##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 10-Q

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|x |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
|  |  | For the quarterly period ended September 30, 2003 or                                    
|  |  |                                                                                         
|o |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|  |  | For the transition period fromto                                                        
|  |  |                                                                                         
|  |  | Commission file number 1-12410                                                          

Simula, Inc.




(Exact Name of Registrant as Specified in Its Charter)


|                                |  |                    
|------------------------------- |  | -------------------
|Arizona                         |  | 86-0320129         
|                                |  |                    
|(State or Other Jurisdiction of |  | (I.R.S. Employer   
|Incorporation or Organization)  |  | Identification No.)

|                                         |  |           
|---------------------------------------- |  | ----------
|7822 South 46th Street, Phoenix, Arizona |  | 85044     
|                                        
|(Address of Principal Executive Offices) |  | (Zip Code)

(602) 643-7233




(Registrants Telephone Number, Including Area Code)




---

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)


Indicate by check mark whether the registrant:



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

Yes x   No o

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the
Exchange Act).

Yes o   No x

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

|                             |  |                                  
|---------------------------- |  | ---------------------------------
|Class                        |  | Outstanding at September 30, 2003
|                             |  |                                  
|Common Stock, $.01 par value |  | 13,153,870                       





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TABLE OF CONTENTS



|                            |                                                                                               |                                                                                   |  |  |  |  |  | 
|--------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- |  |  |  |  |  | 
|                            |                                                                                               | Unaudited Consolidated Balance Sheets                                            
|                            |                                                                                               | Unaudited Consolidated Statements of Operation                                   
|                            |                                                                                               | Unaudited Consolidated Statements of Shareholders Deficit and Comprehensive Loss
|                            |                                                                                               | Unaudited Consolidated Statements of Cash Flows                                  
|                            | Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
|                            | Item 3. Quantitative and Qualitative Disclosure about Market Risk                            
|                            | Item 4. Controls and Procedures                                                              
|PART II  OTHER INFORMATION
|                            | Item 6. Exhibits and Reports                                                                 
|SIGNATURES                 
|INDEX TO EXHIBITS          
|Ex-31.1                    
|Ex-31.2                    
|EX-32.1                    
|EX-32.2                    



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##### Table of Contents



SIMULA, INC.

TABLE OF CONTENTS

|                                                                                                                             |  |      |       | 
|---------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | 
|                                                                                                                             |  | Page
|PART I  FINANCIAL INFORMATION                                                                                               |  |      |       | 
|Item 1
 Interim Unaudited Consolidated Financial Statements                                                                 |  |      |       | 
|Consolidated
Unaudited Balance Sheets as of
September 30, 2003 and December 31, 2002                                         |  |      | 2     | 
|Consolidated
Unaudited Statements of Operations for the Three Month and Nine Month
Periods Ended September 30, 2003 and 2002 |  |      | 3     | 
|Consolidated
Unaudited Statement of Shareholders Deficit for the
Nine Month Period Ended September 30, 2003                 |  |      | 4     | 
|Consolidated
Unaudited Statements of Cash Flows for the Nine Month
Periods Ended September 30, 2003 and 2002                 |  |      | 5     | 
|Notes
to Interim Unaudited Consolidated Financial Statements                                                                 |  |      | 611  | 
|Item 2  Managements Discussion and Analysis of
Results of Operations and Financial Condition                               |  |      | 1216 | 
|Item 3  Quantitative and Qualitative Disclosure about Market Risk                                                           |  |      | 17    | 
|Item 4 Controls and Procedures                                                                                              |  |      | 17    | 
|PART II - OTHER INFORMATION                                                                                                  |  |      |       | 
|Item 6  Exhibits and Reports                                                                                                |  |      | 18-19 | 
|SIGNATURES                                                                                                                   |  |      | 20    | 





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##### Table of Contents






SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Balance Sheets
September 30, 2003 and December 31, 2002

|                                                     |                                                                                                                                                  |                             |            |              |             |      |            |             |             |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------- | ---------- | ------------ | ----------- | ---- | ---------- | ----------- | ----------- | -
|                                                     |                                                                                                                                                  |                             |            | 2003         |             | 2002
|                                                     |                                                                                                                                                  |                             |            |              |             |     
|ASSETS                                               |                                                                                                                                                  |                             |            |              |             |      |            |            
|CURRENT ASSETS                                       |                                                                                                                                                  |                             |            |              |             |      |            |            
|                                                     | Cash and cash equivalents                                                                                                                        |                             | $          | 12,130       |             |      | $          | 147,842     |            
|                                                     | Contract and trade receivables  Net (including costs and estimated
earnings in excess of billings of $10,324,236 and $14,216,255,
respectively) |                             |            | 19,159,489   |             |      |            | 20,446,665  |            
|                                                     | Inventories                                                                                                                                      |                             |            | 2,491,032    |             |      |            | 3,953,837   |            
|                                                     | Prepaid expenses and other                                                                                                                       |                             |            | 1,199,111    |             |      |            | 1,402,252   |            
|                                                     | Current assets of discontinued operations                                                                                                        |                             |            |             |             |      |            | 9,115,864   |            
|                                                     |                                                                                                                                                  |                             |            |              |             |      |            |            
|                                                     |                                                                                                                                                  | Total current assets        |            |              | 22,861,762  |      |            |             | 35,066,460  |  
|PROPERTY, EQUIPMENT, and LEASEHOLD IMPROVEMENTS -Net |                                                                                                                                                  |                             | 6,151,065  |              |             |      | 7,737,356  |            
|DEFERRED FINANCING COSTS                             |                                                                                                                                                  |                             | 704,478    |              |             |      | 2,419,054  |            
|INTANGIBLES  Net                                    |                                                                                                                                                  |                             | 1,388,400  |              |             |      | 1,311,857  |            
|OTHER ASSETS                                         |                                                                                                                                                  |                             | 469,800    |              |             |      |           |            
|LONG-TERM ASSETS OF DISCONTINUED OPERATIONS          |                                                                                                                                                  |                             |           |              |             |      | 7,908,655  |            
|                                                     |                                                                                                                                                  |                             |            |              |             |      |            |            
|TOTAL                                                |                                                                                                                                                  | $                           | 31,575,505 |              |             | $    | 54,879,484 |            
|                                                     |                                                                                                                                                  |                             |            |              |             |      |            |            
|LIABILITIES AND SHAREHOLDERS DEFICIT                |                                                                                                                                                  |                             |            |              |             |      |            |            
|CURRENT LIABILITIES                                  |                                                                                                                                                  |                             |            |              |             |      |            |            
|                                                     | Revolving line of credit                                                                                                                         |                             | $          | 3,542,601    |             |      | $          | 11,283,393  |            
|                                                     | Trade accounts payable                                                                                                                           |                             |            | 5,010,539    |             |      |            | 3,555,552   |            
|                                                     | Other accrued liabilities                                                                                                                        |                             |            | 5,139,572    |             |      |            | 6,355,349   |            
|                                                     | Deferred revenue                                                                                                                                 |                             |            | 60,000       |             |      |            | 60,000      |            
|                                                     | Accrued restructuring costs                                                                                                                      |                             |            | 759,077      |             |      |            | 1,140,444   |            
|                                                     | Advances on contracts                                                                                                                            |                             |            | 1,143,890    |             |      |            | 940,752     |            
|                                                     | Current portion of long-term debt                                                                                                                |                             |            | 56,085,537   |             |      |            | 29,988,315  |            
|                                                     | Current liabilities of discontinued operations                                                                                                   |                             |            |             |             |      |            | 6,374,093   |            
|                                                     |                                                                                                                                                  |                             |            |              |             |      |            |            
|                                                     |                                                                                                                                                  | Total current liabilities   |            |              | 71,741,216  |      |            |             | 59,697,898  |  
|DEFERRED REVENUE                                     |                                                                                                                                                  |                             | 435,000    |              |             |      | 480,000    |            
|DEFERRED LEASE COST                                  |                                                                                                                                                  |                             | 1,101,150  |              |             |      | 807,156    |            
|LONG-TERM DEBT  Less current portion                |                                                                                                                                                  |                             | 228,099    |              |             |      | 32,313,087 |            
|LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS     |                                                                                                                                                  |                             |           |              |             |      | 9,582      |            
|                                                     |                                                                                                                                                  |                             |            |              |             |      |            |            
|                                                     |                                                                                                                                                  | Total liabilities           |            |              | 73,505,465  |      |            |             | 93,307,723  |  
|                                                     |                                                                                                                                                  |                             |            |              |             |      |            |            
|SHAREHOLDERS DEFICIT                                |                                                                                                                                                  |                             |            |              |             |      |            |            
|                                                     | Preferred stock, $.05 par value authorized 50,000,000 shares;
none outstanding                                                                  |                             |            |              |             |      |            |             |            
|                                                     | Common stock, $.01 par value authorized 50,000,000 shares;
issued 13,153,870 and 13,014,395, respectively                                       |                             |            | 131,539      |             |      |            | 130,144     |            
|                                                     | Additional paid-in-capital                                                                                                                       |                             |            | 63,015,447   |             |      |            | 62,715,713  |            
|                                                     | Accumulated deficit                                                                                                                              |                             |            | (102,284,533 | )           |      |            | (97,412,354 | )          
|                                                     | Accumulated other comprehensive loss                                                                                                             |                             |            | (2,792,413   | )           |      |            | (3,861,742  | )          
|                                                     |                                                                                                                                                  |                             |            |              |             |      |            |            
|                                                     |                                                                                                                                                  | Total shareholders deficit |            |              | (41,929,960 | )    |            |             | (38,428,239 | )
|                                                     |                                                                                                                                                  |                             |            |              |             |      |            |            
|TOTAL                                                |                                                                                                                                                  | $                           | 31,575,505 |              |             | $    | 54,879,484 |            
|                                                     |                                                                                                                                                  |                             |            |              |             |      |            |            

See notes to unaudited consolidated financial statements.

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SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Operation

|                                             |  |                          |             |                         |  |      |            |      |  |   |            |   |  |   |            |  
|-------------------------------------------- |  | ------------------------ | ----------- | ----------------------- |  | ---- | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                             |  | Three Month Period Ended |             | Nine Month Period Ended
|                                             |  | September 30,            |             | September 30,          
|                                             |  |                          |             |                        
|                                             |  | 2003                     |             | 2002                    |  | 2003 |            | 2002
|                                             |  |                          |             |                         |  |      |            |     
|REVENUE                                      |  | $                        | 18,193,516  |                         |  | $    | 18,881,105 |      |  | $ | 50,615,351 |   |  | $ | 60,290,863 |  
|COST OF REVENUE                              |  |                          | 11,836,289  |                         |  |      | 12,802,633 |      |  |   | 32,228,438 |   |  |   | 39,495,660 |  
|                                             |  |                          |             |                         |  |      |            |      |  |   |            |   |  |   |            |  
|GROSS MARGIN                                 |  |                          | 6,357,227   |                         |  |      | 6,078,472  |      |  |   | 18,386,913 |   |  |   | 20,795,203 |  
|ADMINISTRATIVE EXPENSES                      |  |                          | 3,655,778   |                         |  |      | 3,269,192  |      |  |   | 10,891,606 |   |  |   | 10,119,760 |  
|RESEARCH AND DEVELOPMENT                     |  |                          | 593,303     |                         |  |      | 597,232    |      |  |   | 1,722,590  |   |  |   | 1,310,791  |  
|RESTRUCTURING CHARGES                        |  |                          |            |                         |  |      | 762,459    |      |  |   | 598,921    |   |  |   | 762,459    |  
|                                             |  |                          |             |                         |  |      |            |      |  |   |            |   |  |   |            |  
|OPERATING INCOME                             |  |                          | 2,108,146   |                         |  |      | 1,449,589  |      |  |   | 5,173,796  |   |  |   | 8,602,193  |  
|INTEREST EXPENSE                             |  |                          | 2,520,390   |                         |  |      | 2,623,171  |      |  |   | 8,277,363  |   |  |   | 7,737,789  |  
|OTHER EXPENSE (Note 7)                       |  |                          |            |                         |  |      |           |      |  |   | 1,000,000  |   |  |   |           |  
|                                             |  |                          |             |                         |  |      |            |      |  |   |            |   |  |   |            |  
|INCOME (LOSS) BEFORE INCOME TAXES            |  |                          | (412,244    | )                       |  |      | (1,173,582 | )    |  |   | (4,103,567 | ) |  |   | 864,404    |  
|INCOME TAX EXPENSE (BENEFIT)                 |  |                          |            |                         |  |      | (463,458   | )    |  |   | 17,011     |   |  |   | 402,812    |  
|                                             |  |                          |             |                         |  |      |            |      |  |   |            |   |  |   |            |  
|INCOME (LOSS) BEFORE DISCONTINUED
OPERATIONS |  |                          | (412,244    | )                       |  |      | (710,124   | )    |  |   | (4,120,578 | ) |  |   | 461,592    |  
|LOSS FROM DISCONTINUED
OPERATIONS            |  |                          | (937,008)   |                         |  |      | (30,679    | )    |  |   | (751,601)  |   |  |   | (319,780   | )
|                                             |  |                          |             |                         |  |      |            |      |  |   |            |   |  |   |            |  
|NET INCOME (LOSS)                            |  | $                        | (1,349,252) |                         |  | $    | (740,803   | )    |  | $ | (4,872,179 | ) |  | $ | 141,812    |  
|                                             |  |                          |             |                         |  |      |            |      |  |   |            |   |  |   |            |  
|INCOME (LOSS) PER COMMON SHARE  Basic       |  |                          |             |                         |  |      |            |      |  |   |            |   |  |   |            |  
|INCOME(LOSS) BEFORE DISCONTINUED
OPERATIONS  |  |                          | (0.03       | )                       |  |      | (0.05      | )    |  |   | (0.32      | ) |  |   | 0.04       |  
|LOSS FROM DISCONTINUED
OPERATIONS            |  |                          | (0.07       | )                       |  |      | (0.01      | )    |  |   | (0.05      | ) |  |   | (0.03      | )
|                                             |  |                          |             |                         |  |      |            |      |  |   |            |   |  |   |            |  
|INCOME (LOSS) PER COMMON SHARE  Basic       |  | $                        | (0.10       | )                       |  | $    | (0.06      | )    |  | $ | (0.37      | ) |  | $ | 0.01       |  
|                                             |  |                          |             |                         |  |      |            |      |  |   |            |   |  |   |            |  
|INCOME (LOSS) PER COMMON SHARE 
Diluted     |  |                          |             |                         |  |      |            |      |  |   |            |   |  |   |            |  
|INCOME (LOSS) BEFORE DISCONTINUED
OPERATIONS |  |                          | (0.03       | )                       |  |      | (0.05      | )    |  |   | (0.32      | ) |  |   | 0.04       |  
|LOSS FROM DISCONTINUED
OPERATIONS            |  |                          | (0.07       | )                       |  |      | (0.01      | )    |  |   | (0.05      | ) |  |   | (0.03      | )
|                                             |  |                          |             |                         |  |      |            |      |  |   |            |   |  |   |            |  
|INCOME (LOSS) PER COMMON SHARE 
Diluted     |  | $                        | (0.10       | )                       |  | $    | (0.06      | )    |  | $ | (0.37      | ) |  | $ | 0.01       |  
|                                             |  |                          |             |                         |  |      |            |      |  |   |            |   |  |   |            |  

See notes to unaudited consolidated financial statements.

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SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Shareholders Deficit and Comprehensive Loss
Nine Months Ended September 30, 2003

|                                                         |  |              |            |            |  |             |         |               |  |               |            |               |  |      |              |   |  |             |            |   |  |   |             |   |  |   |            |  
|-------------------------------------------------------- |  | ------------ | ---------- | ---------- |  | ----------- | ------- | ------------- |  | ------------- | ---------- | ------------- |  | ---- | ------------ | - |  | ----------- | ---------- | - |  | - | ----------- | - |  | - | ---------- | -
|                                                         |  |              |            |            |  |             |         |               |  |               |            |               |  |      |              |   |  | Accumulated |            |   |  |   |             |   |  |  
|                                                         |  | Common Stock |            | Additional |  |             |         |               |  | Other         |            | Total         |  |      |              |  
|                                                         |  |              |            | Paid-in    |  | Accumulated |         | Comprehensive |  | Shareholders |            | Comprehensive
|                                                         |  | Shares       |            | Amount     |  | Capital     |         | Deficit       |  | Loss          |            | Deficit       |  | Loss
|                                                         |  |              |            |            |  |             |         |               |  |               |            |               |  |     
|Balance, January 1, 2003                                 |  |              | 13,014,395 |            |  | $           | 130,144 |               |  | $             | 62,715,713 |               |  | $    | (97,412,354  | ) |  | $           | (3,861,742 | ) |  | $ | (38,428,239 | ) |  | $ |           |  
|Net loss                                                 |  |              |            |            |  |             |         |               |  |               |            |               |  |      | (4,872,179   | ) |  |             |            |   |  |   | (4,872,179  | ) |  |   | (4,872,179 | )
|Issuance of common
shares                                |  |              | 139,475    |            |  |             | 1,395   |               |  |               | 299,734    |               |  |      |              |   |  |             |            |   |  |   | 301,129     |   |  |   |           |  
|2003
currency translation
adjustment                     |  |              |            |            |  |             |         |               |  |               |            |               |  |      |             |   |  |             | (814,223)  |   |  |   | (814,223)   |   |  |   | (814,223)  |  
|2003
currency translation
adjustment write off (note 11) |  |              |            |            |  |             |         |               |  |               |            |               |  |      |             |   |  |             | 1,883,552  |   |  |   | 1,883,552   |   |  |   | 1,883,552  |  
|                                                         |  |              |            |            |  |             |         |               |  |               |            |               |  |      |              |   |  |             |            |   |  |   |             |   |  |   |            |  
|Balance, September 30,
2003                              |  |              | 13,153,870 |            |  | $           | 131,539 |               |  | $             | 63,015,447 |               |  | $    | (102,284,533 | ) |  | $           | (2,792,413 | ) |  | $ | (41,929,960 | ) |  | $ | (3,802,850 | )
|                                                         |  |              |            |            |  |             |         |               |  |               |            |               |  |      |              |   |  |             |            |   |  |   |             |   |  |   |            |  

See notes to unaudited consolidated financial statements.

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SIMULA, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows
Nine Month Periods Ended September 30, 2003 and 2002

|                                                     |                                                                                         |                   |                                                                                    |                                                     |           |            |             |         |           |            |            |  
|---------------------------------------------------- | --------------------------------------------------------------------------------------- | ----------------- | ---------------------------------------------------------------------------------- | --------------------------------------------------- | --------- | ---------- | ----------- | ------- | --------- | ---------- | ---------- | -
|                                                     |                                                                                         |                   |                                                                                    |                                                     |           | 2003       |             | 2002   
|                                                     |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|                                                     | Net (loss) income                                                                       |                   | $                                                                                  | (4,872,179                                          | )         |            | $           | 141,812 |          
|                                                     | Adjustment to reconcile net (loss) income to net cash provided by
operating activities: |                   |                                                                                    |                                                     |           |            |             |         |          
|                                                     |                                                                                         |                   | Loss
from discontinued operations                                                  |                                                     |           | 751,601    |             |         |           |           |           
|                                                     |                                                                                         |                   | Depreciation and amortization                                                      |                                                     |           | 2,645,289  |             |         |           | 2,443,862  |           
|                                                     |                                                                                         |                   | Deferred income taxes                                                              |                                                     |           |           |             |         |           | 158,136    |           
|                                                     |                                                                                         |                   | Capitalized interest                                                               |                                                     |           | 1,174,937  |             |         |           | 1,139,532  |           
|                                                     |                                                                                         |                   | Loss on disposal of assets                                                         |                                                     |           | 155,785    |             |         |           |           |           
|                                                     |                                                                                         |                   | Restructuring charge                                                               |                                                     |           | 598,921    |             |         |           |           |           
|                                                     |                                                                                         |                   | Currency translation adjustment                                                    |                                                     |           |           |             |         |           | (411,138   | )         
|                                                     |                                                                                         |                   | Bad debt expense                                                                   |                                                     |           |           |             |         |           | 391,066    |           
|                                                     |                                                                                         |                   | Non-cash equity compensation                                                       |                                                     |           |           |             |         |           | 144,525    |           
|                                                     |                                                                                         |                   | Write down of intangibles                                                          |                                                     |           | 99,754     |             |         |           |           |           
|                                                     | Changes in net assets and liabilities:                                                  |                   |                                                                                    |                                                     |           |            |             |         |          
|                                                     |                                                                                         |                   | Contract and trade receivables  net of advances                                   |                                                     |           | 1,490,314  |             |         |           | 950,751    |           
|                                                     |                                                                                         |                   | Inventories                                                                        |                                                     |           | 1,462,805  |             |         |           | 618,933    |           
|                                                     |                                                                                         |                   | Prepaid expenses and other                                                         |                                                     |           | (40,917    | )           |         |           | 427,993    |           
|                                                     |                                                                                         |                   | Other assets                                                                       |                                                     |           | 113,224    |             |         |           | 21,290     |           
|                                                     |                                                                                         |                   | Trade accounts payable                                                             |                                                     |           | 1,454,987  |             |         |           | 719,173    |           
|                                                     |                                                                                         |                   | Deferred revenue                                                                   |                                                     |           | (45,000    | )           |         |           | (15,693    | )         
|                                                     |                                                                                         |                   | Deferred lease costs                                                               |                                                     |           | 293,994    |             |         |           | 308,244    |           
|                                                     |                                                                                         |                   | Accrued restructuring costs                                                        |                                                     |           | (980,288   | )           |         |           | 797,362    |           
|                                                     |                                                                                         |                   | Other accrued liabilities                                                          |                                                     |           | (2,637,194 | )           |         |           | (1,642,443 | )         
|                                                     |                                                                                         |                   | Net assets of discontinued operations                                              |                                                     |           |           |             |         |           | (2,189,577 | )         
|                                                     |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|                                                     |                                                                                         |                   |                                                                                    | Net cash provided by operating activities           |           |            | 1,666,033   |         |           |            | 4,003,828  |  
|                                                     |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|                                                     |                                                                                         |                   | Purchase of property and equipment                                                 |                                                     |           | (1,376,572 | )           |         |           | (1,185,691 | )         
|                                                     |                                                                                         |                   | Costs incurred to obtain intangibles                                               |                                                     |           | (353,156   | )           |         |           | (326,003   | )         
|                                                     |                                                                                         |                   | Proceeds
from sale of discontinued operations, property, equipment and intangibles |                                                     |           | 14,530,349 |             |         |           |           |           
|                                                     |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|                                                     |                                                                                         |                   |                                                                                    | Net cash provided by (used in) investing activities |           |            | 12,800,621  |         |           |            | (1,511,694 | )
|                                                     |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|                                                     |                                                                                         |                   | Net payments under line of credit                                                  |                                                     |           | (7,740,792 | )           |         |           | (2,503,266 | )         
|                                                     |                                                                                         |                   | Principal payments under other debt arrangements                                   |                                                     |           | (7,162,703 | )           |         |           | (136,216   | )         
|                                                     |                                                                                         |                   | Issuance
of common stock                                                           |                                                     |           | 301,129    |             |         |           | 210,977    |           
|                                                     |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|                                                     |                                                                                         |                   |                                                                                    | Net cash (used in) provided by financing activities |           |            | (14,602,366 | )       |           |            | (2,428,505 | )
|                                                     |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                         |                   | (135,712                                                                           | )                                                   |           |            | 63,629      |        
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD       |                                                                                         |                   | 147,842                                                                            |                                                     |           |            | 461,502     |        
|                                                     |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|CASH AND CASH EQUIVALENTS, END OF PERIOD             |                                                                                         | $                 | 12,130                                                                             |                                                     |           | $          | 525,131     |        
|                                                     |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|                                                     |                                                                                         | Interest Paid     |                                                                                    | $                                                   | 5,346,870 |            |             | $       | 5,109,268 |           
|                                                     |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        
|                                                     |                                                                                         | Income Taxes Paid |                                                                                    | $                                                   | 163,422   |            |             | $       | 484,254   |           
|                                                     |                                                                                         |                   |                                                                                    |                                                     |           |            |             |        

See notes to unaudited consolidated financial statements.

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Notes to Interim Unaudited Consolidated Financial
Statements

Note 1 - Basis of Presentation

The consolidated financial statements include the accounts of Simula, Inc.
and its subsidiaries (collectively we and our). All of the subsidiaries
are wholly-owned. All intercompany transactions are eliminated in
consolidation.

The accompanying unaudited consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. As noted
in the accompanying financial statements, current maturities of debt are
approximately $59.6 million as of September 30, 2003 and there is
uncertainty relating to the Companys ability to refinance certain of its debt.
These factors, among others, indicate that the Company may be unable to
continue as a going concern. The accompanying financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern. As
part of the plan to meet future quarterly covenants and current and long-term
debt maturities, we sold our automotive safety business during July 2003 and
subsequently entered into an Agreement and Plan of Merger to be acquired by
Armor Holdings, Inc., a Delaware corporation (Armor Holdings) as discussed in
Note 11  Transactions and Subsequent Events.

As permitted by rules of the Securities and Exchange Commission for
interim reporting, we have prepared the accompanying interim consolidated
financial statements in accordance with accounting principles generally
accepted in the United States of America (GAAP) for interim financial
information and with the instructions to Form 10-Q. As permitted by these
rules, certain information and notes required by GAAP for complete financial
statements are condensed or omitted. In the opinion of management, all
adjustments and reclassifications considered necessary for a fair and
comparable presentation have been included and are of a normal recurring
nature. Operating results for the three and nine-month periods ended September
30, 2003 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2003. Such interim financial statements should be
read in conjunction with our consolidated financial statements and notes
thereto included in our 2002 Form 10-K.

Certain
reclassifications have been made to the financial statements for the
prior periods to conform with current year's presentation.

Note 2  Recently Issued Accounting Standards

In April 2003, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 149, Amendment of
Statement No. 133 on Derivative Instruments and Hedging Activities, which
amended and refined certain characteristics of derivative instruments and
hedges. The application of SFAS No. 149 did not have a material effect on the
Companys financial statements.

In May 2003, the FASB issued a SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity,
which requires the classification of certain financial instruments, previously
classified within the equity section of the balance sheet, to be included in
liabilities. SFAS No. 150 is effective for financial instruments entered into
or modified after May 31, 2003 and June 15, 2003 for all other instruments.
The application of SFAS No. 150 did not have a material effect on the Companys
financial statements

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44 and 64, amendment of FASB Statement No.13, and Technical
Corrections, which, among other things, no longer allows for the
classification of gains and losses from extinguishment of debt as
extraordinary. We adopted SFAS No. 145 effective January 1, 2003 and upon
adoption, gains and losses on certain future debt extinguishment, if any, will
be recorded in pre-tax income. In addition any previously recorded
extraordinary gains or losses from early extinguishment of debt will be
reclassified to income before extraordinary income or loss to conform to the
requirements under SFAS 145.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities,which addresses financial
accounting and reporting for costs associated with exit or disposal activities.
SFAS No. 146 also nullifies Emerging Issues Task Force (EITF) No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). SFAS No. 146 is effective for exit or disposal activities
initiated after December 31, 2002. We adopted SFAS No. 146 effective January
1, 2003 and do not

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##### Table of Contents



anticipate that the new standard will have a material impact on our
financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based CompensationTransition and Disclosure. This Statement amends
SFAS No. 123 to provide alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation. We adopted the new disclosure requirements of SFAS No. 148 in
2002. We continue to account for stock-based compensation under the
recognition and measurement principles of Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees,and related
Interpretations.

In November 2002, the FASB issued Interpretation (FIN) No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. The interpretation requires a
guarantor to recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the guarantee and expands
the disclosures required. Initial recognition and measurement provisions of FIN
No. 45 are applicable on a prospective basis to guarantees issued or modified
after December 31, 2002. The adoption of FIN No. 45 had no effect on our
financial position, results of operations or cash flows.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities  an Interpretation of ARB No. 51. FIN No. 46 clarifies the
consolidation requirements of variable interest entities. We have adopted the
interpretation. We have no interests in any variable interest entities and,
consequently, adoption of FIN No. 46 had no effect on our financial position,
results of operations or cash flows.

Note 3 - Earnings per share

The following is a reconciliation of the numerators and denominators of
basic and diluted per share computations. For the three month period and nine
month periods ended September 30, 2003 the effect of 176,741 and 138,833 shares
related to stock options were not used because the result would have been
anti-dilutive. Additionally, for the three and nine month periods ended
September 30, 2003 and 2002, the effect of 1,774,074 shares to be issued upon
conversion of the 8% Senior Subordinated Convertible Notes was not used in
determining dilutive earnings per share because the result would have been
anti-dilutive.

|                                                     |  |                    |            |                   |  |      |            |      |  |   |            |   |  |   |            | 
|---------------------------------------------------- |  | ------------------ | ---------- | ----------------- |  | ---- | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | 
|                                                     |  | Three Months Ended |            | Nine Months Ended
|                                                     |  | September 30,      |            | September 30,    
|                                                     |  |                    |            |                  
|                                                     |  | 2003               |            | 2002              |  | 2003 |            | 2002
|                                                     |  |                    |            |                   |  |      |            |     
|Net (loss) earnings
available to common shareholders |  | $                  | (1,349,252 | )                 |  | $    | (740,803   | )    |  | $ | (4,872,179 | ) |  | $ | 141,812    | 
|                                                     |  |                    |            |                   |  |      |            |      |  |   |            |   |  |   |            | 
|Basic weighted average
shares outstanding            |  |                    | 13,076,853 |                   |  |      | 12,939,056 |      |  |   | 13,037,460 |   |  |   | 12,914,148 | 
|Effect of dilutive
securities                        |  |                    |           |                   |  |      |           |      |  |   |           |   |  |   | 262,727    | 
|                                                     |  |                    |            |                   |  |      |            |      |  |   |            |   |  |   |            | 
|Diluted weighted
average
shares outstanding          |  |                    | 13,076,853 |                   |  |      | 12,939,056 |      |  |   | 13,037,460 |   |  |   | 13,176,874 | 
|                                                     |  |                    |            |                   |  |      |            |      |  |   |            |   |  |   |            | 
|Basic per share amounts                              |  | $                  | (0.10      | )                 |  | $    | (0.06      | )    |  | $ | (0.37      | ) |  | $ | 0.01       | 
|                                                     |  |                    |            |                   |  |      |            |      |  |   |            |   |  |   |            | 
|Diluted per share
amounts                            |  | $                  | (0.10      | )                 |  | $    | (0.06      | )    |  | $ | (0.37      | ) |  | $ | 0.01       | 
|                                                     |  |                    |            |                   |  |      |            |      |  |   |            |   |  |   |            | 

Note 4  Stock Based Compensation

We have three stock-based employee compensation plans. We account for
those plans under the recognition and measurement principles of APB Opinion No.
25, Accounting for Stock Issued to Employees,and related Interpretations
under which no compensation cost has been recognized. However, we have
computed compensation cost, for pro forma disclosure purposes, based on the
fair value of all options awarded on the date of grant, utilizing the
Black-Scholes option pricing method. The following table illustrates the
effect on net income and earnings per share if we had applied the fair value
recognition

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##### Table of Contents



provisions of FASB Statement No. 123, Accounting for Stock-Based
Compensation,to stock-based employee compensation for the three month and
nine month periods ended September 30:

|                                                                                                 |  |                    |            |                   |  |      |          |      |  |   |            |   |  |   |          |  
|------------------------------------------------------------------------------------------------ |  | ------------------ | ---------- | ----------------- |  | ---- | -------- | ---- |  | - | ---------- | - |  | - | -------- | -
|                                                                                                 |  | Three Months Ended |            | Nine Months Ended
|                                                                                                 |  | September 30,      |            | September 30,    
|                                                                                                 |  | 2003               |            | 2002              |  | 2003 |          | 2002
|                                                                                                 |  |                    |            |                   |  |      |          |     
|Net (loss) income  as reported                                                                  |  | $                  | (1,349,252 | )                 |  | $    | (740,803 | )    |  | $ | (4,872,179 | ) |  | $ | 141,812  |  
|                                                                                                 |  |                    |            |                   |  |      |          |      |  |   |            |   |  |   |          |  
|Deduct: Total stock based employee compensation
expense determined under fair value based method |  |                    | (6,096     | )                 |  |      | (60,264  | )    |  |   | (42,470    | ) |  |   | (292,895 | )
|                                                                                                 |  |                    |            |                   |  |      |          |      |  |   |            |   |  |   |          |  
|Net (loss) income  pro forma                                                                    |  | $                  | (1,355,348 | )                 |  | $    | (801,067 | )    |  | $ | (4,914,649 | ) |  | $ | (151,083 | )
|                                                                                                 |  |                    |            |                   |  |      |          |      |  |   |            |   |  |   |          |  
|(Loss) income per share: basic and diluted as reported                                           |  | $                  | (0.10      | )                 |  | $    | (0.06    | )    |  | $ | (0.37      | ) |  | $ | 0.01     |  
|                                                                                                 |  |                    |            |                   |  |      |          |      |  |   |            |   |  |   |          |  
|(Loss) income per share: basic and diluted  pro forma                                           |  | $                  | (0.10      | )                 |  | $    | (0.06    | )    |  | $ | (0.38      | ) |  | $ | (0.01    | )
|                                                                                                 |  |                    |            |                   |  |      |          |      |  |   |            |   |  |   |          |  

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes options pricing model and the following table
illustrates the assumptions used for grants for the three month and nine-month
periods ended September 30:

|                        |  |                    |      |                   |  |      |      |      |  |  |      |   |  |  |      |  
|----------------------- |  | ------------------ | ---- | ----------------- |  | ---- | ---- | ---- |  |  | ---- | - |  |  | ---- | -
|                        |  | Three Months Ended |      | Nine Months Ended
|                        |  | September 30,      |      | September 30,    
|                        |  | 2003               |      | 2002              |  | 2003 |      | 2002
|                        |  |                    |      |                   |  |      |      |     
|Dividend yield          |  | None               |      | None              |  | None |      | None
|Expected volatility     |  |                    | 116  | %                 |  |      | 96   | %    |  |  | 116  | % |  |  | 98   | %
|Risk-free interest rate |  |                    | 3.6  | %                 |  |      | 3.6  | %    |  |  | 3.6  | % |  |  | 3.6  | %
|Expected lives          |  |                    | 3.25 |                   |  |      | 3.25 |      |  |  | 3.25 |   |  |  | 3.25 |  

Note 5  Inventories

At September 30, 2003 and December 31, 2002, inventories consisted of the
following:

|                  |                   |   |           |           |      |   |           |           | 
|----------------- | ----------------- | - | --------- | --------- | ---- | - | --------- | --------- | 
|                  |                   |   | 2003      |           | 2002
|                  |                   |   |           |           |     
|Raw Materials     |                   | $ | 2,647,830 |           |      | $ | 3,298,676 |          
|Work in Progress  |                   |   | 205,151   |           |      |   | 636,980   |          
|Finished Goods    |                   |   |          |           |      |   | 258,181   |          
|Inventory Reserve |                   |   | (361,949  | )         |      |   | (240,000  | )        
|                  |                   |   |           |           |      |   |           |          
|                  | Total Inventories |   | $         | 2,491,032 |      |   | $         | 3,953,837 | 
|                  |                   |   |           |           |      |   |           |          

Note 6  Property, Equipment and Leasehold Improvements

At September 30, 2003 and December 31, 2002 property, equipment and
leasehold improvements consisted of the following:

|                                               |                                                      |   |            |           |      |   |            |           | 
|---------------------------------------------- | ---------------------------------------------------- | - | ---------- | --------- | ---- | - | ---------- | --------- | 
|                                               |                                                      |   | 2003       |           | 2002
|                                               |                                                      |   |            |           |     
|Land                                           |                                                      | $ |           |           |      | $ | 816,888    |          
|Buildings and leasehold improvements           |                                                      |   | 2,429,746  |           |      |   | 3,885,263  |          
|Equipment                                      |                                                      |   | 13,552,245 |           |      |   | 13,229,244 |          
|                                               |                                                      |   |            |           |      |   |            |          
|Total                                          |                                                      |   | 15,981,991 |           |      |   | 17,931,395 |          
|Less accumulated depreciation and amortization |                                                      | ( | 9,860,460  | )         |      | ( | 10,194,039 | )        
|                                               |                                                      |   |            |           |      |   |            |          
|                                               | Property, equipment and leasehold improvements - net |   | $          | 6,151,065 |      |   | $          | 7,737,356 | 
|                                               |                                                      |   |            |           |      |   |            |          

Note 7  Debt

On September 30, 2003, we were not in compliance with certain non-monetary
financial covenants under our Revolving Line of Credit (the RLC) and our
Senior Secured Note. On November 12, 2003, we received waivers of the
non-compliance at September 30, 2003. As of June 30, 2003,
we were not in compliance with a certain non-monetary financial
covenant under our Senior Secured Note which, provided for a
performance fee of $1.0 million. Our RLC had outstanding borrowings of $
3.5 million and remaining borrowing availability of $ 3.5 million at September
30, 2003 as compared to outstanding borrowings of $11.3 million and a remaining
borrowing availability of $1.3 million at December 31, 2002.

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Note 8  Other Intangible Assets

All of our intangible assets with finite lives ranging from 15 to 20 years
were principally comprised of technology patents with a total cost at September
30, 2003 and December 31, 2002 as follows:

|                              |                   |   |           |           |      |   |           |           | 
|----------------------------- | ----------------- | - | --------- | --------- | ---- | - | --------- | --------- | 
|                              |                   |   | 2003      |           | 2002
|                              |                   |   |           |           |     
|Patents and licenses          |                   | $ | 1,648,910 |           |      | $ | 1,686,456 |          
|Other                         |                   |   | 132,669   |           |      |   | 566,010   |          
|                              |                   |   |           |           |      |   |           |          
|Total                         |                   |   | 1,781,579 |           |      |   | 2,252,466 |          
|Less accumulated amortization |                   |   | (393,179  | )         |      |   | (940,609  | )        
|                              |                   |   |           |           |      |   |           |          
|                              | Intangibles  net |   | $         | 1,388,400 |      |   | $         | 1,311,857 | 
|                              |                   |   |           |           |      |   |           |          

Intangible asset amortization expense for the three month periods ended
September 30, 2003 and 2002 were approximately $24,000 and $51,000,
respectively and $106,000 and $134,000 for the nine month periods ended
September 30, 2003 and 2002, respectively. Additionally, during
the nine month period ended September 30, 2003 we wrote off
approximately $100,000 of intangibles. Estimated amortization expense for the five succeeding fiscal
years is as follows:

|     |  |   |         | 
|---- |  | - | ------- | 
|2003 |  | $ | 116,000 | 
|2004 |  |   | 100,000 | 
|2005 |  |   | 100,000 | 
|2006 |  |   | 100,000 | 
|2007 |  |   | 100,000 | 

Note 9  Research and Development

Our research and development efforts arise from funded development
contracts and proprietary research and development. Amounts arising from such
efforts are as follows:

|                                  |                                                                      |   |                    |         |                   |   |          |           |          |   |           |          |   |   |           |            |  
|--------------------------------- | -------------------------------------------------------------------- | - | ------------------ | ------- | ----------------- | - | -------- | --------- | -------- | - | --------- | -------- | - | - | --------- | ---------- | -
|                                  |                                                                      |   | Three Months Ended |         | Nine Months Ended
|                                  |                                                                      |   | Sept 30,           |         | Sept 30,          |   | Sept 30, |           | Sept 30,
|                                  |                                                                      |   | 2003               |         | 2002              |   | 2003     |           | 2002    
|                                  |                                                                      |   |                    |         |                   |   |          |           |         
|Research and development expenses |                                                                      | $ | 593,303            |         |                   | $ | 597,232  |           |          | $ | 1,722,590 |          |   | $ | 1,310,791 |           
|                                  |                                                                      |   |                    |         |                   |   |          |           |          |   |           |          |   |   |           |           
|Funded contracts:                 |                                                                      |   |                    |         |                   |   |          |           |          |   |           |          |   |   |           |           
|                                  | Revenue funded by customers                                          |   | $                  | 71,711  |                   |   | $        | 1,168,976 |          |   | $         | 543,288  |   |   | $         | 2,998,081  |  
|                                  | Research and development expenses
classified as cost of such revenue |   |                    | (32,328 | )                 |   |          | (571,227  | )        |   |           | (299,638 | ) |   |           | (1,807,629 | )
|                                  |                                                                      |   |                    |         |                   |   |          |           |          |   |           |          |   |   |           |           
|Income of funded contracts        |                                                                      | $ | 39,383             |         |                   | $ | 597,749  |           |          | $ | 243,650   |          |   | $ | 1,190,452 |           
|                                  |                                                                      |   |                    |         |                   |   |          |           |          |   |           |          |   |   |           |           

Note 10 - Restructuring

In December 1999, we adopted a plan of restructuring that included the
divestiture of our commercial airline seat manufacturing operation. In July
2002, we adopted a plan of restructuring focused on reducing workforce to align
with a newly developed strategic focus and in January 2003, we adopted a plan
to restructure our Aerospace and Defense business by reducing workforce and
closing our Asheville facility and consolidating those operations into our
Phoenix facility. The Asheville facility was closed and all operations were
moved to the Phoenix location as of March 31, 2003. We completed the sale of
the Asheville facility on April 8, 2003 and retired the mortgage note payable
related to that facility. At September 30, 2003, there was $759,077 of
remaining restructuring liability, which principally relates to lease
obligations associated with the closed airline facility, which run through May
of 2008. Severance
obligations as part of the 2002 and 2003 restructuring, which are expected to
be fully paid by December 2004. A summary of the change in accrued
restructuring is as follows:

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##### Table of Contents



|                              |  |          |          |           |  |           |          |       |  |   |          |   |  |   |           |  
|----------------------------- |  | -------- | -------- | --------- |  | --------- | -------- | ----- |  | - | -------- | - |  | - | --------- | -
|                              |  | Facility |          | Other     |  |           |          |       |  |   |          |  
|                              |  | Closure  |          | Contracts |  | Severance |          | Total
|                              |  |          |          |           |  |           |          |      
|Balance at December 31, 2002  |  | $        | 535,285  |           |  | $         | 331,941  |       |  | $ | 273,218  |   |  | $ | 1,140,444 |  
|Nine Months restructuring     |  |          |         |           |  |           |         |       |  |   | 598,921  |   |  |   | 598,921   |  
|Reclassification of charges   |  |          | 294,279  |           |  |           | (294,279 | )     |  |   |         |   |  |   |          |  
|Cash payments                 |  |          | (181,061 | )         |  |           | (8,268   | )     |  |   | (790,959 | ) |  |   | (980,288  | )
|                              |  |          |          |           |  |           |          |       |  |   |          |   |  |   |           |  
|Balance at September 30, 2003 |  | $        | 648,503  |           |  | $         | 29,394   |       |  | $ | 81,180   |   |  | $ | 759,077   |  
|                              |  |          |          |           |  |           |          |       |  |   |          |   |  |   |           |  

Note 11  Transactions and Subsequent Events

On July 22, 2003, we completed the sale of all the assets of our
Automotive Safety division to Zodiac, S.A. at a selling price of approximately
$14.5 million in cash. Customary closing and purchase price adjustments
increased the previously announced selling price by approximately $0.2 million.
After deducting closing costs and related fees, we received net proceeds of
approximately $12.9 million. The transaction resulted in a gain on sale of
approximately $0.6 million, which includes approximately
$0.3 million related to an escrow account, from which we can
potentially recover a maximum of $0.5 million in 18 months from the closing of
the transaction, before the impact of the
one-time charge to write off accumulated foreign currency translation
losses of approximately $1.9 million. We applied the net proceeds to
repay a portion of our outstanding debt.

On September 2, 2003, we announced that we signed an Agreement and Plan of
Merger (the Merger Agreement) to be acquired by Armor Holdings, Inc., a
Delaware corporation (Armor Holdings). The Merger Agreement states that
Armor Holdings shall acquire all outstanding common stock of Simula, retire
outstanding indebtedness, and assume all liabilities of Simula for total
consideration of $110.5 million. Consideration to Simulas shareholders will,
at Armor Holdings discretion, consist of cash or a combination of cash and
registered shares of Armor Holdings common stock, with at least 20% of the
value of the payment to shareholders to be in cash. The transaction is
structured as a merger and is expected to be taxable to Simulas shareholders.

Note 12  Segment Reporting

We are a holding company for wholly-owned subsidiaries, which now operate
in one primary business segment. Our Commercial segment consisted of our
Automotive Safety division, which was sold as discussed in Note 11, above. Our
Aerospace and Defense segment includes operations that design and manufacture
crash resistant components, energy absorbing devices, and ballistic armor
products, which are sold principally to branches of the United States armed
forces. All other activity, included in Other, represents general corporate
operations, including unallocated interest and technology sales and royalties
and operations from our business derived from proprietary technology and
polymer materials.

For the three-month periods ended September 30, 2003 and 2002,
inter-segment sales were insignificant and total intercompany sales of $20,696
and $4,081, respectively, have been eliminated. For the three-month periods
ended September 30, 2003 and 2002 sales to the branches of the United States
Armed Forces were 86% and 85%, respectively of total sales.

10



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|                        |                                |   |            |            |               |   |            |         |       |        |            |            |  |        | 
|----------------------- | ------------------------------ | - | ---------- | ---------- | ------------- | - | ---------- | ------- | ----- | ------ | ---------- | ---------- |  | ------ | 
|                        |                                |   |            |            | 2003         
|                        |                                |   |            |            |              
|                        |                                |   |            |            | Aerospace and |   |            |         |       |        |            |            | 
|                        |                                |   |            |            | Defense       |   | Other      |         | Total
|                        |                                |   |            |            |               |   |            |         |      
|Revenue:                |                                |   |            |            |               |   |            |         |       |        |            |           
|                        | Contract revenue               |   | $          | 17,893,236 |               |   | $          |        |       |        | $          | 17,893,236 | 
|                        | Product sales:                 |   |            |            |               |   |            |         |       |        |            |            | 
|                        |                                |   | Other      |            |               |  |            |         |       | 58,200 |            |            |  | 58,200 | 
|                        | Technology sales and royalties |   |            |           |               |   |            | 242,080 |       |        |            | 242,080    | 
|                        |                                |   |            |            |               |   |            |         |       |        |            |            | 
|Total revenue           |                                | $ | 17,893,236 |            |               | $ | 300,280    |         |       | $      | 18,193,516 |           
|                        |                                |   |            |            |               |   |            |         |       |        |            |            | 
|Operating income (loss) |                                | $ | 3,192,493  |            |               | $ | (1,084,347 | )       |       | $      | 2,108,146  |           

|                        |                                |       |            |               |   |       |            |         |        |   |            |            |        | 
|----------------------- | ------------------------------ | ----- | ---------- | ------------- | - | ----- | ---------- | ------- | ------ | - | ---------- | ---------- | ------ | 
|                        |                                |       |            | 2002         
|                        |                                |       |            |              
|                        |                                |       |            | Aerospace and |   |       |            |         |        |   |            |           
|                        |                                |       |            | Defense       |   | Other |            | Total  
|                        |                                |       |            |               |   |       |            |        
|Revenue:                |                                |       |            |               |   |       |            |         |        |   |            |           
|                        | Contract revenue               |       | $          | 18,665,971    |   |       | $          |        |        |   | $          | 18,665,971 |       
|                        | Product sales:                 |       |            |               |   |       |            |         |        |   |            |            |       
|                        |                                | Other |            |               |  |       |            |         | 30,442 |   |            |            | 30,442 | 
|                        | Technology sales and royalties |       |            |              |   |       |            | 184,692 |        |   |            | 184,692    |       
|                        |                                |       |            |               |   |       |            |         |        |   |            |            |       
|Total revenue           |                                | $     | 18,665,971 |               |   | $     | 215,134    |         |        | $ | 18,881,105 |           
|                        |                                |       |            |               |   |       |            |         |        |   |            |            |       
|Operating income (loss) |                                | $     | 2,482,387  |               |   | $     | (1,032,798 | )       |        | $ | 1,449,589  |           

For the nine-month periods ended September 30, 2003 and 2002,
inter-segment sales were insignificant and total intercompany sales of $231,748
and $48,917, respectively, have been eliminated. For the nine-month periods
ended September 30, 2003 and 2002 sales to the branches of the United States
Armed Forces were 86% and 85%, respectively of total sales.

|                        |                                |       |            |               |   |       |            |         |        |   |            |            |        | 
|----------------------- | ------------------------------ | ----- | ---------- | ------------- | - | ----- | ---------- | ------- | ------ | - | ---------- | ---------- | ------ | 
|                        |                                |       |            | 2003         
|                        |                                |       |            |              
|                        |                                |       |            | Aerospace and |   |       |            |         |        |   |            |           
|                        |                                |       |            | Defense       |   | Other |            | Total  
|                        |                                |       |            |               |   |       |            |        
|Revenue:                |                                |       |            |               |   |       |            |         |        |   |            |           
|                        | Contract revenue               |       | $          | 49,832,281    |   |       | $          |        |        |   | $          | 49,832,281 |       
|                        | Product sales:                 |       |            |               |   |       |            |         |        |   |            |            |       
|                        |                                | Other |            |               |  |       |            |         | 97,096 |   |            |            | 97,096 | 
|                        | Technology sales and royalties |       |            |              |   |       |            | 685,974 |        |   |            | 685,974    |       
|                        |                                |       |            |               |   |       |            |         |        |   |            |            |       
|Total revenue           |                                | $     | 49,832,281 |               |   | $     | 783,070    |         |        | $ | 50,615,351 |           
|                        |                                |       |            |               |   |       |            |         |        |   |            |            |       
|Operating income (loss) |                                | $     | 7,976,949  |               |   | $     | (2,803,153 | )       |        | $ | 5,173,796  |           

|                        |                                |       |            |               |   |       |            |           |         |   |            |            |         | 
|----------------------- | ------------------------------ | ----- | ---------- | ------------- | - | ----- | ---------- | --------- | ------- | - | ---------- | ---------- | ------- | 
|                        |                                |       |            | 2002         
|                        |                                |       |            |              
|                        |                                |       |            | Aerospace and |   |       |            |           |         |   |            |           
|                        |                                |       |            | Defense       |   | Other |            | Total    
|                        |                                |       |            |               |   |       |            |          
|Revenue:                |                                |       |            |               |   |       |            |           |         |   |            |           
|                        | Contract revenue               |       | $          | 59,039,168    |   |       | $          |          |         |   | $          | 59,039,168 |        
|                        | Product sales:                 |       |            |               |   |       |            |           |         |   |            |            |        
|                        |                                | Other |            |               |  |       |            |           | 214,814 |   |            |            | 214,814 | 
|                        | Technology sales and royalties |       |            |              |   |       |            | 1,036,881 |         |   |            | 1,036,881  |        
|                        |                                |       |            |               |   |       |            |           |         |   |            |            |        
|Total revenue           |                                | $     | 59,039,168 |               |   | $     | 1,251,695  |           |         | $ | 60,290,863 |           
|                        |                                |       |            |               |   |       |            |           |         |   |            |            |        
|Operating income (loss) |                                | $     | 9,868,013  |               |   | $     | (1,265,820 | )         |         | $ | 8,602,193  |           

11



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##### Table of Contents






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

Results of Operations

Three and Nine Month Periods Ended September 30, 2003 Compared to
Three and Nine Month Periods Ended September 30, 2002

CONSOLIDATED

|                                                                                |  |                    |        |                   |  |        |        |           |  |      |      |      |  |         |    |           |  |   |        |   |  |   |        |   |  |   |        |         |  |  |      |   
|------------------------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ------ | ------ | --------- |  | ---- | ---- | ---- |  | ------- | -- | --------- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | ------- |  |  | ---- | --
|                                                                                |  | Three Months Ended |        | Nine Months Ended
|                                                                                |  | September 30,      |        | September 30,    
|                                                                                |  |                    |        |                  
|                                                                                |  |                    |        |                   |  |        |        |           |  |      |      |      |  | Percent |    |           |  |   |        |   |  |   |        |   |  |   |        | Percent
|(In thousands)                                                                  |  | 2003               |        | 2002              |  | Change |        | Inc (Dec) |  | 2003 |      | 2002 |  | Change  |    | Inc (Dec)
|                                                                                |  |                    |        |                   |  |        |        |           |  |      |      |      |  |         |    |          
|Revenue                                                                         |  | $                  | 18,194 |                   |  | $      | 18,881 |           |  | $    | (687 | )    |  |         | (4 | %)        |  | $ | 50,615 |   |  | $ | 60,291 |   |  | $ | (9,676 | )       |  |  | (16  | %)
|Gross margin                                                                    |  |                    | 6,357  |                   |  |        | 6,078  |           |  |      | 279  |      |  |         | 5  | %         |  |   | 18,387 |   |  |   | 20,795 |   |  |   | (2,408 | )       |  |  | (12  | %)
|Administrative and research
and development expense                             |  |                    | 4,249  |                   |  |        | 3,866  |           |  |      | 383  |      |  |         | 10 | %         |  |   | 12,614 |   |  |   | 11,431 |   |  |   | 1,183  |         |  |  | 10   | % 
|Operating income                                                                |  |                    | 2,108  |                   |  |        | 1,450  |           |  |      | 658  |      |  |         | 45 | %         |  |   | 5,174  |   |  |   | 8,602  |   |  |   | (3,428 | )       |  |  | (40  | %)
|Interest expense, net                                                           |  |                    | 2,520  |                   |  |        | 2,623  |           |  |      | (103 | )    |  |         | (4 | %)        |  |   | 8,277  |   |  |   | 7,738  |   |  |   | 539    |         |  |  | 7    | % 
|Other expense                                                                   |  |                    |       |                   |  |        |       |           |  |      |     |      |  |         |    |           |  |   | 1,000  |   |  |   |       |   |  |   | 1,000  |         |  |  |     |   
|(Loss) income before income
tax                                                 |  |                    | (412   | )                 |  |        | (1,174 | )         |  |      | 762  |      |  |         | 65 | %         |  |   | (4,104 | ) |  |   | 864    |   |  |   | (4,968 | )       |  |  | (575 | %)
|Income tax expense (benefit)                                                    |  |                    |       |                   |  |        | (463   | )         |  |      | 463  |      |  |         |   |           |  |   | 17     |   |  |   | 402    |   |  |   | (385   | )       |  |  | (96  | %)
|Gross margin as a percentage
of revenue                                         |  |                    | 35     | %                 |  |        | 32     | %         |  |      |      |      |  |         |    |           |  |   | 36     | % |  |   | 34     | % |  |   |        |         |  |  |      |   
|Administrative and research
and development expenses
as a percentage of revenue |  |                    | 23     | %                 |  |        | 20     | %         |  |      |      |      |  |         |    |           |  |   | 25     | % |  |   | 19     | % |  |   |        |         |  |  |      |   

AEROSPACE & DEFENSE

|                                        |  |                    |        |                   |  |        |        |           |  |      |      |      |  |         |    |           |  |   |        |   |  |   |        |   |  |   |        |         |  |  |     |   
|--------------------------------------- |  | ------------------ | ------ | ----------------- |  | ------ | ------ | --------- |  | ---- | ---- | ---- |  | ------- | -- | --------- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | ------- |  |  | --- | --
|                                        |  | Three Months Ended |        | Nine Months Ended
|                                        |  | September 30,      |        | September 30,    
|                                        |  |                    |        |                  
|                                        |  |                    |        |                   |  |        |        |           |  |      |      |      |  | Percent |    |           |  |   |        |   |  |   |        |   |  |   |        | Percent
|(In thousands)                          |  | 2003               |        | 2002              |  | Change |        | Inc (Dec) |  | 2003 |      | 2002 |  | Change  |    | Inc (Dec)
|                                        |  |                    |        |                   |  |        |        |           |  |      |      |      |  |         |    |          
|Revenue                                 |  | $                  | 17,893 |                   |  | $      | 18,666 |           |  | $    | (773 | )    |  |         | (4 | %)        |  | $ | 49,832 |   |  | $ | 59,039 |   |  | $ | (9,207 | )       |  |  | (16 | %)
|Gross margin                            |  |                    | 6,232  |                   |  |        | 5,985  |           |  |      | 247  |      |  |         | 4  | %         |  |   | 18,050 |   |  |   | 20,008 |   |  |   | (1,958 | )       |  |  | (10 | %)
|Gross margin as a
percentage of
revenue |  |                    | 35     | %                 |  |        | 32     | %         |  |      |      |      |  |         |    |           |  |   | 36     | % |  |   | 34     | % |  |   |        |         |  |  |     |   

Results of Operations for the Three-Month Period Ended September 30, 2003

Revenue for the three-month period ended September 30, 2003 decreased 4%
compared to revenue in the same period for 2002. Revenue for the period
declined 4% in the Aerospace and Defense segment primarily due to timing of
orders coupled with delays in Department of Defense funding of various programs.
Small Arms Protective Inserts (SAPI) business continues to be robust,
however, SAPI revenues were negatively impacted during the third quarter of
2003 compared to the same period in 2002 due to the timing of orders. The
aforementioned decreases were partially offset by increased revenues related to
our inflatable systems, fixed wing seating and rotorcraft seating. Additionally, we experienced decreases in funded engineering
services and product spares.

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Gross margin as a percent of sales increased to 35% for the three-month
period ended September 30, 2003 from 32% for the comparable period in 2002.
Gross margin as a percent of sales in our Aerospace and Defense segment
increased to 35% for the three months ended September 30, 2003 from 32% for the
same period in 2002. The increase was primarily due to cost savings related to
the move and integration of the Asheville facility to our Phoenix location as
well as the effect of cost reduction efforts completed in 2002 and early 2003.
In addition in the third quarter of 2002 we were negatively impacted
by increased costs
of approximately $1.0 million related to voluntary rework of our SAPI plates.

Administrative and research and development expenses for the three-month
period ended September 30, 2003 increased 10% as compared to the same 2002
period. During the three-month period ended September 30, 2003 we incurred and
expensed approximately $0.8 million of transaction costs related to the sale of
our automotive safety business and the pending merger with Armor Holdings. The
aforementioned increase was partially offset by cost saving reductions in
general administrative expenses related to restructuring activities that were
implemented in 2002 and 2003.

Operating income for the three-month period ended September 30, 2003 was
$2.1 million compared to $1.5 million for the same period
in 2002. Operating income for the three-month period ended September
30, 2003 was negatively impacted by $0.8 million in transaction costs
discussed above. Although
revenues were down period to period we were able to capitalize on restructuring
activities that were implemented in prior periods and experience the benefits
the costs savings generated with the move and integration of our Asheville
facility.

Interest expense decreased to $ 2.5 million for the three-month period
ended September 30, 2003 compared to $2.6 for the same period in 2002. The
decrease is primarily attributable to the reduction of debt through the use of
proceeds from the sale of our automotive safety business. Cash paid for
interest for each of the three-month periods ended September 30, 2003 and 2002
was $ 1.6 million and $ 1.7 million, respectively.

Results of Operations for the Nine-Month Period Ended September 30, 2003

Revenue for the nine-month period ended September 30, 2003 decreased 16%
compared to revenue in the same period for 2002. In the first quarter of
2003, SAPI body armor revenue grew compared to the same period in 2002.
However, production revenues and profitability were negatively impacted as we
completed the SAPI body armor design validation for rework announced in
November of 2002. We resumed full production of SAPI for the U.S. Army in late
February 2003, but the design validation process caused delays in the timing
of revenues anticipated related to new SAPI orders. Also in the first quarter,
we completed the consolidation of our Asheville, North Carolina, operation into
the larger Aerospace and Defense facility based in Phoenix. The plant closure
and transition resulted in a temporary revenue shortfall. Additionally,
revenues were negatively impacted by decreases in orders and cancellation of
funding for some of our military sealed parachute product and were partially
offset by increased production of military personnel vests and flotation
collars. The aforementioned decreases were also partially offset by increases
in our fixed wing seating and rotorcraft seating. Technology and licensing
revenues for the nine-months ended September 30, 2003 decreased approximately
34% compared to the same period in 2002 and is primarily attributed to a
strategic decision to retain all technology rights as an asset during our
focused efforts on selling the entire Company.

Gross margin as a percentage of sales increased to 36% for the nine-month
period ended September 30, 2003 from 34% for the comparable period in 2002.
Gross margin as a percent of sales in our Aerospace and Defense segment
increased to 36% for the nine-month period ended September 30, 2003 from 34%
for the same period in 2002. The integration of the Asheville facility to the
Phoenix location enabled us to achieve cost savings not experienced in 2002 and
cost reduction efforts began in 2002 and early 2003 have been the key drivers
for the increased margins. Additionally, in 2002 we began voluntary rework
related to our SAPI plates and we recorded a loss of approximately $1.0
million, for projected rework costs.

Administrative and research and development expenses for the nine-month
period ended September 30, 2003 increased $1.2 million or 10% as compared to
the same 2002 period. During the nine-month period ended
September 30, 2003 we incurred and expensed approximately $1.4 million of
transaction costs related to the sale of our automotive safety business and the
pending merger with Armor Holdings. Additionally, we and others in the aerospace and defense industry have
experienced a shift from externally funded development to more internally
funded development, which has caused research and development expenditures to
increase for the nine-month period ended September 30, 2003 compared to the
same period in 2002.

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The aforementioned increases were partially offset by cost saving reductions in
general administrative expenses related to restructuring activities that were
implemented in 2002 and 2003.

Operating income for the nine-month period ended September 30, 2003 was
$5.2 million as compared to $8.6 million for the same period in 2002. The 2003
operating income for the nine-month period ended September 30, 2003 was negatively impacted by lower
revenues discussed above and transaction costs of $1.4 million as
well as, restructuring charges,
costs associated with the move of our Asheville facility, the investments in
the design and qualification testing for SAPI body armor for future
procurements and the completion of the voluntary SAPI rework.

Interest expense for the nine-month period ended September 30, 2003 was
$8.3 million compared to $7.7 million for the same period in 2002. The
increase in interest expense between the two periods is primarily attributable
to approximately $0.4 million of expense related to a yield maintenance
interest feature in the mortgage note for the Asheville facility that was
retired in April 2003. Cash paid for interest for the nine-month period ended
September 30, 2003 and 2002 was $5.3 million and $5.1 million, respectively.

Other expense for the nine-month period ended September 30, 2003 was $1.0
million and was entirely attributable to a one-time performance fee payment
related to covenant non-compliance for failure to meet a leverage ratio as of
June 30, 2003 under our Senior Secured Note.

Liquidity and Capital Resources

The accompanying unaudited consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. As noted
in the accompanying financial statements, current maturities of debt are
approximately $59.6 million as of September 30, 2003 and there is
uncertainty relating to the Companys ability to refinance certain of its debt.
These factors, among others, indicate that the Company may be unable to
continue as a going concern. The accompanying financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern. As
part of the plan to meet future quarterly covenants and current and long-term
debt maturities, we sold our automotive safety business during July 2003 and
subsequently entered into an Agreement and Plan of Merger (the Merger
Agreement) to be acquired by Armor Holdings, Inc., a Delaware corporation
(Armor Holdings) as discussed in Note 11  Transactions and Subsequent
Events, to the accompanying unaudited consolidated financial
statements.

Current maturities of our debt as of September 30, 2003 are $59.6 million
and primarily consist of $3.5 million under our revolving line of credit
(RLC) due December 31, 2003, $ 24.7 million of our Senior Secured Note due
December 31, 2003, and $ 31.4 million of our 8% Senior Subordinated Notes due
May 1, 2004. As part of the plan to meet future quarterly covenants and
current and long-term debt maturities, we sold our automotive safety business
during July 2003 and subsequently entered into the Merger Agreement, all as
discussed below.

On July 22, 2003, we completed the sale of all the assets of our
Automotive Safety division to Zodiac, S.A. at a selling price of approximately
$14.5 million in cash. Customary closing and purchase price adjustments
increased the previously announced selling price by approximately $0.2 million.
After deducting closing costs and related fees, we received net proceeds of
approximately $12.9 million. The transaction, which is
classified in discontinued operations, resulted in a gain on sale of
approximately $0.6 million, which includes approximately
$0.3 million related to an escrow account, from which we can
potentially recover a maximum of $0.5 million in 18 months from the closing of
the transaction, before the impact of the
one-time charge to write off accumulated foreign currency translation
losses of approximately $1.9 million. We applied the net proceeds to
repay a portion of our outstanding debt.

On September 2, 2003, we announced that we signed an Agreement and Plan of
Merger (the Merger Agreement) to be acquired by Armor Holdings, Inc., a
Delaware corporation (Armor Holdings). The Merger Agreement states that
Armor Holdings shall acquire all outstanding common stock of Simula, retire
outstanding indebtedness, and assume all liabilities of Simula for total
consideration of $110.5 million. Consideration to Simulas shareholders will,
at Armor Holdings discretion, consist of cash or a combination of cash and
registered shares of Armor Holdings common stock, with at least 20% of the
value of the payment to shareholders to be in cash. The transaction is
structured as a merger and is expected to be taxable to Simulas shareholders.

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On September 30, 2003, we were not in compliance with certain non-monetary
financial covenants under our Revolving Line of Credit (the RLC) and our
senior secured note. On November 12, 2003, we received waivers of the
non-compliance at September 30, 2003. Our RLC had outstanding borrowings of $
3.5 million and remaining borrowing availability of $ 3.5 million at September
30, 2003 as compared to outstanding borrowings of $11.3 million and a remaining
borrowing availability of $1.3 million at December 31, 2002.

Because of our management and operational re-alignment and our operational
profitability, we expect to generate future positive operating cash flows that,
together with our existing availability under our RLC, will be adequate to fund
our planned operations, excluding the principal payments on the current debt
previously discussed.

We continually review our revenue and cost forecasts so that we can react
to changes in our operations and liquidity position. The amount and timing of
Department of Defense procurement and future constraints on certain raw
materials and their costs could impact our ability to generate Aerospace and
Defense revenue and income. SeeForward-Looking Information and Risks and
Uncertainties in our Businessbelow andQuantitative and Qualitative
Disclosure about Market Riskincluded Item 3 of this Part I

Our ability to generate sufficient cash flow from operations is
principally dependent upon our ability to continue to increase revenue and
contain or reduce operating expenses. At September 30, 2003, we had cash and
cash equivalents of $12,130 compared to $147,842 at December 31, 2002. Our RLC
had outstanding borrowings of $3.5 million and remaining borrowing availability
of $3.5 million at September 30, 2003 as compared to outstanding borrowings of
$11.3 million and a remaining borrowing availability of $1.3 million at
December 31, 2002. At November 5, 2003 our outstanding borrowings under the
RLC was $2.3 million and remaining borrowing availability was $5.6 million.
Because of our federal and certain state net operating loss carryforwards, we
are not a significant cash taxpayer.

Operating
activities provided approximately $1.7 million of cash during
the nine-month period ended September 30, 2003 as compared to approximately
$4.0 million for the comparable period in 2002. The decrease in cash provided
by operations was attributable primarily to lower results of
operations for the nine month period due to the one time performance
fee for a covenant violation, loss on the sale of our automotive safety
business and transaction costs, previously
discussed.

Investing
activities provided $12.8 million during the nine-month period
ended September 30, 2003 compared to a use of approximately $1.5 million for
the same period in 2002. The increase in cash provided by investing activities
is related to the completion of the sale of our automotive safety business, of
the Asheville facility and of land. The cash provided by investing activities
was partially offset by the purchase of manufacturing equipment and additional
investment in our patent portfolio.

Financing activities used net cash of $14.6 million for the nine-month
period ended September 30, 2003, compared to $ 2.4 million provided by
financing activities for the same period in 2002. Cash used in financing
activities during the nine-month period ended September 30, 2003 was
attributable to the retirement of our 9.5% Senior Subordinated Notes, the
retirement of the Asheville facility mortgage note payable, payments made to
our RLC and our Senior Secured Note from the proceeds of the sale of our
automotive safety business and decreased borrowings under our RLC.

15



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##### Table of Contents



We believe we have sufficient manufacturing capacity, at September 30,
2003, to meet our anticipated future delivery requirements. We may, however,
seek strategic partners for the joint development of capital intensive
manufacturing capacity for new high technology products.

Research and Development

Historically, we have made significant investments in research and
development. Our research and development expenditures have fluctuated based
on available government-funded contracts and available company funding. We
anticipate that future fluctuations will continue as a result of our efforts to
expand product lines and enhance our existing technologies.

Forward Looking Information and Risks and Uncertainties in our Business

A wide variety of factors affect our projected operating and financial
results and can adversely impact our revenues, profitability and cash flows.
Our liquidity and available working capital depend upon our cash flow from
operations and, will require proceeds from asset sales or licensing,
refinancing of our debt, or potential sale or merger of Simula. Improved cash
flow from operations will depend on our ability to continue to implement our
cost cutting initiatives. Continued compliance with our debt covenants is
necessary to avoid loan defaults and is a requirement for maintaining access to
funds available under our RLC.

With respect to our product offerings many of our products are
subassemblies in final products. We act as subcontractor to defense industry
prime contractors. Accordingly, we are reliant on others to gain and retain
market acceptance for our products, and we must continue to demonstrate that
our products will provide advantages to the manufacturers of final products,
including increasing product safety and providing such manufacturers with
competitive cost advantages

Although we have long established relationships with a number of our
Aerospace and Defense customers, we do not have significant long-term supply
contracts with any of these customers. Our customers typically do not commit
to long-term production schedules and, as a result, customer orders generally
are subject to cancellation or delay. Reliance upon defense contracts involves
certain risks, including dependence on congressional appropriations and changes
in governmental policies that reflect military and political developments.

Factors pertinent to our ability to meet our current and future financial
requirements and projections include:



| |  | our ability to complete the pending acquisition by Armor Holdings, Inc.;                                                                                                                                                     
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | our relationship with our senior lenders and on-going compliance with loan terms and covenants;                                                                                                                              
| 
| |  | our relationship with significant customers and maintenance of preferred supplier relationships that are
renegotiated frequently;                                                                                            
| 
| |  | our leveraged status and the level and cost of our debt;                                                                                                                                                                     
| 
| |  | the continued reduction of our fixed expenses;                                                                                                                                                                               
| 
| |  | ability to monetize assets including through sales of certain assets or technologies at a favorable price;                                                                                                                   
| 
| |  | our ability to continue to provide design and manufacturing services, products and new product applications that compare
favorably on the basis of time to introduction, cost, and performance with those of our competitors;
| 
| |  | the level and makeup of military expenditures;                                                                                                                                                                               
| 
| |  | contract mix and shifting production and delivery schedules among our market segments;                                                                                                                                       
| 
| |  | the amount of resources available for independent research and development;                                                                                                                                                  
| 
| |  | proof of concept and production validation of certain of our new technologies and proposed products, as well as our
financial ability to establish manufacturing capacity for such products; and                             
| 
| |  | technological changes introduced by competitors and customers.                                                                                                                                                               

As used throughout this report, the words estimate, anticipate,
expect, should, intend, project, target, or other expressions that
indicate future events identify forward-looking statements which are made
pursuant to safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. We undertake no obligation to update any of these forward-looking
statements to reflect events or circumstances after the date on which such
statements were made or to reflect the occurrence of unanticipated events.
Actual results and trends may differ materially. Risks include those described
herein

16



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and in our registration statements and periodic reports filed with the
U.S. Securities and Exchange Commission.




Item 3. Quantitative and Qualitative Disclosure about Market Risk

Currency Exchange Rate Risk

We have currency exposures related to buying and selling in currencies
other than the local currency in which we operate. These exposures may impact
future earnings and/or operating cash flows. Currently, our most significant
exposure relates to the Euro and the British Pound. We had supply contracts
that are Euro denominated for our ITS® and AHPS products. We maintained a
manufacturing facility in the United Kingdom for which we funded operating
expenses in British Pounds. We entered into foreign currency hedge
transactions to mitigate our associated risks. The magnitude of the exposure
varied over time and we entered into agreements from time to time by which we
sought to manage certain portions of our foreign exchange exposure in
accordance with established policy guidelines. These arrangements primarily
hedged cash flows for forecasted transactions involving receivables and
payables. We currently have no hedging contracts open as of September 30,
2003, and we disposed of our U.K. manufacturing facility when we sold our
automotive safety business on July 22, 2003.




Item 4. Controls and Procedures

We evaluated, under the supervision and with the participation of
management, including the Chief Executive Officer (CEO) and the Chief Financial
Officer (CFO), the effectiveness of the design and operation of our disclosure
controls and procedures as of September 30, 2003 pursuant to Rule 15d-14 under
the Securities Exchange Act of 1934 (Exchange Act). Based upon that
evaluation, the CEO and CFO concluded that Simulas disclosure controls and
procedures are effective to ensure that information required to be disclosed in
Simulas reports filed or submitted under the Exchange Act are recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and forms.

During
the quarterly period covered by this report, there were no significant
changes in our internal controls or in other factors that could significantly
affect the disclosure controls.

17



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##### Table of Contents






PART II  OTHER INFORMATION




Item 6. Exhibits and Reports

(a)  Exhibits: The following Exhibits are included pursuant to Item 601 of
Regulation S-K.

|       |  |                                                                                                                                              |  |           |     |  
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | --- | -
|No.    |  | Description                                                                                                                                  |  | Reference
|3.1    |  | Articles of Incorporation of Simula, Inc., as amended and restated                                                                           |  |           | (2  | )
|       |  |                                                                                                                                              |  |           |     |  
|3.2    |  | Bylaws of Simula, Inc., as amended and restated                                                                                              |  |           | (1  | )
|       |  |                                                                                                                                              |  |           |     |  
|4.7    |  | Indenture dated April 1, 1997, in connection with the Companys issuance of the 8%
Senior Subordinated Convertible Notes due May 1, 2004     |  |           | (6  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.11  |  | 1992 Stock Option Plan, as amended effective September 15, 1998                                                                              |  |           | (3  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.12  |  | 1992 Restricted Stock Plan                                                                                                                   |  |           | (1  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.21  |  | 1994 Stock Option Plan, as amended effective September 15, 1998                                                                              |  |           | (3  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.26  |  | Simula, Inc. Employee Stock Purchase Plan                                                                                                    |  |           | (2  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.27  |  | Outside Directors Equity Plan                                                                                                                |  |           | (9  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.37  |  | Simula, Inc. 1999 Incentive Stock Option Plan                                                                                                |  |           | (4  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.41  |  | Financing Agreement with The CIT Group/Business Credit, Inc. dated December 30,1999                                                          |  |           | (5  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.41A |  | Amendment Number Three to Financing Agreement between the Company and The CIT
Group/Business Credit, Inc. dated September 26, 2001           |  |           | (7  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.41B |  | Amendment Number Five to Financing Agreement between the Company and The CIT
Group/Business Credit, Inc. dated June 30, 2002                 |  |           | (10 | )
|       |  |                                                                                                                                              |  |           |     |  
|10.41C |  | Amendment Number Seven to Financing Agreement between the Company and The CIT
Group/Business Credit, Inc. dated October 22, 2002             |  |           | (10 | )
|       |  |                                                                                                                                              |  |           |     |  
|10.41D |  | Amendment Number Nine to Financing Agreement between the Company and The CIT
Group/Business Credit, Inc. dated March 25, 2003                |  |           | (11 | )
|       |  |                                                                                                                                              |  |           |     |  
|10.41E |  | Waiver to Certain Financial Covenants to Financing Agreement between the Company and
The CIT Group/Business Credit, Inc. dated April 9, 2003 |  |           | (11 | )
|       |  |                                                                                                                                              |  |           |     |  
|10.45  |  | Loan Agreement between the Company and Allied Capital Corporation dated September 26,
2001                                                   |  |           | (7  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.45A |  | Waiver and Amendment No. 1 to Loan Agreement between the Company and Allied Capital
Corporation dated August 19, 2002                        |  |           | (10 | )
|       |  |                                                                                                                                              |  |           |     |  
|10.45B |  | Consent and Amendment No. 2 to Loan Agreement between the Company and Allied Capital
Corporation dated March 25, 2003                        |  |           | (11 | )
|       |  |                                                                                                                                              |  |           |     |  
|10.46  |  | Employment Agreement between the Company and Bradley P. Forst dated November 12,
2001, effective October 1, 2000                             |  |           | (7  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.48  |  | Employment Agreement between the Company and Joseph Coltman dated December 13, 2001,
effective October 13, 2000                              |  |           | (8  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.50  |  | Retention Agreement between the Company and John A. Jenson dated December 20, 2002                                                           |  |           | (11 | )
|       |  |                                                                                                                                              |  |           |     |  
|31.1   |  | Certification of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K                                                       |  |           | *   |  
|       |  |                                                                                                                                              |  |           |     |  
|31.2   |  | Certification of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-K                                                       |  |           | *   |  
|       |  |                                                                                                                                              |  |           |     |  
|32.1   |  | Certification of Chief Executive Officer pursuant to item 601(b)(32) of Regulation S-K                                                       |  |           | *   |  
|       |  |                                                                                                                                              |  |           |     |  
|32.2   |  | Certification of Chief Financial Officer pursuant to item 601(b)(32) of Regulation S-K                                                       |  |           | *   |  

* Filed herewith



| | (1)  |  | Filed with Registration Statement on Form S-18, No. 33-46152-LA,
under the Securities Act of 1933, effective April 13, 1992.
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------
|
| | (2)  |  | Filed with Definitive Proxy on May 15, 1996, for the Companys
Annual Meeting of Shareholders held on June 20, 1996.        
|
| | (3)  |  | Filed with report on Form 10-Q for the quarter ended September 30,
1998.                                                    
|
| | (4)  |  | Filed with Definitive Proxy on May 14, 1999, for the Companys
Annual Meeting of Shareholders held on June 17, 1999.        
|
| | (5)  |  | Filed with report on Form 10-K for the year ended December 31,
1999.                                                        
|
| | (6)  |  | Filed with report on Form 10-Q for the quarter ended March 31,
2000.                                                        
|
| | (7)  |  | Filed with report on Form 10-Q for the quarter ended September 30,
2001.                                                    
|
| | (8)  |  | Filed with report on Form 10-K for the year ended December 31,
2001.                                                        
|
| | (9)  |  | Filed with Registration Statement on Form S-8, effective March 28,
2002.                                                    
|
| | (10) |  | Filed with report on Form 10-Q for the quarter ended September 30,
2002.                                                    

18



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##### Table of Contents





| | (11) |  | Filed with report on Form 10-K for the year ended December 31,
2002.
| | ---- |  | --------------------------------------------------------------------

(b) Reports on Form 8-K:



| | (1) |  | Report on Form 8-K dated July 23, 2003 disclosing the completion of
the sale of our automotive safety business and the signing of a Letter
of Intent to be acquired by Armor Holdings.     
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Report on Form 8-K dated August 12, 2003 furnishing notification of
issuance of a press release pertaining to earnings for the fiscal
quarter ended June 30, 2003.                         
|
| | (3) |  | Report on Form 8-K dated September 11, 2003 disclosing the
execution of the Agreement and Plan of Merger with Armor Holdings.                                                              
|
| | (4) |  | Report on Form 8-K/A dated July 23, 2003 furnishing notification of
amendment to previous 8-K to add pro forma financial information
related to the sale of our automotive safety business.

19



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-Q for the quarter ended
September 30, 2003 to be signed on its behalf by the undersigned thereunto duly
authorized.

|                        |  |                        
|----------------------- |  | -----------------------
|                        |  | SIMULA, INC.           
|                        |  |                        
|DATE: November 14, 2003 |  | /s/ John A. Jenson     
|                        |  | John A. Jenson         
|                        |  | Chief Financial Officer

20



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##### Table of Contents






INDEX TO EXHIBITS

|       |  |                                                                                                                                              |  |           |     |  
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | --- | -
|No.    |  | Description                                                                                                                                  |  | Reference
|3.1    |  | Articles of Incorporation of Simula, Inc., as amended and restated                                                                           |  |           | (2  | )
|       |  |                                                                                                                                              |  |           |     |  
|3.2    |  | Bylaws of Simula, Inc., as amended and restated                                                                                              |  |           | (1  | )
|       |  |                                                                                                                                              |  |           |     |  
|4.7    |  | Indenture dated April 1, 1997, in connection with the Companys issuance of the 8%
Senior Subordinated Convertible Notes due May 1, 2004     |  |           | (6  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.11  |  | 1992 Stock Option Plan, as amended effective September 15, 1998                                                                              |  |           | (3  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.12  |  | 1992 Restricted Stock Plan                                                                                                                   |  |           | (1  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.21  |  | 1994 Stock Option Plan, as amended effective September 15, 1998                                                                              |  |           | (3  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.26  |  | Simula, Inc. Employee Stock Purchase Plan                                                                                                    |  |           | (2  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.27  |  | Outside Directors Equity Plan                                                                                                                |  |           | (9  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.37  |  | Simula, Inc. 1999 Incentive Stock Option Plan                                                                                                |  |           | (4  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.41  |  | Financing Agreement with The CIT Group/Business Credit, Inc. dated December 30,1999                                                          |  |           | (5  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.41A |  | Amendment Number Three to Financing Agreement between the Company and The CIT
Group/Business Credit, Inc. dated September 26, 2001           |  |           | (7  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.41B |  | Amendment Number Five to Financing Agreement between the Company and The CIT
Group/Business Credit, Inc. dated June 30, 2002                 |  |           | (10 | )
|       |  |                                                                                                                                              |  |           |     |  
|10.41C |  | Amendment Number Seven to Financing Agreement between the Company and The CIT
Group/Business Credit, Inc. dated October 22, 2002             |  |           | (10 | )
|       |  |                                                                                                                                              |  |           |     |  
|10.41D |  | Amendment Number Nine to Financing Agreement between the Company and The CIT
Group/Business Credit, Inc. dated March 25, 2003                |  |           | (11 | )
|       |  |                                                                                                                                              |  |           |     |  
|10.41E |  | Waiver to Certain Financial Covenants to Financing Agreement between the Company and
The CIT Group/Business Credit, Inc. dated April 9, 2003 |  |           | (11 | )
|       |  |                                                                                                                                              |  |           |     |  
|10.45  |  | Loan Agreement between the Company and Allied Capital Corporation dated September 26,
2001                                                   |  |           | (7  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.45A |  | Waiver and Amendment No. 1 to Loan Agreement between the Company and Allied Capital
Corporation dated August 19, 2002                        |  |           | (10 | )
|       |  |                                                                                                                                              |  |           |     |  
|10.45B |  | Consent and Amendment No. 2 to Loan Agreement between the Company and Allied Capital
Corporation dated March 25, 2003                        |  |           | (11 | )
|       |  |                                                                                                                                              |  |           |     |  
|10.46  |  | Employment Agreement between the Company and Bradley P. Forst dated November 12,
2001, effective October 1, 2000                             |  |           | (7  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.48  |  | Employment Agreement between the Company and Joseph Coltman dated December 13, 2001,
effective October 13, 2000                              |  |           | (8  | )
|       |  |                                                                                                                                              |  |           |     |  
|10.50  |  | Retention Agreement between the Company and John A. Jenson dated December 20, 2002                                                           |  |           | (11 | )
|       |  |                                                                                                                                              |  |           |     |  
|31.1   |  | Certification of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K                                                       |  |           | *   |  
|       |  |                                                                                                                                              |  |           |     |  
|31.2   |  | Certification of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-K                                                       |  |           | *   |  
|       |  |                                                                                                                                              |  |           |     |  
|32.1   |  | Certification of Chief Executive Officer pursuant to item 601(b)(32) of Regulation S-K                                                       |  |           | *   |  
|       |  |                                                                                                                                              |  |           |     |  
|32.2   |  | Certification of Chief Financial Officer pursuant to item 601(b)(32) of Regulation S-K                                                       |  |           | *   |  

* Filed herewith



| | (1)  |  | Filed with Registration Statement on Form S-18, No. 33-46152-LA,
under the Securities Act of 1933, effective April 13, 1992.
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------
|
| | (2)  |  | Filed with Definitive Proxy on May 15, 1996, for the Companys
Annual Meeting of Shareholders held on June 20, 1996.        
|
| | (3)  |  | Filed with report on Form 10-Q for the quarter ended September 30,
1998.                                                    
|
| | (4)  |  | Filed with Definitive Proxy on May 14, 1999, for the Companys
Annual Meeting of Shareholders held on June 17, 1999.        
|
| | (5)  |  | Filed with report on Form 10-K for the year ended December 31,
1999.                                                        
|
| | (6)  |  | Filed with report on Form 10-Q for the quarter ended March 31,
2000.                                                        
|
| | (7)  |  | Filed with report on Form 10-Q for the quarter ended September 30,
2001.                                                    
|
| | (8)  |  | Filed with report on Form 10-K for the year ended December 31,
2001.                                                        
|
| | (9)  |  | Filed with Registration Statement on Form S-8, effective March 28,
2002.                                                    
|
| | (10) |  | Filed with report on Form 10-Q for the quarter ended September 30,
2002.                                                    
|
| | (11) |  | Filed with report on Form 10-K for the year ended December 31,
2002.                                                        

21