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, 2004
                                       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                                 (Zip Code)
         executive offices)

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

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

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                     Common Stock, par value $.01 per share
                                (Title of Class)

      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 an accelerated  filer (as
defined in Exchange Act Rule 12b-2) 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, 2004, was approximately
$6,554,000.

      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 |_|.

      The number of shares  outstanding of the registrant's  common stock, as of
March 1, 2005, is as follows:

--------------------------------------------------------------------------------
Class                                                           Number of Shares
--------------------------------------------------------------------------------
Common Stock, par value $.01 per share                                 5,320,147
--------------------------------------------------------------------------------

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE


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<PAGE>

         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  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 2005,  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): general economic conditions in the
Company's  market,  including  inflation,  recession,  interest  rates and other
economic  factors;  casualty to or other disruption of the Company's  facilities
and equipment;  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 or to reflect the  occurrence
of unanticipated events.


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<PAGE>

                                     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 and Europe.  The Company has recently  entered into
joint  ventures  to  produce  products  in  China  and  South  Africa,  although
commercial  production has not yet commenced in either of these  locations.  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 for luggage,  filtration and military tents.  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  $247.9  million,  $183.7  million and $244.3  million in the year
ended  December 31, 2004,  the nine month period from March 30, 2003 to December
31, 2003,  and the year ended March 29, 2003,  respectively.  Subsequent  to the
Change of Control  (described below), the Company has changed its fiscal year to
a calendar year end to coincide  with the fiscal year end of Zapata  Corporation
("Zapata",  NYSE:  "ZAP").  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, 2004 and March 29,
2003 each consisted of twelve months of operations.

Change of Control

      On September 29, 2003, Zapata filed a Schedule 13D with the 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  "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 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.  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,  representing  126,900 options,  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 one-time, non-recurring bonus payable in the event of
a  change  of  control.  The  aggregate  bonus  was  $1.4  million  and was also
recognized as an expense in 2003.

      Following the 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


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<PAGE>

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 will 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 will be 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 Change of Control has been approved.  The
Company does not expect any material  financial impact to result from the change
in its tax filing status.

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.  Such acquisition contributed approximately $7.8
million  in sales and had a negative  impact of  approximately  $1.1  million on
gross profit and  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
were transferred to other European  operations of the Company primarily in lower
labor cost facilities and countries.

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.


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<PAGE>

      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 its customers
who 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  that are  required  to assist the 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 will be 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 2005. 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 fabrics,  in China (the "China Joint Venture").  The Company  anticipates
that the China Joint Venture, which has not yet commenced commercial production,
will produce  automotive airbag cushions in China utilizing the 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.

Products

      The  Company's  automotive  products  include  passenger,  driver and side
(thorax)  impact airbag  cushions,  side  protection  curtains,  knee protection
cushions  and  related  parts  and   accessory   components   manufactured   for
installation  in over 200 car and truck models sold  worldwide and airbag fabric
for sale to airbag manufacturers. Sales of airbag related products (inclusive of
sales of airbag  fabric)  accounted  for  approximately  88.5% of the  Company's
consolidated net sales in the fiscal year ended December 31, 2004, approximately
89.8% of the  Company's  consolidated  net sales in the nine month  period  from
March 30, 2003 to December  31, 2003 and  approximately  90.8% of the  Company's
consolidated net sales in the fiscal year ended March 29, 2003.

      The Company also manufactures a wide array of specialty  technical fabrics
for consumer and industrial uses. These fabrics include:  (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; (v) release liners used in tire  manufacturing;  and (vi) high-end luggage
fabrics,  including  "ballistics"  fabric  used in  Hartman  and Tumi  brands of
luggage.  Sales of technical related products accounted for approximately  11.5%
of the Company's  consolidated  net sales in the fiscal year ended  December 31,
2004,  approximately  10.2% of the Company's  consolidated net sales in the nine
month period from March 30, 2003 to December 31, 2003 and approximately  9.2% of
the  Company's  consolidated  net sales in the fiscal year ended March 29, 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


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of these products occurs at the South Carolina facility,  using much of 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 many of 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  8 to  the  Consolidated  Financial  Statements  for  additional
financial information by product type.

Customers

      The Company  sells its airbag  cushions to airbag  module  integrators  in
North  America and Europe 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, the United Kingdom and Germany.

      The Company sells its fabric in North America either  directly to a module
integrator  or,  in some  cases,  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. The
Company  also 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  module
integrators,  the most  significant  being  Autoliv,  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.  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.

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.


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<PAGE>

      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 28.8 million airbag cushions and
related components to the Company's North American and European customers during
the fiscal year ended  December 31, 2004.  The Company  believes it has adequate
capacity to manufacture  for the anticipated  customer  requirements of its 2005
fiscal year.

      The Company's South Carolina facility produced  approximately 18.5 million
yards of fabric in the fiscal year ended December 31, 2004. The Company believes
it  has  adequate   capacity  to  manufacture  for  the   anticipated   customer
requirements  of fiscal 2005.  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.

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.  The Company believes that it has good working  relationships with its
customers  due to its high volume and low-cost  manufacturing  capabilities  and
consistency of quality products and service.

      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.  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 a dedicated prototype cell, complete with a
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


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<PAGE>

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  the
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,  ISO 9001 and/or ISO
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,
expecting completion by December 2005 and July 2006,  respectively.  The Company
also performs process  capability studies and design of 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 and A2LA, as well as
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.

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 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.

Discontinued Operations

      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.
Net sales of metal and defense related products were $0 for both the fiscal year
ended  December  31,  2004 and the nine  month  period  from  March 30,  2003 to
December 31, 2003 and were  approximately  $5.4 million in the fiscal year ended
March 29, 2003 for the discontinued  operations.  See Note 3 to the Consolidated
Financial Statements for more information.

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.


                                       8
<PAGE>

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

      Certain of the Company's  operations generate net sales and incur expenses
in foreign  currencies.  The  Company's  financial  results  from  international
operations may be affected by  fluctuations in currency  exchange rates.  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, 2004 has resulted in the
recognition of other income of approximately  $677,000.  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  Note  12 to the  Consolidated
Financial Statements for information regarding derivatives and hedging.

      See  Note  8 to  the  Consolidated  Financial  Statements  for  additional
financial information by geographic area.

Employees

      At December 31, 2004, the Company employed  approximately 2,800 employees.
The Company's  hourly  employees in Mexico,  Czech Republic and South Africa are
entitled to a federally regulated minimum wage, which is adjusted annually.  The
Company's  employees  at  its  Mexican  facility  are  unionized.  In  addition,
Automotive Safety Components  International  GmbH & Co. KG, 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


                                       9
<PAGE>

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 will not be material.

      The Company has received a General  Notice of Potential  Liability  letter
from the U.S. Environmental  Protection Agency ("EPA"), dated November 22, 2004,
addressed to Valentec Wells, LLC, an inactive  subsidiary  ("Valentec Wells") of
the Company, regarding the RRGClayton Chemical Site (the "Site"). The EPA Notice
states that the agency has received  information  indicating that Valentec Wells
is a PRP for the  Site  pursuant  to the  Comprehensive  Environmental  Response
Compensation  and Liability Act. The EPA letter indicates that Valentec Wells is
one of 73 PRPs that were selected to receive this Notice as the alleged  largest
contributors  of waste to the Site.  The EPA Notice  invited  Valentec  Wells to
attend  PRP  meetings  in early  December  2004 and to  respond  indicating  the
company's  willingness to perform or finance remedial response activities at the
Site. In subsequent  communications,  EPA has alleged that Valentec Wells may be
connected to the Site through  another  corporation.  The Company has  requested
that EPA  provide  any  information  in its  possession  related to the  alleged
successor  relationship  between Valentec Wells and the other company. As of the
date of this Annual Report on Form 10-K, no information has been provided by the
EPA and the  Company's  inquiry into this matter has not confirmed any corporate
relationship  between Valentec Wells and the other company,  nor has it revealed
any  information  to indicate that Valentec  Wells ever sent wastes to the Site.
The Company will  continue to review this matter.  At this time,  the Company is
unable to predict the outcome or reasonably estimate a range of possible loss.

      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.

Intellectual Property

      The Company  holds  thirty-five  patents and approval for five  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.

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


                                       10
<PAGE>

cushions were approximately  $1.5 million,  $1.2 million and $1.2 million in the
year ended  December  31,  2004,  the nine month  period  from March 30, 2003 to
December 31, 2003 and the year ended March 29, 2003, respectively.

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. ("SCFTI") manufacturing facility. The Company owns or
leases five  facilities in which it  manufactures  airbag and technical  fabrics
related products, with total plant area of approximately 1.2 million square feet
(including administrative,  warehouse,  engineering and research and development
areas  housed at  Company  locations).  Below is an  overview  of the  Company's
properties at its airbag and technical fabrics related products facilities as of
December 31, 2004.

<TABLE>
<CAPTION>
                                                                      Floor Area   Owned/      Lease
                     Location                                          (Sq. Ft.)   Leased    Expiration
                     --------                                          ---------   ------    ----------
<S>                                                                      <C>       <C>           <C>
   Ensenada, Mexico (airbag cushions)                                    97,000    Leased        2005 (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)
   Hildesheim, Germany (airbag cushions)                                 70,000     Owned         N/A (1)(6)
   Jevicko, Czech Republic (airbag cushions)                            100,000     Owned         N/A (4)
   Otay Mesa, California (airbag cushions)                               16,000    Leased        2006 (5)(6)
   Newport, Wales (European sales offices)                                  500    Leased             (7)(6)
</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)   Facility is leased on a month-to-month basis

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 is 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.  The Company has reserved  $275,000 for any potential
exposure associated with the Reporting/Fee  Dispute.  Although no assurances can
be given in this regard,  management does not expect that the Company will incur
material  expenditures  in  addition  to  those  reserved  with  respect  to the
Reporting/Fee Dispute.

      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 the internal investigation  conducted by management nor the
ensuing external investigation led by the 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 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, and
that the employee has 30 days from his receipt of such notification to request a
hearing before an Administrative Law Judge. As of the date of this Annual Report
on Form 10-K,  the employee  has not yet sought such a hearing to the  Company's
knowledge.


                                       11
<PAGE>

      See   "Environmental   Matters"   in  Item  1  with   respect  to  certain
environmental proceedings involving the Company.

      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, 2004.


                                       12
<PAGE>

                                     PART II

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

      Pursuant to the Plan discussed in Item 1, the claims of the holders of the
Notes were converted into the right to receive 4,840,774 shares of the Company's
common stock on the Emergence Date (4,816,574 shares to the holders of the Notes
and 24,200  shares to the financial  advisors of the holders of the Notes).  The
pre-bankruptcy  common  stock,  excluding  stock  held by Robert A.  Zummo,  the
Company's  former  Chairman and Chief  Executive  Officer,  was  converted  into
159,226 shares of the Company's  post-bankruptcy  common stock, including 39,619
shares of  treasury  stock (for an  aggregate  of  5,000,000  shares  issued and
4,960,381  shares  outstanding  post-bankruptcy)  and  warrants  to  acquire  an
additional  681,818  shares of such  common  stock on the  Emergence  Date (such
warrants  expired  on April 10,  2003).  All other  options  and  warrants  were
cancelled on the Emergence Date.

      The  Company's  common  stock is not  listed on any  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 and nine month periods ended December 31, 2004 and December 31, 2003,
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
                                                           ----          ---
Period from March 30, 2003 to December 31, 2003
         First Quarter                                   $   7.50     $  5.75
         Second Quarter                                     11.00        7.50
         Third Quarter                                      14.00       10.05

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

      As of March 1, 2005, there were approximately 158 holders of record of the
Company's  common stock.  The warrants to acquire 681,818 shares of common stock
issued by the Company,  pursuant to the Plan, on the Emergence Date,  expired as
of April 10, 2003.

      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 Congress
Facilities (as defined below)  restrict the Company's  ability to pay dividends.
See the discussion of the Congress 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, 2004 the
Company did not repurchase  any equity  securities  that were  registered by the
Company pursuant to Section 12 of the Exchange Act.

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 year ended December 31, 2004,
the nine month period from March 30, 2003 to December 31, 2003, the fiscal years
ended March 29,  2003 and March 30,  2002,  the period from  October 11, 2000 to
March 31, 2001, and the period from March 26, 2000 to October 10, 2000 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) as discussed in Note 3
to the  Consolidated  Financial  Statements  of the  Company.  The  Consolidated
Financial Statements for the fiscal year ended December 31, 2004, the nine month
period from March 30, 2003 to December  31,  2003,  fiscal years ended March 29,
2003 and March 30, 2002 and the period  from  October 11, 2000 to March 31, 2001
reflect the Company's emergence


                                       13
<PAGE>

from  Chapter 11 and were  prepared  utilizing  the  principles  of fresh  start
accounting  contained in the American Institute of Certified Public Accountants'
Statement of Position 90-7,  "Financial  Reporting by Entities in Reorganization
Under the Bankruptcy Code" ("SOP 90-7").  As a result of the  implementation  of
fresh start  accounting,  certain of the selected  financial data for the fiscal
year ended  December  31,  2004,  the period from March 30, 2003 to December 31,
2003,  fiscal  years  ended March 29, 2003 and March 30, 2002 and for the period
from  October  11,  2000 to March 31,  2001 is not  comparable  to the  selected
financial  data of  prior  periods.  See  Note 1 to the  Consolidated  Financial
Statements  of the Company for further  discussion of the effects of fresh start
accounting on the Company's  Consolidated  Financial Statements.  As a result of
differences  in  comparability,  selected  financial  data for the  "Reorganized
Company" have been separately identified from that of the "Predecessor Company."
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.

<TABLE>
<CAPTION>
                                                    --------------------------------------------------------------------------------
In thousands, except per share data and footnotes                                                                      | Predecessor
(see Notes to Selected Financial Data)                                    Reorganized Company                          |   Company
                                                    --------------------------------------------------------------------------------
                                                    Fiscal Year  Period from    Fiscal Year  Fiscal Year   Period from | Period from
                                                       Ended      3/30/03 to       Ended         Ended     10/11/00 to |  3/26/00 to
                                                      12/31/04     12/31/03       3/29/03       3/30/02       3/31/01  |   10/10/00
                                                    (12 Months)   (9 Months)    (12 Months)   (12 Months)   (6 Months) |  (6 Months)
                                                    -------------------------------------------------------------------------------
<S>                                                  <C>           <C>           <C>           <C>           <C>          <C>
INCOME STATEMENT DATA (1):                                                                                             |
Net sales (2)                                        $ 247,883     $ 183,666     $ 244,338     $ 203,323     $ 92,052  |  $ 109,139
Cost of sales, including depreciation                  211,137       157,568       214,318       176,817       79,337  |     93,307
                                                    -------------------------------------------------------------------------------
Gross profit                                            36,746        26,098        30,020        26,506       12,715  |     15,832
Selling, general and administrative                                                                                    |
  expenses                                              19,594        12,671        14,475        11,595        5,235  |      5,941
Research and development expenses                        1,540         1,225         1,242           899          335  |        353
Compensation expense associated                                                                                        |
  with change of control (3)                                --         2,797            --            --           --  |         --
Amortization of intangible assets (4)                      153           106           124           900          448  |        675
                                                    -------------------------------------------------------------------------------
Operating income                                        15,459         9,299        14,179        13,112        6,697  |      8,863
Other (income) expense, net                             (1,467)       (2,275)       (3,446)       (1,034)        (327) |        828
Interest expense (5)                                       946         1,664         3,616         4,143        2,561  |      3,883
                                                    -------------------------------------------------------------------------------
Income from continuing operations                                                                                      |
  before reorganization items, income                                                                                  |
  taxes and minority interest                           15,980         9,910        14,009        10,003        4,463  |      4,152
Reorganization items (6)                                    --            --            --            --           --  |     41,740
                                                    -------------------------------------------------------------------------------
Income (loss) from continuing                                                                                          |
  operations before income taxes                                                                                       |
  and minority interest                                 15,980         9,910        14,009        10,003        4,463  |    (37,588)
Income tax provision (benefit)                           5,771         3,808         6,120         3,397        1,769  |    (17,511)
Minority interest in loss of                                                                                           |
  consolidated subsidiary (7)                              (39)           --            --            --           --  |         --
                                                    -------------------------------------------------------------------------------
Income (loss) from continuing operations                10,248         6,102         7,889         6,606        2,694  |    (20,077)
Discontinued operations, net of taxes:                                                                                 |
 Loss from discontinued operations                          --            --            --            --           --  |      1,440
 Loss (gain) on disposition of                                                                                         |
   discontinued operations (8)                              --            --         2,023         2,517        1,444  |       (214)
Extraordinary gain, net of taxes (9)                        --            --            --            --           --  |     29,370
Cumulative effect of change in accounting                                                                              |
  method (10)                                               --            --       (14,651)           --           --  |         --
                                                    -------------------------------------------------------------------------------
Net income (loss)                                    $  10,248     $   6,102     $  (8,785)    $   4,089     $  1,250  |  $   8,067
                                                    ===============================================================================

PER SHARE DATA, BASIC (11):
Income from continuing operations                    $    1.97     $    1.23     $    1.59     $    1.33     $   0.54
Loss from discontinued operations                           --            --         (0.41)        (0.51)       (0.29)
Cumulative effect of change in accounting
  method                                                    --            --         (2.95)          --            --
                                                     ----------------------------------------------------------------
Net income (loss) per common share                   $    1.97     $    1.23     $   (1.77)    $    0.82    $    0.25
                                                     ================================================================
PER SHARE DATA, DILUTED (11):
Income from continuing operations                    $    1.94     $    1.19     $    1.59     $    1.33    $    0.54
Loss from discontinued operations                           --            --         (0.41)        (0.51)       (0.29)
Cumulative effect of change in accounting
  method                                                    --            --         (2.95)          --            --
                                                     ----------------------------------------------------------------
Net income (loss) per common share                   $    1.94     $    1.19     $   (1.77)    $    0.82    $    0.25
                                                     ================================================================
Weighted average number of shares outstanding,
  basic                                                  5,206         4,973         4,960         4,960        4,960
                                                     ================================================================
Weighted average number of shares outstanding,
  diluted                                                5,294         5,119         4,960         4,960        4,960
                                                     ================================================================

<CAPTION>
BALANCE SHEET DATA:                                                           Reorganized Company
                                                      12/31/04      12/31/03       3/29/03       3/30/02      3/31/01
                                                     ----------------------------------------------------------------
<S>                                                   <C>           <C>            <C>           <C>         <C>
Working capital (12)                                  $ 37,429      $ 26,653       $ 8,016       $ 3,711     $ 27,079
Total assets                                           127,526       123,326       134,064       125,271      130,683
Long term debt, net of current maturities (12)           3,729        11,817         7,363        12,182       43,541
Stockholders' equity                                    80,524        64,029        51,913        55,838       51,943
</TABLE>


                                       14
<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 outstanding shares of
      the Company's common stock,  resulting in the Change of Control  described
      above in "The  Company  - Change  of  Control"  in Item 1. The  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 one-time,
      non-recurring  bonus  payable  in the  event of a change of  control.  The
      aggregate  bonus,  payable  following  the  Change  of  Control,  was $1.4
      million.

(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.  Amortization  expense  for the fiscal year ended March 30, 2002 and
      the period  from  October  11,  2000 to March 31,  2001 was  approximately
      $791,000 and $395,000, respectively.

(5)   Contractual  interest  for the period  from March 26,  2000 to October 10,
      2000,  was $8.5  million.  Interest  expense  on the  Company's  Notes was
      reported to the Petition Date (April 10, 2000).  Such interest expense was
      not  reported  subsequent  to that date  because it was not required to be
      paid during the bankruptcy  proceedings and was not an allowed claim under
      the Plan.  The difference  between  reported  interest  expense and stated
      contractual  interest expense of the Predecessor Company was approximately
      $4.7 million for the period from March 26, 2000 to October 10, 2000.

(6)   During the period from March 26, 2000 to October 10,  2000,  the impact of
      adjusting assets and liabilities to fair value in accordance with SOP 90-7
      resulted in a net charge of approximately $34.0 million. Professional fees
      and  expenses of $3.7  million  included in  Reorganization  Items for the
      period represent fees and expenses associated with the Company's financial
      restructuring and Chapter 11 bankruptcy proceeding. The revaluation of the
      Notes totaled $2.9 million, representing the write-off of related deferred
      financing  costs.  Also  included  in  this  amount  is  $1.1  million  of
      restructuring  charges  that  consist  primarily  of a charge  for  future
      severance  payments to the Company's  former  Chairman and Chief Executive
      Officer.

(7)   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, utilizing the fabrics produced
      by its joint venture  partner.  As of December 31, 2004,  the South Africa
      Joint  Venture  had not begun  commercial  production.  Minority  interest
      represents the amount of loss  attributable to the Company's  unaffiliated
      joint venture partner.

(8)   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, $5.4 million,
      $10.5 million, 8.4 million and 12.2 million in the year ended December 31,
      2004,  the period from March 30,  2003 to December  31, 2003 and the years
      ended March 29, 2003 and March 30, 2002,  the period from October 11, 2000
      to March 31, 2001, and the period from March 26, 2000 to October 10, 2000,
      respectively, for the discontinued operations.

(9)   During the period  from March 26,  2000 to  October  10,  2000,  the early
      extinguishment  of the Notes and related accrued  interest  resulted in an
      extraordinary gain of $29.9 million, net of income taxes of $17.5 million.
      This was offset by a loss recognized in the amount of $573,000  related to
      deferred  financing  costs  associated  with the early  termination of the
      Company's prior credit facility during the period.

(10)  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.

(11)  Share and per share data are not  meaningful  on or prior to  October  10,
      2000 due to the significant  change in the capital structure that resulted
      from the Plan.

(12)  The  decrease  in  working  capital  and  long-term  debt,  net of current
      portion,  at March 29, 2003 and March 30, 2002 was  principally due to the
      classification  of the  Congress  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 Congress Facility and repaid the
      subordinated  secured note prior to their  maturity in October  2003.  See
      Note 5 to the Consolidated Financial Statements.


                                       15
<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 and Europe.  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 "Cautionary
Statement   Pursuant  to  Safe  Harbor  Provisions  of  the  Private  Securities
Litigation  Reform Act of 1995"  regarding  forward-looking  information  at the
beginning  of this Form 10-K and,  from  time to time,  in the  Company's  other
filings with the SEC.

Critical Accounting Policies

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

      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  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,  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. In addition, the Company emerged from
bankruptcy  in  October  2000 and  revalued  its  tangible  assets at that time.
Accordingly,  estimates of tangible asset  impairment are not considered to be a
critical  accounting  policy or  estimate.  We believe  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 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 (loss)" 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.

      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,
2004,  the nine month  period from March 30,  2003 to December  31, 2003 and the
year ended March 29, 2003,  the impact of changes in the  relationship  of other
currencies to the U.S.  dollar  resulted in the  recognition  of other income of
approximately


                                       16
<PAGE>

$677,000, $2.0 million and $3.5 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.

      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. 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.

      Discontinued  Operations.  On December 23, 2002, the Company completed the
disposal of all operations that it had classified as "discontinued  operations."
As discussed in Note 3 to the  Consolidated  Financial  Statements,  the Company
reported the metal and defense  businesses  as  discontinued  operations  in its
Consolidated  Financial  Statements as of October 10, 2000,  or the  measurement
date, through the sale of the final  discontinued  operation,  Galion,  Inc., on
December 23, 2002. To report the metal and defense  businesses  as  discontinued
operations  required the Company to make estimates  regarding (i) the results of
operations to the expected  disposal  date and (ii) the expected  proceeds to be
received  upon sale.  Based on the  Company's  determination  that  losses  were
expected both from operations and upon disposal, the Company accrued substantial
charges for future  losses in the years ended March 29, 2003 and March 30, 2002.
Accordingly,  the  businesses' net losses for the years ended March 29, 2003 and
March 30, 2002,  which were incurred  subsequent to the  measurement  date, were
applied against the accrued losses and were not recognized as losses as incurred
in the Consolidated Statements of Operations.

      Goodwill Impairment.  As discussed in Note 2 to the Consolidated Financial
Statements, the adoption of Statement of Financial Accounting Standards ("SFAS")
No. 142, "Goodwill and Other Intangible Assets", required the Company to perform
an assessment for impairment of the Company's "reorganization value in excess of
amounts allocable to identifiable  assets" arising from the valuation  performed
upon its  emergence  from  Chapter 11 in October  2000  ("excess  reorganization
value"),  and goodwill,  as of March 31, 2002. Under the transition  guidance of
SFAS No.  142,  the Company  was  required  to perform  its  initial  impairment
evaluation  within six months of adopting the new standard,  and any  impairment
charges were to be retroactively  recorded in the first quarter of the Company's
fiscal year.  Other  identifiable  intangible  assets of the Company  consist of
patents that continue to be amortized  over their  estimated  useful  lives.  In
accordance  with  SFAS No.  142,  the  Company  compared  the book  value of the
Company's net assets, including the excess reorganization value and goodwill, to
the Company's fair value as of March 31, 2002.  Because the fair value was lower
than the book value of the Company's net assets, excess reorganization value and
goodwill were determined to be impaired and  accordingly,  the carrying value of
such  assets  (approximately  $14.7  million at March 31,  2002) was  charged to
earnings as the cumulative effect of a change in method of accounting  effective
March 31, 2002.  There was no tax effect of the change in accounting  principle,
as the excess  reorganization  value and goodwill were not deductible for income
tax purposes.

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  purchase fabric from airbag fabric producers
such as the Company. Like the automotive supply industry generally,  the Company
continues to  experience  significant  competitive  pressure.  For example,  the
Company  supplies  airbag  cushions  and/or  airbag  fabric  to its  three  most
significant customers based upon releases from formal purchase orders, which are
subject  to  periodic   negotiation   with   respect  to  price  and   quantity.
Additionally,  the  ability  of the  Company to pass  along raw  material  price
increases will be imperative for it to maintain its levels of profitability. The
Company  expects  that  it  will  continue  to  experience  competitive  pricing
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 their current levels.


                                       17
<PAGE>

      On  November  30,  2004,  the  Company  announced  that it had  signed  an
agreement  to form the South Africa Joint  Venture  with  Gelvenor.  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  will be
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 2005.  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 the China Joint  Venture with  Kingsway  International  Limited,  an entity
associated with Huamao.  The Company  anticipates  that the China Joint Venture,
which has not yet  commenced  commercial  production,  will  produce  automotive
airbag cushions in China utilizing the 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.

Results of Operations

      Following the 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
for the years ended December 31, 2004 and December 31, 2003  (unaudited) and the
nine month  periods  from March 30, 2003 to December 31, 2003 and from March 31,
2002 to December 28, 2002 (unaudited) (in thousands):

<TABLE>
<CAPTION>
                                                       ---------------------------------------------------------------
                                                                         Period from                      Period from
                                                       Period from       12/29/02 to     Period from       3/31/02 to
                                                        1/1/04 to          12/31/03       3/30/03 to        12/28/02
                                                         12/31/04        (12 months)       12/31/03        (9 Months)
                                                       (12 months)       (unaudited)      (9 Months)       (unaudited)
                                                       ---------------------------------------------------------------
<S>                                                     <C>               <C>             <C>               <C>
Net sales                                               $ 247,883         $ 247,142       $ 183,666         $ 180,863
Gross profit                                               36,746            34,750          26,098            21,369
Income from operations                                     15,459            13,825           9,299             9,484
Other income, net                                          (1,467)           (3,024)         (2,275)           (2,822)
Interest expense                                              946             2,515           1,664             2,772
Income tax provision                                        5,771             5,472           3,808             4,456
Loss on discontinued operations, net of taxes                  --               660              --             1,363
Cumulative effect of change in method of accounting            --                --              --           (14,651)
Net income (loss)                                          10,248             8,202           6,102           (10,886)
</TABLE>


                                       18
<PAGE>

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

<TABLE>
<CAPTION>
                                   ---------------------------------------------------------------------
                                                       Period from                           Period from
                                   Period from         12/29/02 to         Period from        3/31/02 to
                                    1/1/04 to            12/31/03          3/30/03 to          12/28/02
                                     12/31/04          (12 months)          12/31/03          (9 Months)
                                   (12 months)         (unaudited)         (9 Months)        (unaudited)
                                   ---------------------------------------------------------------------
<S>                                  <C>                  <C>                <C>                <C>
Net sales                            100.0%               100.0%             100.0%             100.0%
Gross profit                          14.8                 14.1               14.2               11.8
Income from operations                 6.2                  5.6                5.1               5.2
Interest expense                       0.4                  1.0                0.9               1.5
Income tax provision                   2.3                  2.2                2.1               2.5
Net income (loss)                      4.1                  3.3                3.3              (6.0)
</TABLE>

      During  the second  quarter  of 2004,  one of the  Company's  largest  raw
materials  suppliers  implemented a price increase of  approximately  11% on raw
material yarn  purchased for the Company's  North America  airbag fabric weaving
facility.  Management  has  estimated  the  impact  on the cost of raw  material
purchases to be approximately $1.4 million for the year ended December 31, 2004.
The Company  has not,  as yet,  been  successful  in passing  along most of this
increase to its airbag  cushion  customers in North America and continues in its
efforts to do so, although no assurances can be given in the Company maintaining
such price levels.

      During the third  quarter of 2004,  the Audit  Committee of the  Company's
Board of  Directors,  with the  assistance  of  special  outside  counsel  and a
forensic  accounting firm,  completed an investigation  begun in July 2004 after
notification by management,  based upon issues raised by an employee who claimed
improprieties  in  the  Company's  operations  in  Mexico  and  California.  The
investigation  of the issues  raised did not  substantiate  any of the concerns.
Expenses  related to this matter  approximated  $1 million for the twelve months
ended December 31, 2004 and are included in general and administrative  expenses
in the accompanying condensed consolidated statements of operations.

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

      Net Sales.  Net sales increased  $700,000,  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 is 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.

      Gross  Profit.  Gross profit  increased  $2.0  million,  or 5.7%, to $36.7
million for the twelve  months ended  December  31, 2004  compared to the twelve
months  ended  December 31,  2003.  Gross  profit as a  percentage  of net sales
increased to 14.8% for the twelve months ended  December 31, 2004 from 14.1% for
the twelve months ended December 31, 2003. The European  operations  experienced
an  improvement  of $4.7  million  or 39.8%  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  increased  gross
profit  compared to the prior year.  Gross profit for North American  operations
decreased  approximately  $2.7 million or 12.0% due primarily to price increases
on raw material of approximately $1.4 million and the sales decline noted above.

      Income from Operations.  Income from operations increased $1.6 million, or
11.8%,  to $15.5 million for the twelve months ended  December 31, 2004 compared
to the twelve  months  ended  December  31, 2003.  Income from


                                       19
<PAGE>

operations as a percentage of net sales  increased to 6.2% for the twelve months
ended  December 31, 2004 from 5.6% in the prior period.  During the prior twelve
months ended December 31, 2003, the Company  recognized a charge of $2.8 million
associated  with the  Company's  Change of Control.  The increase in income from
operations  is  attributable  to the increase in gross profit  discussed  above,
savings of $1.2  million  associated  with the closure of the  Company's  United
Kingdom  facility  and the  effect of the  prior  year's  charge,  offset by the
following  costs  included in  selling,  general  and  administrative  expenses:
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 the investigation previously
discussed;  approximately  $566,000  in  expense  from the  increased  liability
associated  with  recognized  gains on its  deferred  compensation  plan assets;
approximately  $440,000 in  increased  wage and  employee  benefits  costs;  and
approximately  $600,000 in costs for implementation of new information  systems.
With the possible  exception of employee benefit and information  systems costs,
the above items are not  expected to continue at the current rate of expense for
subsequent years.

      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,  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 64.6%, 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  4.0%  and a  decrease  in  average
outstanding  debt from $29.1 million to $11.5 million for the current  period as
compared to the prior period.

      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 from 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 year ended December
31, 2004 is a result of the payment of deductible foreign taxes in that year.

      Discontinued  Operations.  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 was $660,000 for the twelve months ended
December  31,  2003.  The loss was  principally  due to the  sale of  Galion  on
December  23,  2002  and  included  the   recognition  of  a  tax  provision  of
approximately  $660,000 related to an adjustment of the deferred tax liabilities
of the 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.

Nine Months Ended  December 31, 2003 Compared to Nine Months Ended  December 28,
2002 (Unaudited)

      Net Sales.  Net sales  increased $2.8 million,  or 1.5%, to $183.7 million
for the nine months ended  December  31, 2003  compared to the nine months ended
December 28, 2002.  North American  operations' net sales decreased $8.1 million
or 8.1%  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  $10.9 million or 13.5% compared to the prior period.  The
increase in European  net sales is due  principally  to the effect of changes in
foreign  currency  exchange  rates that  increased  sales as  expressed  in U.S.
dollars by  approximately  $11.9  million  over the amount  that would have been
reported based on exchange rates in effect in the nine months ended December 28,
2002. The


                                       20
<PAGE>

favorable  effect of  exchange  rates was  offset  by a  reduction  in volume of
approximately  $1.0 million due to decreased  demand in the European  automotive
market.

      Gross Profit.  Gross profit  increased  $4.7 million,  or 22.1%,  to $26.1
million for the nine months ended  December 31, 2003 compared to the nine months
ended December 31, 2002. The European  operations  experienced an improvement of
$5.2 million or 146.1% due to  improvements in operating  efficiencies  and cost
savings of approximately $4.2 million and the favorable effect of exchange rates
of approximately $1 million. With respect to the European operations,  the prior
period's  results  reflect losses at the Woodville  operations of  approximately
$1.5 million and costs of approximately $1.7 million associated with the move of
the  Woodville  production  lines and the ramp-up of programs at other  European
facilities.  Gross profit for North American operations decreased  approximately
$403,000  or 2.2%  due,  in  part,  to the  sales  decline.  Gross  profit  as a
percentage  of net sales  increased to 14.2% for the nine months ended  December
31, 2003 from 11.8% for the nine months ended December 28, 2002.

      Income from  Operations.  Income from operations  decreased  $185,000,  or
2.0%,  to $9.3 million for the nine months ended  December 31, 2003  compared to
the nine months ended December 28, 2002. The decrease is due to a higher selling
and  administrative  costs including  non-recurring  costs of approximately $2.8
million  associated  with a $1.4  million  stock  compensation  charge  and $1.4
million in executive  bonuses  resulting from the Change of Control,  along with
other increases in general and administrative  expenses.  Income from operations
as a  percentage  of net  sales  decreased  to 5.1%  for the nine  months  ended
December 31, 2003 from 5.2% in the prior period. The decrease as a percentage of
net sales was due to the items discussed above.

      Other  Income,  net.  The Company  recognized  other  income,  net of $2.3
million  for the nine  months  ended  December  31,  2003,  as compared to other
income,  net of $2.8 million for the nine months ended December 28, 2002.  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 $2.0  million for the nine months ended  December  31, 2003,  compared to net
foreign  transaction gains of $800,000 during the comparable period in the prior
period. The foreign transaction gains resulted from favorable changes in foreign
currency exchange rates of approximately 15.3% in the December 31, 2003 exchange
rates as compared to those at December 28, 2002.

      Interest expense.  Interest expense  decreased $1.1 million,  or 39.9%, to
$1.7  million for the nine months ended  December 31, 2003  compared to the nine
months ended December 28, 2002. The decrease is attributable  both to a decrease
in  average  interest  rates  from  5.8%  to  5.4%  and a  decrease  in  average
outstanding  debt from $44.6 million to $26.8 million for the current  period as
compared to the prior period.

      Provision  for Income  Taxes.  The  provision  for income taxes  decreased
$648,000 for the nine months ended December 31, 2003 compared to the nine months
ended  December  28,  2002  due  primarily  to the  following  reasons:  (i) the
recording in the prior period of a $350,000  provision  for income taxes for the
Company's  German  subsidiary  resulting  from an  examination  performed by the
German  taxing  authorities  covering  years  1997  through  1999  and  (ii) the
reduction  of $200,000 in income taxes in Mexico from lower  pre-tax  income for
the nine months  ended  December 31, 2003 as compared to the prior  period.  The
Company's  effective  tax rates for the nine  months  ended  December  31,  2003
compared  to the nine  months  ended  December  28,  2002 were  38.4% and 43.7%,
respectively. The effective tax rate for the nine months ended December 28, 2002
is higher than the statutory tax rate due to the tax examination related reserve
noted above and foreign earnings taxed at different rates.

      Discontinued  Operations.  No impacts from  discontinued  operations  were
recorded during the nine month period ended December 31, 2003 as the Company had
sold all remaining discontinued operations in the nine months ended December 28,
2002.  Loss on disposition of  discontinued  operations was $1.4 million for the
nine months ended December 28, 2002. The loss was principally due to the sale of
Galion on December 23, 2002 and included the  recognition  of a tax provision of
approximately  $660,000 related to an adjustment of the deferred tax liabilities
of the discontinued operations.

      Cumulative  Effect of Change in Method of Accounting.  The Company adopted
SFAS No. 142, "Goodwill and Other Intangible Assets",  effective March 31, 2002.
As a  result  of  management's  assessment  of the  Company's  fair  value,  the
Company's  "Reorganization  value in excess of identifiable assets" and goodwill
were  determined  to be impaired  and,  accordingly,  the total  amount of those
assets (approximately $14.7 million) was written off as the


                                       21
<PAGE>

cumulative  effect of a change in method of  accounting in the nine months ended
December 28, 2002 (see further  discussion  under "New  Accounting  Standards").
There was no tax effect of the  change in  accounting  principle,  as the excess
reorganization value and goodwill were not deductible for income tax purposes.

      Net Income.  The Company's net income was $6.1 million for the nine months
ended  December  31,  2003,  compared to net loss of $10.9  million for the nine
months ended December 28, 2002. The current period earnings were a result of the
items discussed  above.  The net loss in the prior period was primarily a result
of the  write-off  of  $14.7  million  of  reorganization  value  in  excess  of
identifiable assets and goodwill, as discussed above, recognized as a cumulative
effect of a change in method of accounting  resulting  from the adoption of SFAS
No. 142.

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.

Liquidity and Capital Resources

      It  is  expected  that  the  Company's   equipment  and  working   capital
requirements  will  continue  to  increase  in order to  sustain  its  growth of
operations.  The Company  expects to fund its liquidity  requirements  through a
combination of cash flows from  operations,  equipment  financing and the use of
the Company's line of credit.

Cash Flows

      Net cash provided by operating  activities was approximately $13.4 million
for the twelve  months ended  December 31, 2004.  The cash provided by operating
activities  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  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  from a change in payment  terms with a  significant
supplier in return for prompt  payment  discounts and payments of trade balances
with certain significant suppliers.  The Company is not currently aware of other
factors  that will result in a change in its current  terms with  customers  and
suppliers.  The  decrease  from  2003  to 2004 in  cash  provided  by  operating
activities  is  primarily  a result  of the  increases  in the  Company's  asset
balances in 2004, whereas in 2003 there were decreases in asset balances.

      Net cash used in continuing  operations for investing  activities was $6.5
million for the twelve months ended December 31, 2004.  Capital  expenditures in
2004 and  2003  were  necessitated  primarily  by new  programs  awarded  by the
Company's  customers.  The  Company  expects to incur  capital  expenditures  of
approximately  $12.0  million in 2005 to support new programs from the Company's
customers and to invest in new technology and its joint venture operations.

      Net cash used in continuing  operations  for  financing  activities in the
twelve month period ended December 31, 2004 was $8.8 million due  principally to
net repayments on the Congress Facilities and payments on various other debt and
long-term  obligations  of $10.1  million  offset in part by  proceeds  from the
exercise of the Company's stock options of $1.3 million.

      The activities  discussed above in conjunction with the favorable  effects
of foreign  exchange  rates of $1.8 million,  resulted in a net decrease in cash
and cash  equivalents of  approximately  $192,000 in the year ended December 31,
2004.

Credit Facilities

      The Company has a credit  facility  with  Congress  Financial  Corporation
(Southern),  a subsidiary of Wachovia Bank, National  Association  ("Congress").
The Company has an  aggregate  $35.0  million  revolving  credit  facility  with
Congress (the "Congress  Revolver") expiring October 8, 2006. Under the Congress
Revolver,  the Company  may


                                       22
<PAGE>

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 Congress Revolver at December 31,
2004 was $105,000.  The Congress Revolver also includes a $5.0 million letter of
credit facility, which was unutilized at December 31, 2004.

      In addition,  the Company has a term facility with Congress (the "Congress
Term A loan") under which $2.0 million was  outstanding as of December 31, 2004.
The  Congress  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 Congress Term A
loan.  In addition to the Congress  Revolver and the Congress  Term A loan,  the
Company  also has an  additional  term loan  (the  "Congress  Term B loan"  and,
collectively  with the  Congress  Revolver  and the  Congress  Term A loan,  the
"Congress  Facilities")  which is  undrawn  and under  which  $3.5  million  was
available  as of  December  31,  2004.  At  December  31,  2004,  the  Company's
availability for additional  borrowings  (based on the maximum  allowable limit)
under the Congress Revolver and the Congress Term B loan was approximately $38.4
million.

      The  interest  rate on the Congress  Revolver and Congress  Term A loan is
variable,  depending  on the amount of the  Company's  Excess  Availability  (as
defined in the Congress  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 Congress
Facilities  (the "Prime  Rate") or the LIBOR rate as  described  in the Congress
Facilities,  in each case with an  applicable  margin  applied to the rate.  The
Congress  Term B loan bears  interest at the Prime Rate plus 3%. At December 31,
2004, the margin on Prime Rate loans was 0.0% and the margin on LIBOR rate loans
was 1.75%. The Company is required to pay a monthly unused line fee of 0.25% per
annum on the unutilized portion of the Congress Revolver and a monthly fee equal
to 1.75% per annum of the amount of any outstanding letters of credit.

      Under the  Congress  Revolver  and  Congress  Term A loan,  the Company is
subject to a covenant that requires it to maintain a certain tangible net worth.
To the extent that the Company has  borrowings  outstanding  under the  Congress
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
Congress Term B loan to the extent of certain excess cash flow.

      The Congress 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, 2004, the Company was in
compliance with all financial  covenants.  At December 31, 2004, the Company was
also in  compliance  with all  non-financial  covenants  other  than a  covenant
requiring  the  Company  to  dissolve   certain   inactive   subsidiaries.   The
non-compliance  under this  covenant was waived by Congress.  Substantially  all
assets of the Company are pledged as  collateral  for the  borrowings  under the
Congress Facilities.

      In July 2004,  the Company and  Congress  entered into an amendment to the
Congress Facilities which, among other things, allows the Company to include its
Romanian  subsidiary  and  entities  formed in  connection  with the China Joint
Venture within the group of affiliates to which the Company is permitted to make
loans up to an aggregate  specified  amount.  In October  2004,  the Company and
Congress  entered  into an  amendment  and  consent to the  Congress  Facilities
pursuant to which Congress consented to certain actions by the Company,  and the
Company and Congress agreed to certain amendments to the Congress Facilities, in
each case in order to permit the  Company to enter into the South  Africa  Joint
Venture.  This amendment also, among other things, allows the Company to include
the entity formed to conduct this joint  venture  within the group of affiliates
to which the Company is  permitted  to make loans up to an  aggregate  specified
amount.

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 note facility dated June 4, 1997. This


                                       23
<PAGE>

amendment extended the mortgage facility for five years, established an interest
rate of 1.7% over EURIBOR  (EURIBOR was 2.42% at December  31,  2004),  requires
monthly  payments  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 facility. At December 31, 2004,  approximately $2.6 million
was outstanding under the HVB facility.

      On July 10,  1998,  the Company  entered  into a $10.0  million  financing
arrangement  with  KeyCorp  Leasing,  a division of Key  Corporate  Capital Inc.
("KeyCorp").  The KeyCorp  financing  agreement  has a  seven-year  term,  bears
interest at a rate of 1.25% over LIBOR (LIBOR was 2.42% at December  31,  2004),
requires monthly  payments of  approximately  $150,000 and is secured by certain
equipment  located at the Company's  Greenville,  South  Carolina  facility.  At
December 31, 2004,  approximately $1.0 million was outstanding under the KeyCorp
facility.

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, 2004.

<TABLE>
<CAPTION>
                                               Payments due by Period (in thousands)
                                   ------------------------------------------------------------
                                               Less than      1 - 3        3 - 5      More than
Contractual obligations             Total        1 year       years        years       5 years
                                   ------------------------------------------------------------
<S>                                <C>          <C>          <C>          <C>          <C>
    Long term debt                 $ 6,268      $ 2,870      $ 3,398           --           --
    Capital lease obligations        1,244          561          683           --           --
    Operating leases                 1,340          660          609           64            7
                                   -----------------------------------------------------------

            Total                  $ 8,852      $ 4,091      $ 4,690      $    64      $     7
                                   ===========================================================
</TABLE>

The amounts of contractual obligations set forth above include an assumed annual
interest rate of 5% for long term debt and an assumed range of interest rates of
between 6% and 8.5% for capital lease obligations.

      Additionally,  the Company  has  material  commitments  for funding of the
South Africa Joint Venture  through the  combination  of machinery and equipment
and related  in-kind  services of $1.2  million  and the  intention,  but not an
obligation,  for funding of its China Joint Venture  through  potential  loan or
capital contributions of up to $6.5 million as of December 31, 2004.

Off-Balance Sheet Arrangements

      As of December 31, 2004, 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. The Company enters into derivative  foreign 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, 2004,
the Company and various  consolidated  subsidiaries of the Company are borrowers
under the Congress 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.


                                       24
<PAGE>

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 will be effective for
inventory  costs incurred during fiscal years beginning after June 15, 2005. The
Company is in the process of evaluating the effect, if any, that the adoption of
SFAS No. 151 will have 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 will be
effective for nonmonetary asset exchanges  occurring in fiscal periods beginning
after June 15, 2005. The Company is in the process of evaluating the effect,  if
any, that the adoption of SFAS No. 153 will have 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) will be effective
for interim or annual reporting periods beginning on or after June 15, 2005. The
Company is in the process of evaluating the effect, if any, that the adoption of
SFAS No. 123(R) will have on its financial position and results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      To the extent that  amounts  borrowed  under the Congress  Facilities  and
certain other facilities are  outstanding,  the Company has market risk relating
to such amounts  because the interest  rates under the Congress  Facilities  and
those  certain  other  facilities  are  variable.  As of December 31, 2004,  the
Company's interest rate, inclusive of credit fees under the Congress Facilities,
approximated 5.00%. Due to the variability of the interest rates, a hypothetical
increase or decrease in the interest  rates of 100 basis points  relating to the
Congress  Facilities  may result in an  addition  to or  reduction  in  interest
expense of  approximately  $75,000 on an annual basis.  As of December 31, 2003,
the  Company's  interest  rate,  inclusive  of credit  fees  under the  Congress
Facilities, approximated 4.00%.

      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, 2004 has resulted in the  recognition of other
income of approximately  $677,000 compared to the recognition of other income of
$2.0 million in the nine months ended  December 31, 2003. 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.  If, however,  there
were a  sustained  decline  of these  currencies  versus  the U.S.  dollar,  the
Consolidated Financial Statements could be materially adversely affected.

      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  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 a credit to net earnings of approximately $80,000 for the twelve months
ended  December 31, 2004 on these forward  contracts.  At December 31, 2004, the
Company had no such  outstanding  forward  exchange  contracts.  At December 31,
2003,  the Company had  outstanding  forward  exchange  contracts  that  matured
between  January  and March 2004 to  purchase  Mexican  pesos with an  aggregate
notional  amount  of  approximately  $2.7  million.  The  fair  values  of these
contracts at December 31, 2003 totaled approximately $52,000, which was recorded
as a


                                       25
<PAGE>

liability  on the  Company's  Consolidated  Balance  Sheets  in  "other  current
liabilities." The Company recorded a credit to earnings of approximately $47,000
for the nine months  ended  December 31, 2003 and the  unrealized  loss on these
forward  contracts of approximately  $52,000 was included in "accumulated  other
comprehensive income" at December 31, 2003.

      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  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 charge to net earnings
of approximately $141,000 for the twelve months ended December 31, 2004 on these
forward  contracts.  At December 31, 2004,  the Company had no such  outstanding
forward  exchange  contracts.  At December 31, 2003, the Company had outstanding
forward  exchange  contracts  that  matured  between  January  and March 2004 to
purchase Czech Korunas with an aggregate  notional amount of approximately  $2.1
million.  The fair  values of these  contracts  at  December  31,  2003  totaled
approximately  $100,000,  which was  recorded  as a liability  on the  Company's
balance sheet in "other current  liabilities."  The Company recorded a charge to
earnings of  approximately  $47,000 for the nine months ended  December 31, 2003
and the unrealized loss on these forward contracts of approximately  $89,000 was
included in "accumulated other comprehensive income" at December 31, 2003.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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
officers (Messrs. Corey and Menezes,  respectively),  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,  each of Messrs.  Corey and 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

      On March 7, 2005,  the  Compensation  Committee of the Company's  Board of
Directors  finalized cash bonuses to the Company's Chief  Executive  Officer and
other Named  Executives (as defined below) from a bonus plan  established  under
the Company's  Management  Incentive Plan. The Compensation  Committee evaluated
the  performance  of the  Company and the Named  Executives  for the year ending
December 31, 2004 against the  performance  targets set forth in the  Management
Incentive Plan. Based on this evaluation,  the Compensation Committee authorized
both  formula-based  and  nonformula-based  cash  bonuses  for 2004.  These 2004
bonuses are reflected in the "Bonus"  column of the Summary  Compensation  Table
included in Item 10 of this Annual Report on Form 10-K.


                                       26
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Board of Directors

      The  Board of  Directors  is  divided  into  three  classes,  one of which
currently has three directors and two of which currently have two directors. The
terms of two of the three  Class II  Directors,  Ben E. Waide III and Carroll R.
Wetzel,   Jr.,  were  to  expire  at  the  Company's   2003  Annual  Meeting  of
Stockholders.  The Company  adjourned  its 2003 Annual  Meeting of  Stockholders
previously noticed for Tuesday, October 14, 2003, due to the absence of a quorum
for the transaction of business.  Prior to that meeting,  the Company received a
letter from Zapata that its shares of the  Company's  common  stock would not be
present at the  meeting.  In light of Zapata's  letter and other  communications
from Zapata subsequently  received by the Company, the Company has not yet set a
new date for this  meeting or noticed a  subsequent  meeting.  Mr. Waide and Mr.
Wetzel,  together with the third Class II Director,  Leonard DiSalvo, who joined
the Board on  January  26,  2004,  will  continue  to hold  office  until  their
successors  have  been  duly  elected  and  qualified  or  until  their  earlier
resignation or removal. The terms of the Class III Directors,  John C. Corey and
Avram A.  Glazer,  were to  expire  at the  Company's  2004  Annual  Meeting  of
Stockholders;  no  meeting  was held in 2004.  Mr.  Corey  and Mr.  Glazer  will
continue  to hold  office  until  their  successors  have been duly  elected and
qualified or until their earlier resignation or removal.  The terms of the Class
I Directors,  Andy Goldfarb and W. Allan Hopkins, are to expire at the Company's
2005 Annual Meeting of Stockholders.

      Each of  Messrs.  Corey,  Goldfarb,  Hopkins,  Waide and  Wetzel  has been
serving as a director of the Company  since the  Emergence  Date pursuant to the
Plan.  Mr. DiSalvo and Mr.  Glazer,  designees of Zapata,  were appointed by the
Board pursuant to the Company's bylaws as of January 26, 2004.

      The names,  ages,  and principal  occupations of the Class I, Class II and
Class III Directors are provided below.

Class I Directors

      ANDY  GOLDFARB.  Age 57. Mr.  Goldfarb  has  served as a  Director  of the
Company  since the  Emergence  Date.  From 1985 until March 2000,  Mr.  Goldfarb
served as Chairman, President and Chief Executive Officer of HCC Industries, the
world's largest independent  hermetic sealing operation.  From 1976 to 1985, Mr.
Goldfarb served HCC Industries in various  operational and financial  positions,
including Chief Operating Officer.

      W. ALLAN  HOPKINS.  Age 66. Mr.  Hopkins  has served as a Director  of the
Company  since the  Emergence  Date.  From 1998 until August 2000,  Mr.  Hopkins
served as President and Chief Executive Officer of Atlas Steels Inc., a producer
and seller of stainless and specialty  steel  products.  From 1993 to 1996,  Mr.
Hopkins served as President and Chief Executive  Officer of Algoma Steel Inc., a
manufacturer  and marketer of steel  products.  From 1984 to 1992,  Mr.  Hopkins
served in various capacities including Senior Vice President,  Vice President of
Sales and Vice President and General Manager of Stelpipe,  Inc., a subsidiary of
Stelco, Inc., Canada's largest steel producer.

Class II Directors

      LEONARD  DISALVO.  Age 46. Mr.  DiSalvo  has  served as a Director  of the
Company since  January 2004.  Mr.  DiSalvo  joined Zapata in September  1998 and
currently  serves as its Vice President - Finance and Chief  Financial  Officer.
Mr.  DiSalvo  also  currently  serves  as Vice  President  -  Finance  and Chief
Financial Officer of Zap.Com,  Corporation  ("Zap.Com"),  a subsidiary of Zapata
(which until December 2000 was an internet  advertising  and e-commerce  network
company,  and is currently a public shell company), a position he has held since
April 1999.  Mr. DiSalvo has over 20 years of experience in the areas of finance
and  accounting.  Mr.  DiSalvo  served as a finance  manager  for  Constellation
Brands, Inc., a national manufacturer and distributor of wine, spirits and beer,
from 1996 until September 1998. Prior to that position, Mr. DiSalvo held various
management  positions in the areas of finance and accounting in the Contact Lens
Division  of Bausch & Lomb  Incorporated.  Mr.  DiSalvo  is a  Certified  Public
Accountant.


                                       27
<PAGE>

      BEN E. WAIDE  III.  Age 66.  Mr.  Waide has  served as a  Director  of the
Company  since the  Emergence  Date.  Since  1998,  Mr.  Waide has  served as an
Executive  Consultant  to E.I. du Pont de Nemours  and  Company - DuPont  Safety
Resources,  a global workplace consulting firm. From 1995 to 1998, Mr. Waide was
Chairman  and Chief  Executive  Officer of  Atlantic  Aviation  Corporation,  an
aircraft  maintenance  management services company.  Mr. Waide served as General
Manager of the Films  Division of E.I. du Pont de Nemours and Company  from 1990
to 1995.

      CARROLL R.  WETZEL,  JR. Age 61. Mr.  Wetzel has served as Chairman of the
Board of the Company since the Emergence Date. From 1988 to 1996, Mr. Wetzel was
a  Managing  Director  with  the  Mergers  and  Acquisition  Group  of  Chemical
Bank/Chase  Manhattan.  Prior to that,  from  1981 to  1988,  he was a  Managing
Director in Smith Barney's Mergers and Acquisitions Group. From 1976 to 1981, he
worked as an  investment  banker with Dillon,  Read & Co. Inc.  Mr.  Wetzel also
serves on the Board of  Directors  of Laidlaw  International,  Inc.,  a publicly
traded company.

Class III Directors

      JOHN C. COREY. Age 57. Mr. Corey has served as President,  Chief Executive
Officer and Director of the Company since the Emergence Date.  Prior to that, he
had served as  President,  Chief  Operating  Officer and Director of the Company
since March 1999.  Mr. Corey served as  President  of Stanley  Mechanics  Tools,
Inc.,  a division of The Stanley  Works,  a company  engaged in the  business of
manufacturing  and  distributing  mechanics  hand tools,  from September 1996 to
March 1999, where he was responsible for worldwide operations. Mr. Corey is also
a director of Stoneridge,  Inc., a publicly  traded company and  manufacturer of
electronic parts and accessories for motor vehicles.

      AVRAM A.  GLAZER.  Age 44. Mr.  Glazer  has  served as a  Director  of the
Company since January 2004.  Mr. Glazer has been  President and Chief  Executive
Officer of Zapata since March 1995,  Chairman of the Board of Zapata since March
2002 and a director of Zapata since July 1993.  He also serves as a director and
as the  President  and Chief  Executive  Officer of Zap.Com.  Mr. Glazer is also
Chairman  of the Board and a director  of Omega  Protein  Corporation,  a marine
protein company and majority-owned subsidiary of Zapata.

Audit Committee Financial Expert

      The Company's  Board of Directors has determined that the Company does not
have an audit committee  financial expert serving on its audit committee.  Since
the Company's stock is not currently traded on a securities exchange, but rather
on the  Over-The-Counter  Bulletin Board, the Company is not required to have an
audit committee  financial expert. The Board of Directors has determined that it
is not  necessary to appoint an audit  committee  financial  expert at this time
because  the Board  believes  that the  members of the audit  committee  possess
sufficient  experience  and  expertise  with respect to all  relevant  audit and
financial matters.

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>
John C. Corey           57         Director, President and Chief Executive Officer
Brian P. Menezes        52         Vice President and Chief Financial Officer
Stephen B. Duerk        63         Vice President; President, North American Automotive
Vick Crowley            38         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 who are not also directors of the Company:

      BRIAN P.  MENEZES.  Mr.  Menezes  has served as Vice  President  and Chief
Financial  Officer of the Company  since  September  1999.  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


                                       28
<PAGE>

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
since April 1998 and as  President  of Safety  Components  Fabric  Technologies,
Inc., 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, from 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 1998, most
recently as the Vice President of the Industrial Synthetic Group.

      VICK  CROWLEY.  Mr.  Crowley has served as Treasurer of the Company  since
August 2000.  Prior to that, he had served as Assistant  Treasurer with HomeGold
Financial, Inc., of Greenville, South Carolina, a financial services firm, since
1995.

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").  The Code of Business Conduct and Ethics has been filed as
Exhibit 14 to this Annual Report on Form 10-K.  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   at
http://www.safetycomponents.com,  or to file a Form  8-K to  disclose  any  such
amendments or waivers.

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, 2004,  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.


                                       29
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

      The  following  table  summarizes  the  compensation  paid  to  the  Chief
Executive Officer of the Company and the other most highly compensated executive
officers of the Company (each person  appearing in the table is referred to as a
"Named  Executive").  As a result of the Change of Control,  a change of control
occurred for purposes of all contractual change of control provisions  discussed
herein.

                           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                           2004           $353,210         $356,680              --      $  49,748(2)
    President and Chief             Dec 2003 (3)        239,444          256,890              --        995,888(4)(5)
    Executive Officer                   2003            325,000          265,425          46,800         41,978(6)
                                        2002            316,040          231,675         173,200         62,013(7)

Brian P. Menezes                        2004           $214,755         $178,207              --      $  25,931(8)
    Vice President and Chief        Dec 2003 (3)        156,375          128,015              --        408,340(4)(9)
    Financial Officer                   2003            200,450          129,920          27,000         28,125(10)
                                        2002            191,824          123,985          75,000         32,969(11)

Stephen B. Duerk                        2004           $193,130         $ 88,037              --      $  19,488(12)
    Vice President;                 Dec 2003 (3)        144,847           82,724              --         14,002(13)
    President North American            2003            187,500          102,988          21,500         20,036(14)
    Automotive Group                    2002            182,000           80,223          71,000         12,495(15)

Vick Crowley                            2004           $113,875         $ 50,888              --      $   6,450(16)
    Treasurer                       Dec 2003 (3)         82,688           41,705              --          2,848(17)
                                        2003            105,000           45,723           2,000         12,667(18)
                                        2002            100,471           39,250           5,800          5,674(19)
</TABLE>

----------

(1) Grants  reflected  for 2002 and 2003 are options  under the  Company's  2001
Stock Option Plan (the "Option Plan"). As a result of the Change of Control, all
such options became immediately vested.

(2) Amount reflects  $14,056 of life insurance  premiums,  a $14,400  automobile
allowance,  a $5,781  matching  contribution  under the  Company's  401(k) plan,
$1,290  of group  life  insurance  premiums,  $10,708  of  supplemental  medical
reimbursements, and $3,513 of membership dues.

(3)  Following the 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, 2004, March 29, 2003 and
March 30, 2002 each consisted of twelve months of operations.

(4) 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  Change of  Control.  See  "Employment
Agreements - Corey  Agreement" and "Employment  Agreements - Menezes  Agreement"
below.


                                       30
<PAGE>

(5) Includes $14,056 of life insurance premiums, a $10,800 automobile allowance,
$968  of  group  life  insurance  premiums,   $6,029  of  supplemental   medical
reimbursements, and $2,635 of membership dues.

(6) Amount reflects  $14,056 of life insurance  premiums,  a $14,400  automobile
allowance,  a $5,161 matching contribution under the Company's 401(k) plan, $690
of group life insurance premiums, $4,158 of supplemental medical reimbursements,
and $3,513 of membership dues.

(7) Amount reflects  $12,476 of life insurance  premiums,  a $14,400  automobile
allowance,  a $5,312 matching contribution under the Company's 401(k) plan, $570
of  long-term  disability  insurance  premiums,  $690 of  group  life  insurance
premiums,  $9,516  of  supplemental  medical  reimbursements,   and  $19,049  of
membership dues.

(8)  Amount  reflects  a  $14,400  automobile   allowance,   a  $5,781  matching
contribution  under the  Company's  401(k)  plan,  $417 of group life  insurance
premiums, and $5,333 of supplemental medical reimbursements.

(9)  Includes  a $10,800  automobile  allowance,  $330 of group  life  insurance
premiums, and $3,910 of supplemental medical reimbursements.

(10)  Amount  reflects  a  $14,400  automobile  allowance,   a  $4,706  matching
contribution  under the  Company's  401(k)  plan,  $269 of group life  insurance
premiums, and $8,750 of supplemental medical reimbursements.

(11) Amount reflects  $5,394 of life insurance  premiums,  a $13,500  automobile
allowance,  a $5,312 matching contribution under the Company's 401(k) plan, $516
of  long-term  disability  insurance  premiums,  $255 of  group  life  insurance
premiums, and $7,992 of supplemental medical reimbursements.

(12)  Amount  reflects  a  $6,000  automobile   allowance,   a  $5,598  matching
contribution  under the  Company's  401(k)  plan,  $1,140  group life  insurance
premiums, $2,266 of supplemental medical reimbursements and $4,484 of membership
dues.

(13)  Amount  reflects  a  $4,500  automobile   allowance,   a  $3,874  matching
contribution  under  the  Company's  401(k)  plan,  $843  group  life  insurance
premiums, $2,067 of supplemental medical reimbursements and $2,718 of membership
dues.

(14)  Amount  reflects  a  $6,000  automobile   allowance,   a  $5,463  matching
contribution  under  the  Company's  401(k)  plan,  $791  group  life  insurance
premiums, $4,679 of supplemental medical reimbursements and $3,103 of membership
dues.

(15)  Amount  reflects  a  $6,000  automobile   allowance,   a  $3,760  matching
contribution  under the  Company's  401(k)  plan,  $681 of group life  insurance
premiums, $1,356 of supplemental medical reimbursements,  and $698 of membership
dues.

(16) Amount reflects a $4,667 matching  contribution  under the Company's 401(k)
plan, $59 of group life insurance premiums,  and $1,724 of supplemental  medical
reimbursements.

(17) Amount reflects a $2,481 matching  contribution  under the Company's 401(k)
plan, $44 of group life insurance  premiums,  and $323 of  supplemental  medical
reimbursements.

(18) Amount reflects a $2,363 matching  contribution  under the Company's 401(k)
plan, $53 of group life insurance premiums,  and $10,251 of supplemental medical
reimbursements.

(19) Amount reflects a $3,920 matching  contribution  under the Company's 401(k)
plan,  $199 of  long-term  disability  premiums,  $49 of  group  life  insurance
premiums, and $1,506 of supplemental medical reimbursements.

Option Grants in Last Fiscal Year

      There were no options to  purchase  our common  stock  granted  during the
fiscal year ended December 31, 2004 to the Named Executives.


                                       31
<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  exercisable and unexercisable options held as of December
31, 2004. The value of unexercised, in-the-money options at December 31, 2004 is
the  difference  between the  exercise  price and the fair  market  value of the
underlying stock on December 30, 2004 (the last trading day of the fiscal year).
All options were  in-the-money  as of December  31,  2004,  based on the closing
sales price of the  Company's  common stock at December 30, 2004,  of $13.75 per
share.

<TABLE>
<CAPTION>
                                                                  Number of
                                                            Securities Underlying              Value of Unexercised
                                                           Unexercised Options at            In-the-Money Options at
                          Shares            Value             December 31, 2004                  December 31, 2004
                        Acquired on       Realized      ---------------------------    ------------------------------------
Name                   Exercise (#)        ($)(1)       Exercisable   Unexercisable    Exercisable ($)    Unexercisable ($)
----------------       ------------        ------       -----------   -------------    ---------------    -----------------
<S>                        <C>            <C>             <C>                <C>          <C>                  <C>
John C. Corey               7,100          51,759         212,900            --           $1,188,068           $  --

Brian P. Menezes               --              --         102,000            --              585,480              --

Stephen B. Duerk           92,500         752,355              --            --                   --              --

Vick Crowley                7,800          74,766              --            --                   --              --
</TABLE>

----------

(1)   The  value  realized  is  calculated  based on the  amount  by  which  the
      aggregate  market price,  on the date 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.

Employment Agreements

  Corey Agreement

      Mr.  Corey  currently  serves as  President  and Chief  Executive  Officer
pursuant to an employment  agreement with the Company which became effective May
18, 2001 (with subsequent amendments) and replaced all prior agreements with Mr.
Corey.  The  employment  agreement  provides  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  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,  in the event of a change of control (as defined) while
he is still employed with the Company or under certain  circumstances  following
his termination of employment  other than for Cause (as defined) or by reason of
a Constructive Termination (as defined), he will be entitled to a one-time bonus
of $961,400 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
Change of Control,  a change of control  occurred for purposes of the employment
agreement and this bonus was paid to Mr. Corey in 2003.

      Pursuant to the employment agreement,  Mr. Corey received, upon execution,
options to  purchase  173,200  shares of the  Company's  common  stock under the
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 of common  stock 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 of the Company  had not  occurred by April 1,
2002, Mr. Corey received, 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).


                                       32
<PAGE>

      If Mr.  Corey's  employment  is  terminated  by the Company  other than by
reason of death or  Disability  (as  defined) or for Cause or if the  employment
agreement is  terminated  by him by reason of a  Constructive  Termination,  the
Company shall pay 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; in the event such termination had occurred before October
31, 2001, then the foregoing 24 month period and corresponding  dollar amount of
severance and non-competition payment would have been increased by one month for
each calendar month by which such termination  preceded November 1, 2001. If Mr.
Corey's  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 is initially offered and accepts the 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.  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;  in the event such termination had occurred on or before
October 31, 2001,  then the foregoing 24 month period and  corresponding  dollar
amount of severance and non-competition payment would have been increased by one
month for each calendar  month by which such  termination  preceded  November 1,
2001. All cash payments and health care continuation payments shall cease in the
event of  competitive  employment.  Such  payments  shall be mitigated by 50% of
"severance  period  earnings" in the event of  non-competitive  employment  with
annual  compensation  up to $100,000 and shall cease  altogether in the event of
such annual compensation exceeding $100,000.

   Menezes Agreement

      Mr. Menezes currently serves as Vice President and Chief Financial Officer
pursuant to an employment  agreement with the Company which 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)
while  he is still  employed  by the  Company  or  under  certain  circumstances
following his termination of employment  other than for Cause (as defined) or by
reason of a  Constructive  Termination  (as  defined),  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 Change of Control,  a change of control occurred for purposes of
the employment agreement and this bonus was paid to Mr. Menezes in 2003.

      Pursuant  to  the  employment  agreement,   Mr.  Menezes  received,   upon
execution, options to purchase 75,000 shares of the Company's common stock under
the  Company's  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 of common stock 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.

      If Mr.  Menezes'  employment  is  terminated  by the Company other than by
reason of death or  Disability  (as  defined) 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  mitigated  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.


                                       33
<PAGE>

   Duerk Agreement

      Mr. Duerk currently  serves as Vice President of the Company and President
of the North American Automotive Group pursuant to an employment agreement which
became effective May 18, 2001 (with subsequent amendment) and replaced all prior
agreements  with Mr. Duerk.  The employment  agreement  provided 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.

      If Mr.  Duerk's  employment  is  terminated  by the Company  other than by
reason of death or  Disability  (as defined) or for Cause (as defined) or if the
employment   agreement  is  terminated  by  him  by  reason  of  a  Constructive
Termination  (as  defined),  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)  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  mitigated  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.

   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.

Management Incentive Plan

      Messrs.  Corey,  Menezes,  Duerk and Crowley each received bonuses for the
year ended  December  31,  2004 under the  Management  Incentive  Plan.  See the
Summary  Compensation Table and " - Employment  Agreements" above for additional
information concerning the Management Incentive Plan.

Severance Program

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

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 Mr.  Wetzel as Board  Chairman and an  additional  $5,000 each for committee
chairmen. They also each receive attendance fees ranging from $500 to $1,250 for
attendance at Board and committee  meetings  attended by telephone or in person.
Finally,  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.


                                       34
<PAGE>

      Each  non-employee  director then holding office  received an option grant
under the Option Plan immediately  following its approval by the stockholders on
April 27, 2001 (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 is 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 is the per share price determined to be their fair market value as
of the date of grant ($6.71 per share). As a result of the Change of Control,  a
change of control  occurred  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

      During the last completed fiscal year, Messrs.  DiSalvo,  Goldfarb,  Waide
and Wetzel  served as the  Company's  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.

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, 2005,  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.

<TABLE>
<CAPTION>
                                                        Amount and Nature of         Percent of
       Name and Address of Beneficial Owner             Beneficial Ownership      Common Stock (1)
-----------------------------------------------------------------------------------------------------
<S>                                                            <C>                     <C>
Zapata Corporation                                             4,162,394               78.2%
     100 Meridian Centre, Suite 350
     Rochester, New York 14618
Ramius Capital Group, LLC and related parties (2)                309,380                5.8%
     666 Third Avenue, 26th Floor
     New York, New York 10017

                  Officers and Directors
John C. Corey (3)(4)                                             212,900                3.8%
Leonard DiSalvo (5)                                                   --                  *
Avram A. Glazer (5)                                                   --                  *
Andy Goldfarb (3)                                                 15,000                  *
W. Allan Hopkins (3)                                              15,000                  *
Ben E. Waide III (3)(4)                                           15,000                  *
Carroll R. Wetzel, Jr. (3)                                        20,014                  *
Brian P. Menezes (3)(4)                                          102,000                1.9%
Stephen B. Duerk (3)                                                   3                  *
Vick Crowley (3)                                                      --                  *

All executive officers and directors as a group                  379,917                6.7%
     (consisting of 10 individuals)
</TABLE>

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

(1) Shares beneficially owned, as recorded in this table, expressed as a
percentage of the 5,320,147 shares of common stock outstanding on March 1, 2005


                                       35
<PAGE>

(2) The information  shown is as of March 29, 2004 and is based upon information
disclosed  by Ramius  Capital  Group,  LLC,  RCG  Carpathia  Master  Fund,  Ltd.
("Carpathia"),   SPhinX   Distressed  (RCG  Carpathia),   Segregated   Portfolio
("SPhinX"), 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 filed  with the SEC on April 6,  2004 (the  "Ramius
13G"),  which indicates that each of these reporting persons has shared power to
vote and to dispose,  or direct the disposition of, these shares. The Ramius 13G
also indicates that as of the date of its filing, each of these reporting person
may be deemed the  beneficial  owner of (i) 278,509 shares of common stock owned
by Carpathia,  (ii) 10,871 shares of common stock owned by SPhinX,  a segregated
account of SPhinX Distressed Fund SPC, (the "Fund"),  and (iii) 20,000 shares of
common stock owned by Ramius  Securities.  The Ramius 13G filing  further states
that:  (i) the Fund is an index fund which invests in various  securities,  (ii)
SPhinX is managed by Ramius,  (iii) Ramius is the  investment  advisor of SPhinX
and  Carpathia  and has the power to direct  some of the  affairs  of SPhinX and
Carpathia,  including decisions  respecting the disposition of the proceeds from
the sale of shares of the  common  stock,  (iv)  Ramius  Securities  is a broker
dealer  affiliated with Ramius,  (v) C4S is the managing member of Ramius and in
that capacity directs its operations,  and (vi) 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.

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

(4) Includes  212,900  shares for Mr. Corey,  15,000  shares for Mr. Waide,  and
102,000 shares for Mr. Menezes  underlying  currently  exercisable stock options
under the Option Plan.

(5) Mr.  Glazer is the  Chairman  of the Board of Zapata and its  President  and
Chief  Executive  Officer.  Mr. DiSalvo is Zapata's Vice President - Finance and
Chief Financial Officer. Each of Mr. Glazer and Mr. DiSalvo disclaims beneficial
ownership of all shares held by Zapata.  The address of each of these persons is
c/o Zapata  Corporation,  100 Meridian Centre,  Suite 350,  Rochester,  New York
14618.

Equity Compensation Plan Information

      The Company has one equity  compensation plan, the Option Plan, which is a
shareholder  approved  plan.  As of  December  31,  2004,  the number of options
outstanding and remaining available under the 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                 354,200                  $      8.14                  209,700

Equity compensation
    plans not approved
    by security holders                   --                           --                       --
                                     -------                                               -------

Total                                354,200                                               209,700
</TABLE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Since the  beginning  of the  Company's  last fiscal  year,  except as may
otherwise  be  described  herein,  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.


                                       36
<PAGE>

      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 is  required  to pay Zapata its share of federal  income
taxes, if any. 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 $675,000 to Zapata in
2004 for taxes related to 2003.  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 will 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 will
be consolidated  into Zapata's tax filing group for the fourth calendar  quarter
of 2003 and the first  calendar  quarter of 2004.  Information  regarding  other
transactions that have occurred involving Zapata can be found under "The Company
- Change of Control"  in Item 1 above.  One of our  directors,  Mr.  Glazer,  is
President and Chief Executive Officer of Zapata and the Chairman of its Board of
Directors.  Another director,  Mr. DiSalvo,  is Vice  President-Chief  Financial
Officer of Zapata.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

      The fees billed in the  transition  period  consisting  of the nine months
ended  December  31,  2003 and in the fiscal  year ended  December  31, 2004 for
PricewaterhouseCoopers LLP's services to the Company were:

                                   Nine Month Period             Year ended
                                 ended December 31, 2003      December 31, 2004
                                 -----------------------      -----------------
            Audit Fees .............     $324,000                  $749,000

            Audit-Related Fees .....       54,000                    45,000

            Tax Fees ...............           --                     2,500

            All Other Fees .........           --                        --

            Total Fees .............     $378,000                  $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;

            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 include fees
                  related to services  provided in connection with the Change of
                  Control;

            o     "tax  fees"  are fees  billed  by the  independent  registered
                  public  accounting  firm  for  professional  services  for tax
                  compliance,  tax advice,  and tax  planning;  and includes tax
                  advice.

            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 pre-approval of all audit and non-audit  services  provided by its
independent  registered  public accounting firm. The policy requires the


                                       37
<PAGE>

general pre-approval of annual audit services, general pre-approval of all other
permitted  services up to specified  dollar limits and specific  pre-approval of
all other permitted services.  In determining  whether to pre-approve  permitted
services,  the Audit  Committee  considers  whether such services are consistent
with SEC rules and  regulations.  Furthermore,  requests  for  pre-approval  for
services that are eligible for general  pre-approval  must be detailed as to the
services to be provided.  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.


                                       38
<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)

            2.2     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.  (incorporated  by reference to Exhibit
                    3.5 to the Company's  Quarterly  Report on Form 10-Q for the
                    quarter ended October 10, 2000)

            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)

            4.2     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    Form of Master Equipment Lease  Agreement,  dated as of July
                    10,  1998,  between  KeyCorp  Leasing,  a  division  of  Key
                    Corporate Capital Inc. and Safety Components  International,
                    Inc.,  including  Security  Agreement dated July 10, 1998 by
                    and  between  Safety  Components  International,   Inc.  and
                    KeyCorp Leasing  (incorporated  by reference to Exhibit 10.7
                    to the  Company's  Quarterly  Report  on Form  10-Q  for the
                    quarter ended September 26, 1998)

            10.2    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)  (incorporated by
                    reference to Exhibit 10.68 to the Company's Quarterly Report
                    on Form 10-Q for the quarter ended October 10, 2000)

            10.3    Subordinated  Secured Credit  Agreement  dated as of October
                    11,  2000,  by and among  Safety  Components  International,
                    Inc.,  the  subsidiaries  named  therein  as  Borrowers  and
                    Guarantors,  KeyBank  National  Association  ("KeyBank") and
                    Fleet Bank, as lenders,  and KeyBank as administrative agent
                    (incorporated by reference to Exhibit 10.69 to the Company's
                    Quarterly  Report on Form 10-Q for the quarter ended October
                    10, 2000)

            *10.4   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)

            *10.5   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


                                       39
<PAGE>

                    Form 10-K for the fiscal year ended March 31, 2001)

            *10.6   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)

            *10.7   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)

            *10.8   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)

            *10.9   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)

            *10.10  Safety Components  International,  Inc.  Executive  Deferral
                    Program  (incorporated  by reference to Exhibit 10.17 to the
                    Company's  Quarterly  Report  on Form  10-Q for the  quarter
                    ended September 29, 2001)

            *10.11  Amendment No. 1 to the Safety Components International, Inc.
                    Executive  Deferral  Program  (incorporated  by reference to
                    Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q
                    for the quarter ended September 29, 2001)

            *10.12  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)

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

            10.14   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)  (incorporated  by reference to Exhibit  10.14 to
                    the Company's  Quarterly Report on Form 10-Q for the quarter
                    ended December 29, 2001)

            10.15   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)

            10.16   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)

            *10.17  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)

            10.18   Amendment No. 1 to  Subordinated  Secured  Credit  Agreement
                    dated as of October 11, 2002, by and among Safety Components
                    International,  Inc.,  the  subsidiaries  named  therein  as
                    Borrowers  and  Guarantors,   KeyBank  and  Fleet  Bank,  as
                    lenders, and KeyBank as administrative agent.  (incorporated
                    by reference  to Exhibit  10.26 to the  Company's  Quarterly
                    Report  on Form 10-Q for the  quarter  ended  September  28,
                    2002)

            10.19   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)  (incorporated  by reference to Exhibit  10.27 to
                    the Company's  Quarterly Report on Form 10-Q for the quarter
                    ended September 28, 2002)


                                       40
<PAGE>

            10.20   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)  (incorporated  by reference to Exhibit  10.29 to
                    the Company's  Quarterly Report on Form 10-Q for the quarter
                    ended September 27, 2003)

            10.21   Form of  Indemnification  Agreement  by and  between  Safety
                    Components International, Inc., Automotive Safety Components
                    International,  Inc., Safety Components Fabric Technologies,
                    Inc., and certain  officers and directors  (incorporated  by
                    reference to Exhibit 10.30 to the Company's Quarterly Report
                    on Form 10-Q for the quarter ended September 27, 2003)

            *10.22  Safety  Components  International,  Inc.  Nine Months Ending
                    December  31,  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)

            *10.23  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)

            *10.24  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)

            *10.25  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)

            10.26   Amendment   No.  1,  dated  October  8,  2003,  to  Security
                    Agreement  dated  July  10,  1998,  by  and  between  Safety
                    Components   International,   Inc.   and   KeyCorp   Leasing
                    (incorporated by reference to Exhibit 10.26 to the Company's
                    Annual  Report  on Form  10-K  for  the  fiscal  year  ended
                    December 31, 2003)

            10.27   Tax sharing and  indemnity  agreement  dated as of March 19,
                    2004  between  Zapata   Corporation  and  Safety  Components
                    International,  Inc.  (incorporated  by reference to Exhibit
                    10.27 to the  Company's  Annual  Report on Form 10-K for the
                    fiscal year ended December 31, 2003)

            10.28   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)  (incorporated
                    by reference  to Exhibit  10.28 to the  Company's  Quarterly
                    Report on Form 10-Q for the quarter ended June 30, 2004)

            10.29   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)  (incorporated  by reference to Exhibit  10.29 to
                    the Company's  Quarterly Report on Form 10-Q for the quarter
                    ended September 30, 2004)

            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

            23.2    Consent of Deloitte & Touche 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

            32.1    Certification of CEO Pursuant to 18 U.S.C.  Section 1350, as
                    Adopted Pursuant to Section 906 of the


                                       41
<PAGE>

                    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


                                       42
<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/ John C. Corey
                                                 -----------------
                                                 John C. Corey
                                                 Chief Executive Officer
                                                 and President

                                           Date: March 10, 2005

      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/ John C. Corey                    Chief Executive Officer,                    March 10, 2005
---------------------------          President and Director
John C. Corey

/s/ Carroll R. Wetzel, Jr.           Director, Chairman of the Board             March 10, 2005
---------------------------
Carroll R. Wetzel, Jr.

/s/ Brian P. Menezes                 Vice President, Chief Financial             March 10, 2005
---------------------------          Officer
Brian P. Menezes

/s/ William F. Nelli                 Controller                                  March 10, 2005
---------------------------
William F. Nelli

/s/ Ben E. Waide III                 Director                                    March 10, 2005
---------------------------
Ben E. Waide III

/s/ W. Allan Hopkins                 Director                                    March 10, 2005
---------------------------
W. Allan Hopkins

/s/ Andy Goldfarb                    Director                                    March 10, 2005
---------------------------
Andy Goldfarb

/s/ Leonard DiSalvo                  Director                                    March 10, 2005
---------------------------
Leonard DiSalvo

/s/ Avram A. Glazer                  Director                                    March 10, 2005
---------------------------
Avram A. Glazer
</TABLE>


                                       43
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                        Page
<S>                                                                                      <C>
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING                        F-2

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS:
         PRICEWATERHOUSECOOPERS LLP                                                      F-3
         DELOITTE & TOUCHE LLP                                                           F-5

CONSOLIDATED FINANCIAL STATEMENTS:

     Consolidated Balance Sheets as of December 31, 2004 and December 31, 2003           F-6

     Consolidated Statements of Operations for the Year ended December 31, 2004,
        the period from March 30, 2003 to December 31, 2003, and
        the Year ended March 29, 2003                                                    F-7
     Consolidated Statements of Stockholders' Equity for the Year ended
        December 31, 2004, the period from March 30, 2003 to December 31, 2003, and
        the Year ended March 29, 2003                                                    F-8

     Consolidated Statements of Cash Flows for the Year ended December 31, 2004,
        the period from March 30, 2003 to December 31, 2003, and
        the Year ended March 29, 2003                                                    F-9

     Notes to Consolidated Financial Statements                                          F-10

SUPPLEMENTAL SCHEDULE:

II  Valuation and Qualifying Accounts
</TABLE>


                                      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.

      The  Company's  management  assessed the  effectiveness  of the  Company's
internal  control over  financial  reporting as of December 31, 2004.  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,
2004, 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, 2004 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 an integrated audit of Safety Components International, Inc.'s
2004  consolidated  financial  statements  and  of  its  internal  control  over
financial  reporting  as  of  December  31,  2004  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 schedule

In our opinion, the 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, 2004 and 2003,  and the results of their  operations  and their
cash flows for the year ended December 31, 2004 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 and  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 above on page F-2, that
the Company maintained effective internal control over financial reporting as of
December 31, 2004 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,
2004, based on criteria  established in Internal Control - Integrated  Framework
issued  by  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 10, 2005


                                      F-4
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Safety Components International, Inc.
Greenville, South Carolina

We have audited the accompanying consolidated statements of operations of Safety
Components  International,  Inc. and subsidiaries  (the "Company),  for the year
ended March 29, 2003 and the related  consolidated  statements of  stockholders'
equity  and cash flows for the year then  ended.  Our audit  also  included  the
consolidated  financial  statement  schedule  for the year ended  March 29, 2003
listed in the Index as Supplemental  Schedule II. 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 audit.

We  conducted  our audit in  accordance  with  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 includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the results of the Company's  operations and cash flows for
the year  ended  March  29,  2003,  in  conformity  with  accounting  principles
generally accepted in the United States of America.  Also, in our opinion,  such
financial  statement schedule for the year ended March 29, 2003, when considered
in relation to the basic  consolidated  financial  statements  taken as a whole,
presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the consolidated  financial  statements,  on March 31,
2002,  the Company  changed its method of  accounting  for  goodwill  (including
reorganization  value in excess of amounts allocable to identifiable  assets) to
conform to Statement of Financial  Accounting  Standards No. 142,  "Goodwill and
Other Intangible Assets".

DELOITTE & TOUCHE LLP

Greenville, South Carolina
June 6, 2003


                                      F-5
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                (in thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                                              December 31, 2004   December 31, 2003
                                                                                              -----------------   -----------------
<S>                                                                                               <C>                <C>
ASSETS

Current assets:
     Cash and cash equivalents ...............................................................    $      4,184       $      4,376
     Accounts receivable, net ................................................................          39,272             37,109
     Inventories, net ........................................................................          26,882             23,552
     Assets held in deferred compensation plan ...............................................           4,361              3,345
     Prepaid and other .......................................................................           2,653              2,476
                                                                                                  ------------       ------------
          Total current assets ...............................................................          77,352             70,858

Property, plant and equipment, net ...........................................................          48,449             50,428
Identifiable intangible assets, net ..........................................................           1,108              1,172
Other assets .................................................................................             617                868
                                                                                                  ------------       ------------
          Total assets .......................................................................    $    127,526       $    123,326
                                                                                                  ============       ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable ........................................................................    $     16,828       $     24,419
     Accrued salaries and benefits ...........................................................           4,270              3,505
     Deferred compensation ...................................................................           3,666              2,832
     Accrued and other current liabilities ...................................................           4,486              4,245
     Income taxes payable ....................................................................           6,715              4,477
     Current portion of long-term debt .......................................................           3,263              4,214
                                                                                                  ------------       ------------
          Total current liabilities ..........................................................          39,228             43,692

Long-term debt, net of current maturities ....................................................           3,729             11,817
Deferred income taxes ........................................................................           3,635              3,511
Other long-term liabilities ..................................................................             277                277
                                                                                                  ------------       ------------
          Total liabilities ..................................................................          46,869             59,297
                                                                                                  ------------       ------------

Commitments and contingencies

Minority interest ............................................................................             133                 --

Stockholders' equity:
     Preferred stock: 5,000,000 shares authorized and unissued ...............................              --                 --
     Common stock:  $.01 par value per share - 20,000,000 shares authorized; 5,295,778 and
         5,037,478 shares outstanding at December 31, 2004 and December 31, 2003, respectively              53                 51
     Additional paid-in-capital ..............................................................          54,660             52,865
     Treasury stock:  40,322 shares at cost ..................................................            (411)              (411)
     Retained earnings .......................................................................          12,904              2,656
     Accumulated other comprehensive income ..................................................          13,318              8,868
                                                                                                  ------------       ------------
          Total stockholders' equity .........................................................          80,524             64,029
                                                                                                  ------------       ------------
          Total liabilities and stockholders' equity .........................................    $    127,526       $    123,326
                                                                                                  ============       ============
</TABLE>

                 See notes to consolidated financial statements


                                      F-6
<PAGE>

            SAFETY COMPONENTS INTERNATIONAL , INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                     (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                      Period from
                                                                                   Year Ended     March 30, 2003 to     Year Ended
                                                                               December 31, 2004  December 31, 2003   March 29, 2003
                                                                                (Twelve Months)     (Nine Months)    (Twelve Months)
                                                                               -----------------  -----------------   --------------
<S>                                                                              <C>                <C>               <C>
Net sales ..................................................................     $    247,883       $    183,666      $    244,338
Cost of sales, excluding depreciation ......................................          199,841            149,479           204,656
Depreciation ...............................................................           11,296              8,089             9,662
                                                                                 ------------       ------------      ------------
        Gross profit .......................................................           36,746             26,098            30,020

Selling and marketing expenses .............................................            3,156              2,239             2,176
General and administrative expenses ........................................           16,438             10,432            12,299
Research and development expenses ..........................................            1,540              1,225             1,242
Amortization of intangible assets ..........................................              153                106               124
Compensation expense associated with change of control .....................               --              2,797                --
                                                                                 ------------       ------------      ------------
        Income from operations .............................................           15,459              9,299            14,179

Other income, net ..........................................................           (1,467)            (2,275)           (3,446)
Interest expense ...........................................................              946              1,664             3,616
                                                                                 ------------       ------------      ------------
        Income from continuing operations before income taxes
         and minority interest .............................................           15,980              9,910            14,009

Provision for income taxes .................................................            5,771              3,808             6,120
Minority interest in loss of consolidated subsidiary .......................              (39)                --                --
                                                                                 ------------       ------------      ------------
        Income from continuing operations .................................            10,248              6,102             7,889

Loss on disposition of discontinued operations, net of income tax
  provision of $0, $0 and $660, respectively ...............................               --                 --             2,023
                                                                                 ------------       ------------      ------------
        Income before cumulative effect of change in method of accounting ..           10,248              6,102             5,866

Cumulative effect of change in method of accounting ........................               --                 --           (14,651)
                                                                                 ------------       ------------      ------------
Net income (loss) ..........................................................     $     10,248       $      6,102      $     (8,785)
                                                                                 ============       ============      ============

Net income (loss) per common share, basic:
        Income from continuing operations ..................................     $       1.97       $       1.23      $       1.59
        Loss on disposition of discontinued operations .....................               --                 --             (0.41)
        Cumulative effect of change in method of accounting ................               --                 --             (2.95)
                                                                                 ------------       ------------      ------------
Net income (loss) per common share, basic ..................................     $       1.97       $       1.23      $      (1.77)
                                                                                 ============       ============      ============

Net income (loss) per common share, diluted:
        Income from continuing operations ..................................     $       1.94       $       1.19      $       1.59
        Loss on disposition of discontinued operations .....................               --                 --             (0.41)
        Cumulative effect of change in method of accounting ................               --                 --             (2.95)
                                                                                 ------------       ------------      ------------
Net income (loss) per common share, diluted ................................     $       1.94       $       1.19      $      (1.77)
                                                                                 ============       ============      ============

Weighted average number of shares outstanding, basic .......................            5,206              4,973             4,960
                                                                                 ============       ============      ============

Weighted average number of shares outstanding, diluted .....................            5,294              5,119             4,960
                                                                                 ============       ============      ============
</TABLE>

                See notes to consolidated financial statements.


                                      F-7
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                         (in thousands, except shares)

<TABLE>
<CAPTION>

                                                                                        Common      Common      Common    Additional
                                                                                        Stock       Stock       Stock      Paid-in
                                                                                        Shares      Amount     Warrants    Capital
                                                                                      ---------   ---------   ---------   ----------
<S>                                                                                   <C>         <C>         <C>         <C>
Balance at March 30, 2002 ......................................................      4,959,678          50          34      50,916
   Comprehensive income for the year ended March 29, 2003:
       Net loss ................................................................             --          --          --          --
       Foreign currency translation adjustment .................................             --          --          --          --

   Net comprehensive loss ......................................................             --          --          --          --
                                                                                      ---------   ---------   ---------   ---------
Balance at March 29, 2003 ......................................................      4,959,678          50          34      50,916
   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
                                                                                      =========   =========   =========   =========
   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
                                                                                      =========   =========   =========   =========

<CAPTION>
                                                                                               Retained     Accumulated
                                                                                  Treasury     Earnings        Other
                                                                                    Stock    (Accumulated  Comprehensive
                                                                                    Amount      Deficit)   (Loss) Income    Total
                                                                                  ---------  ------------  -------------  ---------
<S>                                                                               <C>          <C>            <C>         <C>
Balance at March 30, 2002 ......................................................       (411)       5,339            (90)     55,838
   Comprehensive income for the year ended March 29, 2003:
       Net loss ................................................................         --       (8,785)            --      (8,785)
       Foreign currency translation adjustment .................................         --           --          4,860       4,860
                                                                                                                          ---------
   Net comprehensive loss ......................................................         --           --             --      (3,925)
                                                                                  ---------    ---------      ---------   ---------
Balance at March 29, 2003 ......................................................       (411)      (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 ...................................................  $    (411)   $   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 ...................................................  $    (411)   $  12,904      $  13,318   $  80,524
                                                                                  =========    =========      =========   =========
</TABLE>

                See notes to consolidated financial statements.


                                      F-8
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                Period from
                                                                             Year Ended      March 30, 2003 to      Year Ended
                                                                         December 31, 2004   December 31, 2003     March 29, 2003
                                                                          (Twelve Months)      (Nine Months)       (Twelve Months)
                                                                         -----------------   -----------------     --------------
<S>                                                                          <C>                 <C>                 <C>
Cash Flows From Operating Activities:
  Net income (loss) ...................................................      $   10,248          $    6,102          $   (8,785)
  Loss on disposition of discontinued operations ......................              --                  --               2,023
  Cumulative effect of accounting change ..............................              --                  --              14,651
                                                                             ----------          ----------          ----------
  Income from continuing operations ...................................          10,248               6,102               7,889
  Adjustments to reconcile income from continuing
        operations to net cash provided by operating activities:
      Depreciation ....................................................          11,296               8,089               9,662
      Amortization of intangible assets ...............................             153                 106                 124
      Provision for bad debts .........................................             447                  29                 295
      Loss on disposition of assets ...................................             283                 541                 271
      Minority interest ...............................................             133                  --                  --
      Deferred taxes ..................................................            (277)               (931)              1,591
      Tax benefit from exercise of stock options ......................             525                  76                  --
      Accretion of interest on current obligations ....................              --                  --                  81
      Non-cash charge associated with change of control ...............              --               1,404                  --
      Changes in operating assets and liabilities:
       Accounts receivable ............................................          (2,610)              6,744              (9,121)
       Inventories ....................................................          (3,329)                446              (7,225)
       Prepaid and other current assets ...............................              93                (480)                 97
       Other non-current assets .......................................            (634)             (1,319)               (677)
       Accounts payable ...............................................          (7,591)             (2,294)              8,196
       Income taxes payable ...........................................           2,238               1,874               1,198
       Deferred compensation ..........................................             834               2,099                 268
       Accrued and other liabilities ..................................           1,561                (540)               (541)
                                                                             ----------          ----------          ----------
       Net cash provided by continuing operations .....................          13,370              21,946              12,108
       Net cash provided by discontinued operations ...................              --                  --                 812
                                                                             ----------          ----------          ----------
       Net cash provided by operating activities ......................          13,370              21,946              12,920
                                                                             ----------          ----------          ----------

Cash Flows From Investing Activities:
      Purchases of property, plant and equipment ......................          (6,547)             (2,594)             (7,916)
      Proceeds on disposition of assets ...............................              --                  --                 454
                                                                             ----------          ----------          ----------
       Net cash used in continuing operations .........................          (6,547)             (2,594)             (7,462)
       Net cash provided by discontinued operations ...................              --                  --                  26
                                                                             ----------          ----------          ----------
       Net cash used in investing activities ..........................          (6,547)             (2,594)             (7,436)
                                                                             ----------          ----------          ----------

Cash Flows From Financing Activities:
      Repayment of KeyBank Subordinated Secured term note .............              --              (9,202)             (9,731)
      (Repayment of) proceeds from Congress term note .................          (2,127)              1,604              (2,347)
      Net (repayments) borrowings on Congress revolving
        credit facility ...............................................          (4,523)            (12,085)             16,713
      Repayment of Deutsche Bank Mortgage .............................              --              (2,014)               (209)
      Payment to former owner of acquired business ....................              --                  --              (2,327)
      Repayments of other debt and long term obligations ..............          (3,400)             (2,023)             (2,758)
      Proceeds from issuance of common stock ..........................           1,270                 511                  --
                                                                             ----------          ----------          ----------
       Net cash used in continuing operations .........................          (8,780)            (23,209)               (659)
       Net cash used in discontinued operations .......................              --                  --                  --
                                                                             ----------          ----------          ----------
       Net cash used in financing activities ..........................          (8,780)            (23,209)               (659)
                                                                             ----------          ----------          ----------
Effect of exchange rate changes on cash and cash equivalents ..........           1,765                 669                  47
                                                                             ----------          ----------          ----------
Change in cash and cash equivalents ...................................            (192)             (3,188)              4,872
Cash and cash equivalents, beginning of period ........................           4,376               7,564               2,692
                                                                             ----------          ----------          ----------
Cash and cash equivalents, end of period ..............................      $    4,184          $    4,376          $    7,564
                                                                             ==========          ==========          ==========

Supplemental disclosure of cash flow information:
  Cash paid during the period for:
      Interest ........................................................      $      547          $    1,305          $    3,056
      Income taxes ....................................................           2,908               2,877               3,732

Supplemental disclosure of non-cash investing activity:
  Equipment acquired under capital lease obligations ..................             553                  --               1,086
</TABLE>

                See notes to consolidated financial statements.


                                      F-9
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 and Europe.

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.

      The Plan was  accounted  for  pursuant  to  Statement  of  Position  90-7,
"Financial  Reporting by Entities in  Reorganization  Under the Bankruptcy Code"
("SOP 90-7"),  issued by the American Institute of Certified Public Accountants.
The accompanying  consolidated  financial  statements  reflect the use of "fresh
start"  reporting as required by SOP 90-7.  Under "fresh start"  reporting,  the
Company's  assets and  liabilities  were  adjusted to estimated  fair values and
resulted in the creation of a new reporting entity (the "Reorganized Company" or
the "Company")  with no retained  earnings or accumulated  deficit as of October
11, 2000. In conjunction with the revaluation of the assets and  liabilities,  a
reorganization  value for the entity was determined  based upon the  approximate
fair value of the entity  before  considering  debt  requirements.  Under "fresh
start"  reporting,  the  reorganization  value of the entity is allocated to the
entity's assets and liabilities.  The portion of the  reorganization  value that
cannot be attributed to specific tangible or identified intangible assets of the
Reorganized  Company is  reported as  "reorganization  value in excess of amount
allocable to identifiable assets."

Change of Control

      On September 29, 2003, Zapata Corporation ("Zapata",  NYSE: "ZAP") filed a
Schedule 13D with the 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 "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 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.  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,  representing  126,900 options,  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 one-time, non-recurring bonus payable in the event of
a  change  of  control.  The  aggregate  bonus  was  $1.4  million  and was also
recognized as an expense in 2003.


                                      F-10
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      Following the 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 will 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 will be 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 Change of Control has been approved.  The
Company does not expect any material  financial impact to result from the change
in its tax filing status.

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  and other
subsidiaries  controlled  by the Company.  The  ownership of the other  interest
holders of consolidated  subsidiaries  is reflected as minority  interest and is
not significant.  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,
allowances  for deferred tax assets,  reserves for  discontinued  operations and
assessment of asset impairment.  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.


                                      F-11
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal year

      Following the 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, 2004 to December 31, 2004 and March 31, 2002 to March 29,
2003 each consisted 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
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 (loss)
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, 2004,  the Company had no  outstanding  forward  exchange
contracts.  On December 31, 2003 the Company had  outstanding  forward  exchange
contracts to purchase  Mexican Pesos and Czech Korunas that met the requirements
of SFAS No. 133 and were  accounted  for as qualifying  hedges.  See Note 12 for
further information  regarding derivative  instruments entered into and executed
during the twelve months ended  December 31, 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,  2004,  three  customers  accounted  for
approximately 36%, 11% and 10% of its trade  receivables.  At December 31, 2003,
these same three customers  accounted 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.

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


                                      F-12
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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:

<TABLE>
<S>                                                                         <C>
                Machinery and equipment ..........................          4 - 10 years
                Furniture and fixtures ...........................          3 - 5 years
                Buildings ........................................          25 - 40 years
                Leasehold improvements ...........................          Lesser of useful life or lease term
</TABLE>

      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 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.

Intangible assets

      At December 31, 2004, intangible assets consist of certain Company patents
revalued at the "fresh  start" date to fair value.  Such  patents are  amortized
over  estimated  lives  between  15 and 20 years.  Accumulated  amortization  at
December 31, 2004 and December 31, 2003 was approximately $544,000 and $391,000,
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 fair value of the  assets.  When the 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 intangible assets.

      The  adoption of SFAS No. 142,  "Goodwill  and Other  Intangible  Assets",
required  the  Company to  perform an  impairment  assessment  of the  Company's
"reorganization  value in excess of amounts  allocable to  identifiable  assets"
arising  from the  valuation  performed  upon its  emergence  from Chapter 11 in
October 2000 ("excess  reorganization  value"),  and  goodwill,  as of March 31,
2002. Under the transition guidance of SFAS No. 142, the Company was required to
perform its initial impairment  evaluation within six months of adopting the new
standard,  and any impairment  charges were to be retroactively  recorded in the
first quarter of the Company's fiscal year. Other identifiable intangible assets
of the  Company  consist of patents  that  continue to be  amortized  over their
estimated  useful lives. In accordance  with SFAS No. 142, the Company  compared
the book value of the Company's net assets,  including the excess reorganization
value and  goodwill,  to the  Company's  fair  value as of March 31,  2002.  The
Company estimated its fair value using the following methodologies: a discounted
cash flows approach,  relative market multiples for comparable  businesses and a
market approach based on the Company's total market capitalization.  Because the
fair value was lower than the book value of the  Company's  net  assets,  excess
reorganization   value  and  goodwill   were   determined  to  be  impaired  and
accordingly,  the carrying value of such assets  (approximately $14.7 million at
March 31, 2002) was charged to earnings as the cumulative  effect of a change in
method of accounting  effective  March 31, 2002.  There was no tax effect of the
change in accounting principle,  as the excess reorganization value and goodwill
were not deductible for income tax purposes.


                                      F-13
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                                   December 31, 2004     December 31, 2003
                                                   -----------------     -----------------
<S>                                                   <C>                   <C>
Identifiable intangible assets - patents:
Gross carrying amount                                 $     1,652           $     1,563
Accumulated amortization                                     (544)                 (391)
                                                      ---------------------------------
Net carrying amount                                   $     1,108           $     1,172
                                                      =================================
</TABLE>

      Amortization expense for the year ended December 31, 2004, the nine months
ended  December  31,  2003 and the  years  ended  March 29,  2003 was  $153,000,
$106,000 and $124,000, 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, 2004 and December 31,
2003 were $349,000 and $401,000, 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,
2004 aggregated  approximately  30%, 24% and 8% of net sales.  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. The Company's net sales
to these  same  three  customers  in the year ended  March 29,  2003  aggregated
approximately 32%, 21% and 19% of net sales, respectively.

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 year ended December 31, 2004, the
nine  months  ended  December  31,  2003 and the year ended  March 29, 2003 were
insignificant.  Undiscounted  liabilities are recognized for remedial activities
when the cleanup is probable and the cost can be reasonably estimated.  See Note
7 for further information regarding environmental reserves.


                                      F-14
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advertising costs

      Advertising  costs are charged to operations  when  incurred.  Advertising
costs were  approximately  $195,000,  $81,000 and $117,000 during the year ended
December  31, 2004,  the nine months ended  December 31, 2003 and the year ended
March 29, 2003,  respectively,  and were  recorded as a component of selling and
marketing expenses in the accompanying consolidated statements of operations.

Shipping costs

      The costs to ship  products to customers of  approximately  $3.7  million,
$2.9 million and $2.9 million  during the year ended December 31, 2004, the nine
months ended December 31, 2003 and the year ended March 29, 2003,  respectively,
are  included as a component of cost of sales 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 year ended  December 31, 2004,  the nine
months  ended  December  31, 2003 and the year ended March 29,  2003,  were $1.5
million, $1.2 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.  It also requires a reconciliation  of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS  computation.  Diluted EPS includes  unexercised  stock  options
using the treasury stock method. (See Note 11).

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 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.


                                      F-15
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      The Company applies 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
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  (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,
the Company's SFAS No. 123 pro-forma  compensation  expense would have been $1.1
million and  $419,000  for the nine months  ended  December 31, 2003 and for the
twelve months ended March 29, 2003, respectively.

      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  and $0 for the nine months  ended  December  31, 2003 and for the
twelve months ended March 29, 2003, respectively.


                                      F-16
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      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  (loss)  and net income  (loss) 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     March 30, 2003 to        Year Ended
                                         December 31, 2004   December 31, 2003     March 29, 2003
                                          (Twelve Months)       (Nine Months)      (Twelve Months)
                                         ---------------------------------------------------------
<S>                                          <C>                 <C>                 <C>
Net income (loss), as reported:              $   10,248          $    6,102          $   (8,785)
 Add: Total stock-based
  employee compensation
  expense included in reported
  net income (loss), net of tax                      --                 823                  --

 Deduct: Total stock-based
  employee compensation
  expense determined under
  fair value method, net of tax                      --               1,650                 419
                                             --------------------------------------------------
Pro forma net income (loss):                 $   10,248          $    5,275          $   (9,204)
                                             ==================================================

Net income (loss) per share:

 Basic - as reported:                        $     1.97          $     1.23          $    (1.77)

 Basic - pro forma:                          $     1.97          $     1.06          $    (1.86)

 Diluted - as reported:                      $     1.94          $     1.19          $    (1.77)

 Diluted - pro forma:                        $     1.94          $     1.03          $    (1.86)
</TABLE>

      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  have an exercise  price of $8.75,
74,200  have an  exercise  price of $6.71 and 7,500  have an  exercise  price of
$0.01, with all options having a weighted average remaining  contractual life of
5.84  years.  All options  outstanding  became  fully  vested upon the Change of
Control and are currently exercisable.

      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  became fully vested upon the Change of
Control and are currently exercisable.

      There were 700,100 options outstanding at March 29, 2003, of which 510,100
had an exercise price of $8.75 and 190,000 had an exercise price of $6.71,  with
a weighted average  remaining  contractual life of 7.60 years;  341,767 of these
options were currently  exercisable with an exercise price of $8.75.  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. There were no options exercised, forfeited or expired for the
year ended March 29, 2003.

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


                                      F-17
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO 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.
Translation  of these foreign  operations to United States  dollars occurs using
the current  exchange  rate 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 (loss)" 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
income,  net." During the year ended  December  31, 2004,  the nine months ended
December 31, 2003 and the year ended March 29, 2003,  transaction gains included
in operations amounted to $677,000, $2.0 million and $3.5 million, respectively.

Fair value of financial instruments

      The  consolidated   financial  statements  include  financial  instruments
whereby  the fair  market  value of such  instruments  may differ  from  amounts
reflected on a historical basis. Financial instruments of the Company consist of
cash deposits,  accounts receivable,  advances to affiliates,  accounts payable,
certain  accrued  liabilities  and long-term  debt.  The carrying  amount of the
Company's long-term debt at December 31, 2004 and December 31, 2003 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.

Discontinued Operations

      As  discussed  in Note 3, the Company has  reported  its metal and defense
businesses as discontinued  operations in the consolidated  financial statements
from October 11, 2000, the measurement  date,  through March 29, 2003.  Prior to
March 29, 2003, the Company had disposed of all discontinued operations with the
sale of Galion,  Inc. on December 23, 2002.  Accordingly,  the  businesses'  net
losses  during the years  ended March 30,  2002 and March 29,  2003,  which were
incurred  subsequent to the  measurement  date, were applied against the accrued
losses recorded during those periods as incurred in the consolidated  statements
of operations.

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  aggregated  the results  into a single
segment for purposes of reporting financial condition and results of operations.
See Note 8 for product revenue and geographic information.

New Accounting Standards

      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 will be effective for
inventory  costs incurred during fiscal years beginning after June 15, 2005. The
Company is in the process of evaluating the effect, if any, that the adoption of
SFAS No. 151 will have on its financial position and results of operations.


                                      F-18
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      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 will be
effective for nonmonetary asset exchanges  occurring in fiscal periods beginning
after June 15, 2005. The Company is in the process of evaluating the effect,  if
any, that the adoption of SFAS No. 153 will have 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) will be effective
for interim or annual reporting periods beginning on or after June 15, 2005. The
Company is in the process of evaluating the effect, if any, that the adoption of
SFAS No. 123(R) will have on its financial position and results of operations.

Note 3 Discontinued Operations

      As previously  discussed,  on October 10, 2000,  the Company  concluded to
exit and sell its metal and defense  businesses  consisting  of Valentec  Wells,
LLC, the metallic belt links business located in Missouri  (relocated from Costa
Mesa, CA) and Galion,  Inc., the defense systems and products  divisions located
in Ohio.

      On September 27, 2001, the Company finalized the sale of the metallic belt
links business of Valentec Wells, LLC.  Pursuant to an asset purchase  agreement
dated September 16, 2001 between Valentec Wells, LLC and Alliant Lake City Small
Caliber  Ammunition  Company  LLC,  the  Company  sold the  metallic  belt links
production  assets and inventory of Valentec Wells, LLC for  approximately  $4.8
million in cash.  The resulting  gain on this sale was  substantially  offset by
additional  provisions  for losses and an asset  write-down  at Galion,  Inc. in
fiscal 2002.

      On  December  23,  2002,  the  Company   completed  the  disposal  of  its
discontinued  operations with the sale of Galion,  Inc. ("Galion") pursuant to a
stock purchase  agreement  between the Company and Galion  Acquisition,  LLC, an
affiliate of The Diversified Group Incorporated.  The Company sold all its stock
in Galion for an adjusted  purchase  price of $454,000 in cash,  resulting  in a
loss on disposition of discontinued  operations of  approximately  $2.0 million,
including the recognition of a tax provision of  approximately  $660,000 related
to an adjustment of the deferred tax liabilities of the discontinued operations.
There was no tax effect on the loss on  disposition  as the  Company  recorded a
deferred tax asset and a concurrent  reserve on the tax asset as a result of the
loss being a capital loss.

      Following  is  a  summary  of  financial  information  for  the  Company's
discontinued metal and defense operations (in thousands):

<TABLE>
<CAPTION>
                                                                   Period From
                                              Year Ended        March 30, 2003 to       Year Ended
                                          December 31, 2004     December 31, 2003     March 29, 2003
                                           (Twelve Months)        (Nine Months)       (Twelve Months)
                                           ----------------------------------------------------------
<S>                                             <C>                 <C>                     <C>
      Net sales                                 $     --            $     --                $5,435
      Discontinued operations:
        Loss on disposition, net
        of income taxes                               --                  --                 2,023(a)
</TABLE>

      (a)   During fiscal year 2003, the Company  recorded a loss on disposition
            of  discontinued  operations  due to the  sale of  Galion,  Inc.  in
            December 2002.


                                      F-19
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      The Company  accounted for its discontinued  operations in accordance with
APB No. 30. Accordingly, the Company recognized an initial estimated loss at the
measurement date and additional  losses subsequent to the measurement date under
the "net  realizable  value"  principle.  Continued,  unforeseen  losses  at the
Valentec and Galion  operations  were the primary reason for  additional  losses
being  recognized.  Unanticipated  costs  related  to the  move of the  Valentec
operation  from  California  to  Missouri;   the  unanticipated  loss  of  major
contracts;  changing market conditions resulting in additional pricing pressure;
a  deferred  tax  provision  adjustment  associated  with  Galion;  and  a  loss
recognized on the  disposition of Galion were the primary  contributors to these
additional losses.

Note 4 Composition of Certain Consolidated Balance Sheet Accounts (in thousands)

<TABLE>
<CAPTION>
                                                                       December 31, 2004      December 31, 2003
                                                                       ----------------------------------------
<S>                                                                         <C>                    <C>
Accounts receivable:
 Trade receivables, net of allowances of $892 and $445 at
   December 31, 2004 and December 31, 2003, respectively                    $ 37,547               $ 35,361
 Other                                                                         1,725                  1,748
                                                                            -------------------------------
 Total                                                                      $ 39,272               $ 37,109
                                                                            ===============================

Inventories:
 Raw materials                                                              $  7,153               $  6,273
 Work-in-process                                                               8,073                  7,089
 Finished goods                                                               11,656                 10,190
                                                                            -------------------------------
 Total                                                                      $ 26,882               $ 23,552
                                                                            ===============================

Property, plant and equipment:
 Land and buildings                                                         $ 20,479               $ 18,757
 Machinery and equipment                                                      67,238                 59,221
 Furniture and fixtures                                                        1,167                  1,396
 Construction in process                                                       2,277                    603
                                                                            -------------------------------
                                                                              91,161                 79,977
 Less - accumulated depreciation and amortization                            (42,712)               (29,549)
                                                                            -------------------------------
 Total                                                                      $ 48,449               $ 50,428
                                                                            ===============================
</TABLE>

Note 5  Long-Term Debt  (in thousands)

<TABLE>
<CAPTION>
                                                                              December 31, 2004    December 31, 2003
                                                                              --------------------------------------
<S>                                                                                <C>                 <C>
Congress revolving credit facility due on October 8, 2006, bearing a
  variable interest rate (5.00% at December 31, 2004)                              $    105            $  4,628
Congress Term A loan due on October 8, 2006, bearing a variable interest
  rate (5.00% at December 31, 2004)                                                   2,048               4,176
KeyCorp equipment note due August, 2005                                               1,028               2,690
HVB Bank Czech Republic mortgage note due March, 2007                                 2,640               3,509
Capital equipment notes payable, with various interest rates ranging
  from 6.42% to 8.36%, maturing at various dates through March 2007                   1,171               1,028
                                                                                   ----------------------------
Total debt                                                                            6,992              16,031
Less - current portion of long-term debt                                             (3,263)             (4,214)
                                                                                   ----------------------------
Total long-term portion of debt                                                    $  3,729            $ 11,817
                                                                                   ============================
</TABLE>


                                      F-20
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Credit Facilities

      The Company has a credit  facility  with  Congress  Financial  Corporation
(Southern),  a subsidiary of Wachovia Bank, National  Association  ("Congress").
The Company has an  aggregate  $35.0  million  revolving  credit  facility  with
Congress (the "Congress  Revolver") expiring October 8, 2006. Under the Congress
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  Congress
Revolver at December 31, 2004 was $105,000.  The Congress Revolver also includes
a $5.0 million letter of credit  facility,  which was unutilized at December 31,
2004.

      In addition,  the Company has a term facility with Congress (the "Congress
Term A loan") under which $2.0 million was  outstanding as of December 31, 2004.
The  Congress  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 Congress Term A
loan.  In addition to the Congress  Revolver and the Congress  Term A loan,  the
Company  also has an  additional  term loan  (the  "Congress  Term B loan"  and,
collectively  with the  Congress  Revolver  and the  Congress  Term A loan,  the
"Congress  Facilities")  which is  undrawn  and under  which  $3.5  million  was
available  as of  December  31,  2004.  At  December  31,  2004,  the  Company's
availability for additional  borrowings  (based on the maximum  allowable limit)
under the Congress Revolver and the Congress Term B loan was approximately $38.4
million.

      The  interest  rate on the Congress  Revolver and Congress  Term A loan is
variable,  depending  on the amount of the  Company's  Excess  Availability  (as
defined in the Congress  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 Congress
Facilities  (the "Prime  Rate") or the LIBOR rate as  described  in the Congress
Facilities,  in each case with an  applicable  margin  applied to the rate.  The
Congress  Term B loan bears  interest at the Prime Rate plus 3%. At December 31,
2004, the margin on Prime Rate loans was 0.0% and the margin on LIBOR rate loans
was 1.75%. The Company is required to pay a monthly unused line fee of 0.25% per
annum on the unutilized portion of the Congress Revolver and a monthly fee equal
to 1.75% per annum of the amount of any outstanding letters of credit.

      Under the  Congress  Revolver  and  Congress  Term A loan,  the Company is
subject to a covenant that requires it to maintain a certain tangible net worth.
To the extent that the Company has  borrowings  outstanding  under the  Congress
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
Congress Term B loan to the extent of certain excess cash flow.

      The Congress 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, 2004, the Company was in
compliance with all financial  covenants.  At December 31, 2004, the Company was
also in  compliance  with all  non-financial  covenants  other  than a  covenant
requiring  the  company  to  dissolve   certain   inactive   subsidiaries.   The
non-compliance  under this  covenant was waived by Congress.  Substantially  all
assets of the Company are pledged as  collateral  for the  borrowings  under the
Congress Facilities.

      In July 2004,  the Company and  Congress  entered into an amendment to the
Congress Facilities which, among other things, allows the Company to include its
Romanian  subsidiary and entities formed in connection with its joint venture in
China within the group of  affiliates  to which the Company is permitted to make
loans up to an aggregate  specified  amount.  In October  2004,  the Company and
Congress  entered  into an  amendment  and  consent to the  Congress  Facilities
pursuant to which Congress consented to certain actions by the Company,  and the
Company and Congress agreed to certain amendments to the Congress Facilities, in
each case in order to permit  the  Company  to enter  into its joint  venture in
South Africa.  This amendment  also,  among other things,  allows the Company to
include  the


                                      F-21
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

entity  formed to conduct this joint  venture  within the group of affiliates to
which the  Company  is  permitted  to make  loans up to an  aggregate  specified
amount.

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 note facility dated June 4, 1997. This amendment  extended the
mortgage  facility  for five years,  established  an interest  rate of 1.7% over
EURIBOR  (EURIBOR was 2.42% at December 31, 2004),  requires monthly payments 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 facility.

      On July 10,  1998,  the Company  entered  into a $10.0  million  financing
arrangement  with  KeyCorp  Leasing,  a division of Key  Corporate  Capital Inc.
("KeyCorp").  The KeyCorp  financing  agreement  has a  seven-year  term,  bears
interest at a rate of 1.25% over LIBOR (LIBOR was 2.42% at December  31,  2004),
requires monthly  payments of  approximately  $150,000 and is secured by certain
equipment located at the Company's Greenville, South Carolina facility.

      Future annual  minimum  principal  payments of long-term  debt and capital
lease obligations at December 31, 2004 are due in the following fiscal years (in
thousands):

                  2005                       $      3,263
                  2006                              3,284
                  2007                                445
                  2008                                 --
                  2009                                 --
                  Thereafter                           --
                                             ------------
                                             $      6,992
                                             ============

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, 2004,
the Company and various  consolidated  subsidiaries of the Company are borrowers
under the Congress 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-22
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 Income Taxes

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

<TABLE>
<CAPTION>
                                                                      Period From
                                                Year Ended         March 30, 2003 to         Year Ended
                                             December 31, 2004     December 31, 2003       March 29, 2003
                                               (Twelve Months)        (Nine Months)        (Twelve Months)
                                             ------------------------------------------------------------
<S>                                                 <C>                  <C>                   <C>
Current taxes:
  Federal                                           $ 1,425              $ 2,392               $ 3,529
  State                                                 223                  360                   633
  Foreign                                             3,798                1,987                 1,593

Deferred taxes:
  Federal                                                70                 (885)                  378
  State                                                  11                 (135)                  (38)
  Foreign                                               244                   89                    25
                                                    --------------------------------------------------
                                                    $ 5,771              $ 3,808               $ 6,120
                                                    ==================================================
</TABLE>

      Income before income tax expense  attributable  to domestic  operations is
approximately  $6.8  million,  $4.6 million,  and $11.9 million  during the year
ended  December 31, 2004,  the nine months ended  December 31, 2003 and the year
ended  March  29,  2003,   respectively.   Income   before  income  tax  expense
attributable to foreign operations is approximately  $9.3 million,  $5.3 million
and $2.1 million  during the year ended December 31, 2004, the nine months ended
December 31, 2003 and the year ended March 29, 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        March 30, 2003 to        Year Ended
                                               December 31, 2004     December 31, 2003      March 29, 2003
                                                (Twelve Months)        (Nine Months)       (Twelve Months)
                                               -----------------------------------------------------------
<S>                                                   <C>                   <C>                  <C>
Expected taxes at federal statutory rate              34%                   34%                  34%
State income taxes, net of federal benefits            1                     2                    3
Foreign earnings taxed at different rates              4                     3                    6
Deductible foreign taxes                              (3)                   --                   --
Valuation allowance on deferred tax assets             1                     1                   --
Recovery of non-taxable bankruptcy expense            --                     1                   --
Other, net                                            (1)                   (2)                   1
                                                    -------------------------------------------------
                                                      36%                   39%                  44%
                                                    =================================================
</TABLE>


                                      F-23
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      The following summarizes the deferred tax assets (liabilities)  recognized
in the accompanying consolidated balance sheets (in thousands):

<TABLE>
<CAPTION>
                                                                              December 31, 2004        December 31, 2003
                                                                              ------------------------------------------
<S>                                                                                <C>                    <C>
Deferred tax assets (liabilities):
  Accrued compensation                                                             $      --              $     212
  Accrued insurance                                                                      204                    234
  Other accrued liabilities                                                              556                    290
  Inventory                                                                              523                    504
  Receivables                                                                            327                     99
  Property, plant and equipment                                                       (4,703)                (4,836)
  Deferred compensation                                                                1,371                  1,060
  Environmental reserves                                                                 103                    103
  Stock options                                                                           31                    389
  Capital loss carryforward                                                              795                    795
  Foreign deferred tax assets (liabilities) - other                                      451                   (114)
  Foreign net operating loss carryforwards                                                --                    550
                                                                                   --------------------------------
  Net deferred tax liabilities before valuation allowances                              (342)                  (714)
  Valuation allowance on capital loss and foreign net operating loss
    carryforwards and foreign deferred tax assets                                     (1,440)                (1,345)
                                                                                   --------------------------------
   Net deferred tax liabilities                                                    $  (1,782)             $  (2,059)
                                                                                   ================================

Recognized as follows in the accompanying consolidated balance sheets:
  Current deferred tax assets                                                      $   1,609              $   1,340
  Long-term deferred tax assets                                                          244                    112
  Long-term deferred tax liabilities                                                  (3,635)                (3,511)
                                                                                   --------------------------------
   Net deferred tax liabilities                                                    $  (1,782)             $  (2,059)
                                                                                   ================================
</TABLE>

      Current deferred tax assets are included in "prepaid and other" assets and
long-term deferred tax assets are included in "other assets" in the accompanying
consolidated balance sheets.

      The net  valuation  allowance  on capital  loss and foreign  deferred  tax
assets  increased  by  approximately  $95,000  due  to  the  establishment  of a
valuation  allowance  for  foreign  deferred  tax  assets  attributable  to  the
Company's United Kingdom operations.

      No taxes have been  provided  relating  to the  possible  distribution  of
approximately   $26.3  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 is currently undergoing  examinations of
its corporate  income tax returns by tax authorities and it is possible that the
examination  could result in  assessment  and payment of taxes  related to these
positions  during  2005.  Therefore,   the  reserves  for  these  positions  are
classified as current in the accompanying consolidated balance sheet.

      The  Company  does  not  expect  any  material  impact  on  its  financial
statements from the American Jobs Creation Act of 2004.


                                      F-24
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7 Commitments and Contingencies

Legal proceedings

      As described in Note 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 is 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. The Company has
reserved $275,000 for any potential  exposure  associated with the Reporting/Fee
Dispute. Although no assurances can be given in this regard, management does not
expect that the Company will incur  material  expenditures  in addition to those
reserved with respect to the Reporting/Fee Dispute.

      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.

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 5.  Certain of the lease  payments are subject to  adjustment  for
inflation.  The Company incurred rent expense of $1.7 million,  $1.3 million and
$2.0  million  for the year ended  December  31,  2004,  the nine  months  ended
December 31, 2003 and the year ended March 29, 2003, respectively.

      Future annual minimum lease payments for all  non-cancelable  leases as of
December 31, 2004 are as follows (in thousands):

                                                             Capital   Operating
                                                             -------------------
            2005                                             $  561      $  660
            2006                                                529         384
            2007                                                154         225
            2008                                                 --          49
            2009                                                 --          15
            Thereafter                                           --           7
                                                             -------------------
            Total minimum lease payments                      1,244      $1,340
                                                                         ======
            Amount representing interest                         73
                                                             ------
            Net present value of minimum lease payments      $1,171
                                                             ======

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 Company has received a General  Notice of Potential  Liability  letter
from the U.S. Environmental  Protection Agency ("EPA"), dated November 22, 2004,
addressed to Valentec Wells, LLC, an inactive  subsidiary  ("Valentec Wells") of
the Company, regarding the RRGClayton Chemical Site (the "Site"). The EPA Notice
states that


                                      F-25
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the agency has received information  indicating that Valentec Wells is a PRP for
the Site pursuant to the Comprehensive  Environmental  Response Compensation and
Liability  Act. The EPA letter  indicates  that Valentec Wells is one of 73 PRPs
that were selected to receive this Notice as the alleged largest contributors of
waste to the Site. The EPA Notice invited  Valentec Wells to attend PRP meetings
in early December 2004 and to respond  indicating  the company's  willingness to
perform or finance  remedial  response  activities  at the Site.  In  subsequent
communications, EPA has alleged that Valentec Wells may be connected to the Site
through  another  corporation.  The Company has  requested  that EPA provide any
information  in its  possession  related to the alleged  successor  relationship
between  Valentec  Wells and the other  company.  As of the date of this  Annual
Report  on Form  10-K,  no  information  has  been  provided  by the EPA and the
Company's inquiry into this matter has not confirmed any corporate  relationship
between  Valentec  Wells  and  the  other  company,  nor  has  it  revealed  any
information  to indicate that Valentec  Wells ever sent wastes to the Site.  The
Company will continue to review this matter. At this time, the Company is unable
to predict the outcome or reasonably estimate a range of possible loss.

      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.

Note 8 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 and Europe.  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        March 30, 2003 to       Year ended
                                     December 31, 2004    December 31, 2003     March 29, 2003
                                      (Twelve Months)       (Nine Months)       (Twelve Months)
                                     ---------------------------------------------------------
<S>                                       <C>                  <C>                  <C>
      United States
          Airbag Cushions                 $ 59,442             $ 47,899             $ 68,022
          Airbag Fabric                     26,221               25,321               40,235
          Technical Fabric                  28,552               18,669               22,471

      Germany
          Airbag Cushions                   96,544               64,994               72,811

      United Kingdom
          Airbag Cushions                   37,124               26,783               40,799
                                          --------------------------------------------------

      Total Net Sales                     $247,883             $183,666             $244,338
                                          ==================================================
</TABLE>


                                      F-26
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long Lived Assets:

                                         December 31, 2004    December 31, 2003
                                         ---------------------------------------

      United States                          $ 17,069             $ 16,141

      Mexico                                    4,961                4,943

      Germany                                  13,193               13,621

      Czech Republic                           14,357               15,654

      Other European Countries                     --                1,435
                                        ----------------------------------------

      Total Long-lived Assets                $ 49,580             $ 51,794
                                        ========================================

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

Note 9 Employee Benefit Plans

      The Company has a defined  contribution plan for eligible  employees which
provides  for  discretionary  employer   contributions.   The  Company  expensed
approximately $224,000, $171,000 and $254,000 during the year ended December 31,
2004, the nine months ended December 31, 2003 and the year ended March 29, 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.  Additionally,  the Company
funds an amount equal to the exercise price of the options  associated  with the
deferred  compensation,  which is payable by the  employee  upon  exercise.  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" were $4.4 million and
$3.3 million, and included in "deferred compensation" were $3.7 million and $2.8
million at December 31, 2004 and December 31, 2003, respectively.

Note 10 Equity Securities

Preferred Stock

      The Company has  5,000,000  shares of preferred  stock  authorized  and no
shares issued at December 31, 2004 and December 31, 2003. 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 with such other  preferences  and
qualifications  as shall be stated in the  resolutions  adopted  by the board of
directors at time of issuance.

Common Stock and Warrants

      The Company has  5,336,100  and  5,077,800  shares of common stock issued,
5,295,778 and 5,037,478 shares of common stock outstanding, and 40,322 shares of
treasury  stock at  December  31,  2004 and  December  31,  2003,  respectively.
Warrants  were granted  pursuant to the Plan to purchase  681,818  shares of the
Company's common stock. These warrants had an exercise price of $19.99 per share
and expired on April 10, 2003.


                                      F-27
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11 Reconciliation to Diluted Earnings per Share (in thousands)

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

<TABLE>
<CAPTION>
                                                                             Period From
                                                          Year ended      March 30, 2003 to      Year ended
                                                      December 31, 2004   December 31, 2003    March 29, 2003
                                                       (Twelve Months)      (Nine Months)     (Twelve Months)
                                                      -------------------------------------------------------
<S>                                                        <C>                  <C>                <C>
Net income (loss)                                          $10,248              $ 6,102            $(8,785)
                                                           =======              =======            =======

Weighted average number of common shares used
  in basic earnings per share                                5,206                4,973              4,960
Effect of dilutive securities:
  Stock options                                                 88                  146                 --
                                                           -------              -------            -------
Weighted average number of common shares and
  Dilutive potential common stock used in diluted
  earnings per share                                         5,294                5,119              4,960
                                                           =======              =======            =======
</TABLE>

      At December 31, 2004 options on 354,200  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.  Options on 700,100
shares of common stock were not included in computing diluted earnings per share
at March 29, 2003, because their effects were antidilutive.

Note 12 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  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 a credit to net earnings of approximately $80,000 for the twelve months
ended  December 31, 2004 on these forward  contracts.  At December 31, 2004, the
Company had no such  outstanding  forward  exchange  contracts.  At December 31,
2003,  the Company had  outstanding  forward  exchange  contracts  that  matured
between  January  and March 2004 to  purchase  Mexican  pesos with an  aggregate
notional  amount  of  approximately  $2.7  million.  The  fair  values  of these
contracts at December 31, 2003 totaled approximately $52,000, which was recorded
as a liability on the Company's  Consolidated  Balance  Sheets in "other current
liabilities." The Company recorded a credit to earnings of approximately $47,000
for the nine months  ended  December 31, 2003 and the  unrealized  loss on these
forward  contracts of approximately  $52,000 was included in "accumulated  other
comprehensive income" at December 31, 2003.

      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  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 charge to net earnings
of approximately $141,000 for the twelve months ended December 31, 2004 on these
forward  contracts.  At December 31, 2004,  the Company had no such  outstanding
forward  exchange  contracts.  At December 31, 2003, the Company had outstanding
forward  exchange  contracts  that  matured  between  January  and March 2004 to
purchase Czech Korunas with an aggregate  notional amount


                                      F-28
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of  approximately  $2.1 million.  The fair values of these contracts at December
31, 2003 totaled  approximately  $100,000,  which was recorded as a liability on
the Company's balance sheet in "other current liabilities." The Company recorded
a charge to earnings of approximately $47,000 for the nine months ended December
31, 2003 and the  unrealized  loss on these forward  contracts of  approximately
$89,000 was included in "accumulated other comprehensive income" at December 31,
2003.

Note 13 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 is  required  to pay Zapata its share of federal  income
taxes, if any. 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 $675,000 to Zapata in
2004 for taxes related to 2003.  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 will 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 will
be consolidated  into Zapata's tax filing group for the fourth calendar  quarter
of 2003 and the first calendar quarter of 2004.

Note 14 Transitional Period Operating Results

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

<TABLE>
<CAPTION>
                                                                                            Twelve Months
                                                                     Twelve Months              Ended
                                                                         Ended            December 31, 2003
                                                                  December 31, 2004           (Unaudited)
                                                                  -----------------------------------------

<S>                                                                    <C>                     <C>
Net sales                                                              $ 247,883               $ 247,142
Gross profit                                                              36,746                  34,750
Income from operations                                                    15,459                  13,825
Provision for income taxes                                                 5,771                   5,472
Income from continuing operations                                         10,248                   8,862
Loss on disposition of discontinued operations                                --                    (660)
                                                                       ---------------------------------
Net income                                                             $  10,248               $   8,202
                                                                       =================================

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

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

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

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


                                      F-29
<PAGE>

             SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15  Unaudited Quarterly Results

      Unaudited quarterly financial  information for the year ended December 31,
2004  and the nine  months  ended  December  31,  2003 is set  forth  below  (in
thousands, except per share data).

<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

<CAPTION>
                                                           Quarter Ended
                                               ---------------------------------------
Nine Month Period from                         June 28,   September 27,   December 31,
March 30, 2003 to December 31, 2003              2003          2003           2003
                                               ---------------------------------------
<S>                                           <C>           <C>             <C>
Net sales                                     $ 67,416      $ 52,747        $ 63,503
Gross profit                                    10,586         5,028          10,484
Income (loss) from operations                    6,295        (1,255)*         4,259
Net income (loss)                                4,380        (1,491)          3,213
Net income (loss) per share, basic                0.88         (0.30)           0.65
Net income (loss) per share, diluted              0.88         (0.30)           0.61
</TABLE>

*     - See Note 1 - "Change of Control" for impact of the Zapata purchase for
      quarter ended September 27, 2003.

Note 16  Subsequent Events

      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 fabrics,  in China (the "China Joint Venture").  The Company  anticipates
that the China Joint Venture, which has not yet commenced commercial production,
will produce  automotive airbag cushions in China utilizing the 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.  Pursuant to the joint  venture  agreement,  the Company has the
intention, but not an obligation, for funding of its China Joint Venture through
potential loan or capital contributions of up to $6.5 million as of December 31,
2004.


                                      F-30
<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 year ended March 29, 2003:
  Allowance for doubtful accounts                             $     228      $     295          $    (107)      $     416
  Valuation reserves on inventory                                 1,650           (574)(a)             --           1,076
  Reserve on deferred tax assets                                  1,285          1,030                 --           2,315
                                                              -----------------------------------------------------------
                                                              $   3,163      $     751          $    (107)      $   3,807
                                                              ===========================================================

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
  Reserve on 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
  Reserve on deferred tax assets                                  1,345            645               (550)          1,440
                                                              -----------------------------------------------------------
                                                              $   3,466      $     939          $    (572)      $   3,833
                                                              ===========================================================
</TABLE>

(a) - Represents net change of inventory allowances