  (which  represents  the  Company's  ownership
interest  in  this  affiliate's  equity)  in  the  Company's  balance  sheet  in
investment in unconsolidated  affiliate. The Company will participate in NxGen's
subsequent profits and losses pro rata in accordance with its equity ownership.

      Upon closing of the stock purchase transaction described in 2005 Change of
Control in Item 1 above, the Company paid bonuses of approximately  $1.4 million
to its former chief executive officer and chief financial officer in lieu of any
special change of control bonus that was or might have been payable  pursuant to
employment agreements,  and Zapata made a capital contribution to the Company in
the  aggregate  amount of $1.0  million for the  purpose of the  Company  paying
additional  bonuses to the Company's  executive officers and other key employees
for their  efforts in  connection  with the  attempts to sell the Company and to
provide  management  with an  incentive  to remain with the  Company  during the
pendency of the stock purchase transaction.  In addition, the Company recognized
expenses of approximately  $600,000 related to this stock purchase  transaction.
The Company recognized these charges in the fourth quarter of 2005.

      Following the 2003 Change of Control,  the Company's  Audit  Committee and
Board of Directors  determined  that it was in the  Company's  best  interest to
change the  Company's  fiscal  year end from the last  Saturday  in the month of
March to a calendar-based year ending December 31 to coincide with Zapata's year
end. This change was effective as of the quarter  ended  December 31, 2003.  The
Company's  operations were previously  based on a fifty-two or fifty-three  week
fiscal year ending on the Saturday closest to March 31. As such, the period from
March 30, 2003 to December 31, 2003  consists of nine months of  operations.  To
enhance  comparability,  the following table summarizes operating results of the
Company  and  operating  results  expressed  as a  percentage  of net  sales for
corresponding  periods for the years ended  December  31, 2005 and  December 31,
2004 and the  twelve  month  period  ended  December  31,  2003  (in  thousands)
(unaudited):

                                       23

<PAGE>

<TABLE>
<CAPTION>
                                                         -----------------------------------------------------------------
                                                             Period from           Period from           Period from
                                                              1/1/05 to             1/1/04 to            12/29/02 to
                                                               12/31/05              12/31/04              12/31/03
                                                             (12 months)           (12 months)           (12 months)
                                                                                                         (unaudited)
                                                         -----------------------------------------------------------------
<S>                                                        <C>        <C>        <C>        <C>        <C>        <C>
Net sales                                                  $220,114   100.0%     $247,883   100.0%     $247,142   100.0%
Cost of sales, including depreciation                       196,693    89.4       212,167    85.6       213,571    86.4
Selling, general and administrative expenses                 16,145     7.3        20,257     8.2        16,949     6.9
Expenses associated with changes of control                   2,965     1.3            --      --         2,797     1.1
Other expense (income), net                                     538     0.2        (1,467)   (0.6)       (3,024)   (1.2)
Interest expense                                                682     0.3           946     0.4         2,515     1.0
Provision for income taxes                                      907     0.4         5,771     2.3         5,472     2.2
Minority interest in loss of consolidated subsidiaries         (605)   (0.3)          (39)     --            --      --
Equity in earnings from unconsolidated affiliate               (754)   (0.3)           --      --            --      --
Loss on discontinued operations, net of taxes                    --      --            --      --           660     0.3
Net income                                                    3,543     1.6        10,248     4.1         8,202     3.3
</TABLE>

Twelve Months Ended  December 31, 2005 Compared to Twelve Months Ended  December
31, 2004

      NET SALES. Net sales decreased $27.8 million,  or 11.2%, to $220.1 million
for the twelve  months  ended  December 31, 2005  compared to the twelve  months
ended  December  31,  2004.  North  American  operations'  net  sales  decreased
approximately  $8.5  million,  or 7.5%,  compared  to the  twelve  months  ended
December 31, 2004, with the decrease  principally due to decreased demand in the
North America automotive market and increased customer in-sourcing of production
of cushions  and  fabric.  Net sales for  European  operations  decreased  $19.7
million,  or 14.7%,  resulting from  decreased  overall demand in the automotive
market and  decisions  by certain  customers  to curtail  outsourcing  and begin
production of certain  programs using their own facilities.  The decrease in net
sales for  European  operations  contained no  significant  effect of changes in
foreign currency exchange rates compared to the twelve months ended December 31,
2004. The joint venture in China commenced  sales in October 2005,  contributing
approximately $441,000 of net sales in the current year.

      COST  OF  SALES,   INCLUDING   DEPRECIATION.   Cost  of  sales,  including
depreciation  ("cost of sales")  decreased  $15.5  million,  or 7.3%,  to $196.7
million for the twelve  months ended  December  31, 2005  compared to the twelve
months ended December 31, 2004. The decrease was  attributable to North American
operations' cost of sales decreasing  approximately  $3.2 million,  or 3.4%, and
European  operations'  cost of sales  decreasing  $13.7 million,  or 11.6%,  and
offset by increased costs of  approximately  $1.4 million related to the ongoing
joint venture  pre-production  activities in South Africa and China, compared to
the twelve  months ended  December  31,  2004.  The decrease in cost of sales is
attributable  to the decrease in net sales in the  corresponding  time  periods.
Cost of sales as a  percentage  of net sales  increased  to 89.4% for the twelve
months ended  December 31, 2005 from 85.6% for the twelve months ended  December
31,  2004.  The  increase  in cost of  sales  as a  percentage  of net  sales is
primarily  a result  of the  fixed  cost  component  of cost of sales  not being
reduced in  proportion  to the decrease in net sales in the  corresponding  time
periods,  as well as  inflationary  increases  for raw materials and supplies as
noted  above and costs  associated  with the  pre-production  activities  of the
Company's  Joint  Ventures,  offset by a  decrease  in  depreciation  expense of
approximately  $2.2 million due to the  maturation of the  depreciable  lives of
certain property, plant and equipment.

      SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES.   Selling,  general  and
administrative  expenses decreased $4.1 million,  or 20.3%, to $16.1 million for
the twelve  months ended  December 31, 2005  compared to the twelve months ended
December 31, 2004. The decrease in selling,  general and administrative expenses
is   attributable   primarily  to  reduced   professional   services   costs  of
approximately   $3.0  million,   including  $1.0  million  for  a  whistleblower
investigation  in  2004,  reduced  compensation,  benefits  and  other  costs of
approximately   $1.8  million  and  reduced  costs  of  approximately   $300,000
associated with the closure of the Company's U.K.  facility in the twelve months
ended  December 31, 2004.  These  reductions in costs were  partially  offset by
costs that the Company  incurred in the twelve months ended December 31, 2005 of
approximately  $900,000  related to the  ongoing  joint  venture  pre-production
activities.  Expenses from  pre-production  activities  are expected to continue
until commercial production

                                       24

<PAGE>

begins  at the  South  Africa  Joint  Venture,  which  is  expected  to occur in
mid-2006.  Selling,  general and administrative  expenses as a percentage of net
sales  decreased to 7.3% for the twelve months ended December 31, 2005 from 8.2%
for the twelve months ended December 31, 2004 due to the items noted above.

      EXPENSES  ASSOCIATED  WITH  CHANGES OF  CONTROL.  The  Company  recognized
expenses of approximately  $3.0 million resulting from the sale of its shares by
Zapata  Corporation to the WLR Recovery  Funds.  $2.4 million of this amount was
paid to certain key  executives of the Company in lieu of any special  change of
control bonuses that were or might have been payable under employment agreements
and for efforts to sell the Company and as an incentive to remain  employed with
the Company during the pendency of the completion of the stock transaction.  The
bonuses were partly funded by a capital contribution by Zapata of $1 million. In
addition,  the Company recognized expenses of approximately  $600,000 related to
this stock purchase transaction.

      OTHER EXPENSE (INCOME),  NET. The Company recognized other expense, net of
$538,000 for the twelve months ended December 31, 2005 compared to other income,
net of $1.5  million  for the twelve  months  ended  December  31,  2004.  Other
expense,  net was realized  primarily from foreign  transaction gains and losses
resulting  primarily from the revaluation of intercompany  balances  between the
Company's  European  subsidiaries  and the  U.S.  parent  company.  Net  foreign
transaction  losses of  approximately  $917,000  during the twelve  months ended
December 31, 2005 resulted from unfavorable changes in foreign currency exchange
rates of approximately 10.7% from rates prevailing at December 31, 2004. The net
foreign  transaction  losses were  partially  offset by  approximately  $379,000
primarily  by  unrealized  gains on its  deferred  compensation  plan assets and
interest income.

      INTEREST  EXPENSE.  Interest  expense  decreased  $264,000,  or 27.9%,  to
$682,000 for the twelve  months ended  December 31, 2005  compared to the twelve
months  ended  December  31,  2004.  The  decrease  is  attributable  to average
outstanding  debt  decreasing to $6.4 million from $11.5 million,  offset by the
average weighted interest rate for all Company debt increasing to 5.9% from 4.2%
for the twelve  months ended  December 31, 2005 as compared to the twelve months
ended  December 31, 2004.  Because a substantial  portion of the Company's  debt
carries  interest rates based on the prime rate,  such increase in the Company's
average weighted interest rate is primarily  attributable to increases  totaling
225 basis points in the prime rate over the past 12 months.  Average outstanding
debt  decreased  for the twelve  months ended  December 31, 2005 compared to the
twelve months ended  December 31, 2004 due to the Company  paying down long-term
debt primarily from positive cash flows from operations in 2004 and 2005.

      PROVISION FOR INCOME TAXES.  The provision for income taxes for the twelve
months  ended  December  31,  2005  was   approximately   $907,000  compared  to
approximately  $5.8 million for the twelve months ended  December 31, 2004.  The
Company's  effective tax rate for the twelve months ended  December 31, 2005 was
29.4% compared to 36.0% for the twelve months ended December 31, 2004. The lower
provision for income taxes  resulted from lower income before taxes and minority
interest and a lower effective tax rate for the twelve months ended December 31,
2005 compared to the twelve months ended December 31, 2004. The lower  effective
tax rate for the twelve  months ended  December 31, 2005  compared to the twelve
months ended December 31, 2004 resulted  primarily from the Company's release of
a valuation  allowance  in  connection  with the  utilization  of a capital loss
carried back against a capital gain resulting from the sale of intangible assets
associated with the sale of a former subsidiary in 2001.

      MINORITY  INTEREST IN LOSS OF CONSOLIDATED  SUBSIDIARIES.  On November 30,
2004, the Company  announced that it formed the South Africa Joint Venture,  and
on  January 4,  2005,  the  Company  announced  that it formed  the China  Joint
Venture.  The China Joint Venture began producing and selling airbag cushions in
October  2005.  The  increase  in  minority  interest  in loss  of  consolidated
subsidiaries  from  $39,000 for the twelve  months  ended  December  31, 2004 to
$605,000  for  the  twelve   months  ended   December  31,  2005  resulted  from
establishing the China Joint Venture in 2005 and the full year of pre-production
operations  for both  joint  ventures  in  2005.  Minority  interest  in loss of
consolidated  subsidiaries  for  the  twelve  months  ended  December  31,  2005
represents the amount of loss attributable to the Company's  unaffiliated  joint
venture partners for one full year of pre-production  activities,  including the
approximately  two months of  operating  results  from the China Joint  Venture.
Minority  interest in loss of  consolidated  subsidiaries  for the twelve months
ended  December  31,  2004  represents  the amount of loss  attributable  to the
Company's  unaffiliated South Africa Joint Venture partner for approximately one
month of pre-production activities.

      EQUITY IN EARNINGS FROM UNCONSOLIDATED  AFFILIATE.  The Company recognized
equity in earnings  from  unconsolidated  affiliate  of $754,000  (net of income
taxes of $448,000) for the twelve months ended

                                       25

<PAGE>

December 31, 2005 compared to equity in earnings from  unconsolidated  affiliate
of $0 for the twelve  months ended  December 31, 2004.  Equity in earnings  from
unconsolidated   affiliate  was  realized   primarily  from  the  receipt  of  a
distribution  representing the Company's share in a one-time license payment for
the license of patent and related technology from NxGen in which the Company has
a 49% ownership interest, partially offset by an amount to record the investment
at net book value.

      NET  INCOME.  The  Company's  net income was $3.5  million  for the twelve
months ended  December 31, 2005  compared to $10.2 million for the twelve months
ended December 31, 2004.  This change in net income  resulted from a combination
of the items discussed above.

Twelve Months Ended  December 31, 2004 Compared to Twelve Months Ended  December
31, 2003 (Unaudited)

      NET SALES. Net sales increased  approximately $741,000, or 0.3%, to $247.9
million for the twelve  months ended  December  31, 2004  compared to the twelve
months ended December 31, 2003.  North American  operations' net sales decreased
$8.4 million or 6.9% compared to the prior period, with the decrease principally
due to decreased demand in the North American  automotive  market. Net sales for
European operations increased $9.1 million or 7.4% compared to the prior period.
The increase in European net sales was due  principally to the effect of changes
in foreign  currency  exchange rates that  increased  sales as expressed in U.S.
dollars by  approximately  $12.5  million  over the amount  that would have been
reported  based on exchange  rates in effect in the twelve months ended December
31, 2003.  The favorable  effect of exchange  rates was offset by a reduction in
volume of  approximately  $3.3 million due to  decreased  demand in the European
automotive market.

      COST  OF  SALES,   INCLUDING   DEPRECIATION.   Cost  of  sales,  including
depreciation  decreased $1.4 million,  or 0.7%, to $212.2 million for the twelve
months ended  December 31, 2004 compared to the twelve months ended December 31,
2003.  Cost of sales as a  percentage  of net sales  decreased  to 85.6% for the
twelve  months ended  December  31, 2004 from 86.4% for the twelve  months ended
December 31, 2003.  The European  operations  experienced an increase in cost of
sales of $4.7 million as a result of the increase in net sales mentioned  above.
The European operations  experienced a decrease in cost of sales as a percentage
of net sales due to  improvements  in  operating  efficiencies  and cost savings
resulting  from,  among other  things,  the  Company's  closure of the Company's
United  Kingdom  facility and transfer of  production  lines to lower labor cost
areas  within  Europe  in the prior  year,  as well as the  favorable  effect of
exchange rates of approximately $1.3 million,  net of one-time lease termination
costs of  approximately  $400,000  associated  with the closure of the Company's
United Kingdom facility.  The closure of the United Kingdom facility contributed
approximately  $1.7  million to  decreased  cost of sales  compared to the prior
year. Cost of sales for North American operations  decreased  approximately $6.3
million due to the decrease in net sales  mentioned  above.  The North  American
operations experienced an increase in cost of sales as a percentage of net sales
primarily  resulting from price increases on raw material of approximately  $1.4
million and the North American operations' net sales decrease mentioned above.

      SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES.   Selling,  general  and
administrative  expenses increased $3.3 million,  or 19.5%, to $20.3 million for
the twelve  months ended  December 31, 2004  compared to the twelve months ended
December 31, 2003. Selling,  general and administrative expenses as a percentage
of net sales  increased to 8.2% for the twelve  months  ended  December 31, 2004
from  6.9%  in  the  prior  period.   The  increase  in  selling,   general  and
administrative  expenses is attributable to the following  costs:  approximately
$300,000 in one-time charges associated with the closure of the Company's United
Kingdom  manufacturing  facility  which includes  redundancy  charges and moving
expenses; costs approximating $2.4 million in legal, professional and consulting
expenses   regarding  company  financing,   Sarbanes-Oxley   related  and  other
compliance  activities,  including a $1.0 million  investigation cost related to
allegations  raised  by  a  former  employee  described  under  "Item  3.  Legal
Proceedings";  and  approximately  $600,000 in costs for  implementation  of new
information systems.

      EXPENSES  ASSOCIATED  WITH  CHANGES OF  CONTROL.  The  Company  recognized
expenses of  approximately  $2.8 million in the twelve months ended December 31,
2003  resulting from the purchase of  approximately  84% of its shares by Zapata
Corporation.  This  change  of  control  triggered  certain  provisions  of  the
Company's Stock Option Plan,  including  immediate vesting of all options and an
automatic change in the exercise price of a certain number of the options, which
required   the  Company  to   recognize  a  one-time,   non-recurring   non-cash
compensation  cost of $1.4 million for the modified options.  Additionally,  the
Company recognized expense of $1.4

                                       26

<PAGE>

million  as a bonus  payable  to  certain  of its  key  executives  under  their
employment agreements upon the change of control of the Company.

      OTHER  INCOME,  NET.  The Company  recognized  other  income,  net of $1.5
million for the twelve  months ended  December  31,  2004,  as compared to other
income, net of $3.0 million for the twelve months ended December 31, 2003. Other
income, net is realized  primarily from net foreign  transaction gains resulting
from the revaluation of intercompany  balances between the European subsidiaries
and the U.S. parent company.  The Company recorded net foreign transaction gains
of  approximately  $677,000  for the twelve  months  ended  December  31,  2004,
compared to net foreign  transaction gains of $2.5 million during the comparable
period  in the  prior  period.  Additionally,  in 2004  the  Company  recognized
unrealized  gains on its  deferred  compensation  plan  assets of  approximately
$566,000. The foreign transaction gains for the twelve months ended December 31,
2004 resulted  from  favorable  changes in foreign  currency  exchange  rates of
approximately 10.7% in the December 31, 2004 exchange rates as compared to those
at December 31, 2003.

      INTEREST EXPENSE.  Interest expense  decreased $1.6 million,  or 62.4%, to
$946,000 for the twelve  months ended  December 31, 2004  compared to the twelve
months ended December 31, 2003. The decrease is attributable  both to a decrease
in  average  interest  rates  from  5.4%  to  4.2%  and a  decrease  in  average
outstanding  debt from $29.1  million to $11.5  million  for 2004 as compared to
2003.  Average  outstanding  debt decreased for the twelve months ended December
31,  2004  compared  to the twelve  months  ended  December  31, 2003 due to the
Company  paying down  long-term  debt  primarily  from  positive cash flows from
operations in 2003 and 2004.

      PROVISION  FOR INCOME  TAXES.  The  provision  for income taxes  increased
$299,000 for the twelve  months ended  December 31, 2004  compared to the twelve
months  ended  December  31, 2003 due in part to an increase of $1.6  million in
pre-tax income compared to the prior year. The Company's effective tax rates for
the twelve  months ended  December 31, 2004 and December 31, 2003 were 36.0% and
38.2%,  respectively.  The lower  effective tax rate for the twelve months ended
December 31, 2004 is a result of the payment of deductible foreign taxes in that
year.

      MINORITY  INTEREST IN LOSS OF CONSOLIDATED  SUBSIDIARIES.  On November 30,
2004,  the Company  announced  that it had formed the South Africa Joint Venture
with a  minority  interest  partner  for  the  production  in  South  Africa  of
automotive airbag cushions and, as of December 31, 2004,  commercial  production
had not  begun.  The  amount  of  minority  interest  in  loss  of  consolidated
subsidiaries of $39,000 for the twelve months ended December 31, 2004 represents
the amount of loss attributable to the Company's unaffiliated South Africa Joint
Venture minority  interest partner for approximately one month of pre-production
activities.

      LOSS  ON   DISCONTINUED   OPERATIONS,   NET  OF  TAXES.  No  impacts  from
discontinued  operations  were  recorded  during the twelve  month  period ended
December 31, 2004 as the Company had sold all remaining discontinued  operations
before December 28, 2002. Loss on disposition of discontinued operations, net of
taxes was $660,000 for the twelve months ended  December 31, 2003.  The loss was
principally due to the sale of the Company's former  subsidiary,  Galion,  Inc.,
the Company's metal and defense related product  business,  on December 23, 2002
and  included  the  recognition  of an income  tax  provision  of  approximately
$660,000  related to an  adjustment  of the  deferred tax  liabilities  of these
discontinued operations.

      NET  INCOME.  The  Company's  net income was $10.2  million for the twelve
months ended  December 31, 2004,  compared to net income of $8.2 million for the
twelve months ended December 31, 2003. Earnings in the current and prior periods
were a result of the items discussed above.

Seasonality and Inflation

      The automotive  operations are subject to the seasonal  characteristics of
the automotive industry in which there are generally seasonal plant shutdowns in
the third and fourth quarters of each calendar year. Excluding the impact of the
increase in raw material cost noted above, the Company does not believe that its
operations to date have been materially affected by inflation.

                                       27

<PAGE>

Liquidity and Capital Resources

      It  is  expected  that  the  Company's   equipment  and  working   capital
requirements  will continue to increase in order to support the expansion in its
joint ventures and of other existing production  capabilities and/or development
of operations.  The Company expects to fund its liquidity requirements through a
combination  of cash  flows from  operations,  equipment  financing,  use of the
Company's  line of credit and new financing as management  deems  necessary (see
below).

Cash Flows

      Net cash provided by operating  activities was approximately  $6.9 million
for the twelve  months ended  December 31,  2005,  compared to cash  provided by
operating  activities  of $13.4  million in the  comparable  period in the prior
year.  This decrease in cash  provided by operating  activities in 2005 resulted
principally  from a decrease in the Company's net income  combined with negative
changes in working  capital  primarily  from the payment of income  taxes offset
primarily by the non-cash addition for depreciation and amortization. During the
twelve  months  ended  December  31,  2005,  two now former  employees  who were
participants in the Company's  executive  deferred  compensation plan elected to
withdraw  monies  from the  plan as  permitted  by its  terms.  The  withdrawals
provided  approximately  $306,000  in net cash as a result  of the  recovery  of
Company-matching funds held in the deferred compensation plan. The cash provided
by operating activities in 2004 resulted principally from income from operations
combined with non-cash additions of depreciation offset by increases in accounts
receivable and inventories and a decrease in accounts  payable.  The increase in
accounts receivable in 2004 is due primarily to a change in payment terms with a
significant  customer in return for foregoing early payment  discounts,  and the
decrease in accounts payable  resulted  primarily from a change in payment terms
with a significant supplier in return for prompt payment discounts.

      Net cash used in investing  activities was approximately  $7.4 million for
the twelve  months  ended  December  31, 2005,  compared to  approximately  $6.5
million for the comparable period in the prior year. Capital expenditures in the
current and prior years were  necessitated  primarily by new programs awarded by
customers,  as well as  investment  in  information  technology  and  production
equipment  replacements  and  upgrades.  Additionally,  the  Company  recorded a
$237,000  investment  in a minority  interest in NxGen  Technologies,  LLC as it
acquired a 49% ownership interest in NxGen as previously described.  In 2005 the
Company's  annual capital  expenditures  were  approximately  $7.1 million.  The
Company  currently  expects  to spend  approximately  $12.0  million  on capital
expenditures  in 2006  primarily  to purchase  assets  necessary  to support new
programs awarded by customers and to fund its joint venture operations.

      Net cash provided by financing  activities was  approximately  $763,000 in
the  twelve  months  ended  December  31,  2005,  compared  to net cash  used in
financing  activities of approximately $8.8 million for the comparable period in
the prior year. Net cash provided by financing  activities for the twelve months
ended  December  31,  2005  resulted   primarily  from  a  $1  million   capital
contribution  from Zapata in connection with its sale of the Company's shares to
the WLR Recovery Funds,  which was used to pay management  bonuses.  The Company
used cash flows from  operations  and net  borrowings  on the  Company's  credit
facilities to pay down its other debt and long-term obligations.

      The activities discussed above in conjunction with the unfavorable effects
of foreign  exchange  rates of $376,000,  resulted in a net decrease in cash and
cash  equivalents of  approximately  $97,000 in the twelve months ended December
31, 2005.

      The Company's  capital  expenditure and working capital  requirements  are
expected  to be funded  through a  combination  of cash flows  from  operations,
equipment  financing  and  use  of  the  Company's  current  and  future  credit
facilities.  The Company's Wachovia Facilities described below expire in October
2006. Although no assurances can be provided,  the Company's management believes
that it will be able to renegotiate or replace these  facilities  prior to their
expiration  and maturity with amended or new  facilities  on  comparable  terms.
These sources are  considered to be adequate to fund the Company's  requirements
for at least the next  twelve  months and the  Company  does not  foresee  these
sources being inadequate beyond such period.

                                       28

<PAGE>

Credit Facilities

      The Company has a credit facility with Wachovia Bank, National Association
("Wachovia"),  successor by merger to Congress Financial Corporation (Southern),
that is composed of an aggregate  $35.0 million  revolving  credit facility (the
"Wachovia Revolver") expiring October 8, 2006, and two-term loans.  Accordingly,
the Company has  classified  the entire  amount  outstanding  under the Wachovia
Facilities in current  portion of long-term  debt on the Company's  Consolidated
Balance Sheets at December 31, 2005.  Under the Wachovia  Revolver,  the Company
may borrow up to the lesser of (a) $35.0 million or (b) 85% of eligible accounts
receivable,  plus 60% of  eligible  finished  goods,  plus 50% of  eligible  raw
materials.  The amount  outstanding  under the Wachovia Revolver at December 31,
2005 was $2.3 million. The Wachovia Revolver also includes a $5.0 million letter
of credit sub-facility, of which $521,000 was utilized at December 31, 2005.

      In addition,  the Company has a term facility with Wachovia (the "Wachovia
Term A loan") under which $1.5 million was  outstanding  as of December 31, 2005
and  was  included  in  current  portion  of  long-term  debt  on the  Company's
consolidated  balance  sheets.  The  Wachovia  Term A loan is  payable  in equal
monthly installments of approximately  $45,000, with the unpaid principal amount
due on October 8, 2006. Additional amounts are not available for borrowing under
the Wachovia Term A loan. The Company also has a second term loan (the "Wachovia
Term B loan" and,  collectively with the Wachovia Revolver and the Wachovia Term
A loan, the "Wachovia Facilities") which is undrawn and under which $4.5 million
was  available  as of December 31, 2005.  At December  31, 2005,  the  Company's
availability for additional  borrowings  (based on the maximum  allowable limit)
under the Wachovia Revolver and the Wachovia Term B loan was approximately $35.2
million.

      The interest  rate on the Wachovia  Revolver and Wachovia Term A loan (the
"Prime Rate loans") is variable, depending on the amount of the Company's Excess
Availability (as defined in the Wachovia  Facilities) at any particular time and
the ratio of the Company's EBITDA, less certain capital expenditures made by the
Company,  to certain fixed  charges of the Company (the "Fixed  Charge  Coverage
Ratio"). The Company may make borrowings based on the prime rate as described in
the Wachovia Facilities (the "Prime Rate") or the LIBOR rate as described in the
Wachovia Facilities, in each case with an applicable margin applied to the rate.
At December 31, 2005,  the margin on Prime Rate loans was 0.0% and the margin on
LIBOR rate loans was 1.75%. The Wachovia Term B loan bears interest at the Prime
Rate plus 3%. The Company is required to pay a monthly  unused line fee of 0.25%
per annum on the unutilized  portion of the Wachovia  Revolver and a monthly fee
equal to 1.75% per annum of the amount of any outstanding  letters of credit. At
December 31, 2005,  the interest  rate on the Wachovia  Revolver and Term A loan
was 7.25% per annum.

      Under the  Wachovia  Revolver  and  Wachovia  Term A loan,  the Company is
subject to a covenant that requires it to maintain a certain tangible net worth.
If the Company has borrowings  outstanding under the Wachovia Term B loan, it is
subject to  additional  financial  covenants  that require the  Company:  (i) to
maintain EBITDA of no less than certain  specified  amounts,  (ii) to maintain a
Fixed  Charge  Coverage  Ratio  of no less  than a  specified  amount,  (iii) to
maintain a ratio of certain  indebtedness to EBITDA not in excess of a specified
amount,  and  (iv) not to make  capital  expenditures  in  excess  of  specified
amounts. In addition, the Company would be required to repay the Wachovia Term B
loan to the extent of certain excess cash flow.

      The Wachovia Facilities also impose limitations upon the Company's ability
to,  among  other  things,  incur  indebtedness   (including  capitalized  lease
arrangements); become or remain liable with respect to any guaranty; make loans;
acquire investments;  declare or make dividends or other  distributions;  merge,
consolidate,  liquidate or dispose of assets or indebtedness; incur liens; issue
capital stock; or change its business.  At December 31, 2005, the Company was in
compliance with all financial  covenants.  At December 31, 2005, the Company was
also in compliance with all  non-financial  covenants.  (The Company  obtained a
waiver of  non-compliance  from Wachovia in 2003 for not  dissolving an inactive
subsidiary,  which waiver  remains in effect.)  Substantially  all assets of the
Company  are  pledged  as  collateral  for the  borrowings  under  the  Wachovia
Facilities.

      The Company  intends to  renegotiate  or replace the  Wachovia  Facilities
prior to their expiration and maturation in October 2006. Although no assurances
can be provided in this regard, the Company's management currently believes that
it will be able to  renegotiate  or  replace  these  facilities  prior  to their
expiration and maturity with amended or new facilities on comparable  terms.  As
discussed in "Item 1A. Risk Factors," the inability to secure such financing

                                       29

<PAGE>

could adversely affect the Company's ability to procure inventory and fund other
working capital needs and could have a material adverse effect on the Company's
financial position and results of operations.

Other Long-term Obligations

      On March 28, 2002, the Company's  Czech  Republic  subsidiary and HVB Bank
Czech Republic, successor to Bank Austria, entered into an amendment to its $7.5
million  mortgage loan dated June 4, 1997. This amendment  extended the due date
of the mortgage loan for five years to expire on March 30, 2007,  established an
interest  rate of 1.7% over EURIBOR  (EURIBOR  was 2.3% at December  31,  2005),
requires monthly payments of interest and principal of approximately $89,000 and
is secured by the real estate  assets of the  Company's  subsidiary in the Czech
Republic.  The Company has  guaranteed  the  repayment  of up to $500,000 of the
obligations of this  subsidiary with respect to this loan. At December 31, 2005,
approximately $1.3 million was outstanding under the HVB loan.

      On July 10,  1998,  the Company  entered  into a $10.0  million  financing
agreement  with  KeyCorp  Leasing,  a division of Key  Corporate  Capital,  Inc.
("KeyCorp").  The  KeyCorp  financing  agreement  had a  seven-year  term,  bore
interest  at  a  rate  of  1.25%  over  LIBOR,   required  monthly  payments  of
approximately  $150,000  and was  secured  by certain  equipment  located at the
Company's  Greenville,  South  Carolina  facility.  The Company paid the KeyCorp
financing agreement in full in August 2005.

      In  December  2005,  the  Company  entered  into a  $193,000  note with GE
Capital.  At December 31, 2005, the outstanding balance of $193,000 was included
in current  portion of  long-term  debt on the  Company's  Consolidated  Balance
Sheets.  The GE Capital  financing  agreement is due in December 2006,  bears an
interest rate of 8.0% and is secured by production equipment.

Contractual Obligations

      The  following  table  aggregates  the Company's  contractual  obligations
(including  those  described  above) related to long-term  debt,  non-cancelable
leases and other obligations at December 31, 2005.

<TABLE>
<CAPTION>
                                            Payments due by Period (in thousands)
                               ---------------------------------------------------------------
                                              Less than      1 - 3       3 - 5      More than
                                  Total        1 year        years       years       5 years
                               ---------------------------------------------------------------
<S>                            <C>            <C>           <C>          <C>        <C>
Contractual obligations

   Long term debt              $   5,551      $   5,274     $   277      $  --      $   --
   Capital lease obligations       1,332            767         420        145          --
   Operating leases                2,066            990         889        187          --
                               ---------------------------------------------------------------

      Total                    $   8,949      $   7,031     $ 1,586      $ 332      $   --
                               ===============================================================
</TABLE>

      The amounts of contractual  obligations set forth above include an assumed
annual blended  interest rate of 5.7% for long term debt and an assumed range of
interest rates of between 4.8% and 6.9% for capital lease obligations.

      Additionally   as  of  December  31,  2005,   the  Company  has  remaining
commitments   for  funding  of  the  South  Africa  Joint  Venture  through  the
combination  of  machinery  and  equipment  contributions  and  related  in-kind
services of approximately  $940,000 and, with respect to the China joint venture
agreement, the intention,  but not an obligation,  for funding its share of this
China joint venture through possible loan or capital contributions of up to $5.1
million.

      The Company has a  contingent  liability  of $521,000  for an  outstanding
letter of credit  for the  purchase  of  capital  equipment  under its  Wachovia
Facilities at December 31, 2005.

Off-Balance Sheet Arrangements

      As of December 31, 2005, the Company does not have any  off-balance  sheet
arrangements that are material to its financial condition, results of operations
or cash flows as defined by Item 303(a) (4) of Regulation S-K promulgated by the
SEC other than the letter of credit  mentioned  above.  The Company  enters into
derivative foreign

                                       30

<PAGE>

contracts  as  noted  and  included  below  in  "Quantitative   and  Qualitative
Disclosures about Market Risk" in Item 7A of this report.

Guarantees

      FASB Interpretation No. 45 provides guidance on the disclosures to be made
by a guarantor about its obligations under certain guarantees that it has issued
and specific disclosures related to product warranties. As of December 31, 2005,
the Company and various  consolidated  subsidiaries of the Company are borrowers
under the Wachovia Facilities (as defined above) and a note payable to a bank in
the Czech Republic (together,  the "Facilities").  The Facilities are guaranteed
by either the Company and/or various consolidated subsidiaries of the Company in
the event that the  borrower(s)  default under the provisions of the Facilities.
The  guarantees  are in effect for the duration of the related  Facilities.  The
Company does not provide product warranties within the disclosure  provisions of
Interpretation No. 45.

Contingencies

      Wachovia  Capital  Markets,  LLC  has  claimed  the  Company  owes  it  an
investment  banking fee of  approximately  $565,000 in connection with the stock
purchase  transaction  described  in "2005  Change of Control" in Item 1 of this
annual  report on Form 10-K.  The  Company is  vigorously  disputing  the claim;
nevertheless,  in accordance with SFAS 5,  "Accounting for  Contingencies",  the
Company has elected to record a reserve of  $565,000 in current  liabilities  on
its  Consolidated  Balance  Sheets at December  31,  2005,  and to  recognize an
expense of equal amount in its  Consolidated  Statements  of Income for the year
ended December 31, 2005.

Critical Accounting Policies

      The  preparation  of financial  statements in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management  to  make  estimates,   assumptions  and  judgments.   Estimates  and
assumptions are based on historical data and other  assumptions  that management
believes are reasonable in the  circumstances.  These  estimates and assumptions
affect the reported  amounts of assets and  liabilities  and the  disclosure  of
contingent  assets and liabilities at the date of the financial  statements.  In
addition,  they affect the reported  amounts of revenues and expenses during the
reported period.

      Judgments  are based on  management's  assessment  as to the  effect  that
certain  estimates,  assumptions  or future  trends  or  events  may have on the
financial  condition  and results of  operations  reported  in the  Consolidated
Financial  Statements.  It  is  important  that  the  reader  of  the  financial
statements  understands  that actual results could differ from these  estimates,
assumptions and judgments.

      In addition, judgment is involved in determining which accounting policies
and estimates would be considered as "critical".  Because the Company  generally
does business with large,  well-established  customers and the Company generally
manufactures  based on  releases  from  purchase  orders,  the  Company  has not
historically  been,  nor  is it  expected  in  the  future  to  be,  exposed  to
significant  bad debt or inventory  losses.  Accordingly,  the  estimates of the
allowance  for bad debts and of  inventory  reserves  are not  considered  to be
critical  accounting  policies or estimates.  Management  believes the following
critical  accounting  policies  contain  the  most  significant   judgments  and
estimates used in the preparation of the Consolidated Financial Statements.

      Foreign Currency Translation. Financial statements of substantially all of
the Company's  foreign  operations  are prepared using the local currency as the
functional  currency.   In  accordance  with  SFAS  No.  52,  "Foreign  Currency
Translation,"  translation of these foreign  operations to United States dollars
occurs using the current  exchange  rate as of the date of the balance sheet for
balance  sheet  accounts  and a weighted  average  exchange  rate for results of
foreign  operations.  Translation gains or losses are recognized in "accumulated
other  comprehensive  income"  as a  component  of  stockholders'  equity in the
accompanying  consolidated  balance sheets.  The Company's  subsidiary in Mexico
prepares  its  financial  statements  using  the  United  States  dollar  as the
functional  currency.  Since the Mexico  subsidiary does not have external sales
and does not own significant  amounts of inventory or fixed assets,  the Company
has  determined  that the United  States  dollar is the  appropriate  functional
currency.  Accordingly,  the translation effects of its financial statements are
included in the results of operations.

                                       31

<PAGE>

      The Company's operations in Mexico, Germany, the United Kingdom, the Czech
Republic,  China and South Africa  expose the Company to currency  exchange rate
risks associated with the volatility of certain foreign  currencies  against its
functional  currency,  the U.S.  dollar.  In the fiscal year ended  December 31,
2005, the impact of changes in the  relationship of other currencies to the U.S.
dollar  resulted  in the  recognition  of other  expense,  net of  approximately
$917,000.  In the fiscal year ended  December 31, 2004 and the nine month period
from  March  30,  2003 to  December  31,  2003,  the  impact of  changes  in the
relationship of other  currencies to the U.S. dollar resulted in the recognition
of other income, net of approximately  $677,000 and $2.0 million,  respectively.
It is unknown what effect foreign  currency rate  fluctuations  will have on the
Company's  financial  position  or  results of  operations  in the  future.  If,
however,  there were a  sustained  decline of these  currencies  versus the U.S.
dollar,  the Consolidated  Financial  Statements  could be materially  adversely
affected.

      Income Taxes.  Deferred tax assets and  liabilities are recognized for the
future tax  consequences  attributable  to  differences  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective tax bases and operating loss and tax credit carryforwards. Management
estimates  the  Company's  tax assets and  liabilities  on a periodic  basis and
adjusts these  balances on a timely basis as  appropriate.  Management  believes
that it has  adequately  provided  for its  future tax  consequences  based upon
current facts and circumstances and current tax law through the establishment of
reserves  (approximately  $525,000 at December 31,  2005) when it believes  that
certain tax positions  are likely to be challenged  and it may not fully prevail
in overcoming these  challenges.  The Company expects to undergo  examination by
tax  authorities of certain of its foreign income tax returns in mid-2006 and it
is possible that the examination could result in assessment and payment of taxes
related to these positions during 2006 or later.  However,  should  management's
tax positions be challenged and not prevail, different outcomes could result and
have a significant impact on the amounts reported in the Consolidated  Statement
of Operations.

New Accounting Pronouncements

      In November 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards ("SFAS") No. 151, Inventory Costs,
which  clarifies the accounting for abnormal  amounts of idle facility  expense,
freight,  handling  costs,  and wasted  material.  SFAS No. 151 is effective for
inventory  costs incurred during fiscal years beginning after June 15, 2005. The
Company currently expects that the adoption of SFAS No. 151 in 2006 will have no
material affect on its financial position and results of operations.

      In December 2004,  the FASB issued SFAS No. 153,  Exchanges of Nonmonetary
Assets,  which  eliminates  the exception for  nonmonetary  exchanges of similar
productive  assets and  replaces it with a general  exception  for  exchanges of
nonmonetary  assets  that do not have  commercial  substance.  SFAS  No.  153 is
effective for nonmonetary asset exchanges  occurring in fiscal periods beginning
after June 15, 2005. The Company currently expects that the adoption of SFAS No.
153 in 2006 will have no material  affect on its financial  position and results
of operations.

      In December 2004, the FASB issued SFAS No.  123(R),  Share-Based  Payment,
which  establishes  standards for  transactions in which an entity exchanges its
equity instruments for goods or services. This standard requires a public entity
to measure the cost of employee  services  received in exchange  for an award of
equity  instruments  based  on the  grant-date  fair  value of the  award.  This
eliminates  the exception to account for such awards using the intrinsic  method
previously  allowable under APB Opinion No. 25. SFAS No. 123(R) is effective for
annual  reporting  periods  beginning  on or after June 15,  2005.  The  Company
currently has no partially  vested options  remaining in any of its stock option
plans and few fully vested options remain in such plans. Therefore,  the Company
currently  expects  that the  adoption  of SFAS No.  123(R) in 2006 will have no
material affect on its financial  position and results of operations with regard
to its existing  stock option plans.  The  Company's  board of directors has not
developed a stock option plan at this time.  Should future stock option plans be
created,  the award of options  from such future  stock  option plans may have a
material affect on the Company's financial position and results of operations.

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      To the extent that  amounts  borrowed  under the Wachovia  Facilities  and
certain other credit  facilities  are  outstanding,  the Company has market risk
relating to such amounts  because the interest  rates under the  facilities  are
variable.  An interest rate increase would have a negative  impact to the extent
the Company borrows against the facilities. The actual impact would be dependent
on the level of  borrowings  actually  incurred.  As of December 31,  2005,  the
Company's interest rate, exclusive of credit fees, under the Wachovia Facilities
was approximately 7.25%,

                                       32

<PAGE>

and the total  principal  amount  outstanding  was $3.8  million.  Assuming  for
illustrative  purposes  only that the  interest  rates in effect  and the amount
outstanding under the Wachovia  facilities on December 31, 2005 remains constant
for all of 2006,  an increase in the  interest  rate of 1% would have a negative
impact of  approximately  $38,000 on annual interest expense for the year ending
December 31, 2006. Similarly, assuming for illustrative and comparative purposes
only that the  interest  rates in effect  and the amount  outstanding  under the
Wachovia  facilities on December 31, 2004 had remained constant for all of 2005,
an  increase  in the  interest  rate of 1% would have had a  negative  impact of
approximately  $22,000 on annual  interest  expense for the year ending December
31,  2005.  The  increase in the  negative  impact is due to the higher level of
borrowings  under the  facilities  at December 31, 2005 compared to December 31,
2004.

      The Company's operations in Mexico, Germany, the United Kingdom, the Czech
Republic,  China and South Africa  expose the Company to currency  exchange rate
risks.  The Company  monitors its risk associated with the volatility of certain
foreign currencies against its functional currency,  the U.S. dollar. The impact
of changes in the  relationship  of other  currencies to the U.S.  dollar in the
twelve months ended  December 31, 2005 has resulted in the  recognition of other
expense of approximately $917,000 compared to the recognition of other income of
approximately  $677,000 and $2.0 million in the twelve months ended December 31,
2004 and nine months ended December 31, 2005,  respectively.  It is unknown what
the  effect of  foreign  currency  rate  fluctuations  will be on the  Company's
financial  position or results of operations in the future.  If, however,  there
were a  sustained  decline  of these  currencies  versus  the U.S.  dollar,  the
Consolidated Financial Statements could be materially adversely affected.  Based
on amounts outstanding at December 31, 2005, a hypothetical increase or decrease
of  1.0%  in the  value  of the  U.S.  dollar  against  the  foreign  currencies
corresponding  to the countries in which the Company has operations would result
in a reduction or addition of approximately  $110,000 in other expense (income),
net. The effect of a hypothetical  1% increase or decrease at December 31, 2004,
would have been  approximately  $10,000. A 1% change at December 31, 2005, would
have had a greater effect because average outstanding intercompany balances were
greater in 2005 as  compared  to 2004 due to changes in  balances by and between
the Company's domestic and foreign subsidiaries from operational needs.

      Derivative  financial  instruments  are utilized  from time to time by the
Company to reduce  exposures to volatility of foreign  currencies  impacting the
operations  of  its  business.   The  Company  does  not  enter  into  financial
instruments for trading or speculative purposes.

      Certain operating expenses at the Company's Mexican facilities are paid in
Mexican pesos. To reduce exposure to fluctuations in the U.S. dollar and Mexican
peso exchange rates, the Company  periodically  enters into forward contracts to
buy Mexican pesos with U.S. Dollars for periods and amounts  consistent with the
related,  underlying forecasted cash outflows. These contracts are designated as
hedges at inception and are monitored for  effectiveness on a routine basis. The
Company recorded  credits to net earnings of approximately  $343,000 and $80,000
for  the  twelve  months  ended   December  31,  2005  and  December  31,  2004,
respectively on these forward  contracts.  At December 31, 2005 and December 31,
2004, the Company had no such outstanding forward exchange contracts.

      Certain intercompany sales at the Company's Czech facility are denominated
and settled in Euros.  To reduce  exposure to  fluctuation in the Euro and Czech
Koruna exchange rates, the Company periodically enters into forward contracts to
buy Czech  Korunas  with  Euros for  periods  and  amounts  consistent  with the
related,  underlying  forecasted cash inflows  associated with the  intercompany
sales.  These  contracts are designated as hedges at inception and are monitored
for  effectiveness  on a routine  basis.  The  Company  recorded a credit to net
earnings of approximately  $85,000 and a charge to net earnings of approximately
$141,000 for the twelve  months  ended  December 31, 2005 and December 31, 2004,
respectively on these forward  contracts.  At December 31, 2005 and December 31,
2004, the Company had no such outstanding forward exchange contracts.

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      This item appears in Item 15(a)(1) and (2) of this Report.

                                       33

<PAGE>

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

      Not applicable.

ITEM 9A.     CONTROLS AND PROCEDURES

      As required by Rule 13a-15(b)  under the Securities  Exchange Act of 1934,
as amended (the "Exchange Act"), the Company's management, under the supervision
and with the  participation of its principal  executive and principal  financial
officer  (Mr.  Menezes),  conducted  an  evaluation  as of the end of the period
covered  by  this  report,  of the  effectiveness  of the  Company's  disclosure
controls and  procedures  as defined in Rule  13a-15(e)  under the Exchange Act.
Based on that evaluation,  Mr. Menezes  concluded that the Company's  disclosure
controls and procedures are effective to ensure that information  required to be
disclosed  in the reports that the Company  files or submits  under the Exchange
Act is recorded,  processed,  summarized  and  reported  within the time periods
specified in the SEC's rules and forms.

      There  have  been  no  changes  in the  Company's  internal  control  over
financial  reporting  identified in connection  with the evaluation  required by
Rule  13a-15(d) of the  Exchange Act that  occurred  during the  Company's  last
fiscal  quarter  that have  materially  affected,  or are  reasonably  likely to
materially affect, the Company's internal control over financial reporting.

      The report of management on internal  control over financial  reporting is
included at page F-2 of the Consolidated Financial Statements.

ITEM 9B.     OTHER INFORMATION

      None.

                                    PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Board of Directors

      The  Company's  Board of  Directors  (the  "Board") is divided  into three
classes with staggered  three-year terms.  Currently,  Class I has two directors
(Dr. Daniel D. Tessoni and Michael J. Gibbons), Class II has one director (David
H.  Storper) and Class III has one director  (Wilbur L. Ross,  Jr.).  The names,
ages, and principal occupations of the current directors are provided below. The
Company  has not held an  annual  meeting  of  stockholders  or an  election  of
directors by  stockholders  since 2002.  Consequently,  all directors  will hold
office  until their  successors  have been duly  elected and  qualified or until
their earlier resignation or removal.

      Dr. Tessoni was appointed to the Board by the  then-existing  directors on
May 3, 2005.  Messrs.  Gibbons,  Storper and Ross were appointed to the Board on
December 2, 2005 pursuant to the September 2005 Stock Purchase Agreement between
Zapata Corporation and the WLR Recovery Funds in connection with the 2005 Change
of Control  described  above under "Item 1. Business - The Company - 2005 Change
of  Control."  Mr.  Ross was also  appointed  Chairman  of the  Board  effective
December 2, 2005.  Mr. Ross is the  Chairman and Chief  Executive  Officer of WL
Ross & Co. LLC and the managing member of each of WLR Recovery Associates II LLC
and WLR  Recovery  Associates  III LLC. WLR  Recovery  Associates  II LLC is the
general  partner,  and WL  Ross & Co.  LLC is  the  investment  manager,  of WLR
Recovery Fund II, L.P. Similarly, WLR Recovery Associates III LLC is the general
partner,  and WL Ross & Co. LLC is the investment  manager, of WLR Recovery Fund
III, L.P. Mr. Ross is also the Chairman and Chief  Executive  Officer of each of
the WLR Recovery Funds. Accordingly,  WL Ross & Co. LLC, the WLR Recovery Funds,
WLR Recovery  Associates II LLC, WLR Recovery  Associates III LLC, and Wilbur L.
Ross,  Jr. can be deemed to share voting and  dispositive  power over the shares
beneficially owned directly by the WLR Recovery Funds.

                                       34

<PAGE>

Current Directors

      DANIEL D. TESSONI  (Class I). Age 58. Dr. Tessoni has served as a Director
of the Company since May 2005.  Dr.  Tessoni  holds a Ph.D.  in  accounting  and
finance from Syracuse University, is an assistant professor of accounting at the
College of Business at the Rochester  Institute of Technology in Rochester,  New
York, and has been a member of the accounting faculty since 1974. He is licensed
as a certified public  accountant in the State of New York. He is also the owner
of Value  Based  Management  Associates,  through  which he  provides  financial
training and  consulting  services to a wide  variety of publicly and  privately
held  companies.  Dr. Tessoni served as a director of ACC Corp., a multinational
provider  of  telecommunication  services,  from 1987 until its  acquisition  by
Teleport Communications Group Inc. (now part of AT&T) in 1998, and was the chair
of  its  audit  committee  and a  member  of  its  executive,  compensation  and
nominating  committees and several special committees.  He is currently a member
of the Board of  Trustees of Keuka  College  where he serves as the chair of its
audit committee and a member of its executive  committee,  and he is currently a
director of Genesee  Regional  Bank, a community  bank in  Rochester,  New York,
where he serves as the chair of its audit committee.

      MICHAEL J. GIBBONS  (Class I). Age 34. Mr.  Gibbons has been a director of
the Company since December 2005 and has been the Chief  Financial  Officer of WL
Ross & Co. LLC, a merchant banking firm, since July 2002. From 1996 to July 2002
Mr.  Gibbons  was a Senior  Manager  of the  Hedge  Fund/Investment  Partnership
specialty  practice  group of Marcum &  Kliegman  LLP, a public  accounting  and
financial  consulting  firm.  Mr.  Gibbons is  licensed  as a  certified  public
accountant in the State of New York and graduated  from Pace  University  with a
B.A. in Business Administration.

      DAVID H. STORPER  (Class II).  Age 40. Mr.  Storper has been a director of
the Company since December 2005 and has been the Senior Managing  Director of WL
Ross & Co. LLC, a merchant  banking  firm,  since its founding in April 2000. He
holds a B.S.  from  Columbia  University's  School of  Engineering  and  Applied
Science and an M.B.A. from Columbia University.

      WILBUR L. ROSS,  JR. (Class III).  Age 67. Mr. Ross has been a director of
the Company since December 2005 and is the Chairman and Chief Executive  Officer
of WL Ross & Co.  LLC, a merchant  banking  firm,  a position  he has held since
April 2000.  Mr. Ross is also the  Chairman and Chief  Executive  Officer of WLR
Recovery Fund L.P., WLR Recovery Fund II L.P., WLR Recovery Fund III L.P.,  Asia
Recovery Fund, Asia Recovery Fund Co-Investment,  Nippon Investment Partners and
Absolute Recovery Hedge Fund, each of which is an investment  advisory firm. Mr.
Ross is the  Non-Executive  Chairman of  International  Coal Group,  Inc., which
acquires and operates coal mining facilities,  Chairman of International Textile
Group,  Inc., a provider of global textile  solutions and  distinguished  market
brands to apparel and interior furnishings customers worldwide,  and Chairman of
Nano-Tex, LLC, a fabric innovations company, each in the United States. Mr. Ross
is a board member of Mittal Steel Company,  N.V., a global steel producer (which
recently  acquired   International  Steel  Group,  Inc.)  headquartered  in  the
Netherlands,  Insuratex,  Ltd., an insurance company, in Bermuda, Nikko Electric
Industry Co. Ltd., an electrical  equipment company,  and Ohizumi  Manufacturing
Company, an electrical equipment company, in Japan, Tong Yang Life Insurance Co.
in Korea, and Syms Corp., an off-price apparel retailer, Clarent Hospital Corp.,
an operator of acute care hospitals and related healthcare businesses,  and News
Communications   Inc.,  a  publisher  and  distributor  of  community   oriented
newspapers and targeted audience publications, in the United States. Mr. Ross is
also a member of the  Business  Roundtable.  Previously,  Mr. Ross served as the
Executive Managing Director at Rothschild Inc., an investment banking firm, from
October  1974 to  March  2000.  Mr.  Ross  was  also  formerly  Chairman  of the
Smithsonian  Institution  National  Board and currently is a board member of the
Japan Society and the Yale  University  School of  Management.  He holds an A.B.
from Yale University and an M.B.A., with distinction, from Harvard University.

Audit Committee

      The  Board  has a  standing  audit  committee  currently  composed  of two
directors,  Dr. Tessoni (chair) and Mr.  Gibbons.  The Board has determined that
Dr. Tessoni is an audit committee  financial  expert (within the meaning of Item
401(h) of Regulation  S-K,  promulgated  under the Exchange Act) with respect to
the Company and that he is  independent  within the meaning of NYSE Rule 303A.02
and Rule 10A-3(b) promulgated under Section 10A of the Exchange Act.

                                       35

<PAGE>

Changes in Procedures by which  Security  Holders May Recommend  Nominees to the
Board

      There have been no changes to the procedures by which security holders may
recommend  nominees to the  registrant's  board of  directors  since the Company
filed its Schedule 14F1 with the Commission on November 18, 2005.

Current Executive Officers

      The  following  table  sets forth the names,  ages and all  positions  and
offices with the Company held by the Company's present executive officers.

<TABLE>
<CAPTION>
     Name           Age                       Positions and Offices Presently Held
---------------------------------------------------------------------------------------------------------
<S>                 <C>   <C>
Brian P. Menezes    53    Interim President & Chief Executive Officer and Vice President, Chief Financial
                          Officer
Stephen B. Duerk    64    Vice President; President, North American Automotive
Vick Crowley        39    Treasurer
</TABLE>

      Executive  officers are appointed by the Board and serve at the discretion
of the Board.  Following is information with respect to the Company's  executive
officers:

      BRIAN P. MENEZES. Mr. Menezes has served as Vice President,  Secretary and
Chief  Financial  Officer of the Company since September 1999. He became Interim
President  and Chief  Executive  Officer  effective  January  15,  2006 upon the
effectiveness of John C. Corey's resignation from those positions.  From October
1997 to September 1999, Mr. Menezes served as Vice President and General Manager
of  Odyssey  Knowledge   Solutions,   Inc.,  a  Canadian  software  and  systems
development  company focused on web-based  e-commerce and enterprise  solutions.
From  January  1993 to June  1997,  Mr.  Menezes  served  as Vice  President  of
Operations for Cooper Industries (Canada) Inc.  Automotive Products  ("Cooper"),
the largest supplier in the Canadian  automotive  replacement parts market. From
January  1993 to June 1995,  Mr.  Menezes  also served as the Vice  President of
Finance of Cooper.

      STEPHEN B. DUERK.  Mr. Duerk has served as a Vice President of the Company
since June 1998, as President of the Company's North American  Automotive Group,
a  division  of the  Company,  since  April  1998  and as  President  of  Safety
Components Fabric Technologies, Inc. ("SCFTI"), a wholly-owned subsidiary of the
Company,  since January 1998.  From July 1997 to January 1998,  Mr. Duerk served
the Company as Co-Managing Director of SCFTI. Prior to the Company's acquisition
of the Air Restraint and Technical  Fabrics  Division of JPS Automotive  L.P. in
July 1997, Mr. Duerk had served JPS Automotive, L.P., a tier one supplier to the
automotive  industry of carpet and knit fabrics for headliner and body cloth, as
Vice  President  of Air  Restraint  Fabrics in the  Greenville,  South  Carolina
facility, beginning in October 1988. From 1965 to October 1988, Mr. Duerk served
in  various  positions  for JP  Stevens & Co.,  Inc.,  a company  engaged in the
business of manufacturing industrial textiles, of which JPS Automotive, L.P. was
a part until its  restructuring in May 1988, most recently as the Vice President
of the Industrial Synthetic Group.

      VICK CROWLEY.  Mr. Crowley has served as Treasurer and Assistant Secretary
of the Company since August 2000.

Section 16(a) Beneficial Ownership Reporting Compliance

      The  Company's  executive  officers,  directors and 10%  stockholders  are
required  under the Exchange Act and  regulations  thereunder to file reports of
ownership  and changes in ownership  with the SEC.  Copies of those reports must
also be furnished  to the  Company.  To the  Company's  knowledge,  based on the
Company's  review of the copies of such  reports  furnished to it during or with
respect to the fiscal year ended  December 31, 2005,  all of our  directors  and
officers subject to the reporting requirements and each beneficial owner of more
than 10% of our common stock satisfied all applicable  filing  requirements  for
such fiscal year,  except that Mr.  Gibbons and Mr.  Storper were late in filing
their Forms 3 upon becoming subject to the reporting  requirements of Section 16
of the Exchange Act with respect to the Company.

                                       36

<PAGE>

Code of Ethics and Business Conduct

      The Company has adopted a Code of Ethics and Business Conduct that applies
to all of the  Company's  directors and key  employees,  including the Company's
principal executive officer,  principal financial officer,  principal accounting
officer or controller or persons performing similar functions (collectively, the
"Selected   Officers"),   which  is  posted  on  the   Company's   web  site  at
http://www.safetycomponents.com.  The Company  intends to post any amendments to
or  waivers  from a  provision  of the  Code  of  Ethics  and  Business  Conduct
applicable  to any  Selected  Officer on its  website,  or to file a Form 8-K to
disclose any such amendments or waivers.

ITEM 11.     EXECUTIVE COMPENSATION

      The  following  table  summarizes  the  compensation  paid to the  current
executive  officers of the Company  identified  in Item 10 above and Mr. John C.
Corey,  the  Company's  former  President  and Chief  Executive  Officer (who we
sometimes refer to collectively as the "Named  Executives") during the Company's
last three completed fiscal years.

      The Company  experienced  the 2003 Change in Control when Zapata  acquired
beneficial ownership of a majority of the Company's  outstanding common stock in
September  2003, and as a result,  a change of control  occurred for purposes of
all of the contractual change of control provisions discussed below (except with
respect to Mr.  Crowley).  Following  the 2003 Change of Control,  the Company's
Board and audit committee  determined that it was in the Company's best interest
to change the  Company's  fiscal year end from the last Saturday in the month of
March to a  calendar-based  year ending  December 31 to coincide  with  Zapata's
fiscal year end. This change was effective as of the quarter ended  December 31,
2003. The Company  experienced  the 2005 Change in Control when the WLR Recovery
Funds acquired Zapata's shares of the Company's common stock in the fall of 2005
and WLR Recovery Funds nominees  acquired a majority of the directorships on the
Company's board.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                            Long-Term
                                                                           Compensation
                                                                           ------------
                                                  Annual Compensation         Awards
                                                 ----------------------    ------------
                                                                            Securities
                                                                            Underlying         All Other
        Name and                    Fiscal        Salary        Bonus      Options/SARs      Compensation
    Principal Position               Year           ($)          ($)          (#)(1)              ($)
-------------------------------------------------------------------------------------------------------------
<S>                              <C>             <C>          <C>          <C>             <C>
John C. Corey (2)                    2005        $ 358,280           --              --    $ 1,416,346 (4)(6)
    President and Chief              2004          353,210    $ 356,680              --         49,748
    Executive Officer            Dec 2003 (3)      239,444      256,890              --        995,888 (5)
                                 Mar 2003 (3)      325,000      265,425          46,800         41,978

Brian P. Menezes                     2005        $ 214,755           --              --    $   626,698 (4)(7)
    Vice President and Chief         2004          214,755    $ 178,207              --          5,781
    Financial Officer            Dec 2003 (3)      156,375      128,015              --        408,340 (5)
                                 Mar 2003 (3)      200,450      129,920          27,000         28,125

Stephen B. Duerk                     2005        $ 193,130           --              --    $    81,233 (4)(8)
    Vice President;                  2004          193,130    $  88,037              --         19,488
    President North American     Dec 2003 (3)      144,847       82,724              --         14,002
    Automotive Group             Mar 2003 (3)      187,500      102,988          21,500        20,036

Vick Crowley                         2005        $ 118,450           --              --    $    54,541 (4)(9)
    Treasurer                        2004          113,875    $  50,888              --          6,450
                                 Dec 2003 (3)       82,688       41,705              --          2,848
                                 Mar 2003 (3)      105,000       45,723           2,000         12,667
</TABLE>

                                       37

<PAGE>

----------
(1)   Grants  reflected  for 2003 are  options  under the  Company's  2001 Stock
      Option Plan (the "2001 Stock Option Plan"). As a result of the 2003 Change
      of Control, all such options became immediately vested in 2003.

(2)   Mr. Corey served as the Company's  President and Chief  Executive  Officer
      from  October  2000 when the  Company  emerged  from  bankruptcy  until he
      resigned  from  all  positions  with  the  Company  and  its  subsidiaries
      effective  January 15, 2006 in order to accept the  position of  President
      and Chief  Executive  Officer  of  Stoneridge,  Inc.,  a  publicly  traded
      manufacturer of electronic  parts and accessories for motor vehicles,  for
      which Mr. Corey had served as a director for several years.

(3)   Following the 2003 Change of Control,  the Company changed its fiscal year
      to a calendar  year end to coincide  with  Zapata's  fiscal year end.  The
      Company's  operations were previously  based on a fifty-two or fifty-three
      week fiscal year ending on the Saturday  closest to March 31. As such, the
      period from March 30, 2003 to December 31, 2003 (referred to in this table
      as "Dec  2003")  consists of nine  months of  operations.  The years ended
      December  31, 2005,  December 31, 2004 and March 29, 2003  (referred to in
      this table as "Mar 2003") each consisted of twelve months of operations.

(4)   Includes  $994,000  and  $406,000  paid  to Mr.  Corey  and  Mr.  Menezes,
      respectively,  in lieu of any special  change of control bonus that was or
      might have been payable  pursuant to the Company's  employment  agreements
      with  them upon the  closing  of the stock  purchase  transaction  between
      Zapata and the WLR Recovery  Funds.  Also  includes  $400,000  paid to Mr.
      Corey, $214,500 paid to Mr. Menezes, $75,000 paid to Mr. Duerk and $50,000
      paid to Mr.  Crowley out of the $1 million  contributed  to the  Company's
      capital by Zapata at the closing of the stock purchase transaction for the
      purpose of the Company paying bonuses to its executive  officers and other
      key  employees.  See "Item 1.  Business  - The  Company  - 2005  Change of
      Control" and  "Employment  Agreements - Corey  Agreement" and  "Employment
      Agreements - Menezes Agreement" below.

(5)   Includes  $961,400 and $393,300,  respectively,  paid to each of Mr. Corey
      and Mr. Menezes in accordance  with the terms of the Company's  employment
      agreements  with them,  upon the occurrence of the 2003 Change of Control.
      See "Employment Agreements - Corey Agreement" and "Employment Agreements -
      Menezes Agreement" below.

(6)   The amount for Mr. Corey reflects $1,394,000 of change of control payments
      as described in note 4 above, $14,056 of life insurance premiums, a $7,000
      matching contribution under the Company's 401(k) plan, and $1,290 of group
      life  insurance  premiums.  In 2005 Mr. Corey also  received an automobile
      allowance of $14,400 and $3,513 of membership  dues which are not included
      in the Summary Compensation Table.

(7)   The amount for Mr. Menezes reflects $620,500 of change of control payments
      as described in note 4 above,  a $5,781  matching  contribution  under the
      Company's 401(k) plan, and $417 of group life insurance premiums.  In 2005
      Mr. Menezes also received an automobile  allowance of $14,400 which is not
      included in the Summary Compensation Table.

(8)   The amount for Mr. Duerk reflects $75,000 of change of control payments as
      described  in note 4  above,  a $5,093  matching  contribution  under  the
      Company's  401(k) plan,  and $1,140 of group life insurance  premiums.  In
      2005 Mr. Duerk also received an automobile  allowance of $6,000 and $4,493
      of  membership  dues which are not  included in the  Summary  Compensation
      Table.

(9)   The amount for Mr. Crowley  reflects $50,000 of change of control payments
      as described in note 4 above,  a $4,482  matching  contribution  under the
      Company's 401(k) plan, and $59 of group life insurance premiums.

Option Grants in Last Fiscal Year

      There were no options to  purchase  our common  stock  granted  during the
fiscal year ended December 31, 2005 to the Named Executives.

                                       38

<PAGE>

Aggregated  Option  Exercises  in Last  Fiscal  Year and Fiscal  Year End Option
Values

      The  following  table sets  forth  information  with  respect to the Named
Executives  concerning  option exercises during the year ended December 31, 2005
and concerning  exercisable  and  unexercisable  options held as of December 31,
2005. The value of unexercised, in-the-money options at December 31, 2005 is the
difference  between  the  exercise  price  and  the  fair  market  value  of the
underlying stock on December 29, 2005 (the last trading day of the fiscal year).
All options were  in-the-money  as of December  31,  2005,  based on the closing
sales price of the  Company's  common stock at December 29, 2005,  of $14.50 per
share.

<TABLE>
<CAPTION>
                                                           Number of
                                                     Securities Underlying             Value of Unexercised
                                                     Unexercised Options at          In-the-Money Options at
                        Shares         Value            December 31, 2005               December 31, 2005
                      Acquired on    Realized     ---------------------------   -----------------------------------
Name                 Exercise (#)     ($)(1)      Exercisable   Unexercisable   Exercisable ($)   Unexercisable ($)
-----------------    ------------   -----------   -----------   -------------   --------------    -----------------
<S>                  <C>            <C>           <C>           <C>             <C>               <C>
John C. Corey (2)          50,000       372,625       162,900        --            $1,099,113            $--
Brian P. Menezes               --            --       102,000        --               692,580             --
Stephen B. Duerk               --            --            --        --                    --             --
Vick Crowley                   --            --            --        --                    --             --
</TABLE>

----------
(1)   The  value  realized  is  calculated  based on the  amount  by  which  the
      aggregate  market price, on the dates of exercise,  of the shares received
      exceeded the  aggregate  exercise  price paid,  regardless of whether such
      shares were sold or retained by the option holder on that date.

(2)   In  connection  with his  resignation  on  January  15,  2006,  Mr.  Corey
      exercised 20,000 options and the remaining 142,900 options were forfeited.

Employment Agreements

      Corey Agreement.

      Mr. Corey served as President  and Chief  Executive  Officer until January
2006 pursuant to an employment  agreement with the Company that became effective
on May 18, 2001 (with  subsequent  amendments) and replaced all prior agreements
with Mr. Corey. The employment  agreement provided for a base salary of $315,000
(increased to $358,280 in April 2004), subject to increases at the discretion of
the Board and the recommendations of the Compensation  Committee. In addition to
base salary,  the employment  agreement  provided for an annual  incentive bonus
under the Company's Management Incentive Plan or in accordance with a formula or
other bonus plan to be established by the Compensation Committee for each fiscal
year. It also  provided,  in the event of a Change of Control (as defined in the
agreement)  while he was  still  employed  with  the  Company  or under  certain
circumstances  following his termination of employment  other than for Cause (as
defined in the agreement) or by reason of a Constructive Termination (as defined
in the  agreement),  he would be entitled to a one-time bonus of $961,400 at the
time the Change of Control was  consummated,  provided  it  occurred  within ten
years following termination of his employment. As a result of the 2003 Change of
Control,  a Change of Control occurred for purposes of the employment  agreement
and this bonus was paid to Mr. Corey in 2003.

      Upon closing of the Stock Purchase  Agreement,  and in lieu of any special
change of control bonus that was or might have been payable in  connection  with
the WLR  Recovery  Funds'  purchase of Zapata's  shares of the Common  Stock and
resulting  change in the  majority of the  members of the Board  pursuant to Mr.
Corey's employment agreement, the Company paid Mr. Corey a bonus of $994,000. In
addition,  immediately  prior to the  closing of the Stock  Purchase  Agreement,
Zapata made a capital  contribution  to the Company in the  aggregate  amount of
$1.0  million  for the purpose of the Company  paying  bonuses to the  Company's
executive  officers and other key employees for their efforts in connection with
the attempts to sell the Company and to provide  management  with an appropriate
incentive to remain with the Company  during the pendency of the stock  purchase
transaction,  and the Compensation  Committee of the Board allocated $400,000 of
this amount to Mr. Corey, which the Company paid to Mr. Corey in 2005.

                                       39

<PAGE>

      Pursuant to the employment agreement,  Mr. Corey received, upon execution,
options to  purchase  173,200  shares of the Common  Stock  under the 2001 Stock
Option Plan.  Such grant  consisted  of (i) Class A Options to purchase  110,000
shares at an  exercise  price  equal to fair  market  value on the date of grant
($8.75 per share),  two-thirds of which immediately  vested, and the final third
of which vested on October 31, 2003, and (ii) Class B Options to purchase 63,200
shares at an  exercise  price  equal to fair  market  value on the date of grant
($8.75  per  share),  vesting  one-third  on October  31,  2001,  an  additional
one-third  on October 31,  2002,  and the final  one-third  on October 31, 2003.
Because a change of  control  (as  defined in the plan) of the  Company  had not
occurred by April 1, 2002,  Mr.  Corey  received  on that date,  pursuant to the
employment  agreement,  a grant of Class C Options to purchase 36,800 additional
shares of Common Stock (together with an additional  grant of Class C Options to
purchase  another  10,000 shares of Common Stock not provided in the  employment
agreement)  vesting  over the next three  anniversary  dates of such grant.  The
exercise price for such Class C Options is the per share price  determined to be
the fair  market  value for the  shares as of the date of the grant  ($6.71  per
share).

      The employment agreement was terminable at any time by either Mr. Corey or
the  Company;  however,  in certain  instances  of  termination,  Mr.  Corey was
entitled to severance  payments.  If Mr.  Corey's  employment  was terminated by
reason of death,  Disability  (as  defined in the  agreement)  or other than for
Cause more than six months  after the  beginning  of a fiscal  year and he would
have been entitled to a bonus if no termination had occurred, then Mr. Corey was
entitled to a pro-rated annual bonus for the portion of the fiscal year in which
he was employed.  If Mr. Corey's  employment was terminated by the Company other
than by  reason  of  death  or  Disability  or for  Cause  or if the  employment
agreement was  terminated by him by reason of a  Constructive  Termination,  the
Company would have paid Mr. Corey a severance and non-competition  payment equal
to two  times  his base  salary  at the time of  termination,  payable  in equal
monthly  installments  over the next  succeeding  24  months,  plus 18 months of
health care  continuation  payments.  If Mr.  Corey's  employment  agreement was
terminated by the Company in connection  with a change of control and he was not
offered a position with the acquirer with similar  responsibilities or if he was
initially  offered  and  accepted  the  position  with  the  acquirer,  but  was
terminated  without Cause within 12 months after accepting such position,  then,
in lieu of any other  severance  payment  under his  employment  agreement,  the
Company would have paid Mr. Corey a severance and non-competition  payment equal
to two times  his base  salary at the time of  termination  in 24 equal  monthly
installments,  plus 18 months of health  care  continuation  payments.  All cash
payments and health care continuation payments would have ceased in the event of
competitive  employment.  Such  payments  would  have  been  reduced  by  50% of
"severance  period  earnings" in the event of  non-competitive  employment  with
annual compensation up to $100,000 and would have ceased altogether in the event
of such annual  compensation  exceeding  $100,000.  Mr.  Corey  voluntarily  and
unilaterally  terminated his employment with the Company  effective  January 15,
2006 and therefore is not entitled to any severance payments nor has he made any
claims for severance payments.

      Mr. Corey's employment agreement contains a confidentiality agreement that
extends for the term of the  agreement  plus the  greater of (i) two  additional
years or (ii) the period in which  severance  and  non-competition  payments are
made  pursuant  to  the  agreement.   It  also  contains   non-competition   and
non-solicitation  provisions  that extend for the term of the agreement plus any
period after termination in which severance or non-competition payments are made
or extended benefits coverage is provided pursuant to the agreement.

      Mr. Corey's  employment  agreement  provides that all provisions which are
contingent  upon a change of  control  and  "parachute  payments"  as defined by
Section 280G of the U.S.  Internal  Revenue  Code are subject to and  contingent
upon the  approval by a separate  vote of the persons who owned more than 75% of
the voting power of the Company's  outstanding  stock  immediately  prior to the
change of control, subject to certain exceptions.

      Menezes Agreement.

      Mr. Menezes currently serves as Vice President and Chief Financial Officer
pursuant to an employment  agreement  with the Company that became  effective on
May 18, 2001 (with subsequent amendments) and replaced all prior agreements with
Mr.  Menezes.  The employment  agreement  provides for a base salary of $190,000
(increased to $216,840 in April 2004), subject to increases at the discretion of
the Board and the recommendations of the Compensation  Committee. In addition to
base salary,  the employment  agreement  provides for an annual  incentive bonus
under the Company's Management Incentive Plan or in accordance with a formula or
other bonus plan to be established by the compensation committee for each fiscal
year. It also provides  that, in the event of a Change of Control (as defined in
the  agreement)  while he is still  employed  by the  Company  or under  certain
circumstances  following his termination of employment  other than for Cause (as
defined in the agreement) or by reason of a

                                       40

<PAGE>

Constructive Termination (as defined in the agreement), he will be entitled to a
one-time  bonus of  $393,300  at the time the Change of Control is  consummated,
provided it occurs within ten years following termination of his employment.  As
a result  of the 2003  Change  of  Control,  a Change of  Control  occurred  for
purposes of the  employment  agreement and this bonus was paid to Mr. Menezes in
2003.

      Upon closing of the Stock Purchase  Agreement,  and in lieu of any special
change of control bonus that was or might have been payable in  connection  with
the WLR  Recovery  Funds'  purchase of Zapata's  shares of the Common  Stock and
resulting  change in the  majority of the  members of the Board  pursuant to Mr.
Menezes' employment agreement, the Company paid Mr. Menezes a bonus of $406,000.
In addition,  immediately prior to the closing of the Stock Purchase  Agreement,
Zapata made a capital  contribution  to the Company in the  aggregate  amount of
$1.0  million  for the purpose of the Company  paying  bonuses to the  Company's
executive  officers and other key employees for their efforts in connection with
the attempts to sell the Company and to provide  management  with an appropriate
incentive to remain with the Company  during the pendency of the stock  purchase
transaction,  and the Compensation  Committee of the Board allocated $214,500 of
this amount to Mr. Menezes, which the Company paid to Mr. Menezes in 2005.

      Pursuant  to  the  employment  agreement,   Mr.  Menezes  received,   upon
execution, options to purchase 75,000 shares of Common Stock under the Company's
2001 Stock Option Plan.  Such grant consisted of (i) Class A Options to purchase
45,000  shares at an exercise  price  equal to fair market  value on the date of
grant ($8.75 per share),  two-thirds of which immediately  vested, and the final
third of which vested on October 31, 2003,  and (ii) Class B Options to purchase
30,000  shares at an exercise  price  equal to fair market  value on the date of
grant ($8.75 per share),  vesting  one-third on October 31, 2001,  an additional
one-third  on October 31,  2002,  and the final  one-third  on October 31, 2003.
Additionally  in April 2002, Mr. Menezes  received a grant of Class C Options to
purchase  27,000 shares of Common Stock vesting over the next three  anniversary
dates of such  grant.  The  exercise  price for such  Class C Options is the per
share price determined to be the fair market value for the shares as of the date
of the grant ($6.71 per share).

      The  employment  agreement is terminable at any time by either Mr. Menezes
or the Company;  however, in certain instances of termination,  Mr. Menezes will
be entitled to severance  payments.  If Mr. Menezes' employment is terminated by
reason of death,  Disability  (as  defined in the  agreement)  or other than for
Cause more than six months  after the  beginning  of a fiscal  year and he would
have been entitled to a bonus if no termination  had occurred,  then Mr. Menezes
shall be entitled to a pro-rated annual bonus for the portion of the fiscal year
in which he was  employed.  If Mr.  Menezes'  employment  is  terminated  by the
Company  other  than by  reason  of death or  Disability  or for Cause or if the
employment   agreement  is  terminated  by  him  by  reason  of  a  Constructive
Termination,  the Company shall pay Mr. Menezes a severance and  non-competition
payment  equal  to one  and  one-half  times  his  base  salary  at the  time of
termination, payable in equal monthly installments over the next 18 months, plus
18 months of health  care  continuation  payments.  If Mr.  Menezes'  employment
agreement is terminated  by the Company in  connection  with a Change of Control
and he is not offered a position with the acquirer with similar responsibilities
or if he initially is offered and accepts a position with the  acquirer,  but is
terminated  without Cause within 12 months after accepting such position,  then,
in lieu of any other  severance  payment under this  employment  agreement,  the
Company shall pay Mr. Menezes a severance and  non-competition  payment equal to
one and one half times his base  salary at the time of  termination  in 18 equal
monthly installments,  plus 18 months of health care continuation  payments. All
cash payments and health care continuation  payments shall cease in the event of
competitive  employment.  Such  payments  shall be reduced by 50% of  "severance
period  earnings"  in  the  event  of  non-competitive  employment  with  annual
compensation  up to  $50,000  and shall  cease  altogether  in the event of such
annual compensation exceeding $50,000.

      Mr. Menezes's  employment  agreement contains a confidentiality  agreement
that  extends  for  the  term  of the  agreement  plus  the  greater  of (i) two
additional  years or (ii) the  period  in which  severance  and  non-competition
payments are made pursuant to the  agreement.  It also contains  non-competition
and  non-solicitation  provisions that extend for the term of the agreement plus
any period after termination in which severance or non-competition  payments are
made or extended benefits coverage is provided pursuant to the agreement.

      Mr. Menezes's  employment agreement provides that all provisions which are
contingent  upon a change of  control  and  "parachute  payments"  as defined by
Section 280G of the U.S.  Internal  Revenue  Code are subject to and  contingent
upon the  approval by a separate  vote of the persons who owned more than 75% of
the voting power of the Company's  outstanding  stock  immediately  prior to the
change of control, subject to certain exceptions.

                                       41

<PAGE>

      Duerk Agreement.

      Mr. Duerk currently  serves as Vice President of the Company and President
of the North American  Automotive Group of the Company pursuant to an employment
agreement which became effective on May 18, 2001 (with subsequent amendment) and
replaced all prior agreements with Mr. Duerk. The employment  agreement provides
for an original  base salary of $182,000  (increased to $193,130 in April 2003),
subject to increases at the discretion of the Board and the  recommendations  of
the Compensation Committee. In addition to base salary, the employment agreement
provides for an annual incentive bonus under the Company's  Management Incentive
Plan or in accordance  with a formula or other bonus plan to be  established  by
the Compensation Committee in advance of each fiscal year.

      Immediately prior to the closing of the Stock Purchase  Agreement,  Zapata
made a capital  contribution  to the  Company  in the  aggregate  amount of $1.0
million for the purpose of the Company paying bonuses to the Company's executive
officers  and other key  employees  for their  efforts  in  connection  with the
attempts  to sell the  Company  and to provide  management  with an  appropriate
incentive to remain with the Company  during the pendency of the stock  purchase
transaction,  and the Compensation  Committee of the Board allocated  $75,000 of
this amount to Mr. Duerk, which the Company paid to Mr. Duerk in 2005.

      The employment  agreement is terminable at any time by either Mr. Duerk or
the Company;  however,  in certain  instances of termination,  Mr. Duerk will be
entitled to severance  payments.  If Mr.  Duerk's  employment  is  terminated by
reason of death,  Disability  or other than for Cause more than six months after
the  beginning of a fiscal year and he would have been entitled to a bonus if no
termination had occurred, then Mr. Duerk shall be entitled to a pro-rated annual
bonus  for the  portion  of the  fiscal  year in which he was  employed.  If Mr.
Duerk's employment is terminated by the Company other than by reason of death or
Disability or for Cause or if the  employment  agreement is terminated by him by
reason of a Constructive Termination (as defined in the agreement),  the Company
will pay Mr. Duerk a severance and non-competition  payment equal to one and one
half times his base salary at the time of termination,  payable in equal monthly
installments  over the next succeeding 18 months,  plus 18 months of health care
continuation  payments. If Mr. Duerk's employment agreement is terminated by the
Company in connection with a Change of Control (as defined in the agreement) and
he is not offered a position with the acquirer with similar  responsibilities or
if he  initially  is offered and  accepts a position  with the  acquirer  but is
terminated  without Cause within 12 months after accepting such position,  then,
in lieu of any other  severance  payment  under his  employment  agreement,  the
Company shall pay Mr. Duerk a severance and non-competition payment equal to one
and one half  times  his base  salary  at the  time of  termination  in 18 equal
monthly installments,  plus 18 months of health care continuation  payments. All
cash payments and health care continuation  payments shall cease in the event of
competitive  employment.  Such  payments  shall be reduced by 50% of  "severance
period  earnings"  in  the  event  of  non-competitive  employment  with  annual
compensation  up to  $50,000  and shall  cease  altogether  in the event of such
annual compensation exceeding $50,000.

      Mr. Duerk's employment agreement contains a confidentiality agreement that
extends for the term of the  agreement  plus the  greater of (i) two  additional
years or (ii) the period in which  severance  and  non-competition  payments are
made  pursuant  to  the  agreement.   It  also  contains   non-competition   and
non-solicitation  provisions  that extend for the term of the agreement plus any
period after  termination in which severance,  or  non-competition  payments are
made or extended benefits coverage is provided pursuant to the agreement.

      Mr. Duerk's  employment  agreement  provides that all provisions which are
contingent  upon a change of  control  and  "parachute  payments"  as defined by
Section 280G of the U.S.  Internal  Revenue  Code are subject to and  contingent
upon the  approval by a separate  vote of the persons who owned more than 75% of
the voting power of the Company's  outstanding  stock  immediately  prior to the
change of control, subject to certain exceptions.

                                       42

<PAGE>

      Crowley Agreement.

      Under  his  severance  agreement  with  the  Company,  if Mr.  Crowley  is
terminated  by the Company other than for Cause,  death or Disability  within 24
months following a Change of Control  (including a termination by Mr. Crowley by
reason of a Constructive  Termination)  (all the foregoing  capitalized terms as
defined in Mr.  Crowley's  severance  agreement),  Mr.  Crowley is entitled to a
severance  payment  equal to his annual base  salary in effect at the  effective
date of  termination,  payable in twelve equal  monthly  installments  following
termination.

      Immediately prior to the closing of the Stock Purchase  Agreement,  Zapata
made a capital  contribution  to the  Company  in the  aggregate  amount of $1.0
million for the purpose of the Company paying bonuses to the Company's executive
officers  and other key  employees  for their  efforts  in  connection  with the
attempts  to sell the  Company,  and the  Compensation  Committee  of the  Board
allocated  $50,000 of this amount to Mr. Crowley,  which the Company paid to Mr.
Crowley in 2005.

Management Incentive Plan

      In 2001,  the Company  adopted a Management  Incentive  Bonus Program (the
"MIP").  Generally under the MIP, the Compensation Committee establishes a bonus
pool for all MIP participants scaled to the Company's achievement of targets for
operating income and return on assets. A portion of each participant's  bonus is
generally  determined by a formula and based on (i) targeted  performance levels
relating  to the  consolidated  operating  income  and  return  on assets of the
Company as a whole, (ii) for participants  functioning in a particular budgeting
unit of the Company,  the operating income and return on assets of that unit and
(iii) the achievement of specific  personal goals. The remaining  portion of the
bonus  pool for MIP  participants  is  discretionary  and  based on  outstanding
achievement  in other  areas  such as  contributions  made in  diversifying  the
Company's customer base, attaining major new customers,  identifying appropriate
acquisition   candidates  and  the   consummation   of   significant   financing
transactions  of the Company.  This portion is  determined  by the  Compensation
Committee for the Company's chief executive  officer and determined by the chief
executive  officer and  reviewed  by the  Compensation  Committee  for all other
participants and key employees.  In 2005, no bonus pool was established,  and no
bonuses  were paid under the MIP.  For 2004,  the total amount of the bonus pool
for all MIP participants was scaled to the Company's  achievement of targets for
operating  income and  return on assets and was capped at 7.5% of the  Company's
operating  income.  The  Company's  2004  operating  income and return on assets
resulted in the maximum  amount  payable  under the MIP for 2004.  The aggregate
bonus earned in 2004 and paid in 2005 to all MIP  participants  was  $1,301,628,
and the Company paid an additional $50,000 in bonuses out of the MIP pool to key
employees who were not MIP participants.

Severance Program

      See " - Employment Agreements" above for additional information concerning
severance arrangements applicable to the Named Executives.

Deferred Compensation Plan

      The Company  established the Safety  Components  International,  Inc., Key
Employee Share Option Plan (KEYSOP) (the "Deferred  Compensation  Plan") for the
benefit of certain  key  executive  employees.  The Named  Executives  and other
senior  management  personnel  participated  in the Deferred  Compensation  Plan
through  December  31,  2005.  The  Deferred   Compensation  Plan  provides  for
participants to defer any portion of their cash  compensation  until some future
point in time. The participants' contributions to the Deferred Compensation Plan
are immediately 100% vested.

      The Company has set aside assets in a so-called  "rabbi"  trust to provide
funds for the payment of benefits under the Deferred  Compensation  Plan.  Under
the provisions of the Deferred Compensation Plan prior to the 2005 amendment and
restatement  described below,  the trust invested in securities  selected by the
participants from a list of approved types of securities.  Seventy-five  percent
of the  purchase  price  of the  securities  was  paid  with  amounts  equal  to
participant  deferrals and twenty-five  percent was paid with additional Company
funds;  however, if the participant elects to receive a distribution from his or
her plan account, the Company's contribution to the purchase price must first be
repaid.  The  Company  does  not pay  interest  on  participants'  accounts,  so
participants do not receive additional compensation from the Company in the form
of interest paid at above market rates.

      On December  12,  2005,  the Company  amended and  restated  the  Deferred
Compensation  Plan to comply with the new  requirements of Internal Revenue Code
Section 409A. These new requirements  primarily  restrict the timing of deferral
elections and distributions under nonqualified  deferred  compensation plans and
prohibit  acceleration  of the  payment of benefits  under such plans.  Benefits
accrued  and vested  prior to 2005 remain  subject to the terms of the  Deferred
Compensation  Plan in  effect  prior to the  amendment  and  restatement.  Under
transition rules relating to the new requirements, the amendment and restatement
is effective  as of January 1, 2005.  The  Deferred  Compensation  Plan was also
retitled the Safety Components  International,  Inc. Deferred Compensation Plan.
The amendment and  restatement of the plan did not affect the rabbi trust or the
participants' prior contributions to it.

Director Compensation

      Directors who are  employees of the Company  receive no  compensation,  as
such,  for service as members of the Board.  Directors  who are not employees of
the Company  receive an annual retainer of $20,000,  plus an additional  $10,000
for the  Chairman  of the  Board and an  additional  $5,000  each for  committee
chairmen.  They  also each  receive

                                       43

<PAGE>

attendance  fees for Board and  committee  meetings  attended by telephone or in
person.  Such fees for a board  meeting are $1,250 for  attendance in person and
$625 by telephone.  Fees for committee  meetings are $750 per meeting.  Finally,
non-employee  directors receive additional  compensation at a rate of $1,750 per
day for special  assignments,  not  including  attendance at Board and committee
meetings.  All directors are reimbursed for expenses incurred in connection with
attendance at meetings.

      Andy Goldfarb,  W. Allan Hopkins, Ben E. Waide, III and Carroll R. Wetzel,
were  non-employee  directors  from  October  2000 until May of 2005.  Following
approval of the 2001 Stock  Option Plan by the  stockholders  on April 27, 2001,
each  non-employee  director then holding office  received an option grant under
the plan (for 10,000 shares to Mr. Wetzel, as Chairman, and 7,500 shares to each
of the other non-employee directors who received grants). The exercise price for
the shares of common stock subject to these options was the fair market value of
the shares on the date of grant ($8.75 per share), subject to adjustment to $.01
per  share in the  event of a change  of  control  as  described  in the  option
agreements.  In April 2002,  each  non-employee  director  then  holding  office
received  an  additional  option  grant (for  10,000  shares to Mr.  Wetzel,  as
Chairman,  and  7,500  shares to each of the other  non-employee  directors  who
received  grants).  The exercise price for the shares of common stock subject to
these  options was the per share price  determined to be their fair market value
as of the  date  of  grant  ($6.71  per  share).  The  2003  Change  of  Control
constituted a change of control for purposes of these option agreements, and the
options granted to each of the non-employee directors were immediately vested.

Compensation Committee Interlocks and Insider Participation

      At the beginning of fiscal year 2005,  the  Compensation  Committee of the
Board was composed of Leonard  DiSalvo,  Andy  Goldfarb,  Ben E. Waide,  III and
Carroll R. Wetzel. In May 2005, Messrs. Goldfarb, Waide and Wetzel resigned from
the  Board,  and Dr.  Daniel  D.  Tessoni  was  appointed  to the  Board and the
Compensation  Committee.  In December 2005, Mr. DiSalvo resigned from the Board,
and David H. Storper was appointed to the Board and the Compensation  Committee.
No interlocking  relationship exists between the Company's Board of Directors or
Compensation  Committee and the board of directors or compensation  committee of
any other company.

                                       44

<PAGE>

ITEM 12.     SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT
             AND  RELATED STOCKHOLDER MATTERS

      Except as otherwise  indicated,  the  following  table and notes set forth
certain information,  to the knowledge of the Company,  regarding the beneficial
ownership  of the  Company's  common  stock as of March 1, 2006,  by all persons
known by the  Company to be the  beneficial  owner of more than 5% of the common
stock, by each director of the Company,  by each of the Named  Executives and by
all  directors  and  executive  officers  of the  Company as a group.  Except as
otherwise indicated,  to the knowledge of the Company, each beneficial owner has
the sole power to vote and to dispose  of all  shares of common  stock  owned by
such beneficial  owner. The Company's  certificate of  incorporation  authorizes
preferred stock, but no shares of preferred stock have been issued.

<TABLE>
<CAPTION>
                                                           Amount and Nature of      Percent of
          Name and Address of Beneficial Owner             Beneficial Ownership   Common Stock (1)
--------------------------------------------------------------------------------------------------
<S>                                                        <C>                    <C>
      Non-management 5% or Greater Beneficial Owners

WL Ross & Co. LLC                                               4,162,394               77.0%
WLR Recovery Fund II, L.P., WLR Recovery Fund III, L.P.,
WLR Recovery Associates II LLC, and
WLR Recovery Associates III LLC
   600 Lexington Avenue, 19th Floor
   New York, New York 10022 (2)

Mellon HBV Alternative Investment Strategies LLC                  358,606                6.6%
   200 Park Avenue
   New York, New York  10166 (3)

Ramius Capital Group, LLC and related parties                     350,671                6.5%
   666 Third Avenue, 26th Floor
   New York, New York 10017 (4)

         Officers and Directors

Wilbur L. Ross, Jr. (2)                                         4,162,394               77.0%
David H. Storper (5)                                                   --                  *
Michael J. Gibbons (5)                                                 --                  *
Dr. Daniel D. Tessoni (6)                                              --                  *
John C. Corey (8)                                                      --                  *
Brian P. Menezes (6)                                              102,000(7)             1.9%
Stephen B. Duerk (6)                                                    3                  *
R. Vick Crowley (6)                                                    --                  *
   All executive officers and directors as a group
   (8 individuals)                                              4,264,397(5)            77.4%
</TABLE>

----------
* Less than 1%.

(1)   Shares  beneficially  owned,  as recorded in this  table,  expressed  as a
      percentage of the 5,405,147 shares of common stock outstanding on March 1,
      2006.

(2)   241,419 of these  shares  (approximately  4.5% of the  outstanding  common
      stock) are owned  directly by WLR Recovery Fund II, L.P., and 3,920,975 of
      these shares  (approximately  72.5% of the  outstanding  common stock) are
      owned  directly by WLR Recovery Fund III, L.P.  Wilbur L. Ross, Jr. is the
      Chairman and Chief Executive Officer of WL Ross & Co. LLC and the managing
      member  of  each  of WLR  Recovery  Associates  II LLC  and  WLR  Recovery
      Associates III LLC. WLR Recovery Associates II LLC is the general partner,
      and WL Ross & Co. LLC is the investment  manager, of WLR Recovery Fund II,
      L.P.  Similarly,  WLR Recovery  Associates III LLC is the general partner,
      and WL Ross & Co. LLC is the investment manager, of WLR Recovery Fund III,
      L.P. Mr. Ross is also the Chairman and Chief Executive  Officer of each of
      the WLR Recovery Funds.  Accordingly,  WL Ross & Co. LLC, the WLR Recovery
      Funds,  WLR Recovery  Associates II LLC, WLR Recovery  Associates III LLC,
      and Wilbur L.  Ross,  Jr.  can be deemed to share  voting and  dispositive
      power over the shares owned directly by the WLR Recovery Funds.  Mr. Ross'
      address is the same as for the affiliated entities.

                                       45

<PAGE>

(3)   The  information  shown  is as  of  March  29,  2005  and  is  based  upon
      information disclosed by Mellon HBV Alternative  Investment Strategies LLC
      ("Mellon")  in Amendment No. 1 to Schedule 13D filed with the SEC on March
      29, 2005 (the  "Amendment")  which indicates that Mellon has sole power to
      vote and to dispose of these  shares.  The  Amendment  reports that Mellon
      serves as investment advisor of Mellon HBV Master  Multi-Strategy Fund LP,
      Mellon HBV Master Leveraged  Multi-Strategy  Fund LP and Mellon HBV Master
      US Event  Driven  Fund LP and that none of these funds  individually  owns
      more than 5% of the Company's shares.

(4)   The  information  shown is as of  December  31,  2005  and is  based  upon
      information disclosed by Ramius Capital Group, LLC ("Ramius Capital"), RCG
      Carpathia  Master Fund,  Ltd.  ("Carpathia"),  Ramius  Securities,  L.L.C.
      ("Ramius Securities"),  C4S & Co., L.L.C., ("C4S"), Peter A. Cohen, Morgan
      B. Stark,  Thomas W.  Strauss and Jeffrey M.  Solomon in a Schedule  13G/A
      filed  with  the SEC on  February  14,  2006  (the  "Ramius  13G"),  which
      indicates  that  each  of  these  reporting  persons  may  be  deemed  the
      beneficial  owner of (i) 330,671 shares of common stock owned by Carpathia
      and (ii) 20,000  shares of common  stock owned by Ramius  Securities.  The
      Ramius  13G/A  filing  further  states  that:  (i)  Ramius  Capital is the
      investment  advisor of  Carpathia  and has the power to direct some of the
      affairs of Carpathia,  including  decisions  respecting the disposition of
      the  proceeds  from the sale of shares of the common  stock,  (ii)  Ramius
      Securities is a broker dealer affiliated with Ramius Capital, (iii) Ramius
      Capital  is the  managing  member  of Ramius  Securities,  (iv) C4S is the
      managing  member  of  Ramius  Capital  and in that  capacity  directs  its
      operations, and (v) Peter A. Cohen, Morgan B. Stark, Thomas W. Strauss and
      Jeffrey M.  Solomon are the managing  members of C4S and in that  capacity
      direct its operations.

(5)   Excludes  shares  beneficially  owned  by  WL  Ross  &  Co.  LLC  and  its
      affiliates.  Mr. Storper is the Senior Managing  Director of WL Ross & Co.
      LLC. Mr. Gibbons is the Chief  Financial  Officer of WL Ross & Co. LLC. WL
      Ross & Co. LLC is  affiliated  with the entities  named above in Note (2).
      Each of Mr. Storper and Mr. Gibbons disclaims  beneficial ownership of all
      shares held by WL Ross & Co. LLC and its  affiliates.  The address of each
      of these  persons is c/o WL Ross & Co. LLC,  600  Lexington  Avenue,  19th
      Floor, New York, New York 10022.

(6)   The   address  of  each  of  these   persons  is  c/o  Safety   Components
      International, Inc., 41 Stevens Street, Greenville, South Carolina 29605.

(7)   All of the 102,000 shares for Mr. Menezes  underly  currently  exercisable
      stock options under the 2001 Stock Option Plan.

(8)   Mr.  Corey  served as  President  and Chief  Executive  Officer  until his
      resignation effective January 15, 2006.

Equity Compensation Plan Information

      The Company has one equity  compensation plan, the 2001 Stock Option Plan,
which is a shareholder  approved  plan.  As of December 31, 2005,  the number of
options outstanding and remaining available under the 2001 Stock Option Plan was
as follows:

<TABLE>
<CAPTION>
                                                             Number of securities to     Weighted-average     Number of securities
                                                             be issued upon exercise    exercise price of    remaining available for
                        Plan category                        of outstanding options    outstanding options       future issuance
----------------------------------------------------------   -----------------------   -------------------   -----------------------
<S>                                                          <C>                       <C>                   <C>
Equity compensation plans approved by security holders              264,900                  $ 8.24                  209,700

Equity compensation plans not approved by security holders               --                      --                       --
                                                                    -------                  ------                  -------
Total                                                               264,900                                          209,700
</TABLE>

                                       46

<PAGE>

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Since the  beginning  of the  Company's  last fiscal  year,  except as may
otherwise be described in this report on Form 10-K,  there were no  transactions
occurring or  relationships  that existed  between the Company and its officers,
directors or 5% stockholders that require disclosure under SEC regulations.

      On March 19, 2004,  Zapata and the Company  entered into a Tax Sharing and
Indemnity  Agreement to define their respective rights and obligations  relating
to federal, state and other taxes for taxable periods attributable to the filing
of   consolidated  or  combined  income  tax  returns  as  part  of  the  Zapata
consolidated federal income tax group. Pursuant to the Tax Sharing and Indemnity
Agreement,  the Company was  required to pay Zapata its share of federal  income
taxes, if any. In addition, each party was required to reimburse the other party
for its use of either party's tax attributes.  Similar  provisions applied under
the Tax Sharing and Indemnity  Agreement to other taxes, such as state and local
income taxes. Accordingly,  the Company paid approximately $137,000 to Zapata in
2005 for taxes  related to 2004 and $675,000 to Zapata in 2004 for taxes related
to 2003. Due to exercises of options to purchase Common Stock, on or about March
31, 2004, the number of shares of Common Stock  outstanding  increased and, as a
result, Zapata's ownership was reduced to less than 80%. As a result of Zapata's
ownership of Common Stock  falling  below 80%,  Zapata did not  consolidate  the
Company into Zapata's  consolidated income tax returns for periods subsequent to
the first quarter of 2004.  Under the Tax Sharing and Indemnity  Agreement,  the
Company was consolidated  into Zapata's tax filing group for the fourth calendar
quarter of 2003 and the first calendar quarter of 2004.

      As provided in the Stock  Purchase  Agreement  between  Zapata and the WLR
Recovery  Funds,  after the closing of the  transaction,  the Company's Board of
Directors voted three WLR Recovery Funds' nominees (Wilbur L. Ross, Jr., Michael
J. Gibbons and David H. Storper) to the Company's  board of directors and Zapata
then caused its own representatives to resign as directors of the Company.  Also
immediately prior to the closing of the stock purchase transaction,  Zapata made
a capital  contribution  to the Company in the aggregate  amount of $1.0 million
for the  purpose  of the  Company  paying  bonuses  to the  Company's  executive
officers  and other key  employees  for their  efforts  in  connection  with the
attempts  to sell the  Company  and to provide  management  with an  appropriate
incentive to remain with the Company  during the pendency of the stock  purchase
transaction.  The  Compensation  Committee of the  Company's  Board of Directors
determined  that this $1.0 million  aggregate  amount be distributed as follows:
$400,000 to John C. Corey,  $214,500 to Brian P. Menezes,  $75,000 to Stephen B.
Duerk,  Vice President and president of the Company's North American  Automotive
Group,  and $50,000 to Vick Crowley,  Treasurer,  with the remainder of $225,000
distributed  among  other key  employees  of the Company as  recommended  by the
Company's President and Chief Executive Officer.

ITEM 14.     PRINCIPAL ACCOUNTING FEES AND SERVICES

      The fees billed in the years ended December 31, 2005 and December 31, 2004
for PricewaterhouseCoopers LLP's services to the Company were:

                                        Year ended          Year ended
                                     December 31, 2005   December 31, 2004
                                     -----------------   -----------------
      Audit Fees .................       $ 700,000           $ 749,000
      Audit-Related Fees .........              --              45,000
      Tax Fees ...................         191,492               2,500
      All Other Fees .............              --                  --
      Total Fees .................       $ 891,492           $ 796,500

In the above table, in accordance with applicable SEC rules:

      o     "audit fees" are fees billed by the  independent  registered  public
            accounting  firm  for  professional  services  for the  audit of the
            consolidated  financial  statements  included in the Company's  Form
            10-K,  including audits of the foreign subsidiary  statutory reports
            of the Company's  foreign  subsidiaries for their respective  fiscal
            years, and review of financial  statements included in the Company's
            Form 10-Qs,  or for services that are normally  provided by auditors
            in connection with statutory and regulatory filings or engagements;

                                       47

<PAGE>

      o     "audit-related  fees" are fees billed by the independent  registered
            public  accounting firm for assurance and related  services that are
            reasonably  related to the performance of the audit or review of the
            financial  statements,  and the 2004  fees  were  paid for  services
            provided in connection with the investigation of a former employee's
            allegations   of   improprieties   in  the  Company's   Mexican  and
            Californian operations described in "Item 3. Legal Proceedings";

      o     "tax  fees" are fees  billed by the  independent  registered  public
            accounting firm for  professional  services for tax compliance,  tax
            advice,  and tax planning  including  assistance in  preparation  of
            domestic and foreign tax returns (minimal  services were provided in
            2004);

      o     "all  other  fees"  are fees  billed by the  independent  registered
            public  accounting firm to the Company for any services not included
            in the first  three,  and include fees  related to  assistance  with
            non-financial systems.

      The Audit  Committee of the Company's Board of Directors has established a
policy  requiring its approval of all audit and non-audit  services prior to the
provision of these  services by its  independent  registered  public  accounting
firm.  Pursuant to this policy, the Audit Committee annually approves a detailed
request for annual audit and other  permitted  services up to  specified  dollar
limits.  In determining  whether to pre-approve  permitted  services,  the Audit
Committee  considers  whether such  services are  consistent  with SEC rules and
regulations.  If the  Company's  management  believes  additional  services  are
necessary or that the dollar  amount of  previously  approved  services  must be
increased,  they must seek specific  prior  approval for these services from the
Audit  Committee.  To ensure prompt  handling of unexpected  matters,  our Audit
Committee  has  delegated  to  its  chairperson  the  authority  to  pre-approve
permissible  non-audit  services  and fees and to amend or modify  pre-approvals
that have been  granted  by the  entire  Audit  Committee.  A report of any such
actions taken by the committee chairperson is provided to the Audit Committee at
the following Audit Committee meeting. None of the services described above were
approved by the Audit Committee under the exception provided by Rule 2-01(c) (7)
(i) (C) of Regulation S-X of the SEC.

                                       48

<PAGE>

                                     PART IV

ITEM 15.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1)   The  financial  statements,  related  notes  thereto and reports of our
         independent  registered  public  accounting firm required by Item 8 are
         listed in the index 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:

         2.1      Joint  Plan of  Reorganization  of Safety  Components  Debtors
                  Under  Chapter  11   Bankruptcy   Code  dated  June  12,  2000
                  (incorporated  by  reference  to Exhibit 2.3 to the  Company's
                  Annual Report on Form 10-K for the fiscal year ended March 25,
                  2000)

         2.1.1             First Amended Joint Plan of  Reorganization of Safety
                           Components  International,  Inc.,  Safety  Components
                           Fabric   Technologies,    Inc.,   Automotive   Safety
                           Components International, Inc., ASCI Holdings Germany
                           (DE) Inc.,  ASCI Holdings UK (DE) Inc., ASCI Holdings
                           Mexico (DE) Inc.,  and ASCI Holdings  Czech (DE) Inc.
                           (incorporated  by  reference  to Exhibit  99.1 to the
                           Company's  Current  Report on Form 8-K filed with the
                           Commission on September 13, 2000)

         3.1      Certificate   of   Amendment   of  the  Amended  and  Restated
                  Certificate   of    Incorporation    of   Safety    Components
                  International, Inc.

         3.2      Amended  Bylaws  of  Safety  Components  International,   Inc.
                  (incorporated  by  reference  to Exhibit 3.6 to the  Company's
                  Quarterly  Report on Form 10-Q for the quarter  ended  October
                  10, 2000)

         4.1      Restructuring  Agreement  dated April 6, 2000  between  Safety
                  Components  International,  Inc.,  Robert  A.  Zummo  and  the
                  consenting   holders   signatory   thereto   (incorporated  by
                  reference to Exhibit 99.1 to the Company's  Current  Report on
                  Form 8-K filed with the Commission on April 13, 2000)

         4..1.1            First Amendment to  Restructuring  Agreement dated as
                           of May 10, 2000  between  Safety  Components  and the
                           consenting holders signatory thereto (incorporated by
                           reference  to Exhibit 99.1 to the  Company's  Current
                           Report on Form 8-K filed with the  Commission  on May
                           19, 2000)

         10.1     Loan and Security  Agreement  dated as of October 11, 2000, by
                  and  among  Safety   Components   International,   Inc.,   the
                  subsidiaries  named  therein as Borrowers and  Guarantors  and
                  Congress  Financial   Corporation   (Southern)  (succeeded  in
                  interest by Wachovia Bank, N.A.) (incorporated by reference to
                  Exhibit 10.68 to the Company's  Quarterly  Report on Form 10-Q
                  for the quarter ended October 10, 2000)

         10.1.1            Amendment  No. 1 and  Consent  to Loan  and  Security
                           Agreement,  dated  November  2,  2001,  by and  among
                           Safety    Components    International,    Inc.,   the
                           subsidiaries   named   therein   as   Borrowers   and
                           Guarantors   and   Congress   Financial   Corporation
                           (Southern)  (succeeded in interest by Wachovia  Bank,
                           N.A.)  (incorporated by reference to Exhibit 10.14 to
                           the Company's  Quarterly  Report on Form 10-Q for the
                           quarter ended December 29, 2001)

         10.1.2            Amendment No. 2 to Loan and Security Agreement, dated
                           October  11,  2002,  by and among  Safety  Components
                           International,  Inc., the subsidiaries  named therein
                           as Borrowers and  Guarantors  and Congress  Financial
                           Corporation  (Southern)  (succeeded  in  interest  by
                           Wachovia Bank,  N.A.)  (incorporated  by reference to
                           Exhibit  10.27 to the Company's  Quarterly  Report on
                           Form 10-Q for the quarter ended September 28, 2002)

                                       49

<PAGE>

         10.1.3            Amendment  No. 3 and  Consent  to Loan  and  Security
                           Agreement,  dated October 8, 2003 by and among Safety
                           Components  International,   Inc.,  the  subsidiaries
                           named  therein  as  Borrowers  and   Guarantors   and
                           Congress Financial Corporation  (Southern) (succeeded
                           in interest by Wachovia Bank, N.A.)  (incorporated by
                           reference to Exhibit 10.29 to the Company's Quarterly
                           Report on Form 10-Q for the quarter  ended  September
                           27, 2003)

         10.1.4            Amendment No. 4 to Loan and Security Agreement, dated
                           July  20,  2004  by  and  among   Safety   Components
                           International,  Inc., the subsidiaries  named therein
                           as Borrowers and  Guarantors  and Congress  Financial
                           Corporation  (Southern)  (succeeded  in  interest  by
                           Wachovia Bank,  N.A.)  (incorporated  by reference to
                           Exhibit  10.28 to the Company's  Quarterly  Report on
                           Form 10-Q for the quarter ended June 30, 2004)

         10.1.5            Amendment No. 5 to Loan and Security Agreement, dated
                           October  1,  2004  by  and  among  Safety  Components
                           International,  Inc., the subsidiaries  named therein
                           as Borrowers and  Guarantors  and Congress  Financial
                           Corporation  (Southern)  (succeeded  in  interest  by
                           Wachovia Bank,  N.A.)  (incorporated  by reference to
                           Exhibit  10.29 to the Company's  Quarterly  Report on
                           Form 10-Q for the quarter ended September 30, 2004)

         10.2     Amendment No. 1, dated March 28, 2002, to the Credit  Facility
                  Agreement  dated  May  29,  1997  between   Automotive  Safety
                  Components  International  s.r.o.  and HVB Bank Czech Republic
                  a.s.  (incorporated  by  reference  to  Exhibit  10.23  to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  March 30, 2002)

         10.2.1            Letter of  Guarantee,  dated March 28, 2002,  between
                           Safety  Components  International,  Inc. and HVB Bank
                           Czech  Republic  a.s.  (incorporated  by reference to
                           Exhibit 10.24 to the Company's  Annual Report on Form
                           10-K for the fiscal year ended March 30, 2002)

         *10.3    Safety Components  International,  Inc. 2001 Stock Option Plan
                  (incorporated  by reference  to Exhibit 10.4 to the  Company's
                  Annual Report on Form 10-K for the fiscal year ended March 31,
                  2001)

         *10.3.1           Form  of  Stock  Option  Agreement  -  Class  A and B
                           (incorporated  by  reference  to Exhibit  10.8 to the
                           Company's  Annual  Report on Form 10-K for the fiscal
                           year ended March 31, 2001)

         *10.3.2           Form   of   Stock   Option   Agreement   -   Class  C
                           (incorporated  by reference  to Exhibit  10.25 to the
                           Company's  Quarterly  Report  on  Form  10-Q  for the
                           quarter ended June 29, 2002)

         *10.4    Employment  Agreement,  effective May 18, 2001 between  Safety
                  Components International, Inc. and John C. Corey (incorporated
                  by reference to Exhibit 10.5 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended March 31, 2001)

         *10.4.1           Amendment   dated   June  27,   2001  to   Employment
                           Agreement,   dated  May  18,  2001   between   Safety
                           Components  International,  Inc.  and  John C.  Corey
                           (incorporated  by reference  to Exhibit  10.19 to the
                           Company's  Quarterly  Report  on  Form  10-Q  for the
                           quarter ended September 29, 2001)

         *10.4.2           Amendment   No.  2  dated   September   22,  2003  to
                           Employment  Agreement,  dated  May 18,  2001  between
                           Safety  Components  International,  Inc.  and John C.
                           Corey  (incorporated by reference to Exhibit 10.23 to
                           the  Company's  Annual  Report  on Form  10-K for the
                           fiscal year ended December 31, 2003)

         *10.4.3           Letter from John C. Corey to the Company with respect
                           to his receipt of a change of control  bonus from the
                           Company in  connection  with sale of Company stock by
                           Zapata to the WLR  Recover  Funds and the  changes in
                           the  composition of the Company's  board of directors
                           directly resulting therefrom.

         *10.5    Employment  Agreement,  effective May 18, 2001 between  Safety
                  Components   International,   Inc.   and   Brian  P.   Menezes
                  (incorporated  by reference  to Exhibit 10.6 to the  Company's
                  Annual  Report on Form 10-K,  for the fiscal  year ended March
                  31, 2001)

         *10.5.1           Amendment   dated   June  27,   2001  to   Employment
                           Agreement,   dated  May  18,  2001   between   Safety
                           Components  International,  Inc. and Brian P. Menezes
                           (incorporated by

                                       50

<PAGE>

                           reference to Exhibit 10.20 to the Company's Quarterly
                           Report on Form 10-Q for the quarter  ended  September
                           29, 2001)

         *10.5.2           Amendment   No.  2  dated   September   22,  2003  to
                           Employment  Agreement,  dated  May 18,  2001  between
                           Safety  Components  International,  Inc. and Brian P.
                           Menezes  (incorporated  by reference to Exhibit 10.24
                           to the  Company's  Annual Report on Form 10-K for the
                           fiscal year ended December 31, 2003)

         *10.5.3           Letter  from  Brian P.  Menezes to the  Company  with
                           respect to his  receipt of a change of control  bonus
                           from the Company in  connection  with sale of Company
                           stock by  Zapata  to the WLR  Recover  Funds  and the
                           changes in the  composition of the Company's board of
                           directors directly resulting therefrom.

         *10.6    Employment  Agreement,  effective May 18, 2001 between  Safety
                  Components   International,   Inc.   and   Stephen   B.  Duerk
                  (incorporated  by reference  to Exhibit 10.7 to the  Company's
                  Annual Report on Form 10-K for the fiscal year ended March 31,
                  2001)

         *10.6.1           Amendment  dated  September  29,  2003 to  Employment
                           Agreement,   dated  May  18,  2001   between   Safety
                           Components  International,  Inc. and Stephen B. Duerk
                           (incorporated  by reference  to Exhibit  10.25 to the
                           Company's  Annual  Report on Form 10-K for the fiscal
                           year ended December 31, 2003)

         *10.7    Service  Agreement  dated July 3, 2000 between the Company and
                  Vick Crowley  (incorporated  by reference to Exhibit  10.25 to
                  the  Company's  Amendment to Annual  Report on Form 10-K/A for
                  the fiscal year ended March 30, 2002 filed with the Commission
                  on July 29, 2002).

         *10.8    Form of Severance Letter (incorporated by reference to Exhibit
                  10.9 to the  Company's  Annual  Report  on Form  10-K  for the
                  fiscal year ended March 31, 2001)

         *10.9    Safety  Components  International,  Inc.  Key  Employee  Share
                  Option Plan dated June 17, 2002.

         *10.9.1           Safety   Components   International,   Inc.  Deferred
                           Compensation  Plan (Amending and Restating the Safety
                           Components  International,  Inc. Key  Employee  Share
                           Option Plan on  December  12,  2005  effective  as of
                           January 1, 2005).

         *10.10   Form of  Indemnification  Agreement  dated  December  6,  2005
                  between the Company and each of Wilbur L. Ross,  Jr.,  Michael
                  J. Gibbons and David H. Storper  (incorporated by reference to
                  Exhibit  10.30.1 to the Company's  Current  Report on Form 8-K
                  dated  December  2,  2005 and  filed  with the  Commission  on
                  December 8, 2005).

         *10.10.1          Form of Amended & Restated Indemnification  Agreement
                           effective  December  6, 2005  between the Company and
                           each of John C. Corey,  Brian P. Menezes,  Stephen B.
                           Duerk, R. Vick Crowley and Dr. Daniel D. Tessoni.

         *10.11   Safety   Components   International,   Inc.  2001   Management
                  Incentive Bonus Program  (incorporated by reference to Exhibit
                  10.16 to the  Company's  Annual  Report  on Form  10-K for the
                  fiscal year ended March 31, 2001)

         10.11.1           Safety Components International, Inc. 2003 Management
                           Incentive Bonus Program (incorporated by reference to
                           Exhibit 10.22 to the Company's  Annual Report on Form
                           10-K for the fiscal year ended December 31, 2003)

         14.1     Safety Components International, Inc. and Subsidiaries Code of
                  Ethics and  Business  Conduct  (incorporated  by  reference to
                  Exhibit 14.1 to the  Company's  Annual Report on Form 10-K for
                  the fiscal year ended December 31, 2003)

         21.1     Subsidiaries of Safety Components International, Inc.

         23.1     Consent of PricewaterhouseCoopers LLP

         31.1     Certification of CEO as required by Rule 13a-14(a), as adopted
                  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

         31.2     Certification of CFO as required by Rule 13a-14(a), as adopted
                  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

                                       51

<PAGE>

         32.1     Certification  of CEO Pursuant to 18 U.S.C.  Section  1350, as
                  Adopted Pursuant to Section 906 of the  Sarbanes-Oxley  Act of
                  2002

         32.2     Certification  of CFO Pursuant to 18 U.S.C.  Section  1350, as
                  Adopted Pursuant to Section 906 of the  Sarbanes-Oxley  Act of
                  2002

      *     Indicates exhibits relating to executive compensation

                                       52

<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/ Brian P. Menezes
                                     ----------------------------
                                     Brian P. Menezes
                                     Interim President & Chief Executive Officer
                                     and Vice President, Chief Financial Officer

                                 Date: March 15, 2006

      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/ Brian P. Menezes          Interim President & Chief Executive Officer    March 15, 2006
-----------------------       and Vice President, Chief Financial Officer
Brian P. Menezes

/s/ William F. Nelli          Controller                                     March 15, 2006
-----------------------
William F. Nelli

/s/ Wilbur L. Ross, Jr.       Director and Chairman of the Board             March 15, 2006
-----------------------
Wilbur L. Ross, Jr.

/s/ Daniel D. Tessoni         Director                                       March 15, 2006
-----------------------
Daniel D. Tessoni

/s/ Michael J. Gibbons        Director                                       March 15, 2006
-----------------------
Michael J. Gibbons

/s/ David H. Storper          Director                                       March 15, 2006
-----------------------
David H. Storper
</TABLE>

                                       53

<PAGE>

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

                                                                           Page

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING           F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                     F-3

CONSOLIDATED FINANCIAL STATEMENTS:

     Consolidated Balance Sheets as of December 31, 2005 and December
        31, 2004                                                            F-5

     Consolidated Statements of Operations for the Year ended December
        31, 2005, the Year ended December 31, 2004, and the period from
        March 30, 2003 to December 31, 2003                                 F-6

     Consolidated Statements of Stockholders' Equity for the Year ended
        December 31, 2005, the Year ended December 31, 2004, and the
        period from March 30, 2003 to December 31, 2003                     F-7

     Consolidated Statements of Cash Flows for the Year ended December
        31, 2005, the Year ended December 31, 2004, and the period from
        March 30, 2003 to December 31, 2003                                 F-8

     Notes to Consolidated Financial Statements                             F-9

SUPPLEMENTAL SCHEDULE:

II  Valuation and Qualifying Accounts

                                       F-1

<PAGE>

        REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

      The management of Safety Components International, Inc. (the "Company') is
responsible for  establishing  and maintaining  adequate  internal  control over
financial  reporting  as  defined in Rules  13a-15(f)  and  15d-15(f)  under the
Securities Exchange Act of 1934, as amended.

      Because of its  inherent  limitations,  internal  control  over  financial
reporting  may not prevent or detect  misstatements.  Also,  projections  of any
evaluation  of  effectiveness  to future  periods  are  subject to the risk that
controls may become  inadequate  because of changes in  conditions,  or that the
degree of compliance with the policies or procedures may deteriorate.

      Under the supervision and participation of the chief executive officer and
chief financial officer,  the Company's management assessed the effectiveness of
the Company's internal control over financial reporting as of December 31, 2005.
In making this assessment,  the Company's management used the criteria set forth
by the Committee of Sponsoring  Organizations of the Treadway  Commission (COSO)
in Internal Control-Integrated Framework.

      Based on our  assessment,  management  concludes  that, as of December 31,
2005, the Company's internal control over financial reporting is effective based
on those criteria.

      Management's  assessment of the  effectiveness  of the Company's  internal
control  over  financial  reporting  as of December 31, 2005 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in their report which appears herein.

                                       F-2

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have completed integrated audits of Safety Components  International,  Inc.'s
2005 and 2004 consolidated financial statements and of its internal control over
financial  reporting  as  of  December  31,  2005  and  an  audit  of  its  2003
consolidated financial statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States).  Our opinions,  based on our
audits, are presented below.

Consolidated financial statements and financial statement schedules

In our opinion, the accompanying consolidated financial statements listed in the
accompanying  index  appearing  under Item 15 present  fairly,  in all  material
respects,  the financial position of Safety Components  International,  Inc. and
its  subsidiaries at December 31, 2005 and December 31, 2004, and the results of
their  operations  and their  cash flows for each of the two years in the period
ended  December 31, 2005 and the  nine-month  period ended  December 31, 2003 in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule listed in
the index appearing under Item 15 presents fairly, in all material respects, the
information  set  forth  therein  when  read in  conjunction  with  the  related
consolidated  financial  statements.  These  financial  statements and financial
statement  schedule are the  responsibility  of the  Company's  management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
financial  statement  schedule  based on our audits.  We conducted our audits of
these  statements  in  accordance  with  the  standards  of the  Public  Company
Accounting Oversight Board (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 of financial statements
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management's assessment,  included in Report of Management
on Internal  Control over  Financial  Reporting  appearing on page F-2, that the
Company  maintained  effective  internal control over financial  reporting as of
December 31, 2005 based on criteria established in Internal Control - Integrated
Framework  issued by the Committee of Sponsoring  Organizations  of the Treadway
Commission  (COSO), is fairly stated, in all material  respects,  based on those
criteria.  Furthermore,  in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31,
2005, based on criteria  established in Internal Control - Integrated  Framework
issued by the COSO.  The Company's  management is  responsible  for  maintaining
effective  internal  control over financial  reporting and for its assessment of
the   effectiveness   of  internal   control  over  financial   reporting.   Our
responsibility  is to express  opinions on  management's  assessment  and on the
effectiveness of the Company's  internal control over financial  reporting based
on our  audit.  We  conducted  our  audit of  internal  control  over  financial
reporting in  accordance  with the  standards of the Public  Company  Accounting
Oversight  Board  (United  States).  Those  standards  require  that we plan and
perform  the  audit to  obtain  reasonable  assurance  about  whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects.  An  audit of  internal  control  over  financial  reporting  includes
obtaining  an  understanding  of  internal  control  over  financial  reporting,
evaluating  management's  assessment,  testing  and  evaluating  the  design and
operating   effectiveness  of  internal  control,   and  performing  such  other
procedures as we consider  necessary in the  circumstances.  We believe that our
audit provides a reasonable basis for our opinions.

                                       F-3
<PAGE>

A company's  internal control over financial  reporting is a process designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures that (i) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions of the assets of the company;  (ii)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company;  and (iii) provide  reasonable  assurance  regarding  prevention or
timely  detection  of  unauthorized  acquisition,  use,  or  disposition  of the
company's assets that could have a material effect on the financial statements.

Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Spartanburg, South Carolina
March 15, 2006

                                       F-4
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                 (in thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                                             December 31, 2005   December 31, 2004
                                                                                             -----------------   -----------------
<S>                                                                                          <C>                 <C>
ASSETS

Current assets:
   Cash and cash equivalents .............................................................   $           4,087   $           4,184
   Accounts receivable, net ..............................................................              35,887              39,272
   Inventories, net ......................................................................              25,557              26,882
   Deferred income taxes .................................................................               1,879               1,609
   Assets held in deferred compensation plan .............................................               2,911               4,361
   Prepaid and other .....................................................................               2,282               1,044
                                                                                             -----------------   -----------------
      Total current assets ...............................................................              72,603              77,352

Property, plant and equipment, net .......................................................              43,828              48,449
Identifiable intangible assets, net ......................................................                 817               1,108
Investment in unconsolidated affiliate ...................................................                 237                  --
Other assets .............................................................................                 869                 617
                                                                                             -----------------   -----------------
      Total assets .......................................................................   $         118,354   $         127,526
                                                                                             =================   =================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable ......................................................................   $          15,195   $          16,828
   Accrued salaries and benefits .........................................................               2,981               4,270
   Deferred compensation .................................................................               2,475               3,666
   Accrued and other current liabilities .................................................               4,766               4,486
   Income taxes payable ..................................................................               1,361               6,715
   Current portion of long-term debt .....................................................               5,675               3,263
                                                                                             -----------------   -----------------
      Total current liabilities ..........................................................              32,453              39,228

Long-term debt, net of current maturities ................................................                 810               3,729
Deferred income taxes ....................................................................               3,696               3,635
Other long-term liabilities ..............................................................                 319                 277
                                                                                             -----------------   -----------------
      Total liabilities ..................................................................              37,278              46,869
                                                                                             -----------------   -----------------
Commitments and contingencies

Minority interest ........................................................................                 407                 133

Stockholders' equity:
   Preferred stock: 5,000,000 shares authorized and unissued .............................                  --                  --
   Common stock: $.01 par value per share - 20,000,000 shares authorized;
     5,385,147 and 5,295,778 shares outstanding at December 31, 2005 and December 31,
     2004, respectively ..................................................................                  54                  53
   Additional paid-in-capital ............................................................              56,545              54,660
   Treasury stock: 40,322 shares at cost .................................................                (411)               (411)
   Retained earnings .....................................................................              16,447              12,904
   Accumulated other comprehensive income ................................................               8,034              13,318
                                                                                             -----------------   -----------------
      Total stockholders' equity .........................................................              80,669              80,524
                                                                                             -----------------   -----------------
      Total liabilities and stockholders' equity .........................................   $         118,354   $         127,526
                                                                                             =================   =================
</TABLE>

                 See notes to consolidated financial statements.

                                       F-5

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                                 Period from
                                                                         Year Ended          Year Ended       March 30, 2003 to
                                                                      December 31, 2005   December 31, 2004   December 31, 2003
                                                                       (Twelve Months)     (Twelve Months)      (Nine Months)
                                                                      -----------------   -----------------   -----------------
<S>                                                                   <C>                 <C>                 <C>
Net sales .........................................................   $         220,114   $         247,883   $         183,666
Cost of sales, excluding depreciation .............................             187,590             200,871             150,380
Depreciation ......................................................               9,103              11,296               8,089
                                                                      -----------------   -----------------   -----------------
   Gross profit ...................................................              23,421              35,716              25,197

Selling, general and administrative expenses ......................              16,145              20,257              13,101
Expenses associated with changes of control .......................               2,965                  --               2,797
                                                                      -----------------   -----------------   -----------------
   Income from operations .........................................               4,311              15,459               9,299

Other expense (income), net .......................................                 538              (1,467)             (2,275)
Interest expense ..................................................                 682                 946               1,664
                                                                      -----------------   -----------------   -----------------
   Income before income taxes, minority interest and earnings from
     unconsolidated affiliate .....................................               3,091              15,980               9,910

Provision for income taxes ........................................                 907               5,771               3,808
Minority interest in loss of consolidated subsidiaries ............                (605)                (39)                 --
Equity in earnings from unconsolidated affiliate ..................                (754)                 --                  --
                                                                      -----------------   -----------------   -----------------
Net income ........................................................   $           3,543   $          10,248   $           6,102
                                                                      =================   =================   =================

Net income per common share, basic ................................   $            0.66   $            1.97   $            1.23
                                                                      =================   =================   =================

Net income per common share, diluted ..............................   $            0.65   $            1.94   $            1.19
                                                                      =================   =================   =================

Weighted average number of shares outstanding, basic ..............               5,370               5,206               4,973
                                                                      =================   =================   =================

Weighted average number of shares outstanding, diluted ............               5,447               5,294               5,119
                                                                      =================   =================   =================
</TABLE>

                 See notes to consolidated financial statements.

                                       F-6

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                          (in thousands, except shares)

<TABLE>
<CAPTION>
                                                                         Common        Common     Common    Additional   Treasury
                                                                       Stock Shares     Stock     Stock      Paid -in     Stock
                                                                       Outstanding     Amount    Warrants     Capital     Amount
                                                                      -------------   --------   --------   ----------   --------
<S>                                                                   <C>             <C>        <C>        <C>          <C>
Balance at March 29, 2003 ..........................................      4,959,678   $     50   $     34   $   50,916   $   (411)
   Comprehensive income for the period from March 30, 2003 to
     December 31, 2003:
      Net income ...................................................             --         --         --           --         --
      Foreign currency translation adjustment ......................             --         --         --           --         --
      Unrealized loss on derivatives ...............................             --         --         --           --         --
   Net comprehensive income ........................................             --         --         --           --         --
   Expiration of warrants ..........................................             --         --        (34)          34         --
   Issuance of common stock ........................................         77,800          1         --        1,915         --
                                                                      -------------   --------   --------   ----------   --------
Balance at December 31, 2003 .......................................      5,037,478   $     51   $     --   $   52,865   $   (411)
                                                                      =============   ========   ========   ==========   ========
   Comprehensive income for the year ended December 31, 2004:
      Net income ...................................................             --         --         --           --         --
      Foreign currency translation adjustment ......................             --         --         --           --         --
      Reclassification adjustment for derivatives ..................             --         --         --           --         --
   Net comprehensive income ........................................             --         --         --           --         --
   Issuance of common stock ........................................        258,300          2         --        1,795         --
                                                                      -------------   --------   --------   ----------   --------
Balance at December 31, 2004 .......................................      5,295,778   $     53   $     --   $   54,660   $   (411)
                                                                      =============   ========   ========   ==========   ========
   Comprehensive loss for the year ended December 31, 2005:
      Net income ...................................................             --         --         --           --         --
      Foreign currency translation adjustment ......................             --         --         --           --         --
   Net comprehensive loss ..........................................             --         --         --           --         --
   Contribution of capital in connection with change of control ....             --         --         --        1,000         --
   Issuance of common stock ........................................         89,369          1         --          885         --
                                                                      -------------   --------   --------   ----------   --------
 Balance at December 31, 2005 ......................................      5,385,147   $     54   $     --   $   56,545   $   (411)
                                                                      =============   ========   ========   ==========   ========

<CAPTION>
                                                                      (Accumulated     Accumulated
                                                                         Deficit)         Other
                                                                        Retained      Comprehensive
                                                                        Earnings      Income (Loss)     Total
                                                                      -------------   -------------   ---------
<S>                                                                   <C>             <C>             <C>
Balance at March 29, 2003 ..........................................  $      (3,446)  $       4,770   $  51,913
   Comprehensive income for the period from March 30, 2003 to
     December 31, 2003:
      Net income ...................................................          6,102              --       6,102
      Foreign currency translation adjustment ......................             --           4,250       4,250
      Unrealized loss on derivatives ...............................             --            (152)       (152)
                                                                                                      ---------
   Net comprehensive income ........................................             --              --      10,200
   Expiration of warrants ..........................................             --              --          --
   Issuance of common stock ........................................             --              --       1,916
                                                                      -------------   -------------   ---------
Balance at December 31, 2003 .......................................  $       2,656   $       8,868   $  64,029
                                                                      =============   =============   =========
   Comprehensive income for the year ended December 31, 2004:
      Net income ...................................................         10,248              --      10,248
      Foreign currency translation adjustment ......................             --           4,298       4,298
      Reclassification adjustment for derivatives ..................             --             152         152
                                                                                                      ---------
   Net comprehensive income ........................................             --              --      14,698
   Issuance of common stock ........................................             --              --       1,797
                                                                      -------------   -------------   ---------
Balance at December 31, 2004 .......................................  $      12,904   $      13,318   $  80,524
                                                                      =============   =============   =========
   Comprehensive loss for the year ended December 31, 2005:
      Net income ...................................................          3,543              --       3,543
      Foreign currency translation adjustment ......................             --          (5,284)     (5,284)
                                                                                                      ---------
   Net comprehensive loss ..........................................             --              --      (1,741)
   Contribution of capital in connection with change of control ....             --              --       1,000
   Issuance of common stock ........................................             --              --         886
                                                                      -------------   -------------   ---------
 Balance at December 31, 2005 ......................................  $      16,447   $       8,034   $  80,669
                                                                      =============   =============   =========
</TABLE>

                 See notes to consolidated financial statements.

                                       F-7

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                                 Period from
                                                                         Year Ended          Year Ended       March 30, 2003 to
                                                                      December 31, 2005   December 31, 2004   December 31, 2003
                                                                       (Twelve Months)     (Twelve Months)      (Nine Months)
                                                                      -----------------   -----------------   -----------------
<S>                                                                   <C>                 <C>                 <C>
Cash Flows From Operating Activities:
   Net income .....................................................   $           3,543   $          10,248   $           6,102
   Adjustments to reconcile net income to net cash provided by
     operating activities:
      Depreciation and amortization ...............................               9,257              11,449               8,195
      Provision for bad debts .....................................                 526                 447                  29
      Loss on disposition of assets ...............................                 141                 283                 541
      Minority interest ...........................................                (605)                133                  --
      Deferred taxes ..............................................                (141)               (277)               (931)
      Tax benefit from exercise of stock options ..................                 187                 525                  76
      Non-cash charge associated with previous change of control ..                  --                  --               1,404
      Changes in operating assets and liabilities:
         Accounts receivable ......................................                 517              (2,610)              6,744
         Inventories ..............................................                 (99)             (3,329)                446
         Assets held in deferred compensation plan ................               1,450              (1,016)             (1,942)
         Prepaid and other current assets .........................              (1,220)              1,109               1,462
         Other non-current assets .................................                 220                (634)             (1,319)
         Accounts payable .........................................                (679)             (7,591)             (2,294)
         Income taxes payable .....................................              (5,140)              2,238               1,874
         Deferred compensation ....................................              (1,191)                834               2,099
         Accrued and other liabilities ............................                 136               1,561                (540)
                                                                      ---------------------------------------------------------
         Net cash provided by operating activities ................               6,902              13,370              21,946
                                                                      ---------------------------------------------------------

Cash Flows From Investing Activities:
      Purchases of property, plant and equipment ..................              (7,149)             (6,547)             (2,594)
      Investment in unconsolidated affiliate ......................                (237)                 --                  --
                                                                      ---------------------------------------------------------
         Net cash used in investing activities ....................              (7,386)             (6,547)             (2,594)
                                                                      ---------------------------------------------------------

Cash Flows From Financing Activities:
      Repayment of KeyBank Subordinated term note .................                  --                  --              (9,202)
      (Repayment of) proceeds from Wachovia term note .............                (534)             (2,127)              1,604
      Net borrowings on (repayments of) Wachovia revolving credit
       facility ...................................................               2,146              (4,523)            (12,085)
      Repayment of Deutsche Bank Mortgage .........................                  --                  --              (2,014)
      Repayments of other debt and long term obligations ..........              (2,548)             (3,400)             (2,023)
      Contribution of capital upon change of control ..............               1,000                  --                  --
      Proceeds from issuance of common stock ......................                 699               1,270                 511
                                                                      -----------------   -----------------   -----------------
         Net cash provided by (used in) financing activities ......                 763              (8,780)            (23,209)
                                                                      -----------------   -----------------   -----------------
Effect of exchange rate changes on cash and cash equivalents ......                (376)              1,765                 669
                                                                      -----------------   -----------------   -----------------
Change in cash and cash equivalents ...............................                 (97)               (192)             (3,188)
Cash and cash equivalents, beginning of period ....................               4,184               4,376               7,564
                                                                      -----------------   -----------------   -----------------
Cash and cash equivalents, end of period ..........................   $           4,087   $           4,184   $           4,376
                                                                      =================   =================   =================

Supplemental disclosure of cash flow information:
   Cash paid during the period for:
      Interest ....................................................   $             360   $             547   $           1,305
      Income taxes ................................................               6,816               2,908               2,877

Supplemental disclosure of non-cash investing activity:
   Equipment acquired under capital lease obligations .............                 694                 553                  --
</TABLE>

                 See notes to consolidated financial statements.

                                       F-8

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

Note 1 Business and Basis of Presentation

      Safety Components International,  Inc. (including,  when context requires,
its  consolidated  subsidiaries,  the  "Company" or "SCI")  operates in a single
segment as a manufacturer of automotive airbag fabric and cushions and technical
fabrics with operations principally in North America, Europe and China.

2005 Change of Control

      On  September  23, 2005,  Zapata  Corporation  ("Zapata"),  the record and
beneficial  owner of 77.3% of the Company's  outstanding  common stock,  entered
into a Stock Purchase  Agreement with WLR Recovery Fund III, L.P. ("WLR III") to
sell to WLR III all of its 4,162,394  shares of the Company's  common stock.  On
September 26, 2005, Zapata, WLR III and WLR Recovery Fund II, L.P. ("WLR II" and
collectively with WLR III, referred to as the "WLR Recovery Funds") entered into
Amendment  No. 1 and  Joinder  Agreement  which  joined WLR II as a party to the
Stock Purchase  Agreement.  The Amendment No. 1 provided that WLR II and WLR III
shall  purchase  241,419 and  3,920,975  shares of the  Company's  common stock,
respectively.  The purchase  price of $12.30 per share,  or  $51,197,446  in the
aggregate,  was  paid in  immediately  available  funds  at the  closing  of the
transaction  on December 2, 2005.  The WLR Recovery  Funds are affiliates of Mr.
Wilber L. Ross, Jr., and W. L. Ross and Co., LLC.

      As provided in the Stock  Purchase  Agreement and after the closing of the
transaction,  the Company's board of directors  elected three WLR Recovery Funds
nominees  to the  Company's  board of  directors  and Zapata then caused its own
representatives  to resign as directors of the Company.  The WLR Recovery Funds'
nominees to the Company's board of directors are Wilbur L. Ross, Jr., Michael J.
Gibbons and David H. Storper.

      Upon closing of the stock purchase transaction, and in lieu of any special
change  of  control  bonus  that was or might  have  been  payable  pursuant  to
employment  agreements  between  the  Company  and  each of John C.  Corey,  the
Company's then President and Chief Executive Officer, and Brian P. Menezes, Vice
President and Chief Financial  Officer,  the Company paid a bonus of $994,000 to
Mr. Corey and $406,000 to Mr. Menezes.

      In  addition,  in  connection  with  the  closing  of the  stock  purchase
transaction,  Zapata made a capital contribution to the Company in the aggregate
amount of $1.0  million  for the purpose of the  Company  paying  bonuses to the
Company's  executive  officers  and other key  employees  for their  efforts  in
connection with the attempts to sell the Company and to provide  management with
an  appropriate  incentive to remain with the Company during the pendency of the
stock purchase transaction. The Compensation Committee of the Company's Board of
Directors  determined  that this $1,000,000  aggregate  amount be distributed as
follows:  $400,000 to Mr. Corey, $250,000 to Mr. Menezes,  $75,000 to Stephen B.
Duerk,  Vice President and president of the Company's North American  Automotive
Group,  and $50,000 to Vick Crowley,  Treasurer,  with the remainder of $225,000
distributed  among  other key  employees  of the Company as  recommended  by the
Company's  President and Chief  Executive  Officer.  These bonus amounts paid to
Messrs.  Corey and Menezes were in addition to the amounts paid to them that are
described in the  immediately  preceding  paragraph.  In  addition,  the Company
recognized  expenses of  approximately  $600,000  related to this stock purchase
transaction. All of the bonus amounts and purchasing expenses have been included
in the  Company's  income  statement  in  expenses  associated  with  changes of
control.

      As a result of the  foregoing  transactions,  a change of  control  of the
Company occurred (the "2005 Change of Control").

2003 Change of Control

      On September 29, 2003,  Zapata filed a Schedule 13D with the United States
Securities and Exchange  Commission (the "SEC")  indicating that as of September
18, 2003 it had acquired  2,663,905  shares of the Company's  common stock which
then  constituted  approximately  53.7% of the issued and outstanding  shares of
such common  stock.  As a result,  a change of control of the Company (the "2003
Change of Control")  occurred.  On October 6, 2003, Zapata filed an amendment to
its Schedule  13D with the SEC,  indicating  that it had acquired an  additional
1,498,489 shares of the Company's  common stock which,  together with the shares
previously  acquired,  then  constituted  approximately  83.9% of the issued and
outstanding common stock of the Company.

                                       F-9

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

      The 2003 Change of Control triggered  certain  provisions of the Company's
Stock Option Plan,  including  immediate vesting of all options and an automatic
change in the  exercise  price of a portion  of the  options to $0.01 per share.
This change in exercise  price  constituted a  modification  of the Stock Option
Plan and the  Company  was  required  to  recognize  a  one-time,  non-recurring
compensation  cost of $1.4 million for the modified  options for 126,900 shares,
for the nine months ended December 31, 2003. Additionally, in lieu of re-pricing
their Class A stock options, the employment agreements of certain key executives
included a  provision  for a bonus  payable in the event of a change of control.
The aggregate  bonus paid under these  provisions  in  connection  with the 2003
Change of Control  was $1.4  million  and was also  recognized  as an expense in
2003.

      Following the 2003 Change of Control,  the Company's  Audit  Committee and
Board of Directors  determined  that it was in the  Company's  best  interest to
change the  Company's  fiscal  year end from the last  Saturday  in the month of
March to a calendar-based year ending December 31 to coincide with Zapata's year
end. This change was  effective as of the quarter ended  December 31, 2003. At a
meeting on January 26, 2004,  the  Company's  Board of Directors  appointed  two
designees  of  Zapata,  Avram  Glazer  and  Leonard  DiSalvo,  as members of the
Company's Board of Directors.

      As a result of the above transactions, the consolidated federal income tax
group of the Company that existed  prior to these  transactions  terminated  and
Safety  Components  and its  subsidiaries  became  members  of the  consolidated
federal income tax group of Zapata. In the first quarter of 2004, Zapata and the
Company  entered  into a Tax Sharing and  Indemnity  Agreement  to define  their
respective rights and obligations relating to federal, state and other taxes for
taxable  periods  attributable  to the filing of consolidated or combined income
tax returns as part of the Zapata consolidated federal income tax group.

      Due to exercises of options to purchase common stock of the Company, on or
about March 31, 2004, the number of shares of common stock outstanding increased
and, as a result,  Zapata's  ownership was reduced to less than 80%. As a result
of Zapata's  ownership of the company's  outstanding  common stock falling below
80%, Zapata could not consolidate the Company into Zapata's  consolidated income
tax returns for periods  subsequent to the first quarter of 2004.  Under the Tax
Sharing and Indemnity Agreement,  the Company was consolidated into Zapata's tax
filing  group for the fourth  calendar  quarter  of 2003 and the first  calendar
quarter of 2004. On January 4, 2005, the Company received  notification from the
Internal  Revenue  Service  that  its  plan to  return  to the  taxpayer  status
consistent to the periods prior to the 2003 Change of Control had been approved.

NxGen Partnership

      On September 1, 2005 the Company exercised an option to acquire 49% of the
ownership  interests  of  NxGen  Technologies,  LLC  ("NxGen"),  which is in the
business of designing  airbags,  airbag systems and inflator units.  The Company
exercised  this  option in  connection  with  NxGen's  entry into a License  and
Consulting Agreement with a major automotive supplier  ("Supplier")  pursuant to
which NxGen granted Supplier an exclusive, worldwide, royalty-bearing license to
certain  of  NxGen's  patents  and  patent   know-how.   The  Company  waived  a
right-of-first-refusal  with  respect  to the  license.  Supplier  paid NxGen an
initial  license  fee and will owe it two  additional  payments,  which  will be
treated as prepaid  royalties for subsequent  sales,  if and when validation and
sales targets are met. If sales exceed the volume  corresponding  to the prepaid
royalties,  Supplier will pay NxGen an additional royalty for each airbag system
sold  using  the  licensed   patents  and  know-how.   The  Company   recognized
approximately  $754,000  (net of income taxes of $448,000) in equity in earnings
of  unconsolidated  affiliate in connection  with the exercise of the option and
the allocation of the Company's  proportionate  share of NxGen's income from the
receipt of the initial  license fee from Supplier.  As a result of the above and
also the Company's receipt of a distribution from NxGen, the Company recorded an
asset of  approximately  $237,000  (which  represents  the  Company's  ownership
interest in this affiliate's  equity) in the Company's balance sheet at December
31, 2005 in investment in unconsolidated affiliate. NxGen's summarized financial
information is derived from its unaudited financial statements.  At December 31,
2005,  NxGen  had  total  assets  consisting  of cash  and cash  equivalents  of
approximately  $429,000  and no  significant  liabilities.  For the  year  ended
December 31, 2005,  NxGen  recognized  revenue from license fees of $3.0 million
which  resulted  in gross  margin  of the  same and  recognized  net  income  of
approximately  $3.0 million.  Prior to 2005 there were no significant  revenues,
net income,  assets or  liabilities.  The Company  will  participate  in NxGen's
subsequent profits and losses pro rata in accordance with its equity ownership.

                                      F-10

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

Note 2 Summary of Significant Accounting Policies

Principles of consolidation

      The  Company's  consolidated  financial  statements  include  the  assets,
liabilities  and operating  results of  majority-owned  subsidiaries,  including
joint ventures controlled by the Company. The share of the unaffiliated minority
interest  investors'  investment  in such joint  ventures  is  presented  in the
Company's Consolidated Balance Sheets and the share of the unaffiliated minority
interest  investors'  loss in  consolidated  subsidiaries  is  presented  in the
Company's Consolidated Statements of Operations.  Additionally, the Company owns
a minority  interest in NxGen and records its share of NxGen's income or loss in
its Consolidated Statements of Operations and records its investment in NxGen on
the Company's  Consolidated  Balance  Sheets,  adjusting this investment for the
Company's share of NxGen's results of operations.  All significant  intercompany
accounts and transactions have been eliminated.

      Effective  as  of  March  31,  2004,  the  Company   adopted  the  revised
interpretation of Financial Accounting Standards Board (FASB) Interpretation No.
46 (FIN 46), "Consolidation of Variable Interest Entities," (FIN 46-R). FIN 46-R
requires that certain variable  interest entities be consolidated by the primary
beneficiary of the entity if the equity  investors in the entity do not have the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated financial support from other parties. The Company does not have any
investments in entities it believes are variable interest entities for which the
Company is the primary beneficiary.

Financial Statement Preparation

      The  consolidated  financial  statements  have been prepared in conformity
with accounting  principles  generally accepted in the United States of America,
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,  contingencies and other reserves
and allowances for deferred tax assets.  Management  believes that its estimates
included  in  the  financial  statements,   including  for  these  matters,  are
reasonable.  However, actual results could differ from those estimates.  Certain
prior  year  amounts  have been  reclassified  to conform  to the  current  year
presentation.

Fiscal year

      Following the 2003 Change of Control,  the Company changed its fiscal year
to a calendar year end to coincide with Zapata's  fiscal year end. The Company's
operations were previously  based on a fifty-two or fifty-three week fiscal year
ending on the Saturday  closest to March 31. As such,  the period from March 30,
2003 to December  31, 2003  consists  of nine months of  operations.  The fiscal
years from  January 1, 2005 to December 31, 2005 and January 1, 2004 to December
31, 2004 each consist of twelve months of operations.

Cash equivalents

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

Derivative financial instruments

      Derivative  financial  instruments  are  utilized by the Company to reduce
exposures to volatility of foreign  currencies  impacting the  operations of its
business.  The Company does not enter into financial  instruments for trading or
speculative purposes.

      The Company uses SFAS No. 133, "Accounting for Derivative  Instruments and
Hedging  Activities",  which, as amended,  establishes  accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts, and hedging activities. It requires the recognition
of all  derivative  instruments as either assets or liabilities in the statement
of financial position and measurement of those instruments at fair value. The

                                      F-11

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

accounting treatment of changes in fair value is dependent upon whether or not a
derivative  instrument  is  designated as a hedge and, if so, the type of hedge.
For derivatives designated as cash flow hedges, to the extent effective, changes
in fair value are recognized in accumulated other comprehensive income until the
hedged item is recognized in earnings. Ineffectiveness is recognized immediately
in earnings.  For derivatives  designated as fair value hedges,  changes in fair
value are recognized in earnings.

      On December  31, 2005 and 2004,  the  Company had no  outstanding  forward
exchange  contracts.  On December 31, 2003 the Company had  outstanding  forward
exchange contracts to purchase Mexican Pesos with U.S. Dollars and Czech Korunas
with Euros that met the  requirements  of SFAS No. 133 and were accounted for as
qualifying  hedges.  See Note 11 for further  information  regarding  derivative
instruments  entered into and executed  during the twelve months ended  December
31, 2005 and 2004 and nine months ended December 31, 2003.

Concentration of credit risk

      The Company is subject to a  concentration  of credit risk relating to its
trade  receivables.   At  December  31,  2005,  three  customers  accounted  for
approximately 29%, 16% and 15% of its trade  receivables.  At December 31, 2004,
these same three customers  accounted for approximately  36%, 11% and 10% of its
trade  receivables.  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.

Inventories

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

Property, plant and equipment

      Property,  plant  and  equipment  are  stated  at  cost  less  accumulated
depreciation. 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 ............   4  - 11 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.

Tangible asset impairment

      The Company  continually  monitors conditions that may affect the carrying
value of its tangible assets. When conditions  indicate potential  impairment of
such  assets,  the  Company  evaluates  the fair value of the  assets.  When the
estimated  fair value of an asset is less than the carrying  value of the asset,
the impaired asset is written down to its estimated  fair value,  and is charged
to operations in the period in which impairment is determined. Management is not
aware of any events that would  indicate  potential  impairment  of its tangible
assets.

Assets held for sale

      At December 31, 2005, the Company had productive assets held for sale at a
fair value, net of disposal costs, of  approximately  $560,000 which is included
in other assets in the Company's Consolidated Balance Sheets.

                                      F-12

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

Intangible assets

      At December  31, 2005,  intangible  assets  consisted  of certain  Company
patents  which are  amortized  over  estimated  lives  between  15 and 20 years.
Accumulated  amortization  at  December  31,  2005 and  2004  was  approximately
$698,000  and  $544,000,  respectively.  Amortization  of patents is expected to
approximate $155,000 per year for each of the five succeeding years. The Company
continually  monitors  conditions  that may  affect  the  carrying  value of its
intangible assets. When conditions indicate potential impairment of such assets,
the Company evaluates the estimated fair value of the assets. When the estimated
fair  value of an  asset  is less  than the  carrying  value of the  asset,  the
impaired  asset is written down to its estimated  fair value,  and is charged to
operations  in the  period in which  impairment  is  determined.  Management  is
currently not aware of any events that would  indicate  potential  impairment of
its intangible assets.

      Following is a summary of intangible assets (in thousands):

                                           December 31, 2005  December 31, 2004
                                           ------------------------------------
Identifiable intangible assets - patents:
Gross carrying amount                           $ 1,515            $ 1,652
Accumulated amortization                           (698)              (544)
                                           ------------------------------------
Net carrying amount                             $   817            $ 1,108
                                           ====================================

      Amortization  expense for the years ended  December  31, 2005 and 2004 and
the nine months ended  December 31, 2003 was  $154,000,  $153,000 and  $106,000,
respectively.

Deferred financing costs

      Costs incurred in connection  with  financing  activities are deferred and
amortized  over  the  lives  of  the  respective  debt  instruments   using  the
straight-line method (which approximates the effective interest method), and are
charged to  interest  expense in the  accompanying  consolidated  statements  of
operations.  Total  costs  deferred  and  included  in  "other  assets"  in  the
accompanying  Consolidated  Balance  Sheets at  December  31, 2005 and 2004 were
$133,000 and $349,000, respectively.

Income taxes

      Income taxes are recognized for financial  reporting  purposes  during the
year in which transactions enter into the determination of income, with deferred
taxes being provided for temporary  differences  between the basis for financial
reporting purposes and the basis for income tax reporting purposes.  A valuation
allowance  is  provided  for  deferred  tax  assets  when,  in  the  opinion  of
management,  it is more likely than not that the deferred tax assets will not be
realized.

Revenue recognition

      The Company  recognizes revenue from product sales when it has shipped the
goods and  title  and the risk of loss has  passed.  Additionally,  the  Company
accrues for estimated sales returns and other allowances at the time of shipment
based upon historical experience. Actual sales returns and other allowances have
not differed materially from such estimates.

Annual revenues from major customers

      The Company's net sales to three  customers in the year ended December 31,
2005 aggregated  approximately  30%, 21% and 9% of net sales.  The Company's net
sales to  these  same  three  customers  in the year  ended  December  31,  2004
aggregated  approximately  30%,  24%  and 8% of  net  sales,  respectively.  The
Company's  net sales to these  same three  customers  in the nine  months  ended
December  31,  2003  aggregated  approximately  32%,  23% and 13% of net  sales,
respectively.

                                      F-13

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

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  that extend the life of the related
property or prevent future  environmental  contamination  are  capitalized.  The
Company's  environmental  expenditures for the years ended December 31, 2005 and
2004  and  the  nine  months  ended   December  31,  2003  were   insignificant.
Undiscounted liabilities are recognized for remedial activities when the cleanup
is probable  and the cost can be  reasonably  estimated.  See Note 6 for further
information regarding environmental reserves.

Advertising costs

      Advertising  costs are charged to operations  when  incurred.  Advertising
costs were approximately  $235,000,  $195,000 and $81,000 during the years ended
December  31,  2005 and  2004  and the nine  months  ended  December  31,  2003,
respectively,  and  were  recorded  as  a  component  of  selling,  general  and
administrative   expenses  in  the  accompanying   Consolidated   Statements  of
Operations.

Shipping costs

      The costs to ship  products to customers of  approximately  $3.8  million,
$3.7 million and $2.9 million  during the years ended December 31, 2005 and 2004
and the nine months ended  December 31,  2003,  respectively,  are included as a
component  of  cost  of  sales,   excluding  depreciation  in  the  accompanying
consolidated statements of operations.

Research and development expenses

      Research and development costs are charged to operations when incurred and
are included in operating expenses. Costs associated with design and development
for fabric and airbag  cushions  for the years ended  December 31, 2005 and 2004
and the nine months ended December 31, 2003, were $3.1 million, $1.5 million and
$1.2 million, respectively.

Comprehensive income

      SFAS No. 130, "Reporting Comprehensive Income",  establishes standards for
reporting and display of  comprehensive  income and its components in a full set
of general-purpose  financial  statements.  The Company currently has two items,
unrealized  gain or loss on  foreign  currency  translation  and gain or loss on
derivatives,  which are  components of other  comprehensive  income.  Unrealized
gains or  losses on  foreign  currency  translation  are not shown net of income
taxes  because the earnings of foreign  subsidiaries  are  considered by Company
management to be permanently reinvested.

Earnings per share

      Earnings per share amounts have been computed using Statement of Financial
Accounting  Standards No. 128,  "Earnings per Share" ("SFAS No. 128").  SFAS No.
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. Diluted EPS includes unexercised stock options using
the treasury stock method. (See Note 10).

Stock Based Compensation

      On May 18, 2001,  the Safety  Components  International,  Inc.  2001 Stock
Option Plan ("Stock  Option  Plan")  became  effective  pursuant to  shareholder
approval. The Stock Option Plan provides for the issuance of options to purchase
up to an  aggregate of 900,000  shares of SCI's  common  stock to key  officers,
employees, directors and consultants of SCI or its affiliates. Unless designated
otherwise  by the  Compensation  Committee  of the Board of  Directors,  options
granted pursuant to the Stock Option Plan are intended to be non-statutory stock
options.  The Compensation  Committee determines the exercise price and the term
of options granted pursuant to the Stock Option Plan at the time of grant.  Each
award is  determined  by the  Compensation  Committee  on an  individual  basis.
Options to purchase a total of 510,100 shares

                                      F-14

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

of common stock at a fair market price of $8.75 per share (subject to adjustment
in certain circumstances), to vest ratably over a period of three years from the
date of grant on May 18, 2001, were granted by the Compensation  Committee to 22
employee  participants and to the outside directors under the Stock Option Plan.
Additional  options to purchase  190,000 shares of common stock at a fair market
price of $6.71 per share,  to vest ratably over a period of three years from the
date of grant on April 1, 2002,  were granted by the  Compensation  Committee to
employees and outside directors. All options expire on October 31, 2010.

      At the time all outstanding options were granted,  the Company applied the
principles of Accounting  Principles  Board Opinion ("APB") No. 25 in accounting
for employee stock option plans (the intrinsic value method).  All stock options
granted had an exercise  price equal to the fair market value of the  underlying
common  stock  at  the  date  of  grant.  Accordingly,  under  APB  No.  25,  no
compensation cost was recognized in the Company's financial  statements in prior
periods. During the quarter ended September 27, 2003, the 2003 Change of Control
occurred  and as a result  under the  provisions  of the Stock  Option  Plan all
options vested  immediately  and the exercise  prices of a certain subset of the
options were automatically  changed to $0.01 per share (the "modified options").
This change in exercise  price  constituted a  modification  of the Stock Option
Plan and  under APB No.  25 and  Financial  Interpretation  Number  ("FIN")  44,
"Accounting for Certain Transactions  involving Stock Compensation," the Company
was required to recognize  compensation  cost of $1.4 million  ($823,000  net of
tax) for the modified  options,  representing  126,900 options,  for the quarter
ended  September  27, 2003. No expense was  recognized on the remaining  567,800
options  that  were not  subject  to the  automatic  change in  exercise  price.
According  to the  provisions  of SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation"  and as  amended  by SFAS No.  148,  "Accounting  for  Stock-Based
Compensation - Transition and  Disclosure,"  the Company is required to disclose
the  compensation  expense  included  in net income  based on APB No. 25 and the
related pro-forma cost measured by the fair value method under SFAS No. 123, net
of tax effects.  Additionally,  the modification  resulted in an increased value
for the  modified  options (the  "incremental  fair value") that is disclosed as
part of the pro-forma expense measured by the fair value method.

      The fair values of the original  options are based upon the  Black-Scholes
option-pricing  model, and are estimated on the date of grant with the following
assumptions  used for grants in fiscal years 2003 and 2002,  respectively:  risk
free interest rate of 4.79 and 5.45 percent;  zero percent  dividends;  expected
lives of 6.0 years for each grant;  and  expected  volatility  of 80.9 and 188.0
percent.  The fair  values of the  options  granted at May 18, 2001 and April 1,
2002, were $4.26 and $6.44 per share,  respectively.  Prior to the  modification
described above, the Company's SFAS No. 123 pro-forma compensation expense would
have been $1.1 million for the nine months ended December 31, 2003.

      As a  result  of the  modification,  the  incremental  fair  value  of the
modified options is to be estimated  immediately before their terms are modified
and on the date of  modification.  The fair values for the modified options were
also  based  on the  Black-Scholes  option-pricing  model,  with  the  following
assumptions  used:  risk  free  interest  rate of  0.99  percent;  zero  percent
dividends;  expected life of 0.5 years; expected volatility of 83.7 percent; and
an exercise price of $0.01 and $8.75. The incremental fair value of the modified
options was $7.38. As a result, the incremental  pro-forma  compensation expense
was $534,000 for the nine months ended December 31, 2003.

                                      F-15

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

      Had compensation cost for the Company's stock option plans been determined
based on the  estimated  fair value at the grant  dates for awards  under  those
plans  consistent  with the method of SFAS No. 123 (as  amended),  the Company's
compensation  cost (net of tax),  net income  and net  income per common  share,
basic and  diluted,  would have been  affected  as  indicated  in the  pro-forma
amounts below (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                                 Period from
                                          Year Ended          Year Ended      March 30, 2003 to
                                      December 31, 2005   December 31, 2004   December 31, 2003
                                       (Twelve Months)     (Twelve Months)      (Nine Months)
                                      ---------------------------------------------------------
<S>                                   <C>                 <C>                 <C>
Net income, as reported:                   $ 3,543            $ 10,248             $ 6,102
   Add: Total stock-based
      employee compensation
      expense included in reported
      net income, net of tax                    --                  --                 823

   Deduct: Total stock-based
      employee compensation
      expense determined under
      fair value method, net of tax             --                  --               1,650

                                      ---------------------------------------------------------
Proforma net income:                       $ 3,543            $ 10,248             $ 5,275
                                      =========================================================

Net income per share:

   Basic - as  reported:                   $  0.66            $   1.97             $  1.23

   Basic - pro forma:                      $  0.66            $   1.97             $  1.06

   Diluted - as  reported:                 $  0.65            $   1.94             $  1.19

   Diluted - pro forma:                    $  0.65            $   1.94             $  1.03
</TABLE>

      There were 264,900 options outstanding as of December 31, 2005. During the
year  ended  December  31,  2005,  there  were  89,300  options  exercised,   no
forfeitures  and no options  were  granted or expired.  Of the  264,900  options
outstanding  at December  31, 2005,  198,200 had an exercise  price of $8.75 and
66,700  had an  exercise  price of $6.71,  with all  options  having a  weighted
average remaining contractual life of 4.84 years. All options outstanding became
fully vested upon the 2003 Change of Control and are currently exercisable.

      There were 354,200 options outstanding as of December 31, 2004. During the
year  ended  December  31,  2004,  there  were  258,300  exercised  options,  no
forfeitures  and no options  were  granted or expired.  Of the  354,200  options
outstanding at December 31, 2004, 272,500 had an exercise price of $8.75, 74,200
had an exercise  price of $6.71 and 7,500 had an exercise  price of $0.01,  with
all options having a weighted average remaining  contractual life of 5.84 years.
All options  outstanding  at December 31, 2004 became fully vested upon the 2003
Change of Control and were currently exercisable at December 31, 2004.

      There were 612,500 options outstanding as of December 31, 2003. During the
nine months  ended  December  31,  2003,  there were 77,800  exercised  options,
forfeitures  of 6,400  and 3,400  options  with an  exercise  price of $8.75 and
$6.71,  respectively,  and no options  were  granted or expired.  Of the 612,500
options  outstanding  at December  31,  2003,  350,400 had an exercise  price of
$8.75,  100,300 had an exercise price of $0.01 and 161,800 had an exercise price
of $6.71, with all options having a weighted average remaining  contractual life
of 7.10 years. All options  outstanding at December 31, 2003 became fully vested
upon the 2003 Change of Control and were  currently  exercisable at December 31,
2003.

      See "New Accounting  Pronouncements"  below for further information on the
potential impact of new accounting guidance on stock based compensation.

                                      F-16

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

Foreign currency translation

      Financial  statements  of  substantially  all  of  the  Company's  foreign
operations are prepared  using the local  currency as the  functional  currency.
Translation  of these foreign  operations to United States  dollars occurs using
the current  exchange  rate on the date of the balance  sheet for balance  sheet
accounts and a weighted  average  exchange rate over the  applicable  accounting
period  for  results  of  foreign  operations.  Translation  gains or losses are
recognized  in  "accumulated  other  comprehensive  income"  as a  component  of
stockholders' equity in the accompanying Consolidated Balance Sheets.

      The Company's subsidiary in Mexico prepares its financial statements using
the United States dollar as the functional currency. Since the Mexico subsidiary
does not have external sales and does not own  significant  amounts of inventory
or fixed assets, the Company has determined that the United States dollar is the
appropriate  functional  currency.  Accordingly,  the translation effects of the
financial  statements  are  included  in the results of  operations.  During the
periods presented herein, such amounts were not significant.

      Foreign currency  transaction  gains are reflected in operations in "other
expense  (income),  net." During the years ended  December 31, 2005 and 2004 and
the nine months ended December 31, 2003,  transaction (losses) gains included in
operations amounted to ($917,000), $677,000 and $2.0 million, respectively.

Fair value of financial instruments

      The consolidated financial statements include financial  instruments,  and
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 and long-term  debt. The carrying amount of the Company's  long-term
debt at December 31, 2005 and December 31, 2004  approximated  fair market value
based on prevailing  market rates.  The Company's  other  financial  instruments
generally  approximate their fair values based on the short-term nature of these
instruments.

Segment Information

      The Company has adopted the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise  and Related  Information."  The Company sells similar
products (airbag cushions,  airbag fabric and technical  fabrics),  uses similar
processes in selling the  products and sells the products to similar  classes of
customers. As a result of these similar economic characteristics and the way the
business is managed,  the  Company has  determined  that it operates as a single
segment for purposes of reporting financial condition and results of operations.
See Note 7 for product revenue and geographic information.

New Accounting Pronouncements

      In November 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards ("SFAS") No. 151, Inventory Costs,
which  clarifies the accounting for abnormal  amounts of idle facility  expense,
freight,  handling  costs,  and wasted  material.  SFAS No. 151 is effective for
inventory  costs incurred during fiscal years beginning after June 15, 2005. The
Company currently expects that the adoption of SFAS No. 151 in 2006 will have no
material affect on its financial position and results of operations.

      In December 2004,  the FASB issued SFAS No. 153,  Exchanges of Nonmonetary
Assets,  which  eliminates  the exception for  nonmonetary  exchanges of similar
productive  assets and  replaces it with a general  exception  for  exchanges of
nonmonetary  assets  that do not have  commercial  substance.  SFAS  No.  153 is
effective for nonmonetary asset exchanges  occurring in fiscal periods beginning
after June 15, 2005. The Company currently expects that the adoption of SFAS No.
153 in 2006 will have no material  affect on its financial  position and results
of operations.

      In December 2004, the FASB issued SFAS No.  123(R),  Share-Based  Payment,
which  establishes  standards for  transactions in which an entity exchanges its
equity  instruments  for goods or  services.  This  standard  requires a  public
entity to measure the cost of  employee  services  received  in exchange  for an
award of equity  instruments  based on the  grant-date  fair value of the award.
This  eliminates  the  exception to account for such awards using the  intrinsic
method

                                      F-17

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

previously  allowable under APB Opinion No. 25. SFAS No. 123(R) is effective for
annual  reporting  periods  beginning  on or after June 15,  2005.  The  Company
currently has no partially  vested options  remaining in any of its stock option
plans and few fully vested options remain in such plans. Therefore,  the Company
currently  expects  that the  adoption  of SFAS No.  123(R) in 2006 will have no
material affect on its financial  position and results of operations with regard
to its existing  stock option plans.  Other than the 2001 Stock Option Plan, the
Company's   board  of  directors  has  not  developed  a  new,   alternative  or
supplemental stock option plan at this time. Should future stock option plans be
created,  the award of options  from such future  stock  option plans may have a
material affect on the Company's financial position and results of operations.

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

<TABLE>
<CAPTION>
                                                                              December 31, 2005     December 31, 2004
                                                                              -----------------------------------------
<S>                                                                           <C>                   <C>
Accounts receivable:
   Trade receivables, net of allowances of $688 and $892 at
      December 31, 2005 and December 31, 2004, respectively                           $ 34,266               $ 37,547
   Other                                                                                 1,621                  1,725
                                                                              -----------------------------------------
   Total                                                                              $ 35,887               $ 39,272
                                                                              =========================================
Inventories:
   Raw materials                                                                      $  8,357               $  7,703
   Work-in-process                                                                       6,523                  7,523
   Finished goods                                                                       10,677                 11,656
                                                                              -----------------------------------------
   Total                                                                              $ 25,557               $ 26,882
                                                                              =========================================
Property, plant and equipment:
   Land and buildings                                                                 $ 19,704               $ 20,479
   Machinery and equipment                                                              65,786                 67,238
   Furniture and fixtures                                                                  974                  1,167
   Construction in process                                                               2,222                  2,277
                                                                              -----------------------------------------
                                                                                        88,686                 91,161
   Less - accumulated depreciation                                                     (44,858)               (42,712)
                                                                              -----------------------------------------
   Total                                                                              $ 43,828               $ 48,449
                                                                              =========================================
</TABLE>

Note 4 Long-Term Debt (in thousands)

<TABLE>
<CAPTION>
                                                                                  December 31, 2005     December 31, 2004
                                                                                 -----------------------------------------
<S>                                                                              <C>                    <C>
Wachovia revolving credit facility due on October 8, 2006, bearing a variable
   interest rate (7.25% at December 31, 2005)                                         $  2,251               $    105

Wachovia Term A loan due on October 8, 2006, bearing a variable interest
   rate (7.25% at December 31, 2005)                                                     1,514                  2,048

KeyCorp equipment note, paid August 2005                                                    --                  1,028
HVB Bank Czech Republic mortgage note bearing a variable interest rate
   (4.03% at December 31, 2005) due March, 2007                                          1,296                  2,640

GE Capital equipment note payable due December 2006                                        193                     --

Capital equipment notes payable, with various interest rates ranging
   from 4.80% to 6.94%, maturing at various dates through March 2007                     1,231                  1,171
                                                                                 -----------------------------------------
Total debt                                                                               6,485                  6,992
Less - current portion of long-term debt                                                (5,675)                (3,263)
                                                                                 -----------------------------------------
Total long-term portion of debt                                                       $    810               $  3,729
                                                                                 =========================================
</TABLE>

                                      F-18

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

Credit Facilities

      The Company has a credit facility with Wachovia Bank, National Association
("Wachovia"), successor by merger to Congress Financial Corporatio n (Southern),
that is composed of an aggregate  $35.0 million  revolving  credit facility (the
"Wachovia Revolver") expiring October 8, 2006, and two term loans.  Accordingly,
the Company has classified the amount outstanding under the Wachovia  Facilities
in current  portion of  long-term  debt on the  Company's  Consolidated  Balance
Sheets at December 31, 2005. Under the Wachovia Revolver, the Company may borrow
up to  the  lesser  of  (a)  $35.0  million  or (b)  85%  of  eligible  accounts
receivable,  plus 60% of  eligible  finished  goods,  plus 50% of  eligible  raw
materials.  The amount  outstanding  under the Wachovia Revolver at December 31,
2005 was $2.3 million. The Wachovia Revolver also includes a $5.0 million letter
of credit sub-facility, of which $521,000 was utilized at December 31, 2005.

      In addition,  the Company has a term facility with Wachovia (the "Wachovia
Term A loan") under which $1.5 million was  outstanding as of Decembe r 31, 2005
and was  included  in  current  portion  of  long-term  debt on the  Company'  s
consolidated  balance  sheets.  The  Wachovia  Term A loan is  payable  in equal
monthly installments of approximately $45,000, with the unpaid principal  amount
due on October 8, 2006.  Accordingly,  the  Company  has  classified  the entire
amount outstanding under the Wachovia Facilities in current portion of long-term
debt  on the  Company's  Consolidated  Balance  Sheets  at  December  31,  2005.
Additional  amounts are not available  for  borrowing  under the Wachovia Term A
loan.  The Company also has a second term loan (the  "Wachovia Term B loan" and,
collectively  with the  Wachovia  Revolver  and the  Wachovia  Term A loan,  the
"Wachovia  Facilities")  which is  undrawn  and under  which  $4.5  million  was
available  as of  December  31,  2005.  At  December  31,  2005,  the  Company's
availability for additional  borrowings  (based on the maximum  allowable limit)
under the Wachovia Revolver and the Wachovia Term B loan was approximately $35.2
million.

      The interest  rate on the Wachovia  Revolver and Wachovia Term A loan (the
"Prime Rate loans") is variable, depending on the amount of the Company's Excess
Availability (as defined in the Wachovia  Facilities) at any particular time and
the ratio of the Company's EBITDA, less certain capital expenditures made by the
Company,  to certain fixed  charges of the Company (the "Fixed  Charge  Coverage
Ratio"). The Company may make borrowings based on the prime rate as described in
the Wachovia Facilities (the "Prime Rate") or the LIBOR rate as described in the
Wachovia Facilities, in each case with an applicable margin applied to the rate.
At December 31, 2005,  the margin on Prime Rate loans was 0.0% and the margin on
LIBOR rate loans was 1.75%. The Wachovia Term B loan bears interest at the Prime
Rate plus 3%. The Company is required to pay a monthly  unused line fee of 0.25%
per annum on the unutilized  portion of the Wachovia  Revolver and a monthly fee
equal to 1.75% per annum of the amount of any outstanding  letters of credit. At
December 31, 2005,  the interest  rate on the Wachovia  Revolver and Term A loan
was 7.25% per annum.

      Under the  Wachovia  Revolver  and  Wachovia  Term A loan,  the Company is
subject to a covenant that requires it to maintain a certain tangible net worth.
If the Company has borrowings  outstanding under the Wachovia Term B loan, it is
subject to  additional  financial  covenants  that require the  Company:  (i) to
maintain EBITDA of no less than certain  specified  amounts,  (ii) to maintain a
Fixed  Charge  Coverage  Ratio  of no less  than a  specified  amount,  (iii) to
maintain a ratio of certain  indebtedness to EBITDA not in excess of a specified
amount,  and  (iv) not to make  capital  expenditures  in  excess  of  specified
amounts. In addition, the Company would be required to repay the Wachovia Term B
loan to the extent of certain excess cash flow.

      The Wachovia Facilities also impose limitations upon the Company's ability
to,  among  other  things,  incur  indebtedness   (including  capitalized  lease
arrangements); become or remain liable with respect to any guaranty; make loans;
acquire investments;  declare or make dividends or other  distributions;  merge,
consolidate,  liquidate or dispose of assets or indebtedness; incur liens; issue
capital stock; or change its business.  At December 31, 2005, the Company was in
compliance with all financial  covenants.  At December 31, 2005, the Company was
also in compliance with all  non-financial  covenants.  (The Company  obtained a
waiver of  non-compliance  from Wachovia in 2003 for not  dissolving an inactive
subsidiary,  which waiver  remains in effect.)  Substantially  all assets of the
Company  are  pledged  as  collateral  for the  borrowings  under  the  Wachovia
Facilities.

      The Company  intends to  renegotiate  or replace the  Wachovia  Facilities
prior to their expiration and maturation in October 2006. Although no assurances
can be provided in this regard, the Company's management currently believes that

                                      F-19

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

it will be able to  renegotiate  or  replace  these  facilities  prior  to their
expiration and maturity with amended or new facilities on comparable  terms. The
inability to secure such financing could adversely affect the Company's  ability
to procure  inventory  and fund  other  working  capital  needs and could have a
material  adverse  effect on the  Company's  financial  position  and results of
operations.


Other Long-term Obligations

      On March 28, 2002, the Company's  Czech  Republic  subsidiary and HVB Bank
Czech Republic, successor to Bank Austria, entered into an amendment to its $7.5
million  mortgage loan dated June 4, 1997. This amendment  extended the due date
of the mortgage loan for five years to expire on March 30, 2007,  established an
interest  rate of 1.7% over EURIBOR  (EURIBOR  was 2.3% at December  31,  2005),
requires monthly payments of interest and principal of approximately $89,000 and
is secured by the real estate  assets of the  Company's  subsidiary in the Czech
Republic.  The Company has  guaranteed  the  repayment  of up to $500,000 of the
obligations of this  subsidiary with respect to this loan. At December 31, 2005,
approximately $1.3 million was outstanding under the HVB loan.

      On July 10,  1998,  the Company  entered  into a $10.0  million  financing
agreement  with  KeyCorp  Leasing,  a division of Key  Corporate  Capital,  Inc.
("KeyCorp").  The  KeyCorp  financing  agreement  had a  seven-year  term,  bore
interest  at  a  rate  of  1.25%  over  LIBOR,   required  monthly  payments  of
approximately  $150,000  and was  secured  by certain  equipment  located at the
Company's  Greenville,  South  Carolina  facility.  The Company paid the KeyCorp
financing agreement in full in August 2005.

      In  December  2005,  the  Company  entered  into a  $193,000  note with GE
Capital.  At December 31, 2005, the outstanding balance of $193,000 was included
in current  portion of  long-term  debt on the  Company's  Consolidated  Balance
Sheets.  The GE Capital  financing  agreement is due in December 2006,  bears an
interest rate of 8.0% and is secured by production equipment.

      Future annual  minimum  principal  payments of long-term  debt and capital
lease obligations at December 31, 2005 are due in the following fiscal years (in
thousands):

                        2006                 $ 5,675
                        2007                     669
                        2008                     141
                        2009                      --
                        2010                      --
                        Thereafter                --
                                             -------
                                             $ 6,485
                                             =======

Guarantees

      FASB Interpretation No. 45 provides guidance on the disclosures to be made
by a guarantor about its obligations under certain guarantees that it has issued
and specific disclosures related to product warranties.  As of December 31, 2005
and 2004, the Company and various  consolidated  subsidiaries of the Company are
borrowers under the Wachovia Facilities (as defined above) and a note payable to
a bank in the Czech Republic  (together,  the "Facilities").  The Facilities are
guaranteed by either the Company and/or various consolidated subsidiaries of the
Company in the event that the  borrower(s)  default under the  provisions of the
Facilities.  The  guarantees  are in  effect  for the  duration  of the  related
Facilities.   The  Company  does  not  provide  product  warranties  within  the
disclosure provisions of Interpretation No. 45.

                                      F-20

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

Note 5 Income Taxes

      The provision for income taxes from continuing  operations is comprised of
      the following (in thousands):

                                                                 Period From
                       Year Ended           Year Ended        March 30, 2003 to
                    December 31, 2005    December 31, 2004    December 31, 2003
                     (Twelve Months)      (Twelve Months)       (Nine Months)
                   ------------------------------------------------------------
Current taxes:
   Federal              $  (504)             $ 1,425               $ 2,392
   State                     84                  223                   360
   Foreign                1,468                3,798                 1,987

Deferred taxes:
   Federal                 (198)                  70                  (885)
   State                    (31)                  11                  (135)
   Foreign                   88                  244                    89
                   ------------------------------------------------------------
                        $   907              $ 5,771               $ 3,808
                   ============================================================

      Income before income tax expense  attributable  to domestic  operations is
approximately $1.3 million, $6.8 million and $4.6 million during the years ended
December  31,  2005 and  2004  and the nine  months  ended  December  31,  2003,
respectively.   Income  before  income  tax  expense   attributable  to  foreign
operations is approximately  $1.8 million,  $9.3 million and $5.3 million during
the years ended  December 31, 2005 and 2004 and the nine months  ended  December
31, 2003, respectively.

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

<TABLE>
<CAPTION>
                                                                                                  Period From
                                                           Year Ended          Year Ended      March 30, 2003 to
                                                       December 31, 2005   December 31, 2004   December 31, 2003
                                                        (Twelve Months)     (Twelve Months)      (Nine Months)
                                                       ---------------------------------------------------------
<S>                                                    <C>                 <C>                 <C>
Expected taxes at federal statutory rate                      34%                 34%                34%
State income taxes, net of federal benefits                    1                   1                  2
Foreign earnings taxed at different rates                     31                   4                  3
Deductible foreign taxes                                      (5)                 (3)                --
Change in valuation allowance on deferred tax assets         (26)                  1                  1
Recovery of non-taxable bankruptcy expense                    --                  --                  1
Other, net                                                    (6)                 (1)                (2)
                                                       ---------------------------------------------------------
                                                              29%                 36%                39%
                                                       =========================================================
</TABLE>

      For the year ended December 31, 2005,  the income tax rate  reconciliation
shows foreign earnings taxed at a rate  differential of 31% due primarily to the
Company  not  recognizing  any  benefit  for the  losses  incurred  at its joint
ventures in China and South Africa during its pre-production activities, as well
as the recognition of income tax for statutory  issues related to prior years in
the United  Kingdom and the Czech  Republic  subsidiaries.  Also,  the change in
valuation  allowance on deferred tax assets is  attributable to the release of a
valuation allowance in connection with the utilization of a capital loss carried
back against an identified  capital gain  resulting  from the sale of intangible
assets associated with the sale of a former subsidiary in 2001.

                                      F-21

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

      The following summarizes the deferred tax assets (liabilities)  recognized
in the accompanying Consolidated Balance Sheets (in thousands):

<TABLE>
<CAPTION>
                                                                         December 31, 2005    December 31, 2004
                                                                         --------------------------------------
<S>                                                                      <C>                  <C>
Deferred tax assets (liabilities):
   Accrued insurance                                                         $    244             $   204
   Other accrued liabilities                                                      551                 556
   Inventory                                                                      865                 523
   Receivables                                                                    219                 327
   Property, plant and equipment                                               (5,100)             (4,703)
   Deferred compensation                                                          943               1,371
   Environmental reserves                                                         103                 103
   Stock options                                                                   31                  31
   Capital loss carryforward                                                       96                 795
   Foreign deferred tax assets - other                                          1,096                 451

                                                                         --------------------------------------
      Net deferred tax liabilities before valuation allowances                   (952)               (342)
   Valuation allowance on capital loss and  deferred tax assets                  (689)             (1,440)
                                                                         --------------------------------------
      Net deferred tax liabilities                                           $ (1,641)            $(1,782)
                                                                         ======================================

Recognized as follows in the accompanying consolidated balance sheets:
   Current deferred tax assets                                               $  1,879             $ 1,609
   Long-term deferred tax assets                                                  176                 244
   Long-term deferred tax liabilities                                          (3,696)             (3,635)
                                                                         --------------------------------------
      Net deferred tax liabilities                                           $ (1,641)            $(1,782)
                                                                         ======================================
</TABLE>

      Long-term deferred tax assets are included in "other assets" in the
accompanying consolidated balance sheets.

      The net  valuation  allowance  on  capital  loss and  deferred  tax assets
decreased by  approximately  $751,000  due  primarily  to the  utilization  of a
capital loss carried  back  against a capital  gain  resulting  from the sale of
intangible assets associated with the sale of a former subsidiary in 2001.

      No taxes have been  provided  relating  to the  possible  distribution  of
approximately   $28.1  million  of  undistributed   earnings  considered  to  be
permanently reinvested in foreign operations.

      Significant  judgment is required in  evaluating  the  Company's  federal,
state and foreign tax positions and in the  determination  of its tax provision.
Despite  management's  belief that the Company's tax return  positions are fully
supportable,  the Company may establish,  and has established,  reserves when it
believes that certain tax  positions are likely to be challenged  and it may not
fully  prevail in  overcoming  these  challenges.  The Company may adjust  these
reserves as relevant  circumstances  evolve,  such as guidance from the relevant
tax  authority,  its tax advisors or  resolution  of issues.  The  Company's tax
expense  includes the impact of reserve  provisions and changes to reserves that
it considers  appropriate.  The Company  expects to undergo  examination  by tax
authorities  of certain of its foreign  income tax returns in mid-2006 and it is
possible that the  examination  could result in assessment  and payment of taxes
related to these  positions  during 2006 or later.  Therefore,  the reserves for
these  positions  are  classified  as current in the  accompanying  Consolidated
Balance Sheet at December 31, 2005.

Note 6 Commitments and Contingencies

Legal proceedings

      The Company emerged from  bankruptcy  proceedings on October 11, 2000, and
an order  entering  the final decree and closing the Chapter 11 cases was signed
on November 21, 2003. The final decree was subject to a "Limited  Reservation of
Jurisdiction"  for a  "Reporting/Fee  Dispute" with the U.S. Trustee Office over
administrative  matters associated with the cases.  During the fourth quarter of
2005,  the  Company  resolved  this  matter  with the U.S.  Trustee  Office  for
$158,000, an amount less than previously reserved by the Company.

                                      F-22

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

      By letter  dated  November  2, 2004,  a division  employee,  at the time a
controller for the Company's North American  Automotive Group, filed a complaint
with the U.S. Department of Labor,  Occupational Safety & Health  Administration
("OSHA"),   pursuant  to  Section  806  of  the  Corporate  and  Criminal  Fraud
Accountability  Act of 2002, Title VIII of the  Sarbanes-Oxley  Act of 2002 (the
"Act"), alleging that a change in his duties in September 2004 resulted from his
allegations  of  improprieties  in  the  Company's   operations  in  Mexico  and
California. Neither numerous internal investigations conducted by various levels
of the Company's management nor the ensuing external investigation  conducted by
a forensic  accounting firm engaged by the Company's  Audit Committee  following
notification  by  management  of  the  issues  raised  substantiated  any of the
allegations.  Due  to  circumstances  unrelated  to  the  investigation  or  the
complaint,  the Company  terminated the employee on December 15, 2004. By letter
dated  December 15, 2004,  the former  employee  amended his complaint to allege
that his  termination  was also in retaliation  for his  allegations.  By letter
dated  February 14, 2005, the Company was notified by OSHA that it had completed
its  investigation  and found that there is no reasonable  cause to believe that
the Company  violated the Act. On November 3, 2005, the former  employee filed a
complaint  against the Company and its  subsidiaries  Safety  Components  Fabric
Technologies,  Inc.,  and  Automotive  Safety  Components  International,  Inc.,
("ASCI") in U.S.  District Court,  District of South Carolina (the  "Complaint")
alleging  five causes of action:  violation  of the Act,  wrongful  discharge in
violation of public policy,  breach of contract,  breach of contract accompanied
by a  fraudulent  act and  promissory  estoppel.  In the  Complaint,  the former
employee seeks compensatory and punitive damages as well as costs and attorney's
fees. The Company believes the former employee's claims are without merit and is
vigorously  defending  the case.  ASCI has asserted a  counterclaim  for damages
related to  expenses  incurred  in  investigating  unreasonable  allegations  of
financial irregularities made by the plaintiff.

      The Company,  from time to time,  becomes party to legal  proceedings  and
administrative  actions, which are of an ordinary or routine nature,  incidental
to the  operations  of the  Company.  Although  it is  difficult  to predict the
outcome of any legal  proceeding,  in the opinion of the  Company's  management,
such proceedings and actions should not, individually or in the aggregate,  have
a material adverse effect on the Company's  financial  condition,  operations or
cash flow.

Fee Dispute

      Wachovia  Capital  Markets,  LLC  has  claimed  the  Company  owes  it  an
investment  banking fee of  approximately  $565,000 in connection with the stock
purchase  transaction  described  in "2005  Change  of  Control"  in Note 1. The
Company is vigorously disputing the claim; nevertheless, in accordance with SFAS
5, "Accounting for  Contingencies",  the Company has elected to record a reserve
of  $565,000  in  current  liabilities  on its  Consolidated  Balance  Sheets at
December  31,  2005,  and  to  recognize  an  expense  of  equal  amount  in its
Consolidated Statements of Income for the year ended December 31, 2005.

Leases

      The Company has non-cancelable  leases for equipment and office space that
expire at various dates through 2010. The net present value of the capital lease
obligations is included as part of the Company's  total long-term debt described
above in Note 4.  Certain of the lease  payments are subject to  adjustment  for
inflation.  The Company incurred rent expense of $1.4 million,  $1.7 million and
$1.3 million for the years ended  December 31, 2005 and 2004 and the nine months
ended December 31, 2003, respectively.

                                      F-23

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

      Future annual minimum lease payments for all  non-cancelable  leases as of
December 31, 2005 are as follows (in thousands):

                                                          Capital     Operating
                                                        ------------------------
          2006                                              $   767      $   990
          2007                                                  420          889
          2008                                                  145          166
          2009                                                   --           14
          2010                                                   --            7
          Thereafter                                             --           --
                                                        ------------------------
          Total minimum lease payments                        1,332      $ 2,066
                                                                      ==========
          Less: amount representing interest                   (101)
                                                        -----------
          Net present value of minimum lease payments       $ 1,231
                                                        ===========

Joint ventures

      As of December 31, 2005,  the Company has  commitments  for funding of the
South Africa Joint Venture  through the  combination  of machinery and equipment
contributions  and related in-kind services of approximately  $940,000 and, with
respect  to the  China  joint  venture  agreement,  the  intention,  but  not an
obligation,  for funding its share of this China joint venture through  possible
loans or capital contributions of up to $5.1 million.

Environmental issues

      An undiscounted  reserve of $277,000 has been included in "other long-term
liabilities"  on the  accompanying  Consolidated  Balance  Sheets for  estimated
future   environmental   expenditures  related  to  the  Company's  facility  in
Greenville,  South Carolina (the "Greenville  facility") for conditions existing
prior to the Company's  ownership of the facility.  Such reserve was established
at the time the Company acquired the facility,  and the amount was determined by
reference  to the  results  of a Phase  II  study  performed  at the  Greenville
facility.  In addition,  the Greenville  facility has been identified along with
numerous  other  parties  as a  Potentially  Responsible  Party  ("PRP")  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.

      The U.S.  Environmental  Protection  Agency (the "EPA") has  notified  the
Company that it believes Valentec Wells, LLC ("Valentec"), as a successor to one
or  more  other  companies,  is one of the 73  largest  Potentially  Responsible
Parties  ("PRPs")  with  responsibility  for the RRG Clayton  Chemical Site (the
"Site") in  Sauget,  Illinois  under the  Comprehensive  Environmental  Response
Compensation and Liability Act ("CERCLA"). Valentec is an inactive subsidiary of
the Company.  Valentec has entered into a Participation  Agreement with a number
of other  companies that also have been named PRPs concerning the performance of
limited response  activities at the Site under an EPA Administrative  Settlement
Agreement  and  Order  on  Consent  for  Removal  Action  (the   "Administrative
Settlement").  Along with these other companies,  the Company has become a party
to the  Administrative  Settlement  and  estimated  costs  of  this  matter  are
currently considered de minimis.  There can be no assurance,  however,  that the
Company's entry into the Administrative  Settlement will limit any costs imposed
on the Company as proposed in the  Administrative  Settlement because compliance
with the Administrative Settlement does not release the Company from all further
liability, and if costs were greater than the Company's estimates, they could be
material to the Company; however the Company does not believe that under current
circumstances, such costs could be material to the Company.

      Although  no  assurances  can be given in this  regard,  in the opinion of
management,  no material  expenditures  beyond those  accrued are expected to be
required for the Company's  environmental control efforts and the final outcomes
of these  matters  are not  expected  to have a material  adverse  effect on the
Company's  financial  position  or results  of future  operations.  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 independent consultants on environmental matters.

                                      F-24

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

Note 7 Product and Geographic Information

      The Company  operates in a single segment as a manufacturer  of automotive
airbag fabric and cushions and technical fabrics with operations  principally in
North  America,  Europe and China.  The Company  attributes  its  revenues  from
external  customers  based on the location of its sale  contracts and long-lived
assets to a particular  country  based on the location of each of the  Company's
production  facilities.  Summarized  financial  information  by product type and
geographic area is as follows:

Revenues from External Customers:

<TABLE>
<CAPTION>
                                                                          Period From
                                  Year ended           Year ended      March 30, 2003 to
                               December 31, 2005   December 31, 2004   December 31, 2003
                                (Twelve Months)     (Twelve Months)      (Nine Months)
                              ----------------------------------------------------------
<S>                           <C>                  <C>                 <C>
United States
   Airbag Cushions                 $ 56,798            $ 59,442            $ 47,899
   Airbag Fabric                     23,138              26,221              25,321
   Technical Fabric                  25,764              28,552              18,669

Germany
   Airbag Cushions                   84,539              96,544              64,994

United Kingdom
   Airbag Cushions                   27,781              35,415              25,910

Czech Republic
   Airbag Cushions                    1,653               1,709                 873

China
   Airbag Cushions                      441                  --                  --
                              ----------------------------------------------------------

All Foreign Countries
   Airbag Cushions                  114,414             133,668              91,777
                              ----------------------------------------------------------

Total Net Sales                    $220,114            $247,883            $183,666
                              ==========================================================
</TABLE>

Long Lived Assets:

<TABLE>
<CAPTION>
                              December 31, 2005    December 31, 2004   December 31, 2003
                              ----------------------------------------------------------
<S>                           <C>                  <C>                 <C>
United States                      $ 16,803            $ 17,069            $ 16,141

Mexico                                5,217               4,961               4,943

Germany                               9,776              12,668              13,621

Czech Republic                       11,004              14,357              15,654

United Kingdom                           --                  --               1,435

South Africa                            531                 525                  --

China                                 1,786                  --                  --
                              ----------------------------------------------------------

All Foreign Countries                28,314              32,511              35,653
                              ----------------------------------------------------------

Total Long-lived Assets            $ 45,117            $ 49,580            $ 51,794
                              ==========================================================
</TABLE>

      Long-lived assets include property, plant and equipment, intangible assets
and certain other specified assets.

                                      F-25

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

Note 8 Employee Benefit Plans

      The  Company  has a defined  contribution  plan (the  "401(k)  Plan")  for
eligible employees which provides for discretionary employer contributions.  The
Company contributed and expensed approximately  $231,000,  $224,000 and $171,000
during the years ended December 31, 2005,  December 31, 2004 and the nine months
ended December 31, 2003, respectively, to the 401(k) Plan.

      The  Company  established  the  Safety  Components   International,   Inc.
Executive  Deferral Program (the "Deferral  Program") for the benefit of certain
key executive employees. The Deferral Program provides for participants to defer
any  portion of their cash  compensation  until some future  point in time.  The
participants' contributions to the Deferral Program are immediately 100% vested.
Under  the  provisions  of the  Deferral  Program,  a trust was  established  to
maintain  the  amounts   deferred  by  the   participants.   The  trust  invests
participants'  contributions in securities  selected by the participants  from a
list of approved types of securities. Seventy-five percent of the purchase price
of the  securities  was paid with amounts  equal to  participant  deferrals  and
twenty-five  percent was paid with  additional  Company funds;  however,  if the
participant  elects to receive a distribution from his or her plan account,  the
Company's  contribution to the purchase price must first be repaid.  The Company
does not pay interest on participants'  accounts, so participants do not receive
additional  compensation  from the Company in the form of interest paid at above
market rates.  The Company  amended the Deferral  Program in 2005 to comply with
new regulations promulgated in connection with the American Jobs Creation Act of
2004.  This  amendment  had no impact on the  Deferral  Program's  assets or the
participants'  contributions.  The assets of the trust are  included  in "assets
held  in  deferred  compensation  plan"  and  the  related  amounts  due  to the
participants  are  included  in  "deferred  compensation"  in  the  accompanying
Consolidated  Balance Sheets.  The amounts  included in "assets held in deferred
compensation  plan" are $2.9 million and $4.4 million,  and the amounts included
in  "deferred  compensation"  were $2.5 million and $3.7 million at December 31,
2005 and 2004, respectively.

Note 9 Equity Securities

Preferred Stock

      The Company has  5,000,000  shares of preferred  stock  authorized  and no
shares issued at December 31, 2005 and 2004. The Company's board of directors is
authorized  to provide for the  issuance of the  preferred  stock in the future,
with voting  powers,  dividend rate,  redemption  terms,  repayment,  conversion
terms,  restrictions,  rights and such other  preferences and  qualifications as
shall be stated in the resolutions  adopted by the board of directors at time of
issuance.

Common Stock

      The Company has  5,425,469  and  5,336,100  shares of common stock issued,
5,385,147 and 5,295,778 shares of common stock outstanding, and 40,322 shares of
treasury stock at December 31, 2005 and 2004, respectively.

                                      F-26

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

Note 10 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>
                                                                                           Period From
                                                    Year ended          Year ended      March 30, 2003 to
                                                December 31, 2005   December 31, 2004   December 31, 2003
                                                 (Twelve Months)     (Twelve Months)      (Nine Months)
                                                ---------------------------------------------------------
<S>                                             <C>                 <C>                 <C>
Net income                                           $ 3,543            $ 10,248             $ 6,102
                                                     =======            ========             =======

Weighted average number of common shares used
  in basic earnings per share                          5,370               5,206               4,973
Effect of dilutive securities:
  Stock options                                           77                  88                 146
                                                     -------            --------             -------
Weighted average number of common shares and
  dilutive potential common stock used in
  diluted earnings per share                           5,447               5,294               5,119
                                                     =======            ========             =======
</TABLE>

      At December 31, 2005 options on 264,900  shares of common were  considered
dilutive and therefore  were included in computing  diluted  earnings per share.
These constituted all common stock equivalents at year-end.

Note 11 Derivatives and Hedging

      The Company  monitors its risk  associated  with the volatility of certain
foreign currencies against its functional currency, the U.S. dollar. The Company
uses certain derivative  financial  instruments to reduce exposure to volatility
of foreign  currencies.  The Company has formally  documented all  relationships
between  hedging  instruments  and  hedged  items,  as well  as risk  management
objectives and strategies for undertaking various hedge transactions. Derivative
financial instruments are not entered into for speculative purposes.

      Certain operating expenses at the Company's Mexican facilities are paid in
Mexican pesos. To reduce exposure to fluctuations in the U.S. dollar and Mexican
peso exchange rates, the Company  periodically  enters into forward contracts to
buy Mexican pesos with U.S. Dollars for periods and amounts  consistent with the
related,  underlying forecasted cash outflows. These contracts are designated as
hedges at inception and are monitored for  effectiveness on a routine basis. The
Company recorded credits to net earnings of approximately $343,000,  $80,000 and
$47,000 for the twelve months,  twelve months and nine months ended December 31,
2005, 2004 and 2003,  respectively on these forward  contracts.  At December 31,
2005 and 2004, the Company had no such outstanding forward exchange contracts.

      Certain intercompany sales at the Company's Czech facility are denominated
and settled in Euros.  To reduce  exposure to  fluctuation in the Euro and Czech
Koruna exchange rates, the Company periodically enters into forward contracts to
buy Czech  Korunas  with  Euros for  periods  and  amounts  consistent  with the
related,  underlying  forecasted cash inflows  associated with the  intercompany
sales.  These  contracts are designated as hedges at inception and are monitored
for  effectiveness  on a routine  basis.  The  Company  recorded a credit to net
earnings of approximately  $85,000 and a charge to net earnings of approximately
$141,000 for the twelve months ended December 31, 2005 and 2004, respectively on
these  forward  contracts.  For the nine months ended  December  31,  2003,  the
Company recorded a charge to earnings of  approximately  $47,000 on such forward
contracts.  At December 31, 2005 and 2004,  the Company had no such  outstanding
forward exchange contracts.

Note 12 Related Party Transactions

      On March 19, 2004,  Zapata and the Company  entered into a Tax Sharing and
Indemnity  Agreement to define their respective rights and obligations  relating
to federal, state and other taxes for taxable periods attributable to the filing
of   consolidated  or  combined  income  tax  returns  as  part  of  the  Zapata
consolidated federal income tax group. Pursuant to the Tax Sharing and Indemnity
Agreement,  the Company was  required to pay Zapata its share of federal  income
taxes, if

                                      F-27

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

any, during the periods of consolidation. In addition, each party is required to
reimburse the other party for its use of either party's tax attributes.  Similar
provisions  apply under the Tax Sharing and Indemnity  Agreement to other taxes,
such  as  state  and  local  income   taxes.   Accordingly,   the  Company  paid
approximately $137,000 and $675,000 to Zapata in 2005 and 2004 for taxes related
to 2004 and 2003,  respectively.  Due to exercises of options to purchase common
stock of the Company, on or about March 31, 2004, the number of shares of common
stock outstanding increased and, as a result,  Zapata's ownership was reduced to
less than 80%. As a result of Zapata's  ownership of the  company's  outstanding
common stock falling below 80%,  Zapata could not  consolidate  the Company into
Zapata's  consolidated  income tax returns for periods  subsequent  to the first
quarter of 2004. Under the Tax Sharing and Indemnity Agreement,  the Company was
consolidated  into Zapata's tax filing group for the fourth calendar  quarter of
2003 and the first calendar quarter of 2004.

      On December 2, 2005, under the provisions of the 2005 Change of Control as
described  in Note 1, Zapata made a capital  contribution  to the Company in the
aggregate  amount of $1.0 million for the purpose of the Company  paying bonuses
to the Company's executive officers and other key employees for their efforts in
connection with the attempts to sell the Company and to provide  management with
an  appropriate  incentive to remain with the Company during the pendency of the
stock purchase transaction.

Note 13 Transitional Period Operating Results

      The following  table  compares the  statement of  operations  data for the
twelve  months  ended  December  31, 2005 and 2004 with the twelve  months ended
December 31, 2003 (unaudited) for information purposes only (in thousands):

<TABLE>
<CAPTION>
                                                          Twelve Months Ended   Twelve Months Ended   Twelve Months Ended
                                                           December 31, 2005     December 31, 2004     December 31, 2003
                                                                                                         (Unaudited)
                                                          ---------------------------------------------------------------
<S>                                                       <C>                   <C>                   <C>
Net sales                                                      $ 220,114             $ 247,883             $ 247,142
Gross profit                                                      23,421                35,716                34,750
Income from operations                                             4,311                15,459                13,825
Provision for income taxes                                           907                 5,771                 5,472
Minority interest in loss of consolidated subsidiaries              (605)                  (39)                   --
Equity in earnings from unconsolidated affiliate                    (754)                   --                    --
Income from continuing operations                                  3,534                10,248                 8,862
Loss on disposition of discontinued operations                        --                    --                  (660)
                                                          ---------------------------------------------------------------
Net income                                                     $   3,534             $  10,248             $   8,202
                                                          ===============================================================

Net income per common share, basic:
   Income from continuing operations                           $    0.66             $    1.97             $    1.78
   Loss on disposition of discontinued operations                     --                    --                 (0.13)
                                                          ---------------------------------------------------------------
Net income per common share, basic                             $    0.66             $    1.97             $    1.65
                                                          ===============================================================

Net income per common share, diluted:
   Income from continuing operations                           $    0.65             $    1.94             $    1.78
   Loss on disposition of discontinued operations                     --                    --                 (0.13)
                                                          ---------------------------------------------------------------
Net income per common share, diluted                           $    0.65             $    1.94             $    1.65
                                                          ===============================================================

Weighted average number of shares outstanding, basic               5,370                 5,206                 4,960

Weighted average number of shares outstanding, diluted             5,447                 5,294                 4,960
</TABLE>

                                      F-28

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

Note 14 Unaudited Quarterly Results

      Unaudited quarterly financial information for the years ended December 31,
2005 and 2004 are set forth below (in thousands, except per share data).

<TABLE>
<CAPTION>
                                                           Quarter Ended
                                        ---------------------------------------------------
                                        March 31,   June 30,   September 30,   December 31,
                                           2005       2005         2005            2005*
                                        ---------------------------------------------------
<S>                                     <C>         <C>        <C>             <C>
Year Ended December 31, 2005
Net sales                               $  58,612   $ 59,008     $ 50,562       $  51,932
Gross profit                                8,138      7,473        3,940           3,870
Income (loss) from operations               3,767      2,950          298          (2,704)
Net income (loss)                           2,190      1,894        1,546          (2,087)
Net income (loss) per share, basic           0.41       0.35         0.29           (0.39)
Net income (loss) per share, diluted         0.40       0.35         0.28           (0.39)
</TABLE>

<TABLE>
<CAPTION>
                                                           Quarter Ended
                                        ---------------------------------------------------
                                        March 31,   June 30,   September 30,   December 31,
                                           2004       2004         2004            2004
                                        ---------------------------------------------------
<S>                                     <C>         <C>        <C>             <C>
Year Ended December 31, 2004
Net sales                               $  69,231   $ 65,858     $ 56,172       $  56,622
Gross profit                               11,203     10,524        8,473           6,546
Income from operations                      5,932      5,605        2,460           1,462
Net income                                  3,123      3,843        1,922           1,360
Net income per share, basic                  0.62       0.73         0.37            0.26
Net income per share, diluted                0.60       0.72         0.36            0.26
</TABLE>

* - See Note 1 - "2005  Change of Control"  for impact of the Zapata sale and WL
Ross Recovery Funds purchase for quarter ended December 31, 2005.

                                      F-29

<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

         Schedule II - Valuation and Qualifying Accounts (in thousands)

<TABLE>
<CAPTION>
                                                                     Additions
                                                                     Charged to
                                                        Beginning    Costs and    Deductions/    Ending
                                                         Balance      Expenses     Write-Offs    Balance
                                                        -------------------------------------------------
<S>                                                     <C>         <C>           <C>           <C>
For the period from March 30, 2003 to
   December 31, 2003:
   Allowance for doubtful accounts                      $     416   $   622        $   (593)    $    445
   Valuation reserves on inventory                          1,076       600(a)           --        1,676
   Valuation allowance for deferred tax assets              2,315        92          (1,062)       1,345
                                                        -------------------------------------------------
                                                        $   3,807   $ 1,314        $ (1,655)    $  3,466
                                                        =================================================

For the year ended December 31, 2004:
   Allowance for doubtful accounts                      $     445   $   469        $    (22)    $    892
   Valuation reserves on inventory                          1,676      (175)(a)          --        1,501
   Valuation allowance for deferred tax assets              1,345       645            (550)       1,440
                                                        -------------------------------------------------
                                                        $   3,466   $   939        $   (572)    $  3,833
                                                        =================================================

For the year ended December 31, 2005:
   Allowance for doubtful accounts                      $     892   $   526        $   (730)    $    688
   Valuation reserves on inventory                          1,501       881(a)           --        2,382
   Valuation allowance for deferred tax assets              1,440       262          (1,013)         689
                                                        -------------------------------------------------
                                                        $   3,833   $ 1,573        $ (1,647)    $  3,759
                                                        =================================================
</TABLE>

(a) - Represents net change of inventory allowances