##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)



| |  | [X]Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| |  | ------------------------------------------------------------------------------------------



| |  |  | For the quarterly period ended March 31, 2001 or
| |  |  | ------------------------------------------------



| |  | [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| |  | --------------------------------------------------------------------------------------------



| |  |  | For the transition period from ___________ to _________
| |  |  | -------------------------------------------------------
|
| |  |  | Commission file number 1-12410                         

Simula, Inc.
(Exact Name of Registrant as Specified in Its Charter)

|                                                                                                 |  |                                     
|------------------------------------------------------------------------------------------------ |  | ------------------------------------
|Arizona                                                                                          |  | 86-0320129                          
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|(State or Other Jurisdiction of
Incorporation or Organization)                                   |  | (I.R.S. Employer
Identification No.)
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|2700 North Central Avenue, Suite 1000, Phoenix, Arizona
(Address of Principal Executive Offices) |  | 85004
(Zip Code)                    

(602) 631-4005
(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)
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    |  |   |  |        
|--- |  | - |  | -------
|Yes |  | X |  | No ____



|(2) |  | has been subject to such filing requirements for the past 90 days.
|--- |  | ------------------------------------------------------------------

|    |  |   |  |        
|--- |  | - |  | -------
|Yes |  | X |  | No ____

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

|                             |  |                               |            | 
|---------------------------- |  | ----------------------------- | ---------- | 
|Class                        |  | Outstanding at March 31, 2001 |           
|                             |  |                               |           
|Common Stock, $.01 par value |  |                               | 12,190,011 | 





---

TABLE OF CONTENTS



|                                |                                                                                                                |  |  |  |  |  |  | 
|------------------------------- | -------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I - FINANCIAL INFORMATION 
|Item 1.  Financial Statements. 
|                                | Consolidated Balance Sheets
                 March 31, 2001 and December 31, 2000                             
|                                | Consolidated Statements of Operations
                 Three Months Ended March 31, 2001 and 2000             
|                                | Consolidated Statement of Shareholders' Deficit
                 Three Months Ended March 31, 2001            
|                                | Consolidated Statements of Cash Flows
                 Three Months Ended March 31, 2001 and 2000             
|                                | Notes to Interim Consolidated Financial Statements                                                            
|                                | Item 2 -Management's Discussion and Analysis of
                 Results of Operations and Financial Condition
|PART II - OTHER INFORMATION    
|Item 6. -  Exhibits and Reports
|SIGNATURES                     



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##### Table of Contents



SIMULA, INC.

INDEX

PART I FINANCIAL INFORMATION

|                                                                                               |  |      |       | 
|---------------------------------------------------------------------------------------------- |  | ---- | ----- | 
|                                                                                               |  | PAGE |      
|                                                                                               |  |      |      
|Item 1
 Financial Statements                                                                 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Consolidated Balance Sheets
March 31, 2001 and December 31, 2000                               |  |      | 2     | 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Consolidated Statements of Operations
Three Months Ended March 31, 2001                       
|and 2000                                                                                       |  |      | 3     | 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Consolidated Statement of Shareholders Deficit
Three Months Ended                            
|March 31, 2001                                                                                 |  |      | 4     | 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Consolidated Statements of Cash Flows
Three Months Ended March 31,                            
|2001 and 2000                                                                                  |  |      | 5     | 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Notes to Interim Consolidated Financial Statements                                             |  |      | 6-9   | 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Item 2
 Managements Discussion and Analysis of
Results of Operations and Financial Condition |  |      | 10-14 | 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|

PART II  OTHER INFORMATION

|                              |  |  |    | 
|----------------------------- |  |  | -- | 
|                             
|                             
|                             
|                             
|Item 6
 Exhibits and Reports |  |  | 15 | 
|                             
|                             
|                             
|                             
|SIGNATURES                    |  |  | 16 | 

1



---



##### Table of Contents









PART I FINANCIAL INFORMATION







Item 1. Financial Statements.







SIMULA, INC.
CONSOLIDATED BALANCE SHEETS



---



|                                                    |                                                                                                                                                   |                             |            |             |            |   |              |             |            |  
|--------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ---------- | ----------- | ---------- | - | ------------ | ----------- | ---------- | -
|                                                    |                                                                                                                                                   |                             |            | March 31,   |            |   | December 31, |            
|                                                    |                                                                                                                                                   |                             |            | 2001        |            |   | 2000         |            
|                                                    |                                                                                                                                                   |                             |            |             |            |   |              |            
|ASSETS                                             
|                                                   
|                                                   
|                                                   
|                                                   
|CURRENT ASSETS                                     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Cash and cash equivalents                                                                                                                         |                             | $          | 239,475     |            |   | $            | 746,078     |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Contract and trade receivables Net                                                                                                               |                             |            | 26,614,369  |            |   |              | 24,992,446  |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Inventories                                                                                                                                       |                             |            | 6,470,169   |            |   |              | 5,927,139   |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Deferred income taxes                                                                                                                             |                             |            | 3,243,000   |            |   |              | 3,243,000   |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Prepaid expenses and other                                                                                                                        |                             |            | 813,549     |            |   |              | 739,297     |           
|                                                    |                                                                                                                                                   |                             |            |             |            |  
|                                                    |                                                                                                                                                   | Total current assets        |            |             | 37,380,562 |   |              |             | 35,647,960 |  
|                                                   
|                                                   
|                                                   
|                                                   
|PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS Net |                                                                                                                                                   |                             | 8,224,606  |             |            |   | 8,345,520    |            
|                                                   
|                                                   
|                                                   
|                                                   
|DEFERRED INCOME TAXES                               |                                                                                                                                                   |                             | 34,168,000 |             |            |   | 34,340,000   |            
|                                                   
|                                                   
|                                                   
|                                                   
|DEFERRED FINANCING COSTS                            |                                                                                                                                                   |                             | 3,232,170  |             |            |   | 3,534,759    |            
|                                                   
|                                                   
|                                                   
|                                                   
|INTANGIBLES Net                                    |                                                                                                                                                   |                             | 3,256,235  |             |            |   | 3,115,689    |            
|                                                   
|                                                   
|                                                   
|                                                   
|OTHER ASSETS                                        |                                                                                                                                                   |                             | 1,201,699  |             |            |   | 914,474      |            
|                                                    |                                                                                                                                                   |                             |            |             |            |  
|                                                    |                                                                                                                                                   | TOTAL                       |            | $           | 87,463,272 |   |              | $           | 85,898,402 |  
|                                                    |                                                                                                                                                   |                             |            |             |            |  
|LIABILITIES AND SHAREHOLDERS DEFICIT              
|                                                   
|                                                   
|                                                   
|                                                   
|CURRENT LIABILITIES                                
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Revolving line of credit                                                                                                                          |                             | $          | 7,299,057   |            |   | $            | 5,329,429   |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Trade accounts payable                                                                                                                            |                             |            | 6,077,987   |            |   |              | 5,966,003   |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Other accrued liabilities                                                                                                                         |                             |            | 9,357,375   |            |   |              | 10,688,627  |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Deferred revenue                                                                                                                                  |                             |            | 2,173,419   |            |   |              | 2,327,615   |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accrued restructuring costs                                                                                                                       |                             |            | 1,982,473   |            |   |              | 1,911,115   |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Advances on contracts                                                                                                                             |                             |            | 2,119,820   |            |   |              | 1,098,976   |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Current portion of long-term debt                                                                                                                 |                             |            | 20,047,262  |            |   |              | 19,711,509  |           
|                                                    |                                                                                                                                                   |                             |            |             |            |  
|                                                    |                                                                                                                                                   | Total current liabilities   |            |             | 49,057,393 |   |              |             | 47,033,274 |  
|                                                   
|                                                   
|                                                   
|                                                   
|DEFERRED REVENUE                                    |                                                                                                                                                   |                             | 2,037,503  |             |            |   | 2,632,271    |            
|                                                   
|                                                   
|                                                   
|                                                   
|DEFERRED LEASE COST                                 |                                                                                                                                                   |                             | 166,832    |             |            |   | 142,999      |            
|                                                   
|                                                   
|                                                   
|                                                   
|LONG-TERM DEBT Less current portion                |                                                                                                                                                   |                             | 36,508,075 |             |            |   | 36,750,894   |            
|                                                    |                                                                                                                                                   |                             |            |             |            |  
|                                                    |                                                                                                                                                   | Total liabilities           |            |             | 87,769,803 |   |              |             | 86,559,438 |  
|                                                    |                                                                                                                                                   |                             |            |             |            |  
|SHAREHOLDERS DEFICIT                              
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Preferred stock, $.05 par
value authorized 50,000,000 shares
Common stock, $.01 par value authorized, 50,000,000 shares;

    issued 12,190,011 |                             |            | 121,900     |            |   |              | 121,900     |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Additional paid-in capital                                                                                                                        |                             |            | 62,149,281  |            |   |              | 62,149,281  |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accumulated deficit                                                                                                                               |                             |            | (62,159,921 | )          |   |              | (62,482,382 | )         
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accumulated other comprehensive income                                                                                                            |                             |            | (417,791    | )          |   |              | (449,835    | )         
|                                                    |                                                                                                                                                   |                             |            |             |            |  
|                                                    |                                                                                                                                                   | Total shareholders deficit |            |             | (306,531   | ) |              |             | (661,036   | )
|                                                    |                                                                                                                                                   |                             |            |             |            |  
|                                                    |                                                                                                                                                   | TOTAL                       |            | $           | 87,463,272 |   |              | $           | 85,898,402 |  
|                                                    |                                                                                                                                                   |                             |            |             |            |  

See notes to consolidated financial statements

2



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##### Table of Contents









SIMULA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS



---



|                                           |  |                    |            |   |      |   |            |  
|------------------------------------------ |  | ------------------ | ---------- | - | ---- | - | ---------- | -
|                                           |  | Three Months Ended |           
|                                           |  | March 31,          |           
|                                           |  |                    |           
|                                           |  | 2001               |            |   | 2000 |  
|                                           |  |                    |            |   |      |  
|Revenue                                    |  | $                  | 25,535,767 |   |      | $ | 24,558,858 |  
|                                          
|                                          
|                                          
|                                          
|Cost of revenue                            |  |                    | 16,383,598 |   |      |   | 16,945,302 |  
|                                           |  |                    |            |   |      |  
|Gross margin                               |  |                    | 9,152,169  |   |      |   | 7,613,556  |  
|                                          
|                                          
|                                          
|                                          
|Administrative expenses                    |  |                    | 5,661,754  |   |      |   | 5,054,110  |  
|                                          
|                                          
|                                          
|                                          
|Restructuring charge                       |  |                    | 479,000    |   |      |   |           |  
|                                           |  |                    |            |   |      |  
|Operating income                           |  |                    | 3,011,415  |   |      |   | 2,559,446  |  
|                                          
|                                          
|                                          
|                                          
|Interest expense                           |  |                    | (2,516,954 | ) |      |   | (2,263,638 | )
|                                           |  |                    |            |   |      |  
|Income before taxes                        |  |                    | 494,461    |   |      |   | 295,808    |  
|                                          
|                                          
|                                          
|                                          
|Income tax expense                         |  |                    | (172,000   | ) |      |   | (104,000   | )
|                                           |  |                    |            |   |      |  
|Net income                                 |  |                    | 322,461    |   |      |   | 191,808    |  
|                                          
|                                          
|                                          
|                                          
|Preferred stock dividends                  |  |                    |           |   |      |   | 33,658     |  
|                                           |  |                    |            |   |      |  
|Income available to common stockholders    |  | $                  | 322,461    |   |      | $ | 158,150    |  
|                                           |  |                    |            |   |      |  
|Income per common share basic             |  | $                  | 0.03       |   |      | $ | 0.01       |  
|                                           |  |                    |            |   |      |  
|Income per common share assuming dilution |  | $                  | 0.03       |   |      | $ | 0.01       |  
|                                           |  |                    |            |   |      |  

See notes to consolidated financial statements

3



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##### Table of Contents









SIMULA, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS DEFICIT
THREE MONTHS ENDED MARCH 31, 2001



---



|                                |  |              |            |  |         |   |         |             |  |            |               |  |  |        |             |   |       |             |          |  
|------------------------------- |  | ------------ | ---------- |  | ------- | - | ------- | ----------- |  | ---------- | ------------- |  |  | ------ | ----------- | - | ----- | ----------- | -------- | -
|                                |  |              |            |  |         |   |         |             |  |            |               |  |  |        |             |   |       | Accumulated |         
|                                |  |              |            |  |         |   |         |             |  | Additional |               |  |  |        |             |   | Other |            
|                                |  | Common Stock |            |  | Paid-in |   |         | Accumulated |  |            | Comprehensive | 
|                                |  | Shares       |            |  | Amount  |   |         | Capital     |  |            | Deficit       |  |  | Income |            
|                                |  |              |            |  |         |   |         |             |  |            |               |  |  |        |            
|BALANCE, January 1, 2001        |  |              | 12,190,011 |  |         | $ | 121,900 |             |  | $          | 62,149,281    |  |  | $      | (62,482,382 | ) |       | $           | (449,835 | )
|                               
|                               
|                               
|                               
|Net income                      |  |              |            |  |         |   |         |             |  |            |               |  |  |        | 322,461     |   |       |             |          |  
|                               
|                               
|                               
|                               
|Currency translation adjustment |  |              |            |  |         |   |         |             |  |            |               |  |  |        |             |   |       |             | 32,044   |  
|                                |  |              |            |  |         |   |         |             |  |            |               |  |  |        |            
|BALANCE, March 31, 2001         |  |              | 12,190,011 |  |         | $ | 121,900 |             |  | $          | 62,149,281    |  |  | $      | (62,159,921 | ) |       | $           | (417,791 | )
|                                |  |              |            |  |         |   |         |             |  |            |               |  |  |        |            

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                |  |               |          |   |               |   |         | 
|------------------------------- |  | ------------- | -------- | - | ------------- | - | ------- | 
|                                |  | Total         |         
|                                |  | Shareholders' |          |   | Comprehensive |  
|                                |  | Deficit       |          |   | Income        |  
|                                |  |               |          |   |               |  
|BALANCE, January 1, 2001        |  | $             | (661,036 | )
|                               
|                               
|                               
|                               
|Net income                      |  |               | 322,461  |   |               | $ | 322,461 | 
|                               
|                               
|                               
|                               
|Currency translation adjustment |  |               | 32,044   |   |               |   | 32,044  | 
|                                |  |               |          |   |               |  
|BALANCE, March 31, 2001         |  | $             | (306,531 | ) |               | $ | 354,505 | 
|                                |  |               |          |   |               |  

See notes to consolidated financial statements

4



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##### Table of Contents









SIMULA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS



---



|                                                    |                                                                              |                                                 |                                                  |           |                              |            |            |            |            |            |  
|--------------------------------------------------- | ---------------------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------------------ | --------- | ---------------------------- | ---------- | ---------- | ---------- | ---------- | ---------- | -
|                                                    |                                                                              |                                                 |                                                  |           | Three Months Ended March 31, |           
|                                                    |                                                                              |                                                 |                                                  |           |                              |           
|                                                    |                                                                              |                                                 |                                                  |           | 2001                         |            |            | 2000       |           
|                                                    |                                                                              |                                                 |                                                  |           |                              |            |            |            |           
|Cash flows used for operating activities:          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net income                                                                   |                                                 | $                                                | 322,461   |                              |            | $          | 191,808    |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Adjustment to reconcile net income to net cash used in operating activities:
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Depreciation and amortization                   |                                                  |           | 1,117,211                    |            |            |            | 1,194,748  |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Deferred income taxes                           |                                                  |           | 172,000                      |            |            |            | 104,000    |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Capitalized interest                            |                                                  |           | 116,269                      |            |            |            | 114,040    |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Restructuring charge                            |                                                  |           | 479,000                      |            |            |            |           |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Currency translation adjustment                 |                                                  |           | 32,044                       |            |            |            | (315,031   | )         
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Changes in net assets and liabilities:                                      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Contract and trade receivables net of advances |                                                  |           | (601,079                     | )          |            |            | (2,594,785 | )         
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Inventories                                     |                                                  |           | (543,030                     | )          |            |            | (1,927,961 | )         
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Prepaid expenses and other                      |                                                  |           | (74,252                      | )          |            |            | (271,704   | )         
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Other assets                                    |                                                  |           | (286,745                     | )          |            |            | 35,476     |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Net assets held for sale                        |                                                  |           |                             |            |            |            | 677,582    |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Trade accounts payable                          |                                                  |           | 111,984                      |            |            |            | (1,485,200 | )         
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Deferred revenue                                |                                                  |           | (701,298                     | )          |            |            |           |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Deferred lease costs                            |                                                  |           | (23,833                      | )          |            |            |           |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Restructuring reserve                           |                                                  |           | (358,124                     | )          |            |            | (1,313,595 | )         
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                              | Other accrued liabilities                       |                                                  |           | (1,331,252                   | )          |            |            | (1,260,173 | )         
|                                                    |                                                                              |                                                 |                                                  |           |                              |           
|                                                    |                                                                              |                                                 | Net cash used in operating activities            |           |                              | (1,568,644 | )          |            |            | (6,850,795 | )
|                                                    |                                                                              |                                                 |                                                  |           |                              |           
|Cash flows (used) provided in investing activities:
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Purchase of property and equipment                                           |                                                 |                                                  | (420,644  | )                            |            |            | (99,994    | )         
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Costs incurred to obtain intangibles                                         |                                                 |                                                  | (247,596  | )                            |            |            | (140,363   | )         
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Proceeds from sale                                                           |                                                 |                                                  |          |                              |            |            | 11,358,660 |           
|                                                    |                                                                              |                                                 |                                                  |           |                              |           
|                                                    |                                                                              |                                                 | Net cash (used) provided in investing activities |           |                              | (668,240   | )          |            |            | 11,118,303 |  
|                                                    |                                                                              |                                                 |                                                  |           |                              |           
|Cash flows provided (used) in financing activities:
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net borrowings (repayments) under line of credit                             |                                                 |                                                  | 1,969,628 |                              |            |            | (2,189,383 | )         
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Principal payments under other debt arrangements                             |                                                 |                                                  | (239,347  | )                            |            |            | (6,278,903 | )         
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Dividends paid                                                               |                                                 |                                                  |          |                              |            |            | (33,658    | )         
|                                                    |                                                                              |                                                 |                                                  |           |                              |           
|                                                    |                                                                              |                                                 | Net cash provided (used) in financing activities |           |                              | 1,730,281  |            |            |            | (8,501,944 | )
|                                                    |                                                                              |                                                 |                                                  |           |                              |           
|Net decrease in cash and cash equivalents           |                                                                              |                                                 | (506,603                                         | )         |                              |            | (4,234,436 | )         
|                                                   
|                                                   
|                                                   
|                                                   
|Cash and cash equivalents at beginning of period    |                                                                              |                                                 | 746,078                                          |           |                              |            | 5,223,236  |           
|                                                    |                                                                              |                                                 |                                                  |           |                              |           
|Cash and cash equivalents at end of period          |                                                                              | $                                               | 239,475                                          |           |                              | $          | 988,800    |           
|                                                    |                                                                              |                                                 |                                                  |           |                              |           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Interest paid                                                                |                                                 | $                                                | 1,897,793 |                              |            | $          | 2,508,779  |           
|                                                    |                                                                              |                                                 |                                                  |           |                              |           
|                                                    | Taxes paid                                                                   |                                                 | $                                                | 28,900    |                             
|                                                    |                                                                              |                                                 |                                                 

See notes to consolidated financial statements

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SIMULA, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Basis of Presentation:

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

The accompanying interim consolidated financial statements of the Company
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. 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 months ended March
31, 2001 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2001.

The accompanying 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. The financial
statements do not include any adjustments relating to recoverability and
classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
The Companys continuation as a going concern depends upon its ability to
obtain refinancing of certain of its debt and comply with the terms and
covenants of its financing agreements.

The Company incurred losses of $4.9 million in 2000, $22.8 million in 1999
and $27.7 million in 1998. These losses were primarily related to unprofitable
businesses and charges and write-offs related to the disposition of those
businesses as well as charges and write-offs related to our recent
restructuring activities described below.

In the fourth quarter 2000, the Board of Directors changed executive
management and named a new CEO. A new Chief Operating Officer was named in the
first quarter of 2001 and a Chief Development Officer was named in the second
quarter of 2001. Subsequent to the change in executive management, the Company
undertook an evaluation of its business plan and current operations. As a
result of this evaluation, we adopted a restructuring plan which included
narrowing the focus of our operations, consolidating certain of our operating
units, reducing our workforce, monetizing our technology portfolio, eliminating
nonessential internal research and development costs, and restructuring our
balance sheet by refinancing our debt structure to achieve overall interest
savings and reducing our debt through improved earnings and strategic
disposition of assets. During the first quarter of 2001, we completed our new
business model, executed our reduction in workforce, began the consolidation of
two of our business units and continued our efforts in restructuring our
existing debt through debt refinancing. In conjunction with these
restructuring activities, the Company recorded additional restructuring charges
totaling $479,000 in the quarter ending March 31, 2001.

The loss incurred in 2000 was primarily due to charges recorded in the
fourth quarter related to nonrecurring write-downs of long-lived assets and the
accrual of one-time charges. As a result of this loss, the Company was in
technical default of certain financial covenants with its Senior Secured Notes
at December 31, 2000 and remains in default of these covenants at March 31,
2001. The Company is currently in compliance with the terms of the RLC
agreement. We have attempted to negotiate waivers of the non-monetary
financial defaults with the holder of the Senior Secured Notes but have been
unsuccessful in reaching agreement on the appropriate amount of compensation to
be paid to the lender for waiver of the defaults. Although we have not
received a notice of default or notice of acceleration, the Senior Secured Note
holder has asserted its right to receive default rate interest, effective
January 2001. Acceleration of these notes would materially adversely effect
our liquidity. As a result of our non-compliance and absence of appropriate
waivers from the lender, the Senior Secured Notes in the amount of $18.9
million, with a face value of $20.6 million, have been reclassified as a
current liability.

With regard to refinancing our debt structure, including but not limited
to our Senior Secured Notes, the Company has retained an investment banker.
The Company had previously completed preliminary due diligence which resulted
in the delivery of a term sheet for replacement financing with preliminary
terms subject to completion of due diligence, documentation and other
conditions. After evaluation by management of the Company, it was determined
that the proposal did not represent acceptable terms. The Company continues to
consider financing alternatives. In the event that we are successful in
obtaining replacement financing, the terms of the new financing would allow us
to reclassify this debt. Because our ability to achieve debt refinancing
cannot be assured, and due to

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SIMULA, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

the continuing non-compliance with our senior
lenders, these potential impacts on liquidity raise
substantial doubt about our ability to continue as a going concern. The
financial statements do not include any adjustments that might be necessary if
we are unable to continue as a going concern.

Note 2 Inventories:

At March 31, 2001 and December 31, 2000, inventories consisted of the
following:

|                |                   |   |           |           |  |              |           |           | 
|--------------- | ----------------- | - | --------- | --------- |  | ------------ | --------- | --------- | 
|                |                   |   | March 31, |           |  | December 31, |          
|                |                   |   | 2001      |           |  | 2000         |          
|                |                   |   |           |           |  |              |          
|Raw materials   |                   | $ | 4,415,099 |           |  | $            | 4,102,441 |          
|               
|               
|               
|               
|Work in process |                   |   | 1,482,115 |           |  |              | 1,551,463 |          
|               
|               
|               
|               
|Finished goods  |                   |   | 572,955   |           |  |              | 273,235   |          
|                |                   |   |           |           |  |             
|                | Total inventories |   | $         | 6,470,169 |  |              | $         | 5,927,139 | 
|                |                   |   |           |           |  |             

Note 3  Restructuring

Management of the Company, with the approval of the board of directors,
committed itself to a plan of restructuring which included narrowing the focus
of our operations, consolidating certain of our operating units, reducing our
workforce, monetizing our technology portfolio, eliminating nonessential
internal research and development costs, restructuring our balance sheet by
refinancing its debt structure to achieve overall interest savings and a
program of debt reduction through improved earnings and strategic disposition
of assets. As a result, we recorded fourth quarter 2000 charges totaling $7.9
million related to the write down of certain long-lived assets, executive
severance, and termination of our self funded health insurance plan. During
the first quarter of 2001, we recorded additional restructuring costs of $0.5
million consisting of $0.4 million in employee severance and $0.1 million
related to remaining facility lease liability and write down of fixed assets.
The headcount reductions occurred in mid March 2001 and total severance of
approximately $0.1 million has been paid at March 31, 2001. The remaining
severance costs are expected to be paid prior to June 30, 2001 and the facility
lease liability is expected to be extinguished prior to 2001 fiscal year end.

In December 1999, management of the Company, with the approval of the
board of directors, committed itself to a plan to address its
financial and operating results and recorded a
charge to income of $18.3 million. The plan included a
refinancing our outstanding bank line of credit and certain term notes and the
divestiture of our commercial new airline seat manufacturing operation. The
Company entered into an agreement to sell substantially all the assets of the
airline seat manufacturing operation in December 1999 and completed the
transaction in January 2000 closing the operating facility at that time and
terminating approximately 300 management and production employees. Total
proceeds for the sale were approximately $12 million resulting in a loss on the
sale of $10.3 million. The remaining 1999 charge is comprised of
severance costs of $1.6 million, $2.5 million related to the abandonment of
leased operating facilities and equipment, $2.3 million related to the write
down to net realizable value for inventory and fixed assets and $1.6 million in
recognition of additional liabilities related primarily to outstanding purchase
order commitments which were non-cancelable.

During 2000, the Company paid total restructuring costs of approximately
$5.2 million comprised of $2.0 million in employee severance and health claims,
$1.1 million in facilities and equipment lease costs, and $2.1 million in
transaction and shutdown costs. During the three months ended March 31, 2001,
the Company has paid restructuring costs of approximately $0.3 million
primarily comprised of facilities and equipment lease costs and additional
health claims.

Note 4  Segment Reporting

The Company is a holding company for wholly owned subsidiaries which
operate in two primary business segments. The Commercial Products segment
includes operations encompassing inflatable restraints and related technology
for automobiles, airline seating soft goods and polymer materials. The
Aerospace and Defense segment includes operations that design and manufacture
crash resistant components, energy absorbing devices, ballistic

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SIMULA, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

armor and composites principally in connection with branches of the United
States armed forces procurement. The remaining segment, entitled Other,
represents general corporate operations.

For the three month period ended March 31, 2001 and 2000 inter-segment
sales were insignificant and total intercompany sales of $199,430 and $767,110,
respectively, have been eliminated.

|                        |                                |                           |           |            |            |   |               |            |            |       |            |   |       |   |           |            |            | 
|----------------------- | ------------------------------ | ------------------------- | --------- | ---------- | ---------- | - | ------------- | ---------- | ---------- | ----- | ---------- | - | ----- | - | --------- | ---------- | ---------- | 
|                        |                                |                           |           | 2001       |           
|                        |                                |                           |           |            |           
|                        |                                |                           |           | Commercial |            |   | Aerospace and |           
|                        |                                |                           |           | Products   |            |   | Defense       |            |            | Other |            |   | Total |  
|                        |                                |                           |           |            |            |   |               |            |            |       |            |   |       |  
|Revenue:               
|                       
|                       
|                       
|                       
|                        | Contract revenue               |                           |           |            |            |   | $             | 13,566,420 |            |       |            |   |       |   | $         | 13,566,420 |           
|                       
|                       
|                       
|                       
|                        | Product sales:                
|                       
|                       
|                       
|                       
|                        |                                | Automotive safety systems |           | $          | 10,193,226 |   |               |            |            |       |            |   |       |   |           |            | 10,193,226 | 
|                       
|                       
|                       
|                       
|                        |                                | Other                     |           |            | 1,441,774  |   |               |            |            |       |            |   |       |   |           |            | 1,441,774  | 
|                       
|                       
|                       
|                       
|                        | Technology sales and royalties |                           |           | 282,347    |            |   |               | 52,000     |            |       |            |   |       |   |           | 334,347    |           
|                        |                                |                           |           |            |            |   |               |            |            |       |            |  
|                        |                                | Total revenue             |           | $          | 11,917,347 |   |               | $          | 13,618,420 |       |            | $ |      |   |           | $          | 25,535,767 | 
|                        |                                |                           |           |            |            |   |               |            |            |       |            |  
|Operating (loss) income |                                | $                         | 2,295,108 |            |            | $ | 1,851,859     |            |            | $     | (1,135,553 | ) |       | $ | 3,011,414 |           

|                        |                                |                           |           |            |            |   |               |            |            |       |          |   |       |   |           |            |            | 
|----------------------- | ------------------------------ | ------------------------- | --------- | ---------- | ---------- | - | ------------- | ---------- | ---------- | ----- | -------- | - | ----- | - | --------- | ---------- | ---------- | 
|                        |                                |                           |           | 2000       |           
|                        |                                |                           |           |            |           
|                        |                                |                           |           | Commercial |            |   | Aerospace and |           
|                        |                                |                           |           | Products   |            |   | Defense       |            |            | Other |          |   | Total |  
|                        |                                |                           |           |            |            |   |               |            |            |       |          |   |       |  
|Revenue:               
|                       
|                       
|                       
|                       
|                        | Contract revenue               |                           |           |            |            |   | $             | 10,894,185 |            |       |          |   |       |   | $         | 10,894,185 |           
|                       
|                       
|                       
|                       
|                        | Product sales:                
|                       
|                       
|                       
|                       
|                        |                                | Airline seat systems      |           | $          | 4,270,034  |   |               |            |            |       |          |   |       |   |           |            | 4,270,034  | 
|                       
|                       
|                       
|                       
|                        |                                | Automotive safety systems |           |            | 7,820,985  |   |               |            |            |       |          |   |       |   |           |            | 7,820,985  | 
|                       
|                       
|                       
|                       
|                        |                                | Other                     |           |            | 1,241,010  |   |               |            |            |       |          |   |       |   |           |            | 1,241,010  | 
|                       
|                       
|                       
|                       
|                        | Technology sales and royalties |                           |           | 270,220    |            |   |               | 62,424     |            |       |          |   |       |   |           | 332,644    |           
|                        |                                |                           |           |            |            |   |               |            |            |       |          |   |      
|                        |                                | Total revenue             |           | $          | 13,602,249 |   |               | $          | 10,956,609 |       |          | $ |      |   |           | $          | 24,558,858 | 
|                        |                                |                           |           |            |            |   |               |            |            |       |          |   |      
|Operating (loss) income |                                | $                         | 1,844,694 |            |            | $ | 1,052,014     |            |            | $     | (337,262 | ) |       | $ | 2,559,446 |           

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SIMULA, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Note 5  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 ended
March 31, 2001 and 2000, the effect of 1,774,074 shares and 1,965,812 shares,
respectively, to be issued upon conversion of the 8% Notes was not used in
determining dilutive earnings per share because the result would be
anti-dilutive.

|                                              |                                             |   |                              |            |  |      |         |            | 
|--------------------------------------------- | ------------------------------------------- | - | ---------------------------- | ---------- |  | ---- | ------- | ---------- | 
|                                              |                                             |   | Three Months Ended March 31, |           
|                                              |                                             |   |                              |           
|                                              |                                             |   | 2001                         |            |  | 2000 |        
|                                              |                                             |   |                              |            |  |      |        
|Net Earnings                                  |                                             | $ | 322,460                      |            |  | $    | 191,808 |           
|                                             
|                                             
|                                             
|                                             
|Dividends on preferred stock                  |                                             |   |                             |            |  |      | 33,658  |           
|                                              |                                             |   |                              |            |  |     
|Net earnings available to common stockholders |                                             | $ | 322,460                      |            |  | $    | 158,150 |           
|                                              |                                             |   |                              |            |  |     
|                                              | Basic weighted average shares outstanding   |   |                              | 12,190,011 |  |      |         | 11,180,685 | 
|                                             
|                                             
|                                             
|                                             
|                                              | Effect of dilutive securities               |   |                              | 395,435    |  |      |         | 21,132     | 
|                                              |                                             |   |                              |            |  |     
|                                              | Diluted weighted average shares outstanding |   |                              | 12,585,446 |  |      |         | 11,201,817 | 
|                                              |                                             |   |                              |            |  |     
|                                              | Basic per share amounts                     |   | $                            | 0.03       |  |      | $       | 0.01       | 
|                                              |                                             |   |                              |            |  |     
|                                              | Diluted per share amounts                   |   | $                            | 0.03       |  |      | $       | 0.01       | 
|                                              |                                             |   |                              |            |  |     

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SIMULA, INC.







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

General The following discussion and analysis provides information that
management of Simula, Inc. (the Company) believes is relevant to an
assessment and understanding of the Companys results of operations and
financial condition for the three month period ended March 31, 2001 compared to
the same periods in 2000. This discussion should be read in conjunction with
the Interim Consolidated Financial Statements and the Notes thereto included
elsewhere in this Form 10-Q. This Form 10-Q contains certain forward-looking
statements and information. The cautionary statements contained below should
be read as being applicable to all related forward-looking statements wherever
they appear. See Forward Looking Information and Risks of the Business.

The Company

We specialize in the development, manufacture and marketing of advanced
occupant safety, seating, and restraint systems installed in air, ground and
sea vehicles and protective equipment and materials for military and civilian
personnel. We are a recognized leader in safety technology innovations.

Since our founding in 1975, our historic core business has been as a
government and defense contractor. Commencing with acquisitions and commercial
product developments since 1993, we became a supplier of seating systems for
rail and other mass transit vehicles and a new entrant in the manufacture of
new commercial airliner seating. Utilizing our proprietary safety technology,
we have introduced crashworthy systems for a variety of vehicles and aircraft
and various inflatable restraint systems for automobiles including the
Inflatable Tubular Structure (ITS).

In 1993 and 1994, we pursued an acquisition strategy designed to enable us
to exploit our energy absorption technology within the commercial airline
seating business. In 1993, we acquired an airline passenger seat re-upholstery
and refurbishing business, which provided certain FAA certifications and seat
assembly capacity. In 1994, we acquired two competing companies in the rail
and mass transit seating business, which provided large scale manufacturing
capacity synergistic with the airline seating business. In 1996, we entered
the commercial airline seating market. In 1998, we decided to discontinue our
rail and mass transit business when our commercial airline seating business no
longer needed the manufacturing capacity supplied by these operations, and we
sold this businesses in 1999. In late 1999, we decided to sell our commercial
airline seating business to concentrate on more profitable businesses.

Our revenue has historically been derived from three sources: sales of our
manufactured products; contract research and development for third parties; and
technology sales and royalties. A substantial portion of our current revenue
from the Aerospace and Defense segment is accounted for under the percentage of
completion method of accounting. Under this method, revenue is recorded as
production progresses so that revenue less costs incurred to date yields the
percentage of gross margin estimated for each contract. Overall gross margin
percentages can increase or decrease based upon changes in estimated gross
margin percentages over the lives of individual contracts.

We are a holding company for wholly owned subsidiaries that operate in two
primary business segments. Our Commercial Products segment includes technology
development, products and safety systems for automobiles and trucks, high
impact transparent polymer products, and airline seat soft goods. Our
Aerospace and Defense segment includes technology development and manufacturing
operations for military aircraft seating, armor, and aircraft crew safety
systems sold principally to U.S. and foreign armed forces. Our remaining
segment, entitled Other, represents general corporate operations.

In summary, our core businesses today are grounded in our self-created
core technology. This includes our founding technology in military helicopter
seating which has grown into a much broader government business; our inflatable
restraint business created in our laboratories and migrated to the automobile
industry; uniquely designed parachutes and flotation collars; and the
beginnings of a potentially large business with our developed polymers.

Liquidity and Capital Resources

In the fourth quarter 2000, the Board of Directors changed executive
management and named a new Chief Executive Officer. A new Chief Operating
Officer was named in the first quarter of 2001 and a Chief Development Officer
in the second quarter of 2001. Subsequent to the change in executive
management, Simula undertook an evaluation of its business plan and current
operations. As a result of this evaluation, we adopted a restructuring
plan

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SIMULA, INC.

for our business which included narrowing the focus of our
operations, consolidating certain of our operating units, reducing our
workforce, monetizing our technology portfolio, eliminating nonessential
internal research and development costs, and restructuring our balance sheet by
refinancing our debt structure and reducing our debt through improved earnings
and strategic disposition of assets. During the first quarter of 2001, we
completed our new business model, executed our reduction in workforce, began
the consolidation of two of our business units and continued our efforts to
restructure our existing debt through debt refinancing.

In part because of the restructuring activities described above, we
incurred a loss of $4.9 million in 2000. This loss is primarily attributable
to $2.2 million in severance costs recorded in connection with changes in
management and nonrecurring write-downs of $4.2 million in long-lived assets
and the accrual of one-time charges of $1.5 million due to the termination of
our self funded health insurance. As a result of this loss, we were in
technical default of certain financial covenants under our Senior Secured Notes
at December 31, 2000 and remain in default of these covenants at March 31,
2001. The Company is currently in compliance with the terms of the revolving
line of credit agreement (the RLC). We have attempted to negotiate waivers
of the non-monetary financial defaults with the holder of the Senior Secured
Notes but have been unsuccessful in reaching agreement on the appropriate
amount of compensation to be paid to the lender for waiver of the defaults.
Although we have not received a notice of default or notice of acceleration,
the lender has the ability to claim acceleration as a remedy and has asserted
its right to receive default rate interest. Acceleration of these notes would
materially adversely effect our liquidity. As a result of our non-compliance
and absence of appropriate waivers from the lender, the debt under our Senior
Secured Notes in the amount of $18.9 million, with a face value of
approximately $20.6 million, has been reclassified as a current liability.

With regard to refinancing our debt structure, including but not limited
to our Senior Secured Notes, we have retained an investment banker. The
Company had previously completed preliminary due diligence which resulted in
the delivery of a term sheet for replacement financing with preliminary terms
subject to completion of due diligence, documentation and other conditions.
After evaluation by management of the Company, it was determined that the
proposal did not represent acceptable terms. The Company continues to consider
financing alternatives. In the event that we are successful in obtaining
replacement financing, the terms of the new financing would allow us to
reclassify this debt as long-term. Because our ability to achieve a debt
refinancing cannot be assured, and due to the continuing non-compliance with
our senior lenders non-monetary financial covenants and their ability to claim
acceleration as a remedy, these potential impacts on liquidity raise
substantial doubt about our ability to continue as a going concern.
Accordingly, the independent auditors opinion on our 2000 financial statements
reflects that while the financial statements are fairly stated, an issue about
the Company as a going concern exists as a result of our violation of certain
covenants under its Senior Secured Notes which management is addressing through
refinancing efforts.

If we complete our refinancing efforts in 2001, we expect that our debt
will be reclassified as long-term and the uncertainty about our ability to
continue as a going concern would be eliminated.

We define liquidity as the ability to access cash to meet operating and
capital needs. Our ability to continue to fund working capital requirements
and debt service during the next year will be dependent upon successful
refinancing of our Senior Secured Notes and continued improvement of operating
earnings and cash flow from operating units. Following the 1999 restructuring
related to the disposal of our commercial airline operation and the disposal of
our rail and mass transit operation which was accounted for as a discontinued
operation, the remaining operations have a recent history of profitability and
positive cash flow. In addition, because of the disposal of these operating
units and as a result of our current cost cutting measures described above, we
have significantly reduced our working capital needs and believe that existing
availability under our RLC is adequate to fund our operations. Available and
outstanding borrowing under the RLC at March 31, 2001 was $13.5 and $7.3
million, respectively.

We believe we have sufficient manufacturing capacity, at March 31, 2001,
to meet our anticipated future delivery requirements. We may, however, seek to
obtain additional capital should demand for our products exceed current
capacity. The raising of capital in public markets will be primarily dependent
upon prevailing market conditions and the demand for our products and
technologies.

Our liquidity is greatly impacted by the nature of the billing provisions
under our contracts. Generally, in the early period of contracts, cash
expenditures and accrued profits are greater than allowed billings while
contract completion results in billing previously unbilled costs and profits.
Contract and trade receivables, net of advances on

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SIMULA, INC.

contracts, increased approximately $0.7 million for the three months ended
March 31, 2000. This increase is primarily due to timing of contract billing
provisions and actual costs incurred in our Aerospace and Defense segment.

Operating activities required the use of $1.6 million of cash during the
three months ended March 31, 2001, compared to the use of $6.9 million of cash
during the same period in 1999. Cash used by operating activities in the 2001
period was primarily used to increase accounts receivable (discussed above),
inventories and other assets and reduce deferred income and accrued
liabilities. The increases in accounts receivable and inventories is
principally related to increased business volume in both segments. The
increase in other assets is related to increases in deferred development costs
related to the Distributive Charge Inflator ("DCI") technology and ITS product integration which will be
reimbursed by the OEM under the terms of a development contract. The
reduction in deferred revenue is due to recognition of ITS license
fees
and prepaid product received in 2000. The reduction in other liabilities is
primarily related to the payment of semi-annual interest on our 8% Notes and
accrued salaries in January 2001.

Investing activities used $0.7 million of cash during the three months
ended March 31, 2001 and was primarily for leasehold improvements and
intangibles.

Financing activities provided $1.7 million of cash during the three months
ended March 31, 2001 primarily attributable to increased borrowing under our
line of credit and was used primarily to fund operations.

Results from Continuing Operations

Three Months Ended March 31, 2001 Compared to 2000:

Revenue for the three months ended March 31, 2001 increased 4% to $25.5
million from $24.6 million for the comparable period in 2000. Commercial
Products revenue decreased 12% to $11.9 million from $13.6 million. This
decrease is primarily due to the sale of our commercial airliner seating
systems business in January 2000 which had sales of $4.2 in the comparable 2000
period and is partially offset by a $2.4 million increase in ITS sales.
Aerospace and Defense revenue increased 24% to $13.6 million from $11.0 million
and is attributable to an increase in overall business volume primarily related
to our armor products and the effect of full production under the Companys
contract to provide our patented parachute to the U.S. military.

Gross margin for the three months ended March 31, 2001 increased 20% to
$9.2 million from $7.6 million for the comparable period in 2000. Gross margin
as a percent of sales for the three months ended March 31, 2001 increased 5% to
36% from 31%. Commercial Products gross margin increased 17% to $4.4 million
from $3.8 million and increased as a percent of sales to 37% from 28%. The
increase in Commercial Products gross margin is attributable to the volume
increase of ITS sales and lower depreciation expense as a result of the
write-down in long-lived assets recorded in the fourth quarter of 2000. The
increase in Commercial Products gross margin as a percent of sales is
attributable to the disposal of our commercial airline seat manufacturing
business in January 2000 as well as efficiencies achieved due to higher sales
and production volume of the ITS and lower depreciation expense. Aerospace and
Defense gross margin increased 23% to $4.7 million from $3.8 million and as a
percent of sales remained consistent with the comparable 2000 period of 35%.
The increase in gross margin in the Aerospace and Defense segment is primarily
attributable to its increase in revenues.

Administrative expenses for the three months ended March 31, 2001
increased 12% to $5.7 million from $5.1 million for the comparable period in
2000. Commercial Products administrative expenses increased 9% to $2.1 million
from $1.9 million and is primarily attributable to an increase in research and
development related to the DCI technology and increases in overall operating
expenses. Aerospace and Defense administrative expenses increased 3% to $2.9
million from $2.8 million and as a percentage of sales was 21% for the three
month period ended March 31, 2001 as compared to 25% in the comparable 2000
period and is attributable to the increase in revenue noted above.

Interest expense increased 11% to $2.5 million for the three months ended
March 31, 2001 from $2.3 million for the comparable period in 2000. The
increase in interest expense is primarily attributable to the payment of
default rate interest on our Senior Secured Notes offset partially by interest
savings as a result of decreased overall outstanding borrowings.

The effective income tax rate for the three month periods ended March 31,
2001 and 2000 approximated the Companys combined statutory rate of 35%.

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SIMULA, INC.

Inflation

We do not believe that we are significantly impacted by inflation.

Research and Development

Our research and development occurs under fixed-price, government-funded
contracts and Company-sponsored efforts. Historically, research and development
efforts have fluctuated based upon available government-funded contracts and
available Company funding. We anticipate that future fluctuations may also
occur as a result of efforts to expand our inflatable restraint, crashworthy
aircraft seating systems, uses and application for our polymer technology and
other technologies.

Seasonality

We do not believe that we are currently significantly impacted by seasonal
factors.

Forward Looking Information and Financial Targets

We believe that in 1999 and early 2000 we successfully addressed the
manufacturing inefficiencies, operating losses, cash flow and liquidity
problems that we experienced in recent years. We believe that we have
significant competitive advantages based on our current and developing
technologies and products, and that we will continue to benefit from our
worldwide recognition as a premier safety technology company. Management
believes we are positioned for consistent revenue and earnings growth during
the next five years.

This forward looking information is subject to, and qualified by, the
trends and uncertainties in our business described below and elsewhere in this
Report.

Risks and Uncertainties in the Business

A wide variety of factors will affect our projected operating and
financial results and could adversely impact our revenues, profitability and
cash flows. Our liquidity and available working capital will be significantly
dependent upon our ability to refinance our current indebtedness on terms more
favorable to us than certain of our existing indebtedness, as well as upon our
cash flow from operations and, potentially, upon proceeds from asset sales or
licensing. Improved cash flow from operations will depend on our ability to
continue to implement our cost cutting initiatives.

Many of our products are subassemblies in final products. We act as
subcontractor to defense industry prime contractors and as a component supplier
to automotive OEM first tier systems suppliers. Accordingly, to gain and
retain market acceptance, 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
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.

In our Commercial Products segment, we operate in the highly competitive
automotive safety industry. As most of our competitors have greater resources
than we do, our success in this industry is largely dependent on our ability to
build and maintain strategic alliances with large first tier contractors. Our
ability to compete effectively in this industry also depends on our ability to
remain competitive in pricing, service, and performance. In addition,
automotive OEMs continually exert downward pressure on prices, forcing us to
innovate in order to maintain or increase margins from year to year.

Other factors pertinent to our ability to meet our current and future
financial projections include:



| |  |  | our leveraged status and the level and cost of our debt;
| | - |  | --------------------------------------------------------
|
| |  |  | the continued reduction of our fixed expenses;          

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SIMULA, INC.



| |  |  | 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 cyclical nature of the automobile industry and other markets addressed by our products;                                                                                                                                 
|
| |  |  | 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;                                
|
| |  |  | technological changes.                                                                                                                                                                                                      

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. Actual results and trends may differ materially. Risks include
those described herein and in our registration statements and periodic reports
filed with the U.S. Securities and Exchange Commission.







PART II OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in litigation in the ordinary course of business from time
to time. We presently are not a party to any threatened or pending litigation,
the negative outcome of which would be material to us.

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SIMULA, INC.







ITEM 6. Exhibits and Reports



|a) |  | 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          |  |           | (10           | ) 
|      
|      
|      
|      
|10.11  |  | 1992 Stock Option Plan, as amended effective September 15, 1998                                                                                   |  |           | (6            | ) 
|      
|      
|      
|      
|10.12  |  | 1992 Restricted Stock Plan                                                                                                                        |  |           | (1            | ) 
|      
|      
|      
|      
|10.21  |  | 1994 Stock Option Plan, as amended effective September 15, 1998                                                                                   |  |           | (6            | ) 
|      
|      
|      
|      
|10.26  |  | Simula, Inc. Employee Stock Purchase Plan                                                                                                         |  |           | (2            | ) 
|      
|      
|      
|      
|10.29  |  | Form of Change of Control Agreements, as amended and restated,
between the Company and Donald W. Townsend, Bradley P. Forst and James A. Saunders |  |           | (5            | ) 
|      
|      
|      
|      
|10.30  |  | Form of Employment Agreements between the Company and Donald W.
Townsend, Bradley P. Forst and James A. Saunders                                  |  |           | (4            | ) 
|      
|      
|      
|      
|10.32  |  | Employment Agreement between the Company and James C. Dodd dated
March 2, 1999                                                                    |  |           | (8            | ) 
|      
|      
|      
|      
|10.33  |  | Change of Control Agreement between the Company and James C. Dodd
dated March 2, 1999                                                             |  |           | (8            | ) 
|      
|      
|      
|      
|10.37  |  | Simula, Inc. 1999 Incentive Stock Option Plan                                                                                                     |  |           | (9            | ) 
|      
|      
|      
|      
|10.41  |  | Financing Agreement with The CIT Group/Business Credit, Inc.
dated December 30, 1999                                                              |  |           | (10           | ) 
|      
|      
|      
|      
|10.42A |  | Securities Purchase Agreement with Levine Leichtman Capital
Partners II, L.P. dated December 31, 1999                                             |  |           | (11           | ) 
|      
|      
|      
|      
|10.42B |  | Second Amendment to Securities Purchase Agreement with Levine
Leichtman Capital Partners II, L.P. dated August 17, 2000                           |  |           | (12           | ) 
|      
|      
|      
|      
|10.43  |  | Employment Agreement between the Company and Joseph W. Coltman
dated February 1, 2000                                                             |  |           | (10           | ) 
|      
|      
|      
|      
|10.44  |  | Change of Control Agreement between the Company and Joseph W.
Coltman dated February 1, 2000                                                      |  |           | (10           | ) 
|      
|      
|      
|      
|18.    |  | Preference Letter re: change in accounting principles                                                                                             |  |           | (3            | ) 
|      
|      
|      
|      
|21.    |  | Subsidiaries of the Company                                                                                                                       |  |           | (10           | ) 
|      
|      
|      
|      
|24.    |  | Powers of Attorney  Directors                                                                                                                    |  |           | (4), (7), (10 | ),
|      
|      
|      
|      
|       |  |                                                                                                                                                   |  |           | (13           | ) 



|(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 June 30, 1996.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    
|(4)  |  | Filed with report on Form 10-K for the year ended December 31, 1997. The
Employment Agreement for Messrs. Townsend, Forst and Saunders were
substantially identical and differed materially only in the following two
respects: (i) the initial term of the agreement with Mr. Townsend was five
(5) years while that of Messrs. Forst and Saunders was three (3) years;
and (ii) the post-termination non-compete period with Mr. Townsend was
thirty (30) months while it was eighteen (18) months for Messrs. Forst and
Saunders. Messrs. Townsend and Saunders were employees of the Company in
2000 but are no longer employees of the Company and their Employment
Agreements are no longer in effect, pursuant to Severance Agreements with
each respectively.
|    
|(5)  |  | Filed with report on Form 10-Q for the quarter ended March 31, 1998. The
Change of Control Agreement for Messrs. Townsend, Forst and Saunders were
substantially identical and differed materially only in that Mr. Townsend
was entitled to an amount equal to five (5) years base salary and benefits
upon a change of control while Messrs. Forst and Saunders were entitled to
an amount equal to four (4) years base salary and benefits upon a change
of control. Messrs. Townsend and Saunders were employees of the Company
in 2000 but are no longer employees of the Company and their Change of
Control Agreements are no longer in effect.                                                                                                               
|    
|(6)  |  | Filed with report on Form 10-Q for the quarter ended September 30, 1998.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    
|(7)  |  | Filed with report on Form 10-K for the year ended December 31, 1998.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    
|(8)  |  | Filed with report on Form 10-Q for the quarter ended March 31, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    
|(9)  |  | Filed as Appendix A with Definitive proxy on May 14, 1999, for the
Companys Annual Meeting of Shareholders held on June 17, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    
|(10) |  | Filed with report on Form 10-K for the year ended December 31, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    
|(11) |  | Filed with Schedule 13D, under the Securities Exchange Act of 1934, on
January 10, 2000 effective December 31, 1999 by Levine Leichtman Capital
Partners II, L.P.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    
|(12) |  | Filed with Amendment to Schedule 13D, under the Securities Exchange Act
of 1934, on August 25, 2000 effective August 17, 2000 by Levine Leichtman
Capital Partners II, L.P.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    
|(13) |  | Filed with report on Form 10-K for the year ended December 31, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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SIMULA, INC.







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 March
31, 2001 to be signed on its behalf by the undersigned thereunto duly
authorized.

|                   |  |                                                                                                             
|------------------ |  | ------------------------------------------------------------------------------------------------------------
|                   |  | SIMULA, INC.                                                                                                
|                  
|                  
|                  
|                  
|DATE: May 11, 2001 |  | /s/ Bradley P. Forst
___________________________
BRADLEY P. FORST
President
Chief Executive Officer         
|                  
|                  
|                  
|                  
|                  
|                   |  | /s/ James C. Dodd
___________________________
JAMES C. DODD
Executive Vice President
Chief Financial Officer

16